Bernsteins sue over Crown sale

Real Estate Weekly, July 17, 1991 by Lois Weiss

Bernsteins sue over Crown sale

The long-awaited sale of the Crown Building is being challenged by the Bernstein brother's Canadian Land Company. The Ralph and Joseph Bernstein company is one of the former claimants to the gold-domed building, located at the corner of Fifth Avenue and 57th Street, which was once owned by the late Philippine President, Ferdinand Marcos and his wife, Imelda.

The 26-story tower was sold for $96.5 million at a federal bankruptcy auction earlier this year to a partnership of Marvin S. Winter, Bernard Spitzer and Jerome L. Green. The group was reported to be the only bidders indemnified by Security Pacific, the bank holding the first mortgage on the property, against a claim by a Liechtenstein enterprise, Establissement Mabari, which the litigants say may not have been properly foreclosed.

According to Canadian Land attorney Philip R. Carter, a motion was made before Judge Pierre N. Laval in opposition to the confirmation of the referee's report which details the sale and the distribution of monies. Carter said he and David W. Dykhouse and his team at Patterson Belknap Webb & Tyler are representing Canadian Land as co-counsel.

The Crown building was to be sold free and clear, Carter said, and yet the special master, Stephen E. Estroff, made the sale subject to the Mabari mortgage. "This was in violation of the judge's order," Carter noted adding that an encumbered sale prevented bidders from making their highest bid and could have cost the claimants millions of dollars in lost revenue.

Nico Construction, which also had a multi-million dollar claim against the Crown Building, has also applied to intervene. Eugene Mittelman, the Dreyer & Traub partner representing Nico, said they are only concerned about the accounting and the amount of money due to Security Pacific.

"We are not trying to undo the sale," Mittelman explained, "Nico is simply fighting about the way the money is being distributed. We claim a superior right to part of the money."

James M. Hirschhorn, an attorney with Sills Cummis Zuckerman Radin Tischman Epstein & Gross P.A., which represents the Philippine Government, said they are also not interested in overturning the sale but are concerned with certain proceeds. "We are among the claimants to the equity in the property," Hirschhorn said. "It's a dispute between equity claimants on one hand and the bank on the other."

Rental monies paid to a referee prior to the closing are also being challenged.

Estroff said of the efforts to opposed his report, "it's the same opposition trying to stir up the same trouble."

A conference was scheduled for this week at the Federal Courthouse in Foley Square.