Company liquidating trust
While at Am Base, Mantell (a tax attorney) had significant responsibility for Am Base's tax matters. The Assignment of Certain Liabilities From City to Am Base Pursuant to an August 1985 Assignment Agreement, Am Base assumed certain liabilities of City in consideration for City's payment of 8,767,000 and the unwinding of certain debits and credits relating to intercorporate transactions.
Among those liabilities were City's obligations for federal income taxes as the common parent of City's corporate affiliates.
Am Base did not seek to bring the Trust into the case or to sue the Trust.
The trouble with non-traded REITs, North Star Real Estate Income Trust, is that they are complex and inherently risky products.
The District Court further denied Am Base leave to amend its complaint because the breach of contract and breach of third-party beneficiary contract claims Am Base sought to add in its amended complaint were also time barred. Before its dissolution and liquidation, City was the holding company for a multinational conglomerate with subsidiaries in the manufacturing, housing, and insurance industries. Defendant-appellee Eben Pyne has been a Trustee of the Trust since its creation and was a member of the Am Base Board from prior to 1985 until January 1993.
This is Am Base's second bite at the litigation apple, its first bite having been taken in an action filed in the Delaware Chancery Court, see Am Base Corp. And defendant-appellee Lester Mantell has served as a Trustee of the Trust since its creation, had been a senior City officer before the Am Base spin-off, and served in several officer positions (including Treasurer and Chief Financial Officer) at Am Base from prior to 1985 until December 1996.
Schedule I listed among the liabilities assumed “any cost, expense or liability associated with any claim asserted against City with respect to any act or omission attributable to its operations or affairs which has not been discharged in full or adequately provided for.” In addition, Schedule I included, as a liability of the Trust, the costs and liabilities incurred in the defense of any litigation arising after September 25, 1985, in which City Investing was a defendant. During this time, American companies looking to raise money in the Eurobond market often formed a wholly-owned subsidiary in the Netherlands Antilles, which would issue debt securities in the Eurobond market that were guaranteed by the American parent corporation. The Netherlands Antilles subsidiary would then lend the Eurobond offering proceeds to the U. In 1974, City formed a wholly-owned subsidiary in the Netherlands Antilles. “The payment of principal and interest on these notes was unconditionally guaranteed by City.” Id. The IRS later extended that claim to the period covering tax years 1981 through 1985.
Tax liabilities were not expressly mentioned in Schedule I. Tax Dispute During the latter half of the 1970s, City sought access to the Eurobond market to obtain long-term financing at a fixed rate of interest and to reduce the amount of indebtedness it had borrowed from its American bankers under a revolving credit agreement. In 19, City raised million and million, respectively, from the Eurobond market through its Netherlands Antilles subsidiary. Furthermore, the notes provided that the issuer would indemnify the holders with respect to any American withholding taxes that might be imposed. City's Netherlands Antilles subsidiary immediately lent the proceeds from the Eurobond offering to City. The amount of the withholding at issue was almost million.