Dominion Financial Services, LLC. v. Pavlovsky
673 F.Supp.3d 727
D. Maryland2023Background
- Dominion Financial Services made eight commercial construction/purchase loans (Mar–Nov 2021) to companies controlled by Alexander Pavlovsky for seven Florida properties and one New York property.
- Willman Cabrera (and his entities) purchased the properties then quickly resold them to Pavlovsky entities at dramatically inflated prices; Pavlovsky entities obtained loans to cover inflated prices and renovation draws.
- Dominion alleges Pavlovsky provided false building permits and withdrew large construction draws that were not used for work; many properties were later deemed unsafe or demolished; Cabrera received kickbacks via wire transfers.
- Dominion sued for breach of contract, breach of guaranty, and fraud; defendants defaulted (Clerk entered defaults); Dominion moved for default judgment seeking roughly $9.08M plus interest, fees, and costs.
- The Court found personal jurisdiction (forum-selection clauses for signatories; conspiracy theory for Cabrera defendants), rejected merger as to two Florida foreclosures, awarded fraud and contract/guaranty judgments as detailed below, plus prejudgment interest (from Dec. 28, 2022) and reasonable fees/costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over loan-signatories and non-signatories (Cabrera) | Forum-selection clauses bind signatories to Maryland courts; Cabrera are co-conspirators whose acts were directed at Maryland lender | Cabrera lacked direct Maryland contacts; PJ improper | PJ established: signatories bound by forum clauses; Cabrera defendants subject to PJ under Maryland conspiracy/agency theory |
| Effect of Florida foreclosures on claims for Loans Three and Seven (merger/res judicata) | Florida foreclosure did not include deficiency judgments; Dominion may seek money judgments here | Defendants argued merger/duplication of relief where Florida entered foreclosures | Merger does not bar money judgments; Florida judgments reserved deficiency; Dominion may recover outstanding balances here |
| Fraud claims (Rule 9(b) particularity; joint-and-several liability) | Allegations identify who, what, when (inflated prices, false permits, kickbacks) and intent; seeks joint-and-several liability for full loan balances | Konstantin (and others) denied fraud liability and challenged sufficiency / alleged duplication | Fraud pleaded with particularity as to Alexander and Cabrera defendants; court awards joint-and-several fraud judgment of $9,079,051.78 plus post-judgment interest; fraud claim against Konstantin denied |
| Breach of contract / guaranty liability | Loan documents and guaranties make borrowers/guarantors liable for outstanding balances and fees | Some defendants argued duplication with other judgments; challenge to amounts | Breach and guaranty claims established; Konstantin liable on loans he guaranteed for $4,383,875.39 plus post-judgment interest |
| Prejudgment interest — accrual date and rate | Dominion: six percent (MD legal rate) from loan execution dates | Defendants: challenge accrual date; dispute that amounts were then "certain, definite, and liquidated" | Court denies interest from execution dates (acceleration was discretionary); awards discretionary prejudgment interest at 6% per annum from Dec. 28, 2022 |
| Attorneys' fees and costs (contractual fee-shifting; block billing objection) | Contractual fee provisions cover Dominion's reasonable fees; requested $65,332 fees + $22,947.87 costs | Alexander argued block billing should bar fees | Fee-shifting enforceable; timesheets sufficient despite some block billing; awards $88,279.87 jointly and severally against defendants who signed loan documents |
Key Cases Cited
- Ryan v. Homecomings Fin. Network, 253 F.3d 778 (4th Cir. 2001) (defaulted defendant deemed to admit well-pleaded facts but not damages or legal conclusions)
- Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200 (5th Cir. 1975) (basis in the pleadings required for default judgments)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard applies to well-pleaded allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must be plausible to survive challenge)
- Int'l Shoe Co. v. Washington, 326 U.S. 310 (1945) (minimum contacts due process standard for jurisdiction)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941) (federal courts apply forum state choice-of-law rules)
- Mackey v. Compass Mktg., Inc., 892 A.2d 479 (Md. 2006) (Maryland conspiracy theory of jurisdiction—overt acts by coconspirator attributable for PJ)
- Etgen v. Washington Cty. Bldg. & Loan Ass'n, 41 A.2d 290 (Md. 1945) (co-conspirators liable for fraud irrespective of degree of participation)
- De Las Cuevas v. Nat'l Enters., Inc., 927 So.2d 41 (Fla. Dist. Ct. App. 2006) (distinguishing foreclosure sale from a judgment on the note; deficiency/judgment not automatic)
- Monmouth Meadows Homeowners Ass'n, Inc. v. Hamilton, 7 A.3d 1 (Md. 2010) (contractual fee awards analyzed under Maryland professional-conduct factors rather than lodestar)
- Parkway 1046, LLC v. U.S. Home Corp., 961 F.3d 301 (4th Cir. 2020) (prejudgment interest required only when obligation and amount were certain and liquidated by a specific date)