Greene Ave. Restoration Corp. v. Green Throop LLC (In re Greene Ave. Restoration II Corp.), Case No. 17-45394-CEC

597 B.R. 202

IN RE GREENE AVENUE RESTORATION II CORP., Debtor.

Greene Avenue Restoration Corp., a/k/a Greene Avenue Restoration Corp. II, Plaintiff,

v.Green Throop LLC, Avi Rosengarten, Esq., Myopic, LLC, and Susan Green, Defendants.

Case No. 17-45394-CEC

Adv. Pro. No. 18-01022-CEC

United States Bankruptcy Court, E.D. New York.

Signed February 11, 2019

Avrum Rosen, Esq., Rosen, Kantrow & Dillon, PLLC, 38 New Street, Huntington, New York 11743, Attorney for Plaintiff

Charles L. Mester, Esq., Wenig Saltiel, LLP, 26 Court Street, Suite 1200, Brooklyn, New York 11242, Attorney for Defendants: Myopic LLC and Susan Green

DECISION AFTER TRIAL

CARLA E. CRAIG, Chief United States Bankruptcy JudgePlaintiff, Greene Avenue Restoration Corp. II ("Plaintiff"), commenced this adversary proceeding seeking a determination that it is the owner of 689 Greene Avenue, Brooklyn, New York (the "Property"), and that defendants have no interest in the Property. Susan Green, the prior owner of the Property, executed a deed, dated December 3, 2014 (the "2014 Deed"), transferring the Property to Plaintiff's predecessor in interest, Greene Avenue Restoration Corp. (the "Purchaser"), an entity also owned by Plaintiff's principal, Adler Milord. In October 2017, Susan Green entered into a contract to sell the Property to defendant Myopic, LLC ("Myopic").

Susan Green offers several reasons why this Court should find that she owns the Property, and has the right to sell it to Myopic, notwithstanding her prior transfer of the Property to the Purchaser. She contends (i) that the 2014 Deed is void ab initio because she lacked authority to transfer the Property; (ii) that the 2014 Deed should be rescinded because it was executed as a result of fraud in the inducement; and (iii) that, because of a violation of New York Real Property Law § 265-a (the Home Equity Theft Prevention Act ("HETPA") ) in connection with her transfer of the Property to Purchaser, the Court should either rescind the 2014 Deed, grant equitable relief, such as designating Plaintiff and Susan Green co-owners in the Property, or award her monetary damages. Alternatively, Susan Green seeks dismissal of Plaintiff's bankruptcy case.

A trial was held on October 4, 2018, where the Court heard testimony from Plaintiff's principal, Adler Milord ("Milord"), Susan Green, and Wayman G. Wynn ("Prince").¹ Following trial, the parties submitted additional briefing on the applicability of HETPA, and argument on that issue was heard on November 14, 2018 and November 27, 2018.²

For the reasons set forth in this decision, Plaintiff is entitled to declaratory judgment that it is the owner of the Property and that the defendants do not have any rights or interest in the Property. The evidence shows that the transfer of the Property pursuant to the 2014 Deed was neither void nor the result of fraud in the inducement, and that HETPA is inapplicable because the Property was not Susan Green's primary residence at the time of, or immediately prior to, the transfer of the Property to the Purchaser.

JURISDICTION

This Court has jurisdiction of this proceeding pursuant to 28 U.S.C. § 1334(b), and the Eastern District of New York standing order of reference dated August 28, 1986, as amended by order dated December 5, 2012. This matter is a core proceeding under 28 U.S.C § 157(b)(2)(A), (B), (K), (O). See In re Strathmore Grp., LLC, 522 B.R. 447, 452 (Bankr. E.D.N.Y. 2014) ("[T]he bankruptcy court has core jurisdiction to adjudicate all of those interests' professed by a debtor and its creditors in averred property of the estate.") (citation omitted). This decision constitutes the Court's findings of fact and conclusions of law to the extent required by Federal Rule of Bankruptcy Procedure 7052.

BACKGROUND

A. The Parties' Contentions

1. The Greene Throop Deed

The parties agree that, prior to the transfer of the Property pursuant to the 2014 Deed, a fraudulent deed was recorded on August 20, 2013, purportedly transferring the Property to defendant Greene Throop LLC (the "Greene Throop Deed"). (Defs.' Joint Pre-Trial Order ("Def. JPTO") ¶ 5(6), ECF No. 30.)³ Susan Green denies that she executed the Greene Throop Deed, and contends that her signature on that document was forged. (Def. JPTO ¶ 5(7); Tr. 113:22-114:1.) In this adversary proceeding, Plaintiff asserted a claim against Greene Throop LLC and its attorney, Avi Rosengarten, seeking an order setting aside the Greene Throop Deed. Susan Green does not oppose this. (Def. JPTO ¶ 5(7).)

Greene Throop LLC and Avi Rosengarten have not appeared in this proceeding, and on August 9, 2018 a default judgment was entered declaring the Greene Throop Deed to be void. (ECF No. 20.)

2. Plaintiff's Contentions

Plaintiff contends that the Purchaser acquired the Property from Susan Green pursuant to the 2014 Deed, and that the transfer was a purchase of the Property subject to no contingencies or collateral agreements. (Pl.'s Joint Pre-Trial Order ¶ 6(7), ECF No. 29 ; Tr. 93:1-5.) Milord, Plaintiff's principal, testified that, after evaluating the title issues relating to the Property and consulting with counsel, he decided to purchase the Property. (Tr. 74:18-75:5.) Milord paid Susan Green $ 20,000 and paid Prince a finder's fee, and in exchange, Susan Green transferred ownership of the Property to Purchaser, which subsequently transferred the Property to Plaintiff. (Tr. 89:2-5, 64:2-5.) Milord, who is in the business of investing in distressed real property, maintains that he never purchases owner-occupied properties, and that before purchasing the Property, he confirmed that Susan Green did not reside in the Property. (Tr. 34:24-35:16.) Milord testified that he inspected the Property before purchasing it and saw that it was in disrepair, bolted with a lock and chain, with all the windows and entryways boarded and sealed. (Id. )

3. Defendants' Contentions

Susan Green contends that the transfer of the Property to the Purchaser was intended to be contingent on Milord's accomplishing certain conditions. (Def. JPTO ¶ 5(11-12.) She maintains that Milord made oral representations, on which she relied when executing the 2014 Deed, that he would, in addition to paying her $ 20,000, bear the cost and responsibility of (i) clearing the title issues relating to the fraudulent Greene Throop Deed; and (ii) satisfying the mortgage on the Property, which had been in foreclosure since 2008. (Id.; Tr. 121:20-122:3.) Ms. Green alleges that Milord promised he would not record the deed until he completed these conditions. (Def. JPTO ¶ 5(12.) According to Ms. Green, these conditions (the "conditions") were important because she wanted to "clear [her] credit and move on with [her] life." (Tr. 146:23-147:3; see also Tr. 119:5-11.) Because she relied on Milord's representations that he would perform the conditions in signing the 2014 Deed, and because Milord never intended to perform the conditions, Susan Green argues, she was fraudulently induced to transfer the Property to the Plaintiff.

Alternatively, Susan Green contends that the 2014 Deed is void because she was not the record owner of the Property at the time of the transfer because of the previously recorded fraudulent Greene Throop Deed, and that therefore she lacked authority to transfer the Property to the Purchaser. Ms. Green also argues that the transfer of the Property was in violation of New York's HETPA, a statute that protects parties who sell their primary residence while in foreclosure.

B. Procedural History

On July 5, 2018, Plaintiff filed a motion: (i) seeking summary judgment against defendants Susan Green and Myopic; and (ii) seeking a default judgment against defendants Greene Throop LLC and Avi Rosengarten, Esq. (ECF No. 13.) On July 24, 2018, defendants Susan Green and Myopic cross-moved for summary judgment and also moved to dismiss the Plaintiff's bankruptcy case. (ECF No. 15.) On August 9, 2018, a default judgment was entered against defendants Greene Throop LLC and Rosengarten, declaring the Greene Throop Deed void. (ECF No. 20.) On the same date, the Court entered an Order denying both summary judgment motions, denying the motion to dismiss the bankruptcy case, and scheduling trial. (ECF No. 21.) At trial, defendants Susan Green and Myopic again moved to dismiss the bankruptcy case. (Tr. 61:24-62:21.)

C. Facts

The following facts are either conceded by Defendants or were established at trial.

In 2006, Susan Green obtained a mortgage to acquire the Property from her father. (Def. JPTO ¶ 7(3).) Later in 2006, the mortgage was refinanced, and in 2008, the mortgage was in default and an action to foreclosure the mortgage was commenced, which is pending. (Id. at ¶ 7(4-5); Tr. 111:5-12.) Susan Green is a defendant in that action. (Tr. 54:17-20.)

In August 2013, the fraudulent Greene Throop Deed was recorded, purportedly reflecting the transfer of the Property by Susan Green to defendant Greene Throop LLC.⁴ (Def. JPTO ¶ 5(6).) In the summer of 2014, Susan Green learned from Prince of the fraudulent Greene Throop Deed. (Tr. 113:18-23, 115:19.) At that time, Ms. Green and Prince went together to defendant Avi Rosengarten's office to request that the Greene Throop Deed be removed from record. (Tr. 114:2-13, 131:11-18.) At this meeting, and at subsequent meetings with Avi Rosengarten's investment partners, Ms. Green testified, she was informed that Rosengarten and his partners had also been defrauded by the person who executed the Greene Throop Deed, and that they would transfer title to the Property back to her in exchange for $ 125,000, which, Ms. Green was told, was the amount that Greene Throop LLC paid to "the fake Susan Green," and expended in clearing out and cleaning the Property. (Tr. 115:9-116:11, 131:19-24.) Susan Green did not agree to this. (Tr. 116:6-20.)

Milord is the principal of the Plaintiff. (Tr. 29:11-12.) His business involves investing in properties in foreclosure. (Tr. 29:18-21.) To identify potential investment...