Crawford v. Margabandhu (In re Maya Rests., Inc.)

585 B.R. 761
CourtUnited States Bankruptcy Court, W.D. Pennsylvania
DecidedMarch 29, 2018
DocketCase No. 16–23901–GLT
StatusPublished

This text of 585 B.R. 761 (Crawford v. Margabandhu (In re Maya Rests., Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Crawford v. Margabandhu (In re Maya Rests., Inc.), 585 B.R. 761 (Pa. 2018).

Opinion

GREGORY L. TADDONIO, UNITED STATES BANKRUPTCY JUDGE

*764A chapter 7 trustee was nearly arrested on criminal charges for conducting a site inspection on property of the bankruptcy estate. The police and district attorney pursued the charges after receiving a complaint from Prasad Margabandhu, the owner of the chapter 7 debtor, Maya Restaurants, Inc. ("Maya"), identifying Rosemary Crawford as the perpetrator of a criminal trespass and burglary. But Mr. Margabandhu failed to tell the police that Maya was in bankruptcy and Ms. Crawford was serving as its chapter 7 trustee. The Court finds that Mr. Margabandhu's willful failure to disclose these material facts constituted an attempt to impede the trustee's administration of the bankruptcy estate. Although the criminal charges have since been withdrawn, the Court concludes that sanctions against Mr. Margabandhu are warranted to compensate the parties injured by his irresponsible conduct.

I.

Maya petitioned for relief under chapter 11 of title 11 of the U.S. Code ("Bankruptcy Code") on October 18, 2016. Its primary asset is a building located at 623 Long Run Road in McKeesport, Pennsylvania ("Premises"). Throughout its chapter 11 case, Maya was not an operational entity, nor did it produce any revenue.2 Mr. Margabandhu is Maya's president,3 and he claims to be its "sole equity owner."4

A year earlier, water from an underground spring and a "casualty loss" scuttled Maya's plan to renovate the Premises into a restaurant and banquet hall.5 Maya intended to pursue two claims arising out of this incident. It sought proceeds from an insurance policy to fund its restoration expenses6 and claimed a valuable cause of action against the party from which it purchased the Premises-Festival Fun Parks, LLC-because the seller failed to disclose known drainage issues prior to the sale.7

From the beginning of the case, Maya demonstrated an inability to comply with basic bankruptcy requirements. Within weeks of the filing, the U.S. Trustee filed a motion to dismiss the case because Maya had no general liability or property insurance in place to cover the Premises.8 Maya also failed to file a single monthly operating report ("MOR") during the first six months of the case.

Due to Maya's inability to move the case forward, the Court established compulsory benchmarks that, if missed, could lead to dismissal.9 The Court also directed Maya to file a plan of reorganization by August *76516, 2017.10 Maya partially complied with the Court's orders, but it failed to timely file a plan of reorganization.11

On September 29, 2017, the Court granted the U.S. Trustee's motion to convert the case to a chapter 7 proceeding.12 The Court found cause for conversion under 11 U.S.C. § 1112(b)(4)(J) because, after more than 300 days in bankruptcy, Maya had failed to make any discernible progress toward reorganization, and it was unlikely to confirm a plan within a reasonable time without a sustainable source of revenue.13 In reaching this determination, the Court observed a "history of noncompliance in this case" and "a lack of respect for the [bankruptcy] process."14

Maya filed a motion to reconsider the conversion order through a new attorney, Jeffrey Morris, who had not previously entered an appearance in the case or been approved as counsel.15 At the hearing, Maya claimed a prospective tenant was prepared to operate a Spanish steakhouse on the first floor of the Premises based on a "letter of intent" signed just two days before.16 The tenant, a friend of Mr. Margabandhu,17 represented that he had no previous restaurant experience (indicating only that he runs a catering company)18 but suggested the space could be refurbished for only $1,000 in materials plus his own labor.19 Mr. Margabandhu concurred with this assessment and represented that a portion of the Premises could easily be opened within a short time.20 He also suggested that Maya's insurance claim was a "slam dunk" and could be quickly resolved21 because the insurer already "accepted liability" and made an initial payment on the claim.22

The Court ultimately denied the request for reconsideration after Mr. Margabandhu revealed that he allows a woman (later identified to be Jonette Blazevich) to run a weekly bingo game on the allegedly dormant Premises.23 Although these events *766attract visitors to the site, Maya does not receive revenue from these activities, nor does Ms. Blazevich pay rent. Instead, Mr. Margabandhu suggests that Ms. Blazevich provides in-kind services and pays "some bills."24

Ms. Crawford was appointed to serve as the chapter 7 trustee on September 29, 2017, but she did not visit the Premises for nearly two months.25 On November 20, she contacted Attorney Morris and expressed her intent to inspect the Premises the following day.26 Although Attorney Morris attempted to tell Trustee Crawford that Mr. Margabandhu was unavailable on November 21, she did not receive his message.27 Instead, she called Attorney Morris at approximately 11:30 a.m. on November 21 and informed him that she was at the Premises, sought access to the building, and inquired as to Mr. Margabandhu's whereabouts.28 Thereafter, Attorney Morris contacted Mr. Margabandhu and requested that he meet the trustee. Mr. Margabandhu claims he canceled an existing appointment and immediately headed to the Premises but was unable to get there by noon.29 While en route, Mr. Margabandhu encountered traffic and discontinued his trip to the Premises for some unexplained reason.

When Mr. Margabandhu failed to appear, Trustee Crawford hired a contractor to gain access to the Premises and change the locks.30 Upon entering the Premises, Trustee Crawford observed 12-14 fully operational video gaming terminals.31 None of the machines were listed on Maya's schedules. Trustee Crawford also observed perishable food and alcohol that Maya claimed to be left over from a "birthday party" that occurred the night before.32

By 6 p.m. on November 21, Trustee Crawford filed a motion for sanctions ("First Motion for Sanctions ") against Maya and Mr. Margabandhu, which detailed the existence of the video gaming terminals on the Premises. Maya's former and current counsel were both given electronic *767notice of the First Motion for Sanctions.33

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Cite This Page — Counsel Stack

Bluebook (online)
585 B.R. 761, Counsel Stack Legal Research, https://law.counselstack.com/opinion/crawford-v-margabandhu-in-re-maya-rests-inc-pawb-2018.