WASHINGTON -- An appeals court victory has given the Resolution Trust Corp. managerial control of six of the nation's most famous golf courses.
The courses include Palm Beach Polo and Country Club in Florida, PGA West in La Quinta, Calif., and links on Kiawah Island, S. C.
The owners, units of Landmark Land Co., had placed the golf courses under Chapter 11 bankruptcy protection in a desperate attempt to thwart such a takeover.
Lawyers said the decision Tuesday by a U. S. Circuit Court of Appeals in Richmond, Va., was a major setback to creditors of all failed savings and loans.
Owners: Thrift Subsidiaries
The golf links, where some of the professional sport's most prestigious tournaments are played, had been owned by six subsidiares of the failed Oak Tree Savings Bank, New Orleans, which in turn is owned by Landmark Land Co.
Oak Tree had placed the subsidiares in Chapter 11 bankruptcy last Oct. 11 correctly suspecting that the Office of Thrift Supervision intended to close the institution and name the RTC its conservator. The move was the first time bankruptcy courts had been employed to block the government's seizure of assets from a failed thrift.
The three-judge appeals panel ruled that the RTC must get control of all a failed thrift's assets in order to resolve the institution.
Industry experts said the appellate ruling is a blow to creditors becuase it enables the RTC to take control of thrift subsidiaries' assets and sell them even if little nothing is left over for creditors.
Dispute over RTC's Reach
"There has long been an issue as to what extent do RTC powers truly go to the subsidiary of a thrift," said Michael Roster, a partner in the Morrison & Foerester law firm.
"It is bad news for creditors of subsidiaries," said Thomas Leahey, a partner at Kirkpatrick & Lockhart in Washington. "If you can't enjoin the RTC when it appears they are going to do something to diminish your position, then you are going to be left with nothing but a claim against a receivership."
U. S. District Judge Falcon B. Hawkins issued an injunction Oct. 11 in Charleston, S. C., to keep the RTC away from the golf courses. The interests of stockholders, club members, and property owners would be best served if Landmark, not the RTC, sold the properties, the judge ruled. He said Landmark probably could get a better price than the government.
Federal thrift regulators seized Oak Tree, a $2.3 billion-asset thrift, two days later and turned it over to the RTC.
The OTS issued $1 million civil penalties against four officials of Landmark, claiming the bankruptcy filing violated an earlier agreement. The agency also issued an order freezing the Landmark chairman Gerald G. Barton, who also was chairman of Oak Tree.
Landmark officials argued that they had found two buyers for the golf courses but that the RTC inexplicably prevented the sales, though the deals would have boosted Oak Tree's capital and brought it into compliance with laws requiring savings and loans to divest real estate holdings.
The company implied that the RTC had blocked the sales because it favored another buyer.
The agency replied that the two buyers were not putting up enough of their own money and that Oak Tree was providing too much of the financing.
The appellate decision permits the RTC to take management control of the subsidiaries, said Stephen Katsanos, a spokesman for the agency. He added that he expects the subsidiaries to appeal.
"As owner and manager it gives us the opportunity to talk to the [bankruptcy] court in that capacity. Before, we were just recognized as a creditor that had a claim against the bankruptcy estate, he said.
Landmark officials and attorneys could not be reached for comment.