Malul v. Azulay
| Decision Date | 04 January 2013 |
| Docket Number | No. 5280/2010.,5280/2010. |
| Citation | 2013 N.Y. Slip Op. 50022,38 Misc.3d 1208,967 N.Y.S.2d 867 |
| Court | New York Supreme Court |
| Parties | Charles MALUL, Plaintiff, v. Maimon Ziv AZULAY, Ziv Complex, Inc., and Matanah M.H., LLC, Defendants. |
The following papers numbered 1 to 27 were read on this motion by defendant, MATANAH M.H., LLC, for an order pursuant to CPLR 3212 granting summary judgment and dismissing the plaintiff's complaint and vacating the lis pendens on the ground that the complaint fails to state a cause of action against said defendant; and the amended cross-motion of plaintiff, SHALOM MALUL, for an order pursuant to CPLR 2215 and 3025 granting plaintiff leave to amend the complaint:
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¦Papers ¦Numbered ¦
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¦MATANAH Notice of Motion–Affidavits–Exhibits ¦1–6 ¦
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¦Plaintiff's Notice of Cross–Motion–Exhibits ¦7–11 ¦
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¦Plaintiff's Affirmation in Opposition ¦12–16 ¦
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¦AZULAY Affirmation in Opposition to Cross–Motion ¦17–19 ¦
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¦AZULAY Affirmation in Support of Co–Defendant's Motion¦20–23 ¦
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¦MATANAH Reply Affirmation ¦24–27 ¦
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In this action for a constructive trust, unjust enrichment, breach of fiduciary duty, and fraud, related to the sale of certain properties in Rosedale, Queens, defendant Matanah M.H. LLC, moves for an order granting summary judgment dismissing the plaintiff's complaint against it on the ground that the complaint fails to state a cause of action against defendant Matanah.
According to the plaintiff's complaint, dated March 2, 2010, in the Fall of 2006, plaintiff Malul and defendant Azulay established a limited liability company known as Ziv Complex LLC (ZCL), for the purpose of acquiring and developing vacant land located on Hook Creek Boulevard in Rosedale, Queens. Pursuant to the agreement, each party owned 50% of the LLC and the partners agreed to equally share the profits or losses of the venture. On December 26, 2006, ZCL borrowed two million dollars from Rosenthal & Rosenthal Inc. and purchased land which eventually was subdivided into 16 separate parcels, each improved with a two-family house. Plaintiff asserts that in addition to lending his credit to obtain the loan from Rosenthal & Rosenthal he made substantial investments of approximately $900,000 from his own funds which was used for the development and improvement of the Hook Creek properties.
Subsequently, two of the houses were sold to third parties with the net proceeds divided equally between plaintiff and Azulay. However, plaintiff contends that on August 28, 2008, defendant Azulay deeded four properties to himself from ZCL for no consideration and refused to share the rental income being collected from the tenants of each property. Plaintiff also asserts that Azulay refinanced the mortgages on the four properties netting over $100,000 which he has also not shared with the plaintiff. Plaintiff further asserts that on December 18, 2009, Azulay and ZCL, without plaintiff's knowledge or consent, negotiated a purchase and assignment of the mortgages against the remaining ten properties to defendant Matanah. Plaintiff asserts that Matanah is aFiduciaryn entity controlled by Azulay and in which Azulay has a substantial interest. Plaintiff alleges that on December 22, 2009, Azulay, without plaintiff's knowledge or consent, caused ZCL to convey the ten houses to Matanah yielding net proceeds to ZCL of at least $500,000. Plaintiff alleges that Azulay has refused to share rental income from those properties and has refused to share any profits or consideration in connection with the sale of the properties to Matanah.
Plaintiff asserts that Azulay and ZCL breached their promise to plaintiff to share the profits of the partnership and as a result, defendants Matanah, Azulay and ZCL have breached their fiduciary duty and have been unjustly enriched. In addition, plaintiff alleges that Matanah aided, abetted and conspired with Azulay and ZCL to violate their fiduciary duties by purchasing the ten houses knowing that the acquisition of the properties was part of a scheme by Azulay and ZCL to divert and misappropriate plaintiff's partnership opportunities. The complaint also states that on information and belief Matanah is Azulay's alter ego. Plaintiff alleges that Matanah's acquisition of the properties was fraudulent and was promulgated to deprive plaintiff of his profit from the sale of the properties and as a result plaintiff seeks a constructive trust and a judgment against Matanah invalidating the deeds.
Plaintiff commenced the instant action by filing a summons and complaint and lis pendens on fourteen properties on March 3, 2010. Matanah served its answer on April 30, 2010, denying the allegations in the complaint but admitting that Matanah did purchase both the mortgage and the ten properties for good and valuable consideration. The answer contains an affirmative defense stating that Matanah was a bona fide purchaser for value and as a result the complaint fails to state a cause of action against it. Plaintiff filed a note of issue on March 14, 2012. The case is on the calendar in the trial scheduling part on February 5, 2012.
Matanah now moves for summary judgment dismissing the complaint on the ground that no valid cause of action has been pled against Matanah. In support of its motion, defendant submits an affidavit from Michael Goldman, managing member of Matanah, dated June 19, 2012, stating that the transaction in which Matanah purchased the properties “was an arms length, bona fide transaction for which full consideration was tendered, wholly independently from either co-defendant.” Goldman states that plaintiff has presented no factual support for its conclusion that Matanah is partly owned and/or controlled by Azulay and ZCL. He states that Matanah is controlled by the Koralashvili family and that there is no connection between that family and the co-defendants. Goldman states that ZCL was unable to sell the remaining ten properties and that Rosenthal & Rosenthal was going to foreclose on its loan unless the mortgages were satisfied for three million dollars. Matanah negotiated an agreement with Azulay to satisfy the mortgages and to pay ZCL an additional sum of $500,000 in consideration for which Matanah would receive deeds to the ten houses. At the closing on December 22, 2009 the mortgages were satisfied by payment from Matanah directly to Rosenthal & Rosenthal. In addition, Matanah paid the sum of $500,000 to various entities for the benefit of the seller. Goldman annexes copies of the checks and a closing statement and states that Matanah is a third-party who purchased the property for three and a half million dollars in a bona fide transaction and that it is not involved in the partnership dispute between Azulay and Malul. Thus, Goldman alleges that there is no factual basis for the claims against Matanah contained in the complaint and as such the causes of action for a constructive trust, unjust enrichment, breach of fiduciary duty and fraud should be dismissed on the basis that the complaint fails to state a cause of action.
Specifically, Matanah asserts that the causes of action for unjust enrichment and breach of fiduciary duty do not set forth any factual allegations against Matanah. Counsel asserts that the plaintiff's claims for damages arise soley from his business relationship with Azulay and that Matanah never transacted any business with the plaintff. Further, counsel claims that there is no fiduciary relationship between Matanah and the plaintiff and that the claim for unjust enrichment is related to the alleged failure of Azulay to divide the partnership profits with Malul. Counsel asserts that the cause of action for a constructive trust has no relation to Matanah as it also arises out of the partnership between Azulay and Malul. Counsel also claims that there should be no constructive trust asserted against the ten properties as Matanah acquired title for valuable consideration and that the only claim in the complaint regarding Matanah is that Matanah is an entity controlled Azulay. Counsel contends that the plaintiff's dispute has no basis in the real estate but rather he is seeking the proceeds from the sale. Therefore, counsel states that the plaintiff's recourse, if any, lies in recouping his share of the funds from the purchase of the properties from Azulay and there is no basis for a cause of action for a constructive trust against the properties.
With respect to the cause of action for fraud and misconduct, Matanah alleges that the allegations of a conspiracy between Matanah and Azulay are wholly unsubstantiated and based only upon information and belief. Counsel asserts that he has submitted documentation verifying the genuineness of the subject transaction, the wholly independent source of the funds utilized, and the lack of connection between Matanah and Azulay. Counsel also submits a document dated September 9, 2008, signed by Malul, in which he claims that Malul waived any claim to the sale of the ten houses by Ziv Complex to Matanah. The document signed by Malul states as follows:
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