The opinion
Seaton v Babad
2025 NY Slip Op 30370(U)
January 23, 2025
Supreme Court, New York County
Docket Number: Index No. 654196/2021
Judge: Andrew Borrok
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
Op 30001(U), are republished from various New York
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publication.
INDEX NO. 654196/2021
NYSCEF DOC. NO. 306 RECEIVED NYSCEF: 01/23/2025
1SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 53
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SIMON SEATON, DEBRA SEATON, INDEX NO. 654196/2021
Plaintiff,
MOTION DATE 10/27/2024
-v-
MOTION SEQ. NO. 011
CHIAM BABAD, CONGREGATION KAHAL MINCHAS
CHINUCH, INC.,PARK 121 REALTY, LLC,
DECISION + ORDER ON
Defendant. MOTION
-----------------------------------------------------------------------------------X
HON. ANDREW BORROK:
The following e-filed documents, listed by NYSCEF document number (Motion 011) 252, 253, 254, 255,
256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 266, 267, 268, 269, 270, 271, 272, 273, 274, 275,
276, 277, 278, 279, 281, 283, 284, 285, 286, 287, 288, 289
were read on this motion to/for SUMMARY JUDGMENT(AFTER JOINDER .
Upon the foregoing documents, the plaintiffs’ motion (Mtn. Seq. No. 011) is granted on the issue
of liability as set forth below.
THE RELEVANT FACTS AND CIRCUMSTANCES
This is a derivative action. Simon Seaton and Debra Seaton, in their derivative capacities as
investors and members of Park 121 Realty, LLC (Park), seek damages on behalf of Park against
Chiam Babad and New York religious corporation Congregation Kahal Minchas Chinuch
(Congregation) arising from the following alleged actions stated in the third amended complaint
(the TAC; NYSCEF Doc. No. 287) of Mr. Babad in his individual capacity and as the president
and signatory of Congregation:
21. By reasons of the allegations set forth above, the Plaintiffs, derivatively, on behalf of
nominal defendant PARK, have been and continue to be irreparably harmed by
Defendant BABAD, who has recently borrowed, in his capacity as Managing Member
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NYSCEF DOC. NO. 306 RECEIVED NYSCEF: 01/23/2025
and fiduciary a further loan of FOURTEEN MILLION ($14,000,000.00) DOLLARS that
added additional debt to Defendant PARK and then, paid all of the net proceeds, in
excess of ONE MILLION ($1,000,000.00) DOLLARS to the CONGREGATION, his
alter ego, in violation of his statutory and contractual obligations and fiduciary
responsibilities
….
24. Defendant BABAD has, upon information and belief, diverted and converted funds to
his own personal use; has allegedly received kick-backs for payments to alleged
contracts; has improperly failed to arrange timely and appropriate mortgages solely for
his own personal benefit both in his individual capacity and as the President of the Board
of Directors and signatory on behalf of alter ego and co-defendant CONGREGATION;
he has used and converted company funds to pay premiums for his insurance policy
business, has used the nominal defendant [PARK’s] assets as collateral to obtain a
personal loan for his daughter, together with many other instances of conversion that will
be proven at trial
(NYSCEF Doc. No. 287 ¶¶ 21, 24).
As relevant to the instant motion, reference is made to a prior Order of the Court, dated January
13, 2022 (NYSCEF Doc. No. 76), where the Court appointed a receiver (the Receiver) to
operate the business of Park and a second prior Decision and Order of the Court, dated
December 17, 2024 (NYSCEF Doc. No. 302), where the Court inter alia approved the
Receiver’s interim accounting and authorized certain payments.
The TAC sets forth four causes of action: (i) against Mr. Babad for breaches of fiduciary and
other responsibilities to Park; (ii) against all defendants for participating in a common course of
conduct and concerted action damaging Park; (iii) against Mr. Babad and Congregation for
aiding and abetting breaches of one another’s duties to Park; and (iv) against Mr. Babad for
negligence (NYSCEF Doc. No. 287 at 11-16).
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DISCUSSION
As an initial matter, although the plaintiffs claim that they are entitled to summary judgment on a
cause of action sounding in fraudulent inducement, the plaintiffs did not bring a cause of action
sounding in fraudulent inducement. In addition, this is not a derivative claim. Accordingly, as to
this new cause of action, summary judgment is denied.
On a motion for summary judgment, the movant bears the burden of demonstrating that there is
no triable issue of material fact such that the movant is entitled to judgment as a matter of law
(Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). The opposing party must then “produce
evidentiary proof in admissible form sufficient to require a trial of material questions of fact”
that its claim rests upon (Zuckerman v New York, 49 NY2d 557, 562 [1980]).
To establish a breach of fiduciary duty, the plaintiff must demonstrate (i) the existence of a
fiduciary duty, (ii) misconduct by the other party, and (iii) damages caused by that misconduct
(Pokoik v Pokoik, 115 AD3d 428, 429 [1st Dept 2014]).
The plaintiffs have met their burden of coming forward with sufficient evidence to establish that
(i) Mr. Babad, as a managing member himself, owed fiduciary duties to Park and its members,
(ii) he breached those duties by inter alia engaging in self-dealing by advancing the interests of
Congregation at the expense of Park, failing to even attempt to finance Park through institutional
lenders at a reasonable rate of interest as required in the Operating Agreement (NYSCEF Doc.
No. 256 § 14 [b]), and instead borrowing the money from Congregation, a corporation in his
control, and (iii) this misconduct caused damages to Park. In their opposition papers, the
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defendants fail to raise an issue of fact warranting trial. Indeed, the defendants only filed the
brief affirmation of Brendan C. Kombol indicating that the defendants had tried to adjourn this
motion and arguing that the motion was premature and procedurally improper.
As such, the plaintiffs’ motion for summary judgment is granted to the extent that the defendants
are liable to Park for breach of fiduciary duty. It would appear that trial is required on the issue
of damages.1
The Court has considered the parties’ remaining arguments and finds them unavailing.
Accordingly, it is ORDERED that the plaintiffs’ motion for summary judgment is GRANTED
solely to the extent set forth above; and it is further
ORDERED that the issue of damages shall be determined at trial; and it is further
ORDERED that a Status Conference is scheduled for February 25, 2025 at 12:00 pm.
1/23/2025
DATE ANDREW BORROK, J.S.C.
CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION
□ □
X GRANTED DENIED GRANTED IN PART OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
□
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
1
The Receiver did not file any papers in connection with this motion. I It is thus not clear whether any information
reviewed by the forensic accountant would be relevant to the issue of damages. Accordingly, the Court may, after
receiving input from the Receiver at the status conference scheduled for February 25, 2025 at 12:00 pm, issue a
supplemental order as to damages mooting the need for trial.
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