-against- an order pursuant to CPLR 6401 appointing a temporary receiver for property known as

Transcription

1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x SAID HAKIM, SAID HAKIM on behalf of RANELL FREEZE COMPANY, and SAID HAKIM on INDEX NO /05 behalf of RANELL FREEZE CORPORATION Plaintiffs, Hon. Karla Moskowitz -against- KAMRAN HAKIM, RANELL FREEZE COMPANY and RANELL FREEZE CORPORATION, Defendants x PLAINTIFF S REPLY MEMORANDUM OF LAW IN SUPPORT OF MOTION SEEKING TEMPORARY RECEIVER AND IN OPPOSITION TO DEFENDANTS MOTION SEEKING DISMISSAL/SUMMARY JUDGMENT PRELIMINARY STATEMENT This memorandum of law is submitted in further support of plaintiff s motion seeking an order pursuant to CPLR 6401 appointing a temporary receiver for property known as 536 East 89 th Street, New York City (the 89 th Street Property ), and in opposition to Defendants motion seeking dismissal or summary judgment. As we demonstrate below: 1) Defendant is misusing partnership assets for his own personal benefit and depleting partnership profits; 2) there is no basis to dismiss any of Plaintiff s causes of action; and 3) there are issues of fact requiring denial of Defendant s motion. 1

2 These issues of fact include: whether the additional properties were part of the parties partnership; whether Defendant concealed the sale of these properties from Plaintiff and make misrepresentations concerning the status of same; whether Plaintiff had an obligation to retain records which he alleges that he no longer has. FACTS The facts are fully set forth in the accompanying affidavit of Said Hakim and the Court is respectfully directed to same. Briefly stated, Plaintiff Said Hakim and Defendant Kamran Hakim ( Defendant ) agreed to enter into a partnership to invest in New York City real estate. This partnership was managed by Defendant and, initially included a third brother Masud Hakim. They purchased several properties including: 536 East 89 th St., New York, New York, 456 West 57 th St., New York, New York, 328 East 61 st St., New York, New York and 728 Tenth Ave., New York, New York. (The Properties ) These should have been part of the Ranell Freeze Company (RF Company) partnership and covered by the K-1's issued with respect to same. Said Hakim provided the bulk of the funds used to purchase these properties. Said Hakim and Defendant agreed that these properties were part of the this partnership. Defendant appears in the chain of title of most of these properties (Exhibit B) In the early 1980's the partnership was modified. Masud withdrew and Said s interest was increased to 50% in consideration for certain tax benefits which Defendant and Masud received from another business interest we owned. For some 15 years, consistent with their agreement, Said Hakim received K-1's 2

3 indicating that he had a 50% interest in RF Company. He also received yearly partnership income payments. In 2003, Said Hakim received a K-1 which indicated that he only had a 33 1/3 partnership share Said called Defendant s accountant who indicated that this was a mistake and a new K-1 would be issued reflecting Said s 50% interest. In 2002, Defendant stopped paying Plaintiff partnership income although he concedes that Plaintiff is entitled to approximately $75,000 in such income for the past three years. Plaintiff also recently learned that in 1997 Defendant entered into a mortgage modification agreement with Emigrant Savings Bank for the 89 th Street Property whereby Defendant received in his individual name more than $607, This modification includes a signature which purports to be that of Plaintiff, but is not. Upon information and belief, this money was not used for partnership purposes. Defendant sold all of the Properties except for the 89 th Street Property in the 1970's. For the past 25+ years, Said and Defendant regularly communicated about the additional properties. During this time, Defendant never advised him that any of these properties had been sold and led him to believe that they still owned them and that they were part of our RF Company partnership. Indeed, Defendant does not allege in his affidavit that he ever advised Plaintiff of these sales. In or about early 2005, Said learned for the first time that some of the properties may have been sold. Shortly thereafter he commenced the instant action. 3

4 Plaintiff entered into a written agreement with Defendant under which he was to receive a portion of a claim filed with respect to the nationalization of the parties Iranian business know as Pars Manufacturing (the Pars Claim ). This agreement remained in effect at all relevant times. After a hearing, an award was rendered on the Pars Claim which with interest was almost $2,000,000. Plaintiff believes that Defendant actually received payment of the award around Plaintiff has not been paid any of the award proceeds. POINT I A TEMPORARY RECEIVER SHOULD BE APPOINTED FOR THE 89 TH STREET PROPERTY Defendant concedes that he Plaintiff was entitled to more than $75,000 in partnership income for the past three years but offers no evidence that he received same. (See affidavit of Kamran Hakim sworn to November 2005, paragraph 6) Plaintiff has recently learned of additional facts which support Plaintiff s contention that a temporary receiver should be appointed with respect to the 89 th Street Property In 1997, Defendant individually received $607, from Emigrant Savings Bank pursuant to a Mortgage Modification Agreement and that this money was not used for partnership purposes. This modification was obtained with a signature which purports to be that of Plaintiff but is not. These facts further demonstrate that Defendant has mismanaged this property and 4

5 wasted partnership assets, and there is a danger of injury. Defendants actions will quite possibly leave the building with insufficient funds to make Plaintiff whole for the injuries he has suffered. Defendant suggests that the tax returns indicate that he was earning a modest management fee and accordingly he has not mismanaged the property or wasted assets. This contention disregards many issues concerning Defendant s management. To begin, it is Defendant who has generated these tax documents which we submit must be viewed with this in mind. Pursuant to the parties agreement, Defendant was only to receive a 2% management fee. As noted above, Defendant has received a mortgage on the property in his individual name from Emigrant Savings Bank. This mortgage contains a fraudulent signature which purports to be that of Said. These facts offer additional proof that Defendant is misusing partnership assets for his own personal benefit and depleting partnership profits. POINT II SUMMARY JUDGMENT IS A DRASTIC REMEDY AND SHOULD NOT BE GRANTED WHERE THERE ARE TRIABLE ISSUES OF FACT Courts have consistently held that summary judgement is a drastic remedy and should not be granted where there is any doubt as to the existence of a triable issue of fact. Brunetti V. Musallam, 11 A.D.3d 280, 783 N.Y.S.2d 347 (1 st Dept. 2004) Rotuba Extruders, Inc. v. Ceppos, 46 N.Y.2d 223, 413 N.Y.S.141 (1978);Blake-Vedeer Realty, Inc. v. Crayford, 110 A.D.2d 1007, 488 N.Y.S.2d 295 (3rd Dept. 1985)(where there is any 5

6 significant doubt as to whether a triable issue of fact exists, a litigant should not be denied his day in court); Gale v. Kessler, 93 A.D.2d 744, 461 N.Y.S.2d 295 (1st Dept. 1983) (a court's function upon a motion for summary judgement is issue finding, not issue determination); see also Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 165 N.Y.S.2d 498 (1957). Where a defendant seeks summary judgment, the plaintiff is entitled to the benefit of every favorable inference which may be drawn from the pleadings, affidavits and examinations before trial. Blake-Vedeer Realty, supra at 297; Egan Real Estate, Inc. v. McGraw, 40 A.D.2d 299, 339 N.Y.S.2d 870 (4th Dept. 1973). "[S]tatements made in opposition to the motion must be accepted as true." Creighton, supra at 188; see also Hourigan v. McGarry, 106 A.D.2d 845, 484 N.Y.S.2d 243 (3rd Dept. 1984). Moreover, "the credibility of the parties is not a proper consideration for the court." Creighton, supra at 188. The movant must prove by admissible evidence that it is entitled to judgment as a matter of law; where the party fails to meet this burden, the motion should be denied even if the papers in opposition are deemed inadequate. Pastoriza v. State, 108 A.D.2d 605, 494 N.Y.S.2d 832 (1st Dept. 1985). POINT III MASUD HAKIM IS NOT AN INDISPENSABLE PARTY REQUIRING DISMISSAL OF THE COMPLAINT Defendant seeks to dismiss the first and fourth causes of action on the ground that Masud Hakim is a partner of RF Company and thus an indispensable party. However, the 6

7 facts demonstrate that he is not a partner. In his affidavit, Said indicates that Masud Hakim withdrew from this partnership in the early 1980s. This is confirmed by the fact that Defendant has not produced any partnership tax documents showing that Masud was a partner in the 1980s or 1990s. Under such circumstances, Masud is not an indispensable or necessary party. See: Steinlauf v. Camporese 142 N.Y.S.2d 166 (N.Y. Sup. 1955). Assuming arguendo, without conceding same, that the Court should find that Masud is a necessary party, this is not a basis to dismiss. The Court may simply order that he be made a party. It is well established that a dismissal pursuant to CPLR 3211a(10) is a harsh remedy which is rarely used and only as a last resort. See e.g. Saratoga County Chamber of Commerce Inc. v. Pataki, 275 A.D.2d 145, 712 N.Y.S.2d 687, (3 rd Dept. 2000). Siegel, Practice Commentaries, McKinney's Cons. Laws of N.Y., Book 7B, CPLR C3211:34, at 47-48). Dismissal is only appropriate upon a showing that a person indispensable to the action has not been, and cannot be, made a party. Siegel Practice Commentary, CPLR C3211:34, supra. Here, Defendant has not even addressed whether Masud can be made a party. The cases cited by Defendants on this point do not support Defendant s argument that the instant case should be dismissed. Defendants cases simply find that the absent party was a necessary party. See e.g: Tesco Properties. Inc. v, Troy Rehabilitation and Improvement Project Inc A.D.2d 839,562 N.Y.S.2d 827 (3d Dept 1990); Marks v. Zucker 118 A.D.2d 452, 499 N.Y.S.2d 740 ( 1st Dept.1986). 7

8 POINT IV PLAINTIFF S CLAIMS DO NOT VIOLATE THE STATUTE OF LIMITATIONS Defendant seeks dismissal/summary judgment of the remaining causes of action on statute of limitations/ Laches grounds. A. Plaintiff s Accounting Cause of Action Does Not Violate the Statute of Limitations Pursuant to Partnership Law 74 the six year statute of limitations for an accounting action does not begin to run until the partnership has been dissolved. See e.g. Green v. Albert 199 A.D.2d 465, 605 N.Y.S.2d 395 (2 nd Dept. 1993), Schwartz v. Lois Associates 149 A.D.2d 307, 539 N.Y.S.2d 360 (1 st Dept.1989). Here, Plaintiff seeks dissolution of the partnership in the instant action. Accordingly, Plaintiff may seek an accounting without violating the statute of limitations. This accounting may cover the whole life of the partnership. If commenced within six years of dissolution, an accounting may be sought from the beginning of a partnership. In the leading case of Missan v. Schoenfeld, 95 A.D,.2d 198, 465 N.Y.S.2d 706 (1 st Dept. 1983), the First Department held that plaintiff attorney s partnership accounting action was not barred by statute of limitations for the period 1969 to 1973 where dissolution of partnership occurred only six months prior to commencement of accounting action in See also: 44 A.L.R.4th 678 When Statute of Limitations Commences to Run on Right of Partnership Accounting citing Missan. None of the cases cited by Defendant are contrary to the Missan decision. Defendant s cases either do not involve partnerships or do not address the issue directly. 8

9 B. Defendant Has Failed to Demonstrate that the Pars Claim does Violates the Statute of Limitations Plaintiff asserts that Defendant failed to pay him his share of the proceeds of the award of the Pars Claim pursuant to the parties written agreement. Defendant concedes that they were awarded $691,000 plus interest (which he does not quantify). In Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 599 N.Y.S.2d 507, 615 N.E.2d 985 (1993), the Court of Appeals set forth the basic principles as to when the Statute of Limitations begins to run in a breach of contract action: Generally, any Statute of Limitations begins to run when a cause of action accrues (CPLR 203[a]). In New York, a breach of contract cause of action accrues at the time of the breach (Edlux Constr. Corp. v. State of New York, 252 App.Div. 373, 374, 300 N.Y.S. 509 aff d. 277 N.Y. 635, 14 N.E.2d 197 see also, Kassner & Co. v. City of New York, 46 N.Y.2d 544, 550, 415 N.Y.S.2d 785, 389 N.E.2d 99). Defendant asserts that received payment of the award this in 1998 but has offered no proof of same and thus has not demonstrated a violation of the statute of limitations. On the other hand, Said asserts that this money was received by Defendant around We respectfully submit that this contradictory testimony raises an issue of fact requiring the Court to deny summary judgment on statute of limitations grounds. 9

10 C. Under the Principle of Equitable Estopped Defendant Should Be Barred from Raising a Statute of Limitations Defense with Respect to the Sold Properties. There are issues of fact concerning application of the Statute of Limitations to Plaintiff s actions for waste, breach of fiduciary duty, fraud, declaratory judgment, conversion and Breach of Contract Action contained in the Amended Complaint. Defendant should be estopped from pleading the Statute of Limitations defense based on his failure to advise Plaintiff of the sale of these Properties and statements which led Plaintiff to believe that they still had an interest in these properties. It is well established that "A defendant may be estopped from pleading the Statute of Limitations where a plaintiff was induced by fraud, misrepresentation or deception to refrain from timely commencing an action (Simcuski v. Saeli, 44 N.Y.2d 442, , 406 N.Y.S.2d 259, 377 N.E.2d 713, Phelps v. Greco 177 A.D.2d 559, 576 N.Y.S.2d 158,.Ramsey v. Mary Imogene Bassett Hosp., 113 A.D.2d 149, 495 N.Y.S.2d 282)." Gleason v. Spota 194 A.D.2d 764, 599 N.Y.S.2d 297 (2nd Dept. 1993). In a fiduciary relationship, such as a partnership Berger v. Spring Partners, L.L.C. 9 Misc.3d 1122(A), 2005 WL (N.Y.Sup.,2005), even a concealment without an actual misrepresentation, may form the basis of application of equitable estoppel. Niagara Mohawk Power Corp. v. Freed 288 A.D.2d 818, 733 N.Y.S.2d 828 (4 th Dept. 2001)(If there is concealment without an actual misrepresentation, equitable estoppel is appropriate where there is a fiduciary relationship that gave the defendants an obligation to inform plaintiff of facts underlying the claim.) In the leading case, General Stencils, Inc. v. Chiappa, 18 N.Y.2d 125, 219 N.E.2d 169, 272 N.Y.S.2d 337 (1966), the Court of Appeals held: 10

11 The principle that a wrongdoer should not be able to take refuge behind the shield of his own wrong is a truism. The United States Supreme Court has espoused the doctrine in these terms: "To decide the case we need look no further than the maxim that no man may take advantage of his own wrong. Deeply rooted in our jurisprudence this principle has been applied in many diverse classes of cases by both law and equity courts and has frequently been employed to bar inequitable reliance on statutes of limitations." (Glus v. Brooklyn East. Term., 359 U.S. 231, , 79 S.Ct. 760, 762, 3 L.Ed.2d 770 [1959].) Thus in Erbe v. Lincoln Rochester Trust Co., 13 A.D.2d 211, 214 N.Y.S.2d 849 [4th Dept., 1961], the Appellate Division properly ruled that the defendants, trustees of an estate of which plaintiffs were beneficiaries, could not take advantage of their affirmative concealment of a breach of fiduciary duty, and that the issue of equitable estoppel could thus be raised at the trial in answer to the defense of the Statute of Limitations. (See Clarke v. Gillmore, 149 App.Div. 445, 133 N.Y.S [1st Dept., 1912]; Dodds v. McColgan, 229 App.Div. 273, 241 N.Y.S. 574 [1st Dept., 1930]; Safrin v. Friedman, 27 Misc.2d 687, 96 N.Y.S.2d 627 {Sup.Ct.], affid. without passing on this question 277 App.Div. 1138, 101 N.Y.S.2d 216 {2d Dept. 1950].) * * * * * * Our courts have long had the power, both at law and equity, to bar the assertion of the affirmative defense of the Statute of Limitations where it is the defendant's affirmative wrongdoing - a carefully concealed crime here - which produced the long delay between the accrual of the cause of action and the institution of the legal proceeding. (Feinberg v. Allen, 143 App.Div. 866, 128 N.Y.S. 906 [3d Dept., 1911], affd. 208 N.Y. 215, 101 N.E. 893 [1913]; Safrin v. Friedman, supra). Consequently, the admitted 11

12 thievery of defendant entitles plaintiff to litigate the issue of equitable estoppel. "`The issue of whether defendant should be equitably estopped from asserting the Statute of Limitations as an affirmative defense to plaintiff's complaint is not a question of law, but rather a question of fact, which should be fully developed and determined upon the trial of the action' (citations omitted)." Schirano v. Paggioli 99 A.D.2d 802, 472 N.Y.S.2d 391 (2nd Dept. 1984). In Will of Spewack 203 A.D.2d 133, 610 N.Y.S.2d 243 (1 st Dept.1994), the Court held that the Executor of decedent's estate made a prima facie case that defendant was equitably estopped from pleading the applicable three-year statute of limitations based on misrepresentation and concealment of facts. The Court further held that the fact that decedent failed to discover the theft for 30 years did not preclude invocation of equitable estoppel. The Court in Niagara Mohawk Power Corp. v. Freed 288 A.D.2d 818, 733 N.Y.S.2d 828, (4th Dept. 2001) held that there were issues of fact as to whether the plaintiff justifiably relied upon an alleged affirmative misrepresentation contained in a written statement made by defendant, and whether defendant concealed alleged wrongdoing from plaintiff, which precluded summary judgment in plaintiff s breach of fiduciary duty action. In the present case, we respectfully submit that the allegations in the accompanying affidavit of Said Hakim submitted in opposition to defendants' motion to dismiss on statute of limitations grounds are sufficient to make out a prima facie case of estoppel. Here, Said Hakim states that between the 1970s and 2005, he regularly communicated with Defendant concerning these properties but Defendant concealed from 12

13 him the fact that the properties had been sold. Indeed, Defendant made misrepresentations to Plaintiff such as the fact that he was keeping the properties vacant which were meant to lead Plaintiff to believe that they still owned the apartments. D. There Are Issues of Fact Concerning Defendant s Defense of Laches Defendant also argues that Plaintiff s action should be barred by laches based on the allegations that Plaintiff unreasonably delayed to Defendant s prejudice. Defendant asserts that he no longer has the relevant documents both with respect to the Pars claim and the sold properties. Plaintiff states that he did not have knowledge of the sale of the property until recently. Thus, he did not unreasonably delay in taking action. We respectfully submit that the issue of laches is entwined with other issues of fact relating to fraud and equitable estoppel and accordingly should not be decided on a motion for summary judgment. See: Schirano v. Paggioli 99 A.D.2d 802, 472 N.Y.S.2d 391 (2 nd Dept. 1984) (Summary judgment should not be granted based on laches where a prima facie defense of equitable estoppel has been made). Defendant should not be able to claim prejudice based on the fact that he no longer has certain documents. As a fiduciary of Plaintiff, Defendant knew that he had obligation to plaintiff and knew that he was concealing information about these properties in breach of his fiduciary duty. Under these circumstances, he should not have destroyed the documents and he should not be able to rely on his own destruction of documents to claim prejudice. c.f. Sage Realty Corp. v. Proskauer Rose, LLP 275 A.D.2d 11, 713 N.Y.S.2d 155, (1 st Dept. 2000) (Party cannot argue that allegedly spoliated documents had not been 13

14 shown to be relevant because destruction of the evidence diminishes the ability of the deprived party to prove the relevance of such documents directly.) With respect to the Pars claim, assuming arguendo Defendant s assertion, the statute of limitations only recently expired. Defendant has not explained why he no longer has these documents. We submit that at the very least there is an issue of fact concerning whether Defendant had an obligation to maintain these documents. The cases relied on by Defendant concerning laches are all distinguishable and inapposite. For example, in Hutchinson v. Sperry, 158 A.D. 704, 143 N.Y.S. 876 ( 1 st Dept.1913), as Defendant notes in his brief, the Plaintiff had knowledge of his claim for ten years and sat on his rights. Here, Plaintiff just learned about his claim. E. Plaintiff s Fraud Cause of Action Does Not Violate the Statute of Limitations Since Defendant Only Discovered the Fraud in 2005 Defendant concedes at page 9 of its brief that the Statute of Limitations for a fraud claim is six years from commission of the wrongful act or two years from discovery. Here, Plaintiff did not discover that the Properties had been sold until 2005 and he commenced the lawsuit within several months of such discovery. POINT V DEFENDANT S MISCELLANEOUS GROUNDS FOR DISMISSAL ARE NOT SUPPORTED BY THE LAW OR FACTS Defendant asserts that the Eighth Cause of Action for a Receiver should be dismissed because the properties have been sold. This cause of action includes the 89 th 14

15 Street Property which is still owned by the partnership. Defendant has not presented any grounds for dismissal. Defendants argument seeking to dismiss Plaintiff s fraud cause of action based on Spodek v. Neiss 291 A.D.2d 551, 737 N.Y.S.2d 662, (2nd Dept. 2002) is misplaced. Here, there are issues of fact concerning the parties relationship which make any such finding inappropriate. With respect to Plaintiff s cause of action for punitive damages, Defendant does not dispute that Plaintiff is entitled to seek punitive damages but simply argues without support that this cause of action has no independent viability. In the event that such damage is dismissed, we respectfully submit that Plaintiff should be granted leave to seek punitive damages in the complaint s wherefore clause. 15

16 CONCLUSION For the reasons set forth above, Plaintiff s motion should be granted and a temporary receiver appointed for for property known as 536 East 89 th Street, New York City and Defendant s cross-motion seeking summary judgment/dismissal denied in its entirety and for such other relief as this Court may find just and proper Dated: New York, New York December 7, 2005 Respectfully Submitted Law Offices of Ian L. Blant By: IAN L. BLANT Attorneys for Plaintiff 475 Park Avenue South,16th Floor New York, New York (212)