In re Mitchell

546 B.R. 339, 2016 WL 762698
CourtUnited States Bankruptcy Court, D. South Carolina
DecidedFebruary 26, 2016
DocketC/A No. 15-05656-HB
StatusPublished
Cited by2 cases

This text of 546 B.R. 339 (In re Mitchell) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. South Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Mitchell, 546 B.R. 339, 2016 WL 762698 (S.C. 2016).

Opinion

ORDER DENYING MOTION FOR RELIEF FROM STAY

HELEN E. BURRIS, US Bankruptcy Judge, District of South Carolina

THIS MATTER is before the Court for consideration of the Motion filed by Henry Lazcano and Guaray “Mike” Gupta (“Mov-[341]*341ants”).1 Movants seek relief from the automatic stay of 11 U.S.C. § 362(a)2 to continue a lawsuit pending in Virginia state court for breach of contract and resulting damages against Debtor Mario Antonio Mitchell. If successful in establishing a debt in that action, Movants also seek relief to submit any judgment for payment to the Virginia Real Estate Transaction Recovery Fund, Va.Code Ann. §§ 54.12114 and 2116 (the “Recovery Fund”), under the Virginia Real Estate Transaction Recovery Act, Va.Code Ann. § 54.1-2112 et seq. (the “Recovery Act”).

For the reasons set forth below, the Court finds that Movants failed to establish cause for relief pursuant to § 362(d). Movants did not demonstrate that they are possible claimants under the Recovery Act and failed to establish grounds for the continued pursuit of a breach of contract case against Mitchell in the Virginia state court.

The Court enters the following findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a)(1), made applicable to this contested matter pursuant to Fed. R. Bankr.P. 7052 and 9014.

Facts

1. Mitchell was present at all hearings on this matter and testified under oath. Mitchell is currently a real estate professional in North and South Carolina and lives in Ballantyne, North Carolina.

2. Movants are residents of Virginia and did not attend any hearing or provide testimony.

3. On February 27, 2012, Movants and Mitchell entered into an agreement titled “Home Investing Partnership Agreement” (the “Partnership Agreement”) and formed MGL Consulting, LLC (the “LLC”). The .LLC’s business was to purchase distressed properties, renovate the properties, and sell them for a profit.

4. The Partnership Agreement provided that each of the partners had an equal voice in the management of the LLC and would be distributed an equal proportion of any net profits or losses of the LLC. According to the Partnership Agreement, Movants contributed $15,000 each in initial capital for the LLC and Mitchell was responsible for financing the note on each home purchased by the LLC.

5. Mitchell testified that although Mov-ants claim they actually provided $50,000 each as initial capital, that amount was never paid and they each contributed only $15,000.

6. The LLC only purchased and resold one property in Virginia before the parties terminated their business relationship.

7. Mitchell testified that prior to the closing of the sale of that property, Mov-ant Lazcano requested a HUD-1 Settlement Statement.3 Mitchell provided Mov-ants a preliminary HUD-1 that differed from the final HUD-1 generated at closing because it did not include loans. Mitchell explained that in his experience, HUD-ls may be prepared multiple times during a real estate transaction and the final HUD-1 is rarely the same as a preliminary HUD-1.

[342]*3428. Mitchell testified that the property sold for a loss because the sale price did not cover the purchase price and renovation costs. Despite this, Mitchell stated that he wired $35,000 to Lazcano’s account three months after the sale to cover Mov-ants’ $15,000 initial capital contributions as well as $5,000 for a vehicle Movants claimed was purchased with their contributions.

9. After the sale of the property, on November 15, 2013, Movants submitted a complaint against Mitchell to the Virginia Real Estate Board. As a result, on January 22, 2015, the Board fined Mitchell $2,250 and revoked his real estate license for improper, fraudulent, or dishonest conduct and for failing to update his address of record in violation of Board regulations.

10. Mitchell testified that he failed to respond to the allegations of misconduct because he neglected to provide the Board with his North Carolina forwarding address as required by the Board’s regulations. Consequently, he was unaware of the complaint for misconduct brought against him and the Board’s investigation, and failed to contest or otherwise participate in the proceeding.

11. Thereafter, as a result of the Board’s decision in Virginia, the North Carolina Real Estate Commission issued a conditional two-month suspension of Mitchell’s North Carolina license, effective July 1, 2016, should he fail to comply with certain requirements imposed by the Commission. A Consent Order entered between Mitchell and the Commission stated that the basis for the disciplinary action in Virginia was “a business deal in which [Mitchell] was a principal, and [Mitchell’s] failure to update his personal information with the agency.”

12. No action has been taken against Mitchell by the South Carolina Real Estate Commission.

13. On March 6, 2015, Movants initiated an action against Mitchell in the state Circuit Court of Prince William County, Virginia, captioned Henry Lazcano and Guaray “Mike” Gupta v. Mario A. Mitchell, C/A No. CL 15001645.

14. Movants’ initial complaint alleged Mitchell breached the Partnership Agreement and sought a finding that Mitchell engaged in improper and dishonest conduct within the meaning of the Recovery Act. Movants asserted Mitchell was indebted to them in the amount of $82,862.20.

15. Mitchell, through counsel in Virginia, responded by submitting a demurrer to the complaint. The demurrer argued, in part, that Movants’ request for a finding of “improper and dishonest conduct” within the meaning of the Recovery Act was inappropriate because they did not initiate a case pursuant to Va.Code Ann. § 54.1-2114 and comply with other requirements of the statute, and the statute is penal and does not create a private right of action.

16. On June 5, 2015, the Virginia court entered an order sustaining Mitchell’s demurrer to Movants’ complaint “for reasons stated from the bench” that are not in this record. As a result, the Virginia court granted Movants leave to amend their complaint.

17. Thereafter, on June 25, 2015, Mov-ants filed an amended complaint that removed the allegation and request for a finding that Mitchell engaged in improper and dishonest conduct within the meaning of the Recovery Act.

18. The amended complaint alleges Movants provided additional capital contributions to the LLC beyond their initial contributions, the LLC purchased a property in Virginia on September 5, 2012, for $70,100.00, which was paid for in cash by [343]*343the LLC, and the LLC sold the property to a third party purchaser on August 1, 2013, for $170,500.00. It further alleges that Mitchell breached the Partnership Agreement of that LLC by depositing capital contributions from Movants into a personal bank account rather than a business account, encumbering the Virginia property, incurring obligations, and withdrawing capital funds all without the express written consent of Movants, and failing to account for the proceeds from the sale of the property.

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Related

In re Coffey
595 B.R. 501 (D. South Carolina, 2018)
In re Beaumont
548 B.R. 437 (D. South Carolina, 2016)

Cite This Page — Counsel Stack

Bluebook (online)
546 B.R. 339, 2016 WL 762698, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-mitchell-scb-2016.