276 Skillman St. LLC v Ralph Constr.
Annotate this CaseDecided on February 22, 2008
Supreme Court, Kings County
276 Skillman Street LLC, Plaintiff,
against
Ralph Construction, et al., Defendants.
33645/06
Attorney for Plaintiff
David J. Wolkenstein
Lauterbauch Garfinkel Damast & Hollander, LLP
22 West 38th Street, 12th Floor
New York, New York 10018
Attorney for Defendant
Patrick Barnhart
Rossi & Crowley, LLP
42-24 235th street
Douglaston, NY 11363
Carolyn E. Demarest, J.
In this action by plaintiff 276 Skillman Street LLC (plaintiff) against defendants Ralph Construction, Skillman St. LLC, Garret Evanty, Ralph Willingham a/k/a Ralph Williams (Ralph Williams), John Doe No.1, John Does #2-5, and J & R Holding Management Corp. a/k/a J & R Holding Management, Inc. (J & R) to reclaim title to a certain parcel of real property, plaintiff moves for an order: (1) pursuant to CPLR 3215, granting it a default judgment on the claims set forth in its amended complaint against Ralph Construction, Ralph Willingham, Skillman St. LLC, and Garret Evanty, and directing that a hearing date for an assessment of damages be scheduled, and (2) pursuant to CPLR 3212, granting it summary judgment on the claims set forth in its amended complaint against J & R. [*2]
Lazer Strulovitch is a real estate developer, who, through various entities set up for the purpose, owns between 10 and 20 properties in Brooklyn, New York. Each of these properties is owned by a separate LLC and all are managed by Park Avenue Management, a management company also owned by Lazer Strulovitch. In November 2002, plaintiff was formed with Lazer Strulovitch as its sole member and manager. By deed dated November 21, 2002, and recorded with the New York City Register on December 12, 2002, plaintiff purchased a parcel of real property, located at 276 Skillman Street, in Brooklyn, New York, from Aron Ostreicher. The property consists of a fenced unimproved 120 foot by 20 foot vacant lot.
By deed dated September 13, 2004, defendant Skillman St. LLC purported to convey title to the 276 Skillman Street property to Ralph Construction. The deed was executed by Garret Evanty, as Skillman St. LLC's president, and recorded with the New York City Register on September 27, 2004. The Real Property Transfer Report lists no consideration paid for that transfer. There is no limited liability company registered under the name of Skillman St. LLC. Ralph Construction is an unincorporated entity; a business certificate dated October 25, 2001, reflects that Ralph Willingham conducts business under the name of Ralph Construction.
In response to plaintiff's motion, Pierre Rochemont, who is the president and sole shareholder of J & R, a real estate management and development company, claims that in mid-September 2006, while ordering some iron work from a shop on Skillman Street for a gut renovation project, he noticed the vacant property at 276 Skillman Street with several vehicles parked on it, and approached a man who appeared to be managing the parcel and who identified himself as Ralph Willingham, the owner of the parcel through a business known as Ralph Construction. According to Pierre Rochemont, at that time, he told Ralph Willingham to give him a call if he were ever interested in selling the property, and, during the first week in October 2006, Ralph Willingham informed him that he was interested in selling the property for all cash and with no mortgage contingency. Pierre Rochemont asserts that after checking the City's ACRIS system to confirm that Ralph Construction was the owner of the property and viewing a picture of the property on the website Propertyshark.com, he negotiated the purchase of the property with Ralph Willingham for a purchase price of $90,000, and ordered a title abstract.
A contract for the sale of the 276 Skillman Street property, dated October 25, 2006, by Ralph Construction, as seller, to J & R, as buyer, was prepared by Ralph Construction's attorney, Adrien J. Woolley, Esq., and executed by Ralph Willingham. J & R, by checks dated October 25, 2006, paid Ralph Willingham $10,000 and $50,000. The closing of the sale of the property was held on the morning of November 3, 2006, and J & R, by checks dated November 3, 2006, made payable to Ralph Willingham in the amount of $5,000 and $24,245, paid the balance of the purchase price. The deed, dated November 3, 2006, was taken from the closing by the title closer for the title abstract company for recording with the New York City Register. [*3]
According to Lazer Strulovitch, the sale of the 276 Skillman Street property to Ralph Construction was unbeknownst to him and plaintiff, and it was not until the fall of 2006, that Shia Rosenbaum, an employee of Park Avenue Management, while driving by the property, noticed that it was being used as a parking lot and that the lock on the gate of the fence surrounding the property had been broken and replaced with a new lock. Lazer Strulovitch claims that on or about October 20, 2006, after a search on ACRIS, he discovered the property had been transferred by the September 27, 2004 deed. Despite the similarity in name between Skillman St. LLC and plaintiff (276 Skillman Street LLC), plaintiff and Lazer Strulovitch deny that plaintiff has any connection whatsoever to Skillman St. LLC. They assert that Garret Evanty has never been a member, owner, or manager of plaintiff and that Garret Evanty never had any authority to act for plaintiff or to transfer title to the property to Ralph Construction.
Consequently, at 3:14 p.m. on November 3, 2006, the same day the closing of the sale took place, plaintiff filed a summons and complaint against Ralph Construction, Skillman St. LLC, Garret Evanty, Ralph Willingham, John Doe #1 (which is an alternative fictitious name for a defendant whose first name may be Garret), and John Does # 2-5 (who are the individuals whose names are not known to plaintiff who may also be owners and operators of Ralph Construction). At the same time, plaintiff filed a notice of pendency with the Kings County Clerk against the 276 Skillman Street property. On November 15, 2006, the deed from Ralph Construction to J & R was recorded with the New York City Register. On December 2, 2006, plaintiff served the summons and complaint, by nail and mail service pursuant to CPLR 308 (4), upon Ralph Willingham, Ralph Construction, Garret Evanty, and Skillman St. LLC by affixing the summons and complaint to the door of 892 Bedford Avenue and mailing them to these defendants at that address.
Plaintiff claims that upon learning of the further sale of the 276 Skillman Street property to J & R, it filed a supplemental summons and amended complaint dated January 3, 2007, adding J & R as a defendant to this action. Plaintiff effectuated service upon J & R through the Secretary of State on January 11, 2007. On January 31, 2007, plaintiff personally served the supplemental summons and amended complaint on Ralph Construction and Ralph Willingham, and served the other defendants by first class mail on January 10, 2007.
Plaintiff's amended complaint alleges causes of action for a determination of title to the real property pursuant to RPAPL article 15, fraud, and trespass. It seeks, among other things, a declaratory judgment that it is the true lawful owner of the 276 Skillman Street property and directing that the deeds from Skillman St. LLC to Ralph Construction and from Ralph Construction to J & R be cancelled and stricken from the New York City Register's records. J & R served its answer on March 30, 2007, interposing defenses, including that it was a bona fide purchaser for value, that it has a superior interest in the property, and that plaintiff and Skillman St. LLC are alter egos and are owned and operated by the same principals. J & R's answer also asserts cross claims against Ralph Willingham and Ralph Construction. The other defendants have failed to interpose [*4]answers or otherwise appear in this action. A preliminary conference was held on August 8, 2007. Thereafter, while discovery pursuant to the preliminary conference order remained outstanding, plaintiff brought this motion for summary judgment. The court has directed that discovery proceed pending the determination of this motion.
In addressing plaintiff's motion, it is noted that generally, "[p]ursuant to Real Property Law § 266, a bona fide purchaser . . . for value is protected in his or her title unless he or she had previous notice of the alleged prior fraud by the seller" (Karan v Hoskins, 22 AD3d 638, 638 [2005]; see also LaSalle Bank Natl. Assn. v Ally, 39 AD3d 597, 599-600 [2007]). Where, however, the grantor lacks actual or apparent authority to sign a deed on an entity's behalf and the grantee has knowledge of facts that would lead a reasonable, prudent purchaser to make inquiries as to the circumstances of the transaction, a purchaser's title cannot be protected since he or she has previous notice of the prior fraud by the immediate seller (see LaSalle Bank Natl. Assn., 39 AD3d at 599-600). Moreover, "a person cannot be a bona fide purchaser for value through a forged deed, as such a deed is void and conveys no title" (Karan, 22 AD3d at 639; see also LaSalle Bank Natl. Assn., 39 AD3d at 600; Cruz v Cruz, 37 AD3d 754, 754 [2007]; Yin Wu v Wu, 288 AD2d 104, 105 [2001]; Rosen v Rosen, 243 AD2d 618, 619 [1997]; Kraker v Roll, 100 AD2d 424, 432 [1984]). Thus, where the signature of the grantor to a deed is a forgery, the deed is null and void and cannot divest the title of the actual owner (see LaSalle Bank Natl. Assn., 39 AD3d at 600; Cruz, 37 AD3d at 754; Karan, 22 AD3d at 432; Yin Wu, 288 AD2d at 105; Rosen, 243 AD2d at 619; Kraker, 100 AD2d at 432). Furthermore, once a property has been obtained by way of a forged deed, any subsequent purchaser from the alleged grantee, even for value and without notice, will not be protected, and such transfer is also a nullity (see Yin Wu, 288 AD2d at 105).
Plaintiff, in support of its motion, has submitted the sworn affidavit of Lazer Strulovitch, who states that he does not know Garret Evanty or Ralph Willingham and had never heard of Ralph Construction until he discovered the deed, more than two years after it was filed with the New York City Register. He attests that neither he nor plaintiff transferred the property to Ralph Construction on September 13, 2004 and that he was shocked when he discovered the ostensible transfer.
Plaintiff thus asserts that the 276 Skillman Street property was fraudulently transferred to Ralph Construction on September 13, 2004, without its knowledge or consent, and without any authority given by it. Plaintiff further asserts that since its name is 276 Skillman Street LLC, the deed to Ralph Construction purporting to transfer the property from a fictitious owner/transferor, Skillman St. LLC, which was never the owner of the property, is invalid on its face and could not validly transfer the property to Ralph Construction. Plaintiff argues that the deed to Ralph Construction was, thus, tantamount to a forged deed, which is null and void. Plaintiff then argues that, inasmuch as the 276 Skillman Street property was never validly owned by Ralph Construction, the ostensible further transfer of the property from Ralph Construction to J & R was likewise a nullity.
In seeking the relief requested by its motion, plaintiff contends that since Ralph Construction, Skillman St. LLC, Garret Evanty, and Ralph Willingham have failed to answer its complaint, it is entitled to a default judgment as against them. It further contends that, by their default, these defendants have admitted the truth of the allegations that the [*5]September 13, 2004 deed to Ralph Construction is a forgery. Plaintiff argues that it has, therefore, established that the transfer of the 276 Skillman Street property from Ralph Construction to J & R was void ab initio since it was obtained by J & R from a grantee (Ralph Construction) who took the property by way of a forged deed.
It is true that, procedurally, by defaulting in an action, a defendant admits all factual allegations of the complaint (see Fleet Bank v Powerhouse Trading Corp., 267 AD2d 276, 277 [1999]; Silberstein v Presbyterian Hosp. in City of NY, 96 AD2d 1096, 1097 [1983]). However, the default of Ralph Construction cannot work to the prejudice of J & R, who has answered the complaint and raised defenses with respect to the merits of this action. Thus, since the entry of a default judgment against the defaulting defendants would effectively determine the merits of this action which are disputed by J & R, plaintiff's motion insofar as it seeks the entry of a default judgment against the defaulting defendants must be deferred until the time of the disposition of this action as against J & R, which has answered the complaint (see CPLR 3215 [d]).
Plaintiff further argues, however, that even without Ralph Construction's effective admission by default, the deed to J & R must be declared a nullity since it derives from Ralph Construction's deed, under which the 276 Skillman Street property was transferred to it by a non-existent entity (i.e., Skillman St. LLC) or a person (i.e., Garret Evanty) who had no authority to do so. In this regard, plaintiff does not claim that J & R participated in any fraud, but, rather, states that J & R "appears to be another victim of Ralph Construction's fraud." Plaintiff asserts that since it has denied any involvement with Skillman St. LLC, Garret Evanty, Ralph Willingham, and Ralph Construction, and any knowledge of the deed to Ralph Construction until October 20, 2006, it is entitled to summary judgment against J & R.
While plaintiff and J & R agree that a fraud has been perpetrated, they dispute who is responsible for it. J & R seeks to cast responsibility on plaintiff, claiming that it may have been responsible for the fraudulent conveyances and should, therefore, not be permitted to benefit from the filing of its notice of pendency which, as noted above, occurred on November 3, 2006, the very day of the transfer of the 276 Skillman Street property to J & R which was not recorded in the New York City Register's Office until November 15, 2006.Although plaintiff argues that J & R has not demonstrated that plaintiff was involved in the transfers of the 276 Skillman Street property, J & R opposes plaintiff's motion for summary judgment as premature, asserting that the evidence which it has been able to uncover to this point suggests that plaintiff may have had some connection or involvement in these conveyances and that it needs further discovery in order to substantiate its defense. Plaintiff responds that J & R does not offer any realistic basis supporting its claim that further discovery will result in uncovering any relevant evidence.
To support its assertion that an opportunity for further discovery should be afforded to it, J & R points out that in the depositions of plaintiff's representatives, Lazer Strulovitch and Shia Rosenbaum, which took place on September 25, 2007, a central line of inquiry focused on an effort to determine whether, despite plaintiff's denial, there was some connection between plaintiff and either Garret Evanty, Ralph Willingham, or another person or entity involved in the alleged transfers to Ralph Construction and then to J & R, two years later. A further central line of inquiry during these depositions was an attempt to learn how plaintiff, after more than two years following the September 13, 2004 transfer to [*6]Ralph Construction, suddenly learned of the allegedly fraudulent transfer and then filed its notice of pendency on the very afternoon of the closing of the sale of the property to J & R on November 3, 2006, following J & R's payment for the property. As part of these inquiries, plaintiff's representatives were asked to provide certain documents following the depositions. While plaintiff has provided some of the requested documents, plaintiff's attorney, by a letter dated November 1, 2007, has refused to provide certain other documents.
Specifically, plaintiff has completely refused to provide the names of the tenants of 388 Berry Street (plaintiff's former address) from the years 2002-2007; leases for 388 Berry Street; a list of partners/investors in the properties managed by Park Avenue Management, and a list of partners/investors in L & F Realty (which is another real estate entity owned by plaintiff and its principals). Plaintiff alleges that it need not produce this information because there is no basis to assume that a tenant of 388 Berry Street is the connection between plaintiff and Garret Evanty or Ralph Willingham.
Plaintiff has also not produced a list of all other real properties and corporate entities managed and served by Park Avenue Management and a list of all other real properties owned by Lazer Strulovitch, either individually or through a corporate entity. In the November 1, 2007 letter, plaintiff's attorney asserted that it would provide these lists only if J & R executed an enclosed non-disclosure agreement, but it did not enclose this non-disclosure agreement nor did it subsequently produce these documents. Plaintiff asserts that this information is not relevant to this action, and that J & R's request for it constitutes nothing more than a "fishing expedition."
In assessing the relevance of the requested information, it is significant that one of the properties owned and managed by Lazer Strulovitch is 388 Berry Street, which was listed on the deed to Ralph Construction as the address of the transferor, Skillman St. LLC. On September 13, 2004, when the property transfer to Ralph Construction took place, 388 Berry Street was the address of plaintiff, in which plaintiff's offices were located, and the address of Park Avenue Management. 388 Berry Street is also the address listed as plaintiff's address on the original November 21, 2002 deed in which plaintiff obtained title to the property. In addition, the 388 Berry Street address is listed as plaintiff's address in its summons and complaint. Thus, the determination as to who had an ownership interest or was a tenant at the 388 Berry Street property during the relevant time periods is relevant and pertinent to J & R's defense of this action.
J & R has also submitted the sworn affidavit of Arlene Barsch, a real estate sales agent, paralegal, and title closer for Prudential Douglas Elliman Real Estate. Arlene Barsch, in her sworn affidavit, asserts that she is familiar with a person named Garrett Everett, who she believes to be the same person as Garret Evanty, the named defendant in this case. Arlene Barsch states that Garrett Everett has been involved in several fraudulent transactions, including one which is involved in current litigation pending in this court under Index No. 32843/06. Arlene Barsch further states that a man known to her as John Boswell has been involved in questionable real estate transactions in Williamsburg. Arlene Barsch attests that John Boswell has rendered services for Garrett Everett and has been in possession of keys for properties with which Garrett Everett has been involved, and that she is also aware that "John Boswell has worked for and/or in conjunction with Lazer Strulovitch in a similar capacity." [*7]
In response, plaintiff argues that Arlene Barsch is untruthful since there is no evidence of her having a real estate agent's license in New York. Plaintiff's argument, though, is belied by the fact that J & R has submitted evidence showing that Arlene Barsch is listed as a real estate agent for Prudential Douglas Elliman Real Estate. Plaintiff also complains that Arlene Barsch's information is hearsay and not specific enough to identify the capacity in which Garrett Everett worked for John Boswell, how she knows John Boswell, or the connection between John Boswell and Lazer Strulovitch. The lack of specificity of Arlene Barsch's affidavit, however, at this juncture, does not change the fact that the issues raised therein may warrant further investigation and should not foreclose J & R from pursuing such inquiry.
Thus, contrary to plaintiff's argument, the requested records and information are pertinent to J & R's investigation of plaintiff's claim of fraud perpetrated by Garret Evanty or Ralph Willingham since it will permit J & R to cross-reference the owners, mortgagees, transferees, and tenants and properties to determine if there is any commonality between any of them and those involved in the transaction at issue here. As J & R points out, if there is some thread of commonality, this may be indicative that plaintiff and its representatives had some involvement or had notice of the prior allegedly fraudulent transfers.
J & R also contends that further discovery as to Lazer Strulovitch's bank accounts is necessary since he testified, at his deposition, that he had three or four bank accounts at JP Morgan Chase Bank, where Ralph Willingham cashed the checks provided to him by J & R (Strulovitch's Dep. Transcript at 107). Plaintiff's attorney now claims that there was "no such active account" and has provided no information as to these bank account numbers. Plaintiff opposes providing this bank account information, contending that since all of the checks were made out to Ralph Willingham, this information is irrelevant. J & R, however, seeks to determine if any of this money was thereafter transferred into any bank account held by Lazer Strulovitch. Plaintiff maintains that J & R should have subpoenaed JP Chase Morgan Bank for the relevant information. J & R asserts that it intends to do so, now that plaintiff has refused to provide the requested information, and that it should be afforded the time needed in order to do so. Thus, inasmuch as this information appears to be pertinent to J & R's investigation and defense of the claim of fraud, there is no reason to foreclose J & R from engaging in further discovery.
In opposing plaintiff's motion, J & R also asserts that it is entitled to have a full opportunity to investigate plaintiff's "coincidental" filing of the notice of pendency on November 3, 2006, the very afternoon of the sale to J & R. In an attempt to explain this simultaneous filing, plaintiff has submitted the reply affidavit of Shia Rosenbaum. Shia Rosenbaum explains that in October 2006, he had submitted an application to the Department of Sanitation (the DOS), on behalf of plaintiff, for the removal of vehicles which were placed on the 276 Skillman Street property. He claims that until the DOS advised him that the application would not be processed because plaintiff was not listed as the record owner of the property, neither he nor plaintiff had any idea of the transfer of title to the property to Ralph Construction. He states that, instead, he and plaintiff merely believed that somebody was trespassing on the property. Plaintiff has submitted a copy of the application to the DOS to remove cars parked on the 276 Skillman Street property in order to corroborate this explanation. [*8]
However, while plaintiff claims complete ignorance of the transfer of the 276 Skillman Street property until October 2006, Lazer Strulovitch admits that in July 2006, plaintiff paid a real estate tax bill addressed to Ralph Construction at 388 Berry Street. Mr. Strulovitch admitted that when he approved of this bill, he "most probably" noticed how this bill was addressed (Strulovitch's Dep. Transcript at 52). J & R contends that this July 2006 tax payment suggests prior knowledge of, and acquiescence in, the transfer to Ralph Construction. Thus, questions of fact are raised which bear upon plaintiff's responsibility with respect to the alleged fraudulent conveyances (see Levy v City of New York, 232 AD2d 160, 161 [1999]).
Pursuant to CPLR 3212 (f), summary judgment must be denied as premature where facts essential to justify opposition may exist, but cannot then be stated, particularly where the moving party has failed to comply with pending discovery requests (see Colicchio v Port Auth. of N.Y & N.J., 246 AD2d 464, 468 [1998]; Campbell v City of New York, 220 AD2d 476, 477 [1995]; Soto v City of Long Beach, 197 AD2d 615, 616 [1993]; Wohlgemuth v Logan, 144 AD2d 160, 161 [1988]). Summary judgment cannot be granted where the party opposing the motion has not had an adequate opportunity to conduct discovery into issues within the knowledge and possession of the moving party (see Colombini v Westchester County Healthcare Corp., 24 AD3d 712, 715 [2005]; OK Petroleum Distrib.Corp. v Nassau/Suffolk Fuel Oil Corp., 17 AD3d 551, 552 [2005]; Mazzola v Kelly, 291 AD2d 535, 535 [2002]; Firesearch Corp. v Micro Computer Controls Corp., 240 AD2d 365, 366 [1997]).
Here, J & R has not yet been afforded an adequate opportunity to conduct discovery into the relevant issues, some of which are exclusively within plaintiff's knowledge (see Firesearch Corp., 240 AD2d at 366). Additional time to complete the discovery process will not unfairly prejudice plaintiff since the filing of its notice of pendency ensures that J & R cannot sell or encumber the property and that the status quo will be maintained while discovery is completed. Furthermore, plaintiff has not indicated any immediate need to sell the property or any other urgent need to clear title. Therefore, J & R should be given an opportunity to complete discovery and further develop the facts upon which its defense rests (see Soto, 197 AD2d at 616). Consequently, denial of plaintiff's motion, without prejudice to renewal upon the completion of discovery, is warranted (see CPLR 3212 [f]).
Accordingly, plaintiff's motion is denied without prejudice to renewal following the completion of discovery. The parties are directed to appear for conference on April 9, 2008 in Commercial I.
This constitutes the decision and order of the court.
E N T E R,
J. S. C.
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