091007 Complaint D E 2 10 07 09 Draft Final

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION www.flsb.uscourts.gov

In re: MAISON GRANDE CONDOMINIUM ASSOCIATION, INC., a Florida not-for-profit corporation, Debtor.

Chapter 11 Case No. 09-21589-LMI

MAISON GRANDE CONDOMINIUM ASSOCIATION, INC., a Florida not-for-profit corporation, Plaintiff, v. DORTEN, INC., a Florida corporation, and ROBERT L. SIEGEL, AS SUCCESSOR TRUSTEE UNDER THE SIEGEL FAMILY TRUST, Defendants.

Adv. Pro. No. _______________

AMENDED COMPLAINT

Plaintiff/Debtor Maison Grande Condominium Debtor, Inc. (the “Debtor”) sues

Defendants Dorten, Inc. (“Dorten”) and Robert L. Siegel, as Successor Trustee under the

Siegel Family Trust (the “Trust”), and alleges as follows:

Jurisdiction and Venue

1. This Court has subject matter jurisdiction over this proceeding pursuant to

28 U.S.C. §§ 1334 & 2201.

2. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2) (A), (F), (K)

& (O). The Debtor consents to the entry of final orders and judgment by this Court as to

any aspects that might be determined to be non-core.

Case 09-02107-LMI Doc 2 Filed 10/07/09 Page 1 of 40

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3. This adversary proceeding is commenced pursuant to Rule 7001 of the

Federal Rules of Bankruptcy Procedure including, but not limited to, subsections

7001(1), (2) and (9).

4. Venue as to this proceeding is proper in this District pursuant to 28 U.S.C.

§ 1409.

Statement of Facts

5. The Maison Grande Condominium (the “Condominium”) is a 502-unit

condominium located in the City of Miami Beach, Florida.

6. The Condominium was developed by Maison Grande, Inc. (the

“Developer”) and its affiliates.

7. The Developer formed the Debtor to serve as the condominium

association for the Condominium.

8. While the Developer was in control of the Debtor, it caused the Debtor to

execute a document entitled Ninety-Nine Year Lease (the “Lease”). A true and accurate

copy of the Lease is attached hereto as Exhibit A.

9. The Lease was also executed by Dorten and the Trust (collectively, the

“Lessor”), who were affiliates of the Developer.

10. Robert L. Turchin signed the Lease as president of both Dorten and the

Debtor.

11. Pursuant to the Lease, the Lessor purported to lease to the Debtor certain

improved real property that primarily consisted of a swimming pool and some parking

spaces.

12. On June 10, 2009, the Debtor commenced this bankruptcy case by filing a

voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the

“Bankruptcy Code”).


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13. In connection with this bankruptcy case, the Debtor has filed a motion to

reject the Lease pursuant to Section 365 of the Bankruptcy Code.

14. The Lessor objected to the rejection motion.

15. The Lessor also filed the following motions seeking affirmative relief

from this Court: (A) Creditors, Robert L. Siegel’s And Dorten, Inc.’s Motion To Prohibit

Use Of Cash Collateral [DE 86]; (B) Motion For Abstention By Creditors, Robert L.

Siegel’s And Dorten, Inc. [DE 87]; (C) Motion For Appointment Of Trustee And

Incorporated Memorandum Of Law [DE 88]; (D) Creditors, Robert L. Siegel And

Dorten, Inc.’s Motion To Dismiss Pursuant To 11 U.S.C. § 1112(B) [DE 89]; and (E)

Creditors, Robert L. Siegel’s And Dorten, Inc.’s Motion For Relief From Stay [DE 90].

16. The Lessor has suggested to the Debtor’s board of directors that their

actions relating to this bankruptcy case will subject them to removal from their positions,

litigation, and/or other adverse actions by unit owners.

17. Such threats are premised on, among other things, the Lessor’s

assumptions that, if and when the Lease is rejected, the Lessor will have the right to

foreclose on individual units and other assets for the full amount of past due and future

rent under the Lease and take other steps adverse to the interests of unit owners.

18. The Debtor contends that the Lessor’s assumptions are unfounded and are

interposed for the purpose of interfering with the Debtor’s governance and bankruptcy

case.

19. The Debtor commences this proceeding, in part, for the purpose of seeking

a determination as to the inaccuracy of the Lessor’s position in order to deter the Lessor

from continuing to attempt to incite an insurrection by the other unit owners against the

Debtor’s board of directors to improperly influence this bankruptcy case.


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COUNT I

AVOIDANCE OF ALLEGED LIEN ON ESTATE ASSETS

20. The Debtor incorporates the allegations contained in paragraphs 1 through

19 of this Complaint as if fully set forth herein.

21. The Lessor contends that it has a valid security interest in personal

property of the Debtor by virtue of language in the Lease purporting to provide the

Lessor with “a continuing lien paramount and superior to all others, including

condominium owners, upon its assets and common surplus.” See Lease, § XV(c)(1).

Such language is hereinafter referred to as the “Purported Security Agreement.”

22. The Lessor’s alleged security interest was not “perfected” within the

meaning of the Uniform Commercial Code as adopted in Florida (the “UCC”) and

applicable law as of the commencement of this bankruptcy case because the Lessor did

not have on file with the Florida Secured Transaction Registry a valid UCC-1 financing

statement and because the Lessor did not have control over assets such as cash for which

the UCC requires control to effectuate perfection.

23. The Lessor has stipulated in open court in this bankruptcy case that it does

not have on file a UCC-1 financing statement.

24. Pursuant to Sections 544 and 1107 of the Bankruptcy Code, a Chapter 11

debtor-in-possession has the authority to seek the avoidance of unperfected security

interests.

25. This Court should avoid any and all security interests asserted by the

Lessor against assets of the estate because the Lessor does not have a perfected security

interest against any such assets.


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COUNT II

DETERMINATION OF INVALIDITY OF ALLEGED LIEN ON ESTATE ASSETS


19, and 21 of this Complaint as if fully set forth herein.

27. An actual controversy exists between the Debtor and the Lessor regarding

the validity of the Purported Security Agreement.

28. The Debtor contends that the Purported Security Agreement did not create

a valid security interest under Florida law because such language did not contain a

particularized description of classes of intended collateral.

29. The issue of whether the Lessor has a valid security interest in assets of

the Debtor affects whether certain potential plans of reorganization can be confirmed by

this Court. It affects, for example, the manner in which the Debtor might be required to

treat some or all of the Lessor’s claim against the estate.

30. This Court should determine and declare that the Lessor is not the holder

of a valid security interest in assets of the Debtor because of the defects in the Purported

Security Agreement

COUNT III

DETERMINATION OF INVALIDITY OF ALLEGED LIEN ON CONDOMINIUM PROPERTY



32. The Lessor contends that Section XV of the Lease grants it valid liens on

all Condominium units, certain personal property located within units, and all common

elements (the “Purported Condominium Collateral”), which alleged rights are hereinafter

referred to as the “Purported Condominium Lien Rights.”


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the validity of the Lessor’s Purported Condominium Lien Rights.

34. The Debtor contends that the Purported Condominium Lien Rights are

invalid under various legal and equitable theories. Such theories include, but are not

limited to, (A) that there is no specific statutory authority supporting the alleged liens (as

opposed to liens of associations, for example), and (B) that the alleged liens are not

enforceable mortgages under Florida law, see, e.g., Fla. Stat. § 697.04.

35. The issue of whether the Purported Condominium Lien Rights are valid

affects the Debtor’s ability to reorganize. The Debtor generates its revenue from

assessments on unit owners. These unit owners have limited pools of resources from

which to pay assessments. The Debtor will have a greater flexibility to reorganize if, for

example, it is determined that unit owners can commit to funding a proposed plan with

assets they otherwise might need in order to satisfy liens of the Lessor that might exist

against their property.

36. The Debtor seeks resolution of the issue both in its capacity as debtor-in-

possession and also in its capacity as a representative of unit owners authorized by

Florida Statute Section 718.111(3) to institute and maintain litigation on their behalf as to

issues of common interest to most or all of them.

37. This Court should determine and declare that the Purported Condominium

Lien Rights are invalid based on the terms of the Lease and applicable legal and equitable

principles.

COUNT IV

DETERMINATION OF EXTENT OF ALLEGED LIEN ON CONDOMINIUM PROPERTY WHERE PRO RATA

PAYMENTS HAVE BEEN MADE TO LESSOR



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19, and 32 of this Complaint as if fully set forth herein.

39. The Lessor contends that its Purported Condominium Lien Rights entitle it

to collect monies under the Lease by foreclosing upon an individual condominium unit

even if the owner of that unit has paid to the Lessor the portion of all monies past due

under the Lease to the Lessor equal to the percentage interest in common elements and

common surplus owned by and attributable to such unit (such portion being referred to as

a “Pro Rata Share”).

40. An actual controversy exists between the Debtor and the Lessor as to

whether the Lessor can foreclose upon a condominium unit and related property if the

owner of that unit has paid the Lessor a Pro Rata Share of all monies past due under the

Lease.

41. The Debtor contends that, to extent the Purported Condominium Lien

Rights could be determined valid, the Lessor is, at a minimum, prohibited from seeking

to foreclose under such circumstances as a result of particular terms of the Lease,

including but not limited to the following:

so long as a condominium unit owner shall pay that portion of the total monthly rental due and owing the Lessor equal to his proportionate share of the common expenses of the Association, either to the Association or directly to the Lessor, the Lessor will not, and may not enforce any of its rights which it might otherwise have against the condominium unit owner under the terms and provisions hereof . . .

See Lease, Section XV (d). Such terms also include the provision that “the lien against

any . . . portion of the said condominium unit may be discharged by the owner thereof by

the payment to the Lessor” of the Pro Rata Share. See id.

42. The Debtor also contends that the Lessor is prohibited from seeking to

foreclose under such circumstances by Florida law, including Florida Statute Section

718.121(3), which provides as follows: “If a lien against two or more condominium


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parcels becomes effective, each owner may relieve his or her condominium parcel of the

lien by exercising any of the rights of a property owner under chapter 713, or by payment

of the proportionate amount attributable to his or her condominium parcel” and Florida

Statute Section 711.20(3) (repealed 1976), which provided as follows: “In the event a lien

against two or more condominium parcels becomes effective each owner thereof may

relieve his condominium parcel of the lien by payment of the proportionate amount

attributable to his condominium parcel.”

43. The Debtor also contends the Lessor is prohibited from seeking to

foreclose under such circumstances by Florida law, as the Lease denominates monies due

under the Lease as common expenses of the Condominium, and under Florida Statute

Section 718.115(2), funds for the payment of common expenses must be collected by

assessments against units in their Pro Rata Share, and under Florida Statute Section

718.119(1), the liability of a unit owner for common expenses is limited to the amount

assessed against the unit.

44. The issue of whether the Lessor can recover more than a Pro Rata Share of

past due amounts owed under the Lease on account of a particular unit affects the

Debtor’s ability to reorganize. The Debtor generates its revenue from assessments on

unit owners. These unit owners have limited pools of resources from which to pay

assessments. The Debtor will have a greater flexibility to reorganize if, for example, it is

determined that unit owners can commit to funding a proposed plan with assets they

otherwise might need in order to be able to pay more than their Pro Rata Share.






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46. This Court should determine and declare that the Lessor cannot recover

more than a Pro Rata Share of past due amounts owed under the Lease on account of a

particular unit and related property based on the terms of the Lease and applicable law.

COUNT V

DETERMINATION OF EXTENT OF ALLEGED LIEN ON CONDOMINIUM PROPERTY WHERE PRO RATA

PAYMENTS HAVE BEEN MADE TO DEBTOR


19, 32, and 39 of this Complaint as if fully set forth herein.

48. An actual controversy exists between the Debtor and the Lessor as to

whether the Lessor can foreclose upon a condominium unit and related property if the

owner of that unit has paid the Debtor a Pro Rata Share of all monies past due under the

Lease.

49. The Debtor contends that, to extent the Purported Condominium Lien

Rights could be determined valid, the Lessor is, at a minimum, prohibited from seeking

to foreclose under such circumstances as a result of particular terms of the Lease,

including but not limited to the following:

so long as a condominium unit owner shall pay that portion of the total monthly rental due and owing the Lessor equal to his proportionate share of the common expenses of the Association, either to the Association or directly to the Lessor, the Lessor will not, and may not enforce any of its rights which it might otherwise have against the condominium unit owner under the terms and provisions hereof . . .

Lease, Section XV (d) (emphasis added).

50. The issue of whether the Lessor can recover a Pro Rata Share of past due

amounts on account of a particular unit under such circumstances affects the Debtor’s

ability to reorganize. The Debtor generates its revenue from assessments on unit owners.

These unit owners have limited pools of resources from which to pay assessments. The


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Debtor will have a greater flexibility to reorganize if, for example, it is determined that

unit owners can commit to funding a proposed plan with assets they otherwise might

need in order to be able to pay another Pro Rata Share (i.e., a share to the Lessor in

addition to the share they previously paid to the Debtor for the same rent).





52. This Court should determine and declare that the Lessor cannot recover

any amounts owed under the Lease on account of a particular unit where the owner of the

unit paid a Pro Rata Share of such amounts to the Debtor based on the terms of the Lease.

COUNT VI

DETERMINATION OF INVALIDITY OF ALLEGED LIEN ON CONDOMINIUM PROPERTY UPON REJECTION


19 and 32 of this Complaint as if fully set forth herein.

54. The Lessor contends that, if the Debtor’s pending motion to reject the

Lease is granted, the Lessor will be entitled to exercise its Purported Condominium Lien

Rights to collect future rent under the Lease.


the legal effect of rejection of the Lease on the Lessor’s Purported Condominium Lien

Rights.

56. The Debtor contends that, after rejection of the Lease, the Lessor will lack

any Purported Condominium Lien Rights with respect to future rent under the Lease.

57. The issue of whether the Lessor has a valid security interest in the


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Purported Condominium Collateral affects the Debtor’s ability to reorganize. The Debtor

generates its revenue from assessments on unit owners. These unit owners have limited

pools of resources from which to pay assessments. The Debtor will have a greater

flexibility to reorganize if, for example, it is determined that unit owners can commit to

funding a proposed plan with assets they otherwise might need to pay future rent.





59. This Court should determine and declare that the Lessor lack any

Purported Condominium Lien Rights with respect to future rent under the Lease after it is

rejected, in light of applicable law and the terms of the Lease.

COUNT VII

AVOIDANCE AND RECOVERY OF PREFERENTIAL TRANSFER



61. On or about June 1, 2009, the Debtor made a payment to or for the benefit

of the Lessor in the amount of $75,000 (the “Payment”).

62. The Debtor made the Payment to the Lessor on account of an antecedent

debt owed by the Debtor to the Lessor pursuant to the Lease prior to the date the Payment

was made.

63. At the time the Payment was made, the Debtor was insolvent.

64. Receipt of the Payment enabled the Lessor to receive more than it would

have received if this was a case under Chapter 7 of the Bankruptcy Code, the Payment

had not been made, and the Lessor received a distribution to the extent provided by the


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Bankruptcy Code.

65. The Payment represents a preference that can be avoided and recovered

for the benefit of the estate pursuant to Sections 547 and 550 of the Bankruptcy Code.

66. This Court should avoid the Payment and enter a judgment in favor of the

Debtor and against the Lessor to recover the amount of the Payment.

WHEREFORE, the Debtor respectfully requests that the Court:

A. avoid and set aside any and all security interests asserted by the

Lessor against assets of the estate or, in the alternative, determine and declare that the

Lessor is not the holder of any valid security interests against such assets;

B. determine and declare that the Lessor’s Purported Condominium

Lien Rights are invalid;

C. determine and declare that the Lessor cannot recover more than a

Pro Rata Share of past due amounts owed under the Lease on account of a particular unit

and related property;

D. determine and declare that the Lessor cannot recover any amounts

owed under the Lease on account of a particular unit where the owner of the unit paid a

Pro Rata Share of such amounts to the Debtor;

E. determine and declare that, after rejection of the Lease, the Lessor

will not have any Purported Condominium Lien Rights with respect to future rent under

the Lease;

F. avoid the Payment and enter a judgment in the amount of $75,000

against the Lessor and in favor of the Debtor; and


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G. grant such other and further relief as the Court might deem just,

proper and equitable.

Dated: October 7, 2009

Respectfully Submitted, Messana Stern, P.A.

Counsel for the Debtor 401 East Las Olas Boulevard, Suite 1400 Ft. Lauderdale, Florida 33301 Telephone: (954) 712-7400 Facsimile: (954) 712-7401 /s/ David N. Stern

Thomas M. Messana Florida Bar No. 991422 David N. Stern Florida Bar No. 040398

Michael S. Hoffman Florida Bar No. 41164





























091007 Complaint D E 2 10 07 09 Draft Final

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bankruptcy case

debtor suesdefendants

debtor consents

debtor toexecute

maison grande condominium

lease purporting

s motion