Court Opinion

ID: 9966029
Source: CourtListenerOpinion
Date Created: 2024-05-03 20:09:48.699936+00
Date Added: 2024-06-11T08:24:49.180314
License: Public Domain

Schultz v Martinez
               2024 NY Slip Op 31542(U)
                     April 30, 2024
           Supreme Court, New York County
        Docket Number: Index No. 655430/2023
                  Judge: Joel M. Cohen
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, including the New
  York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
                                                                                                                        INDEX NO. 655430/2023
  NYSCEF DOC. NO. 16                                                                                              RECEIVED NYSCEF: 04/30/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 03M
            ----------------------------------------------------------------------------------- X

             HARVEY SCHULTZ, ANDREA SCHULTZ, SASHA                                                  INDEX NO.         655430/2023
             TEHRANI,

                                                          Plaintiffs,                               MOTION DATE        02/29/2024

                                                - V -                                               MOTION SEQ. NO.        001
             ANTHONY R. MARTINEZ, NOKAMA EQUITIES, LLC,
                                                                                                     DECISION+ ORDER ON
                                                          Defendants.                                      MOTION

            ----------------------------------------------------------------------------------- X

            HON. JOEL M. COHEN:

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 7, 8, 9, 10, 11, 12,
            13, 14, 15
            were read on this motion for                                                  DEFAULT JUDGMENT

                      Plaintiffs Harvey Schultz, Andrea Schultz and Sasha Tehrani ("Plaintiffs"), move for an

            Order pursuant to CPLR 3215 for entry of a default judgment against Defendant Nokama

            Equities, LLC (the "Company") and Anthony Martinez (collectively, "Defendants") on liability

            for the relief demanded in Plaintiffs' Complaint dated October 31, 2023, and setting an inquest to

            determine damages.

                      According to the Complaint, Mr. Martinez induced Plaintiffs to invest approximately

            $520,000 with the Company, by promising Plaintiffs that the Company would sell its real estate

            interests and that Plaintiffs' investment would be liquidated in a five-to-seven-year time frame

            (NYSCEF 1 ,J,J2-6). When Mr. Martinez failed to sell the real estate interests, Plaintiffs sought

            dissolution of the Company. Mr. Martinez vigorously opposed the claim, and the court found

            that Mr. Martinez could and would "carry on the business in accordance with the ... Operating

            Agreement." (id. at ,J,J9-12). Thereafter on March 7, 2019, Plaintiffs withdrew as members of

             655430/2023 SCHULTZ, HARVEY ET AL vs. MARTINEZ, ANTHONY R. ET AL                                           Page 1 of 5
             Motion No. 001

                                                                            1 of 5
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                                                                                                  INDEX NO. 655430/2023
  NYSCEF DOC. NO. 16                                                                      RECEIVED NYSCEF: 04/30/2024

            the Company, triggering their right "to an amount equal to the value of the Member's

            Membership Interest in the Company, to be paid over a period not to exceed five years together

            with interest" pursuant to the express terms of the Company's Operating Agreement (NYSCEF 2

            § 12.2(b)). However, Mr. Martinez has failed to pay the Plaintiffs, refuses to communicate with

            them regarding a payment schedule or plan, and has profited from the increased value of the real

            estate between March 7, 2019 and the present day (NYSCEF 1 ,J,Jl 1-12, 97). Plaintiffs have

            now asserted claims for declaratory judgment, breach of contract, breach of the covenant of good

            faith and fair dealing, unjust enrichment, breach of fiduciary duty, conversion, constructive trust,

            equitable accounting, and temporary receivership (NYSCEF 1).

                      The time for the Defendants to answer has expired (January 12, 2023), and Defendants

            have not answered or otherwise moved with respect to the Summons and Complaint in this

            action. 1 For the reasons described below, the motion for default judgment is granted in part.

                      Plaintiffs have submitted unrebutted evidence demonstrating compliance with the

            requirements of CPLR 3215 through the Affirmation of Siddartha Rao, Esq. dated February 29,

            2024 (NYSCEF 11), and the Affidavit of Harvey Schultz, sworn to on February 26, 2024

            (NYSCEF 13), together with the exhibits annexed thereto (NYSCEF 14-15), including the

            Complaint setting forth the facts establishing Plaintiffs' claims. Plaintiffs also submitted proof

            that service of summons and complaint was made upon Defendants (see NYSCEF 5-6). No

            opposition has been filed.

            1
              On January 12, 2024, Defendant Mr. Martinez purported to record representation for both
            Defendants. However, Mr. Martinez cannot appear on behalf of the Company, as a corporate
            defendant cannot appear prose under CPLR § 321(a). Moreover, after appearing, Mr. Martinez
            filed no Answer to the Complaint for himself or the Company, nor requested any extension, nor
            filed opposition to this motion.

                655430/2023 SCHULTZ, HARVEY ET AL vs. MARTINEZ, ANTHONY R. ET AL                  Page 2 of 5
                Motion No. 001

                                                              2 of 5
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                                                                                                     INDEX NO. 655430/2023
  NYSCEF DOC. NO. 16                                                                         RECEIVED NYSCEF: 04/30/2024

                      Therefore, Plaintiffs' motion for default judgment is granted as to ( 1) the claims for

            declaratory judgment, constructive trust, and equitable accounting; and (2) liability only on

            Plaintiffs' breach of contract claim and unjust enrichment claim. 2 The Court directs the parties

            to an inquest, before a Special Referee, to hear and make a recommendation to the Court as to an

            equitable accounting and the amount of damages, if any, to which Plaintiffs are entitled under

            their breach of contract and unjust enrichment claims.

                      Defendants may seek a vacatur of the instant default judgment if it can satisfy the

            requirements of CPLR § 5015, CPLR § 317, or any other relevant law.

                      Accordingly, it is

                      ORDERED that Plaintiffs' Motion for default judgment against Defendants is

            GRANTED IN PART as to Plaintiffs' claims for declaratory judgment, breach of contract,

            unjust enrichment, constructive trust, and equitable accounting; the motion is otherwise denied; it

            is further

                      ADJUDGED and DECLARED that the Company's operating agreement requires Mr.

            Martinez and the Company to provide a payment schedule based on the value of the Plaintiffs'

            2
             Default judgment cannot be granted on the remaining claims. Plaintiffs' breach of the covenant
            of good faith and fair dealing, breach of fiduciary duty, and conversion claims are duplicative of
            their breach of contract claim (see Hazan v Biamonte, 77 Misc 3d 1217(A) [Sup Ct, NY County
            2022] [noting on default judgment that certain claims were duplicative of breach of contract
            claims]). Additionally, Plaintiffs have failed to demonstrate the need for a temporary
            receivership as Plaintiffs have failed to "produce any evidence that the funds or property of the
            corporation are in danger of being materially injured or destroyed. Therefore, appointment of a
            receiver is not warranted at this time" (Smith v Gegen, 2014 WL 894839 [Sup Ct, NY County
            2014]). Finally, Plaintiffs have not supported their request for attorney's fees either by citation to
            the parties agreement or any applicable law (Hooper Assoc., Ltd. v AGS Computers, Inc., 74
            NY2d 487,491 [1989] ["A]ttorney's fees are incidents oflitigation and a prevailing party may
            not collect them from the loser unless an award is authorized by agreement between the parties,
            statute or court rule"]).

                655430/2023 SCHULTZ, HARVEY ET AL vs. MARTINEZ, ANTHONY R. ET AL                     Page 3 of 5
                Motion No. 001

                                                              3 of 5
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                                                                                                  INDEX NO. 655430/2023
  NYSCEF DOC. NO. 16                                                                      RECEIVED NYSCEF: 04/30/2024

            membership interests as of March 7, 2019 with the final payment to be made no later than March

            7, 2024; it is further

                      ORDERED AND ADJUDGED that a constructive trust is granted imposing an

            equitable trust upon the Company and its interests, making Mr. Martinez an equitable trustee for

            the benefit of Plaintiffs; it is further

                      ORDERED that this matter is directed to an Inquest before a Special Referee who shall

            hear and make a recommendation to the Court as to (1) an equitable accounting; and (2)

            Plaintiffs' damages, if any, on the breach of contract and unjust enrichment claims; and it is

            further

                      ORDERED that the powers of the JHO/Special Referee to determine shall not be limited

            further than as set forth in the CPLR; and it is further

                      ORDERED that this matter is hereby referred to the Special Referee Clerk (Room 119

            M, 646-386-3028 or spref@courts.state.ny.us) for placement at the earliest possible date upon

            the calendar of the Special Referees Part (Part SRP), which, in accordance with the Rules of that

            Part (which are posted on the website of this Court at www.nycourts.gov/supctmanh at the

            "Local Rules" link), shall assign this matter to an available Special Referee to determine as

            specified above; and it is further

                      ORDERED that Plaintiffs' counsel shall serve a copy of this order with notice of entry

            on Defendants within five days and that counsel for Plaintiffs shall, after thirty days from service

            of those papers, submit to the Special Referee Clerk by fax (212-401-9186) or email an

            Information Sheet (which can be accessed at

            http://www.nycourts.gov/courts/ljd/supctmanh/refpart-infosheet-10-09.pdf) containing all the

            information called for therein and that, as soon as practical thereafter, the Special Referee Clerk

             655430/2023 SCHULTZ, HARVEY ET AL vs. MARTINEZ, ANTHONY R. ET AL                     Page 4 of 5
             Motion No. 001

                                                           4 of 5
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                                                                                                    INDEX NO. 655430/2023
  NYSCEF DOC. NO. 16                                                                          RECEIVED NYSCEF: 04/30/2024

            shall advise counsel for the parties of the date fixed for the appearance of the matter upon the

            calendar of the Special Referees Part; and it is further

                      ORDERED that the hearing will be conducted in the same manner as a trial before a

            Justice without a jury (CPLR § 4318) (the proceeding will be recorded by a court reporter, the

            rules of evidence apply, etc.) and that the parties shall appear for the reference hearing, including

            with all such witnesses and evidence as they may seek to present, and shall be ready to proceed,

            on the date first fixed by the Special Referee Clerk subject only to any adjournment that may be

            authorized by the Special Referee's Part in accordance with the Rules of that Part; and it is

            further

                      ORDERED that, except as otherwise directed by the assigned JHO/Special Referee for

            good cause shown, the trial of the issue specified above shall proceed from day to day until

            completion.

                      This constitutes the Decision and Order of the Court.

                      4/30/2024
                        DATE                                                       JOEL M. COHEN, J.S.C.

                                      ~
             CHECK ONE:                   CASE DISPOSED                   NON-FINAL DISPOSITION

                                          GRANTED         □ DENIED        GRANTED IN PART          □ OTHER
             APPLICATION:                 SETTLE ORDER                    SUBMIT ORDER

             CHECK IF APPROPRIATE:        INCLUDES TRANSFER/REASSIGN      FIDUCIARY APPOINTMENT    □ REFERENCE

             655430/2023 SCHULTZ, HARVEY ET AL vs. MARTINEZ, ANTHONY R. ET AL                       Page 5 of 5
             Motion No. 001

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