A Pelham contractor has been accused of using bankruptcy to avoid repaying a loan for a failed house flipping project.
Stephen Yager, of Kearny, New Jersey, claims that a $126,000 state court judgement against Michael C. Domenici may not be discharged in bankruptcy court because the debt was a product of fraud.
“Defendant is not the good faith debtor who has fallen on hard times,” according to the adversary complaint filed Sept. 11 in bankruptcy court, “and his fraud should not be rewarded.”
Domenici’s home in Pelham was pledged as security for the Yager loan, according to court records, and Domenici asked bankruptcy court for a homestead exemption on the property.
He characterized the Yager debt as “a real estate investment gone bad” and bankruptcy as the “only alternative to obtain relief and a fresh start.”
U.S. Bankruptcy Judge Sean H. Lane rejected Yager’s objections to voiding the state court judgement on Aug. 3 and granted the homestead exemption.
Now in the adversary proceeding, Yager claims that the loan may not be discharged through bankruptcy because it was obtained by fraud, embezzlement and larceny.
The dispute goes back to late 2018, when Yager loaned $100,000 in cash to Domenici, at 10% interest, to be repaid in seven months. The money was supposed to be used to buy, renovate and sell a house on Oak Lane in Pelham, according to the new complaint.
But after the loan came due, Yager claims, Domenici evaded collection attempts. He allegedly said the project was taking longer than anticipated; the sale was completed but it was taking time for the bank to clear a very large check; and the renovations did not go as well as planned and he lacked the funds to satisfy the debt.
Yager also claims that Domenici never actually bought the property to be renovated.
Yager sued Domenici’s company, JMA Holding of NY Inc., in Westchester Supreme Court. In February 2022, Justice Gretchen Walsh granted summary judgment, awarding $125,938, including interest and other costs, to Yager.
This past June, Domenici petitioned for Chapter 7 liquidation, declaring $690,549 in assets and $951,106 in liabilities. He owed $780,000 to Loan Depot for a home mortgage and $136,000 to Yager.
His intention, according to the petition, was to retain ownership of his property, repay Loan Depot and get the Yager debt voided.
“Mr. Yager is not the sole reason for having to file,” Domenici stated in papers supporting his request to void Yager’s court judgment.
He said he was hospitalized for COVID in 2020. His wife lost her job. They fell behind on the mortgage and were two years in arrears and facing foreclosure. Then he was fired from his job in January.
He got a new job as a construction manager, earning $19,167 a month.
“Bankruptcy was a last resort for me,” Domenici stated. “I tried other alternatives, but they did not work for me. I feel I had no other choice, especially due to the actions of Mr. Yager.”
Yager claims that the sole purpose of Domenici’s Chapter 7 petition, is “to unload debts that he can afford to pay but chooses not to.”
Yager is represented by Manhattan attorneys Adrienne Woods and Omar Zareh.
Domenici’s bankruptcy is being handled by Mount Kisco attorney Nathan Horowitz.
