Decided December 13, 2010.
Roy A. McKenzie, Esq., New York NY, For Nahzi, f/k/a Nazi.
Zane Rudofsky, By: Edward S. Rudofsky, Esq., New York NY, For Lieblich, Lot 1555 Corp., and Biberaj.
Papers considered in review of this motion to vacate and consolidate, and cross motion for summary judgment and sanctions:
Papers Document Number
Order to Show Cause, Affidavits, Exhibits 1
Afidavits in Support2 — 4
Cross Motion, Affirmation, Exhibits 5
Affirmation in Opp. to Cross Motion and Further Support of Motion 6
Reply Aff. in Further Support of Motion 7
These two related litigations are each discussed by movants in their order to show cause.
Defendants in Action 1, Gerald Lieblich and Lot 1555 Corp., move by order to show cause pursuant to CPLR 5015 (a) (2) and (3) to vacate the orders entered on about October 17, 2007 (Mot. Seq. 002) and January 7, 2009 (Mot. Seq. 007), and the Judgment entered on January 27, 2009, all pertaining to Action No. 1, based on newly discovered evidence which, if previously produced would probably have resulted in a different result, and based on their claim that the 2009 Order/Judgment was procured by fraud, misrepresentation, or other misconduct by plaintiff. Upon vacatur and renewal pursuant to CPLR 2221 (e), defendants ask the court to deny the summary judgment motion which resulted in the 2009 order. They also seek to consolidate Action No. 1 with a second action, Lot 1555 Corp., Gerald Lieblich, and Hasan Biberaj v Fron Nahzi, f/k/a Fron Nazi, Index No. 101973/2009 ("Action No. 2").
Plaintiff in Action No. 1, Fron Nahzi, who is the defendant in Action No. 2, cross-moves for an order granting summary judgment dismissing Action No. 2 on the ground of res judicata, and seeks sanctions against defendants and their counsel for filing a frivolous motion.
By interim order dated July 28, 2010, the court stayed the execution of judgment in Action No. 1, including the payment under the appeal bond, pending further court order (Interim Dec./Order, Mot. Seq. 012 [Feinman, J.]).
An appeal undertaking in the amount of $627,190.60, was filed in the County Clerk's office on June 10, 2009 on the defendants' behalf, after they appealed the judgment finding them liable for that sum. As set forth below, the Appellate Division of the First Department affirmed the trial court's decision by its decision and order dated January 7, 2010 ( Nahzi v Lieblich , 69 AD3d 427 [1st Dept. 2010]). Defendants argue that the stay should be extended pending determination of the litigation.
For the reasons which follow, the motion and cross motion are denied in their entirety and the stay of execution of the judgment shall be dissolved ten days after service of a copy of this order with notice of its entry upon the defendants in Action No. 1.
Plaintiff Nahzi commenced his action against Lieblich and Lot 1555 Corp. in August 2006. He alleges that defendants fraudulently deprived him of his rightful share of the proceeds from the sale of real property belonging to Lot 1555 Corp., a company in which he had purchased 25 percent of the shares in 1994 for $90,000, with the other 75 percent owned by Lieblich. Lieblich sold the real property in question in 2005 for $2 million, without informing Nahzi, and also failed to tender to him 25 percent of the proceeds, i.e., $500,000. The complaint alleges fraudulent inducement, unjust enrichment, and conversion, and seeks a set aside of the fraudulent conveyance.
In sum, defendants claim that in January 2000 they purchased a $165,000 cooperative apartment in Forest Hills in Nahzi's name, in reliance on Nahzi's representation that the purchase price was in full consideration of Nahzi's interest in Lot 1555 Corp.
By decision and order dated October 16, 2007, Nahzi was granted summary judgment on his complaint, and the fraudulent conveyance was set aside and the parties directed to settle order ( Nahzi v Lieblich et al., 112000/2006, Dec Order in Mot. Seq. 002 [Kapnick J.]). Summary judgment was granted based on plaintiff's proof of a stock certificate showing his 25 percent interest in Lot 1555, proof of the sale of the corporation's real property, and a showing that the stock certificate showed no endorsements that would indicate a transfer of the shares from plaintiff to the corporation or another person. Defendants had submitted no documents showing an agreement that they would purchase the apartment as payment for Nahzi relinquishing his shares in the corporation, or an effectuation of the transfer or surrender of Nahzi's shares back to Lot 1555. The court's decision also noted, without comment, Nahzi's acknowledgment that in January 2000 he had borrowed $165,000 from non-party Hasan Biberaj, a business associate of defendants and formerly of plaintiff's, and that he and Biberaj had agreed that he would have no obligation to return the $165,000 until the property owned by Lot 1555 Corp. was sold.
Specifically, Nahzi's May 21, 2007, affidavit claimed that Biberaj owed him in excess of $165,000, a sum comprised of unpaid commissions earned by Nahzi for the sale of real estate and money loaned to him by Nahzi (OSC, Ex. C, Nahzi Aff. in Supp. of Summ. Judg.). These claims are the subject of Nahzi's counterclaim in Action No. 2.
A Special Referee was directed to hear and report as to the actual profit realized from the sale, and any expenses to be credited to defendants, and the Referee's report was issued on July 3, 2008 (mot Seq. 005 [Lowenstein, Spec. Referee]). Plaintiff's subsequent motion to confirm the Report was granted by decision filed with the Clerk on January 7, 2009, to the extent that the Clerk was directed to enter judgment in Nahzi's favor in the sum of $466,982.89, together with interest ( Nahzi v Lieblich, 112000/2006, mot. Seq. 007 [Kapnick, J.]). The branch of plaintiff's motion seeking an additional $199,266.65 based on the then-recent disclosure of defendants' 2005 federal tax forms appearing to show additional income and retained earnings for that year, was referred back to the Referee to hear and report. On April 27, 2009, the Special Referee issued his Report recommending that plaintiff's motion pertaining to the recovery of additional monies be denied (mot. Seq. 008 [Lowenstein, Special Referee]). The Report indicated that the corporate tax returns did not show any income stream from the property between 1994 through 2005, and that Lieblich's testimony established only that a parking lot operated at the property as recently as 2001, but not that it generated corporate or other income of which Nahzi would be entitled to a 25 percent share. This court confirmed these recommended findings of fact and conclusions of law by decision and order dated January 13, 2010, and entered on January 15, 2010 ( Nahzi v Lieblich et al., 112000/2006, mot. Seq. 011 [Feinman, J.]).
According to the Referee's Report, after conducting a hearing and taking testimony, he allowed both sides to submit post-hearing memoranda of law, but only Nahzi provided a memorandum.
On January 27, 2009, the Clerk of New York County Supreme Court, signed a Judgment granting Nahzi judgment against Lieblich and Lot 1555 Corp. in the total amount of $627,190.60.
On Feburary 13, 2009, Lot 1555 Corp., Lieblich, and Hasan Biberaj commenced Action No. 2 against Nahzi, under Index 101973/2009. Their complaint contains two causes of action: breach of contract and unjust enrichment, and claims that Nazhi borrowed $165,000 from plaintiffs in November 2000 to purchase a cooperative apartment which has not been repaid. Nahzi's answer, verified by his attorney, contains three affirmative defenses and a counterclaim that "[o]ne or more of the plaintiffs is indebted to [him] in excess of $165,000 for unpaid commissions from the sale of real property, unpaid returns on investments, and unpaid loans." (Index No. 101973/2009, E-file Doc. 12).
A copy of the complaint is attached as Exhibit A to the document efiled as Document 4, under Index number 101973/2009.
Defendants then appealed the Judgment in Action No. 1, and an undertaking for the amount of $627,190.60, dated May 29, 2009, was filed in the County Clerk's office on June 10, 2009, on the defendants' behalf.
By decision and order dated January 7, 2010, the Appellate Division, First Department affirmed the January 7, 2009 order of the trial court ( Nahzi v Lieblich , 69 AD3d 427 [1st Dept. 2010]). In pertinent part, the Court held:
Defendants acknowledged that they sold the real property in April 2005 without compensating plaintiff, but asserted that they purchased a cooperative apartment for plaintiff in full consideration of his interest in the corporation. Defendants, however, produced no evidence, such as corporate books and records or a cancelled stock certificate, tending to show that plaintiff's interest in the corporation had been transferred or that the apartment purchase was in consideration of plaintiff's interest in the corporation. Defendants also asserted that they were continuing to search for records concerning the apartment transaction and needed further disclosure, and that plaintiff should be required to produce his own records. Plaintiff acknowledged that he purchased the apartment with borrowed money, but that the loan was made by a third person and had no connection with his interest in the corporation. We hold that it was not plaintiff's burden to show that there was no such connection, but rather defendants' burden to adduce evidentiary facts in admissible form showing that there was such a connection . . . and find that defendants failed to offer anything other than mere hope that evidence favorable to their claim of such a connection might be obtained if additional disclosure were had.
Defendants move herein by order to show cause, pursuant to CPLR 5015 (a) (2) and (3), to vacate the orders granting summary judgment to plaintiff, entered on about October 17, 2007, and directing the Clerk to enter judgment in plaintiff's favor in the sum of $466,982.89 plus interest, entered on January 7, 2009, and the Judgment filed on January 27, 2009. Upon vacatur, they seek to renew the motion brought by plaintiff seeking summary judgment on the complaint, pursuant to CPLR 2221 (e), and for a denial of the motion. They also seek to consolidate this action with Action No. 2. Plaintiff opposes and cross-moves for sanctions and dismissal of the related action in which he is the defendant based on res judicata ( Lot 1555 Corp. et al. v Nahzi, Index No. 101973/2009 ["Action No. 2"]).
CPLR 5015 (a) vests the court with the discretionary power to relieve a party from a judgment or order. CPLR 5015 (a) (2) provides that upon motion, a court which rendered a judgment or order may relieve a party from it upon such terms as may be just, when there is produced "newly-discovered evidence which, if introduced at the trial, would probably have produced a different result and which could not have been discovered in time to move for a new trial under section 4404." CPLR 5015 (a) (3) provides that upon motion, a judgment or order may be vacated when the movant shows "fraud, misrepresentation, or other misconduct of an adverse party."
Defendants seek the vacatur of the Judgment based on what they term newly discovered evidence acquired during the course of discovery in their litigation against plaintiff ("Action No. 2"). On May 5, 2010, they took a pre-trial deposition of Nahzi who also produced documents in response to discovery demands (OSC, Ex. F [EBT of F. Nahzi, hereinafter "Nahzi EBT"]; Exs. G, H [checks payable by Nahzi to other entities]). Defendants argue that Nahzi's deposition testimony, the copies of the two checks produced by him, and certain statements contained in his memorandum submitted to the Court of Appeals in opposition to defendants' motion for leave to appeal (OSC, Ex. I), together show that he previously misstated facts to the court concerning his investment in Lot 1555 and, in essence, attempted to perpetrate a fraud upon the court (OSC, Rudofsky Aff. ¶¶ 19 et seq.). They argue that the two checks payable on behalf of Nazhi, show that Nahzi invested a total of $90,000 in two other entities controlled by non-party Biberaj, and that he never actually invested any monies in Lot 1555. Nahzi testified that he was owed profits from these two entities and that Biberaj orally agreed in December 1994 that in lieu of paying the profits owed to him, Nahzi would be assigned the shares in Lot 1555, an entity in which Biberaj also owned an interest (Nahzi EBT 28, 99-100, 103-104). Nahzi further testified that they orally agreed he would continue to own his shares in the other entities and be entitled to his share of the profits (Nahzi EBT 111). Defendants argue that Nahzi's testimony is greatly at odds with his 2007 affidavit submitted in support of his original motion for summary judgment, which does not mention the other entities and his ongoing interest in them, or that he gave no separate monetary consideration for his shares in Lot 1555, and claims an interest in any profits from his shares in the other investments.
Nahzi testified that he invested $50,000 with one entity for a share in two parking lots, and $40,000 with another entity for a share in another parking lot (Nahzi EBT 96-97). He conceded that his claim as to the $90,000 investment in Lot 1555 was the same $90,000 as was invested in the two other entities (Nahzi EBT 97-98).
Nahzi testified that he continues to be owed a share of the profits in these two entities (Nahzi EBT 111); this claim of course, is not part of his complaint in Action No. 1, but rather part of his counterclaim in Action No. 2. The court expresses no opinion about the validity of these claims, at this juncture.
Plaintiff argues in opposition that defendants' motion is frivolous and sanctionable. He argues that defendants still do not proffer evidence that calls into question the validity of the stock certificate and shareholder's agreement showing his ownership interest in Lot 1555, and points out that the Appellate Division's decision indicates that any attempt to vacate the judgment must address the fact that there is no proof that the certificate was ever transferred from his ownership. He further argues that any argument concerning his consideration for the Lot 1555 shares is of no merit, given that the stock certificate is itself presumptive proof that Lot 1555 received adequate consideration for the shares, and given that evidence proffered by defendants in the form of affidavits, confirms that they credited plaintiff with a $90,000 contribution to Lot 1555 as consideration for his 25 percent ownership.
A party seeking relief based on newly discovered evidence must show that it is "material, not merely cumulative, not of a kind as would merely impeach an adverse witness's credibility, that it would probably have changed the result and that the material could not have been previously discovered by the exercise of due diligence." ( Prote Contr. Co., Inc. v Board of Educ. of City of NY, 230 AD2d 32, 39 [1st Dept. 1997]). Evidence that could have been discovered with due diligence, but for the neglect of a party's attorneys is not newly discovered ( Shouse v Lyons , 4 AD3d 821 , 822-823 [4th Dept. 2004]). However, evidence showing that a plaintiff gave sworn testimony contrary to that party's sworn statements in the matter, can constitute fraud, misconduct, or misrepresentation by the plaintiff and will warrant vacatur of the judgment ( Shouse v Lyons, 4 AD3d at 823).
The testimony by Nahzi, and the copies of the checks, do set forth specific factual allegations not previously brought to the court's attention. However, this evidence does not undermine his claim that he possessed a written agreement and stock certificate showing ownership of a 25 percent interest in Lot 1555, and that he did not receive his share of the profits from the sale of that entity's real property. His testimony was that the shares were given to him in exchange for payment equivalent to the unpaid profits from other investments, as well as commissions owed to him and monies loaned by him, and while his 2007 affidavit does not elucidate this history, it does not undermine the validity of the stock certificate or agreement. It also does not offer support for defendants' defense that they purchased Nahzi's cooperative apartment to buy out his interest in Lot 1555, although it certainly reinforces the admission by defendants and noted by the court in its October 16, 2007, decision and order, that corporate formalities were not followed (OSC Ex. A, Dec./Order 10/16/2007, p. 2 n. 1 [Kapnick, J.]).
As noted above, the Appellate Division stated that because there is no evidence that Nahzi's ownership interest in Lot 1555 was transferred prior to the sale of the property, defendants must show a connection between the purchase of the cooperative apartment and Nahzi's shares in Lot 1555 in order to establish the existence of triable questions of fact that would preclude summary judgment. Defendants' "new evidence" on this point consists of affidavits from Daniel Perla, a real estate investor and business associate of Biberaj who sold the cooperative apartment to Nahzi, and was paid with funds from various entities owned by Biberaj (Perla Aff. ¶¶ 1-4), and Ronald Eletto, the accountant who prepared Nahzi's taxes for the years 1995-2005. Perla states that he clearly remembers being told by Biberaj that Nahzi's interest in Lot 1555 was being bought out through the purchase of the coop apartment (Perla Aff. ¶ 5). Eletto avers that his former client never stated that he was owed commissions or that he had loaned money to Biberaj (Eletto Aff. ¶¶ 2,7). Defendants offer no reason why these affidavits dated May 4, 2010, and February 24, 2010, respectively, could not have been procured in time to oppose the original motion for summary judgment in 2007. Their belated submission at this juncture, in particular on behalf of Perla, an associate of non-party Biberaj, is suspect. Defendants appeal to the court's equitable jurisdiction and proffer citations to various decisions where courts exercised their discretion to set aside verdicts or judgments in the interests of justice (OSC, Rudofsky Aff. pp. 4-5). In this instance, however, defendants' arguments are unavailing, and their motion to vacate is denied. The branch of their motion seeking to consolidate is therefore denied as academic.
Plaintiff Nahzi's cross motion for summary judgment and dismissal Action No. 2 on the ground of res judicata is denied. First, he fails to submit a first person affidavit in support of the motion, as required by CPLR 3212 (b). Notably, his answer in this second action is verified only by his attorney and is therefore insufficient to serve as an affidavit ( see CPLR 105[u]; cf. Salch v Paratore, 60 NY2d 851, 853). The motion is also improper procedurally as the two litigations have not been previously consolidated or joined for trial, and therefore the cross motion should have been filed and brought under Index No. 101973/2009. Plaintiff also failed to proffer a copy of the pleadings as required by that statute (CPLR 3212 [b]). For all these procedural reasons, the branch of the cross motion which seeks summary judgment in Action No. 2 must be denied.
The branch of plaintiff's cross motion seeking sanctions is denied. Under § 130-1.1 of the New York Rules of Court, the court may award sanctions costs, in the form of reimbursement for actual expenses incurred and attorneys' fees, resulting from "frivolous conduct." Conduct is frivolous when it is "completely without merit in law or fact and cannot be supported by a reasonable extension, modification or reversal of existing law," or "undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another," or "asserts material factual statements that are false." Defendants' motion, although denied, cannot be deemed frivolous. It is
ORDERED that the motion is denied; and it is further
ORDERED that the stay of enforcement previously placed by the court in its interim decision and order of July 28, 2010, is dissolved 10 days after service of a copy of this order with notice of entry; and it is further
ORDERED that the cross motion is denied in its entirety.
This constitutes the decision and order of the court.