Opinion
Index No. 160995/2017
08-08-2023
Marco Grassetto, TRUSTEE FOR THE LIQUIDATION OF SIMOD, S.P.A., Plaintiff, v. Agnese Donatella Sartore, Defendant.
James Montgomery, Esq., New York, NY, and Giacomo J. Corrado, Esq., New York, NY, for plaintiff. Reinhardt Savic Foley LLP, New York, NY (Andrea Fiocchi, Stefan Savic, and Sarah E. Tallent of counsel), for defendant.
Unpublished Opinion
James Montgomery, Esq., New York, NY, and Giacomo J. Corrado, Esq., New York, NY, for plaintiff.
Reinhardt Savic Foley LLP, New York, NY (Andrea Fiocchi, Stefan Savic, and Sarah E. Tallent of counsel), for defendant.
Gerald Lebovits, J.
This is a fraudulent-conveyance action related to a bankruptcy proceeding (and other related litigation) in Italy. Plaintiff, Marco Grassetto, is a bankruptcy trustee in Italty for Simod S.p.A., a bankrupt Italian corporation. He is seeking to recover, for the bankruptcy estate, ownership of a luxury Manhattan apartment currently owned by defendant, Agnese Donatella Sartore, on the ground that Simod fraudulently conveyed the apartment to Sartore without fair consideration shortly before filing for bankruptcy.
In March 2021, this court, on plaintiff's motion, appointed a receiver for the property to collect rent from defendant's tenants in the apartment, pay the mortgage and common charges, and take other, related steps. (See NYSCEF No. 85.) The parties then engaged in a series of disputes about whether plaintiff, and plaintiff's proffered receiver, had complied with the various terms of the receivership order. The court concluded, on multiple occasions, that plaintiff had failed in different ways to do so. (See Grassetto v Sartore, 2021 NY Slip Op 50896[U] [Sup Ct, NY County Sept. 22, 2021]; Grassetto v Sartore, 2022 NY Slip Op 50418[U] [Sup Ct, NY County May 24, 2022].)
Defendant, contending that plaintiff still has not complied with the terms of this court's most recent order, now moves to hold plaintiff in contempt, for an accounting of rents paid to the receiver, and for other related relief. (NYSCEF No. 200 [order to show cause].) Plaintiff-who has since changed counsel-opposes the motion and cross-moves for appointment of a new receiver on different terms from the 2021 receivership order. (NYSCEF No. 203.) Defendant's motion is granted in part and denied in part. Plaintiff's cross-motion is granted.
DISCUSSION
1. With respect to defendant's contempt motion, plaintiff argues that as a foreign national not fluent in English, he relied heavily on his (former) counsel not only to represent his interests, but also to help ensure that he complied with this court's orders-and that his former counsel failed in numerous respects to discharge these responsibilities satisfactorily. (See NYSCEF No. 207.) This court finds persuasive plaintiff's detailed affirmation on these points, which is consistent with this court's own observations of the litigation. This court recognizes defendant's frustration with plaintiff's sustained failures to comply with this court's orders. Nonetheless, in these circumstances, the court concludes that contempt is not warranted.
2. Defendant also seeks an order requiring plaintiff to account for the funds that defendant's tenant has paid in rent to plaintiff's receiver and present and former counsel, including the accounts in which the funds are being held and the status of those funds from the time they were remitted to date. (See NYSCEF No. 200 at 2.) This court agrees that the accounting sought by defendant is warranted with respect to all funds remitted by defendant or defendant's tenant to plaintiff's counsel (current or former), or to the receiver previously appointed by the court, since March 2021.
3. The parties agree that the receiver appointed under this court's March 2021 receivership order is unsatisfactory. Defendant seeks replacement of that receiver and appointment of a new receiver under the terms of the original receivership order (and this court's ensuing orders as they pertained to the receivership). (See id.) Plaintiff, on the other hand, cross-moves, in effect, for revocation of that receivership order altogether and appointment of a new receiver, on different terms, from the court's Part 36 fiduciary list. (See NYSCEF No. 203 [notice of cross-motion, itemizing proposed terms for the receivership].) This court concludes that plaintiff's cross-motion papers establish that the terms of the receivership should be modified as plaintiff proposes. The court also agrees with plaintiff that doing so will obviate the need for a receivership undertaking.
Defendant, although criticizing plaintiff for reversing field and belatedly seeking modification of the receivership that plaintiff had originally proposed (NYSCEF No. 211 at 3-5), does not contend that the receivership terms now sought by plaintiff would be inappropriate or counterproductive.
4. One additional point warrants discussion. On motion sequence 006 in this action, this court granted defendant's cross-motion to stay proceedings on plaintiff's fraudulent-conveyance claim to allow the Italian bankruptcy court to address the validity of the transfer of the apartment from Simod to defendant, and whether Simod received fair consideration for that transfer. (See Grassetto, 2022 NY Slip Op 50418[U], at *5-6.) The court also directed the parties to submit quarterly updates on the status of the adjudication in the Italian bankruptcy proceeding. (Id. at 7.)
In one of those quarterly updates (submitted in the form of a letter), plaintiff contends that the Italian bankruptcy court "has already adjudicated the question of the fraudulent conveyance," in a 2015 decision that was upheld by an intermediate appellate court. (NYSCEF No. 216 at 2 [emphasis added].) Plaintiff is thus implicitly suggesting that the stay should be lifted. Defendant, on the other hand, asserts its own letter that the contention in plaintiff's letter brief on this point is "an improper submission masquerading as an update for the purpose of attempting to re-argue motions that were already fully briefed by both parties and decided by this Court" on motion sequence 006. (NYSCEF No. 220 at 1.) Although the issue of the stay (and whether it should be continued) is not squarely presented by the current motion, given the parties' respective letter submissions on the issue the court opts for economy's sake to address it here.
Plaintiff also submitted for review translated copies of those decisions (which include the requisite attestations to the authenticity of the decisions and the accuracy of the translations). (See NYSCEF Nos. 217, 218.)
The court does not agree with plaintiff that the decision of the Italian bankruptcy court (and appellate court) resolves the fraudulent-conveyance issue with respect to plaintiff's claims in this action. The court acknowledges the challenges inherent in carefully analyzing a foreign-court decision that is available only in translation. Nonetheless, as this court reads the bankruptcy-court ruling, the question before that court was whether (i) the transfer of the apartment from Simod to defendant diminished Simod's bankruptcy estate, such that (ii) Simod's failure to disclose that transaction fully to the creditors' committee in bankruptcy constituted a material omission that (iii) potentially influenced the creditors' committee's position on Simod's proposed reorganization plan, and therefore (iv) warranted revoking the confirmation of that plan under the Italian bankruptcy code. (See NYSCEF No. 217 at 13-17.)
That is, the fraud found by the Italian court did not consist in the transfer doing "economic injury to the interests of [Simod's] creditors" by putting the apartment beyond their reach, but rather that the failure to fully disclose that transfer harmed the creditors' "right to a full and transparent information regarding the circumstances relevant to the formation of consent upon casting their vote" for or against the proposed reorganization plan. (Id. at 16.) Plaintiff's claims in this action under Debtor & Creditor Law (DCL) §§ 273 and 276, on the other hand, are based squarely in the economic harm done to Simod's creditors (by intent or in effect) through a transfer of property allegedly made without fair consideration shortly before Simod filed for bankruptcy. And plaintiff seeks here to void that transaction altogether-a remedy that was neither sought nor obtained from the Italian bankruptcy court in the decision relied on by plaintiff.
Given this court's understanding of what the Italian bankruptcy court did (and did not) hold in 2015, the question becomes whether and under what circumstances the Italian courts will have occasion to resolve whether the transfer of the apartment is a voidable fraudulent-conveyance in the sense meant by DCL art. 10. The record as it stands leaves this court uncertain on that point. That uncertainty is exacerbated by the existence of at least two Italian court proceedings that might implicate the validity of the apartment transfer. (See NYSCEF No. 216 at 1 [distinguishing between the two proceedings].)
The court therefore directs the parties to file further letter briefing on this issue. The parties' submissions should describe, as clearly and precisely as possible, whether either or both of the Italian proceedings will rule, or already have ruled, on the issues presented by plaintiff's DCL fraudulent-conveyance claims in this action, and the circumstances under which the courts are likely to issue those rulings (if they have not already done so). The court will then issue a further, supplemental order with respect to the current stay of plaintiff's DCL claims.
Accordingly, it is
ORDERED that the branch of defendant's motion seeking to hold plaintiff in contempt is denied; and it is further
ORDERED that the branch of defendant's motion for an accounting is granted; and it is further
ORDERED that the parties shall, within seven days of entry of this order, meet and confer about what payments defendant understands to have been remitted to plaintiff, plaintiff's current or former counsel, and plaintiff's receiver; and that plaintiff shall, within 45 days of entry of this order, provide to defendant an accounting with respect to those payments; and it is further
ORDERED that plaintiff's cross-motion seeking to remove the current receiver and, in effect, to modify the existing receivership order is granted as follows:
(i) This court's order entered March 29, 2021, providing for the appointment of a receiver on the terms specified in that order is hereby vacated, and the appointment of any receiver chosen by plaintiff pursuant to the March 29, 2021, order (whether Michael Guarnieri or someone else appointed consistent with the court's orders entered March 29, 2021, and May 24, 2022), is hereby revoked;
(ii) The parties shall, within 45 days, settle order on the terms of a modified receivership, with the terms of that receivership to be consistent with the approach laid out in plaintiff's notice of cross-motion at NYSCEF No. 203, whereupon this court will appoint a receiver from the Part 36 fiduciary list; and
(iii) The branch of this court's order entered May 24, 2022, that granted defendant's request to require plaintiff to post an undertaking in connection with the receivership (mot seq 005) is hereby vacated;
and it is further
ORDERED that the parties shall, within 45 days, submit letter briefing about whether the related Italian court proceedings will resolve (or have resolved) the issues underlying plaintiff's DCL art. 10 claims, as described in more detail above, with the submissions to be made by e-filing on NYSCEF and email to SFC-Part7-Clerk@nycourts.gov; and it is further
ORDERED that plaintiff serve a copy of this order with notice of its entry on defendant; and on Michael Guarnieri or any receiver appointed pursuant to this court's March 29, 2021, and May 24, 2022, orders, by certified mail, return receipt requested, directed to their respective last-known addresses.