In re Crest by the Sea, LLC

522 B.R. 540, 2014 Bankr. LEXIS 5153, 2014 WL 7366200
CourtUnited States Bankruptcy Court, D. New Jersey
DecidedDecember 23, 2014
DocketCase No.: 14-31681-ABA
StatusPublished
Cited by6 cases

This text of 522 B.R. 540 (In re Crest by the Sea, LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. New Jersey primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Crest by the Sea, LLC, 522 B.R. 540, 2014 Bankr. LEXIS 5153, 2014 WL 7366200 (N.J. 2014).

Opinion

Chapter: 7

MEMORANDUM DECISION

Honorable Andrew B. Altenburg, Jr., United States Bankruptcy Court

I. Procedural Background

This matter is before the court on two motions. First, the Motion of the Debtor Crest By The Sea, LLC (the “Debtor”) to Enforce the Automatic Stay as to the Debtor’s Individual Members (the “Motion to Enforce”), see Doc. No. 3 on the Court’s Docket by and through its counsel, John R. Crayton, Esq., with opposition having been filed against the Motion to Enforce by Crest by the Sea Condominium Association, Inc. and numerous unit owners (collectively, the “Association”), by and through its counsel, Anne-Marie P. Kelley, Esquire and James H. Landgraf, Esquire of Dilworth Paxson LLP, see Doc. No. 19 on the Court’s Docket. Second, there is the Motion by the Association for an Order Dismissing Case for Filing the Petition without Authority and/or in Bad Faith or, Alternatively, Granting Relief from the Automatic Stay and Waiving the 14-Day Stay of Effectiveness of Order (the “Motion to Dismiss”). See Doc. No. 16 on the Court’s Docket. The Debtor opposed the Motion to Dismiss. See Doc. No. 29 on the Court’s Docket. An initial hearing was held on November 25, 2014 at which time the court requested further submissions and scheduled the matter for a plenary hearing on December 4, 2014. On that date, the court took argument and testimony.1 Three of the individual members of the Debtor — William Lublin, James Walsh and Joseph Bada, Jr. (each a “Member”)— are represented by and through their separate counsel, Mara Cohen Jackel, Esquire and David F. Michelman of Michelman & Bricker, P.C. Member William Lublin and Member Joseph Ciminera testified on behalf of the Debtor.2

The following constitutes the court’s findings of facts and conclusions of law.

II. Findings of Fact

The Debtor

The Debtor is a Limited Liability Company that designed, developed, built and sold a residential community development consisting of ten condominium units and certain common elements contained in a single story building located at 408 E. Farragut Road, Wildwood Crest, New Jersey known as “Crest by the Sea.”

The Debtor was incorporated under the laws of the State of New Jersey on March 26, 2004. As part of its incorporation process, the Debtor created an Operating Agreement (the “Operating Agreement”) which governs its activities. See Doc. No 20 on the Court’s Docket (the “Operating Agreement”). At the time of its incorporation the Debtor had five members, the four previously named Members and Michael Callahan. Id., at page 2. The Percentage Interests in the Debtor were as follows: Michael T. Callahan — 33.33%; Joseph J. Ciminera — 16.67%; Joseph F. Bada, Jr. — original interest 16.66%; James Walsh — 16.67%; and William H. Lublin— 16.67%. (collectively, the “Percentages”). Id., at Section 7.1.

The Debtor is a manager-managed limited liability company. Member Lublin and Member Walsh were named co-managers [543]*543to act as the “Manager” of the Debtor. Id., at Section 4.1. Member Callahan filed for bankruptcy in November of 2010.3 The Debtor ceased its operations and has had no income since 2010.

The State Court Actions

The Debtor and its Members are currently defendants in a lawsuit filed by the Association in 2010 in the Superior Court of New Jersey — Cape May County related to alleged acts and omissions Committed in connection with a condominium construction project captioned Crest by the Sea Condo. Assoc, et al. v. Crest by the Sea, LLC et al., Docket No. 10-491 (the “State Court Action”). The Association alleged against the Debtor and the Members, inter alia, breaches of fiduciary duty and expressed and implied contractual responsibilities; common law and statutory fraud; and piercing the respective corporate veil. The Debtor and its Members have denied the allegations. Discovery in the State Court Action is complete. • A hearing on a series of motions in limine was to be held on October 31, 2014. The State Court Action was scheduled for a trial beginning December 1, 2014 and expected to run for several weeks.

The Debtor and its Members are also currently defendants in second lawsuit which was filed in May 2014 in the Superi- or Court of New Jersey — Cape May County captioned Evanston Ins. Co. v. Crest by the Sea Condo Assoc. et al., Docket No. 14-211 (the “Declaratory Judgment Action”). This second lawsuit is an insurance declaratory judgment action related to potential insurance coverage through one of its insurers and indemnification by that insurer for the Debtor and its Members in the State Court Action.

Member Lublin and Member Walsh have been personally funding both litiga-tions. There are no promissory notes between the Debtor and Member Lublin and Member Walsh for their funding of the litigations.

The Bankruptcy Case

On October 23, 2014, Member Lublin and Member Walsh, as Manager of the Debtor, met in person and voted in favor of filing for bankruptcy protection. Member Walsh contacted Member Bada by telephone that same day and secured his vote authorizing the filing. Both Member Walsh and Member Bada attempted to contact Member Ciminera that same day but he could not be reached. Member Callahan was not contacted.

On October 24, 2014, the Debtor filed its complete chapter 7 bankruptcy Petition, Schedules and Statement of Financial Affairs “(SOFA”) (collectively, the “Petition”). The Corporate Resolution filed with the Petition, Doc. No. 2 on the Court’s Docket, states that a majority of members authorized the bankruptcy filing. Shortly after the Petition was filed, Member Ciminera contacted the Debtor’s attorney and left him a voice message consenting to the bankruptcy filing. Member Ciminera testified and confirmed that he ratified the Debtor’s decision to file the Petition.

The Petition reflects that it was signed by Member Walsh on behalf of the Debtor. The Petition was signed by Member Walsh as true and correct under penalty of perjury. The Petition is not dated anywhere. The Petition lists as its only assets a condominium unit of little, if any value at all4 and a bank account of $629.82. TD Bank, N.A. and Wildwood Crest Borough are listed as secured creditors against the con[544]*544dominium unit: The. only other creditors listed are the plaintiffs and co-defendants in the State Court Action. All are listed with a claim of $0.00. The Petition reveals that the Debtor has no income or expenses.

The SOFA provides at Question No. 9 that bankruptcy counsel was retained and paid in June 2014. Question No. 1 also confirms that the Debtor has had no income in 2012, 2018 and 2014. Question 21 provides that Member Walsh and Member Lublin each own 50% of the membership interests in the Debtor.5

On the date of the Petition, the Debtor filed the Motion to Enforce. No Member provided a certification in support of the Motion to Enforce. Based on the Debtor’s bankruptcy case and the pending Motion to Enforce, the State Court Action was stayed by the trial judge pending a ruling from the bankruptcy court regarding the applicability of the Debtor’s automatic stay to the non-debtor Defendants.

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Cite This Page — Counsel Stack

Bluebook (online)
522 B.R. 540, 2014 Bankr. LEXIS 5153, 2014 WL 7366200, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-crest-by-the-sea-llc-njb-2014.