Cortes v. Juquila Mexican Cuisine Corp.
| Decision Date | 31 March 2022 |
| Docket Number | 17-CV-3942 (RER) |
| Court | U.S. District Court — Eastern District of New York |
| Parties | Pamella Cortes, Leticia Gonzalez, and Ariana Reyes, on behalf of themselves and all others similarly situated Plaintiffs, v. Juquila Mexican Cuisine Corp. D/B/A/ Juquila Mexican Cuisine, Juquila Kitchen and Bar Corp. D/B/A/ Juquila Kitchen & Bar; Teofila Mendez, and Cristobal Bonilla, Defendants, and Santa Catarina, Inc., Respondent. |
Pamella Cortes, Leticia Gonzalez, and Ariana Reyes, on behalf of themselves and all others similarly situated Plaintiffs,
v.
Juquila Mexican Cuisine Corp. D/B/A/ Juquila Mexican Cuisine, Juquila Kitchen and Bar Corp. D/B/A/ Juquila Kitchen & Bar; Teofila Mendez, and Cristobal Bonilla, Defendants,
and Santa Catarina, Inc., Respondent.
No. 17-CV-3942 (RER)
United States District Court, E.D. New York
March 31, 2022
MEMORANDUM AND ORDER
RAMON E. REYES, JR., U.S.M.J.
On April 5, 2021, this Court entered final judgment awarding damages, attorneys' fees, costs, and post-judgment interest (the “Judgment”) in favor of Plaintiffs Pamella Cortes, Leticia Gonzalez, Ariana Reyes, Lucia Isabel Rivera Estrada, and Blanca Nelly Ayala (collectively, “Plaintiffs” or “Judgment Creditors”) against their former employer, Juquila Mexican Cuisine Corp. (“Juquila” or “Judgment Debtor”). (ECF No. 96). On November 19, 2021, Plaintiffs served an information subpoena and restraining notice upon non-party respondent Santa Catarina, Inc.
(“Santa Catarina” or “Respondent”) seeking post-judgment discovery regarding Juquila's assets (ECF Nos. 99, 102; see also ECF No. 108-1 (“Subpoena and Restraining Notice”)), and now move pursuant to Rule 69 of the Federal Rules of Civil Procedure to enforce the Judgment against Santa Catarina as Juquila's fraudulent transferee and garnishee (ECF No. 100 (“Turnover Mot.”)). Santa Catarina, in turn, opposes the motion and cross-moves to quash the information subpoena pursuant to Rule 45 of the Federal Rules of Civil Procedure, or alternatively seeks a protective order vacating the subpoena pursuant to Rule 26 of the Federal Rules of Civil Procedure. (ECF No. 107). After carefully reviewing the record, and for the reasons set forth herein, Plaintiffs' motion for a turnover order is granted to the extent that the Court finds it has jurisdiction to preside over these proceedings and has personal jurisdiction over Respondent, but is otherwise denied at this time. Respondent's cross-motion to quash the information subpoena is denied in its entirety.
BACKGROUND
Although the Court assumes familiarity with the facts underlying Defendants' liability and Plaintiffs' damages, details regarding the procedural history of the action and relevant facts are provided as context for the fraudulent activities Plaintiffs allege were undertaken by Defendants and by the Respondent during the pendency of these proceedings.
Plaintiffs commenced this action on June 30, 2017. (ECF No. 1 (“Compl.”)). After nearly a year of proceedings and the completion of discovery, the parties informed the Court that they reached a settlement in principle on August 1, 2018. (See ECF Nos. 28, 30; Order dated 06/20/2018). Later that month, however, Juquila filed for Chapter 11 bankruptcy. (See Bankr. E.D.N.Y. 1:18-44976 (NHL), ECF No. 1, Voluntary Petition for Non-Individuals Filing for Bankruptcy dated 8/29/2018). As a result of the bankruptcy, Defendants' counsel informed the Court that Juquila could not commit to a settlement because any offer would need to be approved
by the bankruptcy court and by the restaurant's other creditors. (ECF No. 39). The parties nevertheless continued to negotiate a settlement with individual defendants Cristobal Bonilla and Teofila Mendez-the husband and wife team that owned and operated Juquila-and contemplated settling with Juquila as a debtor in possession beginning in November 2018 and through early 2019. (ECF Nos. 44, 48, 49, 50, 51).
During those settlement negotiations, the parties consented to my jurisdiction. (ECF No. 47). While those negotiations were taking place, Mr. Bonilla's and Ms. Mendez's son, Darion Mendez (“Darion”), incorporated Santa Catarina, Inc. under the laws of the State of New York on January 3, 2019. (ECF No. 101-3 (“Cert. of Inc.”) at 5). The address provided in the certificate of incorporation is the site of Juquila's restaurant, 40-12 83rd Street, Elmhurst, N.Y. 11373, which was still operating at the time. (Id. at 4).
Less than two weeks later, on January 15, 2019, Mr. Bonilla informed Juquila's bankruptcy counsel that he intended to close down the restaurant. (ECF No. 52). As a result, Juquila filed a motion to dismiss the chapter 11 case. (Bankr. E.D.N.Y. 1:18-44976 (NHL), ECF No. 36 (“Bankr. Mot. to Dismiss”)). In the motion, Juquila explained that after months of declining profitability, it could no longer effectively reorganize or continue to operate. (Id. at 5). Juquila further explained that it owed $48, 000 in rent arrears, which, along with more than $35, 000 in administrative claims, took priority over the then-disputed, unsecured claims that formed the basis for this litigation. (Id. at 4-5.). According to the motion:
[Juquila's] administrative claim and the amount due for rental arrears exceed[ed] the value of its assets. The Debtor's only assets [we]re its bank accounts, security deposits, supplies, kitchen equipment and restaurant furnishings. The Debtor valued its assets at approximately $89, 000 in its Schedule B, but it suspects that the assets would bring substantially less than that amount if they were liquidated
(Id. at 5).
On February 18, 2019, while Juquila's motion to dismiss its Chapter 11 case was pending, Mr. Bonilla agreed to terminate the restaurant's lease-which was originally set to expire in September 2024-and surrendered the property to his landlord, Jose Aguera (the “Landlord”). (ECF No. 101-1 at 8; ECF No. 66 at 7).[1] According to the terms of the termination agreement, Mr. Bonilla surrendered the lease to the Landlord “as is, ” to satisfy Juquila's outstanding debt of $83, 210.54 in unpaid rent and utility bills. (ECF No. 101-1 at 8; ECF No. 66 at 7). Although the “Restaurant Premises, Equipment & tools [were] not enough to cover even 30%” of that outstanding debt, [2] the Landlord and Mr. Bonilla agreed that “the termination of the lease and surrender of leased premises is at the end the best decision.” (Id.).
In bankruptcy filings, Mr. Bonilla explained that he was forced to close Juquila after Ms. Mendez terminated their marriage and left their joint business along with half of their staff. (Bankr. E.D.N.Y. 1:18-44976 (NHL) ECF No. 41 ¶ 1). Soon after that, Mr. Bonilla “closed the doors and returned the keys to the Landlord, ” and “[s]ince virtually all of the contents belonged to the Landlord, and [Juquila] owed him a significant amount of rent, [Mr. Bonilla] thought this was the proper thing to do.” (Id.) (emphasis added). The Landlord's counsel similarly informed the bankruptcy court shortly after the termination of the lease that, based on representations made by Mr. Bonilla through Juquila's bankruptcy counsel, and based on representations made by the Landlord himself, “that all of the contents of the restaurant, except for two small used refrigerators, were in the premises when [Juquila] leased the space and the contents belonged to the Landlord, ” and that “[w]hen [Juquila] vacated the premises, he returned the premises and its
contents to the Landlord.” (Bankr. E.D.N.Y. 1:18-44976 (NHL) ECF No. 40 ¶ 2) (emphasis added).
Around this time, in February 2019, “Santa Catarina Inc. [doing business as] Juquila” applied for a New York State liquor license. (ECF No. 101-4 at 3) (emphasis added). In March 2019, Dr. Sevilla Vilar and Darion entered into an oral agreement to share ownership of Santa Catarina, with respective 90% and 10% interests. (ECF No. 110 (“Darion Mendez Decl.”) ¶ 5; ECF No. 109 (“Vilar Decl.”) ¶ 5)). On March 7, 2019, less than three weeks after Mr. Bonilla surrendered the restaurant, Dr. Vilar and Darion signed an agreement with the Landlord on behalf of Santa Catarina to rent the restaurant space “as is.” (ECF No. 108-2 at 1, 8, 11). The lease provided for a seven year term at a base monthly rate of $11, 000 for the first year, with 3% increases each year thereafter. (Id. at 10). The same day that the Landlord and Santa Catarina executed the new lease, the bankruptcy case against Juquila was dismissed. (Bankr. E.D.N.Y. 1:18-44976 (NHL) ECF No. 43).
On March 15, 2019, Plaintiffs informed the Court of their understanding that the restaurant had closed down, that Mr. Bonilla intended to file for personal bankruptcy, and that Ms. Mendez's whereabouts were unknown. (ECF No. 54). Darion and Dr. Vilar report that at that time, they had already begun operating the restaurant, and that Ms. Mendez was working there as a part-time employee assisting with food deliveries. (Darion Mendez Decl. ¶¶ 8-9; Vilar Decl. ¶¶ 8-9).[3]
By May 3, 2019, Plaintiffs learned that Juquila had reopened, and believed the restaurant to be under the same ownership and operation as before. (ECF No. 56 at 1). At that point, Mr. Bonilla denied having any interest in the re-opened restaurant; nevertheless, Plaintiffs explained in a letter to the Court that they believed that the corporate successor operating Juquila restaurant would be
liable for Plaintiffs' claims. (Id. at 1). After learning of Ms. Mendez's personal bankruptcy filing, [4]and of the dissolution of Juquila, Plaintiffs requested a stay of the proceedings in June 2019 to give them time to “investigate and consider the option of identifying and naming, as a Defendant, the successor corporation that currently owns and operates Juquila Mexican Cuisine.” (ECF No. 61).
In July 2019, Plaintiffs confirmed their understanding that Juquila Restaurant was taken over by Santa Catarina, and alleged that Juquila fraudulently transferred the restaurant to Santa Catarina for no remuneration. (ECF No. 65). Plaintiffs simultaneously notified the Court that they intended to pursue a default judgment inquest against Juquila, and to move to reverse the conveyance or enforce the judgment against Santa Catarina. (Id.). At a telephone conference held July 19, 2019, Plaintiffs' counsel reiterated their belief that fraudulent activity was...
To continue reading
Request your trial