Schlossberg v. Abell (In re Abell)

• Decision Date: 31 March 2016
• Docket Number: Case No. 13–13847–TJC,Adversary No. 14–00417
• Citation: 549 B.R. 631
• Parties: In re: Vincent L. Abell, Debtor Roger Schlossberg, Chapter 11 Trustee, Plaintiff v. Vincent L. Abell, et al., Defendants
• Court: U.S. Bankruptcy Court — District of Maryland

549 B.R. 631

In re: Vincent L. Abell, DebtorRoger Schlossberg, Chapter 11 Trustee, Plaintiff

v.Vincent L. Abell, et al., Defendants

Case No. 13–13847–TJC

Adversary No. 14–00417

United States Bankruptcy Court, D. Maryland, at Greenbelt .

Signed March 31, 2016

Filed April 1, 2016

Jean Evelyn Lewis, Catherine Mary Manofsky, Justin Akihiko Redd, David J. Shuster, Kramon & Graham, P.A., Baltimore, MD, for Plaintiff.

Kristen E. Burgers, Tysons Corner, VA, James Greenan, Leah Victoria Lerman, McNamee, Hosea, et. al., Christopher Hamlin, Greenbelt, MD, Lawrence A. Katz, Hirschler Fleischer, Tysons, VA, Robert Norman Levin, Robert N. Levin, P.C., Gaithersburg, MD, Richard M. McGill, Law Offices of Richard M. McGill, Upper Marlboro, MD, Philip James McNutt, Hughes & Bentzen, PLLC, John Thomas Szymkowicz, Szymkowicz & Szymkowicz, LLP, Washington, DC, Marc A. Ominsky, The Law Offices of Marc A. Ominsky, James R. Schraf, Yumkas, Vidmar, Sweeney & Mulrenin, LLC, Columbia, MD, Kevin M. Tabe, Tabe and Associates, P.C., Takoma Park, MD, for Defendants.

MEMORANDUM OF DECISION RESOLVING MOTIONS TO DISMISS

THOMAS J. CATLIOTA, U.S. BANKRUPTCY JUDGE

Roger Schlossberg, the Chapter 11 trustee, filed a 118–page amended complaint alleging that the debtor Vincent L. Abell, his wife Marta Bertola, and numerous related parties and entities, engaged in a massive real estate and asset concealment scheme to hide millions of dollars of assets from the debtor's creditors and the court. The amended complaint, as filed, named 44 defendants and included 43 counts for relief against the debtor and various defendants.¹ Presently, before the court are motions to dismiss filed by the following groups of defendants:

(1) Caniss Construction, Inc., and Cristino Gonzalez (ECF 11);

(2) Marta Bertola, Phoenix Real Estate 2, LLC, Modem Management Company Employee Benefit Trust, Phoenix Real Estate 2 LLC Employee Benefit Trust, and Columbia Security, LLC (ECF 21);

(3) Vincent L. Abell, Phoenix Real Estate, LLC, Modern Management Company, 107 47th Street Builders, LLC, 1828 18th Street, LLC, 2103 Suitland Terrace, LLC, 277 Newcomb Street, LLC, 1311 T LLC, 2925 26th Street Builders, LLC, 3514 13th Street, LLC, 3750 Bel Pre Builders, LLC, 5118 Hanna, LLC, 6014 Prince George Street, LLC, 2926 Partnership, and Alabama Builders, LLC (ECF 24);

(4) Maria Antonopoulos, Fela Bertola, American Trust, LLC, V.L.A., a minor child, Bronte Abell, Alexandra Abell, and Christian Abell (ECF 25); and

(5) Maria Maya (ECF 29).

For the reasons set forth here, the court will deny the motions to dismiss as to Counts 1, 2, 3, 4, 5, 6, 7, 8, 9, 19, 20, 21, 26, 27, 28, 29, 30, 31, 35, 36, 37, 38, 39, 40, 41, 42, and 43 and grant the motions to dismiss as to Counts 32 and 33. While the court is denying the motions to dismiss Count 36 to the extent it seeks disallowance of claims under 11 U.S.C. § 502(b),² the court will stay Count 36 to the extent it seeks disallowance of claims under § 502(d).

I. Facts as Alleged in the Amended Complaint

The following pertinent facts are alleged in the amended complaint and are assumed to be true for purposes of the motions to dismiss.

A. Background

On March 5, 2013, Vincent L. Abell (hereinafter "Mr. Abell") filed for Chapter 11 bankruptcy relief. Post-petition, Mr. Abell operated his real estate business and managed his personal affairs as a debtor-in-possession pursuant to §§ 1107 and 1108. Upon motions filed by the United States Trustee and creditor Maria Wilson, and with the consent of Mr. Abell, the court ordered the appointment of a Chapter 11 trustee. On September 19, 2013, the court approved the appointment of Roger Schlossberg as trustee (the "Trustee").

The events giving rise to the bankruptcy and this adversary proceeding can be traced back several years. Prior to filing for Chapter 11 protection, Mr. Abell was engaged in the real estate business, specifically, buying, selling, and leasing residential properties. Mr. Abell, along with his associates, engineered a mortgage rescue scam to dupe vulnerable and elderly individuals out of their homes. He pretended to help those who fell behind on their mortgage payments. Mr. Abell would convince his victims that he would pay off their outstanding mortgages in exchange for their promise to repay him. However, the documents memorializing the proposed loans were predominantly illegitimate, and instead of signing promissory notes, Mr. Abell's victims unwittingly deeded their homes over to him. Once Mr. Abell held his victims' deeds, he would further abuse their desperate financial position and create a landlord-tenant relationship. The rental amounts were set high so that most individuals could not afford the monthly payments, and upon default, Mr. Abell would evict his victims and either re-lease or sell the homes for a profit.

Marta Bertola (hereinafter "Ms. Bertola") is Mr. Abell's estranged wife, and is the lead actor in his purported fraudulent plots. ECF 7 at ¶ 126. As Mr. Abell's former lawyer, notary public, and licensed real estate agent, Ms. Bertola represented him in numerous transactions, and she witnessed and notarized numerous deeds and other legal documents that Mr. Abell used to fraudulently transfer properties to various entities or close associates. Id. at ¶ 129. She has assisted in preparing a variety of documents in connection to the transfers of property, including, "the creation and recordation of many of the false deeds, deeds of trust, and other sham instruments intended to deceive and perpetuate false and misleading information concerning the ownership of Abell's companies and properties." Id. at ¶ 132. She also prepared land instrument intake sheets in connection with the recording of deeds, in which she knowingly included false consideration amounts. On numerous occasions she prepared lease documents involved in Mr. Abell's mortgage rescue scam. She has also admitted to altering deeds and at least one HUD–1 after the documents were signed, including adding the amount of consideration and challenging the amount of reinstatement figures. Id.

Many of Mr. Abell's victims pursued civil actions against him. Id. at ¶ 6. Several have been filed in Maryland, and as many as 130 cases have been filed in the District of Columbia. As pertinent to this adversary proceeding, Maria Wilson ("Ms. Wilson") filed a civil lawsuit against Mr. Abell on April 13, 2007, after he evicted her out of her home for failure to maintain rent payments. The court awarded Ms. Wilson compensatory and punitive damages of $2 million as against Mr. Abell and his management company, Modern Management.

After Ms. Wilson obtained the judgment, she attempted to obtain post-judgment discovery in aid of enforcement. Mr. Abell inimically thwarted her efforts by refusing to answer basic questions about his assets and entities and by refusing to provide information about the extent of his holdings. Since the judgment, Mr. Abell has concealed from his creditors and the bankruptcy estate his assets and obstructed any efforts by his creditors to collect on their judgment. As a result of Mr. Abell's refusal to cooperate in discovery and turnover of assets and records, and given the complexity of Mr. Abell's fraud, the full scope of his assets and fraud is not yet known.

B. Scheme to Evade Creditors

To evade his judgment creditors and other victims who were pursuing him for his fraud, Mr. Abell concocted a two-fold scheme to avoid repaying his creditors: (1) orchestrating sham transactions to hide his assets and the nature of the true ownership; and (2) defrauding the bankruptcy court.

Mr. Abell engaged in various sham transactions with friends and family members to hide his assets to the detriment of his creditors and the bankruptcy estate while retaining his equity. He employed eight types of schemes: (a) creating sham transfers of property or corporate interests to friends and family members for no consideration and with little or no supporting documentation or recordation; (b) creating more than 100 limited liability companies, which in turn own hundreds of properties; (c) designating his friends and family members, on paper, as members of the LLCs or as property owners, when in fact Mr. Abell is the true beneficial owner of the interests and his friends and family are merely nominal owners; (d) opening multiple bank accounts, so called "escrow" accounts and purported "employee benefit trusts" to launder funds; (e) creating sham liens that are purportedly held by family and friends on properties as security for non-existent loans; (f) directing that income from the sale of assets be funneled away from himself and, instead, to others to hold in secret for him; (g) abusing the corporate and LLC form, and ignoring corporate formalities; and (h) attempting to use the "tenants by the entirety" form of titling assets as a way to cut off his creditors from his assets. Id. at ¶ 75. The amended complaint identifies over 200 entities that Mr. Abell purportedly maintains a secret interest in, and the list of entities was appended in a spreadsheet attached and labeled as Exhibit 1.³

1. Modern Management and Phoenix Real Estate (the "Phoenix Transfer")

Mr. Abell, as the sole owner of Modem Management, used this company and its purported successors to acquire and control hundreds of rental properties and evade paying creditors. Shortly after Ms. Wilson obtained her judgment against both Mr. Abell and Modern Management, and in an effort to insulate himself and his assets, Mr. Abell ceased the operations of Modem Management. In its place, Mr. Abell created Phoenix Real Estate, LLC ("Phoenix 1"), which he purports to have held as tenants-by-the-entirety with Ms. Bertola. Phoenix 1 occupied the same office space, utilized the same assets, and maintained the same accounts, employees, and operations as Modern Management; it was just operating under a different name. Ultimately, Mr. Abell's judgment creditors learned that Phoenix 1 was a continuation of Modem...