Vashovsky v Zablocki

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Vashovsky v Zablocki 2023 NY Slip Op 31648(U) May 16, 2023 Supreme Court, Kings County Docket Number: Index No. 507373/21 Judge: Leon Ruchelsman Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 507373/2021 FILED: KINGS COUNTY CLERK 05/16/2023 11:52 AM NYSCEF DOC. NO. 567 RECEIVED NYSCEF: 05/16/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS : CIVIL TERM: COMMERCIAL 8 ----~---- -- --- - ---- - ------------- X CHANA VASHOVSKY, individually and derivatively on behalf 0£ HUDSON VALLEY NY HOLDINGS LLC, Plaintiffs, -agairi.st- Decision ~nd Order Index No. 507373/21 YOSEF ZABLOCKI and NATIONAL JEWISH CONVENTION CENTER, Defendants, May 16, 2023 And HUDSON VALLEY NY HOLDINGS LLC, --------- --- Nominal Defendant, ------------ -----------~---~ YOSEF ZABLOCIG and NATIONAL JEWISH CONVENTION CENTER, Counterclaim Plaintiffs, -:againstCHANA VASHOVSKY and EPHRAIM VASHOVSKY, Counterclaim-Defendants, -------------·---.- .---- .--. - ··---. ·---·---- ·--x PBESENT: HON. LEON RUCHELSMAN Motion Seq, #26, #27 & #28 The d,efenc:lants have moved seeking to reargue a decision and order dated March 15, 2023 which delineated the terms of the sale of the subject property. The defendants have also moved pursuant to CPLR §5S19{a) (6) seeking, essentially, a stay. have been opposed. arguments held. The motions Papers were submitted by the parties and After reviewing all the arguments this court now makes the following .determination.. The facts have. been adequately presented in prior decisions and. need riot be repeated he-re. VashoVsky v . .Zablocki, As. noted, in a companion case Index Number 52$'729/2022 the court granted the plaintiff::' s request seeking dissolution. [* 1] 1 of 8 Moreoveri th.e court INDEX NO. 507373/2021 FILED: KINGS COUNTY CLERK 05/16/2023 11:52 AM NYSCEF DOC. NO. 567 RECEIVED NYSCEF: 05/16/2023 afforded the defendant to right to first purchase the property for the same price the receiver had been offered by party. a: third Furthermore, specifically because the defendant had provided substantial sums to the property, the court permitted the defendant the right to purchase the property without any down payment. The defendants argue the terms of the order which permitted the defendant Yossi Zablocki a right to purchase the property constituted "financial injustice" because it failed to consider the st1ms Zablocki had already contributed in e,xcess of the plaintiff (see, Affirmation in Support, 'JI 6 [NYSCEF Doc. No. 546J). Indeed, the defendant's sole objection to the court's order is the fact the defendant is required to purchase the property, if he so chooses, without considering the substantial sums he has already contril:mted. The plaintiffs oppose that request and argue that the payments made by the plaintiff were mere.ly "voluntary payments" and that pursuant to the voluntary payment doctrine they cannot be recovered in any manner by the defendant. Whether an infusion should be tre9 ted as a loan is determined by the intent of the parti:es (Doyle v. Icon LLC, 135 AD3o. 64.2, 24. NYS3cl. 60.2 [Pt Dept., 2016]). Thus, Whether the payments were voluntary is a legal conclusion that simply cannot be determined at this time:. In any €:'!Vent, there arE:'! numerous 2 [* 2] 2 of 8 INDEX NO. 507373/2021 FILED: KINGS COUNTY CLERK 05/16/2023 11:52 AM NYSCEF DOC. NO. 567 RECEIVED NYSCEF: 05/16/2023 r.easons the payments should not be treated as voluntary at this First, in Man Chou Chiu v. Chiu, 125 AD3d 824, time, [ 2 d Dept. , 2 015 J the court held, es s entia 11 y, 4 NYS3d 279 that contributions are generally treated as loans since that is the default reason . . infusions are made. Further, notwithstanding the cbnc1usibns that Cannot be made at this time, the voluntary payment doctrine may have no applicability to this case at a:11. That doctrine bars the recovery .of payments voluntarily made with full knowledge of the facts .absent fraud or mistake {Overbay LLC v. Berkman, ·Henoch, Peterson, Peddy 128 NYS3d 56 [2d Dept., 2020] ) • & Fenchel P. C., 185 AD3d 787, The rationale for the rule is the simple truism that "when a: party intends to resort to litigation in order to resist paying an unjust demand, that party should take its position a:t the time o-f the demand; and litigate the issue before, rather than after, payment is made" ( s.ee, Gimbel Brothers Inc., v. Brook Shopping Centers Inc., 118 AD2d 532, 499 NYS2 435 [2d Dept., 1986]). York, 70 NY 497, 25 Sickles 497 In Peyser v. City of New [1877] the court expanded upon that reason and explained that "the reason of this principle is, that a person shall not be permitted, with the knowledge that the dema.nd made upon him is illegal and unfounded, to make payment without resistance, where res:i,stance is lawfµl and. possitile, and af'te.rwards tq choose his own time to :pring an action f-or restoration, when, perchance, his at;:l.ve.rsary h,:3,s lost the ev.:l-dence 3 [* 3] 3 of 8 INDEX NO. 507373/2021 FILED: KINGS COUNTY CLERK 05/16/2023 11:52 AM NYSCEF DOC. NO. 567 RECEIVED NYSCEF: 05/16/2023 to sustain his side" (id). Other jurisdictions are in accord. Thus, in.Putnam v. Time Warner Cable of Southeast Wisconsin Ltd. Partnership, 649 NW2d 626, 255 Wis2d 447 [Supreme Court of Wisconsin 2022] the court explained "tht:'Te are two primary reasons why courts have adopted the voluntary payment doctrine. First, the doctrine allows entities that receive payment for services to rely upon these funds and to use them unfettered in future ac:tivities ... Second, the doctrine operates as a means to settle disputes without litigation by requiring the party contesting the payment to notify the payee o:f its concerns. After such notification, a payee who has acted wrongfully can react to rectify the situation" (id). It is clear that where a potential member of an entity infuses the entity with cash where litigation has already commenced and no payments are demanded then the voluntary payment doctrine may well be entirely inapplicable. The plaintiff's argue that "the reason Defendants made these voluntary paym.ent,s was so that he could c:ontinue his windfall" (see, Affirmation in Opposition, CJ[ 8 [NYSCEF Doc. No. 548]) and not tb provide loans to the c;ompany. However, according to records maintained by the receiver a-s of April 30, ·202 3 the defendant infused the hotel with $2,369,400. Further, since April 202.2 the receiver has docµmented total receipts of $2,751;867.45 and disbursements of $2,808,O9J.45. 4 [* 4] 4 of 8 The evidence INDEX NO. 507373/2021 FILED: KINGS COUNTY CLERK 05/16/2023 11:52 AM NYSCEF DOC. NO. 567 RECEIVED NYSCEF: 05/16/2023 The plaintiff's further argue of any windfall is curious indeed. and have consistently argued that the defendant charges high fees to various vendors and clients and only forwards of the receipts to the receiver. a small portion However, if true, that means the defendant is depositing unreported money he receives back into the hotel just to permit the receiver to pay expenses to The circuitous nature bf these keep the hotel barely afloat. actions really defies common sense. This convoluted scheme does not explain why the defendant would act in this fashion and why he would continue a cycle of deficit and unprofitability. Of course, these issuE:!s will be resolved in the court of litigation. They are only highlighted here to demonstrate that defendaht's payments ,cannot be unrecoverable pursuant to the voluntary payment doctrine at this time. Thus, while the nature of the payments made still require further litigation, the defendant has presented sufficient evidence the payments made were in furtherance o-f the hotel and were not voluntary. Therefore, the defendant's motion to reargue to the extent that the defendant will be required to close upb:h the property with a purchase price of $5,130,GOO which is $7,500,000 less the $2,369,400 he has already paid, is granted. In the event it i.s later determin.ed those payntents should not .hav.e reduced the. purphase price the plaintiff will maintain a j udgemE'?,nt agq.inst the defendant for any difference. 5 [* 5] 5 of 8 The hotel INDEX NO. 507373/2021 FILED: KINGS COUNTY CLERK 05/16/2023 11:52 AM NYSCEF DOC. NO. 567 RECEIVED NYSCEF: 05/16/2023 itself can serve as collateral for that eventual debt, if any. Likewise, pursuant to prior determinations, if the defendant fails to close within the requisite time and the plaintiff chooses to purchase it, the purchase price for the plaintiff is now $7,477,000 which is $7,500,000 less the $23,000 the plaintiff has contributed. Turnin9 to the motion seeking a stay, that motion really contradicts the motion for reargument and must be viewed as an alterrtati ve relief sought. Thus, the application for a stay is only being entertained if neither party chooses to purchase the property-. If the defendant or the plaintiff elect to purchase the property nc> stay shall be imposed. If neither party seeks to purchase the property then a review of the relevant statutes is necessary. CPLR §5519 (a) (6) states that "service upon the adverse party of a notice of appeal .. ,stays all proceedings to enforce the judgment or order app,ealed from pending the appeaL .. where ... the appellant or moving party is in possessioh o.r control of real property which the judgment or order directs be conveyed or delivered, and an undertaking in a sum fixed by the court .of original instance is given that the appellant or m:ovihg party will hot com:mit or suffEff to be com:mitted .any waste and that if the judgment or order appealed from, or any part of it, is affirmed, or the appeal is dismissed, the appellant or moving 6 [* 6] 6 of 8 INDEX NO. 507373/2021 FILED: KINGS COUNTY CLERK 05/16/2023 11:52 AM NYSCEF DOC. NO. 567 RECEIVED NYSCEF: 05/16/2023 of such occupancy and use of the party shall pay the value . . . . . . . property, or the part of it as to Which the judgment or order is affirmed, from the taking of the appeal until the delivery of possession of the property; if the judgment or order directs the sale of mortgaged property and the payment of any deficiency, the undertaking shall also provide that the appellant or moving party shall pay any such cleficiency" (id). Thus, where a party is in possession or control of real property then an automatic stay can be obtained by fixing an appropriate undertaking. The plaintiff argues that since a receiver has been appointed the defendants are no longer in possession and control of the property. Thus, the plaintiffs concede that Zablocki could have moved prior to the appointment of a receiver ''because Defendants, at that time, were in control of HVRbefore f:l1e Receiver's Order by virtue of Zablocki's position as the Managing Member bf HVNY" (see, Memorandum of Law ih Opposition, page 4 [NYSCEF Doc. No'. 5521) . Thus, the plaintiffs assert that upon the appointment bf a receiver Zablocki no longer controls or is in posse-ssion of the property. However, a receiver can only act with the powers granted pursuant to CPLR §640l(b) as contained ir:i a court order. Consequently, "a Receiver is an officer bf the court and not an agent of the mortgagee or the owner ... His duty is to preserve and operate the property, within the confines of 7 [* 7] 7 of 8 INDEX NO. 507373/2021 FILED: KINGS COUNTY CLERK 05/16/2023 11:52 AM NYSCEF DOC. NO. 567 RECEIVED NYSCEF: 05/16/2023 the order of appointment and any subsequent authorization granted to him by the court" ( ~ , Jacynicz v. 73 Seaman Associates., 270 AD2d 83, 704 NYS2d 68 [Pt. Dept.; 2000]). Thus, while the receiver is charged with managing the property the receiver does not divest the ciefE=ndant of possession or control for purposes of the automatic stay pursuant to CPLR §5519(a) (6). Further, it was surely never contemplated that the appoihtmerit of a receiver would inhibit appellate rights of any party. Therefore, if neither party purchases the property a stay will be imposed pending any appeals. Concerning any undertaking, the court has afforded the plaintiff the ability to purchase the property if the defendants That option obviates the need for al1.y fail to do so. undertaking. Therefore, a.stay, without any undertaking, will be imposed only in the event neither party exercises the option to purchase the property. Further, no pct:i::ty may file an:y motion: or Order to sh6½1 cause for any relief without prior court approval. So orctereda ENTER: DATED: May 16, 2-023 Brooklyri N.Y. Hori. Leori Ruch-elsman JSC 8 [* 8] 8 of 8

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