Komolov v Segal

[*1] Komolov v Segal 2013 NY Slip Op 51339(U) Decided on August 14, 2013 Supreme Court, New York County Kornreich, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 August 14, 2013
Supreme Court, New York County

Alexander Komolov, ALSKOM REALTY LLC, and HIGH VALUE TRADING, LLC, Plaintiffs,

against

David Segal, MOHAMED SERRY, ARTIQUE MULTINATIONAL LLC, ARTIQUE INTERNATIONAL LTD., and SEGAL & SEGAL HOLDING, LLC, Defendants.



651626/2011



The Law Office of Roman Popik, P.C., for plaintiffs.

Frankfurt, Kurnit, Klein & Selz, PC, for defendants.

Shirley Werner Kornreich, J.

Defendants David Segal, Mohamed Serry, Artique Multinational LLC (Artique Multinational), Artique International Ltd. (collectively, with Artique Multinational, the Artique Defendants), and Segal & Segal Holding, LLC move to dismiss the thirteenth cause of action in the Amended Complaint (the AC) pursuant to CPLR 3211.[FN1] Defendants' motion is granted for the reasons that follow.

Factual Background & Procedural History

This case has a tortured history.[FN2] On November 17, 2010, plaintiffs commenced an action in this court (Index No. 652042/2010) against a similar group of defendants (the First Action). The First Action was assigned to another Justice of this Court. The complaint in the First Action contained 26 causes of action arising from allegations of theft and fraud relating to artwork, jewelry, and the sale of a condominium. The court assumes familiarity with those allegations, which were discussed at length in that Justice's order dated May 12, 2011 (the May 2011 Order), in which he dismissed the entire complaint in the First Action on statute of limitations and statute of frauds grounds, among others. The vast majority of plaintiffs' allegations are not relevant to this decision. At issue on this motion are the allegations relating to the sale of the subject condominium, which is located in Columbus Circle in Manhattan.

In the First Action, plaintiff Alskom Realty LLC (Alskom) alleged that it sold the [*2]condominium to the Artique Defendants and that they failed to pay the full $4.1 million sale price. However, at the time the First Action was commenced, plaintiffs' counsel did not have a copy of the sale contract because he was not involved in the underlying transaction and was having difficulty obtaining it from Alskom's prior counsel, who was convicted, disbarred, and incarcerated for committing bank fraud. In fact, when the motion to dismiss the complaint in the First Action was briefed, it was undisputed that a sale contract existed, that the condominium had been transferred, and that there had been partial payment of the sale price. Yet, the May 2011 Order held that:

The breach of contract cause of action must fail because Alskom, as the purported transferor of the condominium, cannot provide any written agreement regarding the transfer and cannot even identify the entity to which the condominium [FN3] was transferred, which makes the agreement violative of the statute of frauds and unenforceable.

Id. at 18, citing RAJ Acquisition Corp. v Atamanuk, 272 AD2d 164 (1st Dept 2000). Plaintiffs did not appeal the May 2011 Order, move to reargue or renew the motion to dismiss, file an amended complaint, or move to vacate the judgment that was entered in the First Action.

Instead, on June 13, 2011, plaintiffs commenced this action by filing a complaint with 16 causes of action that alleged virtually identical facts and claims as their complaint in the First Action. In an order dated November 3, 2011 (the November 2011 Order), this court held that the doctrines of res judicata and collateral estoppel bar this action and dismissed the case because "this is a repeat of an action brought before" the previous Justice. The court did not reach the merits of plaintiffs' allegations. Rather, the court took exception to plaintiffs' decision to file a new action. However, it should be noted that, unlike when the First Action was commenced, plaintiffs produced a copy of the contract for the sale of the condominium. See 11/3/11 Transcript, p.8 ("plaintiffs obtained a copy of the contract of sale on May 19, 2011" [one week after the previous Justice dismissed the First Action and less than a month before this action was commenced]).

This action was restored when, in an order dated June 12, 2012 (corrected June 18, 2012), the Appellate Division modified the November 2011 Order by reinstating all of plaintiffs' claims except the claim related to the condominium. See Komolov v Segal, 96 AD3d 513 (1st Dept 2012). The Appellate Division held that the action should not have been dismissed because the previous Justice's May 2011 Order "should have been without prejudice since the claims in that action were dismissed for pleading deficiencies and not on the merits" butthat "[c]ollateral estoppel does, however, bar plaintiffs' sixteenth cause of action alleging breach of contract in connection with the sale of a condominium since that claim was dismissed in the prior action for non-compliance with the statute of frauds." Id.

Approximately three months before the Appellate Division made this ruling, this court, in an order dated March 6, 2012 (the March 2012 Order), upon reargument, dismissed plaintiffs' conversion claims based on similar grounds to those relied on by the previous Justice in the May 2011 Order. However, in an order dated December 27, 2012, the Appellate Division modified [*3]the March 2012 Order by reinstating some of plaintiffs' conversion claims.[FN4] See Komolov v Segal, 101 AD3d 639 (1st Dept 2012).

Earlier this year, after all of the events described above created confusion as to which of plaintiffs' claims were still at issue in this case, the court encouraged plaintiffs to file an amended complaint. On May 30, 2013, plaintiffs filed the AC. The AC's twelfth thorough

sixteenth causes of action relate to the condominium: (12) a declaratory judgment as to the rights to the $4.2 million currently held in escrow from a subsequent sale that occurred in November 2012; (13) unjust enrichment (the only claim at issue on this motion); (14) fraud; (15) rescission; and (16) another declaratory judgment claim which, as discussed supra, has been withdrawn.

On July 10, 2013, defendants filed the instant motion to dismiss the unjust enrichment claim on the ground that it is improperly duplicative of the breach of contract claim that was dismissed due to being barred by the statute of frauds. To be clear, the first court dismissed the claim on statute of frauds grounds. That decision was never appealed. This court never reached the issue of whether such claim should have been allowed upon the discovery of the contract. Rather, this court merely held that the failure to appeal, reargue or move to renew the original decision barred plaintiff from commencing a second, duplicative action.[FN5] On appeal, the Appellate Division affirmed this court's "collateral estoppel" ruling on the condominium claim (but not on the other claims), a ruling that this court cannot question. Thus, the issue presented is whether a plaintiff may maintain a quasi-contract claim that is duplicative of a breach of [*4]contract claim barred by the statute of frauds where a written contract governing the underlying transaction actually exists and the contract was partly performed. For the reasons discussed below, the answer is no.

Discussion

On a motion to dismiss, the court must accept as true the facts alleged in the complaint as well as all reasonable inferences that may be gleaned from those facts. Amaro v Gani Realty Corp., 60 AD3d 491 (1st Dept 2009); Skillgames, L.L.C. v Brody, 1 AD3d 247, 250 (1st Dept 2003), citing McGill v Parker, 179 AD2d 98, 105 (1992); see also Cron v Harago Fabrics, 91 NY2d 362, 366 (1998). The court is not permitted to assess the merits of the complaint or any of its factual allegations, but may only determine if, assuming the truth of the facts alleged, the complaint states the elements of a legally cognizable cause of action. Skillgames, id., citing Guggenheimer v Ginzburg, 43 NY2d 268, 275 (1977). Deficiencies in the complaint may be remedied by affidavits submitted by the plaintiff. Amaro, 60 NY3d at 491. "However, factual allegations that do not state a viable cause of action, that consist of bare legal conclusions, or that are inherently incredible or clearly contradicted by documentary evidence are not entitled to such consideration." Skillgames, 1 AD3d at 250, citing Caniglia v Chicago Tribune-New York News Syndicate, 204 AD2d 233 (1st Dept 1994). Further, where the defendant seeks to dismiss the complaint based upon documentary evidence, the motion will succeed if "the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law." Goshen v Mutual Life Ins. Co. of NY, 98 NY2d 314, 326 (2002) (citation omitted); Leon v Martinez, 84 NY2d 83, 88 (1994).

Plaintiffs' argument is a non-starter. The statute of frauds precludes the enforcement of real estate contracts unless they are in writing. See Pollak v Moore, 85 AD3d 578, 579 (1st Dept 2011), citing General Obligations Law § 5-703(2). If one could use a quasi-contract claim to enforce an oral real estate contract, the statue of frauds would be pointless.

Plaintiffs are correct that "the statute of frauds is not necessarily a bar to a cause of action for unjust enrichment." Mark Bruce Int'l, Inc. v Blank Rome LLP, 19 Misc 3d 1140(A), at *7 (Sup Ct, NY County 2008), aff'd 60 AD3d 550 (1st Dept 2009). However, "where, as here, the claim for damages is indistinguishable from, and merely duplicative of, the breach of contract claim, dismissal is warranted." Id., citing Andrews v Cerberus Partners, 271 AD2d 348 (1st Dept 2000).

In contrast, seemingly duplicative unjust enrichment claims are only allowed when the plaintiff actually performed services for which it is equitably entitled to compensation (e.g. a situation of detrimental reliance) or where it seeks to recover its related out-of pocket expenses. See Farash v Sykes Datatronics, Inc., 59 NY2d 500, 503-04 (1983); RTC Properties, Inc. v Bio Resources, Ltd., 295 AD2d 285, 286 (1st Dept 2002). An unjust enrichment claim, however, is not viable when the claim merely seeks the enforcement of the unenforceable contract itself. See Mark Bruce, supra. This would permit an end- run around the statute of frauds; every time a claim for breach of a real estate contract was dismissed for lack of a written contract, a plaintiff, nonetheless, could enforce the contract by maintaining an unjust enrichment claim. This has never been the law.

Here, there happens to be a written contract for the sale of the subject condominium. Unfortunately for plaintiffs, due to the holdings of the Appellate Division, this does not matter. As far as the law is concerned, there may as well be no contract. That a prior judgment may [*5]have been in error is insufficient to overcome the doctrine of collateral estoppel. Accordingly, it is

ORDERED that the motion by defendants David Segal, Mohamed Serry, Artique Multinational LLC, Artique International Ltd., and Segal & Segal Holding, LLC to dismiss the thirteenth cause of action in the Amended Complaint is granted, and (to avoid any confusion) the claim is dismissed with prejudice.

Dated: August 14, 2013ENTER:

__________________________

J.S.C. Footnotes

Footnote 1:Defendants also moved to dismiss the sixteenth cause of action, but plaintiffs withdrew that claim with prejudice while this motion was sub judice.

Footnote 2:Though this decision focuses primarily on the highly unusual procedural history that has led to this motion, this case has also been fraught will constant disputes between the attorneys, including substantial discovery disputes, motion practice over countless notices of pendency, and a disqualification motion. In the interest of progress, the court will not recount the bitter disputes that are not relevant to this decision.

Footnote 3:At that time, plaintiffs were unsure which of the Artique Defendants was the signatory to the contract. The contract, which has now been found and produced, indicates that the condominium was sold to Artique Multinational.

Footnote 4:5 It is unclear how this court's ruling could be considered to be have been on the merits, yet, the previous Justice's May 2011 Order was supposedly merely a decision based on insufficient pleadings that lacked the effect of collateral estoppel. The only new fact or allegation that came to light between the First Action and this action was the sale contract. If anything, leave to replead Alskom's condominium claim arguably should have been granted in the interest of justice. However, the one claim which apparently warranted a second bite at the apple due to changed circumstances was the only claim that plaintiffs were precluded from asserting. To wit, even if the first court incorrectly dismissed plaintiffs' conversion claim (which it did in part based on the UCC statute of frauds, the same ground that resulted in dismissal of the condominium claim), the failure to appeal that decision should have collaterally estopped plaintiffs from filing a new action (plaintiffs could have either appealed on the merits or appealed his denial of leave to replead). Now, after much (highly contentious) discovery has taken place, it is clear that the parties possess little, if any, documentary evidence to support the conversion claims (the parties are attempting to patch together a document trail from various third parties, such as auction houses and international shipping companies). This completely predictable outcome is the very sort of situation that the statute of frauds was meant to prevent. Yet, to plaintiffs' bewilderment, the one claim that can be supported by a written contract, and arguably by part performance, is barred by the statute of frauds. Regardless, this court is bound by the rulings of the Appellate Division. Consequently, for the reasons discussed in part II, plaintiffs cannot enforce their contract through a quasi-contract claim.

Footnote 5:6 Indeed, had this court considered the merits, rather than merely the collateral estoppel issue, the court may very well have permitted a breach of contract claim due to the recent discovery of the written contract and also due to partial performance (i.e. the down payment and transfer of the condominium). Now, however, this is moot.