FILED: NEW YORK COUNTY CLERK 11/13/2013 INDEX NO /2013 NYSCEF DOC. NO. 46 RECEIVED NYSCEF: 11/13/2013

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1 FILED: NEW YORK COUNTY CLERK 11/13/2013 INDEX NO /2013 NYSCEF DOC. NO. 46 RECEIVED NYSCEF: 11/13/2013 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X GERALD CHAMBERS, JOCELYN CHAMBERS, JULIAN CHAMBERS, and SASKATOON FINANCIAL LIMITED, Index No.: /2013 Plaintiffs, -against- ELIYAHU WEINSTEIN, FREDERICK TODD, 148 INVESTMENTS, LLC, TODD, FERENTZ, & EDELSTEIN, LLP, ALEX SCHLEIDER, DAVID SCHLEIDER, AARON MUSCHEL, MEND-AM LLC, SHEL-AM CORP, DAVID STEINMETZ, NAFTALI KUNSTLINGER, KUNSTLINGER STEINMETZ LLP, AARON GLUCKSMAN, DIVERSIFIED HOLDINGS, LLC, FREDERICK TODD, as trustee of the ERASTINO TRUST, PARK 121 REALTY LLC, CONGREGATION KAHAL MINCHAS CHINUCH, CHAIM BABAD, NEW YORK LOSS MITIGATION, INC., ARTHUR GOLDEN, GREENBURG TRAURIG, LLP, MICHAEL BURNBAUM, PROSKAUER ROSE LLP., and HENOCH PEARL, AFFIRMATION IN OPPOSITION TO DEFENDANT BABAD S, DEFENDANT CONGREGATION MINCHAS CHINUCH S, AND DEFENDANT PARK 121 REALTY LLC s MOTION TO DISMISS Defendants X DANIEL H. RICHLAND, ESQ., an attorney duly admitted to the bar of the State of New York, does hereby affirm the following under penalty of perjury: 1. I am a principal of Paykin, Richland & Falkowski, PC, attorneys for the Plaintiffs. I make this affirmation upon personal knowledge, discussions with my client, and a review of my file. 2. I make this affirmation in opposition to Defendants Kahal Minchas Chinuch, Chaim Babad, and Park 121 Realty LLC s/h/a 121 Park Realty LLC (collectively, the Babad Defendants ) pursuant to NY CPLR 3211(a)(1), NY CPLR 3211(a)(7), NY CPLR 6514(a),(b), and (c) ( Motion to Dismiss ) seeking to dismiss the Sixth Cause of Action for Page 1 of 23

2 Aiding and Abetting Fraud, the Eighth Cause of Action for Aiding and Abetting Fraud, the Twenty-Sixth Cause of Action seeking an accounting and constructive trust, and the Thirtieth Cause of Action for Unjust Enrichment. 3. The motion, as submitted, is patently defective. The Memorandum of Law refers to documents, such as loan agreements, not submitted on this motion and asserts facts which are neither substantiated nor assumed to be true under the procedural posture of this motion, for example that there was consideration between the Babad Defendants and Defendant 148 Investments, LLC ( 148 ) with respect to the assignments of mortgage. 4. As a result, the Babad Defendants motion is an impenetrable morass of purported facts and arguments containing absolutely no relevance to the legal issues on this motion. 5. As the motion is prematurely made, defective in its evidence, and fails to actually state a basis to dismiss the Verified Complaint as and against the Babad Defendants, the instant motion to dismiss must be denied. The Relevant Factual Background 6. Between 2004 and 2011, Defendant Eliyahu Weinstein ( Weinstein ) engaged in a $200 million Ponzi scheme among the Orthodox Jewish community. Exhibit A (hereinafter referenced as Verified Complaint ) 227; Exhibit B. 7. On August 11, 2011, the United States commenced a criminal action against Defendant Weinstein and non-party Vladimir Siforov in the United States District Court, District for New Jersey, under Docket No. 3:11-cr JAP. Exhibit B; Exhibit C. 8. On October 7, 2011, Defendant 148 Investments, LLC ( 148 ) was formed in Delaware by Defendant Todd. Exhibit D. Although Defendant Todd is the sole member, Page 2 of 23

3 Defendant Weinstein in reality is in control of 148. Exhibit E (being hereinafter referred to as the Ubellacker Aff. ) 9. Defendant Weinstein was arrested and subsequently released pursuant to a Consent Order on October 14, Exhibit F. One condition of the Consent Order was that Defendant Weinstein not engage in any financial transactions in excess of $1, without the approval of a Special Counsel. Id.; Verified Complaint At or around the time of his release, Defendant Weinstein, Defendant Alex Schleider ( Schleider ), Defendant Frederick Todd ( Todd ), and Defendant Aaron Muschel ( Muschel ) targeted Plaintiffs in a fresh scheme. Verified Complaint Defendant Schleider was friendly with the Plaintiffs from a prior matter which, at this time, is not believed to be related to the scheme detailed in the Verified Complaint. 12. On November 22, 2011, in contemplation of the fraudulent scheme, Defendant Congregation assigned a $6 million consolidated mortgage ( Park Avenue Mortgage ) to Defendant 148 which encumbered the real property commonly known as Park Avenue, New York, New York and known on the tax map for the Borough of Manhattan as Block 1770 Lots 1, 2, 3, 4, 72, and 101 ( Park Avenue Property ). Verified Complaint 86. The assignment ( 2011 Assignment ) is attached hereto. Exhibit G. 13. The purpose of this assignment was to enable Defendant 148 to represent that it had assets and to entice prospective investors, including Plaintiffs, into lending money to Defendant 148. Verified Complaint On February 1, 2012, Defendant Schleider ed Plaintiffs, Eli has an interesting deal involving Facebook s IPO let me know if you guys have an appetite? Exhibit G; Verified Complaint 35; Ubellacker Aff. 5. Page 3 of 23

4 15. [I]n truth and in fact, and as defendants WEINSTEIN, SCHLEIDER and MUSCHEL, and [Todd], well knew, they did not have access to large blocks of pre-ipo Facebook shares. Ubellacker Aff. 2; Verified Complaint Defendant Schleider retained Defendant Kunstlinger & Steinmetz to represent Plaintiffs in the expected transactions. Verified Complaint 219; Ubellacker Aff Between February 6, 2012 and March 4, 2012, Plaintiffs lent an aggregate of $4.675 million to Defendant 148 upon promises that Defendant Muschel, Defendant Todd, or Defendant 148 would acquire pre-ipo shares of Facebook. Verified Complaint 38; Ubellacker Aff. 6, None of the funds were used to purchase shares of Facebook and Defendants had no access to pre-ipo shares of Facebook. Verified Complaint 39; Ubellacker Aff Various written instruments were executed between Plaintiffs and Defendant Muschel, Defendant Todd, and Defendant 148, but in each instance, the promised security was already encumbered, non-existent, or not as described, despite warranties and representations to the contrary. Verified Complaint 40, 43, 49, 67, , ; Ubellacker Aff , 28, 30, As is relevant on this motion to dismiss, Defendant 148 and Defendant Todd specifically warranted that, (a) At a minimum, the value of the assets currently owned by 148 Investments, LLC is valued at $12,000, and (b) Park Avenue, New York, NY 10016, the property which is encumbered by two mortgages held by 148 Investments, LLC is worth, cumulatively, $12,000, Verified Complaint On March 20, 2012, after the final payment from Plaintiffs, Defendant 148 assigned the Park Avenue Mortgage back to Defendant Congregation ( 2012 Assignment ). Page 4 of 23

5 Exhibit I. The 2012 Assignment was recorded on October 31, 2012 as CRFN: In addition to these transactions, on February 23, 2012, Plaintiffs invested $2.5 million with Defendant Schleider in the Belle Glade Gardens project. Verified Complaint 124, et seq. Defendant Schleider misrepresented that he was investing the same amount as Plaintiff in the transaction. Verified Complaint The monies paid to Defendant Greenberg Traurig for the Belle Glade Gardens project were wired into an escrow account for Defendant Schleider and a sub-account for the Belle Glade Gardens. Verified Complaint Defendant Greenberg Traurig, without authorization from or knowledge of Plaintiffs, disbursed the funds to Defendant 148. Verified Complaint Between June 2012 and February 16, 2013, the various loans to Defendant 148 began to mature. Verified Complaint Immediately after receipt, Defendant Todd, Defendant Schleider, Defendant Muschel, and Defendant Weinstein began to launder the funds through the assistance of various coconspirators, using a vast array of entities, employing diverse tactics, and engaging in a wide variety of fraudulent transactions. Exhibit J, p. 5. The ultimate disposition of much of the money is unknown. 27. For example, on December 20, 2012, the Babad Defendants paid $1 million as a loan repayment to Defendant Proskauer Rose LLP for the criminal defense of Defendant Weinstein in the 2011 Criminal Action. Verified Complaint On January 3, 2013, in the 2011 Criminal Action, Defendant Weinstein pled guilty to wire fraud conspiracy in violation of 18 U.S.C and money laundering in violation of 18 U.S.C Exhibit K. Page 5 of 23

6 29. On May 13, 2013, the United States commenced another criminal action against Defendant Weinstein for the actions set forth in the Ubellacker Aff. and in the Verified Complaint in this action ( 2013 Criminal Action ). Exhibit E. 30. On May 20, 2013, my office notified Defendant Proskauer Rose LLP of the 2013 Criminal Action. Verified Complaint On May 29, 2013, Defendant Proskauer Rose LLP moved the District Court in the 2011 Criminal Action to be relieved as attorneys for Defendant Weinstein due to the allegations in the 2013 Criminal Action. Verified Complaint However, Defendant Proskauer Rose LLP has averred that it spent the entirety of the $1 million and has refused to return any portion of said funds to Plaintiffs or any other party. Verified Complaint On August 26, 2013, the instant action was commenced by the filing of the Summons and Verified Complaint. Exhibit A. A. The Legal Standard on a Motion to Dismiss Pursuant to NY CPLR 3211(a)(7). 34. Upon a [NY CPLR 3211(a)(7)] motion to dismiss a cause of action we look to the substance rather than to the form. Such a motion is solely directed to the inquiry of whether or not the pleading, considered as a whole, fails to state a cause of action. Looseness, verbosity and excursiveness, must be overlooked on such a motion if any cause of action can be spelled out from the four corners of the pleading. Foley v. D Agostino, 21 A.D.2d 60, 65 (1 st Dept. 1964). 35. Accordingly, [o]n a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction (see, CPLR 3026). We accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable influence, and Page 6 of 23

7 determine only whether the facts as alleged fit within any cognizable legal theory. Leon v. Martinez, 84 N.Y.2d 83, (1994) (citing Morone v. Morone, 50 N.Y.2d 481, 484; Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 634). 36. In assessing a motion under CPLR 3211(a)(7), however, a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint and the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one. Id. (citing Rovello, 40 N.Y.2d at ; Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275). B. The Sixth and Eighth Causes of Action States a Cause of Action for Aiding and Abetting Fraud by the Babad Defendants. 37. The Verified Complaint does state a cause of action for aiding and abetting fraud by the Babad Defendants as to the assignment and reassignment of the mortgage against Park Avenue, New York, New York and as to the payment of $1 million by the Babad Defendants to Defendant Proskauer Rose LLP. 38. The elements of a claim of aiding and abetting fraud are (1) the existence of the underlying fraud, (2) actual knowledge, and (3) substantial assistance. Oster v. Kirschner, 77 A.D.3d 51, 55 (1 st Dept. 2010). 39. Due to the nature of such a claim, NY CPLR 3016(b) simply requires factual allegations in support of each element of fraud, to meet such requirement a plaintiff need only provide sufficient detail to inform defendants of the substance of the claims. Kaufman v. Cohen, 307 A.D.2d 113, 120 (1 st Dept. 2003) (citing Monaco v. New York Univ. Med. Ctr., 213 A.D.2d 167, 169) (1 st Dept. 1995); Bernstein v. Kelso & Co., 231 A.D.2d 314, 320 (1 st Dept. 1997)). Page 7 of 23

8 40. This provision does not require specificity where it may be impossible to state in detail the circumstances constituting a fraud. Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.2d 553 (2009). 41. Here, the Verified Complaint amply and adequately sets forth the details of the fraudulent scheme, including dates of actions and amounts. Exhibit A. i. There Is No Dispute That Plaintiffs Were Defrauded by Defendant Weinstein, Defendant Todd, Defendant Schleider and Defendant Muschel. 42. There is no possible dispute that as to the existence of the scheme to defraud, the first required element, because Defendant Weinstein has admitted it: [Weinstein] operated with the assistance of various coconspirators, using a vast array of entities, employing diverse tactics, and engaging in a wide variety of fraudulent transactions. The unifying theme in [the] seven-year multi-faceted conspiracy was that Weinstein and others raised funds from victims for specific real estate transactions and used material portions of the raised funds for other purposes without disclosing these diversions of funds to victims. The purported object of the conspirators was to enrich themselves by making false and fraudulent representations relating to purported investments. The manner and means by which Weinstein accomplish [sic] the scheme allegedly included.(iv) inducing an investor to provide substantial capital to Weinstein based on false representations about the nature of the investments; and (v) convincing an investor to invest in transactions that he fabricated. Exhibit J, p Further, Defendant Weinstein has claimed that this fraud does not differ from the frauds he perpetrated in 2004 through 2011: The conduct alleged in the [2013 Criminal] Complaint does not differ in any meaningful way from the transactions that preceded it and were incorporated in the charged conspiracy to which Weinstein pled guilty. Exhibit B, p. 7. Page 8 of 23

9 44. These statements were made in the 2011 and 2013 Criminal Actions and constitute judicial admissions as to the allegations stated in the Ubellacker Aff., as well as the substantively identical allegations in the Verified Complaint. 45. Accordingly, there can be absolutely no question that there was a fraudulent scheme, satisfying the first element of a cause of action for aiding and abetting fraud. ii. The Babad Defendants Actually Knew of the Fraudulent Scheme. 46. Plaintiffs can also establish a factual basis for the Babad Defendants actual knowledge of this fraudulent scheme. Verified Complaint The First Department has stated, that actual knowledge need only be pleaded generally, cognizant, particularly at the prediscovery stage, that a plaintiff lacks access to the very discovery materials which would illuminate a defendant s state of mind. Oster v. Kirschner, 77 A.D.3d at Participants in a fraud do not affirmatively declare to the world that they are engaged in the perpetration of a fraud.an intent to commit fraud is to be divined from surrounding circumstances. Id. (citing Eurycleia Partners, LP, 12 N.Y.3d at 553). 49. Here, the Court can infer actual knowledge from the Babad Defendants own conduct and statements. 50. As noted, the Babad Defendants assigned the Park Avenue Mortgage to Defendant 148 on November 22, Exhibit G; Verified Complaint As a matter of law, A grant takes effect, so as to vest the estate or interest intended to be conveyed, only from its delivery. NY RPL 244. The recordation of the grant is prima facie evidence of its delivery. See, e.g. Munoz v. Wilson, 111 N.Y. 295 (1888). Page 9 of 23

10 52. Hence, the 2011 Assignment was delivered and effective, presumptively, on November 22, Hence, Defendant 148 was the holder and owner of the Park Avenue Mortgage on and after that date until its reassignment on March 20, Exhibit I; Verified Complaint According to the City Register s recording page, no consideration or transfer tax was paid by Defendant 148 or Defendant Congregation for this assignment. Exhibit G; Exhibit I; Verified Complaint It is Plaintiffs contention that the assignment was given and reconveyed as part of the scheme to defraud and for the purpose of inducing Plaintiffs to lend money to Defendant 148. Verified Complaint 75. Specifically, Plaintiffs assert that the assignment was not given for value, but instead to establish that Defendant 148 had assets. Verified Complaint Conveniently, Defendant 148 owned the note and mortgage for just so long as it needed to obtain funds from Plaintiffs and then reconveyed the Park Avenue Mortgage to Defendant Congregation. 56. As the shares of Defendant 148 had been pledged to Plaintiffs, Defendant Weinstein, Defendant Todd, and Defendant Schleider had a motive to want to return the Park Avenue Mortgage to Defendant Congregation. 57. A second troubling issue is the conclusory explanation by Defendant Babad about the assignments and the transactions in general. Defendant Babad asserts that the Babad Defendants sought to obtain approximately $8 million to pay its insurance premium funding obligations. Babad Aff Although the assignment is dated November 22, 2011, according to Defendant Babad, the first payment from Defendant 148 did not occur until February 16, Exhibit L. Page 10 of 23

11 59. And, with the purportedly entire $2.25 million loan outstanding, prior to a single payment from the Babad Defendants, Defendant 148 re-assigned the Park Avenue Mortgage. Id. 60. However, the assignment itself reflects that there is a $6.5 million Note between Defendant Congregation and Defendant 148. Exhibit G. 61. Moreover, Defendant Babad admits to receiving additional monies from entities other than 148. Babad Aff. 5. Defendant Babad does not disclose those entities or their relationship to any of the other defendants, however. 62. So we are left with a bewildering array of facts about these assignments, these transactions between the Babad Defendants and Defendant Weinstein, Defendant Schleider, Defendant Todd, Defendant 148, and/or Defendant Muschel, and other possible transactions which do not fit neatly into any possible legitimate transaction. 63. In addition, there is the $1 million loan repayment to Defendant Proskauer Rose LLP. According to the FBI, Instead of repaying those funds to 148 Investments, defendant WEINSTEIN directed Rabbi C.B. to send a check from Congregation K for approximately $1 million to Law Firm B, which defendant WEINSTEIN was in the process of retaining for the trial of his then pending criminal case Ubellacker Aff. 40; see also Verified Complaint 100, Needless to say, the Babad Defendants clearly must have known this transaction was not kosher insofar as a $1 million repayment to Defendant 148 was diverted to the personal legal bills of Defendant Weinstein in the 2011 Criminal Action, at a time when Defendant Weinstein was not permitted to engage in financial transactions in excess of $1, Exhibit F. 65. Finally, the record provided by Defendant Babad asserts an interest free loan Page 11 of 23

12 for more than one year. Exhibit M. No explanation of the terms of this loan have been provided and we are left to consider why Defendant 148 would have made an apparently interest-free loan of Plaintiffs money to Defendant Babad. 66. From these facts and circumstances, it is clear that the Babad Defendants had actual knowledge of the fraudulent scheme and that Plaintiffs have sufficiently pled said actual knowledge. iii. The Babad Defendants Substantially Assisted Defendant Weinstein, Defendant Todd, and Defendant Schleider with Defrauding Plaintiffs by Manipulating the Park Avenue Mortgage. 67. The final element of a claim of aiding and abetting fraud is substantial assistance, which occurs when a defendant affirmatively assists, helps conceal or fails to act when required to do so, thereby enabling the breach to occur. However, the mere inaction of an alleged aider and abettor constitutes substantial assistance only if the defendant owes a fiduciary duty directly to the plaintiff. Kaufman v. Cohen, 307 A.D.2d 113, 126 (1 st Dept. 2003) (citations omitted). 68. Courts have recognized that the acts of the fraud itself encompass more than just the misrepresentation or the payment of money. 69. In Rostuca Holdings, Ltd. v. Polo, the defendant allegedly rendered substantial assistance in furtherance of her then husband s fraud on April 7, 1988, by sending 22 cases of valuable art and furnishings, acquired by Polo with the investments funds, to Rosa Franco in Paris, France 231 A.D.2d 402, 403 (1 st Dept. 1996). 70. The point of Rostuca Holdings is that actions taken to secrete assets or funds and prevent their recovery is substantial assistance with a fraud sufficient to aid and abet said fraud. 71. In this scheme, as explained by Defendant Weinstein, the diversion of funds from Page 12 of 23

13 its intended use to other uses was a key component and part of the scheme. 46, supra. 72. The first substantial assistance by the Babad Defendant was their cooperation in manipulating the assignments of the Park Avenue Mortgage in order to establish non-existent assets for Defendant 148. Verified Complaint Assuming, as it must, that every allegation of the Complaint is true and providing every favorable inference, including the Babad Defendants actual knowledge, then the assignment to Defendant 148 of the Park Avenue Mortgage in order to further that fraudulent scheme was substantial assistance. 74. Further, since Defendant 148 was pledged to Plaintiffs and was a likely target of any subsequent criminal or civil action, the immediate assignment of the Park Avenue Mortgage back to Defendant Congregation was also substantial assistance. 75. In addition, if the Babad Defendants manipulated their records in order to minimize their interactions with Defendant 148 as seems clear but engaged in more transactions with other entities known to be associated with Defendant Weinstein, Defendant Schleider, Defendant Todd, or Defendant Muschel, as has been more or less tacitly admitted, then clearly the Babad Defendants substantially assisted the fraudulent scheme. 76. Thus, the Plaintiffs have set forth sufficient facts to establish that the Babad Defendants substantially assisted, by the manipulation of the assignments of the Park Avenue Property, with Defendant Weinstein s, Defendant Todd s, Defendant Schleider s, and Defendant Muschel s scheme to defraud. iv. The Babad Defendants Substantially Assisted the Fraudulent Scheme By Laundering Money on Behalf of Defendant Weinstein, Defendant Todd, Defendant Schleider and Defendant With respect to the Eighth Cause of Action, there is also a clear substantial Page 13 of 23

14 assistance in the fraudulent scheme by the Babad Defendants. 78. There is absolutely no question that the Babad Defendants substantially assisted Defendant Weinstein, Defendant Todd, and Defendant Schleider by borrowing money from Defendant 148 and repaying the same in order to launder money. The Babad Defendants have admitted as much. Babad Aff Further, the Babad Defendants substantially assisted with Defendant Weinstein by repaying funds as he directed and not to Defendant 148. Babad Aff. 5, 6; Verified Complaint 228; Ubellacker Aff There is no dispute, for example, that the Babad Defendants paid $1 million to Defendant Proskauer Rose LLP as a loan repayment to Defendant 148. However, those funds went to benefit Defendant Weinstein and never even passed through the hands of Defendant Accordingly, Plaintiffs have established that the Babad Defendants substantially assisted Defendant Weinstein, Defendant Schleider, Defendant Todd, and Defendant Muschel in defrauding Plaintiffs. v. Plaintiffs Have Adequately Set Forth the Basis for Their Allegations in the Verified Complaint. 82. One of the Babad Defendants less reputable claims is the allegation that Plaintiffs are required to state the source of their information about the allegations in the Verified Complaint. 83. In 6-33, Plaintiffs have detailed a fraudulent scheme with specificity and detail. The basis for some of the information and belief comes from the affidavit of Special Agent Karl Ubellacker of the FBI, others from documents in the possession of Plaintiffs, and public records, such as the Automated City Register s Information System ( ACRIS ). 84. The Babad Defendants are well aware of the Plaintiffs basis for information and Page 14 of 23

15 raise this issue solely to delay resolution of Plaintiffs claims. If, however, the Babad Defendants need more specificity beyond these statements, they are welcome to make the appropriate discovery requests. C. The Twenty-Sixth Cause of Action States a Cause of Action. 85. The Twenty-Sixth Cause of action seeks an accounting and a constructive trust on the proceeds of fraudulent transactions entered into between Defendant Weinstein, Defendant Schleider, Defendant 148, Defendant Todd, and Defendant Muschel with the Babad Defendants, among others. 86. The Babad Defendants seek to dismiss these causes of action because of a lack of fiduciary relationship between the parties. However, that issue is not determinative of either claim and therefore the Twenty-Sixth Cause of Action must not be dismissed as against the Babad Defendants. 87. This cause of action is based upon an equitable principle casually overlooked by the Babad Defendants in their motion. 88. It is generally held that [equity] has jurisdiction to compel an accounting whenever one party has profits in which another is entitled to share regardless of the relationship between the parties at the time the profits were earned * * * if the remedy at law is inadequate. Kaminsky v. Kahn, 23 A.D.2d 231, 238 (1 st Dept. 1965). 89. As has been noted, there is no possible dispute as to the existence of a fraudulent scheme. As to the Babad Defendants, the sole issue is the extent of their role and liability. 90. As this Court must assume all of the allegations in the Complaint to be true and correct, and permit every favorable inference, this Court should infer that a successful claim for Page 15 of 23

16 aiding and abetting fraud permits a claim for accounting and constructive trust. 91. Simply put, if the Babad Defendants, as part of the fraud, used the Plaintiffs funds, through Defendant 148, to obtain profits, those profits belong to Plaintiffs, not the Babad Defendants. 92. For the Court to ignore this claim would be improper, wrong, and inequitable as it would permit the Babad Defendants to aid and abet a massive fraud by laundering funds and then walk free with the profits of that wrong by merely handing back the funds they borrowed. 93. As for the Babad Defendants claim that Plaintiffs claim for a constructive trust must fail, they are also wrong. 94. The salutary purpose of the constructive trust remedy is to prevent unjust enrichment. Sharp v. Kosmalski, 40 N.Y.2d 119, 122 (1976). A constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee. Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 389 (1919, J. Cardozo). 95. Due to the fraud-rectifying nature of a constructive trust, there is no requirement that all four elements be alleged or even found to impose a constructive trust. Robinson v. Day, 103 A.D.3d 584, 587 (1 st Dept. 2013) ( We are not persuaded by defendants arguments that because plaintiff cannot plead the four requirements mentioned in Sharp, plaintiff has no claim for a constructive trust. Although the [Sharp] factors are useful in many cases[,] constructive trust doctrine is not rigidly limited citing Simonds v. Simonds, 45 N.Y.2d 233, 241 (1978)). 96. However, the Babad Defendants have brazenly asserted that The failure to plead these elements mandates dismissal of the complaint. Memorandum of Law, p. 20. Page 16 of 23

17 97. Further, the case they cite for that purpose, Consumers Union of U.S., Inc. v. State, discussed constructive trusts in its Footnote 14 and denied a constructive trust because, Plaintiffs did not renew their request for a constructive trust in their amended complaint. 5 N.Y.3d 327, 348 (2005). Clearly, those facts are dissimilar to the facts of this matter, where an explicit claim for constructive trust has been made. 98. Accordingly, Plaintiffs have set forth a basis not to dismiss the Twenty-Sixth Cause of Action and the Babad Defendants motion to dismiss should be denied. D. The Plaintiffs Have Stated A Cause of Action for Unjust Enrichment. 99. The Babad Defendants assert that the entirety of the Verified Complaint as against them should be dismissed, but do not advance any argument as to why the Plaintiffs claim for unjust enrichment (the Thirtieth Cause of Action) does not lie A cause of action for unjust enrichment is stated where plaintiffs have properly asserted that a benefit was bestowed by plaintiffs and that defendants will obtain such benefit without adequately compensating plaintiffs therefor. Seargents Benevolent Ass n Annuity Fund v. Renck, 19 A.D.3d 107, 111 (1 st Dept. 2005) (citing Wiener v. Lazard Freres & Co., 241 A.D.2d 114, 119 (1 st Dept. 1998) (quoting Tarrytown House Condominiums v. Hainje, 161 A.D.2d 310, 313 (1 st Dept. 1990)) Plaintiffs claim for unjust enrichment against the Babad Defendants is that they are in possession of funds properly belonging to Plaintiffs (a benefit bestowed) and that the Babad Defendants will retain said benefit without adequately compensating Plaintiffs for it. Verified Complaint Accordingly, Plaintiffs have stated a cause of action for unjust enrichment and Page 17 of 23

18 that portion of the Babad Defendants motion should be denied. E. The Babad Defendants Motion to Dismiss Upon Documentary Evidence Fails Because They Have Set Forth No Documentary Evidence A motion to dismiss pursuant to NY CPLR 3211(a)(1) may be appropriately granted only where the documentary evidence utterly refuse plaintiff s factual allegations, conclusively establishing a defense as a matter of law. Goshen v. Mut. Life Ins. Co., 98 N.Y.2d 314, 326 (2002); Leon v. Martinez, 84 N.Y.2d 83, 88 (1994) The Babad Defendants submissions here come nowhere close to establishing a NY CPLR 3211(a)(1) basis for dismissing the Verified Complaint The evidence in support of the Babad Defendants motion to dismiss is (1) an affidavit of Chaim Babad dated October 25, 2013, (2) copies of cancelled checks, wires, and a bank statement, and (3) a Schedule purportedly setting forth the payments and receipts from Defendant First, the affidavit of Chaim Babad, and quite simply the Memorandum of Law, is per se not documentary evidence. Memorandum of Law, p. 18; Williamson, Picket, Gross, Inc. v. Hirschfield, 92 A.D.2d 289, 290 (1 st Dept. 1983) ( To the extent the affidavit is so used [to support a CPLR 3211(a)(1) motion] we must ignore it since an affidavit does not qualify as documentary evidence which will support a motion to dismiss under CPLR 3211 (subd [a], par 1) ) On this motion, the Babad Defendants affidavit and the Memorandum of Law have no value and cannot be used to establish their defense It appears that the Babad Defendants intended to provide more documents than they actually did: loan agreements, the payment records, as evidenced by cancelled checks and Page 18 of 23

19 bank transfer records, and the repayment records, as evidenced by cancelled checks and bank transfer records. Memorandum of Law, p However, no such documentation is attached to the Babad Aff. as an exhibit and therefore, those documents cannot be used, even on Reply, to support this portion of the motion to dismiss What has been attached, a number of documents purportedly reflecting payment and a spreadsheet, are too inconclusive and do not support any affirmative defense Without the loan agreements, it is impossible to know whether these payment records accurately reflect the totality of the transactions between Defendant 148, Defendant Weinstein, Defendant Schleider, Defendant Todd, and the Babad Defendants As noted, the amount owed between the Babad Defendants and Defendant 148, Defendant Weinstein, Defendant Schleider, and Defendant Todd varies by the document being reviewed - $8 million initially, then $6.5 million in the assignment, $3.88 million in the Ubellacker Aff., and now $2.25 million according to Defendant Babad Further, it is not clear what the checks were for or how they relate to Defendant 148. Defendant Babad has provided no written documents explaining the transactions between the Babad Defendants and Defendant 148, Defendant Weinstein, Defendant Schleider, or Defendant Todd Finally, the spreadsheet attached as Exhibit B appears to have been crafted for this litigation and/or redacted. Its veracity is questionable at best, and certainly inconclusive in light of Defendant Babad s statement that there were transactions with other entities. Quite frankly, it is not even clear that the Statement reflects all of the transactions between the Babad Defendants and Defendant 148. Page 19 of 23

20 115. For example, the 2/15/12 check was returned for not sufficient funds and later redeposited. Exhibit N. However, there is no record in the spreadsheet to reflect this discrepancy As another example, the Babad Defendants have submitted a wire sheet for July 12, 2012 but no proof that the same was ever actually wired There is also no explanation why a 3/21/13 check to Bais Shimuel was a payment to Defendant In sum, none of the documents submitted by the Babad Defendants are remotely conclusive to establishing any defense whatsoever and to the extent there is a purported defense of payment, there are enough serious discrepancies to warrant denial of this motion. F. The Notice of Pendency Should Not Be Cancelled The Seventh Cause of Action seeks to vacate the March 20, 2012 assignment of mortgage from Defendant 148 to Defendant Congregation A Notice of Pendency is properly filed where the action affects the title to, or the possession, use or enjoyment of, real property. NY CPLR 6501; 5303 Realty Corp. v. O & Y Equity Corp., 64 N.Y. 2d 313, (1984) In entertaining a motion to cancel, the court essentially is limited to reviewing the pleading to ascertain whether the action falls within the scope of CPLR Realty Corp., 64 N.Y.2d at Further, a court is not to investigate the underlying transaction in determining whether a complaint comes within the scope of CPLR Instead, in accordance with historical practice, the court s analysis is to be limited to the pleading s face. Id. at 321. Page 20 of 23

21 123. Here, Plaintiffs seek to vacate an assignment of mortgage which has been recorded in the Office of the City Register for the City of New York. Verified Complaint 80, 95; Exhibit I As a document filed with the City Register, who maintains the land records for the City of New York, vacatur is only possible with notice to the owner of the affected property Park 121 Realty LLC (also mortgagor), the assignee (Defendant Congregation) and the assignor (Defendant 148) Hence, contrary to the Babad Defendants bizarre assertions, Defendant Park 121 Realty LLC is a necessary and indispensable party, as the owner of the Park Avenue Property, and mortgagor However, as in any other RPAPL Art. 15 action, no claims are made against Defendant Park 121 Realty LLC and no judgment is presently sought against it. Cf. Memorandum of Law, pp. 3, Accordingly, as the Babad Defendants have failed to set forth any reason to cancel the Notice of Pendency pursuant to NY CPLR 6514, their relief must be denied. The Seventh Cause of Action clearly sets forth a basis for the Notice of Pendency and the relief sought in this action necessarily affects the title to the Park Avenue Property. G. The Babad Defendants Moving Papers Contain False Statements of Fact and Irrelevant Issues of Law Not Supported by the Verified Complaint or Any Documentary Evidence and Thus Should Be Summarily Denied Quite a bit of the Babad Defendants papers are dedicated to refuting the nonexistent direct claim for fraud against themselves. Commencing on page 6 of the Memorandum of Law and proceeding through page 15, the Babad Defendants explore an irrelevant legal issue: Page 21 of 23

22 a direct claim for fraud However, none of Plaintiffs claims for fraud are directly against the Babad Defendants. See, e.g. Verified Complaint 26 et seq.; 74 et seq.; 100 et seq.; 117 et seq.; 210 et seq.; 284 et seq. Hence, this legal issue is irrelevant to the motion to dismiss and should be disregarded Nor do Plaintiffs make a claim of fraudulent omission. Memorandum of Law, p. 15 ( Plaintiffs have not claimed there was any representation by Kahal. Their claim is one of omission ) Similarly, the Babad Defendants insistence upon their own silence and lack of privity is irrelevant to the claim of aiding and abetting fraud. There is no issue that mere silence or inaction would be a bar to maintaining an action for aiding and abetting fraud. 8, supra. However, Plaintiffs maintain that the Babad Defendants did affirmatively act to further the fraudulent scheme, as set forth above In addition, the Babad Defendants attempt to add elements to aiding and abetting fraud. Cf. 8, supra. There is no legal requirement that an aider and abettor have privity or a special relationship approaching privity and no case law in support is provided by the Babad Defendants. Cf. Memorandum of Law, p The one, unreported case cited by the Babad Defendants, the Bautista case, is actually a misquote relating to the causes of action for fraud, not aiding and abetting fraud. Bautista v. NMC NY Corp., 2013 N.Y. Misc. LEXIS 3372 (unreported decision) As is perfectly clear from the Verified Complaint, the claims against the Babad Defendants are for aiding and abetting fraud (as to two types of occurrences), for unjust enrichment, and for an accounting/constructive trust. Page 22 of 23

23 135. Hence, the Babad Defendants tilting at windmills is a waste of judicial resources and completely irrelevant to the instant motion. WHEREFORE, the Babad Defendants motion should be denied, in its entirety. DATED: November 12, 2013 New York, NY Respectfully Submitted, Paykin, Richland & Falkowski, P.C. By: Daniel H. Richland, Esq th Avenue, 59 th Floor New York, NY Phone: x 802 Fax: (not for service of process) Attorneys for Plaintiffs Page 23 of 23