In re Strathmore Group, LLC

522 B.R. 447, 2014 WL 7450772
CourtUnited States Bankruptcy Court, E.D. New York
DecidedDecember 31, 2014
DocketCase No. 1-13-45669-nhl, Case No. 1-13-46187-nhl
StatusPublished
Cited by5 cases

This text of 522 B.R. 447 (In re Strathmore Group, LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Strathmore Group, LLC, 522 B.R. 447, 2014 WL 7450772 (N.Y. 2014).

Opinion

Chapter 11

DECISION DENYING MOTIONS FOR ABSTENTION

HONORABLE NANCY HERSHEY LORD, UNITED STATES BANKRUPTCY JUDGE

Strathmore Group, LLC (“Strathmore”) filed a voluntary petition under chapter 11 of the Bankruptcy Code on September 18, 2013. Strathmore’s schedules of assets and liabilities list a fee simple interest in an apartment building located at 37-06 69th Street, Woodside, New York (the “Building”). Kathy Liosis (“Liosis”), as administrator of the estate of Ioannis Hi-letzaris a/k/a John Hiletzaris (“John”), challenges Strathmore’s ownership of the Building. '

Before the Court is Liosis’ motion (the “Motion for Abstention”), filed in the Strathmore case and the related individual chapter 11 bankruptcy of Strathmore’s principal, Nikolaos Hiletzaris (“Nikolaos”). Liosis requests that this Court abstain from hearing any matters in these bankruptcy cases connected to proceedings pending in Queens County Surrogate’s Court (the “Surrogate’s Court”). Because the determination of core bankruptcy issues require this Court to consider questions yet unresolved in Surrogate’s Court, such as whether the Building was properly [451]*451transferred to Strathmore, the Motion for Abstention is denied.

Background

Nikolaos and his brother John inherited multiple properties when their father Christos Hiletzaris (“Christos”) died intestate in 1998. Mot. 4 ¶¶ 6, 8, ECF No. 155.1 One of those assets, the Building, was purportedly transferred to Strathmore shortly after its formation in April 1999. Mot. 4-5 ¶¶ 10-11, ECF No. 155. According to Strathmore’s Operating Agreement, signed by Nikolaos in his individual capacity and as Attorney in Fact to John, Nikol-aos and John initially held 51% and 49% of the shares, respectively. Mot. Ex. C 4,18, ECF No. 155-8. By May 1999, John was no longer an owner of Strathmore, his interest allegedly having been transferred to Nikolaos and Nikolaos’ wife. Mot. 5 ¶ 12, ECF No. 155. The schedules to Ni-kolaos’ bankruptcy petition list his interest in Strathmore as having a value of $2,810,938.81. Sched. B 1, ECF No. 13-46187 Doc. 20.

Liosis alleges that Nikolaos improperly diverted assets of Christos’ estate, including the Building and its rents. Mot. 6 ¶¶ 14-16, ECF No. 155. Appointed administrator of John’s estate when he died in 2004, Liosis commenced a proceeding in Surrogate’s Court in 2008 to compel an accounting from Nikolaos, the administrator of Christos’ estate. Subsequently, Liosis filed a turnover action in Surrogate’s Court seeking, inter alia, a determination that John’s estate is the 50% owner of the Building.2 Mot. 7 ¶ 19, ECF No. 155.

Liosis contends that, among other improprieties, Nikolaos repeatedly refinanced the Building and retained the proceeds for his own benefit. Mot. 5 ¶ 11, ECF No. 155. Most recently, in 2009, Strathmore obtained a loan in the amount of $3,400,000, which, according to Nikolaos, Strathmore, and alleged mortgagee SDF30 Woodzone LLC (“SDF”), was secured by a mortgage on the Building. SDF Opp’n 6-7 ¶ 21, ECF No. 170. In 2012, Strathmore defaulted on the loan, and SDF commenced a foreclosure proceeding, which the bankruptcy filings stayed. Mot. 8 ¶ 22, ECF No. 155. Liosis challenges the validity of SDF’s mortgage. Mot. 10-11 ¶ 31, ECF No. 155. She maintains that the Building cannot serve as collateral for SDF’s loan, because the transfer of the Building to Strathmore was unauthorized.

On May 7, 2014, this Court entered an Order approving the sale of the Building, free and clear of liens, claims, and encumbrances (the “Sale Order”). Strathmore sought authority to satisfy SDF’s secured claim at closing, but the Court directed that the proceeds be held in escrow pending further order of this Court.3 Debtor Mot., ECF No. 123; Sale Order 16 ¶ 33, ECF No. 143. Thus, Strathmore commenced an adversary proceeding, pursuant to 11 U.S.C. § 506 and Federal Rule of Bankruptcy Procedure 7001(2), for a determination of the validity, extent, and priori[452]*452ty of SDF’s lien and a declaratory judgment that Liosis has no interest in the sale proceeds. Compl., ECF No. 14-01078 Doc. 1. Nikolaos also filed a complaint against Liosis, pursuant to 11 U.S.C. § 502 and Federal Rule of Bankruptcy Procedure 7001(2) and (9), for a declaration that she has no valid claim against Nikolaos or his estate. Compl., ECF No. 14-01079 Doc. 1.

After Liosis moved for abstention, but before the matter was marked submitted, she filed a $9,940,000 proof of claim in each bankruptcy case.4 The proofs of claim, which include an asserted one-half interest in the $10,400,000 proceeds from the sale of the Building, are based on John’s rights as Christos’ heir. Liosis believes that the Surrogate’s Court is the proper forum to determine the parties’ interest in the Building, and this Court should abstain from hearing any matters related to the Surrogate’s Court proceedings. This Court disagrees. The bankruptcy court is the proper forum to decide whether Strathmore rightfully characterizes the Building as property of its bankruptcy estate; the validity, priority, and extent of liens encumbering the Building; and Lios-is’ claims against both debtors.

Discussion

A. Jurisdiction

1. 28 U.S.C. § 157(b)

28 U.S.C § 1334(b) provides, in pertinent part, that the district courts have “jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.” Section 157(a) states that “[e]ach district court may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district.” 28 U.S.C § 157(a). The bankruptcy courts in this district have jurisdiction pursuant to § 1334(b) and the Eastern District of New York standing order of reference dated August 28, 1986, as amended by order dated December 5, 2012. This jurisdiction encompasses “all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11, referred under subsection, (a).” 28 U.S.C. § 157(b)(1). The statute does not define “core proceedings,” but lists non-exclusive examples, including “matters concerning the administration of the estate;” “allowance or disallowance of claims against the estate;” “determinations of the validity, extent, or priority of liens;” and “other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship.” 28 U.S.C § 157(b)(2)(A), (B), (K), (O).

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Bluebook (online)
522 B.R. 447, 2014 WL 7450772, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-strathmore-group-llc-nyeb-2014.