CDR Créances S.A.S. v Cohen

[*1] CDR Créances S.A.S. v Cohen 2008 NY Slip Op 52351(U) [21 Misc 3d 1135(A)] Decided on November 21, 2008 Supreme Court, New York County Tolub, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 21, 2008
Supreme Court, New York County

CDR Créances S.A.S., as Successor to Société de Banque Occidentale, Plaintiff,

against

Leon Cohen a/k/a LEON LEVY a/k/a LEON LEVY COHEN a/k/a LEON COHEN LEVY a/k/a LEON COHEN-LEVY a/k/a LEVY COHEN a/k/a LEVY LEO COHEN a/k/a LEO COHEN LEVY a/k/a LEON COMEN; MAURICE COHEN a/k/a MAURICIO ASSOR a/k/a MAURICIO COHEN ASSOR a/k/a MAURICE ASSOR; SONIA COHEN; IDERVAL HOLDING, LTD.; BLUE OCEAN FINANCE, LTD.; WORLD BUSINESS CENTER, INC., ROBERT MARABOEUF; EDOUARD SONNENSCHEIN; ROBERT HARRISON; ALLEGRIA ACHOUR AICH; MICHELLE SENAT; CLARA LOPEZ; JUDI YOUMANS; PATRICIA HABIB PETETIN; MARTINE GALES; JOELLE HABIB and SUMMERSON INTERNATIONAL ESTABLISHMENT f/k/a FLATOTEL INTERNATIONAL ESTABLISHMENT, Defendants.



600448/06



Counsel for Plaintiff:

Douglas A. Kellner, Esq.

Kellner Herlihy Getty & Friedman, LLP

470 Park Avenue South

New York, New York

Counsel for Defendants Leon Cohen, Maurice Cohen and Sonia Cohen :

David S. Pegno, Esq.

Dewey Pegno & Kramarsky LLP

220 East 42nd Street

New York, New York

Counsel for Defendants Joelle Habib, Allegria Aich, Robert Maraboeuf, and Patricia Petetin(Benharbon):

Bradley D. Simon, Esq. Brian D. Waller, Esq.

Simon & Partners LLP

30 Rockefeller Plaza, 42nd Floor

New York, New York

Walter B. Tolub, J.

Motion Sequences 022, 025 and 026 are consolidated and resolved in the following memorandum decision.

The bulk of the motion practice associated with these three sequences challenge this court's August 7, 2008 decision ("the August decision") which granted plaintiff a default judgment

valued in excess of one quarter of a billion dollars (the "default judgment"). By motion sequence 022, plaintiff CDR Créances, S.A.S. ("CDR") moves for an order pursuant to CPLR 5229 restraining defendants Leon Cohen, Maurice Cohen, Sonia Cohen, Iderval Holding, Ltd., World Business Centre, Inc., Blue Ocean Finance, Ltd. Robert Maraboeuf, Patricia Habib Petetin, Allegria Aich, Joelle Habib, and any of their officers, directors, employees, agents, representatives, successors and assigns and all other persons acting under their direction or control or in active concert or participation with them, from selling, transferring, or interfering with any property in which defendants have an interest, except upon direction of the sheriff or pursuant to an order of the court, until the default judgment is satisfied.

In opposition, defendants Leon Cohen, Maurice Cohen and Sonia Cohen (collectively, the "Cohen defendants") cross-move pursuant to CPLR 2221(d) and 2221(e) for leave to renew and reargue the August 2008 decision, and upon renewal and re-argument, an order vacating their default, and ultimately, an award of summary judgment pursuant to CPLR 3212 and dismissal of plaintiff's claims.[FN1] Under an alternative theory of relief, the Cohen defendants seek an order vacating the August decision pursuant to CPLR 5015(a). Defendant Joelle Habib joins the Cohen defendants cross-motion and similarly seeks an order vacating her default by way of CPLR 2221(d) and/or 2221(e), or alternatively, via CPLR 5015(a).

A motion virtually identical to the cross-motion asserted in [*2]motion sequence 022 is made by defendant Habib in motion sequence 025, and motion sequence 026, advanced by defendants Allegria Aich, Robert Maraboeuf, and Patricia Petetin(Benharbon),[FN2] echoes the relief sought by the Cohen defendants.

Relevant Background

The complexity of the facts of this case, and its State Supreme Court sibling, CDR Créances S.A.S., as Successor to Société de Banque Occidentale v. Maurice Cohen, et al. (Index No. 109565/03)(the "2003 action") has been previously detailed.[FN3] The core event giving rise to this, and several other related actions,[FN4] involves the alleged breach of two Pledge Agreements (the "Pledge Agreements") issued in 1991 by CDR's predecessor in connection with a loan of more than $92 million dollars ("the loan"). The loan was issued to Euro-American Lodging Corporation ("EALC") and its shareholders, Summerson International Establishment, a Liechtenstein trust, ("Summerson") and Summersun International et Cie ("Summersun") for the purpose of acquiring property at 135 West 52nd Street in Manhattan ("the Flatotel"). EALC, Summerson and Summerson were controlled by defendant Maurice Cohen and his son.

CDR's consideration for the loan included a security interest in EALC's 1000 shares of authorized and issued stock, which was owned and equally divided between Summerson and Summersun. The terms of the Pledge Agreements executed in connection with the loan prohibited the increase, sale, merger, or consolidation of those stock shares (see, Motion Sequence 010 Affirmation in Opposition, Ex. 3, et seq.). Plaintiff's complaint, which includes thirty-eight causes of action, claims [*3]that following the execution of the Pledge Agreements, defendant Maurice Cohen orchestrated the unauthorized transfer and eventual sale of the original 1000 shares of EALC stock and the issuance and eventual transfer of 9000 additional shares of EALC stock. This sale and transfer of additional shares, according to plaintiff, breached the Pledge Agreements, effectively defeating CDR's security interest.

The claimed actions and inactions of the defendants, and in particular, Maurice Cohen, have now been litigated in multiple courts in the United States and France. The largely unpaid loan, as of the August 2008 decision, was valued at more than one quarter of a billion dollars.

The August Decision

As briefly touched upon earlier, this court's August decision involved a total of seven motions advanced in the two actions. Five of those motions are revisited today. Three of those motions were advanced by defendants and sought protective orders and suspension of court-ordered discovery (motion sequence 013); summary judgment (motion sequence 014); and an order vacating the January 29, 2008 default judgment taken against Robert Maraboeuf, Allegria Aich, and Patricia Petetin (motion sequence 016). The two motions advanced by plaintiff sought a default judgment (motion sequence 015) and leave to enlarge the record in support of the requested default judgment (motion sequence 016). In opposition to sequence 016, defendants cross-moved to dismiss this action pursuant to CPLR 3211, and further sought (1) a declaration that CDR had been dissolved; and (2) a stay of all further depositions.[FN5]

With the basic history of this action and prior motion practice now in place, this court first addresses those portions of the incoming motions which seek to renew, reargue, and ultimately vacate this court's August decision.

Discussion

It is well established that on a motion to reargue, the court's inquiry is strictly limited to the papers presented on the initial motion. Success requires the moving party to demonstrate that the court either overlooked or misapprehended the facts or the law or somehow mistakenly arrived at its [*4]conclusion (CPLR 2221(d)(2); Foley v. Roche, 68 AD2d 558, 567 [1st Dept 1979]; Schneider v. Solowey, 141 AD2d 813 [2nd Dept 1988]; Pahl Equipment Corp. v. Kassis, 182 AD2d 22,27 [1st Dept 1992]). By contrast, motions to renew are limited to the presentation of new or additional facts which either did not exist or were unknown at the time the original motion was made (see, Mangine v. Keller, 182 AD2d 476 [1st Dept 1992]). In addition, the moving party on a motion to renew must present a justifiable excuse for not bringing the evidence to the court's attention on the original motion (CPLR 2221(e)(2)(3); see, Martin v. Triborough Bridge & Tunnel Authority, 180 AD2d 596 [1st Dept 1992]). The presentation of a justifiable excuse and a demonstrated meritorious defense is also required in order to obtain relief from a default judgment under CPLR 5015. None of these required elements have been met in the applications for relief made here.

The Cohen defendants claim that re-argument of the August decision is warranted because the penalty of a multi-million dollar default judgment is "improper and excessive" given that a court-issued discovery order had only existed for two months (Cohen defendants Memorandum of Law p. 9). They argue that this court's scheduling orders were not ignored, but rather, were stayed by virtue of motions made under CPLR 3013(b), and, they claim the existence of meritorious defenses along with a lack of demonstrated prejudice to plaintiff (id., 11-13). Renewal, the Cohen defendants argue, is appropriate because of "law office failure", or more specifically, the failure of their former counsel, John Gleason, Esq., to inform them of the ramifications of their inaction and non-responsiveness to court orders and discovery and deposition demands. These facts and meritorious defenses, according to the Cohen defendants, support the granting of a motion to vacate the August 2008 default judgment under both renewal and re-argument, and pursuant to CPLR 5015. Similar claims and supporting arguments are advanced by defendants Habib, Maraboeuf, Aich, and Petetin in each of their respective motions for relief.

As a preliminary matter, this court rejects the defendants' claim that they did not knowingly violate discovery orders issued by this court. When counsel for the parties first appeared in this Part in March of 2008, they were put on notice that this court was not going to tolerate any further discovery delays even when presented with motions which otherwise provide for an automatic stay of discovery. This was stated to Counsel in conferences, this was stated to them on the record during oral argument, and it was made quite clear when this court declined to sign a June Order to Show Cause presented by defendants seeking a stay of discovery. In other words, any claim that this court's discovery orders were not violated is at best, disingenuous. [*5]

Also rejected by this court, is the collective contention that this court misinterpreted the facts presented on the underlying motions and therefore arrived at an incorrect result when applying the law. To the contrary, much of this court's decision was based upon the lack of facts and evidence presented by defendants in support of their own arguments. In fact, notwithstanding the vehement opposition expressed by defendants' past and current legal counsel, this court has yet to see an affidavit of merit from any of the defendants in the now sixteen motions presented since March of this year. Without an affidavit of merit, every single one of the arguments advanced by defendants continue to fail. The law in this State is quite clear: affidavits made by an attorney with no personal knowledge of the facts offer no probative value (see, Rudner v. New York Presbyterian Hospital, 42 AD3d 357 [1st Dept 2007] (affidavit of an attorney offered no probative value on motion for summary judgment); Guzman v. Mike's Pipe Yard, 35 AD3d 266 [1st Dept 2006](affidavit of attorney offered no probative value on motion to amend complaint); Yovannone v. Sibley's Department Store, 101 AD2d 1014 [4th Dept 1984](affidavit of attorney insufficient to vacate default judgment).[FN6] In other words, the court cannot misinterpret arguments and evidence which were never properly before it on the original motions.

Perhaps most troubling to this court however, are defendants' arguments in support of renewal, which largely take the form of a collective cry of "law office failure" aimed at their prior counsel, Mr. Gleason. There is a very fine line between a claim of law office failure, as in "the case wasn't properly calendared", "the office moved and the file was misplaced", or simply, "we forgot" and a claim of deliberate failure to represent one's client. The former examples are heralded as classic law office failure. The latter is not, and the serious nature of this allegation demands supporting [*6]documentation, which, not surprisingly, is not found in any of the defendants' papers.

In fact, defendants' papers, upon further examination, are devoid of a number of important elements which are, in this court's opinion, noteworthy. Allegria Aich, Patricia Petitin, Joelle Habib and Robert Maraboeuf each claim that they each independently agreed to have Mr. Gleason represent them in this action, paid an undisclosed fee to him, yet never spoke to him (see, the respective Affidavits of Allegria Aich, Patricia Petitin, Joelle Habib and Robert Maraboeuf contained in the Order to Show Cause for Motion Sequence 025 and 026). There are no retainer agreements, no proof of payment, no statement of how much was to be paid for legal representation, and no indication of when and how retention of counsel was made.[FN7] The claims advanced, unaccompanied by the submission of any affidavits of merit, are simply unsupported.

Allegria Aich, Patricia Petitin, Joelle Habib and Robert Maraboeuf also claim that they only learned of this case from each other, or, in Ms. Aich's case, from the Cohen defendants - who she claims advised her to contact Mr. Gleason (id.). Missing however, is that Allegria Aich, Patricia Petitin, Joelle Habib and Robert Maraboeuf each learned of this action when they were served in 2006 with the Summons and Notice - in France. In fact, in accordance with French "custom", each one of these defendants was summoned to, and appeared at, their local police station. At the police station, they were presented with a copy of Summons with Notice in English and in French, after which they were required to make a statement about the receipt of the legal documents on the record (Affirmation in Opposition, Sequence 025 and 026, Exhibits C-F). Equally incredulous is the claim that these four defendants did not understand what was going on in this action. Were this truly the case, it is doubtful that they would have joined Maurice and Sonia Cohen in an attempt to obtain an injunction from the Paris Commercial Court preventing CDR from further prosecuting this action on March 26, 2008, roughly two months after the initial determination that Aich, Petitin, Habib and Maraboeuf were in default for failure to appear in the action (id., Exhibit R). In the absence of the presentation of new or additional facts which either did not exist or were unknown at the time of the original motion, renewal of the underlying motions are neither warranted nor justified.

The portions of the motions and cross-motions seeking to vacate portions of the August 2008 decision also fail. A necessary element of a motion to vacate a default judgment under [*7]CPLR 5015 is a demonstrated meritorious defense (Pedone v. Avco Financial Services, 102 AD2d 885 [2nd Dept 1984]; see generally, Barr, Altman, Lipshie, Gerstman, New York Civil Practice Before Trial,[James Publishing 2008] §39.421). As discussed, the Cohen defendants have never once provided an affidavit of merit in support of any of their claimed defense. Ms. Habib, Mr. Maraboeuf, Ms. Aich, and Ms. Petetin, who did submit affidavits in support of their respective applications, each claim that their meritorious defenses against CDR's allegations include: (1) a failure to state a claim; (2) an unidentified, but expired, statute of limitations; (3) a lack of personal jurisdiction; (4) a claim of inappropriate forum;(5) a lack of causal connection; and a claim that of non-involvement in a prominent position and a general denial of participation in any diversion of assets as described in plaintiff's complaint (see, Affidavit of Joelle Habib, ¶¶ 8-12; Affidavits of Robert Maraboeuf, Allegria Aich, and Patricia Petetin).

This court has already stated on more than one occasion that the plaintiff's lengthy complaint sufficiently alleges that the defendants participated in a conspiracy to defraud plaintiff. The claims advanced against Ms. Habib, Mr. Maraboeuf, Ms. Aich, and Ms. Petetin are extremely detailed. More significantly, the claims are supported by documentary evidence suggesting that contrary to their claims, each of these four defendants had a greater involvement in the underlying transaction than they wish this court to believe.

For example, Ms. Aich's signature appears on key documents written in French, and executed in New York. These documents allowed Blue Ocean Finance Ltd.[FN8] to divert millions of dollars into a Swiss bank account (see Affirmation in Opposition to Motion Sequence 025, 026 (Summary Judgment) Exhibits I, K, L). Mr. Maraboeuf was the President of EALC from April 20, 1995 until February 14, 2000 and was elected as a director of EALC on May 7, 2006. His signature, along with the signature of Ms. Petetin, authorized the issuance of EALC shares to Iderval Holding in derogation of terms of the Pledge Agreements (id. Exhibit G). Mr. Maraboeuf also signed documents effectuating the transfer of 500 original EALC shares from Summersun to Summerson (id. Exhibit G, Exhibit II).

Ms. Petetin, despite her claims of non-involvement, was a director of EALC in 1996 and served as its secretary from 1994 through 2000 (id. Exhibits E, T). In fact, Ms. Petetin signed the amendment to EALC's Certificate of Incorporation which [*8]authorized the issuance of the additional 9,000 stock shares claimed by plaintiff to further diminish CDR's security interest. Ms. Petetin also signed a document transferring 900 additional shares to Iderval - without any apparent exchange of consideration (id. Exhibit E, G). Ms. Habib's involvement appears to include the authorization of the transfer of ownership of Macson Express, USA, Inc., to the Elias controlled Ospin entity. These documents, written in French and signed by Ms. Habib in New York in her capacity of President of Groupotel appear to undermine her claim of non-involvement.

Based on this documentary evidence, and considering that the Pledge Agreements themselves authorize the Courts of this State to interpret and resolve any disputes pertaining to or arising out of those agreements, it is very difficult for this court to conclude that the defenses asserted by Ms. Habib, Mr. Maraboeuf, Ms. Aich, and Ms. Petetin are meritorious. If anything, they simply raise more red flags with respect to their individual involvement. Inasmuch as defendants have failed to demonstrate a valid excuse for their default and a meritorious defense (CPLR 5015), the portions of the motions and cross-motions seeking this relief are denied.

The remaining issue, is whether CDR is entitled to an order pursuant to CPLR 5229 restraining defendants Leon Cohen, Maurice Cohen, Sonia Cohen, Iderval Holding, Ltd., World Business Centre, Inc., Blue Ocean Finance, Ltd. Robert Maraboeuf, Patricia Habib Petetin, Allegria Aich, Joelle Habib, and any of their officers, directors, employees, agents, representatives, successors and assigns and all other persons acting under their direction or control or in active concert or participation with them, from selling, transferring, or interfering with any property in which defendants have an interest, except upon direction of the sheriff or pursuant to an order of the court, until the default judgment is satisfied.

CPLR 5229, in pertinent part states:

In any court, before a judgment is entered, upon motion of the party in whose favor a verdict or decision has been rendered, the trial judge may order examination of the adverse party and order him restrained with the same effect as if a restraining notice had been served upon him after judgment.

What little has been written about this provision and its applicability, informs that "the only statutory requirement is that the application for 5229 relief be made by the prevailing party" (Sequa v. Nave, 921 F. Supp 1072, 1076 [S.D.NY 1996]; Gallegos v. Elite Model Management Corporation, 1 Misc 3d 200, [Sup. Ct. NY Co. 2003]). The provision is discretionary, and may be granted whenever it appears necessary to prevent an adverse party from disposing assets in an attempt to avoid judgment (see, [*9]Weinstein-Korn-Miller NY Civ. Practice ¶¶ 5229.01, 5229.04).

This court has not been able to yet ascertain whether defendants have or have not engaged in the actual transfer or diversion of assets since this action was commenced. However, given the conduct of the defendants in this action, and fully cognizant of the actions of other courts and their decisions to sanction defendants and or strike responsive pleadings for failure to comply with court orders and discovery orders, it appears that the relief sought is justifiably warranted.

This matter shall now proceed to Inquest.

Accordingly it is

ORDERED that the cross-motion advanced by Leon Cohen, Maurice Cohen and Sonia Cohen, and joined by defendant Joelle Habib which sought to renew and reargue this court's August 2008 decision is granted and upon renewal and re-argument, this court adheres to its original decision; and it is further

ORDERED that the alternative theory of relief contained within the cross-motion advanced by Leon Cohen, Maurice Cohen and Sonia Cohen, and joined by defendant Joelle Habib which sought to vacate this court's August 2008 decision is denied; and it is further

ORDERED that motion sequences 025, brought by defendant Joelle Habib; and 026, brought by defendants Allegria Aich, Patricia Petitin (Benharbon), and Robert Maraboeuf, which seek identical relief as set forth in the cross-motion advanced in sequence 022, is denied; and it is further

ORDERED that the motion advanced by plaintiff CDR Créances, S.A.S. for an order pursuant to CPLR 5229 restraining defendants Leon Cohen, Maurice Cohen, Sonia Cohen, Iderval Holding, Ltd., World Business Centre, Inc., Blue Ocean Finance, Ltd. Robert Maraboeuf, Patricia Habib Petetin, Allegria Aich, Joelle Habib, and any of their officers, directors, employees, agents, representatives, successors and assigns and all other persons acting under their direction or control or in active concert or participation with them, from selling, transferring, or interfering with any property in which defendants have an interest, except upon direction of the sheriff or pursuant to an order of the court, until the default judgment is satisfied, is granted; and it is further

ORDERED that in the absence of either an express directive of this court or a stay from the Appellate Division, First Department, these matters are referred to a Special Referee to determine damages; and it is further

ORDERED that a copy of this order with notice of entry shall be served on the Clerk of the Judicial Support Office (Room 311) to arrange a date for the reference to a Special Referee.

Plaintiff is directed to settle an Order with respect to the award of an order of restraint pursuant to CPLR 5229.[*10]Defendants, so that there is no misunderstanding whatsoever, are collectively put on notice that although this court has directed Plaintiff to submit an Order for signature, the relief of the restraint order has been granted and defendants are therefore prohibited from attempting to divert, transfer, or sell any assets. Acting in derogation of this court's Order will assuredly result in additional financial consequences.

This memorandum opinion constitutes the decision and order of the Court.

Dated:

____________________________

HON. WALTER B. TOLUB, J.S.C.

Footnotes

Footnote 1: Although not expressly requested in the motion papers, the challenges advanced by defendants, and the arguments advanced in opposition by plaintiff warrants the re-consideration of whether summary judgment is warranted in this matter. As such, the record on the motion for summary judgment (Motion Sequence 014 and its related submissions) is deemed part of this record, and the analysis of plaintiff's complaint and the challenges advanced against it will be conducted accordingly.

Footnote 2: To maintain consistency and avoid confusion in this court's decisions, this court has decided to continue to identify Ms. Benharbon as Ms. Petetin.

Footnote 3: In the interest of brevity, the complete facts of this case are not repeated here. A complete recitation of facts may be found in this court's decisions issued in motion sequences 009, 010, and in the August Decision which covered motion sequences 13-16 in this action and motion sequences 12 and 13 in the 2003 action.

Footnote 4: At present, in addition to the two actions presently before this court, there are related actions pending in the Florida Circuit Court (CDR Créances, S.A.S v. Leon Cohen, et al., (08-50688 CA 32), and the U.S. Bankruptcy Court for the Southern District of New York (In re Euro-American Lodging Corp v. World Business Center, Inc., Maurice Cohen, Sonia Cohen and Leon Cohen (Case No. 06-11325 (SMB)).

Footnote 5:The remaining two motions advanced by plaintiff in the 2003 action sought relief which included a default judgment against defendants pursuant to CPLR 3216 (Sequence 012), and an order directing additional discovery from defendants (Sequence 013). Defendants cross-moved in opposition to sequence 013 for the same relief sought in their cross-motion to sequence 016, in the instant action.

Footnote 6: The court notes that the lack of an affidavit of merit from the Cohen defendants would have also successfully precluded an award of summary judgment. As noted in the August 2008 decision, affirmations made by attorneys who have no personal knowledge of the facts do not satisfy the requirements of a summary judgment motion(see, Zuckerman, 49 NY2d 557 [1980]; Morales v. Coram Materials Group, 51 AD3d 86 [2nd Dept 2008]; Dinham v. Wagner, 48 AD3d 349 [1st Dept 2008]). An attorney's affirmation may serve "as the "vehicle" for the submission of " evidentiary proof in admissible form'" (Van Alstyne v. Magique Discotheque Corp., 180 AD2d 453 [1st Dept 1992] (internal citations omitted)). It cannot however, act to fill the void created by the failure to submit any supporting evidentiary proof.

Footnote 7: There is also no statement from Mr. Gleason with respect to any of these allegations.

Footnote 8: These entities are fully identified and their relationships between each other are set forth in this court's August 2008 decision.