LandAmerica exchange agreement party seeks return of $1.2 million

By Jennifer Lanning Drey

Portland, Ore., Dec. 12 - LandAmerica Financial Group Inc. should be directed to turn over $1.2 million related to an exchange agreement to Haddon Square Partners LLC, according to a Friday filing made by Haddon Square with the U.S. Bankruptcy Court for the Eastern District of Virginia.

Haddon Square is seeking a declaratory judgment in its favor for all direct and consequential damages resulting from LandAmerica's holding of the money in a trust.

According to the filing, Haddon Square entered into an exchange agreement with LandAmerica in October after closing on a property sale.

Haddon Square said under the agreement it transferred $1.2 million to LandAmerica to effectuate a tax-deferred exchange on replacement property.

The agreement was structured so that Haddon Square would assign the purchase agreement for the sale of the property to LandAmerica, and LandAmerica would transfer it to the buyer.

The buyer would then transfer the purchase price to LandAmerica, which would hold the proceeds until the closing of the replacement property then transfer the proceeds to the seller of the replacement property.

In turn, the seller would then transfer the title to the replacement property to LandAmerica and LandAmerica would transfer the title to the replacement property to Haddon Square.

However, Haddon Square said that upon LandAmerica's filing for bankruptcy the company said it does not intend to consummate the exchanges under the agreements and that it believes the funds are property of its estate.

Additionally, the court has entered an order prohibiting LandAmerica from transferring the funds, which Haddon Square said constitutes a breach of the exchange agreement.

Haddon Square said the deadline for it to complete the tax exchange is in four months, and it will suffer damages if the funds are not turned over before then or if the exchange is not completed.

LandAmerica, a title insurance underwriter based in Glen Allen, Va., filed for bankruptcy on Nov. 26. Its Chapter 11 case number is 08-35994.

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