Levin v. Kitsis

WAYNE SAITTA, JUSTICE

Unpublished Opinion

WAYNE SAITTA, JUSTICE

Upon the foregoing papers, defendants Oscar Kitsis and his wife, Ada Kitsis (collectively, the Kitsis Defendants), and Avenue R. Condominium LLC (R LLC) (collectively, Moving Defendants) move (in motion sequence [mot. seq.] 24) for an order, pursuant to CPLR 3212, granting them summary judgment dismissing the amended complaint with prejudice or, alternatively, striking plaintiffs' jury demand (NYSCEF Doc No. 17).

Background

The amended complaint, filed in April 2013, alleges that "Plaintiffs bring this action to recover damages arising out of fraudulent real estate transactions, conspiracy, deceptive business practice, unjust enrichment and other wrongful acts committed by the Defendant[s]" (NYSCEF Doc No. 27 at ¶ 1). Specifically, the amended complaint alleges that this action involves the development of a residential building with 12 condominium units with building parking at 1824 East 17^th Street in Brooklyn (Building), which Building was owned by the developer of the project, Homecrest Building Development, LLC (Homecrest) (id. at ¶¶ 12 and 14). The amended complaint describes plaintiffs Googla Imports, Inc. (Googla) as "in business, among other things, of providing services, labor and/or material for construction of the condominium [B]uilding . . ." (id. at ¶ 4). ABC Funding, LLC (ABC), Mobil Food Vendors, LLC (Mobil) and Progressive 1, Inc. (Progressive) are similarly described as "in business, among other things, of providing services, labor and/or material for construction of the Building . . ." (id. at ¶¶ 5-7).

Allegedly, "[a]t various times during construction of the Building [from March 2006 to February 2008], the Plaintiffs loaned money and provided services, material and labor for construction of the Building . . ." (id. at ¶¶ 12 and 15). The amended complaint alleges that the Developer [Homecrest] executed promissory notes in favor of the Kitsis Defendants, which were secured by three mortgages encumbering the Building (id. at ¶ 12). One of the mortgages for $304.400.00 was also secured by a Deed in Lieu of Foreclosure, which was to be held in escrow as security for the loan (id. at ¶ 13).

The amended complaint alleges, upon information and belief, that "at the end of 2008, the Developer [Homecrest] defaulted on payments for the Plaintiffs' loans, services, material and labor" (id. at ¶ 18). Consequently, "Plaintiffs filed judgments by confession and mechanic's liens in this court to recover costs of their services, material and labor provided to the Developer [Homecrest]" and "in order to resolve the default . . . the Developer [Homecrest] began search[ing] to refinance KITSIS's mortgage[s] and to obtain additional funds" (id. at ¶¶ 19-20).

Allegedly, "[i]n January of 2009, KITSIS . . . transfer[red] title to the Building from the Developer [Homecrest] to [themselves] by recording the Deed in Lieu of Foreclosure, [which] prohibited and restricted the Developer's entry into the Building" and then assigned the mortgages to defendant L'Esperanza NY Inc. (hereinafter L'Esperanza), his daughter Anna Kitsis' wholly owned company (id. at ¶¶ 22 and 23). During the pendency of this action, in February of 2012, Oscar Kitsis allegedly "transferred the title to the Building to R LLC[,]" which allegedly "began selling off the Building units below the current market value and ha[s] already received over $2,000,000.00 in profit from the sale proceeds" (id. at ¶¶ 26 and 27). The amended complaint alleges, upon information and belief, that "Defendants did not provide any notices regarding the sale of the Building units to the Plaintiffs" and "[a]s of the date hereof, KITSIS's loans have not been satisfied or discharged, and remain valid against the Developer [Homecrest]" (id. at ¶¶ 28-29).

The amended complaint asserts the following eight causes of action: (1) a judgment declaring that the transfer of the Building from the Developer [Homecrest] to Kitsis (pursuant to the Deed in Lieu of Foreclosure) is vacated and the mortgage assignment to L'Esperanza is void; (2) a judgment declaring that plaintiffs have a valid and enforceable equitable mortgage against the Building; (3) civil conspiracy; (4) constructive fraud; (5) intentional interference with business relations and economic advantage; (6) unjust enrichment; (7) civil contempt; and (8) an award of attorneys' fees.

On or about May 19, 2013, the Kitsis Defendants and R LLC collectively answered the amended complaint, denied the material allegations and asserted affirmative defenses and two counterclaims for: (1) a judgment declaring that Googla's mechanic's lien is void and vacated "[b]y reason of [its] willful exaggeration of the amounts claimed in its Notice of Mechanic's Lien . . ." and (2) damages asserting that plaintiffs ABC, Mobil and Progress docketed fraudulent Judgments by Affidavit of Confession which "improperly interfered with the lawful economic rights of KITSIS and . . . R [LLC] in their use, benefit and development of the [Building]" (NYSCEF Doc No. 28 at ¶¶ 28 and 62).

Moving Defendants' Summary Judgment Motion

The Kitsis Defendants and R LLC move for summary judgment dismissing the amended complaint. In support of their instant summary judgment motion, defendants submit a two-page affidavit from Oscar Kitsis merely attesting that:

"Both my wife, Ada Kitsis and I, made a construction loan to Homecrest . . . for the construction of [the] condominium building . . . The partners and members of Homecrest were Boris Revzin, Dimitry Serebryany and Arkady Rotenberg, who all personally guaranteed the loan.

"Oscar Kitsis and Ada Kitsis, were not investors in Homecrest. We had no dealings whatsoever with Googla Imports, Inc., ABC Funding, LLC, Mobil Food Venders, LLC and Progressive 1, Inc. We had no knowledge of any alleged loans, investments or services between these plaintiffs and Homecrest. Boris Revzin . . . Dimitry Serebryany and Arkad Rotenberg never advised us [of] any alleged loans or investments between their companies or any other company with Homecrest and they did not discuss any such matters with us.

"Homecrest and its partners or members, Revzin, Serebryany and Rotenberg, defaulted and consented to the release of the Deed in Lieu of Foreclosure. None of them ever requested that I should not transfer the property or the mortgage. They surrendered possession of the property voluntarily to me" (NYSCEF Doc No. 18 at ¶¶ 2-4).

The moving defendants also submit a lengthy attorney affirmation describing that "[o]ver the course of 2006 to 2008 Kitsis advanced the total sum of $3,704,400.00 to Homecrest . . . for the construction of [the] condominium building . . ." (NYSCEF Doc No. 19 at ¶ 5). Defense counsel further asserts that:

"the annexed Exhibits and deposition testimony show that [plaintiffs] engaged in self-dealing between themselves; understood and appreciated the consequences of their actions and agreements they entered into with Kitsis under the construction loan documents, including the Deed in Lieu of Foreclosure; and moreover never discussed with Kitsis or made Kitsis aware of their alleged loan from 'themselves to themselves'" (NYSCEF Doc No. 19 at ¶ 4).

Although defense counsel does not claim to have any personal knowledge of the facts, he describes the "Relevant Facts" regarding his clients' real estate investment and exhibits, including the mortgages, the escrow agreement, the power of attorney, the Deed in Lieu of Foreclosure and the September 17, 2008 Notice of Default, none of which were described, discussed or authenticated in defendant Kitsis' two-page affidavit (id. at ¶¶ 5-19).

Defense counsel further affirms that:

"Pursuant to the escrow agreement and power of attorney executed by Homecrest, the Deed in Lieu of Foreclosure was released and recorded. Kitsis went into possession of the partially constructed property and commenced the necessary construction. Homecrest did not proceed with a claim pursuant to RPL § 320 to void the Deed in Lieu of Foreclosure executed by Homecrest to Kitsis or to proceed to redeem the property. Instead, Homecrest, and its surviving partners or members, Revzin and Serebryany, who are also the sole members of the respective entities in this action, stood by over the past eleven years while Kitsis proceeded to complete the construction, filed and obtained the required permits for the certificate of occupancy and filed for approval of Kitsis' condominium offering plan" (id. at ¶ 14).

Defense counsel argues that "[u]nder the LLC Law, the Plaintiffs, who have brought claims as creditors of Homecrest, lack standing to assert any direct or indirect claim under RPL § 320, as Homecrest is not a party . . ." (id. at ¶ 35). Notably, however, defense counsel specifically acknowledges that the plaintiffs, in addition to being alleged creditors of Homecrest, also "managed the daily operations of Homecrest; executed the mortgage documents for Homecrest; defaulted under the mortgage; [and] executed Deed in Lieu of Foreclosure documents to Kitsis for Homecrest . . ." (id. at ¶ 24).

Regarding the first cause of action for a declaration vacating the transfer of the Building from Homecrest to Kitsis, defense counsel argues that "Plaintiffs should be estopped from asserting their alleged claims [as creditors of Homecrest] when they elected to stand by in their capacity as members or partners in Homecrest while Kitsis proceeded to complete construction of the building at Kitsis' own cost and expense" (id. at ¶ 38). Defense counsel contends that the second cause of action for an equitable mortgage should be dismissed because "Plaintiffs have advanced no basis warranting the Court to impose an equitable mortgage" (id. at ¶ 46).

Defense counsel asserts that Plaintiffs' third cause of action in the amended complaint for civil conspiracy cannot stand alone, as a matter of law, but stands or falls with the underlying tort (id. at ¶ 49). Defense counsel asserts that the fourth cause of action for constructive fraud is subject to dismissal because "[t]he Plaintiffs in their alleged capacity as either lenders or investors in Homecrest have not alleged any facts demonstrating the existence of a fiduciary or confidential relationship between themselves and Kitsis[,]" they "have not alleged any plausible facts which even remotely resemble a misrepresentation on the part of Kitsis" and "Kitsis did not have a duty to investigate whether Homecrest had other debts or loans with other creditors or provide any sort of notice to any creditor, especially when the alleged loans made by ABC, Mobil and Progressive were never disclosed to Kitsis" (id. at ¶¶ 55, 57 and 58).

Defense counsel asserts that the fifth cause of action for tortious interference with business relations and economic advantage should be dismissed based on the deposition testimony of Revzin and Serebryani, the principals of ABC and Mobil, who, according to defense counsel, "testified that they could not recall ever having a conversation with Kitsis specifically informing him that transfer of the mortgage would affect the alleged loans made by ABC and Mobil to Homecrest" (id. at ¶ 60). Counsel argues that there is no proof that Kitsis induced Homecrest to default on loans to Plaintiffs and "[t]he alleged loans were already in default prior to the Deed in Lieu of foreclosure and Assignment of mortgage" (id. at ¶ 63).

Defense counsel also argues that the sixth cause of action for unjust enrichment should be dismissed because "[t]here is no nexus between Kitsis, and the alleged ABC, Mobil or Progressive loans made to Homecrest" (id. at ¶ 74). Regarding the seventh cause of action for civil contempt, defense counsel asserts that such application is jurisdictionally defective without the warnings required by Judiciary Law § 756 (id. at ¶ 76). Finally, defense counsel asserts, among other things, that the eight cause of action for attorney fees should be dismissed as plaintiffs have failed to provide any basis for such an award.

Plaintiffs' Opposition

Plaintiffs, in opposition, submit an attorney affirmation arguing that summary judgment should be denied because there are genuine issues of material fact for trial (NYSCEF Doc No. 3). Specifically, Plaintiffs' counsel asserts that:

"In sum and substance, the Defendants argue that they were not aware of the Plaintiffs creditor's right at the time when Defendants conveyed the property in issue by unlawful[ly] recording the deed in lieu of foreclosure and avoiding a proper foreclosure process, and the time when they converted and obstructed Plaintiffs['] interests by fraudulent[ly] assigning the inexistent mortgage.

"Viewing the instantly available facts, there is a clear question of fact regarding the Defendants' fault" ( id. at ¶¶ 7-8).

Contrary to defense counsel's contention, Plaintiffs' counsel asserts that both Revzin and Serebryany testified at their depositions that they specifically asked Kitsis not to take any action with respect to the Deed in Lieu of Foreclosure and the transfer of the Building because of their interests as investors (id. at ¶¶ 15-17).

Discussion

Summary judgment is a drastic remedy that deprives a litigant of his or her day in court and should, thus, only be employed when there is no doubt as to the absence of triable issues of material fact (Kolivas v Kirchoff, 14 A.D.3d 493 [2005]; see also Andre v Pomeroy, 35 N.Y.2d 361, 364 [1974]). "The proponent of a motion for summary judgment must make a prima facie showing of entitlement to judgment, as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Manicone v City of New York, 75 A.D.3d 535, 537 [2010], quoting Alvarez v Prospect Hosp., 68 N.Y.2d 320, 324 [1986]; see also Zuckerman v City of New York, 49 N.Y.2d 557, 562 [1980]; Winegrad v New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985]). If the movant has made a prima facie showing of entitlement to summary judgment, "the burden shifts to the opposing party to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (Garnham & Han Real Estate Brokers v Oppenheimer, 148 A.D.2d 493 [1989]).

Here, the Moving Defendants have failed to demonstrate their prima facie right to summary judgment dismissing the amended complaint based on unauthenticated documents, Kitsis' two-page moving affidavit with limited facts and an extensive hearsay affirmation from defense counsel, who lacks personal knowledge of the facts.

Furthermore, there are questions of material fact regarding plaintiffs' role as members of Homecrest, as opposed to their alternate role as alleged creditors of Homecrest. Additionally, there is conflicting testimonial evidence regarding whether Kitsis was aware of Plaintiffs' alleged rights as creditors and/or investors in the Building when he recorded the Deed in Lieu of Foreclosure and subsequently transferred the Building. While Revzin and Serebryany testified that they asked Kitsis not to take any action with respect to the transfer of the Building based on their financial interests in the construction project at the Building, Kitsis denies that he ever spoke to them. Based on these disputed facts, summary judgment is not warranted. Accordingly, it is hereby

ORDERED that defendants' summary judgment motion (mot. seq. 24) is denied. This constitutes the decision and order of the court.