U.S. Bankruptcy Court For the District of Nevada
Case: 16-50644-btb
Chapter 15
Reza Zandian debtor
Hearing held on 01/24/2020 at 1:30 PM.
This is an unofficial transcript. I bought a copy of the recording of the hearing, converted it to mp3, and sent it to GoTranscript.com . I then spent some time correcting it. I believe this is an accurate transcript of the hearing. You can always listen to it yourself. It is only 28:56 minutes. JM
THE COURT: Good afternoon. Please be seated. If you're in-- If you're on the phone you can stand or sit as you like. This is a case of Patrick Canet, I think it is. Case number 16-50644 amended motion to dismiss case.
MR. ZORIO: Good afternoon Your Honor, Arthur Zorio on behalf of Jed Margolin.
THE COURT: Okay. So where are we?
THE CLERK: And Your Honor we do have-
THE COURT: I'm sorry. Mr. Holley go ahead.
MR. HOLLEY: This Richard Holley. We are having a little bit of a difficulty hearing on our end, but this is Richard Holley on behalf of the Star Living Trust and also the, on behalf of Ray and Sathsowi Koroghli as trustees of the Koroghli Management Trust.
THE COURT: Okay, thank you. And both of us will try to get closer to the microphones so you can hear us.
MR. HOLLEY: Can you hear me okay?
THE COURT: Yes we can, boomingly.
MR. HOLLEY: Oh. Well.
THE COURT: [laughs] Please go ahead.
[00:01:07]
MR. ZORIO: Yes well, Your Honor, we've attempted to reach an amicable resolution but have not. So we've had to appear here to continue the hearing.
THE COURT: Okay.
MR. ZORIO: I can-- I have a very short presentation to bring us up to speed and get us on track. As you recall, Jed Margolin has a default judgment against Mr. Zandian that was procured around, I think, 2012 or 2013, recorded that in multiple counties throughout Nevada and, a Chapter 15 was filed by [phone rings] Mr. Canet around 2016. I believe is when this case was started.
THE COURT: Okay.
MR. ZORIO: We took the position at the beginning that there was never any basis for the Chapter 15. Late last year we presented the court with evidence that the document upon which the Chapter 15 was based, was a judgment against Mr. Zandian that had expired in 2008. So there was in fact never any basis for the Chapter 15 or any subject matter jurisdiction for this court to entertain any proceedings.
In December, in response to the motion to dismiss and to void all the orders entered in the adversary proceeding, counsel for the foreign representative conceded that there's no good faith opposition to the admitted motion to dismiss, seeking dismissal of the Chapter 15 and avoiding the interlocutory order entered in the adversary proceeding.
At the same time, Mr. Holley on behalf of Misters Sadri and Koroghli and their trusts, I'll just refer to them as Sadri and Koroghli for convenience, did not contest the dismissal of the Chapter 15. Rather, they were concerned about their individual two-- one third interest in real property with specific regard to three parcels of property that were conveyed pursuant to a Sheriff's deed in enforcing the judgment against Mr. Zandian. And that was a limited opposition to the dismissal and to the avoidance of the interlocutory order.
Mr. Margolin maintains that the Sheriff's deeds do not convey Sadri and Koroghli’s interest in the properties. The only interest conveyed by those Sheriff's deeds are the interests of the judgment debtor, Zandian and his companies. In fact the judgment that was recorded as a judgment lien against these properties and others throughout Nevada does not mention Sadri and Koroghli and therefore does not constitute a lien on any interest Sadri and Koroghli have in anything.
Likewise, the Sheriff's deeds that we read the last hearing --I have copies of those again if you'd like to review those again-- the conveyance of-- in those sheriff's deeds-- only convey the interests of the judgment debtor, that being Zandian and his entities. It does not purport to convey any interests of Sadri and Koroghli. So, Sadri and Koroghli raised a 349 of the Code as -- and in the claim there's good cause for the interlocutory order that adjudicates the lien-- the judgment lien is invalid and the Sheriff's deed is invalid,
THE COURT: As to them?
MR. ZORIO: As to everything.
THE COURT: Oh, as to everything, okay.
MR. ZORIO: The interlocutory order that this court entered in the adversary proceeding voids the judgment lien. So it does not just affect the Sheriff's deeds-
THE COURT: Everything.
MR. ZORIO: It affects everything, and a whole bunch of properties that Sadri and Koroghli have never complained about. And again, they can't, because the judgment lien-
THE COURT: Is gone.
MR. ZORIO: Well, it can't, it cannot affect an interest of Sadri and Koroghli because the judgment never names Sadri and Koroghli. So they have no interest in really avoiding the judgment lien, their only interest was they believe there was some confusion about whether their interest was conveyed by the three Sheriff's deeds. And so at the last hearing, in December, I represented to this court that we have no problem if Mr. Holley and Sadri and Koroghli have some concern over that to clarify.
And in fact, my client has signed quitclaim deeds regarding those three parcels making it clear that those properties-- Sadri and Koroghli have their one third’s interest in those properties. So therefore, Sadri and Koroghli have no interest
[phone rings]
THE COURT: I apologize. I have an Apple watch which rings. I do not know how to stop it. I'm sorry. I should never wear it anyway. I try not to but I didn't remember.
MR. ZORIO: That's okay. So the fact that Sadri and Koroghli’s one third interest in those three parcels is not a dispute-- not in dispute, there's no dispute, they have their one third interest. They have absolutely zero interest in having that interlocutory order survive the dismissal of this Chapter 15. Zero interest in letting that order survive. If this court does what we're asking, dismiss the Chapter 15 for which there's no dispute, it should be dismissed, and they were never in basis for in the first place, and void the interlocutory order, Sadri and Koroghli have not been harmed and have no basis to even file an appeal. Because again, their one third interest is confirmed. I've got in my hand copies of a quitclaim deed signed and notarized ready for Mr. Holley to have recorded if he wishes. The only party, the only party that is prejudiced by this order surviving is Mr. Margolin. He's been chasing Mr. Zandian for over a decade. He's got $1,400,000 in principal judgment against Mr. Zandian that was entered in 2013.
So the only party that benefits from allowing that interlocutory order from-- to survive the dismissal of the Chapter 15 is Mr. Zandian. Mr. Zandian has never appeared in this court. Mr. Zandian has judgment against him. Mr. Zandian is the putative debtor that there was no bankruptcy proceeding involving. There's absolutely no reason whatsoever, there's no cause whatsoever for this court to accept from the operation of Section 349 the fact that that interlocutory order should be voided.
THE COURT: Okay.
MR. ZORIO: Thank you, Your Honor.
THE COURT: Mr. Holley.
[00:09:01]
MR. HOLLEY: Thank you, Your Honor. I'm a little concerned that I may be booming on your end and you're not very booming on mine so-
THE COURT: [unintelligible 00:09:07] the boom better.
MR. HOLLEY: Is this-- Is this volume okay?
THE COURT: You could --you could take it down a couple of notches. Oh we could, hang on. Okay say something again, please.
MR. HOLLEY: Is this any better?
THE COURT: I think it's about the same, but it's certainly not-- it's certainly not that bad.
MR. HOLLEY: Okay. First of all Your Honor, I want to advise the court that working with Mr. Francis and Mr. Zorio has really been a pleasure for me. This is the first time I've had this opportunity and I've enjoyed it tremendously. I appreciate their efforts to try to resolve this matter and unfortunately, we could not do so. Your Honor, I will point out that while we are now told that Mr. Margolin does not dispute the interests of my clients in the properties that were the subject of the Sheriff's sale, earlier in the proceedings and in fact in the cross motions for summary judgment, that was not the case.
As a matter of fact, because that was not the case, my clients were compelled to file the adversary proceeding against Mr. Margolin. Had Mr. Margolin agreed about the interest early on perhaps this wouldn't have been necessary but in any event, we were required to file the adversary proceeding in order to address ownership interests and also to address the propriety of the Sheriff's sale.
We went through a cross motion summary judgment process where all of the parties agreed that there were no genuine issues of material fact and all of the parties agreed that there were no-- there were no issues with respect to the law. After having gone through that process, the court then issued its findings of fact and conclusions of law ruling in favor of my clients with respect to their ownership interest and also ruling that the Sheriff's sale was not done appropriately.
With respect to the Sheriff's sale documents, Your Honor, one it wasn't conducted properly and two, there is confusion in terms of what was actually foreclosed upon via the Sheriff's sale versus what was not. The property descriptions in the Sheriff's sale documents interchangeably refer to the property in totality by the APN numbers at issue, and then in part with respect to Mr. Zandian's interest in those APN numbers.
So Your Honor, what we are asking for is -- I understand the court is-- The Court already indicated that it is going to dismiss this Chapter 15 case. In fact, Mr. Hartman in our last hearing indicated that he really had no evidentiary support or substance at this point in time after the case has been pending for-- it appears as though at least, you know, perhaps three years, that you know, the case would be dismissed.
My clients likewise, have been dealing with Mr. Zandian for a very, very long time, even predating Mr. Margolin's involvement with Mr. Zandian, and those experiences had not been pleasant. They were required to participate in this foreign proceeding just like Mr. Margolin was required to do so. They were required to litigate these issues. And so what we are looking for, Your Honor, is really a structured dismissal as opposed to a dismissal advocated by Mr. Margolin that voids the findings of fact and conclusions of law by this Court in the adversary proceeding.
I would submit that the adversary again was required because of Mr. Margolin's earlier positions in the case and as such, Section 1517(d), Your Honor, governs modification or termination of a Chapter 15 proceeding. Importantly, the provision applies with the grounds for granting recognition in the first place were either partially lacking, or even fully lacking. And in this instance, Mr. Margolin is arguing that the grounds for recognition in the first place were fully lacking. Well, Section 1517(d) addresses that circumstance.
And so even where the grounds were fully lacking, the provision gives the court discretion to fashion relief to avoid unduly prejudicing a party to this case. In looking at-- In doing our research regarding section 1517(d), Your Honor, candidly, we did not file-- we did not find any case law further elaborating upon the statutory language, but by analogy I think we can refer to Section 349 which governs the effect of dismissal of a bankruptcy case.
Section 349 grants the court discretion to grant a structured dismissal in the U.S. Supreme Court decision of Jevic the court discussed a structured dismissal as a dismissal that dismissed the case without necessarily vacating orders or unwinding transactions undertaken during the course of the case. In other words, Section 349(b) is designed to give bankruptcy court the flexibility to make appropriate orders to protect rights acquired in reliance on the bankruptcy case.
In the Ninth Circuit, Your Honor, legal prejudice is defined as prejudice to some legal claim, some legal interest or some legal argument. In this particular case, again, You Honor, my clients were required to litigate the issues that were the subject of the adversary proceeding and then were more particularly addressed in the cross motion for summary judgment.
That expensive effort should not be rewarded now by simply voiding the cross motions and the court's findings of fact and conclusions of law. Rather, with the-- what we request the court do-- is enter an order structuring dismissal of this Chapter 15 case so that the findings that are set forth in the findings of fact and conclusions of law are preserved, so that we don't have to address any of these issues in the future, Your Honor. Thank you.
THE COURT: Okay. Do you have a response to that?
[00:16:22]
MR. ZORIO: There's a fatal flaw in Mr. Holley's argument that you just heard, Your Honor. He presented to us zero prejudice to his client in avoiding the Order. Zero prejudice. We've confirmed that his clients have two thirds interest. Therefore, the three Sheriff's deeds that they filed a motion for summary judgment on, whatever defect they claimed in them, is cured. And in responding to the motion for summary judgment, we told this Court we believe that they have their one third's interest, so there is zero prejudice.
There's no ability for this Court to find cause whatsoever to maintain the interlocutory order. And what you just heard from Mr. Holley regarding a structured dismissal, is quite disturbing. Because Mr. Holley is advocating for the entirety of that order to be maintained. Who is Mr. Holley representing? Three parcels, three Sheriff's deeds, out of all of them involved in Elko County, Lyon County, Clark County, Washoe County. That interlocutory order affects Mr. Zandian's interest in all those counties but only three parcels of Sadri and Koroghli's properties in Washoe County.
Why is Mr. Holley advocating that the interrogatory order should be maintained when it does nothing-- when that order is vacated-- does nothing to prejudice his client, nothing whatsoever. He has not articulated one factual circumstance that says that if you --if you don't allow that order to be maintained-- we're going to be prejudiced in the future, none. The only party prejudiced is Mr. Margolin.
The only party benefited is Mr. Zandian, the rogue individual who's done harm to Mr. Margolin and Sadri and Koroghli, but for some reason, Mr. Holley is here advocating for Mr. Zandian's rights. He wants the entirety of that interlocutory order to survive when making that order go away does nothing to affect Sadri and Koroghli's interest. Nothing.
[00:19:00]
MR. HOLLEY: You Honor, may I briefly respond?
THE COURT: Certainly.
MR. HOLLEY: First of all, I'm certainly not advocating for Mr. Zandian's rights. But what I -what I do find disturbing, Your Honor- is that if there's no prejudice to us why were we required to file an adversary proceeding in the first place? Why were we required to engage in cross motions for summary judgment in the second place? Why were we required to litigate this matter to fruition with respect to these three parcels of property?
And now after all that expense and all of that effort has been incurred, Mr. Margolin is now standing before you and saying, "Your Honor, really, there was no harm no foul. It was kind of a-- You know, we required that they engage in this process, but hey, you know, at the end of the day, we really didn't have much as an issue with them at all." Even in the cross motions for summary judgment they tell us that it was up to us to prove that we had the ownership interest.
And now at the end of the day, after all this expense has been incurred, you know, they're disturbingly telling the Court, "Oh, there was really no need to go through that process at all." After the fact. And so we litigated that issue, Your Honor, we litigated the issues that are set forth in the findings of fact and conclusions of law and that ruling we should be entitled-- We-- That ruling should stand so that there is no question, one, regarding ownership and two, regarding the manner in which that Sheriff's-- those three Sheriff's sales were conducted.
[00:20:49]
MR. ZORIO: Your Honor, first of all, the manner which the Sheriff's sales were conducted was not the issue of the motion for summary judgment. They based it upon whether the lien was properly recorded, so the manner of the Sheriff's sales weren't the issue. And with regard to certainty, Mr. Holley drafted these deeds that my client signed.
THE COURT: Okay.
MR. ZORIO: These deeds that were signed on January 16th and notarized January 16th deal with the issue of the partial subject of the Sheriff's sale. And again, while Mr. Holley is complaining about having to go through litigation in the past, he still has not provided one bit-- one reason why vacating that order causes prejudice to his clients, nothing.
THE COURT: Okay, well, I'm going to have to take a look at this because my last note says, of seven days ago, that the parties will request a continuance because they are working on an agreeable resolution, so [laughs]
MR. ZORIO: Understood.
THE COURT: I'm going to spend some time with this, so.
MR. ZORIO: Your Honor, I have a copy if you'd like to make it a record-- part of the record of the quitclaim deeds that were signed. May I approach the court?
[00:21:55]
THE COURT: Please do that. And Mr. Holley, will you accept that?
MR. HOLLEY: Your Honor I'm sorry. I'm having difficulty hearing you.
THE COURT: Copies of the quitclaim deeds. He wants to put in evidence and you'll-- We'll send what we get to you.
MR. HOLLEY: Those are part of settlement discussions, Your Honor, I don't think they're appropriately admitted to the court.
THE COURT: Then not at this moment.
[00:22:24]
MR. ZORIO: Let me speak to that Your Honor. At the last hearing, in December, Mr. Holley specifically told this court that he wanted certain representation from my client regarding their one third interest in those three parcels and that-- the lack of that certainty is what was preventing him from saying the Chapter 15 can be dismissed and that the interlocutory order can be voided.
That was placed on the record in December as the sole basis holding up Mr. Holley's consent to dismissal of 15 and voiding the interlocutory order. We have it. Mr. Holley is free to record these. It's not part of the settlement discussions. It was part of the proceedings before this court.
THE COURT: Mr. Hol [coughs]-- Pardon me, Mr. Holley.
MR. HOLLEY: Your Honor, again, if-- with respect to these Sheriff's sales themselves, paragraph 10 and 11 of the findings of fact and conclusions of law expressly address this foreclosure sale-- of the Sheriff's sale and the court finds that Margolin never recorded an affidavit to create his judgment lien in the manner stipulated by NRS 17.150 subsection 4, the court finds that on April 3rd, 2015 Margolin caused parcels two, four and eight property to be sold to himself by Sheriff's sale for $5000, $5000 and $3000, respectively. He received Sheriff's certificates of sale of property on the date of the three parcels.
The court finds that on September 8, 2016 a sheriff's deed upon execution was recorded in Washoe County. The court finds that SLT and KMT had no notice of the sales or their rights to protect interest in the property. The court then goes on in its conclusions of law to state that the Sheriff's sales are void. And so we're simply asking Your Honor that these-these findings of fact and conclusions of law-- survive the dismissal of the case.
[00:24:38]
We went through the litigation together. Mr. Margolin insisted or at least, required us to initiate this adversary proceeding, and we did. We litigated it to fruition. And now, from our perspective Mr. Margolin is trying to sidestep the ruling that they invited from the court and I think that's inappropriate.
THE COURT: Okay-okay. For the moment I'm not going to take those into evidence. You can --you can offer them at some time in the future but not at this moment.
MR. ZORIO: Understood, Your Honor. The point being however, that they have-- That order going away, doesn't affect any of their interests and you haven't heard anything from Mr. Holley to the contrary. All you've heard from Mr. Holley is, "Well, we went through this process so we want the order that largely benefits Mr. Zandian to remain." We haven't heard anything from Mr. Holley saying that, if that order goes away, here is how we're prejudiced. Nothing.
THE COURT: Well, I'm going to have to go look at this stuff because as I said, my notes say the parties are-- the parties are negotiating amicably, and it's said that they were going to request continuance. So that's what I prepared for.
MR. ZORIO: Understood, Your Honor.
[00:26:25]
THE COURT: I apologize. So we'll be in recess and, let's set a-- let's set a continued hearing in 30 days. Okay, or there about. Mr. Holley your typing comes through more clearly than your voice.
MR. HOLLEY: Um, that-- I'm not typing Your Honor. I'm actually in the courtroom. [?]
THE COURT: Oh I'm sorry. I was-- I wasn't opposed to your typing, but it does come quite well through the phone.
MR. HOLLEY: I wish I could type that quickly or that smoothly.
THE COURT: I certainly-I certainly could not.
THE CLERK: Your Honor around that 30 day mark, you're looking at Tuesday, February the 25th. If we do 11 AM, that gives parties an hour for argument or the presentation, is that going to work?
THE COURT: That work for you?
MR. ZORIO: That's fine with me, Your Honor.
MR. HOLLEY: Your Honor unfortunately I'm going to be out of the country from February 19th through March 4th.
THE COURT: Well have a good time. Are you going someplace fun?
MR. HOLLEY: I'm going to Vietnam and Cambodia.
THE COURT: That does not sound like a fun place to me, but anyway, we will-- We won't interrupt your trip, so
MR. HOLLEY: Thank you.
THE CLERK: Your Honor, would you like this-- we can do it on the 18th, one day before his trip, or we can do it when upon his return.
THE COURT: Is a day before your trip going to be a problem?
MR. HOLLEY: I don't think so. I think - See. Now the day before is fine, Your Honor and then even on the 19th. I don't depart until 4 PM.
THE COURT: Okay, so let's set this for then. I'm sure that's what your family wants you to do, is be working on this, while they're getting ready to go to Vietnam.
MR. HOLLEY: It could be convenient, Your Honor, for me if-- [laughs]
THE COURT: You do-- You don't have to deal with the packing.
MR. ZORIO: I'm sorry, Your Honor, is February 18 working out?
THE COURT: I believe so.
THE CLERK: Yes, February 18th.
MR. ZORIO: Um-
MR. HOLLEY: At what time?
THE COURT: Just wait a second. Mr. Margolin,
THE CLERK: Mr. Zorio, are you available on the 18th?
MR. ZORIO: It looks as though I am, yes.
THE COURT: Okay.
THE CLERK: Okay, let's go with February the 18th at 10:30. Will that work?
MR. ZORIO: That works.
THE CLERK: Okay.
THE COURT: All right.
MR. HOLLEY: Yes, it does. Thank you.
MR. ZORIO: Thank you, Your Honor.
THE COURT: Thank you guys very much. Appreciate it. Thank you for coming out.
MR. HOLLEY: Okay, thank you.
THE COURT: We'll be in recess.
THE CLERK: All rise.
[00:28:57] [END OF AUDIO]