Levin v. Garfinkle, Civ. A. No. 77-3211
| Decision Date | 11 June 1980 |
| Docket Number | Civ. A. No. 77-3211,78-3271. |
| Citation | 492 F. Supp. 781 |
| Parties | Bennett LEVIN v. Howard N. GARFINKLE, Barbara Garfinkle, Asher Fensterheim, Cyrus West, K. B. Weissman, Edward Breger, Norman Septimus, Jack Deutschmann, Huckleberry Farm, Inc., Haw Corporation, Tafu Corporation, Czar Realty Corporation. Bennett LEVIN v. RONDI RIVER REALTY CORPORATION. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
COPYRIGHT MATERIAL OMITTED
Patrick T. Ryan, Mark M. Wilcox, Philadelphia, Pa., for plaintiff.
Jerome J. Shestack, David Smith, Philadelphia, Pa., for defendants.
Harry A. Rutenberg, Philadelphia, Pa., for defendant Weissman.
SUR PLEADINGS AND PROOF
Beginning in 1975, plaintiff Bennett Levin and defendant Howard Garfinkle participated in a series of complicated real estate ventures involving substantial amounts of money. Levin at first held a minority interest in a variety of properties owned by corporations controlled by Garfinkle, but later purchased Garfinkle's interest in seven large apartment complexes in Charlotte, North Carolina, giving, as part of the purchase price, a sizeable blanket mortgage (deed of trust) to Garfinkle. In October, 1976, Garfinkle alleged that Levin was in default on the mortgage. Rather than risk foreclosure, Levin authorized Garfinkle to sell the properties, both to satisfy Levin's debt as well as to realize a profit for Levin from appreciation of the properties. When the last property had been sold, the Garfinkle interests asserted that Levin still owed them a sizeable sum on his indebtedness to them, while Levin asserted that the defendants had conspired to defraud him in both the purchase and sale of the Charlotte properties, and in several other real estate ventures.
In this suit plaintiff seeks to recover compensatory and punitive damages for fraud, misrepresentation, conversion, and breach of fiduciary duty. He also seeks an accounting for the proceeds from various transactions which he alleges the Garfinkle interests diverted to their use without giving him credit against his indebtedness.
The matter was tried over several days from January 7-22, 1980. Testimony comprising over 2,000 pages of transcript was heard, and the parties submitted close to 400 exhibits. Thereafter, the parties submitted requests for findings of fact and conclusions of law, together with briefs on the legal issues. On pleadings, proof, and the written submissions of the parties, I make the following
1. Plaintiff Bennett Levin is a professional engineer whose practice is conducted through several corporations. He has performed engineering services in a variety of real estate projects for major builders, although prior to his ventures with defendants he had never invested in real estate.
2. Defendant Howard Garfinkle's principal occupation is investing in real estate, which he pursues by investing his own capital through corporations which he controls, and by creating partnerships and syndications in which he participates.
3. Defendant Barbara Garfinkle is Howard Garfinkle's wife.
4. Defendant Asher Fensterheim is a member of the New York Bar, and in effect serves as Garfinkle's in-house attorney. He acts as an officer and director of various corporations controlled by Garfinkle, and generally receives a share in the ownership of Garfinkle ventures.
5. Defendant Cyrus West is a Garfinkle employee who handled disbursements and kept financial records for a number of Garfinkle corporations.
6. Defendant K. B. Weissman is a New York financier who has a long-standing business relationship with Howard Garfinkle, and who lent money to both Garfinkle and Levin to finance their various investments.
7. Defendant Edward Breger is a member of the New York Bar in private practice, whose specialty is real estate closings. He represented both Howard Garfinkle and Bennett Levin in connection with some of the properties they owned.
8. Defendant Norman Septimus is an accountant who performed services for one of Levin and Garfinkle's joint ventures.
9. Defendant Jack Deutschmann was a Garfinkle employee and investor in several Garfinkle real estate ventures.
10. Defendant Huckleberry Farm, Inc. is Garfinkle's horse farm and personal residence in Albany, New York.
11. Defendants HAW Corporation, TAFU Corporation, and Czar Realty Corporation are all corporations which the parties have stipulated are controlled by Howard Garfinkle (P-364).
12. Defendant Rondi River Realty Corporation is a corporation formed by Howard Garfinkle to hold title to a New York property which he owned jointly with Bennett Levin. The parties have stipulated that this corporation is under the control of Howard Garfinkle.1
13. Levin met Garfinkle in June, 1973, (T. 442) and performed professional engineering services for him in 1973 and 1974. (T. 34). He visited Garfinkle at his home in Florida, at which time he learned that Garfinkle was involved in some controversy over his business dealings, and had previously been convicted of criminal charges in connection with one of his ventures. (T. 442-446).
14. In February, 1975, Garfinkle filed for bankruptcy, at which time Levin entered a claim for approximately $700,000 for engineering services he had performed for Garfinkle. (T. 448-449).
15. To compensate Levin for his services, Garfinkle offered Levin the opportunity to invest $60,000 in a limited partnership, in which Levin would be given a participating share sufficient to cover Garfinkle's pre-bankruptcy debt to him. (T. 37-38).
16. The limited partnership was never formed, so Garfinkle then offered Levin the opportunity to invest in various real estate ventures. Levin accepted and invested in various properties in which he received an equity share of twenty to fifty percent. (T. 40).
17. Between late 1975 and early 1976, Levin and Garfinkle purchased seven large garden-apartment complexes in Charlotte, North Carolina (the Charlotte Properties), in which Garfinkle interests held a seventy-five percent share, and Levin held a twenty-five percent share. Levin paid more than $100,000 to purchase his share. (T. 455).
18. Each of the seven properties had a development name, which in every case but one was changed by the Garfinkle interests when they bought the properties:
Chatham Square formerly Idlewild
Sheffield Farms formerly Hope Valley
Timberline formerly Countryside
Greenhouse formerly Briarcreek
Cobblestones formerly East Forrest
Hunt Club formerly Hunter Oaks
Southgate which remained the same
19. At the time the properties were purchased, both parties knew that existing mortgages on all of the properties were seriously in default. (T. 459). The purchase seemed advisable, however, because the price per apartment was substantially below the prevailing market replacement cost for similar units. (T. 460).
20. After purchasing the properties, both Levin and Garfinkle received detailed reports about problems with the physical condition of some of the units and the vacancy rate. (T. 475-495).
21. In December, 1975, Daryl Greenberg was hired to manage the Charlotte properties. (T. 1471). Although Greenberg was the on-site manager, the rent receipts were forwarded to Garfinkle's office in New York, and Garfinkle's employees there disbursed the funds to pay vendors and mortgage lenders. (T. 1474, 1479).
22. In January, 1976, vendors began receiving bad checks from the Garfinkle office. (T. 1474-75). Greenberg kept a ledger of these checks. (P-70). In late January and early February, mortgage holders began to call Greenberg in North Carolina to complain about failures to meet mortgage payments. (T. 1479).
23. In March, 1976, Greenberg sought Levin's help in securing payment for vendors and mortgage lenders, and Levin was successful in making arrangements with them for paying the bills. (T. 1482-85).
24. In April, 1976, it was agreed by the parties that Levin should assume management of the Charlotte properties. He borrowed $350,000 from Continental Bank (T. 496), and upgraded computer facilities in his Philadelphia office to facilitate rent collection. (T. 426). During April, 1976, Estelle (Sue) Manin, a Garfinkle employee, worked in Levin's Philadelphia office, to which rent receipts were directed, and from which disbursements were made.
25. Levin also opened two accounts for his signature with Continental Bank, in the names of Charlotte Acquisition Corporation, and Acquisition Management Corporation (T. 108-09), both of which were Garfinkle corporations. (P-364, ¶ 1).
26. To induce Continental to lend the $350,000 to Levin and to service the accounts, Garfinkle persuaded defendant K. B. Weissman to deposit $240,000 in time accounts at the bank.
27. For a period of time, all of the rents were flown directly to Levin's office in Philadelphia. Thereafter, Garfinkle directed that the rents be flown to his office in New York, ostensibly so that his office could make duplicate rent records. (T. 872). Garfinkle employees then deducted a portion of the rent, instructed the Garfinkle employee in Levin's office, Sue Manin, to record a lower rent figure than was actually received, and forwarded the balance to Levin's office. (T. 872-874).
28. In May, 1976, Garfinkle forged Levin's name to certain checks on the Continental accounts, overdrawing them in the amount of approximately $136,000. (T. 109; 875); (P-66). Subsequently, collection of the rents was transferred back to Garfinkle's New York office.
29. Shortly after Garfinkle overdrew Levin's account, K. B. Weissman withdrew the $240,000 he had deposited in Continental Bank and closed his account. (T. 110-111); (P-62).
30. By the end of June, 1976, Levin owed Continental Bank approximately $526,000 as a result of his...
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