Revankar v Tzabar

[*1] Revankar v Tzabar 2007 NY Slip Op 51590(U) [16 Misc 3d 1127(A)] Decided on June 22, 2007 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 22, 2007
Supreme Court, Kings County

Gopal Revankar a/k/a Gopaul Revankar, Individually, and as a Shareholder of A.G. Development, Inc., on Behalf of Himself and All Other Shareholders of A.G. Development, Inc. Similarly Situated and in the Right of A.G. Development, Inc., Plaintiffs,

against

Abraham Tzabar, et al., Defendants.



18096/04



Attorney for Plaintiff:

Bernard Kobroff, Esq.

Goetz Fitzpatrick, LLP

One Penn Plaza, 44th Floor

New York, NY 10119

Attorneys for Defendants Haguy Tsabary, Marcia Tsabary and FE Development & Management, Inc.:

Vincent Bianco, Esq.

Ginsberg & Bianco, Esqs.

114 Old Country Road, Suite 116A

Mineola, NY 11501

Attorneys for Defendant Gregg A. Luckman:

Brian J. Carey, Esq.

McElroy, Deutsch, Mulvaney & Carpenter, LLP

88 Pine Street, 24th Floor

New York, NY 10005

Attorney for Defendant Abraham Tzabar:

Meir Moza, Esq.

217 Willis Avenue, Suite 101

Mineola, NY 11501

Attorneys for Defendants Gregg M. Ilag and Queens Computer Center, Inc.

Joel Spivak, Esq. 90 Cutter Mill Road, Suite 310N

Great Neck, NY 11021

Carolyn E. Demarest, J.

Upon the foregoing papers in this shareholder's derivative action seeking specific performance, injunctive relief, monetary damages, and recovery of attorney's fees and expenses, and alleging claims of breach of fiduciary duty, conversion, fraud, imposition of a constructive trust and tortious interference, plaintiffs Gopal Revenkar a/k/a Gopaul Revankar (Revankar), individually, and as a shareholder of A.G. Development, Inc. (AGD), on behalf of himself and all other shareholders of AGD similarly situated (collectively, plaintiffs) move for an order, pursuant to CPLR 6212(a), confirming the ex parte order of attachment granted in this action on January 23, 2007, and, pursuant to CPLR 3212(e), granting them partial summary judgment in their favor as against Marcia Tsabary (Marcia) on their fifth and sixth causes of action in their third amended verified complaint for the sum of $78,500. Plaintiffs, in a separate motion, further move for an order: (1) pursuant to CPLR 3215(b), for an assessment of damages and entry of judgment against defendant Abraham Tzabar (Tzabar), and (2) pursuant to CPLR 3212, for summary judgment as against defendants FE Development & Management Inc. (FED) and Haguy Tsabary (Haguy). Defendants Marcia, FED, and Haguy cross-move for summary judgment dismissing plaintiffs' complaint and all cross claims as against them. Defendants Queens Computer Center, Inc. (QCCI) and Greg M. Ilag (Ilag) move for summary judgment dismissing plaintiffs' complaint as against them. Defendant Gregg A. Luckman (Luckman) moves for an order dismissing plaintiffs' complaint as against him, in accordance with CPLR 3211(a) (7) and 3016(b), and/or for summary judgment pursuant to CPLR 3212(b).

On June 8, 2004, Revankar, the majority (50.5%) shareholder of AGD, a corporation in the business of purchasing, improving, developing, and selling real estate, on behalf of AGD, commenced this shareholder's derivative action. Plaintiffs, thereafter, twice amended their complaint to include additional defendants. The primary defendant is Tzabar, who was AGD's other shareholder. Tzabar held 49.5% (a minority) of AGD's shares, and was AGD's director, vice-president, secretary, and chief operating officer. Plaintiffs allege that Tzabar breached the fiduciary duties he owed to AGD, as its officer and director, by diverting the proceeds of its sales [*2]of real properties and the proceeds of AGD's loans from AGD to his own benefit, wasting AGD's assets.

Plaintiffs have suffered losses as a result of Tzabar's diversion of corporate assets and are seeking to recover for such losses from the named defendants to whom such assets were distributed in various transactions. Plaintiffs claim that these defendants acted in collusion with Tzabar and fraudulently acquired and/or unlawfully diverted these assets. That is, plaintiffs assert that these defendants conspired with Tzabar to wrongfully and unlawfully transfer AGD's monies and properties to themselves, and then, after taking their share or their fees for disguising, laundering, or enabling the transaction, forwarded the remainder either directly to Tzabar or as Tzabar directed them, causing them to sustain damages. These defendants claim that their actions with respect to their receipt and/or transfer of these assets were lawful.

Among these defendants are Haguy (who is Tzabar's cousin), Marcia (who is Haguy's wife), and FED (the corporation which Haguy owns and of which Haguy is president). FED was a general contractor, which was hired by Tzabar pursuant to a January 9, 2004 contract between FED and AGD (the FED contract) to construct four two-family homes on property owned by AGD, located at 24-16 95th Street, in Jackson Heights, New York. The other defendants are QCCI, which allegedly received $450,000 of AGD's money and profited by $200,000 due to the sale of real property, located at 132-03 Linden Boulevard, South Ozone Park, New York (the Linden Property), for which AGD was in contract; Ilag, the president and sole owner of QCCI; and Luckman, an attorney who represented Tzabar, Ilag, and QCCI in the purchase and sale of real property and in the transfer and receipt of monies belonging to AGD.

Plaintiffs' first and second causes of action seek specific performance and an injunction, respectively, against Tzabar. Plaintiffs' third cause of action seeks individual recovery in favor of Revankar against AGD for money lent. Plaintiffs' fourth cause of action alleges a claim of breach of fiduciary duty against Tzabar. Plaintiffs' fifth cause of action alleges that all of the defendants acquired the real property and other assets of AGD in contravention of its rights and seeks the imposition of a constructive trust, reconveying all property and assets of AGD which remain in their possession and an accounting of all of AGD's assets previously disposed of by them. Plaintiffs' sixth cause of action for conversion alleges that all of the defendants converted to their own use and benefit the property and monies part to AGD as consideration for the sale of its real property and/or loaned to AGD in furtherance of its business. Plaintiffs' seventh cause of action for fraud alleges that Tzabar conspired with all of the other defendants in engaging in a fraudulent course of conduct or scheme to divert the corporate assets of AGD to obtain for themselves AGD's corporate assets without adequate payment to AGD. Plaintiffs' eighth cause of action for tortious interference alleges that these defendants have acted as aiders and abettors in Tzabar's waste of AGD's assets and usurping of its business opportunities. Plaintiffs' ninth cause of action requests an injunction, and plaintiffs' tenth cause of action seeks the recovery of attorney's fees.

By decision and order dated May 4, 2006, a motion by defendant J.P. Morgan Chase Bank, N.A. (Chase) to dismiss the third amended verified complaint as against it was granted. This action was also discontinued as against defendants O.D. 2003 Corp. and Avi Semah. Tzabar originally appeared at a hearing and then defaulted herein, absconding to Israel (although the client has retained his passport). On October 18, 2006, a default judgment on the issue of liability was granted as against Tzabar in favor of plaintiffs. [*3]

On January 23, 2007, this court granted an ex parte order of attachment against the property of Marcia (who has moved to Israel), who received funds from Tzabar, purportedly without consideration and allegedly to purposely defraud plaintiffs. The attached property included real property owned by Marcia, located at 870 East 14th Street, in Brooklyn, New York (Marcia's East 14th Street house) and any account she maintains at Apple Bank. Plaintiffs have filed an undertaking with respect to the attachment order.

The alleged fraudulent transfers and conversions which are the subject of this action concern various monies of AGD. Copies of checks show that between January and May 2004, AGD transferred $477,000 to FED as payment under the FED contract. Revankar asserts that this payment was for work by FED, which Tzabar misrepresented to him, had been completed by FED. Plaintiffs claim that FED had actually breached the FED contract and did not complete the work required to receive payment under the FED contract's schedule of payments. Plaintiffs further allege that FED, in breach of section 7.6.3.2 et seq. of the FED contract, which prohibited loans, gifts and payments by FED to AGD's representatives (i.e., Tzabar), colluded with Tzabar and paid him $116,798.31 to misrepresent to them that FED had performed the required work. Plaintiffs have submitted FED's checks and bank statements, showing payments and debit card expenditures, amounting to $116,798.31, to Tzabar or his designees.

Plaintiffs assert that FED also used monies from the $477,000 payment under the FED contract by AGD to FED to pay for the conversion of Marcia's East 14th Street house from a one-family to a two-family house (for which work Marcia, in her New York City Department of Building's filings, identified AGD as the general contractor). The payments to various trade contractors, who provided work, labor, services, and related materials to Marcia's East 14th Street house, as evidenced by FED's checks dated from January 22, 2004 through May 28, 2004, totaled $28,500.

On May 17, 2004, AGD, by Tzabar, sold AGD's property, located at 206-11 46th Road, in Bayside, New York (the Bayside property) for $615,000 and received checks payable to AGD's order in the amount of $600,804. Tzabar deposited these checks on May 18, 2004 into an AGD bank account, which he had opened, without authorization, in AGD's name. Tzabar then transferred $500,000 of these monies on May 20, 2004 into a bank account in his individual name. On the same date, Tzabar wired $450,000 of these AGD monies from this individual account to QCCI's checking account. According to Ilag, who (as noted above, is president of, and wholly owns QCCI), this $450,000 was a business loan. It is evidenced by a 30-year note with a 6% interest rate and required monthly payments of $2,697.98. The note was drafted by Ilag and QCCI's attorney, Luckman, and was notarized by Marcia. Plaintiffs allege that this $450,000 was converted by, and fraudulently transferred to Ilag and QCCI. During the summer and fall of 2004, QCCI made payments on the note. Rather than making regular monthly payments to Tzabar, however, QCCI made payments to others on Tzabar's behalf. These payments were also in excess of the monthly payments required to be made by QCCI under the note.

The note was executed by QCCI in connection with the purchase by QCCI of the Linden property. On May 20, 2004, AGD, by Tzabar, transferred to QCCI, for no consideration, a contract, which AGD had, to purchase the Linden property. On that date, QCCI (of which, as noted above, Ilag is president) purchased the Linden property for $225,000 from the sellers of the property. On October 11, 2004, Ilag signed a power of attorney (prepared by Luckman), allowing Tzabar to act as his attorney-in-fact for the sale of the Linden property. On October 28, 2004, QCCI (by Tzabar), [*4]after expending $1,500 to ready the Linden property for sale, sold it for $430,000, resulting in a profit to QCCI of $203,500. Plaintiffs assert that by Tzabar's assignment of the contract between AGD and the sellers to QCCI, they were deprived of this $203,500 profit. Luckman represented QCCI at the closing of the sale and was paid a fee of $500 from the closing proceeds for his professional services. Tzabar retained $30,000 for himself from the proceeds of the sale of the Linden property and gave Ilag $329,638.56. Ilag claims that he was angry over Tzabar's retention of the $30,000, and, therefore, decided to pay off the note and end his business dealings with Tzabar. On November 19, 2004, Luckman prepared a satisfaction of note and QCCI paid off the balance of the note ($164,000).

In May 2004, Tzabar contracted to sell AGD's real property located at Veterans Avenue, in Brooklyn, New York (the Veterans Avenue property). On June 2, 2004, Tzabar sold the property and received net proceeds of $325,120, which he deposited in an AGD account that had been opened without authorization, and he then transferred these proceeds to his individual bank account.

This court entered a temporary restraining order on June 8, 2004, enjoining Tzabar and FED from transferring or in any way conveying any monies received from AGD, and FED was served with this order. Notwithstanding that order, FED subsequently transferred over $70,000 out of its bank account, including $50,456.95 to Marcia's Citibank account on June 15, 2004. On June 23, 2004, the court specifically restrained FED and Marcia and Haguy's Citibank accounts. However, by June 25, 2004, according to a Citibank statement, only $1,699.92 remained in Marcia and Haguy's accounts and only $247.02 remained in FED's account. Haguy and Marcia's deposition testimony and communication between counsel do not identify the accounts to which these monies were transferred, but Marcia admitted that in 2005, she opened the checking account in Apple Bank, which was attached by the ex parte order.

Plaintiffs have also submitted AGD's bank statement for May 12-June 9, 2004, evidencing the $921,000 of transfers in May and June 2004 (discussed above) of AGD's monies (derived from the sales of the Bayside property and the Veterans Avenue property) from the AGD account which Tzabar had opened (without authorization) to his individual Chase bank account. Marcia and Haguy's Citibank account statement shows that on June 9, 2004, Tzabar, apparently for no consideration, wired $450,000 of these monies from his individual Chase bank account to Haguy and Marcia's Citibank account. This Citibank statement further shows that on June 15, 2004, Haguy wired $400,000 of these monies to Tzabar's brother (and Haguy's cousin), Moshe, in Israel. A check payable to Marcia, under her maiden name, Marcia Akerman, evidences that on June 16, 2004, Haguy then transferred the $50,000 balance of these monies to Marcia.

Plaintiffs' motion seeks, pursuant to CPLR 6211(b), an order to confirm the ex parte order of attachment, which attached Marcia's East 14th Street house and the Apple Bank account. This motion has been timely brought within five days after the Sheriff of the City of New York docketed a notice of attachment against the East 14th Street house and served the notice of attachment on Apple Bank. CPLR 6212 provides that on a motion for an order to confirm an order of attachment, the plaintiff is required to "show, by affidavit and such other written evidence as may be submitted, that there is a cause of action, that it is probable that [he or she] will succeed on the merits, that one or more grounds for attachment provided in [CPLR] 6201 exist, and that the amount demanded from the defendant exceeds all counterclaims known to plaintiff."

Pursuant to CPLR 6201, "[a]n order of attachment may be granted in any action, except a matrimonial action, where the plaintiff has demanded and would be entitled, in whole or in part, or [*5]in the alternative, to a money judgment against. . .[a] defendant[]," when one of the specified grounds exists. These specified grounds include when "the defendant is a nondomiciliary residing without the state" (CPLR 6201 [1]), and when "the defendant, with intent to. . .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" (CPLR 6201 [3]).

Here, plaintiffs have asserted a cause of action against Marcia for monetary damages. Plaintiffs state that their claim as against Marcia's property is for monetary damages in the amount of $927,000, which they allege represents AGD's monies, which were transferred to her, her husband (Haguy), or her husband's corporation, FED. They also seek interest, thereon from June 25, 2004, the date Marcia received notice from Citibank of an order by this court restraining her bank account. Plaintiffs seek to attach Marcia's East 14th Street house and whatever sums may remain in Marcia's Apple Bank checking account. The amount demanded by plaintiff from Marcia exceeds all counterclaims asserted by her (see CPLR 6212 [a]). Plaintiffs assert that they have also demonstrated that it is probable that they will succeed on the merits and that they have satisfied the grounds for attachment set forth in CPLR 6201 (1) and (3).

In opposition, Marcia contends that plaintiffs have not shown that she is a nondomiciliary residing without the state pursuant to CPLR 6201(1). However, the fact of the matter is that subsequent to the commencement of this action, Marcia, together with her husband, Haguy, and their children, left the State of New York and are now residing in Israel, Haguy and Tzabar's birthplace.

Marcia has submitted an affidavit, executed by her in Israel, wherein she states that she intends to return to New York. She explains that while she is currently living in Israel, her intention is "not to remain there indefinitely, but to simply temporarily live [t]here for the benefit of [her] children, to spend some time with [her] family and allow [her] husband, Haguy. . .,an opportunity to continue his education." While Marcia has thus stated that her present subjective intent is to someday return to New York, she provides no objective evidence corroborating that New York is her domicile. Specifically, she provides no set date for her return to New York, nor is any date given for the completion of Haguy's education (who is already a college graduate and a certified public accountant and who has allowed his New York State CPA registration to lapse).

Furthermore, the objective evidence shows that Marcia now resides in Israel, and that she has rented her New York real property (with no information provided regarding the length of time of such rentals). Marcia does not provide any information as to the length of time she has leased her Israel residence or whether she has purchased real property in Israel. Marcia also admits that she has taken items, property, and money to Israel so she can continue to live a lifestyle commensurate with the way she lived in the United States. There is, thus, sufficient evidence to conclude that Marcia is a nondomiciliary residing without the State (see CPLR 6201 [1]).

Although Marcia's attorney argues that Marcia will appear in court, making attachment unnecessary, even if a nondomiciliary-nonresident is subject to in personam jurisdiction, CPLR 6201 (1) still sanctions the granting of an order of attachment to assure the plaintiff that when he or she obtains a judgment, there will be property in New York upon which he or she may execute (see McLaughlin, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C6201:2 at 12). Thus, the nonresident attachment statute (CPLR 6201[1]) permits "attachments against nonresidents when appropriate to secure [a] judgment, even when unnecessary to secure jurisdiction" (see ITC Entertainment Ltd. v Nelson Film Partners, 714 F2d 217, 220 [2d Cir 1983]). [*6]

In this case, Marcia does not assert that her assets would be kept in this jurisdiction, where they can be applied to satisfy a judgment (see Davila Pena v Morgan, 149 F Supp 2d 91, 94 [SD NY 2001], but, instead, states that any equity she has in the East 14th Street house is hers to do with as she wishes, and that it is her right, if she "choose[s] to convert th[e] equity [in her East 14th Street house] for [her] benefit," and to take money out of her Apple Bank account. Marcia's residence outside of New York and the need to ensure that a judgment in plaintiffs' favor will be satisfied provides an adequate reason for granting a continuance of the attachment of Marcia's assets (see Merrill Lynch Futures v Kelly, 585 F Supp 1245, 1249 [SD NY 1984]). Thus, plaintiffs have adequately demonstrated that the ground for attachment provided by CPLR 6201(1) has been satisfied (see Matter of Russian-Brazilian Holdings [Saraev], 197 AD2d 391, 392 [1993]).

Plaintiffs have further demonstrated that the ground for attachment specified in CPLR 6201(3), i.e., that Marcia, with the intent to frustrate the enforcement of a judgment that might be rendered in plaintiffs' favor against her, has disposed of, encumbered, or secreted property, and/or removed it from the state, and/or threatens to do so, has been satisfied (see Mineola Ford Sales Ltd. v Rapp, 242 AD2d 371, 371-372 [1997]). It has been established that (as noted above) Marcia received $50,456.95 of AGD's monies which had been transferred to her Citibank account, in violation of a restraining order, by FED, which were then transferred out of that account prior to this court's June 23, 2004 order specifically restraining that account, to some other account which Marcia has refused to identify. It has also been shown that (as previously discussed) Marcia received $50,000 of AGD's monies on June 16, 2004, which had been transferred by Tzabar, in violation of the June 8, 2004 restraining order, to Haguy, who then transferred it to Marcia by check made payable to her under her maiden name. Marcia has refused to identify the whereabouts of AGD's monies which were deposited and transferred from her bank accounts.

It appears that Marcia's assets, except for Marcia's East 14th Street house and the funds remaining in the Apple bank account, have been taken with her and her family to Israel. In fact, Marcia admits that she has already removed her personal property and monies from New York, and with respect to Marcia's East 14th Street house, she states (as noted above) that unless this court orders otherwise, she "may choose to convert that equity for [her] benefit and the benefit of [her] family." Indeed, Marcia asserts that she will not allow her property to be held "hostage" to this lawsuit, but will continue to use it to maintain her family's United States lifestyle in Israel. Consequently, the order of attachment must be confirmed (see CPLR 6201 [1],[3]; 6211 [b], 6212; Merrill Lynch Futures, 585 F Supp at 1249; Davila Pena, 149 F Supp 2d at 94; Mineola Ford Sales Ltd., 242 AD2d at 371; Matter of Russia-Brazilian Holdings [Saraev], 197 AD2d at 392).

Plaintiffs' motion, insofar as it seeks a default judgment against Tzabar, seeks to recover the total amount of $1,246,222.31 with applicable interest, as damages, from him. This amount is composed of the $600,804 proceeds from the sale of the Bayside property; the $325,120 proceeds from the sale of the Veterans Avenue property; the $116,798.31 which Tzabar received from FED pursuant to transfers made to him or to others pursuant to his direction or which he charged to FED's debit card; and the $203,500 profit of which AGD was allegedly deprived due to Tzabar's assignment to QCCI, for no consideration, of the contract to purchase the Linden property.

Pursuant to CPLR 3215(d), when there are multiple defendants and one of the defendants has defaulted, "the court may enter an ex parte order directing that proceedings for. . .the making of an assessment. . .be conducted at the time of or following the trial or other disposition of the action against the defendant who has answered." Plaintiffs' claim regarding an award of damages [*7]against Tzabar implicates the liability of Ilag, QCCI, and FED. In addition, to the extent that the damages trial is defended by the non-defaulters, this will have a bearing upon the amount of damages. Therefore, to grant an award of damages against Tzabar on issues affecting the remaining non-defaulting defendants who are still in litigation on liability as well as damages would be prejudicial to these non-defaulting defendants (see Grossman Steel Stair Corp. v Steinberg, 54 NYS2d 275, 276 [1944]). Thus, plaintiffs' request for an assessment of damages and an entry of a judgment on damages as against Tzabar must be held in abeyance, pending a determination of liability as to all other defendants herein (see CPLR 3215[d]).

Plaintiffs, in their motion, also seek partial summary judgment as against Marcia in their favor in the amount of $78,500 on their fifth and sixth causes of action for the imposition of a constructive trust and conversion, respectively. Plaintiffs contend that they are entitled to recover the $28,500 paid by FED checks to the trade contractors who provided work, labor, services, and related materials to Marcia's East 14th Street house. They also contend that they are entitled to recover the $50,000 transfer from Haguy and Marcia's Citibank account by check dated June 16, 2004 made payable to Marcia under her maiden name, which was derived from the $450,000 of AGD's monies wired by Tzabar from his individual Chase bank account to Haguy and Marcia's Citibank account.

As to plaintiffs' fifth cause of action for a constructive trust, it is noted that the lack of a fiduciary relationship does not automatically defeat a claim of constructive trust (see In re Koreag, Controle et Revision S.A., 961 F2d 341, 353-354 [2d Cir 1992], cert denied sub nom. Koreag v Refco F/X Assocs., 506 US 865 [1972]; Simonds v Simonds, 45 NY2d 233, 241 [1978]; Coco v Coco, 107 AD2d 21, 24 [1985]). "[T]he absence of any one factor will not itself defeat the imposition of a constructive trust when otherwise required by equity" (In re Koreag, Controle et Revision S.A., 961 F2d at 354). The key factor is unjust enrichment (see id.; Simonds, 45 NY2d at 242).

The purpose of a constructive trust is to restore a particular asset to the plaintiff, and it may be used to recover misappropriated assets and any property into which misappropriated assets have been converted. Thus, "[a] transferee receiving corporate assets with knowledge of the diversion is liable as a constructive trustee" (Julien J. Studley, Inc. v Lefrak, 66 AD2d 208, 214 [1979], affd 48 NY2d 954 [1979]; see also Laco X-Ray Systems v Fingerhut, 88 AD2d 425, 431 [1982]).

Here, plaintiffs allege that the $28,500 and $50,000 were diverted from AGD. Thus, if these allegations are proven, a constructive trust may be imposed on the diverted assets (see Executive Fashions v Howard, 261 AD2d 159, 160 [1999]).

As to plaintiffs' sixth cause of action, it is noted that "[t]he tort of conversion is established when one who owns and has a right to possession of personal property proves that the property is in the unauthorized possession of another who has acted to exclude the rights of the owner" (Republic of Haiti v Duvalier, 211 AD2d 379, 384 [1995]; see also Hoffman v Unterberg, 9 AD3d 386, 388 [2004]). Money can be the subject of conversion when it can be described, identified, or segregated in the manner that a specific chattel can be and when it is subject to an obligation to be returned (see Republic of Haiti, 211 AD2d at 384). "The funds of a specific named bank account. . .are sufficiently identifiable" for purposes of establishing a conversion claim (Lenczycki v Shearson Lehman Hutton, Inc., 238 AD2d 248, 248 [1997]; see also Republic of Haiti, 211 AD2d at 384).

A wrongful intention to possess the property of another is not an essential element of a conversion (General Elec. Co. v American Export Isbrandtsen Lines, 37 AD2d 959, 959 [1971]). It is sufficient if the owner has been deprived of the property by the defendant's unauthorized act in [*8]assuming dominion and control (see id.). Thus, one who, without right, takes, detains, disposes of, or otherwise asserts ownership or dominion with respect to the personal property of another, is subject to liability as a defendant for conversion, unless the person has disposed of the property before knowing of the plaintiff's claim (see Gilman v Abagnale, 235 AD2d 989, 991 [1997]; Ahles v Aztec Enterprises, 120 AD2d 903, 903-904[1986]; 23 NY Jur 2d, Conversion § 34).

Furthermore, a person may be liable for conversion by conniving with another in an act of conversion (see Ahles, 120 AD2d at 904). Thus, one who participates with a fiduciary in a misappropriation of funds is responsible for the conversion (see Grace v Corn Exchange Bank Trust Co., 287 NY 94, 100-101 [1941]). Liability for conversion may, therefore, be established by evidence that a party received wrongfully taken funds, knowing them to have been wrongfully taken, and he or she is chargeable with culpable knowledge of the wrongful act (see Leve v C. Itoh & Co. [America], 136 AD2d 477, 478 [1988]; 23 NY Jur 2d, Conversion § 43).

Here, with respect to the $28,500, Marcia, in opposition to plaintiffs' motion and in support of her cross motion for summary judgment, asserts that she paid Tzabar for all work done on the East 14th Street house, i.e., either by cash or by allowing him to bill her and Haguy's credit card for his personal expenses, and, if he used any money from AGD or FED to pay for the house, she knew nothing about it. Plaintiffs, however, have identified the $28,500 in checks and each of these checks was drawn on FED's account and signed by Haguy. Plaintiffs claim that these monies originated from payments made by AGD to FED, and that FED had taken and used these monies in breach of the FED contract. The issue of whether FED wrongfully received and/or used these monies, however, raises triable issues of fact not subject to summary judgment determination. Thus, summary judgment as to these monies cannot be granted.

With respect to the $50,000 check, Marcia states that this check, made payable to her in her maiden name, was given to her because Tzabar needed cash quickly and had no available bank account, and that she exchanged it for cash. This statement, however, is belied by the fact that the $50,000 check was not drawn by Tzabar, but was drawn by Haguy on Marcia's account which she jointly maintained with Haguy. Marcia's statement is also inconsistent with Haguy's deposition testimony that the $50,000 was for payment of loans which he made to Tzabar (Haguy's Dep. Tr. at 129, 177). Additionally, there is no evidence of any loans made to Tzabar.

Moreover, plaintiffs have shown that the $50,000 can be traced back to being part of the monies derived from Tzabar's sales of the Bayside property and the Veterans Avenue property. Thus, plaintiffs have sustained their burden, on their partial summary judgment motion, of making a prima facie showing of their entitlement to judgment as a matter of law with respect to the wrongful transfer of this $50,000 to Marcia (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). In opposing a summary judgment motion, the opponent bears the burden of making an evidentiary showing sufficient to raise a genuine triable issue of fact (see id. at 562; Rotuba Extruders v Ceppos, 46 NY2d 223, 231 [1978]; Abacus Real Estate Finance Co. v P.A.R. Constr. & Maintenance Corp., 115 AD2d 576, 576 [1985]). Marcia's nonspecific bare assertion, however, is devoid of any evidentiary facts as to why she received a $50,000 check from Tzabar, and is, thus, insufficient to defeat plaintiffs' well established prima facie showing based on the documentary evidence (see Zuckerman, 49 NY2d at 562; Corvetti v J & S Mills, Inc., 201 AD2d 448, 449 [1994]). Marcia has not offered any reasonable explanation, by competent evidence, to refute plaintiffs' evidentiary showing or to raise a bona fide triable issue of fact as to a defense to plaintiffs' claims. Consequently, plaintiffs are entitled to partial summary judgment as against Marcia with respect to [*9]this $50,000 sum, and Marcia's cross motion for summary judgment, insofar as it seeks dismissal of these claims, must be denied (see CPLR 3212 [e]).

Plaintiffs, by their motion, also seek summary judgment against FED and Haguy in the amount $116,798.31, with applicable interest, which FED paid to Tzabar's order and/or expended for Tzabar's benefit, as evidenced by FED's checks and bank statements as well as Haguy's deposition testimony. Plaintiffs contend that they are entitled to recover this $116,798.31 from FED because FED breached the Business Ethics sections of the FED contract, in section 7.6.3.2 et seq., which prohibited loans, gifts, and payments by FED to Tzabar.

Plaintiffs argue that Haguy should be personally held liable for the $116,798.31 which FED paid to Tzabar or paid for Tzabar's benefit because the facts warrant a piercing of the corporate veil (see Walkovszky v Carlton, 18 NY2d 414, 418 [1966]; Forum Ins. Co. v Texarkoma Transp. Co., 229 AD2d 341, 342 [1996]). In this regard, plaintiffs have shown that FED had no assets or income other than its contract with AGD. FED also conducted Haguy's personal business, paying $28,500 for the conversion of Marcia's house from a one-family to a two-family house. Moreover, AGD was FED's only customer, and FED did not conduct any business with any customer other than AGD. In addition, on June 15, 2004, within a week of the commencement of this action, Haguy made a closing withdrawal of the $50,456.95 remaining balance in FED's bank account, rendering it insolvent.

FED and Haguy argue that the $116,798.31 was made as loans to Tzabar, as the owner's representative, and they had no reason to know that Revankar did not approve of these loans. Such argument is unavailing since such payments to Tzabar was expressly prohibited by the FED contract. FED's violation of this ethics provision of the FED contract, however, does not automatically entitle plaintiffs to recover this $116,798.31 from FED or Haguy. Plaintiffs must show that such payments were made in exchange for Tzabar's misrepresentations to AGD that FED had fulfilled its performance obligations, entitling it to payment under the FED contract, and that FED had not, in fact, satisfactorily performed under the FED contract. Plaintiffs have not, at this juncture, established this as a matter of law.

Thus, plaintiffs' motion insofar as it seeks summary judgment with respect to the $116,798.31 claim against FED and Haguy must be denied, and FED and Haguy's cross motion, insofar as it seeks summary judgment dismissing plaintiffs' fifth, sixth, and seventh causes of action for imposition of a constructive trust, conversion, and fraud, respectively, must be denied.

As to plaintiffs' eighth cause of action for tortious interference, it is noted that tortious interference with contract requires the existence of a contract between plaintiff and a third party, defendant's knowledge of the contract, and defendant's intentional inducement of the third party to breach the contract, thereby causing plaintiff damages (see Bernberg v Health Management Systems, 303 AD2d 348, 349 [2003]). Tortious interference with a prospective economic advantage is actionable if such interference is effected by unlawful or wrongful means, solely motivated by malice and results in special damages to the plaintiff (see Snyder v Sony Music Entertainment, 252 AD2d 294, 299-300 [1997]).

FED could not interfere with its own contract, and there is no showing that FED, Haguy, or Marcia tortiously interfered with a contract or a prospective economic advantage. Thus, since the requested elements of a tortious interference cause of action are not satisfied, dismissal of plaintiffs' eighth cause of action for tortious interference as against FED, Haguy, and Marcia must be granted (see Bernberg, 303 AD2d at 349; Snyder, 252 AD2d at 299-300). [*10]

Plaintiffs' motion also seeks summary judgment against Haguy for the $450,000 transferred by Tzabar to Haguy's Citibank account, of which $400,000 was wired by Haguy to Tzabar's brother, Moshe Tzabar, in Israel, and $50,000 was drawn by Haguy, by a check payable to his wife, Marcia. Haguy testified, at his deposition, that Tzabar transferred the $450,000 to him because he had an opportunity to purchase a property (Haguy's Dep. Tr. at 159). He claims that he did not end up purchasing the property because the owner was given a better offer by someone else, and he, therefore, sought to return the money to Tzabar, and was told by Tzabar to wire $400,000 to Moshe Tzabar in Israel (Haguy's Dep. Tr. at 162, 177). Haguy asserts that he kept the $50,000, as repayment for various loans previously made by him to Tzabar, which added up to $50,000 (Haguy's Dep. Tr. at 129, 177).

Despite the fact that discovery has been completed, however, there is no evidence submitted by Haguy regarding this claimed potential purchase of property, and no affidavit of Haguy has been submitted. Additionally, with respect to the $50,000 in claimed loans, there are no loan documents whatsoever, but only blank checks, which were given by FED to Tzabar to make payable to whomever he wished. Moreover, plaintiffs have demonstrated that Haguy knew that the source of the $450,000 originated from AGD and, therefore, should have been returned to AGD, rather than diverted to Haguy's cousin or Marcia.

FED and Haguy contend that there is no evidence that they knew that Tzabar was acting without the authority of Revankar or against AGD's interests with respect to these monies. They note that Tzabar was the director and chief operating officer of AGD, and that there was no provision in the Shareholder's Agreement between Revankar and Tzabar stating that only Revankar could sign checks. They state that they relied upon the representations made by Tzabar and Revankar that Tzabar was authorized to do business on behalf of plaintiffs, and Revankar and AGD's acquiescence, which, they claim, amounted to a ratification of Tzabar's conduct. They argue that AGD and Revankar cloaked Tzabar with apparent authority to act.

Such argument is unavailing. "Essential to the creation of apparent authority are words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possesses authority to enter into a transaction" (Hallock v State of New York, 64 NY2d 224, 231 [1984]). There must be a factual showing " that the third party relied upon the misrepresentation of the agent because of some misleading conduct on the part of the principalnot the agent'" (id., quoting Ford v United Hosp., 32 NY2d 464, 473 [1973]). It must further be established that the third party's reliance upon the appearance of authority was reasonable (see Standard Funding Corp. v Lewitt, 89 NY2d 546, 551 [1997]).

Here, there is no evidence whatsoever of any misleading conduct on plaintiffs' part which gave rise to an appearance or belief that Tzabar had the authority to transfer $450,000 in sums belonging to AGD to Haguy and Marcia and to direct Haguy to transfer it to Israel or to Marcia. Haguy testified, at his deposition, that Tzabar had told him that he had formed AGD with an investor from India, i.e., Revankar (Haguy's Dep. Tr. at 186), and that Revankar was the source of AGD's monies. Furthermore, none of the payments made to FED ever came from Tzabar nor were any of the checks ever signed by Tzabar. Additionally, at the time of the transfer on June 15 and 16, 2004, Haguy and Marcia knew that Tzabar had been enjoined from transferring monies belonging to AGD.

Thus, since plaintiffs have made a prima facie showing of their entitlement to summary judgment on their claims for conversion and fraud with respect to the $450,000 diverted by Haguy, and Haguy, in opposition, has not refuted plaintiffs' evidentiary showing or raised any genuine [*11]triable issue of fact as to any defense to these claims, summary judgment on these claims against Haguy must be granted, and his cross motion, insofar as it seeks dismissal of these claims, must be denied (see CPLR 3212 [b], [e]). Since it does not appear that any of these monies remain in the possession of Haguy, the court cannot grant a constructive trust with respect to these monies as against Haguy.

In support of QCCI and Ilag's motion, Ilag asserts that he met Tzabar in February 2003, that Tzabar introduced him to Revenkar in December 2003, and that Tzabar referred to Revenkar as his partner. Ilag states that Tzabar told him that he was the owner of AGD, that he ran it, and that Revankar was an investor. Ilag explains that in the winter and spring of 2004, he conducted business through QCCI and was looking to borrow money so that QCCI could purchase real properties.

Ilag asserts that on May 20, 2004, Tzabar agreed to make the business loan of $450,000 to QCCI. Ilag points out that the $450,000 in funds transferred by Tzabar (which, as noted above, originally belonged to AGD) came from Tzabar's personal account (rather than from checks or wire transfers directly from AGD) and was placed in QCCI's checking account. Ilag states that he went to the office of his attorney, Luckman, who prepared the note for $450,000 from QCCI at a 6% interest rate with monthly payments of $2,697.98.

Ilag claims that Tzabar personally lent QCCI the $450,000, and that this loan was a legitimate arms-length transaction. QCCI and Ilag contend that they believed Tzabar possessed the authority to loan QCCI the $450,000 since it was transferred from Tzabar's own account, not from AGD. They claim that they were not acting in bad faith and did not know that Tzabar was not acting within his authority or that the monies used by Tzabar to make the loan had been wrongfully taken by Tzabar and belonged to AGD.

QCCI and Ilag further contend that Tzabar had actual or apparent authority to execute the assignment of the Linden property to QCCI on behalf of AGD. Ilag has submitted his sworn affidavit, wherein he attests that he did not know that Tzabar was acting outside of his authority, and that he thought that Tzabar, along with Revankar, was in charge of AGD. Ilag claims that he did not act in bad faith in taking the assignment. He asserts that Tzabar told him that the Linden property was one of his investments, but that since there might be a problem with his purchasing this property, QCCI might be able to purchase it instead. Ilag states that he went to the closing with Tzabar, that the sellers rejected an offer to pay $200,000 for the Linden property, and that he then offered to pay $225,000, on behalf of QCCI, for the Linden property, and the sellers accepted it.

At the closing, there was an assignment of the contract from AGD (who was the named purchaser in the contract) by Tzabar, as assignor, to QCCI, as assignee. The assignment of contract was prepared by AGD's attorney, Kenneth Golden (Golden), who handled the transaction. Tzabar signed all AGD documents, and the September 16, 2003 contract of sale between AGD and the sellers was executed by Tzabar, as president of AGD, and notarized by Golden. There was also a power of attorney executed by Revankar on May 5, 2001, which appointed Tzabar as Revankar's attorney-in-fact, granting him the authority to sell real property owned by AGD.

Ilag claims that he did not act in collusion with Tzabar with respect to the sale of the Linden property, but was, instead, angry that Tzabar retained $30,000 from its sale, after he gave Tzabar the power of attorney to conduct the sale on his and QCCI's behalf. Ilag asserts that he had no knowledge that there was an injunction in this case or that Tzabar was enjoined from taking any money from QCCI until late December 2004/January 2005, when he received a copy of a notice of motion to punish him for contempt. He points out that the affidavit of service for that motion was [*12]mailed to him on December 15, 2004. Ilag states that he, therefore, had no knowledge of the injunction until after the Linden property closed on October 28, 2004 and QCCI had already fully repaid the $450,000 loan.

Plaintiffs, in opposition to QCCI and Ilag's motion, have submitted Revankar's sworn affidavit, wherein he states that Ilag knew, because he specifically told him in December 2003, what his and Tzabar's relationships were in AGD, i.e., that Revankar was the president and the majority shareholder and had supplied all of AGD's capital, and that Tzabar was responsible for AGD's day-to-day management. Revankar states that Ilag was a consultant to him and AGD, and that he believed Ilag would assist him and Tzabar in structuring AGD so that his investment in AGD would be protected. In fact, AGD's attorney, Golden, testified, at his deposition, that Ilag "was a trusted adviser" for both Revankar and Tzabar (Golden's Dep. Tr. at 106).

Plaintiffs have identified the AGD bank account from which the $450,000 originated prior to being placed in Tzabar's personal account and transferred to QCCI. Revankar asserts that the $450,000 transfer to Ilag's wholly owned corporation to QCCI could not have been a legitimate arms-length transaction because Ilag was aware, from conversations with him, that he, and not Tzabar, "was the money person." Also, Revankar points out that with respect to the $450,000 loan, no due diligence was performed regarding QCCI's financial condition, and QCCI had no income or cash flow with which it could make the monthly payments required by the note. While the note, on its face, states that it was secured by a mortgage, no mortgage was ever executed by QCCI, and it was completely unsecured and non-recourse. In addition, as noted above, QCCI did not remit the payments pursuant to the payment schedule and the note was repaid in full 29 ½ years early.

With respect to the Linden property, Revankar argues that Ilag could not have believed the assignment of the contract, a valuable asset, by Tzabar to QCCI was legitimate since it was assigned for no consideration and Ilag admitted, at his deposition, that the Linden property was worth in excess of $100,000 over AGD's contract's purchase price (Ilag's Dep. Tr. at 105). Revankar further asserts that Ilag's claim that he did not learn of this case until late December 2004/January 2005 is disingenuous. He states that he and Ilag spoke on July 28, 2004 in the courthouse about this case and that, at that time, Ilag misrepresented to him that he had no business dealings with Tzabar.

Thus, material and triable issues of fact are raised as to Tzabar's actual and apparent authority with respect to the $450,000 loan and the assignment of the contract for the Linden property, and the involvement by QCCI and Ilag in the conversion and fraudulent transfers of AGD's monies and property. A triable issue of fact is also raised as to whether there was tortious interference with respect to AGD's loss of a corporate opportunity to purchase the Linden property (see Bernberg, 303 AD2d at 349; Snyder, 252 AD2d at 299-300). Where a corporate opportunity is usurped and identifiable monies fraudulently transferred or converted, retribution may be had in the form of a constructive trust on the funds involved (see Julien J. Studley, 66 AD2d at 214; Executive Fashions, 261 AD2d at 160; Laco X-Ray Systems, 88 AD2d at 431). Summary judgment dismissing plaintiffs' complaint as against QCCI and Ilag must, therefore, be denied. The court must conduct a full and fair trial, whereby it may "view the witnesses and evaluate their credibility"(Merrell Benco Agency, LLC v HSBC Bank USA, 20 AD3d 605, 607 [2005]).

Luckman, in support of his motion, asserts, in his sworn affidavit, that Ilag, on May 20, 2004, requested that he prepare a note in connection with a loan, and, on that same day, Ilag and Tzabar came to his office. Luckman states that he had never met Tzabar before that day, that Ilag told him the information which he wanted in the note, and that he printed a form of note. He claims that he [*13]did not know the purpose of the note and there was no discussion as to the accounts from which the monies were to be transferred, the purposes of the note, when QCCI would receive the principal, or anything about Revankar or AGD. Luckman states that the note was not signed in his presence. Luckman also states that he, also on May 20, 2004, prepared a loan calculator (an amortization schedule), intended to demonstrate the repayment of a typical 30-year loan, but that he did not discuss when

repayment under the note would actually begin. Luckman claims that he did not charge a fee for preparing the note or loan calculator.

Luckman further asserts that Ilag referred Tzabar to him as a client, and that Tzabar signed a retainer agreement dated June 14, 2004, retaining him as his attorney in this action for a retainer fee of $5,000. Luckman states that Tzabar arranged with Ilag for QCCI to pay the retainer because his account had been frozen, and Ilag paid this fee by check on June 18, 2004. A hearing was held on July 14, 2004, at which Luckman attended. Luckman claims that he was not made aware, during that hearing, of allegations that Tzabar had wrongfully transferred monies, which belonged to AGD, to either QCCI or Ilag. On July 15, 2004, Tzabar terminated his attorney-client relationship with Luckman by telephone, and he substituted new counsel on July 20, 2004. Luckman states that Tzabar had exhausted the full amount of the retainer at that time.

Luckman additionally states that on October 11, 2004, Ilag requested that he prepare the durable power of attorney in favor of Tzabar in order to give Tzabar the authority to complete the documents necessary for QCCI to sell the Linden property. Luckman admits that he complied with Ilag's request, and that he notarized Ilag's signature on the power of attorney. Luckman states that he did not charge Ilag or QCCI a fee for preparing the power of attorney. Luckman further states that he appeared at the closing on the Linden property, and that he prepared a bargain and sale deed and a proceeds from real estate transaction form. The proposed payments included a $30,000 payout to Tzabar, and Luckman was paid a fee of $500 from the closing proceeds for his professional services. Luckman also admits that he prepared the satisfaction of note and that he notarized Tzabar's signature on it on November 19, 2004. Luckman claims that these foregoing actions by him cannot be a basis for his liability to plaintiffs.

Plaintiffs, in opposition to Luckman's motion, argue that Luckman should have known as early as July 14, 2004 or, at the very least, should have been under a duty to make inquiry at that time, whereupon he would have discovered that Tzabar had, on May 20, 2004, wrongfully transferred $450,000 of AGD's monies, derived from the May 17, 2004 sale of AGD's Bayside property, to QCCI's Chase bank account, and that this was the same $450,000 represented by the May 20, 2004 note that Luckman had drafted for QCCI in favor of Tzabar, and from which Luckman had received his $5,000 retainer to represent Tzabar. Specifically, plaintiffs assert that Luckman was aware of the $450,000 transferred by Tzabar to QCCI, this lawsuit alleging that Tzabar misappropriated AGD's funds, the June 8, 2004 temporary restraining order enjoining Tzabar from conveying any monies belonging to AGD, and Tzabar's instruction to Ilag to have QCCI pay him the note's first two payments, which were not due until August and September 2004, as Luckman's $5,000 retainer fee.

Plaintiffs contend that the sale of the Linden property and the $30,000 payment to Tzabar from its sale proceeds should have raised a duty of inquiry on Luckman's part regarding Tzabar and his dealings with Ilag and QCCI. Plaintiffs further contend that Luckman should not have assisted [*14]in the November 19, 2004 transfer by QCCI to Tzabar in violation of this court's June 8, 2004 temporary restraining order by preparing the satisfaction of note.

Since Luckman was never in possession of any proceeds wrongfully transferred from AGD, there are no proceeds upon which to impress constructive trust. There is also no viable claim against him for tortious interference since there is no showing that Luckman has tortiously interfered with any contract or economic advantage of AGD (see Vigoda v DCA Productions Plus, 293 AD2d 265, 266-267 [2002]; Schoettle v Taylor, 282 AD2d 411, 411 [2001]; Business Networks of New York v Complete Network Solutions, 265 AD2d 194, 195 [1999]). Thus, dismissal of these causes of action as against Luckman is warranted.

With respect to plaintiffs' sixth cause of action for conversion, the court notes that it is not necessary for a converter to have taken physical possession of the property; it is enough if he or she acted in concert with another, exercising dominion over the property (see Ahles, 120 AD2d at 904). Additionally, it is noted with respect to plaintiffs' seventh cause of action for fraud that where there is a nexus between the primary fraud and a defendant's knowledge of the fraud and his or her actions with the intention of advancing the fraud's commission, a defendant may be held liable for aiding and abetting the fraud (see Franco v English, 210 AD2d 630, 633 [1994]). Thus, since Luckman has not established, as a matter of law, his lack of any knowledge of, or involvement in the fraudulent transfers and inasmuch as triable issues of fact exist with respect to Luckman's role in the aiding of such transfers, summary judgment dismissing plaintiffs' sixth cause of action for conversion and seventh cause of action for fraud as against Luckman cannot be granted (see Franco, 210 AD2d at 633; Ahles, 120 AD2d at 904).

Accordingly, plaintiffs' motion, insofar as it seeks an order, pursuant to CPLR 6212(a), confirming the order of attachment against Marcia's property, is granted. Plaintiffs' motion, insofar as it seeks partial summary judgment as against Marcia in their favor on their fifth and sixth causes of action, is granted with respect to the sum of $50,000, and is denied with respect to the sum of $28,500. Plaintiffs' additional motion, insofar as it seeks an order, pursuant to CPLR 3215(b), for an assessment of damages and entry of judgment as against Tzabar, is held in abeyance pending the determination of liability as to all other defendants. Plaintiffs' motion, insofar as it seeks summary judgment as against FED and Haguy, is granted on their sixth cause of action for conversion and seventh cause of action for fraud as against Haguy in the amount of $450,000, and is otherwise denied. Marcia, FED, and Haguy's cross motion for summary judgment is granted insofar as it seeks dismissal of plaintiffs' eighth cause of action for tortious interference as against them, and is otherwise denied. QCCI and Ilag's motion for summary judgment dismissing plaintiffs' complaint as against them, is denied. Luckman's motion for summary judgment dismissing plaintiffs' complaint as against him is granted with respect to plaintiffs' fifth cause of action for imposition of a constructive trust and eighth cause of action for tortious interference, and is otherwise denied.

This constitutes the decision and order of the court.

E N T E R

J. S. C.