Coyle v Lefkowitz, Mayer Realty Corp.
Annotate this CaseDecided on April 11, 2014
Supreme Court, Kings County
Terence Coyle and Edward Kuhrt, Plaintiff,
against
Lefkowitz, Mayer Realty Corp., Congregation Kol Shalom, Inc., and Moore Management LLC, Defendant.
4129/10
Plaintiff Attorney: Amos Alter, Esq.
Defense Attorney: Stein Farkas & Schwartz
Yvonne Lewis, J.
Defendants Thomas Lefkowitz, Mayer Realty Corp., Congregation Kol Shalom, Inc., and Moore Management LLC (hereinafter collectively "the defendants" ), have submitted a motion for an order dismissing the complaint in part pursuant to CPLR §§ 3211(a)(5) and (a)(7), on the grounds that: (1) the plaintiffs fail to state a cause of action as they are unable to set forth two required elements necessary to prevail on a fraudulent conveyance claim; and (2) the cause of action as to actual fraudulent intent may not be maintained because of the statute of limitations.
The action was commenced by plaintiffs Terence Coyle and Edward Kuhrt (hereinafter Coyle and Kuhrt or the plaintiffs ) in February 2010, as judgment creditors stemming from a prior money damages action, alleging that the defendants engaged in several fraudulent conveyances of a property located at 28 Throop Avenue, Brooklyn (hereinafter the "Property") to frustrate plaintiffs' collection of a judgment against defendant Mayer Realty.
The complaint asserts three causes of action based on the alleged fraudulent conveyances. The first cause of action alleges that the 2000 distribution of the proceeds from the Property refinance to defendants Lefkowitz and Kol Shalom were fraudulent conveyances within the meaning of Debtor and Creditor Law § 273-a, and that the transfers were made with actual intent to hinder, delay and defraud the plaintiffs, within the meaning of DCL § 276-a. The second cause of action alleges that the 2001 conveyance of the Property by defendant Mayer Realty to one Joshua Wagshal (hereinafter Wagshal), and the 2005 transfer of the Property by Wagshal to defendant Moore Management were fraudulent conveyances, as defined in DCL § 273-a, and that the transfers were made with actual fraudulent intent, as defined in DCL § 276-a. The third [*2]cause of action alleges that all conveyances complained of were made with actual intent, as opposed to intent presumed in law, to hinder, delay and defraud creditors, within the meaning of DCL § 276. By order dated September 17, 2010, this Court granted, in part, plaintiffs' motion for summary judgment to the extent of striking the defendants' statute of limitations defense with respect to the first two causes of action, and otherwise denied the motion without prejudice to renewal after discovery. Both parties appealed, and the Appellate Division, Second Department modified the Court's order and affirmed as modified. (Coyle v. Lefkowitz, 89 AD3d 1054, 934 N.Y.S.2d 216).
The defendants are requesting that the complaint be dismissed in part as to the second cause of action, which alleges that the 2001 and 2005 conveyances were fraudulent pursuant to DCL §§ 273-a and 276-a, and in part as to the third cause of action, which alleges that the conveyances were made with actual fraudulent intent pursuant to DCL § 276. The defendants request the second cause of action be dismissed, pursuant to CPLR § 3211(a)(7), for failure to state a cause of action inasmuch as the plaintiffs are unable to set forth two required elements necessary to prevail on a fraudulent conveyance claim. To prevail on such a claim under Debtor and Creditor Law § 273-a, "the movant must establish three elements: (1) that the conveyance was made without fair consideration; (2) that at the time of transfer, the transferor was a defendant in an action for money damages or a judgment in such action had been docketed against him; and (3) that a final judgment has been rendered against the transferor that remains unsatisfied." (Fischer v. Sadov Realty Corp., 34 AD3d 632, 633, 829 N.Y.S.2d 107, 110).
The Appellate Division has held that the 2001 conveyance was fraudulent as a matter of law, and plaintiffs Coyle and Kuhrt were entitled to summary judgment. (Coyle v. Lefkowitz, 89 AD3d 1054). The Appellate Division also held that plaintiffs' motion for summary judgment was properly dismissed to the extent of the 2005 conveyance, as plaintiffs failed to make the requisite showing that the person who made that conveyance, Wagshal, was a defendant in an action for money damages, thereby precluding a constructive fraud claim as to that conveyance. (DCL § 273-a; see Murin v. Estate of Schwalen, 31 AD3d 1031, 819 N.Y.S.2d 341). As Wagshal was not a defendant in the prior action and there was no unsatisfied judgment against him, the Appellate Division held that the 2005 transfer of the Property from Wagshal to defendant Moore Management could not be set aside pursuant to DCL § 273-a. Accordingly, defendants now move this Court to dismiss the § 273-a cause of action for failure to state a cause of action.
In response, plaintiffs Coyle and Kuhrt argue that at the very least, there is a triable issue of fact as to whether the 2005 conveyance was fraudulent, and therefore defendants' motion for summary judgment on this claim should be denied. They contend that they will prove at trial that the first transfer (2001 conveyance from defendant Mayer Realty to Wagshal) was merely a pretense, and that in fact, Mayer Realty still held the property. Plaintiffs assert that the 2005 transfer from Wagshal to Moore Management was therefore in fact, a fraudulent conveyance from Mayer Realty to Moore Management.
The facts surrounding the 2001 and 2005 conveyances are as follows. In 2001, during the pendency of the personal injury action against it, defendant Mayer Realty, which would become the judgment debtor, transferred the Property to Wagshal, who co-owned Mayer Realty with defendant Lefkowitz. In 2005, Wagshal, acting for Lefkowitz with a power of attorney, transferred the Property to defendant Moore Management, an entity owned entirely by Lefkowitz. The plaintiffs put forward additional facts that they contend support the theory that the 2001 transfer from Mayer Realty to Wagshal was not a bona fide transfer: (i) Lefkowitz and Wagshal were the 50/50 owners of Mayer Realty, (ii) the 2001 deed from Mayer Realty to Wagshal was purportedly signed on behalf of Mayer Realty by a Yoel Kohn as President of Mayer Realty, yet Lefkowitz, as half-owner of Mayer Realty, testified that he was not aware at the time that the property was being transferred, and that he does not know who Yoel Kohn is, (iii) Lefkowitz continued to be partners with Wagshal in the property, and (iv) the 2005 transfer from Wagshal to defendant Moore Management was by deed signed by Lefkowitz, as attorney in fact for [*3]Wagshal. In light of these facts, the plaintiffs assert that Wagshal was, between 2001 and 2005, only a nominee or constructive trustee for defendant Mayer Realty, and therefore the 2005 transfer was in reality a fraudulent transfer from Mayer Realty, the defendant in the prior action, to Moore Management.
To defeat summary judgment, the nonmoving party need only show facts sufficient to require a trial of any issue of fact. [CPLR 3212(b)]. Applying these standards to the facts in the instant matter, plaintiffs have satisfied this burden. This Court finds that there is, at the very least, a triable issue of fact as to whether the 2005 conveyance is a fraudulent conveyance pursuant to the DCL § 273-a, namely whether or not the 2005 transferor was in fact a judgment debtor in a previous money damages action. Accordingly, this branch of defendants' motion is denied.
With regard to the third cause of action, to the extent that it alleges the 2000 and 2001 conveyances were made with actual fraudulent intent in violation of DCL § 276, defendants Lefkowitz, Mayer Realty, Kol Shalom, and Moore Management request that it be dismissed pursuant to CPLR § 3211(a)(5), claiming that the statute of limitations has lapsed. In response, plaintiffs Coyle and Kuhrt have cross-moved this Court, seeking dismissal of defendants' statute of limitations defense. The Appellate Division denied the plaintiffs' motion to dismiss the statute of limitations defense as to so much of the third cause of action, finding that plaintiffs failed to meet their burden of demonstrating that their § 276 cause of action was timely under the six-year limitations period. (Coyle v. Lefkowitz, 89 AD3d 1054). "A cause of action based on actual fraud pursuant to Debtor and Creditor Law § 276 must be brought within six years of the date that the fraud of conveyance occurs or within two years of the date that the fraud should have been discovered, whichever is longer." (Liberty Co. v. Boyle, 272AD2d 380, 381, 708 N.Y.S.2d 122). Therefore, as plaintiffs first asserted the DCL § 276 cause of action in 2010, more than six years after the date that the allegedly fraudulent 2000 and 2001 transactions occurred, the cause of action as to those conveyances were time-barred. The Court held that although the six-year limit was temporarily tolled with respect to the DCL §273-a portions of the first two causes of action, the toll did not apply to the DCL § 276 cause of action. Furthermore, although the plaintiffs argued that the 2000 conveyance was discovered within two years of the commencement of the instant action and was therefore timely, the argument was improperly raised for the first time on appeal, and consequently was not within the scope of review. (CPLR § 5501; see Burgos v. Rateb, 64 AD3d 530, 883 N.Y.S.2d 115).
Defendants Lefkowitz, Mayer Realty, Kol Shalom, and Moore Management request that the third cause of action be dismissed since the statute of limitations defense still stands following the Appellate Division decision. Plaintiffs Coyle and Kuhrt counter that the Appellate Division did not consider the alternative of two years from discovery in its earlier decision when it denied plaintiffs' motion to strike the defense of limitations and therefore they are not precluded from raising it now. Since the statute of limitations for actual fraud is the later of six years from accrual, or two years from discovery of the facts or from when the facts could have been discovered with reasonable diligence, the plaintiffs may seek the benefit of the exception to the six-year general limitations period and move to strike if the action was commenced within two years from the date that the fraud was or should have been discovered. [CPLR 203(g)].
The plaintiffs claim that Aaron M. Stein, Esq. (hereinafter Stein), who previously represented defendant Mayer Realty in its refinance and is currently counsel for defendants in this action, did not comply with a subpoena to reveal what distributions were made of the 2000 refinance proceeds until January 2010, after the judgment was reinstated by the Appellate Division in September 2008. As the judgment of reinstatement revived the subpoena, that was the date "from when the facts could with reasonable diligence have been discovered." [CPLR 203(g)]. Plaintiffs maintain that despite prior efforts to make Stein comply with the subpoena, they did not know to whom the mortgage proceeds were distributed until Stein's cooperation in 2010. It was then for the first time that the plaintiffs learned of the transfer of the mortgage proceeds from the Property, which was defendant Mayer Realty's only significant asset, to Stein's client, [*4]defendants Lefkowitz and Kol Shalom, together with the related amounts. This action was commenced in February 2010, approximately one month after plaintiffs first learned of the identity of the transferee, and therefore was less than two years from the Appellate Division reversal in September 2008, which revived the subpoena to Stein. As plaintiffs were incapable of discovering the fraudulent nature of the conveyance prior to Stein's cooperation with the subpoena, despite reasonable efforts to do so, plaintiffs argue that their DCL § 276 cause of action was timely under CPLR 203(g), and therefore move to strike defendants' statute of limitations defense. The plaintiffs also assert that if their argument as to the second cause of action is correct and the transfer of the Property from defendant Mayer Realty to Moore Management in fact occurred in 2005, not 2001, then this action, which was commenced less than six years after the transfer, is timely as to the § 276 cause of action under the general limitations period.
Defendants argue that plaintiffs' motion to dismiss the defense has been litigated and decided on its merits, and therefore plaintiffs are barred, pursuant to CPLR 3211(e), from attempting to move a second time for dismissal on an alternate ground they neglected to assert in the initial motion. The defendants interpretation of the law is incorrect. The limitation of CPLR 3211(e) to one motion under that section is limited only to motions against causes of action. Therefore it does not apply to this cross-motion, which is made under CPLR 3212 for summary judgment dismissing a defense. [See Ramos v. City of New York, 51 AD3d 753, 858 N.Y.S.2d 702 (the single motion rule is intended to prohibit parties from making successive motions to dismiss a pleading)]. "Plaintiff contends that Supreme Court's denial of defendant's first summary judgment motion required the court to deny the second motion as well. We disagree. The denial of a motion for summary judgment has little preclusive effect." (Schriptek Mktg. Inc. v. Columbus McKinnon Corp., 187 AD2d 800, 801, 589 N.Y.S.2d 656; see also Zook v. Hartford Accident & Indem. Co., 64 AD2d 701, 407 N.Y.S.2d 570). Here, plaintiffs have made a new independent motion seeking dismissal of the defense, therefore denial of the earlier motion has no preclusory effect.
The plaintiffs further point out that the Appellate Division did not grant defendants summary judgment on the limitations defense, and that the Court expressly stated it was not considering the alternative of two years from discovery.Therefore, while the Appellate Division in its earlier decision in this action denied plaintiffs' motion to strike the defense of limitations as to this part of the DCL § 276 cause of action, it did so exclusively on the basis that the limitations period was six years from the 2000 transfer date. This Court denies defendants' motion for summary judgment. Further this Court finds that plaintiffs meet the burden of demonstrating that the DCL § 276 cause of action was timely under the exception to the six-year general limitations period, pursuant to CPLR 203(g).Therefore, the Court grants plaintiffs' cross-motion to the extent of striking the defense of limitations as to the § 276 cause of action. Accordingly, defendant's motion is denied in its entirety and plaintiffs cross-motion for an order dismissing the statute of limitations defense is granted.
This constitutes the decision and order of this Court.
E N T E R,
_____________________________
yvonne lewis, J.S.C.
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