Sky Lodge, claiming $5.6 million error, seeks bankruptcy protection
September 18, 2009
The Sky Lodge has petitioned for bankruptcy protection as it tries to resolve a $5.6 million dispute with a lender, claiming that the firm is withholding money that it erroneously received through a transfer from another one of the development’s lenders.
Three Sky Lodge-related business entities, using their umbrella Easy Street moniker, filed the Chapter 11 petitions on Monday in the U.S. Bankruptcy Court in Salt Lake City. The three are listed as the plaintiffs in a complaint against the lender filed the next day in the same court. No court dates have been set. Chapter 11 bankruptcies allow a firm to reorganize while under protection.
The Sky Lodge in the filing seeks the return of the $5.6 million from the lender, a Boston firm named BayNorth Realty Fund VI, and other damages. The money came from sales proceeds at the Sky Lodge.
Another lender, called West LB AG, mistakenly authorized the $5.6 million payment on Feb. 15, according to the filing. The Sky Lodge and West LB have demanded the return of the money, but BayNorth has refused to give it back, the filing says.
In the meantime, West LB claims it was not paid $4.9 million owed by the Sky Lodge and maintains that the Sky Lodge has defaulted on the agreement, the filing says. West LB froze two accounts totaling more than $3.2 million that were used to pay contractor and professional bills, it says.
Without that money, the Sky Lodge has been unable to pay some of its contractors in full, said Joe Wrona, one of the attorneys representing the Sky Lodge side, resulting in them filing liens against the property. On Sept. 8, the general contractor filed to foreclose on its lien, the court filing indicates. The liens, meanwhile, have kept the Sky Lodge from making sales, it says.
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The Sky Lodge claims that BayNorth intentionally refused to return the money in an effort to allow it to foreclose on its interests and "ultimately take control of the Sky Lodge" after the Easy Street side developed the property. BayNorth has engaged in "bad faith and predatory practices," the Sky Lodge side says.
"That money, obviously, belonged to somebody, and it didn’t belong to BayNorth," Wrona said.
Wrona said the lodge is operating as normal and employees continue to be paid. The Sky Lodge occupies a sought-after location at the Main Street-Heber Avenue intersection.
"It remains open. It remains completely operational," he said, adding that people staying there will not notice a difference.
A representative from BayNorth did not immediately return a phone message seeking comment.