Opinion ID: 1904669
Heading Depth: 2
Heading Rank: 1

Heading: The Transaction(s) at Issue

Text: The essential facts, viewed in the light most favorable to the tenants, are as follows: In March of 1999 George Hesse sold the Eldon to Independent Management Company, Inc. (IMC), which was owned entirely by Yafet Alem. [1] Because the Eldon was big time losing money, Alem soon decided to sell the property, and he listed it with a real estate broker in 2002. Alem eventually decided to sell the property to HL Investments, a company owned and controlled by Hong Ly Thai. Alem and Thai initially structured their agreement so that IMC would transfer a 95% interest as Tenants in Common at closing; then, 366 days later, IMC was to transfer its remaining Five (5%) interest to [HL Investments] for consideration of [one dollar]. In return, Thai was to pay the total purchase price, $3,875,000, at closing. Alem testified that the purpose behind this structure was to avoid the requirements of the Sale Act. This deal never went to closing, however, because Thai had difficulty obtaining title insurance as a result of various liens on the property. In June of 2003, Alem again attempted to sell the Eldon to Thai in a manner that would avoid the requirements of the Sale Act. This time Alem and Thai decided to structure the transaction as a stock purchase. Because IMC owned other properties, Alem decided to create a wholly owned subsidiary, to which IMC would transfer ownership of the Eldon. The stock of that subsidiary would then be sold to Thai. On June 24, 2003, Alem created Independence Management of Delaware, Inc. (IMDel), a wholly-owned subsidiary of IMC. The next day, on June 25, Alem appointed himself president of IMDel; he then resigned and appointed Thai as sole director and sole officer. That same day, IMC, acting through Alem, its president, entered into an Agreement of Sale of Shares of Stock of Independence Management of Delaware, Inc. (Stock Sale Agreement), with L Street Building, LLC, a company owned by Thai. In the contract, IMC agreed to sell 99% of IMDel's stock to L Street Building for $3,875,000  the price originally negotiated for the sale of the Eldon. Alem testified that he contracted to sell 99% of IMDel, rather than 100%, because he believed it would allow him to avoid the requirements of the Sale Act. The Stock Sale Agreement specified that on the Closing Date, record title to the [Eldon] will be in IMD[el].... At the time the agreement was signed, on June 25, title to the Eldon was still in IMC. However, on June 26, Alem, acting as president of IMC, signed a deed transferring title to IMDel, as contemplated by the Stock Sale Agreement. [2] Six days later, on July 2, Thai and Alem closed on the Stock Sale Agreement. On July 3, a copy of the deed (the version dated June 21, 2003 (see footnote 2)) was recorded. As a result of the stock sale, Thai (through L Street Building, LLC) owned 99% of the stock in IMDel, which in turn owned the Eldon in fee simple. After the tenants learned about the transfer of the property to IMDel and Thai, the Tenants' Association filed the Sale Act case in February 2004 to assert the rights of its members to notice and an opportunity to purchase.