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In re Section 20 Land Group, Ltd.
Citations: 261 B.R. 718; 46 Collier Bankr. Cas. 2d 346; 2000 Bankr. LEXIS 1742; 2000 WL 33288817Docket: Nos. 99-14697-9P1, 99-14699-9P1, 99-14702-9P1, 99-14703-9P1, 99-14705-9P1, 99-14709-9P1, 99-17249-9P1
Court: United States Bankruptcy Court, M.D. Florida; December 5, 2000; Us Bankruptcy; United States Bankruptcy Court
MDG Capital Partners filed an application seeking administrative expense allowance for $158,000, claiming costs incurred during due diligence for a failed property purchase from TwinEagles Development LTD and others. A contract dated August 4, 1999, stipulated a closing by August 16, 1999, with an extension to August 31, 1999, contingent on certain conditions; however, the sale did not close, and the property was sold to another party. MDG's claim was primarily based on prepetition due diligence efforts, including attorney's fees incurred before the Chapter 11 filing. Postpetition legal services were linked to opposing the debtor's DIP financing request and preparing an adversary proceeding that was ultimately dismissed with prejudice, allowing MDG to apply for administrative allowance up to $100,000. MDG contended that under Florida's equitable conversion doctrine, it effectively became the owner of the property upon contract execution, suggesting the property was not part of the bankruptcy estate per 11 U.S.C. § 541(d). To support its claim, MDG referenced relevant Florida case law, asserting that its efforts conferred a benefit on the estate. Cain, Bultman, and Yaist involved agreements for deeds that established equitable title, which differs from the current case, where there is merely a contract to purchase. Therefore, MDG's reliance on these precedents is not applicable. In Henry v. Ecker, the Fifth District Court noted that a purchaser’s contractual right to receive legal title is sometimes deemed equitable title, but this only holds when the purchaser has actual possession or their rights are publicly recorded. The court finds the precedent in McCannon v. Marston unpersuasive, as it did not involve Florida land sales, and while a purchaser may have a right to specific performance, this assumes the existence of a valid contract that the seller refuses to complete, which is not the case here. MDG's assertion that relinquishing its right to sue for specific performance constitutes a benefit qualifying for administrative expense is rejected. Furthermore, MDG claims its due diligence aided the Debtor in the property sale, but the court highlights that the sale required closing by August 31, 1999, and any failure to close amounts to a breach of contract, not an administrative expense. Consequently, the court disallows MDG’s administrative claim and determines that a general unsecured claim must be evaluated, necessitating a final evidentiary hearing to ascertain who breached the contract and the amount of any claim. A pre-trial conference is set for December 28, 2000, to schedule this hearing.