Court Opinion

ID: 9964081
Source: CourtListenerOpinion
Date Created: 2024-04-26 20:10:21.602343+00
Date Added: 2024-06-11T08:25:09.795209
License: Public Domain

DB Auraria LLC v Nelson
               2024 NY Slip Op 31436(U)
                     April 19, 2024
           Supreme Court, New York County
        Docket Number: Index No. 653436/2022
                 Judge: Melissa A. Crane
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, including the New
  York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
~ ,..                                                                                               INDEX NO. 653436/2022
   NYSCEF DOC. NO. 271                                                                        RECEIVED NYSCEF: 04/19/2024

                               SUPREME COURT OF THE STATE OF NEW YORK
                                         NEW YORK COUNTY

              PRESENT:        HON. MELISSA A. CRANE                               PART                            60M
                                                                       Justice
                             ---------------.X                                    INDEX NO.         653436/2022
               DB AURARIA LLC,
                                                                                  MOTION DATE       03/12/2024
                                                 Plaintiff,
                                                                                  MOTION SEQ. NO.        009
                                          - V-

               PATRICK NELSON, NELSON PARTNERS, LLC                                 DECISION + ORDER ON
                                                                                           MOTION
                                                 Defendant
               --------------------X

              The following e-filed documents, listed by NYSCEF document number (Motion 009) 207, 208, 209, 210,
              211,212,213,214,215,225,226,227,228,229,230,234,235,236,237,238,239,244,245,247,266
              were read on this motion to/for                                    MISCELLANEOUS

             Upon the foregoing documents, it is

                     The court held a multi-day hearing (5 days total) to determine whether to hold defendants

             in contempt and whether to appoint a receiver over the interests of the judgment debtors in any

             business entity. For the reasons stated on the record on April 5, 2023, plaintiffs motion for a

             receiver, pursuant to CPLR 5228, is granted.

                     In deciding whether to appoint a receiver, the court considers: ( 1) whether there are less

             drastic alternative remedies; (2) the degree to which receivership will increase the likelihood of

             satisfaction and (3) the risk of fraud or insolvency were the court not to appoint a receiver (see

             Hotel Mezz Lender LLC v Falor, 14 NY3d 303, 317 (2010).

                     The hearing revealed an individual, defendant Patrick Nelson, who clearly cares a great

             deal about the business of student housing. The hearing also revealed that the business as a

             whole, (ie. all the entities holding the properties, be they LLCs, DSTs or something else) is over-

             leveraged for a variety of reasons, including possibly not having healed yet from the effects of

             the pandemic on student housing.

              653436/2022 DB AURARIA LLC vs. NELSON, PATRICK ET AL                                  Page 1 of 4
              Motion No. 009

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                                                                                                   INDEX NO. 653436/2022
  NYSCEF DOC. NO. 271                                                                      RECEIVED NYSCEF: 04/19/2024

                    However, there are glaring reasons to appoint a receiver. First and foremost is the

           judgment debtors' inability to comply with court orders. On March 18, 2024, at defendants'

            urging, this court cut back on a previous order, but did direct defendants to provide a detailed

           accounting of their assets each month [EDOC 247]. Despite everything being on the line,

           defendants failed to comply on time. Although defendants' lawyers threw themselves on the

           sword to take the blame for this failing because of some kind of "misunderstanding," it was

           ultimately defendants' responsibility to comply. Moreover, the excuse seems to be yet another

           liberal "misunderstanding" (see Tr. dated April 5, 2024 pg 36 [EDOC 270]). These

           "misunderstandings" form a pattern. It harkens back to the first day of testimony when Mr.

           Nelson testified he did not understand the restraining notices operated to preclude certain

           transactions.

                   Equally disturbing were defendants' efforts to distance themselves from their own

           documents when they became inconvenient. For example, the judgment debtors changed the

           amount of debt on their properties that their own documents reflected. Entries on defendants'

           own documents reflecting inter-company transfers suddenly became loans so that the debtors

           could portray the funds as belonging to an entity other than the debtor.

                   When confronted with an "Agreed Final Judgment' from a case involving real property in

           Texas, in which he admitted to making false statements, Mr. Nelson claimed his lawyer acted

           without authority. A chart from defendants, (Pl. Ex 24 ), purports to be a list of properties in

           which Nelson Partners has an ownership interest. Under the column "Nature of Ownership"

           often the term "Fee Simple" appears. At trial, Mr. Nelson testifies that the chart was rife with

           errors. For instance, Hampton Ridge is not owned in fee simple, but rather Nelson Partners

           owns NP Hampton Ridge which owns Hampton Ridge. This type of ownership is more distant

             653436/2022 DB AURARIA LLC vs. NELSON, PATRICK ET AL                                 Page 2 of 4
             Motion No. 009

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                                                                                                 INDEX NO. 653436/2022
  NYSCEF DOC. NO. 271                                                                    RECEIVED NYSCEF: 04/19/2024

            that that of fee simple. Moreover, the debt on properties in which the debtors have an interest

            kept growing at trial.

                   There was also conflicting testimony about the ownership ofNBPRE, yet another

            company in this labyrinth of companies. First, Mr. Nelson was an owner of NB PRE. Then, it

            was his broth~r who was the owner. There appears to be a deficient tracking for who owns what

            and what is owed to whom. Conveniently, one of the Borrowers on a sale, NB 700 Logan, LLC,

            is owned by Mr. Nelson's brother. That entity, along with NP Hampton Ridge, LLC, that Mr.

           Nelson testified Nelson Partners owns, received $5,000,000.00 in a sale on August 10, 2023.

            Plaintiff received nothing. (See Pl Ex 26).

                   It is also clear from the evidence that Nelson Partners Property Management (NPPM), an

           entity over which this court does not currently have jurisdiction, is now paying personal

           expenses for Mr. Nelson. Mr. Nelson testified that NPPM is paying his child support and

           mortgage and is even paying NP's employee salaries. There are several instances where NPPM

           loaned money to NP and then the money was immediately transferred to Mr. Nelson, his ex-wife

           or his mother (see, e.g. Pl Ex 6). Thus, it is clear that the judgment debtors are attempting an end

           run around the restraining notices by having an affiliate they control pay personal expenses and

           other debts of their choosing.

                   Money flows between the various entities so freely in the form of "loans" (see PL Ex 5)

           that it is difficult to track and leaves the court wondering why the judgment debtors could not

           take a loan to pay the judgment here? Even worse, it appears that Mr. Nelson has a second string

           of entities under the Sun Pacific umbrella that are engaged in the same business as the Nelson

           Partners empire.

            653436/2022 DB AURARIA LLC vs. NELSON, PATRICK ET AL                                 Page 3 of4
            Motion No. 009

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                                                                                                         INDEX NO. 653436/2022
  NYSCEF DOC. NO. 271                                                                              RECEIVED NYSCEF: 04/19/2024

                    Finally, the evidence shows that there is a high risk of insolvency within and among the

           Nelson Partners empire. Receivers or bankruptcy trustees have taken over at least 8 managed

           properties. Investors have sued. Yet, Mr. Nelson blames everyone else for his business failings:

           the documents are wrong because the person who wrote them made mistakes; this court's order

           spooked the lender for the sale of University Gardens that tanked the deal; plaintiffs are

           predatory lenders. It is always someone else's fault, never his own.

                   For all these reasons, a receiver is more than appropriate at this juncture (see In re 4042

           East Tremont Cafe Corp., v Sodano III, 177 AD3d 456, 459 (1 st Dep't 2019]).

                   Accordingly, the court grants the motion in accordance with the attached judgment and

           order appointing a receiver.

                   4/19/2024
                     DATE                                                         MELISSA A. CRANE, J.S.C.

                                                                       ~
            CHECK ONE:                    CASE DISPOSED                    NON-FINAL DISPOSITION

                                          GRANTED         □ DENIED         GRANTED IN PART            □ OTHER
            APPLICATION:                  SETTLE ORDER                     SUBMIT ORDER

            CHECK IF APPROPRIATE:         INCLUDES TRANSFER/REASSIGN       FIDUCIARY APPOINTMENT      □ REFERENCE

            653436/2022 DB AURARIA LLC vs. NELSON, PATRICK ET AL                                        Page 4 of 4
            Motion No. 009 '

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