CDR Creances S.A.S. v First Hotels & Resorts Invs., Inc.

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[*1] CDR Creances S.A.S. v First Hotels & Resorts Invs., Inc. 2009 NY Slip Op 50928(U) [23 Misc 3d 1124(A)] Decided on April 24, 2009 Supreme Court, New York County Tolub, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on April 24, 2009
Supreme Court, New York County

CDR Creances S.A.S., Plaintiff,

against

First Hotels & Resorts Investments, Inc., (a/k/a Les Premiers Investments Hoteliers & Villegiature, Inc.), HSBC BANK, USA, N.A., Board of Managers of the Trump World Tower Condominium, State of New York, City of New York, "John Doe No.1" through "John Does #2, the last ten names being fictitious and unknown to plaintiff, the persons or parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises described in the complaint, Defendants.



650084/09



ATTORNEY FOR THE PLAINTIFF :

KELLNER HERLIHY GETTY &

470 PARK AVENUE SO., 4TH FLR.

NEW YORK, NY 10016

Phone : (212)889-2121

ATTORNEY FOR THE DEFENDANT :

KROVATIN KLINGEMAN LLC

7 TIMES SQUARE, 20TH FLR

NEW YORK, NY 10036

Phone : 212-403-9339

Walter B. Tolub, J.



This is an application by the defendant FIRST HOTELS & RESORTS INVESTMENTS, INC. (First Hotels) to cancel a notice of pendency filed by the plaintiff CDR CREANCES S.A.S. (CDR). First Hotels seek a declaration that upon placement of the net proceeds from the sale of condominium unit (86-B), located at 845 United Nations Plaza (the unit), in an interest bearing account, the lis pendens should be cancelled unless CDR posts an undertaking of $10,000,000. In addition, First Hotels seeks an enlargement of time within which to answer.

This is the most recent episode in a saga previously detailed by this Court in its opinion in the related cases of CDR Creances, SAS v. Leon Cohen, et. al. Index 600448/06 [FN1], dated November 21, 2008 (2008 NY Slip Op. 52351U; 21 Misc 3d 1135A; 2008 NY Misc. Lexis 6885). In that decision, this Court, after 5 years of stonewalling by the Cohen family, numerous holding companies and three French individuals, a judgment was entered in the sum of $265,865,120.81. Presently the matter is on appeal and the Appellate Division, First Department, has refused to stay enforcement of the judgment or the subpoenas issued in pursuit of the judgment debtors.

In the course of discovery in the underlying action, CDR learned that Maurice Cohen formed the defendant First Hotels, which is also known as Les Premiers Investments Hoteliers & Villegiature, Inc., a Quebec corporation controlled by Maurice Cohen. First Hotels was formed for the express purpose as being the fee owner of Unit 86-B at the Trump World Condominium. CDR brought the instant proceeding contemporaneously with the filing of a lis pendens in an attempt to collect on its judgment.

The unit was purchased in early 2004, and in March of 2004, the defendant HSBC issued a mortgage to First Hotels in the sum of $7.2 million dollars. The mortgage at this point in time has been reduced to roughly $5 million dollars. HSBC documents reveal that First Hotels was a "special purpose vehicle" established by Mauricio Cohen for the sole purpose of purchasing a condominium in New York City at 845 United Nations Plaza (Contempt OSC Exhibits 61, 62 and 63). First Hotels is 100% owned by Mauricio Cohen, and the primary source of repayment is cash flow from Mr. Cohen's investments (Contempt OSC Exhibits 62 and 63). Other than that, First Hotels has no assets. It should be noted that at no time, and despite a flurry of documents, has there ever been any denial by a party or by counsel that First Hotels is anything other than the alter ego of Mr. Cohen. Also uncontested is that $10 million dollars is the fair market value of the property.

After commencement of the instant action and the filing of the lis pendens in February of this year, First Hotels notified CDR that it has found a potential buyer for the unit at a price of $10 million dollars.

The prospective purchaser, a noted New York real estate lawyer, insisted that he would [*2]not go to closing unless he had clear title and the he could close by May 8, 2009. Clear title meant that the HSBC mortgage would have to be satisfied and that all taxes (real estate and FIRPTA Taxes [FN2]) and brokerage commissions would have to be paid. Most important was that the instant notice of pendency would have to be cancelled. CDR refused and the instant application followed.

Discussion

CPLR §6515 provides, in relevant part, that:

. . . the court, upon motion of any person aggrieved and upon such notice as it may require, may direct any county clerk to cancel a notice of pendency, upon such terms as are just, . . . if the moving party shall give an undertaking in an amount to be fixed by the court, and if:

1. The court finds that adequate relief can be secured to the plaintiff by the giving of such an undertaking; or

2. In such action, the plaintiff fails to give an undertaking, in and amount to be fixed by the court, that the plaintiff will indemnify the moving party for the damages that he or she may incur in the notice is not cancelled.

Thus, the CPLR provides a mechanism by which an aggrieved party, plaintiff or defendant, may seek cancellation by requiring an undertaking in lieu of a notice of pendency. Indeed the courts have even resorted to "double bonding" under certain circumstances (Ansonia Realty Co. v. Ansonia Associates, 117 AD2d 527 [1st Dept 1986]).

At first blush, First Hotels' proposal to place the proceeds of the sale in escrow seems eminently reasonable. The proposed order however carves out certain items to be deducted (mortgage, taxes, commissions, closing costs, etc.) so that in fact the net proceeds would amount to less than $5 million dollars. Additionally, CDR raises the issue of the bona fides of the HSBC mortgage. Although it is unlikely that CDR will succeed in defeating HSBCs' interests, given the sordid history of this case and HSBC's longstanding involvement with the Cohens and their entities, at this juncture, the court is not prepared to release what amounts to $5 million dollars, or, half the value of the property, without providing CDR the opportunity to continue its discovery and explore any remedy it might have with respect to HSBC. Under these circumstances, First Hotels' offer is simply inadequate (Weksler v. Yaffe, 129 Misc 2d 633 [Sup. Court, Kings County 1985]).

That having been said, the court is not unmindful of the vagaries of the current real estate market and the exposure CDR may have by preventing the sale of the unit. It is therefore the court's decision to impose double bonding, requiring both the plaintiff and the defendant to post an undertaking.

The amount of such undertaking should be proportionate to the damage the parties may suffer as a result of the continued of cancellation of the notice of pendency (Ansonia Realty Co. v. Ansonia, supra). The defendant First Hotels is at risk for the $5 million dollars over and [*3]above the balance of the mortgage. The plaintiff, should it succeed in defeating HSBC's interest, would be at risk of losing the $10 million dollars the sale of the unit might yield.

Accordingly, plaintiff's undertaking shall be in the sum of $5 million dollars and defendant's in the sum of $10 million dollars.

Accordingly, it is

ORDERED that both plaintiff and defendant are required to post an undertaking as indicated; and it is further

ORDERED that the defendant is to post its bond on or before May 1, 2009; and it is further

ORDERED that should the Defendant post its bond, that the plaintiff is to post its bond on or before May 5, 2009; and it is further

ORDERED that defendant First Hotels time to answer is extended to May 15, 2009.

This shall constitute the decision and order of the Court.

Dated: _____

ENTER:

_________________________

Walter B. Tolub, J.S.C. Footnotes

Footnote 1:The 2006 index number is intrinsically related to CDR Creances SAS et. al. v. Cohen Index 109565/03 [2003 Action]. A complete recitation of the underlying facts may be found in the 2006 Action under motion sequence 009 and sequence 010 and in the 2003 Action under motion sequence 012 and sequence 013.

Footnote 2:The disposition of a US real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding.



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