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In re Ledstrom

United States District Court, D. Nevada

January 27, 2017

IN RE AFRODITI LEDSTROM.
v.
DOLORES ELIADES, Appellee. PETER ELIADES, et al., Appellants,

          OPINION

          ANDREW P. GORDON UNITED STATES DISTRICT JUDGE

         Appellants Peter Eliades; Peter Eliades as Trustee of the Eliades Family Trust; Aristotle Holding, LP; Pete the Greek, LLC; and Aristotelis Eliades appeal the bankruptcy court's preliminary ruling on a variety of issues in a consolidated adversary action. ECF Nos. 1, 20, 23. Appellee Dolores Eliades opposes. ECF No. 41. The receiver appointed by the bankruptcy court also filed an opposition brief. ECF No. 46.

         I. BACKGROUND

         This case arises out of a dispute about who owns and controls a family-run business, the Olympic Garden Gentlemen's Club (also known as the “OG”), and who owes what to whom as a result of the family's financial transactions. On one side are: (1) appellant Peter Eliades (the father of Dolores, Aristotelis, and Afroditi) and entities controlled by him; (2) appellant Aristotelis Eliades (also known as Telly); and (3) non-appellant and debtor Afroditi Eliades. The bankruptcy court and the parties refer to this side of the dispute as the Eliades Family Group. On the other side is appellee Dolores Eliades.

         The consolidated adversary action involves interrelated lawsuits filed in state court that were removed to the bankruptcy court as part of Afroditi's bankruptcy proceeding. The first lawsuit was filed in December 2009 by the Eliades Family Group against Dolores regarding alleged breaches of loan agreements, breach of fiduciary duties, and fraud. ECF No. 1 at 51. Dolores counterclaimed that Peter, Telly, and Afroditi were conspiring against her to deprive her of her interest in the OG. Id. In 2011, Dolores filed her own complaint but the state court determined it was duplicative of her counterclaims in the first lawsuit so it was dismissed. Id. at 52. In November 2011, Aristotle Holding (an entity owned by Peter) filed an unlawful detainer action against the OG, alleging that the club was not paying rent and was holding over after being notified its lease was terminated. Id.

         In 2012, Afroditi filed for bankruptcy after a multi-million-dollar judgment was entered against her in litigation related to a car accident in which a third party, Michael Ponzio, was killed. Id. at 53. Afroditi then removed the state court litigation to bankruptcy court where all the lawsuits were consolidated into one adversarial proceeding. Id.

         The bankruptcy court made extensive factual findings and I will not repeat them in full here. In sum, the Eliades Family Group claims that Dolores owes substantial sums to Peter for purported loans he made to her so she could purchase her share in the two entities that now own the OG and for her share in another entity that purchased land adjacent to the OG. The Eliades Family Group also contends Dolores owes sums she stole from the club and from Peter personally while she operated the OG. Dolores, in contrast, contends that the Eliades Family Group has conspired to divest her of her interest in the OG in retaliation for her refusal to assist the family in shielding Afroditi's assets from the Ponzio wrongful death lawsuit.

         The Eliades Family Group requested the bankruptcy court order the immediate dissolution of the two limited liability companies that owned the OG because the members were deadlocked and because Afroditi filed for bankruptcy. Id. at 53. The Eliades Family Group agreed a receiver could be appointed but only to wind up the club's affairs upon dissolution.[1] Id. Aristotle Holding requested the OG be evicted and for restitution of the premises based on non-payment of rent under a 2010 lease. Id. at 53-54. Peter moved for a pre-judgment writ of attachment on Dolores's ownership interest in the OG based on sums she allegedly owes under various loans and because she stole from him. Id. at 54.

         Dolores opposed dissolution because it would destroy her interest in the OG. Id. She also asserted that the effort to evict the club was part of the Eliades Family Group's efforts to deprive her of any value from the club. Id. In response to Peter's motion for a writ of attachment, Dolores argued the purported loans were actually gifts, Peter waived the right to payment by failing to demand payment for years, and her withdrawals were authorized by Peter or his late wife, Janet. She also argued that to the extent Peter was entitled to any recovery, she was entitled to an offset for certain gaming space lease payments that Peter received instead of those payments going to the OG. Id.

         The bankruptcy court appointed a temporary receiver and the proceedings were stayed for some time while the parties negotiated a sale of the club and settlement. Id. at 56-57. At the parties' request for a temporary solution to operate the club in the meantime, the bankruptcy court ordered Telly, Afroditi, and Dolores to hold weekly meetings on the club's operation, with the bankruptcy trustee also attending as a tie breaker when needed. Id. at 58. The Ponzio wrongful death claim thereafter settled and Afroditi's bankruptcy plan was confirmed. Id.

         When no further settlements could be consummated, the parties requested the bankruptcy court resolve their various motions. Id. The bankruptcy court made preliminary rulings and the Eliades Family Group appeals on numerous grounds. I address each in turn below.

         II. STANDARD OF REVIEW

         I review de novo the bankruptcy court's conclusions of law. In re Rains, 428 F.3d 893, 900 (9th Cir. 2005). I review its factual findings for clear error. Id. The bankruptcy court's factual findings are clearly erroneous only if they “leave the definite and firm conviction” that the bankruptcy court made a mistake. Id. (quotation omitted). Under clear error review, if the bankruptcy court's findings are “plausible in light of the record viewed in its entirety, ” I may not reverse them even if I would have “weighed the evidence differently.” Anderson v. City of Bessemer City, N.C. , 470 U.S. 564, 574 (1985). In other words, “[w]here there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous, ” particularly where the decision rests on a credibility determination. Id. at 574-75. But if documents or objective evidence so contradict a witness's testimony, or testimony is “so internally inconsistent or implausible on its face that a reasonable factfinder would not credit it, ” then I may find clear error even if the bankruptcy court's findings are based on a credibility determination. Id. at 575. I may affirm the bankruptcy court's decision “on any ground fairly supported by the record.” In re Warren, 568 F.3d 1113, 1116 (9th Cir. 2009).

         III. ANALYSIS

         A. Pre-Judgment Writ of Attachment

         Peter contends the bankruptcy court erred by not granting him a pre-judgment writ of attachment on Dolores's interests in the two entities that owned the OG: OG Eliades, LLC (OGE) and OG Eliades A.D., LLC (OGEAD). Peter argues that Dolores's interests in these two entities are her only assets, he demonstrated probable validity of his claims that Dolores owes him money, and the bankruptcy court therefore should have issued the writ. Specifically, Peter contends he showed Dolores owed him money for: (1) a $763, 099.55 balance on a loan Peter made to Dolores so she could purchase her share of ownership interests in SHAC Eliades, LLC, an entity formed to purchase the Sapphire Club; (2) a $3, 334, 934.24 balance on a loan Peter made to Dolores so she could purchase her share in OGE; (3) a $3, 185, 273.97 balance on a loan Peter made to Dolores so she could purchase her share in OGEAD; (4) over $1 million Dolores took from one of Peter's accounts to buy her daughter a house and to pay for meals, gifts, clothing, and other personal expenses; and (5) a $2, 444, 541.86 balance on a loan Peter made to Dolores so she could purchase her share in AA and D of Nevada, LLC (AAD), a company formed to hold property located next to the OG.[2]

         Dolores responds that the amounts Peter claims for AAD and Dolores's daughter's house are each secured by a lis pendens on two different properties so a writ is unnecessary. Dolores also argues that a writ of attachment is unnecessary because any other money taken from the club is small in comparison to the amount of her interest in the club. She asserts Peter has waived any right to repayment on the balance of the loan related to SHAC and that the balance was satisfied when the children paid off another loan on Peter's behalf. Finally, as to the promissory notes related to her share in OGE and OGEAD, Dolores argues the bankruptcy court's conclusion that Peter was unlikely to prevail on these claims is supported by the evidence.

         The bankruptcy court found that the documents underlying the family's transactions were “riddled with inconsistent signing dates and date modifications, ” that the documents “were only created to appease regulators and maintain the appearance of business formalities without ever being given actual effect, ” and the “documentary backdrop was largely ignored so long as the family remained unfractured.” ECF No. 1 at 21-22. Consequently, the bankruptcy court concluded that “enforcing the letter of the documents in this record is virtually impossible.” Id. at 22.

         In line with this conclusion, the bankruptcy court found Peter never required payment from his children on the OGE and OGEAD promissory notes until after this litigation commenced. Id. at 43-44 (“The Court finds no credible evidence he truly expected payments from his children for the OG Club until things went wrong.”). The bankruptcy court made this same finding with respect to AAD.[3] Id. at 44. The bankruptcy court thus found Peter had not satisfied his burden of showing his claims had probable validity to support a mandatory writ of attachment. Id. at 88. Specifically, the court noted there were significant disputes about whether the promissory notes were enforceable and whether Peter waived a right to payment. Id.

         As to the theft allegations, the bankruptcy court acknowledged that it viewed with skepticism Dolores's testimony about her authority to make all of the challenged expenditures, but that issues surrounding Dolores's express or implied authority to act in relation to the accounts raised doubts about Peter's ability to show Dolores had the requisite intent to steal. Id. at 88-89. The court thus denied a mandatory writ of attachment. Id. at 89. The bankruptcy court also denied a discretionary writ as unnecessary because Dolores's interest in the OG was not in danger of being moved outside the court's jurisdiction and the court was appointing a receiver to protect the club's value. Id.

         Under Nevada law, a plaintiff may apply for a writ of attachment on the defendant's property as security for the satisfaction of a judgment that may be recovered in a lawsuit. Nev. Rev. Stat. § 31.010(1). The court has discretion to issue a writ of attachment with or without notice in certain cases. Id. §§ 31.013, 31.017. For example, the court may order a writ of attachment without notice if the court determines that the defendant converted the plaintiff's property without consent or money was obtained through embezzlement. Id. §§ 31.017(3), (6), 31.022. If the court orders the defendant to show cause why an attachment order should not issue, it must hold a hearing and determine the “probable validity of the plaintiff's underlying claim against the defendant.” Id. §§ 31.024, 31.026. “If the court determines such claim is probably valid it shall order the clerk to issue a writ of attachment.” Id. § 31.026.

         The bankruptcy judge held a multi-day evidentiary hearing during which he heard testimony from Peter, Afroditi, Telly, Dolores, and other witnesses. He thus had the opportunity to evaluate the parties' credibility and examine the evidence underlying Peter's claims. The bankruptcy judge's finding that factual disputes remain such that Peter's claims lack probable validity is not clearly erroneous. There is an evidentiary basis for the bankruptcy judge's view that questions remain about whether (1) the parties properly executed the promissory notes, (2) those notes were executed for a lawful purpose, (3) Peter expected payment under those notes before this litigation, (4) Peter waived payment rights, and (5) whether Dolores exceeded her authority and had intent to steal with respect to expenditures from Peter's account. The record amply supports the bankruptcy judge's view that Peter was extremely generous with his children and required no payment from them so long as they remained on his good side, that the family's transactions were often not documented at the time of the transaction, and that the documented transactions and relationships often did not reflect how things functioned in practice.[4] Peter's disagreement with the bankruptcy judge's evaluation of the evidence and the witnesses' credibility does not suffice to establish that the preliminary findings were clearly erroneous. Consequently, the bankruptcy court's refusal to issue a mandatory writ was not reversible error.

         The bankruptcy court's refusal to issue a discretionary writ also was not error. The asset that Peter seeks to attach is not in jeopardy of being dissipated or removed from the court's jurisdiction. Accordingly, I affirm the bankruptcy court's decision to deny a writ of attachment.

         B. The Lease

         The parties disputed before the bankruptcy court which version of a lease governed the relationship between the OG and its landlord, Aristotle Holding. The Eliades Family Group contends the bankruptcy court's finding that the 2007 lease is the governing document was clearly erroneous. They argue the bankruptcy court was inconsistent when it found the 2010 lease was invalid because it was signed by only one member of OGE and OGEAD (Telly), yet it found the 2007 lease was valid even though it likewise was signed by only one member of OGE and OGEAD (Dolores). The Eliades Family Group also asserts that in making this ...


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