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LLC v. Core Seven Bar H, LLC

United States District Court, D. New Mexico

August 8, 2017

TIC SEVEN BAR 12, LLC a Delaware Limited Liability Company, Plaintiff,
CORE SEVEN BAR H, LLC, a Delaware Limited Liability Company, CORE SEVEN BAR S, LLC, a Delaware Limited Liability Company, and CORE REALTY HOLDINGS MANAGEMENT, INC., a California Company, Defendants.



         This matter is before the Court on TIC Seven Bar 12, LLC's Motion to Confirm and Enter Judgment on Arbitration Award and Memorandum in Support, filed on April 12, 2017. (Doc. 1.) Jurisdiction arises under 28 U.S.C. § 1332 and 9 U.S.C. § 9.[1] The Court held a hearing on the Motion on August 1, 2017. (See Doc. 16.) Having considered the submissions and arguments of counsel and relevant law, the Court will deny Plaintiff's Motion in part, remand for clarification of the Arbitration Award, and defer its decision on the remainder of the Motion pending such clarification.

         I. Background

         This case arises from a dispute about the rights and obligations of tenants-in-common to certain real property. TIC Seven Bar 12, LLC (TIC 12 or Plaintiff) and Core Seven Bar H, LLC (Core H), Core Seven Bar S, LLC (Core S), and Core Realty Holdings Management, Inc. (CRHMI)[2] (collectively, CORE or Defendants) were parties to a tenants-in-common agreement (the TIC Agreement). (See Docs. 1 ¶ 18; 1-A ¶ 4; 1-A-1 (TIC Agreement).) TIC 12 purchased a 1.85% interest in the property. (Doc. 1-A-1, at 31 ¶ 2 (TIC 12's Arbitration Demand).) “The TIC agreement was one of several operative documents that governed the rights and obligations of the tenants-in-common . . . with respect to the” Vistas at Seven Bar Ranch apartments in Albuquerque, New Mexico (the Property). (Docs. 1-A ¶ 6; 10 ¶ 10.) Among the objectives of the parties to the TIC Agreement was to prepare the property for sale within ten years. (Doc. 1-A-3, at 2-3 (Defendants' Answer, Defenses and Counterclaim).)

         “TIC 12 was originally purchased by Harold and Georgia Hartmann (the ‘Hartmanns') in 2005.” (Doc. 1-A ¶ 7.) In October 2015, Volt Properties Tulsa, LLC (Volt) “entered into a Purchase and Sale Agreement (‘PSA') with the Hartmanns for the option to purchase 100 percent of the Hartmanns' membership interest in TIC 12.” (Id. ¶ 8; see also Doc. 1 ¶ 10.) Defendants assert that the Hartmanns' right to sell their interest was conditional and subject to one of the TIC-related agreements. (Doc. 1-A-3, at 62.) Defendants refused to recognize the sale to Volt and ignored communications from Volt regarding the property. (Doc. 1-A ¶¶ 9-10; Doc. 1-A-3, at 62-65.)

         Prior to and during the weeks surrounding the Hartmanns' sale to Volt, Defendants communicated with all of the parties to the TIC Agreement (including the Hartmanns) about the upcoming ten-year deadline and loan maturation. (Doc. 1-A-3, at 62-66.) Eventually, Defendants presented the parties with a ballot that had three options: sale of the property, refinance of the property, or a buyout option that evidenced the party's intent to refinance the property with a sale of that party's interest to a third party “for no less than 69% of the original investment.” (Id. at 63.) Defendants later presented the parties with another ballot that reduced the purchase price to $103, 333.00 per 1% share, or 62% of the original investment. (Id. at 63-64.) Defendants assert that because the Hartmanns, on behalf of TIC 12, did not return the ballot on time, and because Defendants did not recognize Volt's authority to direct the actions of TIC 12, [3] Defendants deemed TIC 12 a “Dissenting TIC” under the TIC Agreement and exercised their contractual option to purchase TIC 12's interest in the property. (Id. at 64.) At 62% of the original purchase price, this amounted to $191, 166.00 for the Hartmanns' 1.85% interest. (Id.) Defendants notified the Hartmanns and Volt “that the proceeds from the attempted sale of TIC 12 [to Defendants' affiliate, Ramsey Charles II, LLC (RCII), ] were being held in escrow . . . to be disbursed upon receipt of instructions as to whom the funds should be sent.” (Doc. 1-A ¶ 12.) The Hartmanns and Volt “challenged CORE's application of the ‘Dissenting TIC' provision and opposed any sale of TIC 12 or its interest.” (Id. ¶ 13.)

         Pursuant to the TIC Agreement, Plaintiff filed an Arbitration Demand with the American Arbitration Association based on CORE's alleged breaches of the TIC Agreement and related claims on February 22, 2016. (Id. ¶¶ 15-16; see also Doc. 1-A-2 (Arbitration Demand).) CORE filed an Answer, Defenses and Counterclaim on March 18, 2016. (Doc. 1-A ¶ 19; see also Doc. 1-A-3.) The Arbitrator issued the Final Award on January 23, 2017. (See Doc. 1-A-6 (Final Award).) The Arbitrator ordered CORE, jointly and severally, to pay Plaintiff $804, 750.00. (Id. ¶ A.) The Final Award provided that “[t]he unpaid balance of this amount shall bear simple interest at the statutory rate of 8.75% from the date of this Final Award . . . until it is paid in full.” (Id. (citing NMSA 1978 § 56-8-4(A) (1993)).) The Arbitrator did not provide a time schedule or deadline for the amount to be paid in full. (See id.) The Arbitrator also ordered that the funds being held in escrow from the forced sale of TIC 12 to RCII be returned to RCII. (Id. ¶ H.) TIC 12 disclaimed its interest in the funds held in escrow on February 13, 2017. (Docs. 1-A-7 at 177; 1-A-8.)

         CORE has made the following post-award payments to TIC 12:

March 7, 2017: $50, 000.00 principal and $8, 488.48 interest
March 29, 2017: $3, 980.53 interest
April 28, 2017: $5, 428.00 interest
May 25, 2017: $5, 066.13 interest

(See Doc. 10 ¶¶ 11-12.) The remaining balance of the award is $754, 750.00. (Id. ¶ 12.) Plaintiff now seeks confirmation of the Final Award, as well as costs and attorneys' fees incurred with respect to this Motion. (Doc. 1 at 11-14.)

         II. ...

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