Hooksett firm calls in the cops, then files for bankruptcy, to prevent foreclosure auction
Police blocked bidders from coming onto the property, forcing the auction to take place in the driveway in front of a police cruiser
An owner of MTS Associates — a Hooksett-based golf equipment and servicing firm — used local police, and is now using the federal bankruptcy court, to prevent TD Bank from foreclosing on its land and selling it to the highest bidder, according to the bank’s attorney.
On April 24, police blocked bidders from coming onto the property, forcing the auction to take place in the driveway in front of the police cruiser, wrote Ed Ford, an attorney representing the bank. Then in mid-auction, PM Cross, an MTS-related entity that leases the land out of which MTS operates, filed for Chapter 11 reorganization, less than nine months after it emerged from a similar bankruptcy.
MTS – which has sold and serviced golf carts, shuttles and utility vehicles since 1986 – never filed for bankruptcy, and continues to operate.
David McCurdy, a principal with both entities, did not return phone calls and did not comment after a bankruptcy hearing on Thursday in Bankruptcy Court in Manchester.
In 2007, TD Bank granted a $1 million loan, backed by the U.S. Small Business Administration, to PM Cross, and it filed for Chapter 11 protection for the first time in January 2012. In October 2012, the bankruptcy court approved a renegotiated loan of $1.1 million. Most of it ($963,000) would be at 5.25 percent, and $154,000 would be interest-free, but due in five years, working out to a monthly payment of nearly $7,400. According to PM Cross’s bankruptcy filings, MTS was supposed to be paying it $14,500 a month to lease the property. It got some $61,400 in rent in 2011, but nothing in 2012 and 2013.
PM Cross missed all of its payments to the bank, according to TD Bank, though it did offer to pay nearly $6,800 in December — an offer the bank rejected.
At issue is a swap breakage fee represented by the noninterest-bearing note of the loan, both sides agreed. The bank says it amounts to $1.15 million, slightly more than the property’s worth.
The only other creditors are the town of Hooksett ($32,400) and the SBA ($8,200), according to PM Cross’s filing.
On March 18, the bank filed foreclosure notice, and there was no filing, in either state court or bankruptcy court, to halt a foreclosure auction.
On April 24, six bidders arrived, only to find a cruiser from the Hooksett Police Department “parked in such a fashion as to block entrance to the property, thus effectively preventing any bidder from inspecting the property, in blatant violation of TD Bank’s rights,” wrote the bank’s attorney.
Ford said he called PM Cross’ attorney, Peter Tamposi, who questioned whether the firm had to provide access. In any case, none was provided, said Ford, and the police remained. (When questioned by NHBR, Tamposi said he wasn’t present and couldn’t say what happened at the auction. The Hooksett police chief could not be reached at deadline.)
The auction was set up on the driveway, while McCurdy watched from behind the cruiser, and his agent recorded the proceedings, Ford wrote. Of the six bidders, two were active: Nicholas Mercier, the high bidder, and Louis Pichette, a Manchester-based financier, who unbeknownst to the bank, was working with McCurdy, alleged Ford.
Mercier’s bid of $1,075,000 topped Pichette’s bid by $25,000. But before it got up to that point – while Pichette was ahead – PM Cross filed for bankruptcy protection, Ford said. (The actual filing is dated two days later, April 26.)
In his filing, and at the hearing, Ford characterized it as a “bad faith” filing.
“There is no reorganization purpose here, but only a purpose to frustrate TD Bank’s ability to sell at auction to a third party for the highest and best price,” wrote Ford.
He asked Bankruptcy Judge Bruce Harwood to accelerate the proceeding to dismiss the bankruptcy stay, allowing TD Bank to proceed with the foreclosure sale.
“We have a buyer willing to stick around 60 days, and there is no good reason to lose him,” Ford argued.
But Tamposi said there is no reason to make a decision by “fire drill.” Pichette was willing to match the top bid, if the rival bidder walked away, protecting TD’s investment, he said.
Judge Harwood said he was willing to speed things up by zooming in on one key point: Is PM Cross a small business? For the most part, bankruptcy law prevents small businesses who can’t hold off creditors by filing for bankruptcy protection twice in two years.
Ford said that it was obviously a small business, but Tamposi argued that it was a “real estate holding company” that rents to MTS, the small business, though at times during the hearing he lumped the two together, such as when he offered an insurance policy held by MTS to satisfy the bankruptcy trustee’s requirement that PM Cross be insured.
A hearing on that issue and others was scheduled for May 28.