5 W. 120th Realty Corp. v Continental Capital Group, LLC.
Annotate this CaseDecided on October 24, 2005
Supreme Court, New York County
5 West 120th Realty Corp., Plaintiff,
against
Continental Capital Group, LLC., BUDGET CONSTRUCTION CORP., ABC COMMERCIAL FUNDING INC., WOLF LANDAU, MICHAEL WEISS and JOSEPH GREENBLATT, Defendants.
110318/05
Abraham Spector , Esq.
26 Court Street
Brooklyn, NY 11242
Attorney for Defendants
Continental Capital Group LLC & Wolf Landau
by: Abraham Spector
De Lotto & Fajardo LLP
370 Lexington Avenue, Suite 1001
New York, NY 10017
Attorneys for Plaintiff
by: Lauren De Lotto
Louis B. York, J.
In this lawsuit, plaintiff seeks to enjoin defendants from foreclosing upon the mortgage on its property, which is located at 5 West 120th Street, in New York, New York. Currently, it moves, by Order to Show Cause, for a preliminary injunction pending the final determination on the lawsuit. The court notes that the language of the Order to Show Cause does not make it clear that plaintiff is moving for preliminary rather than ultimate relief. However, paragraph 2 of the affidavit in support by Jo E. Caughman, a principal of plaintiff, clearly states that the purpose of plaintiff's Order to Show Cause is to obtain "a preliminary injunction and temporary retraining order . . . ." Thus, the court treats this as an application for a preliminary injunction.
In September 2004, Jo E. Caughman, owner of plaintiff ("plaintiff") purchased a vacant brownstone in Harlem which she intended to repair and to use for both personal and business purposes. She needed financing for the construction work, and for this purpose she consulted co-defendant Joseph Greenblatt. Greenblatt offered to arrange financing, allegedly promising her a 12% per annum interest rate. Subsequently, Greenblatt obtained a loan of $650,000 for plaintiff from co-defendant Continental Capital Group, LLC. ("Continental").
Plaintiff signed a note related to this loan on February 2, 2005. According to plaintiff, the closing - engineered by Greenblatt - went by "in a whirlwind," Caughman Aff. at ¶ 8.; and all those involved in the transaction, including Continental, were involved in swindling her. She also states that her counsel, supposedly there to represent her interests, was instead at the conference as part of the ploy. Plaintiff further asserts that the attorney did not review the papers or even retain copies of them after the closing. Moreover, plaintiff states that the terms of the agreement were significantly to her disadvantage. For one thing, instead of the 12% rate she allegedly [*2]was promised, the Note provided for a 17% interest rate and payments were for interest only. For another, the term of the Note was only one year, at the end of which the entire $650,000 was due. For a third, plaintiff asserts that, without her knowledge, co-defendant ABC Commercial Funding ("ABC") - a mortgage broker, which plaintiff did not retain - was paid $26,500 of his loan proceeds; and, defendant Michael Weiss, who plaintiff believes is the father of the owners of ABC, also received a $26,500 payment out of his loan.
Next, plaintiff claims that the construction agreement also was obtained fraudulently. According to plaintiff, she did not enter into a renovation contract with anyone and she did not authorize Greenblatt to hire a contractor on her behalf. Nonetheless, co-defendant Budget Management Corporation ("Budget") received $366,065.00 of plaintiff's loan proceeds for renovation work. As a result of this and of the payments noted above, plaintiff received only $150,000 of the loan amount. She has used this money to pay her interest-only mortgage payments. Plaintiff claims that she was unaware of these arrangements because she trusted both Greenblatt and her lawyer and because the closing was conducted in such a quick, manipulative fashion.
The day after the closing, plaintiff states, the "fog cleared," id. at ¶ 12, and she agreed with Greenblatt and Budget that the latter would hand over the $366,065.00 it had received to her and would not undertake the renovation work. Plaintiff further contends that Budget did mail six payments to her, but that all of the checks bounced. Next, plaintiff states, she learned that although Greenblatt paid ABC money at the closing, ABC's attorney refunded the money to Greenblatt. This strengthens her belief that Greenblatt arranged with the other parties to defraud her.
Finally, plaintiff states that when she attempted to learn more about the relationship between defendants and received no answers from any of them, she stopped making mortgage payments to Continental. She states that she is willing to make future payments in escrow with the Court until the matter is resolved. However, following her refusal to make payments on the mortgage, ABC attempted to foreclose on the property. Plaintiff seeks a preliminary injunction with respect to these efforts.
In support of plaintiff's allegation that Greenblatt and the other defendants were engaged in a scheme to defraud her, plaintiff submits news releases concerning the illicit activity of defendant Joseph Greenblatt. Primarily, plaintiff annexes a press release issued by the New Jersey Attorney General's office. The release states that Greenblatt, several family members and 68 corporations created for this purpose carried out a securities fraud scheme. The parties offered investments in residential properties which needed repair; and allegedly they promised their victims loans secured by safe mortgages with low interest rates. Instead, they apparently obtained unsecured loans which they used for their personal expenses. In addition, the Attorney General's release states that Greenblatt and his cohorts were engaged in the same scheme in several other states, including California, Florida and New York; and that, in Kings County in 1995, Greenblatt pled guilty to fraud charges regarding an unrelated real estate scam. Along with the Press Release, plaintiff annexes articles from the website "newjersey.com" which detail Greenblatt's activities related to the trial and reiterate his alleged crimes. The Press Release is dated January 13, 2005; and, the articles indicate that the trial and sentencing took [*3]place around June and July. Plaintiff asserts that, although the amount at issue here is but a fraction of the multi-millions illicitly obtained by Greenblatt, plaintiff is the victim of the same sort of fraud that is described by the New Jersey Attorney General.
In addition, plaintiff submits documents which allegedly show that the other defendants are part of Greenblatt's scheme. In particular, she shows that all the companies involved in the February 2, 2005 transaction which resulted in the loan and the issuance of the Note were incorporated immediately prior to the transaction. The lender, Continental, was incorporated one week earlier, on January 25, 2005. The construction company, Budget, was incorporated just under a week after Continental on January 31, two days before the transaction. Finally, the mortgage broker, ABC, was incorporated just a few weeks prior, on January 9, 2005.
Continental opposes the Order to Show Cause, submitting the affidavit of Wolf Landau ("defendant"), its Managing Member and also a defendant in the case. Defendant asserts that neither he nor anyone else on behalf of Continental conspired with Greenblatt or any of his alleged cohorts. Instead, defendant states, he loaned plaintiff money at terms which he'd been told were satisfactory to her. Plaintiff told him that she was a licensed real estate broker and was familiar with real estate transactions; and, he annexes a card which represents her as such. Therefore, he states, he had no reason to suspect that she was being duped or was ignorant of the terms of the agreement.
Next, defendant asserts that he acted properly under the circumstances. After plaintiff complained of Greenblatt's conduct to him, he says, defendant refused to refer prospective business opportunities to Greenblatt and he had his attorney investigate further. It was only at this point that he learned of Greenblatt's illegal activities. He annexes a letter from his attorney to plaintiff, dated May 26, 2005, which mentions the Kings County criminal proceedings. In addition, he submits a letter that plaintiff's counsel sent to Greenblatt, which states that plaintiff was terminating her relations with Greenblatt and Budget and which also acknowledges that defendant shared her concerns about Greenblatt and Budget's conduct.
Finally, defendant challenges plaintiff's suggestion that Continental was incorporated for the purpose of entering into the loan agreement with her. He states, without annexing proof of this, that Continental made one loan before the February 2 transaction and made ten loans after that date. Therefore, the date of filing of the incorporation papers in such close proximity to February 2 - and in such close proximity to the filing of the incorporation papers of all the other involved parties - "is simply coincidental." Landau Aff. at ¶ 7.
The court grants a preliminary injunction on the condition that plaintiff pay the mortgage payments into escrow with the court. If the injunction is not granted, plaintiff will lose the property, thus mooting the entire issue in dispute and irreparably harming plaintiff. Although, as defendant states, a court generally only grants a preliminary injunction where plaintiff has proven a likelihood of success on the merits, "[i]n the circumstances of this case, . . . the equities lie in favor of preserving the status quo." Calo v. Chui, 254 AD2d 191, 192, 679 NYS2d 42, 43 (1st Dept. 1998); see Abed v. Zach Associates, 124 AD2d 531, 532, 507 NYS2d 676, 677 (2nd Dept. 1986). The court reiterates that in this context its role is not "to determine finally the merits of an action . . . ; rather, the purpose of the interlocutory relief is to preserve the status quo . . . . Therefore, a preliminary injunction may also be granted where injunctive relief is deemed necessary to maintain the status quo, even if the movant's success on the merits cannot be [*4]determined at the time that the application for a preliminary injunction is brought." Jacobowitz v. Jacobowitz, 5 Misc 3d 1012(A), 798 NYS2d 710 (Sup. Ct. Kings County 2004)(avail at 2004 WL 2532297, at *4); see, e.g., Mr. Natural v. Unadulterated Food Products, Inc., 152 AD2d 729, 544 NYS2d 182 (2nd Dept. 1989)(appellate court ordered injunction despite existence of factual issues, because in its absence plaintiff was likely to go out of business).
Accordingly, because "the denial of injunctive relief would render the final judgment ineffectual, the degree of proof required to establish the element of likelihood of success on the merits should be reduced." State v. City of New York, 275 AD2d 740, 741, 713 NYS2d 360, 361 (2nd Dept. 2000). In light of this, although it cannot determine which party is likely to prevail on the merits, the court finds that plaintiff has raised sufficient issues of fact to justify the injunction. Among the pertinent facts are: the criminal history of Greenblatt and the similarity of the scheme in New Jersey and Kings County to the scenario at issue here; the fact that in the past corporations had been incorporated to work with Greenblatt as lenders, brokers and the like; the fact that every other company involved seems to have been affiliated with Greenblatt; the fact that every other company was incorporated within days or weeks of both the incorporation of Continental and of the February 2 transaction; and the fact that the February 2 transaction occurred less than a month after January 13, 2005, when New Jersey's Attorney General sent out the press release about Greenblatt's alleged criminal activities in that State. None of these facts prove that there was a scheme involved here. Moreover, even if there were a scheme to defraud plaintiff, these facts do not show that defendant and his company, Continental, were involved in it. Continental's statement of the facts is also plausible. However, plaintiff has raised triable issues of fact sufficient to motivate this court to protect her interest in the property, through a preliminary injunction, until the lawsuit is resolved. See Calo v. Chui, 254 AD2d at 192, 679 NYS2d at 42 (where plaintiff, who faced eviction, alleged sufficient acts to sustain complaint against dismissal motion, equities favored preservation of status quo and court properly granted preliminary injunction).
Further, it appears that defendant will not suffer irreparable hardship as a result of the preliminary injunction. See Abed, 124 AD2d at 532, 507 NYS2d at 677. The problems that defendant asserts he does not know how the payments will be monitored or how penalties for nonpayment into escrow will be assessed - are not specific to this situation and do not suggest that any irreparable hardship to defendant will result. Another asserted problem is that plaintiff may not pay her taxes and insurance. However, she also could fail to pay taxes and insurance regardless of whether she pays her mortgage into escrow.
Accordingly, it is
ORDERED that this motion for a preliminary injunction is granted and the defendants are enjoined from foreclosing on the property at 5 West 120th Street, New York, New York, in New York County, provided that plaintiff makes future payments to be held in escrow by her attorney commencing on November 1, 2005, with a 10-day grace period; and it is further
ORDERED that plaintiff's counsel shall furnish plaintiff with a written receipt for each payment, and a copy of the receipt shall be forwarded to counsel for defendants Continental Capital Group LLC and Wolf Landau.
ENTER:
Dated:__________________________
[*5]
Louis B. York, J.S.C.
Appearances:
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