Zokaites Props., LP v. La Mesa Racing, LLC, Civil Action No. 11-259

ZOKAITES PROPERTIES, LP, Plaintiff,

v.LA MESA RACING, LLC, Defendant.

Civil Action No. 11-259

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

Date: August 1, 2012

Magistrate Judge Maureen P. Kelly

MEMORANDUM OPINION

I. INTRODUCTION

Pending before the Court are a Motion to Remand and a Motion to Dismiss for Lack of Subject Matter Jurisdiction Under the Doctrine of Rooker-Feldman (the "Motion to Dismiss"), filed by the Plaintiff. [ECF Nos. 13 & 22]. The motions were reinstated on April 26, 2012, after being denied without prejudice in connection with an earlier stay in this case. [ECF No. 62]. For the reasons that follow, the two pending motions will be denied.

II. BACKGROUND

Plaintiff Zokaites Properties, LP ("Zokaites Properties"), is a limited partnership formed under the laws of Pennsylvania. [ECF No. 1-2 at 3, ¶ 1]. Frank Zokaites ("Zokaites") and his wife are its limited partners. [ECF No. 26 at 42]. Zokaites Properties maintains its principal place of business in Wexford, Pennsylvania. [ECF No. 1 at ¶ 14]. Defendant La Mesa Racing, LLC ("La Mesa"), is a limited liability company formed under the laws of New Mexico. [Id. at ¶ 17]. La Mesa maintains its principal place of business in Raton, New Mexico. [Id.].

La Mesa was incorporated on October 19, 1998. [ECF No. 1-2 at 12-13]. In its articles of organization, La Mesa listed Steven Vincent ("Vincent") and William L. Siskind ("Siskind")as its managers. [Id. at 16]. Butch Maki ("Maki"), a resident of Sante Fe, New Mexico, was listed as La Mesa's "initial registered agent." [Id.]. La Mesa owns roughly 213 acres of property located in Raton, New Mexico. [ECF No. 1-2 at 4, ¶ 4]. The property includes a horse-racing track that is not currently operational. [Id.]. A dilapidated club house and several grandstands are located near the track. [Id.].

In 2002, Siskind informed Zokaites that La Mesa was in need of money to prevent an imminent foreclosure action stemming from a mechanic's lien in the approximate amount of $118,500.00.¹ [Id. at 4, ¶ 7]. In addition to the money needed to prevent the holder of the lien from foreclosing on La Mesa's property, La Mesa needed funds to have the property appraised and cover other expenses. [Id.]. After hearing about the situation, Zokaites provided Siskind with a loan in the amount of $151,550.00. [ECF No. 8 at 100]. It was agreed that Siskind would execute a promissory note providing for the repayment of the loan, that La Mesa would guarantee the promissory note and related collateral agreement, and that the loan would be cross-collateralized with an indemnity mortgage on the "Jefferson Building." [ECF No. 1-2 at 4-5, ¶ 8]. The Jefferson Building was located in Baltimore, Maryland, and owned by Transamerican Commercial Limited ("TCL"). [Id.].

Siskind executed the promissory note on March 20, 2002. [Id. at 19-21]. The maturity date of the note was designated as two years from the date of its execution, with interest to be accrued at the rate of 8%. [Id. at 19]. The note further provided that the maturity date could be "automatically extended" for an additional two years, during which the total amount of the principal and interest due thereunder would be amortized over a five-year period at an interest rate of 9%. [Id.]. That same day, Siskind signed a document which stated that La Mesa "fullyguarantee[d]" the promissory note and collateral agreement, and that he had "full authority" to assent to such an obligation on La Mesa's behalf. [Id.]. Zokaites and Siskind both signed the collateral agreement, which provided Zokaites with an undiluted 2% ownership interest in La Mesa. [Id. at 25].

On April 5, 2002, TCL executed the indemnity mortgage agreement in Zokaites' favor, thereby placing an encumbrance on the Jefferson Building. [Id. at 27-30]. TCL formed 101 Charles, LLC ("101 Charles"), on July 9, 2002. [ECF No. 1-2 at 7, ¶ 16]. On July 31, 2002, TCL recorded a deed to the Jefferson Building in favor of 101 Charles. [Id.].

La Mesa used the $151,550.00 loan to satisfy the mechanic's lien, have the property appraised, and cover other expenses. [ECF No. 1-2 at 6, ¶ 14]. No payments were made on the loan prior to June 5, 2004. [Id. at 6, ¶ 15]. On that date, Jeffrey Siskind ("Jeffrey"), Siskind's son and attorney, contacted Zokaites and asked that the principal and interest payments be deferred for two years pursuant to the terms of the promissory note. [Id.]. Zokaites agreed to that arrangement. [Id.]. On June 24, 2004, Zokaites faxed to Siskind an invoice indicating that the principal and accrued interest owed on the loan had equaled $175,798.00 as of March 20, 2004, and that $10,947.84 was due immediately. [Id. at 32]. In a handwritten notation, Zokaites stated that he agreed to let the balance accrue through March 2006. [Id.].

TCL sold its interest in 101 Charles and the Jefferson Building on September 15, 2004. [Id. at 7, ¶ 17]. Pursuant to the terms of the indemnity mortgage agreement, TCL paid the principal and outstanding interest to Zokaites at the closing. [Id.]. On September 25, 2004, Zokaites sent the promissory note back to Siskind and mistakenly marked it as having been paid in full. [Id. at 7, ¶ 18]. In a letter dated October 6, 2004, Jeffrey informed Zokaites that TCL had paid the money due under the note "by means of an adjustment to the purchase price at theclosing of the sale of the remaining portion of the Jefferson Building." [Id. at 34]. Jeffrey asked Zokaites to assign the note to TCL so that the money owed by Siskind and La Mesa could be recovered. [Id.]. Three days later, Zokaites assigned the note to TCL by completing a form that had been sent with Jeffrey's letter. [Id. at 36].

On July 31, 2007, La Mesa filed a petition for bankruptcy relief in the United States Bankruptcy Court for the District of Maryland. [Id. at 7-8, ¶ 20]. Although the original petition was filed under Chapter 7 of the United States Bankruptcy Code [11 U.S.C. § 701 et. seq.], the case was later converted to a proceeding under Chapter 11 [11 U.S.C. § 1101 et seq.]. [Id.]. La Mesa identified the claim owed to TCL in its bankruptcy schedules. [Id. at 8, ¶ 21]. Zokaites Properties purchased TCL's rights under the promissory note on October 12, 2009. [Id. at 8, ¶ 22]. Siskind's wife and children executed a document assigning TCL's rights under the promissory note to Zokaites Properties. [Id. at 38]. Shortly thereafter, Zokaites Properties filed an original proof of claim in La Mesa's bankruptcy case. [ECF No. 8 at 143-144].

A hearing in the bankruptcy proceeding was held before United States Bankruptcy Judge Nancy V. Alquist on September 29, 2010. With the express consent of all parties present at the hearing, Judge Alquist stated that she would dismiss the bankruptcy petition. [ECF No. 51-3 at 10]. On October 1, 2010, she signed an order dismissing the case and barring La Mesa from filing another voluntary bankruptcy petition for a period of five years. [ECF No. 11 at 103-104]. The order, which was entered on the Bankruptcy Court's docket on October 4, 2010, had the effect of terminating the automatic stay that had been imposed on claims against La Mesa pursuant to 11 U.S.C. § 362(a). [Id. at 104].

Zokaites Properties commenced this action in the Court of Common Pleas of Allegheny County, Pennsylvania, on October 1, 2010, alleging that La Mesa had breached its contractualobligations by failing to fulfill its financial responsibilities under the assignment. [ECF No. 1-2 at 8-9, ¶¶ 26-32]. As of that date, Zokaites Properties claimed that it was owed $358,583.00. [Id. at 9, ¶ 31]. On November 5, 2010, Zokaites Properties filed an affidavit of service in the Court of Common Pleas. [ECF No. 3 at 2-3]. In the affidavit of service, Zokaites Properties stated that a copy of its Complaint against La Mesa had been served by certified mail on Maki, La Mesa's registered agent, on October 25, 2010. [Id.]. La Mesa did not file a responsive pleading. Zokaites Properties moved for a default judgment on November 30, 2010, claiming that it was entitled to a monetary award of $363,888.20. [ECF No. 4 at 1-2]. The amount of damages claimed by Zokaites Properties included $5,305.20 in interest accrued between October 2, 2010, and November 30, 2010. [Id. at 2]. The Court of Common Pleas proceeded to enter a default judgment against La Mesa in the amount of $363,888.20. [ECF No. 5].

On December 20, 2010, Zokaites Properties filed a "notice of filing of foreign judgment" in the District Court of Colfax County, New Mexico. [ECF No. 11 at 139-140]. Zokaites Properties filed a "complaint in foreclosure of judgment lien" in the District Court of Colfax County on February 10, 2011, seeking to foreclose on La Mesa's property in New Mexico in order to satisfy the judgment entered in Pennsylvania. [Id. at 124-127]. La Mesa responded on February 11, 2011, by filing a petition to strike the default judgment in the Court of Common Pleas of Allegheny County. [ECF No. 6 at 1-19]. That petition was accompanied by an alternative petition to open the default judgment.² [Id.]. In support of its position, La Mesa argued, inter alia, that it had not received actual notice of this action until after the default judgment had already been entered. [Id. at 4]. Zokaites Properties responded to La Mesa'spetitions on February 21, 2011, by filing an amended affidavit of service. [ECF No. 9]. Unlike the original affidavit of service, the amended affidavit of service contained a copy of an electronic signature made by "J. Flowers" on October 25, 2010. [Id. at 6]. At that point, it was apparent that Maki had not signed for the Complaint himself.

A hearing on La Mesa's petitions was held before Judge Timothy Patrick O'Reilly on February 22, 2011. [ECF No. 13 at ¶ 13]. On February 25, 2011, Judge O'Reilly signed an order denying La Mesa's petitions. [ECF No. 13-1]. That same day, La Mesa filed a notice of removal pursuant to 28 U.S.C. §§ 1441 and 1146, seeking to remove...