Day v. Durie Props., LLC, Case No. 08-18384 (MS)
| Decision Date | 07 February 2014 |
| Docket Number | Case No. 08-18384 (MS),Adv. Pro. No. 13-1959 |
| Parties | Re: In re Ralph M. Day, Sr. Wasserman v. Durie Properties, LLC, et als |
| Court | U.S. Bankruptcy Court — District of New Jersey |
Re: In re Ralph M. Day, Sr.
Wasserman
v.
Durie Properties, LLC, et als
Case No. 08-18384 (MS)
Adv. Pro. No. 13-1959
UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY
February 7, 2014
MORRIS STERN
BANKRUPTCY JUDGE
WASSERMAN, JURISTA & STOLZ, P.C.
Scott S. Rever, Esq.
Attorneys for Plaintiff,
Robert B. Wasserman, Chapter 7 Trustee
CAPEHART & SCATCHARD, P.A.
William G. Wright, Esq.
Attorneys for Offices of Charles Shaw
& Associates and Charles Shaw, Esq.
DUNN, BROWNE & VARCADIPANE, LLC
Timothy J. Dunn II, Esq.
Jeffrey W. Varcadipane, Esq.
Attorneys for Defendants, Durie Properties, LLC,
CLM Management Corp., Louis A. Capazzi, Jr.
and Ann Capazzi
CHARLES SHAW & ASSOCIATES, P.C.
Charles Shaw, Esq.
Eilish McLoughlin, Esq.
Attorneys for Charles Shaw, Esq.
and Virginia Day
Dear Counsel:
The trustee in this Chapter 7 case seeks a permanent injunction against certain adverse parties initiating and/or continuing state court litigation which would by rule, statute, and a proposed voluminous complaint, extend matters in dispute. That extension of litigation would include (but not be limited to) frivolous litigation assertions against the trustee and related parties. Those parties adverse to the trustee have moved this court for various forms of relief to
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permit the state court processes to go forward.
This bankruptcy case, currently under Chapter 7, was originally filed via a voluntary Chapter 11 petition on May 6, 2008. A Chapter 11 trustee, Robert Wasserman, was appointed on January 5, 2009; ultimately the case was converted to one under Chapter 7 (February 3, 2010), with Wasserman being the Chapter 7 trustee.
The period following the original filing (now approaching six years) has had extensive litigation activity, currently focusing on the Superior Court of New Jersey, Law Division, Bergen County case (Dkt. No. L-46004-09) (the "state case"), which was initiated May 20, 2009 (ostensibly naming the debtor, Ralph Day, Sr., and his wife Virginia as plaintiffs, the debtor being replaced as a plaintiff by Robert Wasserman, then Chapter 11 trustee, in an amended complaint filed November 17, 2009).2 The trustee's pleading has culminated by process of amendment (including the naming of additional defendants) in the "Third Amended Complaint," filed July 15, 2011.
By the time the dust settled in the affirmative pleading process, the trustee was asserting twenty-three counts emanating from real estate-based development projects co-ventured in one
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form or another by the debtor and defendant Louis A. Capazzi, Jr. Their many business ventures, seemingly gone sour, generated counts for RICO violations (Counts 1, 2, 3 and 4), Misrepresentation (Count 5), Fraud (Count 6), False Premises (Count 7), Negligence (Counts 8 and 9), and Attorney Malpractice (Count 10), among other direct claims seeking recourse against parties-defendant in addition to Capazzi.
In addition to Capazzi, named defendants included: Capazzi's wife Ann (hereinafter "Ann"), (who, notably, was/is an owner of East Coast Title Agency, though at one point Capazzi was said to be the "principal"3); East Coast Title Agency (Ann's agent/broker entity which served in that capacity for Chicago Title Insurance Company in certain relevant real estate transactions); Chicago Title (a national title insurer which issued policies in relevant transactions); William J. Rush, Esq. (real estate attorney who provided legal services in one or more relevant transactions in dispute); Ankit Duggal (a notary public, said to be associated with Rush and/or East Coast, who is alleged to have attested to certain documentation relevant to real estate transactions in dispute); Paul Case (said to be associated with Capazzi, a notary public alleged to have attested to certain documentation relevant to real estate transactions in dispute); and, Durie Properties, LLC (a New Jersey limited liability company through which Day and Capazzi operated, to one degree or another).
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As will be seen, by virtue of three bankruptcy court approved settlements directly4 affecting certain defendants in the state case (with Rush and Chicago, then East Coast and Case, and then Duggal), the matters in dispute in that case were at least theoretically narrowed.
The ultimate responsive pleading included, in addition to denials and defenses, eleven significant counterclaim counts.5 The counterclaiming defendants were only Capazzi, Durie, and CLM. As pled, the trustee and Virginia Day (the ultimate named plaintiffs) were targeted.6 Essentially, the same basic real estate ventures complained of by the trustee were, in one or another reverse view, complained of by the counterclaimants. There are, however, at least two variants from the real estate-based claims: counterclaim Count 9 is for malicious prosecution based upon the trustee's (and Virginia Day's) initiation of the subject litigation; Count 11 is a claim asserting negligence of the trustee and seeks recourse only against him.
It is noteworthy that the counterclaimants: failed to seek bankruptcy court relief and
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authorization to sue the trustee; never sought relief to assert claims in the state case stayed by 11 U.S.C. § 362(a); chose not to file a proof of claim in this bankruptcy case; and, did not take steps to seek an exception to the discharge of Day's debts (which has now been granted). Moreover, now ingrained in the state court motions and proposed pleadings are (among other movant-pled deficiencies): allegations inconsistent with this court's approved settlements, appointments and determinations; assertions (particularly of "fraud" on this court) which should, if at all meritorious, have been raised with this court but were not; claims based on inapplicable legal concepts (e.g., that the trustee has been pursuing "derivative" actions for Durie rather than, as is his charge per 11 U.S.C. §§ 323, 704 and 1106, for the benefit of the 11 U.S.C. § 541(a) created estate in bankruptcy); and, causes with prepetition origins now subject to discharge (as well as the effect of extraordinary delay in properly moving against Day).
Bankruptcy Court Appointment Approvals (Trustee, Counsel and Special Counsel). Over the course of this bankruptcy case, trustee Wasserman was approved by this court for appointment twice, once as Chapter 11 trustee and then as Chapter 7 trustee. In each capacity, Wasserman's law firm was appointed to be his counsel. Of continuing significance is the series of appointments of Charles Shaw, Esq. (and/or his firm) as special counsel, first to the Chapter 11 debtor-in-possession (10/1/08 order), then in that capacity to the Chapter 11 trustee (5/18/09), and ultimately as special counsel to the Chapter 7 trustee (1/17/12). Shaw had filed the state case. No objection was raised to Shaw's three previous appointments or his service over a period of more than four years. However, by motions filed on 11/21/12 on behalf of a number of the state case defendants, Shaw's representation was attacked; disqualification was sought (and/or sanctions) for purported infractions in applying for special counsel status and otherwise
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undertaking/promoting representation in the state case.7 In the same period, Shaw's representation was challenged by motion in the state case. Both bankruptcy court and state court motions to disqualify Shaw were denied.
This court has noted that the East Coast-Case-Ann motion before this court argued (in their supporting brief and among its many assertions) that: "The Claims in Day v. Capazzi, et al. are Meritless and Were Contrived by Day and Shaw as Part of a Larger Scheme to Manipulate the Bankruptcy Estate"8 (p.22). This ultimate point was not reached for determination (nor the subject of direct focus at this time). Rather, this court dealt with the bona fides of the state case only in terms of the trustee's assessment of it and confidence in it. Deference was given to that assessment and Shaw's continued role in the litigation. Compliance with state court rules by Shaw, his status as a potential witness, conflict of interest and such issues were identified as possible state court interests "if those issues were real." In sum, this court said:
Now, if Mr. Shaw's conduct ran afoul of one or another Court Rule in the Superior Court it was the obligation of the moving parties here to bring that to the attention of that judge. They certainly moved on the basis of potential witness status of Mr. Shaw and lost on that motion [in the state case]. And they could have coupled that motion with substantive issues if those issues were real on the basis of conflict or otherwise. And so they've taken another bite at the apple here. The Court denies the motion for the reasons set forth on the record.
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12/17/12 Tr. at 15:13-21 (emphasis added)9.
Similarly, there was a state case hearing of December 5, 2012. The hearing transcript (related to Shaw being a witness in that case and as a precursor to the effort to disqualify him - ultimately denied), characterizes Shaw as an alleged party to purported Day misdeeds. The state judge was clear as to Shaw's potential party status. "He's not a party and he's not going...
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