Failure to Follow Traditional Mezzanine Financing Structure Precludes Plaintiffs from Recovering as Secured Parties: Lebedowicz v Meserole Factory LLC
In a December 20, 2011, decision by Justice Schmidt, the court denied plaintiffs’ motion for summary judgment declaring that they are entitled to defendants’ membership interests in defendant-LLC as a security interest in connection with the purchase of real property. Defendant-LLC borrowed $3.5 million to purchase real property from the plaintiffs. Plaintiffs claimed that under the mezzanine loan agreements, the defendant-LLC members pledged their membership interests in the LLC as security to be transferred to plaintiffs upon default. The defendant-members signed the loan agreements, not in their individual capacities, but on behalf of defendant-LLC. Because an LLC “cannot hold its own LLC interests and, therefore, could not grant the plaintiffs a lien on its own LLC interests,” the court denied plaintiffs’ motion. The court further noted that had the parties followed “the traditional mezzanine loan structure,” they would have formed a separate holding company to own the borrower-LLC, allowing the LLC to grant plaintiffs a lien on its interests in the newly-formed holding company.
Lebedowicz v Meserole Factory LLC, Sup Ct, Kings County, December 20, 2011, Schmidt, J., Index No. 20293/10
Motion to Reargue Denied, Defendants Fail to Show Steps Taken Prior to Closing To Remedy Alleged Title Defect: Latipac Corp. v. Birchard and Haddock
In a January 31, 2012 decision by Justice Oing, the court denied a motion to reargue the denial of defendants’ summary judgment motion. Plaintiff was supposed to purchase a $3 million property from defendants but failed to do so, arguing that two commercial units in the property had been illegally combined in contravention to the property’s certificate of occupancy. Plaintiff sued to recover its $150,000 deposit and defendants counterclaimed for a declaration that they were entitled to keep the down payment. The parties disputed whether the nonconforming use was, under the contract, a defect that defendants had to cure. The court determined that there was no dispute that the parties were discussing a remedy for the nonconforming, but there was an issue of fact as to what steps, if any, defendants took prior to the closing to rectify the situation requiring the denial of defendants’ summary judgment motion.
Latipac Corp. v. Birchard and Haddock, Sup Ct, New York County, January 31, 2012, Oing, J, Index No. 603299/09.
Jilted Boyfriend Can Proceed with Action Against Ex For Wrongful Transfer of Real Property: Menteiga v DePaola
In a November 30, 2011 decision by Justice Pines, the court granted in part and denied in part the defendants’ motion to dismiss the complaint which contained 12 separate causes of action premised on the plaintiff’s allegations that defendant DePaola transferred title to real property located in Pennsylvania to herself and the plaintiff as tenants in common when they began dating but then wrongfully transferred the deed back to herself by forging the plaintiff’s name, following their break-up. The court dismissed the cause of action for slander on the grounds that the plaintiff failed to plead special damages with the requisite particularity, the fraud claim because the plaintiff failed to allege in detail, as required under CPLR § 3016(b), any misrepresentation DePaola made on which the plaintiff justifiably relied, and the claim for civil conspiracy as such cause of action is not recognized in New York. However, the court permitted the plaintiff to proceed on his other claims (except those he voluntarily dismissed). First, the court rejected the defendants’ argument that it lacked subject matter jurisdiction over the claims brought under Article 15 of the Premises Actions and Proceedings Law and RPL § 329 because the subject property was located in Pennsylvania on the grounds that the court’s undisputed personal jurisdiction over the defendants gave the court equity jurisdiction over their rights with respect to foreign property. The court also found that the plaintiff stated a claim for breach of fiduciary duty based on the legal principle that co-tenants in common owe each other fiduciary duties and may not ordinarily acquire adverse title to the common property without consent. Finding that claim sufficient, the court permitted the plaintiff to proceed on his claim for aiding and abetting breach of fiduciary duty. Finally, the court found the defendants’ argument that the claims against defendant Nolan as a notary failed because the plaintiff cannot prove money damages, as premature, because the plaintiff was not required to provide a rationale for his damages at the pleadings stage.
Manteiga v DePaola, Sup Ct Suffolk County, November 30, 2011, Pines, J, Index No. 16432-2011
My Brother's Keeper; Court Grants Motion for Temporary Receiver for Properties Co-Owned by Deceased's Brother and Widow: Clark v Clark
In a December 20, 2011 decision by Justice Warshawsky, the court granted in part the plaintiff’s motion, pursuant to CPLR 6401 for the appointment of a temporary receiver. The plaintiff, Winifred Clark, the widow of William Clark, brought the action against William’s brother, James Clark. In the instant motion, Winifred moved for the appointment of a temporary receiver for 32 properties, 28 of which she, through William, and James owned as tenants in common; as to the others, the ownership was disputed. Winifred’s brought the motion in an attempt to protect her rights to 50% of the net rental income from the properties, which James managed. The appointment of a temporary receiver is an extreme remedy; the statute requires the movant to prove, by clear and convincing evidence that “there is a danger that the property will be removed from the state, or lost, materially injured or destroyed.” The court explained that while it is “loathe to appoint a receiver in most cases,” and notwithstanding the significant cost required to do so, it found that all of James’ actions taken together, including: defaulting on tax payments; under reporting income; maintaining double books; failing to pay Winifred her fair share of income; and misuse of joint income for personal needs, provided clear and convincing evidence that the CPLR 6401 standard was met. Therefore, the court granted the motion with respect to the 28 properties for which Winifred and James’ co-ownership was undisputed.
Clark v Clark, Sup Ct, Nassau County, December 20, 2011, Warshawsky, J., Index No. 5514/2008
Questions of Fact and Automatic Stay Prohibit Motion for Summary Judgment: Tomlinson v Degannes
In a December 2, 2011 decision by Justice Schmidt, the court denied the defendant/third-party defendant, Chan’s, motion for summary judgment pursuant to CPLR 3212 which sought to dismiss the complaints of both the plaintiff, Tomlinson, and the intervening defendant/third-party plaintiff, BNC Mortgage, Inc. The case stemmed from a sale of real property in which Tomlinson was the seller and Chan was the settlement agent representing BNC, who was the lender. After the closing, Tomlinson commenced the action for recision of the contract of sale and for damages resulting from an alleged “mortgage rescue scheme.”
In the instant motion, Chan asserted that: 1) with respect to Tomlinson’s complaint, he was not a party to the transaction and, notwithstanding, there were no irregularities in the disbursements of the loan proceeds because "simple arithmetic" and the HUD-1 statement verified that the loan proceeds were accounted for; and 2) with respect to BNC’s complaint, the claims were unsupported by the record and BNC failed to properly plead their causes of action. The court found that material questions of fact existed related to Tomlinson’s allegations about irregularities in the disbursements at the closing, precluding summary judgment as to Tomlinson’s complaint. The court then dismissed without prejudice the branch of Chan’s motion seeking summary judgment against BNC because BNC was under Chapter 11 bankruptcy protection and subject to the automatic stay. The court noted that Chan could renew that part of the motion when BNC emerged from bankruptcy or when the automatic stay was lifted.
Tomlinson v. Degannes, et al, Sup Ct, Kings County, December 2, 2011, Schmidt, J., Index No. 41418/2007
Express As-Is Lease Provisions Bars Fraud Claim: Midorimatsu, Inc. v Hui Fat Co.
In an November 22, 2011, decision by Justice Kitzes, the court granted defendant’s motion to dismiss for failure to state a cause of action. Plaintiff-restaurant tenant sued defendant-landlord for allegedly failing to prepare the premises for compliance with certain restaurant regulations, including seating capacity for up to 150 customers. Defendant moved to dismiss based on specific provisions in the lease, which expressly placed the burden of such compliance on plaintiff in several “as is” provisions. Based on the unambiguous lease provisions, the court granted the motion, finding that defendant was under no obligation to make any changes to the premises and that any alleged representations to the contrary were specifically merged into the lease documents.
Midorimatsu, Inc. v Hui Fat Co., Sup Ct, Queens County, November 22, 2011, Kitzes, J., Index No. 16053/2011
Motion to Dismiss Granted Where Causes of Action in Amended Complaint Were Identical to Those in Original: Siegel Consultants, Ltd. v Nokia, Inc.
In an April 28, 2011 decision by Justice Bransten, the court granted the third-party defendant Frieland’s motion to dismiss the third-party complaint against it; denied the defendant/third-party plaintiff 5 LLC’s cross-motion to disqualify Friedland’s attorney (“Frohman”); and denied Friedland’s motion for sanctions. The matter arose out of the rental of real property owned by 5 LLC. Friedland was 5 LLC’s exclusive agent but Siegel, a real estate broker, claimed it had an instrumental role in securing the rental, entitling it to a commission. After a prior order of the Court dismissed all eight causes of action against Friedland, 5 LLC served an amended third-party complaint which repeated each of the eight causes of action previously dismissed, and added a ninth cause for declaratory judgment. Granting Friedland’s motion to dismiss, the court held that “the CPLR does not permit a party to replead causes of action that have already been dismissed through an amendment to the complaint.” The Court also held that the ninth cause of the action was duplicative of the first cause of action and that declaratory relief was inappropriate because 5 LLC had an adequate alternative remedy. The court dismissed 5 LLC’s cross-motion for disqualification, which alleged Frohman had represented both 5 LLC and Friedland and advocated for both at the same time, finding that 5 LLC failed to establish each of the three requirements of a motion to disqualify: 1) 5 LLC was never Frohman’s client; 2) there was not a substantial relationship between the main action and the third-party action; and 3) the interests of the parties were not materially adverse because in the first action both parties maintained that Friedland was the sole procuring broker. Finally, the court found that the sanctions were not warranted because none of the party’s arguments were completely without merit.
Siegel Consultants, Ltd. v. Nokia, Inc., Sup Ct New York County, April 28, 2011, Bransten, J., Index No. 603277/08.
Court Decides Motions for Summary Judgment arising from Fraudulent Financial Advice and Resultant Mortgage Default: Mauro v Countrywide Home Loans, Inc.
In an October 17, 2011 decision by Justice Warshawsky, the court: 1) denied in part and granted in part both Kaplan’s and Countrywide’s motion for summary judgment to dismiss the complaint; and 2) denied Mauro’s cross-motion for summary judgment against Countrywide. On the advice of Dawson, who held himself out as an experienced financial manager, Mauro mortgaged two previously unencumbered properties for investment purposes. Mauro alleged that she did not receive complete information about the loans, including how the proceeds would be disbursed, and that nothing was explained to her at the closing, where Kaplan was the attorney for Countrywide. Although the HUD-1 Settlement Statements indicated that the proceeds would be distributed to Mauro, all proceeds were delivered to Dawson or entities he controlled, including the defendant BMG. BMG initially made the mortgage payments on both loans but eventually defaulted and Dawson was arrested for grand larceny.
The court denied parts of Kaplan’s motion for summary judgment holding that material issues of fact existed as to: 1) the elements of fraud with respect to whether and for what purpose Kaplan made the representation that the loan funds were to be directed to Mauro alone; 2) breach of fiduciary duty, because while it was unlikely that Kaplan entered into an attorney-client relationship with Mauro by drafting two deeds, it was still a factual possibility; and 3) Countrywide’s cross-claims for professional negligence, breach of contract and indemnity. Kaplan’s motion to dismiss the claim for intentional tort was granted because the actions giving rise to the claim occurred beyond the one-year statute of limitations period.
On Countrywide’s motion, the court held that: 1) there were factual issues precluding the dismissal of the claims for breach of contract and fraud, and Countrywide’s cross-claims against Kaplan that it could be only be liable due to its agent’s (i.e., Kaplan’s) negligence and breach of contract; 2) because Mauro could not establish a likelihood of success on the merits and was seeking economic damages, the claim for injunctive relief was inappropriate and therefore dismissed; 3) the claims seeking a declaration that loans were void because obtained under false pretenses were dismissed because Mauro’s cooperation in their placement established their validity; and 5) because there were no factual issues with respect to Dawson’s criminal wrongdoing through BMG, summary judgment was granted on Countrywide’s cross-claim for indemnification against Dawson and BMG.
Finally, the court denied each part of Mauro’s motion for summary judgment against Countrywide finding that: 1) issues of material fact with respect to the direction of proceeds to BMG precluded the claims for breach of contract, fraud, and declaratory relief; and 2) Mauro had not established a likelihood of success on the merits, precluding injunctive relief.
Mauro v Countrywide Home Loans, Inc., Sup Ct, Nassau County, October 17, 2011, Warshawsky, J., Index No. 000191/2011.
Nothing New to Say; Motion for Leave to Amend Complaint Denied: Verdeber v Commander Enters. Centerreach, LLC
In an October 18, 2011 decision by Justice Warshawsky, the court denied the plaintiffs’ motion to amend the complaint pursuant to CPLR 3025(b) to include claims for breach of contract and waiver with respect to defendant Benco LLC’s (“Benco”) alleged failure to consummate a closing to purchase the plaintiffs’ interest in the defendant Commander Enterprises Centereach, LLC (“CEC”). The defendants opposed the motion asserting that the new claims were without merit, and were based on transactions that were previously resolved by the court and affirmed by the Second Department. The individual plaintiffs were holders of a 20% interest in CEC; Benco owned the remaining 80%. The underlying dispute arose from the individual plaintiffs’ sale of their interests in CEC to the plaintiff company Verbenco, LLC (“Verbenco”). In a prior proceeding, the court held and the Second Department affirmed that an operating agreement from the year 2000 was controlling. Pursuant to the operating agreement, Benco alone was entitled to purchase the interests. Therefore, the court held that the plaintiffs’ attempted transfer to Verbenco terminated their membership in CEC and was an offer to sell their interest, which Benco accepted. In denying the current motion, the court held: 1) that the proposed amended complaint did not raise any “‘additional or subsequent transactions or occurrences’ as mandated by § 3025(b)”; and 2) that it was bound by the prior decision of the Second Department.
Verdeber v Commander Enters. Centereach, LLC, Sup Ct, Nassau County, October 18, 2011, Warshawsky, J, Index No. 00769/09.
Motion to Dismiss Granted Based on Findings of no Course of Conduct or Justifiable Reliance: Treeline 990 Steward Partners LLC v. Rait Atria, LLC
In a November 10, 2011 decision by Justice Bucaria, the court granted the defendants’ (the “RAIT” defendants) motion pursuant to CPLR 3211(a)(1), (a)(5), and (a)(7) to dismiss the amended complaint and the answer and interpleader complaint of the defendant/interpleader plaintiff 990 Stewart Avenue Investors, LLC (“SAI”), and because of that disposition, the court denied as moot SAI’s motion pursuant to CPLR 1006 for permission to pay certain monies into the court. SAI was formed by Plaintiff Treeline 990 Stewart Partners LLC (“Treeline”) and RAIT Atria, LLC (“RAIT”) to acquire certain property in Garden City. The Operating Agreement required all modifications thereto to be in writing. The property allegedly experienced revenue flow problems due to downturn in the economy, leading Treeline and the RAIT defendants to discuss a discounted buyout or some other modification of what Treeline claimed, and the RAIT defendants disputed, was a “loan”. Treeline alleged that the parties orally agreed that RAIT would accept a discounted payoff of the “loan,” which led Treeline to invest, to its detriment, further money into the property.
In granting the RAIT defendants’ motion to dismiss, the court found that: 1) the claim for breach of contract was precluded by General Obligations Law § 15-301(1) (written agreements expressly prohibiting oral modifications cannot be changed by oral executory agreements) because the memorandum offered by Treeline as written proof of the modification was insufficient because it made clear that all of the material terms were not then agreed to, and the requirement that modifications be in writing was not waived by an alleged course of conduct; and 2) Treeline’s claims for fraud and negligent misrepresentation could not be maintained because it “fail[ed] to allege a single fraudulent statement or negligent misrepresentation made by defendants on which [it] justifiably relied….” and, moreover, because all of the parties knew of the written modifications requirement, Treeline’s alleged detrimental reliance on oral representations could not have been justified.
Treeline 990 Stewart Partners LLC v Rait Atria, LLC, Sup Ct, Nassau County, November 10, 2011, Bucaria, J., Index No. 18904/2010
$400,000 Note is Not the Same as $400,000 Payment, Strict Compliance Required to Exercise Option: Sag Harbor Land, LLC v Sag Development Partners, LLC
In a September 8, 2011 decision by Justice Emerson the court granted a mortgage holder summary judgment on its foreclosure claim and for the appointment of a referee. The claim arose from a $16 million real estate purchase, $8 million of which was originally contingent upon the purchaser receiving certain environmental and other approvals. The purchaser had the option to seek a reduction in the amount of the mortgage if the approvals were not received within three years of the closing. The parties later entered into a number of modification agreements which eliminated the purchaser’s right to a reduction of the mortgage but extended the loan’s maturity date. The last of these agreements extended the maturity date to January 6, 2011 and gave the purchaser the option of further extending the maturity date upon the payment of $400,000 by December 6, 2010.
The purchaser attempted to execute the option by sending the mortgage holder a $400,000 note on January 3, 2011. Plaintiff mortgage holder rejected the purchaser’s attempt to exercise the option and declared the loan due on its maturity date, January 6, 2011. The purchaser defaulted and the plaintiff mortgage holder commenced this foreclosure action and moved for summary judgment. The court granted the plaintiff summary judgment, rejecting the mortgage holder’s argument that it validly exercised the option, holding that strict compliance is required to validly exercise an option. The court also denied defendant’s motion for leave to amend its answer to assert fraud in the inducement and promissory estoppel because those defenses were unavailable to the defendant as a matter of law.
Sag Harbor Land, LLC v Sag Development Partners, LLC, Sup Ct, Suffolk County, September 8, 2011, Emerson, J, Index No. 2799-11.
Commercial Building Not Subject to Residential Foreclosure Requirements: Meyerson Capital X, LLC v Kats
In an October 25, 2011 decision by Justice Hinds-Radix the court had to decide in the context of a foreclosure action whether a loan was a “home loan” or a loan against commercial property. The defendant moved to dismiss the complaint arguing, by way of his attorney’s affidavit, that the loan was a home loan and plaintiff failed to comply with the statutory requirements before foreclosing on the loan. Defendant submitted the contract of sale from when he brought the property, which was entitled “Residential Contract of Sale,” to support his argument. Plaintiff submitted in opposition the loan documents signed by plaintiff which stated that the loan was for business or commercial purposes and not for personal, family, consumer or household purposes. The court found, based on the loan documents signed by plaintiff, that the loan was not a “home loan” under the various statutes and denied plaintiff’s motion to dismiss.
Meyerson Capital X, LLC v Kats, Sup Ct, Kings County, October 25, 2011, Hinds-Radix, J, Index No. 8797/11.
That's No Excuse! Advice of Loan Servicing Agent Insufficient Basis for Leave to File Late Answer: Bank of NY v. Jayaswal
In an October 17, 2011 decision by Justice Whelan, the court denied the defendants-mortgagors’ motion for leave to file a late answer pursuant to CPLR 3012(d). Plaintiff commenced the mortgage foreclosure action in September 2009, and after multiple settlement conferences were unsuccessful, defendants failed to submit an answer or otherwise timely appear. The court denied the defendant’s motion which sought to relieve them of their default in answering and for leave to serve and file a late answer because they failed to provide a reasonable excuse for their default. The sole excuse proffered by defendants was that after receiving the summons complaint, they panicked and relied exclusively on advice they received from a loan servicing agent, which, according to the defendants, was to “calm down and not worry about the legal paper work.” The court held that this excuse consisted of “nothing but vague, conclusory and unsubstantiated claims.” The court also found that there was no evidence of justifiable reliance on the advice because the summons included a warning, mandated by RPAPL 1320, which explicitly: advised the defendants to speak to an attorney; informed them that they “must respond by serving a copy of the answer”; and alerted them that failing to do so could lead to a default judgment and the loss of their home. The court noted that the defendants’ failure to demonstrate a reasonable excuse obviated the need to examine whether they had a potentially meritorious defense.
The Bank of New York v. Jayaswal, Sup Ct, Suffolk County, October 17, 2011, Whelan, J, Index No. 38145/09.
LLC Member not Entitled to File Notice of Pendency against Property Owned by LLC: Born To Build, LLC v Saleh
In a September 20, 2011, decision by Justice Warshawsky, the court denied plaintiff-contractor’s motion for an order directing the clerk of court to accept and file a notice of pendency and granted defendant-owners’ corresponding motion to preclude the filing of the notice. The court also denied plaintiff’s request for injunctive relief but otherwise denied defendants’ motion to dismiss the complaint under CPLR 3211 [a] [1] based on documentary evidence. Plaintiff performed $2.5 million of construction services for which it was not paid, obtained a judgment, and sought recovery in connection with certain real property owned by defendants. Plaintiff claimed to have acquired an interest in the limited liability company that owned the property and attempted to file a notice of pendency against the property. The court held, however, that under LLCL § 601 membership interest in an LLC “is personal property and does not give a member interest in specific property of the limited liability company” and decided the parties’ lis pendens motions accordingly. The court then denied defendants’ motion to dismiss based on a sworn statement from the LLC member from whom plaintiff allegedly acquired his interest, finding that “the documentary evidence is convincing, but not conclusive on the subject of relationship between [the owners of the property].”
Born To Build v Saleh, Sup Ct, Nassau County, September 20, 2011, Warshawsky, J., Index No. 9558/2011
No Duplication of Claims, Reasonable Reliance Determination Benefitted by Discovery, Jury Waiver Provision Valid: Ambac Assur. Corp. v. DLJ Mtge. Capital, Inc.
In an October 7, 2011 decision by Justice Kornreich, the court granted plaintiffs’ motion for leave to reargue; denied defendants’ motion to dismiss plaintiff’s fraudulent inducement claim; and granted defendants’ motion to strike plaintiff’s demand for a jury trial. Plaintiff’s motion to reargue followed an order dismissing its fraudulent inducement claim and striking its demand for jury trial. The action arose out of the securitization of a pool of over two thousand second lien, residential mortgage loans, which had been transferred to a trust. Plaintiff entered a contract with DLJ Mortgage Capital, Inc, the sponsor of the transaction, whereby it issued a policy guaranteeing certain payments of the securities. Defendant Credit Suisse Securities (USA), LLC served as the underwriter.
The court held that the First Department’s recent decision in MBIA Ins. Corp. v. Countrywide required the granting of plaintiffs’ motion to reargue. There, the First Department established that a fraudulent inducement claim is not duplicative of a breach of contract claim solely because “some of the allegedly false representations are also contained in the agreements as warranties and form the basis of the breach of contract claim.”
The court denied defendant’s motion to dismiss the fraudulent inducement claim, holding that although plaintiffs’ reliance on Credit Suisse’s allegedly fraudulent misrepresentations was most likely unreasonable as a matter of law, determining reasonable reliance requires a fact-intensive inquiry that “would benefit from a complete record created after the parties’ discovery.” As to plaintiffs’ demand for a jury trial, the court found that jury wavier provision in the Insurance and Indemnity agreement between plaintiffs and DLJ was controlling. The court held that the provision was broad enough to cover the fraudulent inducement claim and plaintiffs did not expressly challenge it. Further, because their fraudulent inducement claim depended, in part, on the warranties contained in the agreement, the court held that plaintiffs had effectively affirmed its validity.
Ambac Assur. Corp. v DLJ Mtge. Capital, Inc., Sup Ct, New York County, October 7, 2011,Kornreich, J, Index No. 600070/10.
Default Motion for a Judgment of Foreclosure and Sale Denied for Accuracy: Madison Natl. Bank v 256 Jefferson Mgt. LLC
In a September 22, 2011 decision by Justice Hinds-radix in an action concerning the foreclosure of a mortgage on commercial real property, the court denied the plaintiff’s default motion for the entry of a judgment of foreclosure and sale. Although there was no opposition to the motion, the court reviewed the proposed judgment for accuracy and identified certain factors warranting its denial. Those circumstances included a request by the plaintiff’s counsel for the reimbursement of expenses which were not reimbursable on their face and the inclusion of language permitting the plaintiff to recover any mortgage debt deficiency from the mortgage guarantors, where such payment was not required under the guarantee. The court also questioned attorney fees incurred by the plaintiff’s counsel concerning adjourning a motion for summary judgment due to bankruptcy, as it was unclear whether the bankruptcy of the defendant was intended. The court noted that if the defendant was a judgment debtor in a pending bankruptcy, the foreclosure sale would be subject to a bankruptcy stay.
Madison Natl. Bank v 256 Jefferson Mgt. LLC, Sup Ct, Kings County, Sept. 22, 2011, Hinds-Radix, J, Index No. 16545/10
"Piercing the Corporate Veil" Is Not An Independent Cause of Action; Ersail v. Pour et al.
In an August 3, 2011 decision by Justice Driscoll the court granted a motion to dismiss claims against an entity seeking to pierce the corporate veil and against that entity’s purported “controlling officer.” The litigation arose from a mortgage transaction which was the subject of a companion foreclosure suit. This litigation – brought by the mortgagee – brought claims against various individuals and entities sounding in breach of fiduciary duty, negligence, fraud and unjust enrichment. The complaint only stated a cause of action for “breach of the corporate veil” against one of the defendant entities and then stated a claim against that entity’s “controlling officer” by “imputing” to that person the entity’s purported wrongful conduct. The court dismissed both claims holding that there was no independent claim for “piercing the corporate veil” and that there were no allegations of wrongful conduct by the entity (or its principle) supporting liability against the purported “controlling officer.”
Ersail v. Pour et al., Sup Ct, Nassau County, August 3, 2011, Driscoll, J, Index No.20835/10.
Matter of Widespread Public Notice Not the Basis for Fraud or Misrepresentation: Khindri v. Getty Petroleum Mktg., Inc. and Albert Salib
In an October 11, 2011 decision by Justice Pines, the court granted defendant Getty’s motion for summary judgment dismissing the complaint against it, and dismissed the complaint against non-moving defendant Salib. Pursuant to a purchase agreement, the plaintiffs were to acquire a gas station business from Salib. Plaintiffs also entered into a lease of the real property on which the gas station was located with Getty, the owner thereof. The plaintiffs’ suit alleged that Getty defrauded them into purchasing the business, asserting two causes of action for fraud, and a third for negligent misrepresentation. The suit centered on a proposed public condemnation of part of the property that arose after the purchase agreement was signed but before the closing, which would have prevented its future use as a gas station. The plaintiffs alleged that they were never informed of the condemnation and that both defendants knew about and purposely concealed it from them.
The court held that Getty sustained its prima facie showing because the plaintiffs could have discovered the condemnation with the use of due diligence, as it was a matter of public record and part of a press release to numerous media outlets. The court then found that plaintiffs failed establish any material issues of fact because their allegation that Getty promised improvements to the property, including new gas tanks, could not have been justifiably relied upon in light of the pending condemnation. After searching the record pursuant to its ability under CPLR 3212(a), the court held that the plaintiffs also had no claims against Salib. The court again reasoned that even if Salib knew of and purposefully concealed the condemnation from the plaintiffs, it was a widely publicized matter of public record before the closing.
Khindri v. Getty Petroleum Mktg., Inc., Sup Ct, Sup Ct, Suffolk County, October 13, 2011, Pines, J, Index No. 39158/08
Failure to Serve Notice of Default Not a Proper Ground for Dismissal under CPLR 3211: Old Rock Assoc. v BDG Yapshank, LLC
In a September 16, 2011, decision by Justice Whelan, the court denied in part and granted in part defendant’s motion to dismiss plaintiff’s mortgage-foreclosure action and demand for a deficiency judgment in connection with the purchase of certain commercial real property. Defendant argued that plaintiff failed to comply with the default provisions of the mortgage, which allegedly constituted a condition precedent to defendant’s performance under the mortgage and entitled it to dismissal of plaintiff’s complaint. Citing CPLR 3215, the court found that “compliance with the contractual conditions precedent is not an element of a plaintiff’s claim for foreclosure and sale of mortgaged premises” and denied defendant’s motion on this ground. As to plaintiff’s demand for a judgment for the deficiency in the net amount of the proceeds of the public sale of the premises, however, the court agreed with defendant’s argument that the mortgage expressly limited plaintiff’s remedies, finding that defendant’s “moving papers sufficiently demonstrated that the plaintiff has no cause of action for recovery of a deficiency judgment against the moving defendant because the nonrecourse provisions specifically limit the remedies of the plaintiff to the mortgaged premises.”
Old Rock Assoc. v BDG Yapshank, LLC, Sup Ct, Suffolk County, September 16, 2011, Whelan, J., Index No. 16221/11
Too Late To Amend For Actual Partial Eviction: Todd Rotwein, D.P.M., P.C., v Nader Enterprises
In a September 22, 2011 decision by Judge Driscoll, the court denied plaintiff’s motion to amend its complain to add a cause of action for actual partial eviction. Plaintiff, a tenant in the defendant LLC’s property located in Hempstead, initiated the action for a breach of lease based on, inter alia, failing to provide heat and elevator service. Plaintiff filed its Amended Verified Complaint, containing six causes of action on March 7, 2008. Discovery ensued, including the deposition of Plaintiff, and Plaintiff filed its Note of Issue with a trial of the action scheduled for November 1, 2011.
On July 8, 2011, after plaintiff moved its business from defendant’s property, Plaintiff filed its motion for leave to amend its complaint. Through the motion, plaintiff sought to replace the sixth cause of action seeking a permanent injunction and requiring specific performance under the lease with a new cause of action for actual partial eviction based on the defendant’s alleged failure to provide sufficient elevator service at the property.
In denying plaintiff’s motion, the court rejected plaintiff’s argument that because the condition of the elevator had been raised in prior motions, the proposed amendment would not cause prejudice to defendant. The court held that defendant would be prejudiced by the amendment given the posture of the case: it was trial-ready; defendant had already conducted discovery, including taking the deposition of plaintiff based on the causes of action in the Amended Verified Complaint; and plaintiff failed to make a reasonable explanation for its delay in seeking the amendment.
Todd Rotwein, D.P.M., P.C., v. Nader Enterprises, LLC, Sup Ct, Nassau County, September 22, 2011, Driscoll, J, Index No. 454/08
Foreclosure Stayed, Hearing Ordered, Plaintiff Must Prove Proper Service of Process: Citibank NA v Jerome
In an August 18, 2011 decision by Justice Pines the court ordered a hearing to determine whether the defendant was properly served in this mortgage foreclosure action. The defendant made two prior unsuccessful motions to vacate the judgment against him (the first was denied because he failed to properly serve plaintiff and the second was denied because he failed to show a reasonable excuse for his failure to appear and a meritorious defense). Defendant’s third attempt to vacate his default was made under CPLR 5015(4) which does not require a showing of a meritorious defense. Defendant’s affidavit rebutted the process server’s affidavit of service because it contained specific reasons why service of process was improper; namely that he did not live at the address used by the process server and the person who allegedly accepted service was 13 years old at the time (and therefore wasn’t a person of suitable age and discretion). The court ordered a hearing to determine if there was good service, which was to be held before the Suffolk County Commercial Division’s “Principal Court Attorney” who was to act as a “Special Referee” to “hear and determine whether personal jurisdiction was obtained over the defendant.”
Citibank NA v Jerome, Sup Ct, Suffolk Count, August 18, 2011, Pines, J, Index No 119149-2007.
Is Madonna's Music Too Loud? Question of Fact Which Must Go to Trial: George v. Board of Directors of One W. 64th St., Inc., Midboro Mgmt., Inc. and Madonna Ciccone
While not from the Commercial Division, an August 24, 2011 decision by Justice York raises issues of a landlord’s responsibility for actions of tenants which disturb other tenants. In this case the plaintiff sued alleging that pop icon Madonna, who owned the apartment below her, was playing her music for 1.5 to 3 hours a day for over two years at a volume which interfered with the plaintiff’s use and enjoyment of her apartment and caused her to have to leave her apartment. Plaintiff sued Madonna as well as her cooperative and the cooperative’s managing agent. This decision deals with the parties’ competing motions for summary judgment on plaintiff’s breach of warranty of habitability claim against the cooperative and her nuisance claims against both the cooperative and Madonna.
The warranty of habitability provides that a landlord (including a cooperative) is reasonable to make sure that (1) a residential premises be fit for human habitation; (2) the condition of the premises be in accord with the uses reasonably intended by the parties; and (3) the tenants are not subjected to any conditions endangering or detrimental to their life, health or safety. The court found that Madonna’s playing loud music for a number of hours could constitute a breach of the warranty of habitability, but it could not rule in either parties’ favor on their dueling motions because there was an issue of fact as to “whether the noise in question possessed such qualities as to violate the warranty of habitability.”
The court also addressed plaintiffs’ nuisance claims against the cooperative and Madonna, which involves a substantial, intentional, unreasonable, interference with plaintiff’s use and enjoyment of her apartment. The court found that under this claim the cooperative corporation couldn’t be held liable for Madonna’s acts but there is a question as to the unreasonableness of the music. For this reason the cooperative was granted summary judgment dismissing the nuisance claim against it, but Madonna was denied the same relief.
George v. Board of Directors of One W. 64th St., Inc., Midboro Mgmt., Inc. and Madonna Ciccone, Sup Ct, New York County, August 24, 2011, York, J, Index No. 114555/09.
Derivative Claims Brought on Behalf of an LLC Cannot Be Intermingled with Individual Claims: Waxman Real Estate LLC v Sacks
In a September 7, 2011, decision by Justice Fried, the court granted in part defendant-LLC members’ motion to dismiss and denied their motion to compel arbitration. The court also denied plaintiff-investors’ cross-motion for injunctive relief under CPLR 6301, as well as for an order under LLCL 414, removing the defendants from a real estate investment company. In the action, plaintiffs alleged that defendants misled them into forming the company by, among other things, grossly misrepresenting the costs of the development project for which the company was formed. The court rejected defendants’ argument 1) that plaintiffs’ action was barred by an exculpation clause in the operating agreement because it depended on the resolution of fact issues regarding whether defendants’ alleged conduct was “objectionable” – an express exception to the exculpatory clause in the agreement; 2) that plaintiffs’ waived their status as fiduciaries in the operating agreement because such a clause “does not bar a claim based on LLC Law § 409” regarding the duties of managing members; and 3) that plaintiffs’ consented to arbitration of disputes among the members of the company in the operating agreement because the conduct alleged constituted “material decisions” – an express exception to the arbitration clause in the agreement. The court also rejected defendants’ argument that plaintiffs failed to state a derivative claim because the complaint alleged sufficient harm to the company and reasons supporting the futility of a demand but nonetheless dismissed plaintiffs’ derivative claims (without prejudice) because, as with corporations and partnerships, such claims cannot be intermingled with individual claims. The court otherwise 1) granted defendants’ motion to dismiss plaintiffs’ unjust enrichment claim on the basis of the existence of an enforceable written contract because “plaintiffs d[id] not contest this claim in their opposition papers”; and 2) denied plaintiffs’ cross-motion for injunctive relief because of issues of fact as to their success on the merits and because LLCL 414 “does not authorize a court to remove an LLC manager.”
Waxman Real Estate LLC v Sacks, Sup Ct, New York County, September 27, 2011, Fried, J., Index No. 652057/2010
No Sanctions for Sending Tenant Three Day Notice to Cure After Court Issues Yellowstone Injunction: Fucile v. L.C.R. Development, Ltd.
In an August 12, 2011 decision by Justice Bucaria the court partially granted a motion to dismiss and denied a cross motion for sanctions. The litigation stems from a commercial lease which was assigned to the current tenant. The landlord served the tenant with a notice to cure for failure to pay rent. The tenant then brought a declaratory judgment action and sought (and was granted) a Yellowstone injunction. The landlord then moved to dismiss the entire litigation.
The landlord argued that the statute of limitations had run on the tenant’s breach of contract and reformation claims. The court held that where a tenant challenges the calculation of a rent escalation the cause of action accrues on the date the tenant received constructive knowledge of the landlord’s method of computation. And because the tenant’s claim was brought within six-years of gaining that knowledge, its claim was timely. The court also ruled that a reformation claim must be brought within six-years of the date of the mistake in the contract, and dismissed that claim as untimely.
In addition, months after the commencement of the action the landlord served the tenant with an additional three day notice to cure, seeking the same rent it sought in a prior rent demand. The court found that “since no other action to terminate plaintiffs’ tenancy was taken” the court would not construe the notice as a violation of the Yellowstone injunction and denied plaintiffs’ cross motion for sanctions.
Fucile v. L.C.R. Development, Ltd., Sup Ct, Nassau County, August 12, 2011, Bucaria, J, Index No. 525/11.
Right of Removal of Excess Excavation Material Not Bargained for in Land Deal: Circle Assoc., LP v Starlight Props., Inc.
In a July 25, 2011, decision by Justice Whelan, the court granted defendant-seller’s motion for summary judgment dismissing plaintiff-buyer’s fraud action and finding for defendant on its counterclaim for breach of contract. Defendant, owner of a large tract of subdivided real estate, sold plaintiff a 20-acre lot on which plaintiff planned to construct a concrete plant. In connection with the sale, the parties entered into a contract of sale, followed by certain infrastructure contracts involving the removal of excavation material to comply with certain grading and draining regulations, as well as a letter-agreement that 1) reduced the purchase price of the land to reflect any decreases in acreage and credited plaintiff for its affiliate-contractor’s work under the infrastructure contracts; and 2) required plaintiff to pay defendant for material removed from the site under the infrastructure contracts in excess of the grading indicated on the subdivision maps. The letter-agreement further provided that all additional excavation material “belong[ed] to [plaintiff] for disposal as it sees fit.” Unbeknownst to plaintiff, defendant previously had removed approximately 66,000 cubic yards of material from the site. Plaintiff brought suit claiming that had it known about the removal of additional material – which, allegedly could have been sold to a third party for $9 per cubic foot – it would not have entered into the agreements. Defendant counterclaimed in connection with plaintiff’s failure to complete its payment to defendant for removal of material under the infrastructure agreements. The court granted defendant’s motion dismissing plaintiff’s action, finding that there was no evidence in the record, including in the language of the agreements, that the right to remove excess material was part of the contract negotiations or otherwise bargained for by plaintiff. The court also found that plaintiff failed to present its material-breach defense to defendant’s counterclaim in its opposition papers, and granted defendant summary judgment on its claim for breach of contract.
Circle Assoc., LP v Starlight Props., Inc., Sup Ct, Suffolk County, July 25, 2011, Whelan, J., Index No. 41838/2008
LLC Managing Member Liable for Transferring Company's Sole Asset Without the Knowledge or Consent of the 50% Member: Gitlin v Chirinkin
In a June 29, 2011 decision by Justice Bucaria, the court granted the plaintiff’s motion for summary judgment on the causes of action for violating NY LLC Law § 402, breach of fiduciary duty, breach of contract, fraud, unjust enrichment, and violation of the Debtor Credit Law . The court determined that the plaintiff established that he was a 50% member of the LLC, the sole assets of which were two real properties in Nevada, and that the defendants, one of whom was the LLC’s managing member, transferred those properties to a third party without the plaintiff’s knowledge or consent, without the statutorily required vote of the majority interest of the members, and without paying any consideration to the plaintiff. The court found that the managing member’s representations to the plaintiff that he would manage the LLC’s day-to-day operations to the benefit of the company and its members were false and that after transferring the properties, he continued to counsel the plaintiff on those investments without divulging the transfers.
The court cancelled a notice of pendency which the plaintiff filed on one of the defendant’s personal home on the grounds that the defendant transferred the proceeds of the real property sales to his wife who used those funds to purchase their home. The court dismissed the notice of pendency upon finding that the complaint failed to establish an action for a constructive trust, necessary to file a notice of pendency, because the action was for money damages that would not affect the title to or the possession of the defendant’s home.
For a more in depth discussion of this decision, please go to Peter A. Mahler’s blog at www.nybusinessdivorce.com.
Gitlin v Chirinkin, Sup Ct, Nassau County, June 29, 2011, Bucaria, J, Index No. 12131/07
Court Finds Broker Entitled to 1½% Commission on $20 Million Construction Project Under Theory of Quantum Meruit : Zere Real Estate Servs., Inc. v Parr
In an April 19, 2011, decision by Justice Pines, the court ruled in favor of plaintiff-real estate broker against defendant general contractor after a five-day trial on a claim to recover a finder’s fee under a theory of quantum meruit. At trial, plaintiff presented evidence that she introduced defendant to an area college in connection with the $20 million construction of a new law-school facility. Because plaintiff presented credible evidence regarding the initial introduction followed by more than a decade of involvement in the project, including research on grant programs, dozens of meetings with the dean, and extensive correspondence with defendant – and particularly because she presented a memorandum drafted by defendant “stat[ing] that if one of [defendant’s] organizations is selected as either the general contractor or the construction manager for the . . . project, [plaintiff] would be recognized as the broker who brought about the deal” – the court found that plaintiff and her firm were entitled to a commission on the project. The court further found, based on expert real-estate testimony regarding broker’s fees on similarly-sized projects, that plaintiff was entitled to one and one-half percent of the initial construction cost of the facility.
Zere Real Estate Servs., Inc. v Parr, Sup Ct, Suffolk County, April 19, 2011, Pines, J., Index No. 39680/2007
Fraudulent Conveyance Claims Brought Under Debtor and Creditor Law Satisfied the Statutory Requirements and Survived Motion to Dismiss: K.B.K. Huntington Corp. v James Anthony Cleaners
In a May 16, 2011 decision by Justice Warshawsky, the court denied the defendants’ motion to dismiss the complaint pursuant to CPLR § 3211(a)(7), upon finding that the plaintiff adequately pled causes of action pursuant to the Debtor and Creditor Law. The crux of the plaintiff’s complaint, which sought to recover monies from a previously awarded judgment for unpaid rent against the defendant corporation, was that during the pendency of the action, the wife of the corporation’s principal formed a new entity and transferred the corporations’ assets thereto, rendering the defendant corporation incapable of paying the judgment. In denying the motion, the court determined that the plaintiff properly pled the causes of action for fraudulent conveyances under sections 276, 273-a, 273, and 275 of the Debtor-Creditor law, because the complaint alleged that the defendants transferred the funds in order to hinder or delay the plaintiff from collecting on its judgment and rendered the defendant unable to satisfy the judgment, and were not subject to the heightened pleading requirements of CPLR §3016(b). The court also found that, while there is no separate cause of action for piercing the corporate veil, it held that dismissal of the allegations regarding veil-piercing—that the defendants abused the corporate form in order to perpetrate a fraud upon the plaintiff—was not required because those facts were sufficient to entitle the plaintiff to the relief sought on its other claims.
K.B.K. Huntington Corp. v James Anthony Cleaners, Inc., Sup Ct, Nassau County, May 16, 2011, Warshawsky, J, Index No. 005150/08
Venue of Action Transferred to New York County - Location of Real Property At Issue in the Litigation: Alpert v Alpert, et al.
In a May 3, 2011 decision by Justice Driscoll the court granted defendants’ motion to transfer the action to New York County. The litigation concerned the ownership of a significant number of real properties. A number of family members purchased the various interests in real property beginning in about 1930. The original investors agreed that upon their deaths the real property would be offered for sale to the other original investors at “book value.” This agreement was memorialized in various documents. Over the years one of the original investors transferred his interests in some of the properties (or the entities that owned the properties) to his wife and daughters. Upon his death his wife and daughters refused to offer the real estate interest to the surviving original investors at “book value.”
The remaining two original investors brought suit against the wife and daughter seeking various relief, including requiring the transfer of the investments at book value. The suit was brought in Nassau County based on the residence of one of the original investors. The defendants moved to transfer the action to New York County based on CPLR § 507 arguing that the action affected the title to real property located in New York County. The plaintiffs objected arguing that the litigation was over various interests in corporations that owned real property, not the real property itself. The court disagreed and granted defendants’ motion, finding that at least one actual parcel of real property was at issue in the ligation which was located in New York County and the litigation should have been venued there.
Alpert v Alpert, et al., Sup Ct, Nassau County, May 3, 2011, Driscoll, J, Index No. 26735/09
Court Revisits Foreclosure Action and Grants Summary Judgment for Unlicensed Foreign Bank: Greystone Bank v 15 Hoover St., LLC
In a June 22, 2011, decision by Justice Driscoll, the court granted plaintiff-mortgagee’s motion for summary judgment for foreclosure on and possession of the property in question, as well as for foreclosure on plaintiff’s security interests in personal property and recovery of rental proceeds as provided by the mortgage documents. Finding that the mortgage documents and proof of default submitted by plaintiff on the motion were sufficient to establish a prima facie foreclosure case, in opposition to which defendant-mortgagor failed to raise a triable issue of fact, the court granted plaintiff’s motion and its related application for the appointment of a referee to compute sums due upon the foreclosure sale. Continuing the relief granted in an earlier decision staying the plaintiff’s prosecution of a deficiency judgment under the related promissory note, the court denied plaintiff’s motion for summary judgment as to its causes of action for a deficiency judgment and for a money judgment against the guarantor on the note.
Greystone Bank v 15 Hoover St., LLC, Sup Ct, Nassau County, June 22, 2011, Driscoll, J., Index No. 7223/2010
Motion to Sever the Issue of Damages Under CPLR 603 Denied: East 115th Street Realty Corp. v. Focus & Struga Building Developers LLC
In a May 31, 2011 decision by Justice Bransten, the Court denied plaintiff’s motion to sever the issue f damages. The Court had previously granted summary judgment to plaintiff on a claim its negligence claim against one of the defendants. Plaintiff then moved, pursuant to CPLR 603, to sever the issue of damages on its negligence claim and proceed to a trial on damages. Certain defendants opposed the motion.
In denying the motion for a severance, the Court was guided by principles of judicial economy. Specifically, the Court found that the issues and claims among the remaining parties were intertwined, so that having separate trials would not further judicial economy. In addition, the Court found no prejudice to plaintiff if the severance was denied.
East 115th Street Realty Corp. v. Focus & Struga Building Developers LLC, Sup Ct, New York County, May 31, 2011, Bransten, J, Index No. 604164/2007.
Court Confirms in Part and Denies in Part the JHO's Recommendation for the Payment of Attorney's Fees: 546-552 W. 146th St. LLC v Arfa
In a May 27, 2011 decision by Justice Ramos, the court confirmed in part and rejected in part, pursuant to CPLR § 4003, a special referee’s report recommending that defendants be indemnified for certain legal fees. After the JHO held a two-day evidentiary hearing, at which he was presented with invoices showing block billing and testimony from defense counsel, the JHO issued a report recommending the payment of $121,299 in legal fees. While the court noted that the JHO’s recommendations as to the appropriateness of fees are entitled to deference where the JHO found the billing entries sufficiently informative and credited witness testimony, the court found that the JHO recommended certain fees that were incurred for time spent on the instant matter as well as related matters which the defense counsel sought to allocate entirely to the instant matter, representing that he would have performed the same work even if the other matters were not pending. The court rejected the recommendation and held that a 50-50 split allocation was warranted on the grounds that it is not equitable to charge all of the fees incurred with respect to non-idemnifiable matters to a single indemnifiable matters and because the time entries made it difficult for the court to identify the amount of time spent on tasks for which fees are recoverable.
The court confirmed the JHO’s recommendations for a 40% reduction in fees sought in connection with a reargument motion stemming from the courts’ denial of the defendants’ motion to quash a subpoena and an untimely appeal, as well as a recommendation for a reduction in fees sought in connection with a motion to disqualify counsel, finding that they were reasonable, supported by the record, and clearly defined.
The defendants also sought prejudgment interest, pursuant to CPLR § 5001, because the plaintiffs challenged the entitlement to indemnification and delayed the resolution of the matter. The court denied that request, finding that interest is not a penalty and is not meant to punish a party for delaying the resolution of a matter.
546-552 W. 146th St. LLC v Arfa, Sup Ct, New York County, May 27, 2011, Ramos, J, Index No. 603041/06
Church and Reverend Denied Reversal of Foreclosure Sale: Flushing Savings Bank v. 509 Rogers LLC
In a May 23, 2011 decision by Justice Hinds-Radix the court denied an attempt by tenants of a property to vacate a judgment of foreclosure and sale of a property. The tenants, a church and its reverend, argued that the judgment and sale should be vacated based on excusable default and lack of knowledge of the action. The tenants also brought their motion based on the bank’s failure to properly serve them under Real Property Action and Proceeding Law § 1303.
The court denied the tenants’ motion because they failed to demonstrate a meritorious defense to the action – they did not demonstrate the underlying mortgage was invalid, that there was no default in payment under the mortgage or that the mortgagee had any other cognizable defenses to the forelclosure. The court further found that Real Property Action and Proceeding Law § 1303, as it existed when the action was commenced, did not require additional notice to a tenant (and that a subsequent modification, though passed into law, did not take effect until approximately two months after the foreclosure action was commenced).
Flushing Savings Bank v. 509 Rogers LLC, Sup Ct, Kings County, May 23, 2011, Hinds-Radix, J, Index No. 29529/09.
Claim for Real Estate Broker's Commission Survives Motion to Dismiss: Eastern Consol. Props., Inc. v. Extell Dev. Co.
In a March 24, 2011 decision by Justice Fried, the Court decided defendant’s motion to dismiss plaintiff’s complaint seeking recovery of real estate brokerage commission. Specifically, defendant claimed that the breach of contract claim should be dismissed pursuant to CPLR 3211(a)(1) based on documentary evidence, and that the unjust enrichment and quantum meruit claims were duplicative of the contract claim.
Plaintiff and defendant Extell entered into a brokerage commission agreement in which Extell agreed to pay plaintiff either 3% of the purchase price or $371,800 in connection with Extell’s purchase of air rights to certain property on West 25th Street in New York City. The initial proposed transaction never closed. Years later, the air rights were ultimately sold to a third party, the Sabet Group, who later in turn sold to Extell in 2010. Plaintiff claims it is now owed a commission on the sale, which Extell disputes.
Construing the complaint liberally, the Court concluded that plaintiff sufficiently plead a breach of contract claim. The Court reasoned that the commission agreement did not identify who the seller of the property had to be in order to entitle plaintiff to a commission. The Court rejected Extell’s attempt to establish plaintiff was not entitled to a commission based upon certain documents from the initial proposed transaction that did not close. The Court did, however, dismiss both the unjust enrichment and quantum meruit claims on the ground that there was an enforceable contract between the parties, which supersedes such claims.
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Majority Shareholder Liable for Breach of Fiduciary Duty for Failing to Disclose Sale of Corporation's Sole Asset to Minority Shareholder: Berger v Pavlounis
In an April 14, 2011 decision by Justice Bransten, the court granted the plaintiff’s motion for partial summary judgment on an individual claim asserted in a shareholder derivative action brought by a minority shareholder against a judicially dissolved corporation’s majority shareholder. Because the defendants failed to submit a responsive Rule 19-A Statement, the court deemed all of the plaintiff’s material facts admitted, and found that the plaintiff established that the defendants breached both statutory fiduciary duties under BCL § 909(a) and common law fiduciary duties by concealing from the plaintiff that they sold the corporation’s sole asset, a parking lot, while falsely representing to the purchaser of the property that the sale was approved by an affirmative vote of 2/3 of the corporation’s shareholders, and thereby depriving the plaintiff of his share of the sale proceeds. While the court granted partial summary judgment as to liability, it declined to enter a judgment on the grounds that the plaintiff could be entitled to additional damages from his individual cause of action, which could be foreclosed if judgment was entered.
Farrell Fritz represented the plaintiff in this action.
Berger v Pavlounis, Sup Ct, New York County, April 14, 2011, Bransten, J, Index No. 103170/08
Failure to Join Corporation as Indispensable Party Warrants Dismissal of BCL § 619 Petition: Lindkvist v Honest Ballot Assoc.
In a decision dated May 24, 2011 by Justice Sherwood, the court dismissed a petition brought by shareholders of a residential housing cooperative pursuant to BCL § 619 challenging the election of directors. The court found that dismissal was warranted under CPLR § 3211(a)(10) because the petitioners failed to notify or join the corporation which was a necessary and indispensable party, whose rights were tied to the corporate shareholders and would be prejudiced if the matter proceeded in its absence. The court rejected the petitioners’ attempt to join the corporation through an amended petition because the petitioners failed to seek leave of court before filing the amended pleading, as required under CPLR § 401. Finally, the court held that dismissal of the petition was also warranted because the petition was barred by the four month statute of limitations set forth in BCL § 619 and the petitioners could not avail themselves of the “relation back” doctrine because they never timely sought or obtained court permission to amend the petition and, therefore, did not cure their mistake in failing to join the corporation.
Lindkvist v Honest Ballot Assoc., Sup Ct, New York County, May 16, 2011, Sherwood, J, Index No. 113590/10
Court Vacates Notice of Pendency on Property Owned By Real Estate Venture: Ostad v Nehmadi
In an April 8, 2011 decision by Justice Fried, the court granted the defendants’ motion pursuant to CPLR § 6501 to vacate a notice of pendency. The plaintiff formed an “Enterprise” with the defendants to engage in real estate ventures and specifically alleged in the complaint that the title to the real property was held on behalf of the Enterprise. The court found that a notice of pendency was inappropriate because the claimed interest was in a partnership or corporation that deals in real property because such interest was in personality and does not affect the title to real property. The court rejected the plaintiff’s arguments that a request to impose a constructive trust on the property established a basis for the notice of pendency, finding that under New York law, a cause of action for a constructive trust does not alone permit a filing of a notice of pendency. The court also concluded that the true action behind the plaintiff’s request for a constructive trust was to enforce the defendants’ an oral agreement to share with the plaintiff the profits and income the Enterprise had generated. Thus, the court found that the right to a constructive trust over the proceeds of the real property did not render the claim sufficient to satisfy the notice of pendency requirements.
Ostad v Nehmadi, Sup Ct, NY County, April 8, 2011, Fried, J, Index No. 650460/10
Notice of Pendency Remains in Effect in Action by Bank to Cancel a Previously Issued Satisfaction of Mortgage: Citimortgage, Inc. v. McNeil
In a January 25, 2011 decision by Justice Hinds-Radix, the Court denied non-party Geneva Alston’s motion to cancel a notice of pendency recorded by plaintiff, and to permanently discharge a mortgage recorded against the real property. The case arises out of defendant McNeil’s purported transfer of a residential parcel of property located in Brooklyn. Upon the death of the owner, Mattie Dickens, McNeil conveyed the property as “Executor” of Dickens to McNeil herself. McNeil later borrowed against the property, taking out a series of loans with mortgages. Ultimately, Citimortgage’s predecessor ABN AMRO issued a loan in the amount of $340,000 to McNeil and, in turn, received a mortgage on the premises. Six months later, plaintiff issued a satisfaction of the mortgage, apparently in error.
In the interim, non-party Alston brought an action against McNeil to vacate the deed she issued to herself. Citimortgage brought the instant action to vacate the satisfaction of mortgage, and to restore its mortgage lien position. Citimortgage also filed a notice of pendency. Alston sought to vacate the notice of pendency in the instant action and to bar Citimortgage from enforceing the mortgage lien.
The denied Alston’s motion, concluding that Citimortgage’s complaint is an action affecting real estate, and that no one innocently relied upon Citimortgage’s mistake in issuing a satisfaction. The ultimate relief sought by plaintiff—cancellation of the satisfaction and resuscitation of its mortgage lien of record—affects title to the real estate. Therefore, the notice of pendency was properly filed.
Citimortgage, Inc. v. McNeil, Sup Ct, tKings County, January 25, 2011, Hinds-Radix, J, Index No. 14658/08.
Commercial Landlord Has No Duty to Mitigate Damages: 231-239 W. 39th St. Assoc. v. Ulu Inc. and Ulu
In a March 4, 2011 decision by Justice Oing the Court granted a commercial landlord summary judgment on its claim for rent against the guarantor of a lease. The tenant vacated the premises owing rent. The landlord re-let the premises (even though it did not have an obligation to do so) and sought from the principal/guarantor the difference between the rent under the old lease and the rent being paid by the new tenant. The guarantor alleged a number of affirmative defenses, including lack of personal jurisdiction and equitable defenses.
The Court found that the guarantor failed to oppose the prima facie evidence that he was properly served (the affirmation of service). The Court further found that the other equitable defenses were without merit and granted plaintiff’s motion for summary judgment on its rent claim.
231-239 W. 39th St. Assoc. v. Ulu Inc. and Ulu, Sup Ct, New York Count, March 4, 2011, Oing, J, index No. 601534/09.
Court Interprets Agreement as One to Pay Finder's Fee Rather than Assignment Fee and Rejects Argument Based on Lack of Assignable Interest: Blatt v Ashkenazi
In a December 2, 2010, decision by Justice Bucaria, the court decided the parties’ cross-motions for summary judgment in connection with a commercial real estate deal. Plaintiff-real estate broker sued defendant-buyers for breach of an agreement to pay a finder’s fee. Arguing that he agreed to pay an assignment fee rather than a finder’s fee, the individual defendant moved for summary judgment dismissing the complaint on the basis of the seller’s operating agreement, which indicated that plaintiff had no assignable interest in the underlying property. The LLC defendant separately moved for the same relief on the ground that it was not a party to the agreement. The court denied the individual defendant’s motion, finding that the agreement “may reasonably be construed as providing for a finder’s fee” because plaintiff had introduced him to the seller and brought the parties together. The court, however, also denied plaintiff’s motion finding triable issues of fact regarding the precise nature of the parties’ intentions. Finally, because oral finder’s agreements are barred by the statute of frauds, the court rejected plaintiff’s assertion that the individual defendant had represented himself as a member of the LLC defendant and granted the LLC defendant’s motion based on lack of privity.
Blatt v Ashkenazi, Sup Ct, Nassau County, December 2, 2010, Bucaria, J., Index No. 9556/07
Default Judgment Granted and Corporate Veil Pierced: Washington Title Ins. Co. v. Sand Lane Title Agency, LLC
In a February 15, 2011 decision by Justice Warshawsky, the Court granted the motion of plaintiff for a default judgment against two of the defendants. Plaintiff and defendant Sand Lane Title Agency (“Sand Lane”) entered into an agreement in 2005, by which Sand Lane agreed to issue title insurance policies on behalf of plaintiff. Defendant Aleksandr Polyakov was the manager and officer of Sand Lane. Years later, plaintiff sued Sand Lane for breaching the parties’ agreement, namely, by failing to record numerous deeds, mortgages and other instruments, and failing to account for trust funds. Plaintiff alleges that Polyakov exercised complete dominion and control over Sand Lane, and is thus entitled to pierce the corporate veil. Justice Warshawsky found that plaintiff established proper service on defendants, and therefore was entitled to a default. Since plaintiff sought entry of a default judgment on the various claims, i.e., breach of contract, breach of fiduciary duty, conversion, negligence, fraud, indemnification, equitable accounting, constructive trust, injunction, piercing the corporate veil, account stated and attorney’s fees, the court considered each.
After considering the allegations as to each of the claims, the court granted a default on all except for conversion, fraud, indemnity, constructive trust and account stated, and directed the filing of a Note of Issue for an inquest on damages and fees. As to the conversion and constructive trust claims, the court denied the motion since they appeared duplicative of the breach of contract claim. Turning to the fraud claim, the court dismissed that cause of action for lack of particularity required by CPLR 3016. The court next dismissed the indemnity claim on the basis that the parties’ agreement did not provide for the express indemnity sought. Finally, the court dismissed the account stated claim on the ground that there was no evidence of the rendering of accounts with balances due.
Washington Title Insurance Co. v. Sand Lane Title Agency, Sup Ct, Nassau County, February 15, 2011, Warshawsky, J, Index No. 021167/2009.
Court Denies Motion to Compel Arbitration Due to Lack of Condition Precedent: Red Hook Meat Corp. v Bogopa-Columbia, Inc.
In a March 15, 2011 decision by Justice Demarest, the court denied the plaintiff’s motion for an order compelling arbitration because the plaintiff failed to comply with a condition precedent. The plaintiff sought arbitration to determine whether the defendant unreasonably withheld consent to a sublease under the parties’ lease agreement. The court found that the lease agreement provided that the plaintiff was required to give the defendant notice of its intent to submit to arbitration the question of whether such consent was unreasonable withheld within 10 days of receiving notice from the defendant of its refusal to consent, but did not give such timely notice. The court rejected the plaintiff’s argument that the defendant waived the 10-day notice requirement by its continued acceptance of rent payments, upon finding that such waiver was withdrawn.
Red Hook Meat Corp. v Bogopa-Columbia, Inc., Sup Ct, Kings County, March 15, 2011, Demarest, J, Index No. 28567/10
Plaintiff Not Entitled to Possession of Real Property After Executing Reassignment of Lease and Eviction Warrant Issued: C&D Car Wash, Inc. v Mroczkowski
In a February 8, 2011 decision by Justice Pines, the court denied the plaintiff’s motion for leave to renew and reargue its denied motion for a preliminary injunction upon concluding that the plaintiff failed to demonstrate that the court overlooked or misapprehended any matter of fact or law. The gravamen of the reargument and renewal motion was that a reassignment of lease executed between the plaintiff and a third party was not released by the escrow agent and therefore, did not entitle the defendant landlord to possession of the property. The court deemed that argument unpersuasive because the record did not show that the plaintiff took any steps to seek such release when it had the opportunity to do so. The court also granted the defendants’ motion for summary judgment, upon finding that they made a prima facie showing that the plaintiff was not entitled to the subject premises because the issuance of an eviction warrant terminated any existing tenancy and annulled the landlord-tenant relationship, and because the plaintiff held no interest in the leasehold once it reassigned the lease to a third party.
C&D Car Wash, Inc. v Mroczkowski, Sup Ct, Suffolk County, February 8, 2011, Pines, J, Index No. 14427/10
LLC Dissolved Pursuant to Service of 60 Days Written Notice: Matter of Fassa
In a February 1, 2011 decision by Justice Bucaria, the court held that the limited liability company of which the plaintiff was a 1/3 member was dissolved on September 18, 2010, which was 60 days after the plaintiff served the other members with a 60 days written notice terminating the LLC’s operating agreement and dissolving the company. Although the respondents argued that dissolution could only proceed by way of a petition for judicial dissolution under LLC Law § 702, the court disagreed. Given LLC Law §§ 417(a) and 702, the court found that the parties could not have intended for the company to continue without the operating agreement, and therefore interpreted the 60 days written notice as providing for dissolution of the company. The court also found dissolution appropriate given that the conflict among the members made it unfeasible for the company to carry on its business.
Matter of Fassa, Sup Ct, Nassau County, February 1, 2011, Bucaria, J, Index No. 18824/10
Court Allows Fourth Amendment to Complaint Adding New Parties and New Claims: Holtkampet et al. v Parlex Assoc. et al.
In a February 22, 2011 decision by Justice Demarest the Court allowed the plaintiffs to file a fourth amended complaint and a supplemental summons. The litigation stemmed from a sale of a commercial building. It was alleged that one of the defendants improperly enriched himself when the building was sold through a “wrap around mortgage.”
After filing three amended complaints the parties agreed to settle the action. The defendants did not live up to their obligations under the settlement agreement and the action was reopened. When the action recommenced plaintiffs sought to dismiss certain claims, significantly amend certain claims and add new claims against new parties, including accountants and attorneys. For example, plaintiffs had previously alleged claims against an accounting firm and now sought to add individual accountants as defendants. The Court analyzed each claim and partially granted plaintiffs’ motion.
Holtkampet et al. v Parlex Assoc. et al, Sup Ct, Kings County, February 22, 2011, Demarest, J, Index No. 14514/06
Court Refrains from Entering Judgment Against Defaulting Defendants Due to Plaintiff's Failure to Establish Viable Cause of Action: Cook v Kim
In a December 22, 2010, decision by Justice Driscoll, the court denied plaintiff’s motion for a default judgment. Plaintiff invested nearly $600,000 in various real estate business ventures under three separate agreements with defendants. Plaintiff later commenced a foreclosure action and separately alleged multiple causes of action in law and equity against the individual defendants, including breach of contract, breach of fiduciary duty, accounting, and constructive trust. When defendants failed to answer, move, or otherwise appear in the action, plaintiff moved for a default judgment under CPLR 3215. The court determined that it had “an insufficient basis on which to award plaintiff judgment against the defendants, notwithstanding defendants’ failure to appear or answer.” Specifically, the court found that plaintiff provided insufficient documentation regarding the terms of and parties to the agreements; that plaintiff failed to provide her own affidavit “amplifying the allegations in the complaint” regarding her business relationship with defendants; failed to provide an affidavit from her husband who was intimately involved in the provision of investment funds under the agreements; and failed to provide sufficient documentation regarding the business relationship as between the defendants. Because plaintiff’s motion was not supported with enough facts to enable the court to determine whether plaintiff’s causes of action were viable, the court denied the motion without prejudice.
Cook v Kim, Sup Ct, Nassau County, December 22, 2010, Driscoll, J., Index No. 026362/09
Evidence of Corporate Informalities and Fraudulent Transfer Bars Summary Judgment on Shareholder's Entitlement to Stock Certificate and Transferability of Shares: Tulino v Tulino
In a December 2, 2010, decision by Justice Bucaria, the court denied defendant-50% shareholder’s motion to dismiss but granted his motion to compel discovery. The court also denied plaintiff-50% shareholder’s motion for summary judgment but granted him leave to amend the complaint. Plaintiff entered into an agreement with a third party to sell his interest in defendant-corporation, and defendant refused to consent to the sale as required under the agreement. Plaintiff sought relief with respect to his entitlement to a stock certificate and the alienability of his shares, and defendant moved to dismiss. Notwithstanding the individual nature of plaintiff’s claims against the corporation, the court denied defendant’s motion to dismiss based on standing because the complaint did not confuse plaintiff’s derivative and individual rights. And notwithstanding the lack of any stock certificates, the court also denied defendant’s motion based on failure to state a claim because the corporation’s by-laws provided that its shares would be represented by certificates, justifying plaintiff’s proceeding to compel the corporation to issue certificates. The court, however, denied plaintiff’s motion for summary judgment based on evidence that the shareholders agreed informally that the corporation’s shares would be uncertified and that plaintiff’s sale of his interest to the third party would constitute a fraudulent transfer. Finally, the court granted defendant’s motion to compel discovery related to informal meetings of the directors or shareholders and granted plaintiff’s motion for leave to amend the complaint in his individual capacity.
Tulino v Tulino, Sup Ct, Nassau County, December 2, 2010, Bucaria, J., Index No. 007081/09
Claims by Joint Venturers Not Listed in LLC Operating Agreement Allowed to Proceed, Shapsis et al. v Kogan et al.
In a January 7, 2011 decision by Justice Demarest the court allowed claims by alleged joint venturers who were not parties to an LLC operating agreement to proceed. The litigation stemmed from a venture formed for the development of a commercial building. Two of the plaintiffs were not signatories to the operating agreement for the LLC which owned and developed the premises. Nevertheless, the court allowed their breach of fiduciary and ancillary claims proceed based on the allegations that those plaintiffs’ interest in the entity was held in the name third plaintiff.
The court, nevertheless, dismissed claims brought against the entities’ attorneys who were alleged to have breached their fiduciary duties a breach of contract claim against the attorneys. Both findings were premised on the lack of any allegations that the attorneys represented plaintiffs (rather than the LLC).
Shapsis et al. v. Kogan, et al, Sup Ct, Kings County, January 7, 2011, Demarest, J Index No. 38418/07
Court Dismisses Conversion and Civil Conspiracy Claims on Pre-Answer Motion: Bahiri v Madison Realty Capital Advisors, LLC
In a December 23, 2010, decision by Justice Fried, the court granted defendants’ motion to dismiss plaintiff’s conversion and civil conspiracy claims based on failure to state a cause of action. Plaintiff, a withdrawing member of defendant-LLC, alleged that defendants failed fully to redeem his membership interest and breached the related redemption agreement and promissory note by paying salaries to defendant-members instead. The court dismissed plaintiff’s conversion claim because he failed specifically to identify and segregate the funds allegedly converted and failed to demonstrate an immediate possessory right over the funds, “which simply represent[ed] damages in contract.” The court also dismissed plaintiff’s civil conspiracy claim as duplicative of his related fraudulent transfer claim, concluding that “a conspiracy to commit a tort is never itself a cause of action.”
Bahiri v Madison Realty Capital Advisors, LLC, Sup Ct, New York County, December 23, 2010, Fried, J., Index No. 650743/09
Court Denies Preliminary Injunction to Block Competitor's Use of Domain Names: Goldstar Props. Of NY, LLC v Blackstone Props. Of NY, LLC
In an April 12, 2010 decision by Justice Sherwood, the court denied the plaintiffs’ motion for a preliminary injunction to block their competitor from using certain internet domain names. The plaintiffs alleged that the defendants’ registration of several domain names that were similar to plaintiffs’ business names, violated General Business Law § 349, New York Civil Rights Law § 51, and the Anti-Cybersquatting Consumer Protection Act. In denying the motion, the court found that the plaintiffs failed to establish a likelihood of success on the merits of the GBL claim because the plaintiff merely alleged in conclusory fashion that its customers might be mislead or confused, but failed to produce any evidence of actual confusion. The court held that the plaintiffs failed to establish a likelihood of success on the merits of its Civil Rights Law claim because it produced no evidence showing that the defendants’ domain names constituted a commercial use of the plaintiffs’ names, as mere use of another’s name on the internet is not per se commercial use. Finally, the court found that the plaintiffs’ failure to present any evidence that the defendants’ acted in bad faith in registering the domain names or that they intended in bad faith to profit from the domain names, warranted denial of the preliminary injunction on the Anti-Cybersquatting claim.
Goldstar Props. of NY, LLC v Blackstone Props. of NY, LLC, Sup Ct, NY County, April 12, 2010, Sherwood, J, Index No. 102789/10
Court Determines Arbitration Award Not Sufficiently Final and Definite and Sends Valuation Dispute Back to Arbitrator: Johnson v Caputo
In a June 28, 2010, decision by Justice Sherwood, the court denied respondent’s motion to confirm an arbitration award in connection with a dispute over the valuation of a condominium apartment. The arbitrator determined in his award that the final buyout amount would be subject to and offset by, among other things, certain credits related to the parties’ respective payment of expenses on the apartment over the years. When the parties submitted conflicting calculations of the value of the apartment in connection with respondent’s motion, the court found that the award was “not sufficiently specific and definite to constitute a final award, and, for enforcement purposes, warrants more than a ministerial act or arithmetic calculation to arrive at the buyout amount.” Because the award was not sufficiently final and definite, the court denied the motion and remitted the matter to the arbitrator for a hearing on the buyout amount of the apartment.
Johnson v Caputo, Sup Ct, New York County, June 28, 2010, Sherwood, J., Index No. 117063/07
Yellowstone Appropriate Where Commercial Tenant Would Otherwise Lose a Valuable Leasehold, Canal Furniture Corp. v Harrison
In a December 21, 2010 decision by Justice Kitzes the court granted a commercial tenant a Yellowstone Injunction, and transferred the case to New York County because it was improperly commenced in Queens County. The litigation stemmed from the commercial tenancy. The tenant exercised its right to purchase the property and shortly thereafter the landlord started issuing notices to cure, in an alleged attempt to avoid having to sell the property to the tenant. It is alleged that the landlord did not want to sell the property because it was significantly more valuable than the purchase price set forth in the lease.
The court found that the tenant had demonstrated the requirements for a Yellowstone Injunction but that plaintiff improperly venued the action in Queens. The court found that the “residence” of the plaintiff corporation was in New York County because that was where its principal office was located and that the residences of the shareholders in the corporation was irrelevant.
Of note, defendant argued that because plaintiff failed to obtain an extension of the temporary restraining order on the return date of the motions the original temporary restraining order had been lifted. Justice Kitzes stated that “it is this court’s policy to deem all stays continued on the submission date until an order resolving the matter is issued.”
Canal Furniture Corp. v. Harrison, Sup Ct, Queens County, December 21, 2020, Kitzes, J, Index No. 18467/10
Unlicensed Foreign Bank Authorized to Pursue Foreclosure Action in New York Court: Greystone Bank v 15 Hoover Street, LLC
In a September 28, 2010, decision by Justice Driscoll in connection with a foreclosure action by plaintiff-mortgagee, a North Carolina bank, against defendant-mortgagor, a New York limited liability company, and on defendant’s motion to dismiss on grounds that plaintiff was a foreign corporation not licensed to do business in New York and failed properly to elect its remedy either at law or in equity, the court denied the motion as to plaintiff’s right to sue and granted the motion as to election of remedies. Specifically, the court held that § 200 of the Banking Law authorizes banks to maintain actions to enforce obligations arising out of mortgages given to secure loans made in New York. Concluding further that RPAPL § 1301 “preclude[s] a mortgagee who has elected foreclosure from commencing an action on the mortgage debt without leave of the court,” the court stayed plaintiff’s prosecution of a deficiency judgment based on a promissory note pending the outcome of the foreclosure action.
Greystone Bank v 15 Hoover Street, LLC, Sup Ct, Nassau County, September 28, 2010, Driscoll, J, Index No. 007223-10
Piercing the Corporate Veil Claims Survive Summary Judgment: Utility Audit Group v. Flanagan
In a December 17, 2010 decision by Justice Bucaria, the Court granted in part and denied in part cross-motions for summary judgment. Plaintiff Utility Audit Group (“UAG”) is in the business of consulting with commercial tenants with regard to alleged overcharges by their landlords. Individual defendants were owners of Apple Mac & R Corp., later dissolved by proclamation of the State in 1994. Notwithstanding the dissolved status, in 2003 Apple Mac entered into an agreement with UAG to review rent charges and negotiate with the landlord. A settlement was reached with the landlord in 2004. Ultimately, UAG tendered a bill for $367,612 to Apple Mac, and later brought an action to collect on amounts owed. Judgment on liability was ultimately granted. UAG then commenced the instant action against the individuals on the theory they were personally liable for the fee.
In support of their motion for dismissal, Defendants argue that the nunc pro tunc reinstatement of Apple Mac by the Department of State shields them from personal liability or piercing the corporate veil. The Court considered whether the implied warranty of authority had been breached by the defendants. To avoid a claim of breach, the Court concluded that defendants had the burden to establish that they had no knowledge of Apple Mac’s dissolution or that their actions in entering into the contract with UAG were done so in good faith. Having failed to meet that burden, the court denied defendants’ motions for summary judgment for personal liability on the contracts. However, as to the claims for quantum meruit, the Court granted the motion of defendants, dismissing those claims. The Court also denied UAG’s motion for summary judgment on the ground that UAG did not establish that it conferred benefits on defendants personally.
Utility Audit Group v.Flanagan, Sup Ct, Nassau County, December 17, 2010, Bucaria, J, Index No. 016605-09.
Yellowstone Injunction Not Available Where Party Served with Statutory Prerequisite to Summary Nonpayment Proceeding Rather Than Notice to Cure: Gerald Gardner Wright, P.C.. & Assoc. v Champion Prop. Mgt., LLC
In a November 23, 2010 decision by Justice Driscoll the Court denied plaintiff’s motion for a Yellowstone Injunction and motion for a default judgment. The Court also granted Plaintiff’s motion for civil contempt, to the extent of holding a hearing on the issue and granted Plaintiff’s motion to amend to add a necessary party. The parties dispute arose from a law firm’s lease. The law firm and the prior owner of the property had engaged in prior litigation which was resolved by so-ordered stipulation.
The prior owner and new owner failed to abide by their obligations under the stipulation and the new owner brought a non-payment action in District Court. The law firm tenant commenced the Supreme Court action initially seeking a Yellowstone Injunction and latter seeking to a default judgment and to hold the defendant in contempt for violating the So-Ordered Stipulation. The law firm also sought to amend the complaint to add the true owner of the property, once it became clear that the listed defendant was the managing agent and not the owner.
The Court denied the Yellowstone Injunction finding that the non-payment petition in the District Court action was not a notice of default that triggers relief in the form of a Yellowstone Injunction. On the contempt application for violating the So-Ordered stipulation from the prior litigation the Court concludes that there were issues that needed to be determined at a hearing including (1) whether the managing agent was aware of the stipulation and (2) whether it willfully violated the stipulation. The Court denied a default judgment for failure to appear at conferences before the Court following the relieving of the managing agent’s counsel, in part because of the numerous issues of fact in the litigation. Last, the Court allowed the joinder of the alleged owner of the property as a necessary party to the litigation.
Gerald Gardner Wright, P.C.. & Assoc. v Champion Prop. Mgt., LLC, Sup Ct, Nassay County, November 23, 2010, Driscoll, J, Index No. 004354-08
Stipulation of Settlement Vacated for Failure to Record Power of Attorney: Webb v Smith
In an October 12, 2010 decision by Justice Kapnick, the court granted a motion to reargue a motion to confirm a Special Referee’s report. Following a two-day hearing, the Special Referee found that a valid power of attorney existed and recommended that the court reinstate a previously vacated stipulation of settlement which ended litigation grounded upon an alleged fraudulent transfer of an apartment building. The defendants’ motion for reargument hinged on their position that the Special Referee should have, but failed to, consider whether or not the power of attorney was properly filed and recorded pursuant to EPTL 13-2.3. In confirming the Special referee’s report, the court initially determined that that issue was outside the court’s reference to the Special Referee. However, it subsequently concluded that reargument must be granted and the stipulation of settlement vacated because: (1) EPTL 13-2.3 applied to the transaction at issue and provides that no actions taken pursuant to a power of attorney are effective unless such power of attorney is duly recorded; and (2) there was no evidence in the record that the power of attorney had been recorded.
Webb v Smith, Sup Ct, New York County, October 12, 2010, Kapnick, J, Index No. 101329/00
Contract's Merger Clause Bars Fraud Claims Based On Alleged Misrepresentations: Casano v New 19 W. LLC et al
In an October 18, 2010 decision by Justice Bransten, the Court granted Defendant summary judgment dismissing the complaint. The parties’ dispute arose out of a contract for the sale of a condominium loft. Plaintiff refused to close on sale and brought claims for rescission and fraud, seeking the return of his deposit, claiming that he was misled as to the ability to build a sleeping loft in the apartment.
Plaintiff and defendant both moved for summary judgment in their favor. The court granted Defendant’s motion for summary judgment finding (i) the contract did not contain any misrepresentation regarding the ability to build a sleeping loft, (ii) the contract contained a “general merger clause” (stating that the contract contained the parties’ entire agreement) and (iii) the contract contained a specific merger clause attesting to the fact that Plaintiff had not relied upon anyone representations other than those contained in the contract and Plaintiff reviewed the condominium’s by-laws and regulations and the contract of sale was “as-is.” The Court also found that, even if the contract did not contain those provisions, Plaintiff failed to adequately plead a fraud cause of action because he did not particularize any allegedly fraudulent statements made by defendant.
Casano v New 19 W. LLC et al, Sup Ct New York County, October 18, 2010, Bransten J, index No. 650220/10
Breach of Contract Claim Fails Where Conditions Precedent Not Satisfied: Brady v. VIL Realty LLC
In an October 29, 2010 decision by Justice Demarest, the court dismissed a breach of contract claim which sought specific performance of an escrow agreement contained in a real estate contract of sale. The court found that under the plain language of the contract, the plaintiff was not entitled to release of escrow funds because the condition precedent had not been satisfied and, therefore, the defendants did not breach the contract. The court also dismissed the claim for breach of the implied covenant of good faith and fair dealing on the grounds that granting the relief the plaintiff sought under that claim would be inconsistent with the terms of the parties’ agreement.
Brady v, VIL Realty LLC, Sup Ct, Kings County, October 29, 2010, Demarest, J, Index No. 14180/10
Claim to Set Aside Property Conveyance Fails For Lack of Notice: Del Pozo v Impressive Homes
In a September 28, 2010 decision by Justice Kitzes, the Court granted the defendants’ motion for summary judgment and dismissed the complaint which sought specific performance of a real estate contract and to set aside a conveyance of real property. The plaintiff argued that he filed a Notice of Pendency on March 2004, but admitted that it had not been properly entered in the lien system by the County Clerk, and had not been so indexed until April 30, 2007, after the conveyance was made. In granting summary judgment, the Court held that the defendants did not have actual or constructive notice of the plaintiff’s claims until April 30, 2007, because only the filing and indexing of a Notice of Pendency can apprise a prospective purchaser or encumbrancer of the pendency of an action, and even then, the filing of a lis pendens does not create a substantive right, but merely preserves an existing right, nor precludes a party from conveying real property.
Del Pozo v Impressive Homes, Sup Ct Queens County, September 28, 2010, Kitzes, J, Index No. 5345/04
CP Energy Group, Inc. v Windy Point Partners, LLC, Sup Ct, NY County, October 5, 2010, Fried, J, Index No. 650026/10
In an October 5, 2010, decision by Justice Fried in connection with plaintiff-consultant’s action for breach of contract against defendant-property owners under a consulting agreement to find a buyer for defendants’ property, and on defendants’ motion to dismiss the complaint under CPLR 3211 [a] [4] and CPLR 327, the court denied defendants’ motion, finding that the plain language of the jurisdiction clause in the parties’ consulting agreement was sufficiently particular and mandatory – i.e. “chose a particular forum, New York, and selected it ‘unconditionally and irrevocably’” – to be deemed a mandatory forum-selection clause rather than a permissive service-of-suit clause. Because contractual provisions for the selection of a forum for litigation are prima facie valid in New York, the court enforced the provision in the parties’ agreement and denied defendants’ motion.
Greenberg v Falco Constr. Corp., Sup Ct, Kings County, September 29, 2010, Demarest , J, Index No. 4267/10
In a September 29, 2010 decision by Justice Demarest, the Court granted a number of motions to dismiss, with leave to replead. The actions stem from a number of closely held corporations owned by two sisters and their mother. One of the sisters alleged that the other sister and her mother were improperly controlling the corporations and entering into “sweet heart” deals with other family owned entities which plaintiff did not own. Plaintiff also brought claims for adding and abetting breach of fiduciary duties against the accountants who were working of the entities and plaintiff individually
The Court granted the motions to dismiss (with leave to replead) the individual and derivative breach of fiduciary duties claims against plaintiff’s sister, mother and accountant, because these claims were intermingled. In dismissing these claims the Court stated that plaintiff could seek punitive damages on her breach of fiduciary duty claims if she was able to demonstrate that the breach involved a “high degree of moral turpitude” or “wanton or reckless disregard of” plaintiff’s rights. The Court also stated that in pari dilecto would not bar the claims against the accountant.
The Court also dismissed plaintiff’s inspection claim under BCL 624 because it was not brought by order to show cause.
Bruno v. Gerber, Sup Ct, Nassau County, Sept. 20, 2010, Warshawsky, J., Index No. 024915/2009
In a September 20, 2010 decision by Justice Warshawsky, the Court granted plaintiffs’ motion, pursuant to CPLR 3217, to discontinue the action, without prejudice, in favor of allowing plaintiffs to litigate the issues in an action pending in the federal district court in the District of New Jersey. The court also granted defendants leave to apply to the Court for an order fixing terms as to statutory costs, disbursements, legal fees and additional expenses incured from the inception of the action to the date of the Order. The case arose out of a failed effort to form a corporation under a Shareholders’ Agreement for the purpose of consolidating the parties' individual companies into a single entity involved in the home mortgage business. Defendants objected to the discontinuance, claiming undue prejudice, which the court rejected.
Jan Companies of NY Holdings, LLC v. 734-40 Broadway Realty LLC, Sup Ct, New York County, May 5, 2009, Schweitzer, J, Index No. 604098/07
In a May 5, 2009 decision, Justice Schweitzer granted summary judgment to a landlord in a commercial lease dispute matter where the tenant razed the leased building, without notice to the landlord, because the building in its original state it could not accommodate the three-floor Burger King restaurant the tenant wanted to build.
The Court found that because the tenant engaged in self help in razing the building without notice to the landlord, it could not claim damages for the cost of razing the structure and rebuilding the building under any of the leases clauses which may have provided for landlord’s responsibilities with regard to maintenance of the building (the applicability of which was in dispute).
The Court further found that because the tenant demolished the existing structure before giving the landlord notice and opportunity to consider its legal exposure in light of tenant’s interpretation of the lease, the tenant remained obligated to pay rent for the entire lease term.
Sunset W. LLC et al. v. Sutphin Mgt. Corp. and Eshaghpour, Sup Ct, Kings County, May 22, 2009, Demarest, J, Index No. 27102/06
In a May 22, 2009 decision, Justice Demarest denied the defendants second motion to vacate summary judgment entered in favor of the plaintiffs. The Court denied that motion for failing to satisfy any of the prongs of CPLR 5015(a)(3), and because in reality it was an attempt to reargue a motion decided years before.
The Court also addressed the latest (of many) application by the plaintiffs to hold the defendants in contempt for failure to comply with post-judgment discovery. Notwithstanding the fact that the Court had previously issued a number of conditional orders, the Court allowed the defendants additional time to submit opposition papers to the latest application for contempt.
