Bankruptcy – Country club – Successor liability

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Where a debtor has objected to proofs of claim filed by members of a country club operated by the debtor’s predecessor, the objection must be sustained, as the members are not entitled to obtain from the debtor a refund of their deposits.

“All the evidence presented leads me to conclude that QR Properties [LLC], the debtor in this case, was a mere continuation of its seller, [Quail Ridge Country Club, LLC (QRCC), and thus QR Properties has succeeded to the liabilities of QRCC including its obligations to claimants.

“But having won the battle, claimants have necessarily lost the war. Claimants argue that the sale from QRCC to QR Properties triggered the refund provision of the bylaws. Establishing that QR Properties is a mere continuation of QRCC means that QR Properties has succeeded to QRCC’s obligations to the claimants under the membership subscription agreements, however, so the refund provision of the bylaws could not have been triggered by the transfer from QRCC to QR Properties. Under each subscription agreement, a member’s right to a refund of his deposit is governed by the bylaws which provide for a refund only if QRCC, now QR Properties, permanently discontinues operation of the country club and its facilities.

“According to the disclosure statement in support of QR Properties’ plan of reorganization filed in this case on March 3, 2011, QR Properties operated the country club, including the 18-hole golf course, through a lessee known as QR Members, LLC, during the 2009 and 2010 golf seasons. The disclosure statement also indicates that the debtor would ‘open and operate the golf course in 2011.’ Thus as of the chapter 11 petition date and well beyond, the golf course and country club remained in operation. Claimants have not alleged nevermind offered evidence that the country club and its facilities had ceased operations on the bankruptcy petition date or thereafter. So long as Quail Ridge Country Club operates, claimants have no claims against QR Properties for a refund of their membership deposits.”

In Re: QR Properties, LLC (Lawyers Weekly No. 04-004-13) (14 pages) (Hoffman, J.) (USBC) Joseph G. Butler for the debtor; Ronald Dunbar Jr. for the claimants (Chapter 11 Case No. 10-45514-MSH) (Jan. 7, 2013).

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