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In re Roussos

United States District Court, C.D. California

May 23, 2017

In re Harry Roussos
v.
Howard M. Ehrenberg Theodosios T. Roussos

          PRESENT: HONORABLE JOHN F. WALTER, UNITED STATES DISTRICT JUDGE

          CIVIL MINUTES -- GENERAL

         PROCEEDINGS (IN CHAMBERS): ORDER AFFIRMING BANKRUPTCY COURT'S JANUARY 12, 2017 ORDER

         On January 23, 2017, Appellants Theodosios T. Roussos, Dr. George Singer, MD, Thalia Singer, Harris Roussos, and Theodosia Roussos (collectively, “Appellants”) filed an Appeal from the United States Bankruptcy Court's January 12, 2017 Order, After Hearing, Granting Chapter 7 Trustee's Motion for Order (1) Compelling Theodosios Roussos, Paula Roussos, and S.M.B. Management, Inc., a California Corporation, to Turnover Property of the Estate and (2) Authorizing Trustee to Utilize Services of the United States Marshals to Enforce Court Order (“January 12, 2017 Order”). On March 27, 2017, Appellants filed their Opening Brief. On May 1, 2017, Appellee Howard M. Ehrenberg, Chapter 7 Trustee for the Estate of Appellant Theodosios Roussos (the “Trustee”), filed his Opposition Brief. On May 8, 2017, Appellants filed a Reply Brief. Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7-15, the Court found the matter appropriate for submission on the papers without oral argument. The matter was, therefore, removed from the Court's May 15, 2017 hearing calendar and the parties were given advance notice. After considering the moving, opposing, and reply papers, and the arguments therein, the Court rules as follows:

         I. Factual and Procedural Background

         A. Background Facts

         On June 14, 1993, two brothers, Theodosios Roussos and Harry Roussos (collectively, the “Roussos Brothers”) filed separate Chapter 11 petitions commencing their respective bankruptcy cases, specifically Case No. 2:15-bk-21624-ER, In re Harry Roussos, and Case No. 2:15-bk-21626-ER, In re Theodosios Roussos. On May 9, 1994, in their Chapter 11 bankruptcy cases, the Roussos Brothers filed a Motion By Debtor-In-Possession for Order Authorizing Sale of Real Property Free and Clear of Co-Owner Interests and Liens, and Authorizing Disbursement of Sales Proceeds (the “Sale Motion”). In the Sale Motion, the Roussos Brothers sought approval of the sale of the apartment building located at 2727-2741 Abbot Kinney Boulevard, Venice, California (the “Abbot Kinney Property”) to OF Enterprises, LP (“OF”) and the apartment building located at 153 San Vicente Boulevard, Santa Monica, California (the “San Vicente Property”) (collectively, the “Properties”) to SMB Investors Associates, LP (“SMB”).[1] On October 19, 1994, pursuant to the Sale Order, the Roussos Brothers executed a grant deed conveying title to the “Abbot Kinney Property to O.F., which was recorded on October 24, 1994. On November 29, 1994, pursuant to the Sale Order, the Roussos Brothers executed a grant deed conveying title to the San Vicente Property to S.M.B., which was recorded on December 5, 1994.

         In July 2015, the bankruptcy cases of the Roussos Brothers were reopened when a creditor, Lula Michaelides, discovered that the Roussos Brothers had committed a fraud on the Bankruptcy Court in 1994.[2] Howard M. Ehrenberg was appointed as the Chapter 7 Trustee. After the Trustee concluded that the Roussos Brothers had orchestrated a fraud on the Bankruptcy Court in 1994, the Trustee filed adversary proceedings against the Roussos Brothers and others who were involved with the purportedly fraudulent sale of the Properties. These actions were entitled: (1) Howard M. Ehrenberg v. Theodosios Roussos, Harry Roussos, Christine Roussos, Paula Roussos, OF, Liro, SMB, SMB Management, Chase Bank, N.A., OneWest Bank, N.A., and CIT Bank, N.A., Case No. 2:15-ap-1404-ER; and (2) Howard M. Ehrenberg v. Theodosios Roussos, Harry Roussos, Christine Roussos, Paula Roussos, OF, Liro, SMB, SMB Management, Chase Bank, N.A., OneWest Bank, N.A., and CIT Bank, N.A., Case No. 2:15-ap-1406-ER. In order to prevent any transfer of the properties subject to the adversary proceedings, the Trustee filed a Motion for Order Imposing Stay Pursuant to 11 U.S.C. § 105(a) (the “Initial Stay Motion”) on August 25, 2015, seeking to enjoin the arbitration to avoid further harm to the creditors.

         On September 30, 2015, the Bankruptcy Court granted the Initial Stay Motion, and enjoined the arbitration through December 23, 2015, without prejudice to the Trustee filing a renewed motion for injunctive relief in the adversary proceedings. On November 25, 2015, the Trustee filed a Motion for Preliminary Injunction Re Verified Complaint (1) for Declaratory Relief; (2) To Vacate Sale for Fraud on the Court; (3) To Quiet Title; (4) for Turnover of Property; (5) for Fraud; (6) for Breach of Fiduciary Duty; and (7) for Aiding and Abetting Breach of Fiduciary Duty in each of the adversary proceedings (the "Second Stay Motions") in order to maintain the status quo pending a final judgment or settlement in the adversary proceedings. The Bankruptcy Court granted the Trustee's Second Stay Motions, and a preliminary injunction was issued in both adversary proceedings on December 21, 2015. On January 27, 2016, Theodosios Roussos and his wife, Paula, filed notices of appeal of the December 21, 2015 Orders, and elected to have them heard in the District Court, where they were assigned the following case numbers: Case No. 2:16-cv-00601-JFW and Case No. 2:16-cv-00607-JFW.

         On June 27, 2016, after briefing by the parties, this Court affirmed the Bankruptcy Court's December 21, 2015 Order in each of the cases. Theodosios Roussos and his wife, Paula, separately appealed the District Court's June 27, 2016 Orders to the Ninth Circuit, where they were assigned the following case numbers: Case No. 16-56065 and Case No. 16-56066. The Ninth Circuit consolidated the two appeals, the parties filed their respective briefs, and oral argument was scheduled for January 10, 2017. On November 14, 2016, the Trustee filed a Motion for Order (1) Dismissing Consolidated Appeals as Moot and (2) Continuing Oral Argument Pending Ruling on Motion to Dismiss. In his motion, the Trustee sought dismissal of the consolidated appeals as moot because the Trustee had entered into a settlement agreement with the majority of the defendants in the underlying adversary proceedings, including Harry Roussos and his wife, Christine.[3] The settlement agreement provided that the two fraudulently sold apartment buildings would be returned to the Roussos Brothers' bankruptcy estates. Section 6 of the settlement agreement, as amended, provided:

Harry and Christine currently occupy rent free Units 4D and 4E in the San Vicente Property (the “Units”). From the Effective Date of this Agreement until such time as the escrow for the sale of the San Vicente Property has closed (the “COE”), the Trustee will allow Harry and Christine to continue to occupy the Units rent free. The Trustee may evict Harry and Christine if they attempt to hinder, delay, interfere or thwart the Trustee's efforts to market and/or sell the San Vicente Property or for any other reason provided under applicable law except for the non-payment of rent prior to COE.[4]

         The settlement agreement was approved by the Bankruptcy Court on October 6, 2016 (the “Settlement Approval Order”), and implemented, in part, by judgments entered on October 7, 2016 (collectively, the “Property Judgments”), which (1) voided the original sale order; (2) cancelled the grant deeds originally conveying title to the properties to OF and SMB; and (3) vacated the December 21, 2015 preliminary injunction. On January 4, 2017, the Ninth Circuit granted the Trustee's motion and dismissed the consolidated appeals as moot.

         On October 20, 2016, Theodosios Roussos appealed the Settlement Approval Order and the Property Judgments to the United States Bankruptcy Appellate Panel for the Ninth Circuit. On November 17, 2016, the Trustee elected to have the appeals of the Settlement Approval Order and the Property Judgments transferred to the District Court. As a result, the five appeals were transferred and assigned the following case numbers: Case No. 2:16-cv-08612-JFW (Settlement Approval Order in Case No. 2:15-bk-21624-ER (jointly administered with Case No. 2:15-bk-21626-ER)); Case No. 2:16-cv-08613-JFW (Settlement Approval Order); Case No. 2:16-cv-08642-JFW (Property Judgment in Case No. 2:15-ap-01404-ER); Case No. 2:16-cv-08643-JFW (Property Judgment in Case No. 2:15-ap-01406-ER); and Case No. 2:16-cv-09115-JFW (Settlement Approval Order).[5] On April 19, 2017, after briefing by the parties, this Court affirmed the Bankruptcy Court's October 6, 2016 Settlement Approval Order and its October 7, 2016 Property Judgments in the three remaining cases.

         B. Facts Related to This Appeal

         After the Bankruptcy Court entered the Settlement Approval Order and the Property Judgments, the Trustee immediately assumed control over the Properties, and began to take the necessary steps to market and sell the San Vicente Property pursuant to the terms of the settlement agreement.[6] On October 31, 2016, the Trustee emailed Theodosios Roussos to inform him that as a result of a court-approved settlement and the absence of any leases or stay pending appeal of the Settlement Approval Order or the Property Judgments, he was required to surrender and deliver possession of the three units, Units 3B, 4A, and 4B (collectively, the “Units”), he was illegally occupying in the San Vicente Property. Theodosios Roussos refused to surrender and deliver possession of the Units to the Trustee. Because Theodosios Roussos's illegal occupancy of the units would complicate and potentially hinder the sale process, and in order to facilitate the Trustee's marketing and sale of the San Vicente Property in accordance with the settlement agreement, on November 29, 2016, the Trustee filed a Motion for Order (1) Compelling Theodosios Roussos, Paula Roussos, and S.M.B. Management, Inc., a California Corporation, to Turnover Property of the Estate and (2) Authorizing Trustee to Utilize Services of the United States Marshals to Enforce Court Order (the “Turnover Motion”). The Appellants filed a written opposition to the Turnover Motion on December 21, 2016. After oral argument on January 4, 2017, the Bankruptcy Court entered its Order granting the Trustee's Turnover Motion on January 12, 2017.[7]Appellants now appeal the Bankruptcy Court's January 12, 2017 Order.

         II. Issues of Appeal Appellants present the following issues on appeal:

1. “Whether the Bankruptcy Court erred in its decision.”[8] Appellants' Opening Brief, p. 3.
2. “Whether the Bankruptcy Court erred in finding Roussos did not have a tenancy.” Id.
3. “Whether the Bankruptcy Court erred in finding Roussos' tenancy had been extinguished by virtue of being merged into an involuntary conveyance (on which ...

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