In entertainment and bankruptcy news, the chapter 7 trustee for the bankruptcy filed by former celebrity couple Duane Daniel Martin and Tisha Martin Campbell (the “Debtors”), brought suit against Roxe, LLC (“Roxe”) and others claiming that Roxe was formed by Martin and his brother (also a defendant to this suit) to conceal Martin’s ownership of valuable real estate in Chatsworth, California.  See Gottlieb v. Roxe, LLC, et al. (In re Martin, et al.), Bankr. C.D. Cal. Adv. No. 18-ap-01106, Docket No. 1.  The Debtors are actors who rose to fame on sitcoms in the 1990s.

California

The property at issue was purchased by Duane Martin in 2006 for $900,000 with a $650,000 loan from IndyMac.  Thereafter, Duane Martin borrowed an additional $1,950,000 from IndyMac to construct the Martin family home – a 9,000 square foot luxury residence.

The Trustee alleges that in 2009, Duane Martin quitclaimed the property to the Campbell-Martin Family Trust and thereafter caused the IndyMac loans to go into default “in order to negotiate a short sale” of the property.  To effectuate this, the Trustee claims that Duane Martin negotiated the short sale of the property from Indymac directly to Roxe for a discounted amount of only $1,380,000.

Purchase of the property by Roxe was allegedly funded by a loan of approximately $1.4 million by Will Smith and Jada Pinkett Smith, through their company TB Properties, LLC (“TB Properties”).

The Trustee alleges that, all on the same day in November 2012, TB Properties recorded a deed of trust on the property in the sum of approximately $1.4 million with Roxe listed as borrower, the IndyMac loans used for purchase/construction of the home were satisfied and Roxe obtained title to the property from the Debtors.

Thereafter, the Debtors leased the mansion for $5,000 per month from Roxe.  The Trustee alleges that in July 2018, Duane Martin caused the property to be listed for sale in the amount of $2,695,000 and that the sale proceeds in excess of the TB Properties loans totaled $1.3 million. The Trustee further alleges that the lease was a sham, not intended to be performed.

In the adversary case, the Trustee seeks (i) to quiet title to the property, claiming that the Debtors are the true owners of the property and (ii) a turnover of the property from defendants under Bankruptcy Code Section 542, claiming that the property is estate property.

Both because of the celebrities involved and the bankruptcy litigation claims asserted, this will be an interesting case to follow.  Check back for further updates as the case progresses.