Good Gateway, LLC v. NRCT, LLC (In re Bay Circle Props., LLC)

• Decision Date: 23 August 2022
• Docket Number: Case No. 15-58440-WLH,Adv. Proc. No. 19-5284
• Citation: 646 B.R. 348
• Parties: IN RE: BAY CIRCLE PROPERTIES, LLC, et al., Debtor. Good Gateway, LLC, and Seg Gateway, LLC, on behalf of John Lewis, Chapter 7 Trustee for Bay Circle Properties, LLC, Plaintiff, v. NRCT, LLC, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

646 B.R. 348

IN RE: BAY CIRCLE PROPERTIES, LLC, et al., Debtor.

Good Gateway, LLC, and Seg Gateway, LLC, on behalf of John Lewis, Chapter 7 Trustee for Bay Circle Properties, LLC, Plaintiff,
v.
NRCT, LLC, Defendant.

Case No. 15-58440-WLH
Adv. Proc. No. 19-5284

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

Signed August 23, 2022

646 B.R. 352

Austin Alexander, Thompson Hine LLP, Atlanta, GA, Austin B. Alexander, Walter E. Jones, Patrick Silloway, Balch & Bingham LLP, Atlanta, GA, Damien H. Prosser, Morgan & Morgan, Orlando, FL, for Plaintiff.

Lauren Frieder, Adams and Reese LP, Tampa, FL, Henry F. Sewell, Jr., Law Offices of Henry F. Sewell, Jr., LLC, Atlanta, GA, for Defendant.

Clay Townsend, Morgan & Morgan, PA, Orlando, FL, for Trustee John Lewis, Jr.

ORDER AFTER TRIAL AND FINAL ORDER AWARDING ADEQUATE PROTECTION TO SEG GATEWAY, LLC AND GOOD GATEWAY, LLC

Wendy L. Hagenau, U.S. Bankruptcy Judge

I. Introductory statement

This adversary proceeding arises from the Court's order awarding an adequate protection lien to SEG Gateway, LLC and Good Gateway, LLC (collectively "Gateway") on the proceeds of this Debtor's Contribution Claim, when it sold property on which Gateway held a lien. The five Debtors¹ were liable to Wells Fargo as guarantors of a series of loans and the sale paid down the joint obligation to Wells Fargo. Ultimately, the debt to Wells Fargo was satisfied and all of the Debtors, except NRCT, paid a portion. Bay Circle now seeks contribution from NRCT, the amount of which fixes the amount of the adequate protection lien. The Court's order on adequate protection for Gateway is not a final order,² awaiting the outcome of this adversary proceeding to determine the right of one Debtor against another for contribution. The Court notes that both the award of adequate protection and the determination of contribution are equitable remedies and require the exercise of discretion. The Court now enters its Order in this adversary proceeding and its Final Order on Adequate Protection for Gateway.

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II. Findings of Fact

The Court makes the following findings of fact.³ Additional findings of fact are discussed below in the context of the legal analysis. To understand the claims and defenses, one must start with the history of the entities and obligations involved.

A. Thakkar and Entities

Chittranjan ("Chuck") Thakkar ("Mr. Thakkar") has a background in accounting and business. He holds an MBA in finance, and he worked in commercial lending for banks in the Midwest for several years including as Vice President of Commercial Lending for Bank One. He then went into the manufacturing business and then the information technology business. In 2007-2008, he began investing in real estate. Mr. Thakkar set up various entities and related affiliates, several of which are described below, for which he served as manager. (The Court refers to any entity owned by Mr. Thakkar or his family and for which Mr. Thakkar was manager as a "Thakkar Entity".) At one time, there were over sixty Thakkar Entities; now there are twenty—twenty-five such entities.

Niloy, Inc. ("Niloy"), a Thakkar Entity, was originally in the information technology business and owned a retail computer store. Its focus eventually shifted to be a systems provider for corporate accounts. In its operations, it established a banking relationship with what ultimately became Wells Fargo (Niloy had been a customer of SouthTrust Bank since 1992, which was acquired by Wachovia and later Wells Fargo). Niloy stopped working in the IT industry sometime around 2013-14. Today, it does very little business.

Nilhan Financial, LLC ("NF") was formed in 2008 as a Thakkar Entity to act as a "banker" to the Thakkar Entities—it would loan funds borrowed by it or Niloy from Wells Fargo to other Thakkar Entities. Sometimes the proceeds were "loaned" to the Thakkar Entity documented by a note. Other times, the loan proceeds were "allocated" to another Thakkar Entity with simple accounting entries. An involuntary bankruptcy petition was filed against NF in 2017, Case No. (8:17-bk-03597-MGW), in the U.S. Bankruptcy Court for the Middle District of Florida, and an order for relief was entered. The bankruptcy case remains pending as a Chapter 7 case.

Jax Fairfield Financial, LLC ("Jax Financial") was set up to finance investment in hotels. It financed or invested in some

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hotels, including one owned by Jax Fairfield Hotel Group, LLC, which is owned in part by another Thakkar Entity. When that hotel was sold in 2012, Jax Financial financed the purchase. The purchase money note was paid in 2014. Jax Financial later assumed some accounting functions from NF (tracking transactions between Thakkar Entities). It continued to transfer money to some of the Debtors in these cases post-petition, and Sugarloaf made payments on the SIMBA loan (discussed below) through Jax Financial in 2017 and 2018. Mr. Thakkar testified Jax Financial has no operating business of its own and has been winding down operations for the last three to four years.

Niloy & Rohan, LLC ("N&R") (named for Mr. Thakkar's sons, Niloy and Rohan) was set up to invest in companies. For the last four to five years, N&R has not operated. N&R was also an owner of Orlando Gateway Partners ("OGP") with SEG Gateway, LLC (SEG Gateway's members, in turn, were Good Gateway, LLC and Orlando Gateway).

OGP was formed to acquire and develop real property near the Orlando airport. State court litigation ensued between Gateway and OGP (Gateway alleged OGP improperly transferred property), and a judgment was entered against OGP in Florida. On April 20, 2015, OGP filed its own bankruptcy case (Case No. 6:15-bk-03448-MGW) in the United States Bankruptcy Court for the Middle District of Florida on the eve of a sheriff's sale of its real property.

The five Debtors were also Thakkar Entities.

Bay Circle was owned 50% by Mr. Thakkar and 50% by his wife, Saloni Thakkar ("Mrs. Thakkar") (Case No. 15-58440 Doc. No. 18 p. 5). Bay Circle was formed to hold real estate (6600 Bay Circle and 6610 Bay Circle) previously owned by the Thakkars individually.

DCT was owned 50% by Niloy Thakkar and 50% by Rohan Thakkar (Case No. 15-58441 Doc. No. 19 pp. 5-6). DCT was formerly involved in the IT industry, but it transitioned out of that business and came to own office warehouse facilities in Norcross, Georgia.

Nilhan Developers was owned 50% by Niloy Thakkar and 50% by Rohan Thakkar (Case No. 15-58443 Doc. No. 18 p. 5). Nilhan Developers held several parcels of real property at 2800, 2810, 2812, and 2814 Spring Road, collectively known as the Emerson Property, located in Cobb County, Georgia.

Sugarloaf was owned 100% by Sugarloaf Centre Partners, LLC (Case No. 15-58442 Doc. No. 18 p. 5), which in turn is owned 50% by NRCT (one of the Debtors) and 50% by NCT Systems, Inc. ("NCT"). (Gateway claims 100% ownership of NCT by virtue of a judgment.) Sugarloaf owned unimproved land, a shopping center, and commercial buildings at 1930, 1950, and 1970 Satellite Boulevard, located in Gwinnett County, Georgia.

NRCT was owned 50% by Niloy Thakkar and 50% by Rohan Thakkar (Case No. 15-58444 Doc. No. 18 p. 5). (Mr. Thakkar has subsequently claimed to own a 5% interest in NRCT.) NRCT held non-income producing real property in Georgia and South Carolina, 100% of an entity called Shops at New Hope, LLC, and 50% of Sugarloaf Centre Partners, LLC (which owns Sugarloaf).

B. Loan History

In 2008, Niloy had a line of credit with Wells Fargo in the amount of $50 million or more. On August 15, 2008, Wells Fargo entered into a new revolving line of credit with NF and Niloy as co-borrowers and

646 B.R. 355

direct obligors. The 2008 loan was amended on July 16, 2010. At that time, a new loan agreement was executed. Niloy and NF remained liable for the amounts due under the original note. The loan was guaranteed by DCT, Sugarloaf, NRCT, Nilhan Developers, N&R, and Mr. and Mrs. Thakkar. Mr. and Mrs. Thakkar signed a note in the principal amount of $5,025,000 guaranteed by Niloy, NF, and DCT. DCT signed a note in the principal amount of $6,900,000 guaranteed by Niloy, NF, and Mr. and Mrs. Thakkar. (Bay Circle was not involved in the 2010 loan.)

Separately, Niloy and NF later entered into and were counterparties to interest rate swap transactions under a swap agreement dated January 6, 2009, which was amended on February 7, 2011 (the "Swap Agreement"). There were no other obligors on the Swap Agreement. Mr. and Mrs. Thakkar guaranteed the agreement.

The lending relationship between Wells Fargo and the Thakkar Entities was significantly restructured again on April 30, 2013 into two notes and the Swap Agreement: 1) a company note on which NF and Niloy were obligors (Company Loan Note) in the original principal amount of $19,750,000 and 2) an individual note (Individual Loan Note) on which Mr. and Mrs. Thakkar were obligors in the original principal amount of $12,910,000 (collectively, the "Loan Agreement"). The Individual Loan Note included the outstanding balance of the DCT loan and $2,575,000 of the company balance (which was then around $22 million). The Loan Agreement provides that the Company Loan Note and the Individual Loan Note amended, restated, and superseded the 2010 notes.

Each Debtor guaranteed all loan obligations (this was the first Bay Circle guaranty of any Wells Fargo debt and the first time Nilhan Developers, NRCT, and Sugarloaf guaranteed Mr. and Mrs. Thakkar's debt or the Swap Agreement. DCT was also added as a guarantor to the Swap Agreement.). The Company Loan was also guaranteed by Mr. and Mrs. Thakkar, N&R, OGP, and Jax Financial. The Individual Loan was also guaranteed by Niloy, NF, N&R, OGP, and Jax Financial. (Obligations under the Company Loan Note, the Individual Loan Note, and the Swap Agreement are collectively referred to as the "Loan Obligations.") This is the first time Jax and OGP guaranteed the Loan Obligations.

The Loan Obligations were secured by collateral...