Opinion
1192004
Decided May 3, 2005.
Upon the foregoing papers, plaintiff Mariel Thomson moves, by order to show cause, for an order 1) construing a certain bargain and sale deed and contract of sale executed by plaintiff and defendant Daisy's Luncheonette Crop. (Daisy's) as a mortgage pursuant to Real Property Law § 320, 2) redeeming the alleged mortgage in favor of plaintiff, 3) voiding any transfers by defendants subsequent to the execution of the alleged mortgage, and 4) enjoining defendants from transferring, conveying, assigning, mortgaging, encumbering, wasting, clouding title or disposing of the subject property. Daisy's and defendant Nicholas Faselis cross-move for an order, pursuant to CPLR 3211 (a)(1), (3), (5), and (7), dismissing the complaint. Defendant 395 Van Brunt Street Realty Corp. ("Van Brunt") moves, by order to show cause, for an order dismissing the complaint, canceling the notice of pendency and requiring plaintiff to post a bond pursuant to CPLR 6312 (b) and 6313 (c).
According to the complaint, on February 4, 2003, plaintiff, the owner of the subject property at 395 Van Brunt Street in Brooklyn, procured a loan from Daisy's in the amount of $47,000.00, which transaction was "memorialized" by the simultaneous execution of a contract of sale and a bargain and sale deed from plaintiff to Daisy's. Plaintiff alleges that it was understood between the parties that the deed and contract were to be treated as a mortgage, an agreement "evidenced by the simultaneous execution of the documents." In addition, plaintiff avers that Daisy's agreed not to record the deed unless plaintiff defaulted on repayment of the loan. Daisy's however, recorded the deed and thereafter conveyed the property to Van Brunt.
On the other hand, Nicholas Faselis, an officer of Daisy's, avers in his affidavit that plaintiff was eager to sell him the property as it was scheduled to be sold at a tax lien foreclosure auction the following day and that he offered to pay plaintiff $45,000 for the property to which plaintiff agreed on the condition that she would have a right to repurchase the property. Mr. Faselis maintains that the contract of sale was drawn up in conjunction with the transfer of the deed not to memorialize the alleged mortgage but in order to provide plaintiff with an option to repurchase the property so long as she deposited $5,000 and remitted the balance by May 15, 2003, the date of closing.
By deed dated September 5, 2003, Daisy's transferred the subject property to Van Brunt. Following the commencement of the instant action and the filing of a notice of pendency against the subject property, Van Brunt brought an order to show cause dismissing the complaint as to Van Brunt and canceling the notice of pendency on the ground that Van Brunt was not a party to the transaction between plaintiff and Daisy's and is a bona fide purchaser for value without notice of the alleged mortgage of plaintiff.
A deed conveying real property, although absolute on its face, will be considered to be a mortgage when the instrument is executed as security for a debt ( see Real Property Law § 320; Basile v. Erhal Holding Corp., 148 AD2d 484). Real Property Law § 320 does not require a conclusive showing that the transfer was intended as security; it is sufficient that the conveyance "appears to be" intended only as a security in the nature of a mortgage ( Leonia Bank v. Kouri, 3 AD3d 213, 217). A determination whether the deed constitutes a mortgage requires a factual determination of the respective understandings of the principles of the agreement in question ( see Pioneer Village Development Corp. v. XAR Corporation, 55 AD2d 769). The affidavits of plaintiff and Norman Gluck, who was the co-owner of the subject property at the time the February 4, 2003 deed was executed, along with the contract of sale of the property from Daisy's to plaintiff which was simultaneously executed with the deed provide some evidence that plaintiff intended the deed to be a mortgage. Contrary to the contention of defendants, where a deed has been given as security, it cannot be turned into a conditional sale by way of an agreement to reconvey ( Leonia Bank, 3 AD3d at 217). The holder of a deed given as security must proceed in the same manner as any other mortgagee — by foreclosure and sale — to extinguish the mortgagor's interest ( id. at 217-218). However, the affidavit of Mr. Faselis, which states that the transaction was an outright conveyance of the property with an option to repurchase by a date certain, creates a factual issue as to the intent of the parties.
Plaintiff's order to show cause seeks relief in the nature of a mandatory injunction voiding the transfer of the subject property from Daisy's to Van Brunt and directing that the February 4, 2003 deed to Daisy's be construed as a mortgage and redeeming the alleged mortgage in favor of plaintiff. The order to show cause further seeks a preliminary injunction enjoining any further transfers of the property. "A mandatory injunction should not be granted, absent extraordinary circumstances, where the status quo would be disturbed and the plaintiff would receive the ultimate relief sought, pendente lite" ( Rosa Hair Stylists, Inc. v. Jaber Food Corp., 218 AD2d 793, 794). Here, plaintiff has failed to satisfy her heavy burden of proving a clear right to mandatory injunctive relief, which, in effect, would grant the plaintiff the ultimate relief requested, as there is the unresolved factual issue as to whether or not the February 4, 2003 deed to Daisy's was intended as a mortgage. Moreover, the remedy of granting a preliminary injunction is a drastic one which should be used sparingly, and which will not be granted absent a showing that there is a clear right to such relief on the undisputed facts presented ( Schneider Leasing Plus, Inc. v. Stallone, 172 AD2d 739, 740 [internal quotation marks and citations omitted], appeal dismissed 78 NY2d 1043). Since the facts surrounding the nature of the February 4, 2003 deed are in sharp dispute, plaintiff is not entitled to a preliminary injunction enjoining further transfers. The branch of the cross motion of Daisy's and Mr. Faselis to dismiss the complaint as to Mr. Faselis individually is granted. Where a "document [is] executed by [an individual] in his corporate capacity, [it] cannot form a basis for personal liability upon him" ( Gold v. Royal Cigar Co., 105 AD2d 831, 832; see Gottehrer v. Viet-Hoa Co., 170 AD2d 648). However, Daisy's is not entitled to dismissal of the complaint under CPLR 3211 (a)(1), (3), (5), or (7). Daisy's has not founded a defense based on documentary evidence. The deed, along with the contract of sale, satisfies the documentary requirements of Real Property Law § 320. Further, to succeed on a motion to dismiss pursuant to CPLR 3211 (a) (1), the documentary evidence which forms the basis of the defense must be such that it resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff's claim ( see Trade Source v. Westchester Wood Works, 290 AD2d 437), and there are issues of fact in this matter with respect to the parties' intentions with respect to the February 4, 003 deed and contract of sale. Moreover, there is no indication that plaintiff does not have legal capacity to sue, and no evidence has been presented which establishes that the cause of action may not be maintained because of arbitration and award, collateral estoppel, discharge in bankruptcy, infancy or other disability of the moving party, payment, release, res judicata, statute of limitations, or statute of frauds. Finally, accepting as true the factual allegations of the complaint and according plaintiff all favorable inferences which may be drawn therefrom ( see Leon v. Martinez, 84 NY2d 83, 87-88), the court finds that plaintiff has stated a cause of action against Daisy's.
As a result, the branch of the cross-motion seeking dismissal of the complaint as against Daisy's is denied.
Van Brunt moves by a separate order to show cause to dismiss the complaint as against Van Brunt and cancel the notice of pendency on the ground that it received title to the subject property as a bona fide purchaser. In order to establish as a matter of law that a party is a bona fide purchaser, that party has the burden of proving that he purchased the property for valuable consideration, and that he purchased it without "knowledge of facts that would lead a reasonably prudent purchaser to make inquiry" ( see Berger v. Polizzotto, 148 AD2d 651, 652 quoting Morrocoy Marina v. Altengarten, 120 AD2d 500).
There is no evidence presented that Van Brunt, the corporation which received a deed to the subject property from Daisy's, paid any consideration therefor. In fact, the recording and endorsement cover page generated by the New York City Department of Finance indicates that no transfer tax was paid on the conveyance from Daisy's to Van Brunt. In a reply affirmation, counsel for Van Brunt states the following:
3. On September 5, 2003, defendant Daisy's Luncheonette Corp. (DLC) transferred the property to defendant 395 Van Brunt Street Realty Corp., a corporation newly-formed by defendant Nick Faselis, owner and principal of Daisy's Luncheonette, for the express purpose of taking title to and owning the property at 395 Van Brunt Street.
4. Faselis was the owner of the shares of Daisy's Luncheonette Corp., and a partial owner of the shares of 395 Van Brunt Realty Corp. at the time. As such, the transfer was merely a change of form transfer, requiring no transfer tax to be paid to the City, and none was paid. Since Faselis was transferring the property from one corporation under his control to another, no title insurance was necessary.
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6. On October 6, 2003, defendant Nick Faselis transferred all his shares and interest in 395 Van Brunt Realty Corp. to Salvatore Inzerillo. Inzerillo purchased the shares for value in good faith, paying $200,000.00 in cash, subject to existing liens and encumbrances of record which appeared on a title report . . .
From these allegations, it is apparent not only that no consideration was paid on the transfer of the property from Daisy's to Van Brunt, but that since Mr. Faselis was an owner or officer of Van Brunt at the time of the transfer as well as the owner and principal of Daisy's, and since there remains an issue of fact with respect to whether the deed from plaintiff to Daisy's was intended only as security for a loan, Van Brunt can not establish as a matter of law that it was unaware of plaintiff's potential claim. The fact that Mr. Inzerillo may have purchased, without knowledge of the alleged mortgage, all of Mr. Faselis' shares for $200,000 one month following the transfer of the deed from Daisy's to Van Brunt is of no moment. Mr. Inzerillo allegedly purchased only shares of Van Brunt, which remains the title owner of record, and did not receive any deed to the property in his own name or the name of a different corporate entity. Further, Van Brunt has submitted no documents to substantiate Mr. Inzerillo's purchase of Mr. Faselis' shares of Van Brunt, such as a stock transfer agreement or stock certificate. Van Brunt merely submits a copy of a check payable to Mr. Faselis which bears the name "Lisa Inzerillo."
As a result, Van Brunt's motion to dismiss the complaint and cancel the notice of pendency is denied. That branch of Van Brunt's motion for an order requiring plaintiff to post an undertaking is denied as no injunctions shall issue.
The foregoing constitutes the decision and order of the court.