FILED: NEW YORK COUNTY CLERK 09/01/2015 10:51 AM INDEX NO. 651899/2015 NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 09/01/2015 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK -----------------------------------------------------------------------x HERCULES KONTOS, THERESE KONTOS, Index No.:651899/2015 Plaintiffs, -against- AFFIRMATION IN REPLY 278 WEST 11, LLC, GEORGE AGIOVLASITIS, Defendants. -----------------------------------------------------------------------x 1. Plaintiffs HERCULES KONTOS and THERESE KONTOS ( Plaintiffs ) submit this affirmation in further support of their order to show cause seeking: (a) a temporary restraining order; (b) a preliminary injunction pursuant to protect its rights and maintain the status quo; and (c) an order of attachment. 2. Defendants, in their opposition, rely heavily on the holding in Credit Agricole Indosuez v. Rossinsky Kredit Bank, 94 N.Y.2d 541 (2000), and its progeny, but in Credit Agricole, the Court of Appeals confirmed the basic principle that a preliminary injunction may be appropriate to safeguard a potential judgment involving specific assets that are the subject of the action, while finding that principle not implicated in that case Id. at 548. There, the plaintiff primarily sought damages-repayment of an unsecured loan-and sought an injunction only to prevent the defendant from dissipating assets that might otherwise be used to repay the loan. Id. at 544-45, 548. The Court of Appeals rejected a preliminary injunction there because a general creditor has no legally recognized interest in or right to interfere with the use of the unencumbered property of a debtor prior to obtaining 1
judgment. Id. at 549. That proposition, however, is simply not relevant to this case. 3. The Credit Agricole court made clear that preliminary injunctive relief may be granted where a plaintiff has a legally protected interest in a res that is the subject of the action, which, in some circumstances, can be a fund of money. Id. Neither Credit Agricole, nor the U.S. Supreme Court decision it relied upon, Grupo Mexicano de Dessarollo, S.A. v. Aliance Bond Fund, Inc., 527 U.S. 308 (1999), stand for the proposition that a court in this state cannot issue an injunction to preserve the status quo by ordering a party, in personam, not to disperse a fund that is the subject matter of the suit. In Grupo Mexicano, for example, the issue was whether in an action for money damages, a court of this state (there, a federal court sitting in diversity, and thus bound by New York law), has the power to issue a preliminary injunction preventing the defendant from transferring assets in which no lien or equitable interest is claimed. Grupo Mexicano, 527 U.S. at 310. There, the District Court, finding that defendant Grupo Mexicano had defaulted on a note, based its injunction solely on the fact that the company's liabilities exceeded its assets, and it issued a general order restraining the defendant from transferring any assets, irrespective of whether they were related to the underlying cause of action. The Supreme Court merely held that New York law does not permit such an order. That is inapposite here, where Plaintiffs do claim an equitable interest in the funds sought to be restrained. 4. Similarly, in Credit Agricole, where the plaintiffs sued defendants to recover under certain debentures, the plaintiffs moved for a temporary injunction against the defendants' general assets claiming that they were entitled to injunctive relief to protect their expected money judgment. 94 N.Y.2d 541, 544. In overturning the trial court's grant of injunctive relief, 2
the Court of Appeals noted that the plaintiffs had no rights against the general property of the defendants that the injunction restrained and that defendants' general assets were not the subject matter of the suit, as required by the specific language of C.P.L.R. 6301. Id. at 547-48. That is not the case here. 5. Defendants would have the Court ignore the express language of C.P.L.R. 6301 by characterizing the requested relief as an attachment of Defendants' general assets. But Plaintiffs are not seeking a money judgment, nor do they attempt to restrain Defendants' spending of his own, actual, personal assets. Instead, the Complaint merely asks this Court for a declaration of Plaintiffs' rights under the May 21, 2011 Agreement, fitting squarely into the recognition in Credit Agricole that injunctive relief is appropriate... [where] the suit involves claims of the plaintiff to a specific fund. Id. at 548. Defendants should not be permitted to decide how the sale proceeds should be distributed before this litigation is resolved, thereby rendering any ultimate judgment by this Court illusory. 6. Defendants also asserts that Plaintiffs' fail to sustain their burden of demonstrating irreparable harm, however Defendants fail to recognize that the sole asset of the corporate defendant has already been dissipated and without these monies, the corporation is left insolvent and therefore any judgment granted against it will be illusory. By allowing these funds to be released, the court is essentially saying that Plaintiffs should hope that the individual defendant has enough money to cover any potential judgment against him. Should he fail to have these monies Plaintiffs will be left without a remedy. 7. Similarly should the 1031 Exchange be allowed to go forward and defendant allowed to purchase a new property, Plaintiffs would then be faced with the task of having to unravel 3
a purchase to a bona fide purchaser, or evict tenants or any number of complications that could arise. 8. Defendants also ignore the undisputed fact that Defendants have refused to hold the sale proceeds in escrow until the litigation is resolved. Given that affirming Plaintiffs' rights to those proceeds is the only relief sought in this action, there can be no other conclusion reached other than that absent injunctive relief, the subject matter of this action will no longer exist and the Court will be unable to render justice if it finds in Plaintiffs' favor. 9. Moreover, Plaintiffs have demonstrated a reasonable probability of success on the merits, all that is required for the issuance of a preliminary injunction to maintain the status quo. See Bingham III v. Struve, 184 A.D.2d 85, 88 (1st Dep't 1992); Weissman v. Kubasek, 112 A.D.2d 1086, 1086 (2d Dep't 1985). 10. Plaintiffs have clearly and unequivocally shown that Defendants breached the May 11, 2011, contract and that Plaintiffs were forced to sign a release to get their money. Plaintiffs have shown that Defendants took advantage of Therese Kontos terminal condition by forcing her to accept new terms and giving Plaintiffs no other choice. 11. With respect to the release, Defendants reliance on Centro Empresarial Cempresa S.A. v. Am. Movil, S.A.B. de C.V., 17 N.Y.3d 269, 276, 952 N.E.2d 995, 1000 (2011) is partially correct. In that case, the court held that A release may be invalidated for any of the traditional bases for setting aside written agreements, namely, duress, illegality, fraud, or mutual mistake Id. Although a defendant has the initial burden of establishing that it has been released from any claims, a signed release shifts the burden of going forward... to the [plaintiff] to show that there has been fraud, duress or some other fact which will be 4
sufficient to void the release Id. citing Fleming v. Ponziani, 24 N.Y.2d 105, 111, 247 N.E.2d 114 [1969]). 12. However, the Centro Empresarial case is not the controlling case in this instance, as the Plaintiffs in that case were seeking to invalidate the release based on fraud, whereas here the underlying basis is economic duress as discussed in Austin Instrument, Inc. v. Loral Corp., 29 N.Y.2d 124, 130-31, 272 N.E.2d 533, 535 (1971). In that case, a Navy contractor refused to deliver goods unless the purchaser agreed to a price increase. The Court of Appeals held: The applicable law is clear and, indeed, is not disputed by the parties. A contract is voidable on the ground of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his free will. (See Allstate Med. Labs., Inc. v. Blaivas, 20 N.Y.2d 654, 282 N.Y.S.2d 268, 229 N.E.2d 50; Kazaras v. Manufacturers Trust Co., 4 N.Y.2d 930, 175 N.Y.S.2d 172, 151 N.E.2d 356; Adams v. Irving Nat. Bank, 116 N.Y. 606, 611, 23 N.E. 7, 9; see, also, 13 Williston, Contracts (3d ed., 1970), s 1603, p. 658.) The existence of economic duress or business compulsion is demonstrated by proof that immediate possession of needful goods is threatened (Mercury Mach. Importing Corp. v. City of New York, 3 N.Y.2d 418, 425, 165 N.Y.S.2d 517, 520, 144 N.E.2d 400) or, more particularly, in cases such as the one before us, by proof that one party to a contract has threatened to breach the agreement by withholding goods unless the other party agrees to some further demand. (See, e.g., Du Pont de Nemours & Co. v. J. I. Hass Co., 303 N.Y. 785, 103 N.E.2d 896; Gallagher Switchboard Corp. v. Heckler Elec. Co., 36 Misc.2d 225, 232 N.Y.S.2d 590; see, also, 13 Williston, Contracts (3d ed., 1970), s 1617, p. 705.) However, a mere threat by one party to breach the contract by not delivering the required items, though wrongful, does not in itself constitute economic duress. It must also appear that the threatened party could not obtain the goods from another source of supply and that the ordinary remedy of an action for breach of contract would not be adequate. 13. Id. at 130-31. The facts of the instant case fall squarely within this rubric. Agio s threats, 5
which he does not deny making, (Agiovlasitis Aff. 18) to withhold the sale of the property precluded Plaintiffs exercise of their free will to collect the monies that were due them from the proceeds. Agio threatened to withhold these proceeds unless and until Plaintiffs signed the release. Clearly, Plaintiffs could not turn to any other source to remedy the situation nor could they have sued for breach of contract, because as Agio points out in his affidavit, he was not required to sell the property. 14. Even a cursory reading of Agio s affidavit shows that his intent was clear. He was looking to recoup the expenses incurred by the renovation of the townhouse from the Plaintiffs. 15. It should be noted that Agio does not submit a single shred of documentary evidence to support his position that this money is going towards the payment of taxes. Despite the presence of calculations in his documents, there is no proof that Agio ever paid one dime in taxes with this money. Furthermore, Agio s claim that the money due to Plaintiffs, which he wrongly withheld, was to go toward paying taxes is contradictory. The Defendant has already admitted that the money is being used as part of an Internal Revenue Code 1031 exchange in order to avoid paying taxes on the sale proceeds. 16. Therefore, Agio is in violation off the Profit Splitting Provisions of the Purchase Money Loan, and the provisions of the Payoff Agreement which provide that the wrongly withheld sums be used to pay NYC transfer taxes and other taxes only. The Payoff Agreement does not provide that the Plaintiff be required to contribute to Agio s new purchase. 17. Due to Agio s violation of the agreements between the parties, the Plaintiffs has shown a likelihood of success on the merits, and therefore their request for a preliminary injunction should be granted. 6
18. For the reasons set forth above, Plaintiffs respectfully requests that the Court enter an Order enjoining New York Deferred Exchange Corporation and/or Astoria Bank from releasing the disputed funds. 8/31/2015 Dated: South Salem, NY MARGARITA RUBIN, ESQ. Rubin & Rubin, P.C. Attorneys for the Plaintiffs 212 Elmwood Road South Salem, NY 10590 (347) 68-RUBIN 7