Raj & Raj Realty, Ltd. v. Difficile Realty Corp. (In re Sun Prop. Consultants, Inc.)
| Decision Date | 17 May 2021 |
| Docket Number | Adv. Pro. No.: 8-19-08064-las,Case No.: 8-16-72267-las |
| Citation | 629 B.R. 682 |
| Parties | IN RE: SUN PROPERTY CONSULTANTS, INC., Debtor. Raj & Raj Realty, Ltd., Plaintiff, v. Difficile Realty Corp., Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
Brad Adam Schlossberg, Berger, Fischoff & Shumer, LLP, Syosset, NY, William M. Gearty, Esq., Nesconset, NY, for Plaintiff.
Michael S. Amato, E. Christopher Murray, Ruskin Moscou Faltisckek PC, Uniondale, NY, for Defendant.
Before the Court is defendant's motion pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Fed. R. Civ. P."), as made applicable to this adversary proceeding by Bankruptcy Rule 7012, to dismiss plaintiff's amended complaint ("Amended Complaint")1 for failure to state a claim for relief. [Dkt. No. 41]. Plaintiff opposed the motion [Dkt. No. 46], and defendant filed a reply [Dkt. No. 48]. The Court has carefully considered the arguments and submissions of the parties in connection with the motion to dismiss. For the following reasons, the Court grants defendant's motion and dismisses the Amended Complaint in its entirety.
The Court has subject matter jurisdiction under 28 U.S.C. § 1334(b), 28 U.S.C. § 157(a), and the Standing Order of Reference entered by the United States District Court for the Eastern District of New York, dated August 28, 1986, as amended by Order dated December 5, 2012.
On May 23, 2016, Sun Property Consultants, Inc. ("Debtor") filed a petition for relief under chapter 11 of the Bankruptcy Code. At the time of the bankruptcy filing, the Debtor owned and operated a strip shopping center located at the intersection of 4019-4021 Hempstead Turnpike, Bethpage, New York 11714 and 150-166 Hicksville Road, Bethpage, New York 11714 (the "Property"). In Schedule G (Executory Contracts and Unexpired Leases) to its chapter 11 petition, the Debtor disclosed that, as landlord, it was party to five unexpired leases with the following tenants: Brothers Three Inc., Northshore Community Services, Inc., W.B. Restaurant Inc., Watawa Japanese Cuisine Inc., and Xu Lei. [Bankr. Case No. 16-72267, Dkt. No. 28]3 . Vacant tenant space at the Property, formerly occupied by a restaurant known as Singletons under an alleged lease between the Debtor and the plaintiff Raj & Raj Realty, Ltd. ("Raj & Raj" or "plaintiff"), was the subject of concerted effort by the Debtor and, subsequently, Yann Geron, Esq., the chapter 11 trustee appointed in the Debtor's chapter 11 case, to find a new tenant. Neither Raj & Raj nor Singletons is listed in Debtor's Schedule G as a party to an existing lease for tenant space at the Property. Raj & Raj is listed as a general unsecured creditor in the Debtor's amended Schedules E/F (Creditors Who Have Unsecured Claims) with a disputed claim in an unknown amount with no description given as to the basis for Raj & Raj's claim. [Bankr. Dkt. No. 20]. Raj & Raj is scheduled as having a mailing address of 127 Reeve Road, Rockville Centre, NY 11570 ("Rockville Centre Address").
The Rockville Centre Address is listed in the Debtor's chapter 11 petition as the Debtor's mailing address even though its business address and the Property address are listed as 150 Hicksville Road, Bethpage, NY 11714. [Bankr. Dkt. No. 1]. The Rockville Centre Address is also the address of the Debtor's sole shareholder, Dr. Rajesh K. Singh ("Rajesh"), and his wife Rajeswary Singh ("Rajeswary"). Rajesh and Rajeswary are the parents of Harendra Singh ("Harendra") who operated Singletons. Singletons closed in December 2015 and Bethpage Bistro & Catering, LLC ("Bethpage Bistro") was formed in January 2016 to operate in the tenant space formerly occupied by Singletons. Oct. 5, 2017 Hearing Transcript ("Hr'g Tr.") 51:23-25. [Bankr. Dkt. No. 219].
By motion dated August 23, 2017, the Debtor sought an order authorizing it to enter into a lease agreement with Bethpage Bistro for the tenant space previously occupied by Raj & Raj ("Lease Approval Motion"). [Bankr. Dkt. No. 183]. The Debtor did not move to assume and assign to Bethpage Bistro any existing unexpired lease with Raj & Raj, nor did the Debtor move to reject any existing unexpired lease with Raj & Raj. That it did not undertake either assumption and assignment or rejection is consistent with Schedule G where, as noted above, the Debtor did not state that it is a party to an unexpired lease with Raj & Raj, nor did it list Raj & Raj as a tenant at the Property.
Prior to filing the Lease Approval Motion, during the months of February 2017 to June 2017, the Debtor made several payments to Bethpage Bistro claiming that Bethpage Bistro had arrangements with third parties, including vendors, to provide services, such as garbage removal, extermination, and snow removal, for the Property even though Bethpage Bistro was not a tenant at the time. [Bankr. Dkt. No. 201]. No authority was sought by the Debtor from this Court to make any post-petition payments to Bethpage Bistro for such services. The Lease Approval Motion was withdrawn at a hearing before the Court on January 25, 2018.
Mr. Geron filed a motion to convert the chapter 11 case to a chapter 7 case on August 30, 2018 ("Conversion Motion"). [Bankr. Dkt. No. 301]. The only party to object to conversion of the case was Atalaya Asset Income Fund II LP. [Bankr. Dkt. No. 308]. The Court granted the Conversion Motion after a hearing and the chapter 11 case was converted to a chapter 7 case on October 3, 2018 ("Conversion Date"), [Bankr. Dkt. No. 313], and Mr. Geron was appointed chapter 7 trustee ("Trustee") [Bankr. Dkt. No. 315].
The Trustee filed an application on October 16, 2018 seeking an order (i) approving proposed bidding procedures and terms and conditions of sale of the Property, (ii) scheduling an auction date in connection with the sale, (iii) authorizing the sale of the Property to the highest or best bidder at auction, "as is" and "where is", free and clear of all liens, claims, encumbrances, including any purported easements, and (iv) approving the form of sale agreement to be executed by the Trustee and the successful purchaser (the "Sale Motion"). [Bankr. Dkt. No. 326]. The Sale Motion was served on the Debtor's creditors, and on Raj & Raj, Rajesh, and Rajeswary at the Rockville Centre Address, and on Harendra in care of his counsel who previously filed a notice of appearance in the bankruptcy case. [Bankr. Dkt. No. 330]. No opposition to the Sale Motion was filed and the Court entered an order granting the Sale Motion on November 7, 2018. [Bankr. Dkt. No. 332]. The Trustee conducted the auction sale on November 29, 2018 and after a hearing before the Court on November 30, 2018, the Court entered an order approving the sale of the Property to Valentine Mark Corporation ("VMC") or its assignee ("VMC Sale Order"). [Bankr. Dkt. No. 348]. VMC's assignee, 4021 Hempstead Turnpike, LLC ("4021 HTL"), failed to close on the sale. [Bankr. Dkt. No. 351]. Thereafter, a dispute arose between the Trustee and 4021 HTL as to the disposition of the $620,000 earnest money deposit which was subsequently resolved with the Debtor's estate retaining $420,000 and the balance being released to 4021 HTL.
By Order dated February 1, 2019, the Court approved the sale of the Property to the back-up bidder, REMM Consultants, Inc. ("REMM"), or to REMM's designee ("REMM Sale Order", and together with the VMC Sale Order, the "Sale Orders"). [Bankr. Dkt. No. 373]. The sale of the Property, pursuant to 11 U.S.C. § 363,4 was in ‘as is’ and ‘where is’ condition and free and clear of all liens, claims and encumbrances, including any purported easements, other than "Permitted Exceptions" defined in the sale agreement, with any such liens, claims and encumbrances, including any purported easements, to attach to the sale proceeds.
The Trustee and REMM executed a Purchase and Sale Agreement ("Sale Agreement") for the Property which had attached to it a Rider that defined the "property" sold as including not just the land and buildings, improvements, and structures located on the land, but also "the fixtures, equipment and other personal property attached or appurtenant to the [i]mprovements, to the extent the same belong to the [s]eller." On February 5, 2019, the Trustee conveyed the bankruptcy estate's right, title, and interest in and to the property identified in the Sale Agreement (including the Property) to defendant Difficile Realty Corp. ("Difficile" or "defendant"), as REMM's designee, pursuant to a Bargain and Sale Deed without Covenants.
In the interim, the Trustee entered into separate stipulations with Rajesh, Rajeswary, Harendra and his wife, Ruby Singh ("Ruby"), Raj & Raj, Singh Hospitality Group, and SRB Convention & Catering Corp. (collectively, the "Singh Entities") to toll and extend the time for the Trustee to commence any and all actions against each of the Singh Entities through and including February 13, 2019. [Bankr. Dkt. Nos. 335, 336, 337, 338, 340, 341, 342]. Harendra signed his stipulation on October 15, 2018 [Bankr. Dkt. No. 335] and signed the stipulation on behalf of Raj & Raj, as owner, on November 8, 2018 [Bankr. Dkt. No. 340]. The tolling stipulations were approved by the Court on November 7 and 8, 2018.
Raj & Raj commenced this action on April 12, 2019 by filing its original complaint in State Court ("State Court Action") against Difficile asserting that Difficile's possession of the Property was subject to Raj & Raj's tenancy pursuant to an alleged lease agreement between Raj & Raj and the Debtor, and that Difficile breached that lease when it placed locks on the Property and denied Raj & Raj access to the Property. Raj & Raj also sought money damages for the amount it allegedly spent for capital improvements to...
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