Opinion
Index No. 9121/2015
09-26-2016
363 GRAND AVENUE TENANTS ASSOCIATION, WINNETTE BROWN, DELPHENA CLAXTON, COLUMBUS GAMBLE, NINA GARLAND, LINDA HARPER, ROGER LEGENDRE, BREE WHITLOCK, Plaintiffs, v. AZAD ALI, MIRACULOUS SOLUTIONS INC., FARRELL REALTY CORP., 363 GRAND VENDOME ASSOCIATES LP, VENDOME RESTORATION CORP., 363 GRAND VENDOME INC., 363 GRAND ASSOCIATES, LP, FREEDOM TAX CREDIT PLUS LP, NYC PARTNERSHIP HDFC, NEW YORK CITY DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT, THE CITY OF NEW YORK, NYS HOUSING AND COMMUNITY RENEWAL, NYS AFFORDABLE HOUSING CORPORATION, NYS HOUSING FINANCE AGENCY, Defendants.
At an IAS Term, Part 52 of the Supreme Court of the State of New York, held in and for the County of Kings, at the Courthouse, at Civic Center, Brooklyn, New York, on the 26th day of September, 2016
This is also the date the decision and order was mailed to the plaintiffs, movants and cross movant.
DECISION & ORDER
Recitation in accordance with CPLR 2219 (a) of the papers considered on the joint notice of motion of defendants Azad Ali (hereinafter Ali) and Miraculous Solutions Inc., (hereinafter Miraculous) (hereinafter jointly the movants), filed on January 28, 2016, for an order pursuant to CPLR 3211 (a) (1) dismissing the complaint as asserted against Ali and extending Miraculous's time to answer the complaint.
-Notice of Motion
-Affirmation in support
-Affidavit of Ali in support
-Exhibits A-B
-Affirmation in Opposition
-Plaintiffs' affidavits in opposition
-Exhibits A-E
-Reply affirmation
Ali submits an affirmation in support of Miraculous' motion as the Chief Executive Officer of Miraculous. Ali also submits an affirmation in support of Farrell's cross motion as an officer of Farrell.
The plaintiffs submitted one set of papers to serve as opposition to both the motion and cross motion.
Recitation in accordance with CPLR 2219 (a) of the papers considered on the notice of cross motion of defendant Farrell Realty Corp. (hereinafter Farrell or the cross movant) for an order pursuant to CPLR 3211 (a) (7) dismissing the action as asserted against it for failure to state a cause of action for which relief can be granted.
-Notice of Cross Motion
-Affirmation in support
-Affidavit of Ali in support
-Exhibits A-C
-Affirmation in Opposition
-Plaintiffs' affidavits in opposition
-Exhibits A-E
-Reply affirmation
BACKGROUND
On July 22, 2015, plaintiffs commenced the instant action for a declaratory judgment and injunctive relief by filing a summon and verified complaint (hereinafter the commencement papers) with the Kings County Clerk's office (KCCO). Plaintiff 363 Grand Avenue Tenants Association is as organization comprised of tenants of 363 Grand Avenue, Brooklyn, New York. All other named plaintiffs are individual tenants of units contained in a twenty four unit building located at 363 Grand Avenue, Brooklyn, New York (hereinafter the subject property). The subject premises is known as the Vendome Apartments and is described as a landmark Romanesque Revival structure in the Clinton Hill neighborhood of Brooklyn. The subject premises was constructed in 1887 and is the first apartment building in Clinton Hill. Miraculous is the current record deed holder of the subject property. Farrell is the current record mortgage holder on the subject property. Ali is an affiliate of both Farrell and Miraculous.
The complaint alleges sixty-four allegations of fact in support of two causes of action. The first cause of action seeks declaratory and injunctive relief requiring the parties to certain contracts and there successors in interest to convey the property to either 363 Grand Avenue Tenants Association or to the individual tenant plaintiffs. The second cause of action is for a declaration that: (1) the individual tenants are the lawful tenants of the subject property; (2) that their respective tenancies remain subject to rent stabilization; and (3) that the legal rents are the rents that have been charged and paid.
The complaint alleges the following salient facts, among others. The individual plaintiffs are third-party beneficiaries to certain regulatory agreements that the government defendants entered into with affordable housing developers. In the early 1980s, the City took ownership of the subject property after a fire to preserve the building as affordable housing instead of tearing it down. In or about 1989, the property was transferred to the NYC Partnership HDFC under the NYC Partnership New Homes Program under which City owned properties are transferred to the Partnership with the goal of turning the units into low-income co-ops. In 1989 the City and NYC Partnership HDFC entered into a Land Disposition Agreement (hereinafter the LDA), a City Assistance Agreement and a NYS Affordable Housing Corporation Grant Agreement. The City extended a $373,000.00 purchase money mortgage to NYC Partnership, which was considered the sponsor under the agreements. NYC Partnership paid $12,000.00 for the property and obtained a mortgage from Dime Savings Bank for $1,788,000.00.
The LDA required NYC Partnership to work with private builders to rehabilitate the property and market the apartments as condominium units to bona fide purchasers. The LDA also required that the subject property be conveyed to the Tenants Association, to be maintained as a cooperative or regulated-rental housing or sold to individual tenants pursuant to a condominium plan. The agreements forbid any transfer of the deed before the affordable housing plan was implemented without HPD's permission.
On December 30, 1991, NYC Partnership HDFC assigned its interest to 363 Grand Vendome, L.P. In March of 2008 Washington Mutual as successor in interest to Dime Savings Bank commenced a foreclosure action against 363 Grand Vendome Associates, LP. In January of 2011, 363 Grand Vendome Associates LP deeded the subject property to Miraculous. In December of 2012, Farrell was substituted as plaintiff in the foreclosure action. The current owner and mortgage holder have engaged in activities to circumvent the regulatory agreements and the protections afforded to the plaintiffs. Plaintiffs contend that the defendants are in breach of their obligations under the regulatory agreements to the plaintiffs' detriment.
LAW AND APPLICATION
Ali's CPLR 3211 (a) (1) motion
Defendant Ali seeks dismissal of the complaint as asserted against him pursuant to CPLR 3211 (a) (1). In support of same he has submitted an affirmation of his counsel, his own affidavit and copy of the verified complaint and a copy of the deed to the subject property. Ali avers that he is the chief executive officer of Miraculous, and that Miraculous is the holder of the deed to the subject property. He further alleges that all transactions that he participated in pertinent to the complaint were done in his capacity as an officer of Miraculous and not as an individual.
A motion pursuant to CPLR 3211 (a) (1) to dismiss based on documentary evidence may be appropriately granted only where the documentary evidence utterly refutes the plaintiff's factual allegations, thereby conclusively establishing a defense as a matter of law (see Sabre Real Estate Group, LLC v Ghazvini, 140 AD3d 724 [2nd Dept 2016] citing 25-01 Newkirk Ave., LLC v Everest Natl. Ins. Co., 127 AD3d 850, 851 [2nd Dept 2015]). Such a motion will fail unless the documentary evidence that forms the basis of the defense resolves all factual issues as a matter of law, and conclusively disposes of the plaintiffs' claim (Ader v Guzman, 135 AD3d 668, 669 [2nd Dept 2016]).
In order for evidence submitted in support of a CPLR 3211 (a) (1) motion to qualify as "documentary evidence," it must be "unambiguous, authentic, and undeniable" (Cives Corp. v George A, Fuller Co., Inc., 97 AD3d 713, 714 [2nd Dept 2012], quoting Granada Condominium III Assn. v Palomino, 78 AD3d 996, 996-997 [2nd Dept 2010]). "It is clear that judicial records, as well as documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are 'essentially undeniable,' would qualify as 'documentary evidence' in the proper case.
The affirmation of Ali's counsel and his own affidavit are not documentary evidence within the intendment of CPLR 3211 (a) (1). The deed is documentary evidence and provides proof that the subject property was conveyed by 363 Grand Vendome Associates Limited Partnership to Miraculous. The plaintiffs do not dispute the authenticity of the deed or of the conveyance of title to the subject property by 363 Grand Vendome Associates Limited Partnership to Miraculous.
Plaintiffs claim is that Ali is the alter ego of Miraculous and Farrell and that he has abused his corporate positions in a scheme to deregulate the subject property and deprive the plaintiffs of certain rights that they possessed as third party beneficiaries of certain government agreements.
The deed supports Ali's claim that the subject property is owned by Miraculous and not by him. However, the deed does not form the basis of a defense that resolves all factual issues as a matter of law. In particular, it does not conclusively dispose of the plaintiffs' claims against Ali on a theory of piercing the corporate veil.
" 'A party seeking to pierce the corporate veil must establish that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in the plaintiff's injury' " (Peery v United Capital Corp. 84 AD3d 1201, 1202 [2nd Dept 2011] citing Gateway I Group, Inc. v Park Ave. Physicians, P.C., 62 AD3d 141, 145 [2nd Dept 2009]). The party seeking to pierce the corporate veil must establish that the controlling corporation or individuals "abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will intervene" (Peery v United Capital Corp. 84 AD3d 1201, 1202 [2nd Dept 2011] citing Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 142 [1993]).
Indicia of a situation warranting veil-piercing include:
" '(1) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like, (2) inadequate capitalization, (3) whether funds are put in and taken out of the corporation for personal rather than corporate purposes, (4) overlap in ownership, officers, directors, and personnel, (5) common office space, address and telephone numbers of corporate entities, (6) the amount of business discretion displayed by the allegedly dominated corporation, (7) whether the related corporations deal with the dominated corporation at arms length, (8) whether the corporations are treated as independent profit centers, (9) the payment or
guarantee of debts of the dominated corporation by other corporations in the group, and (10) whether the corporation in question had property that was used by other of the corporations as if it were its own' " (Peery v United Capital Corp. 84 AD3d 1201, 1202 [2nd Dept 2011] citing Gateway I Group, Inc. v Park Ave. Physicians, P.C., 62 AD3d at 146 [2nd Dept 2009]).
Contrary to the contention of defendant Ali, the plaintiffs have adequately plead sufficient facts to keep him in the action based under a theory of piercing the corporate veil. Plaintiffs have alleged that Ali is the chief executive officer and sole shareholder of both Miraculous Solutions and Farrell Realty Corp. Plaintiffs have also alleged that Miraculous and Farrell are alter egos of Ali and that he has abused the corporate form as holder of mortgage and deed of the subject property in a scheme to deregulate the building and deprive the plaintiffs of the rights as third party beneficiaries to multiple government agreements. Accordingly, Ali's motion to dismiss the complaint as asserted against him pursuant to CPLR 3211 (a) (1) is denied (Ader v Guzman, 135 AD3d 668, 669 [2nd Dept 2016]).
Extending Miraculous's Time to Answer
Miraculous has moved for an order granting it additional time to answer the complaint until sometime after the Court has decided Ali's motion to dismiss the complaint. Contrary to the requirements of CPLR 2214, Miraculous has cited no legal authority for its request. However, the plaintiffs have neither opposed nor addressed the request in their opposition papers. A party's time limit to answer a complaint is governed by the method that the party was served with the commencement papers. There is nothing in the papers submitted by any party demonstrating the manner or method that the commencement papers were served upon Miraculous.
The Court sees no prejudice to any party by granting Miraculous's request. Accordingly, the motion is granted pursuant to CPLR 2004 to the extent that Miraculous is directed to serve and file its answer by no later than October 28, 2016.
Farrell's CPLR 3211 (a) (7) Cross Motion
Defendant Farrell seeks dismissal of the complaint as asserted against it pursuant to CPLR 3211 (a) (7). In support of same Farrell has submitted an affirmation of its counsel, an affidavit of Ali, and three annexed exhibits labeled A through C. Exhibit A is a copy of the summons and complaint. Exhibit B is a copy of an assignment of a mortgage encumbering the subject property from JPMorgan Chase Bank N.A. to Farrell. Exhibit C is described as a copy of the 19th Amendatory Agreement pertaining to the subject property.
On a motion to dismiss the complaint pursuant to CPLR 3211 (a) (7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory (Sinagra v City of New York, 127 AD3d 729, 730 [2nd Dept 2015] citing Breytman v Olinville Realty, LLC, 54 AD3d 703, 703-704 [2nd Dept 2008]). A motion to dismiss pursuant to CPLR 3211 (a) (7) will fail if, taking all facts alleged as true and according them every possible inference favorable to the plaintiff, the complaint states in some recognizable form any cause of action known to our law (Ader v Guzman, 135 AD3d 668, 669 [2nd Dept 2016] citing Shaya B. Pac., LLC v Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 AD3d 34, 38 [2nd Dept 2006]).
Accepting all the allegations in the complaint as true, and affording the plaintiffs the benefit of every possible inference, the complaint adequately pleads cognizable claims against Farrell and Miraculous as alter egos of Ali. Furthermore, the remedies sought by the plaintiffs render Farrell a necessary party to the action to the extent that it may potentially effect Fan-ell's mortgage lien on the subject property. Farrell's motion papers do not conclusively establish that plaintiffs have no claim against Farrell nor do they establish that Farrell is not a necessary party. Accordingly, Farrell's cross motion to dismiss the complaint pursuant to CPLR 3211(a) (7) is denied.
CONCLUSION
Azad Ali's motion for an order pursuant to CPLR 3211 (a) (1) dismissing the complaint as asserted against him is denied.
Miraculous Solutions Inc.'s motion for an order extending its time to answer the complaint is granted.
Farrell Realty Corp.'s motion for an order pursuant to CPLR 3211 (a) (7) dismissing the action as asserted against it is denied.
Defendants Ali Azad, Miraculous Solutions Inc. and Farrell Realty Corp. are each directed to serve and file their respective answers to the complaint by no later than October 28, 2016.
The foregoing constitutes the decision and order of the Court
ENTER
/s/_________
J.S.C.