FILED: NEW YORK COUNTY CLERK 02/10/ :54 PM INDEX NO /2014 NYSCEF DOC. NO. 42 RECEIVED NYSCEF: 02/10/2015
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1 FILED: NEW YORK COUNTY CLERK 02/10/ :54 PM INDEX NO /2014 NYSCEF DOC. NO. 42 RECEIVED NYSCEF: 02/10/2015 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X CANADA INC., Index Number: /14 Plaintiff, - against - UNITED REALTY ADVISORS LP, ELI VERSCHLEISER and JACOB FRYDMAN, IAS PART 54 (Judge Kornreich) Motion Sequence No: 001 Defendants X DEFENDANT VERSCHLEISER S MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS UNITED REALTY ADVISORS AND JACOB FRYDMAN S CROSS-MOTION FOR SUMMARY JUDGMENT GULKO SCHWED LLP Simcha Gitelis, Esq. 44 Wall Street, 2 nd Floor New York, New York (212) Attorney for Eli Verschleiser
2 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X CANADA INC., Index Number: /14 - against - UNITED REALTY ADVISORS LP, Plaintiff, IAS PART 54 (Judge Kornreich) Motion Sequence No: 001 ELI VERSCHLEISER and JACOB FRYDMAN, Defendants X DEFENDANT VERSCHLEISER S MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS UNITED REALTY ADVISORS AND JACOB FRYDMAN S CROSS- MOTION FOR SUMMARY JUDGMENT PRELIMINARY STATEMENT This opposition is made in response to defendants United Realty Advisors LP ( United Realty ) and Jacob Frydman ( Frydman ) (collectively, cross-movants ) cross-motion for summary judgment to dismiss cross-movants claim for common-law indemnification. For the reasons set forth herein, cross-movants motion must be denied because (i) cross-movants motion is premature as no pleading or cross-claim has been served on Verschleiser; (ii) common-law indemnification is not a remedy at law available to cross-movants; and (iii) they similarly have failed to sustain their burden of proof for summary judgment. Additionally, cross-movants have failed to comply with Honorable Judge Kornreich s Court Rules regarding Summary Judgment motions; more specifically, Verschleiser was not 1
3 consulted before the filing of the instant motion for summary judgment in order to comply with your Honor s rules regarding the filing of a joint Rule 19-a Statement of Undisputed Material Facts. Finally, this proceeding is one of the close to dozen litigations that Defendant Frydman has been engaged in over the last year, and one of nearly 100 litigations that Defendant Frydman has been involved in the last 10 years. (A copy of Defendant Frydman Litigation history is attached hereto as Exhibit A.) Although Defendant Frydman has been sanctioned 1 and had frivolous lawsuits dismissed (see Order dated 2/4/15 in an action captioned Frydman v. Rosen et al.; Index No.: /14 attached hereto as Exhibit B) as recently as within the last 3-4 months, Defendant has sought each opportunity, including this one, to attempt to hurt and sabotage his former partner s (Verschleiser) business, reputation and relationships. STATEMENT OF FACTS Plaintiff s Motion for Summary Judgment in Lieu of Complaint ( MSJ ) stems from the breach of Promissory Note ( Note ) by United Realty Advisors, L.P. ( United Realty ) that was purportedly guaranteed by both Verschleiser and Frydman independently and individually each for one half of the initial contribution that Plaintiff provided to United Realty for their joint business venture. In addition to the Note and purported guarantees, there was a Partnership Agreement, titled Heter Iska Contract. (A copy of the Promissory Note, Guarantees and Partnership Agreement (Heter Iska) are annexed hereto as Exhibit C.) It should be noted at the outset that Frydman has not alleged nor has he attached a written indemnification agreement between himself and Verschleiser but merely brings his instant cross- 1 See EVUNP et al. v. Frydman et al.; Index No: /2014 (Sup. Ct. N.Y. County) 2
4 motion for summary judgment on the basis of common-law indemnification. As explained more fully in Verschleiser s Affirmation in Opposition to Plaintiff s Motion for Summary Judgment in Lieu of Complaint (attached hereto as Exhibit D), the underlying action is subject to the terms of the Partnership Agreement (Heter Iska) executed by the parties herein and nothing stated herein purports to waive Verschleiser s already stated objection to this litigation being brought in a tribunal other than that which is prescribed by said Agreement. Procedural History Plaintiff commenced the instant action by the filing of a Motion for Summary Judgment in Lieu of a Complaint with this Court on or about November 17, (A copy of attached hereto Exhibit E). In response thereto, Verschleiser filed an Affirmation in Opposition to said motion wherein Verschleiser objects to this action being brought in the Supreme Court of New York County due to a mandatory arbitration provision contained in the Personal Guaranty executed therein. (A copy of said Affirmation of Simcha Gitelis, Esq. in Opposition to Plaintiff s Motion for Summary Judgment is attached hereto as Exhibit D.) United Realty and Frydman now bring their Opposition to Plaintiff s Motion for Summary Judgment and simultaneously cross-move for Summary Judgment against Verschleiser under purported claims of common-law indemnification and in an attempt to escape liability under a Promissory Note. ARGUMENTS I. THE COURT SHOULD DENY CROSS-MOVANTS MOTION FOR SUMMARY JUDGMENT BECAUSE IT IS PREMATURE United Realty and Frydman have not served Verschleiser with a Complaint nor a cross-claim for common-law indemnification in this action, yet they make their current motion for summary judgment. While in certain circumstances, a summary judgment application may be entertained 3
5 based on a theory of recovery not pleaded, the general rule is that summary judgment will not be granted based upon a cause of action that has not been pleaded. Moscato v. New York, 584 N.Y.S.2d 39 (1st Dept. 1992) (citing Siegel, Practice Commentaries, Mckinney s Cons. Laws of New York Book 7B, CPLR 3212:11, at 319) Since Verschleiser has not been served with a complaint or cross-claim in this action, issue has not been joined herein with regards to cross-movants claims for indemnification and as such a motion for summary judgment is premature. Given this prematurity of cross-movants motion, it must be denied in its entirety. II. THE COURT SHOULD DENY CROSS-MOVANTS MOTION FOR SUMMARY JUDGMENT BECAUSE COMMON LAW INDEMNIFICATION IS NOT AN AVAILABLE REMEDY Cross-movants have failed to establish that they are being held vicariously liable to the Plaintiff herein and such failure conclusively disposes of their common-law indemnification claim. An indemnity cause of action can be sustained only if the third-party plaintiff and the third-party defendant have breached a duty to plaintiff and also if some duty to indemnify exists between them. Broyhill Furniture Industries, Inc. v. Hudson Furniture Galleries, LLC, 61 A.D.3d 554, 877 N.Y.S.2d 72 (1st Dept. 2009)(emphasis added) Cross-movants have failed to establish that such a duty to indemnify exists between Verschleiser and Frydman or that they are in a special relationship entitling them to such indemnification. Classic common-law indemnification situations concern vicariously liable tortfeasors and tort-feasors guilty of the acts or omissions causing harm: e.g., master and servant; employer and negligent employee; automobile owner and negligent driver; building owner and independent contractor exclusively responsible for maintenance of the building or parts thereof. In time, the doctrine of implied indemnification was broadened so that one who was cast in 4
6 damages for negligence could, if his negligence were merely passive, nevertheless shift his liability to the tort-feasor whose negligence was considered active. City of New York v. Kalikow Realty Co., 132 A.D.2d 481, 518 N.Y.S.2d 375 (1st Dept. 1987). Nonetheless, an indemnity cause of action can be sustained only if the third-party plaintiff and the third-party defendant have breached a duty to plaintiff and also if some duty to indemnify exists between them. Broyhill Furniture Industries, Inc. v. Hudson Furniture Galleries, LLC, 61 A.D.3d 554, 877 N.Y.S.2d 72 (1st Dept. 2009) Further, it is well settled that a party sued solely for its own alleged wrongdoing, rather than on a theory of vicarious liability, cannot assert a claim for common law indemnification. Esteva v. Nash, 55 A.D.3d 474, 866 N.Y.S.2d 186 (1st Dept. 2008)(citing Mathis v. Central Park Conservancy, 251 A.D.2d 171, 172, 674 N.Y.S.2d 336 (1st Dept. 1998; Holding where a complaint did not propound any theory that defendants were vicariously liable to plaintiffs, defendants are not entitled to common-law indemnification). To state a claim for common-law indemnification, a party must show (1) that it has been held vicariously liable without proof of any negligence or supervision on its part; and (2) that the proposed indemnitor was either negligent or exercised actual supervision or control over the injury-producing work. Naughton v. City of New York, 94 A.d.3d 1, 940 N.Y.S.2d 21 (1st Dept. 2012), citing McCarthy v. Turner Constr., Inc., 17 N.Y.3d 369, (2011). Frydman has failed to establish that he is being held vicariously liable, a recovery available in tort. Rather, it is the case that Frydman is being held liable on his personal guaranty executed in connection with the subject Promissory Note and is being held liable by virtue of his independent contractual obligations personally guarantying payment of one half of the 5
7 obligations due under said Promissory Note. As such he is being held liable in contract and not in tort. As indicated above, vicarious liability is where a party is being held liable in tort, and by virtue of their relationship with the tortfeasor, they too are held liable. This is absolutely not the case here. Plaintiff has not alleged in its Complaint that United Realty committed a tort, nor is there a special relationship between United Realty and Frydman (see City of New York, supra). Rather, the bases of Plaintiff s claims are in contract and as such, cross-movants are not being held vicariously liable at all. Esteva, supra. And again, without a showing of vicariously liability, cross-movants indemnification claim fails completely. City of New York, supra; see also Naughton, supra. Because Frydman simply cannot show that he is being held liable through vicarious liability, common-law indemnification is not available to him as a matter of law. Further, Frydman has not alleged or identified any duty of indemnification that Verschleiser purportedly owed Frydman. Absent such a duty to indemnify, cross-movants claim must fail. Broyhill Furniture Industries, supra. Since Frydman cannot and has not demonstrated that Plaintiff has claimed damages in tort from United Realty, nor has he alleged that he is being sued herein because of a special relationship he has with United Realty, cross-movants cannot show that they are being held vicariously liable herein. For that reason, cross-movants claim for common-law indemnification fails in its entirety and their motion for summary judgment must be denied. III. EVEN ASSUMING ARGUENDO THIS COURD FINDS THAT COMMON- LAW INDEMNIFICTION IS AVAILABLE TO CROSS-MOVANTS, THIS COURT MUST DENY SUMMARY JUDGMENT AS THERE ARE ISSUES OF MATERIAL FACT THAT REQUIRE A TRIAL HEREIN It is well-settled that the proponent of a motion for summary judgment has the burden of establishing a prima facie showing of entitlement to judgment as a matter of law and must tender 6
8 sufficient evidence demonstrating the absence of a material issue of fact. Alvarez v. Prospect Hospital, 68 N.Y.2d 320, 501 N.E.2d 572, 508 N.Y.S.2d 923 (1986); Zuckerman v. City of New York, 49 N.Y.2d 557, 404 N.E.2d 718, 427 N.Y.S.2d 595 (1980); Indig v. Finkelstein, 23 N.Y.2d 728, 244 N.E.2d 61, 296 N.Y.S.2d 370 (1968). Mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient for this purpose. Zuckerman, 49 N.Y.2d at 562, 404 N.E.2d 718, 427 N.Y.S.2d at 598. Moreover, summary judgment should not be granted when there is any doubt as to the existence of any triable issue of fact. Rotuba Extruders v. Ceppos 46 N.Y.2d 223, 385 N.E.2d 1068, 413 N.Y.S.2d 141 (1978); Waldron v. Wild, 96 A.D.2d 190, 468 N.Y.S.2d 244 (4th Dep't 1983). In determining whether an issue of fact exists, the proof submitted must be read in the light most favorable to the party opposing the motion. Goldstein v. Monroe, 11 A.D.2d 232, 432 N.Y.S.2d 966 (4th Dep't 1980). On a motion for summary judgment, the Court must determine whether the factual issues presented are genuine or unsubstantiated. It is not up to the Court to determine issues of credibility or the probability of success on the merits, but whether there exists a genuine issue of fact. Issue finding rather than issue determining is the key to summary judgment and the proof submitted by the proponent of the motion should be scrutinized carefully in the light most favorable to the party opposing the motion. Martin v. Briggs, 235 A.D.2d 192, 196, 663 N.Y.S.2d 184, 187 (1st Dept. 1997). To be entitled to a grant of summary judgment, the proponent must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. Winegrad, supra (citing Zuckerman v. City of New 7
9 York, 49 N.Y.2d 557; Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395)(emphasis added) Further, the proponent must show that there is no defense to the cause of action, or that the defense has no merit. CPLR 3212(b). Failure to make such a showing, requires denial of the motion, regardless of the sufficiency of the opposition papers. Winegrad, supra. When there are clear factual issues concerning the extent to which two parties are respectively liable, summary judgment on a plaintiff s common law indemnification claim cannot be granted. Neighborhood Partnership Housing Development Fund, et. al. v. Blakel Construction Corp., et. al., 34 A.D.3d 303, 824 N.Y.S.2d 89 (1st Dept. 2006) Here, cross-movants have failed to establish that they are entitled to any form of indemnification let alone summary judgment as a matter of law. Specifically, cross-movants have failed to show (i) how Verschleiser s actions conclusively and singlehandedly caused United Realty to default on the underlying Promissory Note; (ii) how that alleged consequence had an effect on Frydman s liability herein and (iii) that the cross-movants are free of any negligence or supervision sufficient to not have contributed to United Realty s inability to pay. a. Cross-movants have failed to show how Verschleiser caused United Realty s alleged default under the Promissory Note As acknowledged by the cross-movants in their moving papers, common law indemnification is available only to a party who can show (1) that it has been held vicariously liable without proof of any negligence or supervision on its part; and (2) that the proposed indemnitor was either negligent or exercised actual supervision or control over the injuryproducing work. Naughton v. City of New York, 94 A.d.3d 1, 940 N.Y.S.2d 21 (1st Dept. 2012), citing McCarthy v. Turner Constr., Inc., 17 N.Y.3d 369, (2011). 8
10 Further, it is well settled that the key element of a common law cause of action for indemnification is not a duty running from the indemnitor to the injured party, but rather is a separate duty owed the indemnitee by the indemnitor. Pimental, ex rel. Reyes v. DeJesus, 53 A.D.3d 401, 861 N.Y.S.2d 332 (1st Dept. 2008). Fatal to cross-movants claim is that they have not alleged any relationship whatsoever between cross-movants and Verschleiser which would give rise to a separate duty owed to cross-movants by Verschleiser entitling them to common law indemnification. In fact, not only have cross-movants failed to allege what duty was owed to them as the indemnitee, but also how Verschleiser purportedly breached said duty. Furthermore, even if cross-movants could fabricate some sort of duty owed to them by Verschleiser, cross-movants have failed to show how Verschleiser s actions could have possibly caused Frydman s liability under the personal guaranty. The fact is that Frydman is being held liable solely by virtue of his own independent execution of the document, separate and apart from Verschleisers s alleged execution of the same document. Cross-movants seek to support their contention that Verschleiser should be responsible to indemnify them by filing Frydman s self-serving and conclusory allegations that Verschleiser had a negative effect on United Realty thus causing defendants United Realty to be in default on the subject Promissory Note. Though Frydman attempts to make this sequence of events seem like dominos falling, it is far from that, as there is absolutely no evidence that any of Verschleiser s alleged actions, could have possibly caused the effect Frydman is complaining of, and even if they did, Frydman has not shown why this permits him to escape liability under a duly executed personal guaranty. First, there has never been a finding by any Court that Verschleiser participated in any sort of defamation against Frydman. Second, cross-movants have failed to show any impact on United Realty as a company, and whether said purported acts caused United Realty to allegedly 9
11 default under the subject Promissory Note. In fact, quite the contrary, in several recent actions filed against Defendant Frydman, it has been extensively noted that he has engaged in both fraudulent and wrongful activities, and thus, such a delinquency in the subject Note should be of no surprise. 2 Furthermore, even assuming arguendo that this Court would even consider Frydman s self-serving conclusory allegations, the cross-movants would still not be entitled to summary judgment because there is an issue of fact as to whether the purported actions of Verschleiser caused United Realty to default under the Promissory Note. That being said, there is nothing in cross-movants moving papers that support the indemnification of Verschleiser on Frydman s personal guaranty of United Realty s Promissory Note because cross-movants have not shown that (i) Frydman was owed any special duty from Verschleiser; (ii) that Verschleiser breached that duty; and (iii) that Verschleiser s actions had any consequence at all on United Realty s decision or ability to pay or not pay the underlying promissory note. Pimental, supra; Naughton, supra. Given the fact that cross-movants have not established the necessary elements to support their claim for common-law indemnification, and that there are triable issues of material fact regarding whether Verschleiser s actions could or did have any impact on United Realty and its decision or ability to pay or not pay the subject Promissory Note, summary judgment must be denied. Winegrad, supra. b. Cross-movants have failed to show they was conclusively free from negligence or supervision of United Realty 2 See Savoy Decision attached hereto as Exhibit E; See also, Real Deal Article dated October 10, 2015 attached hereto as Exhibit F. 10
12 As stated above, common law indemnification is available to a party who can show (1) that it has been held vicariously liable without proof of any negligence or supervision on its part; and (2) that the proposed indemnitor was either negligent or exercised actual supervision or control over the injury-producing work. Naughton v. City of New York, 94 A.d.3d 1, 940 N.Y.S.2d 21 (1st Dept. 2012), citing McCarthy v. Turner Constr., Inc., 17 N.Y.3d 369, (2011). Further fatal to Frydman s requested relief is that he cannot show that he was without supervision of United Realty. Frydman alleges in his own affidavit, Verschleiser voluntarily resigned from each and every position or office he held as manager, officer, director or employee of United Realty on or about December 4, (See Frydman Affidavit, page 17, lines 2-6) This left Frydman in control of United Realty from on or about December 4, 2013 up to and including October 25, the due date of the Promissory Note. Therefore, whether United Realty chose to default under the Promissory Note, or was financially unable to perform thereunder was left exclusively up to those in charge of United Realty, and primarily Frydman, at the time the Promissory Note was due. Thus, it is impossible for Frydman to meet the first element of common law indemnification, to wit, he has failed to show that he had no involvement in the supervision of United Realty, when as acknowledged in his own affidavit, at all times relevant herein he was the CEO and Chairman of United Realty. Naughton, supra. Indeed, after December 4, 2013, Frydman was the sole manager of the company through the date the Promissory Note became due. 11
13 As cross-movants have failed to establish that they were without supervision of United Realty, they fail to make out the first prong for common law indemnification and as such, crossmotion motion for summary judgment against Verschleiser must be denied in its entirety. c. Cross-movants cannot show that Verschleiser exercised actual supervision or control over United Realty As stated above, the second prong required state a claim for common law indemnification is that that the proposed indemnitor was either negligent or exercised actual supervision or control over the injury-producing work. Naughton v. City of New York, 94 A.d.3d 1, 940 N.Y.S.2d 21 (1st Dept. 2012), citing McCarthy v. Turner Constr., Inc., 17 N.Y.3d 369, (2011). For the same reasons above, it is similarly impossible for cross-movants to meet the second prong for common-law indemnification pursuant to cross-movants own statements: that Verschleiser had resigned from all positions and maintained absolutely no control of United Realty after December 4, (See, Frydman s Affidavit, page 17, lines 2-6). Therefore, cross-movants simply cannot show that Verschleiser exercised actual supervision or control over United Realty, and as such could not possibly have single handedly caused said defendant to breach its obligations under a Promissory Note which was not due for ten (10) months after his purported resignation from the company. CONCLUSION Thus, based on the foregoing, the Court should deny defendants United Realty and Jacob Frydman s motion for summary judgment as the same is not ripe for review in this Court since cross-movants have failed to serve Verschleiser with a Complaint or a cross-claim herein setting forth its allegations of common-law indemnification and as such no issue has been joined with respect to this claim. 12
14 It it is also respectfully submitted that defendants United Realty and Jacob Frydman s cross-motion for summary judgment be denied in its entirety as cross-movants have failed to show that they is being held vicariously liable by the plaintiff herein. Absent a claim by the plaintiff for vicarious liability, common law indemnification is unavailable in this litigation, and cross-movants motion for summary judgment should be denied and his common-law indemnification claim should be dismissed. Additionally, it is further respectfully submitted that cross-movants motion for summary judgment be denied in its entirety as cross-movants have failed to show (i) that Verschleiser had an indemnitor/indemnitee relationship with Frydman; (ii) that Verschleiser s alleged wrongful conduct caused United Realty to breach its obligations under the Promissory Note; (iii) crossmovants were free of supervision of control of United Realty after 2013; and (iv) that Verschleiser exercised actual supervision or control of United Realty causing the corporation s breach. As such, cross-movants motion must be denied in its entirety. PRAYER FOR RELIEF WHEREFORE, Defendant Verschleiser respectfully requests that this Court A. Deny defendants United Realty and Jacob Frydman s cross-motion for Summary Judgment against Eli Verschleiser in its entirety because: (i) cross-movants motion is premature as no pleading or cross-claim has been served on Verschleiser; (ii) common-law indemnification is not a remedy at law available to cross-movants; and (iii) they similarly have failed to sustain their burden of proof for summary judgment cross-movants has not shown an absence of material fact with regards to Verschleiser s alleged liability under Frydman s personally and independently executed personal guaranty. 13
15 B. Award Defendant Verschleiser costs, attorneys fees, and any other relief this Court feels is just, meet, and proper. Dated: New York, New York February 10, 2015 GULKO SCHWED LLP Simcha Gitelis, Esq. 44 Wall Street, 2 nd Floor New York, New York (212) Attorney for Eli Verschleiser 14
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