SEFFNER, Fla. — Lazydays RV Supercenter reopened its bankruptcy case July 15 after it obtained a court order in June to enforce a lease for the property upon which the dealership sits, RV Daily Report has learned.
Lazydays is attempting the purchase the property owned by its founder, Don Wallace. However, Wallace’s company is allegedly refusing to honor the purchase option by claiming it did not survive the bankruptcy cases.
Kevin Gross, a U.S. Bankruptcy Court judge, signed an order June 16 ordering that Wallace comply with terms of the lease, including, but not limited to, the purchase option, the settlement agreement and confirmation order.
“The court agrees with the reorganized debtors that when they assumed the lease, they did so in its entirety, including the purchase option,” Gross wrote. “Assuming a lease is an all or nothing proposition — either the whole contract is assumed or the entire contract is rejected.”
According to a court order signed June 15 by Gross for the U.S. Bankruptcy Court for the District of Delaware, the dealership and LDRV Holdings Corp., are seeking to enforce terms of the confirmation order and joint prepackaged plan of reorganization.
The court approved the plan Dec. 8, 2009, which required the dealership to assume a lease and a global settlement and lease assumption agreement with the landlord of the property. The landlord, I-4 Land Holding Limited Company, entered into the lease for the 126-acre site in 1999 and amended it twice. Wallace is the principle owner of I-4 Land Holding Limited Company, RV Daily Report has learned.
The 1999 lease provides for a purchase option by Lazydays. The bankruptcy court approved a settlement agreement in 2009 which states that the lease was not modified and that all terms and conditions remain in full effect, court document show.
Court records suggest that the settlement agreement contained language in which Lazydays announced its intention to assign the lease to LDRV Holdings.
The reorganized debtors are asking the court to reopen the cases to permit reorganized debtors to establish that their assumption of the lease under the plan did not modify the lease upon assignment to reorganized debtors and, accordingly, the purchase option remains viable, documents showed.
Court records show both Lazydays and Wallace have filed separate suits against each other in Florida court. Lazydays is asking the Delaware bankruptcy court to interpret its own confirmation order, which is at the center of the dispute in Florida.
“Although it appears to the court that the settlement agreement constitutes the landlord’s consent to the assignment, the landlord seeks to vitiate (destroy or impair the legal validity of) the purchase option,” wrote Gross. He cited a provision of the lease which prohibits assignment of the lease without the landlord’s prior written consent.
“However, the reorganized debtors have something superior to landlord’s consent, namely an order of the court in a confirmed bankruptcy case which provides the protections of the bankruptcy code,” he added. “Landlord is plainly attempting what Section 365(f)(3) prohibits, namely to enforce a provision that impairs the reorganized debtors’ right to assign the lease without modification.”
Citing a series of federal cases, Gross noted that “these cases establish that Section 365(f)(3) invalidates lease provisions which impede a debtor’s economic interest.”
“To be clear and to provide guidance to any other court asked to decide any issues involving the lease or the purchase option, the lease is to be read without Section 13.1, which is invalid,” Gross wrote. Lease Section 13.1 prohibited Lazydays from assigning the lease without landlord’s permission.
However, Lazydays has since appealed Gross’ order and his interpretation of the law. Attorneys representing I-4 Land Company Holding have identified several appealable issues, including:
- Whether the bankruptcy court erred as a matter of law when it took I-4′s property right without due process and without providing just compensation as required by Amendment 5 of the U.S. Constitution.
- Whether the bankruptcy court erred when it reopened the bankruptcy cases to materially supplement its findings of fact and conclusions in law. That pertains to the confirmation order, which was issued without reopening the case and permitting I-4 to supplement the record of the confirmation hearing, thus denying the company due process.
- Whether the bankruptcy court erred by determining that the assignment of the lease without the purchase option “impeded the debtor’s economic interest” because the record is devoid of any evidence the value to the debtor’s estates or to the purchase option separate from the value of the right of occupancy.
In fact, lawyers representing Wallace appealed the judge’s order on 15 separate issues.
No date has been set for the appeals case to be heard.