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Laura Andrew, Inc. v. DLRA Group, LLC

Supreme Court, Suffolk County

December 6, 2018

Laura Andrew, Inc., Plaintiff,
DLRA Group, LLC, Defendant.

          SOLOMON & CRAMER LLP Attorneys for Plaintiff

          RICHMAN & LEVINE, P.C. Attorneys for Defendant

          Elizabeth Hazlitt Emerson, J.

         Upon the following papers read on this motion for partial summary judgment; Notice of Motion and supporting papers 10-25; Notice of Cross Motion and supporting papers; Answering Affidavits and supporting papers 27-33; Replying Affidavits and supporting papers 34; it is, ORDERED that the motion by the plaintiff for partial summary judgment is granted; and it is further

         ORDERED that the parties are directed to proceed to trial on the issue of damages on the first two causes of action; and it is further

         ORDERED that, upon service of a copy of this order with notice of entry, the defendant is directed to turn over to the plaintiff any rents received within five business days of their receipt; and it is further

         ORDERED that the defendant is directed not to interfere with the plaintiff's right to collect and receive rent after the date of this action.

         The property that is the subject of this action was sold by the plaintiff Laura Andrew, Inc. ("Laura Andrew"), to Holub Enterprises, Inc. ("Holub Enterprises") on January 21, 2005. Laura Andrew took back a purchase money mortgage in the principal amount of $850, 000.00. In September 2006, Laura Andrew loaned Richard Holub and Holub Enterprises (the "Holubs") another $30, 000, which was secured by a second mortgage on the property. The Holubs defaulted on both loans by failing to pay them when they matured in February 2010.

         On June 17, 2011, DL Rothberg & Associates, P.C. ("DL Rothberg") entered a judgment by confession in the amount of $349, 917.74 against the Holubs in the Supreme Court, Suffolk County, for unpaid legal fees. On July 9, 2015, DL Rothberg assigned the judgment to the defendant DLRA Group, LLC ("DLRA"). On July 14, 2015, the property was sold at a public auction to satisfy the judgment. The property was purchased at the auction by DLRA for $60, 000, subject to the two mortgages held by Laura Andrew. On February 17, 2016, Laura Andrew commenced an action in this court to foreclose the two mortgages (Index No. 602520-16). By an order dated March 20, 2017, Laura Andrew's motion for summary judgment and the appointment of a referee was granted, and DLRA's cross motion for summary judgment dismissing the complaint was denied. DLRA moved for reargument of that order. By a subsequent order dated January 22, 2018, this court granted reargument and adhered to its original determination. The judgment of foreclosure and sale was signed on the same day. DLRA appealed from the judgment and moved for an automatic stay pursuant to CPLR 5519 (a) (6) pending hearing and determination of the appeal. The court granted DLRA's application for a temporary restraining order and enjoined enforcement of the judgment and sale of the property pending further order of the court. By an order dated September 10, 2018, the matter was referred to a hearing to fix the amount of the undertaking to be posted by DLRA.

         Laura Andrew commenced this action on April 9, 2018, to recover the rents generated by the property. The complaint contains three causes of action for conversion, breach of contract, and an accounting. DLRA's answer contains ten affirmative defenses and two counterclaims. The counterclaims are: (1) to set aside the mortgages on the property as fraudulent conveyances pursuant to Debtor and Creditor Law § 276 and (2) to recover damages for tortious interference with DLRA's lease of the property. Laura Andrew moves for partial summary judgment on the issue of liability on the first two causes of action for conversion and breach of contract and for dismissal of DLRA's affirmative defenses and counterclaims.

         The first mortgage contains an assignment-of-rent clause that provides, in pertinent part, as follows:

"Borrower hereby absolutely and unconditionally assigns to Lender Borrower's right, title and interest in and to all current and future Leases and Rents; it being intended by Borrower that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Notwithstanding the foregoing, Lender grants to Borrower a revocable license to collect and receive the Rents....
"Upon the occurrence of any Event of Default... the license granted to Borrower to collect and receive rents hereunder shall automatically be revoked and Lender may enter into or upon the Property... and Borrower agrees to surrender possession... of the Property to Lender upon demand and thereupon Lender may... (iv) exercise all rights and powers of Borrower with respect to the Property... including without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all Rent of the Property and every part thereof....

         The second mortgage also contains an assignment-of-rent clause. That clause ...

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