Wilson v. Nandlal Corp. (In re Cumberbatch)

657 B.R. 683

IN RE: Nicole CUMBERBATCH,

aka Nicole Cumberbatch-Cox dba Gloria's In & Out III dba Gloria's In & Out 3, Debtor.

Shaquan Wilson & Lance White, Plaintiffs, v. Nandlal Corp., Ronald Cox, Nicole Cox, MYC & Associates, Inc., and Marc P. Yaverbaum, Defendants.

Case No. 21-40360-ess

Adv. Pro. No. 23-01015-ess

United States Bankruptcy Court, E.D. New York

Signed February 15, 2024

Edward R. Hall, Esq., Balsamo, Rosenblatt & Hall PC, 200 Schermerhorn Street, Brooklyn, NY 11201, Attorneys for Plaintiff Shaquan Wilson and Lance White.

Gary O. Ravert, Esq., Ravert PLLC, 16 Madison Square West (Floor 12, #369), New York, NY 10010, Attorneys for MYC & Associates, Inc. and Marc P. Yaverbaum.

MEMORANDUM DECISION ON MOTION TO DISMISS ADVERSARY PROCEEDING OF DEFENDANTS MYC & ASSOCIATES, INC. AND MARC P. YAVERBAUM

HONORABLE ELIZABETH S. STONG UNITED STATES BANKRUPTCY JUDGE

Introduction

This bankruptcy case began more than three years ago when, on February 13, 2021, Nicole Cumberbatch a/k/a Nicole Cumberbatch-Cox d/b/a Gloria's In & Out III d/b/a Gloria's In & Out 3 filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. Debra Kramer was appointed as the Chapter 7 trustee of Ms. Cumberbatch's Chapter 7 estate. And the property of Ms. Cumberbatch's Chapter 7 estate includes a three-family residential building located at 1553 Eastern Parkway in Brooklyn (the "Property").

On February 24, 2023, Shaquan Wilson and Lance White commenced this action in the Kings County Civil Court, Housing Division (the "Housing Court"). They brought this action on an emergency basis, claiming that they were unlawfully evicted from an apartment at the Property just four days earlier, on February 20, 2023, and seeking emergency relief to restore them to possession of that apartment (the "Housing Court Action").

And five days later, on March 1, 2023, defendant MYC & Associates, Inc., the Chapter 7 trustee's retained real estate broker, filed a Notice of Removal of this action in this Court and the Housing Court, and this action began in this Court. Notice of Removal, ECF No. 1. As stated in the Notice of Removal, "MYC is removing the State Court Action because the causes of action asserted in [that] Action affect property of the Debtor's bankruptcy estate over which the Bankruptcy Court has jurisdiction." Notice of Removal, ¶ 7.

MYC & Associates, Inc. and Marc P. Yaverbaum, a principal of MYC (the "MYC Defendants") now move to dismiss the Complaint¹ under Federal Rules of Civil Procedure 12(b)(1), (6), and (7), on several grounds. They seek dismissal under Rule 12(b)(1), on grounds that this Court lacks subject matter jurisdiction to hear these claims, pointing to the Barton doctrine originating in the Supreme Court's decision in Barton v. Barbour, 104 U.S. 126, 26 L.Ed. 672 (1881). Motion of MYC & Associates and Marc P. Yaverbaum to Dismiss Adversary Proceeding, ECF No. 6 (the "Motion to Dismiss" or "MYC Mot."), ¶¶ 57-63.

The MYC Defendants also seek dismissal of the Complaint under Rule 12(b)(6) on grounds, among others, that "MYC . . . is entitled, as a court-appointed fiduciary, to qualified immunity for its acts taken in the course of its duties to the trustee." MYC Mot. ¶ 64 (citing cases).

And finally, the MYC Defendants argue that the Complaint should be dismissed under Rule 12(b)(7) on grounds, among others, that the Plaintiffs have not joined a necessary party, the Chapter 7 trustee. MYC Mot. ¶¶ 67, 68.

In sum, this Motion calls for the Court to answer three questions. Does this Court lack subject matter jurisdiction to hear this action in light of the Plaintiffs' failure first to obtain leave of this Court to bring an action against the Chapter 7 trustee's retained real estate broker? If so, then this action must be dismissed under Rule 12(b)(1).

Alternatively, do the MYC Defendants have qualified immunity, as court-appointed fiduciaries, for acts taken in the course of their duties to the Chapter 7 trustee, so that the claims asserted against them do not meet the plausibility threshold? If so, then this action must be dismissed under Rule 12(b)(6).

And finally, does the Complaint fall short because the Plaintiffs have not named a necessary party, the Chapter 7 trustee? If so, then this action must be dismissed under Rule 12(b)(7).

The Court considers these questions in turn.

Jurisdiction

This Court has jurisdiction over this matter pursuant to Judiciary Code Sections 157(b)(1) and 1334(b), and the Standing Order of Reference dated August 28, 1986, as amended by the Order dated December 5, 2012, of the United States District Court for the Eastern District of New York. Venue is proper before this Court pursuant to Judiciary Code Section 1408 and 1409. This is a core proceeding pursuant to Judiciary Code Section 157(b)(2)(A), (B), (E), and (M). "Core proceedings include, but are not limited to . . . matters concerning the administration of the estate;" "allowance . . . of claims against the estate," "orders to turn over property of the estate," and "orders approving the use or lease of property, including the use of cash collateral;" among other types of claims. 28 U.S.C. § 157(b)(2)(A), (B), (E), and (M).

Background

Ms. Cumberbatch's Chapter 7 Bankruptcy Case

This adversary proceeding arises in the context of Ms. Cumberbatch's Chapter 7 bankruptcy case, and is but one of four pending adversary proceedings pending in connection with that case. The parties' familiarity with that extensive docket is assumed. This Court describes certain developments over the course of this Chapter 7 bankruptcy case to provide some context to the matters at issue here.

As noted above, Ms. Cumberbatch filed her bankruptcy case three years ago, on February 13, 2021, and she has proceeded both pro se and with the assistance of counsel at various times as that case has moved forward. As of the date of this Memorandum Decision, there are some 251 entries on the docket of the bankruptcy case, and matters including property of the estate, the automatic stay, whether Ms. Cumberbatch should receive a discharge, and whether particular debts should be excluded from discharge, have been addressed by Ms. Cumberbatch, the Chapter 7 trustee, various creditors, and the Court.

And as the docket reflects, the Chapter 7 trustee has reached at least five settlements with various parties that have been approved by the Court. See, e.g., In re Cumberbatch, Case No. 21-40360, Order Authorizing and Stipulation of Settlement by and between the Trustee and Nel-Del Realty Associates LLC for the Distribution of Proceeds from the Sale of Debtors Real Property Pursuant to 11 U.S.C. §§ 105(a) and 506(c) and Rules 2002 and 9019(a) of the Federal Rules of Bankruptcy Procedure and Granting Such Other and Further Relief dated January 3, 2022, ECF No. 133; Order Approving Stipulation by and Between the Trustee and Stephon Hinds dated June 6, 2022, ECF No. 149; Order Approving Stipulation by and between the Trustee, Rhonda Henry and MYC & Associates, Inc. dated September 21, 2022, ECF No. 172; Order Approving Stipulation of Settlement between the Trustee and YM Eastern Parkway LLC dated January 25, 2023, ECF No. 186; Order Granting Trustee's Motion Pursuant to Bankruptcy Rule 9019(a) for Entry of an Order Approving a Stipulation by and between the Trustee and Kim Wilson dated October 13, 2023, ECF No. 234.

Notably, the time of the United States Trustee and the Chapter 7 trustee to object to Ms. Cumberbatch's discharge has been extended to April 18, 2024. See In re Cumberbatch, Case No. 21-40360, Order Granting the Trustee's Motion under Bankruptcy Rule 4004 Extending Trustee's Time to File Complaint Objecting to the Debtor's Discharge dated December 8, 2023, ECF No. 244.

One of the assets of Ms. Cumberbatch's Chapter 7 bankruptcy estate is the Property, a three-family residential building located at 1553 Eastern Parkway in Brooklyn. And on March 8, 2022, the Chapter 7 trustee filed a motion to sell this Property under Bankruptcy Code Section 363(f). See In re Cumberbatch, Case No. 21-40360, Trustee's Motion for Entry of an Order Pursuant to 11 U.S.C. §§ 105 and 363 Authorizing and Approving Terms and Conditions of Trustee's Sale of Debtor's Real Property, ECF No. 138. That motion was addressed by the parties and the Court from time to time as various related matters arose.

On January 13, 2023, the Chapter 7 trustee filed a motion to approve the terms and conditions of a sale of the Property at an auction to be conducted by MYC & Associates, Inc., the trustee's retained real estate professionals. See In re Cumberbatch, Case No. 21-40360, Trustee's Motion for Entry of an Order (I) Authorizing and Approving Terms and Conditions of Sale for the Sale of the Debtor's Real Property; (II) Establishing Auction and Notice Procedures; (III) Fixing the Date for a Sale Confirmation Hearing; and (IV) Granting Related Relief, ECF No. 184. And on February 23, 2023, the Court entered an Order authorizing and approving the terms and conditions for the sale of the Property, and setting an online auction date for February 28, 2023, among other relief. See In re Cumberbatch, Case No. 21-40360, Order (I) Authorizing and Approving Terms and Conditions of Sale for the Sale of the Debtor's Real Property; (II) Establishing Auction and Notice Procedures; (III) Fixing the Date for a Sale Confirmation Hearing; and (IV) Granting Related Relief, ECF No. 189.

Next, on March 1, 2023, the day after the date set for the online auction, this adversary proceeding was commenced when the MYC Defendants filed a Notice of Removal to this Court of the Housing Court Action. See In re Cumberbatch, Case No. 21-40360, ECF No. 194. On March 6, 2023, despite the removal of the Housing Court Action to this Court, certain proceedings continued in the Housing Court, and the Housing Court entered an order directing Mr. Wilson and Mr. White to be restored to possession of the apartment at the Property.

The following day, on ...