SUPREME COURT - STATE OF NEW YORK IAS TERM PART 19 NASSAU COUNTY. Justice

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1 scan SUPREME COURT - STATE OF NEW YORK IAS TERM PART 19 NASSAU COUNTY INDEX NO. 6791/03 PRESENT: HONORABLE Justice LEONARD B. AUSTIN Motion RID: Submission Date: 10- Motion Sequence No. : 003,004/MOT D BUDGET MORTGAGE BANKERS, LTD. Plaintiff, - against - CARL MAZ and STEPHANIE MAZ, Defendants. COUNSEL FOR PLAINTIFF Wurman, Birnbaum & Maday, PLLC One Fulton Avenue Hempstead, New York COUNSEL FOR DEFENDANTS Franklin C. Hyman, P. 595 Stewart Avenue Garden City, New York ORDER The following papers were read on Plaintiff' s motion for a stay and Defendant's cross-motion for summary judgment: Order to Show Cause dated August 10, 2004; Affirmation of Ronald C. Maday, Esq. dated July 29, 2004; Affidavit of Albert Rabizadeh sworn to on July 29, 2004; Notice of Cross-motion dated August 26, 2004; Affidavit of Carl Maza sworn to on August 26, 2004; Affidavit of Stephanie Maza sworn to on August 26, 2004; Affirmation of Ronald C. Maday, Esq. dated September 20, 2004; Affidavit of Albert Rabizadeh sworn to on September 15, 2004; Affidavit of Deanna Robbins sworn to on September 15, 2004; Affidavit of Carl Maza sworn to on October 4, Plaintiff, Budget Mortgage Bankers, Ltd. ("Budget"), moves to stay the

2 prosecution of this action. Defendants, Carl Maza ("Carl") and Stephanie Maza Stephanie ), cross-move for summary judgment. BACKGROUND The issue presented in Budget's motion is whether the prosecution of this action should be stayed pending the disposition of a criminal action presently pending against Carl arising from the facts that give rise to this action. Budget is a mortgage banking firm licensed to do business in New York, New Jersey, Connecticut and several other states. Most of Budget's business involves refinancing residential mortgages. In 1995, Budget retained Carl to act as a closing attorney in connection with its New York transactions. One of Carl' s functions as a closing attorney was to disburse mortgage loan proceeds. When a loan was ready to close, Budget would wire the net funding amount into Carl's escrow account. The net funding amount was calculated by subtracting from the loan amount Budget's fees, prepaid interest and tax and insurance escrows. Budget would generally transfer into Carl's escrow account 97% of the total loan amount. after the final calculations were made, the amount wired into Carl's escrow account was less than the net funding amount, Carl would request and Budget would issue to Carl a shortage check. If the net funding amount was in excess of the net funding amount, Carl was required to refund the overage to Budget.

3 Since most of these loans were refinances and since federal law permits a part three days from the date of the closing to cancel the transaction, the loans were generally not funded until three days after the closing took place. Carl was instructed by Budget not to disburse any funds until he confirmed that the loans had not been cancelled. Thereupon, Budget had funded the loans and transferred the funds into Carl' s escrow account. Carl initally did not issue any checks for the net funding amount unti he had verified that the net funding amount had been wired into his escrow account. At some point during the period , Budget alleges that Carl began to divert money wired into his escrow account as loan proceeds. This resulted in checks issued by Carl as loan proceeds on Budget loans being dishonored. Budget's complaint alleges that it paid out $ to make good on loan proceeds checks issued by Carl which did not clear. Carl resigned from the Bar in See, Matter of Maza, 304 A.D. 2d 93 (2 Dept., 2003). His resignation acknowledges that, from approximately January 4, 1999 through September 30, 1999, funds were entrusted to him by various lending institutions to be disbursed as proceeds of loan transactions and that he failed to maintain at least $ relating to such loan. In May 2004, Carl was arrested and charged with grand larceny in the second degree (a class 0 felony under Penal Law ) due to his alleged misappropriation of approximately $700, from Budget. Carl was arraigned on this charge in June

4 A The present status of the criminal case is not set forth in the papers. Budget asserts that the prosecution of this action should be stayed pending the disposition of the criminal action. Budget's complaint alleges three causes of action. Budget withdrew its second and third causes of action in its papers submitted in connection with these motions. The two withdrawn cause of action s alleged fraudulent conveyance and fraud theories against both Carl and Stephanie. The first and sole remaining cause action alleges that Budget incurred damages of approximately $ as a result of Carl' misappropriating and misusing funds entrusted to him as net loan proceeds. Carl has cross-moved for summary judgment asserting that Plaintiff has not sustained any damages or has not documented its damages. DISCUSSION Defendant's Cross- Motion for Summary Judgment Carl's motion is based upon the premise that Budget has failed to provide him with copies of any checks which he issued for loans funded by Budget which did not clear. In this regard, Carl misstates the law of summary judgment. The party seeking summary judgment must make a prima facie showing of entitlement to judgment as a matter of law. Winegrad v. New York University Medical Center, 64 N. 2d 851 (1985); and Zuckerman v. City of New York, 49 N. 2d 557 (1980). The burden to establish the existence of triable issues of fact does not shift to the party opposing the motion unless

5 the movant establishes a prima facie entitlement to judgment as a matter of law. Winegrad v. New York University Medical Center supra; and Widmaier v. Master Products. Mfg., 9 A. D. 3d 362 (2 Oept., 2004); and Ron v. New York City Housing Auth., 262 AD.2d 76 (1 Dept., 1999). When considering a motion for summary judgment, the court must consider the evidence in a light most favorable to the non-moving party and must give that party the benefit of all the reasonable inferences that can be drawn from the evidence. Neqri v. Stop & Shop, 65 N. 2d 625 (1985). See, Erickson v. J. I.B. Realty COrD., 2004 WL (2 Dept., 2004); and Louniakov v. M. R.O. D. Realty COrD., 282 AD.2d 657 Dept., 2001). In this case, Carl has failed to establish a prima facie entitlement to judgment as a matter of law. In order to establish a prima facie entitlement to judgment as a matter of law, Carl had to establish that none of the checks he wrote on Budget loans were returned as unpaid, that Budget did not issue checks to replace checks Carl issued that were dishonored, that Budget did not have to provide Carl with additional funds to cover checks he issued and that he returned to Budget all funds wired into his escrow account which were not disbursed as net loan proceeds. Carl has not met this burden. His entire motion is premised on the alleged deficiencies in Budget's response to discovery demands. While the Court may impose sanctions upon a party including the striking of a pleading for repeated and willful failure to comply with discovery demands and orders. (See Penafiel v. Puretz, - AD. 3d -, 2004 WL (2 Dept., 2004); and Birch

6 Hil Farm v. Reed, 272 AD. 2d 282 (2 Dept., 2000)), Defendants did not seek such relief. By affidavit of Albert Rabizadeh, Budget's president, and documentary evidence, Budget has established that it sustained nearly $690, in damages as a result of Carl' s misuse and/or misappropriation of Budget's funds. Budget has established that on at least two loans, Carl failed to refund the amount that was overfunded. Budget has also established that Carl failed to pay over to Budget $ on overfunded loans, mortgage insurance premiums and other fees. The Rabizadeh affidavit further asserts that Budget transferred $ to Carl to cover checks he had written on previously funded loans as to which Carl advised Budget that he did not have adequate funds in his escrow account to cover these checks. Budget has also established that on one loan, it issued checks totaling $ directly when Carl failed to issue checks even though the loan had been funded. Finally, the Rabizadeh affidavit avers that Budget issued checks totaling $ when Carl failed to issue checks on funded loans. These allegations, contained in an affidavit made by an individual with personal knowledge of the facts, raise questions of fact sufficient to deny Carl's motion for summary judgment. Plaintiff' s Motion to Stay this Action CPLR 2201 grants the court authority to stay the prosecution of an action under such circumstances and on such terms as the court deems appropriate. Budget claims

7 BUDGET MORTGAGE BANKERS, LTD. v. MAZ that it is appropriate under these circumstances to stay this action pending the final disposition of the criminal matter presently pending against Carl. Ordinarily, the Defendant in the criminal action makes to application for a stay. The basis of such an application is that a party should not be required to waive his or her Fifth Amendment right against self-incrimination in order to defend a civil action. See, DeSiervi v. Liverzani, 136 AD.2d 527 (2 Dept., 1988). However, this is not the only factor to be considered or the only basis for granting a stay. The court should also consider other relevant factors including the risk of inconsistent adjudications and the potential waste of judicial resources. Britt v. International Bus Services. Inc., 255 AD.2d 143 (1 Dept., 1998); and Zonghetti v. Jeromack, 150 AO.2d 561 (2 Dept., 1989). In this case, the Court should also consider the collateral estoppel effect of Carl either pleading guilty or being found guilty after trial. The allegations that give rise to the criminal action are claimed be Carl's misappropriation and misuse of Budget's funds. If Carl were to plead guilty or to be found guilty after trial, he would be collaterally estopped from contesting the facts underlying his conviction in this action. See Schwartz. v. Public Administrator of Bronx County, 24 N. 2d 65 (1969). See also, Sterling Ins. Co. V. Chase, 287 AD.2d 892 (3rd Dept., 2001); and Wagman v. Kandekore, 243 AD.2d 628 (2 Dept., 1997). Finally, in this case, the Court should consider whether Carl will be required to

8 A make restitution if he either pleads guilty or is found guilty after trial. See, Penal Law Under these circumstances, the Court concludes that a stay of the prosecution of this action is appropriate. The granting of a stay wil avoid the possibiliy of irreconcilably inconsistent results. In fact, granting a stay of this action may result in this action never having to proceed to trail. This would certainly save scarce judicial resources. Carl's assertion that Budget lacks standing to move for a stay is without merit. Any party can seek a stay. The decision as to whether to grant the application for the stay is within the sound discretion of the Court. DeSiervi v. Liverzani supra. Carl has not stated that he wil waive his Fifth Amendment privilege when questioned at deposition. Budget should not be required to spend the time or expense necessary to prepare for depositions when faced with the possibilty, if not probabilty, that Carl wil assert his Fifth Amendment right at the deposition. Accordingly, it is ORDERED, that Plaintiff's motion to stay the further prosecution of this action pending the final disposition of the criminal action now pending against Carl is granted; and it is further ORDERED that Defendants' cross-motion for summary judgment is denied; and it is further

9 ORDERED that the attorneys for the parties shall have a telephone conference with the Court on February 11, 2005 at 2: 15 p.m. to advise the Court of the status of the criminal matter. This constitutes the decision and Order of the Dated: Mineola, NY December 14, 2004 Hon. LEONARD B. AUSTIN, J. ENTERED DE _.w.,nr