Opinion
No. CV14–0279.
06-11-2015
Samir DELIBASIC, Snjezana Delibasic, Individually and as members of Srajevo Place LLC, Plaintiffs, v. Neven MANOJLOVIC, Edvina Uzunovic, Individually and as members of Srajevo Place LLC and Lake Placid Properties, LLC, Defendants.
Ryan K. Cummings, Esq., Hodgson Russ LLP, Buffalo, for plaintiffs Samir Delibasic, Snjezana Delibasic, Individually and as Members of Srajevo Place LLC. Thomas R. Fallati, Esq., Tabner, Ryan and Keniry, LLP, Albany, for defendants Neven Manojlovic, Edvina Uzunovic, Individually and as Members of Srajevo Place LLC and Lake Placid Properties, LLC.
Ryan K. Cummings, Esq., Hodgson Russ LLP, Buffalo, for plaintiffs Samir Delibasic, Snjezana Delibasic, Individually and as Members of Srajevo Place LLC.
Thomas R. Fallati, Esq., Tabner, Ryan and Keniry, LLP, Albany, for defendants Neven Manojlovic, Edvina Uzunovic, Individually and as Members of Srajevo Place LLC and Lake Placid Properties, LLC.
ROBERT J. MULLER, J.
Plaintiffs Samir Delibasic and Snjezana Delibasic (hereinafter plaintiffs) are married and reside in Mississauga, Ontario, Canada. Defendants Neven Manojlovic and Edvina Uzunovic (hereinafter defendants) are married and reside in Stamford, Connecticut. In early 2010—after plaintiffs visited defendants' vacation home in the Village of Lake Placid, Essex County—the parties decided to go into business together for the purpose of owning and renting properties in the Lake Placid area. An oral partnership was then formed whereby each of the four partners was to receive a 25% ownership interest in the business. The partners were to contribute equal amounts to the business and share equally in all profits and losses.
In May 2010, the partnership purchased certain unimproved property on Planty Way in Lake Placid. This property was later subdivided into two separate parcels—8 Planty Way and 10 Planty Way, respectively—and a log home was built on each. In August 2010, the partnership purchased vacant property on Cascade Road in Lake Placid. This property—located adjacent to Planty Way—enabled the parties and renters to access the Planty Way properties without crossing an easement over neighboring property. The deeds to both the Planty Way and Cascade Road properties were placed in all four of the partners' names. Later, in December 2011, the partnership purchased certain unimproved property on Seneca Trail in Lake Placid. In March 2012, the partnership created Srajevo Place LLC (hereinafter the LLC) with the assistance of Briggs Norfolk LLP, a law firm in Lake Placid. Briggs Norfolk also assisted the partnership in transferring both Planty Way properties to the LLC, with the Cascade Road and Seneca Trail properties remaining as partnership assets.
At the commencement of the partnership, plaintiffs contributed $410,000.00, which money was used to purchase the properties on Planty Way and Cascade Road. A portion of this $410,000.00 was also used to build the home at 8 Planty Way, as well as the foundation at 10 Planty Way. Defendants, who did not contribute any capital at the commencement of the partnership, financed the remainder of the construction at 10 Planty Way. The former owner of the Seneca Road property agreed to hold the mortgage on that property. The note called for the partnership to make 36 monthly payments of $711.11, with payments to begin on January 9, 2012.
Meanwhile, on January 1, 2012, plaintiffs took over management of rentals for the Planty Way properties. Plaintiffs apparently noticed some discrepancies in the amounts defendants claimed to pay for the construction of 10 Planty Way and the amounts actually charged by the builder. As a result, plaintiffs requested a full accounting from defendants and the LLC in early 2013. The relationship between the parties subsequently deteriorated and, on December 31, 2013, defendants took over the management of 8 Planty Way without plaintiffs' consent, changing the locks so as to prevent plaintiffs from entering the property. Plaintiffs contend that defendants refused to honor any of the rental contracts on 8 Planty Way, which refusal resulted in lost revenue for the partnership. Plaintiffs further contend that defendants declined to pay their portion of the monthly mortgage on the Seneca Road property, as the result of which the partnership missed the February, March and April 2014 mortgage payments. Finally, plaintiffs contend that—unbeknownst to them—defendants paid off the mortgage on the Seneca Road property in April 2014 and had it assigned to their company, defendant Lake Placid Properties, LLC (hereinafter Lake Placid Properties). Then, on April 11, 2014, Lake Placid Properties sent correspondence to all four of the partners declaring "the full amount of the debt to be due and owing" and, further, advising that the "[f]ailure to remit [this] sum by May 12, 2013 may cause the commencement of foreclosure proceedings." According to plaintiffs, they did not discover that Lake Placid Properties was owned by defendants until after receiving this correspondence.
Plaintiffs commenced this proceeding on May 27, 2014 seeking, inter alia, dissolution of the partnership and the LLC. Plaintiffs simultaneously moved by Order to Show Cause for an Order (1) appointing a receiver to oversee the operation of the partnership pending its dissolution; (2) appointing a receiver to oversee the operation of the LLC pending its dissolution; (3) directing defendants to provide an accounting relative to all monies spent or received on behalf of the partnership and the LLC; (4) directing defendants to honor all of plaintiffs' existing rental contracts on 8 Planty Way; (5) prohibiting defendants and Lake Placid Properties from foreclosing on the Seneca Road property; and (6) prohibiting defendants from further encumbering the Planty Way, Cascade Road and Seneca Trail properties. Plaintiffs also sought a Temporary Restraining Order (TRO) pending the return date of the Order to Show Cause which enjoined and restrained defendants and Lake Placid Properties from
(1)foreclosing on the Seneca Road property;
(2)encumbering the Planty Way, Cascade Road and Seneca Trail properties;
(3)refusing to honor all of plaintiffs' existing rental contracts on 8 Planty Way;
(4)destroying any documents, including but not limited to hard copy documents or electronically stored information or e-mails that relate to the partnership or the LLC; and
(5)utilizing the assets of the partnership and the LLC for any purpose other than a legitimate business purpose.
Defendants retained Briggs Norfolk to represent them and appeared in opposition to plaintiffs' application for a TRO (see Uniform Rules for Trial Courts [22 NYCRR] § 202.7 [f] ). The Court, however, was not persuaded and the TRO and Order to Show Cause were both issued on June 10, 2014.
For ease of reference, this motion shall henceforth be identified as plaintiffs' motion for a preliminary injunction.
Then, while this motion for a preliminary injunction was pending and the TRO was in place, Patricia Hurter—who had an existing rental contract with plaintiffs for 8 Planty Way that extended from June 24, 2014 to July 6, 2014—arrived to begin her stay and found the home to be occupied by other renters. As a result, plaintiffs refunded her deposit and assisted her in finding another rental property. Plaintiffs then filed a second motion by Order to Show Cause seeking to find defendants in contempt of court as a result of their failure to comply with the TRO and, further, to disqualify Briggs Norfolk from any further representation of defendants. This Order to Show Cause was issued on July 8, 2014.
For ease of reference, this motion shall henceforth be identified as plaintiffs' motion for contempt.
The parties subsequently engaged in lengthy discussions and were able to resolve all issues raised in plaintiffs' motion for a preliminary injunction with the exception of whether plaintiffs are entitled to an Order prohibiting defendants and Lake Placid Properties from foreclosing on the Seneca Road property pending the outcome of this action. They also resolved a portion of plaintiffs' motion for contempt, with Briggs Norfolk LLP voluntarily withdrawing as counsel for defendants. The Court now turns to the remaining issues, addressing the motions in seriatim.
Motion for Preliminary Injunction
Defendants contend that neither they nor Lake Placid Properties hold the mortgage on the Seneca Road property and, as such, plaintiffs are not entitled to an Order prohibiting them and Lake Placid Properties from foreclosing on the property. Specifically, defendants contend as follows:
"Lake Placid Properties, LLC—07137762 Series purchased the mortgage on Seneca [Road] from Andrew Orringer. Plaintiffs are incorrect when they state that Lake Placid Properties, LLC assumed the mortgage, as it was Lake Placid Properties, LLC—07137762 Series who assumed the mortgage. Lake Placid Properties, LLC and Lake Placid Properties, LLC—07137762 are two separate and distinct LLC[s]. Plaintiffs are incorrect when they state that [my wife and I] are the owners of the Lake Placid Properties, LLC—07137762 Series. To repeat, neither my wife nor I are members of Lake Placid Properties, LLC—07137762 Series. I do however manage this Lake Placid Properties, LLC—07137762 Series."
Indeed, the assignment of mortgage recorded on April 4, 2014 confirms that Lake Placid Properties, LLC—07137762 Series is mortgagee for the Seneca Road property. Further, the April 11, 2014 correspondence warning of the possible commencement of foreclosure proceedings was clearly from Lake Placid Properties, LLC—07137762 Series, as opposed to Lake Placid Properties. Inasmuch as Lake Placid Properties, LLC—07137762 Series is not a party to this action, the Court declines to issue an Order prohibiting foreclosure of the mortgage on the Seneca Road property (see CPLR 1001[a] ; Menorah Home & Hosp. for Aged & Infirm v. Jelks, 61 AD3d 648, 649 [2009] ). This remaining aspect of plaintiffs' motion for a preliminary injunction is therefore denied.
This denial is without prejudice to any future motions for the same or similar relief in the event that Lake Placid Properties, LLC—07137762 is added as a party to this action.
Motion for Contempt
Defendants contend that plaintiffs' motion for contempt must be dismissed because the face of the July 8, 2014 Order to Show Cause does not comply with Judiciary Law § 756, which section provides as follows:
"The application shall contain on its face a notice that the purpose of the hearing is to punish the accused for a contempt of court, and that such punishment may consist of fine or imprisonment, or both, according to law together with the following legend printed or type written in a size equal to at least eight point bold type:
"WARNING: YOUR FAILURE TO APPEAR IN COURT MAY RESULT IN YOUR IMMEDIATE ARREST AND IMPRISONMENT FOR CONTEMPT OF COURT. "
"It is well established that the failure to include both the statutorily required notice and warning provisions ... on the face of the contempt motion is fatally defective and, when raised in a timely manner, warrants dismissal of the motion" (Mente v. Wenzel, 192 A.D.2d 862, 863 [1993] [citations omitted], appeal dismissed, lv. denied 82 N.Y.2d 843 [1993] ; see Matter of Rappaport, 58 N.Y.2d 725 [1982] ; Matter of Hissam v. Mancini, 80 AD3d 802, 805 [2011], lv dismissed and denied 16 NY3d 870 [2011] ; Matter of Glenn v. Glenn, 262 A.D.2d 885, 886 [1999] ).
Here, the requisite warning extends across the top of the Order to Show Cause, but there is no "notice that the purpose of the hearing is to punish the accused for a contempt of court" (Judiciary Law § 756 ). The Court is therefore constrained to dismiss the motion (see Mente v. Wenzel, 192 A.D.2d at 863 ; Matter of Hissam v. Mancini, 80 AD3d at 805 ).
With that said, the Court must take this opportunity to caution defendants that it does not condone their behavior insofar as 8 Planty Way is concerned. Samir Delibasic signed the rental contract with Hurter on July 9, 2013. Neven Manajlovic then signed a rental contract with Darragh Kenny on March 17, 2014, with the rental period to extend from June 23, 2014 to July 14, 2014, thus encompassing the rental period under Hurter's existing contract. While it is unclear from the record whether Manajlovic was aware of Hurter's contract when he signed the contract with Kenny, this is largely irrelevant. What is relevant is that defendants were served with plaintiffs' application for a TRO on June 3, 2014. This application included the proposed language of the TRO, which stated as follows:
"[P]ending the hearing and return date of [p]laintiffs' motion for a preliminary injunction and further Order of the Court, [d]efendants are hereby temporarily restrained, enjoined and prohibited from ... refusing to honor the rental agreements [p]laintiffs already have in place for the Planty Way properties, including but not limited to the following rentals for 8 Planty Way: the June 24, 2014 to July 6, 2014 rental by Patricia Hurter (she paid a deposit in July 2013),...."
Defendants were therefore aware as of June 3, 2014 of the conflict between plaintiffs' contract with Hurter and their contract with Kenny. In fact, in their June 6, 2014 opposition to the TRO, defendants expressly indicated a willingness "to honor the rental agreements that [had] been put in place" by plaintiffs. Defendants were then served with the TRO—which included the language outlined above—on June 12, 2014. They then took no action whatsoever to address the conflict between these contracts. Instead, when plaintiffs requested the lock box code and wireless password for 8 Planty Way on June 18, 2014 in anticipation of Hurter's upcoming stay, defendants did not respond. Plaintiffs then followed up three days later and still received no response. Then, at approximately 11:00 A.M. on the morning of June 23, 2014, Ryan K. Cummings, Esq.—counsel for plaintiff—called Ronald J. Briggs, Esq.—counsel for defendants—and was advised that the lock box code and wireless password would be provided within the hour. Again, nothing. Cummings thus contacted Briggs later that afternoon and then—for the first time—was advised of defendants' conflicting contract with Kenny. Cummings responded immediately, advising of his position that defendants' failure to honor Hurter's contract was a violation of the TRO. He then received an e-mail from Briggs' associate that evening with the lock box code and wireless password, leading him and his clients to believe that defendants had chosen to honor Hurter's contract. This, however, was not the case. Stated simply, defendants were aware of their obligation to honor Hurter's rental contract and failed to do so, instead engaging in the same type of shenanigans that prompted plaintiffs to commence this proceeding in the first instance. Absent the jurisdictional defect outlined above, the Court would have found defendants to be in contempt of court (see Judiciary Law § 753[2] ).
Therefore, having considered the Affirmation of Ryan K. Cummings, Esq. with exhibits attached thereto, sworn to May 22, 2014, submitted in support of motion for a preliminary injunction; Affidavit of Samir Delibasic with exhibits attached thereto, sworn to April 30, 2014, submitted in support of motion for a preliminary injunction; Memorandum of Law of Ryan K. Cummings, Esq., dated May 22, 2014, submitted in support of motion for a preliminary injunction; Affidavit of Neven Manojlovic, sworn to June 19, 2014, submitted in opposition to motion for a preliminary injunction; Affirmation of Ryan K. Cummings, Esq. with exhibits attached thereto, sworn to June 25, 2014, submitted in further support of motion for a preliminary injunction; Affidavit of Samir Delibasic with exhibits attached thereto, sworn to June 25, 2014, submitted in further support of motion for a preliminary injunction; Affirmation of Ryan K. Cummings, Esq. with exhibits attached thereto, sworn to June 25, 2014, submitted in support of motion for contempt; Affidavit of Samir Delibasic with exhibits attached thereto, sworn to June 25, 2014, submitted in support of motion for contempt; Memorandum of Law of Ryan K. Cummings, Esq., dated June 26, 2014, submitted in support of motion for contempt; Affirmation of Ronald J. Briggs, Esq. with exhibits attached thereto, sworn to August 15, 2014, submitted in opposition to motion for contempt; Affidavit of Jenifer R. Briggs, Esq. with exhibit attached thereto, sworn to August 13, 2014, submitted in opposition to motion for contempt; Memorandum of Law of Matthew D. Norfolk, Esq., dated August 14, 2014, submitted in opposition to motion for contempt; Affirmation of Ryan K. Cummings, Esq. with exhibits attached thereto, sworn to August 21, 2014, submitted in further support of motion for contempt; and Memorandum of Law of Ryan K. Cummings, Esq., dated August 21, 2014, submitted in further support of motion for contempt, it is hereby
ORDERED that the Court declines to issue an Order prohibiting foreclosure of the mortgage on the Seneca Road property and, as such, this remaining aspect of plaintiffs' motion for a preliminary injunction is denied; and it is further
ORDERED that the requirements of Judiciary Law § 756 preclude the Court from finding defendants in contempt and, as such, the remaining aspect of plaintiff's motion for contempt is dismissed; and it is further
ORDERED that any relief not specifically addressed herein has nonetheless been considered and is expressly denied.
The original of this Decision and Order is returned to counsel for defendants for filing and service with notice of entry. The above-referenced submissions have been filed by the Court.