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GOODMAN v. BDEAZOULAY

June 25, 1981

Faye GOODMAN and Thelma Makavitt
v.
Daniel bDeAZOULAY and Michael Levin



The opinion of the court was delivered by: SHAPIRO

MEMORANDUM AND ORDER

I. INTRODUCTION

 This is an action brought by Faye Goodman ("Goodman") and Thelma Makavitt ("Makavitt") against Daniel DeAzoulay ("DeAzoulay") and Michael Levin ("Levin") that arises out of proposed development of residential real estate. It is alleged that defendants conspired to defraud Goodman and Makavitt of invested funds by misrepresenting their professional experience, past projects and future prospects, and the return plaintiffs would realize on real estate investments in Margate, New Jersey and Florida (First Amended Complaint P 10, P 20).

 Plaintiffs allege federal jurisdiction under 28 U.S.C. § 1331 and 15 U.S.C. § 78a for claims under Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), and Rule 10b-5 promulgated by the SEC. *fn1" Plaintiffs also assert pendent state law claims of fraud and corporate waste. In addition to damages, they seek the dissolution of a corporation formed by Goodman, DeAzoulay and Levin, GAL Investments Ltd. ("GAL"), and the appointment of a custodian of its assets.

 Plaintiffs have moved for a preliminary injunction to freeze defendants' personal assets and for the appointment of a trustee for GAL. After full consideration of the parties' memoranda and the evidence offered during a hearing which lasted five days, the motion is denied. However, the court's Order of August 4, 1981 which restrains the disposition of GAL assets absent a court order shall remain in effect.

 II. FACTS

 Levin was a fifty-percent owner of a company called Land Development Network (N.T. 129 (9/23/81)); DeAzoulay was his employee. (N.T. 140 (9/23/81)). Goodman met DeAzoulay in December, 1981 (N.T. 7 (9/23/81)); she became friendly with him (N.T. 441 (10/1/81)) and interested in helping him develop real estate. (N.T. 317-18 (9/24/81)).

 In January 1981, Goodman obtained a $ 60,000 loan secured by her personal securities from the Continental Bank. (N.T. 81, 124 (7/24/81)). Fifty thousand dollars of this money was deposited in a Philadelphia National Bank joint account in the names of Goodman and DeAzoulay. (N.T. 158 (7/24/81)). That same month, Goodman's sister, Makavitt, wired $ 20,000 to Goodman's personal bank account; this money was transferred before Makavitt had spoken to either of the defendants. (N.T. 13, 17 (7/23/81)). Makavitt was told by Goodman that this money was to be invested by Levin and DeAzoulay in Florida condominiums. (N.T. 82 (9/23/81)). In February, 1981, Goodman, DeAzoulay and Levin went to Israel to secure commodities contracts (N.T. 38, 39 (9/23/81)), but no contracts were executed. (N.T. 39, 40 (9/23/81)).

 GAL was created sometime in February or March, 1981 (N.T. 156 (9/23/81); N.T. 318 (9/24/81)); Goodman was its president and she, Levin and DeAzoulay were each to hold a one-third interest in it. Goodman was to provide the financing and defendants the entrepreneurial and construction skills required for the joint venture. (N.T. 162 (7/24/81); N.T. 116, 117 (9/23/81)). Goodman mortgaged her home for $ 90,000 in March, 1981, and represented that the funds were to send a child to college (Ex. DL-1). These proceeds were placed in a GAL account at the Atlantic National Bank on which Goodman and DeAzoulay jointly signed checks. (N.T. 163 (7/24/81); Ex. P-4).

 In March and April, 1981, GAL acquired two properties in Margate, New Jersey and executed a use and occupancy agreement with an option to buy a third property. *fn2" (Ex. DL-6, DL-8). Two of the properties acquired remain in the possession of GAL; they cost $ 225,000 and are encumbered by mortgages in the original amount of $ 163,250. (Ex. DL-9, DL-10). In May, 1981, Makavitt wired $ 80,000 to the GAL Atlantic National Bank account. (N.T. 23-25 (7/23/81); N.T. 85 (9/23/81); Ex. DL-12). However, $ 20,000 of her $ 100,000 expenditure was later returned to her. (N.T. 17 (7/23/81)).

 III. DISCUSSION

 A. Defendants' Personal Assets

 The standard in this Circuit for the issuance of a preliminary injunction is settled:

 
... the moving party must generally show (1) a reasonable probability of eventual success in the litigation and (2) that the movant will be irreparably injured pendente lite if relief is not granted.... Moreover, while the burden rests upon the moving party to make these two requisite showings, the district court "should take into account when they are relevant, (3) the possibility of harm to ...

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