Plan to Liquidate Heritage Holding Real Estate Firm Blocked by Court : Litigation: Bankruptcy judge stops attempt by creditors and allows company to reorganize under Chapter 11.
Blocking an attempt by creditors to liquidate the company, a bankruptcy judge has approved a petition by real estate firm Heritage Holding Inc. to reorganize under Chapter 11 of the U.S. Bankruptcy Code.
That action could determine whether Heritage will pursue its lawsuit against Northrop Corp. Heritage, formerly Taiyo Development USA Inc., sued the defense contractor 13 months ago, alleging that Northrop failed to disclose widespread chemical contamination on 53 acres of property in Anaheim that Taiyo had agreed to buy. If Heritage had been liquidated, that lawsuit would automatically have been dropped.
Under the order issued Friday by U.S. Bankruptcy Judge John J. Wilson, Kumiko Kato, an officer of Heritage, will take over as president and will also assume control of its subsidiary, Horizon Development Inc., which has proposed a real estate project in Arizona.
Laurie J. Frost, who according to court documents was removed by Kato as president earlier this month, had said in an interview earlier that there was a dispute over the ownership and management of the company.
Frost could not be reached Monday for comment. Alan Tippe, a Los Angeles lawyer who was asked recently by Frost to represent Heritage, said that Frost believes he is still the president of the company and that he has controlled Heritage for some time. Tippe said that Frost will likely contest Wilson’s order that Heritage be allowed to reorganize.
“There is a lot of confusion over control,” Tippe said. “We would like to have the order clarified.”
Three creditors filed a petition last month alleging that Heritage owed them a total of $917,000 and seeking to force a liquidation of the company under Chapter 7 of the bankruptcy code.
Those creditors--a Los Angeles law firm, a Long Beach environmental consultant and a private investigation firm--apparently supported Frost and wanted the company liquidated.
Under a reorganization, however, the lawsuit against Northrop could proceed.
When Taiyo Development agreed in 1989 to buy the Anaheim property from Northrop for $39 million, it planned to build a 1,341-unit condominium project on the site. But the deal fell apart, and Northrop sued Taiyo in May, 1991, alleging that Taiyo failed to complete its acquisition of the land. Taiyo countersued three months later, alleging that it was not told before signing the purchase agreement that the property was contaminated. Northrop denied that charge.
CSI Finance USA Inc., a real estate company in Santa Monica, was the financial muscle behind Heritage’s plan to build houses in Anaheim. Masao Horiuchi, president of CSI, said Monday that CSI is Heritage’s largest secured creditor.
Horiuchi, who also serves as president of Taiyo Real Estate Co. in Osaka, Japan, said he will withhold comment on the judge’s order until he sees a restructuring plan from Kato, who he said once served as a translator for him.
The creditors who sought the liquidation of Heritage are law firm Gibson Dunn & Crutcher, environmental consultant Targhee Inc. and private investigators Murphy & Maconachy Inc.
Scott Wood, an attorney for Targhee, said he expects a court filing from Frost later this week contesting the judge’s order.
