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Knopf v. Meister Seelig & Fein, LLP

United States District Court, S.D. New York

April 18, 2017


          For the plaintiffs Eric W. Berry Berry Law PLLC

          For defendant Meister, Seelig & Fein, LLP Howard S. Koh Randi L. Maidman Meister Seelig & Fein LLP


          DENISE COTE, District Judge

         Defendant 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.


         The 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.

         In 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.

         I. Proceedings in State Court

         In 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.

         In 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 Dep't 2013).

         On 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.

         On July 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.

         With 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 . . . .

         (Emphasis supplied.)[1]

         After 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.[2] 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.

         With 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:[3]
• 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 longer viable.)
• 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) ...

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