Opinion
301819/2009.
June 21, 2010.
The following Motions and Cross Motions are consolidated for disposition in this same Order:
The Motions and Cross Motions, for partial summary judgment, made by Plaintiffs, LIDO REALTY LLC and LEON GOLDSTEIN (jointly referred to as LIDO); by Defendants MBM1 OWNERS LLC (referred to as MBM1); and by Defendants STEMPLER REALTY CO., INC., and STEPHEN STEMPLER (jointly referred to as STEMPLER), respectively; and
"Order to Show Cause" for an Order of Attachment, and related relief, by Defendant 67-79 LLC; and the Cross Motions for attachment by Defendants MBM1, and by Plaintiff LIDO, respectively; and
Defendant MARK M. BENUN's Motion for a stay.
Facts/Parties:
Defendant MARK M. BENUN pled guilty, on December 11, 2009, to a federal criminal Indictment; in sum, he admitted that he sold certain real property which he did not own. Defendant MARK M. BENUN fraudulently sold the premises, located at 67-79 East 161st Street, in the Bronx, NY, to Defendant 67-79 LLC, for almost 6 million dollars. In furtherance of his scheme, MARK M. BENUN misrepresented his authority to sell the premises and forged documents which he presented at a "Closing" held on February 10, 2009. Consequently, MARK M. BENUN was sentenced, on March 19, 2010, to serve time in prison.
See correspondence by the U.S. Attorney's Office, (by Christopher Frey, Esq.), dated December 11, 2009. See correspondence from STEMPLER's Counsel (STARR Associates, by Andrea Roschelle, Esq.), dated December 15, 2009.
The subject premises are described as located on Block 2484, Lot 35.
See U.S. v. Mark M. Benum, 09 Crim 800, United States District Court, Southern District of New York; Indictment, p. 3-4.
The relevant background facts are that, by virtue of a deed executed by Defendant STEMPLER dated June 8, 2006, Plaintiff LIDO and Defendant MBM1, as tenants in common, had obtained title to the subject premises. LIDO owned a 75% interest in the premises, and MBM1 owned a 25% interest in the premises, as reflected in their "Tenants in Common Agreement", dated June 2006.
Their "Tenants in Common Agreement" also provides, in pertinent part, that neither Owner may sell its interest in the premises without first obtaining the consent of the other Co-Owner. (See TIC, p. 18-19, "Unanimous Consent Actions"). LIDO's rights, under the "Tenants in Common Agreement" include, for example, that the net proceeds of a sale would not be distributed to MBM1, but paid to LIDO, to the extent of the acquisition loan, and the initial and subsequent funding loans made by LIDO, as more particularly explained in the aforesaid "Tenants in Common Agreement". (See TIC, p. 25, "Sale of the Property"; p. 13-17, "Owners' Funding Obligations"). A memorandum of the "Tenancy in Common Agreement" was duly recorded and filed in the Office of the City Register of the County of Bronx, on July 21, 2008, under CRFN No. 2008000288446.
The "Tenancy in Common Agreement" is also referred to herein as "TIC".
In another action, LIDO alleges that MBM1 owes it money on the funding loans; namely, LIDO v. MBM1 MARK M. BENUN, Jams, Morris Benun, Benun Family Holdings, Kings Supreme Court Index No. 4628/09, which was consolidated, in July 2009, with an action pending in this Court, namely, MBM1 and Benun Family Holdings LP v. Mark M. Benun, Benson Acquisitions LLC, Leon Goldstein, and Lido, Bronx Supreme Court Index No. 308063/08, (referred to herein as the "MBM1 Action"), discussedinfra.
The premises was encumbered by three mortgages: The "First Mortgage" was a purchase money mortgage given by LIDO and MBM1, to STEMPLER, in the principal sum of $5 million dollars, and dated June 8, 2006. This "First Mortgage" was duly recorded and filed in the Office of the City Register of the City of New York, County of Bronx under CRFN No. 2006000364299.
The "Second Mortgage" was also given to STEMPLER, by LIDO and MBM1, in the principal sum of $700,000, and dated July 31, 2006. This "Second Mortgage" was duly recorded and filed in the Office of the City Register of the City of New York, County of Bronx under CRFN No. 2006000512508.
The "Third Mortgage" was given to Plaintiff LEON GOLDSTEIN, encumbering MBM1 'sinterest in the premises, in the principal sum of $2 million dollars, and dated December 5, 2007. This "Third Mortgage" was duly recorded and filed in the Office of the City Register of the City of New York, County of Bronx under CRFN No. 2007000629932.
There is another action pending in this Court, commenced in September 2008, wherein MBM1 alleges, inter alia, that MARK M. BENUN was not authorized to so mortgage the property on behalf of MBM1; namely,MBM1 and Benun Family Holdings LP v. Mark M. Benun, Benson Acquisitions LLC, Leon Goldstein, and Lido, Bronx Supreme Court Index No. 308063/08, (referred to herein as the "MBM1 Action"). That Action, which was commenced about 5 months prior to the February 10, 2009 "Closing", will be discussed in more detail infra.
Also, as further security for the payment of this indebtedness, the borrowers, LIDO and MBM1, executed an "Assignment of Leases and Rents" by which they assigned, to STEMPLER, the rents received from the subject premises. This "Assignment of Leases and Rents" was duly recorded and filed in the Office of the City Register of the City of New York, County of Bronx under CRFN No. 2006000364300.
On or about February 10, 2009, a "Closing" was held where MARK M. BENUN purported to convey the subject premises to 67-79 LLC, free and clear of mortgages and encumbrances. In furtherance of his criminal scheme, Defendant MARK M. BENUN, made and presented forged documents, which he subsequently caused to be recorded in the chain of title. He produced a Deed transferring LIDO's portion of the premises to MBM1 (referred to herein as the "MBM1 Deed"); a Deed transferring the entire premises from MBM1 to 67-79 LLC (referred to herein as the "67-79 Deed"); Satisfactions of the aforesaid "First Mortgage", "Second Mortgage", and "Third Mortgage"; and a Termination of the aforesaid "Assignments of Leases and Rents".
Subsequent to the "Closing", Defendant MARK M. BENUN caused the "MBM1 Deed" to be duly recorded in the Office of the City Register of the City of New York, County of Bronx under CRFN No. 2009000054844; and the "67-79 Deed" to be duly recorded in the Office of the City Register of the City of New York, County of Bronx under CRFN No. 2009000054846. (See Plaintiffs' Counsel Mr. Sucher's Affirmation in Support of Summary Judgment, dated June 8, 2009, p. ¶ 33, and Exhibits "W" and "X").
Defendant MARK M. BENUN also caused to be duly recorded in the Office of the City Register of the City of New York, County of Bronx, Satisfactions of the following documents: the aforesaid "First Mortgage" under CRFN No. 2009000054840, "Second Mortgage" under CRFN No. 2009000054842, "Third Mortgage" under CRFN No. 2009000054841, and a Termination of the "Assignments of Leases and Rents" under CRFN No. 2009000054843. (See Plaintiffs' Counsel Mr. Sucher's Affirmation in Support of Summary Judgment, dated June 8, 2009, p. ¶ 33, and Exhibits "S" "T" "U" and "V").
In addition, since the aforesaid "MBM1 Action" was pending at the time of the February 10, 2009 "Closing", MARK M. BENUN addressed the title company's exceptions by making and presenting the following documents: a "Stipulation Discontinuing Action" (which purported to discontinue the "MBM1 Action"); and a "Stipulation Canceling Lis Pendens" (which purported to cancel the two Notices of Pendency that had been filed by MBM1 and LIDO, respectively, on September 26, 2008, and December 24, 2008). It is not disputed that MARK M. BENUN forged the signatures of parties and their Counsel on those Stipulations, to facilitate his scheme.
MARK M. BENUN boldly forged the signatures of Counsel Michael Sucher, Esq., (attorney for LIDO); and Counsel Nicholas Caputo, Esq., (attorney for MBM1).
I. PARTIAL SUMMARY JUDGMENT MOTIONS AND CROSS MOTIONS : A. PLAINTIFF LIDO's and DEFENDANT MBM1's MOTIONS:
Plaintiff LIDO requests partial summary judgment declaring that the "MBM1 Deed", and the "67-79 Deed", are void, and MBM1 joins in the request that the "67-79 Deed" be declared void. LIDO also requests that the Satisfaction of the "Third Mortgage", be declared void. In addition, LIDO and MBM1 also seek a permanent injunction staying 67-79 LLC from taking certain actions with respect to the subject premises, and other relief.
(1). "MBM1 Deed"
It is axiomatic that a forged deed conveys no title. Pursuant to the "MBM1 Deed", MBM1 became the sole owner of the premises. The "Real Property Transfer Report" accompanying the "MBM1 Deed" indicated that LIDO's interest in the property was allegedly transferred to MBM1, for 4 million dollars, on February 10, 2009, pursuant to a contract of sale dated January 28, 2009.
See e.g., Marden v. Dorthy, 160 N.Y. 39 (1899), further discussedinfra.
The "MBM1 Deed" bears a signature of Donna Goldstein as "Sole Member" of LIDO, and Mark M. Benun as "Sole Member" of MBM1. These signatures were improperly notarized by Defendant PAPAIOANNOU on February 5, 2009.
The evidence demonstrates that Donna Goldstein's signature is a forgery.
In this regard, Donna Goldstein swears, in relevant part, that the aforesaid signature is a forgery and not her own signature; that she never met the Notary PAPAIOANNOU; that she is not the "sole member" of LIDO; that she never had authority to sell the premise, and that she never did sell the premises. (See Affidavit by Donna Goldstein, dated May 22, 2009).
Further, Plaintiff LEON GOLDSTEIN swears, among other things, that LIDO did not contract to sell the premises on January 28, 2009; did not receive any money for the alleged transfer of title; did not participate in a Closing on February 10, 2009; and consequently did not deliver the subject Deed. (See Leon Goldstein's Affidavit, dated May 20, 2009).
Consistent therewith, the Notary, PAPAIOANNOU, admits in her Answer, that, although "the signators never appeared before her", she notarized both the "MBM1 Deed" and the Satisfaction of the "Third Mortgage". (See PAPAIOANNOU Answer to the Plaintiffs' Complaint, dated May 4, 2009, p. 2, ¶ "SIXTH").
Moreover, MARK M. BENUM, ultimately admitted that he sold the subject premises to 67-79 LLC by "misrepresenting his ownership . . . and forging various documents which purported to establish Benun's sole ownership of the property. . . . Benun did not have the authorization . . . to proceed with the transaction." [emphasis added]
See U.S. v. Mark M. Benum, 09 Crim 800, United States District Court, Southern District of New York; Indictment, filed August 19, 2009, p. 3-4. See correspondence by the U.S. Attorney's Office, (by Christopher Frey, Esq.), dated December 11, 2009.
Applicable Law/Legal Analysis
Where, as here, the Court "was presented with . . . documentary evidence indicating that the deed was not legitimately executed, acknowledged, and delivered", the Court properly held that "plaintiff demonstrated by clear and convincing evidence that the New York deed purportedly conveying the . . . interest in property to defendant was a forgery". Bryant v. Bryant, 58 A.D.3d 496 (1st Dept. 2009). Marden v. Dorthy, 160 N.Y. 39 (1899).
In Marden, supra, as in the case at bar, the notary's genuine signature was affixed to the acknowledgment, but, the purported grantor had never appeared before the notary to sign the deed. As such, the Marden Court described the deed as being rankly "infected . . . with the vice of a false certificate of acknowledgment." Marden v. Dorthy, supra, 160 N.Y. at 45, 52, 55.
Herein, in light of the Notary PAPAIOANNOU's admission that the Donna Goldstein never signed before her; Donna and Leon Goldstein's undisputed statements that Donna Goldstein did not have authority to sell the premises and did not do so; and the fact that only one individual, MARK M. BENUM, was implicated, indicted, and ultimately pled guilty for the crime, it has been "demonstrated [,] by evidence "so clear and convincing as to amount to a moral certainty" [,citations omitted] that the purported signature of the [Plaintiff] on the deed was a forgery."Matter of Travers v. Brown, 899 N.Y.S.2d 628 (2d Dept. 2010).
MARK M. BENUN forged Donna Goldstein's signature on the "MBM1 Deed", in that "a person is guilty of forgery . . . when, with intent to defraud, deceive or injure another, he falsely makes, completes or alters a written instrument which is or purports to be, or which is calculated to become or to represent if completed: 1. A deed, . . . or other instrument which does or may evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status; or 2. A public record, or an instrument filed or required or authorized by law to be filed in or with a public office or public servant." Penal Law § 170.10, (Forgery in the Second Degree).
"A person "falsely makes" a written instrument when he makes or draws a complete written instrument in its entirety, or an incomplete written instrument, which purports to be an authentic creation of its ostensible maker or drawer, but which is not such either because the ostensible maker or drawer is fictitious or because, if real, he did not authorize the making or drawing thereof." Penal Law § 170.00. [emphasis added]
"A person "falsely completes" a written instrument when, by adding, inserting or changing matter, he transforms an incomplete written instrument into a complete one, without the authority of anyone entitled to grant it, so that such complete instrument appears or purports to be in all respects an authentic creation of or fully authorized by its ostensible maker or drawer." Penal Law § 170.00.
Since Donna Goldstein's signature on the "MBM1 Deed" is a forgery, this deed is void. It is well-established that:
"A forged deed is void and conveys no title (see, Marden v Dorthy, 160 NY 39; Kraker v Roll, 100 AD2d 424, 430-431; Caccioppoli v Lemmo, 152 App Div 650). "'[A] person cannot be a bona fide purchaser through a forged deed'" since the forger has no title to convey in the first instance (Field v Field, 130 Misc 2d 751, 754, quoting 2A Warren's Weed, New York Real Property, Forgery, § 1.04). Real Property Law § 266 applies to fraud situations that are voidable, not those which are void such as here where a forged deed is alleged." [emphasis added]
RPL § 266, "Rights of purchaser or incumbrancer for valuable consideration protected" provides: "This article does not in any manner affect or impair the title of a purchaser or incumbrancer for a valuable consideration, unless it appears that he had previous notice of the fraudulent intent of his immediate grantor, or of the fraud rendering void the title of such grantor."
Yin Wu v. Wu, 288 A.D.2d 104, 105 (1st Dept. 2001). "A person cannot be a bona fide purchaser . . . for value through a forged deed, as it is void and conveys no title." Public Administrator of Kings County v. Samerson, 298 A.D.2d 512, 513 (2d Dept. 2002).
Where, as here, "the deed is a false, fictitious and forged instrument", it is "invalid and void for any purpose." Caccioppoli v. Lemmo, 152 A.D. 650, 659 (2d Dept. 1912). Marden v. Dorthy, supra, 160 N.Y. at 56.
Defendant 67-79 LLC contends that it is a bona fide purchaser for value whose title should not be "impaired" pursuant to RPL § 266. However, as the Court of Appeals long-ago established: "It would not help the [buyer] . . . to allege . . . that it was a bona fide purchaser. It is legally impossible for any one to become a bona fide purchaser of real estate, or a purchaser at all, from one who never had any title, and that is this case. . . . Void things are as no things." Marden v. Dorthy, supra, 160 N.Y. at 56.
Where a thief has stolen real property, the real owner has the right to take it back; and a purchaser, "even if ignorant of the real facts", may not "rely upon a falsehood placed upon record by criminal means, to the prejudice of the rights of the true owner of real estate", since that would "open the door for the destruction of all titles, and make it" easy for a criminal to "purloin real . . . property". Marden v. Dorthy, supra, 160 N.Y. at 57. Even if a deed is recorded, that does not "make it any the less a forgery . . . [or] add . . . to its legal efficacy." Marden v. Dorthy, supra, 160 N.Y. at 55-56. In the case at bar, the aforesaid Deed was not even recorded until subsequent to the Closing.
As aptly stated by the Court of Appeals, where the documents upon which purchasers rely are "simply the result of a crime, and, if they were deceived by it, there is no principle of law or equity that will permit them to make their loss good from the plaintiff's property. They are the victims of a criminal contrivance in which they put faith, and they must seek redress from the criminal who conceived and executed the fraud."Marden v. Dorthy, supra, 160 N.Y. at 58.
Accordingly, this Court declares that this "MBM1 Deed" is void; and the appropriate Clerk, or the Clerk in the Office of the City Register of the City of New York, County of Bronx, shall so mark his records.
(2). "67-79 Deed"
Plaintiffs, and MBM1, also challenge the validity of the "67-79 Deed", which, together with the Real Property Transfer Report, reflects that MBM1 purportedly sold the property to 67-79 LLC, for $5,960,000, on February 10, 2009, pursuant to a contract of sale dated January 28, 2009. This Deed bears the signature, of "MARK BENUN" as "Sole Member" of MBM1, which is notarized by Laurie Bakhchi, a representative of the title company, (First American Title Insurance Company).
For the same reasons stated supra, by this Deed, MBM1 was incapable of transferring LIDO's 75% interest in the property, since such was never acquired by MBM1, because the "MBM1 Deed" is void by virtue of being forged. "A person cannot be a bona fide purchaser or encumbrancer for value through a forged deed, as such a deed is void and conveys no title." Karan v. Hoskins, 22 A.D.3d 638 (2d Dept. 2005).
As far as the remaining 25% ownership interest belonging to MBM1, Defendant 67-79 LLC argues that MBM1 may still have conveyed its own "limited interest in the premises" to a bona fide purchaser. Son Fong Lum v. Antonelli, 102 A.D.2d 258 (2d Dept. 1984). See Field v. Field, 130 Misc. 2d 751, 753 (N.Y. Sup. Ct. 1985).
(See e.g., Defendant 67-79 LLC's Counsel Mr. Spithogiannis' Affirmation in Opposition to Summary Judgment Motions, dated July 27, 2009, p. 23).
However, Defendant 67-79 LLC cannot prevail, based upon the following grounds, more fully discussed herein: MBM1's ability to transfer its 25% interest in the premises was restricted by the terms of its "Tenancy in Common Agreement" with LIDO, pursuant to which MBM1 did not have the authority to convey its portion of the premises without the prior consent of LIDO. Nonetheless, MARK M. BENUM was not authorized to sell MBM1's 25% interest in the property, since he had sold his entire interest in MBM1 in May 2007; thus, on February 10, 2009, he was no longer a member or manager of MBM1. (See Affidavit by Jack M. Benun [who is the manager of MBM1 and the uncle of Mark M. Benun], dated July 7, 2009). Moreover, Defendant 67-79 LLC cannot claim the status of a bona fide purchaser.
See TIC, "Unanimous Consent Actions", p. 18-19, clause 6.4(iii).
It is noted that there are valid reasons for this restriction, since LIDO's rights would be affected by a sale, as is evident from the TIC Agreement. (See e.g., TIC, "Sale of the Property", p. 25, and TIC, "Owners' Funding Obligations", p. 13-17). Also, Plaintiff LEON GOLDSTEIN's rights would be affected by a sale, since the "Third Mortgage" encumbered MBM1's interest in the premises.
— MARK M. BENUN's Lack of Authority:
A case with similarities to the case at bar involved a president of a corporation who entered into a loan transaction in the corporate name, and, upon receiving the loan proceeds, diverted the money to his wife's corporation. The loan was held to be void, because the president's ability to enter into the loan transaction was restricted by the terms of the corporation's Bylaws, pursuant to which "the president required board authorization to enter into such transactions. There was no such authorization for this transaction." 56 E. 87th Units Corp. v. Kingsland Group, Inc., 30 A.D.3d 1134 (1st Dept. 2006).
Similarly, the First Department also recently held that, where companies' governing "operating agreements . . . made clear that [their] business affairs could be conducted only by a majority vote of their operating managers", but "there was no majority vote by either [company]; indeed, [the companies] had no knowledge of the loan transactions", the loan transactions entered into by a part-owner were held to be null and void. Park Assoc., LLC v. Northern Source. LLC, 48 A.D.3d 355 (1st Dept. 2008).
In another analogous case, the Court held "that the deed purporting to transfer the husband's interest in the former marital residence" was void, since the husband's transfer violated a restraining order in the matrimonial action. Catalano v. Catalano, 158 A.D.2d 570 (2d Dept. 1990). See Greenpoint Say, Bank v. Gui1iano, 238 A.D.2d 472 (2d Dept. 1997).
Even where a corporation's purported president signed his own name to a deed on behalf of the corporation, if he "lacked actual authority to sign a deed on [the corporation's] behalf", then a purchaser would not obtain title. LaSalle Bank Natl. Assn. v. Ally, 39 A.D.3d 597 (2d Dept. 2007).
"A deed based on forgery or obtained by false pretenses is void ab initio." [emphasis added] Cruz v. Cruz, 37 A.D.3d 754 (2d Dept. 2007).
Furthermore, in the 56 E. 87th Units Corp. case, its president was not deemed to be "cloaked in apparent authority" to enter into the transaction, since such "must be based on the actions or statements of the principal [citation omitted]. These defendants could point to no act or word of the [corporation] that might have conferred such authority." [emphasis added] 56 E. 87th Units Corp. v. Kingsland Group, Inc., supra, 30 A.D.3d at 1135.
Likewise, in the case at bar, there were no actions or statements conveyed by MBM1, to 67-79 LLC, which cloaked MARK M. BENUN with the "apparent authority to sign a deed" on MBM1's behalf. It is well-established that:
LaSalle Bank Natl. Assn. v. Ally, 39 A.D.3d 597 (2d Dept. 2007).
"Apparent authority must be based on words or conduct of the principal . . . that give rise to the appearance and belief that the agent possesses authority to enter into a transaction; an agent cannot, though his own acts, cloak himself with apparent authority (see Hallock v State of New York, 64 NY2d 224, 231, 474 N.E.2d 1178, 485 N.Y.S.2d 510 [1984]). This rule holds especially true where a party fails to conduct a reasonable inquiry into the scope of the purported agent's authority (see Ford v Unity Hosp., 32 NY2d 464, 472-473, 299 N.E.2d 659, 346 N.Y.S.2d 238 [1973]; Morgold, Inc. v ACA Galleries, 283 AD2d 407, 724 N.Y.S.2d 447 [2001])." [emphasis added]
Park Assoc., LLC v. Northern Source, LLC, supra, 48 A.D.3d at 355-56.
On the contrary, MBM1 had filed documents back in 2008 which provided record and actual notice, to the world, that MARK M. BENUN did not have authority to convey the property. (See Affidavit by Jack M. Benun, dated July 7, 2009). Jack M. Benun, who was MARK M. BENUN's uncle, implored his attorneys to record and file certain documents which demonstrated that his nephew, MARK M. BENUN, was acting beyond his authority. These documents include the following:
(i) — On July 10, 2008, MBM1 filed a Certificate of Amendment of its Articles of Organization with the New York Secretary of State. (See Exhibit "C" to Jack Benun's Affidavit, dated July 7, 2009, in support of MBM1's Motion for Summary Judgment). Signed by Jack M. Benun, this document indicates that MBM1's manager is its general partner, Jack M. Benun, and that its "sole member" is "Benun Family Holdings, L.P." — and not MARK M. BENUN.
(ii) — On July 21, 2008, MBM1 filed a "Memorandum of Tenancy-in-Common Agreement" which was duly recorded and filed with the Office of City Register of the City of New York, County of Bronx, under CRFN No. 2008000288446 (See Plaintiffs' Summary Judgment Motion, at Exhibit "M"). Also signed by Jack M. Benun, this document gives record notice of the existence of the May 2006 "Tenancy-in-Common Agreement" between MBM1 and LIDO, and that MBM1's "sole member" is "Benun Family Holdins, L.P." — and not MARK M. BENUN.
(iii) — On September 26, 2008, MBM1 and Benun Family Holdings, L.P., filed, in this Court, an action against MARK M. BENUN, referred to herein as the "MBM1 Action". (See Plaintiffs' Summary Judgment Motion, Exhibit "Q"). This Complaint, a public record (available in the Bronx County Clerk's office and on its website), shows the prior existence of contentious disputes involving the subject property. Verified by Jack M. Benun, the Complaint sets forth detailed serious allegations, including that MARK M. BENUN fraudulently represented himself to be "sole member" of MBM1 and, without authority, mortgaged MBM1's portion of the property in December 2007; that MARK M. BENUN was no longer a member of MBM1, having sold his entire interest in MBM1 in May 2007; and that the subject property could not be sold without the prior consent of both MBM1 and LIDO. Moreover, MBM1 demanded that MARK M. BENUN be prohibited from attempting to sell the property. (See MBM1 Complaint ¶ 42, 67-68, 13, annexed as Exhibit "Q" to Plaintiffs' Summary Judgment Motion).
This is referred to herein as the "Third Mortgage".
(See Exhibits "A" and "B" to Jack Benun's Affidavit, dated July 7, 2009, in support of MBM1's Motion for Summary Judgment).
(iv) — Most significantly, on September 26, 2008, MBM1 filed a "Notice of Pendency" , indexed against the subject property, with the Bronx County Clerk Docket Department. (See Exhibit "D" to Jack Benun's Affidavit, dated July 7, 2009, in support of MBM1's Motion for Summary Judgment). By its language, this Notice of Pendency, with grave particularity, gave record notice of the aforesaid "MBM1 Action" commenced by MBM1 and Benun Family Holdings (its "sole member"), against MARK M. BENUN and others, for specific performance under the Tenancy in Common Agreement between MBM1 and LIDO — including "enforcing the prohibition against selling the property" without the unanimous consent of both Owners "which [was] not . . . given". [emphasis added].
CPLR 6501 provides that a notice of pendency filed in an action gives notice to a purchaser that "the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property."
(See Exhibit "D" to Jack Benun's Affidavit, dated July 7, 2009, in support of MBM1's Motion for Summary Judgment).
Also, the Plaintiff LIDO had filed a "Notice of Pendency", indexed against the subject property, with the Bronx County Clerk Docket Department, in December 2008.
Under these circumstances, Defendant 67-79 LLC actually and constructively possessed facts that would lead a prudent purchaser to keenly investigate MARK M. BENUN's "purported corporate status and authority to act" on MBM1's behalf, and 67-79 LLC had knowledge of facts that would lead a reasonable prudent purchaser "to make inquiries of the circumstances of the transaction at issue" — but 67-79 LLC failed to do so. LaSalle Bank Natl. Assn. v. Ally, 39 A.D.3d 597 (2d Dept. 2007).
Unfortunately, Defendant 67-79 LLC merely relied upon the documents unilaterally provided to it by MARK M. BENUN at the "Closing". However, where "the documents upon which defendant solely relied were provided to it by [a part-owner who had no authority], and defendant took no further steps to assure itself that [he] had the authority to enter into the . . . transactions", a court held that the loans transacted by the part-owner were "null and void", and the security interest in the companies' property which the part-owner pledged as collateral for the loans, were invalid and unenforceable. Park Assoc., LLC v. Northern Source, LLC,supra, 48 A.D.3d at 355-56.
Defendant 67-79 LLC, and its title company, failed to contact, or require the presence at the "Closing", the persons who signed pivotal documents, including the 2 Deeds, 3 mortgage satisfactions, and 2 Court Stipulations. They also failed to use independent sources to verify the authenticity of the documents that were solely provided by MARK M. BENUN, as well as the scope of his authority to act on behalf of MBM1.
For example, in light of the fact that there were Lis Pendens filed, 67-79 LLC could have contacted Jack M. Benun, and required Jack M. Benun to directly confirm MARK M. BENUN's corporate status and authority to act.
"Pursuant to CPLR 6501, the filing of a notice of pendency provides constructive notice of an action in which the judgment demanded may affect the title to real property." Novastar Mtge., Inc. v. Mendoza, 26 A.D.3d 479 (2d Dept. 2006).
Also, in light of the fact that there were multi-million dollar mortgages recorded, (amounting to nearly 8 million dollars), 67-79 LLC should have contacted Mr. Stempler and Mr. Goldstein and/or obtained documentary proof that their mortgages were actually paid-off. Also, 67-79 LLC should have obtained documentary proof that MBM1 had actually paid 4 million dollars, to LIDO, for the alleged conveyance of its 75% of the property to MBM1.
Having failed to conduct appropriate inquiry and investigation, the Defendant, 67-79 LLC cannot "claim the status of a bona fide purchaser."Morrocoy Marina, Inc. v. Altengarten, 120 A.D.2d 500, 500-501 (2d Dept. 1986). See e.g., Lo Biondo v. D'Auria, 45 A.D.2d 735 (2d Dept. 1974).
See Park Assoc, LLC v. Northern Source, LLC, 48 A.D.3d 355 (1st Dept. 2008).
In 56 E. 87th Units Corp., supra, the Court rejected defendants' contention that a corporation could have "ratified" its president's actions, stating that, "given that [the corporation] promptly objected once it learned of the transaction, and never received the loan proceeds, which were diverted by the president to his wife's corporation, [it] cannot be held to have ratified the transaction." 56 E. 87th Units Corp. v. Kingsland Group, Inc., supra, 30 A.D.3d at 1134-35. Likewise, in the case at bar, it cannot be said that MBM1 "ratified" the transaction, since it promptly objected as soon as it learned of the transaction, and it never received the loan proceeds which were diverted by MARK M.BENUN to his own use.
See U.S. v. Mark M. Benum, 09 Crim 800, United States District Court, Southern District of New York; Indictment.
Accordingly, this Court hereby declares that this "67-79 Deed" is void; and the appropriate Clerk, or the Clerk in the Office of the City Register of the City of New York, County of Bronx, shall so mark his records.
However, it is noted that Defendant 67-79 LLC is not without a remedy, since it may continue to pursue claims for money damages, which remain viable herein. It is noted that the parties' pleadings also include demands for money damages against MARK M. BENUN for orchestrating his criminal scheme; and money damages against the Notary, Defendant PAPAIOANNOU, who, at the behest of MARK M. BENUN, falsely notarized certain documents, which he presented at the "Closing".
In addition, Courts have also considered that "title insurance is available to purchasers of real estate [to protect] them against situations such as this one." Field v. Field, 130 Misc. 2d 751, 755 (N.Y. Sup. Ct. 1985).
(3). Satisfaction of Third Mortgage
That part of Plaintiffs' Motion for partial summary judgment declaring that the Satisfaction of the "Third Mortgage" is null and void, is granted, without opposition. It is not disputed that that the subject Mortgage was not satisfied. Leon Goldstein swears, in relevant part, that he never signed the subject Satisfaction of Mortgage, and he never met the Notary PAPAIOANNOU.
The Notary, PAPAIOANNOU, admits that she notarized Leon Goldstein's signature on the Satisfaction of the "Third Mortgage" even though he never appeared before her. Therefore, the appropriate Clerk, or the Clerk in the Office of the City Register of the City of New York, County of Bronx shall mark the Satisfaction of the "Third Mortgage", as null and void; and shall restore it as a valid lien of record against the subject property.
(See PAPAIOANNOU Answer to the Plaintiffs' Complaint, dated May 4, 2009, p. 2, ¶ "SIXTH").
It is noted that the "Third Mortgage" is the subject of the "MBM1 Action"; and, in that action, there may be made further determinations regarding it.
(4). Injunctive, and other relief
With respect to the injunctive relief requested in their pleadings, the parties engaged in prior motion practice, which resulted in this Court issuing a preliminary injunction, which essentially enjoined Defendant 67-79 LLC "from selling, mortgaging, leasing, offering for sale or lease, encumbering, collecting rent from tenants or otherwise taking any act with respect to the [subject] real property", pending final resolution of this action or until further Order of the Court.
(See So-Ordered Stipulation, dated April 14, 2009, signed by the Hon. Lucy Billings, J.S.C., deciding Plaintiffs' prior motion for a preliminary injunction).
With respect to that part of the instant motions which seeks a permanent injunction, it is granted, consistent herewith; and, therefore, Defendant 67-79 LLC shall not sell, mortgage, lease, offer for sale or lease, encumber, and collect rent from tenants with respect to the subject real property, without further Order of the Court. With respect to that part of the instant motions which seeks to "sever" the causes of action as against Defendant MARK M. BENUN and Notary PAPAIOANNOU, such a procedure is not warranted; rather, those causes of action remain viable within this action.
With respect to the remainder of the instant partial summary judgment motions which seeks to dismiss certain portions of 67-79 LLC's counterclaims, cross claims, and affirmative defenses, as they pertain to LIDO, MBM1, and STEMPLER, respectively, such is granted to the extent that the merits have necessarily been decided in their favor herein.
Remaining issues and other minutia, may be raised, without prejudice, after the filing of the Note of Issue, if the parties cannot stipulate in good faith to resolve them.
B. DEFENDANT STEMPLER's SUMMARY JUDGMENT MOTION:
Defendant STEMPLER's motion for partial summary judgment declaring that three documents, namely: the Satisfaction of the "First Mortgage"; Satisfaction of the "Second Mortgage"; and "Termination of the Assignment of Leases and Rents", are null and void, is granted, without opposition.
It is not disputed that the subject Mortgages remain unpaid and unsatisfied, and that the "Assignment of Rents" was not terminated. Stephen Stempler swears, in relevant part, that he never executed the subject Satisfactions of Mortgage, and the "Termination of the Assignment of Rents"; and he never personally appeared before the Notary PAPAIOANNOU. (See Stephen Stempler's Affidavit, dated July 8, 2009).
Consistent therewith, the Notary PAPAIOANNOU admits that, "without knowledge . . . of the genuineness of documents presented to her [by Mark M. Benun, she] notarized various documents on or about February 10, 2009." (See PAPAIOANNOU's "Answer to Cross Claim and Counterclaim" dated June 8, 2009, p. 2, ¶ "SECOND"). It is also noted that facts which are not controverted "may be deemed to be admitted." Kuehne Nagel. Inc. v. Baiden, 36 N.Y.2d 539, 544 (1975).
(PAPAIOANNOU's "Answer to Cross Claim and Counterclaim" was made in response to the allegations in STEMPLER's "Answer with Cross Claims and Counterclaims" at ¶ 109, 110, and 138).
Therefore, the appropriate Clerk, or the Clerk in the Office of the City Register of the City of New York, County of Bronx shall mark the Satisfactions of the "First Mortgage", "Second Mortgage" and the "Termination of Assignment of Leases and Rents" as null and void; and shall thereby restore the "First Mortgage", "Second Mortgage", and "Assignment of Leases and Rents", as valid liens of record against the subject property.
It is noted that the remainder of STEMPLER's Motion, which sought "reimbursement of the legal fees expended in this action", was withdrawn, pursuant to a So-Ordered Stipulation, dated Sept. 4, 2009, signed by the Honorable Billings.
II. ATTACHMENT MOTIONS:
Defendant 67-79 LLC moves, by "Order to Show Cause", pursuant to CPLR Article 62, essentially, for an Order of Attachment of MARK M. BENUN's assets, and directing MARK M. BENUN to disclose the location of the 6 million dollars he received from 67-79 LLC in connection with the sale of the subject premises. Defendant MBM1, and Plaintiff LIDO, cross move, respectively, for the same relief.
The motions for an Order of Attachment of the assets of MARK M. BENUN are granted. The assets to be attached include, but are not limited to, bank accounts for which MARK M. BENUN is a signatory, or into which the money paid in consideration for the purchase of the subject premises were deposited or are traced. At this time, this Court makes no decision as to the priority of the parties' respective claims. It is noted that the assets to be attached do not include the assets of a Mark J. Benun (who is a cousin of MARK M. BENUN), or the separate assets of MBM1 Owners LLC.
To the extent that the latter cannot be readily ascertained, inquiry shall be made to MBM1 and/or its Counsel.
Pursuant to CPLR 6212(b), movants shall each give an undertaking in the amount of $500.00.
Pursuant to CPLR 6212(c), movants shall file this Order of Attachment with the appropriate Clerk; but the time for filing it is extended to thirty (30) days from the date of its entry.
The TRO that is currently in effect, (set forth in the "Order to Show Cause" made by Defendant 67-79 LLC), shall continue to be in effect during the pendency of this action, or until further order of a Court, namely: "the defendant, MARK M. BENUN, and anyone acting on his behalf or his direction, [is] stayed from paying over, or otherwise disposing of, any money or assets, whether titled in his name or the name of any individual or entity over which he has control, received in connection with the sale of 67-79 161st Street, Bronx, NY." [emphasis added].
(See Defendant 67-79 LLC's OSC dated June 3, 2009, p. 2-3).
Under the circumstances, pursuant to CPLR 6212, attachment is warranted because parties have shown that it is probable that they will succeed on the merits against MARK M. BENUN; that he is liable for money damages; and that a ground for attachment provided in CPLR 6201 exists.
Pursuant to CPLR 6201, there is ground for attachment since MARK M. BENEN, "with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in [movants' ] favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts."
In this regard, for example, the federal criminal Indictment — to which MARK M. BENUN pled guilty — evidences that he unlawfully transferred money obtained as a result of his fraudulent sale of the subject premises, from bank accounts in the State of New York to bank accounts in the States of New Jersey and Georgia.
See U.S. v. Mark M. Benum, 09 Crim 800, United States District Court, Southern District of New York; Indictment.
As to the portions of the motions which seek a order directing MARK M. BENUN to disclose the whereabouts of the funds he received in connection with the sale of the subject premises, as well as the disclosure of the whereabouts of his assets, it is granted, as set forth herein.
CPLR 6220 "Disclosure" provides that, "after the granting of an order of attachment and prior to final judgment in the action, upon such notice as the court may direct, the court may order disclosure by any person of information regarding any property in which the defendant has an interest, or any debts owing to the defendant." In this regard, the parties may duly serve appropriate disclosure devices, (see e.g., CPLR 3102); and the parties may request a Preliminary Conference, which the Court may schedule as soon as practicable in Part 11, this Court's Discovery Part.
III. DEFENDANT MARK M. BENUN'S MOTION FOR STAY:
Defendant MARK M. BENUN's motion to stay this action, pending resolution of pending federal criminal proceedings against him, is deemed moot, because the criminal proceedings were resolved subsequent to his making this motion. On December 11, 2009, MARK M. BENUN pled guilty to pending criminal charges, and he was sentenced therefor on March 19, 2010.
See correspondence by the U.S. Attorney's Office, (by Christopher Frey, Esq.), dated December 11, 2009.
Moreover, his motion would otherwise be denied, since, "in the context of civil litigation, [although] a discretionary stay [could be] appropriate to avoid prejudice to another party that would result from the assertion of the privilege against self-incrimination by a witness . . ., no such accommodation need be extended to the party who invokes the constitutional privilege." [emphasis added] Access Capital v. DeCicco, 302 A.D.2d 48, 52 (1st Dept. 2002).
Where, as here, it is the alleged perpetrator of the crime "who has invoked the privilege", the perpetrator should not be allowed to have an "unfair tactical advantage" over the other parties "merely because his tortious conduct is sufficiently egregious to subject him to criminal prosecution." Access Capital v. DeCicco, supra, 302 A.D.2d at 52. Herein, all parties oppose MARK M. BENUN's motion for a stay, and they should not have to suffer the severe prejudice engendered, for example, by delay in discovering / subpoenaing information from every available source regarding where he secreted the 6 million dollars.
Moreover, "the law is clear that a court is not required to stay a civil action until a pending related criminal prosecution has been terminated so that a party can avoid the difficulty of choosing between presenting evidence in his or her own behalf and asserting his or her Fifth Amendment rights." Matter of Campbell v. New York City Tr. Auth., 32 A.D.3d 350 (1st Dept. 2006).
Conclusion
In conclusion, the appropriate Clerk, or the Clerk in the Office of the City Register of the City of New York, County of Bronx, shall mark his records to reflect that: the documents, filed in February 2009, referred to herein as the "MBM1 Deed" filed under CRFN No. 2009000054844, and "67-79 Deed" filed under CRFN No. 2009000054846, are void .
(See Defendant 67-79's OSC for Attachment, at Exhibits "16" and "17". See Plaintiffs' Counsel Mr. Sucher's Affirmation in Support of Summary Judgment, dated June 8, 2009, p. ¶ 33, and Exhibits "W" and "X").
In addition, the appropriate Clerk, or the Clerk in the Office of the City Register of the City of New York, County of Bronx, shall mark his records to reflect that: the documents, filed in February 2009, referred to herein as the Satisfaction of the "First Mortgage" filed under CRFN No. 2009000054840, Satisfaction of the "Second Mortgage" filed under CRFN No. 2009000054842, Satisfaction of the "Third Mortgage" filed under CRFN No. 2009000054841, and a Termination of the "Assignments of Leases and Rents" filed under CRFN No. 2009000054843, are void ; and shall, therefore, restore the 3 Mortgages and the "Assignment of Leases and Rents" as valid liens of record against the subject property.
(See Defendant 67-79's OSC for Attachment, at Exhibits "13", "14" "15" and "16". See Defendant STEMPLER's Summary Judgment motion, at Exhibit "E". See Plaintiffs' Counsel Mr. Sucher's Affirmation in Support of Summary Judgment, dated June 8, 2009, p. ¶ 33, and Exhibits "S" "T" "U" and "V").
A permanent injunction is granted, as set forth herein. An "Order of Attachment" of the assets of MARK M. BENUN, and related relief, is granted, as set forth herein. MARK M. BENUN's motion for a stay of this action, is denied, as set forth herein.
This constitutes the decision and Order of this Court.