Abley Props., Inc. v Reid

[*1] Abley Props., Inc. v Reid 2007 NY Slip Op 52391(U) [18 Misc 3d 1103(A)] Decided on December 4, 2007 Supreme Court, Kings County Lewis, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 4, 2007
Supreme Court, Kings County

Abley Properties, Inc., Plaintiff,

against

Dennis Reid, STANLEY DOWNER, FLEET BANK, BROOKLYN UNION GAS CO., CITY of NEW YORK ENVIRONMENTAL CONTROL BOARD, DEPARTMENT OF HOUSING PRESERVATION and DEVELOPMENT of the CITY OF NEW YORK, CITY of NEW YORK BUREAU of HIGHWAY OPERATIONS, CITY of NEW YORK PARKING VIOLATIONS BUREAU, SIMON OGAN, HAYES TAYLOR, and THE PEOPLE of the STATE of NEW YORK, Defendants.



12463/02



Plaintiff Attorney: Delbello, Donnellan, Weingarten

Defense Attorney:

Yvonne Lewis, J.

Denise Reid, as administratrix for the estate of Dennis Reid, her father, has moved this court by way of Order to Show Cause to vacate and void an August 25, 2005 assignment of claim to surplus funds from her said father to Vincent Longobardi. Said surplus, amounting to $259,821.51, generated from the foreclosure sale of 250A Kingston Avenue, Brooklyn, NY which Mr. Reid had acquired by deed, dated July 10, 1969. Mr. Reid died on December 24, 2005, at Downstate University Hospital, following years of suffering from Alzheimer disease and dementia.

Pursuant to the assignment document, $100,000.00 was placed in escrow with attorney Scott Klein to defray the costs of redeeming the subject property and to pay legal fees, and other expenses. According to attorney Klein, however, when this court denied his motion to vacate the foreclosure, the $100,000.00 was returned to Mr. Longobardi. In addition, he is unaware of any "various other expenses" having been paid by Longobardi, and he neither reviewed the assignment prior to Mr. Reid signing it, nor advised him in any way with regards to the same.

It is Ms. Reid's contention that her seventy-two year old father lacked ". . .the mental capacity to consent to any assignment of rights in any legal matters, including, but not limited to this surplus money proceeding, four months prior to his Death, due to his struggle with Alzheimer's Disease," that there was no valid consideration for said agreement, and that this court should therefore deem the subject assignment void as a matter of law, and disregard the Notice of Claim to surplus monies made by Mr. Longobardi, dated March 23, 2006 (Motion [*2]therefor, dated June 7, 2006). Ms. Reid's Notice of Claim for the surplus monies is dated June 7, 2006.

Mr. Longobardi represents that he is a "speculator and investor" in real estate. He claims to have paid attorney Klein $7,175.00 in legal fees, and $312.50 in disbursements. He also contends that he paid unspecified legal fees to the law offices of Scott Gross, Esq. to forestall Mr. Reid's eviction pending attorney Klein's motion to set aside the foreclosure. In addition, he deposited the mentioned $100,000.00 to be utilized by Mr. Reid solely to redeem his property should the vacatur be granted. The consideration given in exchange for the foregoing was that Mr. Longobardi would receive any surplus monies from the foreclosure sale.

In opposition to the plaintiff's arguments herein, counsel for Mr. Longobardi asserts that, 1. Ms. Reid lacks standing in the matter sub judice sinceher Temporary Letters of Administration were issued exclusively for the purpose of permitting her to commence a medical malpractice action on behalf of her father's estate prior to expiration of the applicable statute of limitations; 2. the assignment was an arm's length transaction, fully supported by consideration; 3. this court's order, dated September 12, 2005, established ". . .that Mr. Reid's advanced age and frail health did not excuse him from timely appearing in the action. . . .and that Mr. Reid had the insight and acumen to form a corporation with the assistance of his friend Mr. Lancaster to circumvent the referee's sale to French Open Realty, LLC;" and, 4. Ms. Reid failed to demonstrate that Mr. Reid was incompetent at the time that he signed the assignment, which occurred prior to both his intervention in the foreclosure and the formation of the just mentioned corporation. Counsel for Mr. Longobardi concludes that "[t]he fact that Mr. Reid displayed the level of sophistication and understanding to intervene in the proceeding and devise a relatively complex scheme to attempt to avoid the foreclosure judgment and sale suggests that he was certainly competent to sign the Assignment herein." Counsel goes on to cite a number of cases to support his assertion that "unsoundness of mind or insanity sufficient to rescind a contract must be of such character that the incompetent had no reasonable perception or understanding of the nature and terms of the contract at the time when he signed it." (Citing, e.g., Aldrich v. Bailey, 132 NY 85, 30 NE 264 [2d Dept., 1892]; Matter of Herman, 2889 AD2d 239 [1st Dept., 2001]). Finally, counsel asserts that not only has it not been demonstrated by clear and convincing [medical] evidence that Mr. Reid was incompetent when he entered into the subject contract, or that the transaction was unconscionable or unreasonable, but "Mr. Reid's grant of the [a]ssignment in return for assistance in defending the foreclosure action was. . .a reasonable business decision given his [dire] financial status." In addition, even if Mr. Reid had been incompetent, that would only have rendered the assignment voidable and, hence, subject to ratification by the incompetent upon regaining competence or by his duly authorized representative (citing, Ortelere v. Teachers' Retirement Bd. of the City of NY, 25 NY2d 196, Verstanding v. Schlaffer, 296 NY 62, Finch v. Goldstein, 245 NY 300, Blinn v. Schwarz, 177 NY 252, and In re Johanna C., 34 AD3d 465, 824 NYS2d 142 [2d Dept., 2006]), which was not done for over two years in this case.

It is to be noted that 1. attorney Klein submitted an affirmation to the effect that he had been approached by a Mr. Tyrone Lancaster to represent Mr. Reid; 2. Virginia Glanda, Esq. averred in her affirmation that she was employed by the law offices of Scott Gross, and that an associate of Mr. Longobardi's had approached her and asked that their office represent Mr. Reid; [*3]3. the Temporary Letters of Administration issued to Ms. Denis Reid sets forth that they are ". . . issued to initiate a medical malpractice and wrongful death lawsuit before the statute of limitations expires;" 4. the letters also read that ". . .said temporary administrator is restrained from collecting any assets belonging to the decedent without further order of the court;" 5. attached to Mr. Longobardi's papers is a copy of his $100,000.00 check to attorney Klein, with an unreadable memo, whereas no copies of payments (by check or cash receipt) to attorneys Klein or Gross are included.

Stanley Dower, one of the named defendants herein, submitted an affidavit in partial opposition to Ms. Reid in which he asserts that he is eighty-three years old, in poor health, that his claim to surplus monies as a subordinate mortgagee was interposed on or about January 6, 2005, that Mr. Reid's prior motion to set aside the foreclosure sale and Ms. Reid's instant order to show cause have resulted in undue delay of his claim, that he has no position vis-a-vis the instant order to show cause seeking to void the assignment of claim to Mr. Longobardi, but that he would like to see a resolution of this matter before he dies.

In reply, counsel for Ms. Reid contends that as the administrator and heir to the estate of Mr. Denis Reid, his client certainly has standing to ask this court to review the facts and circumstances of the subject assignment which Mr. Longobardi is attempting to obtain for virtually no consideration. In addition, counsel has attached several pages of Mr. Reid's medical records substantiating the fact that he did not have the mental capacity to execute the subject assignment, in that they indicate the following; to wit, "diminished capacity," "impaired," "displayed some paranoid and grandiose ideation as well as some intrusiveness," "rule out bipolar disorder, as well as delusional disorder and/or dementia and delusions'," "delusional disorder.....and impaired decision capacity," and "decisional capacity is impaired." Finally, counsel contends that there was a lack of consideration for the subject assignment since no reasonable person would assign $259,821.51 in surplus monies for $7,487.50 in legal fees and court costs.

Counsel for Mr. Longobardi, of course, objected to the proffer of medical documentation for the first time in Ms. Reid's reply papers. This court also notes that said records are dated from November 12 to 30, 2005, whereas the subject assignment is dated August 25, 2005.

The crux of this court's September 12, 2005 decision was that "[t]he Appellate Division has made it abundantly clear that [i]n the absence of fraud, collusion, mistake, or misconduct, a court is without discretion to set aside a sale of foreclosure unless the requirements of RPAPL §1341 are met.' Hence, where a defendant ". . . failed to make a payment into court and to make a motion to stay the sale of the property as required by RPAPL §1341(2), [the] right to redemption expired. . . .Mr. Reid, the tenants, and interested parties were in fact properly served. In addition, there is no indication of any fraud, collusion, mistake, or misconduct. The error in grantee name is obviously just that since French Open Realty, LLC was admittedly not in existence at the time of the conveyance, and Mr. Reid was and is the sole principal owner of French Open, LLC, located at his same address. Accordingly, the parties can remedy that error by correction deed. (See In Re Baffa's Estate,139 Misc. 298, 248 NYS 332 [1931], cited by Lido; and, compare Levitt v. 1317 Wilkins Corporation, 58 NYS2d 507 [1945])." At no time was the issue of Mr. Reid's competence raised. Hence, Mr. Longobardi's counsel's assertion that this court's order, dated September 12, 2005, established ". . .that Mr. Reid's advanced age and frail [*4]health did not excuse him from timely appearing in the action. . . .and that Mr. Reid had the insight and acumen to form a corporation with the assistance of his friend Mr. Lancaster to circumvent the referee's sale to French Open Realty, LLC" is not only false but obviously intended to mislead and confuse the instant matter. There was no valid basis raised by Mr. Reid, his daughter, or attorney Klein to set aside the foreclosure. In fact, the points raised by attorney Klein for vacatur were meritless.

While not directly on point with the matter sub judice, The Appellate Division, Second Department, in the matter of Dempster v. Overview Equities, Inc., et al, 4 AD3d 495, 773 NYS2d 71, NY Slip Op. 01149, held in pertinent part that ". . .direct evidence of fraudulent intent is often elusive. Therefore, courts will consider badges of fraud' which are circumstances that accompany fraudulent transfers so commonly that their presence gives rise to an inference of intent" (citing Pin Pak Corp. v. LaSalee Nat. Bank of Chicago, 240 AD2d 384, 658 NYS2d 407, quoting MFS/Sun Life Trust-High Yield Series v. Van Dusen Airport Servs., Co., 910 F. Supp. 913). Badges of fraud include (1) the close relationship among the parties to the transaction, (2) the inadequacy of the consideration, (3) the transferor's knowledge of the creditor's claims, or claims so likely to arise as to be certain, and the transferror's inability to pay them, and (4) the retention of control of property by the transferor after the conveyance (citing, Pin Pak Corp. v. LaSalee Nat. Bank of Chicago, supra ).

This court detects sufficient "badges of fraud" in the within transaction so as to negate its authenticity; to wit, the attorneys retained to vacate the foreclosure sale and to forestall his eviction were neither paid nor retained by Mr. Reid, and, all facts considered, it is highly doubtful that they ever had his best interests at heart. Rather, the circumstances suggest that they were merely aiding and abetting in the orchestration of a fraud, because irrespective of Mr. Reid's competence at the time of the purported assignment of claim herein, the simple fact is that the document itself is a sham. For it simply defies logic and common sense to believe that 1. an experienced foreclosure attorney would not have known, ab initio, that the failure to have abided the dictates of RPAPL §1341 would be fatal to his motion to vacate a foreclosure, and, 2. an arm's length bargain would result in a person agreeing to barter $259,821.51 in surplus monies for $7,487.50 in legal fees and court costs to vacate a valid foreclosure, plus whatever other legal fees and costs were paid to forestall an inevitable eviction. There is no verification in Mr. Longobardi's submissions to even establish that said payments were in fact made. The $100,000.00 deposited into escrow reveals Mr. Longobardi's deception even more readily. There is no proof that Mr. Reid ever had access or dominion and control over said funds. In addition, as opposing counsel to attorney Klein's motion to vacate noted, "even if redemption were legally available; i.e., not extinguished by the foreclosure sale, the fact is that the sum of $100,000.00 would be insufficient to accomplish that goal since $88,107.50 was paid to Abley for its foreclosed mortgage and the purchase of the first mortgage that had been held by Neighborhood Housing Services of New York City, Inc., $15,969.00 was paid for real estate taxes, $31,570.25 was collected for unpaid water charges, $25,000.00 for emergency repair charges, and $108,000.00 for HPD charges, totaling $268,646.75. Hence, far from being as he terms it, "a speculator and investor in real estate," the facts before this court reveal that Mr. Longobardi was engaged in a predatory legerdemain designed to unjustly enrich himself while at no time assisting or rendering actual aid to Mr. Reid, who by all accounts was his unwitting prey. [*5]

WHEREFORE, on the basis of all of the foregoing, Denise Reid's motion, as administratrix for the estate of Dennis Reid, her father, to vacate and void the August 25, 2005 assignment of claim to surplus funds from her said father to Vincent Longobardi is granted. This constitutes the decision and order of this Court.

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