United States District Court, S.D. New York
the plaintiffs Eric W. Berry Berry Law PLLC
defendant Meister, Seelig & Fein, LLP Howard S. Koh Randi
L. Maidman Meister Seelig & Fein LLP
OPINION AND ORDER
COTE, District Judge
Meister, Seelig & Fein LLP (“MSF”) has moved
for summary judgment on the sole remaining claim against them
in this long-running dispute, a claim of constructive
fraudulent conveyance brought under the New York Debtor and
Creditor Law (“DCL”). For the following reasons,
MSF's motion is granted.
tortured history of this litigation is set out in two prior
Opinions, which are incorporated by reference and with which
familiarity is assumed. Knopf v. Meister, Seelig &
Fein, LLP, 15cv5090 (DLC), 2016 WL 1166368 (S.D.N.Y.
Mar. 22, 2016)(“Knopf II”); Knopf v. Meister,
Seelig & Fein, LLP, 15cv5090 (DLC), 2015 WL 6116926
(S.D.N.Y. Oct. 16, 2015) (“Knopf I”). This
Opinion summarizes only those facts relevant to the instant
motion. The following facts are either undisputed or taken in
the light most favorable to the plaintiffs.
brief, Norma Knopf and Michael Knopf (the plaintiffs or
“Knopfs”) made two loans at issue in this action
to defendant Pursuit Holdings, LLC (“Pursuit”).
When the Knopfs filed litigation in state court in connection
with those loans, Pursuit and its principal Michael Sanford
(“Sanford”) hired MSF to represent them. During
that litigation, Pursuit extended a real estate mortgage
(“the Mortgage”) to MSF as security for its
obligation to pay MSF's legal fees. The parties now
dispute whether $300, 000 of the Mortgage securing payment
for future legal services was a constructive fraudulent
conveyance to MSF.
Proceedings in State Court
2006, the Knopfs extended two loans to Pursuit: $1, 690, 860
to finance the purchase of a residence located at 44 East
67th Street, Unit PHC (“PHC”), and $3, 250, 000
to finance the purchase of three condominium units located at
10 Bedford Street (the “Townhouses, ”
collectively with PHC, the “Properties”). The
loan agreements included a provision in which Sanford, on
behalf of Pursuit, agreed not to sell, mortgage, hypothecate,
or otherwise encumber the acquired real estate. The Knopfs
subsequently commenced an action against Sanford and Pursuit,
among others, in New York County Supreme Court, alleging that
Sanford and Pursuit had breached the loan agreements by
failing to grant them a mortgage on the Properties. They
sought money damages as well as imposition of a constructive
trust on the Properties.
connection with their claims in the state court action, the
Knopfs filed notices of pendency against the Properties on
September 18, 2009 (the “Initial Notices”). While
Justice Milton Tingling refused to extend the Initial
Notices, the Appellate Division, First Department, did extend
them. Knopf v. Sanford, 972 N.Y.S.2d 893, 894 (1st
April 16, 2012, Pursuit and other companies owned by Sanford
(“the Sanford Entities”) retained MSF to
represent them in defending against the Knopfs' state
court action. They executed a 2012 retainer agreement. MSF
ceased representing the Sanford Entities in September 2012.
29 2014, the Sanford Entities and MSF signed a second
engagement agreement (“the 2014 Engagement
Agreement”) for MSF to provide legal services in
connection with the state court action. The 2014 Engagement
Agreement indicated that MSF would represent Pursuit for the
limited purposes of (1) moving to cancel the notice of
pendency on PHC, (2) moving for partial summary judgment
solely as to the portion of the Knopfs' constructive
trust claim relating to PHC, and (3) prosecuting a claim on
behalf of Pursuit to recover damages/expenses incurred due to
the notice of pendency filed by the Knopfs against PHC and
seeking sanctions. MSF would also represent Pursuit or all
defendants in any appeals taken concerning these three
matters or any motion to stay any order cancelling the
notices of pendency, among other things.
respect to fees, the 2014 Engagement Agreement provided:
MSF agrees that the fees set forth above will be paid out of
the proceeds of the sale of the Property, and you shall
direct the closing agent or title company to distribute them
to us directly. If the lis pendens is cancelled and the sale
of the Property takes place before the entire scope of work
is completed, then you shall deposit in the Firm's escrow
account any remaining unpaid fees as set forth herein (but
not as to appeals not then noticed nor any funds with respect
to the one-third contingency fee relative to
damages/expenses/sanctions), which fees shall be released to
the Firm as, if and when the matters are successfully
concluded as described herein or otherwise released to you.
You have represented to us that Pursuit owns the Property
free and clear other than a mortgage not exceeding $100, 000,
and you have a buyer for the Property for $2, 900, 000 and
you will use your best efforts to close on a sale within
ninety (90) days of an order cancelling the lis pendens. You
further agree to cause Pursuit to sign a mortgage in favor of
the Firm for $700, 000 against the Property . . . .
the 2014 Engagement Agreement was signed, MSF filed an Order
to Show Cause seeking the cancellation of the notices of
pendency. Through a decision by the Appellate Division on
December 11, 2014, the Knopfs won summary judgment on their
breach of contract claims. Knopf v. Sanford, 1 N.Y.S.3d
18, 19 (1st Dep't 2014). But, the Appellate Division also
held that the Knopfs had failed to establish their
entitlement to summary judgment on their constructive trust
claim because they had not made an evidentiary showing that
money damages would be inadequate. Id. at 20.
Justice Tingling cancelled the notices of pendency on
December 23, and the Clerk noted the final cancellation of
the notices of pendency on the appropriate minute books on
December 31, 2014.
the notices of pendency vacated, MSF and Pursuit acted
quickly to execute a mortgage on PHC (the
“Mortgage”). On January 6, 2015, MSF and Pursuit
signed an amendment to the 2014 Engagement Agreement
(“the 2015 Amendment”). It is this document that
is at the heart of the instant motion for summary judgment.
The 2015 Amendment “supplements and modifies” the
2014 Engagement Agreement and provides, in pertinent part:
6. You will escrow $300, 000 with MSF to cover future work
for Pursuit, which is to be billed and paid for at MSF's
normal hourly rates, including:
• Motion for CPLR 6514(c) costs and rule 130 sanctions.
We will endeavor to file this motion within 30 days provided
you supply us the necessary exhibits to the motion.
• Possibly a motion to dismiss the fourth cause of
action. (Arguably this cause of action has already been
effectively dismissed by the recent First Department decision
and you and we have not decided whether to bring such a
motion or simply to take the position that the claim is no
• By January 30, 2015, a notice of appeal and
pre-argument statement with respect to Justice Tingling's
recent decision cancelling the notices of pendency, insofar
as it “denied” (by not granting) ...