Brugnara v. Greenfield

CourtUnited States Bankruptcy Court, N.D. California
DecidedMarch 22, 2022
Docket21-03065
StatusUnknown

This text of Brugnara v. Greenfield (Brugnara v. Greenfield) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Brugnara v. Greenfield, (Cal. 2022).

Opinion

EDWARD J. EMMONS, CLERK 13 □□ \o. U.S. BANKRUPTCY COURT □□ NORTHERN DISTRICT OF CALIFORNIA y ay a □□ □□ 1 . . Signed and Filed: March 22, 2022 □□□ 2 Mini hi 4 Vine 5 DENNIS MONTALI U.S. Bankruptcy Judge 6 7 9 UNITED STATES BANKRUPTCY COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 |/In re ) Bankruptcy Case ) No. 21-30592-DM 11 ||psG MORTGAGE LENDING CORP., ) 12 A DELAWARE CORPORATION, ) Chapter 11 ) 13 Debtor. ) ) 14 ) 15 ) LUKE BRUGNARA, ) Adversary Case No. 21-03065-DM 16 ) Plaintiff, ) 17 ) Vv. ) 18 ) 19 |}PAUL GREENFIELD, CHL, DAKOTA ) LP, DEVITO, GALINDO DONATI, ) 20 ||FUSCO, PSG CAPITAL, ) ) 21 Defendants. )

23 MEMORANDUM DECISION ON MOTION TO REMAND AND 24 MOTION FOR SUMMARY JUDGMENT 25 I. Background Facts 26 The real property located at 224 Sea Cliff Avenue in San 27 llPrancisco (the “Sea Cliff Property”) that lies at the heart of 28 =- 1 =-

1 this adversary proceeding and underlying bankruptcy has also 2 been at the heart of multiple prior bankruptcies and adversary 3 proceedings. This history cannot be ignored as the court 4 considers movant Luke Brugnara’s Motion to Remand (“Remand 5 Motion”) (Dkt. 15) the adversary proceeding back to state court 6 and Defendant Paul Greenfield’s Motion for Summary Judgment 7 (“MSJ”) (Dkt. 8), joined by non-party and Debtor PSG Mortgage 8 Lending Corp. (Dkt. 22) and Defendant Dakota Note, LLC (misnamed 9 as Dakota LP (Dkt. 36). 10 On May 22, 2017, Debtor Brugnara Properties IV (“BPVI”) 11 filed its most recent chapter 11 bankruptcy, Case No. 17-30501- 12 DM. At the time of the BPVI bankruptcy, Kay Brugnara served as 13 the president of BPVI and her husband Luke Brugnara1, the 14 previous president of BPVI, was incarcerated but still somewhat 15 active in the case. The case was eventually converted to a 16 chapter 7 liquidation. BPVI’s main asset was the Sea Cliff 17 Property. Multiple adversary proceedings were commenced during 18 the bankruptcy, including Brugnara Properties VI v. PSG Capital 19 Partners, Philip Fusco, and John DeVito, AP No. 17-03048-DM (the 20 “PSG AP”); Brugnara Properties VI v. Dakota Note, LLC, Arick D 21 Amspacker, Paul Greenfield, and California Home Loans AP No. 17- 22 03049-DM (the “Dakota Note AP”); and Brugnara Properties VI v. 23 Internal Revenue Service and California Franchise Tax Board, AP 24 No. 17-03071-DM (the “Tax AP”). 25 26 27 1 The Court hereinafter references Luke Brugnara and Kay Brugnara by first name to differentiate between the parties. No 28 disrespect is intended. -2- 1 The Tax AP culminated in a Judgment (Tax AP Dkt. 101) that 2 found that BPVI is the nominee of both Luke and Kay, and BPVI is 3 liable for the tax liabilities of the two Brugnaras that were 4 recorded against the Sea Cliff Property. The court further 5 found that BPVI is the alter ego of both Luke and Kay and thus 6 liable for their individual state and federal tax liabilities. 7 The PSG AP culminated in an Order Authorizing Compromise of 8 Controversy (BPVI bankruptcy Dkt. 329) between the chapter 7 9 Trustee, who had at that point stepped into the shoes of BPVI as 10 the Plaintiff, and the Defendants. The underlying Motion to 11 Compromise Controversy (“Compromise”) (BPVI Dkt. 297) was 12 heavily contested by BPVI and Kay. As the Compromise 13 summarizes, BPVI asserted a claim of breach of contract against 14 PSG Capital Partners, Inc. (PSG Capital), which held a secured 15 lien against the Sea Cliff Property, for allegedly failing to 16 fully fund a loan, and asserted a claim of intentional 17 misrepresentation against all Defendants for essentially 18 tricking BPVI into taking a loan secured by the Sea Cliff 19 Property that was more expensive than intended. The Trustee did 20 not believe there was a probability of success in prosecuting 21 the lawsuit for a variety of reasons, and thus found it prudent 22 to accept a $20,000 payment from the Defendants in exchange for 23 dismissing the adversary proceeding with prejudice. 24 The Dakota Note AP culminated in an Order Authorizing 25 Compromise of Controversy (BPVI Dkt. 283) between the chapter 7 26 Trustee, who had at that point stepped in the shoes of BPVI as 27 the Plaintiff, and the Defendants. This Compromise was not 28 opposed by any party. As the Trustee summarized, the underlying -3- 1 Dakota Note AP consisted of claims of breach of contract, 2 intentional misrepresentation, unfair business practices, and 3 loss of business opportunity against the Defendants all of whom 4 were creditors (or principals of creditors) with security 5 interests against the Sea Cliff Property. Each claim relates to 6 a loan made by Defendant Dakota Note LLC to BPVI that was 7 secured by the Sea Cliff Property. The Trustee did not believe 8 there was any probability of success in prosecuting the lawsuit 9 and accepted a $25,000 payment and $25,000 advance from the 10 Defendants in exchange for dismissing the case with prejudice. 11 Upon the resolution of these adversary proceedings the 12 automatic stay in the BPVI case was lifted for these former 13 Defendants and still-secured creditors to foreclose on the Sea 14 Cliff Property. At various points in the BPVI bankruptcy and 15 the adversary proceedings, Kay took alternating positions on 16 whether she or Luke personally had any ownership interest in the 17 Sea Cliff Property. The IRS also at one point took a position 18 that Luke held an “equitable ownership” interest in the Sea 19 Cliff Property by virtue of the nominee liens discussed above 20 (BPVI Dkt. 410). The concept was a novel one created by the 21 IRS, and the court declined to endorse the concept (BPVI Dkt. 22 439). 23 The BPVI bankruptcy is still open and pending in this 24 court. 25 On August 13, 2020, PSG Capital foreclosed on the Sea Cliff 26 Property, and shortly thereafter transferred title to PSG 27 Mortgage Lending Corp. (“Debtor”), the Debtor in this underlying 28 bankruptcy. On September 29, 2020, Luke commenced a lawsuit -4- 1 against “Paul Greenfield, CHL, Dakota LP, PSG Capital, Fusco, 2 DeVito, Galindo Donati” in San Francisco Superior Court 3 (“Complaint”). The Complaint alleges (1) fraud; (2) unfair 4 business practices; (3) unconscionable loans and (4) usury as to 5 loans made to “[Luke’s] family” and secured by the Sea Cliff 6 Property. The Complaint also claims Luke is the “equitable 7 title owner” of the Sea Cliff Property and “President and sole 8 officer of Brugnara Properties VI.” The Complaint also seeks 9 quiet title to the Sea Cliff Property in Luke’s name. 10 On August 15, 2021, Debtor commenced this bankruptcy. A 11 new automatic stay went into effect and controls in this case 12 notwithstanding the termination of the automatic stay in the 13 BPVI case. On December 3, 2021, Debtor removed Luke’s Complaint 14 to this court. Luke filed the Remand Motion seeking to return 15 his lawsuit to the state court, claiming that the lawsuit 16 concerns solely state matters unrelated to the Debtor. 17 Prior to Luke filing the Remand Motion, Defendant Paul 18 Greenfield filed a Motion for Summary Judgment (“MSJ”), seeking 19 summary judgment in his favor as to the entirety of the 20 Complaint based on res judicata, as all issues detailed in the 21 Complaint were previously adjudicated by settlement agreements 22 in the BPVI bankruptcy. Defendant Dakota Note, LLC and Debtor, 23 who is notably not a defendant, joined the MSJ. 24 At a hearing on the two motions held on February 25, 2022, 25 Luke mentioned an amended complaint that cured any defects of 26 pleading. No amended complaint has been filed with this court 27 or the San Francisco Superior Court.

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