Court Opinion

ID: 9947043
Source: CourtListenerOpinion
Date Created: 2024-03-01 21:09:10.003347+00
Date Added: 2024-06-11T14:25:45.708539
License: Public Domain

Kahan v 960 Franklin LLC
               2024 NY Slip Op 30615(U)
                   February 27, 2024
             Supreme Court, Kings County
        Docket Number: Index No. 536153/2022
                Judge: Leon Ruchelsman
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                       publication.
  FILED: KINGS COUNTY CLERK 02/27/2024 01:44 PM                        INDEX NO. 536153/2022
  NYSCEF DOC. NO. 206                                            RECEIVED NYSCEF: 02/27/2024

           SUPREME 'coURT OF THE STATE OF NEW YORK
           COUNTY OF KINGS : CIVIL TERM: COMMERCIAL 8
           - --------------~-------- ---------- -----x
           HAIM KAHAN,
                                           Plaintiff,        Decision and :order

                         - against -                     Index No. 53£153/2022

           960 FRANKLIN LLC and DARYL HAGLER,                 February 27, 2024
                                           Defendants,

           PRESENT: HQN. LEON RUCHELSMAN                         Motion Seq. #6

                 The defendants have moved pursuant to CPLR §3212 seeking

           summary jucigernent dismissing the two remaining causes of action

           of the amended complaint.   The plaintiff opposes the motion,

           Papers were submitted by the parties and after reviewing all the

           arguments, this court novi makes the following determination.

                 According to the amended complaint in 2022 non-party Chesky

           Weisz approached the plaintiff to invest in a real estate deal.

           Kahan agreed and wired ten percent of the purchase price, namely

           $4,500,000 on August 9, 2022.    Sometime thereafter the plaintiff

           asserts that Weisz's representations were false and informed the
           defendants and Weisz 1:hat he woulci agree to use tile funds to

           close on the property with the actual seller.     The closing

           occurred on November 2, 2022 wherein 960 Franklin LLC purchased

           the property fqr $42r750~000,
                 On August 10, 2022, prior to the closing, defep:dant Hagler,

           the s.ole owner of defendant 960 Franklin LLC ente.red in:to an.

           assignment agreement with Weis·z whe.re:by 960 .Franklin Owner LL¢,

           an entity owned b:Y Weisz [he.:reinafter the 'Weisz entity'] would

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  FILED: KINGS COUNTY CLERK 02/27/2024 01:44 PM                             INDEX NO. 536153/2022
  NYSCEF DOC. NO. 206                                                 RECEIVED NYSCEF: 02/27/2024

           become the sole owner of 960 Franklin LLC £pr a purchase price of

            $53,500,000.    The assignment was designed to take place in two

           stages.      First, the Weisz entity would provide a down payment of

            $4,500, 000 and acquire a 51% interest in 960 Franklin LLC and the

           balance Of $49,000,000 would be paid at the closing and the Weisz

           entity would then acquire the remaining 49% interest in 960

           Fr.anklin LLC.

                 On November 2, 2022, the day of the closing, the Weisz

           entity filed for bankruptcy.       The petition listed the 51%

           ownership interest in 960 Franklin I..LC as .an asset and based upon

           the assignment agreement the petition listed Hagler as the

           largest creditor with an unsecured claim in the amount of

            $49,000, ODO.   Although the defendants initially opposed the

           bankruptcy petition, on March 14, 2023 the Weisz entity filed a

           plan of· reorganization which defendant Hagler jo:Lned.         The

           reorganization plan was approved whereby this action and the

           plaintiff's claims survived such reorganization.

                   The plaintiff inBt.ituted this lawBui t    and two causes of

           action for unjust enrichment and conversion remain.          The basis

            for those causes of action is the assertion that the plaintiff

            forwarded significant sums of money which have not been accounted

            to. the pla1.ntif:f in any way.   The def19ndants have now Jrtovec:i

            seeking summary judgement dismissing thos.e claims on the g.rounds

            they fail to allege any v,;ilid clcdms ~

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  FILED: KINGS COUNTY CLERK 02/27/2024 01:44 PM                                   INDEX NO. 536153/2022
  NYSCEF DOC. NO. 206                                                     RECEIVED NYSCEF: 02/27/2024

                                        Conclusions of Law

                  Where the matE=:rial facts at issue in a case are in dispute

           summary judgrneht cannot be granted (Zuckerman v. City of New

           York, 49 NYS2d 557, 427 NYS2d 595 [1980]).              Generally, it is for

           the jury, the trier of fact to determine the legal cause of any

           injury, however, where only one bohcli.1sioh may be drawn from the

           facts then the question of legal cause may be decided by the

           trial court as a matter of law (Marino v. Jamison,             189 AD3d 1021,

           136 NYS3d 324 [2d Dept., 202 i) .

                 The elements of a cause of action :to recover for unjust

           enrichmE:.nt are that "(1) the defendant was enriched,           (2)    at the

           plaintiff's expense, and (3) that it is against equity and good

           conscience to permit thE=:- defendant to retain what is sought to be

           recovered" (see, GFRE. Inc., v. U.S. Bank, N.A.,             130 AD3d 569, 13

           NYS3d 4 52 .[2d Dep t . , 2015]
                                        . ). .   Thus, "the· essential inquiry in any

           action for unjust enrichment or restitution is whether it is

           against equity and good conscience to pe:rtnit the defendant              to
           retairt what is soug'ht to be recovered"       (,see,    Paramount Film

           Distributing Corp., 30 NY2d 415, 344 NYS2d 388 [1972]).

                 It is well settled that to establish a claim for conversion

           the party must show the legal right to ah identifiable item or

            items and that the other party ha..s exerc;ised µnauthorized control

            and ownership over the items (Fiorenti v., Central Emergency

            Physicians, PLLC 1 305 AD2d 453, 762.NYS2d 402 [2d Dept,, .2003J).

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  FILED: KINGS COUNTY CLERK 02/27/2024 01:44 PM                            INDEX NO. 536153/2022
  NYSCEF DOC. NO. 206                                                RECEIVED NYSCEF: 02/27/2024

           As the Court of Appeals e:x:plained "a conversion takes place when

           someone, intentionally and without a:uthc:irity, assumes or

           exercises control over personal property belonging to someone

           else, interfering with that person's right of p6ssessi6n ... Two

           key elements of conversion a:re    (1)   plaintiff's possessory right

           or interest in the property ... and (2) defendant's dominion over

           the property or interference with it, in derogation of

           plaintiff's rights" (see, Colavito v. New York Organ Donor

           Network Inc., 8 NY3d 43, 827 NYS2d 96 [2006]).        Therefore, where

           a defendant "interfered with plaintiff's right to. possess the

           property" (Hillcrest Homes,   LLC v.     Albion Mobile Homes, lnc, ., 117

           AD3d 1434, 984 NYS2d 755 [4 th Dept., 2014]) a conversion has

           occurred.

                   In a decision and order dated May 18, 2023 the court denied

           defendant's motion to dismiss these two causes of action.

           Despite the fact no discovery has since taken place this motion

           seeking summary Judgement has been filed "to demonstrate. that the
           two remaining causes of action :for unjust enrichment and

           conversion ... have absolutely no merit" (see, Memorandum 0£ Law in

           Support, Preliminary Statement [NYSCEF Doc. No. 144]'}.         To the

           extent this motion really seeks to- reargue the earlier

           de.termination the court ¼liTl conduct a fresh analysis.
                  An affidavit provided by Hagler iiiuminate.s the

           transaction~ relevant to this action.        Ac:co.rding.to Hagler on

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  FILED: KINGS COUNTY CLERK 02/27/2024 01:44 PM                                                                     INDEX NO. 536153/2022
  NYSCEF DOC. NO. 206                                                                                        RECEIVED NYSCEF: 02/27/2024

           July 19r 2022 Hagler, through hi,;i entity 960 Franklin LLC,

           entered into contracts to purchase two parcels, for $42,350,000

           and $400, ()QQ. respectively and was required to pay two non-

           refundable deposits of $4,235,000 and $40,000 respec:l::.ively.                                                     Of

           course, the plaintiff's funds were not utilized for these

           deposits since the plaintiff did not yet wire any funds.                                                    Hagler

           then assigned his interests to the :WE!isz entity and negotiated an

           extension of the closing date on behalf of the Weisz entity in

           exchange for additional down payments.                                             Hagler states that ''the

           additional deposits were funded by a down payment payable under

           my contract with the Weisz Entity" (see, Affirmation of Daryl

           Hagler, ,s                         [NHYSCEF 116]).                     Thus, ort August 10, 2022 Hagler

           entered into agreements with Weisz wherein Hagler assigned 51%

           percent of his membership interests in 960 Franklin LLC to Weisz.

           Later that day, pur:su.ant to the agreements, the down payments

           required were wired to the escrow a,gent.                                            Indeed, a wire transfer

           was sent by the plaintiff to the escrowee ~gent on AUgust .9, 2022

            (see,   NYSCEF                              Doc .   No .   24 ] ) .    There can be no   d:i_ spu te t h a t the

           plaintiff's funds provided the down payment neqessary for the

           assignment agreement to become effective. transferring 51% of the

           interests of 960 Franklin LLC to the Weisz entity.                                                  However, the

           Weis.z entity failed to effectuate the closing on Nov.ember 2,

           2022.         At that juncture Hagler, through 960 Fra:n.kliri LLC c.losed

           on the prope.i:-tie$ iri. :efforts )'to prevent the ioss of the

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  FILED: KINGS COUNTY CLERK 02/27/2024 01:44 PM                            INDEX NO. 536153/2022
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           Deposits" (see, Affirmation qf Daryl Hagler, 144 [NYSCEF Doc.            No.
           116]).       Jlagler explains that upon the def-ault of the Weisz

           entity, Weisz "automatically forfeited any interest in 960

           Franklin, I was entitled to retain the Down Payment as liquidated

           damages, arid I was expressly permitted to close title under the

           Underlying Sales Contracts and purchase the Property from the

           Underlying Sellers       (through 960 Franklin),; (see, Affirmation of

           Daryl Hagler, '1[43 [NYSCEF Doc. No, 116]).       Thus, Hagler utilized

           Kahari's funds to salvage the deposits made including Hagler's owh

           deposit.       To be sure, had the Weisz entity closed upon the

           properties then Kahan would only have Claims against Weisz.           The

           failure of Weisz to close forced Hagler to so close using Kahan's

           money.       Thus, Kahan surely ha,s claims for unjust enrichment

           against Hagler.

                    Hagler asserts that the plaintiff has no: claims against him

           because "the Weisz Entity is not a party to the Underlying Sales

           Contracts and contracted to purchase all of my Membership

           Interests in 960      Franklin for a purcha.se price in the aggregate

           sum of $53,500,000"       (See, Affirmation bf Daryl Hagler, '1[29

            [NYSCEF Doc. No. 116]).      In other words, the plaintiff cann9t

           assert arty claims against Hagler because the plaintiff's only

           intera<:t.i.ons in .all these transact;ions were with We.i•S.Z and not

           Hagler at all.       While that is surely true, as noted, Hag.ler

           utiii~ed the plaintiff's funds io close upon the prop$rties,

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                    Hagler further argues that the down payment made by Kahan

           was entitled to be retained by Hagler as "liquidated datnages"-

           pursuant the assignment agreement with the- weis:z: entity,              While

           that is true and of course Hagler did not need to know of or

           particularly care about, Kahan's investment, Karyan did invest

           tho·se funds and by the closing date Hagler was aware of that

           investment.        Thus, Hagler has not adequately demonstrated why no

            unjust enrichment claim accrues to Kahan thereby;              Hagler seeks

           to shift the blame to either Kahan himself for failing to engage

           in due diligence or to Weisz for allegedly committing fraud upon

           Kahan.       Even if both those assertions are true that does not

           change the simple reality that Kahan invested funds which were

            used by Hagler to save his down payment and allow the closing to

           occur.

                     This entire motion is rooted in one question, namely

           whether Hagler's right to retain the down payment upon Weisz's

            default necessarily allows Hagler to keep Kaha:n's investment.

            Hagler insists that "the.re was no relationship between" Kahan and

            Hagler, that they \\had no dealings with each other" _and that "960

            Franklin did not do anything to induce Kal1ari to make the Down

            Payment" (see, Memorandum of Law in. Support, pages 14, 15 [NYSCEF

            Doc. No . 14 4 ] ). .   Howev.e r, to. as se r:t an. unjust .enrichment claim

            privity between the parties. is not reqt1ired 9 s long as the
            relationship i's n:ot too attenuated (Mandarim Trading Ltd., v.

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           Wildenstein, 16 NY3d 173, 919 NYS2d 465 [2011]).            That means "the

           parties must have something akin to specific knowledge of one

           another's existence'!    (Bashian   &   Farber LLP v. Syms, 173 AD3d 659,

           102 NYS3d 255   [2d Dept., 2019]).          Although Hagler claims he was

           not aware of the Kahan wire transfer of funds in August 2022 when

           they were first transferred (see, Affirmation-of Daryl_Hagler,

           9133 [NYSCEF Doc. No. 116]), he certainly became aware of I<ahan's
           deposit shortly before the closing when Kahan complained Of

           Weisz's misrepresentations .        Indeed, on octoper 28, 2022 Ka,han

           informed Hagler that he had deposited $4,500,000 with the

           escrowee am:i sought to preserve his rights to purchase the

           property (see, Letter, dated October 28, 2022 [NYSCEF Doc. No.

           22]).    Thus, prior to the closing Hagler was fully aware that

           Kahari had inve·Sted half the total deposit.          Therefore, Hagler

           utilized Kahan'S funds to save his own deposit when Weisz failed

           to close.    It is true that Hagler may not have wanted to close

           and may have claims against Weisz. in this regard, however, it is

           unavoidably true that Hagler used Kahan' s          funds to ·enable him to

           close and avert losing his own deposit.            Whether Hagler's right

            to retain the down-payment as liquidated damages permits Hagler

            to keep Kahart's funds is surely a question about unjust

            enrichment that cannot be decided without any discovery in a

            summary fashion.     Likewise, Hagler was fully aware the funds

            belonged to Kahan.     Whethe.r he believed he had the right to use

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           them or he was manipulated irtto using them: to secure his own four
           million dollar down payment certainly raises questions whether

           any conversion took place.

                   Lastly, the bankruptcy confirmation plan accepted by Hagler

           does not demand a dismissal     of these claims.    Pursuant to the

           reorganization plan of the Weisz bankruptcy, Hagl·er chose to

           regain all the membership interests o.f 960 Franklin LLC and the

           plan administrator assigned Hagler 51% of the membership interest

           of 960 Franklin LLC, previously assigned to Weisz, on May 22,
           2023.    Thus, Hagler insists that 960 Franklin LLC still owns the

           property.     That reality further supports Kahan's claims since, as

           noted, Hagler purchased the property utilizing Kahan's money.

                   Therefore, the rttotiort see.king sutnrnary judgement dismissing

           the conversion and unjust enrichment causes of action is denied.

                   Considering this motion was really a motion to reargue the

           parties, irtcludirtg the defendants may file a motion for summary

           judgement at the conclusion of all discovery.

                   So ordered.

                                             ENTER:

           DATED: February 27, 2024
                  Brooklyn N•. Y,                       Ruchelsman
                                             JSC

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