Hotel Waldorf-Astoria Corporation. Since the record amply demonstrates that the sale price, $35 million, is fair and that consummation of the sale would be advantageous to the estate, I will enter an Order approving the sale.
The City of New York has objected to two aspects of the Trustees' Petition which are not related to the merits of the proposed sale. Consistently with § 77(o) of the Bankruptcy Act and the established practice in these proceedings, the property is to be conveyed free and clear of liens, the existing liens are to attach to the proceeds of sale, and the proceeds are to be deposited in an escrow account. The City's tax liens on the Waldorf total approximately $9.75 million (excluding interest). In its Answer the City requested that at closing its outstanding tax liens be paid in full from the proceeds. However, in its brief and at oral argument the City conceded that the Reorganization Court has authority to authorize the sale of the Waldorf free of the City's tax liens, provided that the liens attach to the proceeds. Of course, the City's request for present payment may be understood as addressed to this Court's discretion. There are, however, sound reasons for adhering to the practice of escrowing proceeds of sale subject to existing liens. In the first place, the lien of the United States arising from its guarantees of Trustees' certificates and loans under § 211(h) of the RRRA primes the City's liens. The City's tax liens may not be paid without the consent of the United States. Second, the entire question of the Debtor's unpaid tax obligations is now before this Court in other proceedings arising from the Trustees' proposed Plan of Reorganization. In light of these pending issues, it is not appropriate at this juncture to depart from the uniform practice in this case of escrowing proceeds of sale subject to existing liens.
In addition to claiming that the sale proceeds should be used to satisfy its tax liens, the City makes an alternative argument with respect to a pre-existing escrow account. Pursuant to a November 1973 agreement between the Trustees and the lessee, rent accruing after November of 1975 has been deposited in an escrow account (lessee's escrow account) maintained by counsel for the lessee. The approximately $11.818 million principal n1 in the account is made up of three separate rental payments:
Basic rent, November '73 to February '77 $4,333,333.34
Percentage rent, September '73 to January '77 4,990,854.07
Additional rent, October '73 to February '75 2,494,477.86
© 1992-2004 VersusLaw Inc.