Columbia Capital v Cuervo
2012 NY Slip Op 31912(U)
June 28, 2012
Sup Ct, Suffolk County
Docket Number: 15487-2005
Judge: Peter H. Mayer
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SUPREME COURT - STATE OF NEW YORK
1.,4.S. PART 17 - SUFFOLK COUNTY
PK E S E N T:
Hon. PETER H. MAYER
Justice of the Supreme Court
MOTION DATE 3-6-12
ADJ. DA'.^EMot. Seq. # 007 - MG
- against -
DKGO CUERVO, NEW YORK STATE
COMMISSIONER OF TAXATION & FINANCE, :
Chrktopher J. Panny, Esq.
Attorneys for Plaintiff
76 Court Street
Brooklyn, New York 1 1201
Lester & Associates, P.C.
Attorney for Defendant Cuervo
600 Old Country Road
Garden City, New York I1530
Franlk M. Rlaffei, Jr., Esq.
Jakubowski, Robertson, Maffei,
Goldsmith dk Tartaglia, LLP
969 Jericho Turnpike
St. James, h e w York 101 18
Upon the reading and filing of the following papers in this matter: (1) Order to Show Cause by counsel for the receiver, signed
February 2 1. 201 2 (Mayer, J.), and supporting papers; and now
UPON DUE DELIBERATION AND CONSIDERATION BY THE COURT of the foregoing
papers. the motion is decided as follows: it is
ORDERED AND ADJUDGED that Diego Cuervo is guilty of a contempt of court, by his refusal
to comply with the provisions of this Court's Order dated June 22, 201 1 ; and it is further
ORDERED AND ADJUDGED that said Diego Cuervo pay a fine of $26,400.00 dollars 011or
he6x-e JUIY25. 2012 or be imprisoned in the Suffolk County Correctional Facility until the fine is paid or
until a period of forty-five (45) days after the commitment of defendant to jail shall have expired; arid it is
ORDERED that the fine is to be paid to the order of the Receiver; and it is further
ORDERED that the defendant is directed to be present at 9:3C am on July 25, 2012 in Pari 17 of
Columbia Capifd v Citervo
Index Xo. 1548 7-2005
the Supreme Court. Suffolk County. Riverhead, New York for purposes of execution of sentence; and it
ORDERED that failure to be present at said time. date and p l x e will result in the issuance of a
warrant of arrest for the defendant.
‘The action underlying this proceeding was brought to foreclose it mortgage on a parcel of real estate
known as 1224 Suffolk Ave. Brentwood, New York. By Order ofthe Cclurt dated June 22,201 1, Mr. Frank
Mal’fei. Esq. Was appointed Receiver for the benefit of the Plaintiff.
The plaintiff is owner and holder of a certain mortgage on the real estate.
The defendant, Diego Cuervo, is the owner, mortgagor and landlord of the said property.
This proceeding was brought by the court appointed receiver of real property which is the subject
of this litigation to hold the defendant, Diego Cuervo in Civil Contempt pursuant to Section 753 through
756 of the Judiciary Law. The receiver seeks an order imposing a fine, iriprisonment or both for the alleged
fails-e of the defendant to comply with the provisions of this Court’s Order dated June 22, 201 1.
Among other things the order “ directed that the defendant and their agents, officers, employees, and
contractors deliver and attorn to the receiver all rents lists, shareholder lists, unexpired and expired leases,
proprietary leases, agreements, contracts, recognition agreements, corpor&e by-laws, correspondence, notice
reg1 stration statements, tenants securities, shareholders, escrows, and ljsts of current rent or other monies,
arrear, relating to space in the mortgaged premises; ... and further enjoining and restraining the defendant
and their agents, officers, employees and attorneys from (111collecting the rents of said mortgaged
preinises;(ii) interfering in any manner with the mortgaged premises or its possession, or with the
Receiver’s management thereof ’.
On September 6,201 1 the Receiver caused a “Notice to Attorn to Receiver” to be served upon the
defcndant through his attorney.
On December 2, 20 1 1 and December 20, 20 1 1 the Receiver caused Notices to attorn to Re’ceiver
to be served upon the tenants.
The Court heard oral argument from the parties on March 12, 2012 and as a result thereof set the
matter for hearing on April 5,20 12. Evidence on the hearing was taken on April 5,201 2 and May 14,2012.
Pursuant to the Court’s order of March 12 , the defendant was ordered to appear on April 5 , 20 12
with for thc period from September 6, 201 1 to present, all documents related to the premises located at
1224 Suffolk Avenue Hrentwood, New York, including but not limitec to the following: written and oral
rem and lease agreements; names of all occupants: income and expenses: bank records; rent receipts and
‘I‘hc defendant appeared on April 5 and testified. He did not bring any of the ordered materials to
court. ?‘he tenants of the subject parcel testified on May 14, 2012.
Columbia Capital v Ciiervo
I I I ~ Ch’o. I548 7-2005
The essence ofthe Receiver‘s claim was that the tenants continu(-d to pay rent to the landlord during
and after both the defendant and the tenants received the notice t:, attorn served by the Receiver. Morleover,
neither the defendant nor his agents or employees ever delivered any rent lists, unexpired or expired leases.
corporate by-laws etc. There was no factual dispute by the defendant concerning his awareness of the
Noiice To Attorn or this Court‘s order of June 22, 201 1.
I n his testimony the defendant denied receiving any rents from any of the tenants after service of
the Notice to Attorn. He claimed he did take rents from the tenants before the Notice to Attorn was served
but never after. He further claimed he had no records of any past rental receipts, no leases, and no bank
records relating to any of the tenants. When he did take rents he took it in cash. If he gave a receipt, he
did i‘t keep copies of any. He maintained that he himself still engages in the business of the buying and
selling of cars at the same address but has no business bank account from which to operate this business.
He stated he had one at one time but his present recollection was that it was closed. He has no bank records
relating to this account. All of his business was done in cash.
On May 14 three tenants testified that they were indeed tenant!; at 1224 Suffolk Avenue anld paid
reni for the space. All three claimed they paid their rent each month, particularly after the Notice to Attorn
was served, to the defendant’s father, Luis Cuervo. The only exception to this testimony came from Mr.
Jovel Mayan who stated that he gave rent to Diego Cuervo at various times. Specifically, he stated that
either at the end of March or April of 2012 he paid his rent at the office with both Luis and Diego Cuervo
present. He remembers complaining to Diego Cuervo about the hot we.ter as he had not had any for about
two years and that the defendant responded that he would do what he (couldto get it fixed.
The evidence also disclosed the existence of a purported lease that appears to be entered into
between one of the tenants, Ms. Sandra Ruiz and Diego Cuervo, the defendant, on or about November,
20 1 1. Diego Cuervo, when confronted with this lease, denied that the signature was his and denied entering
the lease. ‘This testimony contrasted with Ms. Sandra Ruiz who said the.t she felt this was the lease she was
operating under but she did not see Diego sign it as it was brought to her by the defendant’s father Luis
Cucrvo. Notably, when seeing Diego’s name on the signature line she asked why his name was there. Luis
responded that the property was in Diego’s name but he, Luis, was in charge of everything.
All three tenants testified that they paid rent in cash and that they rarely, if ever, got a receipt.
Spccifically, Mr. Alandro Buruca testified that he paid nine hundred dollars a month in 201 1 to the
d e h d a n t ’ s father and one thousand dollars a month in January and February of 2012 to the defendant’s
father before paying the Receiver in March. Sandra Ruiz testified that her original lease agreement called
for one thousand eight hundred dollars in security with the same amount due each and every month as rent.
She complained of hot water problems as well and thought her lease of November 201 1 reduced her rent
to one thousand dollars a month. Not with standing the lease. she paid lone thousand eight hundred dollars
for the balance of 20 1 1 and one thousand seven hundred from January to May of 20 12, the excess over one
tho isand dollars allegedly being used to help with repairs to the (demisedpremises, including the hot water.
Ms Ruiz stated that this arrangement continued after she began payin,: the receiver one thousand dollars
a month in March and continued to pay the defendant’s father seven hundred dollars on through May “ for
repiirs”. The defendant also never tendered the original security for the Ruiz lease despite the order
mandating sam e
Scction 753 of the Judiciary Law reads, in pertinent part:
Colirntbia Capital v Cuervo
Iitde-v NO. I548 7-2005
“A Court ofrecord has the power to punish. by fine and imprisonment. or either, a
neglect or violation ofdutjr. or other misconduct by which a right or remedy o f a party to a
ciiil action or special proceeding, pending in the court m q be defeated. impaired. impeded,
or pre-iudiced. in any of the following cases: ...
3. A party to the action or special proceeding. an attorney. counselor, or other person,
for the non-payment o f a sum of money ...or for any other disobedience to a lawful mandate
of the court.‘‘
‘To sustain a finding of civil contempt, a court must find that the alleged contemnor violated a lawful
order of the court, clearly expressing an unequivocal mandate, of which that party had knowledge and that
as a result of the violation a right of a party to the litigation was prejudiced. It is not necessary that the
disobedience be deliberate or willful; rather, the mere act of‘ disobedience regardless of motive, is
sufficient if such disobedience defeats, impairs, impedes, or prejudices the rights of a party. (Incorporated
Village oJ’Plandome Manor 11. ,John Ioannou 54 AD3d 365; 862 NYS2d 592 [2”dDept. 20081).
The order eljoined the defendant and his agent’s, employees, and contractors from collecting the
rents or interfering with the mortgaged premises in any way.
An agent is a party who acts on behalf of the principal wi1.h the latter’s express, implied, or apparent
authority in the transaction of some business or the management of some affairs on the principal’s account.
The agent is a substitute or deputy appointed by the principal with power to do things which the principal
maj’ or can do and primarily to bring about business relations between the principal and third persons. ((Time
Warner City Cable v. Adelphi University, 27 AD3d 551, 813 NYS2d 114[2nd Dept. 20061).
It is also well settled that an agent’s authority may be actual or apparent. Actual authority exists
when an agent has the power “to do an act or to conduct a transaction on account of the principal which,
with respect to the principal. he is privileged to do because of the principal’s manifestation to him.” (Forest
ParkCooperative. Inc. V. Coinmonwealth Land Title Insurunce Comp., 201 1 N.Y. Misc. LEXIS 2422, May
19, 201 1 citing Minskoff v. American Exp. Travel Related Swvices Co. 98 F3rd 703  quoting
Restatement (Second) of Agency, Sec. 7 comment a ). Actual agency may be express or implied.
ExFress authority is the authority distinctly, plainly expressed, orally or in writing while implied autlhority
exists when verbal or other acts by a principal reasonably give the appearance of authority to the agent. (See
99 Commercial St., Inc. V. Goldberg, 81 1 F Supp 900 119931).
Apparent authority arises when a principal places an agent in a position where it appears that the
agent has certain powers that the agent may or may not possess. Ifa third person holds the reasonable belief
that the agcnt was acting within the scope of the agent’s authority and changes position in reliance on the
agent’s act, the principal is estopped to deny that the agent’s act was authorized. (2A NY Jurispruclence,
Second Edition, Agency and Independent Contractors, Cohen \ . Utica First Ins. Comp., 436 F. Supp 2”,
5 17 [E.D.N.Y. 20061 applying New York Law). Further, all acts of the agent that are within the apparent
scope of the authority conferred on the agent while no actual aulhority to do these acts has been conferred
are hinding on the principal. (2 A N Y Jurisprudence, Second Edition, Agency and Independent Contractors,
In this case, Mr. Buruca, one of the tenants testified that he used to pay his rent to the defendant,
Colimzbin Cnpifnl Cuervo
Ittcies NO. I548 7-2005
Diego Cuervo pursuant to his lease agreement but then changec to paying the defendant‘s father. Luis. He
stated that Luis told him to pay him and to stop paying Diego.
Ms. Kuiz testified that, as of November 201 1. she thought she was operating under the new lease
thal had Diego Cuervo’s signature on it. but paid Luis because Luis told her the building was in Diego’s
name but that he was in charge.
Mr. Jovcl Mayan testified that although he pays cash rent to Ihe defendant’s father, he sees the
dekndant every time he pays the rent which nearly always lakes place in the car dealership that the
defendant runs. Further. he stated that, at times, he hands the rent direcl ly to Diego Cuervo, the defendant.
He also stated that he complained directly to the defendant about the lack of hot water at the car dealership
which is the defendant’s business. The defendant replied that he knew that the boiler was out of order and
he would see if he could get it fixed. On the Court’s questions, he stated that he paid the rent to one of both
individuals. either Luis or Diego while he was complaining to Diego about the hot water. Both Mr. Cuervo
and the defendant were standing together during this conversation.
The totality ofthe evidence shows that, based on the actions of the defendant, Luis Cuervo had the
implied and/or apparent authority to act on behalf of his son in collecting the rents relevant to this property.
The evidence also shows clear defiance of this Court’s June 22 order and the notices to attorn served by the
receiver. Moreover, the March or April rent tendered by Mr. Mayan was, tendered to both the defendant and
his father under circumstances where Mr. Mayan relied enough on the defendant’s status with respect to
this property to complain to him about the hot water and the defkndant‘s knowledge of the boiler sufficient
to show a level of dominion and control over the property, while at the very same moment, tendering his
renl. This is direct evidence of the defendant’s defiance of the .June order and the Notice to Attorn.
The Court also concludes that the defendant’s testimory giveri in open Court on April 5 , 2012 is
totdly lacking in credibility. He is in the car dealership busine,js, located at the same address, but has no
business checking account. He didn’t bring any records either to the receiver pursuant to this Court’s order
of .lune 22, 201 1 or the court pursuant the subsequent order setting the matter down for a contempt
hearing. Notably, his testimony was that the tenants didn’t pay hirn any rent for more than a year,
conveniently coinciding with this Court’s Order. Just as importantly, however, the defendant never
mentioned anything about his father’s involvement with these properties.
The Court also notes the reluctance of the tenant’s to testify. Although they denied coercion by the
defimdant or his father, their demeanor and insistence that all rent payrnents were in cash with no receipts
giwn clearly show they are, to some degree, under the control of the defendant who, the Court concludes,
concocted a methodology to get around this Court’s order and continue to prejudice the plaintiff by not
remitting rent proceeds to the receiver as mandated by the order. Rather, the defendant simply circumvented
this Court’s order by employing an agent, or alter ego, to collect the rent.
The Receiver was employed to, among other things, collect the rent so it could be used to pay the
inoi-tgage. thc holder ofwhich is the plaintiff. To the extent that rents were paid to the defendant, through
his father or otherwise, after the notice to attorn was received by the defendant, the plaintiff has been
prejudiced. Tli~is. Court finds, the element of prejudice to the plaintiff has been shown. Specifically,
tenant Buruca paid nine hundred dollars a month from the service of the notice to attorn on the defendant
on September 6,20 1 1 and one thousand dollars a month for January and February of 20 12. Since these rents
Columbia Capital v Cirervo
ltrde-u No. 1548 7-2005
\\er: paid after the notice to attorn was served, the Court finds the plaintiff has been prejudiced to the extent
these funds were not tendered to the receiver for his benefit.
Ms. Ruiz paid a total of twelve thousand seven hundred dollar:; from September of 201 1 through
and including May of 2012. The receiver was deprived of the use of these funds for the benefit of plaintiff
thus prejudicing the plaintiffs rights in this amount. The defendant also lever tendered the original security
of one thousand eight hundred dollars given by Ms. Ruiz. The prejudice :o the plaintiff from Ms. Ruiz totals
foui-teen thousand five hundred dollars.
Finally, Mr. Mayan paid nine hundred dollars a month fi*omSeptember 201 1 through March 2012
for 1total of six thousand seven hundred dollars thus prejudicing the plaintiff in this amount.
Thus, the plaintiff has been deprived of the benefit of twenty si Y thousand four hundred doIlars in
rental proceeds that, had they been tendered to the receiver pursuant to this Court’s order of June 22: 20 1 1
and the Notice to attorn served on September 6,201 1 on the defendant would have been available to plaintiff
for Durposes of paying down the balance on the mortgage as well as taxes and other expenses required to
maintain the property.
The Court finds, by clear and convincing evidence, that the defendant’s actions were calculated to,
and actually did defeat, impair, impede and prejudice the rights of the plaintiff herein and, therefore.,finds
the defendant in contempt of this Court’s Order of June 22, 20’11.
The Court directs that the defendant pay a fine of twenty six thousand four hundred dollars on or
before July 25, 2012 or be imprisoned in the Suffolk County Correctional Facility until the fine is paid or
the expiration of 45 days, whichever occurs earlier.
The fine is to be paid to the order of the Receiver.
The defendant is directed to be present at 9:30 am on July 251, 2012 in Part 17 for purposes of
exextion of sentence.
Failure to be present at the above ordered time, date and place will result in the issuance of a warrant
of arrest for the defendant.
‘This constitutes the Order of the Court.
June 28, 2012
PElTER H. MAYER, J.S.C.
I ] FINAL DISPOSITION
NON FINAL DISPOSITION