Opinion
97 Civ. 3459 (GEL).
March 5, 2001
Jacqueline Rudman Jurkowicz, New York, New York for Plaintiff Matilda Rudman
Lloyd Weiss, pro se, for Defendant Lloyd Weiss
OPINION AND ORDER
In October, 1994, Plaintiff Matilda Rudman and her cousin, defendant Lloyd Weiss, were co-tenants under a valuable long-term lease for portions of a building at 305 Canal Street in New York City. On October 11, 1994, a fire broke out in the building. As a result of that fire, Weiss was charged with, and eventually convicted of, arson; the owner of the building served a notice that the tenants were in default of the lease, and, in an apparent effort to avoid termination of the lease, Rudman and Weiss entered certain agreements, including an assignment of Weiss's interest in the lease to Rudman, which on their face were predicated on Weiss's representation that he was not in fact guilty of the arson.
On July 9, 1997, Rudman brought this diversity action, seeking a declaration invalidating the agreements between her and Weiss, as well as any interest of Weiss's in the lease, and damages occasioned as a result of Weiss's alleged breaches of his responsibilities under the lease and his alleged fraud in misrepresenting to Rudman that he was not guilty of arson. The litigation was put on hold for some time, pending resolution of the criminal prosecution of Weiss and of three-cornered litigation in the state courts among Rudman, Weiss and the landlord over the landlord's efforts to terminate the lease
On May 16, 2000, Jacqueline Rudman Jurkowicz, the daughter of plaintiff Rudman, who had died in the interim, moved to substitute herself for her late mother as plaintiff, and for summary judgment invalidating the agreements between Rudman and Weiss and awarding monetary damages arising from defendant's breaches of the lease. (Notice of Motion at 1).
For the reasons stated below, the motions are granted.
FACTS
The facts set forth in this opinion are largely drawn from the affidavit of Jacqueline Rudman Jurkowicz in support of plaintifFs motion for summary judgment. Weiss, although initially represented by counsel in this action, is now representing himself His opposition to the motion consists of a four-page notice of opposition and a two-page unsworn "affidavit." In view of Weiss's status as a pro se party, the Court will treat the assertions of fact in both documents as equivalent to sworn testimony for purposes of this motion. As will appear, however, Weiss's submission actually contests very few of the facts offered by Jurkowicz. While the Court will interpret liberally all assertions of fact actually made by Weiss, it cannot create issues of fact by assuming testimony that has not been offered. Thus, where Jurkowicz presents sworn testimony and documentary evidence, and Weiss's motion papers (however styled) fail to contest that testimony or address the issue in any way, the Court must find that no genuine issue of fact has been created, and accept the uncontradicted testimony presented by Jurkowicz.
It is not necessary to trace the history of the ownership of 305 Canal Street and of the lease in question. Suffice to say that by early 1982, the building was owned by Canal Studio Corp. ("Landlord"), and that Harry Rudman, husband of the original plaintiff, held a lease for commercial premises in the ground floor and basement of the building. The lease was valuable because it locked in a very low rent for a long period of time Harry Rudman sublet the premises to Canal Hardware Corp, a corporation owned equally by himself and Weiss. Upon his retirement in March 1982. Harry Rudman sold his interest in Canal Hardware, and a 50% interest in the lease, to Weiss. Shortly thereafter, Harry Rudman died and his wife Matilda Rudman, the original plaintiff in this action, inherited his interest in the lease.
Thus, from July 1982 through September 1994, Rudman and Weiss were co-tenants under the original lease, and Weiss was the sole owner and manager of Canal Hardware, the subtenant in possession of the premises. Because Rudman was in Florida and Weiss ran his business on the premises, Rudman deferred to Weiss to fulfill the tenants' obligations under the lease, as well as those of his corporation as subtenant. Weiss does not dispute that he undertook to perform these obligations.
On October 11, 1994, a fire broke out in the premises causing minor damages. Following the fire, the Landlord communicated with Rudman, suggesting that the fire had been deliberately set by Weiss, and additionally advising her of numerous alleged breaches of the lease. On November 16, the Landlord served on Rudman and Weiss a Notice to Cure, charging numerous breaches of the lease, including Weiss's alleged arson. Under the terms of the lease, such notice authorized the Landlord to terminate the lease and evict Rudman and Weiss if they did not begin to cure the defaults within five days
In response to this action, Rudman moved on two fronts. First, she brought an action in the New York courts against the Landlord, obtaining a preliminary injunction preventing the Landlord from terminating the lease, and began the process of curing the breaching conditions in the premises. Because Weiss and his corporation were insolvent, Rudman undertook all the costs of curing the defaults, maintaining the premises, and fulfilling the tenants' obligations under the lease.
Second, in an apparent further effort to avoid eviction, Rudman entered into the agreements with Weiss at issue in this action. Apparently hoping for a favorable settlement with the Landlord if Weiss were removed from the picture, Weiss agreed to assign his interest in the lease to Rudman for a consideration of $10.00. The assignment, as signed by Weiss, incorporated a handwritten representation that Weiss was not responsible for the fire:
Certain allegations have been made, that Lloyd Weiss is responsible for a fire which occurred upon the subject above mentioned premises. Weiss denies any responsibility for this fire which occurred on Oct 11, 1994, and Rudman accepts the assignment on the basis of Weiss's representation.
(Jurkowicz Aff. Ex. E.) The assignment, however, was subject to a side agreement, "Rider A," which largely negated the economic effect of the assignment. Under that agreement, which was not disclosed to the Landlord, Rudman essentially agreed to pay to Weiss one-half of any income from the lease, subject to deduction of Weiss's 50% share of any expenses, including legal expenses, incurred by Rudman in attempting to cure defaults under the lease. Simultaneously, Rudman executed a promissory note embodying these terms. In effect, although the entirety of the lease was now nominally held by Rudman, Weiss essentially retained the economic benefits and duties of co-tenancy.
Rudman undertook substantial efforts to remedy the breaches of the lease and defend her legal interest in the lease Documentary evidence submitted in support of the summary judgment motion establishes $260,162.22 in expenses — more than half of it in litigation expenses, and the rest in repairs, maintenance of the premises, back taxes and rent payments, and the like. Meanwhile, two principal litigations in the New York courts were conducted, with major effects on the present problem.
First, Weiss was indicted for arson and insurance fraud. After a jury trial, he was found guilty of arson in the third degree and insurance fraud in the third degree, and sentenced to one to three years of imprisonment. His conviction was affirmed by the Appellate Division on February 17, 2000, People v. Weiss, 704 N.Y.S.2d 210 (1st Dept. 2000), and leave to appeal was denied on April 24, 2000. 710 N.Y.S.2d 10.
Second, Rudman's action against the Landlord, in which the Landlord impleaded Weiss as third-party defendant, continued. After a two-day bench trial, the Court ruled that Weiss's arson were "uncurable defaults" under the lease, and that Weiss's interest in the lease (but not Rudman's) had been terminated. The Court further ruled that "Weiss' purported assignment to Matilda Rudman dated February 26, 1995, was an ineffective sham assignment and is void in light of the side agreement. . . . Weiss cannot evade the termination of his interest simply by claiming to assign it, while, at the same time entering into a side agreement that, for all intents and purposes, nullifies the purported assignment." Rudman v. Canal Studio Corp., Ind. No. 132671/94, at 8-10 (Sup.Ct. N Y Co. Jan. 11, 1999), appeal dismissed, 707 N.Y.S.2d 745 (1st Dept. 2000).
A copy of the opinion of the state court can be found in the record of this case. (Jurkowicz Aff. Ex. J.)
Thus, by spring of 2000, both Weiss's conviction for arson, and the judgment of the state court terminating Weiss's interest in the lease, had become final. Shortly after the Court of Appeals rejected Weiss's application for leave to appeal his conviction, plaintiff filed the instant motions, seeking substitution of Jurkowicz as plaintiff and summary judgment.
DISCUSSION
I. Substitution of Party
The Federal Rules of Civil Procedure provide that "[i]f a party dies and the claim is not thereby extinguished, the court may order substitution of the proper parties. The motion for substitution may be made by any party or by the successors or representatives of the deceased party' FED R. CIV. P. 25(a)(1). In accordance with the rule, Jurkowicz has timely moved for substitution, and has provided adequate proof of her mother's death and her appointment by a competent court as representative of her mother's estate. (Jurkowicz Aff Exs. A, B).
Weiss objects to the substitution "to the extent of Ms. Jurkowicz being substitute [sic] in a meritless and possibly bogus legal action" (Notice of Opposition ¶ 8), but raises no issue that is relevant, under the rule, to the appropriateness of substituting Jurkowicz for her late mother as the plaintiff Although Weiss argues that the action itself is, in his view, without merit, and questions whether Rudman ever authorized its filing, he appears to acknowledge, correctly, that these claims are irrelevant to the substitution motion, and therefore "does not object" to the substitution of parties itself. (Id.)
Accordingly, the motion to substitute parties is granted.
II. Summary Judgment
A. Standards for Summary Judgment
Summary judgment may only be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law" FED. R. CIV. P. 56(b). The party opposing summary judgment "may not rest upon mere allegations or denials"; rather, it must "set forth specific facts showing that there is a genuine issue for trial."Id. 56(e). To defeat a motion for summary judgment, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 1986). "[I]f the evidence is merely colorable, or is not significantly probative, summary judgment may be granted."Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986) Similarly, a party cannot defeat summary judgment by "offering purely conclusory allegations," Meiri v. Dacon, 759 F.2d 989, 998 (2d Cir. 1985), or by offering evidence in opposition that is merely speculative. See Dister v. Continental Group, Inc., 859 F.2d 1108, 1116-1117 (2d Cir. 1988). Accordingly, to defeat summary judgment, the party opposing summary judgment must set forth "concrete particulars" showing that a trial is needed. R.G. Group, Inc. v. Horn Hardart Co., 751 F.2d 69, 77 (2d Cir. 1984).
B. Rescission of Agreement
To the extent that plaintiff seeks summary judgment invalidating the agreements between Rudman and Weiss, the action is largely controlled by the outcomes of the New York litigation already conducted involving Weiss.
First, the New York courts have already declared that the assignment agreement itself, by which Weiss purported to assign his interest in the lease to Rudman, is "an ineffective sham assignment and is void in light of the side agreement." Rudman, Ind. No. 13267 1/94, at 10. It is settled that "federal courts are required to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so." Allen v. McCurry, 449 U.S. 90, 96 (1980). Under New York law, "the doctrine of collateral estoppel, or issue preclusion, prevents relitigation of an issue which is identical to one necessarily decided in a prior action and which the parties were afforded a full and fair opportunity to contest in that prior action."Polur v. Raffe, 912 F.2d 52, 55 (2d Cir. 1990) (citing Halyalkar v. Bd. of Regents, 72 N.Y.2d 261 (1988)).
Here, the validity of the assignment is precisely the issue that was actually litigated among Rudman, Weiss, and the Landlord in the prior state action (indeed, it was the very point of the litigation to determine the interests in the leasehold), and there was a final decision of that issue in the state court after all parties had not only had a full and fair opportunity to litigate the issue, but actually did so. See GAF Corp. v. Eastman Kodak Co., 519 F. Supp. 1203, 1211-12 (S.D.N Y 1981). The assignment is therefore authoritatively adjudged invalid, and the half of the leasehold interest that belonged to Weiss and that was purportedly assigned to Rudman has, by operation of the New York judgment, been terminated. The Landlord has succeeded to that interest, and now holds an interest in the lease as tenant in common with the Rudman or her successors. See Rudman, Ind. No. 132671/94, at 10-11.
Plaintiff, however, seeks invalidation not only of the assignment, but also of the side agreement and promissory note. It was not the purpose of the New York litigation to determine the validity of the side agreement and promissory note. Nevertheless, the invalidation of the assignment necessarily entails the invalidation of the side agreement and promissory note.
It is clear that the assignment, the side agreement and the note constituted an integral agreement between the parties. Jurkowicz, who was involved in the negotiation of the agreements, has testified under oath and without contradiction that the genesis of all of the agreements was that in the wake of the fire, the Landlord asserted that Rudman and Weiss were in default under the terms of the lease, and sought to terminate it. As Jurkowicz describes it,
Weiss advised Mrs. Rudman and me that he was in desperate financial staits and could not bear the cost of any of the cures or any litigation [to restrain the Landlord from terminating the lease]. During this period, the Landlord advised that it had no objection to Mrs. Rudman remaining as a tenant, but that it feared what might happen to the Building if Weiss were permitted to be on the premises or be involved in the operation of the Lease. Based upon the Landlord's indication that it might settle on fair terms with her if Weiss were removed from the Building, on Mrs. Rudman's behalf, I negotiated an arrangement with Weiss, pursuant to which Weiss would assign his interest in the Lease to Mrs. Rudman by an assignment, a side agreement and a promissory note . . ., and obtain the economic benefits of his 50% interest in the Lease. . . . The Assignment made Mrs. Rudman the nominal tenant under the Lease. . . . The Side Agreement gave Weiss the economic benefit of his 50% interest in the Lease
(Jurkowicz Aff. ¶ 5.)
As the Jurkowicz affidavit in effect admits, and as the New York courts found, the assignment and the side agreement (as well as the implementing promissory note) were parts of a single agreement between the parties, by which it was attempted to create the appearance that Weiss had been removed as a co-tenant, while in fact he retained the economic benefit of co-tenancy. Thus, the New York court correctly found that the side agreement was executed "[i]n conjunction with and as part of the purported assignment." Rudman, Ind. No. 132671/94, at 5. The finding that the assignment and the side agreement constituted a single unitary arrangement was essential to — indeed was the crux of — that court's conclusion that the assignment was a "sham." (Id. at 10.) If, as the court found, the assignment was invalid, the consideration for the side agreement failed. The New York court's determination that the assignment was invalid thus necessarily entails the finding that Rudman's side agreement to pay Weiss a portion of the proceeds of the Lease is equally void.
Second, by its own terms the assignment (and thus, the rest of the agreements that formed an integral part of the overall bargain between the parties), was expressly made conditional on Weiss' representation that he was not responsible for the fire:
Certain allegations have been made, that Lloyd Weiss is responsible for a fire which occurred upon the subject . . . premises. Weiss denies any responsibility for this fire which occurred on Oct. 11, 1994, and Rudman accepts the assignment on the basis of Weiss's representation.
(Jurkowicz Aff. Ex. E.) Plaintiff argues, correctly, that because Weiss was responsible for the fire, this representation was false, and the assignment and related agreements are therefore, by their own terms, null and void.
There is no material fact as to Weiss's responsibility for the fire, since he was convicted of arson in the New York courts, he unsuccessfully appealed that conviction, and the judgment has become final. Weiss argues that he is factually innocent of the fire, and points out that he has brought a motion to collaterally attack his conviction in the New York courts on grounds of newly-discovered evidence. (Notice of Opp. ¶ 6.) But this does not create a material issue of fact. Whether Weiss started the fire was of course the central issue litigated in the criminal case. Weiss was found beyond a reasonable doubt to have been guilty of arson, and that conviction has become final. This Court is required to give that judgment full collateral estoppel effect. Thus, there is no issue of material fact in this case as to whether Weiss was responsible for the fire; he is collaterally estopped from contesting that issue by the final New York judgment of conviction. See D'Arata v. New York Cent. Mutual Fire Ins. Co., 76 N.Y.S.2d 24, 26 (1990) (insurance company collaterally estopped from contesting payment to shooting victim where insured homeowner was convicted of assault). Wagman v. Kandekore, 663 N.Y.S.2d 227, 228 (2d Dep't 1997) (defendant convicted of assault and battery in a criminal case collaterally estopped from denying civil liability for assault); see also Chariot Plastics, Inc. v. United States, 28 F. Supp.2d 874, 881 (noting that under New York law, "res judicata and collateral estoppel apply once final judgment is entered in a case, even while an appeal from that judgment is pending").
Weiss further argues that Rudman did not justifiably rely on his representation, since Rudman and Jurkowicz were not "oblivious to the contingency of a potential judgment being rendered against Mr. Weiss at the time when the side agreement was made." (Notice of Opp. ¶ 4.) But that argument doubly misses the point. First, the issue here is not justifiable reliance; the agreement by its terms is made conditional on the truth of Weiss's representation. Second, even if justifiable reliance were relevant, the question isn't whether the parties were "oblivious to the contingency" of criminal charges against Weiss, but whether they justifiably relied on his contention that he didn't set the fire. Weiss cannot simultaneously argue both that he didn't set the fire, and that it was so obvious that he did that no reasonable person would have accepted his representation of innocence.
For both of these reasons, then, no genuine issue of material fact precludes the conclusion that as a matter of law, the assignment, side agreement and promissory note are invalid.
C. Damages
Plaintiff also seeks a judgment for certain damages, which have been carefully documented in the sworn affidavit of Jurkowicz, that she claims were occasioned by curing the defaults under the lease caused by Weiss and by litigating to preserve her interest in the lease. She asserts that these damages resulted from Weiss's actions that created the breaches of the lease, in that Weiss was in sole effective control of the premises during the period in question.
Nothing whatever in Weiss's submissions takes any issue with his responsibility for the alleged breaches of the lease, except to the extent that he challenges his responsibility for the fire — a contention which, as explained above, this Court must reject because of his criminal conviction. Neither does he even attempt to contest the documentary evidence of Rudman's expenses nor their causation by Weiss's actions. Accordingly, no genuine material issue of fact stands in the way of summary judgment for plaintiff on these claims.
CONCLUSION
The motions to substitute plaintiff and for summary judgment for the plaintiff are granted. The agreements are declared void and judgment will be entered against Weiss in favor of plaintiff in the amount of $260,162.22
SO ORDERED