In re Gigliotti, Case No. 11-18910(JKF)
| Decision Date | 25 March 2014 |
| Docket Number | Case No. 12-11986,Adversary No. 12-0471,Case No. 11-18910(JKF),Adversary No. 12-0449 |
| Parties | In re Ronald D. Gigliotti and Carol A. Gigliotti, Debtors. In re John C. Gigliotti, Debtor. Daniel R. Black and Caryn Black, Plaintiffs, v. Ronald D. Gigliotti and John Gigliotti, Defendants |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania |
BY: Jean K Fitzsimon
The deposit funds of Plaintiffs Daniel and Caryn Black (the "Blacks" or the "Plaintiffs") for the purchase of a home that they never occupied were notreturned to them as promised. The Plaintiffs sued the Defendants' company Gigliotti Avignon Associates, L.L.P. ("Gigliotti Avignon") in state court and received a judgment. The Plaintiffs, however, could not collect due to the company's insolvency. In this adversary proceeding, the Blacks seek to recover on the state court judgment from the Defendants Ronald and John Gigliotti (the "Gigliottis" or the "Defendants") based on a theory of piercing the corporate veil. The Plaintiffs also seek to hold any debt owed to them nondischargeable pursuant to sections 523(a)(2) and (a)(4) of the Bankruptcy Code.
The parties filed cross-motions for summary judgment. Based on the available evidence and an examination of the law, the Court concludes that the Plaintiffs, who maintain the burden of proof, have failed to put forth sufficient evidence to support their cause of action for piercing the corporate veil. Therefore, the Plaintiffs' Motion will be denied and the Defendants' Motion will be granted.
Debtors Ronald ("Ronald") and John ("John") Gigliotti, who are brothers, filed separate Chapter 7 bankruptcy petitions on November 18, 2011 and March 1, 2012, respectively.1 On June 15, 2012, Plaintiffs Daniel and CarynBlack filed an initial seven-count complaint in Ronald's bankruptcy, naming as Defendants Ronald, John, their deceased father Christopher, Gigliotti Avignon, the Gigliotti Group, and John or Jane Doe (adv. no. 12-449) alleging, inter alia, fraudulent conveyance, fraud, and conversion. The identical complaint was filed on July 2, 2012 in John's bankruptcy (adv. no 12-471).2
Following Defendants' Motion to Dismiss (doc. #5), and for reasons stated on the record in open court at a hearing held on November 7, 2012, the Court issued an Order dismissing the seven counts of the adversary complaint but permitting the Plaintiffs to file an amended complaint stating causes of action for 1) piercing the corporate veil to enforce a judgment the Plaintiffs received against Gigliotti Avignon in state court (discussed below); and 2) nondischargeability of the debt, if any, pursuant to 11 U.S.C. §§ 523(a)(2) and (a)(4). Doc. #15.
On December 5, 2012, the Plaintiffs, as permitted, filed a three-count Amended Complaint (the "AC"), seeking to pierce the corporate veil to impose personal liability on the Defendants for the state court judgment instituted against Gigliotti Avignon and to deny dischargeability pursuant to §§ 523(a)(2) and (a)(4). Doc. #18.3 The Defendants answered the AC on December 27, 2012. Doc. #19. Following consensual resolution of certain scheduling and discovery disputes, ahearing on the parties' cross-motions for summary judgment (which were filed on June 5, 2013 (doc. #28) and August 23, 2013 (doc. #48)) was held on October 16, 2013 (the "October Hearing").
Prior to taking the matter under advisement and due to the ongoing logistical disputes between the parties, the Court issued an Order on October 29, 2013, setting forth which post-motion briefs and submissions it would consider in deciding this matter. Doc. #62 (the "Logistics Order"). The Plaintiffs' Motion to Reconsider the Logistics Order - specifically the portion of the Order denying the consideration of their post-hearing brief - was denied on November 18, 2013. Doc. #67. For reasons stated on the record in open court on January 8, 2014, the Court also denied a tardy Motion to Compel filed by the Plaintiffs (the "Motion to Compel"), which was submitted over four months after discovery closed and three months after the Plaintiffs sought summary judgment. Doc. #79. A Motion to Reconsider the denial of the Motion to Compel was denied by the issuance of an Order on February 4, 2014. Doc. #84.
Ronald and John, along with their deceased father (Christopher), worked as real estate developers and conducted business through their limited liability companies, Gigliotti Avignon, Gigliotti Avignon, Inc., and the Gigliotti Group, Inc. (the "Group"). AC at 1,3. The Gigliottis have been in the residential building business for over 85 years. Defendants' Motion for Summary Judgment () at 6. Ronald is the President of Gigliotti Avignon and the Group and John is the Vice President of these Companies. Id. Each brother owns a third of each company. Id.
On June 8, 2003, the Blacks, who were married at the time, entered into an agreement (the "Contract") to purchase from Gigliotti Avignon a lot and home for $849,900 (the "Property") in its Quarry Valley Farms development, which is located in New Hope, PA. AC at 3; Defs.' Mtn at 6-7; Ex. B to Pls.' Mtn. The Blacks placed $102,810 in escrow to secure the purchase of the Property. AC at 3; Defs.' Mtn at 7.4 Prior to construction of the Property, in December 2004, the Plaintiffs began divorce proceedings. AC at 4.
Given the Plaintiffs' pending divorce, the parties agreed to build and market the home (without the Blacks' custom choices) to a third party buyer. AC at 4. If a buyer was found, the Blacks would receive their deposit as well as half of any net profits. (The "Agreement").5 Id. On December 19, 2004, the Property was sold by the Gigliottis for "at least" $123,000 more than the Blacks agreed to pay for it. Id. at 4; Plaintiffs' Motion for Summary Judgment ( ) at 9.
The fact that the Blacks did not complete the purchase of the Property led to allegations on both sides. Gigliotti Avignon advised the Blacks that they were in breach of the Contract and that, accordingly, it would be retaining the couple'sdeposit. AC at 4-5; Defs.' Mtn at 7.6 And on December 6, 2005, the Blacks sued (only) Gigliotti Avignon in the Bucks county Court of Common Pleas, seeking damages for: 1) specific performance of the Agreement; 2) breach of the Agreement; 3) fraud; and 4) breach of the Unfair Trade Practices & Consumer Protection Law.7 (The "State Court Action") see Ex. B to Pls.' Mtn.; AC at 4-5. The Blacks prevailed in the State Court Action; on October 22, 2010, State Court Judge John Rufe entered a judgment against Gigliotti Avignon (only) in the amount of $151,276.62 (including fees, the "State Court Judgment"). See "Order of Final Judgment," attached as part of Ex.B to Pls.' Mtn.
Approximately three months after the State Court Judgment was entered, the Plaintiffs were informed by Gigliotti Avignon's counsel that the company was insolvent; counsel offered the Blacks $5,000 to settle the judgment. See Unmarked Exhibit to Pls.' Mtn. The Plaintiffs did not accept this offer. Rather, they filed a second action in the state court on January 20, 2012, this time against the Gigliottis seeking to pierce the corporate veil. However, this lawsuit was stayed by the Debtors' bankruptcy filings in this court. AC at 6.
Before discussing the substance of the law and how it applies in this matter, it is important to make clear what the determinative issues are. The Amended Complaint's threshold cause of action is piercing the corporate veil, i.e. the Plaintiffs seek to disregard the corporate formality and structure of Gigliotti Avignon - the only Defendant in the State Court Action - and impose liability on the Debtor Defendants for the State Court Judgment. If the Plaintiffs are successful in piercing the corporate veil and imposing liability on the Defendants, then (and only then) will the Court need to determine Counts II and III of the Amended Complaint - whether or not the debt for the State Court Judgment is dischargeable in the Debtors' bankruptcies pursuant to 11 U.S.C. §§ 523(a)(2) and (a)(4).
The Plaintiffs, both in their pleadings and in oral argument at the October Hearing, obfuscate these relatively straightforward issues by introducing a host of additional allegations and theories. For example, the Plaintiffs accuse the Debtors of pursuing fraudulent litigation against them, of being liable under Pennsylvania's participation theory doctrine, of mishandling their discovery requests, of being liable under theories of res judicata and or res ipsa loquitur, and of theft and conversion. See generally Pls.' Mtn. While several of the Plaintiffs' arguments are addressed in detail below, it is important to remember that, given the causes of action stated in the Amended Complaint, the instructivematter before the Court is whether the corporate veil of Gigliotti Avignon should be pierced in order to impose liability on the Defendants for the State Court Judgment.
For their part, the Defendants argue that the testimony and evidence on record show that Gigliotti Avignon was sufficiently capitalized and that there is no indication that the Defendants siphoned any funds or intertwined their assets with the company. See generally, Defs.' Mtn. at 16-17. In sum, the Defendants assert that there is no evidence to support a theory of piercing the corporate veil and place the burden on the Plaintiffs to show why their claim should prevail.
Summary judgment is appropriate "only where the record 'shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." EBC, Inc. v. Clark Bldg. Sys., Inc., 618 F.3d 253, 262 (3d Cir. 2010) (quoting Giles v. Kearney, 571 F.3d 318,...
To continue reading
Request your trial