Cozza v. Jekogian

1

FERNANDO COZZA v. NICKOLAS W. JEKOGIAN, III, NICK'S PROPERTIES, LLC, NWJ KANSAS CITY, INC., PLAZA PROPERTY GROUP, LLC AND KANSAS CITY EQUITIES, LLC v. LUIS COZZA, SIGNATURE COMMUNITY INVESTMENT GROUP, LLC, SIGNATURE COMMUNITY MANAGEMENT, LLC, NICKOLAS JEKOGIAN, JR., AS TRUSTEE OF THE JEKOGIAN FAMILY TRUST AND NICKOLAS JEKOGIAN, JR., AS TRUSTEE OF THE BBJ FAMILY TRUST

APPEAL OF: NICKOLAS W. JEKOGIAN, III, NICK'S PROPERTIES, LLC, NWJ KANSAS CITY, INC., PLAZA PROPERTY GROUP, LLC AND KANSAS CITY EQUITIES, LLC, SIGNATURE COMMUNITY INVESTMENT GROUP, LLC, SIGNATURE COMMUNITY MANAGEMENT, LLC, NICKOLAS JEKOGIAN, JR., AS TRUSTEE OF THE JEKOGIAN FAMILY TRUST AND NICKOLAS JEKOGIAN, JR., AS TRUSTEE OF THE BBJ FAMILY TRUST

No. 1169 EDA 2022

No. J-A28006-22

Superior Court of Pennsylvania

April 25, 2023

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

Appeal from the Judgment Entered June 21, 2022 In the Court of Common Pleas of Philadelphia County Civil Division at No(s) 150301196

BEFORE: PANELLA, P.J., LAZARUS, J., and SULLIVAN, J.

MEMORANDUM

PANELLA, P.J.

Nickolas W. Jekogian, III, Nick's Properties, LLC, NWJ Kansas City, Inc., Plaza Property Group, LLC and Kansas City Equities, LLC, Signature Community Investment Group, LLC Signature Community Management, LLC, Nickolas Jekogian, Jr., as trustee of the Jekogian Family Trust and Nickolas Jekogian, Jr., as trustee of the BBJ Family Trust (collectively "Appellants") appeal from the judgment entered in favor of Fernando Cozza ("Fernando") and Luis Cozza ("Luis") (collectively "the Cozzas"), wherein the Cozzas each received $1,979,579.66. On appeal, Appellants argue that the verdict in favor the Cozzas was the result of bias, as the Cozzas conducted their case-in-chief in person while Appellants had to conduct their case over Zoom due to the Covid-19 pandemic; the trial court improperly admitted hearsay statements at trial; the trial court abused its discretion in rendering various evidentiary rulings; Fernando's claims were barred by the statute of limitations; and the verdict was against the weight of the evidence. We affirm.

This case involves a long and convoluted factual and procedural history relating to allegations that Appellants commingled and misappropriated funds from the Cozzas pertaining to real estate investments made by Jekogian and the Cozzas.^[1] Relevantly, in 1996, Luis began working for Jekogian at his company, NWJ Companies. Luis managed some of Jekogian's properties in Philadelphia and looked for potential investments in the city. Fernando joined the company in 2001, and did some construction and management, but primarily sought out potential investments for the company.

In 2002, Jekogian and the Cozzas executed an agreement to form Kansas City Equities, LLC, ("KCE") a Missouri limited liability company. KCE bought properties in the Kansas City area. Significantly, Fernando, Luis, and Jekogian each owned 33.33% of KCE and each of them was a managing member. The agreement provided that the laws of the State of Missouri would govern the application and interpretation of the agreement and that exclusive jurisdiction over the matter would be in the courts of Pennsylvania or United States District Court for the Eastern District of Pennsylvania. Notably, Fernando resided in Newtown, Pennsylvania, and Luis and Jekogian lived in New York, New York.

In 2003, the Cozzas and Jekogian formed Plaza Property Group ("PPG"), a Missouri limited liability company, and Jekogian formed Nick's Properties, a Missouri corporation that he solely owned. PPG and Nick's Properties purchased numerous buildings. PPG owned 82% of these buildings and Nick's Properties owned 18% of the buildings. Under the operating agreement of PPG, the Cozzas and Jekogian were managing members, and Jekogian's interest of 18.8% and the Cozzas' interest was 81.2% (40.6% for each) of PPG's ownership interest in the underlying properties. The agreement included identical governing law and jurisdiction clauses as the KCE agreement.

In 2005, the Cozzas and Jekogian refinanced various properties with Prudential Mortgage Capital and obtained a loan in the amount of $7.2 million. After paying the mortgages, approximately $1.4 million was left; however, the Cozzas did not receive any portion of this money. Additionally, as part of refinancing, the Cozzas and Jekogian had to amend their operating agreements and Prudential required a separate entity to manage KCE and PPG. Thereafter, the parties formed NWJ Kansas City ("NWJKC"), which became the sole managing member of KCE and PPG. However, while Luis was a director and vice president of NWJKC, Jekogian, in effect, owned and controlled NWJKC, and the Cozzas were no longer managing members of the new company. Further, NWJKC took a 1% interest in both KCE and PPG. The amended operating agreement provided that the sole purpose of KCE and PPG was to acquire, own, and operate properties in Kansas City, Missouri. Sometime thereafter, Luis and Fernando left the companies, and they had very little involvement aside from receiving annual reports and K-1s^[2] at the end of each year.

On May 31, 2006, the state of Missouri determined that NWJKC was administratively dissolved or revoked and ordered that NWJKC must wind up and liquidate its business and affairs. Following NWJKC's dissolution, the Neighborhood Group managed the properties between 2006 and 2008. In 2008, Signature Community Management began managing the properties owned by Jekogian, KCE, and PPG. Jekogian was the CEO and owned between 75 and 85 percent of Signature. Among other things, Signature collected rents for KCE and PPG.

In April 2010, Signature opened new accounts for the various properties at Bank of America, one an aggregate account and the other accounts were for each property or entity. Notably, when each property collected rents, they were deposited into its separate bank account. During the evening, the money in the various accounts was deposited in the aggregate bank account. Accordingly, funds from properties owned by PPG and KCE were commingled with funds from other properties, including companies in which the Cozzas had no ownership interests. The funds from the aggregate account were used to pay for, among other things, renovations of the properties. Eventually the accounts at Bank America were overdrawn by $100,000 and the accounts were closed. Subsequently, Signature opened about 20 new accounts for individual properties and an account for short-term funding at Chase Bank. Similar to the Bank of America accounts, once the individual properties' accounts received money, the funds were transferred to the short-term funding account and then transferred to Signature.

The KCE and PPG properties struggled to keep utilities on, checks bounced, and vendors refused to work with the properties. Eventually, Signature stopped making the mortgage payments on the properties. In May 2012, U.S. Bank National Association filed a motion to appoint a receiver against KCE, PPG, and Nick's Properties. Eventually, a court in Missouri appointed a management company as a receiver.

In the interim, in 2009, Jekogian created BBJ Family Trust, a trust for his daughters. Jekogian's father was the trustee and Jekogian was the grantor of the trust. Subsequently, in 2012, Jekogian's father created Jekogian Family Trust, a trust for the benefit of Jekogian's daughters, nieces, and nephews. Jekogian and his sister were the trustees of the Jekogian Family Trust. Between 2011 and 2013, Jekogian transferred ownership interests in various entities, including KCE and PPG, to the trusts. Relevant herein, Jekogian reduced his ownership interest in both KCE and PPG to 1% in 2013 and transferred the remainder of his ownership interest to the trusts. In 2013, the properties were lost to foreclosure.

On March 9, 2015, Fernando filed a complaint against Jekogian, Nick's Properties, and NWJKC. Thereafter, Fernando filed a second amended complaint against Jekogian, Nick's Properties, NWJKC, PPG, and KCE (collectively "Jekogian Defendants"), raising claims of (1) breach of fiduciary duty against Jekogian and NWJKC; (2) breach of contract against NWJKC; (3) accounting against Jekogian, NWJKC, KCE, and PPG; (4) shareholder access to records against KCE and PPG; and (5) statutory personal liability against Jekogian. The Jekogian Defendants filed an answer and new matter. Thereafter, the Jekogian Defendants filed a joinder complaint against Luis, raising claims for joint and several liability, contribution, and indemnification. The Jekogian Defendants alleged that because Luis was a director and vice president at NWJKC, his actions made him jointly and severely liable.

On November 28, 2016, Luis filed an answer to the joinder complaint with new matter and counterclaims, including (1) breach of fiduciary duty against Jekogian and NWJKC; (2) breach of contract against the NWJKC; (3) accounting against Jekogian, NWJKC, PPG, and KCE; (4) statutory personal liability against Jekogian; and (5) declaratory judgment. The Jekogian Defendants filed an answer to Luis's counterclaims with new matter.

On March 2, 2018, Fernando filed a motion for partial summary judgment, arguing that he met the requirements under Missouri law to obtain an accounting of PPG and KCE. The trial court granted Fernando's motion for partial summary judgment and ordered Appellants to provide a full and complete accounting of all transactions, revenues, and expenses of PPG and KCE to Fernando.

On May 8, 2018, Fernando filed the joinder complaint against Signature Community Management, LLC, Signature Community Investment Group, LLC., and Jekogian (collectively "Signature Defendants"). In the joinder complaint Fernando raised claims, including (1)...