Opinion
Index No. 651955/2023 Motion Seq No. 001
11-22-2023
DENA K. WEINER, Plaintiff v. RANDY ABEND and RUTH ABEND, Defendants
Unpublished Opinion
PRESENT: HON. MICHAEL L KATZ, Justice
DECISION + ORDER ON MOTION
MICHAEL L. KATZ, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29 were read on this motion to/for JUDGMENT - SUMMARY IN LIEU OF COMPLAINT.
Plaintiff Dena K. Weiner moves for an order pursuant to CPLR § 3213, directing the entry of a money judgment in her favor and against defendants Randy Abend and Ruth Abend, jointly and severally, in the principal amount of $2,922,500, plus interest on the principal amount at the contractual rate of 6% per annum from November 1, 2007 through the date of entry of judgment, and an additional late charge in the amount of $233,800, together with costs and disbursements incurred in this action, including, but not limited to, reasonable attorneys' fees, on the grounds that this action is based upon an instrument for the payment of money only which is now due and payable.
Defendant Randy Abend opposes the motion on the grounds, inter alia, that the note was never intended to be binding, and cross-moves for an order: (i) pursuant to CPLR § 2201, staying this action on the ground that the claim herein relates to equitable distribution issues which will be determined in the matrimonial action, Ruth Abend, plaintiff v Randy Abend, defendant. Index No. 365262/2021, currently pending before this Court, and (ii) directing an inquest to determine the amount of damages owed by plaintiff.
Defendant also argues that the note is incomplete because Section 10 of the document references a security instrument which was not included.
Background
Defendants, who were married in 2005, are engaged in a highly contentious action for divorce commenced by Ruth Abend against Randy Abend in 2021. Plaintiff in the instant action is Ruth Abend's mother. There is no dispute that plaintiff and her husband, David Rozenholc, a successful real estate attorney, provided substantial financial support to defendants and their two children, including paying for the grandchildren's private school tuition, summer camp and various other expenses, prior to the commencement of the divorce action.
Ms. Weiner and Mr. Rozenholc allegedly continue to pay significant expenses on behalf of Ms. Abend and the children.
There is also no dispute that defendants executed and provided to plaintiff a promissory note in the amount of $2,922,500 on November 1, 2007, and used the funds received in connection with the purchase of a home in Westport, Connecticut.
Sections 1 and 2 of the note provide for the accrual of interest on the outstanding principal from November 1, 2007 at the rate of 6% per annum until the full amount of the principal has been repaid. Section 3 of the note requires defendants to make two payments during the term of the loan, including: (1) an initial payment of interest only, which was due and payable by November 1, 2012; and (2) a second payment for all outstanding principal and interest by November 1, 2017, which is the "Maturity Date" of the loan. Section 6(A) of the note requires defendants to pay a late charge to plaintiff in the amount of 5% of the overdue payment of principal and interest in the event that either of these payments were not fully paid by the respective due dates.
Section 6(B) of the note specifies that defendants would be in default if they failed to pay the full amount of any payment on or before the due date. Under Section 8 of the note, each defendant would be "fully and personally obligated to keep all of the promises made in the Note, including the promise to pay the full amount owed," and plaintiff, as the note holder, "may enforce [her] rights under [the] Note against each person individually" or against both of them together.
Finally, Section 6(E) of the note provides that plaintiff shall "have the right to be paid back by [defendants] for all of its costs and expenses in enforcing [the] Note to the extent not prohibited by applicable law," including attorneys' fees.
There is no dispute that defendants have not made any payment under the note. However, defendant Randy Abend has submitted a sworn affidavit, claiming that he had a conversation with Mr. Rozenholc in 2007 regarding the fact that he "felt very uncomfortable taking money from them," and that Mr. Rozenholc insisted that he and plaintiff could "[g]ive it to [them] now or when [he and Ms. Weiner] are gone, and it's our pleasure." Mr. Abend further claims that Mr. Rozenholc assured him that "the money was a gift - that there were 'no strings attached.'" According to Mr. Abend, he and Ms. Abend "were only able to purchase the Connecticut home "because of the money gifted to [them] by [his] in-laws."
The closing was held at the law offices of Belkin Burden Wenig and Goldman. Mr. Rozenholc was, according to Mr. Abend, close friends with Howard Wenig and Jeff Goldman, two of the named partners of the firm. Robert Jacobs, another attorney at the firm, acted as counsel for Ruth and Randy Abend. Mr. Abend claims that he was given a stack of papers to sign at the closing, which included the promissory note "for the money [he] had been told was being gifted to [them] by [his] in-laws." Mr. Abend reports that he "had never seen this note previously nor had it ever been mentioned to [him] at any time prior," but that "Mr. Jacobs, along with Mr. Rozenholc, advised [him] to sign the note along with the other closing papers."
According to Mr. Abend, "Mr. Jacobs did not mention any potential conflict of interest nor advise [him] to seek outside counsel."
Mr. Abend further claims that he "was told the money referenced in the loan note was a gift" and "was assured that there were 'no strings attached.'" In addition, Mr. Abend alleges that he "was told that the note was merely a formality for tax and/or estate planning purposes, to allow [his] in-laws to avoid any tax and/or estate planning purpose obligations" and "was promised by David Rozenholc that [he] would never be expected to repay the money."
In 2012, Ruth and Randy Abend sold the Connecticut home and purchased an apartment on Park Avenue using the monies from the sale. According to Mr. Abend, Ms. Weiner and Mr. Rozenholc gifted Ms. Abend at the time "approximately $3 million in income generating property in order to bolster [defendants'] financial profile." Mr. Abend claims that he and Ms. Abend submitted extensive financial documentation as part of the application process required to buy into the building. The documents, which listed defendants' assets and liabilities, were, according to Mr. Abend, reviewed by plaintiff and Mr. Rozenholc. The documents did not list any debt and did not refer to the subject note. Defendants likewise did not list any debt when they subsequently applied for a mortgage.
Mr. Abend alleges that plaintiff and Mr. Rozenholc, who he met with frequently, "never requested repayment of any money gifted to [defendants] in 2007," and "did not request repayment when [they] sold the Connecticut home nor at any time thereafter," until after the commencement of the matrimonial action.
In response to Mr. Abend's affidavit, defendant Ruth Abend has submitted a short affidavit disputing Mr. Abend's claim that the purported loan was a gift. She claims that "[t]he Loan was always given with the agreement and expectation that it would be repaid," and argues that "Randy's disavowal of the Note and Loan is an obvious attempt to escape liability for its repayment."
In reply, plaintiff has also submitted a sworn affidavit in which she contends that Mr. Abend's claim that the loan was a gift is false. She claims that both Ruth and Randy Abend "knew that they would eventually need to pay it back."
In addition, plaintiff has submitted an affidavit from Mr. Rozenholc in which he denies that he was present at the closing and claims that his friendly relationships with Mr. Wenig and Mr. Goldman, the Belkin Burden partners, did not develop until after 2007. Mr. Rozenholc further denies ever making any statement, representation, or suggestion to Ruth Abend or Randy Abend that the monies advanced to them were a gift and/or that any portion of the monies need not be repaid. He denies ever stating to Mr. Abend or anyone else that the funds came with "no strings attached" or making any other similar statement.
Discussion
"When an action is based upon an instrument for the payment of money only..., the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint." CPLR § 3213. "In order to qualify for CPLR 3213 treatment, plaintiff must be able to establish a prima facie case by proof of the agreement and a failure to make the payments called for thereunder (citations omitted). Once plaintiff has met its burden, it is incumbent upon defendant to establish, by admissible evidence, that a triable issue of fact exists (citations omitted)." SCP (Bermuda) Inc. v Bermudatel Ltd., 224 A.D.2d 214, 216 (1st Dep't 1996). See also, Bank Leumi Trust Co. v Rattet & Liebman, 182 A.D.2d 541, 542 (1st Dep't 1992).
"Although parol evidence may not be admitted to contradict, vary, add to, or subtract from the terms of a written agreement, such evidence is admissible to show that 'a writing, although purporting to be a contract, is, in fact, no contract at all' (citations omitted)." Dayan v Yurkowski, 238 A.D.2d 541, 541 (2nd Dep't 1997). See also, Lee v Nextcom Construction, Inc., 219 A.D.3d 937, 938 (2nd Dep't 2023).
The facts in Dayan v Yurkowski, supra, are strikingly similar to the case at bar. In Dayan, the plaintiffs advanced money to their daughter and son-in-law to help the couple purchase a house. At the closing, the plaintiffs' daughter and son-in-law executed a promissory note in which they jointly and severally agreed to be liable for payment of the principal, plus interest, on demand. Twelve years later, the plaintiffs' daughter commenced a divorce action against her husband. The plaintiffs thereafter commenced a lawsuit against their son-in-law to recover on the note.
The Appellate Division, Second Department, held that while the note was valid on its face, the motion court erred in granting summary judgment to plaintiffs because the parol evidence presented by the defendant in opposition to the motion raised an issue of fact as to whether he was fraudulently induced to execute the note based upon representations that the money advanced was a gift rather than a loan. Dayan v Yurkowski, supra at 541. See also, Phelps v Phelps, 128 A.D.3d 1545 (4th Dep't 2015), in which the Appellate Division, Fourth Department, held that the defendant raised issues of fact as to whether loan and mortgage documents were part of a "sham" transaction in which the loan was never intended to be repaid; Salztein v Salztein, 70 A.D.3d 806, 807 (2ndDep't 2010), in which the Appellate Division, Second Department, held that parol evidence offered by defendants was properly considered to show that the note, while valid on its face, was never intended to take effect; Greenleaf v Lachman, 216 A.D.2d 65, 65-66 (1st Dep't 1995), Iv. to app. denied, 88 N.Y.2d 802 (1996), in which the Appellate Division, First Department, held that parol evidence was admissible to prove a loan agreement, although facially unambiguous, was nonetheless unenforceable because the parties never considered it a binding debt.
This Court finds that the conflicting affidavits presented in connection with this motion raise triable issues of fact as to whether Mr. Abend was fraudulently induced to sign the note and whether the funds memorialized in the note were intended as a gift rather than a loan.
Although plaintiff argues that any representations made by Mr. Rozenholc have no bearing herein since he was not a party to the note, this Court finds, under the circumstances presented, that there is an issue of fact as to whether plaintiff granted her husband the authority to act on her behalf (see, Hallock v State of New York, 64 N.Y.2d 224, 231 [1984]; cf, Solomon v Langer, 66 A.D.3d 508 [1st Dep't 2009]) and subsequently ratified his alleged representations. Accordingly, plaintiffs motion for summary judgment in lieu of complaint is denied.
Defendant's cross-motion for a stay of this action pending the outcome of the matrimonial action is denied, since plaintiff is not a party to the matrimonial action and the resolution of that action "will not determine all of the questions in this action (citation omitted)." Matter of Qudian Securities Litigation v Qudian Inc., 189 A.D.3d 449, 449 (1st Dep't 2020).
Plaintiff shall, therefore, file a Complaint within 30 days of entry of this order. Defendants shall file Answers to the Complaint within 30 days thereafter.
A preliminary conference shall be held in Part 24, 60 Centre Street, Room 325 on February 29, 2024 at 9:30 a.m.
This constitutes the decision and order of this Court.