Opinion
File No. 2015-56/I
06-05-2023
In the Matter of the Proceeding of JOHNNY THOMPSON as Administrator of the Estate of BEVERLY A. THOMPSON Deceased, For Relief under SCPA Article 19.
Unpublished Opinion
DECISION/ORDER
HON. BERNARD J. GRAHAM, JUDGE
Recitation, as required by CPLR §2219(a), of the papers considered on the review of this motion: petitioner's order to show cause for injunctive relief pursuant to CPLR §6301 et seq., to prevent interference with the Administrator's duties:
Papers Numbered
Order to Show Cause and Affidavits Annexed (Petitioner)......... 1-2
Co-Petitioner's Affirmation in Support of OSC...................... 3
Respondent's Affirmation in Opposition............................... 4
Other:.......................................................................................
Upon the foregoing cited papers, the Decision/Order on this motion is as follows:
Decision:
An Order to Show Cause has been brought by the Petitioner, Johnny Thompson (the "Petitioner") on behalf of the Estate of Beverly A.Thompson (the "Thompson Estate"). The Petitioner, by his attorneys (Levy & Nau P.C.) has brought the motion in his capacity as Administrator of the Thompson Estate for an order pursuant to CPLR §6301 et seq., to temporarily restrain and preliminarily enjoin certain entities who purportedly have entered the property known as 457A Halsey Street, Brooklyn, New York (the "subject property") and have allegedly interfered with the lawful administration of the Thompson Estate. (See Amended OSC dated March 1, 2023).
Letters of Administration had previously been issued to James Thompson and such letters were rescinded. Letters of Administration were issued to Johnny Thompson on June 18, 2019.
The persons and/or parties named by Petitioner as respondents in the OSC are the following:
1. American Regional Real Estate Partners Inc.
2. American Regional Real Estate Partners LLC.
3. Earl Davis a/k/a Earl R. Davis
4. Davis Family Real Estate Holdings Inc.
5. Almanzar Capital Inc.
6. Chai Capital LLC and 7. Davis Family REH Master Series LLC, 457HA Series
Specifically, the Petitioner seeks the following additional relief: that the Court vacate various deeds that Respondents have filed against the subject property and to have the deeds stricken from the City Register; that this Court issue an order requiring that all personal property and fixtures removed from the subject property be returned and restored and; that an order be issued immediately ejecting the Respondents and their related entities from the subject property." (OSC pg. 3).
The relief sought in Petitioner's OSC is joined by another Estate distributee, Tanya Gittens, who has filed an affirmation in support by her attorneys, Cahill and Cahill, P.C. (hereinafter Ms. Gittens and the Petitioner are collectively referred to as the "Petitioner").
Background:
George Thompson and Emma Thompson, as husband and wife, purchased the subject property on or about August 31,1981. The subject property is a two-family dwelling in the Bedford-Stuyvesant neighborhood in Brooklyn. After the death of both George Thompson and Emma Thompson, the subject property automatically passed to their only child, Beverly Thompson, by operation of law. Beverly Thompson resided in the subject property until her death on June 18, 2014.
Beverly Thompson died intestate and without a surviving spouse or children. Beverly Thompson was survived by distributees who, on information and belief, are two (2) uncles and several cousins.
One of the reported distributees is Desiree Scott who had filed for bankruptcy in Nevada on April 25, 2018. The record indicates that Desiree Scott had listed her alleged inheritance of a portion of the subject property as an asset with her bankruptcy filing. The Nevada Bankruptcy Court listed Desiree Scott's interest as a 5.57% interest in the subject property. That court set a valuation of the subject property to be $500,000. The amount was based upon an earlier proposed sale of the property. The Nevada court proceeded to transfer the interest in the subject property to American Regional Real Estate Partners Inc., and a deed was recorded on or about July 17, 2020. The Petitioner alleges that the proportional share, which was transferred to Respondent, American Regional Real Estate Partners Inc., was then transferred to four other entities which are also named as Respondents in this proceeding. Petitioner's attorney has offered credible evidence that American Regional Real Estate Partners Inc. is owned by Earl R. Davis, and he is the principal in the various Respondent entities in this case. Evidence has been offered by Petitioner's attorney, Roger Levy, Esq., that Earl R. Davis is involved in numerous other real estate transactions wherein Mr. Davis and his related entities claim an interest in real property which is derived from a decedent's distributee. (See Aff. of Roger Levy, Esq., pg. 8).
A copy of the bankruptcy petition filed by Desiree Scott in annexed as "Ex. 1" to the OSC.
The relief sought by the Petitioner's counsel, inter alia, is for the Court to void the fractional ownership transfer from Desiree Scott to the Respondents as the transfer is in derogation of the Administrator's rights and duties as a fiduciary to maintain the property and sell property to pay expenses and make distributions to the distributees entitled thereto. (See SCPA §1902).
It is Petitioner's claim that the workers or companies hired by Earl Davis changed the locks on the subject property's doors in 2020 and performed demolition work. Petitioner's counsel affirms that when he confronted Mr. Davis, Mr. Davis refused to cease performing work at the premises and was unbowed by the prospect of court intervention.
Roger Levy states that he met Earl R. Davis at the subject property. Mr. Levy recites the conversation he had with Mr. Davis as follows: "He told us that he legitimately purchased a fractional interest in the property, and no one was going to stop him from doing whatever he wanted to do in and to the property. When we warned him that we would seek court intervention, he laughed and responded that he does this sort of thing every day, all day long, and would not stop". (Levy Aff. Pg 12).
Petitioner also claims that a buyer for the subject property has signed a contract to purchase the property for a purchase price of $1,150,000 (which is significantly more than the $500,000 price offered by a prior prospective purchaser). Attempts by Petitioner's attorney, Mr. Levy, to have Mr. Davis cooperate by clearing title to the subject property (by withdrawing the fractional deeds) to allow the sale to proceed were met with a demand by Mr. Davis to be paid a "premium" above the share that his fractional ownership represents. (See Levy Aff., pg 13, par 14).
Issues Presented
This Court is presented with a number of substantive issues as a result of the relief demanded in the Petitioner's OSC. First, the issue of whether or not a preliminary injunction is appropriate must be determined. A preliminary injunction pursuant to CPLR §6301 requires Petitioner's attorney to demonstrate the danger of irreparable harm; the likelihood of success on the merits; and the Court must determine that a balance of equities is in favor of the movant. (See Second on Second Cage Inc. v Hing Sing Trading Inc., 66 A.D.3d 255 [2d Dept. 2009]).
In deciding whether injunctive relief is warranted, the Court must determine whether the injunction would grant the ultimate relief sought, and if so, whether "extraordinary circumstances" are presented. (Rosa Hairstylists, Inc. v Jaber Food Corp., 218 A.D.2d 793 [2d Dept., 1995]). The Court must also determine whether the allegations made regarding the Respondents' conduct and the impact of such conduct present a detriment to the Estate and is in contravention of the Administrator's duties towards the other beneficiaries.
Secondly, it will be necessary for the Court to consider the competing interests of a proportional share owner of the real property (the Respondents herein), against the duties and powers of the Estate Administrator regarding the operation and administration of an asset which has not been completely distributed. (See SCPA Article 19).
The Respondent's counsel, Charles Cuneo, Esq., argues that his clients' interest in the property immediately vested upon the death of the owner (see LCD Holding Corp v Powell-Allen, 203 A.D.3d 811 [2d Dept. 2022)]. Since Respondents have purchased a fractional share of the Estate, Respondents argue that their interest may not be voided and is not part of the administrable Estate.
The Petitioner's claim is that the transfer of Desiree Scott's interest in the property is invalid as she had never been determined to be an heir of the Estate. Furthermore, Petitioner claims that the obligations of the Administrator to manage and administer the estate assets include the authority to sell the real property. (Article 19 of the SCPA; see also Kinard v Rosenblatt, 39 Misc.3d 1215 (A) [Queens Sur. Ct. 2013] ("notwithstanding that title vests in the statutory distributees, their right to possess and enjoy the property is subject to the administrator's statutory tenancy").
Discussion:
Duties and Obligations of the Administrator:
It is well established that a beneficiary's right of inheritance vests in the real property immediately upon the decedent's death. (Matter of Seviroli, 31 A.D.3d 452 [2d Dept. 2006]). In this case, the Respondent's counsel correctly argues that the Respondents have a claim to a percentage of ownership (ie. 5.57%) of the subject property. There may not have been a final determination of heirship when Desiree Scott's portion of ownership was offered to the bankruptcy court in Nevada, but it would be improper for this Court to nullify the transfer of Ms. Scott's share in the estate without further proceedings. (See 72634552 Corp. v Okon, 189 A.D.3d 1317 [2d Dept., 2020]). At the present time, the Respondents have a colorable claim of title to the subject property, and it would be error to void that interest.
Notwithstanding the fact that the interest of Desiree Scott in the subject property vested by law immediately upon the death of Beverly Thompson, the duly appointed Administrator of the Estate is possessed of broad powers to manage, maintain and dispose of property for the benefit of distributees and creditors. (See EPTL §11-1.1 and SCPA 1902). These powers include the power of a fiduciary to sell the decedent's real property to pay: (a) expenses of administration, (b) funeral expenses, (c) debts of the decedent [but not mortgage liens], including real property taxes, (d) estate taxes, (e) debts or legacies, (f) the respective shares of decedent's estate to the distributees of decedent's estate entitled thereto, and (g) for any other purpose the court deems necessary. (SCPA §902; see also Young v Caruth, 113 Misc.2d 586, affd. 89 A.D.2d 466 [1st Dept. 1982]; In Re Burstein's Estate, 153 Mlsc 515 [Sur. Ct. Kings Co., 1934]).
This Court has reviewed the arguments presented by Respondents' counsel, Mr. Cuneo, Esq., who submits opposition to the instant petition for injunctive relief (among other requested relief). Respondent's counsel correctly states that the prospective ownership interest (if it is confirmed that Ms. Scott is, in fact, an heir to the Thompson Estate) became part of the bankruptcy estate as a result of the bankruptcy filing by Ms. Scott. (See 11 USC 541 (a) (1); see also In re Yonikus, 996 F.2d 866 [7th Cir., 1993]).
Respondent's counsel, in referring to his clients' ownership interest, makes an incorrect statement in which he concludes that "consequently, the subject property is not part of the administrable estate". (Cuneo Aff. In Opp., pg. 9). Mr. Cuneo offers no case law to support his bald statement and the statement runs afoul of well recognized precedent. While the property may vest in beneficiaries at the time of death "their title is qualified and subject to the executor's powers to sell property to satisfy debts and obligations of the estate". Matter of Ballesteros, 20 A.D.3d 414,415 (2d Dept., 2005); Matter of Katz, 55 A.D.3d 836, 836 (2d Dept., 2008). There is no dispute that Respondents have a viable equitable claim (although not yet legally confirmed) which vested in Respondents from the Nevada Bankruptcy Court. That claim, nonetheless, did not fully vest in the Respondents and "remains an estate asset available for the payment of administration expenses and taxes, until the fiduciary gives assent to its release". Kinard v Rosenblatt, 39 Misc.3d 1215 (a) (Sur. Ct. Queens Co., 2013); (See also Estate of Edwards, NYU, Feb. 18, 2000, at 30 [Sur. Ct. Kings Co., 2000]).
On balance, the actions of Respondents, who assert the privileges of ownership of a fractional share of the subject property, must be constrained and limited by the Administrator's authority to sell the subject property (in accordance with the existing contract of sale) so that each beneficiary may be treated equally and without prejudice. (See In re Muller's Estate, 24 N.Y.2d 336 [1969], corrected 24 N.Y.2d 1029).
Allegations Against Respondents
As stated above, this Court has been presented with credible evidence of the type of business engaged in by Earl R. Davis and his affiliated companies. In fact, Mr. Davis is forthright in describing his business practices which usually involve the purchase of fractional interests in real estate from heirs who stand to inherit a share of the property when the estate is distributed. The purchases of the fractional shares are almost exclusively in gentrifying neighborhoods of Brooklyn and involve persons of color.
A recent published article in The City publication contains a thorough analysis of the purchase of "heirs" property which Mr. Davis is engaged in. See The City: A House Divided: How a Band of Speculators Seized Deeds of Black-Owned Brooklyn Brownstones, https://www.thecity.nyc/2023/47l7/23685258.
Recently, this Court has had direct experience with Earl R. Davis in a Public Administrator's turnover proceeding. Mr. Davis became involved with an attempt to acquire property by producing deeds from parties who were alleged to be heirs of an estate. The property was scheduled for an auction by the Public Administrator when Mr. Davis arranged for the filing of the deeds, asserting a claim of ownership on behalf of two "heirs". When credible evidence showed that those purported heirs were not, in fact, heirs, Davis had to stipulate to vacate said deeds and relinquish any claims to the ownership of the property.
Estate of Edmund, File No. 2017-2257/A, (Sur. Ct. Kings Co. 2021).
It is an established rule of evidence that the existence of similar fraudulent acts or actions by a person on a particular occasion cannot be offered to prove that the person did a similar act on a different, unrelated occasion. (See Richardson, Evidence [10th ed.]; §§170,184.) Yet, it is also recognized that evidence of similar acts committed in the past are relevant to prove intent or the absence of mistake. (See Castracane v Campbell, 300 A.D.2d 704 [3d Dept. 2002]; and similar acts committed in the past may also present evidence of a common scheme or plan which would be admissible. (See People v Molineux, 168 NY 264; People v Katz, 209 NY 311). This Court takes notice of the similarity of the methods used by Mr. Davis in conducting his real estate business as it relates to the purchase of fractional shares of property subject to the probate and administration processes. Mr. Davis is known in the predatory real estate environment for his acts involving economic coercion and strong-arm practices. The allegations in the instant matter - of changing locks and preventing access to the subject properties- are the same methods that have been alleged against Mr. Davis in other cases. This Court is of the opinion that there is ample evidence to conclude that the Respondents, under the direction of Mr. Davis, have engaged in disruptive acts which impede the abilities of the Administrator to perform his fiduciary duties under Article 19 of the SCPA.
Injunctive Relief:
In a case in which a party has threatened or acted to violate a plaintiff's rights during the pendency of a legal action, a preliminary injunction pursuant to CPLR §6301 may be granted. The applicability of CPLR Article 63 to Surrogate Court proceedings is recognized in SCPA §102 (see In Re Vanderbilt's Will, 208 Misc. 5 [Sur. Ct., Suffolk Co., 1955]).
Petitioner's counsel has offered credible evidence that the Earl R. Davis controlled affiliates fully intend to hold hostage the administration of the Thompson Estate by interfering with a sale to an arm's length buyer. Respondents have sought to extract a premium from the Estate which would be at the expense of the remaining beneficiaries and such conduct can only be characterized as unconscionable and coercive. By engaging in such conduct, the Respondents jeopardize the sale of the real property and impose negative economic consequences to the recognized distributees.
Given the coercive conduct of Mr. Davis and the Respondents, there is no question that Respondents must be enjoined.
Furthermore, the actions of Earl R. Davis and his colleagues have created a substantial risk of economic harm to the Estate beneficiaries. The refusal to comply with the Respondents' coercive demands would jeopardize the sale of the subject property and likely result in the filing of a partition action. The lack of injunctive relief would result in economic harm to the heirs of the Thompson Estate.
Respondents object to the granting of a preliminary injunction, arguing that it is error to grant an injunction which would effectively grant the ultimate relief sought (St. Paul Fire and Marine Insurance v York Claims Service, Inc., 308 A.D.2d 347 [1st Dept., 2003]). The Court finds this argument unavailing in this instance.
The instant case requires injunctive relief in light of the fact that Respondents have taken a position that would prevent a sale of the subject property. Such a position is contrary to the interests of the heirs and is without a legal justification. Accordingly, the instant matter presents "extraordinary circumstances" in that Respondents would jeopardize a real estate sale which the Administrator is empowered by law to complete for the benefit of the Estate. (EPTL §11.1. See also Matter of Estate of Manchester, 76 Misc.3d 1202 (A) [Sur. Ct. Erie Co., 2022]; In Re Burstein's Estate, 153 Misc. 515 [Sur. Ct. Kings Co., 1934]). A denial of injunctive relief would only benefit the Respondents who seek to gain from a delay. The granting of a preliminary injunction would best serve to protect the interests of the heirs and maintain the status quo.
Applicability of RPAPL §993 ("UPHPA")
In fashioning an appropriate equitable remedy in this case, the Court has considered the Uniform Partition of Heir's Property Act ("UPHPA") which was adopted by the New York Legislature in 2019 as RPAPL §993. The UPHPA was promulgated by the Uniform Law Commissioners "to address deficiencies in how partition law is applied with respect to real estate owned by tenants in common, a significant percentage of whom are relatives. Such property is frequently referred to as 'heirs property'".
The facts in the instant case do not completely align with the applicability and remedies set forth in the UPHPA. The instant case is not the subject of a partition action (at the present time). In addition, there is a contract to sell the subject property for market value ($1,150,000) so there is no need in the instant case for the Court to establish a fair value through appraisals. Despite those small differences, the Petitioner and the distributees are cousins of Beverly Thompson and each distributee is a tenant in common. Furthermore, the subject property is used for residential purposes; there is no agreement in a record binding all the co-tenants; and over twenty (20%) percent of the interests are held by individuals who acquired title from a relative. Accordingly, the subject property would qualify as "heirs property" as defined in RPAPL §993(2)(e).
The UPHPA is useful in that it sets forth protections for the heirs who are tenants in common and at risk of an outside investor taking economic advantage of them. The statute provides for the heirs to purchase the interest of the party who would be seeking a partition and it provides for settlement conferences to negotiate disputes among other relief. It is altogether likely a partition action will result if Earl R. Davis and Respondents are not enjoined from preventing the sale to proceed. Such a result would be to the detriment of the heirs and solely for the benefit of the Respondents.
It would be in the spirit and intent of the Legislators who enacted the New York UPHPA, that an investor, such as Earl R. Davis, not be allowed to hold up an arms-length sale of the Estate property. The fractional interest owned by Respondents must be fixed at the pro rata value that such proportionate share represents, after the payment of the administrative expenses, costs of the sale and other obligations owing by the Estate. It would also be in keeping with the spirit of the UPHPA that Mr. Davis and his affiliates and employees not be permitted to exercise dominion or control over the subject property and be enjoined from interfering with the duties of the Administrator in managing the distribution of the Estate assets.
Conclusion:
Petitioners have offered sufficient credible evidence that Respondents herein have engaged in speculative predatory real estate practices which are to the direct detriment of the Petitioners and would cause injury to the Petitioners if an injunction is not issued. Furthermore, Petitioners will likely prevail on the merits in this action given the wealth of evidence showing the pernicious and coercive conduct engaged in by the Respondents.
The Court will not dismiss or cancel Respondents' ownership interest in the subject property (provided later proceedings do not establish that Desiree Scott is not an heir of Beverly A. Thompson), and the Court is only imposing a restraint on Respondents' unauthorized activity at the subject premises. Furthermore, Respondents cannot claim that they are harmed by this Court barring Respondents from extracting a "premium" from the Estate to cooperate with a duly authorized sale of the subject property, because the demand for a premium is economic coercion and an unfair business practice prohibited by law. As stated above, a preliminary injunction is appropriate, even though the litigation is at its inception, to allow the Administrator to proceed with his legal obligations and prevent significant harm to the distributees. An injunction is necessary at this time as a balance of equities are in the Petitioner's favor. (CPLR §6313; Tesone v Hoffman, 84 A.D.3d 1219 [2d Dept., 2011]).
To effectuate the terms of this preliminary injunction and allow for a sale of the subject property (and clear title for the purposes of a sale), the Court hereby orders a dismissal of the deeds which transferred the 5.57% interest in the subject property to the Respondents which (possibly) represents the portion of the subject property which would have devolved to Desiree Scott. The Administrator shall acknowledge the Respondents claim for a 5.57% fractional ownership of the subject property, if found to be valid, and Respondents shall be entitled to a distribution in the final accounting. In addition, Respondents shall bear their proportionate amount of costs and expenses incurred by the Estate.
It is further ordered that neither Respondents, their employees or agents shall physically enter the subject property, nor remove any items or engage in any renovation, demolition or improvement of the subject property nor may they interfere with the administration of the Estate as it concerns the subject property. Any and all fixtures which have been removed from the subject property are required to be returned.
This shall constitute the decision of the Court.
Petitioner's counsel is directed to submit a proposed order on notice.