Davis v. M & M Developer, LLC (In re MBM Entm't, LLC)

• Decision Date: 27 May 2015
• Docket Number: Adv. Pro. No. 14–02231 MEW, Adv. Pro. No. 14–02386 MEW, Adv. Pro. No. 15–01086 MEW,Case Nos. 14–10991 through 14–10993 MEW
• Citation: 531 B.R. 363
• Parties: In re MBM Entertainment, LLC, MBM Development, LLC, and Altria Development, LLC, Debtors. Janina Y. Davis, Plaintiff, v. M & M Developer, LLC, Moussa Yeroushalmi, Morad Yeroushalmi, Farzaneh Yeroushalmi and Altria Development, LLC, Defendants. Janina Y. Davis, Plaintiff, v. M & M Developer, LLC, Moussa Yeroushalmi, Morad Yeroushalmi, Farzanah Yeroushalmi, and MBM Development, LLC, Defendants. Janina Y. Davis, Plaintiff, v. M & M Developer, LLC, Moussa Yeroushalmi, Morad Yeroushalmi, Farzaneh Yeroushalmi, MBM Development, LLC and MBM Entertainment, LLC, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

531 B.R. 363

In re MBM Entertainment, LLC, MBM Development, LLC, and Altria Development, LLC, Debtors.

Janina Y. Davis, Plaintiff

v.M & M Developer, LLC, Moussa Yeroushalmi, Morad Yeroushalmi, Farzaneh Yeroushalmi and Altria Development, LLC, Defendants.

Janina Y. Davis, Plaintiff

v.M & M Developer, LLC, Moussa Yeroushalmi, Morad Yeroushalmi, Farzanah Yeroushalmi, and MBM Development, LLC, Defendants.

Janina Y. Davis, Plaintiff

v.M & M Developer, LLC, Moussa Yeroushalmi, Morad Yeroushalmi, Farzaneh Yeroushalmi, MBM Development, LLC and MBM Entertainment, LLC, Defendants.

Case Nos. 14–10991 through 14–10993 MEW

Adv. Pro. No. 14–02231 MEW

Adv. Pro. No. 14–02386 MEW

Adv. Pro. No. 15–01086 MEW

United States Bankruptcy Court, S.D. New York.

Signed May 27, 2015

Robinson Brog Leinwand Greene Genovese & Gluck PC, By: Fred B. Ringel, Esq., 875 Third Avenue, New York, N.Y. 10022, Counsel for the Debtors

A.R. Soleil & Company, P.C., By: Andre R. Soleil, Esq., 167 Park Avenue, Brooklyn, N.Y. 11205, Counsel for Plaintiff Janina Y. Davis

MEMORANDUM OPINION

Michael E. Wiles, UNITED STATES BANKRUPTCY JUDGE

The Debtors in these procedurally consolidated cases are MBM Entertainment LLC (“MBM Entertainment ”), MBM Development LLC (“MBM Development ”) and Altria Development LLC (“Altria ”). Each Debtor is the current record owner of real property formerly owned by Janina Y. Davis (“Davis ”). On May 8, 2015 this Court completed a two week trial of various long-running disputes between Davis, the three Debtors and the Debtors' owners and affiliate. Davis claims primarily that the properties were obtained by fraud, conversion or other wrongful act and should be deemed subject to a constructive trust or other equitable interest in her favor, or that the transfers of the properties should be rescinded and her ownership should be restored. She has asserted alternative claims seeking damages for fraud, breach of contract or unjust enrichment. Defendants claim that Davis misrepresented facts about the properties and breached contracts, and during trial they contended that Davis had wrongly taken possession of space at one of the properties beginning in 2012.

Just prior to trial, Davis attempted to amend her pleadings to assert additional claims. In addition, during the trial each side attempted to pursue claims or counterclaims that were not mentioned in the pleadings. The Court's rulings on those matters are summarized in Part III of this Opinion. The fact that the claims and counterclaims included claims by and against various individuals and entities who are related to the Debtors also requires careful consideration of the scope of this Court's jurisdiction and its ability to render final decisions, and those issues are discussed in Part IV.

At trial, the parties presented evidence as to more than 20 separate contracts and instruments. Many of the contracts have unclear or contradictory terms, and some were sham agreements that were never intended to have any effect. The parties differed as to the interpretation and enforceability of nearly every one of the contracts and instruments in evidence, and Davis denied that she had signed some of them. Each side accused the other of fraud, and at different times each side asked the Court to enforce alleged oral agreements and understandings in lieu of the written documents the parties signed. Davis also alleged that she had signed some agreements and instruments under physical or economic duress. The immense number of disputes between the parties requires extensive findings of fact that are set forth in Part V of this Opinion.

For the reasons set forth herein, the Court has concluded as follows:

(1) The Court has jurisdiction over the claims and counterclaims and the ability to render final decisions with respect to them;

(2) There is no merit to Davis's motion to dismiss these Chapter 11 cases;

(3) Davis's claims for the imposition of a constructive trust, or the imposition of an equitable lien, or for a rescission of the transfers of the properties are without merit for a variety of factual and legal reasons;

(4) There is no merit to Davis's claims of fraud, duress, or forgery;

(5) Defendants owe a remaining contract obligation to Davis in the amount of $435,000, for which Altria and its affiliate, M & M Developer, LLC, should be jointly and severally liable;

(6) Altria is entitled to damages of $74,100 from Davis through and including May 31, 2015 plus an additional $5,700 per month for each month from and after June 1, 2015 until Davis relinquishes full possession and control of all units in the Clinton Property (as that term is defined below) to Altria;

(7) Farzaneh Yeroushalmi and Morad Yeroushalmi jointly are entitled to a damage claim against Davis in the amount of $121,600; and

(8) There is no merit to the other counterclaims asserted by Defendants.

The Court will enter a separate Order directing the parties to address issues relating to the computation of prejudgment interest on the outstanding claims, which the parties have not previously addressed, and those issues will be resolved before judgment is entered.

I. The Parties and Other Relevant Individuals

Prior to May 2005 Davis owned property located at 139 Clinton Avenue in Brooklyn, New York (the “Clinton Property ”), property located at 187 Gates Avenue in Brooklyn, New York (the “Gates Property ”) and property located at 148 West 127^th Street in Manhattan (the “Harlem Property ”). Altria is currently the record owner of the Clinton Property; MBM Development is currently the record owner of the Gates Property; and MBM Entertainment is currently the record owner of the Harlem Property.

The Defendants at trial included Moussa Yeroushalmi (“Moussa ”), Farzaneh Yeroushalmi (“Farzaneh ”) and Morad Yeroushalmi (“Morad ”) (collectively, the “Yeroushalmis ”). Farzaneh is Moussa's wife, and Morad is Moussa's brother. The Yeroushalmis reside in Great Neck, Long Island. The three Debtors, and a non-Debtor limited liability company named M & M Developer, LLC (“M & M ”), also were Defendants at trial. One or more of the Yeroushalmis owned, controlled and acted on behalf of M & M as well as each of the three Debtors at all times relevant to this Opinion.

Two other individuals figure prominently in the parties' narratives, though they were not parties to the proceedings before the Court. One is an individual who was identified at various times during the trial as Eric McGill, Aswad Ayinde, Arune Destula, Baku, or some combination or variation of those names; the parties most frequently referred to him as “Baku ” and that shorthand is adopted here. Davis formerly had a romantic relationship with Baku, and the Defendants also had business relationships of various kinds with Baku. The other individual is Subhana Rahim (“Rahim ”). Davis acquired the Gates Property from Baku and Rahim (who had previously owned the Gates Property as tenants in common), and Rahim was a plaintiff in a lawsuit against Davis and others relating to that transaction.

II. Procedural Background

Davis filed three lawsuits in the New York State courts on July 9, 2007. One lawsuit (Adversary Proceeding No. 14–02231) relates to the Clinton Property; it names Altria, M & M, Moussa, Farzaneh and Morad as defendants. The second lawsuit (Adversary Proceeding No. 14–02386) relates to the Gates Property; it names MBM Development, M & M, Moussa, Morad and Farzaneh as defendants. A third lawsuit (Adversary Proceeding No. 15–01086) relates to the Harlem Property; this lawsuit names MBM Development, MBM Entertainment, M & M, Moussa, Morad and Farzaneh as defendants.

Davis's primary contention in her complaints in the three state court lawsuits is that the Defendants obtained the Clinton Property, the Gates Property and the Harlem Property by fraud or other wrongful act. Davis contends that each property should be deemed subject to a constructive trust or other equitable lien in her favor, and/or that the transfers of the properties should be rescinded and her ownership restored. She also alleges claims for breach of contract and unjust enrichment, and seeks damages to the extent that the equitable relief she seeks is not granted. Defendants filed counterclaims, alleging that Davis made false representations and warranties with respect to the properties and breached the parties' contracts.

The Debtors filed voluntary Chapter 11 petitions on April 8, 2014. Judge Gropper entered an Order directing the Joint Administration of the three cases on May 1, 2014.

In July 2014 Davis removed two of her three state court lawsuits to this Court on the ground that they were “related to” the pending Chapter 11 cases. The Notices of Removal of the lawsuits relating to the Clinton Property and the Gates Property were filed on July 1, 2014, and after a series of transfers those lawsuits were referred to this Court on August 18, 2014. The Notices of Removal stated that Davis consented to this Court's entry of a final judgment with respect to all of the removed claims and counterclaims.

On August 14, 2014, Davis also filed proofs of claim against Altria, MBM Development and MBM Entertainment. See Defendants' Trial Exhibits LL, MM and NN. Davis's proof of claim against Altria attached a copy of the complaint in the state court lawsuit relating to the Clinton Property; her claim against MBM Development attached a copy of the complaint in the lawsuit relating to the Gates Property; and her claim against MBM Entertainment attached a copy of the complaint in the state court lawsuit relating to the Harlem Property. Davis thereby incorporated all of her claims against the Debtors in all three of the state court lawsuits into her proofs of claim against the Debtors in these cases.

On August 29, 2014, the Debtors filed a proposed Joint Plan of Liquidation [Dkt. 20]¹ and a proposed Disclosure Statement [Dkt. 23]; amendments were filed on December 19, 2014. The amended plan contemplates sales of the Clinton Property, the Gates Property and the...