Robb Evans & Assocs. v. Diaz-Cueto, CIVIL 21-2049

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Writing for the CourtPETER J. MESSITTE UNITED-STATES DISTRICT JUDGE
PartiesROBB EVANS & ASSOCIATES LLC, as Court Appointed Receiver in the In re Sanctuary Belize Litigation Plaintiff, v. JORGE DIAZ-CUETO, et al. Defendants.
Docket NumberCIVIL 21-2049
Decision Date09 August 2022

ROBB EVANS & ASSOCIATES LLC, as Court Appointed Receiver in the In re Sanctuary Belize Litigation Plaintiff,
v.

JORGE DIAZ-CUETO, et al.
Defendants.

CIVIL No. 21-2049

United States District Court, D. Maryland

August 9, 2022


MEMORANDUM OPINION

PETER J. MESSITTE UNITED-STATES DISTRICT JUDGE

This case arises out of the In re Sanctuary Belize Litigation, a Federal Trade Commission (FTC) enforcement action in which the Court established a Receivership to hold and manage assets frozen and seized in the context of that case. Plaintiff, the Receiver appointed in In re Sanctuary Belize Litigation, has sued Jorge Diaz-Cueto individually and Bella Mar Estates, Ltd., asserting claims for rescission of contract, breach of contract, avoidance of fraudulent transfer, unjust enrichment, piercing the veil/alter ego, and turnover of receivership property. ECF No. 1. Defendants have filed a Motion to Dismiss, ECF Nos. 12; 30. For the reasons the follow, the Motion is DENIED.

I. BACKGROUND

As explained in detail in the Court's prior Opinions in the In re Sanctuary Belize Litigation, the FTC brought that case under Section 13(b) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 53(b) and the Telemarketing and Consumer Fraud and Abuse Prevention Act

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(“Telemarking Act”), 15 U.S.C. §§ 6101-6108. See In re Sanctuary Belize Litigation, 18-cv-3309-PJM, ECF Nos. 1020, 1109. The FTC alleged that Defendants in that case had engaged in a years-long scheme to defraud consumers in selling investment property at “Sanctuary Belize,” a supposed top-tier resort in Belize, Central America. The FTC alleged that the resort did not exist as advertised.[1]

In the course of that litigation, this Court established a Receivership to manage assets that were frozen and later collected pursuant to its judgments in favor of the FTC. Together with its Ex Parte Temporary Restraining Order on November 5, 2018, the Court appointed Robb Evans and Associates, LLC as the Temporary Receiver. The Receiver's role was made permanent pursuant to Preliminary Injunctions entered on February 9, 2019 and October 3, 2019, and was continued when the Court issued its Permanent Injunction and Monetary Judgment Against Defaulting Defendants on January 13, 2021 and its Amended Final Order for Permanent Injunction and Monetary Judgment Against Defendants Andris Pukke, Peter Baker, and Luke Chadwick on March 24, 2021. Having been advised of the appointed Receiver's desire to withdraw from the case, on October 26, 2021, the Court appointed Marc-Philip Ferzan of Ankura Consulting Group, LLC as the successor Receiver. Counsel for the Receiver remained unchanged.

On August 12, 2021, the Receiver filed this suit against Bella Mar Estates, Ltd. (“Bella Mar”), a Bahamian corporation, and Jorge Diaz-Cueto, the owner and President of Bella Mar and

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a United States citizen and resident of Florida. Compl. ¶¶ 12-13. The Receiver states that in its search for assets related to the Court's Receivership Orders, it discovered that misappropriated funds from Sanctuary Belize lot purchasers had been used towards the attempted purchase of a 424-acre tract of land in The Bahamas known as the “Long Island Parcel” (the “Parcel”), property purportedly owned by Bella Mar.[2]

Indeed, all parties appear to agree that in August 2017 Newport Land Group, LLC (NLG), one of the corporate defendants in the In re Sanctuary Belize Litigation and part of the common enterprise SBE, entered into an agreement with Bella Mar to purchase the Parcel for $4,00,000.00, later reduced to $2,800,000.00.[3] The Receiver further alleges that the purchase price was in gross excess of the actual value of the property.[4] Compl. ¶¶ 41, 57, 63; Defs.' Br. Mot. Dismiss 4-5 (hereinafter, “Defs.' Br.”). The sale and purchase deal comprised four documents: an Agreement for Sale (Compl. Exhibit 1), an Indenture of Conveyance (Compl. Exhibit 2), an Indenture of Mortgage (Compl. Exhibit 3), and an Addendum to Agreement for Sale (Compl. Exhibit 4) (together, the “Deal Documents”), which it has attached to the Complaint.[5] Compl. ¶ 43. The terms of the Deal included a down payment of $750,000.00 to Bella Mar, to be followed by

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monthly payments.[6] Compl. ¶ 41. The Indenture of Conveyance was to be executed the day of the execution of the Sale Agreement and would be held in escrow by the lender until the mortgage loan was paid. Ex. 1 ¶ 10. All parties agree that NLG made the down payment and several monthly payments thereafter, totaling $1,065,000.[7] Defs.' Br. 5; Compl. ¶ 59. The Receiver alleges that these payments were made with funds misappropriated from lot purchases for Sanctuary Belize. Compl. ¶ 60. As will be discussed further infra, Defendants contend the payments came from a single investor in NLG, Matthew Bowyer.

On August 18, 2018, NLG failed to timely make a monthly payment on the Bella Mar deal, such that on September 4, 2018, Diaz-Cueto sent NLG a notice of default, although the Receiver points out that the Deal Documents do not appear to contain provisions related to default. Compl. ¶¶ 66-67. NLG eventually made up the missed payment, but then missed the payment deadline for November 18, 2018, shortly after initiation of the In re Sanctuary Belize Litigation case and the Court's appointment of the temporary Receiver and freeze of certain defendants' assets, NLG's included. Compl. ¶ 69. Indeed on November 18, 2018, the Receiver alleges that Diaz-Cueto called Frank Connelly,[8] the CEO of NLG, and learned of the In re Sanctuary Belize Litigation. Compl. ¶ 69. Then, on the morning of November 19, 2018, Diaz-Cueto sent NLG a “November Notice of

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Default,” in apparent violation of this Court's stay of creditor activity under the TRO for Receivership Entities, including NLG. Compl. ¶¶ 69-70. The Notice stated that if payment was not timely made, NLG would be issued a “Final Default” letter “terminating all its rights title and interest to the subject land in Long Island, Bahamas.” Compl. ¶ 70.

The Receiver alleges that Diaz-Cueto, in numerous conversations with Connelly, became concerned about his ability to recover the balance owed by NLG, some $1,735,000. Compl. ¶ 72. Therefore, Diaz-Cueto decided to “terminate” the sale but retained the $1,065,000 already paid by NLG, of which $881,245 had been transferred to Diaz-Cueto personally. On December 10, 2018, Diaz-Cueto, took the position that the payments NLG made were forfeited to Bella Mar, and issued a “Final Notice” purporting to terminate NLG's rights under the agreement. Compl. ¶¶ 71-72, 74. Diaz-Cueto did this, the Receiver contends, knowing of this Court's stay preventing any detriment to Receivership Entities, including NLG. Compl. ¶ 73.

In sum, the Receiver “alleges that the payments received by Bella Mar and Diaz-Cueto were made in exchange for a vastly overpriced parcel of land being sold by ambiguous and unenforceable Deal Documents later to be illegally terminated by Diaz-Cueto in both violation of the Deal Documents and the stay created by the TRO.” Compl. ¶ 78.

In this suit, the Receiver makes nine claims for relief: Rescission of Contact (against Bella Mar) (Count 1); Breach of Contract (against Bella Mar) (Count 2); Avoidance of Fraudulent Transfer Under California Civil Code § 3439.04(a)(1) (against both Defendants) (Count 3); Avoidance of Fraudulent Transfer Under California Civil Code § 3439.04(a)(2)(A) (against both Defendants) (Count 4); Avoidance of Fraudulent Transfer Under California Civil Code § 3439.04(a)(2)(B) (Count 5); Avoidance of Fraudulent Transfer Under California Civil Code § 3439.05 (against both Defendants) (Count 6); Unjust Enrichment/Constructive Trust (against both

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Defendants) (Count 7); Piercing the Veil/Alter Ego (against Diaz-Cueto) (Count 8); and Turnover of Receivership Property (against both Defendants) (Count 9). The Receiver seeks to have the $1,065,000.00 in NLG funds acquired from the victims of SBE, plus interest, turned over to the Receiver, $881,245.00 of which, it claims, is held by Defendant Diaz-Cueto specifically. Compl. ¶¶ 130-131.

On November 23, 2021, Diaz-Cueto, who is apparently a member of the Bar of the State of Florida, on behalf of himself and Bella Mar, filed a Motion to Dismiss the Receiver's suit. ECF No. 12. On January 10, 2022, Plaintiff filed a Motion to Strike, noting that Diaz-Cueto's appearance before the Court appeared improper. ECF No. 19. Indeed, upon further inspection, the Court discovered that Diaz-Cueto had entered an appearance as if this case were a Multi District Litigation case (it is not). In an Order dated January 18, 2022, the Court deemed Diaz-Cueto to be appearing in proper person as an out-of-state attorney on behalf of himself and Bella Mar Estates, Ltd., and instructed him to retain local counsel with respect to Bella Mar, as required by Local Rule 101.1.b. ECF No. 23.

On January 21, 2022, local counsel entered an appearance on behalf of all Defendants, including Diaz-Cueto, and the Court directed local counsel to sign the Motion to Dismiss (which lacked any signature when first filed by Diaz-Cueto).

On January 28, 2022, local counsel filed a signed Motion to Dismiss, but soon discovered that the version he filed was not identical to the version first filed by Diaz-Cueto. On February 2, 2022, local counsel filed the Motion again, this time submitting a Motion effectively identical to the first with just a signature added.[9] ECF No. 30.

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The Receiver has responded in opposition and has filed a notice of Evidentiary Objections. ECF Nos. 31, 32. Defendants have replied. ECF Nos. 33, 34.

Finding no hearing necessary, see Local Rule 105(6), the Court addresses these matters.

II. ANALYSIS

A. Evidentiary Objections

The Receiver objects to Defendants' submission of various affidavits and exhibits attached to the Motion to Dismiss. See Plaintiff's Evidentiary Objections, ECF No. 32....

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