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Jeranian v. Dermenjian

United States District Court, D. Rhode Island

November 15, 2019

JOYCE A. DERMENJIAN, Defendant/Plaintiff in Counterclaim,
DAVID S. JERANIAN, Individually and in his capacity as Executor of the Estate of Harry Jeranian, and FRANK NORTH, Individually, Defendants in Counterclaim.



         Now pending before the Court is the motion (ECF No. 20) of Plaintiffs David S. Jeranian and Frank North to dismiss the Corrected Counterclaim of Defendant Joyce A. Dermenjian.[1]ECF No. 18 (“Countercl.”). The motion is referred to me pursuant to 28 U.S.C. § 636(b)(1)(B).

         This case was commenced as a simple equitable partition action brought pursuant to R.I. Gen. Laws § 34-15-1 and § 34-15-16, et seq., by two (David S. Jeranian, owner of one-half, and Frank North, owner of one-third) of the three possessory owners of a real estate parcel improved by a commercial building located at 1221 Post Road, Warwick, Rhode Island, (the “Real Estate”) against the third owner (Joyce A. Dermenjian, owner of one-sixth) so that they can consummate its sale to a buyer (O'Reilly Automotive Stores, Inc. (“O'Reilly”)). According to undisputed representations made during the Court's recent hearing on various motions, O'Reilly apparently remains willing to purchase the Real Estate for cash at the same price originally offered in 2017, which is based on the tear-down value of the building, subject to its right to perform an inspection that has not yet occurred.

         In addition to Plaintiffs' pending motion to dismiss, there are also pending motions for summary judgment (ECF Nos. 32, 34). The affidavits and statements by the parties at the hearing in connection with the summary judgment motions suggest that, despite years of vitriolic litigation between Jeranian and Dermenjian, siblings who are fighting over every aspect of their father's estate (“Harry Jeranian Estate”), the parties do not materially dispute that partition and sale of the Real Estate to O'Reilly as first proposed in 2017 is the best solution for all three owners. As Dermenjian asserts: “it is to be made clear and unambiguous that, Defendant Dermenjian does not, and did not, object to the sale of the Property.” ECF No. 18 ¶ 5 (“Countercl. ¶ 5”); see ECF No. 47 at 62 (“[M]y purpose would not be to have the O'Reilly go away.”). Therefore, this equitable partition action should be poised swiftly to move forward towards a just resolution.

         The problem is that, despite her stated desire for a speedy sale and her bitter complaints about the delay since 2017 (which she blames on actions taken by her brother in his capacity as executor of the Harry Jeranian Estate), Dermenjian responded to the partition complaint, not just with an answer that essentially admits that the partition and sale to O'Reilly should proceed, but also with a sprawling fifty-seven page, two-hundred-and-twelve paragraph counterclaim with twenty-seven proposed remedies and forty-four attachments, which she denominated as the “Corrected Counterclaim.” In it, Dermenjian focuses on how her brother acting as executor of their father's estate sued her in an effort to sell the Real Estate based on the incorrect premise that the Harry Jeranian Estate owned or should have owned the Real Estate. As a result of this lawsuit, as the Corrected Counterclaim alleges, the sale has not been consummated and the Real Estate is deteriorating. Based on the Corrected Counterclaim, she has filed a contentious motion to compel discovery (ECF No. 26) that focuses on her brother's conduct as executor in connection with the Real Estate over several years, including requests for his privileged communications with the attorneys who have represented him in his disputes with her. Also based on the Corrected Counterclaim, she contends that she is entitled to a jury trial regarding the Real Estate and an array of other issues, including to determine whether her brother acting as executor intentionally and maliciously interfered with the sale of the Real Estate to O'Reilly, the very same buyer to whom her brother is trying to sell the Real Estate now.

         Jeranian and North have moved to dismiss the Corrected Counterclaim, arguing that none of the nine Counts states a plausible claim against either of them and asking that they be dismissed pursuant to Fed.R.Civ.P. 12(b)(6). They also argue that, with no claim that is compulsory pursuant to Fed. R. Civ. P 13(a) and joinder not required pursuant to Fed.R.Civ.P. 19(a), the pleading, in the Court's discretion, should be dismissed against Jeranian in his capacity as executor pursuant to Fed.R.Civ.P. 20. And because Dermenjian seeks to inject matters pertinent to the administration of her father's estate into this case, Plaintiffs invoke Fed.R.Civ.P. 12(b)(1) and argue that parts of the Counterclaim fail because they fall within the probate exception to federal subject matter jurisdiction. See Marshall v. Marshall, 547 U.S. 293, 310-11 (2006).

         In her opposition to the motion to dismiss, Dermenjian appears to contend that she is entitled to relitigate in this partition action matters pertinent to a terminated lawsuit with her brother, Jeranian v. Dermenjian, C.A. No. 17-340JJM-LDA (“Jeranian, 17-340”). She alleges that her brother's breach of his fiduciary duty as executor in pursuing that case has delayed the sale to O'Reilly, to which she has always been willing to assent, causing her injury. In suing Frank North, she justifies the dearth of factual allegations pertaining to him by accusing him of “cho[osing] to sit, as a silent spectator, on the sidelines, to watch the outcome of a meaningless and meritless ‘340' lawsuit.” ECF No. 23 at 12.

         In addition to her opposition to the motion to dismiss, Dermenjian has also moved for leave to amend the Corrected Counterclaim. ECF No. 22. The proposed pleading is denominated as the “Amended Corrected Counterclaim.” ECF No. 22-1. The motion to amend seeks to cure some of the Corrected Counterclaim's more glaring deficiencies. Specifically, Dermenjian proposes to drop the request that this Court appoint her as executrix of her father's estate; she seeks to abandon the Count seeking to bar her brother from unjustly compensating himself as executor of their father's estate; and she no longer asks the Count to award damages to be paid by the attorney who represented her brother in his capacity as executor in Jeranian, 17-340. ECF No. 38 at 7-11. The motion to amend has also been referred to me, but pursuant to 28 U.S.C. § 636(b)(1)(A). In the interest of judicial efficiency, this report and recommendation addresses the dismissal motion in a practical fashion, focusing only on arguments that apply equally to the Amended Corrected Counterclaim.[2] Based on the analysis that follows, I recommend that the Corrected Counterclaim be dismissed without prejudice. Based on the same analysis, in a separate Order, I have denied the motion to amend as futile.

         I. BACKGROUND[3]

         A. Jeranian, 11-315 - First Federal Court Litigation

         The first lawsuit in this Court between these siblings was filed in 2011 and persisted until 2017. Jeranian v. Dermenjian, C.A. No. 11-315JJM-LDA (“Jeranian, 11-315”). Jeranian, 11-315, arose from allegations pertaining to the Cranston residence where Harry and his son then lived. In brief, the amended complaint alleges that, while Harry - then 87 - and his son lived in the home, Dermenjian quitclaimed Harry's interest in the house to herself; not knowing of this unrecorded quitclaim deed, Jeranian and Harry took out a loan and co-signed a mortgage on the house that Harry no longer owned. Jeranian, 11-315, ECF No. 41. After the parties settled in 2012, Dermenjian unsuccessfully tried to resume the case in 2017 with further litigation over whether the settlement agreement had been breached. See Jeranian, 11-315 (Text Order of Nov. 16, 2017, denying motion for post-settlement relief).

         B. Dealings Regarding the Real Estate - 2014 to 2017

         The commercial Real Estate that is in issue in this case was acquired in 1985 by Harry Jeranian, [4] David Jeranian (Harry's son), and Frank North. ECF No. 32-3 ¶ 4.[5] Together, these three ran an insurance business that they operated out of the Real Estate, which they owned in three equal shares as co-tenants. Id.; see Countercl. ¶ 6. In 2014, they decided to sell the Real Estate. ECF No. 32-3 ¶ 6. To market the Real Estate, they engaged Rodman Real Estate Inc. (“Rodman”). Id. ¶ 7; Countercl. ¶ 5. However, before the Real Estate was sold, on April 11, 2016, Harry died. ECF No. 32-3 ¶ 9; Countercl. ¶ 6. David Jeranian is the executor of Harry's estate. Countercl. ¶ 2.

         On March 18, 2016, just before Harry died, Dermenjian, acting as the holder of Harry's power of attorney, established the Harry Jeranian Irrevocable Real Estate Trust (“HJIRET”), and executed a quitclaim deed of Harry's one-third interest in the Real Estate to herself as trustee. Countercl. ¶ 36 & Ex.[6] 12 at 6 (ECF No. 14-24 at 6). Then, on January 19, 2017, Dermenjian (as trustee of HJIRET) executed a second quitclaim deed conveying HJIRET's one-third interest in the Real Estate to herself and her brother, as tenants-in-common. Countercl. ¶ 12 & Ex. 12 at 3-6.

         Meanwhile, Rodman continued to work on trying to sell the Real Estate. See Jeranian, 17-340, ECF No. 2 ¶¶ 19-21. In February 2017, an agreement to sell was reached with O'Reilly. Countercl. ¶ 19. However, as a result of the two quitclaim deeds, Dermenjian owned a one-sixth interest, Jeranian owned a one-half interest and Frank North owned a one-third interest; the Harry Jeranian Estate owned nothing. Jeranian, 17-340, ECF No. 2 ¶¶ 19-20 & Ex. 12. In June 2017, O'Reilly signed an adjusted offer to purchase the Real Estate, now from Jeranian, Dermenjian and North based on their actual respective ownership interests. Countercl. ¶ 32; ECF No. 14-23. In this offer, O'Reilly proposed to pay $795, 000 with an earnest deposit of $5, 000; the offer contemplated “a cash transaction [with] no lender involved.” ECF No. 14-23 at 1; Countercl. ¶ 177. During June 2017, Dermenjian was willing to sell, but disagreed with the documents that Jeranian's counsel proposed to implement the transaction; in the course of this correspondence, each sibling threatened to sue the other. Countercl. ¶¶ 46-47 & Exs. 7, 9, 10, 15. After the O'Reilly purchase agreement expired on June 28, 2017, Jeranian filed Jeranian, 17-340. Countercl. ¶¶ 53, 74. In filing this complaint, Jeranian acted solely in his capacity as executor of the Harry Jeranian Estate. Id.; Jeranian, 17-340, ECF No. 2.

         C. Jeranian, 17-340 - Second Federal Court Litigation

         In Jeranian, 17-340, Jeranian, acting as executor of the Harry Jeranian Estate, alleged that Dermenjian had refused to execute the documents necessary to allow transfer of marketable title to O'Reilly, and consequently the opportunity to sell at a good price had been lost. Jeranian, 17-340, ECF No. 2. Dermenjian responded with a motion to dismiss, arguing that, on its face, the complaint established that the Harry Jeranian Estate never had any interest in the Real Estate, so that Jeranian as executor had no standing and had suffered no injury. She further represented that she was ready, willing and able to sign an appropriate deed transferring her one-sixth interest to O'Reilly, but was prevented from doing so by the “interfering actions of Executor Jeranian.” Countercl. ¶ 59. The Court agreed with her motion and found the complaint to be deficient because Jeranian, acting as executor, lacked standing with respect to Real Estate that the Harry Jeranian Estate did not own and had never owned.

         At the end of the hearing on Dermenjian's motion to dismiss, the Court noted that the Real Estate should be sold to O'Reilly for the previously agreed-upon price if still possible. Jeranian, 17-340, ECF No. 14 at 20-21; see Countercl. ¶ 57. In reliance on the representation of Dermenjian's attorney that she was willing, the Court urged the parties to work to develop documents acceptable to both to get that done: “[b]oth sides in my opinion are taking unreasonable positions on something that has no meaning except to continue a dispute that doesn't need to exist.” Jeranian, 17-340, ECF No. 14 at 20-21; id. at 25 (“I highly encourage you to save the $790, 000 deal to go sit on a bench out there and figure out how to resolve this.”). In addition, finding that Jeranian might have a viable claim on behalf of the Estate if he were adequately to plead breach of fiduciary duty or fraud with particularity, the Court gave him leave to file an amended complaint. Id. at 24. Jeranian opted not to do so, instead moving for leave to voluntarily dismiss the case without prejudice, which the Court allowed. Jeranian, 17-340, ECF No. 15; Text Order of Nov. 27, 2017. Dermenjian objected and moved for dismissal with prejudice; the Court denied her motion. Jeranian, 17-340, ECF No. 16; Text Order of Jan. 19, 2018.

         D. Dermenjian, PC-2017-5076 - Superior Court Litigation

         While the motion to dismiss in Jeranian, 17-340, was pending in federal court, on October 24, 2017, Dermenjian sued Jeranian and his attorney, as co-trustees of a Harry Jeranian Trust in Providence County Superior Court. Dermenjian, PC-2017-5076 (Compl. filed Oct. 24, 2017). In this suit, Dermenjian accused her brother of breach of fiduciary duty and complained of his rude treatment; the gravamen of the case is focused on the use of money from the Harry Jeranian Trust to pay expenses that Dermenjian believes should have been borne by the Harry Jeranian Estate (including costs for an appraisal of the Real Estate). In February 2018, shortly after Jeranian, 17-340, was terminated in federal court, Dermenjian's motion for temporary restraining order in the Superior Court was denied, as she alleges, because Justice Gallo found that, “[i]t was her fault, ” referring to her sale to herself of her father's interest in the Real Estate. Dermenjian, PC-2017-5076 (mot. to lift stay filed July 1, 2019). And following a hearing in April 2018, Justice Keough refused to permit Dermenjian to voluntarily dismiss without prejudice, instead staying the matter pending the resolution of the probate of the Harry Jeranian Estate. Dermenjian, PC-2017-5076 (Order entered May 8, 2019); Countercl. ¶ 81. Dermenjian recently moved to lift the stay, a motion that Justice Long denied in an order entered on October 31, 2019. Dermenjian, PC-2017-5076 (Order entered Oct. 31, 2019). Dermenjian has filed a notice of appeal of Justice Long's order to the Rhode Island Supreme Court. Dermenjian, PC-2017-5076 (notice of appeal filed Oct. 22, 2019).

         E. Post-Jeranian, 17-340, Efforts to Sell in 2017 and 2018

         Despite the representations of Dermenjian's attorney to this Court on October 30, 2017, that she was ready to execute a deed to O'Reilly, Jeranian, 17-340, ECF No. 14 at 20-21, and despite her vigorous and repeated asseveration in the Corrected Counterclaim that she has been willing to do so since 2017, Countercl. ¶ 5, the Corrected Counterclaim contains no factual allegations that explain why the documents to facilitate the sale of the Real Estate were not executed at any time between the October 30, 2017, hearing and the filing of the partition complaint in Rhode Island Superior Court on October 17, 2018. Rather, the Corrected Counterclaim pleads that Dermenjian was willing to permit the sale to proceed (a) only if she was paid more than one-sixth of the pending offer for the Real Estate; (b) only if she was not required to bear any of the costs of sale (including any portion of Rodman's fee for marketing the Real Estate, any portion of the cost of a title report or any portion of the cost of the appraisal); and (c) as to some of her proposals, only if other disputes related to the Harry Jeranian Estate or Trust were resolved on specified terms. Id. ¶¶ 13-16 & Exs. 4, 4A, 5, 5A. Meanwhile, during the fall of 2018, Jeranian, negotiating without including Dermenjian, was able to confirm that O'Reilly remained willing to acquire the Real Estate for the same price and terms. Countercl. ¶¶ 92-95. An appraisal of the Real Estate procured by Jeranian establishes that the Real Estate's fair market value is just over $824, 000, not much more than the O'Reilly offer of $795, 000. Id. ¶¶ 92-95, 128-129 & Ex. 22. Dermenjian alleges that, at all times that O'Reilly was willing to purchase the Real Estate, she was a ready, willing and able seller, but that she “was presented with numerous obstacles by Executor Jeranian, in order for the sale to execute, in addition to preventing Dermenjian, as a rightful owner, from engaging in the process of marketing and sale of the Property.” Countercl. ¶ 102.

         F. The Partition Complaint and Answer

         After Jeranian and Frank North filed this partition action in Superior Court, Dermenjian removed it to this Court on December 3, 2018, based on the Court's diversity jurisdiction because the amount in controversy exceeds $75, 000 and she is a citizen of Massachusetts while Jeranian is a citizen of Rhode Island and North is a citizen of Florida. According to the partition complaint and confirmed by Dermenjian's answer, as of today, the Real Estate has three possessory owners who each hold fee simple undivided co-tenancies as follows: Jeranian has a one half interest; North has a one-third interest; and Dermenjian has a one-sixth interest. ECF No. 14-24. As established by the pleadings, all parties agree that no interest in the Real Estate is held by (a) the Harry Jeranian Estate, (b) Jeranian, in his capacity as executor of the Harry Jeranian Estate or (c) Dermenjian in her capacity as trustee of the HJIRET. Countercl. ¶¶ 5, 25, 50. The partition complaint recites that there is a “ready, willing and able cash buyer that has made a fair and reasonable offer, ” and asks the Court to order partition by sale. ECF No. 1-1 ¶ 12. Under R.I. Gen. Laws § 34-15-18, such a partition is conducted under the direction of the Court, with the proceeds of the sale allocated among the parties after deduction ...

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