DB Auraria LLC v. Nelson

2024 NY Slip Op 31436(U)

• Court: New York Supreme Court, New York County
• Decided: April 19, 2024
• Status: Unpublished

Opinion

DB Auraria LLC v Nelson 2024 NY Slip Op 31436(U) April 19, 2024 Supreme Court, New York County Docket Number: Index No. 653436/2022 Judge: Melissa A. Crane Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. ~ ,.. INDEX NO. 653436/2022 NYSCEF DOC. NO. 271 RECEIVED NYSCEF: 04/19/2024

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY

PRESENT: HON. MELISSA A. CRANE PART 60M Justice ---------------.X INDEX NO. 653436/2022 DB AURARIA LLC, MOTION DATE 03/12/2024 Plaintiff, MOTION SEQ. NO. 009 - V-

PATRICK NELSON, NELSON PARTNERS, LLC DECISION + ORDER ON MOTION Defendant --------------------X

The following e-filed documents, listed by NYSCEF document number (Motion 009) 207, 208, 209, 210, 211,212,213,214,215,225,226,227,228,229,230,234,235,236,237,238,239,244,245,247,266 were read on this motion to/for MISCELLANEOUS

Upon the foregoing documents, it is

The court held a multi-day hearing (5 days total) to determine whether to hold defendants

in contempt and whether to appoint a receiver over the interests of the judgment debtors in any

business entity. For the reasons stated on the record on April 5, 2023, plaintiffs motion for a

receiver, pursuant to CPLR 5228, is granted.

In deciding whether to appoint a receiver, the court considers: ( 1) whether there are less

drastic alternative remedies; (2) the degree to which receivership will increase the likelihood of

satisfaction and (3) the risk of fraud or insolvency were the court not to appoint a receiver (see

Hotel Mezz Lender LLC v Falor, 14 NY3d 303, 317 (2010).

The hearing revealed an individual, defendant Patrick Nelson, who clearly cares a great

deal about the business of student housing. The hearing also revealed that the business as a

whole, (ie. all the entities holding the properties, be they LLCs, DSTs or something else) is over-

leveraged for a variety of reasons, including possibly not having healed yet from the effects of

the pandemic on student housing.

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However, there are glaring reasons to appoint a receiver. First and foremost is the

judgment debtors' inability to comply with court orders. On March 18, 2024, at defendants'

urging, this court cut back on a previous order, but did direct defendants to provide a detailed

accounting of their assets each month [EDOC 247]. Despite everything being on the line,

defendants failed to comply on time. Although defendants' lawyers threw themselves on the

sword to take the blame for this failing because of some kind of "misunderstanding," it was

ultimately defendants' responsibility to comply. Moreover, the excuse seems to be yet another

liberal "misunderstanding" (see Tr. dated April 5, 2024 pg 36 [EDOC 270]). These

"misunderstandings" form a pattern. It harkens back to the first day of testimony when Mr.

Nelson testified he did not understand the restraining notices operated to preclude certain

transactions.

Equally disturbing were defendants' efforts to distance themselves from their own

documents when they became inconvenient. For example, the judgment debtors changed the

amount of debt on their properties that their own documents reflected. Entries on defendants'

own documents reflecting inter-company transfers suddenly became loans so that the debtors

could portray the funds as belonging to an entity other than the debtor.

When confronted with an "Agreed Final Judgment' from a case involving real property in

Texas, in which he admitted to making false statements, Mr. Nelson claimed his lawyer acted

without authority. A chart from defendants, (Pl. Ex 24 ), purports to be a list of properties in

which Nelson Partners has an ownership interest. Under the column "Nature of Ownership"

often the term "Fee Simple" appears. At trial, Mr. Nelson testifies that the chart was rife with

errors. For instance, Hampton Ridge is not owned in fee simple, but rather Nelson Partners

owns NP Hampton Ridge which owns Hampton Ridge. This type of ownership is more distant

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that that of fee simple. Moreover, the debt on properties in which the debtors have an interest

kept growing at trial.

There was also conflicting testimony about the ownership ofNBPRE, yet another

company in this labyrinth of companies. First, Mr. Nelson was an owner of NB PRE. Then, it

was his broth~r who was the owner. There appears to be a deficient tracking for who owns what

and what is owed to whom. Conveniently, one of the Borrowers on a sale, NB 700 Logan, LLC,

is owned by Mr. Nelson's brother. That entity, along with NP Hampton Ridge, LLC, that Mr.

Nelson testified Nelson Partners owns, received $5,000,000.00 in a sale on August 10, 2023.

Plaintiff received nothing. (See Pl Ex 26).

It is also clear from the evidence that Nelson Partners Property Management (NPPM), an

entity over which this court does not currently have jurisdiction, is now paying personal

expenses for Mr. Nelson. Mr. Nelson testified that NPPM is paying his child support and

mortgage and is even paying NP's employee salaries. There are several instances where NPPM

loaned money to NP and then the money was immediately transferred to Mr. Nelson, his ex-wife

or his mother (see, e.g. Pl Ex 6). Thus, it is clear that the judgment debtors are attempting an end

run around the restraining notices by having an affiliate they control pay personal expenses and

other debts of their choosing.

Money flows between the various entities so freely in the form of "loans" (see PL Ex 5)

that it is difficult to track and leaves the court wondering why the judgment debtors could not

take a loan to pay the judgment here? Even worse, it appears that Mr. Nelson has a second string

of entities under the Sun Pacific umbrella that are engaged in the same business as the Nelson

Partners empire.

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Finally, the evidence shows that there is a high risk of insolvency within and among the

Nelson Partners empire. Receivers or bankruptcy trustees have taken over at least 8 managed

properties. Investors have sued. Yet, Mr. Nelson blames everyone else for his business failings:

the documents are wrong because the person who wrote them made mistakes; this court's order

spooked the lender for the sale of University Gardens that tanked the deal; plaintiffs are

predatory lenders. It is always someone else's fault, never his own.

For all these reasons, a receiver is more than appropriate at this juncture (see In re 4042

East Tremont Cafe Corp., v Sodano III, 177 AD3d 456, 459 (1 st Dep't 2019]).

Accordingly, the court grants the motion in accordance with the attached judgment and

order appointing a receiver.

4/19/2024 DATE MELISSA A. CRANE, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED □ DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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