091007  Complaint  D E 2   10 07 09  Draft    Final
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091007 Complaint D E 2 10 07 09 Draft Final

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Complaint filed in the adversary proceeding with the Association representing the unit owners.

Complaint filed in the adversary proceeding with the Association representing the unit owners.

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091007  Complaint  D E 2   10 07 09  Draft    Final 091007 Complaint D E 2 10 07 09 Draft Final Document Transcript

  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 1 of 40 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION www.flsb.uscourts.gov In re: Chapter 11 MAISON GRANDE CONDOMINIUM Case No. 09-21589-LMI ASSOCIATION, INC., a Florida not-for-profit corporation, Debtor. MAISON GRANDE CONDOMINIUM ASSOCIATION, INC., a Florida not-for-profit corporation, Plaintiff, Adv. Pro. No. _______________ v. DORTEN, INC., a Florida corporation, and ROBERT L. SIEGEL, AS SUCCESSOR TRUSTEE UNDER THE SIEGEL FAMILY TRUST, Defendants. AMENDED COMPLAINT Plaintiff/Debtor Maison Grande Condominium Debtor, Inc. (the “Debtor”) sues Defendants Dorten, Inc. (“Dorten”) and Robert L. Siegel, as Successor Trustee under the Siegel Family Trust (the “Trust”), and alleges as follows: Jurisdiction and Venue 1. This Court has subject matter jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 1334 & 2201. 2. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2) (A), (F), (K) & (O). The Debtor consents to the entry of final orders and judgment by this Court as to any aspects that might be determined to be non-core.
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 2 of 40 3. This adversary proceeding is commenced pursuant to Rule 7001 of the Federal Rules of Bankruptcy Procedure including, but not limited to, subsections 7001(1), (2) and (9). 4. Venue as to this proceeding is proper in this District pursuant to 28 U.S.C. § 1409. Statement of Facts 5. The Maison Grande Condominium (the “Condominium”) is a 502-unit condominium located in the City of Miami Beach, Florida. 6. The Condominium was developed by Maison Grande, Inc. (the “Developer”) and its affiliates. 7. The Developer formed the Debtor to serve as the condominium association for the Condominium. 8. While the Developer was in control of the Debtor, it caused the Debtor to execute a document entitled Ninety-Nine Year Lease (the “Lease”). A true and accurate copy of the Lease is attached hereto as Exhibit A. 9. The Lease was also executed by Dorten and the Trust (collectively, the “Lessor”), who were affiliates of the Developer. 10. Robert L. Turchin signed the Lease as president of both Dorten and the Debtor. 11. Pursuant to the Lease, the Lessor purported to lease to the Debtor certain improved real property that primarily consisted of a swimming pool and some parking spaces. 12. On June 10, 2009, the Debtor commenced this bankruptcy case by filing a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). 2
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 3 of 40 13. In connection with this bankruptcy case, the Debtor has filed a motion to reject the Lease pursuant to Section 365 of the Bankruptcy Code. 14. The Lessor objected to the rejection motion. 15. The Lessor also filed the following motions seeking affirmative relief from this Court: (A) Creditors, Robert L. Siegel’s And Dorten, Inc.’s Motion To Prohibit Use Of Cash Collateral [DE 86]; (B) Motion For Abstention By Creditors, Robert L. Siegel’s And Dorten, Inc. [DE 87]; (C) Motion For Appointment Of Trustee And Incorporated Memorandum Of Law [DE 88]; (D) Creditors, Robert L. Siegel And Dorten, Inc.’s Motion To Dismiss Pursuant To 11 U.S.C. § 1112(B) [DE 89]; and (E) Creditors, Robert L. Siegel’s And Dorten, Inc.’s Motion For Relief From Stay [DE 90]. 16. The Lessor has suggested to the Debtor’s board of directors that their actions relating to this bankruptcy case will subject them to removal from their positions, litigation, and/or other adverse actions by unit owners. 17. Such threats are premised on, among other things, the Lessor’s assumptions that, if and when the Lease is rejected, the Lessor will have the right to foreclose on individual units and other assets for the full amount of past due and future rent under the Lease and take other steps adverse to the interests of unit owners. 18. The Debtor contends that the Lessor’s assumptions are unfounded and are interposed for the purpose of interfering with the Debtor’s governance and bankruptcy case. 19. The Debtor commences this proceeding, in part, for the purpose of seeking a determination as to the inaccuracy of the Lessor’s position in order to deter the Lessor from continuing to attempt to incite an insurrection by the other unit owners against the Debtor’s board of directors to improperly influence this bankruptcy case. 3
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 4 of 40 COUNT I AVOIDANCE OF ALLEGED LIEN ON ESTATE ASSETS 20. The Debtor incorporates the allegations contained in paragraphs 1 through 19 of this Complaint as if fully set forth herein. 21. The Lessor contends that it has a valid security interest in personal property of the Debtor by virtue of language in the Lease purporting to provide the Lessor with “a continuing lien paramount and superior to all others, including condominium owners, upon its assets and common surplus.” See Lease, § XV(c)(1). Such language is hereinafter referred to as the “Purported Security Agreement.” 22. The Lessor’s alleged security interest was not “perfected” within the meaning of the Uniform Commercial Code as adopted in Florida (the “UCC”) and applicable law as of the commencement of this bankruptcy case because the Lessor did not have on file with the Florida Secured Transaction Registry a valid UCC-1 financing statement and because the Lessor did not have control over assets such as cash for which the UCC requires control to effectuate perfection. 23. The Lessor has stipulated in open court in this bankruptcy case that it does not have on file a UCC-1 financing statement. 24. Pursuant to Sections 544 and 1107 of the Bankruptcy Code, a Chapter 11 debtor-in-possession has the authority to seek the avoidance of unperfected security interests. 25. This Court should avoid any and all security interests asserted by the Lessor against assets of the estate because the Lessor does not have a perfected security interest against any such assets. 4
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 5 of 40 COUNT II DETERMINATION OF INVALIDITY OF ALLEGED LIEN ON ESTATE ASSETS 26. The Debtor incorporates the allegations contained in paragraphs 1 through 19, and 21 of this Complaint as if fully set forth herein. 27. An actual controversy exists between the Debtor and the Lessor regarding the validity of the Purported Security Agreement. 28. The Debtor contends that the Purported Security Agreement did not create a valid security interest under Florida law because such language did not contain a particularized description of classes of intended collateral. 29. The issue of whether the Lessor has a valid security interest in assets of the Debtor affects whether certain potential plans of reorganization can be confirmed by this Court. It affects, for example, the manner in which the Debtor might be required to treat some or all of the Lessor’s claim against the estate. 30. This Court should determine and declare that the Lessor is not the holder of a valid security interest in assets of the Debtor because of the defects in the Purported Security Agreement COUNT III DETERMINATION OF INVALIDITY OF ALLEGED LIEN ON CONDOMINIUM PROPERTY 31. The Debtor incorporates the allegations contained in paragraphs 1 through 19 of this Complaint as if fully set forth herein. 32. The Lessor contends that Section XV of the Lease grants it valid liens on all Condominium units, certain personal property located within units, and all common elements (the “Purported Condominium Collateral”), which alleged rights are hereinafter referred to as the “Purported Condominium Lien Rights.” 5
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 6 of 40 33. An actual controversy exists between the Debtor and the Lessor regarding the validity of the Lessor’s Purported Condominium Lien Rights. 34. The Debtor contends that the Purported Condominium Lien Rights are invalid under various legal and equitable theories. Such theories include, but are not limited to, (A) that there is no specific statutory authority supporting the alleged liens (as opposed to liens of associations, for example), and (B) that the alleged liens are not enforceable mortgages under Florida law, see, e.g., Fla. Stat. § 697.04. 35. The issue of whether the Purported Condominium Lien Rights are valid affects the Debtor’s ability to reorganize. The Debtor generates its revenue from assessments on unit owners. These unit owners have limited pools of resources from which to pay assessments. The Debtor will have a greater flexibility to reorganize if, for example, it is determined that unit owners can commit to funding a proposed plan with assets they otherwise might need in order to satisfy liens of the Lessor that might exist against their property. 36. The Debtor seeks resolution of the issue both in its capacity as debtor-in- possession and also in its capacity as a representative of unit owners authorized by Florida Statute Section 718.111(3) to institute and maintain litigation on their behalf as to issues of common interest to most or all of them. 37. This Court should determine and declare that the Purported Condominium Lien Rights are invalid based on the terms of the Lease and applicable legal and equitable principles. COUNT IV DETERMINATION OF EXTENT OF ALLEGED LIEN ON CONDOMINIUM PROPERTY WHERE PRO RATA PAYMENTS HAVE BEEN MADE TO LESSOR 38. The Debtor incorporates the allegations contained in paragraphs 1 through 6
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 7 of 40 19, and 32 of this Complaint as if fully set forth herein. 39. The Lessor contends that its Purported Condominium Lien Rights entitle it to collect monies under the Lease by foreclosing upon an individual condominium unit even if the owner of that unit has paid to the Lessor the portion of all monies past due under the Lease to the Lessor equal to the percentage interest in common elements and common surplus owned by and attributable to such unit (such portion being referred to as a “Pro Rata Share”). 40. An actual controversy exists between the Debtor and the Lessor as to whether the Lessor can foreclose upon a condominium unit and related property if the owner of that unit has paid the Lessor a Pro Rata Share of all monies past due under the Lease. 41. The Debtor contends that, to extent the Purported Condominium Lien Rights could be determined valid, the Lessor is, at a minimum, prohibited from seeking to foreclose under such circumstances as a result of particular terms of the Lease, including but not limited to the following: so long as a condominium unit owner shall pay that portion of the total monthly rental due and owing the Lessor equal to his proportionate share of the common expenses of the Association, either to the Association or directly to the Lessor, the Lessor will not, and may not enforce any of its rights which it might otherwise have against the condominium unit owner under the terms and provisions hereof . . . See Lease, Section XV (d). Such terms also include the provision that “the lien against any . . . portion of the said condominium unit may be discharged by the owner thereof by the payment to the Lessor” of the Pro Rata Share. See id. 42. The Debtor also contends that the Lessor is prohibited from seeking to foreclose under such circumstances by Florida law, including Florida Statute Section 718.121(3), which provides as follows: “If a lien against two or more condominium 7
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 8 of 40 parcels becomes effective, each owner may relieve his or her condominium parcel of the lien by exercising any of the rights of a property owner under chapter 713, or by payment of the proportionate amount attributable to his or her condominium parcel” and Florida Statute Section 711.20(3) (repealed 1976), which provided as follows: “In the event a lien against two or more condominium parcels becomes effective each owner thereof may relieve his condominium parcel of the lien by payment of the proportionate amount attributable to his condominium parcel.” 43. The Debtor also contends the Lessor is prohibited from seeking to foreclose under such circumstances by Florida law, as the Lease denominates monies due under the Lease as common expenses of the Condominium, and under Florida Statute Section 718.115(2), funds for the payment of common expenses must be collected by assessments against units in their Pro Rata Share, and under Florida Statute Section 718.119(1), the liability of a unit owner for common expenses is limited to the amount assessed against the unit. 44. The issue of whether the Lessor can recover more than a Pro Rata Share of past due amounts owed under the Lease on account of a particular unit affects the Debtor’s ability to reorganize. The Debtor generates its revenue from assessments on unit owners. These unit owners have limited pools of resources from which to pay assessments. The Debtor will have a greater flexibility to reorganize if, for example, it is determined that unit owners can commit to funding a proposed plan with assets they otherwise might need in order to be able to pay more than their Pro Rata Share. 45. The Debtor seeks resolution of the issue both in its capacity as debtor-in- possession and also in its capacity as a representative of unit owners authorized by Florida Statute Section 718.111(3) to institute and maintain litigation on their behalf as to issues of common interest to most or all of them. 8
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 9 of 40 46. This Court should determine and declare that the Lessor cannot recover more than a Pro Rata Share of past due amounts owed under the Lease on account of a particular unit and related property based on the terms of the Lease and applicable law. COUNT V DETERMINATION OF EXTENT OF ALLEGED LIEN ON CONDOMINIUM PROPERTY WHERE PRO RATA PAYMENTS HAVE BEEN MADE TO DEBTOR 47. The Debtor incorporates the allegations contained in paragraphs 1 through 19, 32, and 39 of this Complaint as if fully set forth herein. 48. An actual controversy exists between the Debtor and the Lessor as to whether the Lessor can foreclose upon a condominium unit and related property if the owner of that unit has paid the Debtor a Pro Rata Share of all monies past due under the Lease. 49. The Debtor contends that, to extent the Purported Condominium Lien Rights could be determined valid, the Lessor is, at a minimum, prohibited from seeking to foreclose under such circumstances as a result of particular terms of the Lease, including but not limited to the following: so long as a condominium unit owner shall pay that portion of the total monthly rental due and owing the Lessor equal to his proportionate share of the common expenses of the Association, either to the Association or directly to the Lessor, the Lessor will not, and may not enforce any of its rights which it might otherwise have against the condominium unit owner under the terms and provisions hereof . . . Lease, Section XV (d) (emphasis added). 50. The issue of whether the Lessor can recover a Pro Rata Share of past due amounts on account of a particular unit under such circumstances affects the Debtor’s ability to reorganize. The Debtor generates its revenue from assessments on unit owners. These unit owners have limited pools of resources from which to pay assessments. The 9
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 10 of 40 Debtor will have a greater flexibility to reorganize if, for example, it is determined that unit owners can commit to funding a proposed plan with assets they otherwise might need in order to be able to pay another Pro Rata Share (i.e., a share to the Lessor in addition to the share they previously paid to the Debtor for the same rent). 51. The Debtor seeks resolution of the issue both in its capacity as debtor-in- possession and also in its capacity as a representative of unit owners authorized by Florida Statute Section 718.111(3) to institute and maintain litigation on their behalf as to issues of common interest to most or all of them. 52. This Court should determine and declare that the Lessor cannot recover any amounts owed under the Lease on account of a particular unit where the owner of the unit paid a Pro Rata Share of such amounts to the Debtor based on the terms of the Lease. COUNT VI DETERMINATION OF INVALIDITY OF ALLEGED LIEN ON CONDOMINIUM PROPERTY UPON REJECTION 53. The Debtor incorporates the allegations contained in paragraphs 1 through 19 and 32 of this Complaint as if fully set forth herein. 54. The Lessor contends that, if the Debtor’s pending motion to reject the Lease is granted, the Lessor will be entitled to exercise its Purported Condominium Lien Rights to collect future rent under the Lease. 55. An actual controversy exists between the Debtor and the Lessor regarding the legal effect of rejection of the Lease on the Lessor’s Purported Condominium Lien Rights. 56. The Debtor contends that, after rejection of the Lease, the Lessor will lack any Purported Condominium Lien Rights with respect to future rent under the Lease. 57. The issue of whether the Lessor has a valid security interest in the 10
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 11 of 40 Purported Condominium Collateral affects the Debtor’s ability to reorganize. The Debtor generates its revenue from assessments on unit owners. These unit owners have limited pools of resources from which to pay assessments. The Debtor will have a greater flexibility to reorganize if, for example, it is determined that unit owners can commit to funding a proposed plan with assets they otherwise might need to pay future rent. 58. The Debtor seeks resolution of the issue both in its capacity as debtor-in- possession and also in its capacity as a representative of unit owners authorized by Florida Statute Section 718.111(3) to institute and maintain litigation on their behalf as to issues of common interest to most or all of them. 59. This Court should determine and declare that the Lessor lack any Purported Condominium Lien Rights with respect to future rent under the Lease after it is rejected, in light of applicable law and the terms of the Lease. COUNT VII AVOIDANCE AND RECOVERY OF PREFERENTIAL TRANSFER 60. The Debtor incorporates the allegations contained in paragraphs 1 through 19 of this Complaint as if fully set forth herein. 61. On or about June 1, 2009, the Debtor made a payment to or for the benefit of the Lessor in the amount of $75,000 (the “Payment”). 62. The Debtor made the Payment to the Lessor on account of an antecedent debt owed by the Debtor to the Lessor pursuant to the Lease prior to the date the Payment was made. 63. At the time the Payment was made, the Debtor was insolvent. 64. Receipt of the Payment enabled the Lessor to receive more than it would have received if this was a case under Chapter 7 of the Bankruptcy Code, the Payment had not been made, and the Lessor received a distribution to the extent provided by the 11
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 12 of 40 Bankruptcy Code. 65. The Payment represents a preference that can be avoided and recovered for the benefit of the estate pursuant to Sections 547 and 550 of the Bankruptcy Code. 66. This Court should avoid the Payment and enter a judgment in favor of the Debtor and against the Lessor to recover the amount of the Payment. WHEREFORE, the Debtor respectfully requests that the Court: A. avoid and set aside any and all security interests asserted by the Lessor against assets of the estate or, in the alternative, determine and declare that the Lessor is not the holder of any valid security interests against such assets; B. determine and declare that the Lessor’s Purported Condominium Lien Rights are invalid; C. determine and declare that the Lessor cannot recover more than a Pro Rata Share of past due amounts owed under the Lease on account of a particular unit and related property; D. determine and declare that the Lessor cannot recover any amounts owed under the Lease on account of a particular unit where the owner of the unit paid a Pro Rata Share of such amounts to the Debtor; E. determine and declare that, after rejection of the Lease, the Lessor will not have any Purported Condominium Lien Rights with respect to future rent under the Lease; F. avoid the Payment and enter a judgment in the amount of $75,000 against the Lessor and in favor of the Debtor; and 12
  • Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 13 of 40 G. grant such other and further relief as the Court might deem just, proper and equitable. Dated: October 7, 2009 Respectfully Submitted, Messana Stern, P.A. Counsel for the Debtor 401 East Las Olas Boulevard, Suite 1400 Ft. Lauderdale, Florida 33301 Telephone: (954) 712-7400 Facsimile: (954) 712-7401 /s/ David N. Stern Thomas M. Messana Florida Bar No. 991422 David N. Stern Florida Bar No. 040398 Michael S. Hoffman Florida Bar No. 41164 13
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