Shvartser v. Lekser

• Decision Date: 11 April 2018
• Docket Number: Civil Action No. 18–473 (JDB)
• Citation: 308 F.Supp.3d 260
• Parties: Konstantin SHVARTSER, Plaintiff, v. Evelina LEKSER, et al., Defendants.
• Court: U.S. District Court — District of Columbia

308 F.Supp.3d 260

Konstantin SHVARTSER, Plaintiff,

v.Evelina LEKSER, et al., Defendants.

Civil Action No. 18–473 (JDB)

United States District Court, District of Columbia.

Signed April 11, 2018

Douglas P. Hibshman, Fox Rothschild LLP, Washington, DC, Ely Goldin, Fox Rothschild LLP, Blue Bell, PA, for Plaintiff.

Evelina Lekser, Forest Hills, NY, pro se.

MEMORANDUM OPINION

JOHN D. BATES, United States District Judge

Before the Court is [10] plaintiff's motion for a preliminary injunction. Plaintiff seeks to enjoin defendants SP Funding 452, LLC and Snowpoint Capital, LLC (collectively, the "lender defendants") from proceeding with a foreclosure sale of the property located at 2150 Florida Avenue NW in Washington, D.C. ("the property"), of which plaintiff is a joint owner. Plaintiff alleges that the security interest on which the lender defendants seek to foreclose was invalidly transferred by defendant Evelina Lekser—plaintiff's daughter and the other joint owner of the property—using a forged power of attorney. For the following reasons, the Court will grant plaintiff's motion and preliminarily enjoin the foreclosure sale.

BACKGROUND

In October 2008, plaintiff and defendant Lekser purchased the property as joint tenants with right of survivorship for $800,000. They did so with the intention of renovating the property and ultimately "flipping" it for a profit. Verified Compl. [ECF No. 1] ¶¶ 16–17. They financed the purchase by acquiring a $417,000 loan from Bank of America, which was secured by a first mortgage on the property. Id. ¶ 18. Because plaintiff is a resident of Russia and was not present in the United States at the time of the purchase, he executed a limited power of attorney that authorized defendant Lekser to execute documents related to the Bank of America loan and mortgage. Id. ¶ 20.

Between 2008 and 2015, plaintiff allegedly invested hundreds of thousands of dollars to make repairs and improvements to the property. Id. ¶¶ 23, 28. Plaintiff alleges that on or around March 30, 2015, he informed defendant Lekser that he wished to list the property for sale to recover his capital investment and an agreed-upon share of the net proceeds from the sale. Id. ¶ 29. According to plaintiff, defendant Lekser responded by perpetrating a fraudulent scheme to withdraw equity from the property for her own personal gain. Id. ¶ 30.

Defendant Lekser allegedly carried out the scheme, along with several co-conspirators also named as defendants, by fraudulently obtaining an $800,000 hard money loan from the lender defendants in November 2015. Id. ¶¶ 31, 77. She allegedly provided false information to the lender defendants, and utilized a fraudulent power of attorney that purported to give her authority to act on plaintiff's behalf, in order to obtain the commercial loan and refinance the then-outstanding Bank of America mortgage encumbering the property. Id. ¶¶ 78–79. Approximately half of the proceeds of the $800,000 loan were utilized to pay off the Bank of America mortgage, while the remaining funds were allegedly misappropriated by defendant Lekser and her co-conspirators. Id. ¶¶ 101, 103, 123. The last payment on the $800,000 loan was made in June 2016, and the loan matured on December 1, 2016.

In June 2016, plaintiff sued defendant Lekser in a related action pending before this Court. See Shvartser v. Lekser, No. 16–cv–1199–JDB (D.D.C. filed June 20, 2016) [hereinafter "Shvartser I"]. In July 2017, this Court granted plaintiff's motion for partial summary judgment in Shvartser I, and provided plaintiff with the ability to access the property, to complete any necessary repairs, to retain a licensed realtor to sell the property, and to deposit all proceeds from the sale with the Clerk of Court pending the outcome of the litigation. See July 5, 2017 Order, Shvartser I [ECF No. 87]. Despite the passage of more than eight months, the property has not yet been sold.

On February 28, 2018, after the lender defendants had notified plaintiff that they intended to foreclose on the property on March 1, 2018, plaintiff filed this lawsuit to block the foreclosure sale. Along with the verified complaint, plaintiff concurrently filed an emergency motion for a temporary restraining order ("TRO"). Mot. for Temporary Restraining Order [ECF No. 3]. The Court held a TRO hearing on the afternoon of February 28, 2018, and granted plaintiff's motion the following day. See March 1, 2018 Order [ECF No. 6] at 2. The Court set a briefing schedule for plaintiff's motion for a preliminary injunction and permitted the parties to serve a limited number of interrogatories and document requests in connection with the briefing. Id. at 2–3. Plaintiff's motion is now fully briefed and ripe for decision.

LEGAL STANDARD

A preliminary injunction is "an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing , carries the burden of persuasion." Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997) ; see also Abdullah v. Obama, 753 F.3d 193, 197 (D.C. Cir. 2014). "The purpose of such interim equitable relief is not to conclusively determine the rights of the parties, but to balance the equities as the litigation moves forward." Trump v. Int'l Refugee Assistance Project, ––– U.S. ––––, 137 S.Ct. 2080, 2087, 198 L.Ed.2d 643 (2017) (citation omitted). A party seeking preliminary injunctive relief must make a "clear showing that four factors, taken together, warrant relief: [1] likely success on the merits, [2] likely irreparable harm in the absence of preliminary relief, [3] a balance of the equities in its favor, and [4] accord with the public interest." League of Women Voters of U.S. v. Newby, 838 F.3d 1, 6 (D.C. Cir. 2016) (quoting Pursuing Am.'s Greatness v. FEC, 831 F.3d 500, 505 (D.C. Cir. 2016) ).

Courts in this Circuit have often balanced these factors on a "sliding scale" whereby a movant's unusually strong showing on one factor could compensate for weaker showings on one or more other factors. See, e.g., Davis v. Billington, 76 F.Supp.3d 59, 63–64 (D.D.C. 2014) (citing Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1291–92 (D.C. Cir. 2009) ). Still, it is crucial for the movant to show at least some harm to obtain preliminary injunctive relief. See Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006) ("A movant's failure to show any irreparable harm is ... grounds for refusing to issue a preliminary injunction, even if the other three factors entering the calculus merit such relief."). Moreover, "[a]bsent a ‘substantial indication’ of likely success on the merits, ‘there would be no justification for the court's intrusion into the ordinary processes of administration and judicial review.’ " Nat'l Parks Conservation Ass'n v. U.S. Forest Serv., No. 15-01582, 2015 WL 9269401, at *1 (D.D.C. Dec. 8, 2015) (quoting Am. Bankers Ass'n v. Nat'l Credit Union Admin., 38 F.Supp.2d 114, 140 (D.D.C. 1999) ); accord Ark. Dairy Co-op Ass'n, Inc. v. U.S. Dep't. of Agric., 573 F.3d 815, 832 (D.C. Cir. 2009).

There is an open question in this Circuit whether the Supreme Court invalidated the sliding scale approach when it decided Winter v. Natural Resources Defense Council, 555 U.S. 7, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008), and relatedly whether the likelihood of success factor constitutes an "independent, free-standing requirement for a preliminary injunction". Sherley v. Sebelius, 644 F.3d 388, 392–93 (D.C. Cir. 2011) ; see also Nat'l Parks Conservation Ass'n, 2015 WL 9269401, at *2.

DISCUSSION

I. LIKELIHOOD OF SUCCESS ON THE MERITS

To begin with, plaintiff claims that he has shown a substantial likelihood of success on his claims for quiet title and negligence. See Pl.'s Mot. for Prelim. Inj. [ECF No. 10] at 7. Plaintiff's quiet title claim is based on his allegation that defendant Lekser used a fraudulent power of attorney to secure the loan. See Lancaster v. Fox, 72 F.Supp.3d 319, 326 (D.D.C. 2014) ("Were [plaintiff] successful in proving his fraud allegations, he could ... clear the title to the property of any cloud created by the contested deeds."). Under District of Columbia law, a deed of trust in favor of a mortgage lender is void if the power of attorney used to acquire it is a forgery. See Smith v. Wells Fargo Bank, 991 A.2d 20, 26–27 (D.C. 2010) ; id. at 31 ("[E]ven a bona fide purchaser cannot acquire a property right by means of a forged instrument relating to the property."); In re Baxter, 320 B.R. 30, 39 (Bankr. D.D.C. 2004) ("[I]f the Limited Power of Attorney was a forgery, the deed of trust executed pursuant to the Limited Power of Attorney is ineffective."); see also Cruz v. Cruz, 37 A.D.3d 754, 832 N.Y.S.2d 217, 218 (2007) ("A deed based on forgery or obtained by false pretenses is void ab initio, and a mortgage based on such a deed is likewise invalid.").

Here, during deposition testimony given in Shvartser I, plaintiff has repeatedly denied that he executed the power of attorney that the lender defendants relied on to complete the subject transaction. See Shvartser Dep. Tr. (Ex. 8 to Pl.'s Mot. for Prelim. Inj.) [ECF No. 10–12] at 44:4–46:13, 59:17–64:12, 66:16–67:4. In addition, the record shows that defendant Lekser did not produce the power of attorney to anyone until just before closing, despite its purportedly being executed seven months earlier. See Lekser Dep. Tr. (Ex. 10 to Pl.'s Mot. for Prelim. Inj.) [ECF No. 10–10] at 99:23–100:3; Vandersnow Dep. Tr. (Ex. 1 to Pl.'s Mot. for Prelim. Inj.) [ECF No. 10–5] at 79:16–21. Plaintiff has also identified numerous "irregularities" on the face of the document, which allegedly call into question its authenticity. A comparison between the 2008 power of attorney—which plaintiff concedes is valid—and the challenged 2015 power of attorney provides further evidence that the later document is not authentic. For example, unlike the 2008 document, the 2015 power of attorney contains no language that...