Opinion
No. 508810/15.
01-29-2016
VNB NEW YORK, LLC, as successor in interest by merger to VNB New York Corp., Plaintiff, v. Eliezer RAPAPORT and Michael Braun, Defendants.
Greg Bernhard, Esq., Zeichner Ellman & Krause, LLP, New York, NY, Attorney for Plaintiffs. Mark Illish, Esq., Barry R. Feerst & Associates, Brooklyn, NY, Attorney for Defendant.
Greg Bernhard, Esq., Zeichner Ellman & Krause, LLP, New York, NY, Attorney for Plaintiffs.
Mark Illish, Esq., Barry R. Feerst & Associates, Brooklyn, NY, Attorney for Defendant.
CAROLYN E. DEMAREST, J.
The following papers read on this motion: NYSCEF Papers Numbered
| Notice of Motion/Order to Show Cause/Petition/ | |
|---|---|
| Cross Motion and Affiddavits(Affirmations)Annexed | 2–7, 17–19, 21–29 |
| Opposing Affidavits (Affirmations) | 32 |
| Reply Affidavits(Affirmations) | 33–34 |
| Affidavits(Affirmations) | |
| Other Papers (Memoranda of Law) | 8, 20, 30, 35 |
Plaintiff moves by Order to Show Cause for an order of attachment, pursuant to CPLR 6201, of property located at 88 Morton St., Unit 90, Brooklyn, N.Y. (“Property”) and defendant Eliezer Rapaport (“Rapaport”) cross-moves to dismiss the action pursuant to CPLR 3211(a)(1) and (7).
BACKGROUND
In the complaint, the plaintiff alleges the following: Plaintiff extended credit to non-party Unique Gems, Inc. (“Unique”) and it was secured by multiple notes. Each of the notes was individually guaranteed by defendant Michael Braun (“Braun”) and his wife, non-party Levia Braun (collectively, the “Brauns”). As collateral for the security, up to $1,000,000, the Brauns executed a mortgage on their property, 44 Albert Drive, Monsey, N.Y. (“Monsey Property”). Unique defaulted on the loans in February and March of 2014. By letters dated May 30, 2014, plaintiff gave written notice to Unique and the Brauns of the default and demanded immediate payment (“Notices of Default”). The balance on the loan at the time the action was commenced, on October 16, 2014, was $868,860.42. On or about August 18, 2014, Braun transferred the Property to Rapaport, a relative, for no consideration. Plaintiff alleges that Braun was either insolvent at the time, or rendered insolvent by the transfer, and this transfer was a violation of the Debtor and Creditor Law, done to defraud the plaintiff.
The first note, dated October 1, 2007, evidenced a loan of $1,000,000. That note was amended on July 2, 2008 and reflected an increase in the loan to $1,200,000. That note was amended on September 24, 2008 and reflected an increase in the loan to $1,500,000. By modification agreement and term note, both dated August 17, 2012, the principal balance owed on the prior notes was acknowledged to be $1,260,000 and an additional $600,000 was loaned.
In support of the Order to Show Cause, plaintiff has provided copies of the Notices of Default and proof of the commencement of a foreclosure action against the Brauns and Unique in Rockland County, with respect to the Monsey Property, on October 16, 2014 (VNB New York, LLC v. Michael Braun, Rockland County, Index Number 34812/14) (“Foreclosure Action”). Plaintiff also provided the Brauns' financial statements and tax returns from 2007 to 2012 which were relied upon by the plaintiff in extending the loans to Unique. In those financial documents and tax returns, Braun was identified as the owner of the Property and recipient of rent for the Property. Plaintiff also submitted an exterior-only appraisal of the Monsey Property, by a licensed real estate appraiser, stating that the market value of the Monsey Property is $735,000. Plaintiff contends that the debt owed to plaintiff, as of October 7, 2015, including interest, is $994,862.92.
Plaintiff contends that after receiving the Notices of Default, Braun transferred the Property to Rapaport in an attempt to defraud plaintiff or frustrate the enforcement of a judgment that might be rendered in the plaintiff's favor. On July 17, 2015, my colleague, Justice Lawrence Knipel, signed an Order to Show Cause which included a temporary restraining order prohibiting the transfer or sale of the Property. The Order to Show Cause seeks an order of attachment on the Property pursuant to CPLR 6201.
In opposition to the Order to Show Cause, and in support of the cross-motion to dismiss, Rapaport argues that he was always the owner of the Property despite the deed to the Property, dated October 6, 1994, only listing Braun, Rapaport's brother-in-law, as the sole owner. Rapaport argues that Braun was only listed as co-owner with Rapaport in the purchase agreement for the Property, and was the sole signatory to the note on October 6, 1994, because Braun was more credit-worthy than Rapaport and his presence was necessary for Rapaport to obtain a loan. Rapaport contends that, with respect to the Property, he made all of the mortgage payments, paid all of the utilities, and submitted affirmations from a partner of the seller of the Property and the property manager stating that Rapaport was the owner of the Property. Rapaport also included a handwritten document (“Handwritten Document”), dated October 6, 1994, that is signed by Braun, indicating that the Property belongs to Rapaport, but:
[Rapaport] will keep the house on [sic ] my name as a security until all mortgage payments are completed so that [Rapaport] does not default payment [sic ] and give me a negative credit rating.
Once all mortgage payments are completed, when Eliezer Rapaport will request of me to switch the property located at 88 Morton St, I will immediately due [sic ] so upon his request.
It is noted that the Handwritten Document is not notarized. The cross-motion included an affirmation from Braun stating that he never made a single mortgage payment on the Property, Rapaport “is and always was, the de facto owner of the [Property], and the terms of our arrangement were set forth in writing.” Rapaport also included a real estate broker's analysis estimating the sale price of the Monsey Property as being between $995,000 and $1,500,000. Accordingly, Rapaport argues that the Monsey Property is sufficient security for the Plaintiff to recover the loan payments in the Forelcosure Action. Rapaport argues that the Debtor and Creditor Law causes of action must fail as he has provided consideration for the Property in the form of payments on the loan. Rapaport argues that he will be prejudiced by an attachment to the Property as he has a child of “marriageable age”, and two additional teenagers that “are coming close to that age” and he needs to have the ability to take out a mortgage on the Property “to pay for the expenses involved in marrying off children.”
However, it is noted that Rapaport has not included proof of the purported note and mortgage signed by Braun for the Property, or proof of payments on the purported note other than three checks issued by “ “Cong A.Y.” that were purportedly applied to Braun's note on the Property. It is especially noted that, other than utility bills and monthly maintenance fees, Rapaport has not submitted any actual proof that he paid for the Property. Although he has submitted affidavits from his mother-in-law and Isaac Weiss, an officer of Congregation Azriel Yehuda (“ “Cong A.Y.”), stating that Rapaport repaid them for loans that they had given him in connection with Property, there is no proof of such payments.
Rapaport alleges that Congregation Azriel Yehuda (“Cong.A.Y.”) is a “free loan society” that made payments for the mortgage and maintenance fees which Rapaport subsequently paid back.
Isaac Weiss's affirmation only addresses payments between May 1, 2002 and June 3, 2009. No explanation is provided for the period between 1994 and 2002.
After the plaintiff submitted opposition to the cross-motion, which included the numerous financial statements and tax returns wherein Braun indicated that he was the owner of the Property, Braun submitted an additional affirmation and affidavit in opposition to plaintiff's motion, dated October 13 and 16, 2015 (“Braun Opposition”) respectively, that contradict his earlier affirmation. In the affirmation submitted in the Braun Opposition, Braun stated:
The understanding was that I would be the legal owner [of the Property] and he will act as the practical owner, live there, and pay all the expenses. I agreed to gift him the condo without any consideration anytime he will ask me to do so, as long as I am relieved of any obligations on the condo.
All the years the condo was under my ownership I acted as any owner would. I used the depreciation deduction on my tax return. I also stated the profit and loss of this condo on my tax return. It was stated in my financial statement as an asset.
On July 29, 2014, The Diamond Dealers Club's, Arbitration Tribunal issued a Decision and Award obligating me to pay another member of the DDC about $200,000.00. On August 15, 2014, I notified Rapaport of the impending obligation that I will not be able to pay. I added, that other obligations might also be coming my way and I might default on them. This will cause liens to be placed on me personally which can be detrimental to the security of the condo.
We discussed possible legal ways of protecting the condo. On August 18, 2014 Rapaport said that his attorney advised him, that the best way to safeguard the condo is, to transfer the condo from Braun to Rapaport without any consideration. He begged me to come to Brooklyn on that day so that his Attorney can affect [sic ] the transfer right away.
In the affidavit submitted in the Braun Opposition, Braun stated:
VNB claims that this was a fraudulent transfer intended to move property out of reach of a creditor. The transfer may have been done to move property out of reach of a creditor but defendant's intent was not to defraud VNB. This transfer was done under the direction
of Rapaport's attorney and defendant assumed that it was completely legal to do so.
In opposition to the cross-motion to dismiss, plaintiff argues that the Handwritten Document did not include Rapaport's signature and called into question whether it was actually written on October 6, 1994. Plaintiff further argues that Rapaport has not explained why the Property was not transferred to Rapaport earlier, if Rapaport paid off the mortgage in 2009 as claimed. Further, plaintiff argues that the timing of the transfer, months after the Notices of Default were sent, supports the plaintiff's claim that the transfer was fraudulent. Plaintiff also argues that $30,000 in real estate taxes are owed on the Monsey Property and, if the Monsey Property were sold at a foreclosure auction, it would likely sell well below the appraised value. At oral argument, Braun appeared, pro-se, and indicated that summary judgment had already been granted in the Foreclosure Action.
DISCUSSION
Upon a motion to dismiss pursuant to CPLR 3211(a)(7), “the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory” (Breytman v. Olinville Realty, LLC, 54 AD3d 703, 703–04 [2d Dept 2008] ). However, the court must base its judgment on factual allegations rather than legal conclusions and can afford no deference to assertions that are “inherently incredible or flatly contradicted by documentary evidence” (O'Donnell, Fox & Gartner v. R–2000 Corp ., 198 A.D.2d 154, 154 [1st Dept 1993] ). Pursuant to CPLR 3211(a)(1), a party “may move for judgment dismissing one or more causes of action against him on the ground that ... a defense is founded upon documentary evidence.” “A motion to dismiss pursuant to CPLR 3211(a)(1) will be granted only if the documentary evidence resolves all factual issues as a matter of law, and conclusively disposes of plaintiff's claim” (Fontanetta v. John Doe 1, 73 AD3d 78, 83 [2d Dept 2010], quoting Fortis Fin. Servs. v. Fimat Futures USA, 290 A.D.2d 383, 383 [1st Dept 2002] ).
The complaint's five causes of action seek monetary damages, attorney's fees, and to set aside the transfer of the Property to Rapaport as fraudulent pursuant to Debtor and Creditor Laws §§ 273, 274, 275, 276, and 276–a. The complaint sufficiently alleged that the transfer of the Property was without consideration, Rapaport received the benefit of the transfer, Braun was insolvent at the time, or rendered insolvent as a result of the transfer, and that the transfer was made at a time Braun believed he would incur debts beyond his ability to pay as they matured and with the intent to defraud creditors. Accordingly, pursuant to CPLR 3211(a)(7), accepting all of the facts as alleged in the pleading to be true, plaintiff has sufficiently alleged causes of action pursuant to Debtor and Creditor Laws §§ 273, 274, 275, 276, and 276–a (see Breytman, 54 AD3d at 703–04 ).
Further, Rapaport's documentary evidence is woefully insufficient to demonstrate that he was the owner of the Property, prior to the transfer, or that the Property was transferred in exchange for consideration. Rapaport has not submitted any proof, other than affidavits from relatives and an acquaintance, that he paid any money for the purchase of the Property. Braun has specifically stated that he owned the Property until the transfer and that contention is supported by numerous documents including a recorded deed, a purchase agreement, a signed admission by Braun, tax filings and financial statements submitted to the plaintiff in support of a loan application. Further, both Rapaport and Braun have admitted in affirmations that they transferred the Property in an attempt to shield the Property from creditors after Rapaport became aware of his inability to pay significant judgments he owed and was anticipating. Accordingly, as the documentary evidence has not resolved all factual issues disposing of plaintiff's claims, Rapaport's motion to dismiss the action pursuant to CPLR 3211(a)(1) is denied (see CPLR 3211(a)(1) ; Fontanetta, 73 AD3d 78, 83 ).
Pursuant to CPLR 6201(3) :
An order of attachment may be granted in any action ... where the plaintiff has demanded and would be entitled, in whole or in part, or in the alternative, to a money judgment against one or more defendants, when:
...
[T]he defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts.
(see generally Crescentini v. Slate Hill Biomass Energy, LLC, 113 AD3d 806 [2d Dept 2014] ). “In order to prevail under CPLR 6201(3), the plaintiff must demonstrate that the defendant has concealed or is about to conceal property in one or more of several enumerated ways, and has acted or will act with the intent to defraud creditors or to frustrate the enforcement of a judgment that might be rendered in favor of the plaintiff' “ (Corsi v. Vroman, 37 AD3d 397 [2d Dept 2007], quoting Benedict v. Browne, 289 A.D.2d 433 [2d Dept 2001] ). “Furthermore, the mere removal, assignment or other disposition of property is not grounds for attachment” (Computer Strategies v. Commodore Bus. Machs., 105 A.D.2d 167, 173 [2d Dept 1984] ; see Abacus Fed. Sav. Bank v. Lim, 8 AD3d 12, 13 [1st Dept 2004] ). “The moving papers must contain evidentiary facts, as opposed to conclusions, proving the fraud. In addition to proving fraudulent intent, the plaintiff must also show probable success on the merits of the action” (Benedict v. Browne, 289 A.D.2d 433 [2d Dept 2001], internal citations omitted; see CPLR 6212 ).
In this action, attachment pursuant to CPLR 6201(3) is warranted. Plaintiff has sufficiently demonstrated evidentiary facts establishing that after it sent notices of default, Braun transferred the Property to Rapaport for no consideration. Further, both Rapaport and Braun have specifically admitted that they transferred the Property in anticipation of Braun's default upon a judgment and to avoid other creditors seeking recovery from Braun. Rapaport has failed to produce any actual proof of his payments towards the purchase of the Property in support of his contention that the transfer was for consideration. Despite Braun's claim that his “intent was not to defraud [plaintiff]”, there are numerous “badges of fraud” that permit an inference of fraud, including the family relationship between the defendants, a quick transfer after notices of default were sent to Braun, no actual proof of consideration by Rapaport, and Braun's knowledge of creditors' claims against him and his inability to pay them (see Shelly v. Doe, 249 A.D.2d 756, 758 [3d Dept 1998] ; Steinberg v. Levine, 6 AD3d 620, 621 [2d Dept 2004] ). As plaintiff has submitted documentary evidence demonstrating that the defendants concealed Braun's property, with an intent to deceive creditors, and established that it will likely succeed on its Debtor and Creditor Law causes of action, an attachment against the Property is warranted pursuant to
CPLR 6201(3) (see Corsi, 37 AD3d at 397 ; Computer Strategies, 105 A.D.2d at 173 ; Abacus, 8 AD3d at 13 ; Benedict, 289 A.D.2d 433 ; Shelly, 249 A.D.2d at 758 ; Steinberg, 6 AD3d at 621 ; CPLR 6212 ).
CONCLUSION
Accordingly, plaintiff's Order to Show Cause is granted and an Order of Attachment, pursuant to CPLR 6201 is granted with respect to the property located at 88 Morton St., Unit 90, Brooklyn, N.Y. (Block 2168; Lot 1063).
Defendant's motion to dismiss is denied.
This constitutes the decision and order of the court.