Nilhan Developers, LLC v. Glass (In re Nilhan Developers, LLC)

• Decision Date: 19 May 2021
• Docket Number: CASE NO. 15-58443-WLH,AP NO. 21-5008-WLH
• Citation: 631 B.R. 507
• Parties: IN RE: NILHAN DEVELOPERS, LLC, Debtor, Nilhan Developers, LLC, Plaintiff, v. Ronald Glass, Solely as Trustee of the Bankruptcy Estate of Nilhan Developers, LLC, and Rass Associates, LLC, a Georgia Limited Liability Company, Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

631 B.R. 507

IN RE: NILHAN DEVELOPERS, LLC, Debtor,Nilhan Developers, LLC, Plaintiff,

v.Ronald Glass, Solely as Trustee of the Bankruptcy Estate of Nilhan Developers, LLC, and Rass Associates, LLC, a Georgia Limited Liability Company, Defendants.

CASE NO. 15-58443-WLH

AP NO. 21-5008-WLH

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

Signed May 19, 2021

Douglas J. Davis, Belli Weil Grozben & Davis, LLC, Atlanta, GA, John A. Moffa, Moffa & Bierman, John Alan Moffa, Moffa & Breuer, PLLC, Fort Lauderdale, FL, for Plaintiff.

Frank W. DeBorde, Morris, Manning & Martin, LLP, Atlanta, GA, for Defendant Ronald Glass, Solely as Trustee of the Bankruptcy Estate of Nilhan Developers, LLC.

Lisa McVicker Wolgast, Morris, Manning & Martin, LLP, Atlanta, GA, for Defendant Ronald Glass, Solely as Trustee of the Bankruptcy Estate of Nilhan Developers, LLC, Leon Jones, as replacement Plan Agent for Nilhan Developers, LLC.

Jeffrey D. Horst, Krevolin & Horst, LLC, Atlanta, GA, for Defendant Rass Associates LLC, a Georgia Limited Liability Company.

ORDER ON MOTIONS TO DISMISS

Wendy L. Hagenau, U.S. Bankruptcy Court Judge THIS MATTER is before the Court on the Motions to Dismiss filed by Ronald Glass, Solely as Trustee of the Bankruptcy Estate of Nilhan Developers ("Mr. Glass") (Doc. No. 9) and Rass Associates, LLC, a Georgia Limited Liability Company ("Rass") (Doc. No. 11). Both Mr. Glass and Rass seek dismissal of the above-styled Complaint, and Rass seeks dismissal with prejudice, for failure to state a claim for relief under Fed. R. Civ. P. 12(b)(6), and Rass alternatively seeks dismissal for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) or for the Court to abstain from this adversary proceeding. For the reasons stated below, the Court finds dismissal under Fed. R. Civ. P. 12(b)(6) is appropriate.

I. DISMISSAL STANDARD

Defendants seek dismissal of the Complaint pursuant to Fed. R. Civ. P. 12(b)(6) for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). "[A] complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ) (internal quotation marks omitted). A complaint is plausible on its face when the plaintiff pleads sufficient factual content for the court to draw the reasonable inference the defendant is liable for the conduct alleged. Id.

While the plausibility standard "asks for more than a sheer possibility that a defendant has acted unlawfully," Iqbal, 556 U.S. at 678, 129 S.Ct. 1937, the purpose of a motion to dismiss is not to resolve disputed facts or decide the merits of a case. Rather, the purpose of a motion to dismiss is to ensure the plaintiff has provided notice of the grounds which entitle him to relief. Twombly, 550 U.S. at 561, 127 S.Ct. 1955. The facts alleged must be taken as true, and "dismissal is inappropriate merely because it appears unlikely ... the plaintiff can prove those facts or will ultimately prevail on the merits." Official Comm. of Unsecured Creditors of Tousa, Inc. v. Technical Olympic, S.A. (In re Tousa), 437 B.R. 447, 452 (Bankr. S.D. Fla. 2010) (citing Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) ).

In reviewing a Rule 12(b)(6) motion to dismiss, all well-pled facts are taken as true and viewed in the light most favorable to the plaintiff. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ). The Court may consider attached exhibits, documents incorporated by reference, and matters properly subject to judicial notice. See Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). Courts may also consider documents central to the plaintiff's claim and undisputed, meaning the authenticity of the document is not challenged. See Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002). The Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citation omitted); Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted). Additionally, the Court is "not required to accept as true allegations that contradict exhibits attached to the Complaint or matters properly subject to judicial notice, or allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Deerpoint Grp., Inc. v. Agrigenix, LLC, 393 F. Supp. 3d 968, 974 (E.D. Cal. 2019) (quoting Seven Arts Filmed Entm't, Ltd. v. Content Media Corp. PLC, 733 F.3d 1251, 1254 (9th Cir. 2013) ).

Pursuant to Fed. R. Evid. 201(b), the Court can take judicial notice of its own docket and the contents of documents filed in the case and may do so without converting a motion to dismiss into a motion for summary judgment. See Horne v. Potter, 392 F. App'x 800, 802 (11th Cir. 2010) ; U.S. v. Rey, 811 F.2d 1453, 1457 n.5 (11th Cir. 1987). Pursuant to an order entered May 4, 2021, the Court provided notice to the parties that it intended to take judicial notice of its own docket and the contents of all pleadings, orders, evidence and transcripts and gave the parties ten days to file an objection. No objections were filed. Accordingly, the Court will take judicial notice of the docket of Nilhan Developer, LLC's Chapter 11 case including all related adversary proceedings maintained by the clerk of this Court and the contents of all pleadings and other documents filed, all orders entered, and all evidence and transcripts from the hearings held before the Court during the pendency of the Chapter 11 case and related adversary proceedings.

II. FACTS

With this background, the Court will examine the facts alleged in the Complaint, as well as the facts developed in this six-year-old case.

a. Facts Alleged in Complaint

Nilhan Developers, LLC ("ND") filed a petition for relief under Chapter 11 of the Bankruptcy Code on May 4, 2015. On April 11, 2017, ND filed a motion to sell certain property at 2800, 2810, 2812, and 2814 Spring Road, Atlanta, Georgia, also known as Emerson Center (the "Property") to Westplan Investors Acquisitions, LLC ("Westplan") for $7 million (Case No. 15-58440 Doc. No. 634). Westplan then assigned all of its rights and interests under the contract to Accent Cumberland Apartments, LP ("Accent"). The sale contract included a "Buyback" provision in paragraph 26, which authorized ND to repurchase the Property by a specific date and time ("Buyback Option"). The contract provided that if, after closing, the purchaser was denied rezoning and annexation by the applicable authorities, ND would have the right to purchase the Property for $7,750,000.00, plus costs, expenses, and interest.

The Court authorized the sale for $7,200,000.00 to Westplan and, on April 28, 2017, the Court entered an order approving the sale. The sale to Accent was consummated on May 1, 2017. The Buyback Option was set to expire on August 20, 2018 at 5:00 PM and the amount of $9,269,212.32 was necessary to exercise the Buyback Option. Mr. Thakkar, the manager of ND, believed the Property was worth more than the buy-back price. ND obtained financing from two sources, Rass and Norcross Hospitality, to exercise the option before the deadline. ND paid the specified price to exercise the option, and Accent conveyed a quit claim deed to ND on August 22, 2018, which was recorded on August 24, 2018.

On December 11, 2018, the Court appointed Mr. Glass as chapter 11 trustee in the ND case ("Trustee"). In April 2019, the Trustee sought to sell the Property and employed CBRE, Inc. ("CBRE") as real estate broker. CBRE marketed the Property for sale and received twelve offers. The Trustee executed an agreement with Habersham Partners, LLC ("Habersham") to buy the Property. The Trustee filed a motion to sell the Property free and clear of all liens, claims, interests and encumbrances. After an auction, the Court ultimately approved a sale of the Property to Rass for $12,795,000.

On January 12, 2021, the Complaint was filed, ostensibly in the name of ND as a "Shell Debtor" "through its Interest Holders" ("Plaintiff").¹ Plaintiff contends the right to buy back the Property was given to ND, not the debtor in possession, and was not property of the estate and, once the Buyback Option was exercised, the estate did not have an ownership interest in the Property. The Complaint seeks a declaratory judgment the estate had no legal interest in the Property and Rass acquired no legal interest in the Property from the estate. In support of its claims, the Complaint referrers to abandonment, to illustrate the difference between the debtor and the estate. Plaintiff also contends the Buyback Option merged with the deed. Alternatively, Plaintiff seeks an order requiring the estate to pay Mr. Thakkar and/or his insiders or affiliates $100,000.00 with applicable interest.

b. Facts as Demonstrated in the Record

The facts set out in the Complaint are true, but incomplete. The full facts taking into account matters subject to judicial notice are as follows. ND is owned 50% by Niloy Thakkar and 50% by Rohan Thakkar; it is managed by Niloy's and Rohan's father, Chuck Thakkar.

ND's schedules reflect it owned the Property, which consisted of a shopping center and office suites. In April 2017, as a deadline to pay its secured creditor neared, ND sought to sell the Property to Westplan or its assignee for $7 million free and clear of all liens, claims and encumbrances. The proposal contemplated that ND would have the right to develop the retail, office, and hotel portion of the Property under certain circumstances while Westplan would develop the residential portion of the Property. Paragraph 26 of the contract provided ND the right to buyback all or a portion of the Property upon the occurrence of certain...