Opinion
29635/07.
Decided August 12, 2009.
Helmut Borchert, Esq., Borchert, Genovesi, LaSpina Landicino, P.C., Whitestone, New York, for defendant.
Marianne J. Gallipoli, Esq., Law Office of Marianne J. Gallipoli, Floral Park, New York.
Plaintiffs', Christopher Vardaros, Nick Melissionos, Costas Katsifas, and Konstantinos Tsahas motion for an order pursuant to CPLR 3212 and 3211 dismissing the defendant's, John Zapas a/k/a John Zappas counterclaims and defendant's cross motion for an order pursuant to CPLR 3212 dismissing the plaintiffs' complaint are hereby decided as follows:
This is an action by plaintiffs to recover from defendant due to defendant having allegedly taken the plaintiffs' money to purportedly purchase real estate on plaintiffs' behalf which defendant instead converted to his own use. The complaint sets forth causes of action: (1) to quiet title pursuant to Article 15; (2) to impose a constructive trust; (3) to recover for unjust enrichment; (4) to recover for breach of contract; (5) to recover for fraud; (6) for declaratory judgment; and (7) to impose an equitable lien. Plaintiffs commenced a prior action with a notice of pendency in 2004 and a prior action without a notice of pendency in 2006.
I. PLAINTIFFS' MOTION TO DISMISS DEFENDANT'S COUNTERCLAIMS
On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction ( Leon v. Martinez, 84 NY2d 83.) In determining whether plaintiff's complaint states a valid cause of action, the court must accept each allegation as true, without expressing any opinion on plaintiff's ultimate ability to establish the truth of these allegations before the trier of fact (219 Broadway Corp. v. Alexanders, Inc., 46 NY2d 506; Tougher Industries, Inc. v. Northern Westchester Joint Water Works, 304 AD2d 822 [2d Dept 2003]). The court must find plaintiff's complaint to be legally sufficient if it finds that plaintiff is entitled to recovery upon any reasonable view of the stated facts (see, CPLR 3211[a][7]; Hoag v. Chancellor, Inc., 246 AD2d 224 [1st Dept 1998]).
At the outset, the court notes that the branch of the plaintiffs' motion for an order pursuant to CPLR 3211 is denied as plaintiffs have failed to submit any proof in support of the relief requested pertaining to this branch.
Defendant asserts four counterclaims in his Answer. The first counterclaim is based on an undenominated cause of action. Said counterclaim asserts in relevant part, that the plaintiffs wrongfully commenced three actions against the defendant, wrongfully filed a lis pendens against the premises, that the plaintiffs were motivated solely by their intent to harm defendant, and that the plaintiffs were seeking a collateral advantage and a corresponding detriment to the defendant which is outside the legitimate ends of process. The second counterclaim is also based on an unspecified theory and asserts that the plaintiffs wrongfully commenced the action for the sole purpose of harming the financial and business reputation of defendant and that the plaintiffs have intentionally damaged the financial credit rating and business reputation of defendant. The third counterclaim also asserts an unspecified theory and alleges that the plaintiffs wrongfully filed a lis pendens against the premises, which improperly prohibited the defendant from the lawful use and enjoyment of the premises, and damaged the defendant's financial reputation and credit rating. The fourth cause of action sounds in malicious prosecution of the 2004, 2006, and the present actions.
The court notes that in the defendant's opposition papers, the defendant only opposes the fourth cause of action for malicious prosecution. Defendant makes no mention of the first, second, and third causes of action, and fails to attempt to dispute the facts asserted by plaintiffs in their moving papers regarding these causes of action. "Facts appearing in the movant's papers which the opposing party does not controvert, may be deemed to be admitted." (Kuehne Nagel, Inc. v. Baider, 36 NY2d 539 [NY 1975]; see also, Tortorello v. Carlin, 260 AD2d 201 [1st Dept 1999]). As such, there being no triable issue of fact, the first, second, and third counterclaims are dismissed.
The fourth counterclaim sounds in malicious prosecution. In order to maintain an action for malicious prosecution, a party must demonstrate: "(1) the commencement of a judicial proceeding against the [party claiming the malicious prosecution], (2) at the insistence of the [party who prosecuted the judicial proceeding], (3) without probable cause, (4) with malice, (5) which action was terminated in favor of the [party claiming malicious prosecution,] and (6) to the [injured party's] injury" (Furgang and Adwar, LLP v. Fiber-Shield Industries, Inc.,55 AD3d 665 [2d Dept 2008]). "To show a termination in its favor, the [party claiming malicious prosecution] must prove that the court passed on the merits of the charge or claim against it under such circumstances as to show its innocence or nonliability, or show that the proceedings were terminated or abandoned at the instance of the [party who prosecuted the action] under circumstances which fairly imply the [party claiming malicious prosecution's] innocence". Id.
There has been no demonstration of malicious prosecution. The plaintiffs' 2004 complaint (and related notice of pendency) was never served, and the plaintiffs' 2006 complaint was dismissed due to improper service. As such, the dispositions of the 2004 and 2006 complaints do not include any determination or any evidence of any determination on the merits of any disposition which fairly implies the defendant's innocence as required. Id. The two prior actions were not dismissed on the merits as required for malicious prosecution. There has been no disposition on the present action.
In addition, a cause of action for malicious prosecution requires special damages beyond legal fees and other expenses and other inconveniences that are normally attendant to defending litigation (Campion Funeral Home, Inc. v. State, 166 AD2d 32 [3d Dept 1991]). No such showing of special damages has been made in the instant case.
Accordingly, plaintiffs' motion pursuant to CPLR 3212 is granted in all respects, and all four of defendant's counterclaims are dismissed.
II. DEFENDANT'S CROSS MOTION FOR SUMMARY JUDGMENT A. RPAPL Article 15 Claim
That branch of defendant's cross motion seeking summary judgment pursuant to CPLR 3212 on the plaintiffs' first cause of action to quiet title pursuant to RPAPL Article 15 declaring plaintiffs are the owners of the disputed premises, is hereby granted.
Plaintiffs allege that as a result of a breach of an oral agreement, in which defendant purportedly received funds to acquire the disputed premises and was then to convey the premises to plaintiffs, defendant has no interest in the premises and therefore the disputed property rightfully belongs to plaintiffs.
It is well settled "to prevail in a proceeding pursuant to RPAPL Article 15, a party must demonstrate good title in itself; it may not rely on the weakness of its adversary's title." (LaSala v. Terstiege, 276 AD2d 529, 530 [2d Dept 2000]; Best Renting Co. v. City of New York, 248 NY 491). With respect to this claim, defendant has established prima facie entitlement to judgment as a matter of law. Defendant has demonstrated good title to the premises, as he is the sole owner reflected on all of the proffered deeds. In opposition, plaintiffs attempt to undermine defendant's right to ownership not by establishing good title in themselves, but rather by relying on the purported weakness of defendant's title. Such a showing is insufficient to meet plaintiffs' burden of showing good title in themselves to raise a triable issue of fact under RPAPL Article 15 (see, LaSala v. Terstiege, 276 AD2d 529, 530 [2d Dept 2000]). As defendant has demonstrated no triable issue of fact with respect to plaintiffs' RPAPL Article 15 claim, summary judgment is appropriate.
B. Constructive Trust Claim
That branch of defendant's cross motion seeking summary judgment pursuant to CPLR 3212 on the plaintiffs' second cause of action for a declaratory judgment seeking the imposition of a constructive trust on the subject realty is hereby denied.
It is well-established law that: "a constructive trust may be imposed [when] property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest' (internal citations omitted).' In the development of the doctrine of constructive trust as a remedy available to courts of equity, the following four requirements were posited: (1) a confidential or fiduciary relation, (2) a promise, (3) a transfer in reliance thereon and (4) unjust enrichment." (Sharp v. Kosmalski, 40 NY2d 119) (internal citations omitted)." "However these elements are simply guidelines and are not to be applied rigidly in pursuing the goal of preventing unjust enrichment." (Henness v. Hunt, 272 AD2d 756 [3d Dept 2000]).
The first element of a constructive trust is a confidential or fiduciary relationship which is "so pregnant with [the] opportunity for abuse and unfairness' as to require equity to intervene and scrutinize the transaction." (Mendel v. Hewitt, 161 AD2d 849 [3d Dept 1990]). "In determining whether a fiduciary relationship exists, a court will look to whether a party reposed confidence in another and reasonably relied on the other's superior expertise or knowledge.'" (Sergents Benevolent Association Annuity Fund v. Renck, 19 AD3d 107 [1st Dept 2005][internal citations omitted]). A confidential relationship is not demonstrated where the parties are merely friends (Prado v. Lattore, 194 AD2d 65 [2d Dept 1993]). Moreover, a fiduciary relationship is not demonstrated where there is a business relationship that is at arms length (H.F. Management Services, LLC v. Pistone, 34 AD3d 82 [1st Dept 2006]).
Defendant has sufficiently established a prima facie case regarding the first element of a constructive trust, ie. that of a confidential or fiduciary relation, in that there was no confidential or fiduciary relation. In support of his motion, defendant presents, inter alia, the examination before trial transcript testimony of Katsifas, wherein he stated that at the time the properties were purchased, he was friends with Mr. Zapas, but not socializing; the examination before trial transcript testimony of Melissionos who testified that it was a business relationship, that the relationship with defendant was of a business nature; the examination before trial transcript of Vardaros, who testified that his relationship with defendant was that defendant was a good salesman and a good talker, who seemed to be very smart; and the examination before trial transcript testimony of plaintiff, Tsahas, who testified that he was not particularly friendly with defendant and did not particularly like him. Defendant therefore established a prima facie case that there was no confidential or fiduciary relation between plaintiffs and defendant.
In opposition, plaintiffs raises a triable issue of fact. Plaintiffs established that it is for the trier of fact to determine whether the relationship was "so pregnant with [the] opportunity for abuse and unfairness' as to require equity to intervene and scrutinize the transaction." (Mendel v. Hewitt, 161 AD2d 849 [3d Dept 1990]). In the instant matter, whether "plaintiff[s] [were] justified in reposing a special trust and confidence in [defendant's] fidelity" is a triable issue of fact. Plaintiffs presented affidavits from each of the plaintiffs which affidavits indicate that "[p]laintiffs believed and defendant represented that defendant was an experienced expert in real estate and in acquiring foreclosure properties and that defendant would guide and protect plaintiffs through the process of acquiring and selling properties mentioned in the complaint." This, combined with the fact that plaintiffs had prior business relationships with defendant allegedly caused them to place trust and confidence in the defendant.
C. Unjust Enrichment Claim
That branch of defendant's cross motion seeking summary judgment pursuant to CPLR 3212 on the plaintiffs' third cause of action seeking a declaratory judgment for unjust enrichment is hereby denied.
It is well-established law that: "[t]o prevail on a claim of unjust enrichment, a party must show that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered" [internal quotation marks and citations omitted]) (Blue Wolf Group, LLC. v. Gaiam, Inc., 16 Misc 3d 1113 (A) [Civ Ct, New York County 2007]).
Defendant has established a prima facie case that the plaintiffs failed to satisfy the element that the defendant received something unjustly of value at the expense of the plaintiffs (McGrath v. Hilding, 41 NY2d 625).
Defendant established a prima facie case that the corporations, not the individual plaintiffs personally gave money as a loan to the defendant, and that in return for the loan, the defendant was to provide services to the corporations. Therefore, there was no benefit being conferred upon the defendant by any of the individual plaintiffs personally. The defendant established a prima facie case that the individual plaintiffs did not lose anything. In support of his argument, defendant provides inter alia, the examination before trial transcript testimony of each of the individual plaintiffs, as well as copies of the checks that were written from a corporate account. As such, defendant established a prima facie case that (1) no benefit was conferred upon defendant since the money was loaned by corporations to the defendant in exchange for services that were to be performed in the future, and (2) any such benefit was conferred upon the defendant by the corporations, not by the individual plaintiffs personally, and so the parties allegedly injured would be the corporations only.
Plaintiffs have established that there are triable issues of fact. In opposition to the cross motion, the plaintiffs present, inter alia, affidavits from each of the plaintiffs personally. Plaintiffs allege that while the money came from the corporations, the plaintiffs, being principals of the corporation are the ones that provided the money to the corporations. There is a triable issue of fact as to whether the money is from the corporation or from the individual plaintiffs personally, i.e. who issued the money. There is also a triable issue of fact as to for what the money was issued. Plaintiffs claim that they individually gave money to the defendant, not as a loan for services to be provided, but rather as money to be used to purchase real estate for the plaintiffs and the defendant.
D. Breach of Contract Claim
That branch of defendant's cross motion seeking summary judgment pursuant to CPLR 3212 on the plaintiffs' fourth cause of action alleging a breach of contract is hereby denied.
Plaintiffs allege in the verified complaint that defendant Zapas breached the oral agreement with plaintiffs, in which defendant purportedly agreed with plaintiffs to purchase the disputed premises solely in his name, and to hold the premises in trust for the plaintiffs until such time as ownership interest could be conveyed to plaintiffs and defendant jointly.
It is well settled that "[a] contract for the leasing for a longer period than one year, or for the sale, of any real property, or an interest therein, is void, unless the contract, or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the lessor or grantor, or by his lawfully authorized agent." (300 West End Ave. Corp. v. Warner, 250 NY 221, 223; see, General Obligations Law § 5-703). Further, "whenever a court finds a statute which makes void an agreement, unless in writing, there is a concomitant holding by the court that such statute may not be pleaded as a defense to an action based upon a constructive trust or in quasi contract, arising out of the unjust enrichment of the estate of the defendant" (Irving Trust Co. v. Reikes, 228 AD 510 [1st Dept 1930]).
In the present case, although defendant has argued that as a matter of law he is entitled to summary judgment as the alleged oral agreement relating to an interest in real property was not in writing and was in violation of the Statute of Frauds, plaintiffs' argument of a constructive trust, and unjust enrichment present issues of fact making summary judgment improper. A triable issue of fact exists as to the presence of a constructive trust and whether plaintiffs and defendant had a confidential and fiduciary relationship. The Statute of Frauds "does not obstruct the recognition of a constructive trust affecting an interest in land where a confidential relation would be abused if there were repudiation, without redress, of a trust orally declared" (Williams v. Williams, 4 AD2d 793 [2d Dept 1957]). Further, notwithstanding the fact that the oral agreement may or may not have related to an interest in real property, an issue of fact exists as to the presence of the purported oral agreement. Defendant's motion for summary judgment with respect to plaintiffs' contract claim is hereby denied.
E. Fraud Claim
That branch of defendant's cross motion seeking summary judgment pursuant to CPLR 3212 on the plaintiffs' fifth cause of action alleging fraud is hereby denied.
Plaintiffs allege in the verified complaint that defendant represented to plaintiffs that he would acquire record title to the disputed premises solely for the purpose of holding the property in trust for the plaintiffs and would subsequently turn the property over to plaintiffs.
It is well settled that a claim for fraud must satisfy the specificity and particularity requirements of CPLR 3016 (b) and allege the essential elements of a fraud claim, misrepresentation of a material fact, falsity, scienter and deception (see, Barclay Arms, Inc. v. Barclay Arms Assocs., 74 NY2d 644, 647; Channel Master Corp. v. Aluminium Ltd. Sales, Inc., 4 NY2d 403). Moreover, essential to the fraud claim is proof that the alleged fraud was a substantial factor in causing identifiable loss to the plaintiff (see, Willberry Corp v. Schwartz, 29 AD3d 899, 814 NYS2d 537; Apollo H.V.A.C. Corp. v. Halpern Const., Inc. 55 AD3d 855 [NY AD2d Dept 2008] [emphasis added]). Defendant argues again as he argues for the dismissal of plaintiffs' third and fourth causes of action, that as it was the corporations, not the individual plaintiffs who gave the money to defendant as a loan, the individual plaintiffs have not personally suffered any identifiable loss to support a claim of fraud. Defendant has made a prima facie showing that the individual plaintiffs have not suffered a loss.
Plaintiffs have alleged that defendant knowingly, willfully, and intentionally represented that he would receive funds from plaintiffs to acquire title to the disputed premises which he would hold in constructive trust for plaintiffs. Plaintiffs allege that they justifiably relied on these representations made by defendant. In opposition to the motion, as herein set forth in their opposition to defendant's motion to dismiss plaintiff's third and fourth causes of action, there are triable issues of fact as to whether the funds delivered to defendant were loan proceeds from corporations or funds from the individual plaintiffs for the specific purpose of purchasing real estate. Under these facts, summary judgment on the issue of fraud would be improper (see, Off Campus of Columbus Ave. v. Steinhauser, 180 AD2d 481 [1st Dept 1992]).
F. Declaratory Judgement Claim
That branch of defendant's cross motion seeking summary judgment pursuant to CPLR 3212 on the plaintiffs' sixth cause of action seeking a declaratory judgment directing defendant to pay off, satisfy, and discharge of record all taxes, liens, judgments, mortgages and liens encumbering the Premises or any portion thereof and to reimburse plaintiffs for any such expenses plaintiffs have incurred and to convey the premises to plaintiffs or to the LLC in fee simple with marketable title thereto free and clear of all liens, taxes, and encumbrances is hereby denied.
As there is a triable issue of fact as to whether the money is from the corporation or from the individual plaintiffs personally, i.e. there is a triable issue of fact as to who issued the money; and as there is a triable issue of fact as to for what the money was issued (plaintiffs claim that they individually gave money to the defendant as money to be used to purchase real estate for the plaintiffs and the defendant, whereas, defendant claims the money was merely a loan to be used for the provision of services) this branch of the motion is denied.
G. Equitable Lien Claim
That branch of defendant's cross motion seeking summary judgment pursuant to CPLR 3212 on the plaintiffs' seventh cause of action for a declaratory judgment that plaintiffs have an equitable lien upon the subject property is hereby denied.
It is well-established law that: "[t]he existence of an equitable lien requires an express or implied contract concerning specific property wherein there is a clear intent between the parties that such property be held, given or transferred as security for an obligation (Datlof v. Turetsky, 111 AD2d 364 [2d Dept 1985]). [T]o find an equitable lien it is necessary that an intention to create such a charge clearly appear from the language and the attendant circumstances. Strict proof of such intention is required." (Pennsylvania Oil Products Refining Co. v. Willrock Producing Company, Inc., 267 NY 427). For an equitable lien to be imposed, there must be a confidential relationship between the parties (Reisener v. Stoller, 51 F Supp 2d 430 [SDNY 1999]).
As the court already determined that a triable issue of fact exists as to whether or not there was a confidential or fiduciary relationship between the plaintiffs and the defendant, there is also a question of fact as to whether an equitable lien should be imposed.
The foregoing constitutes the decision and order of the court.