Bankruptcy Court Judge Bruce Markell denied a motion Tuesday to dismiss Liberty Realty's Chapter 11 bankruptcy reorganization filing, pleasing several real estate agents who told the judge about unpaid commission amounts of up to $114,000.
Markell said he would convert the bankruptcy case to Chapter 7 liquidation and appoint a U.S. Trustee to distribute any assets.
Attorney Edward McDonald with the Office of U.S. Trustee opposed the motion of dismissal and requested the Chapter 7 conversion. He said Liberty appears to have cash on hand from accounts receivable. Also, no monthly operating report was filed for March, even though it was due two weeks ago.
Liberty Realty was acquired last week by Century 21 Aadvantage Gold, a surprise to the judge and to some attorneys in the courtroom, leaving agents with unsigned commission checks that couldn't be cashed. Some agents estimate the figure at $250,000.
Former Liberty agent Juan Gutierrez said he's owed $7,500 and thanked the judge for not dismissing the case.
"I'm behind on my house payment," he said. "I want my money paid. A lot of agents are in my position. We just barely started (selling) again."
Berit Bogdanoff told the judge she's owed $92,000. She has personally sued Liberty Realty owner and broker, Richard Bell. Another agent said Liberty owes him $114,000 in commissions.
If Liberty was sold to Century 21, it was certainly not done with court approval, Markell said.
The Chapter 7 bankruptcy trustee, when appointed, would pursue any assets that may be recovered and available for distribution, he said. The judge encouraged agents to fill out paperwork with the court to be notified of any further proceedings.
Christopher Burke, attorney for Liberty Realty, said a plan of reorganization had not been filed because it is not believed the debtors can perform under such a plan at this time or get the plan confirmed. Liberty lost more than one-fourth of the 1,116 agents it had before filing bankruptcy in September and continued to lose about 25 agents a week until closing.
The brokerage downsized to two offices in Reno and Las Vegas. Liberty's Las Vegas office on Durango Drive is in a building once owned by Silver State Bank, which is now under receivership by the FDIC. One foreclosure sale of the building has already been postponed.
Conversion to Chapter 7 will not benefit creditors as any assets are negligible, Burke said. Liberty's offices and most of its equipment are leased and any remaining desks and chairs have little value.
Markell couldn't say whose rights have been lost and whose rights have been preserved.
"I wouldn't treat the money as a Rembrandt painting that once it's stolen it can never be recovered," the judge said. "Money is money. It's always there. I recommend contacting the trustee and telling him what to be looking for."
Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.
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