Opinion
19207/07.
Decided May 29, 2008.
Floyd G. Grossman, Esq. Dollinger Gonski Grossman, Carle Place, NY, Plaintiff.
Solomon E Antar, Esq. Brooklyn, NY, Defendant.
This action deals with: a trust, MAZEL GUARANTY TRUST (TRUST), that prior to January 15, 2004 owned the premises at 1941 51st Street, Brooklyn, New York (Block 5462, Lot 66); the January 15, 2004 conveyance and the February 3, 2004 mortgaging of the premises; and, the subsequent eviction of Martin Ungar (UNGAR), his wife and five children from the subject premises, by defendant Julian Frankel (JULIAN). Plaintiffs, in their amended complaint [exhibit A of motion], seek, inter alia: the voiding of this conveyance and subsequent mortgaging of the premises; the removal of the successor Trustee of the TRUST, Jacob Feller (FELLER); a financial accounting by FELLER of his performance as Trustee of the TRUST; the appointment of a receiver and a new successor Trustee of the TRUST; and, damages from defendants for breach of their fiduciary responsibilities and civil violation of the federal Racketeer Influenced Corrupt Organizations (RICO) Act, 18 USC §§ 1961 — 1968.
Plaintiffs' counsel, in ¶ 7 of his affirmation in opposition to defendant JULIAN's motion for summary judgment and in support of his cross motion, claims that "[t]his action involves the most calculated, premeditated, and cold-hearted theft of a personal residence and home from a mentally incapacitated individual . . . and his five infant children . . . by the defendants." Plaintiffs allege that the defendants acted in concert to: take advantage of UNGAR by fraudulently taking UNGAR's house from the TRUST, created by his father for the benefit of his children and their families; convey the house to defendant JULIAN, who mortgaged the premises and pocketed the loan proceeds; and, evict UNGAR and his family from the premises.
Defendant JULIAN moves for summary judgment, pursuant to CPLR Rule 3212, to dismiss all of plaintiffs' causes of action, claiming that there are no triable issues of fact. Plaintiffs oppose JULIAN'S motion and cross-move to: remove FELLER as Trustee; compel FELLER to render an accounting and appear from an examination under oath as to the performance of his duties; appoint a receiver to safeguard the TRUST's assets; and, appoint a substitute trustee to replace FELLER; and, dismiss the affirmative defenses alleged by defendants in their respective answers.
After extensive oral argument and a review of the papers submitted on the motion and cross-motion, the Court finds that triable issues of fact exist. Further, the appointment of FELLER as successor Trustee of the TRUST violated the Trust Declaration [exhibit E of motion], which created the TRUST. Therefore, all the recorded real estate transactions that flowed from the invalid FELLER appointment — the conveyance of the premises to defendant JULIAN by successor Trustee FELLER, the mortgaging of the premises by defendant JULIAN with defendant Fairmont Funding, Ltd. (FAIRMONT), and the eviction of the UNGAR family — are voided and cancelled. The Court denies summary judgment to defendant JULIAN and grants plaintiffs the relief requested in their cross-motion. Additionally, the power of attorney given to defendant Uziel Frankel (UZIEL) by defendant JULIAN, for the closing with defendant FELLER as successor Trustee of the TRUST, is defective and void.
Background
It is undisputed that UNGAR's father, Jeno Ungar, as grantor, created the TRUST, pursuant to the August 15, 1997 Declaration of Trust, and appointed Rabbi Meier Weisz (WEISZ) as Trustee. The Trust, according to the preamble paragraph of the Declaration of Trust, was created for "the benefit of the Grantor's children and lineal descendants and their spouses" as beneficiaries. Article VI of the Declaration of Trust, "Dispositive Provisions," states in Article VI (b) (4):
In the event the Trust has interest in the property known as 1941 51st Street, in the County of Kings, City and State of New York, Block 5462, Lot 66 (hereinafter referred to as the "Property"), the Trustee may sell or convey said Property to a bona fide purchaser for the Property's fair market value upon the written and acknowledged consent of the Grantor's fourth born child on the condition that the entire proceeds of such sale or conveyance is applied toward the purchase of another property.
It is uncontroverted that UNGAR is the "fourth born child."
Article IX, "Trustees' Resignation and Successor Trustees," states, in Article IX (a), that WEISZ is the initial Trustee, and "[i]n the event that MEIER WEISZ shall predecease the termination of any of the trusts created herein, or for any reason, shall cease to serve as such, then NECHAMA WEISZ [WEISZ's wife] shall be the successor Trustee." Article IX (b) requires a resigning Trustee to give thirty days written notice to the other trustee(s). Article IX (c) states that if the successor Trustee "shall for any reason be unable to act as Trustee" the remaining Trustee(s) may in a written instrument "appoint an additional suitable individual, partnership or corporation as his or her co-trustee or successor trustee, as the case may be." Article IX (d) states that if only one person is serving as Trustee "the Trustee may resign only by designating a successor Trustee."
Plaintiffs' counsel states, in ¶ 1 of his affirmation in opposition to JULIAN's motion for summary judgment and in support of his cross-motion, that "I have personal knowledge of the facts upon which this affirmation is made," and, in ¶ 9, that:
MARTIN UNGAR has a long history of mental impairment, a psychiatric inability to function, and Chronic Unipolar Disability. He has been hospitalized, is on medications, and is under the care and treatment of a psychiatrist. He has been diagnosed by his psychiatrist as " lacking decisional judgment, limited intellect, and judgment, and poor social awareness." His diagnosis confirms the fact, that because of this condition, he could place himself and family in jeopardy.
UNGAR's wife, Chana Ungar, applied for the appointment of a guardian ad litem to represent UNGAR in the instant action ( In the Matter of the Application of CHANA UNGAR for the appointment of a Guardian ad Litem on behalf of MARTIN UNGAR, an adult incapable of adequately prosecuting or defending his rights, Supreme Court, Kings County, Index Number 26300/06). Justice Bernadette F. Bayne, in her March 12, 2007 decision and order [exhibit U of motion], granted the petition in an order appointing UNGAR's sister, RAZILL CYNTHIA BECHER, as guardian ad litem for the specific purpose of commencing and maintaining the instant action. Justice Bayne ordered the appointment after conducting a hearing and "being satisfied as to the allegations of the petition, and [i]t appearing that MARTIN UNGAR is an adult who is incapable of adequately prosecuting or defending his rights."
Each side presents radically different versions of the events leading to this lawsuit in the affirmations of FELLER and UZIEL in support of JULIAN's motion, and the affirmation of UNGAR in opposition to JULIAN's motion. The court had to dig past the name-calling, invective and recriminations expressed by both sides to determine the facts.
Essentially, UNGAR, in his rambling affirmation, claims that he met UZIEL in his synagogue in 2003, and UZIEL then fraudulently induced him to get WEISZ to resign as Trustee of the TRUST. UNGAR alleges that UZIEL claimed to be a lawyer [he is not] and that UZIEL knew prior to their meeting that UNGAR was receiving social security, food stamps and disability benefits. Further, UNGAR alleges that UZIEL had knowledge of the existence of the TRUST, with WEISZ as Trustee. UNGAR states in ¶ 5 that "Uziel convinced me that I could go to jail, my house could be taken away, and all payments to me would stop if the government ever found out that I was getting all of this money from them while still owning a house. I became very frightened, but he told me that he would help me." UNGAR claims that UZIEL convinced him to go to WEISZ to ask him to resign as Trustee, so that UZIEL's friend, FELLER, could be appointed as Trustee and protect UNGAR's interest. UNGAR states in ¶ 7 that "I trusted Uziel . . . He always told me that I had nothing to worry about because he would hold the house for me." UNGAR then describes how UZIEL's son, JULIAN, had him evicted from his house, and how he became separated from his wife and became homeless. He concludes, in ¶ 22, that "[m]y whole family is broken and is destroyed because of what Uziel Frankel did to me. I have nothing left in life anymore. He took all I had. He took away my house, my family, my children, and everything else from me."
UZIEL and FELLER, in their affirmations in support of JULIAN's motion and in opposition to plaintiffs' cross-motion, both claim that UNGAR is a con artist who feigned mental illness, and is the architect of a scheme to get WEISZ to resign as Trustee, so that the proceeds of the sale of the subject premises could be used as the down payment for the purchase of three houses located at 960-964 East 3rd Street, Brooklyn, New York, controlled by UZIEL. Both UZIEL, at page 4 of his affirmation, and FELLER, at page 2 of his affirmation, compare UNGAR to the late Vincent Gigante, the famous Genovese crime family boss, who pretended for years to be mentally ill but ultimately was found competent. They both deny that they intimidated UNGAR and claim that UNGAR came to them with his real estate plans. Further, they claim that UNGAR persuaded WEISZ to resign as Trustee and appoint FELLER as successor Trustee. FELLER, at page 3 of his affirmation, states that after UNGAR asked him to become the Trustee, "I agreed to do him the favor and accept the position." UZIEL, at page 10 of his affirmation, states that "[t]here was never any intention or conspiracy from any of the Frankel/Feller defendants to defraud Martin Ungar and/or the Trust . . . [and/or] steal anything from Martin Ungar and/or the Trust." Both FELLER and UZIEL claim that they never met WEISZ.
WEISZ's December 31, 2003 written resignation as Trustee of the Trust [exhibit G of motion], because "for personal reasons . . . [I am] unable and/or unwilling to serve as a Trustee," states that he appoints FELLER as successor Trustee, pursuant to Article IX (d) of the Trust Declaration, because "there are no other successor trustees as of this day besides the newly appointed successor Trustee, Jacob Feller." However, as noted above, Article IX (a) states that if WEISZ shall cease to serve as Trustee, "then NECHAMA WEISZ shall be the successor Trustee." Also, WEISZ's resignation is silent as to whether WEISZ, pursuant to Article IX (b) of the Trust Declaration, gave NECHAMA 30 days written notice of his resignation. No party presented to the Court NECHAMA's declination to serve as the successor Trustee of the TRUST. It is clear that NECHAMA was alive on December 30, 2003, since she was one of the plaintiffs in a subsequent action ( Martin Ungar and Chana Ungar; Meier Weisz and Nechama Weisz, as Trustee and successor Trustee under the Mazel Guaranty Trust v Julian Frankel and Jacob Feller, Index Number 38721/04), in which the plaintiffs attempted to recover the subject premises from defendants. NECHAMA signed the November 24, 2004 verification of the complaint. If FELLER is to be believed that he never met WEISZ, it is unexplained why WEISZ would violate Article IX (a) of the Trust Declaration and appoint FELLER as successor Trustee, instead of NECHAMA.
Fifteen days after WEISZ's resignation as Trustee and FELLER's appointment as successor Trustee, FELLER as Trustee conveyed the subject premises to JULIAN, by a warranty deed, dated January 15, 2004. This was recorded in the Office of the City Register of the City of New York [part of exhibit H of motion] on April 8, 2004, in City Register File Number (CRFN) 2004000212063. The Real Property Transfer Tax form, RP-5217NYC, which is part of the recorded conveyance, states that the purchase price is $370,000.00. Further, the signature for the buyer is "Julian Frankel by Uziel Frankel AIF" and the seller's signature is "Jacob Feller," not "Jacob Feller as Trustee of the Mazel Guaranty Trust." The smoke detector affidavit, which was not provided to the Court, but is part of the City Register recording, and reviewed by the Court in the Court's search of the Automated City Register Information System (ACRIS) of the New York City Department of Finance for the subject premises, shows that the grantor is "Jacob Feller," not "Jacob Feller as Trustee of the Mazel Guaranty Trust," and the grantee is "Julian Frankel by Uziel Frankel — Attorney in Fact."
However, the January 14, 2004 Power of Attorney [part of exhibit H of motion] by JULIAN, appointing UZIEL as his attorney in fact, which was recorded on April 8, 2004, at CRFN 2004000212062, is defective on its face. The form, pursuant to General Obligations Law (GOL) § 5-1501, clearly states, in preprinted language, that the principal will initial in the blank space to the left of various subdivisions of authority, those types of authority that the grantor chooses to grant to his or her attorney in fact, lettered "(A)" to "(P)." Then, the form states that:
If the blank space to the left of any particular lettered subdivision is NOT initialed, NO AUTHORITY WILL BE GRANTED for mattersthat are included in that subdivision. Alternatively, the letter corresponding to each power you wish to grant may be written in the blank line in subdivision "(Q)," and you may put your initials in the blank space to the left of subdivision "(Q)," in order to grant each of the powers so indicated.
No specific subdivisions of authority are initialed by principal JULIAN in subdivisions "(A)" to "(P)." JULIAN's power of attorney form, in subdivision "(Q)" lists "each of the matters identified by the following letters: A, B, D, E, F, H, N." Subdivision (A) is authority to conduct "real estate transactions." However there is no initial "in the blank space to the left of subdivision (Q),' in order to grant each of the powers so indicated."
Therefore, since JULIAN's initials were missing in any of the spaces to the left of any lettered subdivisions, "NO AUTHORITY WILL BE GRANTED for matters that are included in that subdivision," and the power of attorney to UZIEL is null and void.Further, UZIEL's "Affidavit as to Power of Attorney Being in Full Force," dated the next day, January 15, 2004, is also defective. UZIEL left blank the name of the principal, the principal's address, the date of appointment, and "the purpose of inducing." Lastly, JULIAN gives his address in the Power of Attorney as 1243 44th Street, Brooklyn, New York, while on the next day, in the Deed, his address is 909 East 29th Street, Brooklyn, New York. The Court wonders if JULIAN moved immediately after giving UZIEL the invalid Power of Attorney and before receiving the Deed to the premises at 1941 51st Street.
Article VI (b) (4) of the Trust Declaration, as stated earlier, allowed the Trustee "to sell or convey said Property to a bona fide purchaser for the Property's fair market value upon the written and acknowledged consent of the Grantor's fourth born child on the condition that the entire proceeds of such sale or conveyance is applied toward the purchase of another property." There is no evidence that FELLER, as successor Trustee of the TRUST ever complied with this provision of the Trust Declaration. Neither Defendant FELLER, in the instant motion, nor defendants JULIAN or UZIEL, in their affirmations in support of the motion, submitted any evidence that JULIAN was "a bona fide purchaser for the Property's fair market value." The contract of sale, the closing statement and all related closing documents, such as the HUD-1 form and all cancelled checks showing payment to the Trust, were never presented to the Court. The "consent of the Grantor's fourth born child," UNGAR, was never presented to the Court. Lastly, the alleged $370,000 proceeds of the sale were "never applied to the purchase of another property."
It appears that the $370,000.00 purchase price was illusory, and that the TRUST never received a penny from JULIAN. On February 10, 2004, the TRUST, by FELLER as plaintiff, agreed to arbitrate a real estate dispute with defendants UZIEL and JULIAN, by his defective power of attorney to UZIEL, in a rabbinical court, regarding the real estate transactions for 960-964 East 3rd Street and 1941 51st Street [part of exhibit D of motion]. The February 16, 2004 decision by Rabbi Mechel Moskowitz of Bais Din Zedek Hachareidis of New York [part of exhibit D of motion] states that the January 15, 2004 conveyance of 1941 51st Street to JULIAN by the TRUST was "in lieu of a cash down-payment of $370,000.00, on a contract of sale for the purchase of three adjacent houses located at 960-964 East 3rd Street." Rabbi Moskowitz ordered JULIAN to pay the TRUST $370,000.00 without any interest for a period of 25 years, pursuant to a payment schedule, and only $50,000.00 was to be a secured debt. Further, the $320,000.00 balance "shall remain as an unsecured debt without guarantee of, any mortgage, other collateral, or formal money judgment against the Defendant Julian Frankel." The purported contract of sale between the TRUST and JULIAN for the East 3rd Street houses was never presented to this Court.
Then, the TRUST, claiming an address in Manhattan, filed a petition in Supreme Court, New York County to confirm the Beth Din arbitration award. Justice Marilyn Shafer ( Mazel Guaranty Trust v Julian Frankel and Uziel Frankel, Index Number 105002/04) issued a judgment on September 2, 2004 confirming Rabbi Moskowitz's February 16, 2004-arbitration award. Neither UNGAR nor any of the other plaintiffs in the instant action were parties in the Beth Din proceeding or the Supreme Court proceeding in New York County to confirm the arbitration award.
JULIAN, one week prior to his agreement to submit his real estate dispute with the TRUST to the Beth Din, mortgaged the subject premises with defendant FAIRMONT, on February 3, 2004, to secure a loan of $329,000.00, which was recorded on March 31, 2004, at CRFN 2004000192562 [exhibit J of motion]. In the mortgage instrument JULIAN committed fraud. Prior to executing the mortgage instrument, in the January 15, 2004 Deed, JULIAN gave his address as 909 East 29th Street. Subsequent to the mortgage execution, the October 11, 2004 Notice of Entry of Justice Shaffer's judgment [exhibit C of motion] lists JULIAN's address as 909 East 29th Street. However, in the February 3, 2004 mortgage instrument JULIAN's address is given as the address of the subject premises, 1941 51st Street. Further, in the Covenants of the Mortgage, it states, on page 4 of the mortgage, that "I promise and I agree with Lender as follows," in § 6, on page 8 of the mortgage instrument, "Borrower's Obligations to Occupy the Property," that "I will occupy the Property and use the Property as my principal residence within 60 days after I sign this Security Instrument. I will continue to occupy the Property and to use the Property as my principal residence for at least one year." Then, above JULIAN's signature, at the end of the mortgage agreement, it states that "BY SIGNING BELOW, I accept and agree to the promises and agreements contained in pages 1 through 17 of this Security Instrument and any Rider signed by me and recorded with it." JULIAN never lived at 1941 51st Street, Brooklyn, New York, and never occupied the premises as his personal residence.
JULIAN continued to perpetrate his residence fraud with FAIRMONT in a consolidation, modification and extension agreement executed on April 1, 2004, and recorded on July 9, 2004, at CRFN 2004000428215. This was not presented to the Court, but discovered by the Court in its ACRIS search of the subject premises. JULIAN states, at page 1 of the Agreement, that "I promise and agree with Lender as follows," including in § VI, on page 2, "Borrower's Interest in the Property," that "I promise that I am the lawful owner occupying the Property."
Subsequently, JULIAN succeeded in a landlord-tenant holdover proceeding to evict UNGAR and his family from 1941 51st Street [exhibits L, M, N, and O of motion]. UNGAR, in an attempt to regain the premises, asked an attorney to commence an action on his behalf against JULIAN and FELLER. An Index Number was purchased, and a summons and complaint were filed on November 26, 2004 with the Kings County Clerk ( Martin Ungar and Chana Ungar; Meier Weisz and Nechama Weisz, as Trustee and successor Trustee under the Mazel Guaranty Trust v Julian Frankel and Jacob Feller, Index Number 38721/04). However, the attorney representing the plaintiffs ceased work on the case. Defendants were never served and the case was never prosecuted.
Ultimately, Justice Bayne appointed UNGAR's sister, Razill Cynthia Becher, as Guardian ad Litem for UNGAR and the plaintiffs commenced the instant action in May 2007.
Summary judgment motion
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. ( Alvarez v Prospect Hospital, 68 NY2d 320, 324; Zuckerman v City of New York, 49 NY2d 557, 562); Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404). Failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers. ( Matter of Redemption Church of Christ v Williams, 84 AD2d 648, 649 [3rd Dept 1981]; Greenberg v Manlon Realty, 43 AD2d 968, 969 [2nd Dept 1974]; Winegrad v New York University Medical Center, 64 NY2d 851 ).
CPLR Rule 3212 (b) requires that for a court to grant summary judgment the court must determine if the movant's papers justify holding as a matter of law "that there is no defense to the cause of action or that the cause of action or defense has no merit." The evidence submitted in support of the movant must be viewed in the light most favorable to the non-movant. ( Marine Midland Bank, N.A. v Dino Artie's Automatic Transmission Co., 168 AD2d 610 [2d Dept 1990]). Summary judgment shall be granted only when there are no issues of material fact and the evidence requires the court to direct judgment in favor of the movant as a matter of law. ( Friends of Animals, Inc., v Associated Fur Mfrs., 46 NY2d 1065).
In examining the evidence in the light most favorable to the nonmoving parties, defendant JULIAN has not made out a prima facie case for summary judgment. Triable issues of fact exist with respect to: the December 31, 2003 resignation of WEISZ as Trustee of the TRUST; the WEISZ appointment of FELLER as the successor Trustee in apparent violation of the Trust Declaration; the subsequent January 15, 2004 conveyance of the Trust's sole asset, 1341 51st Street, to JULIAN, as part of a larger scheme to purchase three properties on East 3rd Street; and, the failure of FELLER, the successor Trustee, to use the illusory January 15, 2004 proceeds of the sale to purchase another property for the UNGAR family.
Violation of fiduciary responsibility
When reviewing the conduct of FELLER and determining if he violated his fiduciary duty to an alleged incompetent, UNGAR, and UNGAR's family, the Court is ever mindful of the admonition of Chief Judge Cardozo in Meinhard v Salmon ( 249 NY 458, 464):
Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the "disintegrating erosion" of particular exceptions. ( Wendt v Fischer, 243 NY 439). Only thus has the highest level of conduct for fiduciaries been kept at a level trodden by the crowd. It will not consciously be lowered by any judgment of this court.
Chief Judge Wachtler, citing Meinhard, supra, and Matter of Rothko's Estate ( 43 NY2d 305, 319), instructed that "it is elemental that a fiduciary owes a duty of undivided and undiluted loyalty to those whose interests the fiduciary is to protect." ( Birnbaum v Birnbaum, 73 NY2d 461, 466). ( See In re Estate of Wallens, 9 NY3d 117, 122; In re Ryan's Will, 291 NY 376, 407). Judge Rosenblatt, for a unanimous Court of Appeals ( In Re Heller, 6 NY3d 649, 655), held:
It is certainly true that the common law in New York contains an absolute prohibition against self-dealing, in that "a fiduciary owes a duty of undivided and undiluted loyalty to those whose interests the fiduciary is to protect." ( Birnbaum v Birnbaum, 73 NY2d 461, 466 [1989]). The trustee is under a duty to the beneficiary to administer the trust solely in the interest of the beneficiary" (Restatement [Second] of Trusts § 170 [1]).
It is clear that when WEISZ resigned as Trustee he violated the Trust Declaration by: not giving 30 days written notice; and, not naming NECHAMA as successor Trustee upon his resignation, but appointing FELLER as successor Trustee. FELLER's sale of the premises within days of gaining control of the TRUST, as part of a real estate transaction involving property on East 3rd Street, demonstrated that FELLER violated his "duty of undivided and undiluted loyalty to those whose interests the fiduciary is to protect." Further, the proceeds from the TRUST's January 15, 2004 conveyance of 1941 51st Street to JULIAN was, pursuant to the Article VI (b) (4) of the Trust Declaration, to be "applied to the purchase of another property" for UNGAR and his family. FELLER violated his "undivided and undiluted loyalty" to the beneficiaries of the TRUST with the TRUST's involvement in a real estate transaction for the East 3rd Street properties.
The Beth Din arbitration award, as confirmed by Justice Shaffer, provided the TRUST with $370,000.00 to be paid without any interest over a 25-year period. Both FELLER and UZIEL told Rabbi Moskowitz about the deal for the East 3rd Street properties, agreed upon before FELLER became the Trustee. Rabbi Moskowitz, on page 2 of his decision, states:
On January 15, 2004, Plaintiff [TRUST] transferred its' ownership of a one family home located at 1941 — 51st Street, Brooklyn, New York (the subject property) to the defendant Julian Frankel in lieu of a cash down payment of $370,000.00 on a contract of sale for the purchase of three adjacent houses located at 960-964 East 3rd Street, Brooklyn, New York, and where the defendant Julian Frankel was the seller under said contract of sale, and where the Plaintiff herein The Mazel Guaranty Trust was the purchaser.
It is undisputed between the parties [FELLER for the TRUST and UZIEL individually and representing JULIAN] that defendant Julian Frankel was the legal seller on the aforementioned contract of sale: having been empowered as such through a notarized purchase-option agreement dated November 3, 2003, between the defendants herein [JULIAN and UZIEL] and the fee owner of the property located at 960-964 East 3rd Street, Brooklyn, New York. The combined total purchase price for 960-964 East 3rd Street under the aforementioned
contract of sale was two million and three hundred thousand dollars ($2,300,000.00). The Mazel Guaranty Trust, as purchaser under said
contract of sale, was obligated to pay Julian Frankel as seller, at the closing, the remaining balance due on the properties in the amount of one million and nine hundred thousand dollars ($1,900,00.00).
FELLER violated his fiduciary responsibility by the sale of UNGAR's home and obligating the TRUST to a real estate transaction on November 3, 2003, before he became Trustee. Therefore, the Court finds that as a result of the invalid resignation of WEISZ as Trustee and the invalid appointment of FELLER as Trustee, FELLER's December 31, 2003 appointment as Trustee is voided and vacated. Further, FELLER's failure of his fiduciary responsibility to UNGAR requires not only the removal of FELLER as Trustee, but also: an accounting of FELLER's stewardship of the TRUST; the appointment of a receiver to safeguard the assets of the TRUST, pending the appointment of a new Trustee of the TRUST; and voiding and cancelling all recorded real estate transactions with respect to 1941 51st Street subsequent to December 31, 2003, the date of FELLER's appointment by WEISZ as Trustee.
Fraud claim
Plaintiffs' amended complaint complies with the requirements of CPLR Rule 3016 (b) that a cause of action for fraud shall state "the circumstance constituting the wrong . . . in detail." Further, plaintiffs have presented in their amended complaint the four elements of fraud. "To state a cause of action for fraud, a plaintiff must allege a representation of material fact, the falsity of the representation, knowledge by the party making the representation that it was false when made, justifiable reliance by the plaintiff and resulting injury." ( Kaufman v Cohen, 307 AD2d, 113, 199 [1d Dept 2002]). ( See Barclay Arms, Inc. v Barclay Arms Associates, 74 NY2d 644, 647; Williams v Eason , 49 AD3d 866 , 867 [2d Dept 2008]; Fredriksen v Fredriksen , 30 AD3d 370 , 372 [2d Dept 2006]).
The Court of Appeals recently held, "[c]ritical to a fraud claim is that a complaint allege the basic facts to establish the elements of the cause of action. Although under section 3016 (b) the complaint must sufficiently detail the allegedly fraudulent conduct, that requirement should not be confused with unassailable proof of fraud." ( Pludeman v Northern Leasing Systems, Inc., ___NY3d___, 2008 NY Slip Op 04183 [May 6, 2008]. An examination of the instant amended complaint demonstrates that it is alleged that: misrepresentations were made to UNGAR about losing his benefits and his home: the statements made by defendants to UNGAR were knowingly false; the defendants intended to mislead UNGAR; and, UNGAR relied upon defendants' false statements to facilitate the transfer 1941 51st Street, and then suffered financial injury as a result.
Civil RICO claim
Plaintiffs' cause of action for civil RICO violations and conspiracy to commit civil RICO violations is properly pled. State courts have concurrent jurisdiction with federal courts to adjudicate civil RICO claims, for violations of 18 USC §§ 1961 — 1968. ( Tafflin v Levitt, 493 US 455). The Court, in Podraza v Carriero ( 212 AD2d 331, 335-336 [4th Dept 1995]) instructed that:
The elements that must be pleaded to state a civil RICO claim are "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity" ( Sedima, S.P.R.L. v Imrex Co., 473 US 479, 496; see also McCool v Strata Oil Co., 972 F2d 1452, 1464 [7th Cir] ["the elements of a civil RICO claim . . . are 1) a violation of the RICO statute, including proof that the defendant has participated in a pattern of racketeering, and 2) an injury to business or property"]). A pattern of racketeering activity "consists of 'at least two acts of racketeering activity, one of which occurred after [October 15, 1970] and the last of which occurred within ten years . . . after the commission of a prior act of racketeering activity.' 18 USC § 1961 (5)" ( Agristor Financial Corp. v Van Sickle, 967 F2d 233, 241 [6th Cir]). The definition of racketeering activity includes "any one of a number of predicate offenses, including wire and mail fraud. 18 USC at § 1961 (1)."
( See Spool v World Child Intern. Adoption Agency, 520 F3d 178[2d Cir; 2008]; De Falco v Bernas, 244 F3d 286, 305 [2d Cir 2001]).
In the instant case, plaintiffs have pled the illegal acts of the defendants which constitute "racketeering activity" and the methods used by them which caused injury to plaintiffs. The alleged pattern of racketeering engaged in by defendants includes: the use of the U.S. mail to fraudulently obtain the judgment confirming the Beth Din arbitration award; filing and recording the allegedly fraudulent deed of January 15, 2004; sending checks issued by defendants in furtherance of their scheme; filing documents with respect to the eviction of the Ungar family in the Housing Part of Civil Court, Kings County; colluding among themselves in filing false statements in their answers; and, the use of telephone wires on numerous occasions to call UNGAR to have him induce WEISZ to resign as Trustee of the TRUST. Plaintiffs allege that each of the defendants acted in concert through an illegal "enterprise" to commit the theft of 1941 51st Street from UNGAR. The definition of "enterprise," pursuant to 18 USC § 1961 (4), includes a "group of individuals associated in fact although not a legal entity." Thus, FELLER, JULIAN and UZIEL are all alleged to be part of an "enterprise" formed to defraud the TRUST and UNGAR. Therefore, plaintiffs allege that the violations of the RICO statutes by defendants FELLER, JULIAN and UZIEL are the proximate cause of plaintiffs' injuries, and are subject to civil penalties of treble damages plus attorneys' fees. ( 18 USC § 1964 (c); Anza v Ideal Steel Supply Corp., 547 US 451, 457; Sedima, S.P.R.L. v Imrex Co., Inc., 473 US 479, 497; McLaughlin v American Tobacco Co., 522 F3d 215 [2d Cir 2008]).
Dismissal of defendants' affirmative defenses
FELLER, in his verified answer [exhibit 5 of cross-motion], alleges 19 affirmative defenses and UZIEL, in his amended verified answer [exhibit 8 of cross-motion], alleges 20 affirmative defenses. In examining FELLER's and UZIEL's affirmative defenses, the Court is mindful of CPLR §§ 3013 and 3018 (b). CPLR § 3013 states with respect to pleadings that "[s]tatements in a pleading shall be sufficiently particular to give the court and parties notice of the transactions, occurrences of series of transactions or occurrences intended to be proved and the material elements of each cause of action or defense." CPLR § 3018 (b) states, with respect to affirmative defenses, that "[a] party shall plead all matters which if not pleaded would be likely to take the adverse party by surprise or raise issues of fact not appearing on the face of a prior pleading." While the days of courts strictly construing pleadings ended with the CPLR's liberalization of pleading requirements, the above cited minimum requirements still apply today, so that parties and courts will have notice of each defense. In Foley v D'Agostino ( 21 AD2d 60 [1st Dept 1964]), the Court analyzed the then new CPLR liberalized pleading requirements, holding, at 63, that "it is clear that, under CPLR, the statements in pleadings are still required be factual, that is, the essential facts required to give notice must be stated," and "a party may supplement or round out his pleading by conclusory allegations . . . if the facts upon which the pleader relies are also stated." In the instant action, both defendant FELLER, in his verified answer, and defendant UZIEL, in his amended verified answer, fail to present more than mere conclusory statements as to their affirmative defenses. There is no recitation of facts, as required by CPLR §§ 3013 and 3018 (b). "Defenses which merely plead conclusions of law without supporting facts are insufficient and should be stricken." ( Petracca v Petracca, 305 AD2d 566, 567 [2d Dept 2003]). ( See CPLR § 3018 (b); Cohen Fashion Optical, Inc. v V M Optical, Inc., ___AD3d___, 2008 NY Slip OP 04307 [2d Dept May 6, 2008]; Plemmenou v Arvanitakis , 39 AD3d 612 , 613 [2d Dept 2007]; Bentivegna v Meenan Oil Co., Inc., 126 AD2d 506, 508 [2d Dept 1987]; Glenesk v Guidance Realty Corp., 36 AD2d 852, 853 [2d Dept 1971]). Therefore, all affirmative defenses of defendants JACOB FELLER and UZIEL FRANKEL are dismissed.
With respect to defendant JULIAN, his amended verified answer contains 14 affirmative defenses. His amended verified answer contains more than mere conclusory statements and there is some recitation of facts. His first affirmative defense is documentary evidence. This affirmative defense is dismissed. The documentary evidence, including WEISZ's resignation as Trustee, the January 15, 2004 deed, the Beth Din award and its confirmation in Supreme Court, New York County, does not conclusively resolve the issues in the instant action as a matter of law. In addition to documentary evidence, the trier of fact must look at the events that led to the execution of these documents and the dealings of the parties with each other to determine the facts. To maintain an affirmative defense based upon documentary evidence, JULIAN must demonstrate, which he has not, that "the documentary evidence that forms the basis of the defense must be such that it resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff's claim." ( Teitler v Max J. Pollack Sons, 288 AD2d 302 [2d Dept 2001]). ( See Held v Kaufman, 91 NY2d 425, 430-431; Leon v Martinez, 84 NY2d 83, 88; Flemming v Kamden Properties, LLC, 41 AD3d 781 [2d Dept 2007]; Berger v Temple Beth-El of Great Neck, 303 AD2d 346, 347 [2d Dept 2003]).
JULIAN's second affirmative defense is collateral estoppel and res judicata, claiming that the decision of the Beth Din and Justice Shaffer is binding upon plaintiffs. However, none of the plaintiffs in the instant action were parties to these actions. Thus, collateral estoppel or issue preclusion, and its legal cousin, res judicata or claims preclusion, do not apply as affirmative defenses against the plaintiffs. JULIAN's second affirmative defense is dismissed. Professor David Siegel, in NY Prac § 442, at 747 [4th ed], makes it clear that:
The doctrine of res judicata is designed to put an end to a matter once duly decided. It forbids relitigation of the matter as an unjustifiable duplication, an unwarranted burden on the courts as well as on opposing parties. Its main predicate is that the party against whom it is being
invoked has already had a day in court, and, if it was not satisfactory, the proper course was to appeal the unsatisfactory result rather than ignore it and attempt its relitigation in a separate action.
Plaintiffs have not yet had their day in Court to litigate their issues. Chief Judge Cooke instructed that "once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy . . ." ( O'Brien v City of Syracuse, 54 NY2d 353, 357). ( See Coliseum Towers Associates v County of Nassau, 217 AD2d 387 [2d Dept 1996]; Yerg v Board of Educ. of Nyack Union Free School District, 141 AD2d 537 [2d Dept 1988]). "Collateral estoppel, an equitable doctrine, is based upon the general notion that a party, or one in privity with a party, should not be permitted to relitigate an issue decided against it ( see Gramatan Home Investors Corp. v Lopez, 46 NY2d 481, 484-485; see also Kaufman v Lilly Co., 65 NY2d 449, 455)." ( D'Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659, 664). ( See Ryan v New York Telephone Co., 60 NY2d 494, 500; G. Rama Const. Enterprises, Inc. v 80-82 Guernsey Street Associates, LLC, 43 AD3d 863, 865 [2d Dept 2007]; Lowe v Fiering, 205 AD2d 505 [2d Dept 1994]).
JULIAN's third affirmative defense is that he is a bona fide purchaser for value of the subject premises. This affirmative defense is dismissed. The premises were purchased on January 15, 2004 from the successor Trustee, FELLER, whose appointment was invalid. Further, JULIAN was represented at the closing by UZIEL, whose power of attorney from JULIAN was defective and void, in violation of GOL § 5-1501, and it granted no authority to UZIEL to sign the recorded real property tax return and smoke detector affidavit. As the Court learned from Rabbi Moskowitz's Beth Din award, Julian paid no cash at the closing. FELLER deeded the property to JULIAN "in lieu of a cash down payment of $370,000.00 on a contract of sale for the purchase of three adjacent houses located at 960-964 East 3rd Street, Brooklyn, New York." JULIAN failed to demonstrate that he is a bona fide purchaser for value by his failure to present to the Court an appraisal of the value of 1941 51st Street, the contract of sale, the HUD-1 form, and any closing documents. ( See Hicksville Properties, LLC v Wollenhaupt, 273 AD2d 356 [2d Dept 2000]; Berger v Polizzotto, 148 AD2d 651 [2d Dept 1989]).
Next, JULIAN's fourth affirmative defense, that another action is pending between the same parties for the same cause of action in Supreme Court, Kings County, is dismissed. That case, ( Martin Ungar and Chana Ungar; Meier Weisz and Nechama Weisz, as Trustee and successor Trustee under the Mazel Guaranty Trust v Julian Frankel and Jacob Feller, Index Number 38721/04) did not have all of the parties in the instant case as parties. Further, in that case only the summons and complaint were filed with the Kings County Clerk, on November 26, 2004. The defendants were never served. Index Number 38721/04 lapsed in late March 2005 when one hundred days passed and none of the defendants were served (CPLR § 306-b).
JULIAN's fifth affirmative defense, that the instant action may not be maintained because of arbitration and award, is dismissed. None of the plaintiffs were parties to the agreement to arbitrate a dispute in the Beth Din before Rabbi Moskowitz. The arbitration agreement and the award only involved the TRUST by FELLER, JULIAN and UZIEL.
Therefore, plaintiffs cannot be bound by an award in an arbitration proceeding in which they were not parties. Further, plaintiffs as the beneficiaries of the TRUST are not bound by an arbitration agreement entered into on behalf of the TRUST by FELLER, whose appointment was invalid and who violated his fiduciary responsibility to the beneficiaries.
The sixth affirmative defense of JULIAN's, lack of personal jurisdiction over the person of defendant JULIAN, is dismissed for two reasons. First, this affirmative defense is presented in his answer as a mere conclusory statement, without any recitation of facts, as required by CPLR §§ 3013 and 3018 (b). "Defenses which merely plead conclusions of law without supporting facts are insufficient and should be stricken." ( Petracca v Petracca, 305 AD2d 566, 567 [2d Dept 2003]). Second, even if facts were recited, JULIAN waived this affirmative defense by not pleading it in a pre-answer motion to dismiss or after raising it in his answer, not moving within 60 days to dismiss (CPLR Rule 3211 [e]), and by his voluntary participation in the instant action. The Court of Appeals ( Gager v White 53 NY2d 475, 488) held:
Unlike subject matter jurisdiction, which limits the power of a particular court rather than the judicial jurisdiction of the State en gros, a defect in basis jurisdiction is waivable (CPLR 3211 subd. [e]). Under the CPLR, the objection may be raised either by a preanswer motion or by pleading it as an affirmative defense, whichever comes first [citations omitted] Absent the pursuit of either course, a defendant's voluntary participation in litigation in which the point can be raised, in and of itself, constitutes a submission to the jurisdiction of the courts of our State and, as such, acts as a predicate for basis jurisdiction.
JULIAN's seventh affirmative defense, that fraud allegations have not been stated in detail as required in CPLR Rule 3016 (b), is without merit and is dismissed. As detailed previously in discussing plaintiffs' cause of action for fraud, the essential elements of fraud exist within the amended complaint and the factual allegations are sufficient to support each element of a fraud action. The instant amended complaint alleges that: misrepresentations were made to UNGAR about losing his benefits and his home: the statements made by defendants to UNGAR were knowingly false; the defendants intended to mislead UNGAR; and, UNGAR relied upon defendants' false statements to facilitate the transfer 1941 51st Street, and then suffered financial injury as a result.
JULIAN's eighth affirmative defense, that plaintiffs have an adequate remedy at law under the arbitration award, is dismissed. Again, plaintiffs were not parties to the agreement to proceed to the Beth Din. JULIAN has not alleged adequate facts in his answer to demonstrate how the arbitration award is an adequate remedy at law for plaintiffs. "A mere allegation of defendants' legal conclusion that plaintiff has an adequate remedy at law does not constitute a defense, unless there is added an allegation of ultimate fact showing adequacy of the remedy at law." ( Levan v American Safety Table Co., 222 AD 110, 114 [1d Dept 1927]). ( See Schiff v Schiff, 270 AD 845 [2d Dept 1946]; Holland v Grote, 193 NY 262, 270).
JULIAN's ninth affirmative defense, that plaintiffs lack standing to sue because the cause of action belongs to the Trustee, FELLER, who recovered his remedy in the arbitration award, is dismissed. JULIAN is incorrect. The plaintiffs, as beneficiaries of the TRUST, are aggrieved parties with standing to sue. "Appellant trust beneficiary is an aggrieved party with standing to appeal in that her interests are united with plaintiffs beneficiaries and she was adversely affected by the order appealed from." ( Kaszirer v Kaszirer, 286 AD2d 598 [1d Dept 2001]).
The tenth affirmative defense of JULIAN is that plaintiffs are estopped from denying JULIAN's ownership of the subject premises. However, FELLER, who was appointed by WEISZ as the successor TRUSTEE in violation of the TRUST Declaration, violated his fiduciary responsibility when executing the January 15, 2004 Deed to JULIAN. Again, JULIAN was represented at the closing by UZIEL, with a defective and void power of attorney, in violation of GOL § 5-1501, which granted no authority to UZIEL. The voiding and cancelling of the Deed terminates JULIAN's claim of ownership of the subject premises. Therefore, JULIAN's tenth affirmative defense is dismissed.
JULIAN's eleventh affirmative defense, that plaintiffs are estopped by the January 15, 2004 Deed, and bound by the Deed, is a variation on the tenth affirmative defense. For the reasons cited in the previous paragraph, for which the Deed is voided and cancelled, this affirmative defense is dismissed.
The twelveth affirmative defense of JULIAN is that the plaintiffs have come to Court with "unclean hands." "The doctrine of unclean hands is only available when the conduct relied on is directly related to the subject matter in litigation and the party seeking to invoke the doctrine was injured by such conduct." ( Weiss v Mayflower Doughnut Corp., 1 NY2d 310, 316). ( See Nishman v De Marco, 62 NY2d 926, 927; Mehlman v Avrech, 146 AD2d 753, 754 [2d Dept 1989]; Dinnerstein v Dinnerstein, 32 AD2d 750 [1d Dept 1969]). Further, "[t]he person seeking to invoke the doctrine of unclean hands has the initial burden of showing, prima facie, that the elements of the doctrine have been satisfied ( see Kaufman v Kehler , 5 AD3d 564 [2d Dept 2004])." ( Fade v Pugliani-Fade, 8 AD3d 612, 614 [2d Dept 2004]). Defendants, in the instant action, have not made any showing that any actions of the plaintiffs have harmed them in any way. It appears that the actions of the defendants have harmed the plaintiffs. Accordingly, JULIAN's twelveth affirmative defense is dismissed.
JULIAN's thirteenth affirmative defense is that plaintiffs are barred by the doctrine of laches. Laches is "an equitable bar, based on a lengthy neglect or omission to assert a right and the resulting prejudice to an adverse party." ( Saratoga Chamber of Commerce, Inc. v Pataki, 100 NY2d 801, 816). Further, "[t]he mere lapse of time, without a showing of prejudice, will not sustain a defense of laches." ( Saratoga Chamber of Commerce, Inc. v Pataki at 816). "Prejudice may be established by a showing of injury, change of position, loss of evidence, or some other disadvantage resulting from the delay." ( Skrodelis v Norbergs, 272 AD2d 316, 316-317 [2d Dept 2000]). ( See In re Linker, 23 AD3d 186, 189 [1d Dept 2005]; In re Bayside Controls, Inc., 295 AD2d 343, 345 [2d Dept 2002]). Defendants have failed to show how plaintiffs' delay in commencing the instant action has injured or disadvantaged them. Therefore, the thirteenth affirmative defense of JULIAN is dismissed.
Last, JULIAN's fourteenth affirmative defense is that plaintiffs' claims are barred by the statute of limitations, with respect to the 2005 eviction of the Ungar family from the subject premises. The CPLR § 215 statute of limitations for a wrongful eviction is one year. However, the eviction is a direct consequence of the voided and cancelled real estate transaction that conveyed the premises to JULIAN. If WEISZ, or a properly appointed successor Trustee, faithfully executed their fiduciary responsibility to UNGAR and his family, it is possible that they would not have been evicted and would still reside in the subject premises. JULIAN's fourteenth affirmative defense is dismissed.
Conclusion
Accordingly, it is
ORDERED that the motion of defendant JULIAN FRANKEL for summary judgment, pursuant to CPLR Rule 3212 (b), and dismissal of plaintiffs' complaint is denied; and it is further
ORDERED that plaintiffs' cross-motion for relief is granted as follows: defendant JACOB FELLER is removed forthwith as Trustee of the MAZEL GUARANTY TRUST; defendant JACOB FELLER shall, within thirty (30) days of service of the notice of entry of this decision and order upon him, render an accounting of his service as Trustee of the MAZEL GUARANTY TRUST; defendant JACOB FELLER shall, within sixty (60) days of service of the notice of entry of this decision and order upon him, appear for an examination under oath of his performance as Trustee of the MAZEL GUARANTY TRUST; the Court shall appoint a receiver to safeguard the assets of MAZEL GUARANTY TRUST, pending the appointment of a substitute Trustee for the MAZEL GUARANTY TRUST; and, all affirmative defenses of defendants JACOB FELLER, JULIAN FRANKEL, and UZIEL FRANKEL are dismissed; and it is further
ORDERED that the following real estate transactions for 1941 51st Street, Brooklyn, New York, Block 5462, Lot 66, County of Kings, are voided and cancelled: the Deed dated January 15, 2004 and recorded on April 8, 2004, at City Register File Number 2004000212063; the Power of Attorney dated January 14, 2004 and recorded on April 8, 2004, at City Register File Number 2004000212062; the Mortgage dated February 3, 2004 and recorded on March 31, 2004, at City Register File Number 2004000192562; the Satisfaction of Mortgage dated May 20, 2004 and recorded on July 4, 2004, at City Register File Number 2004000395256; and, the Consolidation, Extension and Modification Agreement dated April 1, 2004 and recorded on July 9, 2004, at City Register File Number 2004000428215; and it is further
ORDERED that the Office of the City Register of the New York City Department of Finance is directed to amend its records in accordance with this Decision and Order; and it is further
ORDERED, that plaintiff's counsel shall submit to the Court a proposed order for the appointment of a receiver to safeguard the assets of the MAZEL GUARANTY TRUST; and it is further
ORDERED, that the Court shall conduct a hearing with respect to the appointment of a substitute trustee for MAZEL GUARANTY TRUST, before me, in Part 27, on Thursday, July 3, 2008, at 2:30 P.M., in Room 479, 360 Adams Street, Brooklyn, NY 11201.
This constitutes the Decision and Order of the Court.