This month Bernhard Law Firm collected $215K+ for its client in a Miami-Ft. Lauderdale construction fraud lawsuit, after winning through judgment, appeal, and two bankruptcies. (Florida Bar disclaimer: results may not be typical. You may not have as beneficial a result, or same or similar results). Bernhard Law Firm is happy for happy clients. If you have any questions about construction fraud, construction fraud lawsuits, breach of covenants, and construction abandonment, or similar property matters, please contact Bernhard Law Firm at www.bernhardlawfirm.com, abernhard@bernhardlawfirm.com, or 786-871-3349.

As taken from the filings of the Fourth District Court of Appeal case no. 4D22-991:

This case arose because a construction company and its owners stole hundreds of thousands from Bernhard Law Firm‘s client in a construction fraud scheme, and used that money to instead buy numerous real estate properties in the name of the construction company. Bernhard Law Firm‘s client was not their only victim, as court records show other lawsuits for the same fraud scheme.

After Bernhard Law Firm obtained judgment, the construction company filed appeal, never moved for stay, never filed an Initial Brief, never paid an appellate filing fee, and never posted a supersedeas bond. Instead, the construction company moved to relinquish jurisdiction to the trial court, which the appellate court denied. The construction company still never filed an Initial Brief, motion for stay, or supersedeas bond.

After Bernhard Law Firm began execution on one of the 25 properties bought with ill-gotten funds, and the Court ordered the construction company to show cause why its appeal should not be dismissed for failure to comply with appellate rules, the construction company filed two consecutive bad faith bankruptcies.

These bankruptcies began just after notice of the Sheriff’s sale in Bernhard Law Firm’s execution on real estate found in Miami.

Both times, the bankruptcy courts dismissed the bankruptcies for failure to comply with court orders, deadlines, and minimum requirements to sustain a good faith bankruptcy. Both times, the construction company failed to candidly or timely notify the Court when, why, or even that their bankruptcies were dismissed.

After investigation by Bernhard Law Firm‘s client, it came to light that during the two bad faith bankruptcy filings, the construction company had been secretly trying to sell the property subject to execution. As stated in Bernhard Law Firm‘s client sworn affidavit, the construction company had placed an enormous “For Sale By Owner” billboard on the property, with the manager’s personal cell phone as the contact number for buyers.

Bernhard Law Firm argued to the Courts that all of these acts—the unsubstantiated bankruptcy cases, the bereft bankruptcy filings, the refusal to comply with bankruptcy court deadlines or orders, the lack of candor to this Court as to the repeated dismissals of their bankruptcies, and the covert attempt to sell the property that is subject to Bernhard Law Firm‘s client execution—evidenced an improper evasion of execution and maintenance of this appeal in bad faith.

Bernhard Law Firm argued under 11 U.S.C. § 362(c)(2)(B), there is no bankruptcy stay after a bankruptcy case is dismissed. Under 11 U.S.C. § 362(c)(4)(A)(i), there is no automatic bankruptcy stay for a debtor after its second bankruptcy case is dismissed within a year. Under 11 U.S.C. § 109(g), no individual may be a debtor under the bankruptcy code who has been a debtor in a prior case in the preceding 180 days, if the case was dismissed for failure to abide by the bankruptcy court’s orders.

Likewise, under 11 U.S.C. § 362(b)(21), there is no automatic bankruptcy stay upon any act to enforce a judgment lien against real property for a § 109(g) non-debtor; i.e., there is no stay after a debtor’s first bankruptcy case is dismissed. Bernhard Law Firm argued that because the construction company’s bankruptcies were dismissed for failure to abide by prior court orders, it was prohibited from being a bankruptcy debtor and there could be no further bankruptcy stays.

Additionally, Bernhard Law Firm argued that the Court should sanction the construction company for its bad faith bankruptcy filings and delays to further hinder and defraud judgment creditor (Bernhard Law Firm‘s client). The Court had jurisdiction to annul or prevent further delays in the matter under Florida law, because once a bankruptcy case is dismissed, a debtor’s case does not constitute a case under the Bankruptcy Code and the federal court does not have exclusive jurisdiction. R.L. LaRoche, Inc. v. Barnett Bank of S. Fla., N.A., 661 So. 2d 855, 860–61 (Fla. 4th DCA 1995) (citing 28 U.S.C. §§ 157, 1334).

Bernhard Law Firm argued that under Federal Rule of Bankruptcy Procedure 9011, the trial court and appellate court had authority to sanction the construction company when: (1) the papers are frivolous, legally, unreasonable, or without factual foundation, or (2) the pleading is filed in bad faith or for an improper purpose. In re Graffy, 233 B.R. 894, 896 (Bankr. M.D. Fla. 1999); In re Mroz, 65 F.3d 1567, 1572 (11th Cir. 1995) (sanctions under Rule 9011 are warranted when papers are frivolous, legally unreasonable or without factual foundation, or pleading is filed in bad faith or for improper purpose).

Bernhard Law Firm argued that Courts could grant retroactive relief from automatic stay; where bankruptcy petitions are not filed in good faith, the Courts could grant retroactive relief from bankruptcy stay and order that a foreclosure sale go forward. In re Albany Partners, Ltd., 749 F.2d 670, 675 (11th Cir. 1984) (holding court did not abuse discretion by granting retroactive relief from stay to approve prior foreclosure sale, even though creditors were aware of bankruptcy filing when they had conducted the sale).

Bernhard Law Firm also argued that under Florida Statutes § 57.105, the Courts could sua sponte order the construction company to pay the other party’s reasonable attorney’s fee plus interest, or damages for expenses, at any time where: (i) filings, assertions, or actions taken were primarily for the purpose of unreasonable delay; or (ii) the Court finds a party’s claim or defense was not supported by material facts or application of existing law. These are supplemental to other sanctions or remedies available. § 57.105(6), Fla. Stat. (2022). The Courts could also sanction upon consideration of: (1) whether the attorney’s disobedience was willful, deliberate, or contumacious; (2) whether the attorney was previously sanctioned; (3) whether the client was personally involved in the act of disobedience; (4) whether delay prejudiced the opposing party; (5) whether the attorney offered a reasonable justification for noncompliance; and (6) whether delay created significant problems of judicial administration. Kozel v. Ostendorf, 629 So. 2d 817, 818 (Fla. 1993).

Bernhard Law Firm argued that the construction company and its owners had been personally involved in their bad faith bankruptcy filings and disobedience of court orders and deadlines, along with the covert sales attempts of the property subject to execution. The delay was prejudicing Bernhard Law Firm‘s client from recovering the stolen monies, suffering five months of unwarranted delays without any movement in the appeal, suffering potential loss of assets subject to execution, loss of monies sent to the Sheriff’s office, and attorney’s fees in addressing these delays with the Sheriff and the courts. Nobody had offered any adequate justification for this behavior. The Court had repeatedly issued orders to show cause and admonishments, along with one dismissal and one refusal to relinquish jurisdiction, in this appeal already. The evidence showed that the delay activity was willful, deliberate, and contumacious, for the purposes of creating enough delay to covertly sell the property subject to execution before Sheriff sale.

The consistent delays, orders to show cause, dismissal and reinstatement of appeal, double dismissal of two bankruptcy cases, repeated cancelled Sheriff sales on the property, and total lack of any progress in this appeal or execution despite failure to obtain a stay or post a bond, all was creating significant problems of judicial administration. Kozel at 818. There was sufficient to enter sanctions against the construction company and its owners. Further, there was good cause to dismiss this appeal from continued lack of prosecution and lack of candor to the Courts. The construction company had been improperly holding up Bernhard Law Firm‘s client pending writ of execution, which was currently in the Miami Sheriff’s hands for execution.

Under these arguments, Bernhard Law Firm compelled direct cash payment of $215K+ to Bernhard Law Firm‘s client from the construction company. Florida Bar disclaimer: results may not be typical. You may not have as beneficial a result, or same or similar results). Bernhard Law Firm is happy for happy clients. If you have any questions about construction fraud, construction fraud lawsuits, breach of covenants, and construction abandonment, or similar property matters, please contact Bernhard Law Firm at www.bernhardlawfirm.com, abernhard@bernhardlawfirm.com, or 786-871-3349.