The Real Deal Miami

Deauville Beach Resort lost a lawsuit and now can’t pay $400k judgment: court filings

The resort has been closed since July 2017 due to an electrical fire, and later, damage from Hurricane Irma
By Francisco Alvarado |
Research by Haru Coryne
September 04, 2018 08:45AM

Deauville Beach Resort

The company managing hotel operations for the Deauville Beach Resort in Miami Beach is so broke, it can’t pay a judgment of more than $400,000, according to recently filed documents in Miami-Dade Civil Court.

Belinda Meruelo, manager for Deauville Hotel Management, LLC., signed an agreement conveying all of the company’s assets to Miami attorney Felix M. Caceres for liquidation last week. Meruelo and her family have owned and operated the Deauville since 2004. The agreement is part of a petition commencing an assignment for the benefit of creditors filed in civil court by Caceres on the same day.

This type of petition is an alternative to bankruptcy that allows a debtor to voluntarily assign its assets to a third party in order to liquidate them so that the debts are fully or partially paid back. Caceres would be like a trustee who disperses the assets. Although the agreement states that Deauville Hotel Management has zero assets and zero money.

The Melvin Grossman-designed hotel, where the Beatles stayed and performed for the Ed Sullivan Show in 1964, is owned by Deauville Associates, a separate entity controlled by Belinda, Richard and Homero Meruelo. The property is located at 6701 Collins Avenue. Sources say the hotel is being marketed for sale.

During a brief phone call, Richard Meruelo referred questions to his attorney, Jose Chanfrau. He declined comment.

After the petition was filed, Deauville Hotel Management requested a stay in an eight-year-old lawsuit pending against the company. Kemesia and Patrick Ward sued Deauville Hotel Management for allegedly ruining their wedding in the summer of 2010. Their complaint claims that the couple had booked a ballroom at the hotel for their wedding reception, but were not able to hold it there after a Miami Beach building inspector deemed the space unsafe for occupancy.

The Meruelos never notified the Wards until the day of the wedding and relocated their ceremony and party to the Deauville’s lobby, where the event was crashed by other hotel guests, including people in their bathing suits, according to court documents. In 2015, a jury ruled in favor of the Wards, awarding them $27,986 in damages and $405,222 in attorney fees. Deauville Hotel Management appealed and lost in 2017.

Clayton Kaeiser, the lawyer representing Caceres, said the petition is essentially the state version of federal bankruptcy. “In a way it’s a way to protect them from the judgment,” Kaeiser said. “The parties are very antagonistic. This has now ballooned into a nearly half-a-million [dollar] case.”

Josh Migdal, a partner with the law firm Mark Migdal Hayden not involved in the case, said the plaintiffs should investigate if there is a way to link Deauville Hotel Management to Deauville Associates in order to place a lien on the property. “If I was involved in the case, I would want to conduct an inquiry into any fraudulent transfers, such as payments to insiders, leading up to the judgment,” Migdal said. “I would do a deep dive because all of it looks suspect.”

The Deauville has been closed since July 2017 due to an electrical fire that forced the owners to shut down the building’s power and relocate 800 guests. The property also sustained damage from Hurricane Irma two months later. While the property has been shuttered, Miami Beach officials have been applying pressure on the Meruelos to re-open. In May, the city commission’s land use committee directed City Manager Jimmy Morales to come up with an aggressive action plan, including possible litigation, to force the Meruelos to speed up the rehabbing of the 540-room hotel.

The Meruelos paid $4 million for the hotel in 2004.