Neshewat v. Salem

Decision Date08 April 2005
Docket NumberNo. 02 CIV. 9807(WCC).,02 CIV. 9807(WCC).
PartiesMichael NESHEWAT, Plaintiff, v. Maurice J. SALEM f/k/a Maurice J. Neshewat and Clodia A. Salem, Defendants.
CourtU.S. District Court — Southern District of New York
365 F.Supp.2d 508
Michael NESHEWAT, Plaintiff,
v.
Maurice J. SALEM f/k/a Maurice J. Neshewat and Clodia A. Salem, Defendants.
No. 02 CIV. 9807(WCC).
United States District Court, S.D. New York.
April 8, 2005.

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Goldsten & Metzger, LLP, Poughkeepsie, NY (Paul J. Goldstein, of Counsel), for Plaintiff.

Maurice J. Salem, pro se.

Maurice J. Salem, Palos Heights, IL (Maurice J. Salem, of Counsel), for Clodia A. Salem, and Paragon Associates of New York, Inc.

OPINION AND ORDER

WILLIAM C. CONNER, Senior District Judge.


Plaintiff Michael Neshewat commenced this action against defendants Maurice J. Salem ("Salem" or the "defendant") and his wife Clodia Salem (collectively, the "defendants") seeking to set aside: (1) the conveyance by Salem (f/k/a Maurice J. Neshewat) of residential property at 7 Gellatly Drive in Wappingers Falls, New York to himself and Clodia Salem, on May 20, 1999; and (2) Salem's conveyance of a 1989 Model 300 Mercedes Benz to Clodia Salem.1 In addition, plaintiff seeks attorney's fees pursuant to section 276-a of the New York State Debtor and Creditor Law. In the present motion, plaintiff moves for summary judgment pursuant to FED. R. CIV. P. 56 on the fraudulent conveyance claims and for dismissal of defendant's counterclaim2 against plaintiff for failure to state a claim upon which relief may be granted and on the basis of res judicata, collateral estoppel and the statute of limitations. In addition, plaintiff seeks monetary sanctions for frivolous conduct and an injunction to prevent defendants from commencing any further actions against plaintiff or his counsel, Paul J. Goldstein and Goldstein & Metzger, LLP. Defendant cross-moves to amend his counterclaim to: (1) plead specific facts underlying the claim based on N.Y. C.P.L.R. § 5015(a)(3); (2) include a claim of common law fraud on the court; and (3) include opposing counsel, Paul J. Goldstein, as a third-party

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defendant pursuant to N.Y. C.P.L.R. § 1007.

Additionally, the parties seek the Court's assistance with respect to: (1) plaintiff's service of a "Restraining Notice to Garnishee" on a temporary tenant of the subject house, seeking to prevent or suspend rental payments to the owners of the house;3 and (2) the impending April 13, 2005 Sheriff's sale of the premises. Defendant maintains that, as a matter of law, plaintiff cannot restrain the tenant from paying rent under N.Y. C.P.L.R. § 5222(b) and moves for an order quashing the restraining notice. In addition, Paragon Associates of New York, Inc. ("Paragon"), a nonparty adverse claimant, moves, pursuant to FED. R. CIV. P. 24(a)(2) and N.Y. C.P.L.R. §§ 5239 and 5227, for an order allowing it to intervene in this proceeding to determine its rights to the property.4

For the reasons stated hereinafter, plaintiff's motion for summary judgment is granted with respect to setting aside the fraudulent conveyances, but denied with respect to the imposition of attorney's fees. Plaintiff's motion to dismiss defendant's counterclaim is also granted, and defendant's motion to amend the counterclaim is denied.

Additionally, Paragon's motion to intervene is denied. Defendant's motion to quash plaintiff's "Restraining Notice to Garnishee" and plaintiff's cross-motion seeking an order that the rental payments generated from the 7 Gellatly Drive property be turned over to plaintiff are both granted in part and denied in part. In addition, defendant's motion seeking to maintain the status quo and stay the scheduled Sheriff's sale is denied. Lastly, plaintiff's motion for sanctions and injunctive relief is granted with respect to enjoining Salem from commencing further litigation in connection with the default judgment entered against him in New York State Supreme Court.

BACKGROUND

This lawsuit is one of many between the two brothers Salem and Neshewat. In 1996, Neshewat filed an action in New York State Court against Salem for malicious prosecution, abuse of process, defamation, libel and slander. (Pl. Mem. Supp. Summ. J. at 4.) A default judgment was entered against Salem. After a damages inquest, the state court awarded damages in the amount of $166,884.86 and a judgment was entered for that amount in the Dutchess County Clerk's Office on June 16, 1999. (Id.)

On April 12, 1999, defendant commenced an action in the United States District Court for the Southern District of New York, against plaintiff Michael Neshewat; his attorney, Paul J. Goldstein; Judge Pagones, who conducted the inquest; and various other officials. (Id. at 5.) Defendant's lawsuit, inter alia, challenged Judge Pagones's authority to enter the default judgment against defendant, alleging that the judgment was entered based on false and fraudulent statements made to Judge Bernhard. (Id.) In a previous decision by this Court, that action was dismissed and the dismissal was affirmed by the Second Circuit. Salem v. Paroli, 260 B.R. 246 (S.D.N.Y.2001) (Conner, J.); Salem v. Paroli, 79 Fed. Appx. 455 (2d Cir.2003).

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Salem filed for bankruptcy in 2000 and later that year Neshewat commenced an adversary proceeding in bankruptcy court seeking a determination that the judgment against Salem was a non-dischargeable debt. (Id. at 6.) The bankruptcy court conducted a trial and found that Neshewat had proven by a preponderance of the evidence that Salem caused willful and malicious injury to him, and therefore concluded that the debt was non-dischargeable. See In re Salem, 290 B.R. 479 (S.D.N.Y.2003) (Conner, J.). Salem then appealed to this Court, which had jurisdiction pursuant to 28 U.S.C. § 158. In an Opinion and Order dated March 5, 2003, we affirmed the bankruptcy court's determination that Salem's debt was non-dischargeable. Id. This decision was affirmed by the Second Circuit Court of Appeals. In re Salem, 94 Fed. Appx. 24 (2d Cir.2004).

With the intention of enforcing his right as a judgment creditor, plaintiff commenced the instant action in the Supreme Court of the State of New York, County of Dutchess, on November 20, 2002, seeking to set aside two conveyances made by Salem. (Pl. Mem. Supp. Summ. J. at 1.) Plaintiff alleges that defendant fraudulently conveyed his interest in the real property at 7 Gellatly Drive to himself and his wife on May 20, 1999 and fraudulently conveyed a 1989 Model 300 Mercedes Benz, which was in his name alone, to his wife on July 23, 1999. (Id. at 7.) According to plaintiff, the conveyance of the real property "was done immediately after Justice Pagones had rendered his decision and order on May 7, 1999, granting judgment in the sum of $131,622.91, and before the actual judgment, which with costs, disbursements and interest, totaled $166,884.86, was entered on June 16, 1999, in the Dutchess County Clerk's Office." (Id.) Plaintiff seeks to "set aside the conveyances to Salem's wife and return them to their pre-conveyance status; that is, ownership in Salem's name, so that the judgment can be enforced directly against him." (Id. at 8.)

Defendants removed this action to federal court on December 12, 2002 and also served a Verified Answer and counterclaim. (Id. at 2.) The counterclaim seeks to set aside the $166,884.86 default judgment entered against defendant, which is the judgment plaintiff is now seeking to enforce in the present fraudulent conveyance action. Defendant maintains that the default judgment entered on November 6, 1996 by Judge George G. Bernhard, Acting Justice of the Supreme Court, County of Dutchess, was entered because of false and fraudulent statements made by plaintiff and plaintiff's counsel. (Id.)

This action was placed on the suspense calendar by this Court on November 24, 2003 because each defendant, individually, had filed bankruptcy petitions in Illinois. (Id.) The bankruptcy matters having been resolved, this Court reinstated the action and removed it from the suspense docket on December 15, 2004. Shortly thereafter, the present motions were filed.

DISCUSSION

I. Motion to Dismiss Counterclaim

We will address the issues surrounding defendant's counterclaim first because our determination with respect to the counterclaim has a direct bearing on the analysis of plaintiff's claims and requests for relief from the Court.

A. Motion to Dismiss Standard

On a motion to dismiss pursuant to Rule 12(b)(6), the issue is "whether the claimant is entitled to offer evidence to support the claims." See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90

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(1974), overruled on other grounds; Davis v. Scherer, 468 U.S. 183, 104 S.Ct. 3012, 82 L.Ed.2d 139 (1984). A counterclaim should not be dismissed for failure to state a claim "unless it appears beyond doubt that the [claimant] can prove no set of facts in support of his claim which would entitle him to relief." Padavan v. United States, 82 F.3d 23, 26 (2d Cir.1996) (quoting Hughes v. Rowe, 449 U.S. 5, 10, 101 S.Ct. 173, 66 L.Ed.2d 163 (1980)). All well-pleaded factual allegations will be accepted as true and all reasonable inferences must be drawn in favor of the claimant. See Wright v. Ernst & Young LLP, 152 F.3d 169 (2d Cir.1998); In re AES Corp. Secs. Litig., 825 F.Supp. 578, 583 (S.D.N.Y.1993). However, "[c]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss." 2 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE § 12.34[1][b] (3d ed.1997); see also Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1088 (2d Cir.1995). Allegations that are so conclusory that they fail to give notice of the basic events and circumstances on which plaintiff relies, are insufficient as a matter of law. See Martin v. New York State Dep't of Mental Hygiene, 588 F.2d 371, 372 (2d Cir.1978).

B. Defendant's Counterclaim

Defendant filed a counterclaim in the instant action pursuant to N.Y. C.P.L.R. § 5015(a)(3) & (d)...

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