| Ostad v Nehmadi |
| 2011 NY Slip Op 50565(U) [31 Misc 3d 1211(A)] |
| Decided on April 8, 2011 |
| Supreme Court, New York County |
| Fried, J. |
| Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. |
| This opinion is uncorrected and will not be published in the printed Official Reports. |
David H. Ostad, ,
Plaintiff,
against Behzad Nehmadi, -and- BENITA HOLDINGS, LLC , Defendants. |
In this action by David H. Ostad ("Ostad" or "Plaintiff") to recover a ten
percent interest in certain property, Defendants Behzad Nehmadi ("Nehmadi" or "Defendant")
and Benita Holdings, LLC ("Benita") submitted a Notice of Motion to Vacate and Cancel Notice
of Pendency, together with related relief. In support of their motion, the Defendants argued that
the Plaintiff's Notice of Pendency is improper under CPLR §§ 6501, 6514, and
relevant case law because such Notice is issued when the claim implicates an interest in real
property and the Plaintiff is claiming an interest in property acquired by a corporation for the
benefit of a purported partnership, which constitutes an interest in personal, and not real property.
Ostad's original Verified Complaint alleges that sometime in 2003, Nehmadi
proposed to form an "Enterprise" with the Plaintiff in order to transact in various real estate
ventures, including acquiring real property known as 227 East 45th Street, New York, NY
("Premises") for twenty-five million dollars, with a down payment of four million dollars, to
which Ostad initially contributed four hundred thousand dollars. (Verified Complaint
¶¶ 4, 5, 7). In return for Ostad's investment, Nehmadi allegedly made an oral promise
to grant Ostad a ten percent interest in the Premises. (Id. at ¶ 5). Ostad claims that
he attended the closing of the purchase, when Benita—a limited liability company ("LLC")
which Nehmadi formed for the purpose of acquiring title to the Premises—purchased the
Premises as a constructive trustee for the "Enterprise." (Id. ¶¶ 6, 8). The
parties allegedly agreed, as partners and members of the "Enterprise," that Nehmadi and/or his
management company would manage, operate, and handle all financial affairs with respect to the
Premises. (Id. ¶¶ 9—10).
Throughout the existence of the "Enterprise," Ostad allegedly inquired about, and
demanded financial documents with regard to the operation of the Premises, which Nehmadi
never provided. (Id. ¶¶ 16, 18). During this time, the parties met occasionally
to discuss the status of the Premises, while Nehmadi continued to operate the Premises without
Ostad's involvement. (Id. ¶¶ 11—19). Upon his discovery that
Nehmadi refinanced the property for fifty-five million dollars, Ostad allegedly demanded, and the
Defendants refused, to account for Ostad's ten percent interest in the Premises. (Id.
¶¶ 18—19).
On May 27, 2010, the Ostad filed a complaint against Nehmadi and Benita,
requesting a final accounting of all proceeds generated by the Premises, and the formation of a
constructive trust to be imposed upon the Premises and Benita, such that the Premises are
included in the final accounting. (Id. ¶¶ 23—29). In addition, the
Plaintiff requested a judgment that, inter alia, would establish the rights of the parties,
and determine and partition the assets of the alleged "Enterprise." (Id. at ¶ 29). The
Plaintiff filed a Notice of Pendency with regard to the Premises concurrently with the Summons
and Verified Complaint on the ground that his request for relief implicates a ten percent interest
in the ownership of real property, i.e., the Premises. (See Pl.'sNotice of
Pendency).
The Defendants denied all allegations set forth in the original Verified Complaint,
claiming that Ostad has no legal or equitable interest in Benita or its real estate property, and
moved to vacate and cancel the Notice of Pendency. (See Verified Answer; see
Defs.' Notice of Mot. to Vacate and Cancel Notice of Pendency Together With Related
Relief). The Defendants grounded their request for the cancellation of the Notice of Pendency on
their interpretation of the complaint, which involves a dispute over the Plaintiff's alleged interest
in a partnership, and not in real property. (Verified Answer ¶ 53). According to the
Defendants, the dispute does not affect "title, use or possession of the real property" as required
by CPLR § 6501, but instead involves Ostad's personal interest in a purported partnership.
(Id.). The Defendants further counterclaimed that Ostad's Notice of Pendency will
"adversely impact Benita's property and cause interference with prospective business and
economic relationships," thereby requesting special damages. (Id. ¶¶
54—56). (Thereafter, the Plaintiff filed an amended Verified Complaint, which the
Defendants answered with similar denials and counterclaims.)
While the overarching dispute in this case is whether the Plaintiff is, in fact, entitled
to any interest in the partnership or the Premises, at issue on this motion is the validity of
Plaintiff's Notice of Pendency. Thus, the question is whether the disputed ten percent interest
constitutes an interest in real property or Plaintiff's personal interest in a purported partnership,
which indirectly owns real property of Benita. If the disputed interest is in personal property, the
Notice of Pendency is inappropriate. (See 5303 Realty Corp. v. O & Y Equity Corp., 64
NY2d 313 [1984]; see Yonaty v.
Glauber, 40 AD3d 1193 [3d Dep't 2007]).
[*2]The Scope of Judicial Review as Applied to a
Motion to Cancel and/or Vacate a Notice of Pendency.
Upon a motion for cancellation of a notice of pendency on the ground that the action
is not within the scope of CPLR § 6501, courts confine their review to the face of the
complaint and no inquiry is made into the underlying transaction or the merits of the claim.
(5303 Realty Corp., 64 NY2d at 313). But in reviewing the complaint, courts are not
bound by the labels a plaintiff assigns to his claim or the relief sought. (Yonaty, 40 AD3d
at 1193, 1195). Moreover, the validity of the notice must be determined based on a review of the
original complaint, and defects in the filing of the original notice of pendency cannot be cured
based on the filing of an amended complaint. (See Sherpaco LLC v. Kossi, No.
103875-07, 2010 NY Misc. LEXIS 1322 [NY Sup. Ct. 1st Dep't 2010] [citing Piccirillo v.
Ravenal, 161 AD2d 253 [1st Dep't 1990]]). Thus, the amended Verified Complaint
[FN1] is not relevant to a
determination of the validity of the Notice, and my review is circumscribed to the allegations set
out in the Plaintiff's original Verified Complaint.
It is also noteworthy that the Plaintiff's likelihood of success on the merits is
irrelevant to the determination of the validity of the Notice of Pendency. (See Richard J.
Zintz, Inc. v. Pereira, 965 F. Supp. 350 [1997]). As such, the Notice of Pendency must be
vacated where the original complaint fails to comply with CPLR § 6501 requirements. (See Nastasi v. Nastasi, 26 AD3d
32, 36 [2d Dep't 2005]; see CPLR § 6501).
Notice of Pendency is Proper Only With Respect to a Direct Claim on Real
Property.
Generally, a notice of pendency may be filed under CPLR § 6501, in any
action in which the judgment demanded "would affect the title to, or the possession, use or
enjoyment of real property." (CPLR § 6501). The New York Court of Appeals has insisted
upon strict compliance with the procedural requirements of CPLR § 6501 and has narrowly
interpreted the type of action in which a notice of pendency may be used. (See 5303 Realty
Corp., supra.).In Diaz v. Paterson, the federal court, citing New York law observed
that in order to file a notice of pendency, the plaintiff usually must have a direct, pre-existing
claim to the property itself and not merely a transitory claim. (547 F.3d 88 [2d Cir. 2008],
cert. denied, No. 08—890, _U.S._ , 129 S.Ct. 2789 [2009] [mem.]; see also
Braunston v. Anchorage Woods, Inc., 10 NY2d 302 [1961] [holding that a notice of
pendency may be filed only in actions implicating recording act principles, that is, in situations
where plaintiff's right, title, or interest in defendant's land might be lost as a result of a transfer of
the property to a purchaser for value who lacks notice of plaintiff's claim]). The basic test is
whether the pleading on its face directly affects the necessary interest in the land and notice of
pendency is improper if the relationship of action to realty is only indirect. (Shihab v.
215—217 West 10th St. Assoc., 506 N.Y.S.2d 651 [1986]; CPLR § 6501).
Consequently, New York courts have confined the notice of pendency to cases in which the
plaintiff claims a direct interest in the defendant's real property and actions asserting an interest
in personal property do not fall within the scope of CPLR § 6501. (See 5303 Realty
Corp., 64 NY2d at 321; cf. Savasta v. Duffy, 683 257 AD3d 435, [1st Dep't 1999]
[holding that notice of pendency is improper in an action arising from a dispute over ownership
of stock in a cooperative apartment because such claim represented an interest in personal
property]).
The "direct relationship" requirement has been most commonly applied in actions
concerning the transfer of certain personal property which represents a beneficial ownership of
realty. (5303 Realty Corp., 65 NY2d at 323).For example, courts have generally declined
to permit a notice of pendency in situations where the "transaction was for a sale of stock in a
corporation whose sole or primary asset was real estate." (Id.) In this vein, notices of
pendency may not be used [*3]in actions where the relief sought
is a declaration of ownership in a corporation, "even where the sole corporate asset is real
property." (Schlesinger v. Schlesinger, No. 27246/00, 2002 WL 221100, at *10 [NY Sup.
Ct. 2002] [citing 5303 Realty Corp., supra]). Similarly, notices of pendency were found
invalid in actions involving a claimed interest in a partnership dealing in real property, as such
interest was deemed to constitute a personality. (Liffiton v. DiBlasi, 170 AD2d 994, 995
[4th Dep't 1991]; Walsh v. Rechler, 151 AD2d 473 [2d Dep't 1989]; Johnson v.
Johnson, 111 AD2d 1005, 1006 [3d Dep't 1985]; Elias v. Serota, 103 AD2d 410 [2d
Dep't 1984]; Mattikow v. Sudarsky, 248 NY 404, 406-407 [1928]; Fairchild v.
Fairchild, 64 NY 471 [1876]). Thus, in order to ascertain whether the Notice of Pendency is
appropriate in this case, the complaint must be examined in its entirety. (5303 Realty
Corp., 64 NY2d at 323).
The Meaning of "Enterprise" With Respect to Plaintiff's Claim on the Premises.
Neither party disputes that Benita legally owns the Premises. In fact, the Plaintiff
did not allege that he had ever acquired any interest of record in the Premises.[FN2] In his complaint, the Plaintiff
plainly stated that Nehmadi "formed Benita for the purpose of acquiring title to the premises
on behalf of the Enterprise." (Verified Compl. ¶ 5) (emphasis added). In
this regard, Ostad claimed that the parties "have acted as partners and joint venturers in various
real estate transactions," and that sometime in 2003, Nehmadi proposed to form the "Enterprise"
with the Plaintiff in order to acquire the Premises. (Verified Compl. ¶¶ 4—5).
Nevertheless, the Plaintiff urges that he never claimed to have an ownership interest in a
partnership, corporation or any other business entity, and instead seeks to protect his alleged ten
percent interest in the Premises via a constructive trust. (Verified Compl. ¶¶
28—29; Pl.'s Affirmation in Opp'n ¶¶ 7—8). The Plaintiff asserts that
Benita acquired the Premises as a trustee for the "Enterprise," yet claims to have a direct interest
in the property, disregarding the existence of the amorphous "Enterprise" entity. As stated above,
my review is limited to the face of the Plaintiff's original complaint, which indeed begins by
describing Ostad and Nehmadi's ventures as partners in various real estate deals and their
subsequent formation of the "Enterprise" for similar purposes. (Verified Compl. ¶¶ 4,
5). A closer reading of the complaint reveals that such language alleges the existence of a
partnership or quasi-partnership arrangement between Ostad and Nehmadi, which the Plaintiff
labels "Enterprise." Thus, in order to determine the validity of the Notice of Pendency, it is
necessary to ascertain the true nature of the transaction (Oppenheim v. Pemberton, 164
AD2d 430, 432 [N.Y.A.D. 1990]) and the meaning of "Enterprise."
Whether a partnership exists is a question of fact (Olson v. Smithtown Medical
Specialists, P.S., 197 AD2d 564 [2d Dep't 1993]). A partnership has been defined as "an
association of two or more persons to carry on as co-owners of a business for profit . . . ."
(Partnership Law § 10(1); Sherpaco LLC, 2010 NY Misc. LEXIS, at
*11—14; see also Prince v. O'Brien, 234 AD2d 12 [1st Dep't 1996] ["[a]n oral
agreement to form a partnership for an indefinite period creates a partnership at will"]. While no
individual trait is determinative of partnership's existence, factors to consider are [*4]the sharing of profits and losses, parties' intentions, ownership of
the assets, joint control, management, and liability to creditors, compensation, contribution of
capital and loans to the entity; and an equal sharing of profits, losses and control is not required.
(Richbell Information Services, Inc. v. Jupiter Partners, L.P., 309 AD2d 288,
298—299 [1st Dep't 2003]; Brodsky v. Stadlen, 138 AD2d 662, 663 [2d Dep't
1988]; Sherpaco LLC, 2010 NY Misc. LEXIS, at *11).
In a similar vein, a joint venture is generally a business undertaking by two or more
parties engaged in a single project. (Forman v. Lumm, 214 A.D. 579 [1st Dept. 1925]
[holding that a joint venture is "an association of two or more persons to carry out a single
business enterprise for profit, for which purpose they combine their property, money, effects,
skill, and knowledge"];Black's Law Dictionary [9th ed. 2009]). Although the mere purchase of
something by two or more persons does not constitute a joint business or partnership, "the
sharing of profits is a basal ingredient of a joint venture." (Mariani v. Summers, 52
N.Y.S.2d 750, 754 [NY Sup. 1944], aff'd 56 N.Y.S.2d 537 [1st Dep't 1945] [noting that
an agreement to share losses is not indispensable to the existence of a joint venture]). Moreover,
a joint venture may exist for a limited purpose, such as dealings in real estate. (See, e.g.,
Barash, 271 AD2d at 558).
The characteristics that the Plaintiff attributes to the "Enterprise" relate to an entity
not unlike a partnership or a joint venture. (See, e.g., Verified Compl. ¶ 11 ("[t]he
Plaintiff placed his trust in Nehmadi as partner and member of the Enterprise and permitted
Nehmadi to have sole control of the operation and maintenance of the Premises on behalf of the
Enterprise"). The Plaintiff's allegations are not contrary to this notion, as he asserts the existence
of an agreement between himself and Nehmadi to create a real estate-dealing
entity—which he labels "Enterprise"—to "buy the building." (Hr'g Tr.
10:13—10:22, Feb. 14, 2011). The Plaintiff essentially grounds his entire argument to
enforce the Notice of Pendency in ¶ 5 of the complaint, insisting that Nehmadi promised
him a ten percent interest in the Premises. (Id. 8:11—8:12). However, the
remaining portion of the complaint clearly states that the Plaintiff and Nehmadi acted as
members of the "Enterprise," and that the Premises were acquired by Benita on behalf of the
"Enterprise." (See generally Verified Compl.) Thus, assuming that the complaint avers
the existence of a partnership or quasi-partnership entity, the question turns on whether a
partner's or a venturer's claim on the real estate owned by such entity constitutes personal
property, which falls outside the scope of CPLR § 6501. The affirmative answer is found in
the decisions of numerous New York cases discussed below.
When real estate is purchased by a partnership entity, it becomes partnership
property, which constitutes personality. (Mattikow, 248 NY at 406). And a notice of
pendency is "inappropriate where the claimed interest is in a partnership that deals in realty, since
such an interest constitutes personality." (Sherpaco LLC, 2010 NY Misc. LEXIS, at *27;
Liffiton v. Di Blasi, 170 AD2d at 994—95). In other words, an action to enforce a
claim pertaining to a partner's interest in real property cannot support a notice of pendency.
(General Property Corp. v. Diamond, 29 AD2d 173 [1st Dep't 1968]). Likewise, real
estate bought pursuant to an oral agreement to form a joint venture to deal in real estate will be
regarded as personal property, held in trust by the purchaser as trustee. (Barash, 271
AD2d at 558 [holding that an oral agreement to form a partnership or a joint venture to deal in
real property is not subject to statute of frauds, because the interest of each partner or joint
venturer is a personality]; Elias v. Serota, 103 AD2d 410 [2d Dep't 1984]).
The complaint does not allege that Benita holds title to the Premises on behalf of the
Plaintiff; it instead states that the title is held on behalf of the "Enterprise." (Verified Compl.
¶ 6). In this vein, the Plaintiff's investment appeared as a contribution to the purported
"Enterprise" for [*5]the purpose of purchasing and sharing in the
profits of the real estate indirectly owned by the "Enterprise." (See Verified Compl.
¶¶ 15—17 [stating that Nehmadi managed and operated the Premises on behalf
of the "Enterprise" and alluding to the Plaintiff's expectation to receive profits from the
"Enterprise"]). This contribution gives rise to the Plaintiff's personal interest in the "Enterprise,"
but does not provide grounds upon which a notice of pendency may be filed. Thus, while the
Plaintiff seeks relief in form of a declaration that he had acquired an interest in the subject real
property, in examining the entire complaint to determine the true nature of the action, it is
apparent that the Plaintiff's cause of action is grounded in an alleged interest in a partnership or
joint venture which transacted in the subject real estate.
Because the Plaintiff's interest in the Premises derives from his interest in the
"Enterprise," Ostad has no interest in the specific property of the LLC and his purported interest
in Benita constitutes personality. (Limited Liability Company Law § 601). It has been held
that where an action involves a shareholder's rights in a corporation whose sole asset is real
property, such action does not "directly affect the title to [the] real property." (Piccirillo,
161 AD2d at 254; 5303 Realty Corp., 64 NY2d at 323 [citing Brock v. Poor, 216
NY 387, 401 [1915]] [emphasizing, "it is well settled that the property interest of a shareholder
and the corporation are distinct" and even complete ownership of stock would not transfer the
title to corporate property]). Accordingly, such action does not support the filing of a notice of
pendency. (Piccirillo, 161 AD2d at 254). In the present case, the Plaintiff's claim on the
Premises appears to be merely transitory and would not necessarily "affect title to, or the
possession, use or enjoyment of, real property" as required by CPLR § 6501. (CPLR §
6501).
Constructive Trust Issue.
To further support his Notice of Pendency, the Plaintiff
claims that his request to impose a constructive trust on the Premises, establishes a basis for the
proper filing of the Notice.[FN3] (Pl.'s Affirmation in Opp'n ¶¶ 24,
28). It is true that certain actions seeking to impose a constructive trust on real property have
been deemed to affect title to real property. (Shlesinger v. Schlesinger, 2002 WL 221100
[NY Sup. Ct. 2002]). However, courts applying New York law have held that the requirements of
CPLR § 6501 may be satisfied if a cause of action involves the imposition
of a constructive trust on real property and the judgment demanded will "affect
the title to, or the possession, use or enjoyment of real property." (CPLR § 6501; Sierra
Rutile Ltd. ("SRL") v. Katz, 1992 WL 42242 [S.D.NY 1992]; Morice v. Garritano,
No. 33873/07, 2009 N.Y.App.Div. LEXIS 4754, at *1—2 [2d Dep't 2009]). In this
vein, the analysis again turns to whether the essence of the Plaintiff's cause of action entails such
direct claim on the Premises.
For example, in Weingarten v. Minskoff, the court declined to dismiss a
notice of pendency, [*6]holding that the plaintiff alleged an
"entitlement to one-third interest in real property and sought to specifically enforce his claim in
the property." (198 N.Y.S. 691 [1st Dept., 1923]). However, unlike the present case,
Weingarten involved a written contract between the plaintiff and the defendant for the
purchase of the real property in their names jointly and when the title to
property was taken by corporation, it violated the agreement of the joint venture made by the
parties therein. (Id. [emphasis added]). Here, the Premises were purchased by Benita,
with no mention of the Plaintiff's name in the deed.
The Plaintiff relies on a number of New York cases in support of his claim that a
request to impose a constructive trust on real property will somehow validate the Notice of
Pendency. However, all those cases involved a judgment directly affecting the title, possession,
use, or enjoyment of real property, and/or fraudulent transfers of such property to third parties.
For instance, Katz involved an alleged breach of a written, exclusive agency agreement,
where the defendants acted as principles rather than agents of SRL and used
fraudulently-obtained funds to purchase and/or maintain real (and other) property, which they
also held as trustees for the plaintiff's benefit. (See Katz, 1992 WL 42242, supra).
The Plaintiff also mistakenly relies on Klein v. Gutman for the proposition that because
the complaint sought, in part, to impose a constructive trust on the property at issue, it was proper
to impose a notice of pendency (see Pl.'s Affirmation in Opp'n ¶ 23; Klein,
12 AD3d 348 [2d Dep't 2004]). In Klein, the notice of pendency was sustained with
respect to a partner's action to impose a constructive trust on partnership's real property because
the facts of the case involved an allegedly forged and fraudulent transfer of the subject property
to a third party, thereby depriving the plaintiff of his fifty percent interest in the property.
(Klein, 12 AD3d at 350). No such fraudulent transfer is alleged here; the Plaintiff merely
seeks to prove the existence of his ten percent interest in the "Enterprise" which indirectly owns
real property.
Similarly, in Nastasi, the cause of action involved plaintiff's alleged transfer
of real property to the defendant in reliance on an agreement to pay the plaintiff an annuity. (26
AD3d at 32). The Nastasi court held that such action was sufficient to impose a
constructive trust on the real property at issue. (Id.). Again, the factual landscape of that
case involved plaintiff's direct ownership of the subject real property (and a written agreement
conveying such property to the plaintiff), where, upon the plaintiff's purported "exchange" of the
real property for the annuity, no annuity payments were made to the plaintiff by the defendants.
(See id.). To reiterate, transfers of real property, such as those implicated in these
decisions—and which justify the imposition of constructive trusts and notices of pendency
filed in connection with the underlying real property—are not present here.
Other New York cases support the rule that a cause of action to impose a
constructive trust on real property will not alone permit the filing of a notice of pendency if the
alleged claim does not have a direct relationship to the subject real property. In Maiorino v.
Galindo, the court struck down a notice of pendency in an action alleging improper diversion
of corporate assets to improve certain real property. (65 AD3d at 525). While one of the
plaintiff's requests for relief involved the imposition of constructive trust on underlying real
property, the court held that the complaint did not adequately plead a cause of action to impose a
constructive trust on the real property in question because the plaintiff had no preexisting interest
in the subject real property. (Id.).
In Yonaty, the court denied a notice of pendency motion because it found
that the true action behind the plaintiff's request to impose a constructive trust on certain real
property was "to enforce defendants' promise to give the plaintiff a 20% interest in the
LLC which acquired the property, not an ownership interest in the real
property itself." (Yonaty, 40 AD3d at 1194 [emphasis in original]). There, the plaintiff
asserted that the defendants breached various oral contracts involving plaintiff's [*7]assistance in acquiring development rights to the real property in
return for a 20% interest in the LLC that would take title to the property and a construction
management fee. (Id. at 1194). The plaintiff sought, inter alia declaratory relief,
an accounting, and imposition of a constructive trust on the subject property. (Id.) The
Yonaty court held that, "while the plaintiff seeks imposition of a constructive trust on real
property," the plaintiff never claimed to have an interest in the real property itself and asserted
only an interest in the LLC which acquired the subject real estate. (Id. at 1195). Such
claim implicated a membership interest in the LLC, which is personal property, "and an LLC
member has no interest in specific property of the LLC." (Id. [quoting Limited Liability
Company Law § 601]). The Yonaty court also pointed out that a realty-owning
corporation, such as an LLC, itself owns its assets, and a shareholder merely owns an interest in
the corporation, and does not have a direct claim on its real property. (Yonaty, 40 AD3d
at 1195; see also 5303 Realty Corp. 64 NY2d at 323). Thus, in Yonaty, thecourt
looked past the labels assigned to the plaintiff's causes of action and the relief sought, and
ascertained that the pleadings did not support the notices of pendency. (Yonaty, 40 AD3d
at 1195).
The Defendants correctly assert that while the Plaintiff seeks to impose a
constructive trust, "the res of the trust remains a partnership interest." (Reply in Further
Supp. 1). Like in Yonaty, the true action behind the Plaintiff's request to impose a
constructive trust on the Premises was to enforce Nehmadi's oral promise to share with the
Plaintiff all income and profits generated by the partnership-like entity in which he had invested.
That the Plaintiff alleged a constructive trust over the proceeds of the Premises (see Hr'g
Tr. 6:7—6:12, Feb. 14, 2011) is not by itself enough to convert his claim into one which
complies with the necessary requirements of CPLR § 6501.[FN4] While the Plaintiff claims that he is entitled to
his ten percent interest in the Premises, the true nature of the transaction is reflected in Benita's
legal purchase of the Premises, on behalf of a partnership entity formed by both Ostad and
Nehmadi. It is true that unlike the facts in 5303 Realty Corp., the Plaintiff's request for
relief did not assert ownership of stock in the LLC. (See 5303 Realty Corp., 64 NY2d at
323). But the transaction was structured similarly, such that the Plaintiff did not invest in the
realty itself, but instead invested in a partnership entity dealing in realty, which purchased the
Premises through Benita. New York courts have held that such action does not "directly affect
title to or the possession, use or enjoyment of real property." (Yonaty, 40 AD3d at 1195;
5303 Realty Corp., 64 NY2d at 323).
In conclusion, the objective of filing a Notice of Pendency is to protect "some right,
title or interest claimed by a plaintiff in the lands of a defendant, which might be lost under the
recordings acts in the event of a transfer . . . ." (Braunson v. Anchorage Woods, 10 NY2d
302, 305 [1961]). Such objective is lost in the present action because the Plaintiff does not have a
direct claim on the real property at issue. Thus, the Notice of Pendency would serve little purpose
for the Plaintiff, because even if Nehmadi were to effect a sale of the Premises through Benita,
the Plaintiff is not without relief and is entitled to vindicate his alleged rights to "all rents, profits,
mortgage proceeds and other income generated by the Premises" through dissolution and
accounting, as he has requested in his cause of action. (Verified Compl. ¶¶
23—25).
The Defendants are not Entitled to Damages for a Cancelled Notice of Pendency
Under CPLR §§ [*8]6514(b) and (c).
The Defendants claim that they are entitled to an award of the costs incurred by
filing their motion, as is generally permitted by CPLR § 6514(c). (CPLR §6514 (c)).
But moving to vacate and moving to cancel a notice of pendency are two different concepts in
New York. (Id; In re Murphy, 331 B.R. 107 [Bkrtcy. S.D.NY 2005]). A motion to
vacate seeks to vacate a notice of pendency because CPLR § 6501 requirements for
issuance of the notice were not met, whereas a motion to cancel a notice of pendency seeks to do
so for one of the enumerated reasons in the statute. (In re Murphy, 331 B.R. 107;
Richard J. Zitz, Inc. v. Pereira, 965 F.Supp. 350 [E.D.NY 1997]).
CPLR § 6514 (a) permits the court to cancel a notice of pendency for
procedural reasons, such as untimely service of process and CPLR § 6514 (b) gives the
court discretion, upon a motion by order to show cause, to cancel a notice of pendency if "the
plaintiff has not commenced or prosecuted the action in good faith," which the courts have most
often applied to cases involving plaintiff's unreasonable delay of the action. (CPLR §§
6514(a), (b); see, e.g., 551 West Chelsea Partners LLC v. 556 Holding LLC, 40 AD3d [1st Dep't
2007] ("the party seeking to cancel a notice of pendency must demonstrate plaintiff has not
commenced or prosecuted the action in good faith, a burden which is not easily met . . . ."); see
also Williams v. Harrington, 628 N.Y.S.2d 842 [3d Dept., 1995]).
Applying these principles, neither CPLR §6514 (a) nor (b) are applicable to the
Defendants' request for cancellation of the Notice of Pendency. Furthermore, during the parties'
oral argument, the Defendants eschewed their motion to cancel under CPLR § 6514, instead
proceeding under CPLR § 6501 to vacate the Notice of Pendency (Hr'g Tr.
5:5—5:14, Feb. 14, 2011). Accordingly, it is hereby
ORDERED that the motion to vacate the notice of pendency in this action is granted,
and the County Clerk is directed upon service of a copy of this order with notice of entry, to
vacate that notice of pendency; and it is further
ORDERED that the branch of the plaintiff's motion which seeks to cancel the notice
of pendency with costs is denied.Dated:
ENTER:
_____________________
J.S.C.