Francis v. Francis

1

JAMES M. FRANCIS, Plaintiff, v. JOHANNA ML FRANCIS, Defendant.

Civil Action No. 16-4376

United States District Court, E.D. Pennsylvania

April 18, 2023

OPINION

SLOMSKY, J.

TABLE OF CONTENTS

I. INTRODUCTION 1

II. FINDINGS OF FACT 5

A. The New York Properties ................................................................................................. 5

1. Background .................................................................................................................... 5

2. Properties ..................................................................................................................... 11

a. 61 Greene Avenue .................................................................................................... 11

b. 301 Washington Avenue .......................................................................................... 12

B. The Philadelphia Properties........................................................................................... 12

1. Background .................................................................................................................. 12

2. Properties ..................................................................................................................... 17

a. 115 and 117 North Third Street .............................................................................. 17

b. 312 Monroe Street and 307 Pemberton Street ........................................................ 18

c. Queen's Mews Properties ........................................................................................ 19

i. 207 and 209 Monroe Street (Queen's Mews West) ........................................... 19

ii. 718, 720, 722 and 724 South 2nd Street (Queen's Mews South) ...................... 20

d. 232 S. 3rd Street ....................................................................................................... 22

3. Management of the Philadelphia Properties ................................................................ 24

a. James^[1] Fails to Complete Development of the Philadelphia Properties ........................ 24

b. James Takes Control of the Philadelphia Properties............................................... 26

c. James's Transactions Regarding the TrisVanDivi Property ............................................ 28

i. October 2010 Transaction Regarding 312 Monroe Street .................................. 28

ii. 2014 Deed-in-Lieu of Foreclosure Transaction Regarding 312 Monroe Street .............. 30

d. James's Transactions Regarding 115 and 117 North Third Street ................................................................... 31

e. James's Transactions Regarding the Queen's Mews West Properties at 207 and 209 Monroe Street, Philadelphia, Pennsylvania and the Queen's Mews South Properties at 718, 720, 722, and 724 South 2nd Street, Philadelphia Pennsylvania .................................................................... 32

III. CONCLUSIONS OF LAW ................................................................................................. 33

A. James's Claims ................................................................................................................ 33

1. James Has Not Proven by a Preponderance of the Evidence that He is Entitled to Equitable Relief ...................... 33

a. Pennsylvania Law on Quiet Title ............................................................................ 34

b. James Has Not Proven by a Preponderance of the Evidence a Viable Claim to Ejectment Under Pennsylvania Rule of Civil Procedure 1061(b)(1) ................. 36

c. James Has Not Proven by a Preponderance of the Evidence a Viable Claim to Quiet Title Under Pennsylvania Rule of Civil Procedure 1061(b)(2).. ............... 38

2. James Did Not Prove by a Preponderance of the Evidence that Johanna Breached the Partnering Agreement ........ 39

a. James Has Proven by a Preponderance of the Evidence that a Contract Exists ................................... 41

b. James Has Not Proven by a Preponderance of the Evidence that Johanna Breached Her Contractual Obligations .............................................. 41

3. James Has Not Proven by a Preponderance of the Evidence that Johanna Comitted Waste and Mismanagement of the New York Properties or the Philadelphia Properties ......................................... 48

a. Waste and Mismanagement - New York Properties ............................................... 48

b. Waste and Mismanagement - Philadelphia Properties............................................ 52

B. Johanna's Counterclaims ............................................................................................... 55

1. Johanna Has Not Proven by a Preponderance of the Evidence that She is Entitled to Declaratory Judgment ........ 55

2. Johanna Has Not Proven by a Preponderance of the Evidence that James Engaged in Waste or Mismanagement of Property or Assets .................... 58

3. Johanna Has Not Proven by a Preponderance of the Evidence that James was Unjustly Enriched ..................... 60

4. Johanna Has Not Proven by a Preponderance of the Evidence that James Tortiously Interfered with Johanna's Business Relations .......................... 63

5. Johanna Has Not Proven by a Preponderance of the Evidence that James Converted Her Property ....................... 64

IV. CONCLUSION .................................................................................................................... 66

I. INTRODUCTION

This case arises from the deterioration of the personal and professional relationship between a father and daughter. Beginning in or around 2002, Plaintiff James M. Francis (“James”) and his daughter Johanna ML Francis (“Johanna”)^[2] did business together for the acquisition, financing, construction, and/or development of numerous properties in New York and Philadelphia. To do so, they formed various business entities, typically as partnerships or limited liability companies.^[3] The entities were owned by James and Johanna either individually, jointly, or with other members of the Francis family.

In or about 2008, the relationship between James and Johanna began to falter. Projects undertaken by them did not progress as intended and ultimately were never completed. Eventually, the parties were unable to make payments on loans funding their ventures and, consequently, many of the properties they managed were lost in foreclosure or repossessed. Further, Johanna, as the only guarantor on many of the loans, was left liable to creditors.

While the parties' projects deteriorated, so did their relationship. James and Johanna began to dispute the interests each held in the entities created to acquire, manage, and develop the properties. James also took steps to remove Johanna as general partner of the family's investment company. By 2010, the father and daughter stopped working with each other and became adversaries in a series of lawsuits and legal challenges.^[4] This action is one of those lawsuits.

On May 20, 2016, James filed a Complaint (Doc. No. 2-2, Ex. A) in the Philadelphia Court of Common Pleas against Johanna, alleging a number of state claims relating to the parties' failed business ventures. In the Complaint, James asserts five claims.^[5] Each remaining claim will be noted and a short description will follow that explains the relationship between the claim and the parties.

• Count I: Equitable Relief: Quiet Title to 232 S. 3^rd Street^[6]

James seeks to quiet title to 232 S. 3^rd Street, Philadelphia, Pennsylvania. In 2004, Johanna purchased this property on her own. The Partnering Agreement, a document executed by the parties to assist in their Philadelphia-based real estate ventures, provides that each party holds a 50% interest in 232 S. 3^rd Street, which James seeks recognition of in Count I.

• Count II: Breach of Partnering Agreement

James asserts that Johanna breached the Partnering Agreement. Specifically, he alleges that she engaged in misconduct which resulted in the properties either being unreasonably encumbered or lost, and that she has not delivered financial statements, tax returns, and related financial information to James.

• Count III: Waste and Mismanagement - New York Properties

James alleges that Johanna engaged in waste, mismanagement, and self-dealing regarding the New York Properties. He asserts that she: (1) facilitated a transfer of ownership interests without James's approval; (2) created two entities, Etienne Estates at Washington LLC and Etienne Estates on Greene LLC to benefit herself; (3) defaulted on the properties' mortgages; (4) lived in one of the New York Properties without paying rent; and (5) directed funds to herself. Moreover, James claims that Johanna has not supplied him with financial statements, tax returns, and other financial documents for Etienne Estates at Washington LLC and Etienne Estates on Greene LLC.

• Count V: Waste and Mismanagement - Philadelphia Properties

James asserts a second claim of waste and mismanagement, this time regarding the Philadelphia Properties. He alleges that Johanna's actions led to the default on loans relating to multiple properties, which in turn led to lenders filing confessions of judgment. James also claims that Johanna misappropriated funds. Finally, he contends that Johanna did not provide him with financial statements, tax returns, and other financial documents.

(See Doc. No. 2-2, Ex. A ¶¶...