The opinion
PH-105 Realty Corp v Elayaan
2024 NY Slip Op 33530(U)
September 26, 2024
Supreme Court, New York County
Docket Number: Index No. 656160/2016
Judge: Lyle E. Frank
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. 656160/2016
NYSCEF DOC. NO. 735 RECEIVED NYSCEF: 09/26/2024
SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY
PRESENT: HON. LYLE E. FRANK PART 11M
Justice
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PH-105 REALTY CORP, 12 WHITWELL PLACE, LLC,181
EDGEWATER LLC,FARHOUD JABER, 04/23/2024,
MOTION DATE 04/23/2024
Plaintiff,
MOTION SEQ. NO. 022 022
- V -
MUNZER ELAYAAN, PH-FULTON CORP., JOHN AND
DECISION + ORDER ON
JANE DOES 1-20, XYZ CORPORATION/LLCS 1-20,
MOTION
Defendant.
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The following e-filed documents, listed by NYSCEF document number (Motion 022) 690, 691, 692, 693,
694,695,696,697,698,699,700,701,702,703,704,705,706,707,708,722,723,724,725,726,727,
728,729,730
were read on this motion to/for JUDGMENT-SUMMARY
The following e-filed documents, listed by NYSCEF document number (Motion 022) 690, 691, 692, 693,
694,695,696,697,698,699,700,701,702,703,704,705,706,707,708,722,723,724,725,726,727,
728,729,730
were read on this motion to/for SET ASIDE VERDICT
Upon the foregoing documents, defendant's motion to set aside the verdict and enter
judgment in defendant's favor or alternatively, to order a new trial is denied.
Background
This motion arises from a dispute over an ownership interest in 181 Edgewater LLC
("Edgewater") and the associated real property at 181 Edgewater Street, Staten Island, New York
("Property"). Plaintiff Jaber ("Plaintiff') commenced the suit and filed a notice of pendency in
Richmond County (where the Property was located) in late 2016. He alleged that Defendant
Elayaan ("Defendant") unlawfully removed Plaintiff as managing member of 181 Edgewater
LLC and that Defendant unlawfully deprived Plaintiff of the Property. In 2020, a decision
handed down from the First Department applied the doctrine of tax estoppel and held that
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Defendant was estopped from taking a position contrary to the factual statements made in
corporate tax returns. Namely, that Plaintiff was a 75% owner of the Property during the years
2010 to 2014. PH-105 Realty Corp. v. Elayaan, 183 A.D.3d 492 (1st Dept. 2020). The First
Department left open the issue of current ownership of the Property. Id. In December 2021,
while the litigation was ongoing, a third-party company named 181 Edgewater St. LLC
("Edgewater Street") purchased a 75% interest in the Property from Defendant. The parties had a
trial beginning February 9, 2024. At trial, the jury found that 1) Plaintiff was currently a 75%
owner of Edgewater, 2) Edgewater was the current owner of the Property, and 3) that Defendant
was not unjustly enriched.
Defendant now moves asking the Court, pursuant to CPLR § 4404(a), to set aside the
jury's verdict as to both the finding that Plaintiff is the current 75% owner of Edgewater and the
finding that Edgewater is the current owner of the Property. Defendant asks the Court to enter
judgment in their favor or in the alternative, to order a new trial. Plaintiff opposes the motion.
For the reasons discussed below, Defendant's motion is denied.
Standard of Review
Under CPLR § 4404(a), a court may set aside a verdict and either direct a judgment or
order a new trial when "the verdict is contrary to the weight of the evidence [or] in the interest of
justice." The court should when considering such a motion "decide whether substantial justice
has been done [and] whether it is likely that the verdict has been affected." Morency v. Horizon
Transp. Servs. Inc., 139 A.D.3d 1021, 1023 (2nd Dept. 2016). The court also must "construe the
evidence from the trial record in the light most favorable to the non-moving party." Fantazia
Int'l v. CPL Furs New York, Inc., 20 Misc. 3d 1113(A) (Sup. Ct. N.Y. Cnty. 2008).
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The well-settled standard for deciding that a jury's finding was against the weight of
evidence is when the "evidence at trial so preponderated in favor of movant that the verdict could
not have been reached on any fair interpretation of the evidence." Monzon v. Porter, 173 A.D.3d
1779, 1779 (4th Dept. 2019). A motion to set a verdict as against the weight of the evidence
"should only be granted where the verdict is 'palpably wrong'." Cholewinski v. Wisnicki, 21
A.D.3d 791 (1st Dept. 2005), quoting Rivera v. 4064 Realty Co., 17 A.D.3d 201,203 (1st Dept.
2005).
Discussion
Ultimately, Defendant fails to establish that the jury's verdicts were unsupported by the
evidence. Defendant's main argument is that the First Department's decision that Defendant is
estopped from taking a position contrary to the tax records (which state that Plaintiff was the
75% owner of Edgewater as of 2014) does not relieve Plaintiff of the burden of establishing
current ownership according to corporate entity law. Defendant argues that Plaintiff failed to
establish this at trial and therefore the jury's verdicts on Edgewater ownership were without a
basis in law. This argument misstates the crucial issue. Defendant is estopped from arguing that
Plaintiff was not the 75% owner of Edgewater in 2014. Therefore, in order to argue that Plaintiff
is not the current owner, Defendant must show that Plaintiff was validly divested of ownership
sometime between 2014 and now, not that Plaintiff cannot or could not have established the
initial burden of establishing ownership under corporate or LLC law. Once an entity is the owner
of a piece of property, it necessarily follows that to cease being the owner there must be some
event or action that operates to divest the entity of their ownership. To argue that Plaintiff must
have thoroughly established their initial ownership interest at trial is to take a position at odds
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with the tax records. As such, the cases cited by Defendant are distinguishable from the instant
matter.
While Defendant describes Plaintiffs 75% ownership interest post-2014 as a "legal
fiction", they are nevertheless estopped by the First Department from taking a position in
opposition to the tax records stating that Plaintiff was a 75% owner, from at least 2010 to 2014.
The issue then became the matter of current ownership, as the First Department pointed out. The
question therefore becomes whether Plaintiff was validly divested of ownership post-2014, not
whether Plaintiff can establish current ownership under New York corporate law. The jury at
trial considered the evidence presented regarding the events concerning the property post-2014
and they reached a conclusion on the issue of present ownership. Particularly when all evidence
from the trial record is construed in the light most favorable to Plaintiff, Defendant has not
shown that the jury's verdicts could not have been reached based on any fair interpretation of
said trial evidence. The motion is therefore denied as the CPLR § 4404(a) standard has not been
met.
Defendant also argues that the jury's verdict on the issue of current ownership must be
set aside because of the sale to third-party Edgewater Street, a transaction made while the current
litigation was ongoing. Defendant argues that the jury based their decision on the Property's
current ownership based solely on statements made at trial by Plaintiffs attorney that the sale
was a "sham transaction" and that this was insufficient supporting evidence. But Plaintiff
presented testimony from several parties at trial regarding the validity of the transfer deed as well
as other evidence such as a certified Lis Pendens for the Property, filed in Richmond County,
that was active at the time of the transaction according to Plaintiff. Plaintiff also presented
testimony that alleged that the sale was not authorized by the then-current owners of Edgewater.
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The parties now and at trial dispute(d) the good-faith or fraudulent nature of this
transaction, the existence or extent of any consideration, and both sides presented evidence
related to these disputes. Ultimately, it cannot be said that the jury made their decision regarding
current ownership of Edgewater and the Property against the weight of the evidence or that
judgment should be entered in favor of Defendant on this issue as a matter oflaw. A purchaser of
real property is bound by the consequences of a lawsuit of which he has actual knowledge or in
which a notice of pendency was filed against the property. Da Silva v. Musso, 76 N.Y.2d 436,
439 (1990). The jury was entitled to decide what weight to accord the evidence at trial on the
issue and their verdict regarding current ownership of the property cannot be said to be lacking
any fair interpretation of said evidence. Neither can the verdict be said to be without a foundation
in law.
Defendant also argues that the Court deprived Edgewater Street of the Property without
due process, as Edgewater Street was not a party to the trial. This argument fails because it
overlooks the role that Edgewater Street has played in this case. As stated above, during the
course of litigation and after the First Department handed down a decision stating that the current
ownership of Edgewater and the Property was at issue, Defendant ostensibly on behalf of
Edgewater sold a 75% interest in Edgewater to Edgewater Street. Edgewater Street, in addition
to any actual and constructive notice they would have had at the time of the alleged sale (given,
for example, the notice of pendency filed on the property prior to the transaction) was certainly
aware of the trial and its potential impact on the determination of ownership of the Property.
Edgewater Street had attorneys enter an appearance in the case on their behalf starting in 2022,
including explicitly stating in a letter to the Court that they were aware that their interest would
be affected by the outcome of the case. They to this date remain notified ofNYSCEF filings in
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this case. Edgewater Street, however, did not attempt to intervene until filing a motion to do so
after the trial, in March of 2024.
Defendant argues in their Memorandum of Law in Further Support that Plaintiff had the
responsibility under CPLR § 1003 to join Edgewater Street as a party, and that failure to do so is
grounds for dismissal of an action. But Defendant did not move to dismiss the action on those
grounds during the course of litigation, and now they move instead to overturn the jury's verdict.
CPLR § 1003 states that failure to join a party who should be joined under CPLR § 1001 is
indeed grounds for a dismissal "unless the court allows the action to proceed without that party."
CPLR § 1003. Furthermore, CPLR § 1001 states that a party should be joined if they "might be
inequitably affected by a judgment in the action." Given the aforementioned history of
involvement and evidence of actual knowledge of the pending litigation prior to the transaction
allegedly transferring interest in the Property to Edgewater Street, it is difficult to say that their
interest is inequitably affected. Simply because a party has an interest that would be affected is
not enough for necessary joinder to be established, as the inequitable requirement must also be
met. See, e.g., Cohen v. Brown, Harris, Stevens, Inc. 99 A.D.2d 732, 733 (1st Dept. 1984).
As stated above, the parties both presented evidence at trial regarding the validity or
fraudulent nature of the transaction and the extent of Edgewater Street's actual and record notice
of the dispute prior to the sale. The jury's verdict on the current ownership of Edgewater and the
Property went directly to this issue and was supported by evidence at trial as well as a basis in
law. Therefore, Edgewater Street's interest cannot be conclusively said to have been inequitably
impacted by the litigation. For the reasons given above, Defendant's motion to set aside the
verdict is denied. The Court has looked at Defendant's other arguments and found them
unavailing.
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Accordingly, it is hereby
ADJUDGED that defendant's motion is denied.
9/26/2024
DATE LYLE E. FRANK, J.S.C.
~ ~
CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION
GRANTED 0 DENIED GRANTED IN PART
□
OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
□
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
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