Condo lawsuit may go to jury

A judge denied foreclosure on a failed Miami condo building,

saying fraud allegations had not been addressed.

Article Courtesy of The Miami Herald

By Toluse Olorunnopa

Published October 10, 2010

The Filling Station Lofts, the stalled Miami condo project steeped in allegations of fraud and unpaid construction bills, is set for even more litigation after a judge ruled Thursday to deny foreclosure proceedings, opening the avenue for a jury trial.

Miami-Dade Circuit Court Judge Pedro Echarte found that the building's Miami-based mortgage holders failed to address a slew of counterclaims and fraud allegations waged by the defendants -- unpaid contractors who helped build the structure.

"How can you guys obtain summary judgment with a motion that doesn't address the affirmative defenses and the counterclaims?'' Echarte asked the foreclosure-seeking lawyers. "What you guys are telling me just sounds wrong.''

After nearly two hours of debate and case law references, the judge denied the motion for summary judgment with a curt ruling.

The 10-story building shell at 1650 N. Miami Ct. has sat idle since December 2008 as lawyers have battled over questionable title purchases, multimillion-dollar personal guarantees and nearly $3.5 million in construction bills that went unpaid as the property slid into default.

The judge's ruling means the property will not immediately go into foreclosure, and the case will likely undergo additional hearings and possibly a jury trial over fraud allegations. For Alina Rivero, owner of Miami-based Gulf Plumbing, it represents continued hope that she might one day be paid for three months of construction work her company did in the building.

"We're very satisfied with today's outcome, and we think that at least now we have a chance to prove our case in front of a jury,'' said Rivero, who filed a $222,500 lien against the building in 2009.

After the property went into default, its lender, Ocean Bank, sued the developer, Daniel Holtz, for $20 million on his personal guaranty of a 2006 loan. A couple of months later, an investor group bought the property's note and mortgage from Ocean Bank for $7 million and then released Holtz from his personal liability on the debt. In August 2009, the investor group moved to foreclose on the property, a process that would effectively shut out contractors from ever claiming their pay.

At issue is whether the transaction that sent the note from Ocean Bank to the investor group, Versa Capital, was a scheme devised by Holtz to defraud and stiff construction workers.

Lawyers for Versa and Holtz argued in court that evidence of such fraud was non-existent. "There have been depositions of defendants, there have been depositions of cross-defendants, there have been depositions of plaintiffs -- in all of that, what have we got?'' asked Versa's lawyer Frederick Sake. "We have not one affidavit in opposition of the summary judgment.''

Joseph Rebak, attorney for Holtz, said "there is no relationship between Daniel Holtz and Versa. Mere paper allegations, as Mr. Sake has cited, do not suffice to defeat a motion of summary judgment.''

But attorneys for the contractors -- Gulf Plumbing, Biscayne Construction and B & R Engineering -- presented the court with an intricate allegation of fraud, claiming that business and blood ties between the developer and the mortgage purchasers tainted the sale.

Because the investor group consists of family members and business associates of Holtz -- and because Holtz personally guaranteed the entire purchase -- defense lawyers argued that the sale was not an arm's length transaction. Holtz appears to have gained from the note purchase since it resulted in him being released from a $20 million liability.

Holtz is the son of Abel Holtz, the former owner of Capital Bank.

"It appears that if you have friends and family with enough money, you can get away with something like this,'' said Douglas Roberts, lawyer for Biscayne Construction. "On its face, it smells to high heaven.''

Jorge del Valle, who represents B & R Engineering and Gulf Plumbing, said that the property's value has nosedived since the initial default, and now the contractors -- second in line for any foreclosure sale proceeds -- have been left out to dry.

"This court is the only place that our clients -- who are small, working contractors -- have to get some redress,'' he told the judge.

Roberts and del Valle said they would push to take the case before a jury. Sake and Rebak did not return calls requesting comment on Thursday.