Everglades on the Bay, two condominium towers in downtown Miami, can continue to sell and rent units after a U.S. Bankruptcy Court judge rejected Bank of America's motion to dismiss owner Cabi Downtown LLC's Chapter 11 case and stop its rental program.

Bank of America filed to foreclose on a $209 million construction loan for the two 49-story skyscrapers at Northeast Second Street and Biscayne Boulevard, on Aug. 18, 2009, about nine months after it was mostly completed. That same day, Cabi filed for Chapter 11 bankruptcy protection.

Since then, Cabi has proposed a reorganization plan that would restructure Bank of America's debt into a five-year term loan, pay other secured creditors in full and provide $500,000 to unsecured creditors, giving them about a 15 percent recovery, said Cabi attorney Andrew Glenn, a New York-based partner with Kasowitz, Benson, Torres & Friedman.

Under that plan, Cabi's owners, a group of Mexican investors controlled by Grupo Gicsa, would retain ownership in the project. Currently, of 849 condo units, 105 units are sold and about 275 are leased, said Cabi co-counsel, Mindy Mora, with Miami-based Bilzin Sumberg.

In January, Bank of America filed a motion to dismiss the reorganization and stop the rental program, claiming Cabi was diminishing the value of the bank's collateral and that it had rented units to nine convicted criminals, including people convicted of grand theft, forgery and sexual crimes.

Attorneys for Cabi filed a motion in response, saying the bank's filing was ``littered with falsehoods and gross mischaracterizations.''

On Thursday, attorneys for Bank of America acknowledged the inaccuracies before U.S. Bankruptcy Judge Laurel Isicoff in Miami. She ruled against the bank's motion, saying in part, ``I find that there is no diminution of value in the real estate collateral.'

On Friday, the judge issued an order that the bank must show cause why it and its counsel should not be sanctioned the cost of all attorneys appearing at the hearing.

``The conduct that Bank of America has engaged in here was instrumental in causing this development to have to file for bankruptcy in the first place,'' said Kasowitz, Benson attorney Marc Kasowitz, due to its refusal to allow the developer to lower its condo sales prices.

``Now it seems as if they have engaged in further egregious conduct, while the company has been trying to restructure, for purposes of destroying the company by disseminating all kinds of false and malicious information.''

Kasowitz said Cabi would seek to recover money from the bank and its law firm, Kaye Scholer, ``for any extraordinary damage caused.''

In the meantime, Everglades on the Bay will keep renting and selling units before it completes its reorganization. ``The company has a business plan that relies on sales and the deferred purchase program -- rent-to-own,'' Glenn said. ``And the judge's ruling allows us to continue operating our business.''