ADDITIONAL CASES Hyde Park, A Wisconsin Limited Partnership, Appellant, v. DeFlora Lake Development Associates, Inc., et al., Appellees OPINION & ORDER Hyde Park, A Wisconsin Limited Partnership (“Hyde Park” or “Appellant” or “Defendant”) appeals from the January 10, 2020 Order of the Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”), which found that an interest-bearing account maintained by Lewis D. Wrobel, Esq. (“Wrobel”) and bearing the tax identification number of DeFlora Lake Development Associates, Inc. (“DeFlora” or “Debtor” or “Appellee” or “Plaintiff”; the “DeFlora Account”) was property of Debtor’s estate pursuant to 11 U.S.C. §541, and ordered that the funds in the DeFlora Account be disbursed to DeFlora’s counsel. (Decision & Order (“Order”) 4 (Bankr. Dkt. No. 74).)1 For the reasons set forth below, the matter is remanded to the Bankruptcy Court. I. Background In 1980, Debtor’s predecessor Caesar DeFlora (“Caesar”) contracted to sell to Hyde Park seven parcels of property in Dutchess County, New York (the “Property”). (Joint Pre-Trial Order (“PTO”) 15 (Bankr. Dkt. No. 32); Bankr. Dkt. No. 78-1.) Between 1985 and 1995, Caesar transferred his interest in the Property to Debtor. (PTO 16.) Debtor and Hyde Park amended the contract several times, including with a 1995 amendment (the “Amendment”). (Id. 17.) The Amendment states that Hyde Park owes $8,404,989.43 to Debtor, which will “be repaid solely from the proceeds of the management of the Property, and from the sale(s) of the Property and from other credits and reductions described herein.” (Designation of the R. on Appeal Pursuant to Bankruptcy Rule 8006 (“R. Designation”) Ex. JX-6 (“Amendment”) 3 (Bankr. Dkt. No. 78-6).) The Amendment establishes a formula for distributing proceeds from sales of the Property. (Id. at 11-12.) “All net proceeds on sale of any part of or a parcel of the Property shall be paid to [Debtor] as a reduction of [Hyde Park's] indebtedness to [Debtor]…until the gross sales price and credits…on all accumulated sales is equal to $1,800,000.” (Id. at 11.) “After closings of gross sales including credits…greater than $1,800,000…[Hyde Park] shall retain an amount equal to fifty (50 percent ) percent of any net sale price and the remaining balance available shall be paid to [Debtor], as a continued reduction of [Hyde Park's] obligation….” (Id.) Under the Amendment, “[Debtor] may proceed with [a] sale” even if “[Hyde Park] do[es] not consent.” (Id. at 6-7.) In the event of such a contested sale, Hyde Park’s interests are protected by an appraisal process. (Id. at 7-8.) First, “each party shall select an…[a]ppraiser to ascertain the [f]air [m]arket [v]alue of the parcel being sold as of the date of the transfer of such sale, free and clear of all liens and taxes.” (Id. at 7.) If the parties remain unable to agree on a fair market value, “the two appraisers shall select a third…[a]ppraiser, who shall determine the [f]air [m]arket [v]alue for purposes of Hyde Park’s credit….” (Id. at 8.) As indicated, the fair market value establishes the amount of a “credit” to be reduced both from Hyde Park’s $8,404,989.43 debt, and from the $1,800,000 in net proceeds to be paid exclusively to Debtor. (See id. at 11.) The Amendment designates Wrobel as the agent holding the deeds in escrow until instructed by Debtor or Hyde Park as to their disposition. (Id. at 14; PTO 19.) On March 10, 1999, Debtor notified Hyde Park that it intended to sell three parcels of the Property (the “Parcels”) for $900,000. (PTO 21.) This sale was motivated at least in part by the need to pay real estate taxes to avoid a tax foreclosure. (Transcript (“Trial Day 1″) 48 (Bankr. Dkt. No. 49); Transcript (“Trial Day 2″) 56-57 (Bankr. Dkt. No. 40).) Hyde Park objected that the price was too low. (PTO 21.) “Ultimately, on September 21 and 23, 1999, Hyde Park sent letters to Wrobel stating that it would not object to delivering its quitclaim deeds to allow [the parcels] to be sold if $207,116 were delivered to and held by Wrobel.” (Id. 22; see also Bankr. Dkt. Nos. 78-11, 78-12.) Hyde Park did not seek an appraisal. (Trial Day 2 at 100.) Wrobel deposited the $207,116 (the “Wrobel Funds”) into two accounts, the DeFlora Account, and an account bearing Hyde Park’s tax identification number (the “Hyde Park Account”). (PTO 23; see also Trial Day 1 at 55.)2 From the proceeds of the sale, $450,000 was paid to Dutchess County to settle real estate tax obligations. (Trial Day 1 at 49, 130; Trial Day 2 at 98, 104.) These taxes were Debtor’s responsibility. (Trial Day 1 at 93; Amendment 4.) In September 2008, Debtor sued Hyde Park in federal court, in part seeking a declaratory judgment that it was entitled to the Wrobel Funds, and Hyde Park counter-claimed, in part seeking the same relief. (PTO 27; Bankr. Dkt. No. 78-15.) Both Parties’ claims were dismissed as time barred. (PTO 28.) In July 2013, Debtor sued a second time, and the lawsuit was again dismissed. (PTO 30-31.) In March 2017, Debtor filed a Chapter 11 bankruptcy petition, (First Am. Compl. (“FAC”) 2 (Bankr. Dkt. No. 8)), and initiated the current adversary proceeding seeking a declaration that it is entitled to the Wrobel Funds and turnover of the same, (id.
