Deer Valley Lodging faces involuntary bankruptcy
April 30, 2009
If Deer Valley Lodging has been pondering bankruptcy, condominium owners at The Lodges at Deer Valley forced its hand Monday.
Park City attorney Joseph Tesch filed a petition for involuntary Chapter 7 bankruptcy in federal court on behalf of five condominium owners, most of whom are also board members of the homeowners’ association.
In a letter to homeowners on Tuesday, Premier Resorts International, the parent company, said the filing "complicated" the company’s search for a solution to the 500 plus owners who have not been paid for February and March rentals. The letter also said the filing "will likely affect our ability to attract financial assistance."
However, the letter also makes clear that involuntary bankruptcy petitions allow a company to continue operating as normal until a court reaches a decision. That means Premier Resorts will continue negotiations with entities to find a resolution, said company marketing director Bobby Foster.
The letter also made brief mention of what homeowners can expect if a judge orders the company into bankruptcy, an acknowledgement from the company that that may happen.
Foster said he was unable to elaborate on any details of his company’s reaction to the filing since they had not yet received notice from the court on Tuesday. After that notice is received, his company has 20 days to respond.
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David Sime, the Clerk of Court for the U.S. Bankruptcy Court for the District of Utah, located in Salt Lake City, explained that an involuntary bankruptcy is initiated by the filing of a petition by a person or entity’s creditors. It is a mechanism by which creditors can ask a bankruptcy court to declare a company insolvent and subject it to the bankruptcy laws of the United States.
If the court determines the person or entity is insolvent, all creditors are put on a level plain and all disputes are resolved by the court.
Involuntary bankruptcies are rarely filed in Utah. Of the more than 4,300 cases filed so far this year, only two involuntary petitions have been filed.
Tesch said the motivation behind the filing was protection. He said he hopes the company is able to work out its own resolution because that would be better for everyone. But if it does not, this action ensures all homeowners will get a share of the assets.
Tesch said he thought it was "extremely unlikely" that his actions would impede the company’s efforts. If anything, it might "spur the process along."
"The fact that a petition got filed shouldn’t make any difference," he said. "That’s easily resolved."
If the case goes before a judge, Tesch said he’s confident bankruptcy will be declared.
"They wrote a letter to hundreds of owners saying they didn’t have money to pay. That certainly meets the definition of insolvency," he said.
In addition to protection, the action was also a statement to the company, he explained.
"When a contractor says they’ve collected all the money but can’t pay you, then sit back and say, ‘trust me,’ it’s asking a lot. In fact, too much in my view," he said.
Property owner Larry Yang said he didn’t have an opinion on the filing, but said he found the reaction of Deer Valley Lodging to be ironic. In his view, it was "blaming their customers for their own problems."
It’s been almost five weeks since the company announced its inability to pay owners. Yang said he would like to know more about what the company has been doing in that time and why there’s been so little to show for it.
Another property owner, Charles Herring, was also hesitant to choose sides, but said he’s hopeful the petition will "expedite a positive outcome for all."
The petition addresses Premier Resorts of Utah. It is unclear what assets the company holds that could be split by creditors. Assuming it received the court’s notice this week, it has until mid-May to respond.