In re Machevsky

• Decision Date: 23 August 2021
• Docket Number: Case No. 2:14-bk-29611-RK
• Citation: 637 B.R. 510
• Parties: IN RE: Nikolay MACHEVSKY, Debtor.
• Court: U.S. Bankruptcy Court — Central District of California

637 B.R. 510

IN RE: Nikolay MACHEVSKY, Debtor.

Case No. 2:14-bk-29611-RK

United States Bankruptcy Court, C.D. California.

Hearing Dates: January 15, 2021 and June 4, 2021

Signed August 23, 2021

Vahe Khojayan, YK Law, LLP, Los Angeles, CA, for Debtor.

MEMORANDUM DECISION ON MOTION TO ALLOW SUPPLEMENTAL ADMINISTRATIVE EXPENSE CLAIM OF DATA LEVERAGE, LLC

Robert Kwan, United States Bankruptcy Judge

This Chapter 7 bankruptcy case came on for hearing before the undersigned United States Bankruptcy Judge on January 15, 2021 and June 4. 2021 on the contested matter of the Motion to Allow Supplemental Administrative Expense Claim of Data Leverage, LLC ("Motion"), Docket No. 121, filed on November 25, 2020, which seeks an order allowing its amended claim requesting administrative expense priority in the amount of $293,694.87 for actual and necessary costs and expenses of preserving the estate under 11 U.S.C. § 503(b)(1)(A) and § 503(b)(3)(D).¹ Steven R. Fox, of Fox Law Corporation, Inc., appeared for Data Leverage, LLC, and Nancy Hoffmeier Zamora, of Hoffmeier and Zamora, appeared for the Chapter 7 Trustee Wesley H. Avery, who opposed the motion. At these hearings, the court received evidence offered by the parties and heard argument from them. Having considered the evidence and argument presented, the court issues this memorandum decision which constitutes its findings of facts and conclusions of law pursuant to Federal Rules of Bankruptcy Procedure 7052 and 9014 and Federal Rule of Civil Procedure 52.

FACTS

On October 16, 2014, Debtor Nikolay Machevsky commenced this bankruptcy case by filing a voluntary petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. Petition, Docket No. 1. The appointed Chapter 7 trustee, Alberta Stahl, filed a no distribution report in this bankruptcy case, Machevsky was granted a discharge, and the case was closed on January 27, 2015. See Case Docket Entries dated January 21, 2015; Discharge of Debtor, Docket No. 13, entered on January 26, 2015; Bankruptcy Case Closed, Docket No. 14, dated January 27, 2015.

Shortly afterward, Machevsky commenced a civil action in the Superior Court of California for the County of Los Angeles entitled Machevsky v. Kleemoff , Case No. BC 574900, alleging that certain real property consisting of two condominiums located at 10701 Wilshire Blvd., Units 1802 and 1803, Los Angeles, California 90024, belonged to him and that his mother, Izabella Kleemoff, was holding title to this property for him in trust. Complaint filed in Machevsky v. Kleemoff , Case Number BC 574900, Trial Exhibit H. In this lawsuit, Machevsky alleged that his mother, Kleemoff, put the property up for sale and entered into an agreement to sell the property to a party named Binafard without his consent. Id. Machevsky obtained a judgment in his favor against Kleemoff in the state court action on August 26, 2016, which confirmed his title to the property. Judgment in Machevsky v. Kleemoff , Trial Exhibit L. Meanwhile, Binafard had filed a lawsuit against Kleemoff for specific performance and related declaratory relief because she did not follow through on her agreement to sell the property to him, and Binafard had also named Machevsky as a defendant in that action seeking declaratory relief that he (Machevsky) had no right to possession or title in the property. Complaint, Binafard v. Kleemoff , Case No. BC 586794, Trial Exhibit M.²

According to a title document executed in 2011, Machevsky had transferred the property to Kleemoff before he filed his bankruptcy case, and as he alleged in his state court lawsuit, she was holding the property in trust for him. Complaint filed in Machevsky v. Kleemoff , Case Number BC 574900, Trial Exhibit H. Based on this claim and the judgment he later obtained against Kleemoff, Machevsky had a continuing beneficial interest in the property when he filed his bankruptcy petition in 2014. However, Machevsky did not disclose his transfer of the property to his mother or his continued beneficial interest in the property on his bankruptcy petition and schedules. Petition, Docket No. 1.

Data Leverage is a New Mexico limited liability company owned by David Preys and Jennifer Preys, who are brother and sister. Trial Declaration of David Preys, Docket No. 157, filed on December 29, 2020; Trial Testimony of David Preys. David Preys is the managing member of this LLC. Id. Tanya Linton is their mother and acted as the agent of Data Leverage, but she is not an owner/member of the LLC.³ Id.; Trial Declaration of Tanya Linton, Docket No. 157. Data Leverage was interested in purchasing the property as an investment, and before investing, Linton conducted a due diligence investigation on the property for Data Leverage by researching the legal files for the Machevsky and Binafard lawsuits in the Los Angeles County Superior Court, researching real property records at the Los Angeles County Recorder's Office and interviewing the Debtor. Trial Declaration of Tanya Linton, Docket No. 157; Trial Testimony of Tanya Linton.

On October 30, 2018, Machevsky and Data Leverage entered into a purchase and sale agreement for sale of the property by Machevsky to Data Leverage (the "Agreement") whereby Data Leverage agreed to pay unpaid mortgage payments and property taxes and other expenses relating to the property and help Machevsky avoid foreclosure of the existing liens on the property, and Machevsky was to transfer the property to Data Leverage in exchange for a life estate for him and other covenants in Unit 1802. Purchase and Sale Agreement, Trial Exhibit A; Trial Declaration of Tanya Linton, Docket No. 157; Trial Testimony of Tanya Linton; Trial Testimony of David Preys. Under the agreement, Data Leverage would be allowed to restore the partition between Units 1802 and 1803 for its own use. Id.

Machevsky was facing imminent foreclosure by the senior lender, Selene Financial, on the property as a foreclosure sale on Unit 1802 had been scheduled for November 2, 2018. Notice of Default, Trial Exhibit B; Notice of Trustee's Sale, Trial Exhibit C. Data Leverage had tendered the sum of $122,572.68 to the foreclosure trustee representing the arrears on the senior lien held by Selene before the scheduled foreclosure sale, which was made through a wire transfer by an affiliated entity, Prenton, Inc., on Data Leverage's behalf, and the foreclosure sale was cancelled. Notice of Rescission of Notice of Default, Trial Exhibit E; Bank Statement showing wire transfer, Trial Exhibit J; Trial Declaration of Jennifer Preys, Docket No. 157; Trial Testimony of Jennifer Preys; Trial Testimony of David Preys; Trial Declaration of Tanya Linton, Docket No. 157.

According to Data Leverage, pursuant to the agreement, on December 18, 2018, it provided $30,000 in cash to Kleemoff in order for her to pay off the second lien held by JP Morgan Chase on Unit No. 1802. Trial Declaration of Tanya Linton. Docket No. 157. On December 31, 2018, JP Morgan Chase Bank recorded a deed of reconveyance based on a payoff of its second lien. Deed of Reconveyance, Trial Exhibit F. Records obtained by Data Leverage from JP Morgan Chase indicate that the amount paid the bank to record its deed of reconveyance was only $5,678.41. Documents Produced by JP Morgan Chase in Response to Subpoena, Trial Exhibit R.

According to Data Leverage, pursuant to the agreement, it made seven monthly mortgage payments on the senior lien held by Selene Finance from January to July 2019 totaling $17,255.50. Trial Declaration of Tanya Linton, Docket No. 157; Trial Declaration of David Preys, Docket No. 157; Six Payment Checks to Selene Finance, Trial Exhibit K; Documents Produced by Selene Finance LP in Response to Subpoena, Trial Exhibit S; see also, Data Leverage's Brief Following Evidentiary Hearing ("Data Leverage's Post-Trial Brief"), Docket No. 185, filed on June 23, 2021, at 4.

According to Data Leverage, pursuant to the agreement, it paid to the Los Angeles County Tax Collector delinquent property taxes on Unit No. 1803 in the amount of $20,774.19, on June 27, 2019. Trial Declaration of Tanya Linton; Trial Declaration of David Preys; Notice of Unpaid Taxes from County of Los Angeles, Trial Exhibit G; Check Payable to Los Angeles County Tax Collector for $20,774.19, Trial Exhibit I; Certified Documents Produced by Los Angeles County Tax Collector in Response to Subpoena, Trial Exhibit T; see also, Data Leverage's Post-Trial Brief, Docket No. 185, filed on June 23, 2021, at 4-5.

According to Data Leverage, pursuant to the agreement, it advanced payment of Machevsky's legal fees and costs in defending the specific performance lawsuit in Binafard v. Kleemoff and Machevsky , Case No. BC 586794 (Superior Court of California, County of Los Angeles) in the amount of $96,874.00, which were incurred between November 1, 2018 and July 31, 2019. Trial Declaration of Tanya Linton, Docket No. 157. The legal services for which these fees were incurred were performed by Attorney Julia Sklar. Id.

According to Data Leverage, it had not known of Machevsky's bankruptcy case when it entered into the purchase and sale agreement with Machevsky in October 2018 based on testimony of its members and its agent, Linton, which the court finds credible. Trial Testimony of David Preys; Trial Testimony of Tanya Linton; Trial Declaration of Tanya Linton, Docket No. 157. Data Leverage first learned about Machevsky's bankruptcy case at the end of May 2019 or the first week of June 2019 when Linton read the transcript of Machevsky's deposition in the Binafard litigation. Id.; Motion at 5 ("In May, 2019, Data Leverage learned the Debtor's had not disclosed his interest in the Real Property in this case.").

On July 23, 2019, the United States Trustee filed a motion with the court to reopen the case to administer an undisclosed asset, which was granted, and upon reopening of the case, the United States Trustee appointed Wesley Avery as the new Chapter 7 trustee in this case. Motion...