In re Basrah Custom Design, Inc.

602 B.R. 31

IN RE: BASRAH CUSTOM DESIGN, INC., Debtor.

Case No. 18-56801

United States Bankruptcy Court, E.D. Michigan, Southern Division.

Signed June 18, 2019

Stuart Sandweiss, Metro Detroit Bankruptcy Law Group, Southfield, Michigan, for Debtor.

Sean M. Cowley, Office of the United States Trustee, Detroit, Michigan, Attorney for Daniel M. McDermott, United States Trustee.

Bryan Marcus, Bryan D. Marcus, P.C., Royal Oak, Michigan, Attorney for MJCC 8 Mile, LLC.

OPINION REGARDING THE DEBTOR'S MOTION FOR RECONSIDERATION

Thomas J. Tucker, United States Bankruptcy Judge

I. Introduction

This case is before the Court on the Debtor's motion for reconsideration, filed June 4, 2019 (Docket # 119, the "Motion"). In the Motion, the Debtor (sometimes referred to below as "Basrah"), seeks reconsideration of three of the four Orders entered in this case on May 21, 2019 (Docket ## 114, 115, and 116, collectively, the "May 21 Orders"). By those Orders, the Court: (1) denied the Debtor's motion to reject the November 2016 Lease;¹ (2) denied the Debtor's motion seeking a contempt finding and related relief against MJCC; and (3) dismissed this Chapter 11 bankruptcy case with a two-year bar to refiling.²

II. Discussion

The Debtor's present Motion seeks reconsideration of all three Orders, arguing that every one of the Orders is erroneous.

The Court disagrees, for the reasons stated in the Court's two written opinions filed May 21, 2019 (Docket ## 113, 114). For those reasons, and also for the reasons stated below, the Court will deny the Debtor's Motion, in its entirety.

First, the Court finds that the Motion fails to demonstrate any palpable defect³ by which the Court and the parties have been misled, and that a different disposition of the case must result from a correction thereof. See L.B.R. 9024-1(a)(3) (E.D. Mich.). Rather, for the most part,⁴ the Motion merely re-argues the same issues that the Debtor argued before the May 21 Orders were entered.⁵

Second , the Court finds that the Motion fails to establish that any of the May 21 Orders at issue are erroneous or constitute an abuse of discretion, and the Motion fails to establish any other valid ground for relief from any of the Orders.

Third, the Court will respond to some of the specific arguments made in the Debtor's Motion, to elaborate further on why the Debtor's arguments are without merit.

A. The state court's finding that the Debtor, Basrah was the mere agent for the Property owner, Weaam Nocha under the November Lease.

The Debtor disputes this Court's reading of the State Court Decision. The Debtor argues that the state court found that the only parties to the November Lease were the Debtor, Basrah (named in the lease as the "Landlord"), and MJCC (named in the lease as the "Tenant").

This Court concluded, however, that although the Debtor, Basrah, and not Weaam Nocha (the owner of the Nocha Property at issue), is named in the November Lease as the "Landlord," the state court found that the Debtor signed the November Lease as agent of the Nocha Property owner (and the Debtor's 100% shareholder), Weaam Nocha . In its written opinion filed May 21, 2019, at Docket 113 (the "May 21 Opinion"), this Court stated the following, among other things:

The Debtor occupies and uses two conjoined buildings, located at 7451 and 7461 West 8 Mile Road, Detroit, Michigan. That real estate (the "Nocha Property") is owned by Weaam Nocha, who is the President and sole shareholder of the Debtor. It is undisputed that the Debtor is not, and never has been, an owner of the Nocha Property. (footnotes and extensive record citations omitted).

...

The November Lease named the Debtor as the "Landlord" and MJCC as the "Tenant," and it was signed on November 16, 2016 by Weaam Nocha for the Debtor, as "Its Owner," and by MJCC.

...

In the State Court Decision, the state court found and concluded, among other things, that:

• at the time the November Lease was signed, the Nocha Property was owned solely by Weaam Nocha; [citing, in footnote 16, the following paragraphs in the State Court Decision: ¶¶ 155, 156, 168]; [and]

• Weaam Nocha signed the November Lease as an agent of the Debtor, and the Debtor in turn signed the November Lease as agent of and on behalf of the owner of the property at issue, Weaam Nocha; [citing, in footnote 17, the following paragraphs in the State Court Decision: ¶¶ 63, 124, 155, 156, 158, 165-170, 176].⁶

In footnote 17 of its May 21 Opinion, this Court further explained why it views the State Court Decision as having made the finding that the Debtor signed the November Lease only as agent for Weaam Nocha, such that Nocha and MJCC were the only real parties in interest under the November Lease:

This latter finding of the state court, that the Debtor signed the November Lease as agent of and on behalf of the sole owner, Weaam Nocha, makes sense because the state court found that Weaam Nocha, not the Debtor, was the "sole owner" of the Nocha Property. Moreover, Weaam Nocha's status as the real party-in-interest lessor under the November Lease is clearly implied in the state court's findings that (1) "as the sole owner of the [Nocha] Property, Mr. Nocha had full authority to grant possessory rights to the [Nocha] Property;" id. at ¶ 158; and (2) the Debtor had the authority, as agent, to bind Weaam Nocha to "lease the [Nocha] Property;" see id. at ¶¶ 165-167, 170.⁷

Thus, the Debtor is mistaken in arguing that this Court has misread the State Court Decision.

Among other things that further support this Court's reading of the State Court Decision are the following.

First, as discussed in the Court's May 21 Opinion, an important component of the November Lease included the option it gave to MJCC to purchase the Nocha Property, for $ 1.2 million.⁸ Clearly, only the owner of the Nocha Property could legally give such an option, and could perform such an option by selling the property to MJCC, and the only owner of the Nocha Property was Weaam Nocha. Yet all of the language in the November Lease concerning the $ 1.2 million option to purchase referred to the seller's obligations as being those of the "Landlord" (which term is defined in the first paragraph of the Lease as the Debtor, Basrah). For example, ¶ 40 of the November Lease, captioned "Option to Purchase," grants the option in this way: "... Tenant shall have the option during the Term to purchase the [Nocha] Property from Landlord for the sum of [$ 1.2 million], as set forth in Exhibit C."⁹ Exhibit C, in turn, says among other things that upon exercise of the purchase option by "Tenant" (i.e. , MJCC), at closing, MJCC "shall (a) pay to Landlord the purchase price in certified funds" and "Landlord shall: (a) execute and deliver a warranty deed for the [Nocha] Property."¹⁰ These references to the "Landlord" must be references to the only owner of the Nocha Property, i.e. , Weaam Nocha. They could not have been references to the Debtor, Basrah, in its own capacity, since it was clear (as the state court found) that the Debtor was not the owner of the Nocha Property, and therefore could not possibly transfer ownership of the Nocha Property to a buyer like MJCC.¹¹

Given all of this, and also given the language used by the state court in its findings, quoted above, it is clear that the State Court Decision found that the Debtor, Basrah, signed the November Lease as "Landlord" only as agent of and on behalf of the owner of the Nocha Property, Weaam Nocha.

There is a second additional reason that supports this Court's reading of the State Court Decision. This is in the state court's findings, in discussing how Weaam Nocha had the legal authority to enter into the November Lease, without the agreement of his wife, Rafaa Nocha . If the Debtor, Basrah, was the real party in interest as the named "Landlord" in the Lease, rather than Weaam Nocha, this discussion in the State Court Decision would have been entirely unnecessary. And in this discussion, the State Court Decision makes clear that it was Weaam Nocha who conveyed to MJCC the leasehold rights to possession and the option to purchase the Nocha Property, not the Debtor, Basrah. The state court stated:

155. At the time the November Lease was signed Mr. Nocha was the sole owner of the [Nocha] Property . This is reflected on several documents, including, but not limited to, the January 1, 2016 lease between Mr. Nocha and Alvin Alosachi, the [Nocha] Property title report, and on a number mortgages and other documents filed with the Wayne County Register of Deeds.

156. Based on the documents, it is clear that Mr. Nocha was the sole owner of the [Nocha] Property and that Rafaa did not have any interest therein.

157. But even if Rafaa did have any interest in the [Nocha] Property at the time the November Lease was executed, Michigan courts have long held that a husband can lease property held as tenants by the entirety without his wife's approval . [citation omitted].

158. Accordingly, as the sole owner of the [Nocha] Property, Mr. Nocha had full authority to grant possessory rights to the [Nocha] Property.¹²

This Court has correctly interpreted the State Court Decision. And, as the Debtor admits, the findings and conclusions of the state court are binding on this Court and the parties in this bankruptcy case, under the doctrine of collateral estoppel.

B. The state court's findings that all of the members of the Nocha family who were state court defendants, including the Debtor, Basrah's 100% owner Weaam Nocha, tortiously interfered with MJCC's rights under the November Lease, in part, by taking action to open a marijuana dispensary on the Nocha Property

The Debtor argues that the State Court Decision did not find that Weaam Nocha ever attempted to open a marijuana dispensary business himself on the Nocha Property. The Debtor is simply wrong about this.

The Debtor bases its argument on paragraphs 129 and 130 of the State Court Decision. In those paragraphs, the state court discussed MJCC's tort claim that...