Sofia Design & Dev. at S. Brunswick, LLC v. D'Amore (In re D'Amore)

• Decision Date: 31 May 2012
• Docket Number: Bankruptcy No. 10–35725 (MBK).,Adversary No. 10–2569 (MBK).
• Citation: 472 B.R. 679
• Court: U.S. Bankruptcy Court — District of New Jersey
• Parties: In re Anthony P. D'AMORE, III, Debtor. Sofia Design & Development at South Brunswick, LLC, Sofia Homes, LLC, The Guerin Family Trust, Charles Kelly, Eugene Guerin, James Guerin, Louis Filoso, Michael Reilly, Steven Langan, James Carey, and Marsena Carey, Plaintiffs, v. Anthony P. D'Amore, III, Defendant.

472 B.R. 679

In re Anthony P. D'AMORE, III, Debtor.Sofia Design & Development at South Brunswick, LLC, Sofia Homes, LLC, The Guerin Family Trust, Charles Kelly, Eugene Guerin, James Guerin, Louis Filoso, Michael Reilly, Steven Langan, James Carey, and Marsena Carey, Plaintiffs,

v.Anthony P. D'Amore, III, Defendant.

Bankruptcy No. 10–35725 (MBK).

Adversary No. 10–2569 (MBK).

United States Bankruptcy Court, D. New Jersey.

May 31, 2012.

Barry W. Frost, Esq., Teich Groh, Trenton, NJ, for the Defendant.

Andrew T. Walsh, Esq., Chamlin, Rosen, Uliano & Witherington, West Long Branch, NJ, for Plaintiffs.

MEMORANDUM DECISION

MICHAEL B. KAPLAN, Bankruptcy Judge.

I. INTRODUCTION

This matter comes before the Court upon (i) the motion (“Defendant's Motion”) of the Defendant, Anthony P. D'Amore, III, (“Defendant”) for summary judgment to dismiss Plaintiffs, Charles Kelly (“Kelly”), Eugene Guerin, James Guerin, Louis Filoso, Michael Reilly, Steven Langan, James Carey and Marsena Carey's (collectively the “Individual Plaintiffs”) adversary complaint to declare nondischargeable certain debts of the Defendant, and (ii) the cross motion (“Cross Motion”) of the Individual Plaintiffs for summary judgment as to liability, as well as relief from the automatic stay. The Court has reviewed the pleadings submitted and heard oral argument on February 27, 2012. The Court issues the following ruling:

II. JURISDICTION

The Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(b), 1334(e)(1), 157(a) and the Standing Order of the United States District Court dated July 10, 1984, referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(I). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. The following constitutes the Court's findings of fact and conclusions of law as required by Fed. R. Bankr.P. 7052.¹

III. PROCEDURAL HISTORY/FACTS

Sofia Homes, LLC (“Sofia Homes”) was formed as a construction company focusing on the development and construction of residential housing projects. Sofia Design & Development at South Brunswick, LLC (“SDD”) is a limited liability company (“LLC”) established to own property for purposes of development. Defendant was an officer and member of Sofia Homes and SDD (collectively the “Sofia Entities”). With the exception of Plaintiff Steven Langan, each of the Individual Plaintiffs is a member of one or both of the Sofia Entities.

The Sofia Entities received loans from Amboy Bank and Investors Savings Bank to fund the construction projects of Gateway Commons and Liberty Crossing (collectively the “Loans”). The terms of the Loans restricted the use of the funding specifically to the respective projects. Defendant alleges that Kelly violated the Loan agreements by using the funds to write checks and pay bills for ventures unrelated to the Gateway Commons and Liberty Crossing projects (collectively the “Projects”). Specifically, Defendant claims that Kelly: (1) wrote checks to pay contractors and bills for the renovation of his sister's apartment; (2) paid back investors with money that was designated for the completion of the Projects; and (3) wrote checks from the Sofia Entities' accounts and incurred charges on the Sofia Entities' credit cards without documenting the expenses in the ledgers, and without alerting the Defendant or the bookkeeper of such transactions. Defendant contends that Kelly's conduct threatened the solvency of the Sofia Entities and stalled the completion of the Projects. In order to prevent any further harm by Kelly, Defendant contends that he withdrew the remaining funds from the construction account (the “Construction Funds”) and moved them into the account of Bay Dock Holdings, LLC (“Bay Dock”)—an entity owned by Roger Passarella (“Passarella”) and which now employs the Defendant. The Individual Plaintiffs maintain that Defendant improperly diverted Construction Funds in excess of $350,000.00 from the Sofia Entities between March and June of 2009.

On December 23, 2009, Defendant resigned his office and membership in Sofia Homes. On March 22, 2010, an action was filed against Defendant, Bay Dock and Passarella in the Superior Court of New Jersey, Monmouth County, captioned Sofia Design & Development at South Brunswick, LLC, et al. v. Bay Dock Holding, LLC, et al. (MON–L–1430–10) (the “State Court Action”).² In June of 2010, the members of SDD unanimously voted to remove Defendant from his office and terminate his membership. On August 20, 2010, Defendant filed a voluntary petition for relief under Chapter 7, staying the State Court Action as to Defendant. On October 4, 2011, CAD Contracting filed involuntary Chapter 7 petitions against the Sofia Entities. On October 5, 2011, the Individual Plaintiffs and the Sofia Entities executed a “SETTLEMENT, ASSIGNMENT & RELEASE AGREEMENT,” transferring to the Individual Plaintiffs all rights and interests in certain tort claims held by the Sofia Entities.

On December 12, 2010, the Individual Plaintiffs filed the within adversary complaint (the “Adversary Complaint”), alleging the following claims against the Defendant: (1) fraud while acting in a fiduciary capacity; (2) defalcation while acting in a fiduciary capacity; (3) embezzlement; (4) larceny; and (5) usurpation of corporate opportunity. On December 21, 2011, the Defendant's Motion was filed. Defendant contends that the Individual Plaintiffs have failed to establish a genuine dispute of material fact, or put forth a legal basis to preclude the entry of summary judgment in his favor. In this regard, Defendant argues that the transfer of the tort claims to the Individual Plaintiffs contravenes New Jersey Law; moreover, even if such transfer is permissible, the Individual Plaintiffs lack standing to pursue the claims. The Individual Plaintiffs oppose the relief, asserting that as a matter of law, they maintain causes of action independent of claims originally held by Sofia Homes and SDD.

On January 13, 2012, the Individual Plaintiffs filed their Cross Motion. The Individual Plaintiffs argue that the Defendant has failed to establish a genuine dispute of material fact, or put forth a legal basis to preclude the entry of summary judgment in its favor as to: (1) Defendant's liability arising from his breach of his fiduciary duties to each of the Individual Plaintiffs; and (2) the granting of relief from the automatic stay to pursue the State Court Action. Defendant opposes the relief, for the reasons expressed in support of Defendant's Motion. For the reasons which follow, the Court grants Defendant's Motion and denies the Cross Motion.

IV. DISCUSSIONA. Summary Judgment Standard.

Summary judgment is appropriate where “the pleadings, the discovery, and disclosure materials on file, and any affidavits show there is no genuine dispute as to any material fact and the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c).³ As the Supreme Court has indicated, “Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather an integral part of the Federal Rules as a whole, which are designed ‘to secure the just, speedy, and inexpensive determination of every action.’ ” Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (citing Fed.R.Civ.P. 1). In deciding a motion for summary judgment, the judge's function is to determine if there is a genuine dispute for trial. Josey v. John R. Hollingsworth Corp., 996 F.2d 632, 637 (3d Cir.1993).

The moving party bears the initial burden of demonstrating the absence of a genuine dispute of material fact. Huang v. BP Amoco Corp., 271 F.3d 560, 564 (3d Cir.2001) (citing Celotex Corp., 477 U.S. at 323, 106 S.Ct. 2548). In determining whether a factual dispute warranting trial exists, the court must view the record evidence and the summary judgment submissions in the light most favorable to the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Issues of material fact are those “that might affect the outcome of the suit under the governing law.” Id. at 248, 106 S.Ct. 2505. An issue is genuine when it is “triable,” that is, when reasonable minds could disagree on the result. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citations omitted). If the moving party will bear the burden of persuasion at trial, the party must support its motion with credible evidence—using any of the materials specified in Rule 56(c)—that would entitle it to a directed verdict if not controverted at trial. Celotex Corp., 477 U.S. at 331, 106 S.Ct. 2548. Such an affirmative showing shifts the “burden of production” to the party opposing the motion and requires the party to either demonstrate the existence of a “genuine [dispute]” for trial or to request additional time for discovery under Fed.R.Civ.P. 56(f). Fed.R.Civ.P. 56(e).

Once the moving party establishes the absence of a genuine dispute of material fact, the burden then shifts to the non-moving party to “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586, 106 S.Ct. 1348. A party may not defeat a motion for summary judgment unless it sets forth specific facts, in a form that “would be admissible in evidence,” establishing the existence of a genuine dispute of material fact for trial. Fed.R.Civ.P. 56(e) (providing that in response to a summary judgment motion the “adverse party may not rest upon the mere allegations or denials of [its] pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine [dispute] for trial”). See also Fireman's Ins. Co. of Newark, N.J. v. DuFresne, 676 F.2d 965, 969 (3d Cir.1982); Olympic Junior, Inc. v. David Crystal, Inc., 463...