GRASSETTO TRUSTEE FOR LIQUIDATION OF SIMOD v. SARTORE (2021)

The following e-filed documents, listed by NYSCEF document number (Motion 004) 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138 were read on this motion to ENFORCE ORDER.

This action concerns a luxury New York apartment caught up in an Italian bankruptcy dispute. Simod, S.p.A., an Italian company, purchased an apartment in New York City in 2007. In 2013, Simod filed for bankruptcy. Also in 2013, Simod's principal conveyed this apartment to his girlfriend, defendant Agnese Donatella Sartore. The Italian bankruptcy trustee, plaintiff Marco Grassetto, brought this action in 2017 to recover the apartment, asserting that the 2013 conveyance of the apartment to defendant was intended to shield it improperly from the bankruptcy court.

In March 2021, this court granted plaintiff's motion to appoint a receiver for the property to collect rent from defendant's tenants, pay the mortgage and common charges for the property, and take other related steps. (See NYSCEF No. 85.) The court's order on the motion provided that “[a]n independent certified public accountant who is insured for malpractice shall be appointed as receiver ․ in accordance with 22 NYCRR Part 36.1 (10) (ii).” (NYSCEF No. 89 at 1.) The order also provided that “all rents payable under any lease shall be paid by the tenant directly to Plaintiff until further notice,” and directed defendant to notify her current tenant or tenants to pay rent directly to plaintiff; and it required plaintiff to pay “all carrying costs associated with the Premises, including ․ common area charges, mortgage payments, [and] property taxes.” (Id. at 2.)

Also in March 2021, plaintiff filed a note of issue, which certified that “[d]iscovery proceedings now known to be necessary [have been] completed”—although plaintiff's own deposition had not yet been taken. (NYSCEF No. 87 at 2.) Defendant moved to vacate the note of issue as premature. On May 10, 2021, this court entered an order granting defendant's motion to vacate. (See NYSCEF No. 112.) The order directed the parties to “promptly confer about plaintiff's availability for his deposition, which shall occur on or before June 18, 2021. (Id.) Nonetheless, plaintiff still has not been deposed.

Defendant contends that plaintiff has failed to make himself properly available for deposition as required by this court's May 2021 order; failed to establish that his chosen receiver satisfies the requirements of this court's March 2021 order; failed to pay the apartment's various carrying costs as required by this court's March 2021 order; and failed to take necessary steps to ensure that the apartment's current tenant can pay rent to plaintiff.

Defendant moves to hold plaintiff in contempt of this court's orders under Judiciary Law § 753, to strike plaintiff's pleadings as a discovery sanction under CPLR 3126, or in the alternative to compel plaintiff under CPLR 3124 to provide the information sought by defendant to make himself available for deposition. Plaintiff opposes the motion in full.¹ Defendant's requests to hold plaintiff in contempt and to strike his pleadings are denied. Defendant's request to compel plaintiff to appear for his deposition and to provide the requested information is granted.

DISCUSSION

As an initial matter, although the record demonstrates that plaintiff has not complied with aspects of this court's orders—and that his counsel's approach to his interactions with defendant's counsel has been somewhat unhelpful—this court does not agree at this time that plaintiff's conduct constitutes contempt. Nor is this court minded to dismiss the action altogether as a discovery sanction. That said, the court concludes that the different components of defendant's motion to compel are each meritorious.

I. Defendant's Request to Compel Plaintiff's Deposition as Provided for in this Court's May 2021 Order

With respect to defendant's request to compel plaintiff's deposition, the record reflects that after this court issued its May 2021 order, defendant's counsel promptly proposed deposition dates falling within the deadline set by the court. (See NYSCEF No. 119 at 4.) Plaintiff's counsel did not respond to defendant's proposal for a full month—after defendant had sent several follow-up emails and a good-faith letter. And plaintiff's belated responsive email stated without explanation that he and plaintiff would be unavailable until several weeks after the deposition deadline. (See NYSCEF No. 126.) In these circumstances, this court has little difficulty concluding that the request to compel plaintiff to appear for deposition should be granted. Plaintiff must appear for deposition by virtual means on or before October 29, 2021. Plaintiff may not adjourn that deadline without court approval; and this court will grant an adjournment request only upon good cause shown.²

II. Defendant's Request to Compel Plaintiff to Provide Proof that Plaintiff's Choice of Receiver Satisfies this Court's March 2021 Order

Defendant also seeks information demonstrating that plaintiff's choice of receiver satisfies the requirements of this court's May 20201 order—i.e., that the receiver is (i) independent and has no relationship with plaintiff, plaintiff's counsel, or their agents; (ii) a certified public accountant; and (iii) insured for malpractice. Plaintiff contends that defendant is not entitled to this information.³

It is difficult for this court to see, however, why plaintiff should object to providing the requested information. This is particularly true given defendant's showing (which plaintiff does not dispute) that in 2019 plaintiff's chosen receiver entered into a settlement of professional disciplinary charges brought by the ethics committee of the American Institute of CPAs (see NYSCEF No. 127). And even if plaintiff were correct that defendant would not necessarily be entitled to the requested information, this court certainly is entitled to it. Plaintiff must therefore within 14 days submit to the court (by e-filing on NYSCEF and email to mhshawha@nycourts.gov) proof that plaintiff's chosen receiver is independent, remains in good professional standing as a CPA, and carries malpractice insurance.

III. Defendant's Request to Compel Plaintiff to Provide Proof that Plaintiff has Paid Apartment Carrying Costs as Required by this Court's March 2021 Order

Additionally, defendant seeks proof that plaintiff has paid the unit's carrying costs (such as condominium common charges) as expressly required by this court's March 2021 receivership order. In opposition, plaintiff does not dispute defendant's entitlement to this information. Nor does he contend that he has, in fact, paid the carrying costs, or indeed that he has sought authorization from the Italian bankruptcy court to expend funds of the bankruptcy estate to do so—much less obtained that authorization.⁴ At most, plaintiff contends that defendant has not established that she has been prejudiced by any noncompliance with this court's order. (See NYSCEF No. 133 at 4.) But defendant submits on reply evidence that plaintiff has, at a minimum, left unpaid $15,000 in common charges and electricity bills accrued since the receivership order (see NYSCEF No. 136 at 6-7; NYSCEF No. 137), and that these arrears have led the condominium to place a common-charges lien on the unit (see NYSCEF No. 136 at 2-5).⁵

The record does not reflect—and plaintiff has not attempted to explain—why plaintiff has failed to fulfill his obligation to cover the unit's carrying costs. Regardless, plaintiff must take all available steps to ensure that the carrying costs are paid and the unit's lien discharged. Accordingly, plaintiff shall within 14 days inform this court (by e-filing and email to mhshawha@nycourts.gov) of the following: (i) whether approval of the Italian bankruptcy court is required before plaintiff (or plaintiff's receiver) may pay the unit's carrying costs; (ii) if so, whether plaintiff has sought the necessary approvals; (iii) if so, the status of that request. And plaintiff shall also inform this court by the same means once the carrying costs have been fully paid, or shall update this court about his efforts to ensure payment of the carrying costs once 60 days from the date of this order have elapsed, whichever comes first.

IV. Defendant's Request to Compel Plaintiff to Provide His Receiver's Full Bank-Account Information

Finally, the parties’ motion papers dispute the amount of bank-account/wire-transfer information that plaintiff should provide defendant to facilitate the payment of rent to the plaintiff by defendant's tenant. As discussed below, this aspect of the motion has to a degree been overtaken by events.

In early August 2021, defendant sent a bank check for several months’ rent to plaintiff, made out to him in his capacity as bankruptcy trustee. Plaintiff has since taken the position, in emails to this court and opposing counsel, that because the check is made out to plaintiff himself, plaintiff's receiver cannot deposit the check. Plaintiff asked defendant to reissue the check and make it payable instead to the receiver's accounting firm. Defendant, contending that payment to any account other than a dedicated escrow account is improper, declined to do so. Instead, defendant proposed that her tenant could instead pay the check directly to the condominium association to pay down the common-charge arrears.⁶

This court agrees with defendant that payment of funds to be controlled by a receiver must be made to the receiver's escrow account—not to a general account held by the receiver, or for that matter the receiver's firm. Plaintiff shall within 14 days of the date of this order provide this court (by e-filing and email to mhshawha@nycourts.gov) with confirmation that his chosen receiver has established an escrow account in his capacity as receiver. That confirmation shall include the bank that holds the account, and the date the account was established. Plaintiff also shall, within that period, provide defendant with the information necessary to facilitate payment of outstanding rent (whether by bank check or wire transfer) to the receiver's escrow account; and shall within that period notify the court (by e-filing and email to mhshawha@nycourts.gov) that he has done so. Upon receiving this account information, defendant shall within 7 days ensure that payment of all outstanding rent is made to this receivership escrow account, and shall notify the court (by e-filing and email to mhshawha@nycourts.gov) once payment has been made.

Accordingly, for the foregoing reasons it is hereby

ORDERED that the branch of defendant's motion seeking to hold plaintiff in contempt under Judiciary Law § 753 is denied; and it is further

ORDERED that the branch of defendant's motion seeking to strike plaintiff's complaint (or preclude plaintiff from offering evidence) under CPLR 3126; and it is further

ORDERED that the branch of defendant's motion seeking to compel plaintiff under CPLR 3124 to appear for his deposition and to provide the information requested by defendant is granted as set forth above; and it is further

ORDERED that defendant serve a copy of this order with notice of its entry on all parties.

FOOTNOTES

1.   Plaintiff failed initially to oppose this motion timely. Instead, on the motion's original return date, plaintiff's counsel filed a printout of an email he had sent to defendant's counsel in which he indicated that he intended to seek an adjournment. (See NYSCEF No. 130 at 1.) This court treated this filing as an untimely request for an adjournment and granted plaintiff additional time to oppose defendant's motion, nunc pro tunc. (See NYSCEF No. 131.)

2.   Plaintiff asserts that this branch of defendant's motion should be denied for lack of a good-faith affirmation. (See NYSCEF No. 133 at 5-6.) This assertion is meritless. Defendant attached not only copies of the correspondence between counsel regarding deposition scheduling—which plaintiff does not contend is inaccurate or incomplete—but also defendant's June 3, 2021, good-faith letter to plaintiff regarding the deposition.

3.   Plaintiff also suggests (see NYSCEF No. 133 at 3-4) that defendant made her tenant's payment of rent to plaintiff contingent on plaintiff turning over the requested information about the receiver. The record does not bear out this suggestion.

4.   In an April 9, 2021, email, plaintiff's counsel told defendant's counsel that his “understanding is that [plaintiff] is seeking approval.” (See NYSCEF No. 123 at 5.) The nature, scope, and outcome of that request for approval, though, is unclear; and plaintiff's papers on this motion have not provided clarity.

5.   The condominium filed the lien on June 8, 20201; and it formally recorded the lien on June 21—nearly two weeks before defendant brought the current motion. (Compare NYSCEF No. 136 at 2-3 [record of lien], with NYSCEF No. 115 [notice of motion].) This court does not understand, therefore, why plaintiff contends in opposing the motion that “there is no actual prejudice” from his failure to pay carrying costs. (NYSCEF No. 133 at 4.)

6.   For completeness, the court has e-filed a copy of the parties’ correspondence at NYSCEF No. 139.

Gerald Lebovits, J.