The bankruptcies of two notorious Tacoma developers may be all over but the paperwork.
Tom Price and Hyun Um’s legal nemesis, SoundBuilt Northwest, was turned down this week in its last-ditch effort to hang on to a $5.9 million judgment in its favor from a Pierce County court.
SoundBuilt chased Price and Um into bankruptcy court trying to collect, and now that ticket has been punched. Last fall, an appeals court erased the Pierce County ruling based not on the merits of the dispute, but on a two-word hand-written addition to a land contract, scribbled by a real estate magnate who’s now bankrupt and a fugitive. SoundBuilt then asked the Washington Supreme Court to consider the case, and this week it declined.
“They got off on a technicality,” SoundBuilt chief financial officer David Bolotin said Friday. “I believe this ends our involvement in the matter.”
Since August 2010, the men have been in personal bankruptcy reorganization with as much as $350 million in debt related to their real estate business. SoundBuilt has been a leader on the committee of creditors that has dissected Price and Um’s business, Prium Companies, and the dozens of limited liability companies associated with it.
The erasing of SoundBuilt’s judgment means it no longer has a claim in bankruptcy court. The only creditor left on the committee is a holding company for assets from a bank that no longer exists.
Price and Um did not return a phone message for comment Friday. But they have long contended in court that if SoundBuilt’s claim is gone, there is no reason for the bankruptcy to proceed.
In March, they asked the bankruptcy judge to suspend the case while everyone awaited the state high court’s decision, an unusual request that Judge Paul Snyder denied. As the top court mulled it over, the creditors committee kept trying to uncover more of Prium’s assets by conducting a Rule 2004 exam — in bankruptcy lingo, an official interview similar to a deposition — of the men’s wives.
During that March hearing, Todd Tracy, the men’s bankruptcy attorney, told the court it was likely that his clients would ask for a dismissal if the Supreme Court didn’t take the case. On Friday he said his clients were still figuring out their next steps.
“We took the position from the first day that the judgment was entered incorrectly,” he said.
SoundBuilt started suing the men and the company that bears a blending of their names, Prium, in 2005, accusing it of breaking a land contract. In April 2010 SoundBuilt won in Pierce County Superior Court, and a judge awarded the Puyallup-based homebuilder $5.9 million.
SoundBuilt tried to collect by sending moving vans to the men’s Gig Harbor-area mansions, and by seeking ownership interests in the dozens of companies the men controlled. To stop that, Price and Um sought bankruptcy protection in August 2010, along with a company they control called Queen High Full House. Queen High owns the men’s million-dollar homes, and the men pay $100 a month to rent them.
Price and Um’s debts — as much as $350 million then — amounted to one of the largest bankruptcies in the state. Through their personal bankruptcies, Prium’s operations have been examined by a committee of three large creditors that included SoundBuilt. That committee accused the men of running a shell game, and persuaded a judge to have a forensic accountant examine the Prium empire.
In the meantime, one of the large creditors, Sterling Bank, dropped off the committee after settling its claims with Price and Um. That left SoundBuilt and First Independent Bank, which was acquired by Sterling earlier this year. (After that acquisition, a holding company with some leftover First Independent assets held a spot on the committee.)
Last fall, the accountant outlined several questionable business practices, including that Price and Um pay themselves what seemed to be inflated salaries and that one of their companies appeared to be double-charging other companies for property management.
The accountant’s report underscored a report earlier that year by The News Tribune, which charted the men’s extensive use of limited liability companies in real estate leveraging; their series of broken promises for real estate development in downtown Tacoma; and the men’s pattern of stiffing contractors and ignoring tenants’ problems while paying cash for mansions and luxury cars.
Two days before the accountant issued his critical report, the state appeals court threw out SoundBuilt’s judgment based on two words — “with prejudice” — that Seattle real estate magnate Michael Mastro added to paperwork closing the sale of some land to SoundBuilt. He wanted SoundBuilt to drop its lawsuit against his associates Price and Um, and agree not to sue again, before the deal was done.
Though SoundBuilt likely is no longer a player in the bankruptcy, a dismissal isn’t guaranteed. Judge Snyder said in March that having SoundBuilt off the committee will change things, but he wouldn’t guess how. It’s possible other creditors have been satisfied with its lead and might step up in its absence.
“SoundBuilt has certainly has been a driving force,” he said, “and if no one else cares, there’s an issue as to whether the court should be involved.”
It’s up to the U.S. Trustees Office now to decide whether to ask for other creditors to join the committee. Tracy said he would be surprised if that happens, given Snyder’s longstanding concern over administrative expenses in a case that has involved dozens of lawyers and has cost Price and Um more than $500,000 in expenses.
But they’ll have some money coming in. SoundBuilt now must pay Price and Um attorney’s fees for the legal battle of the last several years.kathleen.cooper @thenewstribune.com 253-597-8546