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Ronald R. Heurlin and Tanya E. Heurlin v. Steven Yankowski

February 3, 2012

RONALD R. HEURLIN AND TANYA E. HEURLIN, PLAINTIFFS,
v.
STEVEN YANKOWSKI, IND. AND T/A THORNHURST PROPERTIES, LLC, ET AL., DEFENDANTS



The opinion of the court was delivered by: Magistrate Judge Blewitt

MEMORANDUM AND ORDER

I. Background.

Plaintiffs Ronald R. Heurlin and Tanya, E. Heurlin, ("Plaintiffs") filed this action on April 22, 2011, against the following Defendants: Steven Yankowski, individually and trading as: Thornhurst Properties, LLC, Premier Equity Management Services, Ltd., Premier Equity Scranton, LLC, Cole Alexander Financial, Ltd., and Airport Office Complex, Inc. (Doc. 1).*fn1

After being served, several Defendants filed Motions to Dismiss the original Complaint. (Docs. 5, 7, and 8). Plaintiffs then filed an Amended Complaint on June 3, 2011, which named the following Defendants: Steven Yankowski, individually and trading as: Thornhurst Properties, LLC, Premier Equity Management Services, Inc., Premier Equity Scranton, LLC, Cole Alexander Financial, Ltd., Airport Office Complex, Inc., Atlantic Acquisition Group, Inc., and Premier Equity Mount Cobb, LLC. (Doc. 13).

On June 15, 2011, the Court issued an Order and denied as moot the Docs. 5, 7 and 8 Motions to Dismiss the original Complaint. (Doc. 16).

Also, on June 15, 2011, Defendant Airport Office Complex, Inc., filed a Motion to Dismiss the Amended Complaint. (Doc. 15). On June 24, 2011, Defendant Cole Alexander Financial, Ltd., filed a Motion to Dismiss the Amended Complaint pursuant to Fed.R.Civ.P. 12(b) or, in the alternative, for a More Definite Statement pursuant to Fed.R.Civ.P. 12(e). (Doc. 18). Further, on June 24, 2011, Defendants Steven Yankowski, Thornhurst Properties, LLC, Premier Equity Management Services, Ltd., Premier Equity Scranton, LLC, Atlantic Acquisition Group, Inc., and Premier Equity Mount Cobb, LLC, jointly filed a Motion to Dismiss the Amended Complaint pursuant to Fed.R.Civ.P. 12(b) or, in the alternative, for a More Definite Statement pursuant to Fed.R.Civ.P. 12(e), with an attached Exhibit 1, namely, the February 4, 2009 Modification of Outstanding Mortgages and Interest executed by Plaintiffs and Defendant Yankowski. (Doc. 19).

The three stated Motions to Dismiss Plaintiffs' Amended Complaint were briefed by the parties. (Docs. 20, 21, 22, 23, 24 and 25). None of the moving Defendants filed a reply brief.

On July 25, 2011, the parties consented to the jurisdiction of the undersigned Magistrate Judge for all matters, including trial, pursuant to 28 U.S.C. §636(c). (Doc. 27).

On August 9, 2011, Defendant Airport Office Complex, Inc., filed a voluntary Bankruptcy Petition under Chapter 11 of the U.S. Bankruptcy Code, pursuant to 11 USC §1101, et seq. See 5:11-bk-05550, M.D. Pa. Also, on August 9, 2011, Defendant Airport Office Complex, Inc., filed, in the instant action, a Suggestion of Bankruptcy. (Doc. 28). Following a telephone status conference between the Court and all counsel, the Court issued an Order on August 22, 2011, and administratively closed this case due to the automatic stay provision of the Bankruptcy Code which went into effect with the August 9, 2011 Bankruptcy Petition filed by Defendant Airport Office Complex, Inc. (Doc. 31). Subsequently, on September 28, 2011, Plaintiffs filed a Notice of Voluntary Dismissal of Defendant Airport Office Complex, Inc. (Doc. 32). Defendant Airport Office Complex, Inc. was then dismissed from this case without prejudice.

The Court then re-opened this case on September 28, 2011. The Doc. 15 Motion to Dismiss the Amended Complaint filed by Defendant Airport Office Complex, Inc., was deemed moot.

The Docs. 18 and 19 Motions of the stated Defendants are now ripe for disposition.*fn2 This Court has diversity jurisdiction over this action pursuant to 28 U.S.C. §1332. (Doc. 13, p. 2).*fn3

II. Allegations of Amended Complaint.

Plaintiffs filed this action to recover over $5,000,000 they allegedly loaned to Defendants over several dates and in various amounts commencing in February 2004. Plaintiffs aver that they made the loans to Defendant Yankowski and to Defendant companies so that Yankowski could purchase and develop real estate in the Scranton, Pennsylvania, area for resale. Plaintiffs allege that Defendant Yankowski formed the Defendant companies "ostensibly to acquire and develop real estate with the loans [they made]." (Id., p. 5).

Plaintiffs allege that Defendants have failed and refused to repay these loans to them. Plaintiffs also allege that "Defendant Yankowski induced [them] into making and later modifying the loans through false and fraudulent representations regarding the use of the proceeds from the loans, the priority of the mortgages securing the loans and values of the properties that were subject to the mortgages." (Id., p. 4).

Specifically, Plaintiffs allege:

18. The Heurlins and Yankowski agreed that the loans would be secured by mortgages on properties that Yankowski already owned or would purchase, either individually or through the Companies.

19. Beginning in or about February 2004 the Heurlins began making loans to Yankowski and the Companies.

20. During the period February 2004 to August 2008 the Heurlins made loans to Yankowski and the Companies in excess of Five Million dollars (the "Loans"). These Loans were made in various amounts and at various times. (Id., p. 5).

Further, Plaintiffs allege:

22. While the Heurlins were knowledgeable regarding real estate values in Florida and Nantucket, they did not have any knowledge of real estate values in Northeastern Pennsylvania. The Heurlins relied on Yankowski's representations as to the values of the properties securing the Loans. Specifically, Yankowski represented to the Heurlins that the amount of their loans would be no greater than eighty percent of the value of the property or properties securing those loans.

23. Yankowski also represented to the Heurlins that the mortgages securing the Loans would have a first priority lien position. In fact, in many instances Yankowski delayed recordation of the Heurlin mortgages, borrowing funds from third parties and giving those third parties a mortgage to secure those loans on the same properties he and/or the Companies had mortgaged previously to the Heurlins. As a result, the Heurlins' mortgages did not receive a first priority position on many of the properties securing the Loans.

24. Yankowski and his attorney were responsible for recording the mortgages securing the Loans.

25. The mortgages securing the Loans included the name of the Borrower, the amount of the loan and the terms of repayment. The Loans were interest only with the entire amount of the principal due on a date certain. The terms of the Loans also were set forth in a corresponding promissory note. The Heurlins are in possession of originals or copies of some of these notes but others are believed to be in Yankowski's possession.

26. From time to time during the course of their business relationship Yankowski would ask the Heurlins to modify the Loans by substituting collateral, extending the time for repayment, lowering the interest rate and/or rolling one loan into another with either the same or a different borrower. In each instance Yankowski represented to the Heurlins that they were being afforded either equal or greater security for the loan. (Id., pp. 6-7).

Plaintiffs also allege that Defendant Yankowski induced him to extinguish over $2,000,000 in debt for townhouses to be built by his company called T.R.S. Developers, LLC. (Id., pp. 7-9).

Plaintiffs aver that in October 2008, Defendant Yankowski and the Defendant companies started to fall behind on the interest payments due to them under the loans, and that Defendants later failed to make principal payments on the loans when they became due. (Id., p. 9). Plaintiffs allege that as of the date of their amended pleading, all of the loans they gave Defendants are due and owing in full and that the total principal amount due of $5,448,499, plus interest. (Id.).*fn4

Plaintiffs also allege that on February 4, 2009, Defendant Yankowski induced them to modify the terms of the loans and threatened filing bankruptcy if they did not agree to a modification. (Id., p. 11). Plaintiffs admit that on February 4, 2009, they executed, along with Defendant Yankowski, a Modification of Outstanding Mortgages and Interest ("Modification Agreement"). (See Doc. 19, attached Exhibit 1). With respect to the Modification Agreement, Plaintiffs allege as follows:

42. As of the date of the Modification Agreement the Heurlins still believed that the mortgages securing Yankowski and the Companies' obligations provided them with a first priority lien position on the properties subject to those mortgages and that the value of the properties subject to those mortgages exceeded the amount of the mortgages. Yankowski did not lead them to believe otherwise. Had the Heurlins known that the mortgages on the Properties far exceeded their value and that various mortgages did not provide them with a first lien on the properties they would not have agreed to the modification.

43. Yankowski breached the Modification Agreement by failing to make the interest payments required thereunder according to its terms.

44. The Modification Agreement is null and void because it was procured through Yankowski's ...


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