Triangle Home Invest, LLC v. Kaheel Company, LLC

J-A22027-17
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
TRIANGLE HOME INVEST, LLC AND IN THE SUPERIOR COURT
HOWARD M. DUNETZ OF
PENNSYLVANIA
v.
KAHEEL COMPANY, LLC, HERBERT J.
TOY A/K/A HERBERT JOHN TOY A/K/A
HERBERT JOHN TOY, III, JABRIER
COMPANY, LLC AND TERREY
MANAGEMENT, CO., INC.
APPEAL OF: KAHEEL COMPANY, LLC
AND HERBERT J. TOY A/K/A HERBERT
JOHN TOY A/K/A HERBERT JOHN TOY,
III
No. 898 EDA 2017
Appeal from the Judgment Entered March 28, 2017
In the Court of Common Pleas of Lehigh County
Civil Division at No(s): 2012-C-1107
BEFORE: BOWES, J., LAZARUS, J., and PLATT, J.*
MEMORANDUM BY LAZARUS, J.: FILED NOVEMBER 13, 2017
Kaheel Company, LLC, et al. (“Kaheel Company”) appeals from the
judgment, entered in the Court of Common Pleas of Lehigh County, in favor
of Triangle Home Invest, LLC (“Triangle Home”) on Count Two-Unjust
Enrichment, Count Three-Intentional and Fraudulent Misrepresentation, and
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
J-A22027-17
Count Six-Conversion, in the amount of $289,000.00.1 After careful review,
we affirm on the basis of the well-reasoned opinion of the Honorable Michele
A. Varricchio. See Trial Court Opinion, 12/22/16, at 1-42.
In her Pa.R.A.P. 1925(b) opinion, Judge Varricchio set forth the relevant
factual and procedural background of this incredibly complicated and unusual
case, which we adopt for the purpose of this appeal.
Triangle Home raises the following issues on appeal:
1. [Triangle Home] failed to prove by clear and convincing
evidence that [Kaheel Company] made representations of
existing facts which were untrue and upon which [Triangle
Home] justifiably relied.
2. [Triangle Home] failed to prove by a fair preponderance of the
evidence that Kaheel was undercapitalized; that it failed to
adhere to corporate formalities; that it and Toy substantially
intermingled corporate and personal affairs; or that the
corporate form was used to perpetuate fraud.
Brief of Appellant, at 4.
Our appellate role in cases arising from non-jury trial verdicts is
to determine whether the findings of the trial court are supported
by competent evidence and whether the trial court committed
error in any application of the law. The findings of fact of the trial
judge must be given the same weight and effect on appeal as the
verdict of a jury. We consider the evidence in a light most
favorable to the verdict winner. We will reverse the trial court only
if its findings of fact are not supported by competent evidence in
the record or if its findings are premised on an error of law.
However, where the issue . . . concerns a question of law, our
scope of review is plenary.
____________________________________________
1The trial court found in favor of Kaheel Company on Count One-Breach of
Contract and Count Five-Negligence and dismissed Count Four-Fraud as
duplicative.
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J-A22027-17
The trial court’s conclusions of law on appeal originating from a
non-jury trial are not binding on an appellate court because it is
the appellate court’s duty to determine if the trial court correctly
applied the law to the facts of the case.
Wyatt Inc. v. Citizens Bank of Pennsylvania, 976 A.2d 557, 564 (Pa.
Super. 2009) (citing Wilson v. Transp. Ins. Co., 889 A.2d 563, 568 (Pa.
Super. 2005)) (citations and quotations omitted).
Instantly, the trial court rendered a verdict in favor of Triangle Home on
the counts of unjust enrichment, intentional and fraudulent misrepresentation,
and conversion. The elements of unjust enrichment are
benefits conferred on defendant by plaintiff, appreciation of such
benefits by defendant, and acceptance and retention of such
benefits under such circumstances that it would be inequitable for
defendant to retain the benefit without payment of value. The
most significant element of the doctrine is whether the enrichment
of the defendant is unjust; the doctrine does not apply simply
because the defendant may have benefited as a result of the
actions of the plaintiff.
Northeast Fence & Iron Works, Inc. v. Murphy Quigley Co., Inc., 933
A.2d 664, 670 (Pa. Super. 2007) (citation omitted). Here, the trial court found
Kaheel Company had (1) been enriched by $237,500.00 by retaining funds
tendered to it by Triangle Home and failing to make interest payments and
complying with the terms of acknowledgement agreed upon by the two
parties, and (2) appreciated the benefit of being able to pay for its operating
and business expenses with the investment from Triangle.2 The trial court
____________________________________________
2 Triangle Home sustained further losses in the amount of $52,500.00 from
the non-payment of quarterly interest payments. Thus, the trial court entered
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J-A22027-17
correctly determined it would be inequitable for Kaheel Company to accept
and retain benefits from Triangle Home’s investment without reciprocal
payment of value. Northeast Fence and Ironworks, Inc., supra.Next, the trial court found Kaheel Company liable for intentional
misrepresentation. In Bortz v. Noon, 729 A.2d 555 (Pa. 1999), our Supreme
Court held that the elements of intentional misrepresentation are:
(1) A representation;
(2) which is material to the transaction at hand;
(3) made falsely, with knowledge of its falsity or recklessness as
to whether it is true or false;
(4) with the intent of misleading another into relying on it;
(5) justifiable reliance on the misrepresentation; and,
(6) the resulting injury was proximately caused by the reliance.
Bortz, 729 A.2d at 560. Kaheel Company purported to have silent partners
who had contributed between $650,000.00 and $750,000.00, which the trial
court found was untrue. Accordingly, the trial court correctly determined this
constituted a material misrepresentation that induced Triangle Home to invest
$250,000.00 in Kaheel Company’s real estate venture.
Lastly,
[c]onversion is a tort by which the defendant deprives the plaintiff
of his right to a chattel or interferes with the plaintiff’s use or
possession of a chattel without the plaintiff’s consent and without
____________________________________________
a verdict in the amount of $289,000.00 in favor of Triangle and against Kaheel
Company and Herbert Toy.
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J-A22027-17
lawful justification. A plaintiff has a cause of action in conversion
if he or she had actual or constructive possession of a chattel at
the time of the alleged conversion. Money may be the subject of
conversion. However, the failure to pay a debt is not conversion.
Pittsburgh Construction Co. v. Griffith, 834 A.2d 572, 581-82 (Pa. Super.
2003) (quotations and citations omitted). The trial court correctly determined
that an agent of Kaheel Company took as a personal draw $16,457.65 from
an account in which Triangle had an ownership interest.3 The trial court found
this constituted a conversion of Triangle’s investment funds. Pittsburgh
Construction Co., supra. We agree.
After reviewing the parties’ briefs, the record, and the relevant case law,
we conclude that Judge Varricchio’s well-reasoned opinion thoroughly and
properly disposes of the questions Kaheel Company raises on appeal.
Accordingly, we affirm on the basis of Judge Varricchio’s opinion. We direct
the parties to attach a copy of the opinion in the event of further proceedings.
Judgment affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/13/2017
____________________________________________
3The total verdict owed to Triangle Home is $289,000.00, of which Terrey
Management Co, Inc. is jointly and severally liable for $16,457.65.
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Circulated 10/26/2017 10:42 AM
, . . FILED 12/22/2016 1:36:52 PM.Clerk of Judicial Records, Civil Division, Lehigh County, PA
, 2012-C-1107 /s/1 S
IN THE COURT OF C0l\1MON PLEAS OF LEHIGH COUNTY, PENNSYLVANIA
CIVIL DIVISION
TIU.ANGLE HOME INVEST, LLC11nd ) No. 2012-C-1107
HOWAlIDM, J)UNETZ, )
Plaintiffs )
)
vs. ) CIVIL
)
KAHEEL COMPANY, LLC, HERBERT J. )
TOY a/k/aHERBERT JOHN TOY a/kfa )
HEJIBER,T JOHN TOY, [II, THE JABRIER)
COJ\1P.ANY, LLC, a/k/a JABRIER )
COMPANY, LLC and TERREY )
PROPERTY MANAGEMENT, CO., ) ASSIGNED TO:
Defendants ) The Honorable Mich~le A. Varricchio
No.,.-Jurv Verdict
~o . :
A.}lD.NOW, this 2Z day of December 20] 6, upon consideration of the credible,
relevant, 'and.admissible evidence introduced during the non-jury trialheld August 13, 2015, and
October 22, 2015t attended by Plaintiffs, Howard M. Dunetz and Triangle Home Invest, LLC
and-their legal counsel, Stephen M. Hladick, Esquire and Pamela L. Cunningham, Es-quire and
Defendants,Herbert J. Toy a/k/a Herbert John Toy a/k/a Herbert John Toy, II~, Kaheel
Company, LLC, The Jabrier Company, LLC a/k/a Jabrier Comp-any, LLC and Terrey Property
Management Company and their legal counsel Michael C. Deschler, Esquire; and the joint
stipulations of fact submitted by the parties, and based upon the findings of fact and conclusions
of law set forth in the Decision entered this same date, it is hereby ORDERED and DECREED
that this Court eaters a verdict on the Complaint as follows:
(1) On Count L'Breach of Contract) we find in favor of Defendants, Kaheel Company,
LLC,,Herbert J. Toy a/k/aHerbert John Toy a/k/a Herbert John Toy, III, end Terrey
Property Management, Co. in the amount o.f $0.00 against Plaintiff, Triangle Home
Invest, LLC, and Howard M. Dunetz in accordance with the following opinion.
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2012-C-1107 . /s/1 S
(2) Of\ Count II, Unjust Enrichment, we find in.favor of Plaintiff, Triangle Home Invest,
IJ,C, inthe amount of $237.000.00 against Defendants, Kaneel Company, LLC, and
· Herbert J. Toy afk/a Herbert John Toy a/k/a Herbert John Toy, III, in accordance with
the following opinion .. We find in favor of Defendant, Terrey Property Management,
Co., in the amount of $0.00 against Plaintiff, Triangle Home Invest, LLC. We find in
favor of all Defendants in the amount-of $0.00 against Plaintiff, Howard M. Dunetz,
on Count II.
(3) , Count ill, Intentional and Fraudulent Misrepresentation,.we find in favor .of
Plaintiff,Triangle Home Invest, LLC, in the amount of $289,000.0.0 against
.. ..-
Defendants, Kaheel Company, LLC, and Herbert J. Toy a/kla Herbert John Toy afk/a
Herbert John Toy, ill, in accordance with the following opinion. We find in favor of
Defendant, Terry Property Management, Co., in the amount of $0.00 against Plaintiff,
Triangle Home Invest, LL-C. We find in favor of al! Defendants against Plaintiff,
Howard M, Dunetz, on Count ill.
(4) Count N·, Fraud is hereby DISM!SSED in accordance with the following opinion.
(5) On CountV,Negligence, we find in favor ofD~fendants, Kaheel Company.Ll.C,
Herbert J, Toy a/kla Herbert John Toy.a/k/a Herbert John Toy, In, and Terrey
Property Management Company, LLC, in the amount of ~0.00 against Plaintiff,
Triangle Home Invest, LLC, and Plaintiff, Howard M. Dunetz, in accordance with the
'{allowingopinion.
(6) O~ Count VI, Conversion, we find infavor of Plaintiff, Triangle Home Invest, LLC,
itrthe anwuntQf$1"6,457.65.againstDefendants, Herbert J. Toy a/kJa Herbert John
Toy a/k/a Herbert John Toy, III, and Terrey Property Management Company, in
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2012-C-1107 ls/IS
accordance with the following opinion. We find in favor of Defendant, Kaheel
Company, LLC, in the amount of $0.00 'against Plaintiff, Triangle.Home Invest, LLC.
We find in favor o~ all Defendants in the amount of $0.00 against Plaintiff, Howard
M. Dunetz,
(7) Plaintiff, Triangle Home Invest, LLC, is entitled to a total recovery of $289,000.00.
Accordingly, any amounts recovered by Plaintiff: Triangle Home Invest, LLC, on any
one Count shall be credited against any amount due under other Counts where
recovery was granted.
BY THE COURT:.
Michele A. Varrrcchio, J.
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2012-C-1107 ls/IS
IN TEI'e COURT OF COMMON PLEAS OF LEIDGH COUNTY, PE:NNS-YLVANIA
CIVIL DlVISION -
. TRIANGLE HOME INVEST, LLC and ) No. 2612-C-1107
now ARD M. DUNETZ, )
· Plaintiffs )
)
vs. ) CIVIL
)
KAHEEL COMPANY, LLCt HERBERT J. )
TOY a/kl~ f{ERBERT .JOHN TOY a/kla )
HERBERT JOHN TOY, IH, THE JABRIER)
COMP A:NY, LLC, a/k/a JABRIER )
COMPANY,LLC and TERREY )
PROPERTY MANAGEMENT, CO., ) ASSIGNED TO:
Defendants . ) The Honorable Michele.A. Varricchio
*******'*~*
Appearances:
Stephen M. Hladik, .Esq.
· William E. Miller, Esq.
Ronald E. Corkery, Esq.
Pamela Cunningham, Esq.
For Plaintiffs
Michael C. Deschler, Esq.
For Defendants
Non~Jury Decision Pursuant to Pa.R.C.P.1038
MICHELE A. VARRICCIDO, Judge
This case arises out of a $250,000.00 investment that Plaintiff Triangle Home Invest,
LLC made to Defendant, Kaheel Company, LLC, on April l , 2010, for the purpose of the
purchase of residential properties to "flip"·and sell, with a percentage of the profitsto be returned
!O Plaintiff Triangle Home Invest, LLC. Plaintiffs allege that the other Defendants are shell
companies through wl:rich Defendant, Herbert J. Toy, operated a real estate investment scheme
designed to preclude profits due Plaintiffs. Additionally, Plaintiffs claim that of the original
$2.SOtOOO.QO investment, Plaintiffs only recouped $12,500.00 and argue that Plaintiffs ate owed,
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. 2012-C-1107 ./s/1 S
at a minimumthe return of the remainder of the investment of$235,000:00. In accordance with
the verdict entered this same date, this Court enters the following decision.
PROCEDURAL HISTORY
On March 16, 2012, Plaintiffs, Howard M. Dunetz (Dunetz), sole member of Triangle
Home Invest, LLC, and Triangle Home Invest LLC (Triangle), initiated this action against
Defendants, Kaheel Company, LLC (Kaheel), Herbert J. Toy (Toy), also known as Herbert John
Toy, aJso known as Herbert John Toy III, The Jabrier Company LLC (Jabrier), also known. as·
Jabrier Company LLC, also known as Jabrier Company, LLC, and Terrey Property Management
Company, Inc. (Terrey) and an additional Defendant, Duggan Real Estate Investment, LLC,
seeking damages in excess of $235.,000.00_. BJ Order of Court dated September 24, 20 i'2, the
Honorable William E. Ford sustained Defendants' Preliminary Objections to the Complaint and
the Complaint was stricken with leave to amend with· substantial revisions within 20 days .of the
Order. Plaintiffs filed an Amended Complaint on October 23; 2012. On November 19, 2-012,
Plaintiffs filed a Second Amended Complaint. By Order of Court dated January 3, 2013, the
additionalDefendant, Duggan Real Estate Investments, LLC, was dismissed as a party by
stipulation from this matter.
On February 13, 2013, Plaintiffs filed a Third Amended Complaint, the instant Complaint
in this matter. In their Third Amended Complaint, Plaintiffs have included six counts: Count I,
Breach of Contract, Count II, Unjust Enrichment, Count Ill, Intentional and Fraudulent
Misrepresentation, Count IV, Fraud, Count V, Negligence, and Count VI, Conversion} whereby,
"the Plaintiffs demand judgmentagainst Defendants in a sum exceeding $235,000.00, plus
interest, fees, costs, attorneys' fees and sue~ other relief as the Court deems just and equitable."
See Pl.'s Third Amend. Comp!. After argument held March 18, 2013,.this Court overruled
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2012-C-11b7 /s/1 S
Defendants' Preliminary Objections to the Third Amended Complaint by Order of Court dated
March 19, 2013, and Defendants were Ordered to file an Answer within twenty days.
Defendants filed an Answer with New Matter on April 9, 2013, 'alleging that
Dunetz did not lend any money to any of the Defendants and was only involved
as a member/representative of the remaining Plaintiff, Triangle. Dunetz
individually is not entitled to !illY money or any payment from any of the
Defendants. Toy spoke to the Plaintiffs only in his representative· capacity as a
member of Kaheel and not as a representative/member of the two remaining
Defendants. Toy did not speak to 'either of the Plaintiffs in his individual
capacity; but only in his capacity as a member of Kaheel. Only Triangle lent
money to Kaheel and not to any of the remaining Defendants. This was a loan
uot an investment. The Defendants Toy, Jabrier and Terrey did not receive any
or
funds from either Plaintiff and did not make any representations promises to
either Plaintiff and have no liability to either Plaintiff. The oral Agreement for
financing was solely between Triangle and Kaheel and was as follows:
The $250,000.00 was a 20 year loan with interestcalculated at the rate of
four (4%) percent per annum, interest only payable quarterly with the
principle of $250,000.00 due at the end of the 20 year term. There was to
'be no security or mortgage to be placed on any properties and Kaheel
would be able to utilize the funds to finance real estate purchases,
renovations, sales, etc.
Kaheel fulfilled all of its obligations under the terms of the oral lending
Agreement and did not breach the same. Kaheel stopped making quarterly
interest payments to Triangle after Plaintiffs appropriated property rights of
Defendants, made demands for payment of principal and other inappropriate
· actions.
Defs.' Ans., 1105-11'2 (emphasis added). Plaintiffs filed a Reply to the New Matter on April 30,
2013. In their Reply to the New Matter, Plaintiffs alleged that although Defendants attempted to
categorize the $250,000.00 as a loan, Defendant, Herbert J. Toy ill, as a member of Kaheel
Company, LLC executed an Acknowledgement of Receipt of Investment Funds that plainly
stated that Triangle Home Invest., LLC was making an investment. Ans. to New Matter, 1107.
The acknowledgement read as follows:
This ACKNOWLEDGEMENT confirms and acknowledges the receipt by
Kaheel Company, LLC of the total sum of Two Hundred Fifty Thousand. Dollars
· ($2.S0,000.00) received from Triangle Home Invest, LLC. Kaheel Company, LLC
acknowledges that the Two Hundred Fifty Thousand Dollars ($250,000.00)
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2012-C-1107 /s/1 S
received from Triangle Home Invest, LLC is to be utilized by Kaheel Company,
LLC or its designee/assignee to purchase real property for investment purposes.
The terms and conditions of said investment arc to be outlined in another
agreement bejsic.] prepared in the near future. · Kaheel Company, LLC
agrees that it will provide a security interest to Triangle Homes Invest, LLC
in the appropriate amount invested In any propertyfies) which are purchased
by Kaheel Company, LLC utilizing the funds received as acknewledged
herein.
Pl.'s Reply to New Matter, P. 2 (emphasis placed by Plaintiffs). Based upon the
acknowledgement and there being no subsequent written agreement, Plaintiffs argued that they
are seeking the enforcement of the oral contract between Triangle and Kaheel. Id.
A case management Order dated May 31, 2013, set the non-jury trial in the niatter for
November 19, 2013. However, the case proceeded to a Mediator, Maxwell E. Davison, Esquire
in June of 2013. On October 9, 2013, Plaintiff filed a Motion for Summary Judgment in this
Matter. Defendants filed their Answer to the Motion for Summary Judgment on October 30, ·
2013. On November 6, 2013, the Defendants filed an Amended Response to Plaintiffs' Motion
for Summary Judgment After hearing argument on the Motion for Summary Judgment, the
Motion was denied by Order of Court dated December 12, 2013. Defendants bad filed n Motion
in Limine to exclude the acknowledgement of receipt of investment funds and Plaintiffs filed an
Answer to the Motion in Limine on December 17, 2013 ..
Nothing.further occurred in the case until March 3, 2015, when Plaintiffs filed a Motion
to Enforce a Settlement or in the alternative to re-open the case. On March 17, 2015, Defendants
filed a Response to the Motion. By Order of Court dated April 8, 2015, the Plaintiffs' -tvfotion
- was granted to the extent that the matter was marked open~. On August 12, 2015, Defendants
filed notice of a Chapter 7 bankruptcy filing for the Jabrier Company, LLC at Case No, 15-1.5732
in the United States Bankruptcy Court Eastern District of Pennsylvania. The case then
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2012-C-1107 /s/1 S
proceeded to a two-day bench trial before this Court on August 13, 2015 and October 22, 2015.
Parties were then given deadlines for filing joint stipulations of fact and proposed findings of fact
and conclusions of law.
FINDINGS OF FACT.
The Parties in this matter have stipulated to the following material facts and this Court
hereby adopts them as findings of fact:
1. Plai-ntiff, Triangle Home Invest, LLC ("Triangle"), is a Pennsylvania
limited liability company with an address of I 000 Gypsy Hill Road,
Lower Gwyneed, PA 19002.
2, Plaintiff Howard M. Dunetz ("Dunetz"), is an adultindividual with an
address of 1000 Gypsy Hill Road, Lower Gwyneed, PA 19002.
3. Dunetz is the sole member of Triangle.
4. Defendant, Herbert J. Toy a/k/a Herbert John Toy a/k/a Herbert John
Toy, III ("Toy"), is an adult individual with an address of 4180
Wellington Drive, Bethlehem, Pennsylvania 18018.
5. Defendant, Kaheel Co., LLC ("KaheeP'), is a Pennsylvania limited
liability company with a registered address located at 739 North New
Street, Apartment 1, Bethlehem, Pennsylvania l 8018.
6. Kaheel was created on July 19, 2007, and its Pennsylvania Department
of State Entity Number is 3743841.
7. Toy is the organizer and sole member ofKaheel.
:g, Defendant, The Jabrier Company, LLC ('°Jabrier''), is a Pennsylvania
limited liability company with a registered address located at 739
North New Street, Apt l , Bethlehem, PA t80l8.
9. Jabrier was created on December 2, 2004, with a Pennsylvania
Department of State Entity Number 3266496.
l 0, Toy is the organizer, manager, and sole member of Jabrier.
11. Defendant, Terrey Property Management Co., Inc., ("Terrey•), is a
Pennsylvania dose corporation with a registered address located at
739 N. New Street.Apt.l, Bethlehem, PA 18018-3959.
12. Terrey was created on November 14, 2005 and Terrey's Pennsylvania
Department of State Entity Number is 5601 I 8.
13. Toy is the president and sole shareholder of Terrey.
14. Triangle tendered the sum of $250,000.00, on April 1, 2010, via check
made payable to Kaheel (the "Check").
15. The Check was signed by Dunetz on behalf of Triangle.
16. The Check was deposited by Toy on April 1, 2010 into Kaheel's
checking account.
17. Prior to depositing the Check into Kaheel's checking account, the
balance of the account was zero dollars.
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18. On April 7, 2010, Toy took a $10,000.00 draw out of Kaheel's
checking account to himself personally.
19. On April 7, 2010, Toy, on behalf of Kaheel moved $225,000.00 of the
$250,000.00 into Kaheel's money market account,
20. Exhibit P-38 is the check ledger for Kaheel's checking account that
corresponds. with the bank statements listed as Exhibits P-35 through
P-37.
21. Exhibit P-42 is the check ledger for Kaheel's money market account
that corresponds with the bank statements listed as p:..39 through P-4 L
22. On April 2, 2010, Toy as member of Kaheel, sent by facsimile to
Dunetz an Acknowledgment of Receipt of Investment Funds (the
"Acknowledgement"). ·
23. Dunetz received the Acknowledgement on April 2, 2010.
24. Any notation of "HJT3" in both the ledger for Kahcel's checking
account and Kaheel's money market account is a draw to Toy
. personally.
25. Any notation of "M.M." in Kaheel's checking account is a transfer of
money from Kaheel's checking account into Kaheel 's money market
account.
26. Any notation of "S.C." in both the ledger for Kaheel's checking
account and Kaheel's money market account is a service charge
charged by PNC Bank.
27. Out of the $250,000.00 investment, a total of $12,500.00 has been paid
as follows to [Plaintiff Triangle]:
-$2,500.00 on June 30, 2010, as evidenced· by check 103 in
Kaheel's checking account ledger and bank statement.
~$2,500.00 on September 30, 2010, as evidenced by check 127 in
Kaheel's checking account ledger and bank statement.
-$2,500.00 on December 30, 2010, as evidence-cl by check 153 in
Kaheel's checking account ledger and bank statement.
-$1t500.00 on April 11~ 201l, as evidenced by check 201 in
Kaheel' s checking account ledger and bank statement.
-$2,500.00 on December 14, 2011, as evidenced by check 281 in
Kaheel's checking account ledger and bank statement.
28. Jabrier purchased the following properties utilizing funds from
Kaheei's account:
434 North Fulton Street, Allentown, Pennsylvania J 8104.
~926 West Chew Street, Allentown, Pennsylvania 18102.
-5230 Heston Street, Philadelphia, Pennsylvania 19131.
-3128 Hartsville Street, Philadelphia, Pennsylvania 19134.
29. No properties were. ever titled in the name of Kaheel.
Joint Stipulations of Pact, 11-29. It is important to note from the outset that the Court finds 'that
Jabrier's bankruptcy proceeding prevents the Plaintiffs from proceeding against Jabrier at-this
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· 2012-C-1107 /s/1 S
time. Jabrier's Chapter 7 bankruptcy was addressed at the outsetof the trial and Plaintiffs agreed
that, "we are not seeking any type of judgment or relief against Jabrier at this time." See Notes
of Testimony (N.T.), 8/13/2015, at 7: 19-&:3. Based upon the testimony and evidence presented
at trial, the Court makes the following findings of fact:
1. On August 15~ 2015 and October 22, 20 I 5, this Court conducted a non-jury trial.
2. At trial, Plaintiff, Dunetz, testified. on his behalf and on behalf of Triangle. Defendant,
Toy, testified on his behalf and on behalf of Defendants, Kaheel and Terrey.
3. Plaintiffs introduced Exhibits P 1-P 13, P l6--P26, P3 l-P32, P35-P49, and P59-61 into
evidence at trial.
4. Defendants introduced Exhibits P27-28, P30, and 09-D 10·1nto evidence at trial.
THE MEETING OF THE PARTIES
5. After twenty-five years of practicing general dentistry.Dunetz rctired in October of 2008.
See N.T., 8/13/2015, at 10:15-25.
6. During his retirement, Dunetz became interested in real estate particularly buying and
selling real estate. See N.T., 8/13/2015, at 12:2-18.
7. To aid. this interest, Dunctz 'created Triangle. Home Invest, LLC as a limited liability
company in2010. See N.T., 8/13/2015, at 12:11-12.
8. In early 2010, Dunetz, through Triangle p~chased his first rental. property in West
Philadelphia. See N.T., 8/13/2015, at 12:15-16.
9. Triangle was funded solely by Dunetz's funds. See N.T., 8/13/2015, at l3;5-l l.
10. Prior to forming Triangle, Dunetz began attending meetings of Diversified Investors
Group ("DIG"), which is a real estate investment group, in Plymouth Meeting and Fort
Washington. See N.T., 8/13/2015, at l 3: 12-22.
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11. DIG is an educational and support group for people interested in real estate investments.
See N.T., 8/13/2015, at 13:12-22.
12. DIG provided subgroup meetings. Dunetz began attending subgroup meetings in 2010,
.. · ....
including one on "flipping houses" by buying houses, fixing them up and reselling them
or holding houses as rentals. See N.T., 8!13/2015, at 14:1-23.
13.. Dunetz and Toy first met at one of the DIG subgroup meetings held at Michael's Diner
on Route 309 in Montgomeryville early on in 2010. See N.T., 8/13/2015, at 15:1-8; see
also N.T., 10/22/2015, at 225:3-6.
14. Toy and Dunetz met a few subsequent times in Quakertown at John's Diner or the
Quakertown Diner to discuss ways to "flip houses" to generate income including Dunetz
'investing money with Toy to purchase property, fix it up, put it back on the market, pay a
realtor and then sell it. See N.T., 8/13/15; at 15-19.
15. Toy testified that he and Dunetz met at Michael's diner in February of 2010, on March 2,
ZOl 0, at the Quakertown Diner, on March 12> 2010, at John's Diner in Quakertown, on·
March 23, 2010, at Dave & Buster's, and at Toy's Office on March 31, 2010. See N.T.,
10/22/2015, at225:13-18.
16. Durretz' s understanding was that he and Toy would initially invest an equal amount of
money, $250,000.0D, the money would then be assigned to the purchase, fixing up and
selling of «a particular house or apartment building or a package of houses." See N.T.,
8/13115, at 16:9-18:ll.
17. Dunetz believed that he would be paid 4% interest annually on his investment and would
receive 50% of the profits on the deals. See N.T., 8/13/15, at 17:6-15. ·
11
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18·. At his deposition, Dunetz testified that, «the meeting consisted of Mr. Toy presenting
himself as an experienced real estate investor that had taken money from numerous other
investors over ~ period of 20 years, and produced returns for them on their investments of
50 to 100 percent yearly and to infinity, when using other people's money." See Pis. Ex.
54, P. L6.
19. Further, Dunetz testified at his deposition that Toy represented to him that there "was
always four to five other investors with a total contribution of 650 to 750 thousand
dollars." Id., P.17.
20. Toy and Dunetz were to conduct a- review of their association at the end of each of the
first three years to consider whether they wanted to continue business endeavors together.
See N.T., 8/13/15, at 17: 14-22.
21. During his business discussion meetings with Dunetzat various Quakertown diners, Toy
discussed his companies, Kaheel Company and Jabrier Company and Toy's vast
experience in real estate. See N.T., 8/13/15, at 19:10-22:7.
22. Toy testified that ~e.discussed with Dunetz his experience, "flipping houses, ... buying
holds ... Tax sales, bankruptcy sales, Iandlording, '' See N. T. > l 0/22/201 S, at 225: 10-
226:5.
23. Dunetz believed that Kaheel was the company where the funds were to be deposited.
SeeN.T., 8/13/15, at20:20-24.
24. Toy admitted that at the time he had the investment discussions with Dunetz, Kaheel
owned no real estate and that he did not offer that information to Dunetz, See N.T.,
10/22/2015, at 245: 17-246:7.
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· 25. Toy graduated from Babson College in 1985 with a degree in finance and investments.
Se+ N.T.,"10/22/lS, at 221:22-23.
·26. Toy w~ involved in healthcare brokerage working for his Father from 1976 through
1999-2000. SeeN.T., 10/22/2016, at 222:4-6.
27. Toy and his Father were "brokers for wholesalers in the acute healthcare area, where
we'd represent a paper company, a pharmaceutical company, and a janitorial supplies
company, and we would wholesale those products to hospitals in Eastern Pennsylvania."
See N.T., l 0/22/2016, at 222: 8-12.
28, Toy first became involved in the business of real estate: buying, selling, and investing in
1986. See N.T., 10/22/2016, at 222:13-19.
29.. He is a proclaimed self-taught real estate investor although he received his real estate
license in 1988. Sce.N.T., 10/22/2016i at222:-20-24.
THE INVES1MENT
30. When Dunetz tendered the $ZSO,OOO.OO check to Kaheel, he believed that he would
receive a receipt from Toy and an agreement explaining bow his funds would be utilized,
how they Were going to be invested and all the terms oftbe arrangement the two had
previously discussed. See N.T., 8/13/l5, at 24:18-22.
3 I. During cross-examination, in response to the question about whether on April 1; 2010,
there was a deal between. Toy and Dunetz, Dunetz equivocated stating, ''[w)e had a
transferring of money. Until r had that agreement, I really didn't know what the deal was.
So did we have a deal without an agreement? rm not sure."· See N.T., 8/13/15, at
,44:14:17.
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32. Toy asserted that the $250,000.00 investment was a 20 year loan with 4% annual interest
only. See N.T., 8/13/15, at Z2:16-20; 228:7-9.
33. Toy further asserted that apart from the 4% interest, as a return on Dunetz's investment,
the two "would buy a property together, whether it was in Philly or the- Lehigh Valley,
.and we would split the profits on any deals that made money." Sec N.T~, 10/22/2015, at
229: 2-9.
34. Dunetz, credibly testified, that if those had been the terms he never would have invested
the $250,000.00. See N.T., 8/13115, al 22:16-25.
15. Dunetz' s expectation was that he would receive returns on his investment of 10% to
15%. See N.T., 8/13/15, at 3-5.
36. At John's Diner in Quakertown, on April 1, 2010, Dunetz handed Toy check #125-1,
dated April 1, 2010, written from Triangle Home Invest, LLC to Kahcel Co, LLC for
$250,000.00 and signed by Howard M. Dunetz, See N.T., 8/13/2015, at 23:16-24:22 and
Exhibit P-1.
37. On the back the check was endorsed 'for deposit only Kaheel Co., LLC" and appears to
have a processing date of April 1, 2010.
38. On April 2, 2010, Toy faxed Dunetz an Acknowledgement of Receipt of Investment
Funds, dated April l, 2010, from "The Jack Toy Cos" at 11:38. See N.T., 8i13/15> at
24:18-19, Ex.P.3.
39. The Acknowledgment of Receipt of Investment Funds states:
This ACKNOWLEDGEMENT confirms and acknowledges thereceipt by Kaheel
Company) LLC of the total sum of Two Hundred Fifty Thousand Dollars
($2501000.00) received from Triangle Home Invest, LLC. Kaheel Company, LLC
acknowledges that the Two Hundred Fifty Thousand Dollars ($250,000.00)
received from Triangle Home Invest, LLC is to be utilized by Kaheel Company,
LLC or- its designee/assignce to purchase real property for investment purposes.
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The terms and conditions of said investment are to be outlined in another
agreement be[sic.] prepared in the near future. Kaheel Company, LLC agrees that
it will .provide a security interest to Triangle Homes Invest, LLC in the
appropriate amount invested in any property(ies) which are purchased by Kaheel
Company, LLC utilizing the funds. received as acknowledged herein.
See Exhibit P-2; N.T., 8/13/2015, at 24: 18-25:10.
40. The Acknowledgment was signed by Herbert J. Toy, III, Member on behalf of
Kaheel Co., LLC. See Id
41. Dunetz testified credibly that he had no discussions with Toy about Toy's use of
personal draws from the $250,000.00 or Toy utilizing the $250,000.00 for vehicle
expenses, gas, cars, or other personal expenses. See· N .T., 8/13/2015, at 25·: 11-"24.
42. Dunetz believed that the $250,000.00 was to be used solely as described in the
Acknowledgement of Receipt of funds to purchase real properties. See N.T.,
8/13/2015,- at 26:13~16.
43. At his deposition, Dunetz testified that he had not placed any restrictions on Mr.
Toy's use of the money except to "make me money." See Pis. Ex. 54, P .23-24.
44. At his deposition, Dunetz testified that he expected Mr. Toy's compensation to be
the shared profits made from the real estate transactions. Id
. 45. Although the Acknowledgment stated that the terms and conditions of the
investment were to be memorialized in another agreement, Dunetz never received
such an agreement. See N.T., 8/13/2015, at26:17-2L
46 .. Although the Acknowledgement stated that Kaheel Company, LLC agreed to,
"provide a security interest to Triangle Homes· Invest, LLC in the appropriate
amount invested in any property(ies) which are purchased by Kaheel Company,
LLC utilizing the funds received as acknowledged herein," Triangle never
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received any kind of mortgage from Kaheel even though Kaheel purchased
several properties. S~ N.T., 8/13/2015, at 26: 22-27~4.
47. Dunetz stated that lie did not receive. a Note mentioning the investment being a20
year loan until January 12, 2012. See N.T., 8/13/2015, at 27:15-28:12, Pls.' Ex.
P4-P5.
48. At trial, Toy testified that it was his understanding "that the money that was
provided by the Plaintiffs, the $250,000.00, was to be used solely to purchase!
renovate and sell properties." See N.T., 10/22/2015, at 91: 15-19.
Tiffi BEGINNING OF THE DISPUTE
.
49. At his deposition, Dunetz testified that be had demanded a promissory note after
December of 2011, when a purchase of an apartment building fell through. Toy
failed to come· up with funds, and Dunetz began investigating Toy's background.
See Ex. P.54, Page 62,
50. Dunetz discovered that Toy had"$ l,600,000.00 phis in judgments against him, be.
was not making any payments, I did not have an operating agreement, I was not
secured by any properties, and that basically he was a thief." See Ex.P .54, page
77.
51. Toy testified that Dunetz began to voice objections to the way the business was
handled at the end of June 20 I l , when Dunetz called Toy stating that he had lost
$175,000.00 in a transactional funding scam and that he needed $135,000.00
returned from his original $250,000.00 investment. See N.T., 10/22/2015,
.
239:l7-240:7.
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52. Plaintiffs' Exhibit P-4, purports to be a Judgment Note, dated April 1, 2010, and
stgned by Herbert J. Toy, ITI, Member stating that, "On March 31, 2030, Kaheel
Co., LLC of 739 N. New St. IH, Bethlehem, PA 18018 promises to pay to the
order of Trfangle Horne Invest LLC of 1000 Gypsy Hill Road, Lower Gwyneed,
PA 19.002 the sum of Two Hundred Fifty Thousand Dollars ($250,000.00), plus
interest and cost, without offset, for value received, together with interest at a rate
of four percent (4%) per annum, until paid."
53. Duntez credibly testified that he was surprised to receive the note, and was struck
by the 20}0 date and thought that it was an error, and that the date was suppose:d
to be Match 30, 2013, as he had understood the arrangement to be a tbree-year
term. SeeN.T.> 8/13/2015, at 27:13-28:19.
54. Hand·written on the Fax Cover Sheet in Plaintiffs' Exhibit P$ is a note, that states,
"Here's your note-[illegible two wor(is]-Thx-JT."
55. Dunetz testified that his handwritten notations appear below Toy's and state,
"Total Funds working with 750K. 50%, 50%, 6 other investors?, 1/213 year
review/copy of check, received. Promised 100% returns." Dunetz further testified
that he called Toy after receiving the fax to discuss the items .he noted on the fax
coversheet. See Pls. Ex. 5~ N.T., 8/13/2015, at 29:2-31:3·.
56. Dunetz credibly testified that Toy, had originally infonned Dunetz that he had a
number of other investors in Kaheel that functioned as silent partners in his
business, The investors gave Toy cash, and in return received 4% returns on their
investment and 50% of the profits from their investment. See-N.T., 8/13/2015. at
31:4-8.
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57. Dunetz further credibly testified that Toy bad told him that he regularly produced
returns of 50 to 100% annually on the money invested with him." See N.T.,
8/13/2015, at 31: l 0-13.
5&." Toy denied making any representations about returns of 50 to. ~00% to infinity on
Dunetz's money to Dunetz as the promise would have been "unrealistic." See
N.T., 10/22/2015, at228:i5-229':1.
59. Plaintiffs' Exhibit P-6 is a copy of the judgment note received by Dunetz with
additional handwritten notations made by Dunetz.
60. Dunetz circled the 2030 date believing it to be incorrect, and he made a notation
to add "and or assigns" to Kaheel Co., LLC. SeeEx. P6.
61. Dunetz noted dates for payments quarterly, June 30, Sept 29, Dec. 31, March 3 l,
and noted-disbui:sements how calculated, when? Id
62. Further han.dwritte-n notes state: "personal guarantee. Draw down original
investment provision .... Renews annually upon mutual agrecment. ... Dissolution
return of funds." Id. ·,.:,..,. ..
63. Dunetz explained that when he called Toy to discuss these items and to seek a
"real" note with what we discussed in the very near future, Toy "had a problem
witb the personal guarantee. He said his attorney's not going to like that He told
rue his attorney's not going to like that He told me any money that I borrowed
from anybody meaning personal individuals, I gave a personal guarantee too."
See N.T., 8/13/15, at 29:25-J0:3.
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64. As for quarterly payments, Duntez wanted in detail in the agreement the actual
dates when the $2,500.00 payments would be made. See N.T., 8/13/2015, at
32:15-19.
65. Further, Dunetz wanted to know whether the profits would be dispersed at the
time of the sale of the property or at the end of the year when you receive the tax
filing. SeeN.T., 8/13/2015, at33:7-17.
66. Dunetz expected. a personal guarantee that Toy would be responsible for seeing
that Dunetz received his money back and whatever profits were due to him. See
N.T .• 8/1312015, at 35:12-13.
67. As for the drawdown of original investment provision, Dunetz was seeking a
refund of $135t000.00 of his initial investment as his finances were tight at the·
time due to losing money in a 2011 transactional funding venture; See N.T.,
8/13/2015, at 35:14-17.
68. Dunetz did not receive the $135,000.00, and shortly after receiving the judgment
note on January 12, 2012, he went to the Northampton Courthouse in Easton to
pull all the records on Herbert Toy and all his various entities. See N.T., 37:10-
17.
·69. After receiving the January 10, 2012 fax from Toy; Dunetz received no further
quarterly interest payments. See N.T., 8/13/2015, at 34: 14-24.
70. Dunctz stated that sometime in late January or early February of 2012, Toy
stopped communicating with Dunetz. See N.T., ·8/B/2015, at 39: 18-20.
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THE 'EFFERSON HOU.SE PROPERTYDEAL
71. Prior to the breakdown in communication between the parties, Dunetz had acted
on behalf of Kaheel and Jabrier and had in fact signed many real estate purchase
,.
agreements for them, believing that he was a member of the LLC. See N.T., See
also Ex, P54, Page 68.
72. A friend of Dunetz, Marco Derro, had asked Dunetz if he and Toy would be
interested in being partners with Mr -, Derro in the purchase of the Jefferson House
Property, located at 449-455 North 50th Street in Philadelphia,.which was a 24-
unit apartmentbuilding. See N.T., 8/13/15, at 56:19.
73. Toy alleged that Dunetz breached their agreement b-y participating in the
assignment of the Agreement for the Sale of Commercial Real Estate for the
Jefferson House Property to another buyer for $45,000.00 in cash and retaining,
$28,000.00 of that cash for himself under the belief that he was a member of
Jabrier and had earned the assignment fee, and giving the rest of the cash to Mr,
Derro. See N.T., &/13/2015, at 59: 17-71: l 7; Ex. D9.
74. In a rather bizarre description of a business transaction, Dunetz testified that at
the behest of Tor and Mr. Derro, he went to a restaurant in Media, Pennsylvania:
A. I was to show up there and someone was to give me something, a bag, or -
it was a bag. It was a plastic, red bag.
Q. Who was supposed to give you something?
A. I don't know.
Q. So you're going to a restaurant in Media to pick up something from
someone that you don't know?
A. Correct.
Q. and had never seen before?
A. The person gave me. the bag, I don't think I bad ever seen .them before, but
I'm going to surmise th.at there was someone present that knew what I looked
like. [ ... ]
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A, I mean, this was following a closing, an exchange of 'ownership of this
property, just to put it in context. [ .. , ]
A. I stepped into the restaurant. Somebody walked up to me, pushed a bag in
my chest, and they said, leave. And I turned around and walked out.
Q. Okay. So the person didn't identify-was it a man? .
A. All they said was, leave. It was a man. I can't remember what they looked
like. I didn't know the person.
Q. Without asking you to identify yourself, the person hands you a bag
containing $45,000.00 of cash? That's what you're telling us?
A. Yes, yes.
Q. And you left?
A. Yes.
Q. Never asking-I mean, you could see that it was a wad of cash?
A. Oh, I was going there 'to pick up this bag, or whatever container it was
going to be in, of cash. I mean, I knew exactly why I was going there. Either
Jack or Marco asked me to go there. I believe it was Jack, but I know I spoke
to him a few minutes. Afterwards, but I'm not sure who told mo where to be
when.] ... ]
Q. You testified, I think, that Mr. Toy was expecting to receive some portion
of-the cash you picked up correct?
A. Correct.
Q. Did you give any of that cash to him?
A.No.
Q. To whom did you give the cash?
A. I gave -well-
THE COURT: If anybody.
TI-ill WITNESS: No. It was distributed, Marco Derro got a bigger chunk of it
since he was tbe one who found the property and got it to the point where it
was assigned to somebody else. And the rest of the money, I still have it in the
red bag,
BY MR.DESCHLER:
Q. How much do you have?
A. I think it may be $28,000.00, I think.
Q. Did you say you still have it in the red bag?
A. Ido:
Q. $28,000.00 in cash?
A. Yes.
[... ]
THE COURT: The focus of the question was why you felt-why do you feel
you were entitled to the-»?
A. I was operating under the assumption that I was a member of this Jabrier
LLC.
See N.T·., 8/13/15, at 61 :15-69: 16
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75. Dunetz testified that Toy W;EFEl\iDANT BUSINESS ENTITIES:
83". Toy uses 739 North New Street, Unit I, Bethlehem, PA 1.8020, as a business address and
offices for Kaheel, Jabrier, Terrey, and The Jack Toy Cos. See N.T., 10/22/2015, at
83:22-23; 87:24-88:4.
84. Toy owns the. property of 739 North New Street with his father Herbert J. Toy, Jr. See
N.T., 10/22/2015, at 83:24-84:12.
'f<.aheei:
85. Toy alleges that for the entire time that Kaheel has existed that he has remained the sole
member of the company. See N.T., 10/Z2/2015, at $5:1-85:9.
86. Plaintiff's Exhibit 4 3 contains the operating agreement of Kaheel, See N. T., I 012212015,
at84:5-9.
87. The Kaheel operating agreement paragraph 5 provides that, "Compensation of Member:
The member may be reimbursed for all expenses incurred in managing the Company and
may, at the election of the Member, be entitled to compensation for the management
services rendered, in the amount to be-determined from time to time by the Member .."
See Pls.' Ex. 34.
· 88-. In paragraph 6, the· Kaheei operating agreement provides, «Distributions: Distribution
shall be made to the Member {in cash or in kind) at the times and in the aggregate
amounts determined by the Member and as permitted by the applicable law." Id.
89. Paragraph 9· of the Kaheel operating agreement governs the admission of additional
members stating, "Additional members of the Company may be admitted to the Company
.....
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at the direction of the Member only if a new operating agreement or an amendment and
restatement of this Agreement is executed." Id
90. Furthermore, paragraph 10 of the Kaheel operating agreement limits the liability of the
Member stating, "The Member shall not have any liability for the debts, obligations or
liabilities of theCompany or for the acts or omissions of any other member, officer,
agent, or employee of the Company except to the extent provided in the Act The failure
of the Member to observe any formalities Qr requirements relating to the exercise of the
powers of the Member or the management of the business and affairs of the- Company
under the Agreement or the Act shall not be grounds for imposing liability on the
Member for liabilities of the company." Id
91. Additionally, the Kaheel operating agreement provides for the company to indemnify the
Member under the agreement for "all costs, losses, liabilities and damages paid or
accrued by the Member (as the Member or as an officer, agent, or.employee) or any such
officer, agent, or employee in connection with the business of the Company, except to the
'extent prohibited by-the laws of the Commonwealth of Pennsylvania." Id
92. Also of note, Paragraph 13' of the 'Kaheel operating agreement regards conflicts of interest
between Kaheel and the Member it states, "[njothing in this Agreement shall be
construed to limit the right of the Member to enter into any transaction ·that might be
considered to be competitive with, or a business opportunity that may be beneficial to, the
Company. The Member does not violate a duty or obligation.to the Company merely
· because the conduct of the Member furthers the interests of the Member. The Member
may lend money to and transact other business with the Company. The rights.and
obligations. of the Member upon lending money to or transacting business with the
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Company are the same as those of a person who is not the member, subject to other
applicable law. No Transaction with the Company shall be void or voidable solely
because the Member has a direct or indirect interest in the transaction." Id,
93. Furthermore, the Kaheel operating agreement purports to protect the operating agreement
frombeing used by a creditor, such as Dunetz, with paragraph 17 that states, ''Rights of
Creditors and Third Parties. This Agreement is entered. into by the Member solely to ·
govern the operation of the Company. This Agreement is expressly not intended for the
benefit of any creditor of the Company .... Except and only to the extent provided by
applicable statute, no creditor or thirdparty shall have any rights under this Agreement or
any agreementbetween the Company and the Member, with respect to the subject matter
94. Plaintiffs' Exhibit 44 was a copy of the record from the Pennsylvania Department of
State dated July 191 2007 documenting the creation of'Kaheel. See N.T., 10/22/2015., at
85:10-19 and Pls.' Ex.-44.
95. Toy testified that "Kaheel paid all the bills" regardless ofwhet.p.erthc·propertie"swe-re
owned by Jabrier. See N.T.t 10/22/2015, at 121:5-6; 127: 19-128:6.
Jabrier:
96. Plaintiffs' Exhibit 45 was the operating agreement for Jabrier which lists in. Annex A,
Herbert J, Toy, III as the sole Member owning 1000 units or a 100% share in the
company dated 12/1/2004. SeeN.T., 10/22/2015,at85:20-86:12.; Pls. Ex.45.
97. Jabrier's operating agreement states, "this Agreement, as it maybe amended from time to
time, shall be bindingon any person who at the time is a Member, regardless of whether
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or not the person has executed this Agreement or any amendment hereto." See Pls, Ex.
·. 45.
9.8. Under Section 3.01, Jabrier defined initial and subsequent members as follows: "[tjhe
Members of the Company are the Persons listed in Annex A. A person who is not already
a member and who acquires a previously outstanding Unit or Units in accordance with
this Agreement shall automatically be admitted as a Member; other Persons may be
admitted from time to time upon the issuance to them of a Unit or Units on such terms as
are fixed by the Board of Managers. It shall not be necessary for Persons who are
subsequently admitted as Members or who acquire any or all of an existing Member's
Units to· execute this Agreement either by counterpart or amendment. When any Person is
admitted as a Member or ceases to be a Member, the Board of Manager's shall prepare a
revised version of Annex A and distribute it to all the Members." ld.
99. Section).04 of Jabrier's Operating Agreement governs the transferabilityand assignment
of units, permitting the transfer of Units and Membership Interests in whole or in part
without obtaining the approval of any of the Members. See Id.
l 00. Toy testified that in accordance with Section 4.01 Capital Contributions of Jabrier's ·
Operating Agreement; he initially contributed $1000.00 for 1000 units paying the price of
$1.00 per share. See N.T., 10/22/2016~ at 86:5.-87:2; Pls. Ex. 45.
101. Under the Jabrier Operating Agreement, there was only-to be-one manager of the
company elected annually by the Members. See Pls. Ex. 45, Article 5.
l 02. Under §5.07 of the Jabrier Operating Agreement, managers Were to be compensated, "if
any for their services as Managers as may be designated from time to time by the Board
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of Managers. In addition, Managers shall be entitled to be reimbursed for out-of-pocket
expenses incurred in the course of their service as Managers." See Pls, Ex. 45.
103. The Jabrier Operating Agreement also contains a Conflict of Interest Policy, at §5.08
that states, "Other Business Opoortunities. Subject to the other express provisions of this
Agreement, each Manager of the Company at any time and from time to time may engage
in and possess interests in other business ventures of any type and every type and
· description, independently or with others, except ones in competition with the
Company, with no obligation to offer to the Company or any Member or Manager the
right to participate therein." Id. (Emphasis Added).
104. The Jabrier Operating Agreement provides for limited liability for the Manager, "unless
the person's conduct constitutes self-dealing, willful misconduct, or recklessness." Id. at
105. Section 10. 05 of the Jabrier Operating Agreement covers amendments to said
agreement, the provision states that, "[tjhis agreement or the Certificate may be amended
from time to time only by vote of both (i) the Managers serving at the lime at any regular
or special meeting of the Board of Managers, and (ii) the Members at an annual or special
meeting of the Members. All amendments must be in writing and shall truce effect when
given to the Members, pursuant. to section 10,02. An Amendment
- to Annex A shall not be
considered an amendment requiring a vote. 1' Id
I 06. Plaintiff's Exhibit 46 is a Certificate of Organization of a Domestic Limited Liability
Company from the Pennsylvania Department of State reflecting that Jabrierwas
organized on December l > 2004.
27
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107. Toy testified that at no time has he transferred any units of membership interest in
Jabrier to-any otherparty. See N.T., 10/22/2015, at 86:5-12.
Terrey:
108. Toy formed Terrey Property Management as a corporation. See N.T., 10/22/2015, at 87:
16-20.
109. Toy is the sole shareholder of Terrey. See N.T., 10/22/2'015, at 87:21-23 .
.110. Toy testified that he has never transferred any ownership interest in Terrey to any other
person. See N.T., I0/22/2015, at 88:5-8.
111. Terrey's certificate of organization was dated November 14, 2005.
TlfE MONEY/PROPERnr TRAIL
112. Toy alleges that his use of Dunetz's $250,000.00 investment was legitimate. His.
Answer to Plaintiffs Complaint, stated, «Toy, solely as a member of Kaheel, secured
financing on a long-term basis from Triangle as hereinafter detailed in Defendants' New
Matter. Kaheel utilized the financing to subsequently lend money to Jabrier lo purchase,
renovate and sell properties." See N.T., 10/22/2015, at 90:10-24; Defs.' Aus. to Pls. 3rd
Amend. Compl., ,i-15.
113. Toy claimed that the reason he formed several separate business entities was based on
advice from legal. counsel "that the best w~y to do that [keep everything separated] was to
have one entity own the properties, have another entity finance the properties so if there's·
a problem with one of the entities, the other one could be cleared." See N.T., 10/22/2015,
at 223:7-18.
1 l4. Toy testified that Kaheel was to be the financing entity and Jabrier was to be the
property owning entity. See N.T., 10/22/2015, at 223: 19-23.
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115. Toy testified that Jabrier has had assets throughout the course of its existence in the form
of real estate and thatKabeel has had assets in the form of mortgages on Jabrier
properties. See N.T., 10/22/2015, at 223:14-22.
116. By the end of 2008, neither Kaheel, Jabrier.mor Terrey owne.d any property and Mr. Toy
was unemployed.
2010
117. In March of2010, prior to Triangle's investment, the balance in Kaheel's bank account
was $0.00. See Ex. P35.
118. After
.
the $250,000.00
. check from Triangle was deposited and cleared on April 7, 20 l(r,
that same day Toy took a $10,000.00 personal draw to himself. See Ex .. P3-8; see also
N.T., 10/22/2015, at 96: 12-97: 19.
119. On: April 20, 2010, Kaheel received a $50,000.00 investment from Duggan Real Estate
Investment, LLC. See Ex. P35, see also N.T., 10/22/2015, at 95:10-12.
120.0nApril28, ZOIO, Toy took a $2,000.00 personal draw to himself making his total
monthly personal draw to himself $12,000.0"0 for April erzoio. See Ex. P35_-P38.
121.Additionally, from April 2010 to the filingofthis suit, Toy paid the cable bill for the
office used by Kaheel, Jabrier, Terrey, and the Jack Toy Co's, postage expenses, a
company car, a computer, storage, gas, car expenses, car insurance, restaurant bills, hotel
bills, airfare, and golf trips from the Kaheel business account. See N.T., l 0/22/2015, at
96: 1-161:25.
122.In May of 2010, Toy took a total of $8,000.00 inpersonal draws to himself from the
Kaheel bank account. See Ex. P38.
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123.In May of 2010, Kaheel paid a total of$22,000.00 to settle the property 0£3128
Hartville St., Philadelphia, PA which was titled in the name of Jabrier. A mortgage was
recorded from Jabrier to Kaheel for $75,000.00 for the 3128 Hartville St. property. See
Ex: P3S; Ex. P2J-P29.
124·. Exhibit P27 is a letter signed by Herbert J. Toy, authorizing Howard Dunetz to sign on
behalf of Jabrier Co., LLC the documentation necessary for the settlement of the 3128
Philadelphia property.
125.Thus at the end ofMay.2010, Toyhad spent $20,000.00 of the combined $300,000.00
investment funds orr personal draws to himself and $22, 000.00 of the investment funds
on a real es~te property.
126.In June of201 o,.Toy withdrew a total of $15, 981.70 in personal draws to himself from
the Kaheel Bank Account See Ex.P38.
127. On June 30, 20 l 0, Toy made a $2,500;00 quarterly interest payment to Triangle via
check 103 from Kaheel's bank account See Ex. P.3'8.
128. In July of 2010, Toy paid Duggan Real Estate Investment, LLC a $600.00 quarterly
interest payment from Kaheel's bank account. See Ex. P35-P38.
l29.In July of2Dl 0, Toy paid contractors $6,105.79-for work done on the 3128 Hartville St.
. .
Property fromthe Kaheel Bank Account. See Ex.P38 ..
130. In July of 2010, Toy withdrew a total of$15,700.00 in personal draws to himself from
the Kaheel Bank Account. See Ex. P35-38.
131. Additionally, in July 2010, Toy made a $2000.00 down payment on the 624 W. Chew
St. property and paid $300.00 for the· inspection of 926 v.,r. Chew St., Allentown, PA
from the Kaheel bank account. See. Ex. P35~P38.
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132.ln August of 2010, Toy made total withdrawal of $&,000.00 in personal draws to himself
from 'the Kaheel bank account. See Ex. P 3 5-P 3 8.
133. [n August of2010, Toy paid $597.02 of expenses related to or for work doneat the 3128
Hartville St. Property from the Kaheel bank account. See Exhibits P35-P38.
. .
134. In August of 2010, Toy paid $350.00 for the inspection of885 Andover Property from
the Kah~] bank account. See Ex. P35-P38.
135 ..In frngustof2010, TQy paid $300.00 for the inspection of the 624 W. Chew St. Property
from the Kaheel bank account. See Id.
'136. In addition, in August of2-0l0, Toy paid $34,359.87 from the Kaheel bank account to
purchase 926 W. Chew St. Allentown, PA and $141,.00 to State Farm Insurance for the
926 W. Chew St. Property. See Id.
137. The 926 W. Chew St. Property was titled to Jabrier Company and a Mortgage was given
from Jabrier to Kaheel for $90,000.00 with monthly payments to bemade from Jabrier to
Kaheel and the full debt if not paid earlier, due and payable on August l, 2040. See Ex.
P 11 (Deed for 926 W. Chew St Alleorown, PA price listed as $33,250.00); P 12
(Settlement Statement signed by Toyas Member of Jabrier; P13 (Mortgage).
138. The Mortgage for the 926 W. Chew St Property was recorded on September 13, 2010
with the Lehigh County Clerk.of Judicial Records. See Id.
139.In September of 2010, Toy made a total of$10,000.00 in personal draws to himself from
the Kaheel bank account. See Ex. P35-P38.
140.In Sept~mb~r of 2010, Toy made a $3000.00 down payment for the_434 N. Fulton St.
Property and paid $300.0U for the inspection of said property from the Kaheel bank
account, Id
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141. Also in September of 2010, Toy made a $3000.00 down payment for a 9l5 W. Cedar
Property and paid $.300.00 for the inspection of the 915 W. Cedar Property from the
Kaheel bank account. Id.
142.Also in September of2010, Toy made a $900.00 interest payment to Duggan Real Estate
Investment, LLC and a $2,500.00 interest payment to Triangle. id
143. In October of2010, Toy withdrew a total of $8,500.00 in personal draws to himself from
i.he Kaheel bank account. See Ex. P35-P38.
144.In October of 2010, Toy paid $115.00 for an inspection of the 434 N. Fulton St. Property
and paid $39, 519.45 for Jabrier to purchase the 434 N. Fulton St. property from the
Kahecl bank account. See Ex. P35-P38; P7-P10.
145'. Additionally, in October of2010, Toy spent $325.00 on hauling expenses for the 434 N.
Fulton St. property. See Ex. P35-38.
146. Th" 4~4 N. Fulton Street, Allentown, PA property was titled.in the name of Jabrier
Company for the purchase price of $40,000.00. See Ex..P7.
147. The Settlement Statement for the 434 N. Fulton Street Property representing that Jabrier
was paying $39,519.45 for the property was signed by Herbert J. Toy, IIT as President of
Jabrier. See Ex.P8.
148.An unsigned Note dated October 18, 2010, from Toy and the Jabrier Company to
Duggan Real Estate Investment, LLC·regarding the 434 North Fulton St Property was
made in the amount of $40,000.00 as principal for a loan with 12% annual interest. The
loan was to be repaid by April 18, 2012. Monthly interest payments were to begin
November 18, 2010 in the amount of $400.00 per month. See ExP9.
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149. Also on October 18, 2010, a mortgage was created between Jabrier and- Kaheel
Company-in th~ amount of $80,000.00 for the purchase of 434 North Fulton Street,
Allentown, PA property. There were to be monthly payments with full repayment due on
April 18, 2012. See Ex.PlO.
150. This Mortgage was recorded on October 29, 2010, at the Lehigh. County Clerk of
Judicial Records. See Ex. Pll.
151. Additionally, in October of2010, Toy purchased a 1998 beige Buick automobile for
$2874.50 with funds from the Kabec[ bank account. See Ex.P.35-P38.
152. In November of 20 IO, Toy withdrew a total of $4,750.00 in personal draws from the
Kaheel bank account and used $ l 06.54 for expenses from the Kaheel bank account. See
Ex. P35-P38.
153. Tue Northampton County Reporter· Vol. LVI No.4 7 for November 2?, 2010, lists that by
virtue of a certain writ of execution CV-2009_-03584, the premises known as 1032
Monocacy Street, Bethlehem, Northampton County, P.A.and titled to Herbert J. Toy, III
and Maureen Toy, h/w was seized and taken into execution of the. writ as the J?l'Operty of
Herbert J. Toy, III and Maureen Toy. See Ex.P.34.
154. In November of2010, Toy paid $1700.00 from the Kaheel bank. account for roofing
work done on the 3128 Hartville St. Property. See Ex. P3,5-P38.
155. In November of201_0, Toy paid$ 2500.00 to contractors for work on the 434.N. Fulton
St. property from tbe Ka heel bank account See Ex. P3 5-P3 8.
156,A~ditionally.in November of 2010, Toy paid $3745.61 for work and supplies for the 926
W. Chew St. -Property from the Kabeel bank account. Id.
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157.In November of 2010, Toy paid $350.00 for an inspection of a 5230 Heston.St. property
from the Kaheel bank account Id
158. Additionally in November of 2010, Toy purchased 5230 Heston St. property for J abrier
for $27 ~000.00 with money from the Kaheel bank account. Id.
159. ln November of 2010, Toy spent $5,202.00 on work done on the 5230 Heston St.,
property from the Kaheel bank account. Id._
160. The deed between Cynthia Moore and Jabrier Co., LLC for the 5230 Heston St. property
states that the property was purchased for $25,000.00 and the attached Philadelphia Real
Estate Transfer Tax Certification lists the fair market value for the property to be
$12,720.32. See Ex·. P.16.
161.0n November 8, 2010, Toy sent an email confirmingthat Jabrier Co.,LLC gave Dunetz
authority to sign on behalf of Jabrier Co., LLC, regarding the settlement of 5.230 Heston
St., Philadelphia, PA 1913L See Ex.P18.
162. Based upon the settlement sheet for the 5230 Heston St. property the total amount paid
for the property was $27;026.&6. See Ex. Pl 9.
163. A Mortgage was made between Kaheel and Jabrier and signed by Herbert J. Toy, as
Member of Jabrier on November 8, 2010 regarding the 5230 Heston St. Property in the
amount of $75,000.00. See Ex.P-17.
164.Also on November 8, 2010, an Interest Only Balloon Note was made between Jabrier
and Kaheel regarding the 5230 Heston St. Philadelphia, PA Property, the loan was in the
amount of $75,000.00,. the yearly interest was to be at the rate of 4.00% and Jabrier was
to begin making monthly payments to Kaheel of $250.00 on Dee-ember 8, 2010. The
34
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2012-C-1107 ls/IS
Interest Only Balloon Note was signed by Herbert J, Toy, HI, Member of Jabrier Co. See
Ex.P.20.
165. However, under Section 6 (a) Late Charges for Overdue Payments of the Interest Only
Balloon Note, the late charge was marked nl»: See Id
166.In December of 2010, Toy paid $1,633.57 for work done on the 926 W. Chew St.
Property from the Kaheelbank account. See Ex. P35-38-.
167.In December of 2010, Toy withdrew a total of$5,300.00 in personal draws from the
Kaheel bank account, not including expenses such as gas, car insurance, wine and beer
that he paid for with the Kaheel bank account. See Id.
168.ln December of 2010, Toy made an interest payment to Duggan Real Estate Investment,
LLC of $900.00 and an. interest payment to Dunetz of $2500.00 from the Kaheel bank
account.
169. Thus for the first nine months of the investments by Duggan Real Estate and Dunetz,
Toy spent a total of $88,23"1.70 of the $300,000.00 investment on himself as personal
draws, or as his personal salary. This is roughly 29.41 % of the investment funds. or close
to one third of the entire investment that was dissipated via cash payments to Toy. This
..
does not include the exp~es for all three companies that Toy was paying from the
Kaheel bank account, or the car, car insurance, gas> or Christmas presents for.contracrors
. that Toy also used the Kaheel bank account to pay.
l 70. In the first nine months of the investments by Duggan Real Estate and Dunetz, Toy
spent a total of $154 ,844 j 1 on investigating, purchasing, and -renovatirrg real estate
properties, This is roughly 5 i. 6% of the investment funds.
35
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171. Dunetz and Duggan bad received quarterly interest payments each quarter that they were
entitled to receive them in 2010.
l 72. With the interest payments, real estate investment purchases and costs, and Toy's
personal draws, he had spent roughly $250;ooo.oo of the initial $300,000.00 investment
by the close of 2010.
173.. Kaheel' s Tax Return for 20 l O states that all investments are at risk and reports a loss of
$34,373.00. Included in the business expenses are car and truck expenses of $10,725.00,
Depreciation of $865.00, Insurance of $514.00, Legal and Professional Services of
$2,759·.00, office expense of$746.00, repairs and maintenance of $1,041.00, travel of
$458.00,:deductibJe meals andentertainmeo..t $607.00, utilities of$8,291.00, other
expenses of $8,367.00, and no wages. See Ex. P4 7
174. Jabrier's Tax Return for 2010 states that aU investmentsare at risk and lists a tentative
loss of $64.00~ lists purchased items of$18I,944.00 and under other expenseshe lists
bank service charges of$250.00, Dues and subscriptions of$87.00, Gifts of $1,260.00,
lnspections of $950.00, Jvfiscellaneous expenses of $8-00.00, Storage expense of $20-.00.
and a forfeited ``posit of $5000.00. See Ex. P .4 7.
2011
175.In January of 2:011, Toy paid $294.64 for an inspectionof926 W. Chew St. an1434 N.
Fulton St. Property from the Kaheel bank.account. See Bx. P. 36::P38.
176.Additionally, in January of2011, Toy paid S 1513.23 for work and electricity for the
92-6 W. Chew St. property from. the Kaheel bank account. See Id.
177. In January of2011, Toy paid $&8.89 in utilities for the 5230 Heston St. Property from
the Kaheel Bank account. See Id.
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178. In January of 2011, Toy withdrew $7,500.00 in total personal draws from the Kaheel
bank. account, See Id.
179.Also in January of 20ll, Toy paid $·130.90 for a room at the Double Tree Hotel on a. trip
with Dunetz to see property in Delaware. See Id.
180.In February of201 l , Toy withdrew a total of$5,800.00 in personal draws from the
Kaheel bank account and withdrew $500.00 for accounting from the Kaheel bank.
account. See Id.
181.ln Febtuary·of.2011, Toy paid a total of Sl l , 285.58 for work, supplies, plumbing, and
utilities for" the 926 W. Chew St. Property from U1e Kaheel bank account. See Id.
182. ln February of 2011, Toy paid $48.48 in utility costs for the 434 N. Fulton St Property
from the Kaheelbank account. See Id.
183.In February of 2011, Toy paid-$133.77 for gas for the 5230 Heston St, Property from the
Kaheel bank account. See Id
184. In March of2Ql 1, Toy withdrew a total of $4000.00 in personal draws from the Kaheel
bank account and also paid for numerous lunches and gas, a computer for the office from
Best Buy in the amount of $635.98, and paid for a Florida Trip to see property in the
amount of $413 J7 from the Kaheel bank account, See Id
185. In March of 2011, Toy made an interest payment of $2,500.00 to Triangle and $900.00
to Duggan Real Estate Investment, LLC from the Kaheel bank account. See Id
186,ln March of2011) Toypaid$775.00 to a contractor for work done at the 434 N. Fulton
St. Property from the Kaheel bank account See Id
187.In Marchof2011., Toy paid $7,381.87 for hauling and work done on the 926 W. Chew
St. property from the Kaheel bank account. See Id.
3.7
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2012-C-1107 ls/I S
1.88.In March of 20ll, Toy paid a miscellaneous contractor $278.76 and made a home depot
purchase of $32.80 not associated with a particular property from Kaheel's bank account.
Seold
189.ln. April of 20 I l, Toy withdrew a total of $3000.00 in personal draws from the Kaheel
bank account. See Id.
190. Additionally in April of 2011, Toy claims that-he has taken as a personal draw
$16,457.65 ftom Kaheel's bank account which he used to purchase 1400 Gandy Blvd
N.#716, St. Petersburg, FL as there is no resulting mortgage to Kaheel Company made
and the property is deeded to Terrey instead of Jabrier. In Kaheel's bank ledger he lists
these withdrawals not as personal draws ("HJT') but rather as "purchase #716." See Ex.
P35~P38; P3 l; See N.T., I 0/22/2015, at 13 7: 1-140: 14.
191. The Court finds this to be a conversion of Kaheel's funds designed to shield the profits
from the Florida property from any of Kaheel's creditors. See Ex. P3 l.
192. In April of 2011, Toy paid $790.60 from Kaheel's bank account for his trip to Florida,
expenses in Florida, and his gas in Florida related to the 1400 Gandy Blvd. Property
purchase. See Ex. P38.
193. In April of 20 I I, Duggan Real Estate Investment, LLC invested another $30,000.00 into
Kaheel, See Ex. P35-P38.
194. In April ofZOl l , Dave Leidel, a friend of Toy, invested $25,000.00 in Kaheel according
to Toy without any terms of the investment> just tbat "we were going to buy property
together and its sitting out there right now" and "he gave me $25,000.00-he gave
Kaheel $25,000.00 to put in real estate." See N.T .• 10/22/2015> at 135:7-136:16.
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195. In April of20ll, Toy paid a total of $5138.00 for work done.on the 434 N. Fulton St.
Property from the Kaheel bank account. See Ex, P3.5-P38.
196. In April of 2011, Toy paid a total of $1296.50 for work done and utilities for the 926 W.
Chew St. Property from the Kaheel bank account. See Id.
197. In April of 2011, Toy paid a total of $374.98 for utilities for the 5230 Heston St.
Property from the. Kaheel bank account. See Id.
198. In May of 2011, Toy withdrew a total of $4000.00 in personal draws to himself from
the Kaheel bank account. Additionally, he withdrew $379 .15 for his miscellaneous
expenses, including golfing, from the Kaheel bank account. See Id.
l99.In May of 201.1, Toy paid a total of $18,010.55 in work and other various expenses for
the 434 N. Fulton St. property from the Kaheel bank account. See Id.
200.1n May of 2011, Toy paid $564.16 for utilities and insurance for the 926 W, Chew St.
Property from the Kah eel bank account. See id.
201. In May of 201 L, Toy paid '$2971.12 for work done on and utilities for the 5230 Heston
. .
St. "Property from the Kaheel bank account. See Id.
202.In June of 2011, Toy withdrew a total of $8050.00 in personal draws to hirnsclffrom the
· Kaheel bank account. See Id.
203. In June of 20 l L, Toy made.a $900.00 interest payment to Duggan Real Estate
Investment, LLC from the Kaheel bank account. See Id.
204.ln June of 2011, Toy paid a total of $7676.52 for work done on and utilities for the 5230
Heston `` froperty_.fromthe Kaheel bank account. S~ Id.
205. In June of 2011, Toy paid a total of $6400.37 for work done on and utilities for the 434
N. Fulton St. Property from the Kaheel bank account. SeeJd.
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206. InJune of 2011, Toy also paid $200.00 to Jabrier Co, LLC, and made an additional
·$360.00 payment to Duggan Real Estate Investment, LLC from the Kaheel bank account.
See Id
2D7. In July of 2011, Toy withdrew a total of $9,400.00 in personal draws to himself from the
Kaheel bank account. He additionally withdrew money from the Kaheel bank account
for gas, lunches, dinners, golf, storage, office supplies, and wine. An additional $1600.00
· with the notation, "HIT3-600-Jabrier lk" was withdrawn from the Kaheel bank account.
See Id
208. ln July of 2011, Toy paid $21.}4 for an expense at the 434 N. Fulton St. property from
the Kaheel bank account. See Id.
209.In July of 2011, Toy paid a water bill in t~e amount of $32.91 for the 926 W. Chew St.
property. See Id.
210. In July of 2011, Toy made his first sale of one of the purchased properties selling 5230
Heston Street to Beverly Artis on July 29, 2011. See Ex. P21.
211, By July of 201 l, Kaheel had expended roughly $43,797.26 in the purchase, renovation
and resale of the 523-0 Heston Street Property.
212.Kaheel held a $75,000.00 mortgage on the 5230 Heston Street Property.
2.13. The HUD Settlement Statementfor the sale of 5230 Heston Street Property reveals that
the amount paid by Beverly Artis for the property was $80,153.11 with $153.11 going to
the City of Allentown to paytaxes on the property for August 2, 2011 through December
30, 201 Iin the amount of $153.11, the seller was charged $8052.85 in settlement charges
and the seller paid the closing costs of $3, 100.00 leaving the remaining amount paid of
$69,000.26. See Ex.P22.
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2012-C-1107 /s/1 S
214. The $69.,000.26 was listed as "payoff First Mortgage to Kaheel Co, LLC." See Id.
215. The $69,000.26 was deposited in Kaheel's bank account in August of 2011. See Ex.
P36-P38.
216. Kah.eel made an approximate profit of $25 ,000 .00 on the sale of the·property.
217.However, due to the inflated paper mortgage of $75,000.00 it appears on.paper that
Kaheel and Jabricr had suffered a loss.from the sale of the property.
218.Nonc of the profits from the sale of the 5230 Heston St. Property were distributed to
Dunetz. However, at the time of the deposit of the $69,000.26, on August 2, 2011, Toy
withdrew a $10,000.00 personal draw. SeeN.T., \0122/2015, at 188:6-19.
2-19-. In addition to tho $10,000.00personaI draw to Toy on August 2, 2011, Toy withdrew a
total of $6,492.35 in personal draws to himself from the Kaheel bank account along with
another $310.13 in miscellaneous expenses. See Ex. P.36-P38.
220. In August of 2011, Kaheel paid Jabrier a total of $450.00 from the K?heeI bank
account. See Ex. P36"-P38.
22L InAugustof20l l, Toy paid $7,668.48 for work and landscaping done on the 434 N.
Fulton St. property. See. Id.
222.In_August of 2011, Toy paid a $900.00 interest payment to Duggan Real Estate
Investment and an additional $540 .00 from the Kahcel bank account. See Id
223. In August of 201 I, Toy paid an outstanding gas bill for the 5230 Heston St Property of
$77.77.
224. InAugust-of2Q1 I, Toy made a payment of $450.00 that he designated was for a
property of Integra 3150 and $350.00 for a property he designated 6923. S~ Id.
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225. In September of2011, T?Y withdrew a total of $8,500.00 in personal draws to himself
from the Kaheel bank account. See Ex. P36·38.
226.,In September of 2011, Toy paid $350.00 for an inspection of the 6964 property-and
$.180.00 for a 1028 property from the Kaheel bank account. See Ex. P36·38.
227. In September of 2011, Toy paid.$ 5405.16 for work done on and utilities for the 434 N.
Fulton St. property from the Kaheel bank account. ·See Ex. P36-38.
228. In September of 2011, Toy paid $32.42 for a water bill for the 926 W. Chew St. property
from the Kaheel bank account. See Id
229.In September of 2011, Toy paid bis attorney a total of$500.00 and paid car insurance in
the amount of $429 .66 from the Kaheel bank account. See Id.
230.In October of 2011, Toy withdrew a totalof$12,200.00 in personal draws for himself
from the Kaheel bank account. Additionally, Toy withdrew money for various lunches,
dinners, golf outings, and Wal-Mart from the Kaheel bank account. See Id
231.In October of20t l, Toy paid $26.64 in utilities for the 434 N. Fulton-St, Property from
the Kaheel bank account Seeld.
232. On October 12, 2011, Jabrier Co, LLC and Marco Derro signed the agreement of sale
for the Jefferson Ho.use Property. See Ex. P30.
233. In November of 2011, Toy withdrew a total of $1 l,009.95in personal draws to himself
from the Kaheel bank account as well as numerous lunches and gas expenditures. See
Ex. P36-P38.
234. Toy admitted that one of the personal draws in. the amount of $309.95 was to pay his
.personal credit card bill. See N.T., 10/22/2015, at 160:1-9.
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235. In November of 2011, Toy paid $-483.01 to Home Depot for supplies for the 434 N .
. Fulton St. Property from the Kaheel bank accounl See Ex.P 36-P38.
236. In November of 2011, Toy paid for his car registration of $49.00 from the Kaheel bank
account, See Id
237. In December of 2011, Toy withdrew a total of $700.00 in personal draws to himself
from the Kaheel bank account and made numerous lunch, breakfast, and gas expenditures
from the Kaheel bank account See Id.
238.In December of 2011, Toy paid Dunetz a $2500.00 interest payment from the Kaheel
bank account. Sec Id.
239". In December of 2011, Toy spent $31.76 at Lowes for supplies for the 434 N. Fulton St.
property from the Kaheel bank account, See Id
240. Thus in 2011, Toy paid himself roughly a total of $90,652.30 in personal owners draws
from the Kaheel bank account, not including the car expenses, lunches and dinners, office
supplies, a trip to Florida and purchase of the 1400 Gandy Blvd property in Plorida.
241. Jabrier's Profit or Loss Tax Schedule C for 2011 records income of $69,000.00 less the
cost of goods sold of$54,7'13.00 leaving a gross profit of $14, 287.00. See Ex:. P48.
242. Jabrier's 2011 Tax Return lists car and truck expenses of $4,399.00 even though Kaheel
paid all the car related expenses for 2011. See N.T.> I 0/22/2015, at 192:7-196: 19;
Ex.P48.
243. Jabrier's 2011 Tax Return also-lists legal and professional services of $625.00, office
expense of $185.00, supplies of Sl, 136.00, deductible meals and entertainment of $54.00,
and. other expenses of $3.).685.00 leaving a tentative net profit of $4,068.00. . See Ex. P48.
244. The Jabrier 2011 TaxRetnrn lists a11 investment at risk. Id
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245. The Jabrier 2011 Tax Return lists the inventory at the beginning of the year as
$247,569.00 and the inventory at theend of the year as $215,161.00. Id
246. The Kaheel 2011 Profit or Loss Tax Schedule C for 2011 records income of $0.00, with
a $21,196.00 loss listing zero for car and truck expenses. Id.
247. The Kaheel 2011 Tax Return lists expenses of $23 l.OO In deprecation> $3>686.00 in
insurance, $3,008 .00 for legal and professional services, $892.00 in office expenses,
$128,00 in repairs and maintenance, $1,369.00 for travel, $1,182.00 for deductible meals
and entertainment,$6,325.0.0 in utilities, $228.00 in bank service charges, $779.00 in
gifts, $700.00-in inspections, $1,744.00 in miscellaneous expenses, $474.00 in storage
expenses, and $450 .00 in forfeited deposits. See Id
248. Kaheel's bank checking ledger ends in December of2.0l l with a beginning balance on
December 31, 2011 of $85.22 in the Kaheel checking.account, See Ex. P36-38.
249. 'Within twenty-one months of Triangle and Duggan Real Estate Investment's initial
$30Q,OOO.OO investment, Toy had paid himself roughly $178,884.00 in personal draws
. from the Kaheel bank account, not· including the money withdrawn to purchase the 1400
Gandy Blvd. Property inFlorida.
201Z
250. On March 15, 2012, . Toy sold the 3128 Hartville St. Property for $1.00. to John Burkitt,
Kaheel paid $668. l O in settlementcosts for the sale. See Ex, P29.
251. At the time of the sale, Kaheel had paid $31, 069.91 for the purchase, renovation, and
resale of the 3128 HartvilleSt, Property and retained a $75,000.00 mortgage on the ..
property.
2~2. On March 16, 2012, Dunetz files the initial Complaintin this matter.
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25J. Mr. Toy created new LLC's after receiving the complaint to continue his real estate
endeavors.
254.In September of 2012, Kaheel's bank account has a ledger balance of-$295.18. See Ex.
P37.
255. Jabrier's 2012 Profit or Loss from Business Schedule C Form lists income from.sales of
$77,420,00 for 2012 with the cost of goods sold listed as $50, 075.00 leaving a gross
profit of$27,~45.00. See Ex. P.49.
256.Jabrier's 2012 Tax Return lists expenses in the amount of $1,113.00 leaving a tentative
net profit of $26, 232.00 and lists all in-vestment at risk. See E:?<.. P49.
257. Jabrier' s 2012 Tax Return lists the beginning inventory of $215, 161. 00 and the
remaining inventory at the end of the year of $50,075.00. See Id
258. Kaheel's 2012 Profit or Loss from Business Schedule C'lists zero income for 2012 with
a tentative loss of $2,254.QO from expenses. See Id.
2013
259. On September 17, 2013, the 1400 Gandy Blvd. N. #716 property is sold to Stephen
Burgess from Terrey for $27~774.48 for an estimated profit of .$13.,504.83, this money is
not deposited into the Kaheel bank account. See Ex, P3J.
2015
260.In February of2015, the 926 W. Chew St. Property is sold at a sheriff's sale for back
taxes .
. 261. As of December of ~O 12, Kaheel had paid roughly $62, 434.04 in purchasingand
renovating the 926 W. Chest St Property from the K.aheel bank account and held a
$90,000.00 mortgage on the property.
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262. In July of 2015, the 434 N. Fulton St. Property was listed to be sold at a sheriffs sale for
back taxes.
263. As of December of 2012, Kaheel had paid roughly $89,.800.56 in purchasing and
renovating the 434 N. Fulton St. Property from the Kaheel bank account and held an
$·80,000.00 mortgage on the property.
264.Jn August of 2015, on the eve of trial Jabrier filed bankruptcy.
DISCUSSION
Prior to trial, Defendants had filed a Motion in Limine to Plaintiff's Exhibit 2, the
Acknowledgement of the Receipt of Funds from Kaheel to Triangle, arguing that it should be
precluded as the acknowledgment "was after the formation of the actual agreement and therefore
is irrelevantto the proceedings," See N.T., J0/22/15, at 81 :8-l l. However, the
Acknowledgement was created solely by Toy and signed by him as member of Kaheel and was
sent to Plaintiff and certainly exposes the minimum agreement that Toy believed existed on April
2, 2010. The Court overruled the objection to the admission of Plaintiffs' Exhibit 2, but stated
that Defendants argument would go to the weight that the Court would give to the
Acknowledgment. See N.T., 10/22/2015, at 81:12-13.
M only two witnesses testified at trial this Court's judgment of the witnesses' credibility
factors heavily into the resolution of this matter. The Court found Dunetz to be natve and
· avaricious, but generally honest in his testimony. Thus, the Court found Dunetz's testimony to
be credible on most points. In contrast, the Court found Toy to he shrewd, giving calculated ~.nd
rehearsed testimony, revealing a wolf hiding in sheep's clothing. The Court found Toy's
testimony to be lacking credibility on most points.
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One preliminary issue for the Court to consider in this case is whether or not to pierce the
corporate veils to hold Herbert J. Toy, m personally liable for the debts and actions of Kaheel
and Terrey. At the outset, the. Court notes that there exists a strong presumption against piercing
the corporate veil.' Advanced Telephone Systems, Inc. v. Com-Net Professional Mobile Radio,
LLC., 846 A.2d 1264, 1277 (Pa. Super. 2004); Wedner v. Unemployment Board, 296 A.2d 792,
794 (Pa. 1972). As stated by the Third Circuit in Zubik v. Zubik, "[ a]ny court must start from the
general .rule that the corporate entity should be recognized and upheld, unless specific, unusual
circumstances call for an exception.... Care should be taken on all occasions to avoid making the
entire theory of corporate entity useless." J84 F}d 267, 273 (3d. Cir. 1967). However, "a court
will not hesitate to treat as identical the corporation and the individuals owning all its stocks and
assets whenever justice and public policy demand and when the rights of innocent parties arc not
prejudiced thereby nor the theory of corporate entity made useless." Good v. Holstein, 787 A.2d
426, 430 (Pa. Super. 2001).
The general standard for piercing the corporate veil is as follows:
The legal fiction that cl corporation is a legal entity separate and distinct from its
.shareholders was designed to serve convenience- and justice, .... and will be
disregarded whenever justice or public policy require and where the rights of
. innocent parties are not prejudiced nor the theory of the corporate entity rendered ·
useless ... We have said that whenever one in control of a corporate entity uses that
. control, or uses the corporate assets to further his or her own persona] interests,
the fiction of the separate corporateidentity may properly be disregarded.
Ashley 11. Ashley, 393 A.2d 637, 641 (Pa 1978).
Factors to be considered in piercing the corporate veil are "undercapitalization, failure to
adhere to corporate formalities, substantial intermingling of corporate and personal affairs, and
use of the corporate form to perpetuate a fraud." Dep 't of Environmental Resources 11. Peggs Run
I
Peonsylvania's LLO statute, provides that, "members ofa limited liability company shall not be liable, solely by
reason of being a member, under an order of court or in any other manner for a debt, obligation or liability of the
company of any kind .... " 15 Pa. C.S.A. §8922 (a).
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Coal Co., 423 A.2d 765, 76-8-69 (Pa. Cmwlth. 1980); Lumax Industries, Inc. v, Aultman, 669
A.2d 893, 895 (Pa. 1995). A corporate veil may be pierced under the "alter ego'> theory "when
the individual or corporate owner controls the · corporation to be pierced and the controlling
owner is to be held liable ... and one party seeks to hold the corporation owner liable for any
claim or debt." Good, 787 A.2d at 430; see also Village at Camelback Property Owner's Assn;
Inc; 538. A.2d 528, 533 (Pa. Super._ 1988)("Thus, we inquire ... , whether corporate formalities
have been observed and corporate records kept, whether officers and directors other than the
dominant shareholder himself actually function, and whether the dominant shareholder has used
the assets of the corporation as if they were hls own.").
Here Plaintiffs have demonstrated that Defendant Herbert J. Toy, ill is the sole Member
and controlling manager of Defendants, Kaheel, Jabrier, and Terrey. Toy testified that.he is the
"sole member" of Defendants and that he never transferred any interest any of the defendant
companies to anyone else. As sole member, Defendant Toy admitted to total control of the
finances, policy and business. practices of the defendant business entities. There are no officer
and directors 'beyond Toy, the controlling member and shareholder. Neither Terrey, Kaheel, nor
Jabrier paid dividends in the regular and ordinary course of their business. Toy) both
individually and in his capacity as sole member of the defendant entities, induced Dunetz to
invest. $250,000.00 through false and misleading statements aboutthe number of other investors
he had for Kaheel and through the false promise, that Toy would be investing $2.50,000,00 of his
own. money into Kaheel, Toy made these statements while knowing that Kaheel was
undercapitalized with an account balance of zero and no current property holdings at the time
Toy was inducing Dunetz to invest
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Moreover, the· evidence at trial demonstrated that Toy invested roughly $178,884.00 of
Kaheel's corporate assets in personal draws to himself over- nineteen months while investing
roughly only $227, 101.21 over that same time-period in the purchase, renovation, and re-sale of
real properties for Jabrier. Toy failed to protect the assets of Kaheel and Jabrier by failing to pay
the taxes on the properties that h.e purchased when he had the money to do so, with the result
being that two of the properties were ultimately sold at sheriff's sales for failure to payback
taxes, Toy treated Kaheel, Jabrier, and Terrey as an Alter Ego of himself and often treated the
Kaheel bank account as bis own personal piggy bank going so far as to pay his personal credit
card from the Kaheel bank account one month. Toy did not conduct any arms length
transactions between Kaheel and Jabrier, using Kaheel funds to purchase and renovate Jabrier
properties with only a paper mortgage listing an arbitrary amount, mote than Kaheel spent on the
properties, as a security interest. No monthly payments were made under the .mortgages and
Kaheel never foreclosed on any of the Jabrier properties after the time for repayment of the
mortgages expired.
Defendant Kaheel has been defrauded of'its assets. Toy used the K.aheel bank account
to fund his airfare, hotel, and other costs as he went to Florida to investigate the- 1400 N. Gandy
Blvd. Property .. Toy then withdrew a substantial sum of money, $16,457.65, from the Kaheel
bank account for the purchase of the Florida property, which he. titled in the name of Terrey.
Toy did hot create any mortgage between Terrey and Kaheel for the purchase of the property.
Toy did not deposit the proceeds of the sale of the Florida property in Kaheel's bank account.
Toy simply claiined at trial that the $16,45.7.65 was removed from the Kaheel bank account as a
personal draw without any obligation of repayment, even though the amount was not listed as a
personal draw "HJT3" in the 'Kaheel check ledger but rather as "Purchase 717."
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Reviewing the tax returns for Jabrier and Kaheel from 2010-2012, the bank statements
for Kaheel, and the check ledgers for the Kaheel bank account and Toy's own testimony makes it
abundantly clear that corporate formalities have not been observed and that funds have been
comingled between Kaheel, Terrey> and Jabrier. For example, Toy purchased an automobile that
he used for all three companies, Kaheel, Terrey, and Jabrier, yet he paid for the car, the car
insurance, and all the gas and automobile repairs from Kah eel's bank account. He claimed car
business expenses in 201(}. on the Kaheel Tax Return and then despite all the gas, insurance, etc.
being paid from the Kaheel bank account, claimed the car business expenses on the Jabrier tax
return for 201 L Toy used. the Kaheel bank account to pay for a storage unit that housed
equipment, even though Kaheel was to be solely the "financing entity." Toy used the Kaheel
bank account to pay the cable bill and other office expenses for Toy when the office housed an
throe companies. As was recited in the finding of fact section above, many of Toy's own
per~onal expenses were paid for directly out of Kahee.l.'s bank account. Toy did not keep proper
accounts, and he did not even continue the facade by maintaining even a. minimal business
checking ledger for Kaheel in 2012.
Based upon the undercapitalization, failure to adhere to corporate formalities, substantial
intermingling of corporate and personal affairs and use of the corporate form to perpetrate fraud,
this Court holds that it is appropriate to pierce the corporate veils of Kaheel and Terrey and hold
Toy personally liable for any counts of Plaintiffs' Complaint for which Defendants are found
liable.
A second _preliminary question is whether Plaintiff, Howard M. Dunetz, is able to recover
. .
on any theory when it is undisputed. that the $250-,000.00 investment was tendered by Plaintiff,
,-
Triangle Home Invest, LLC, and the check was signed by Dunetz in his capacity as member of
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Triangle. Plaintiffs are seeking the "sum of $235,000.00 plus all lost profits> interest, costs and
attorney fees." See Pis. Amend. 3rd Compl. None of Plaintiffs' claims have to do with.money or
time or work expended by Dunetz as an individual, but only deal -with the handling by the
Defendants of the $250,000.00 investment from Triangle. Thus, the Court will find in favor of
the Defendants and against Plaintiff, Howard M. Dnnetz, on all counts.
Count One-Breach of Contract
In order "[t]o maintain a cause ofaction in breach of contract, a plaintiff must establish:
(1) the existence of a contract, including its essential terms; (2) a breach of a duty imposed by the
contract; and (3) resulting damages. •> Lackner v. Glosser, 892 A.2d 21 > 24 (Pa. Super. 2006).
Moreover, "[a]n offer to contract must be intentional and sufficiently definite 'in its terms, and no
offer will be found to exist where its essential terms are unclear." Beaver Valley Alby Foundary
Co. v. Therm a-Fab, Inc., 814 A.2d 217, 222 (Pa Super. 2002). Further, "[t]he touchstone of
any valid contract is mutual assent and consideration." Bair v. Manor Care of Elizabethtown,
PA, LLC, 108 A.3d 94, 96(Pa. Super. 2015). As to its breach of contract claim, Plaintiffshave.
the burden of proving a contractual relationship with Defendants. Te/well, Inc. v. Grandbridge
Real Estate Capital, LLC, 143 A.3d 421, 427 (Pa Super. 2016).
In Count One of their third Amended Complaint, Plaintiffs allege breach of contract
against Kaheel, but in the whereforeclause ask for judgment against "Defendants." Pls, Third
Amend.. Compl., ~29. In their Proposed Findings cf Pact and Conclusions of Law, Plaintiffs
focus solely on Kaheel 's breach of the alleged oral contract, and do.not .appear to be trying to
hold the other Defendants beside Kaheel and Toy liable for a breach of contract. See Plaintiffs'
Proposed Findings- of Fact.and Conclusions of Law, t 6-10. The record contains no evidence that
Terrey was a party to any alleged oral contract between Triangle and Kaheel. Thus the Court
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will find in favor of Defendant Terrey against Plaintiffs for- the sum of zero dollars. on Count One
breach of contract claim.
-·
Plaintiffs urge this Court to find the existence of an oral contract where in. exchange for
the investment of $250,000.00 Triangle would receive "investment returns of fifty percent (50%)
to one hundred percent (100%), that net profits would be split equally between Toy and Triangle,
with each receiving fifty percent (50%) oflhe profits, and that Triangle would receive four
.percent ( 4%) interest annually on its initial investment, with one percent (1 %) interest quarterly."
Pls. Proposed Findings of Fact, '1!5o. Plaintiff-would further have this Court find that Triangle's
investment was "to be used solely to purchase, renovate, and sell properties and that Kaheel was
to use the-$250,000.00 to fund real estate transactions" and that Kaheel was to "provide a
security interest to Triangle in the amount invested in any properties which are purchased by
Kaheel utilizing Triangle's investment." Id at 150, ~58. Plaintiffs argue_ that the
Acknowledgment of Receipt of Investment Funds was an affirmation of the oral contract. Id at
Plaintiffs allege that Kaheel breached the terms of the oral contract by: "(I) failing to
split profits equally with Plaintiffs, (ii) failing to provide Triangle with a mortgage or note on
any of the properties Kaheel purchased instead placing the properties in Jabrier' s name, (iii)
failing to acquire any of the properties with equal amounts of Toy's and Triangle's funds, and
(iv) not paying any quarterly interest payments to Dunetz afterDecember of2011." Id at 17.
Plaintiffs further allege that even the use of the $250,000.00 to pay business expenses ofK.aheel
was a breach of the contract
- as the money was to be used only for the-purchase,. renovation, and.
resale of.Properties. Id at 10 ..
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However, while it is clear that the $250:000.00 investment from Triangle to Kaheel was
not a gift, it does not appear that there ever existed a meeting of minds on the essential terms of
the contract. The April 2, 2010, Acknowledgement of Receipt of Investment Funds certainly
reflects a minimal understanding of the terms Toy believed Kaheel bad received the investment
subject too. However, the Acknowledgementmakes no mention of any $2500.00 quarterly
interest payments, that Kaheel in fact made to Triangle throughout 2010 and 2011 and Triangle
accepted as though they were part of the agreement. Moreover, Plaintiff Dunetz testified that, in
response to the question about whether on April l, 2010, there was a deal between Toy and
DUQ.ef.Z, "[ w]e bad a transferring of money. Until I had that agreement, I really didn't know what
the deal was. So did we have a deal without an agreement? I'm not sure." See N.T., 8/13/15, at
44: 14: 17. Dunetz also testified that he had not placed any restrictions on Mr. Toy's use of the
money except to "make me money." See Pis. Ex. 54, P.23-'.?4. Dunetz did not know when the
quarterly interest payments were to be made, although he and Toy both agreed that the profits on
the properties bought with the Kaheel investment were to be split, Dunetz was unaware of
whether the disbursements of those properties would be at the time of the sale of the properties
or annually. Dunetz was unsure of the timing of the annual renewal of the agreement as to
``
whether the parties wanted to continue working together. Toy alleged, in 2012, after Dunetz
asked for a note· to secure the agreement and for a 'large portion of the principal investment back,
that the $2501000.00 had been given to Kaheel as a twenty-year loan with 4% annual interest
payments. Dunetz testified credibly that he would never have tendered the $250,000.00 to
Kaheel had the twenty-year loan been his understanding of the deal. Although the 2010
Acknowledgment of Recci pt of Investment Funds demonstrates that the parties were working
towards a contract for the investment funds, the Plaintiff did not prove by a preponderance of the -
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evidence. the essential terms of the contract and did not demonstrate mutual assent to the terms of
the contract Thus, the Court finds in favor of the Defendants Kaheel and Toy in the sum of zero
dollars on Count One, Breach of Contract.
Count .Twe- Unjust Enrichment
Initially, the Court notes that a finding of unjust enrichment is appropriate, "only when a
transaction is not subject to ... a contract." Northeastern Fence & Iron Works, Inc. v. Murphy
Quigley Co., Inc., 933 A.2d 664, 669 (Pa. Super. 2007); see also Stoeckinger v. Presidential
Financial Corp., 948 A.2d 848 (Pa. Super. 2008)("Either there is a contract and a claim for
breach of contract; or there is no contract but rather a quasi-contract implied by the law and a
claim for unjust enrichment, Even.tbough these two counts are duplicative and a plaintiff cannot
recover on both theories, a plaintiff may plead in the alternative."), In Count One, this Court
found that there was no meeting of the minds in terms of the essential contract terms in exchange
for the investment of the $25.0,000.00. However, Toy and Kaheel admit to receiving and
retaining $250,000.00 of Plaintiff Triangle's funds and denied giving Plaintiffs any ownership
interest in any of the Defendant Entities or repaying the alleged twenty-year loan. As the Court
has found that there was no contract between Plaintiff Triangle and Defendants, a finding of
unjust enrichment is permissible.
As discussed by the Pennsylvania Superior Court in Durst v. Milroy General
Contracting, Inc.,
Where unjust enrichment is found, the law implies a contract, which requires the
defendant. to pay to. the plaintiff the value of the benefit conferred.' Schenck v. KE.
· David. Ltd, 446 Pa.Super, 94, 666 A.'2d 327 (1995). The elements necessary to
prove unjust -enrichment are: ·
(1) benefits conferred on defendant by plaintiff; (2) appreciation. of such
benefits by defendant; and (3) acceptance and retention of such benefits
under such circumstances that it Would be inequitable for defendant to
retain the benefit without payment of value. (citations omitted). The
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application of the doctrine depends on the particular factual circumstances
of the case at issue. In determining if the doctrine applies, our focusis not
on the intention of the parties, but rather on whether the defendant 'has
. been unjustly enriched.
Id, 666 A.2d.. at 328, Accord Torchia v. Torchia, 346 Pa.Super. 229, 499 A.2d
58 I, 582 (1985) C[t)o sustain a claim of unjust enrichment, a claimant must show
that the party against whom recovery is sought either c wrongfully secured or
passively received a benefit that it would be unconscionable for her to retain.?")
(citation omitted). Mitchell v. Moore, 729 A.2d 1200, 1203-04 (Pa,.Super.1999).
52 A.3d 357, 360 (Pa. Super. 2012). An action based on unjust enrichment sounds in quasi-
contract, which "imposes a duty, not as a result of any_ agreement, whether express or implied,
but in spite of the absence of an agreement, when one party receives unjust enrichment at the
expense of the other." Northeastern Fence & Iron Works, Inc., 933 A.2d at 688-689.
Importantly, in determiningan unjust enrichment claim the Court is to focus "not on the
intention of the parties, but rather on whether the defendant has been unjustly enriched." Id at
688-689. When the doctrine of unjust enrichment is found to apply, the person "who has been.
unjustly enriched at the expense of the other must make restitution to the other." Wilson Area
School Dist. v. Skepton, 895 A.2.d 1250, 1254 (Pa. 2006).
In this case, Plaintiff Triangle proved all the elements of unjust enrichment by a
preponderance of the evidence. First, benefits were clearly conferred on Toy and Kaheel when
Triangle tendered $250,000.00 to Kaheel, of which only $12,500..00 was returned to Triangle.
Defendants admitted that the $250,000.00 received from Triangle was not a gift and under
· Defendants theory, payments would still be due and owing to Triangle, as Defendants
characterized the $250,000.00 as a twenty-year loan with annual interest of 4% with quarterly
interest payments to be made. Defendants have made no "quarterly interest payments" on the
alleged.loan since December of 2011. Thus, Defendants have been enrichedby $237,500.00 by
retaining the funds and failing- to· make any interes.t payments and by failing to comply with the
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.tenns of the acknowledgement which Toy provided to Triangle on April 2, 2010, containing his
minimum understanding of the agreement between the two parties. Tue acknowledgementread
as follows:
This ACKNOVlLED.GEMENT confirms and acknowledges the receipt by
Kaheel Company, LLC of the total sum of Two Hundred Fifty Thousand Dollars
($250,000.00) received from Triangle Home Invest, LLC. Kaheel Company, LLC
acknowledges that the Two Hundred Fifty Thousand Dollars {$250,000.00)
received from Triangle Horne Invest, LLC is to be utilized by Kaheel Company,
LLC or its designee/assignee to purchase real property for investment purposes.
The terms and conditions of said investment are to be outlined in another
agreement be[ sic.] prepared in the near future. Kaheel Company, LLC agrees that
it will provide a security interest to Triangle Homes Invest, LLC in the
appropriateamount invested in any property(ies) which are purchased by Kaheel
Company, LLC utilizing the funds received as acknowledged herein.
Pl.' s Reply to New Matter, P. 2. Plaintiff Triangle was never provided with a secnrity interest in
any of the properties purchased by Kaheel utilizing the funds received from Triangle .
. Secondly, Defendants Kaheel and Toy appreciated {he benefits of the $237,500"00
conferred on them by Triangle. DefendantKaheel received the money and-appreciated the
benefit of it, by among other things, purchasing and renovating and selling for a profit the 5230
Heston St. property, without providing any security interest to Triangle and without providing
any of the proceeds of the sale of the property to Triangle. Defendant Kaheel had a checking
account balance of zerowhen.It.received the $250,000 .00 investment from Triangle. Thus
Kaheel appreciated the benefit of being able to pay for its opera ring and business expenses from
the .invcstment from Triangle, Kaheel appreciated the benefit of purchasing and renovating the
. 926 WL Chew St. property, the 434 North Fulton St. property, and the 3128 Hartsville St.
property with the investment funds, without providing Triangle a security interest in said
properties although ultimately the properties resulted in a loss for Kaheel, Defendant Toy
appreciated a benefit from the $250,000.00 investment by Triangle, in the amount of
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$178,884.00, Ween as. personal draws, as perhaps a "salary" over twenty-one months from 2010
to 2012. Toy also appreciated a benefit from withdrawing $16, 457.64 from the Kaheel bank
account to purchase the 1400 W. Gandy Blvd property which he fitted in another of his
companies that he was the sole owner of Terrey, and he later sold said property for roughly a
$13,000.00 profit which he did not share with Triangle or Kaheel. Additionally, Toy received
the benefit of the $250,090.00 investment as he used the Kaheel bank account to purchase an
automobile that he drove on behalf of several of his businesses, paid for the gas in the car, the car
insurance, office expenses for three businesses, storage, trips to see real estate, numerous
breakfasts, lunches, dinners, holiday gifts, and to pay-off his credit card.
Lastly, in this case it would be inequitable for Defendants Toy and Kaheel to accept and
retain the benefits from the $25-0,000.00 investment without the payment of value. Therewas no
meeting of minds over the specific terms of the investment. However, Triangle tendered
$Z50,000.00 and received no benefit for their investment aside from the return of $12,500.00 of
the funds. Dunetz admittedly has received and retained $28,000.00 from the Jefferson House
Property transaction in December of 201 L However, the Defendants did not file a counterclaim
in this matter, and at trial the parties testified that thls.matter is the subject of a lawsuit in
Northampton County. Under the circumstances, it would be inequitable for Defendants to accept
.and retain the benefits they received. without returning $237, 500.00 to Plaintiff Triangle.' Thus,
the Court will enter a verdict in favor of Plaintiff Triangle for $237,500.00 and against
Defendant Toy and Defendant Kahee1.
Count Three-Intentional and Fraudulent Misrepresentation
The theory of fraudulent misrepresentation flows from the "societal duty not to
affirmatively-mislead or advise without factual basis." Bruno v. Erie Ins. Co., 106-A.3d 48, 58
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(Pa. 2014). Fraudulent misrepresentation "constitutes a breach of [the] duty of honesty imposed
by society, and not contractual duties." Mendelsohn; Drucker v. Titan Atlas Mfg., 885 F. Supp.
2d 767, 790 (E.D. PA. 2012). As stated by the Pennsylvania Supreme Court irr Bortz v. Noon,
tbs elements of intentional misrepresentation are:
1) A representation; .
(2) which is material to the transaction at hand;
(3) made falsely, with knowledge· of its falsity or recklessness as to whether it is
_true or false;
(4) with the intent of misleading another into relying on it;
(5) justifiable reliance on the misrepresentation: and,
(6) the resulting: injury was proximately caused by the reliance.
Gibbs v, Ernst, 53& Pa. 193, 207, M7 A.2d 882, 889 (1994), citing, Restatement
(Second) of Torts § 525 (1977) ·
Bortz v. Noon, 729 A.2d 555, 560 (Pa. 1999). As was highlighted by the Pennsylvania Superior
Court in Ira G. Steffy &Son, Inc. v, Citizens Bank of Pennsylvania, "[sJcenter, or the maker's
knowledge of the untrue character of his representation, is a key element in-finding fraudulent
misrepresentation,'1 7 A.3d 27& (Pa. Super. 201 O); citing Restatement (Second) of Torts §526,
Commenta. A "misrepresentation is material if the party would'not have entered into the
agreement, but for the misrepresentation." Eigen v. Textron Lycoming Reciprocating Engine
Div; 874 A.2d 1179, (Pa. Super. 2005). However, "[ojne deceived need not prove that
fraudulent misrepresentation was the sole inducement to the investment of money, a material
inducementis sufficient." Silverman v. Bet! Say. & Loan Assn, 533 A.2d 110, 113 (Pa. Super.
1987). Under Pennsylvania law, :fraud must be proven by clear and convincing evidence. See
Sewak v. Lockhart, 699 A.2d 755, 759 (Pa. Super. 1997).
Defendants argue that "Dunetz and Triangle were not entitled to rely upon mere matters
of opinion as to the potential return on the loan." Defs.' Proposed Conclusions of Law> ~6 citing
Binns v. Copper Range Co., 6 A.2d 895 (Pa. 1939). Defendants also.assert that "[t]he breach of a
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promise to do something in the future is not actionable "in fraud." See Defs.' Proposed
Conclusions of Law, ,s citing, Ira G. Steffy and Son, Inc. v. Citizens Bank of Pennsylvania, 7
A.3dZ78 (Pa. 2010). Plaintiffs allege in their Third Amended Complaint that the representations
made by Toy, in his individual capacity, and as an agent of Kaheel, to Dunetz, in his capacity as
an agent of Triangle, were that: "Toy indicated to Dunetz that he could invest the sum of
$250,00Q.OO with Kaheel, and that money would in turn be invested into residential-properties
· with profit sums being returned to Dunetz, Toy claimed anticipated investment returns of fifty
percent (50%) to one hundred percent ( 100%). The returns to be directed to Dunetz were to be
fifty percent (50%) of any profit from the purchase and s:ale of theproperties," Pls .. ' 3rd. Amend.
Compl., 142.
This Court agrees with Defendants in that Plaintiffs were not entitled to rely on Toy's
opinion that the anticipated investment returns would be 50% to 100% or as Dunetz testified on
the stand that the investment returns would be "50% to infinity." It has long been held that, "a
buyer or seller is not entitled to rely on mere statements of opinion as to value or puffery where
the person to whom these opinions are made has an equal opportunity to ascertain the facts
affecting the value of the thing to be bought or sold." 2 Summ.Pa.Jur.Zd Torts § 16.5 (2d, ed.
2016), citing, Binns v-. Copper Range Co., -6 A.2d 895 (Pa. 1939) and Huddleston v. Infertility
Center-of America, Inc., 700 A.2d 453. (Pa. Super. 1997). Pursuant to Pennsylvania law,"'the
recipientof an allegedly fraudulentmisrepresentation is underno duty to investigate its falsity in
order to justifiably rely." Toy v: Metro. Life Ins. Co., 928 A.2d 186, 207 (Pa. 2007).·
Nonetheless, "a party is unjustified iu relying on a misrepresentation if it knows the
.representation is. false or if its falsity is obvious," Eerier v. Cushman. & Wakefield of
Pennsylvania Inc., 2014 \VI, 2'892408 (E.D. Pa. 20 l 4Xinternal citations omitted).
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Representations that the return on -an investment will be fifty percent to infinity is an. obvious
statement of commercial puffery, a "mere assertion of value" with "no warranty( ... J intended;"
;
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=== .... --.~T. ·
During Trial; Dunetz testified about two other representations made by Toy that he relied
rio
upon in making his decision to have Triangle invest money with Kaheel. First, Dunetz's
understanding was that he and Toy would initially invest an equal 'amount of money,
c~W\ti
reh~ v~th'\
$·250,000.0Q, the money would then be assigned to the purchases and fixing up and selling of "a 4 "::>
particular house pr apartment building 01 a package of houses." See N.T., 8/13/15, at 16:9-
18:11. Secondly, Dunetz credibly testified that Toy, had originally informed Dunetz that be had
a nutriber of other investors in Kaheel that functioned as silent partners in his business. The
investors gave Toy cash, and in return received 4% returns on their investment and 50% of the
profits from their investment. See N.T., 8/13/2015, at 31 :4-8. Thirdly, Dunetz credibly testified
at his deposition that Toy representedto him that there "was always four to five other investors
with a total contribution of 65.0 ta 7 50 thousand dollars." Id., P .17.
As to. Dunetz's understanding that he and Toy would initially invest an equal amount of
'money $250,000.00, and that the nroney would be assigned to the purchase and fixing up and
selling of particular houses, "[i]t is well established that tho breach ofa premise to do something
in the future is not actionable in fraud." Shoemaker v. Commonwealth Bank; 700 A.2d 1003,
I 006 (Pa. Super. 1997). Toy's promise to also invest an equal amount of $250,000.00 is hot
actionable-as a :fraudulent misrepresentation.
However, Toy did make representations that were.material to the transaction at band to
Dunetz about having a number of other investors in Kaheel that functioned as silent partners in
his business, whom.received 4% returns on their investment and 50% of the profits from the
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investment and that there was always four to five other investors with a total contribution of 650
to 750 thousand dollar;. Theserepresentations were material misrepresentations, as they were a
material inducement to Duaetz handing Tey the $250,000.00 chock. These statements were false
----- ·-----·----.
and Toy knew them to be ralse as he admitted that at the time he was making the-statements to
Dunetz, neither Kaheel, Jabrier, or Terrey had owned any property since 2008, he was
unemployed, and Kaheel's bank account was zero. He knew there were no other investors or a
total contribution of $65.0,000.00 .to $750,000.00. Toy was aware that be needed the money from
Triangle's investment for his own expenses and the business expenses of Kaheel, instead of
using it_ solely to purchase real property as the Acknowledgment of the Receipt of Investment
Funds that Toy sent to Tri.angle indicated.
The intent to mislead can be inferred by Toy's actions of sending an acknowledgment of
the receipt of the funds without following up with.any further documents and immediately taking
a $10,000.00 personal draw from the funds the day that Triangle's check cleared the bank.
Lastly, "to be justifiable, r{)lianc~ upon the representation of another mus_tbe reasonable.',
Porreca v. Porreca, 81 l A2d 566, 571 (Pa. 2002). While opinions that are-mere puffery are not
justifiable for someone to rely on, Dunetz was not required to make an independent investigation·
into the truth of the representations as to tbe existence of six or seven other investors and the
bank account. The falsity of these representations was not obvious. The Court finds Dunetz's
reliance on Toy's statements about other investors, the-returns given to them, and the amount of
'the other investors investment reasonable.
The fraudulent misrepresentations proximately caused economic harm. in that Triangle
tendered to T9y $250,000.00 and received in return only $12,500.00. The proper measure of
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damages for fraudulent misrepresentationas summarized in the Pennsylvania Suggested
Standard Civil Jury Instruction 17.270 is:
be
The plaintiff is entitled to fairly and adequately compensated for the actual monetary
loss [he] [she] has suffered. ·
Actual monetary loss includes:
1. the difference between the value [heJ [she] gave or amount [by.) [she] paid and the
.actual, real, or intrinsic value ofwhat [be] [she) received at the-time of the transaction;
and.
2. all other monetary loss suffered as a consequence of the misrepresentation or
nondisclosure, including the additional expenses and losses incurred as a resultof the
misrepresentation or nondisclosure, [but not including] [and including, if the plaintiff is
in the business of engaging in the type of transaction involved.] the profit the plaintiff
[has. shown to a reasonable certainty that {he] [she]] would have made.
Pa.S.S.C.J.I. 17.270 (4th ed. 20·16 supplement). Here Triangle suffered the loss of $237,500.00
and the resulting.loss of the annual 4% quarterly interest payments Trianglewas to receive while
Kaheel retained the investment funds which now totals $52,500.00, The quarterly interest
payments are calculated as follows:
1. For the year 2011, two $2,500.00 payments are owed, for a total of$5,000.00.
2. For the year 2012,-four$2,500.00 payments are owed for a total of$10,000,0Q.
3. For the year 2013, four $2,500.00 payments are owed for a. total of $10,000.00.
4. For the year 2014, four $21500.00 payments are owed for-a total of$10,000.00.
5. For the year 2015~ four $4,500.00 payments are owed for a total. of $10,000.00.
6. For the- year 201 ~ three $2~500.00 payments are. owed for a total of $7,500.00.
See Pls. Proposed Findings of Fact and Conclusions of Law, 187. Thus, the Court will find in
favor of Plaintiff Triangle and against Defendants Kaheel and Toy in. the amount of $W9,000.00
on Count Three Intentional and Fraudulent Misrepresentation.
Count Four-Fraud
I~ Count Four, the Plaintiffs allege word for word the allegations listed in 140 . .156 under
Count Throe-Intentional and Fraudulent Misrepresentation, with the single addition of paragraph
72 which states, "(a]s outlined abovein paragraphs sixty-one (61) through (66) above, Toy,
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directly and as an agent of the defendant corporations herein, made knowingly false statements
to Dunetz concerning the investment 'and its likelihood of success." As this Count is wholly
duplicative of Count Three, the Court will only permit recovery under the theory of fraudulent
misrepresentation once and thus will dismiss Count Four.
Count Five-Negligence
While Count Five is labeled "negligence" generally, the averments of Count Five in the
Plaintiffs third amended complaint make clear that the Plaintiffs are pursuing recovery under
Count Five based upon the theory of negligent misrepresentation. To recover for negligent
misrepresentation, Plaintiffs must prove by a preponderance of the evidence- that there was: ''( 1)
a misrepresentation of a material fact; (2) made under circumstances in which the misrepresenter
ought to have known its falsity; (3) with an intent to induce another to act on it; and (4) which
results in injury to a party acting in justifiable reliance on the misrepresentation."Bili-Rite
Contrs., Inc. v. Architectural Studio, 581 Pa. 454, 866 A.2d 270> 277 (2005). As the Court has
..
found for Plaintiff Triangle on Count Three -Intentional and Fraudulent Misrepresentation, and
the evidence at trial demonstrated that Toy was aware of the falsityof the misrepresentations that
he made to Dunetz, the alternate theory of negligent misrepresentation is disproven. See Bortz v.
Noon, 729 A.2d at 561 (" TI1e elements of negligent misrepresentationdiffer from intentional
misrepresentation in that the misrepresentation must concern a material fact and the speaker need
not know his or her words are untrue, but must have failed to make a reasonable investigation of
the truth of these words.), Further, "[ljiability for negligent misrepresentation, as distinguished
from a misrepeesenfation that is intentional or in reckless ignorance of the truth, is imposed on1y
where a duty exists to give correct. information," Pa. S.$.C.J.I. 17.240, SubcommitteeNote
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citing Renn v. Provident Trust Co, 196 A.8 (Pa. 193 8). Thus, the Court will find in favor of
Defendants and against Plaintiff Triangle in the sum of zero dollars on Count 5~ Negligence.
Count Six-Conversion
As summarized by the Pennsylvania Superior Court in Pittsburgh Const. Co: v. Griffith,
Conversion is a tort by which the defendant deprives. tbe plaintiff of his
. right to a chattel or interferes with the plaintiff's use or possession of a
chattel without the· plaintiffs consent and without lawful justification.
Chrysler CreditCorporation v. Smith, 434 Pa.Super, 429, .643 A.2d 1098,
l 100 (1994), appeal denied, 539· Pa. 664, 652 A.2d 834 (1994). "A
plaintiff has a cause of action in conversion if he or she had actual or
constructive possession of a chattel at the time of the alleged conversion."
Id. Money may be the subject of conversion. Francis. J. Bernhardt, Ill
P.C. v. Needleman, 705 A.2d 875, 878 (Pa.Super.1997) (quoting
Shonberger v. Oswell, 365 Pa.Super. 481, 530 A.2d 112, 114 (1987)).
'However, tho failure' to pay a debt is not conversion. Id.834 A:2d 572, 581 (Pa. Super. 2003). The-requisite intent is the" ... intent to exercise dominion
or control over the goods which is in fact inconsistent with the plaintiffs rights .... " Shon berger
v. Oswell, 530 A.2d 112, 114 (Pa. Super. l987). In International Dairy Queen, Inc. v. Hill, the
Pennsylvania Superior Court further explained that a conversion can be committed by: "(a)
Acquiring possession of the goods, with an intent to assert a right to them which is in fact
adverse to that of the owner. (b) Transferring the goods in a manner which deprives the owner of
control. (c) Unreasonably withholding possession from one who has the right toil. (d) Seriously
damaging or misusing the chattel in defiance of the owner's rights." 378 A.2d 977 (1977),. citing
Prosser, Torts, § 15 (2d ed. 1955). The law is clear "that the measure of damages for conversion
is the market value of the converted property at the time and place of the conversion," L.B.
Foster Co. v. Charles Caracciolo Steel & Metal Yard, Inc., 717 A.2d 1090, 1096 (Pa. Super.
200 I); see also Northcraft v. Edward C. Michener Assoc., Inc., 466 A.2d 620, 628 (Pa. Super.
1983).
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In April of 2011, Toy claimed that he took as a personal draw $16,45'7.65 from Kabeel's
bank account which he used to purchase 1400 Gandy Blvd N.#716, St Petersburg, FL as there
was no resulting mortgage to Kaheel Company made and the property is deeded to Terrey
instead of Jabrier. In Kaheel's bank ledger he lists these withdrawals not as personal draws
("HJT3") but rather as "purchase #716." See Ex. P35--P38; P3 l; See N.T., 10/22/2015, at 13?: 1-
140: 14". The Court finds this to be a conversion of Triangle's investment funds and Kaheel's
funds designed to shield the profits from the Flotida property from any of Kaheel 's creditors,
namely Triangle and Duggan Real Estate Investment, LLC. See Ex. P3 I. As a result of this
transfer and purchase, Terreyacquired $16,457 .65, but no· resulting obligation to repay the fonds
to Kaheel or triangle. Thus, Terrey-and Toy converted the $16, 457 .65 in which Triangle
retained an ownership interest and a verdict will be .entered in favor of Plaintiff Triangle in the
amount of $16, 457.65 on Count Six, Conversion.
CONCLUSIONS OF LAW
For all the foregoing reasons, this Court finds that Plaintiff Triangle has sustained total
losses occasioned by Defendant Toy and Defendant Kaheel in the amount of $289,000.00. A
verdict is entered on the Complaint in favor of Plaintiff Triangle and against Defendant Toy and
Defendant Kaheel in the amount of $~37,500.00 on Count Two-UnjustEnrichment. Moreover,
Plaintiff has sustained further losses occasioned by Defendant Toy and Defendant Kaheel.in the
amount of $52,500.00 in the non-payment of the quarterly interest payments. Thus, a verdict is
entered in favor of Plaintiff Triangle and against Defendant Toy and Defendant Kaheel in the
amount of$ 289,000.00 on Count Three-Intentional and Fraudulent Misrepresentation. Count
Four-Fraud of Plaintiff's Third Amended ``roplaintis hereby dismissed as duplicative: A
verdict in favor of Defendants and against Plaintiff Triangle is entered in the sum of zero dollars
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on Count Five-Negligence. This Court. finds that Plaintiff Triangle has sustained losses caused
by Defendant Toy and Defendant Terrey in the amount of $16,457.65. A verdict is entered on
the Complaint in favor of Plaintiff Triangle and against Defendant Toy and Defendant Kaheel, in
the amount of $16,457.65 on Count Six-Conversion. A verdict-is entered-on the Complaint in
favor of Defendants and against Plaintiff Triangle on Count One-Breach of Contract. The total
verdict owed to Plaintiff Triangle is $289,QOO.OO of which Defendant Terrey is only jointly and
severally liable for $16,457.65. A verdicl is entered in favor of Defendants and against Plaintiff
Howard M. Dunetz on all counts.
Plaintiff Triangle is legally entitled to recover on multiple theories, but its recovery is not
to be duplicated. Accordingly, any amounts recovered by Plaintiff Triangle on any one count
shall be credited against any amount due under other counts where recovery was granted.
BYTHECOURT;
..
Michele A. Varricchio, J.
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