Opinion
Index No. 507120/2020
03-20-2023
St. John's Capital Corp., Plaintiff, v. 1365-1369 St. Johns Place LLC and Kaufman Group Inc., Defendants.
The Law Offices of Hariri & Crispo, New York City (Ronald D. Hariri of counsel), for St. John's Capital Corp., plaintiff. Camacho Mauro Mulholland, LLP, New York City (Anthony Buono of counsel), for 1365-1369 St. Johns Place LLC, defendant. Fuchs Rosenzweig PLLC, New York City (David Bordoni of counsel), for Kaufman Group, Inc., defendant.
Unpublished Opinion
The Law Offices of Hariri & Crispo, New York City (Ronald D. Hariri of counsel), for St. John's Capital Corp., plaintiff.
Camacho Mauro Mulholland, LLP, New York City (Anthony Buono of counsel), for 1365-1369 St. Johns Place LLC, defendant.
Fuchs Rosenzweig PLLC, New York City (David Bordoni of counsel), for Kaufman Group, Inc., defendant.
Aaron D. Maslow, J.
Upon the foregoing papers and having heard oral argument on the record from counsel to all parties, the within motion is determined as follows.
This is a motion by Plaintiff St. John's Capital Corp., which owns the premises located at 1363 St. Johns Place, Brooklyn New York, seeking a pre-judgment attachment of the adjacent premises located at 1365-1369 St. Johns Place ("adjacent property"), which is owned by Defendant 1365-1369 St. Johns Place LLC ("1365-1369"). Defendant Kaufman Group Inc. ("Kaufman") is a contractor hired by Defendant 1365-1369 St. Johns Place LLC to perform rehabilitation of the adjacent property. The notice of motion also states that it seeks "a money judgment for all damages caused to the Premises due to the actions of Defendants" (NYSCEF Doc No. 23).
The within action seeks a judgment against Defendants for damages Plaintiff allegedly sustained during the course of the renovation of the adjacent property by Kaufman. The alleged damages included Plaintiff's roof being damaged, water seeping in, and mold remediation being necessitated. (NYSCEF Doc No. 37, ¶¶ 7-9.) More specifically, it is alleged in paragraph 10:
Defendants have incurred violations related to the damage to the Premises while "renovating" the Adjacent Building including, but not limited to, performing demolition without a permit, failure to protect adjoining properties during construction, failure to maintain building in code compl[ia]nt manner, failure to maintain building's plumbing code compliant, performing electrical work without a permit, performing plumbing work without a permit, failure to maintain boiler in code compl[ia]nt manner, failure to have a construction supervisor on-site while work was being performed, failure to provide tenant protection plan with an active tenant in building, unsafe storage of combustible materials, unsafe supported scaffolding, and failure to maintain construction documents.
There are five predicates for attachment specified in CPLR 6201. The one which Plaintiff relies on is delineated in subdivision (3): "the defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts[.]"
Vincent C. Alexander, Practice Commentaries (McKinney's Cons Laws of NY, CPLR C6201:0), elaborates on the remedy of attachment: "Attachment, which was not known at common law, is a drastic remedy because it deprives the defendant of the free use of his property before a final adjudication on the merits of defendant's liability. Thus, New York courts have consistently construed the attachment statutes narrowly in favor of the parties against whom the remedy is invoked. See, e.g., Penoyar v. Kelsey, 1896, 150 NY 77, 80, 44 N.E. 788, 789; Michaels Electrical Supply Corp. v. Trott Electric Inc., 1996, 231 A.D.2d 695, 695, 647 N.Y.S.2d 839, 840 (2d Dep't); Sylmark Holdings Ltd. v. Silicone Zone International Ltd., 2004, 5 Misc.3d 285, 300-01, 783 N.Y.S.2d 758, 773 (Sup.Ct.N.Y.Co.)."
As justification for seeking attachment in its motion, Plaintiff called attention to certain asserted factors it urged upon the Court:
• Zalmen Wagschall, owner of Defendant 1365-1369 is a notorious slumlord on the list of New York's 100 worst landlords (NYSCEF Doc No. 24, ¶¶ 3, 10).
• The adjacent building appears to be either abandoned or neglected inasmuch as it has 183 violations and is under the control of New York City's Certificate of No Harassment Program ("CONH") and Alternative Enforcement Program ("AEP") (id., ¶¶ 3, 9).
• "Defendants have incurred violations related to the damage to the Premises while 'renovating' the Adjacent Building including, but not limited to, performing demolition without a permit, failure to protect adjoining properties during construction, failure to maintain building in code compl[ia]nt manner, failure to maintain building's plumbing code compliant, performing electrical work without a permit, performing plumbing work without a permit, failure to maintain boiler in code compl[ia]nt manner, failure to have a construction supervisor on-site while work was being performed, failure to provide tenant protection plan with an active tenant in building, unsafe storage of combustible materials, unsafe supported scaffolding, and failure to maintain construction documents" (NYSCEF Doc No. 25, ¶ 15).
• "Defendants have failed to comply with their maintenance obligations and [they are] possibly under the control of a receiver and/or an agency of New York City and that [they are] remedying the Adjacent property in order to sell it" (NYSCEF Doc No. 24, ¶ 9).
• Defendants caused extensive water damage to the roof of Plaintiff's building, water seeped into individual apartments, and remediation was necessitated (NYSCEF Doc No. 25, ¶¶ 13-14).
• Mr. Wagschall owns numerous buildings in New York City that are the subject of foreclosure actions (NYSCEF Doc No. 45 at 6; NYSCEF Doc No. 46).
The affirmation of Ronald D. Hariri, Esq. (NYSCEF Doc No. 24, ¶ 10) and the affidavit of Grazyna Feld (NYSCEF Doc No. 25, ¶ 4) refer to the list of the "Attorney General." Plaintiff's motion papers at NYSCEF Doc Nos. 29 and 50 include an Internet article discussing the list. The article is from October 13, 2016 and was purportedly updated on April 3, 2017. Zalmen Wagschal is listed as number 66 in the list. The list was compiled by Hon. Leticia James, at that time New York City's Public Advocate. Ms. James took office as Attorney General on January 1, 2019. Technically, therefore, it was erroneous to refer in the affirmation and the affidavit to the list being that of the Attorney General. Additionally, the list uses the spelling of "Wagschal," while Plaintiff's motion papers refer to "Wagschall." In any event, the list was compiled nearly four and a half years before the filing of the motion. If Plaintiff wished to prove the inability of Defendant 1365-1369 and/or its owner to satisfy a judgment, at least it should have accurately stated the facts relied upon and submitted current information. Moreover, newspaper article are generally not relied upon as evidence on motions (see Hudson River Museum of Westchester v Union Free School Dist. (2000 WL 35897399 [Sup Ct, Westchester County 2000]).
All of these asserted factors, claimed Plaintiff, render Defendants "more than likely" to "flee the jurisdiction while this case is pending, thus putting any monetary judgment in favor of Plaintiff in jeopardy" (NYSCEF Doc No. 24, ¶ 4). Plaintiff accused 1365-1369 of being likely to assign, dispose of, encumber, or secrete the adjacent property (NYSCEF Doc No. 24, ¶ 11). An order of attachment in an amount not less than $500,000 is sought (id., ¶ 12).
In opposition to Plaintiff's motion, Defendant 1365-1369 argued that Plaintiff's arguments are meritless. Said Defendant maintains that Plaintiff "has not submitted any evidence that 1369 ST. JOHNS intends to dispose of the property and there is certainly no evidence of fraudulent intent. Moreover, the allegation of fraudulent intent defies logic. This action arises out of allegations that construction work caused damage to CAPITAL's premise via water infiltration from the adjoining property. Without conceding any of CAPITAL's allegations, the mere existence of 1369 ST. JOHNS' general liability insurance policy refutes CAPITAL's specious claim of fraudulent asset concealment." (NYSCEF Doc No. 31, ¶ 4.) 1365-1369's liability insurance from Lloyd's has a $1 million limit per occurrence and a $2 million aggregate limit, and 1465-1369 has a contract with Kaufman to be indemnified (NYSCEF Doc No. 42 at 2; NYSCEF Doc No. 43; NYSCEF Doc No. 44).
Defendant Kaufman, in opposition, noted correctly that Plaintiff's motion papers called it a slumlord, when in fact it is a contractor, not a landlord or owner of the adjacent property (NYSCEF Doc No. 36, ¶ 5). This Defendant emphasized that the insurance coverage of both Defendants is more than enough to satisfy a judgment herein; Kaufman's coverage with Southwest Marine and General Insurance Company has a limit of $2 million per occurrence and a $4 million aggregate (id., ¶¶ 8, 10; NYSCEF Doc No. 38).
On July 25, 2022, Hon. Odessa Kennedy, J.S.C., adjourned this motion. Among other things, she ordered that Plaintiff submit "a legal brief regarding the issue of building code violations and defendants' conduct demonstrating removal of property from the State of New York to frustrate judgment." Defendants were to submit proof of insurance coverage sufficient to satisfy the alleged damages. (NYSCEF Doc No. 41.)
Defendants submitted proof of such insurance coverage. Plaintiff, however, did not establish that Defendants engaged in conduct demonstrating removal of property from the state. While Plaintiff did respond with evidence of foreclosure actions having been commenced against Mr. Wagschall and/or his properties, and resubmitted evidence of the building violations, the adjacent property being placed on the CONH list, and Wagschall's name being on a list of the 100 worst landlords, these facts alone do not make out a prima facie case of an intent to escape with all available assets so as to deprive Plaintiff of compensation, especially considering the available insurance coverage.
Where an attachment is sought pursuant to CPLR 6201(3), the plaintiff must demonstrate that the defendant has concealed or is about to conceal property in one or more of several enumerated ways, and has acted or will act with the intent to defraud creditors or to frustrate the enforcement of a judgment that might be rendered in favor of the plaintiff (see Corsi v Vroman, 37 A.D.3d 397 [2d Dept 2007]). Affidavits containing allegations raising a mere suspicion of an intent to defraud are insufficient; it must appear that such fraudulent intent really existed in the defendant's mind (see Societe Generale Alsacienne De Banque, Zurich v Flemingdon Dev. Corp. (118 A.D.2d 769 [2d Dept 1986]).
At best, Plaintiff here has submitted a series of assertions which assail the character of 1365-1369's owner. Especially with the proof of building violations, it established that Mr. Wagschall has not been a paragon of perfection as a property owner and landlord. His properties being the subject of foreclosure actions evidence the possibility of their being sold out from under him due to financial circumstances. No evidence was submitted that the 1365-1369-owned building is under foreclosure. None of Plaintiff's assertions establish conclusively that Mr. Wagschall or 1365-1369 intend to defraud their creditors, frustrate the enforcement of a potential judgment in Plaintiff's favor, or assign, dispose of, encumber, secret, or remove property. The fact that 1365-1369 is undergoing renovation may actually enhance the value of the building so as to be able to satisfy a judgment.
In its memorandum of law at NYSCEF Doc No. 45 at 8, Plaintiff argued:
Thus, Defendants' past history of financial problems and failure to adhere to legal requirements confirm attachment of their properties must be ordered to secure a judgment against them. The case is similar to Wallkill Med. Dev., LLC v. Catskill Orange Orthopaedics, P.C., 2013 NY Slip Op 34023(U) (Sup. Ct., Orange Cty, Marx J.). In that case, Plaintiff succeeded in obtaining a preliminary injunction and pre-judgment attachment because it proved that it would succeed on the merits, that it would be irreparably harmed because Defendants pledged their assets to another creditor which would have defrauded Plaintiff, and the equities favored Plaintiff because it would use Defendant's assets to secure its lease. In this case, Defendants do no[t] dispute that the damages were caused by anyone else but themselves, and Plaintiff is likely to succeed on the merits. Moreover, the fact Defendant 1365 principal is the subject of multiple foreclosure actions and the Adjacent Building is the subject of several city programs means that it could be seized by the city or creditors at anytime and Plaintiff would not be able to secure a judgment for damages caused by Defendants. Further, the equities favor Plaintiff as the damages caused by Defendants are ongoing, and any recovery would be used to fix Plaintiff's building and the damages caused by Defendants. (emphasis added)
Plaintiff's citation to the Orange County Supreme Court's decision in 2013 is inapposite. That part of the Supreme Court's order which granted an order of attachment-based on a finding that the requirements for an attachment had been satisfied-was deleted by the Appellate Division at 131 A.D.3d 601 (2d Dept 2015), which modified the order: "However, with respect to that branch of Wallkill Medical's motion which was for an order of attachment, the defendants disputed allegations relevant to that request for relief, including the time frame of any alleged dissipation of assets, and whether any such actions were taken with the intent to defraud the plaintiff. Therefore, the matter must be remitted to the Supreme Court, Orange County, for a hearing on that branch of Wallkill Medical's motion which was for an order of attachment, and a new determination of that branch of the motion thereafter (see CPLR 6201, 6211, 6212[a])."
In further proceedings in Wallkill Med. Dev., LLC, the Appellate Division affirmed Supreme Court's granting of summary judgment to certain defendants (see Wallkill Med. Dev., LLC v Catskill Orange Orthopaedics, P.C., 178 A.D.3d 987 [2d Dept 2019]).
Plaintiff cited to the case of "In re Renren, Inc. Derivative Litigation, Index No. 653594/2018, (Sup. Ct., NY County, Borrok J.)" for a fact pattern where "The Plaintiff was granted a preliminary injunction and pre-judgment attachment because it demonstrated that Defendants transferred major assets for [their] own benefit at below market value in order to defraud creditors" (NYSCEF Doc No. 45 at 8-9). While Plaintiff did not provide a specific citation to a reported decision or at least a document in that case in the NYSCEF filing system, this Court has located the decision referred to. It is reported as Matter of Renren, Inc. Derivative Litigation (71 Misc.3d 1223[A], 2021 NY Slip Op 50473[U] [Sup Ct, NY County 2021]). The circumstances of that case are a far cry from those in the case at bar. In Renren, Inc., millions of shares were secretly sold at below value without a legitimate corporate purpose while the defendants delayed disclosure of the amount of transferred assets. The proceeds of the share transfers were attached. In the case at bar, nothing has been transferred. Plaintiff mistakenly compares the Renren, Inc. activity to potential judgments and levies against the adjacent property (NYSCEF Doc No. 45 at 9).
A plaintiff must demonstrate an identifiable risk that the defendant will not be able to satisfy a judgment (see VisionChina Media Inc. v Shareholders Representative Servs., 109 A.D.3d 49, 60 [1st Dept 2013]). Here, Defendants have submitted evidence that their liability insurance policies (with several million dollars in coverage) more than adequately provide indemnification for the monetary damages sought by Plaintiff. Plaintiff's arguments as to the bad character of Defendants simply equate to speculation that Defendants possess ulterior motives to avoid paying a judgment. The fact that Defendants procured insurance coverage belies that speculation. Moreover, Defendants are not nondomiciliaries who have absconded (cf. Halse v Hussain, 193 A.D.3d 1140 [3d Dept 2021] [involving tragic, publicized upstate limousine accident wherein numerous lives were lost]).
Whether to grant a motion for an order of attachment rests within the discretion of the court (see Morthenthau v Avion Resources, Ltd., 11 N.Y.3d 383, 387 [2008]; VisionChina Media Inc. v Shareholders Representative Servs., 109 A.D.3d at 59). This court sees no purpose served by an attachment when sufficient insurance coverage exists. It is true that an attachment might be "helpful" and would ease the concern Plaintiff and its residents have but that is not the legal standard which is requisite (see Founders Ins. Co. Ltd. v Everest Natl. Ins. Co., 41 A.D.3d 350 [1st Dept 2007] ["While it might be helpful to respondents to attach the income from the trust account, respondents' own submissions show that various entities have guaranteed petitioner's obligations."]).
During oral argument, Plaintiff argued that were its motion for an attachment granted, the prospects of settlement would be greatly enhanced. This Court sympathizes with the predicament of the residents of 1363 St. Johns Place, whose apartments apparently have sustained damage and deserve compensation from Defendants or their insurers if Defendants are responsible. However, even if Defendants are responsible, this Court must apply the case law construing the statutory pre-judgment remedy of attachment. Neither an attachment nor any other provisional remedy should be granted on the basis that it will likely lead to a speedy settlement. A court's decision must be based solely upon the facts and the law (see Anderson v State, 48 Misc.2d 1061, 1070 [Ct Cl 1966]). Trial courts must apply recognized law (see Matter of M./B. Children, 7 Misc.3d 272, 282 [Fam Ct, Kings County 2007]). Practically speaking, an order of attachment might achieve a settlement sooner rather than later, but this Court "must be guided by what is the legal conclusion to reach" (Lennie v Donahue, N.Y.S.2d 510 [Mun Ct, Queens County 1953]). The Court acknowledges that the parties are engaging in settlement discussions, as mentioned during oral argument, but if the case is not settled, final resolution lies with a trial at which the dispute will culminate in an outcome one way or the other.
The within motion also seeks a hearing to determine damages "as [Defendants] are strictly liable for the damage that they have caused to the Premises" (NYSCEF Doc No. 25, ¶ 25). This Court rejects such request as being premature. Such a determination must take place at trial inasmuch the amount of any damages is an issue of fact to be determined along with liability.
Accordingly, the within motion by Plaintiff seeking an order of attachment and a determination on damages is denied in its entirety.