In re Omne Partners II

Omne Partners II (defendant) operated and managed a factory discount outlet mall located in Portsmouth, New Hampshire. The development and financing of the mall property was a multiparty transaction, with a portion of the funding provided by the Northern New England Carpenters’ Pension Fund (the Pension Fund) (plaintiff). When Omne Partners first approached the Pension Fund for a construction loan, the Pension Fund rejected the request. Omne Partners then proposed a sale-leaseback transaction to ensure that the Pension Fund would have protection for its equity against foreclosure. The Pension Fund agreed, and the parties entered into a sale-leaseback agreement whereby Omne Partners transferred ownership of the mall property to the Pension Fund and the Pension Fund executed a 30-year ground lease with Omne Partners. Under the terms of the ground lease, Omne Partners retained responsibility for many of the typical obligations of ownership. On March 20, 1986, Omne Partners filed for Chapter 11 bankruptcy. Consequently, the Pension Fund filed a complaint seeking the court’s determination of its rights concerning the mall property. The Pension Fund contended that Omne Partners’ rights under the lease had been terminated upon its filing of bankruptcy and that Omne Partners had unlawfully maintained possession of the mall property. Omne Partners denied the Pension Fund’s allegations and sought summary judgment on the basis that the ground lease was not a true leaseback agreement but rather a disguised financing agreement.