Opinion
1636/04.
Decided August 25, 2005.
The parties herein have presented motions on three different actions. Action No. 1, Seymour Escava (Seymour) and Eileen Escava (Eileen) v. Hyman Escava (Hyman), HSBC Bank USA (HSBC), Banco Popular and Citibank, N.A. (Citibank), Index No. 1636/04, Action No. 2, Matter of Seymour for a Judgment Staying the Arbitration Commenced by Hyman, Index No. 16/583/04; and Action No. 3, Seymour v. Hyman and Joyce Escava (Joyce), Index No. 30200/04, are consolidated for the purpose of the disposition of these motions only.
Seymour and Eileen are married. First names are being used as both plaintiffs and defendants have the same last name.
In Action No. 1, Seymour and Eileen move for an order of attachment against Hyman, pursuant to CPLR 6201 and 6210, in any interest in personal property or debt owed to him or, in the alternative, for an order, pursuant to CPLR 6301, enjoining him or any of his agents or person(s) in possession or control of his personal property, from transferring, alienating, hypothecating or otherwise encumbering any of the those assets to the extent of $1,099,748. Pursuant to the order to show cause, a temporary restraining order restraining and prohibiting Hyman from disposing of or transferring any such property was granted. By notice of motion dated April 8, 2004, Banco Popular moves for an order, pursuant to CPLR 3211, dismissing the amended complaint. By notice of motion dated April 28, 2004, Hyman moves for an order: (1) dismissing the fourth, fifth and sixth causes of action in their entirety and the first and second cause of action, in part, as barred by the Statute of Limitations; (2) compelling arbitration of any claims that are not time-barred; and (3) staying the remainder of this litigation pending completion of the arbitration. By notice of motion dated July 19, 2004, HSBC moves for an order, pursuant to CPLR 3211, dismissing the amended complaint as against it or, in the alternative, granting summary judgment, pursuant to CPLR 3212, on the grounds that the complaint fails to state a claim as against it. By order to show cause dated February 25, 2005, Hyman moves for an order releasing the $357,462.65 that he deposited with the Clerk of the Court pursuant to the order to show cause dated January 20, 2004 and the order of this court dated January 26, 2005.
In Action No. 2, by order to show cause dated May 25, 2004, Seymour moves for a judgment, pursuant to CPLR 7503 (b), staying the arbitration between the parties and directing an immediate trial on the issues of the making of or failure to comply with an agreement to arbitrate; a temporary restraining order staying the arbitration was signed by the court. By order to show cause dated November 3, 2004, Seymour moves for an order staying the effectiveness of a notice dated October 11, 2004, pursuant to which Hyman purported to cancel his interest in Escava Brothers Partnership (Escava Brothers); a temporary restraining order so providing was signed by the court.
In Action No. 3, by order to show cause dated September 23, 2004, Seymour moves for an order: (1) pursuant to CPLR 6301, enjoining Hyman from transferring, encumbering, mortgaging, hypothecating or conveying any asset of Escava Brothers without the consent of Seymour, or borrowing or lending any sums on behalf of Escava Brothers pending the determination of this action; (2) pursuant to CPLR 6201 (3), against the assets of Hyman in personal property or any debt owed to him or, in the alternative, pursuant to CPLR 6301, a preliminary injunction enjoining Hyman or any agent acting on his behalf from transferring, alienating, hypothecating or otherwise encumbering any assets to the extent of $3,000,000; and (3) permitting plaintiff to inspect and copy the books and records of Escava Brothers in Hyman's possession; a temporary restraining order enjoining Hyman and anyone acting on his behalf from taking any action in connection with the partnership other than the payment of real estate taxes or debt service on any mortgage affecting the property was signed. By notice of cross motion dated November 15, 2004, Hyman moves for an order: (1) pursuant to CPLR 7503 (a), seeking to compel arbitration in accordance with a partnership agreement executed in 1974 and ratified in 1991; and (2) vacating any injunctions and temporary restraining orders presently in effect as a result of plaintiffs' ex parte order to show cause dated September 23, 2004 (motion sequence no. 001).
The motion and cross motion in Action No. 3 were given only one motion sequence number.
The Partnership
In 1974, Nathan Escava (Nathan), Seymour and Hyman, who are brothers, established Escava Brothers in order to manage the properties that they owned and to pool their resources to make additional investments. Each of the brothers was an equal partner and unanimous consent was required for all important decisions, including borrowing or lending money; entering into a mortgage, lease or contract; selling or purchasing property; or transferring partnership interests. Their agreement was memorialized in a writing dated August 6, 1974 (the 1974 Partnership Agreement).
As is relevant herein, when the Agreement was executed, Escava Brothers was a passive investor in property located at Third Avenue and 149th Street in the Bronx (the 149th Street Property) and the owner of several Bunnie entities, i.e., children's clothing stores. Escava Brothers has acquired and now holds interests in at least eight real properties located in New York and New Jersey that are valued in the millions of dollars, including one located on Jay Street in Brooklyn (the Jay Street Property); the 149th Street Property is claimed to be worth in excess of $20,000,000. Escava Brothers is not directly involved in the management of the 149th Street and the Jay Street Properties and receives distributions from the managing agent, I.S.J. Management Corp. (ISJ). The checks for the distributions have apparently been sent to the partners at their office, located at 100 Delancey Street in Manhattan.
Seymour provides a list of properties owned by Escava Brothers as an exhibit to one of his affidavits, which list includes 100 Delancey Street, New York, New York; 44 West 14th Street, New York, New York; 2918 3rd Avenue, Bronx, New York; 30-42 Steinway Street, Astoria, New York; 210-212, 214-216 Main Street, Paterson, New Jersey; and 634-636 and 638-640 Main Avenue, Paterson, New Jersey.
As is also relevant to the dispute now before the court, paragraph 15 of the 1974 Partnership Agreement (the Arbitration Clause) includes an arbitration clause, which provides that any controversy or claim arising out of or relating to the Agreement or to the breach thereof shall be settled by arbitration and that the arbitrator shall be the brothers' father, Isaac Escava (Isaac), or a member of the law firm of Jaffee Cohen Berman Crystal (the Jaffee firm). Ernest Allen Cohen (Cohen) was a member of the Jaffee firm at the time that the 1974 Partnership Agreement was executed and was a family friend and legal advisor for the family and for Escava Brothers for many years.
In 1987, Nathan died. In 1988, at the age of 45, Seymour suffered a serious stroke that he asserts deprived him of many of his functions, including those relating to reading and writing. By agreement, dated June 26, 1991, Nathan's Estate assigned decedent's one-third interest in the partnership to Joyce, his wife, and Joyce, Seymour and Hyman reaffirmed the provisions of the 1974 Partnership Agreement. Therein, Joyce also acknowledged that Hyman and Seymour would make all partnership decisions (the 1991 Ratification Agreement).
In early 2001, Hyman alleges that Seymour began to complain that he was not getting a fair distribution of monies from the various Escava business ventures. Following what Hyman claims was 18 months of negotiations, a settlement agreement was signed on December 4, 2002 between Seymour, Hyman, five other individuals and thirteen other entities (the 2002 Settlement Agreement). The Agreement covers a multitude of issues, is 18 pages long, and includes an additional seven pages of schedules setting forth the property owned by the entities involved, along with a list of shareholders, officers and debts. That Agreement also contained a general release.
Factual Basis of the Parties' Disputes
The instant dispute arises from the breakdown of the relationship between Seymour and Hyman, ostensibly resulting from a deterioration in the family businesses. In reliance upon copies of checks, deposit slips, and other documents, Seymour claims that after he suffered his stroke, Hyman began to appropriate monies due to the partnership for his own use. In brief, without addressing the specifics of each transaction, Seymour alleges that without his consent, Hyman engaged in a pattern of conduct in which he wrote checks against the partnership account and transferred partnership funds to satisfy personal and other non-business related expenses; bought houses for himself and his children; paid tuition for his grandchildren; diverted checks made payable to Seymour and his wife; mortgaged two partnership properties with the Israel Discount Bank (IDB) for $2,500,000 and $650,000, respectively, after forging Seymour's and/or Joyce's signature to the loan documents; and mortgaged another partnership property to the extent of $1,000,000 to Hyman's friend, Jack Benun, also after allegedly forging Seymour's signature and falsifying the notarization.
Seymour also claims that since the inception of the instant dispute, Hyman has transferred personal assets out of his name, while telling this court and the Appellate Division that he was not secreting any property. This allegation is made in reliance upon copies of deeds, dated December 14 and 21, 2003, which demonstrate that Hyman transferred his residence in Brooklyn and two other properties to his wife in her individual capacity. Seymour claims that the value of these properties approximates $8,000,000. Seymour further asserts that on February 3, 2004, Hyman withdrew $500,000 which had been on deposit in his account with Morgan Stanley and moved it out of state.
Hyman denies these allegations of wrongdoing and explains that Escava Brothers owned 100% interests in some properties, which were held in the name of the partnership, as well as other partial, or passive interests, which were held in the name of the individual partners. Further, over the years, some of the bank accounts maintained by the businesses were held in the name of Escava Realty Company and some accounts were maintained in Hyman's name, individually. Each month, the management company for the Escava Brothers' passive investments mailed the rental/dividend checks, which were made payable to the individual partners, to the partnership office and Hyman deposited them into his personal checking account, which he had earmarked for the benefit of the business. Hyman then used the partnership funds to cover business expenses and to reinvest in or to acquire additional partnership property. Hyman claims that he also used business funds to pay some of Seymour's expenses; he asserts, for example, that the business paid approximately $850,000 for a luxurious summer house for Seymour and Eileen from his personal account. Hyman argues, however, that Seymour was fully aware of the manner in which the partnership money was handled, as was Stewart Rosenberg, Escava Brothers' accountant, with whom Seymour met regularly.
Hyman also accuses Seymour of wrongdoing, claiming that Seymour received some Escava Brothers' checks himself and deposited the money into his personal account, which money properly belongs to the partnership. Hyman also contends that his review of a recently discovered ledger from one of the family's clothing stores revealed disbursements to "Sy" of approximately $2,400,000 in cash over a 15 year period; Hyman further alleges that during the same period, Seymour was fraudulently receiving disability payments from his insurance company and/or from the government, premised upon his claim that he could not work.
Each brother denies the allegations of wrongdoing made by the other and defends his conduct. For example, Seymour alleges that he has never seen the ledgers upon which Hyman relies in accusing him of stealing over $2,000,000, and that the references therein to "Sy" are just as likely references to "Sephardic vendors;" he asserts that he also paid significant business expenses utilizing checks drawn on his personal accounts. Similarly, Hyman alleges that he did not transfer any property to his wife to prevent Seymour from being able to enforce any judgment that he may obtain, but instead transferred the properties in accordance with an estate plan.
In resolving the disputes raised by the pending motions, the court notes that the papers before it are voluminous, having been submitted over a period of more than one year, and are supported by an enormous amount of detail. The parties have also submitted no less than 10 memoranda of law. In addition, the demands for relief as made in each of the three actions overlap. For example, Hyman seeks to compel arbitration in Action No. 1 and Action No. 3, while Seymour seeks to stay arbitration and pursue his claims in court in all three actions. Similarly, Seymour seeks to attach Hyman's property and to enjoin him from making any transfers in Action No. 1 and Action No. 3. Recognizing this overlap, the parties cross reference affidavits throughout the papers, thereby leaving the court with the task of culling through all of the facts, documentary evidence, and legal arguments in an effort to fashion the parties' arguments as they relate to each demand for relief. Accordingly, instead of addressing each motion individually, the court will determine the issues raised in an attempt to more efficiently dispose of the numerous applications now pending.
Procedural History of the Actions
Action No. 1
On January 16, 2004, Seymour and Eileen commenced Action No. 1, alleging that beginning in 1998, Hyman forged plaintiffs' endorsements on checks made payable to them and converted the sum of $357,462.65 for his own benefit. More specifically, plaintiffs assert that ISJ maintained a checking account with Republic National Bank, which has since been taken over by HSBC. Hyman maintained accounts with Bank Leumi, which has subsequently been taken over by Banco Popular, and European American Bank, which has since been taken over by Citibank.
By amended complaint dated January 25, 2004, plaintiffs allege that commencing in 1989, ISJ issued checks made payable to Seymour or Eileen in the amount of $711,249, drawn by ISJ on its account with HSBC; that the checks were converted by Hyman, without the knowledge or permission of plaintiffs; that Hyman endorsed the checks; and that Hyman deposited the funds into his account at Banco Popular and/or Citibank. Plaintiffs accordingly seek to recover the sum of $711,249 from Hyman, along with punitive damages in the amount of $3,000,000, premised upon causes of action sounding in conversion (first cause of action) and fraud (second cause of action). Plaintiffs also seek to recover said $711,249 from HSBC, Citibank and Banco Popular, claiming that the banks are liable for the funds because they paid the checks over forged endorsements (third cause of action).
Plaintiffs further assert that on November 21, 1989, Hyman asked Seymour to participate in a loan to another of Hyman's friends, Stanley I. Chera (Chera), in the amount of $700,000 (the Chera loan); Seymour asserts that one-half of the loan was attributable to money due to him. Plaintiffs deny that they have any knowledge with regard to whether Chera made the interest payments of $50,000, as due between 1991 and 1996, and further aver that on July 2, 1996, without his consent, Hyman released the Chera loan for the assignment to himself, individually, of a 10.38% interest in the 149th Street property owned by I. Chera Sons. Plaintiffs argue that since this time, Hyman's distributions resulting from this new ownership interest exceeded Seymour's by $544,988.
Seymour does not explain why no portion of the monies loaned to Chera should be attributed to Joyce.
Plaintiffs accordingly seek to recover $350,000, plus punitive damages in the amount of $3,000,000, premised upon claims of unjust enrichment (fourth cause of action), breach of fiduciary duty (fifth cause of action) and fraud and conversion (sixth cause of action).
It is unclear how Seymour arrived at this demand or if it takes into account Joyce's entitlement to share in the money.
Upon commencement of the action, the parties engaged in extensive motion and appellate practice pursuant to which plaintiffs sought to attach Hyman's assets and/or to enjoin him from transferring any property and Hyman sought to vacate the restraints. Hence, by order to show cause dated January 20, 2004, the Honorable Gerald S. Held granted an ex parte temporary restraining order which provided that Hyman and anyone acting on his behalf were restrained and prohibited from transferring or paying any assets in which he had an interest, to the extent of $357,462.65. In response, Hyman offered to deposit that sum into court, without admitting any wrongdoing. That agreement was embodied in an order dated January 26, 2004, which also stated that upon receipt of the funds by the Clerk of the Court, the January 20, 2004 order to show cause and all relief entered pursuant thereto would be vacated and rescinded. These are the funds that Hyman now seeks to have released.
By order to show cause, signed on February 6, 2004, originally returnable on March 26, 2004, plaintiffs obtained an order restraining Hyman from transferring $1,099,748. pending hearing of the motion, arguing that they had discovered that Hyman had purloined additional sums well in excess of $357,462.65. On February 24, 2004, Hyman applied to the Appellate Division for an order vacating the restraint. The Honorable Myriam J. Altman vacated the temporary restraining order, pursuant to CPLR 5704, allegedly premised upon the representation made by Hyman's counsel that Hyman did not secrete assets and that he owned a house in Brooklyn worth in excess of $5,000,000; the judge also advanced the return date of the motion.
A review of the court file revealed that the identical order to show cause was again signed on February 11, 2004 in error. That order accordingly bears the notation "application denied, previously granted."
Thereafter, arguing that he discovered deeds that established that Hyman had transferred and/or secreted assets valued at approximately $7,000,000, Seymour's attorneys appeared in the Appellate Division before Judge Altman on May 5, 2004 in connection with an application to reinstate the temporary restraining order. Allegedly having been faced with proof that he secreted assets, Seymour asserts that the parties stipulated that Hyman would post an additional $600,000 in security; no order or stipulation so providing has been provided to this court. Seymour now alleges that despite having so agreed, Hyman has not yet posted any additional security.
On February 15, 2005, claiming that he had become aware of misrepresentations made by Seymour in support of his demand for the temporary restraining order, Hyman obtained an ex parte order pursuant to which the temporary restraining order granted on January 20, 2004 was vacated and $178,731.32, or one-half of the money that Hyman had deposited with the Clerk of the Court pursuant to the January 26, 2004 order, was to be released. Upon being served with a copy of that order, Seymour moved in the Appellate Division to reinstate the restraints. The Honorable Renaldo E. Rivera granted the application, pursuant to CPLR 5704, only to the extent of striking the provision releasing the money, without prejudice to renewal on notice. Accordingly, by order to show cause, dated February 25, 2005, Hyman moved this court for an order releasing the funds held on deposit with the court.
In addition, HSBC and Banco Popular moved to dismiss the action as against them, premised upon affirmative defenses including: (1) that the banks paid the checks in good faith, (2) that recovery is precluded by the fictitious payee rule, and (3) that the causes of action are barred by the Statute of Limitations. Hyman also cross moved for an order dismissing a portion of the first and second and the entire fourth, fifth and sixth causes of action as time-barred, compelling arbitration of any claim that was not time-barred and staying the remainder of the litigation pending completion of the arbitration.
Action No. 2 (Index No. 16583/04)
On May 25, 2004, Seymour commenced this proceeding seeking to stay an arbitration demanded by Hyman in a Notice of Intent to Arbitrate dated May 4, 2004. The order to show cause that commenced the proceeding stayed the arbitration. Pursuant to that notice, Hyman sought arbitration of the following claims: (1) that there is a disability or inability on the part of Seymour to make decisions on behalf of the partnership; (2) that Seymour and his agents interfered with the proper functioning of the partnership by, among other things, unreasonably refusing to consent to the making of leases on vacant properties; (3) all claims raised by Seymour in Action No. 1, to the extent not dismissed by the court; and (4) Seymour's liability to the partnership for partnership assets that he diverted to himself, including tenant rent payments.
By order to show cause dated November 3, 2004, Seymour seeks an order staying Hyman from cancelling his interest in Escava Brothers pursuant to a notice dated October 11, 2004. That order to show cause contains a stay of the notice and purports to cancel Seymour's interest in Escava Brothers, pursuant to paragraph 11 of the 1974 partnership Agreement on the ground that Seymour has been disabled for two consecutive years. Seymour argues that the right to raise the issue of his (Seymour's) disability was waived by the Partnership and by Hyman; in that neither the partnership nor Hyman sought to have Seymour declared disabled at any time (after 1988) when he suffered the stroke from which his claimed disability appears to stem. Seymour further avers that the claim that he is disabled is also belied by the parties' conduct, since following his stroke. The 1991 Ratification Agreement was executed, pursuant to which the partners agreed that Hyman and Seymour would make all partnership decisions, as was the 2002 Settlement Agreement, which also provides that Seymour's consent is required to conduct all significant partnership business. Finally, Seymour asserts that Hyman does not have the right to unilaterally cancel his interest in the partnership.
Seymour also contends that he will be irreparably injured if a preliminary injunction staying Hyman from cancelling his partnership interest is not granted, since Hyman's actions, as discussed above, establish that Hyman is acting on the partnerships' behalf, without his (Seymour's) required consent and in breach of his fiduciary duty, to the detriment of the partnership and to Seymour.
Action No. 3 (Index No. 30200/04)
On September 23, 2004, plaintiff Seymour commenced this action against defendants Hyman and Joyce demanding an accounting with regard to Escava Brothers and, upon completion of said accounting, an order directing Hyman to turn over to Seymour all monies determined by the accounting to be due to him. This demand is predicated upon Hyman's alleged misconduct, including the above discussed allegations of self dealing and embezzlement. By order to show cause of the same date, Seymour sought the order of attachment described more fully above, along with an order permitting him to inspect the books and records of the partnership. The order to show cause also contained a temporary restraining order which enjoined Hyman and any person acting on his behalf from taking any action in connection with or on behalf of the partnership, other than the payment of real estate taxes or debt service on any mortgage affecting the property of the partnership.
Hyman's cross motion for an order compelling arbitration of these claims and seeking an order vacating any injunctions and temporary restraining orders that are presently in effect in this case is premised upon the 1974 Partnership Agreement and the 1991 Ratification Agreement.
Joyce submits an affidavit from counsel in which she alleges that Seymour should not be entitled to an accounting of Escava Brothers because of his bad faith and unclean hands, since the agreements entered into between Hyman and Seymour were fraudulent and constituted preferential payments made to her detriment. Arguing that her brothers' actions demonstrate their insensitivity to their fiduciary duties to her, Joyce argues, however, that she should be permitted to designate the accounting firm to perform the accounting and that Hyman and Seymour should reimburse her for legal fees and the cost of the accounting. She further seeks an order directing Hyman and Seymour to each deposit $100,000 with her lawyers, to be held in escrow to pay said expenses, in order to insure their compliance.
Hyman's Demand for Arbitration
Inasmuch as a determination that the instant disputes as between Seymour, Eileen and Hyman must be arbitrated would resolve many of the issues raised in the pending applications, the court will address this issue first. As the following discussion of the law makes clear, this course of action is also an appropriate starting point inasmuch as a determination that a broad arbitration clause is controlling compels the conclusion that only limited threshold issues should be determined by the court.
Hyman's Contentions
As was noted above, the 1974 Partnership Agreement contains an Arbitration Clause, which provides in full that: "Arbitration: Any controversy or claim arising out of or relating to this Agreement or to the breach thereof shall be settled by arbitration in New York City in accordance with such reasonable procedures as are set forth by the arbitrator. The arbitrator shall be ISAAC ESCAVA, unless he shall be a party to the controversy. If for any reason ISAAC ESCAVA shall not serve as an arbitrator, then the arbitrator shall be a member of the law firm of JAFFEE COHEN BERMAN CRYSTAL." (1974 Partnership Agreement, para 15).
In addition, the Articles of Limited Partnership for 149th Street Realty Associates (149th Street Realty), the owners of the 149th Street Property, also contain an arbitration clause, which provides, in relevant part, that:"Arbitration Procedure. Any dispute arising under, out of, in connection with, or in relation to this Agreement, or any breach thereof, shall be determined and settled by arbitration in New York City pursuant to the rules then obtaining of the American Arbitration Association then." (Articles of Limited Partnership of 149th Street Realty, para 17.13). Further review of the Articles of the Limited Partnership reveals that Hyman was a general partner and that Nathan, Seymour and Hyman were limited partners and that each Escava brother owned an interest of eight and one-third percent interest in the property as a limited partner.
Hyman also relies upon an affidavit submitted by Cohen, in which Cohen alleges that he has known Seymour and Hyman for 30 years; he was a close personal friend of Isaac; and he handled nearly all of the Escava family's business matters, including drafting the 1974 Partnership Agreement. Cohen explains that it was important to Isaac that all disputes between his sons be resolved quickly and privately by someone who knew them and the business; in fact, Isaac envisioned an informal arbitration in which he would listen to what his sons had to say, review the relevant documents, and provide a solution. If Isaac died, he wanted Cohen to act in his place. That the Escava brothers agreed with this dispute resolution procedure is made clear by the fact that the Arbitration Clause was included in the 1974 Partnership Agreement.
Cohen further alleges that he is currently licensed to practice law in New Jersey and Arizona, he previously practiced law in New York State for 45 years, and he has extensive experience in arbitration. He avers that he has no knowledge of the nature of the disputes or of the merits of the claims at issue between Seymour and Hyman, and that he has refused to discuss these issues with any of them, their families or their counsel. Further, Cohen represents that he is willing to travel to New York to preside over the arbitration.
Hyman thus concludes that the disputes as between himself, Seymour, Eileen and Joyce must be resolved through arbitration.
Seymour's Contentions
In opposition, Seymour contends that the arbitration should be stayed because the disputes raised in Action No. 1 are not governed by the Arbitration Clause in the 1974 Partnership Agreement. More specifically, Seymour contends that those issues concern the theft of checks drawn by a third-party, ISJ, and made payable to Seymour and/or Eileen, for property that is owned by the individual partners, so that it does not arise under the 1974 Partnership Agreement. Moreover, Eileen is not a party to the 1974 Partnership Agreement. Seymour also asserts that it is impossible to comply with the qualification of the arbitrators as provided in the 1974 Partnership Agreement because Isaac is now deceased and the Jaffee firm is now defunct. Finally, Seymour contends that Cohen should be disqualified because he initiated ex parte communications with Seymour and his wife, during which he discussed the particulars of the case.
It is well settled that arbitration is favored as a matter of public policy ( see TNS Holdings v. MKI Sec., 92 NY2d 335, 339; Matter of Weinrott [Carp], 32 NY2d 190, 199) since "this State favors and encourages arbitration as a means of conserving the time and resources of the courts and the contracting parties" ( Matter of Nationwide Gen. Ins. Co. v. Investors Ins. Co., 37 NY2d 91, 95). "The strong public policy of this state encourages the arbitration of disputes and dissuades 'parties to such agreements from using the courts as a vehicle to protract litigation'" ( Roffler v. Spear, Leeds Kellogg, 13 AD3d 308, 314, n. 1 [2004], quoting Matter of Weinrott [Carp], 32 NY2d at 199). Hence, "[w]hen faced with a broad arbitration clause, which creates 'a presumption of arbitrability,' a court merely determines whether there is 'a reasonable relationship between the subject matter of the dispute and the general subject matter of the underlying contract'" ( Domansky v. Little, 2 AD3d 132, 133, quoting Collins Aikman Prods. Co. v. Building Sys., 58 F 3d 16, 23; Matter of Nationwide Gen. Ins. Co., 37 NY2d at 96).
In resolving the instant dispute, the court also recognizes that pursuant to CPLR 7501: "A written agreement to submit any controversy thereafter arising or any existing controversy to arbitration is enforceable without regard to the justiciable character of the controversy and confers jurisdiction on the courts of the state to enforce it and to enter judgment on an award. In determining any matter arising under this article, the court shall not consider whether the claim with respect to which arbitration is sought is tenable, or otherwise pass upon the merits of the dispute." Further, pursuant to the statutory scheme, Article 75: "creates 'a hospitable procedural environment that is intended to encourage arbitration,' [under which] the courts play the 'gatekeeping' role of deciding certain' threshold' issues before compelling or staying arbitration (CPLR 7503). . . . The courts' gatekeeping role is delineated in CPLR 7503, which sets forth three specific issues a court must decide, if called upon to do so, before compelling or staying arbitration. These threshold issues are whether a valid agreement was made, whether the agreement was complied with, and whether the claim sought to be arbitrated is barred by a statute of limitations." ( Merrill Lynch, Pierce, Fenner Smith v. Benjamin, 1 AD3d 39, 43-44; accord County of Nassau v. Civil Serv. Empls. Assn., 14 AD3d 509. Hence, it has been held that "no stay of arbitration is available where 'the parties' agreement to arbitrate the dispute is clear and unequivocal but there is some ambiguity as to the coverage of the applicable substantive provision of the contract'" ( Franklin Cent. School v. Franklin Teachers Assoc., 51 NY2d 348, 356-357, quoting Board of Educ. v. Barni, 49 NY2d 311, 314-315; Matter of Wyandanch Union Free School Dist. v. Wyandanch Teachers Assn., 48 NY2d 669; Matter of Board of Educ. v. Roosevelt Teachers Assn., 47 NY2d 748).
In addition, it is well established that the question of whether an agreement is abandoned or terminated involves issues which must be resolved by the arbitrator ( In re Estate of Cassone, 63 NY2d 756, 758-759; accord Port Auth. v. Office of the Contract Arbitrator, 254 AD2d 194, 195, appeal denied 1999 NY App Div LEXIS 2161 [1999], motion denied, in part, dismissed in part 93 NY2d 913 [1999), motion denied 1999 NY LEXIS 1272 [1999] [the issue of whether an arbitration agreement has been terminated is for the arbitrator]; Two Cent. Tower Food v. Pelligrino, 212 AD2d 441, 442 [it is well-settled that issues which go to the validity of the substantive provisions of a contract are to be resolved by an arbitrator, even where there are allegations that the underlying agreement was abandoned or terminated, which could have the effect of negating the agreement's arbitration clause]. Similarly, once parties to a broad arbitration clause make a valid choice of forum, all questions with respect to the validity and effect of subsequent documents purporting to work a modification or termination of the substantive provisions of their original agreement are to be resolved by the arbitrator ( see e.g. Metalink Marine v. Ned Chartering Trading, 207 AD2d 688, 689, appeal denied 84 NY2d 812; accord Fener Realty Co. v. NICO Constr. Co., 182 AD2d 436, 437-438 [termination of a contract's substantive obligations and its replacement with a new agreement are issues which involve conduct of the parties subsequent to the contracting which are to be decided by the arbitrator]).
Discussion
In the matter sub judice, Seymour does not deny that the 1974 Partnership Agreement contains a clause requiring the partners to arbitrate all disputes, that he was a signatory to that Agreement and that the 1991 Ratification Agreement assumed the terms of the 1974 Partnership Agreement. Similarly, Seymour does not argue that there are any conditions precedent that must be complied with for the arbitration provision to be exercised.
Further, the language of the 1974 Partnership Agreement, standing alone, makes it clear that the parties agreed that all disputes arising out of the partnership should be resolved by arbitration. This conclusion finds further support in the above discussed affidavits submitted by Hyman and Cohen, in which each so states. In this regard, it must also be noted that Seymour does not deny that when the 1974 Partnership Agreement was signed, it was the intent of the parties that all of their disputes should be resolved by arbitration. In addition, although the arbitration clause contained in the Articles of Limited Partnership of the 149th Street Realty is not controlling herein because the disputes as between Seymour and Hyman do not involve 149th Street Realty, the arbitration clause contained in that partnership agreement further supports the conclusion that the Escava brothers agreed that all disputes relating to the family business would be resolved by arbitration.
Accordingly, the Arbitration Clause in the 1974 Partnership Agreement is valid and binding ( see generally Morris v. Signorelli, 9 AD3d 433, 434 [arbitration clause in an agreement that provided for the arbitration of "each and every controversy or claim arising out of or relating to this Agreement, or the breach thereof" was held to be broad in scope, clear, explicit, and unequivocal]; Ballon Stoll Bader Nadler v. Kaufman, 210 AD2d 29 [the court properly concluded that the subject dispute should have proceeded to arbitration where it was not disputed that the plaintiff's predecessor-in-interest agreed to a broad arbitration clause, it was clear that the parties' dispute arose before the expiration date of that agreement and the record demonstrated the parties' intention to be governed by the original arbitration clause]).
This court rejects Seymour's claim that the subject disputes do not arise out of or relate to the 1974 Partnership Agreement. Both Seymour and Hyman agree that the 149th Street and the Jay Street Properties are owned by Escava Brothers, and Seymour repeatedly refers to Escava Brothers as a passive investor in the properties. Thus, money due to Hyman, Joyce, Seymour and/or Eileen as income earned from the property interests owned by Escava Brothers must be construed to arise out of or relate to the 1974 Partnership Agreement. Further, the predicate for Seymour's claim of entitlement to additional monies by virtue of Hyman's agreement to accept the assignment of a 10.38% interest in the 149th Street Property in satisfaction of the Chera loan is the contention that Hyman entered into the transaction by loaning money belonging to the partnership. Accordingly, Seymour's claim, as it is premised upon the Chera loan, must also be characterized as arising out of the 1974 Partnership Agreement. As such, Seymour's characterization of his claims as being separate and apart from Escava Brothers is lacking in merit.
Similarly, there can be no dispute that the issues raised in the Notice of Intention to Arbitrate, which arbitration Seymour seeks to stay in Action No. 2, as well as Seymour's demand for an accounting from the partnership, as demanded in Action No. 3, also arise out of the 1974 Partnership Agreement ( see generally City Trade Indus. v. New Cent. Jute Mills Co., 25 NY2d 49, 53 [the court properly stayed demand for an accounting and directed plaintiff to submit all disputes and issues to arbitration, as was originally provided for in the subject contract on which the accounting was premised]; Garson v. Powell, 267 AD2d 277, 277-278 [the court did not err in denying the plaintiff's motion to compel an accounting under circumstances where the parties' agreement included a broad arbitration clause, which encompassed the plaintiff's demand for an accounting, and the court directed the parties to arbitrate the matter]; Feffer v. Goodkind, Wechsler, Labaton Rudoff, 183 AD2d 678 [the imposition of sanctions was not an abuse of discretion under circumstances where plaintiff, a former partner in defendant law firm who sought an accounting and dissolution, had signed a partnership agreement with a broad arbitration clause, but argued that the dispute was not arbitrable because the partnership had been abrogated, since the dispute was arbitrable "without question," so that plaintiff's conduct was designed to delay or prolong resolution of the dispute]). Accordingly, all of the disputes raised in the pending actions as between Hyman, Seymour, Eileen and Joyce must be resolved by arbitration.
Implicit in this holding is the rejection of the claim that Eileen cannot be compelled to arbitrate because she was not a signatory of the 1974 Partnership Agreement. In this regard, it must be emphasized that although both Hyman and Seymour allege that each transferred his interest in the 149th Street Property to his respective wife, no documentation substantiating this claim was submitted to the court. Also significant is the fact that there is no allegation made by either Seymour or Hyman that the said transfers of the interests were effectuated in accordance with Article XI of the Articles of Limited Partnership. This must contrasted with the "Agreement of Assignment and Assumption of Partnership Interest" dated July 2, 1996, pursuant to which I. Chera Sons assigned its 10.38% interest in 149th Street Realty Associates to Hyman. Similarly, the 1991 Ratification Agreement, pursuant to which Nathan's interest in Escava Brothers was transferred to Joyce, was also reduced to writing. In addition, the court notes that Eileen was not mentioned in the 2002 Settlement Agreement, nor was she a signatory thereof, which further supports the conclusion that Escava Brothers did not transfer any ownership interest in the 149th Street Property to her.
Indeed, to establish that he equalized the distributions between his wife and Seymour's wife, Hyman relies solely upon a handwritten note that he faxed to "Steve," which stated in full "[p]lease make shares in 149th St Realty Assoc equal between Jacqueline Escava and Eileen Escava."
Thus, it is concluded that Eileen acquired only an assignment of Seymour's right to receive the income generated by the 149th Street Property, and not an assignment of the ownership interest therein held by Escava Brothers. In this regard, it is hornbook law that an assignee stands in the shoes of an assignor ( see e.g. Arena Constr. Co. v. Sackaris Sons, 282 AD2d 489; Wald v. Marine Midland Bus. Loans, 270 AD2d 73, 74; Richard T. Blake Assocs. v. Aetna Cas. Sur. Co., 255 AD2d 569, 571). From this it follows that Eileen is bound by the Arbitration Clause contained in the 1974 Partnership Agreement. Further, any argument that the agreement concerning the assignment of the partnerships' interest in the money generated by the 149th Street Property superseded the partnership agreement would also be for the arbitrator to decide ( see e.g. Domansky v. Little, 2 AD3d 132, 134, citing Matter of Cassone, 63 NY2d at 758-759).
Seymour's Claim that Arbitration is Impossible
Seymour's contention that the instant disputes cannot be arbitrated pursuant to the 1974 Partnership Agreement because it is impossible for the arbitrators named in the Agreement to serve is incorrect. In making this determination, the court is guided by CPLR 7504, which provides that: "If the arbitration agreement does not provide for a method of appointment of an arbitrator, or if the agreed method fails or for any reason is not followed, or if an arbitrator fails to act and his successor has not been appointed, the court, on application of a party, shall appoint an arbitrator." In interpreting this provision, it has been held that once the court concludes that parties clearly intended that all disputes should be resolved by arbitration, the only issue to be resolved is the designation of the arbitrator ( see generally Sawyer Co. v. John W. Cowper Co., 55 AD2d 774, 774-775 [under circumstances where a subcontract provided that "[a]ll claims, disputes and other matters in question arising out of, or relating to, this Subcontract, or the breach thereof, shall be decided by arbitration in the same manner and under the same procedure as provided in the Contract Documents with respect to disputes between the Owner and the Contractor," but the main contract contained no provision for arbitration, the court properly determined that the language of the subcontract pursuant to which the parties agreed to arbitrate was broad, clear, unambiguous and enforceable, so that the court was correct in directing arbitration before the most appropriate tribunal available under the circumstances, even in view of the absence of any provision in the main contract]; Zandman v. Nissenbaum, 53 AD2d 837 [where an agreement among members of a professional dentistry corporation provided that disputes would be arbitrated under the rules of the American Medical Association but the Association did not provide for arbitration of such issues, the court should have appointed an arbitrator]).
Accordingly, contrary to Seymour's assertion, since the court has already determined that the parties' agreement to arbitrate is binding, if the arbitrators, as designated in the 1974 Partnership Agreement providing for the arbitration are not available, the proper remedy is not for the court to direct the parties to proceed to litigation, but is instead to appoint a successor arbitrator, if necessary ( see generally Kern v. Excelsior 57th, 270 AD2d 25 [when an arbitrator cannot act for reasons of health or unavailability or other circumstances tantamount to the occurrence of a vacancy, there is statutory authorization for a court to appoint a replacement pursuant to CPLR 7504]; Laboratorios Grossman v. Forest Laboratories, 31 AD2d 628, 629 [under circumstances where the designated arbitrator was an organization that never existed, once it was determined that the dominant purpose of the parties' agreement was to settle disputes by arbitration, the court may direct arbitration before such tribunal as it determines would be the most appropriate in the circumstances]).
Seymour's Claim that Cohen Must be Disqualified
The court further declines to hold that Cohen should be disqualified because he allegedly discussed the matter with Seymour and Seymour's wife.
In addressing Seymour's demand for disqualification, the court recognizes that the law does not provide any authority upon which an order of disqualification can be issued:
"Significantly, our statutes, which provide specifically for the enforcement of private arbitration agreements and for the vacatur or modification of awards improperly made, are completely silent on any power to disqualify arbitrators in advance of arbitration proceedings (CPLR art 75). It is only when an arbitrator cannot act for reasons of health or unavailability or other circumstances tantamount to the occurrence of a vacancy that there is statutory authorization for a court to appoint a replacement (CPLR 7504)."
( Siegel v. Lewis, 40 NY2d 687, 689, reh denied 41 NY2d 901). In the Siegel case, the court specifically recognized that: "The parties' reasons for the selection of particular arbitrators may in fact be the very ones which would have disqualified Judges or jurors ( see Matter of Amtorg Trading Corp. [Camden Fibre Mills], 277 App Div 531, affd 304 NY 519; Matter of Perl [General Fire Cas. Co.], 34 AD2d 748). For example, a particular expertise in the general area of factual knowledge involved in the arbitration may be an especially desirable qualification to the parties (8 Weinstein-Korn-Miller, NY Civ Prac, par 7506.18). Also, '[if] the parties so agree, the relationship of an arbitrator to the party selecting him or to the matters in dispute will not disqualify him' (Eager, Arbitration Contract and Proceedings, § 96, subd 1, p. 272; see, also,Arbitrators — Disqualification, Ann., 65 ALR2d 755, esp § 5, p. 764). Indeed, our court long ago held that parties may be bound by a determination by an arbitrator selected to decide the issues before him on the basis of his knowledge alone ( Wiberly v. Matthews, 91 NY 648; see, also, Arbitrators Acting on Own Knowledge, Ann., 154 ALR 1210). "Therefore, strange as it may seem to those steeped in the proscriptions of legal and judicial ethics, fully known relationship between an arbitrator and a party, including one as close as employer and employee ( Matter of Astoria Med. Group [Health Ins. Plan of Greater NY], supra, p. 136) or attorney and client ( Matter of Karpinecz [Marshall], 14 AD2d 569), will not in and of itself disqualify the designee. Of course, if there has been a failure to disclose such an existing or past financial, business, family or social relationship between the arbitrator and a party as is likely to affect the arbitrator's impartiality, the situation would be different. The consensual basis for the choice then would be lacking. However, assent by a party to the choice of an arbitrator in the face of that party's knowledge of a relationship between the other side and the arbitrator is a waiver of his right to object. And, '[since] waiver is a matter of intention . . . the touchstone . . . is the knowledge, actual or constructive, in the complaining party of the tainted relationship or interest of the arbitrator' ( Matter of Milliken Woolens [Weber Knit Sportswear], 11 AD2d 166, 168-169, affd 9 NY2d 878; see, also, Domke, Commercial Arbitration, § 21.04)." ( id. at 689-690 [emphasis added]). Indeed, such reasoning is consistent with the longstanding "policy of this State to 'interfere as little as possible with the freedom of consenting parties' in structuring their arbitration relationship" ( Credit Suisse First Boston v. Pitofsky, 4 NY3d 149, 155, quoting id. at 688; see generally Roffler v. Spear, Leeds Kellogg, 13 AD3d 308, 313-314 [because arbitration is a creature of contract, parties are generally free to designate in their contract the law and procedure to be applied to their controversy to govern the resolution of any dispute]).
Herein, the parties undeniably agreed, when the 1974 Partnership Agreement was executed, that the chosen arbitrator would have a close personal and business relationship with the partners and the business, since Seymour cannot deny that he was aware that his father, Cohen and/or other members of the Jaffee firm were intimately associated with the members of the Escava family and their business interests. Accordingly, Seymour will not be permitted to rely upon the relationship that Cohen has with him, his wife, his brother or the Escava family businesses in seeking to have him disqualified ( see generally Labenski v. Kraizberg, 234 AD2d 296, 297 [the mere fact that the arbitrator had previously represented parties opposed to the appellant in a different arbitration proceeding involving some of the same properties was insufficient to permit an inference of prejudice where the parties had explicitly chosen the arbitrator in question, and the representation was known to the appellant prior to the commencement of the arbitration in the matter at bar]; Lincoln Graphic Arts v. Rohta/New Century Communications, 160 AD2d 871, 872 [a party who knew of a relationship between his adversary and the arbitrator and nevertheless assented to the choice of that arbitrator waived his right to later object]; State Wide Ins. Co. v. Klein, 106 AD2d 390, 390-391 [it is clear that a party-designated arbitrator who would serve on a tripartite panel of arbitrators could not be disqualified, as a matter of law, because of partiality, since the arrangement itself was conceived so as to allow each party the opportunity to have his side represented on the tribunal; similarly, the arbitrator's personal knowledge of the facts relating to the controversy would not provide a ground upon which to remove the designee so long as the relationship had been fully disclosed to the opposing party]).
Moreover, it is significant to note that although Seymour alleges that Cohen had conversations with him and his wife, neither he nor his wife discloses the substance of the conversations that he argues require disqualification. This absence of detail, particularly in view of Cohen's unequivocal denial that he discussed the particulars of the matter with any party having an interest therein, serves to further support the conclusion that disqualification is not appropriate.
Applying the above principles of law to the instant facts, however, the court determines that it is appropriate for Cohen to serve as the arbitrator. In so holding, the court notes that Seymour cannot successfully dispute that it was the intention of the Escava brothers, in signing the 1974 Partnership Agreement, that either their father or a member of the firm that handled the Escava Brothers' legal matters, the Jaffee firm, would serve as their arbitrator. Although the Jaffee firm is now defunct, it is not disputed that Cohen was a member of the firm when the Agreement was executed and that Cohen was the member of the firm upon whom the Escavas relied to handle their legal matters. Inasmuch as Cohen has indicated a willingness to serve as the arbitrator, the court determines that he should so serve. Accordingly, the parties are directed to proceed to arbitration before Cohen forthwith. Having so held, the court must address the issue of whether the remaining demands for relief should be determined by the court or by the arbitrator, and if determination by the court is appropriate, what relief, if any, should be awarded.
Hyman's Demand to Dismiss the Complaint in Action No. 1
In his cross motion in Action No. 1, Hyman argues that the causes of action interposed therein by Seymour and Eileen must be dismissed, in part, as barred by the Statute of Limitations. Throughout his papers, Hyman also argues at length that the claims raised by Seymour therein are preluded by the general release contained in the 2002 Settlement Agreement. In various other submissions, Hyman also argues that Seymour's claims must be dismissed on the ground that he did not first demand an accounting, that he failed to plead the requisite elements of fraud, and that the fraud claims are duplicative of the other causes of action.
The 2002 Settlement Agreement
The court first notes that Hyman improperly failed to raise this demand for relief in the notice of motion, as is required pursuant to CPLR 2214 and 2215 ( see generally Chun v. North American Mortgage. Co., 285 AD2d 42 [the court was virtually without jurisdiction to grant the relief afforded to defendants where there was an absence of a notice of cross motion or any other notice to plaintiff that she would be required to respond to a motion to dismiss]; Bauer v. Facilities Dev., 210 AD2d 992 [affidavits submitted in opposition to defendants' motions were insufficient to constitute a cross motion]). Nonetheless, inasmuch as this issue was raised early in the proceedings and was refuted at length by Seymour, and because resolution of the issue at this stage of the proceedings may well serve to avoid future motion practice, it will be addressed herein.
In support of his demand for dismissal on this ground, Hyman argues that the 2002 Settlement Agreement was intended to settle all disputes between him and Seymour, so that the release bars Seymour from now asserting the claims raised against him. In opposition, Seymour argues that the Settlement Agreement pertains only to houses that Hyman purchased for his children using business funds, and does not address the issues of the money that he converted from the distributions for the 149th Street Property or the additional 10.38% ownership interest that he took therein in satisfaction of the Chera loan.
The release in the 2002 Settlement Agreement provides that: "Excepting the obligations of any party set forth in this Agreement, each of the Owners hereby releases and discharges the remaining Owners and Entities, their officers, directors, heirs, executors, administrators, successors and assigns from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, covenants, contracts, controversies, agreements, promises, damages, judgments, claims and demands whatsoever, in law or in equity, which against them, they or their heirs, executors, administrators, successors and assigns ever had, now have, or hereafter can, shall or may, have for, upon, or by reason of any matter, credit agreement, or thing relating to the subject matter of the transactions set forth [in the 2002 Settlement Agreement] and/or payments received by the Owners, either in the form of compensation as employees, dividends, loans or otherwise." (2002 Settlement Agreement, para 8).
The court holds, in accordance with the above discussed law, however, that inasmuch as the broad Arbitration Clause included in the 1974 Partnership Agreement is binding, the issue of whether the claims now asserted by Seymour are barred by the 2002 Settlement Agreement should be determined by the arbitrator.
Need for an Accounting
Again, Hyman failed to make a motion seeking dismissal of the action for lack of an accounting. In addressing the merits of his assertion, however, it is well settled that as a general rule, partners cannot sue each other at law for acts relating to the partnership unless there is an accounting, prior settlement, or adjustment of the partnership affairs ( see e.g. Gaentner v. Benkovich, 18 AD3d 424; 795 NYS2d 246 [NYAD 2nd Dept 2005]); Stark v. Goldberg, 297 AD2d 203, 204; 1056 Sherman Ave. Assocs. v. Guyco Constr., 261 AD2d 519, 520; Goodwin v. MAC Resources, 149 AD2d 666, 667).
Further, in apparent recognition of the necessity of demanding an accounting prior to seeking to recover money damages, Seymour commenced Action No. 3, in which an accounting was demanded. Accordingly, in the interest of judicial expediency, this claim is addressed on the merits and denied, since it has already been determined that Seymour's demand for an accounting must also be resolved by the arbitrator.
The court similarly denies Joyce's request that Seymour and Hyman should bear the cost of the accounting, as well as the cost of her legal fees, and that each should deposit $100,000 with her attorney in order to secure payment of this amount. In this regard, as noted above, the law is clear that a demand for relief cannot properly be interposed in an affidavit in opposition, without a notice of motion ( see generally CPRL 2214 and 2215; Chun, 285 AD2d 42 [the court was virtually without jurisdiction to grant the relief afforded to defendants where there was an absence of a notice of cross motion or any other notice to plaintiff that she would be required to respond to a motion to dismiss]; Bauer, 210 AD2d 992 [affidavits submitted in opposition to defendants' motions were insufficient to constitute a cross motion]; Guggenheim v. Guggenheim, 109 AD2d 1012 [it was not sufficient to demand relief in opposing affidavits or in a memorandum; an outright notice was required to avoid surprise to the original movant]; Braver v. Nassau County Office of Administrative Servs., 67 Misc 2d 120 [an affidavit in opposition to a motion is not sufficient to constitute a cross motion]).
Insufficiency of Fraud Claim
Again, it is noted that there is no notice of motion before the court in which Hyman seeks dismissal of plaintiffs' claims of fraud on the grounds that they are not sufficiently pleaded. Moreover, this claim has not been addressed by Seymour. Accordingly, as held above, the court is without jurisdiction to grant such relief. Having determined that the parties agreed to and are bound by a broad arbitration clause, determination of whether the claims of fraud, as interposed by plaintiffs, are sufficient to state a claim upon which relief can be granted is for the arbitrator to determine.
Hyman's Demand to Dismiss Seymour's Claims as Time-barred
In support of his assertion that many of Seymour's claims are time-barred, Hyman argues that the claims of conversion and fraud as set forth in the first and second causes of action are based upon his actions in allegedly forging the endorsement of Seymour and/or Eileen and depositing them into his bank accounts between 1989 and 2003. Similarly, Hyman argues that the fourth, fifth and sixth causes of action for unjust enrichment, breach of fiduciary duty, fraud and conversion, as premised upon the Chera loan that was made November 21, 1989 and that was repaid on July 2, 1996, are also time-barred.
In opposition, Seymour argues that Hyman cannot rely upon his own wrong, i.e., absconding with sums due him and his wife, conceal his wrongdoing, and escape liability by arguing that the claims are time-barred. Seymour further asserts that he discovered the misconduct as soon was reasonably possible, in view of the circumstances and his diminished mental capacity. In support of this claim, Seymour alleges that he and his wife received some checks reflecting proceeds earned from the 149th Street Property, and when he questioned Hyman with regard to why the payments were not higher, Hyman told him that the distributions were limited because capital improvements were being made on the building.
"Clearly, under New York law, statutory time limitation questions . . . as opposed to contractual time limitations agreed upon by the parties . . . are for the courts, not the arbitrators" ( County of Nassau, 14 AD3d at 509, quoting Matter of Smith Barney Shearson v. Sacharow, 91 NY2d 39, 48, quoting Matter of Smith Barney, Harris Upham Co. v. Luckie, 85 NY2d 193, 202; accord 237 Park Investors v. Walter Thompson Co., 5 AD3d 304, 305 [whether the arbitration met the Statute of Limitations was a threshold issue to be determined by the court]; Kidder, Peabody Co. v. Henehan, 267 AD2d 120 [under New York law, threshold Statute of Limitations questions are for the courts]; Weight Watchers Intl. v. Mark, 263 AD2d 491, 492 [the court properly determined that the subject arbitration was barred by the expiration of the six-year Statute of Limitations governing breach of contract claims and properly declined to send the issue of the statutory time limitation to the arbitrator for a determination]).
Conversion
The Statute of Limitations for conversion is three years ( see e.g. Rattenni v. Cerreta, 285 AD2d 636, 637, citing Gold Sun Shipping v. Ionian Transp., 245 AD2d 420; Garber v. Ravitch, 186 AD2d 361, appeal denied 81 NY2d 707; Gkanios v. D'Ambrosio, 271 AD2d 488, 489; Davidson v. Fasanella, 269 AD2d 351, 352). Further, "accrual runs from the date the conversion takes place ( see, Sporn v. MCA Records, 58 NY2d 482, 488) and not from discovery or the exercise of diligence to discover ( see, Varga v. Credit-Suisse, 5 AD2d 289, affd 5 NY2d 865)'" ( Vigilant Ins. Co. of Am., 87 NY2d 36, 44; accord State v. Seventh Regiment Fund, 98 NY2d 249, 259 [a cause of action for conversion accrues when all of the facts necessary to sustain the cause of action have occurred, so that a party could obtain relief in court]).
Accordingly, plaintiffs' claims, as premised upon claims of conversion, as pleaded in the first and sixth causes of action, are timely only as to funds allegedly converted subsequent to January 15, 2001.
Breach of Fiduciary Duty
A cause of action premised upon a claim of breach of fiduciary duty claim is governed by a three-year Statute of Limitations where, as here, monetary relief and not equitable relief is sought ( see e.g. Papp v. Debbane, 16 AD3d 128, 790 NYS2d 450, 451; Carlingford Ctr. Point Assocs. v. MR Realty Assocs., 4 AD3d 179, 179-180); Kaufman v. Cohen, 307 AD2d 113, 118; Deutsch v. Polly N. Passonneau, P.C., 297 AD2d 571, 572; Yatter v. William Morris Agency, 256 AD2d 260, 261). To the extent that the breach of fiduciary duty claim sounds in fraud it is subject to the six year or within 2 years of discovery statute of limitations.
Unjust Enrichment
The plaintiffs' cause of action to recover damages for unjust enrichment is barred by the six-year Statute of Limitations found in CPLR 213 (1), which starts to run upon the occurrence of the wrongful act giving rise to a duty of restitution ( see e.g. Loengard v. Santa Fe Indust., 70 NY2d 262; accord Natimir Restaurant Supply v. London 62 Co., 140 AD2d 261, 262; Baratta v. Kozlowski, 94 AD2d 454, 464); Equitable Life Assurance Soc. v. Branch, 32 AD2d 959, 960). Accordingly, plaintiffs' complaint, as premised upon a claim breach of unjust enrichment, as pleaded in the fourth cause of action, is time-barred as to funds allegedly appropriated prior to January 15, 1998.
Fraud
A claim of fraud is untimely if it is not commenced within six years after commission of the fraud or within two years after its discovery, whichever is later ( see e.g. Mazella v. Markowitz, 303 AD2d 564; Richmond v. Norotsky, 284 AD2d 319; Pacchiana v. Pacchiana, 94 AD2d 721, appeal dismissed 60 NY2d 586, citing CPLR 213; 203 [f]). "The burden of establishing that the fraud could not have been discovered before the two-year period prior to the commencement of the action rests on the plaintiff, who seeks the benefit of the exception" ( Lefkowitz v. Appelbaum, 258 AD2d 563, 563).
Herein, plaintiffs assert that Hyman began wrongfully appropriating funds from them in 1989, when he allegedly stopped giving them checks for money that they believed was due to them from Escava Brothers' property. Given the passage of approximately 15 years until they commenced the instant action, plaintiffs' contention that they could not have discovered the fraud earlier is unpersuasive. In the first instance, Seymour's claim that the delay in discovery was due to mental difficulties that he suffered as a result of his stroke is dismissed as lacking in probative value, since the claim is purely speculative and conclusory, without any corroborating medical documentation or evidence. Further, Seymour acknowledged that during the period he questioned Hyman with regard to the decrease in the amount of the distributions that he received from Escava Brothers for the 149th Street Property. His reliance upon Hyman's conclusory assertion that capital improvements were being made is patently unreasonable, particularly in view of the passage of so many years. Moreover, there is no allegation that Seymour made any inquiry of the management company, as he did in support of his motions in Action No. 1, nor did he make any inquiries of 149th Street Realty, of which he was a partner, nor is any explanation offered as to why no such inquiries were made. Similarly, plaintiffs offer no explanation at all as to why they did not inquire about the payment of interest on the Chera loan or the repayment of the loan itself. In addition, during the relevant time period, Seymour executed the 1991 Ratification Agreement and the 2002 Settlement Agreement, both of which evidence his understanding of and participation in the management of Escava Brothers. Moreover, having accused Hyman of unfairly distributing partnership proceeds and demanding the execution of an agreement pursuant to which Hyman agreed to pay him $1,900,000 to reimburse him for what he contended were improper expenditures of business monies, it must be presumed that Seymour had more than sufficient opportunity and information to fully explore the issue of the amount of money earned by the partnership from all of its investments and, hence, the amount due to him; such investigation certainly could have been undertaken long before it was and presumably would have revealed the alleged improprieties upon which Action No. 1 is premised.
Accordingly, since plaintiffs failed to demonstrate that they exercised due diligence, after discovery of the facts, in commencing this action, their claims of fraud are time-barred to the extent that they occurred earlier than six years before the filing of the complaint, or before January 15, 1998 ( see generally Julian v. Carroll, 270 AD2d 457; Prestandrea v. Stein, 262 AD2d 621, 622 [where the circumstances were such as to suggest to a person of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arose, and if he omitted that inquiry when it would have developed the truth, and shut his eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him]; see also Brock v. Brock, 229 AD2d 457, 458 [since the plaintiffs failed to exercise due diligence to discover the alleged fraud within the window afforded by CPLR 203 (g), the cause of action to recover damages for fraud is barred by the Statute of Limitations]).
Estoppel
It is beyond dispute that "[o]ur courts have long had the power, both at law and equity, to bar the assertion of the affirmative defense of the Statute of limitations where it is the defendant's affirmative wrongdoing . . . which produced the long delay between the accrual of the cause of action and the institution of the legal proceeding" ( General Stencils v. Chiappa, 18 NY2d 125, 128 [citations omitted]; accord Kamruddin v. Desmond, 293 AD2d 714, 715 [the principle that defendants' intentional wrongdoing should preclude them from asserting the statute of limitations as an affirmative defense derives from the corollary principle, deeply rooted in our jurisprudence, that no one may take advantage of his or her own wrong]). Hence, the doctrine of equitable estoppel will work to bar the interposition of the statute of limitations defense under circumstances where defendants induced plaintiffs 'by fraud, misrepresentations or deception' to postpone bringing the action ( Appian Estates v. Mastroddi, 274 AD2d 366, 367, citing Simcuski v. Saeli, 44 NY2d 442).
In order to make a prima facie showing that defendant should be estopped from asserting the Statute of limitations, plaintiff must establish an allegation that the defendant "'made an actual misrepresentation or committed some other affirmative wrongdoing' that induced plaintiff to delay bringing the action in a timely manner" ( Herman v. Depinies, 273 AD2d 146, 147, quoting Powers Mercantile v. Feiner, 109 AD2d 117, 121, affd 67 NY2d 981). In other words, "[a]s the cases make clear, the doctrine of equitable estoppel requires proof that the defendant made an actual misrepresentation or committed some other affirmative wrongdoing ( see, Gold v. City of New York, 80 AD2d 138, 144), that the plaintiff relied on the misrepresentation, and that the reliance caused him to delay bringing a timely action ( Five Platters v. Williams, 81 AD2d 534; Locafrance U.S. Corp. v. Daley-Hodkin Corp., 60 AD2d 804)" ( Powers Mercantile, 109 AD2d at 122). Further: "due diligence on the part of a plaintiff in bringing the action is an essential element of equitable estoppel ( see Marshall v. Duryea, 172 AD2d 726, 727. If a plaintiff possesses sufficient knowledge of the possible existence of a claim, he or she is under a duty to make inquiry and ascertain all the relevant facts before the statute of limitations expires ( see Augstein v. Levey, 3 AD2d 595, 598, affd 4 NY2d 791; McIvor v. Di Benedetto, 121 AD2d 519, 520; Ramsay v. Mary Imogene Bassett Hosp., 113 AD2d 149, 153)." ( Estate of Boyle v. Smith, 15 AD3d 338).
In applying the law to the facts of this case, it is clear that Seymour and Eileen have failed to demonstrate the elements necessary to estop Hyman from interposing the Statute of limitations. Most significantly, plaintiffs fail to allege or establish that Hyman did anything to conceal his alleged wrongful conduct from plaintiffs. Instead, he simply stopped sending them checks for the money that they believed that they were entitled to receive, which should have immediately put them on notice of the need to investigate. Plaintiffs failed to establish that they could not have discovered the complained of wrongful conduct with the exercise of due diligence, before the expiration of the statute of limitations. Hyman will not be precluded from interposing the statute of limitations as an affirmative defense on the grounds of equitable estoppel.
Dismissal of Amended Complaint v. Stay of Action
Inasmuch as only portions of plaintiffs' amended complaint have been dismissed as time-barred and an order to arbitrate acts as a stay of the action, the complaint as against Hyman cannot be dismissed until after the arbitration award is confirmed, so the action as against him must be stayed until that time ( see e.g. Weiss v. Kozupsky, 237 AD2d 514, 515; Crawford v. Merrill Lynch, Pierce, Fenner Smith, 41 AD2d 112, 118, citing Langemyr v. Campbell, 23 AD2d 371).
Hyman's Demand to Stay the Remaining Claims Pending the Arbitration
The court further finds that the remaining claims asserted by Seymour and Eileen herein, including the demand for a money judgment as against HSBC, Banco Popular and CItibank, should be stayed pending completion of the arbitration. In this regard, given the facts of this case, it cannot be determined if Seymour and Eileen are entitled to the funds that they claim were wrongfully paid by the banks until the arbitrator determines if they are entitled to recover any additional funds from Hyman and/or Escava Brothers. From this it follows that if they are allowed to pursue their claims as against the banks and succeed in obtaining a money judgment, and the arbitrator thereafter determines that they have already received all of the money to which they are entitled from Hyman and/or Escava Brothers, a judgment against the banks would be an undeserved windfall. Entry of a judgment as against the banks could also work to prejudice Hyman, since it would allow HSBC to pursue its cross claims as against him. The court will not permit such a result.
It is appropriate for a court to stay an action pending resolution of a New York arbitration under circumstances where the plaintiff is closely related to the signatories of the agreement that contained a broad arbitration clause; the issues raised in the litigation, which involved the enforceability of the agreement, were closely related to the issues raised in the arbitration; and the issues in the overall dispute between the contracting parties were inextricably interwoven with the claims raised by the non-signing plaintiff ( see Pacer/Cats/CCS v. MovieFone, 226 AD2d 127; see also PromoFone v. PCC Mgmt., 224 AD2d 259, 260 [New York courts have properly stayed litigation proceedings that included parties who were not signatories to the subject arbitration agreement where the nonsigning party was closely related to the signatories and was alleged to have engaged in substantially the same improper conduct]; Marcus v. Millwork Trading Co., 208 AD2d 448 [the action was properly stayed against a co-defendant who was not a signatory of the arbitration agreement, since plaintiff's claims as against him raised issues similar to those against the defendant who was bound to arbitrate]; Berg v. Dimson, 151 AD2d 362, 363 [the entire action was properly stayed pending arbitration because, although some of the defendants were not signatories to arbitration agreements and some of the partnership agreements did not contain arbitration clauses, the issues to be determined in the arbitration were inextricably interwoven with the remaining issues]; Brown v. V R Advertising, 112 AD2d 856, 859, affd 67 NY2d 772 [the court properly stayed the action as against defendants who were not signatories to the subject contract, and hence were not bound to arbitrate the instant dispute, pending resolution of the arbitration proceeding under circumstances where the claims against them were derivative and were sufficiently similar so that the arbitration proceeding might resolve the disputed issues as against these defendants]). Since the same can be said of the claims raised in the litigation by Seymour and Eileen as against the banks, a stay of the instant action pending arbitration is appropriate ( see generally Strain Son v. Baranello Sons, 90 AD2d 924, 925 [where parallel proceedings are pending, it is generally held that a stay of one or more is appropriate if there is such a commonality of parties and issues that the resolution of one proceeding will substantially determine the others]).
Accordingly, the motions by HSBC and Banco Popular are denied with leave to renew, on proper notice, after the arbitration is completed.
Seymour's Applications for Provisional Relief and
Hyman's Applications to Vacate all Restraints Seymour's Contentions
Seymour argues that the court should attach $3,000,000 of Hyman's assets. This assertion is based upon Hyman's alleged conduct in acting in complete derogation of his partners' rights, as discussed in detail above, in that he transferred four homes into the name of his wife; moved at least $500,000 in cash out of state; perjured himself as to his ownership of these properties in this court and in the Appellate Division; used personal accounts for the deposit of forged checks; mortgaged partnership property in violation of the partnership agreements; and forged Seymour's signature on loan documents for mortgages in the approximate amount of $3,000,000 and in connection with a $1,000,000 loan.
Seymour further asserts that in view of this conduct, Hyman should be enjoined from transferring, encumbering, mortgaging, hypothecating or conveying any asset of Escava Brothers without Seymour's consent, or borrowing or lending any sum of money on behalf of the partnership pending determination of this action for the above reasons, particularly since the controlling partnership agreements require Seymour's consent for all such transactions. Similarly, Seymour contends that Hyman should be enjoined from cancelling his interest in Escava Brothers pending the final determination of the issue, whether by an arbitrator or by a judge.
Hyman's Contentions
In support of his request for an order seeking the release of the $357,462.65 and in opposition to Seymour's demand for further relief, Hyman argues that his hope that the litigation would be quickly resolved if he made the deposit has not proved true. Hyman further contends that the preliminary relief demanded by Seymour is not legally appropriate since Seymour is unable to meet the prerequisites necessary for the issuance of a temporary restraining order, pursuant to CPLR 6301, or for an order of attachment, pursuant to CPLR 6201.
More specifically, Hyman asserts that Seymour is unable to demonstrate a likelihood of success on the merits since the affidavit that Seymour submitted, in support of his motion seeking provisional relief, was false, misleading and inconsistent; he failed to disclose that the 2002 Settlement Agreement, which contained a general release, had been executed; he failed to disclose that a valid arbitration clause precludes him from maintaining the instant action; he never obtained an accounting prior to filing the action; he embezzled approximately $2,400,000 from family owned businesses and committed insurance fraud for over 15 years; and each cause of action is time-barred and/or inadequately pleaded.
Finally, Hyman argues that there is no need for any preliminary restraints in the case. In so arguing Hyman notes that in Seymour's amended complaint, Seymour seeks to recover approximately $1,200,000. In view of the fact that the partnership's assets are worth millions of dollars, any judgment that Seymour may obtain can therefore be satisfied out of the partnership's property.
Preliminary Relief and Arbitration
The criteria to be applied in determining whether a provisional remedy should be granted in the context of an arbitration proceeding is set forth in CPLR 7502 (c): "A court may grant a preliminary injunction in connection with an arbitrable controversy 'only upon the ground that the award to which the applicant may be entitled may be rendered ineffectual without such provisional relief (CPLR 7502 [c]; see Matter of Kal Data v. AMC Computer Corp., 268 AD2d 589). In addition, to obtain relief under that section, a petitioner must make a showing of the traditional equitable criteria for the granting of temporary relief under CPLR article 63 ( see Itzkowitz v. G I Passover Bakery Corp., 303 AD2d 638; Matter of Kal Data v. AMC Computer Corp., supra; Matter of Cullman Ventures, 252 AD2d 222, 230; SG Cowen Secs. Corp. v. Messih, 224 F3d 79, 82-84)." ( Ottimo v. Weatherly Secs., 306 AD2d 287; accord K.W.F. Realty v. Kaufman, 16AD3d 688, 793 NYS2d 67).
Order of Attachment
Since an attachment is considered a harsh remedy, the statute is strictly construed in favor of those against whom it may be employed ( see e.g. Glazer Gottlieb v. Nachman, 234 AD2d 105). It has been held that: "Attachment is a provisional remedy designed to secure a debt by preliminary levy upon the property of the debtor to conserve it for eventual execution. Because of the harsh nature of attachment and because it is in derogation of the common law, the courts have strictly construed the attachment statute in favor of those against whom it may be employed ( see, Elton Leather Corp. v. First Gen. Resources Co., 138 AD2d 132, 135)." ( Michaels Elec. Supply v. Trott Elec., 231 AD2d 695).
Inasmuch as Hyman is a New York domiciliary, the basis for Seymour's demand must be CPLR 6201 (3). It is well settled that:
"To obtain an order of attachment under CPLR 6201 (3), the plaintiff must demonstrate that the defendant has concealed or is about to conceal property in one or more of several enumerated ways, and has acted or will act with the intent to defraud creditors, or to frustrate the enforcement of a judgment that might be rendered in favor of the plaintiff ( see, Arzu v. Arzu, 190 AD2d 87, 91; Societe Generale Alsacienne De Banque, Zurich v. Flemingdon Dev. Corp., 118 AD2d 769, 772). The moving papers must contain evidentiary facts, as opposed to conclusions, proving the fraud ( see, Societe Generale Alsacienne De Banque, Zurich v. Flemingdon Dev. Corp., supra; see also, Rothman v. Rogers, 221 AD2d 330; Rosenthal v. Rochester Button Co., 148 AD2d 375, 376). In addition to proving fraudulent intent, the plaintiff must also show probable success on the merits of the action ( see, CPLR 6212 [a]; Societe Generale Alsacienne De Banque, Zurich v. Flemingdon Dev. Corp., supra, at 773; Computer Strategies v. Commodore Bus. Machs., 105 AD2d 167, 173)." ( Benedict v. Browne, 289 AD2d 433 [2001]; see generally Computer Strategies v. Commodore Business Machines, 105 AD2d 167, 173 [1984], appeal and reargument denied 110 AD2d 743 [1985]; see also A M Exports v. Meridien Intl. Bank, 207 AD2d 741, 742 [1994] [where the merits of plaintiffs' case were equivocal, they were not entitled to an order of attachment]). Further, "the mere removal or assignment or other disposition of property is not grounds for attachment" ( Computer Strategies, 105 AD2d at 173, citing Laco X-Ray Systems v. Fingerhut, 88 AD2d 425 [1982], appeal dismissed 58 NY2d 826 [1983]).
Since Hyman is seeking to vacate the order pursuant to which he deposited $357,462.65 with the Clerk of the court, CPLR 6223 must also be considered. In this regard, it has been stated that: "Upon a motion to vacate an attachment, the plaintiff has the burden of establishing the grounds for the attachment, the need for continuing the levy, and the probability of success on the merits ( see, CPLR 6223 [b]). The court has broad discretion in considering such an application ( see, Zenith Bathing Pavilion v. Fair Oaks S.S. Corp., 240 NY 307, 312-313)." ( Rothman, 221 AD2d at 330; accord Raze Contr. v. Colombo, 16 AD3d 656, 791 NYS2d 444).
Discussion
In view of the showing made by Hyman in support of his motion to vacate the order of attachment and in opposition to plaintiffs' demand for additional provisional relief, plaintiffs have failed to demonstrate their entitlement to an order of attachment. More specifically, the court determines that plaintiffs have failed to establish that the award to which the applicant may be entitled may be rendered ineffectual without such provisional relief, as is required pursuant to CPLR 7502 (2). Plaintiffs have also failed to satisfy the requirements of CPLR 6212 in that they have failed to demonstrate that they will succeed on the merits, that Hyman disposed of any property with an intent to defraud creditors pursuant to CPLR 6201 (3), or that the counterclaims exceed the amount demanded from Hyman.
The court recognizes that Hyman has not interposed any counterclaims herein, since doing so would be inconsistent with his continuing assertion that the parties' dispute must be arbitrated. Hyman has, however, served a notice of intention to arbitrate and his papers make it unequivocally clear that he intends to rely upon the ledger annexed to his moving papers in an effort to establish that Seymour improperly appropriated $2,400,000 from the family businesses.
In so holding, it is significant to note that in the amended complaint in Action No. 1, plaintiffs are seeking to recover compensatory damages in the amount of $1,099.748, plus punitive damages in the amount of $3,000,000. As held above, a portion of plaintiffs' demand for compensatory damages has been dismissed as time-barred, so that the amount of his demand will be significantly reduced. In addition, the complaint in Action No. 3 does not set forth a demand for a sum certain in damages, and instead states that an accounting is necessary for Seymour to determine the amount of money that Hyman improperly appropriated from the partnership. Thus, although Seymour refers to millions of dollars in demands throughout his papers, his pleadings do not reflect these amounts.
Neither party has provided the court with any calculations that would establish the amount by which plaintiffs' demand for compensatory damages will be reduced by reason of this holding.
Most significantly, Seymour has failed to make a showing that he is likely to succeed on the merits. For example, Seymour argues that the mortgage given to Benun in the amount of approximately $1,000,000 should not be enforced against him on the grounds that his signature on the loan documents was forged, that the documents were falsely notarized, and that he did not knowingly enter into the mortgage because of the effects of his stroke. It is not likely that he will prevail on these claims, since these precise arguments were raised by him and rejected by the court when Benun was granted summary judgment in the action that he commenced in New York County Supreme Court, seeking to foreclose on the mortgage ( Jack Benun v. Escava Brothers [New York County Sup. Ct., Index No. 104,004/04]). That decision, along with Seymour's failure to inform the court of the existence of the parties' agreement to arbitrate as contained in the 1974 Partnership Agreement, or the release as contained in the 2002 Settlement Agreement, impacts negatively upon his overall credibility. Hence, his claim that the IDB mortgages were similarly obtained by fraud and forgery, made in a conclusory fashion and without any evidentiary support whatsoever, also fails to demonstrate a likelihood that he will succeed in establishing his claim on the merits. In addition, the court recognizes that Hyman may well succeed in establishing that some, if not all, of Seymour's claims are barred by the release clause in the 2002 Settlement Agreement.
Plaintiffs cannot rely upon their demand for punitive damages in the amount of $3,000,000 to support an order of attachment, since an award of punitive damages as a purely private remedy would possibly enforce an illegal agreement or one violative of public policy and would therefore be subject to vacatur, even if awarded by the arbitrator ( see e.g. Garrity v. Lyle Stuart, Inc., 40 NY2d 354).
Hence, in view of the undeniable complexity of the parties' finances, the amount of money involved, the parties' contradictory accounts of the facts, the numerous allegations of wrongdoing on the part of the other made by each of them, and the manner in which the partnership's finances were handled for so long a period of time, plaintiffs have failed to establish a likelihood of success on the merits.
Even more damaging to plaintiffs' request for an order of attachment is Seymour's allegation that he has been advised that the 149th Street Property is valued in excess of $20,000,000 (Escava Reply Affidavit, Action No. 3, December 15, 2004, para 13). Inasmuch as the Escava Brothers own a 35.38% interest in that building, inclusive of the 10.38% interest that Seymour contends Hyman appropriated to himself in satisfaction of the Chera loan, the partnership's interest is worth approximately $7,000,000, so that Hyman's interest is approximately $2,350,000. This sum alone far exceeds the amount of damages demanded by Seymour. In addition, although neither party offers any substantiating proof or precise valuation, both parties repeatedly allege that the property interests owned by Escava Brothers, which include other real estate in Queens and Manhattan, are valued in the millions of dollars.
Accordingly, it is clear that based upon Seymour's valuation, any judgment obtained against Hyman can be satisfied out of partnership property, so that there is no need to restrain any of Hyman's personal property or money. Thus, while Hyman's conduct in transferring property into the name of his wife and concealing his actions from the court is looked upon with strong disapproval, at best, under the circumstances of this case, his actions are insufficient to entitle Seymour to an order of attachment. From this it follows that Hyman's motion to release the money that he deposited into the court in accordance with the order of January 20, 2004 should be granted.
Preliminary Injunction
To obtain a preliminary injunction, a party must demonstrate a probability of success on the merits, danger of irreparable injury in the absence of an injunction and a balance of equities in its favor ( see e.g. Doe v. Axelrod, 73 NY2d 748; Nobu Next Door LLC v. Fine Arts Hous., 3 AD3d 335, 771 NYS2d 76 [NYAD 1st Dept 2004]); Town of Goshen v. Serdarevic, 17 AD3d 576, 793 NYS2d 485 [NYAD 2nd Dept 2005]). As is also relevant to the instant dispute, it is equally well settled that the purpose of a preliminary injunction is to maintain the status quo and prevent the dissipation of property that could render a judgment ineffectual ( see e.g. First Franklin Square Assocs. v. Franklin Square Prop. Account, 15 AD3d 529; Icy Splash Food Bev. v. Henckel, 14 AD3d 595, 596).
Discussion
As discussed above, Seymour has failed to establish that he is entitled to a preliminary injunction enjoining Hyman from transferring, disposing of or otherwise encumbering any of his personal assets because he has not demonstrated that it is likely that he will succeed on the merits of his claims. Further, plaintiffs have failed to establish that they will be irreparably injured absent an injunction, since the injury alleged is pecuniary in nature, and may be adequately compensated by money damages ( see e.g. New York City Off-Track Betting v. New York Racing Assn., 250 AD2d 437, 442; see also 39 College Point v. Transpac Capital, 12 AD3d 664, 665 [since the plaintiffs could be adequately compensated by damages or could pursue relief under CPLR 6201 for a provisional order of attachment, there was a failure to demonstrate irreparable injury absent the granting of a preliminary injunction]).
The court reaches a different conclusion, however, with regard to the injunctions that Seymour seeks in connection with the partnership and its property. For example, it is beyond dispute that pursuant to the 1974 Partnership Agreement, the unanimous consent of the partners was required for all important decisions, including borrowing or lending money; entering into a mortgage, lease or contract; selling or purchasing property; or transferring partnership interests. Pursuant to the 1991 Ratification Agreement, Seymour and Hyman were to make all business decisions as provided in the earlier Agreement. Seymour is therefore likely to succeed in establishing that Hyman is not authorized to conduct any partnership business without his consent. Similarly, it is self evident that if Hyman disposes of or further encumbers any partnership property without Seymour's consent during the pendency of the arbitration and the instant proceedings, Seymour will be irreparably injured. Further, since Hyman argues that his personal property should not be attached because Escava Brothers owns sufficient assets to satisfy any judgment that Seymour may obtain, Hyman should not be permitted to compromise the value of those assets. Hence, the balance of the equities tip in favor of enjoining Hyman from acting in violation of the terms of the partnership agreements. Accordingly, Hyman and any one acting in his behalf are enjoined from taking any action in connection with or on behalf of the partnership other than the payment of real estate taxes or debt service on any mortgage affecting the property owned by Escava Brothers without the consent of Seymour pending entry of judgment herein or the execution of a written agreement between Seymour and Hyman that provides otherwise.
Similarly, Seymour's argument that he is not disabled, so that his interest in Escava Brothers should not be cancelled, is also persuasive. In this regard, despite the fact that he suffered a stroke in 1988, he executed both the 1991 Ratification Agreement and the 2002 Settlement Agreement, which agreements indicate that he is capable of understanding the business of and participating in the management of Escava Brothers. Further, the affidavits that Seymour submitted on the applications that are now before the court also indicate that he is mentally competent, which also support his claim that his interest in Escava Brothers should not be cancelled on the ground of disability. Accordingly, in order to maintain the status quo until the arbitrator decides the issue of Seymour's disability, Hyman is enjoined from taking any action to cancel Seymour's interest in the partnership.
Conclusion
In summary, the parties' motions, cross motions and petitions are disposed of as follows:
Action No. 1
Hyman Escava's motion to dismiss portions of plaintiffs' complaint as time-barred is granted to extent of: (1) dismissing as time-barred with regard to all alleged misappropriations that occurred prior to January 15, 2001 as premised upon plaintiffs' claims of conversion and (2) dismissing as time-barred with regard to all alleged misappropriations that occurred prior to January 15, 2001 as premised upon plaintiffs' cause of action for unjust enrichment and those remaining claims of fraud. The parties are directed to proceed to arbitration before Ernest Allen Cohen forthwith to resolve all remaining claims raised in the amended complaint; the action shall be stayed pending final resolution of the arbitration. The motions for summary judgment and/or dismissal of the complaint by HSBC and Banco Popular are denied with leave to renew, upon proper notice, after the stay of the action is lifted.
Seymour Escava's motion for an order of attachment of Hyman's assets and/or for a preliminary injunction is denied in its entirety. Hyman's motion for an order releasing the $357,462.65 that he deposited with the Clerk of the court is granted and said sum shall be released forthwith by the Clerk upon presentation of this order upon him and upon the New York City Department of Finance. The order of the court dated January 26, 2004 is vacated in its entirety and all other previously granted temporary restraining orders and/or orders providing any other provisional relief in this action, exceot as herein provided, are also vacated.
Action No. 2
Seymour's application for an order staying arbitration between the parties as demanded in Hyman's notice of intent to arbitrate dated May 4, 2004 is denied and the parties are directed to proceed to arbitration before Ernest Allen Cohen forthwith. Seymour's motion for an order staying Hyman from cancelling his interest in the Escava Brothers Partnership is granted pending a final determination of the issue by the arbitrator.
Action No. 3
Seymour's application for a preliminary injunction is granted only to the extent of enjoining Hyman and any one acting on his behalf from taking any action in connection with or on behalf of the partnership other than the payment of real estate taxes or debt service on any mortgage affecting the property owned by Escava Brothers without the consent of Seymour pending entry of judgment herein or the execution of a written agreement between Seymour and Hyman that provides otherwise. All other relief requested by Seymour is denied.
Hyman's cross motion is granted and the parties are directed to proceed to arbitration, as directed above. The foregoing constitutes the order and decision of this court.