Dreliouch v. Mataev et al

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UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS

EASTERN DIVISION
IN RE
SERGUEI DRELIOUCH, CHAPTER 13
CASE NO. 05-11193-WCH
DEBTOR.
SERGUEI DRELIOUCH,
PLAINTIFF,
VS.
ADVERSARY PROCEEDING
AETAN MATAEY\V, and NO. 05-1375
STELLA MATAEV,
DEFENDANTS.
MEMORANDUM OF DECISION
I. Introduction

The matters before the Court are the motions for summary judgment which both parties
have filed. The Defendants, Aetan and Stella Mataev (collectively “the Mataevs” or individually
“Aetan” and “Stella”), seek summary judgment in the two proceedings which Plaintiff, Serguei
Dreliouch (“Dreliouch’), has filed against them. The first action is this adversary complaint
which is a removed a state court proceeding based upon various fraud counts (“Complaint”), and
the second is Dreliouch’s objection to the proof of claim which Aetan filed in his underlying

chapter 13 proceeding (“Objection”).' The Mataevs contend that summary Judgment is

'On September 1, 2005, I entered a pretrial order in which I orcered the Objection and the
Complaint to be combined for trial.

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

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appropriate for the Complaint because the counts are barred based upon the applicable statute of
limitations, laches or estoppel. With respect to the Objection, the Mataevs seek summary
judgment because Dreliouch cannot establish that he has repaid his debt to them. Dreliouch
seeks summary judgment on the Objection on the grounds that underlving contract became
impossible to perform and the proper forum for consideration of the Objection is the Czech
Republic. For the reasons stated below, I will enter an order denying both motions for summary
Judgment.

II. Procedural and Factual Background

Because the procedural and factual background of the transactions between these two
parties are lengthy and complicated, the following is a brief description of the pending actions
and includes only the facts necessary to resolving the summary judgment motions.

A. The Chapter 13 case

Dreliouch filed the underlying Chapter 13 bankruptcy case on February 22, 2005.” In his
his original Chapter 13 plan, Dreliouch listed a certain mortgage lien cf Aetan as disputed and
proposing to discharge the lien. Aetan and the Internal Revenue Service (“IRS”) objected to the
treatment of their respective claims. After the IRS’ objection was sustained, Dreliouch filed an
amended plan. On Aetan’s motion, and over Dreliouch’s objection, the time for Aetan to object
to Dreliouch’s amended plan was extended to twenty (20) days after the conclusion of this
adversary proceeding.

The filing of the Chapter 13 case had suspended certain proceedings allowing for Aetan

*The docket indicates that errors designating the case as a Chapter 7 instead of a Chapter
13 case during electronic filing were quickly corrected.

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to foreclosure on real estate which Dreliouch owned in the Czech Republic (‘the Czech
proceedings”). The parties filed a stipulation in the Chapter 13 case regarding the suspension the
Czech proceedings. See Stipulation Regarding Suspension of Proceedings Pending in the Czech
Republic, Case No. 05-11193-WCH, Docket No. 115.

B. The Proof of Claim Objection and the Czech Proceedings

Aetan filed his proof of claim in the main case on April 4, 2005, claiming a total of
$298,473.69 due to him, with $150,000 as the secured portion and $148,473.69 as the unsecured
portion. The amounts apparently are related to the mortgage lien referenced in the Czech
proceedings. Aetan claims Dreliouch granted him a mortgage on or around January 2000 and the
lien was recorded against certain real estate owned by Dreliouch in the Czech Republic
(collectively “the 2000 lien agreement”). Translated copies of the agreements referencing the
lien and real estate records from the Czech Republic are attached to Aetan’s proof of claim. The
proof of claim contains twenty (20) pages of documentation.

The Czech proceedings had, at least in part, allowed for the foreclosure of Aetan’s lien
pre-petition. The translation of the decision which the Czech court issued states that the purpose

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of the case involves actions “to cancel the lien” “and to impose precautions,” without further
explanation. Defendants’ Amended Memorandum of Law in Support of Aetan and Stella
Mataevs’ Motion for Summary Judgment (Defendants’ Motion for Summary Judgment),
Certificate and Translation of Decision of District Court in the City of Opava, Czech Republic
dated January 21, 2005, Ex. E at 2. In its written decision, the Czech court avers to a debt which

Dreliouch owed to Aetan in the amount of $150,000 as a result of a loen contract dated October

14, 1998, for which the final payment was due on January 1, 2003. Jd. at 4. Dreliouch does not

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dispute the $150,000 secured portion of the proof of claim is evidenced by the contract of
mortgage. See Debtor, Serguei Dreliouch’s Motion and Memorandum of Law for Summary
Judgment (Plaintiff's Motion for Summary Judgment), at 2,4. Before the Czech court, Dreliouch
unsuccessfully argued that the lien held by Aetan pursuant to the mortgage contract should be
canceled because he had repaid this debt. Jd.

Aetan has never amended the proof of claim despite his admission that he made an error
in the calculation of the claim. Defendants’ Motion for Summary Judgment, Affidavit of Aetan
Mataev dated September 25, 2006, Ex. A §15. The claim includes not only the secured portion
previously admitted by Dreliouch, but also charges for “Interest to 2/2005" in the amount of
$87,649.32 and “Attorneys fees and other cost [sic] of collection” in the amount of $14,530,
without any further breakdown. Dreliouch filed the Objection on July 19, 2005.

C. The Complaint

In the meanwhile, Dreliouch filed the Complaint in Middlesex Superior Court on May 11,
2005, charging the Mataevs with seven counts of fraud: breach of fiduciary duty and diversion of
assets, fraud, civil conspiracy, intentional infliction of emotional distress, violation of
constructive trust, violation of resulting trust, and declaratory judgment. The Mataevs removed
the Complaint to this Court on June 2, 2006.

The facts underlying the Complaint are related to Dreliouch ard Aetan’s former business
dealings during the 1990s, which are now the subject of some dispute. The parties, however,
agree that Dreliouch had allowed the Mataevs to move into his property at 35 Rockland Street,
Newton, Massachusetts (“the Property”) in 1994, and in or around 1995, the parties agreed that

Dreliouch would to sell the Property to Aetan for $300,000. Dreliouch subsequently granted

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Aetan a 50% interest in the Property by transferring it to himself and Aetan as tenants in common
around February 1996.

The subsequent transactions between Dreliouch and Aetan are the subject of considerable
dispute. For instance, Dreliouch and Aetan starkly disagree as to the consideration for the
original $150,000 transfer: Dreliouch claims that of the $150,000 paid to him by Aetan in 1996,
part of the funds were improperly taken from his business account, Plaintiff's Motion and
Memorandum of Law in Opposition to Aetan and Stella Mataev’s Motion for Summary Judgment
(Plaintiff's Opposition to Defendants’ Motion for Summary Judgment) at 3; Aetan claims that the
50% down payment for the Property was paid for by Dreliouch retaining $150,000 owed to Aetan
from their business. Defendants’ Motion for Summary Judgment at 2. The chief claim of
Dreliouch against the Mataevs is that the subsequent transfer of Drelicuch’s 50% in the Property
to the Mataevs by deed dated October 25, 1999 (“the 1999 deed’’) was effectuated by the
Mataevs’ fraud. All seven counts of the Complaint incorporate this allegation.

In support of his argument that the 1999 deed was procured by fraud, Dreliouch alleges
that there are at least five questionable aspects of the 1999 deed which call into question its
validity. First, Dreliouch claims to have been out of the country, but that an individual
identifying himself as Dreliouch, and using a passport with a different passport number from that
of Dreliouch’s, signed the deed. Second, the 1999 deed was not recorded until August 14, 2001,
with Dreliouch claiming not to have discovered its existence until after that time in 2003 when
Aetan started the foreclosure of Dreliouch’s real estate in the Czech Republic. Third, the
consideration for the transfer was a nominal $1.00, with no documentary evidence having been

produced as to the reason for this nominal consideration. Fourth, the document contains

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inconsistencies and mistakes. Fifth, the parties deny having contactec. the attorney who claimed
to create and notarize the deed, such that the actual creator of the deec! is uncertain. See
Plaintiff's Opposition to Defendants’ Motion for Summary Judgment at 4-5.

III. Discussion

A. Summary Judgment Standard

Summary judgment should only be granted when “the pleadinzs, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law.” Fed. R. Bankr. P. 7056 (incorporating Fed. R. Civ. P. 56(c)). All reasonable
inferences from the facts must be drawn in the manner most favorable to the nonmovant.
Desmond y. Varasso (In re Varrasso), 37 F.3d 760, 763 (Ist Cir. 1994). Once the movant has
averred “an absence of evidence to support the nonmoving party’s case,” the nonmovant, to
avoid summary Judgment, must establish the existence of at least one question of fact that is both
“genuine” and “material.” /d. at 763 n.1. The substantive law identifies which facts are material,
and only disputes over facts that might affect the outcome of the suit under governing law will
properly preclude the entry of summary judgment. Anderson v. Liberiy Lobby, Inc., 477 U.S.
242, 248 (1986). In addition, the dispute about a material fact must be genuine such that a
reasonable jury could return a verdict for the nonmoving party. /d. The burden is on the

nonmovant to come forward with sufficient evidence to generate an issue worthy for trial.
McCrory v. Spigel (In re Spigel), 260 F.3d 27, 31 Uist Cir. 2001) (quoting Ralar Distribs., Inc. v.

Rubbermaid, Inc., 4 F.3d 62, 67 (1st Cir. 1993)).

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B. The Objection

In his motion for summary judgment, Dreliouch has introduced two legal theories
apparently not previously argued by Dreliouch during the course of the Czech proceedings.’
Assuming arguendo that Dreliouch is not barred from raising new legal theories on the scope of
the debt under the 2000 lien agreement, Dreliouch’s arguments nonetheless must be rejected.
The first 1s that performance of the 2000 lien agreement was made impossible by the closure of
the bank account referenced to within the agreement. Plaintiff's Motion for Summary Judgment
at 4-5. But, as the Mataevs noted, in order to demonstrate that the 2000 lien agreement was
nullified by impossibility, Dreliouch must demonstrate that the essential purpose of the contract
became impossible. See Aetan and Stella Mataevs’ Opposition to Devtor, Serguei Dreliouch’s
Motion and Memorandum of Law for Summary Judgment (Defendants’ Opposition to Plaintiff's
Motion for Summary Judgment) at 5-6; Wheelabrator Envirotech Operating Ser., Inc. v. Mass.
Laborers Dist. Council Local 1144, 88 F.3d 40, 45 (1st Cir. 1996). The rationale justifying
excuse arises only when an unexpected event makes performance so vitally different from that
which the parties originally contemplated, that the change in performznce can be said effectively
to have vitiated the consent of the parties. /d. That is not the case here. As the Mataevs have
argued, it is clear that the central purpose of the 2000 lien agreement was to secure repayment of

the $150,000. See Defendants’ Opposition to Plaintiff's Motion for Summary Judgment at 6-7.

*I note that the generally recognized rule of international comi:y states that an American
court will only recognize a final and valid judgment. Pilkington Bros. P.L.C. v. AFG Industries
Inc., 581 F.Supp. 1039, 1045 (D. Del. 1984). In this case, however, ] have not been given
enough information about the nature and scope of the Czech proceediags, and the decision
rendered therein, in order to be able to determine which claims or issues may be barred from
relitigation, and much less whether the decision was a final and valid judgment.

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The Mataevs certainly did not excuse Dreliouch from his obligation tc them just because a
certain bank account was closed.

Dreliouch’s second argument, that the 2000 lien agreement should be litigated or is being
litigated in the Czech Republic, must also be rejected because it is simply unbelievable in the
context of these proceedings. In motions submitted in his Chapter 13 filing, Dreliouch
conspicuously stated on multiple occasions that the Chapter 13 case was filed to stop that
foreclosure and that suspension of the Czech proceedings was necessary in order to prevent the
foreclosure of his property there. See, e.g., Motion filed by Debtor Serguei Dreliouch to Compel
Secured Party, Aetan A. Mataev, to Produce Evidence That He Has Postponed Foreclosure
Pursuant to 11 U.S.C. Section 362, Case No. 05-11193-WCH, Docket No. 12; Stipulation By
Debtor Serguei Dreliouch and Aetan Mataev Regarding Suspection oj Proceeding Pending in
the Czech Republic, Case No. 05-11193-WCH, Docket No. 115. Dreliouch now makes the
utterly confounding statement that “[t]he bankruptcy filing had no impact upon the foreclosure of
the Czech property.” Plaintiff's Motion for Summary Judgment at 7-8. In light of the facts of
these proceedings, Dreliouch’s contention now that this proceeding is not the proper forum to
litigate the debt 1s flatly rejected. Dreliouch certainly is free to withdraw the Objection or
dismiss his Chapter 13 case and to go back and litigate in the Czech Republic,’ but that does not
render inappropriate the proceedings before this Court which he has irutiated.

The existence of the 2000 lien agreement evidences something as due. The proof of

claim ts certainly not vague, as it contained 20 pages of documentation, including a copy of the

“Considering that the Czech court rejected Dreliouch’s argument of repayment, and
ordered that his property there be auctioned, it is very surprising to the Court that he would argue
for a return to the Czech Republic.

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2000 lien agreement, which is sufficient under Fed. R. Bankr. P. 3001. A proof of claim
executed and filed in accordance with Rule 3001 constitutes prima facie evidence as to the
validity and amount of the claim. Fed. R. Bankr. P. 3001(f); Jn re Campano, 293 B.R. 281, 285
(D. N.H. 2003). The existence of the 2000 lien agreement begs the question: Why would
Dreliouch have given a security agreement in the Czech property if he did not owe anything to
Aetan? In addition, at least one court has rejected Dreliouch’s contention that he repaid any of
this debt. Dreliouch’s argument that he does not owe a debt to Aetan, at least this juncture, must
be rejected, and Dreliouch’s summary Judgment motion denied.

Aetan, in turn, contends that the question of repayment is the sole issue, and that
Dreliouch is estopped by the fact that the Czech court rejected his repayment defense, thus
entitling him to summary judgment on the proof of claim. As previously noted, whether or not
Dreliouch is collaterally estopped as to certain issues by the decision rendered in the Czech
proceedings is an open question at this point, since at least two of the elements of collateral
estoppel, same issues and final judgment have not been demonstrated. But more so, Aetan has
not explained why one court’s rejection of Dreliouch’s claim that he had repaid an amount of just
over $150,000 entitles him to a claim of $298,473.69. See Plaintiff's Objection to Claim of
Aetan Mataev Case No. 05-11193-WCH, Docket No. 82, 47. Dreliouch certainly is within his
right to question the amount of the claim, which appears to have been inflated many times over
the amount of the original debt, within the context of his objection, as he has done here.
Dreliouch’s questioning of the statutory or contractual basis that entitles Aetan to interest as well
as the reasonableness of the attorneys fees in the claim is sufficient to shift the burden for its

substantiation back to Aetan. See Plaintiff's Motion for Summary Juagment at 9-10; Campano,

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293 B.R. at 285. Once the burden has been shifted back to the claimant, it is ultimately for the
claimant to prove his claim, not for the objector to disprove it. /d. Aetan has admitted that he
made an error in the calculation of the amount of the claim, yet has not amended his claim, nor
offered a breakdown of the calculations underlying this claim. See Defendants’ Motion for
Summary Judgment, Affidavit of Aetan Mataey dated September 25, 2906, Ex. A415;
Defendants’ Opposition to Plaintiff's Motion for Summary Judgment at 10. Accordingly, there
are genuine issues of law and fact with respect to the appropriate amount of Aetan’s claim, and
Aetan’s motion for summary judgment on the proof of claim must also be denied.

C. The Complaint

The Mataevs seek summary judgment on the Complaint alleging that it is time-barred, the
events having occurred more than three years prior to the date that the Complaint was filed. The
parties agree that the applicable statute of limitations in Massachusetts for fraud is three (3) years
from its occurrence. Mass. Gen. Laws. ch. 260, § 2A. In the alternative, the Mataevs allege that
the fraud complaint is barred by laches or estoppel, and that the allegations of fraud have not
been pled with sufficient specificity.

Dreliouch counters that the statute of limitations was tolled until he actually discovered
the fraud. The discovery rule delays the statute of limitations while the facts of an injury remain
‘inherently unknowable” to the injured party. Saenger Organization, Inc. v. Nationwide Ins.
Licensing Assoc., Inc., 119 F.3d 55, 65 (Ast Cir. 1997) (citing Catrone v. Thoroughbred Racing
Ass'ns. of North America., Inc., 929 F.2d 881, 885 (1st Cir. 1991)). In Saenger, the court found
that a party’s deliberate indifference to information contained in a copyright application was not

sufficient to toll the running of the statute of limitations, because the facts contained within were

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inherently knowable to that party. Jd. In contrast, the facts in this case concerning the fraudulent
creation of the 1999 deed were not inherently knowable to Dreliouch. Upon a conversation with
Aetan in 2001, after which Dreliouch went to check the title at the registry of deeds, a title report
dated July 15, 2001 indicated that Dreliouch remained a 50% owner of the Property. See
Plaintiff's Opposition to Defendants’ Motion for Summary Judgment, |:x. 33. The alleged fraud
was simply not inherently knowable as of that point because Aetan hac. concealed it from
Dreliouch by not timely recording the deed. Dreliouch had no further reason to continually be
running to the registry of deeds to check for the alleged fraud after that point.

Dreliouch avers that he learned of the fraud in connection with the 1999 deed some time
in 2003, when Aetan began demanding payment from him under the 2000 lien agreement.
Because genuine issues of material fact exist with respect to when Dreliouch learned of the
transfer of the Property, which underlies the Complaint, the Mataevs’ motion for summary
judgment on the Complaint is denied. I do not find that laches bars the Complaint, where Aetan
has not been actually prejudiced by any injury to him. Also, I find that the facts pled by
Dreliouch are sufficiently specific allegations under the Complaint which can be considered.

IV. Conclusion
For the reasons set forth herein, I will enter separate orders der ying each summary

judgment motion.

Miley

William C. Hillmée” >
United States Bankruptcy Judge

Dated: Decembef/ , 2006

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