Edgartown has the legal right to move forward with acquiring the Yellow House, a lawyer representing the town said this week, despite a move by a member of the family that owns the property to block proceedings because of an ongoing bankruptcy case.
In a letter sent April 18 to an attorney for Benjamin L. Hall Jr., James M. Wilton of Ropes & Gray in Boston said an attempt to block the town action last week asserted a “baseless legal position” and the town’s efforts to take the house through eminent domain are not a violation of federal bankruptcy laws, in part because the property is owned in a trust.
Mr. Wilton’s letter calls for Mr. Hall’s attorney to withdraw an earlier letter opposing the town’s actions by 5 p.m. on Wednesday. Selectmen are scheduled to discuss the issue at a meeting Monday.
The legal back-and-forth comes on the heels of voter approval at town meeting and the town election last week to take the property at 66 Main street by eminent domain for $3 million. The day of the election, Mr. Hall’s attorney, Alexander L. Cataldo of Norwell sent a letter stating the town is prohibited from taking the house because of automatic stay provisions in federal bankruptcy laws. Mr. Hall filed for personal bankruptcy in 2015.
The Yellow House is owned by 66 Main Street Realty Trust, with Ben Hall Jr. and Brian M. Hall listed as trustees.
Meeting with town selectmen last Friday, town counsel Ronald H. Rappaport recommended that the board delay any action while the matter was reviewed by Ropes & Gray in Boston, a firm with an expertise in bankruptcy.
The response from Mr. Wilton forcefully rebuts the arguments put forward by Mr. Cataldo. “The demand letter contains no evidence that the premises constitutes property of the debtor’s bankruptcy estate or that the debtor holds a direct interest in 66 Main Street Realty Trust,” Mr. Wilton wrote.
He added that Mr. Hall has admitted through his actions that his interest in the trust, and the property itself, are not part of his bankruptcy estate. Mr. Wilton stated that on April 3, 2015, two weeks after Mr. Hall began his Chapter 11 bankruptcy case, the Yellow House was transferred from one trust to another without approval of the bankruptcy court.
Mr. Wilton also pointed to one of the town’s ongoing legal disputes with the Hall family trust over the property. Since July 2015, he said, the town and the trust have been involved in litigation over a historic district bylaw requiring minimum upkeep of buildings. “At no point during this litigation has the debtor or the trust filed any request to stay the litigation based on assertions that beneficial interests in the trust or the premises are property of the debtor’s estate,” the letter said.
It also noted that the Dukes County superior court has determined that Mr. Hall has violated state Rules of Civil Procedure “by asserting scandalous and baseless allegations,” and found that his conduct was “malicious and willful,” and awarded sanctions.
Mr. Wilton stated that if Mr. Cataldo does not withdraw his letter by 5 p.m. on Wednesday the town will “request clarification from the bankruptcy court on this issue and may seek sanctions if Mr. Hall responds by asserting the baseless legal position set forth in the demand letter.”
Selectman and board chairman Margaret Serpa said the board is scheduled to discuss the issue at a meeting on Monday, April 24.