Perlman v Chunk, LLC
Annotate this CaseDecided on February 28, 2011
Supreme Court, Kings County
Joshua D. Perlman, Plaintiff,
against
Chunk, LLC, Joseph Stevenson, LLC, and Joseph Cohen, Defendants.
38856/07
Attorney for Plaintiff and Third-Party Defendant Patricia Perlman:
Thomas Wilson, Esq.
186 Montague Street, 4th Fl.
Brooklyn, NY 11201
Attorney for Defendants Chunk, LLC and Joseph Cohen and Third-Party Plaintiffs:
Robert Melamed, Esq.
1502 Kings Highway
Brooklyn, NY 11229
Attorney for Defendant Joseph Stevenson:
Michael & Swerdloff, LLP
2226 Ocean Ave.
Brooklyn, NY 11229
Attorney for Third-Party Defendant David Perlman:
David Perlman, Esq.
186 Montague St.
Brooklyn, NY 11201
Carolyn E. Demarest, J.
Upon the foregoing papers, in this action by plaintiff Joshua D. Perlman (plaintiff) brought pursuant to RPAPL article 15 to compel the determination of a claim to real property and to quiet title to such property, defendants/third-party plaintiffs Chunk, LLC (Chunk) and Joseph Cohen move for an order: (1) declaring that a deed dated December 12, 2003 be deemed a mortgage pursuant to Real Property Law § 320, (2) granting them summary judgment and dismissing plaintiff's action pursuant to CPLR 1003 based upon the ground that plaintiff has failed to join necessary parties in accordance with CPLR 1001, and/or (3) granting them summary judgment and limiting plaintiff's damages to $10,000 based upon the ground that plaintiff is unable to prove damages in excess of that sum, or dismissing plaintiff's complaint on the basis that he is not the true party in interest.
Plaintiff is the son of third-party defendants David Perlman and Patricia Perlman. David Perlman was the attorney for Joseph Cohen for 20 years, and he represented him on numerous legal issues, including the formation of Chunk, an LLC in which Joseph Cohen is the sole member. David Perlman also represented Joseph Cohen in the purchase of premises located at 1208-1210 McDonald Avenue, in Brooklyn, New York (the 1208-1210 McDonald Avenue premises). The 1208-1210 McDonald Avenue premises was purchased by Joseph Cohen in 1999, and, immediately thereafter, he opened his business at that location.
In 1999, David Perlman introduced Joseph Cohen to Sebastiano Piccininni, and allegedly represented that he and Sebastiano Piccininni were business partners in numerous real estate transactions and that they were seeking investors to fund a real estate development. Joseph Cohen and his father, Meyer Cohen, allegedly delivered the sum of $200,000 as an investment to fund the development of David Perlman's real estate venture [*2]with Sebastiano Piccininni. Joseph Cohen claims that in return, he received "mortgage notes," which he and Meyer Cohen believed would be secured by a mortgage. In or about March 2000, Joseph Cohen and Meyer Cohen, at the request of David Perlman, allegedly loaned an additional sum of $500,000 to Sebastiano Piccininni, and then, in June 2000 and August 2000, they delivered additional capital to Sebastiano Piccininni for a total sum of $1.6 million, which they allegedly believed would be secured by mortgages against property to be developed by Sebastiano Piccininni. According to Joseph Cohen, the loan to Sebastiano Piccininni was to be partially repaid on February 28, 2001 and fully repaid on March 31, 2002, or proportionately repaid from the sale of the property to be developed by Sebastiano Piccininni if sold earlier than the loan maturity dates.
Joseph Cohen claims that the payments on the notes from Sebastiano Piccininni were not timely made and, in some cases, were missed. Joseph Cohen and Meyer Cohen demanded the return of their investment and instructed David Perlman to commence a foreclosure action. Joseph Cohen asserts that when he went to David Perlman's office for a meeting to resolve this matter, David Perlman offered to advance $250,000 of "his own money" to him. According to Joseph Cohen, in consideration for this advance, he was to pay interest in the same proportion as that on the debt of Sebastiano Piccininni.
On December 12, 2003, a loan (or an advance, as characterized by Joseph Cohen) in the amount of $250,000 was made to Joseph Cohen. The monies which funded this loan came from plaintiff (who contributed the sum of $10,000 towards this loan), Helene Cohen (who is plaintiff's aunt), and Muriel Cohen (who is plaintiff's grandmother). On that date, a purported quitclaim deed was executed, transferring title to the 1208-1210 McDonald Avenue premises to plaintiff. In addition, an option agreement, also dated December 12, 2003 (the December 12, 2003 agreement) was executed by plaintiff, as the optionor, and Chunk, by Joseph Cohen, as the optionee.
Paragraph 1 of the December 12, 2003 agreement provided that in consideration of the monthly sum of $2,083.33 plus 1/12 of the annual real estate tax due on the 1208-1210 McDonald Avenue premises to be paid by Chunk to plaintiff on the first day of each month, in advance, plaintiff granted Chunk the exclusive option to purchase the 1208-1210 McDonald Avenue premises. Paragraph 2 of the December 12, 2003 agreement further provided that this option would expire at midnight on December 18, 2004. Paragraph 3 of the December 12, 2003 agreement set forth that Chunk would have no right to extend this option. Paragraph 4 of the December 12, 2003 agreement also set forth that the option was to be exercised by Chunk by written notice signed by it and sent by registered mail, prior to the expiration date, to plaintiff. Paragraph 5 of the December 12, 2003 agreement stated that the total purchase price was to be $250,000 to be paid by Chunk, by bank check or certified check if the option was exercised, and that any sums paid for this option were not to be credited toward the purchase price. Paragraph 6 of the December 12, 2003 agreement further stated that if Chunk failed to pay the monthly sum set forth in paragraph 1 on or before the 20th day of each month, or if it did not exercise the option as provided by the option [*3]agreement, then this option would immediately and automatically lapse and all sums paid by Chunk would be retained by plaintiff, free of all claims of Chunk, and neither party would have any further rights or claims against the other.
According to plaintiff, another $50,000 was loaned to Chunk and Joseph Cohen on September 14, 2004. By an agreement executed on September 14, 2004 (the September 14, 2004 agreement) by plaintiff and Chunk (by Joseph Cohen), paragraph 5 of the December 12, 2003 agreement was modified to raise the total purchase price for the 1208-1210 McDonald Avenue premises to $300,000, and to raise the monthly consideration for the option to purchase the 1208-1210 McDonald Avenue premises to the sum of $2,583.33, which Chunk was required to pay on the first day of each month, in advance. The September 14, 2004 agreement set forth that all other terms stated in the December 12, 2003 agreement were to be continued.
In October 2004, after paying interest on the loan for almost a year, Joseph Cohen allegedly renewed his request to David Perlman that an action be commenced for the return of all monies loaned to Sebastiano Piccininni. According to Joseph Cohen, a meeting took place in November 2004 between him, Meyer Cohen, David Perlman, and Patricia Perlman. Joseph Cohen claims that as an advance towards Sebastiano Piccininni's indebtedness, he received a check from Patricia Perlman's account for $550,000 and that David Perlman agreed to forgive $100,000 of the $250,000 loan. Joseph Cohen further claims that he then demanded full compliance on the repayment of the notes by Sebastiano Piccininni, and that David Perlman negotiated an agreement whereby partial satisfaction of the notes would be repaid by Sebastiano Piccininni and the balance due deducted against the $250,000 loan.According to Joseph Cohen, in April 2005, he received the sum of $554,556 from Sebastiano Piccininni, and he executed a general release in favor of Sebastiano Piccininni. Joseph Cohen asserts that he requested an accounting from David Perlman of the interest on the Sebastiano Piccininni notes that was to be credited to him, but that he never received any such accounting.
By deed dated May 21, 2007, Chunk transferred the 1208-1210 McDonald Avenue premises to Joseph Stevenson, LLC, a company in which Joseph Cohen holds a 50% interest and his cousin, Steven Cohen, holds the remaining 50% interest. Joseph Cohen continued to make monthly payments on the $250,000 loan under the December 12, 2003 agreement and the $50,000 loan under the September 14, 2004 agreement until June 2007, when he refused to make any further payments.
On January 29, 2008, plaintiff filed this action against Chunk, Joseph Stevenson, LLC, and Joseph Cohen. Plaintiff alleges that he is the owner of the 1208-1210 McDonald Avenue premises by virtue of the December 12, 2003 deed transferring the ownership of this property from Chunk to him, and that he gave consideration of $250,000 for such ownership interest. Plaintiff claims that Chunk and Joseph Cohen, as a member of Chunk, defrauded him by transferring the 1208-1210 McDonald Avenue premises to Joseph Stevenson, LLC for no consideration. [*4]
Plaintiff's first cause of action seeks to quiet title to the 1208-1210 McDonald Avenue premises on the basis that he is the lawful owner of such premises. Plaintiff's second cause of action for money had and received alleges that he gave Chunk or its member, Joseph Cohen, consideration of $250,000 at the closing on the sale of the 1208-1210 McDonald Avenue premises, and seeks recovery of this $250,000 purchase price, plus interest thereon from May 1, 2007. Plaintiff's third cause of action for fraud and deception asserts that Chunk and Joseph Cohen took $250,000 from him despite having no intent to convey the title to the 1208-1210 McDonald Avenue premises to him, and that they made misrepresentations to Joseph Stevenson, LLC regarding his ownership interest in the 1208-1210 McDonald Avenue premises. Plaintiff seeks, by his third cause of action, damages exceeding $250,000, plus interest thereon from May 1, 2007, and punitive damages. Plaintiff's fourth cause of action for breach of contract alleges that Chunk breached the agreement it had with him in that at the time it transferred ownership of the 1208-1210 McDonald Avenue premises to Joseph Stevenson, LLC, it had already conveyed an interest in the 1208-1210 McDonald Avenue premises to him. Plaintiff, by his fourth cause of action, seeks damages in excess of $250,000 plus interest thereon from May 1, 2007.
Plaintiff's fifth cause of action for unjust enrichment alleges that Chunk and Joseph Cohen were unjustly enriched by the consideration in the amount of $250,000 received by them, and seeks the recovery of this sum plus interest. Plaintiff's sixth cause of action for damage to real property and ameliorative waste asserts that Joseph Stevenson, LLC has damaged and altered the 1208-1210 McDonald Avenue premises and/or engaged in ameliorative waste, and seeks damages in an amount to be determined at trial. Plaintiff's seventh cause of action alleges that he, at the request of Chunk or Joseph Cohen gave $50,000 to Appliance Showroom (which is the business operated at the1208-1210 McDonald Avenue premises) on September 14, 2004, and that $50,000 was added to the December 12, 2003 agreement when it was modified by the September 14, 2004 agreement. Plaintiff, by his seventh cause of action, seeks damages of $50,000, plus interest thereon from May 1, 2007.
Joseph Stevenson, LLC has interposed an answer dated March 24, 2008, denying the allegations of plaintiff's complaint, asserting defenses, a first counterclaim that if plaintiff is successful in vacating the deed, all monies given by it towards the acquisition and renovation of the 1208-1210 McDonald Avenue premises should be treated as an equitable mortgage in the amount of $1,000,000 against the1208-1210 McDonald Avenue premises, and a second counterclaim seeking $25,000 in damages on the basis that the notice of pendency filed by plaintiff against the 1208-1210 McDonald Avenue premises in connection with this action placed a cloud on its title.
Chunk and Joseph Cohen have interposed an answer dated March 25, 2008, which interposes two counterclaims. Chunk and Joseph Cohen's first counterclaim for fraud alleges that plaintiff, acting through his parents, David Perlman and Patricia Perlman, misrepresented that the $250,000 loan was an advance against the indebtedness owed by Sebastiano [*5]Piccininni and not a conveyance of the 1208-1210 McDonald Avenue premises, and that there was a credit given by David Perlman against this loan. This counterclaim demands that the purported December 12, 2003 deed be set aside. Chunk and Joseph Cohen's second counterclaim alleges civil RICO violations under 18 USC § 1961 et seq.
Chunk and Joseph Cohen filed a third-party complaint dated March 25, 2008 against David Perlman and Patricia Perlman, which alleges claims of fraud, legal malpractice, breach of fiduciary duty, and civil RICO violations. David Perlman and Patricia Perlman have interposed an answer to this third-party complaint. The depositions of plaintiff and Joseph Cohen have been held.
In support of their instant motion, Chunk and Joseph Cohen rely upon Real Property Law § 320, which provides as follows:
"Certain deeds deemed mortgages
A deed conveying real property, which, by any other written instrument, appears to be intended only as a security in the nature of a mortgage, although an absolute conveyance in terms, must be considered a mortgage; and the person for whose benefit such deed is made, derives no advantage from the recording thereof, unless every writing, operating as a defeasance of the same, or explanatory of its being desired to have the effect only of a mortgage, or conditional deed, is also recorded therewith, and at the same time."
Real Property Law § 320 "codifies the common law as enunciated in cases for over a century" (Leonia Bank v Kouri, 3 AD3d 213, 217 [2004]). "It is an established doctrine that a court of equity will treat a deed, absolute in form, as a mortgage, when it is executed as security for a loan of money" (Peugh v Davis, 96 US 332, 336 [1877]; see also Mooney v Byrne, 163 NY 86, 91 [1900] ["The facts agreed upon show that there was a mortgage; for a deed, although absolute on its face, when given as security only, is a mortgage by operation of law"]; Weiss v Goffen, 26 Misc 2d 988, 989 [1960]).
"It is well settled that the giving of a deed to secure a debt, in whatever form and however structured, creates nothing more than a mortgage" (Leonia Bank, 3 AD3d at 216-217). Thus, "where a deed is given as security, it becomes a mortgage by operation of law" (Corcillo v Martut, Inc., 58 AD2d 617, 618 [1977], affd 45 NY2d 878 [1978] [internal quotation marks omitted]; see also Real Property Law § 320; DeMaio v Capozello, 74 AD3d 864, 865 [2010]; Henley v Foreclosure Sales, Inc., 39 AD3d 470, 470 [2007]; Basile v Erhal Holding Corp., 148 AD2d 484, 485-486 [1989]; Booth v Landau, 103 AD2d 733, 734 [1984]; Sakow v Bossi, 30 Misc 2d 110, 112 [1961]).
Consequently, " [a] deed conveying real property, although absolute on its face, will be considered to be a mortgage when the instrument is executed as security for a debt'" (Henley, 39 AD3d at 470, quoting Basile, 148 AD2d at 485 [1989]; see also Real Property Law § 320; Booth, 103 AD2d at 734; Maher v Alma Realty Co., 70 AD2d 931, 931 [1979]). Significantly, Real Property Law § 320 "does not require a conclusive showing that the transfer was intended as security; it is sufficient that the conveyance appears to be' intended only as a security in the nature of a mortgage" (Leonia Bank, 3 AD3d at 217; see also [*6]Vitvitsky v Heim, 52 AD3d 1103, 1105 [2008]; Thomson v Daisy's Luncheonette Corp., 7 Misc 3d 1019[A], 2005 NY Slip Op 50674[U], *2 [Sup Ct, Kings County 2005]). To establish that a deed was meant as security, "examination may be made not only of the deed and a written agreement executed at the same time, but also [of] oral testimony bearing on the intent of the parties and to a consideration [of] the surrounding circumstances and acts of the parties" (Corcillo, 58 AD2d at 618; see also Hughes v Harlam, 166 NY 427, 431 [1901]; Pioneer Vil. Dev. Corp. v XAR Corp., 55 AD2d 769, 769 [1976]; Matter of Newcourt Realty Holding Corp. v Gabel, 28 AD2d 704, 704 [1967]).
Here, the December 12, 2003 quitclaim deed appears absolute on its face, but it is accompanied by the December 12, 2003 agreement, which appears to give Chunk an option to purchase the 1208-1210 McDonald Avenue premises by December 15, 2004 in return for monthly payments (see Booth, 103 AD2d at 734). The sworn deposition testimony of both plaintiff and Joseph Cohen, however, conclusively demonstrates that the deed was actually intended as security for a loan to Chunk.
Plaintiff, at his deposition, identified the December 12, 2003 agreement as a "loan" to Chunk and Joseph Cohen (Plaintiff's Dep. Transcript at 6,13). While plaintiff's complaint alleges that he loaned Chunk $250,000, plaintiff admitted that he actually loaned only approximately $10,000 to Chunk and Joseph Cohen (which he gave to his father, David Perlman) and that the balance of the $250,000 loaned to Chunk and Joseph Cohen came from his grandmother, Muriel Cohen, and his aunt, Helene Cohen (Id. at 19, 21). Contrary to the allegations in plaintiff's seventh cause of action, plaintiff also admitted that while an additional $50,000 was loaned to Chunk or Joseph Cohen at the time of the execution of the September 14, 2004 agreement, he was not the one who gave Chunk or Joseph Cohen this $50,000 at the time of such execution (Id. at 33-34).
Plaintiff additionally admitted that he never met Joseph Cohen prior to the execution of the December 12, 2003 agreement, and that the first time he met him was when he went to collect a payment for the December 12, 2003 loan (Id. at 7-9, 18). Plaintiff testified that he executed the December 12, 2003 agreement two days after December 12, 2003 and was not in the presence of Joseph Cohen when he signed it or when Joseph Cohen signed it (Id. at 15, 25). Plaintiff further testified that monthly payments were called for under the December 12, 2003 loan agreement, and that they were paid for by checks from Joseph Cohen (Id. at 27-28). Plaintiff also testified that he occasionally would pick up the money from Joseph Cohen in sealed envelopes and deliver them to his mother, Patricia Perlman (Id. at 28-29, 40). Plaintiff stated that he did not deposit the interest payments made by Chunk and Joseph Cohen into his account, and that he does not know where the funds collected were deposited (Id. at 40-41).
Significantly, plaintiff, throughout his deposition, never characterized the $250,000 as payment for the transfer of the 1208-1210 McDonald Avenue premises to him, never stated that this money given to Chunk and Joseph Cohen was anything but a loan, and never claimed to be the owner of the 1208-1210 McDonald Avenue premises. Rather, plaintiff [*7]merely maintained that the December 12, 2003 agreement was a loan, which he only contributed $10,000 towards, and which required monthly interest payments (Id. at 6, 13, 19, 21, 27-28). Notably, plaintiff never asserts that he inspected or even visited the 1208-1210 McDonald Avenue premises prior to the execution of the December 12, 2003 deed, as would ordinarily accompany a property sale. Chunk and Joseph Cohen also point out that the present value of the 1208-1210 McDonald Avenue premises is in excess of $1 million as compared to the total loan amount of $300,000.
Joseph Cohen and Chunk similarly maintain that the deed was executed as security for a loan. Joseph Cohen, in his third-party complaint, characterized the loan as an "advance" given to him by David Perlman. Joseph Cohen testified, at his deposition, that he made interest payments on the December 12, 2003 agreement in 2004, 2005, 2006 and part of 2007, and that he stopped paying interest and principal on that loan in June 2007 (Joseph Cohen's Dep. Transcript at 31-33, 37, 56).
Plaintiff, in his affidavit submitted in opposition to Chunk and Joseph Cohen's motion, now attempts to explain his characterization of the December 12, 2003 agreement as a loan by stating that he never wanted to own the 1208-1210 McDonald Avenue premises forever, but wanted Chunk to exercise the option to purchase these premises. Plaintiff asserts that there was a transfer of a deed and an agreement for an option to buy back the 1208-1210 McDonald Avenue premises at the same price that was paid to Chunk, rather than a loan.
To the extent that plaintiff's affidavit submitted in opposition to this summary judgment motion is inconsistent with his prior deposition testimony, it must be rejected. Where a feigned factual issue is designed to avoid the consequences of an earlier admission (see McGuire v Quinnonez, 280 AD2d 587, 587 [2001]), it is insufficient to defeat summary judgment (see Gomez v Rodriguez, 31 AD3d 497, 498 [2006]; Israel v Fairharbor Owners, Inc., 20 AD3d 392, 392 [2005]).
Moreover, while plaintiff concedes that Chunk made payments pursuant to the December 12, 2003 agreement in 2004, 2005, 2006, and in 2007 until June of that year, he does not explain why Joseph Cohen would continue to make monthly payments on a option to purchase the 1208-1210 McDonald Avenue premises, when pursuant to the terms of the December 12, 2003 agreement, the option had already expired on December 18, 2004, and could not be extended, and any sums paid for the option were not to be credited toward the purchase price.
"Where a deed has been given as security, it cannot be turned into a conditional sale by way of an agreement to reconvey" (Mooney,163 NY at 92; see also Booth, 103 AD2d at 734). " [T]he courts are steadfast in holding that a conveyance, whatever its form, if in fact given to secure a debt, is neither an absolute nor a conditional sale, but a mortgage, and that the grantor and grantee have merely the rights and are subject only to the obligations of mortgagor and mortgagee'" (Leonia Bank, 3 AD3d at 217, quoting Mooney, 163 NY at 93).
"The holder of a deed given as security must proceed in the same manner as any other mortgagee - by foreclosure and sale - to extinguish the mortgagor's interest" (Leonia Bank, [*8]3 AD3d at 217; see also Gioia v Gioia, 234 AD2d 588, 589 [1996]; Goldblatt v Iris Constr. Corp., 28 Misc 2d 621, 622 [1960]; 77 NY Jur 2d, Mortgages and Deeds of Trust § 32 ["one who has taken an absolute deed as security must, in order to foreclose the debtor's right to redeem, institute a foreclosure proceeding"]).
Here, Chunk and Joseph Cohen, by the submitted deposition testimony, have demonstrated that the December 12, 2003 deed which Chunk, by Joseph Cohen, executed in favor of plaintiff in connection with the 1208-1210 McDonald Avenue premises was intended to be held by plaintiff only as security for the loan and not as an absolute conveyance of the 1208-1210 McDonald Avenue premises (see Leonia Bank, 3 AD3d at 217). In opposition, plaintiff has failed to raise a triable issue of fact as to whether he held title to the 1208-1210 McDonald Avenue premises (see DeMaio, 74 AD3d at 865).
Thus, since plaintiff could not acquire title to the 1208-1210 McDonald Avenue premises by way of the purported deed, which actually constituted a mortgage, plaintiff, in order to assert a claim with respect to the 1208-1210 McDonald Avenue premises, would have to proceed by foreclosure (see Leonia Bank, 3 AD3d at 217; Gioia, 234 AD2d at 589). However, as the parties have agreed to a settlement on the record in open court, discussion of the other issues raised on the motion is unnecessary.
Accordingly, Chunk and Joseph Cohen's motion for an order declaring that the December 12, 2003 deed be deemed a mortgage pursuant to Real Property Law § 320 and granting them summary judgment dismissing plaintiff's complaint, is granted.
This constitutes the decision, order, and judgment of the court.
E N T E R,
J. S. C.
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