Peckar _ Abramson vs. Lyford Holdings, Et Al

SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK Index No. 09-100005--------------------------------------------------------------------xPECKAR & ABRAMSON, P.C.,

-against-

Plaintiff,AMENDEDVERIFIED COMPLAINT

LYFORD HOLDINGS, LTD., MITCHELL STERN, SAVOY MANAGEMENT CORPORATION, SAVOY SENIOR HOUSING CORP.,JACOB FRYDMAN, WHITE ACRE EQUITIES, LLC, TUSCANY BUILDERS, LLC, TIVOLI PARTNERS LLCand SAVOY LITTLE NECK ASSOCIATES, L.P.,

.

Defendants.------------------------------------------------------------------------x

Plaintiff, by its attorneys, Strassberg & Strassberg, P.C., as and for its Amended

complaint against the defendants respectfully show and alleges that:

1. At all times herein set forth, plaintiff Peckar & Abramson, P.C. ("P&A"), was

and still is a corporation duly organized and existing under and by virtue of the laws of the

State of New Jersey, and maintains a place of business in the County, City and State of

New York.

2. On information and belief, defendant Mitchell Stern ("Stern"), was and still

is a resident of the County of Nassau and State of New York.

3. At all times herein set forth, defendant Savoy Management Corporation

("Savoy Management"), was and still is a corporation duly organized and existing under

and by virtue of the laws of the State of New York, and maintains its principal place of

business in the County, City and State of New York.

4. At all times herein set forth, defendant Savoy Senior Housing Corp. ("SSHC"),

was and still is a corporation duly organized and existing under and by virtue of the laws of

the State

(00066263 .1}

Supreme Court Records Online Library - page 1 of 18

of New York, and maintains its principal place of business in the County, City and State of

New York.

5. On information and belief, defendant Jacob Frydman ("Frydman"), was and still

is a resident of the County of Westchester and State of New York.

6. At all times herein set forth, defendant White Acre Equities, LLC ("White

Acre"), was and still is a limited liability company duly formed and existing under and by

virtue of the laws of the State of New York and maintains a place of business in the County,

City and State of New York.

7. At all times herein set forth, defendant Tuscany Builders, LLC ("Tuscany"), was

and still is a limited liability company duly formed and existing under and by virtue of the

laws of

the State of New Jersey, and maintains a place of business in the County, City and State of

New York.

8. At all times herein set forth, defendant Tivoli Partners LLC ("Tivoli") was and

stil1 is a limited liability company duly formed and existing under and by virtue of the laws

of the State of New York and maintains a place of business in the County, City and State of

New York.

9. At all times herein set forth, defendant Savoy Little Neck Associates, L.P.

("Savoy Little Neck"), was and still is a limited partnership duly formed and existing under

and by virtue of the laws of the State of New York

10. Defendant Savoy Little Neck operated pursuant to an Agreement of Limited

Partnership dated the 23rd day of December, 1998, and amendments thereto, including

but not limited to an Amendment by Letter Agreement between the General Partner and

Lyford

{00066263.1}

1


"Holdings, Ltd. ("Lyford 1 ) dated February 16, 1999 and the "First Amendment of Agreement of

Savoy Little Neck Associates Limited Partnership" (of unknown date) by which the foregoing

partnership agreement was further amended to provide for the addition of additional limited

partners including Mitchell Stem (collectively the "LP Agreement2").

11. Defendant Savoy Little Neck purchased certain property located at 55-15 Little

Neck Parkway , Little Neck, New York (the "Property") which it converted into an Assisted

Living Facility.

12. P&A is a law firm. Savoy Little Neck and Savoy Boro Park failed to pay P&A, and

on April 5, 2004 P&A commenced an action in the Supreme Court of the State of New York

entitled Peckar & Abramson, P.C. v. Savoy Little Neck Associates, L.P. and Savoy Born Park

Associates, L.P. (New York County Index No. 105261/04). The action was based on a breach

of contract (a settlement) for work, labor and services provided in 2003 ("the underlying

action").

13. The Answer in the underlying action was verified on May 19, 2004 by

defendant Frydman as President of SSHC, managing member of Alta Knoll, L.L.C.

(general partner of Savoy Little Neck and Savoy Boro Park).

14. On February 22, 2006 P&A entered a judgment against Savoy Little Neck for

$237,731.75 ("Judgment").

15. The Judgment remains unpaid and outstanding.

1 Lyford is listed in the caption which has not been amended since prior decisions in this case. There are no claims against Lyford in this Amended Complaint.

2 Relevant Sections and Definitions from the LP Agreement are re-printed beneath Schedule "A" solely for convenience of reference.

(00066263. l}2


16. P&A is a creditor of Savoy Little Neck pursuant to Sections 278 and/or 279 of

Article 10 of the New York Debtor and Creditor Law ("DCL").

Savoy Little Neck

17. P&A is a law firm that was engaged by Savoy Little Neck and a related entity3,

each

of which were in the business of running Assisted Living Facilities.

18. Savoy Little Neck is one of more than a dozen entities operated by Frydman, an

attorney, who is also an owner and/or indirect beneficiary of each related entity.

19. At all times herein, Frydman, Lyford and Stem were limited partners of Savoy Little

Neck.

20. At all relevant times herein defendants SSHC, White Acre, Tuscany and Tivoli

and non-party Frydman & Co were owned or controlled by defendant Frydman.

21. At all times herein set forth, defendant SSHC was the managing member

of the corporate general partner of Savoy Little Neck.

22. At all times herein set forth, Frydman was the President of SSHC.

Sale of the Assisted Living Facility by Savoy Little Neck - and financial condition at date of sale

23. By deed dated June 16, 2004 Savoy Little Neck conveyed the Property upon

which the assisted living facility operated to an unrelated entity, CRP Little Neck, L.P.

("Date the Property was sold").

24. As at the Date the Property was sold (June 16, 2004) and thereafter Savoy Little

Neck was insolvent, its investors had lost millions of dollars, and its major remaining asset

was a claim for a property tax refund.

3 Savoy Bora Park Associates, L.P. ("Savoy Boro Park").(00066263. I }

3


Other Assets of Savoy Little Neck - Bank Accounts

25. Prior to commencement of the underlying action Savoy Little Neck maintained

three checking accounts at North Fork Bank ("NFB") as follows: Savoy Little Neck

"Operating" account (Checking Acct. No. 9054019857); Savoy Little Neck "Payroll"

account (Checking Acct. No. 9054019865); and Savoy Little Neck "Checking" account

(Checking Acct. No. 9054011102).

26. Jacob Frydman was a signatory on all NFB checking accounts of Savoy Little

Neck [see ,r2s, supra].

27. After commencement of the underlying action Savoy Little Neck transferred

monies to the defendants as set forth in Schedule "A" hereto (hereafter collectively referred

to as the "Other Transfers").

28. In the 10 days before the sale of the Property, Savoy Little Neck depleted

several hundred thousand dollars from its NFB Checking account, transferring cash

therein to defendants White Acre and Tivoli Partners and non-party Frydman & Co. [see

Schedule "A"]

29. On September 2, 2004 Savoy Little Neck depleted its NFB Payroll account by

transferring the remaining balance of $3,008.97 in its payroll account to White Acre, after

which the account was closed without further transactions [see Schedule "A"].

30. On the date the property was sold and thereafter, Savoy Little Neck's

Operating account never contained a balance exceeding $21,471.11 until it was closed

in November of 2004.

(00066263.1)4


AS AND FOR A FIRST CAUSE OF ACTION

31. Plaintiff repeats, reiterates and realleges each and every allegation contained in

paragraphs "1" through "30" inclusive, with the same force and effect as if set forth at length.

32. Tuscany, White Acre, Tivoli and non-party Frydman & Co. were affiliates of Savoy

Little Neck at the time they received the Other Transfers.

33. Each of the affiliate defendants operated by Frydman, directly or indirectly, had

Frydman's knowledge of P&A's lawsuit and its claims.

34. The Other Transfers to defendants Tuscany, White Acre, Tivoli and non-party

Frydman & Co. were without consideration (see Schedule "A"].

35. To the extent there was any actual consideration for the Other Transfers to

defendants Tuscany, White Acre, Tivoli and non-party Frydman & Co. said actual consideration

was based upon a contractual obligation.


Frydman & Co. were without fair consideration as defined in the DCL.


Frydman & Co. rendered Savoy Little Neck insolvent, or came at a time when Savoy Little Neck

was insolvent, as defined in the DCL.


Frydman & Co. were without good faith as defined in the DCL.


Frydman & Co. occurred at a time when Savoy Little Neck had, intended or believed it would

incur debts beyond its ability to pay.

{00066263. I)5


40. The Other Transfers to defendants Tuscany, White Acre, Tivoli and non-

party Frydman & Co. left Savoy Little Neck with unreasonably small capital to remain in

business.


Frydman & Co. were made with the actual intent to hinder, delay or defraud creditors of

Savoy Little Neck including Plaintiff.


party Frydman & Co. were received with the actual intent to hinder, delay or defraud

creditors of

Savoy Little Neck including Plaintiff.


party Frydman & Co. violated DCL §§273, 273-a, 274, 275, 276, 277, 278 and/or 279.


Frydman & Co. should be declared void or voidable and judgment should be entered against

defendants Tuscany, White Acre and Tivoli as transferees, and any other defendants found

to have been beneficiaries of the transfers to defendants Tuscany, White Acre, Tivoli and

non-party Frydman & Co. in an amount equal to each transfer [see Schedule "A"J with

interest from the dates of each transfer4; or alternatively, a judgment should be fashioned in

any manner permitted by law necessary to enforce the setting aside of the transfers herein

including, but not limited to imposition of a constructive trust over the transferred proceeds.

4 Limited only to the extent that the combined award against any defendant (exclusive of damages under DCL §276-a) does not exceed the amount of the judgment due (plus interest) against Savoy Little Neck.

{00066263 .l}6


AS AND FOR A SECOND CAUSE OF ACTION

45. Plaintiff repeats, reiterates and realleges each and every allegation contained

in paragraphs "1" through "44" inclusive, with the same force and effect as if set forth at

length. Assets of Savoy Little Neck - Initial Transfer of the Property Tax Refund

46. On or about September 24, 2004 the Department of Finance of the City of New

York issued a property tax refund check to Savoy Little Neck in the amount of $722,365.43

("Property Tax Refund").

47. On September 30, 2004 the $722,365.43 Property Tax Refund check was not

properly endorsed by Savoy Little Neck, but was endorsed "Savoy" and deposited into

Savoy Management's operating account.

Subsequent Transfers of the Property Tax Refund

48. Within 15 days after deposit, all proceeds of the Property Tax Refund were

depleted leaving the Savoy Management operating account with a negative balance.

49. Disbursement of the Property Tax Refund5 proceeds included

$425,000.00 transferred to Stem, and $65,000.00 to White Acre.

50. The purported consideration for the $425,000.00 transfer to Stem is the sale of

limited partnership interest to SSHC as of August 1, 2004 as more fully set forth in the

annexed "Assignment and Assumption of Limited Partnership Interests" by and between

Stem and SSHC, a copy of which is annexed as Exhibit "1".

5 Recovery for the $154,299.14 transferred to Lyford is not requested herein.

{00066263. L J7


51. The transfer of the Property Tax Refund to defendant Savoy Management

was without consideration as defined in the DCL.

52. To the extent there was any actual consideration for the transfer of the Property

Tax Refund said actual consideration was based upon a contractual obligation or contractual

obligations.


was without fair consideration as defined in the DCL.


rendered Savoy Little Neck insolvent, or came at a time when Savoy Little Neck was

insolvent, as defined in the DCL.


was without good faith as defined in the DCL.

56. The transfer of the Property Tax Refund to defendant Savoy Management occurred

at a time when Savoy Little Neck had, intended or believed it would incur debts beyond

its ability to pay.

57. The transfer of the Property Tax Refund to defendant Savoy Management left

Savoy Little Neck with unreasonably small capital to remain in business.

58. The transfer of the Property Tax Refund to defendant Savoy Management was

made with the actual intent to hinder, delay or defraud creditors of Savoy Little Neck

including Plaintiff.

( 00066263. l)

8



was received with the actual intent to hinder, delay or defraud creditors of Savoy

Little Neck including Plaintiff.


violated DCL §§273, 273-a, 274, 275, 276, 277, 278 and/or 279.


should be declared void or voidable and be set aside, and judgment should be entered

against defendants Savoy Management as transferee, and any other defendants found to

have been beneficiaries of the transfers to defendant Savoy Management in an amount equal

to each transfer with interest from the dates of each Transfer6; or alternatively, a judgment

should be fashioned in any manner permitted by law necessary to enforce the setting aside

of the transfers herein including, but not limited to imposition of a constructive trust over

the transferred proceeds.

AS AND FOR A THIRD CAUSE OF ACTION

62. Plaintiff repeats, reiterates and realleges each and every allegation contained

in paragraphs "1" through "61" inclusive, with the same force and effect as if set forth at

length.

63. P&A is a creditor of Savoy Management pursuant to Sections 278 and/or

279 of Article 10 of the DCL.

64. Savoy Management's transfers of the proceeds of the Property Tax Refund to

defendants Stern and White Acre were without consideration.


{00066263.1)9

Supreme Court Records Online library - page 10 of 18

65. To the extent there was any actual consideration for Savoy Management's

transfers of the proceeds of the Property Tax Refund to defendants Stem and White Acre

said actual consideration was based upon a contractual obligation.

66. Savoy Management's transfers of the proceeds of the Property Tax

Refund to defendants Stern and White Acre were without fair consideration as defined

in the DCL.

67. Savoy Management' s transfers of the proceeds of the Property Tax Refund to

defendants Stern and White Acre rendered Savoy Management insolvent, or came at a time

when Savoy Management was insolvent, as defined in the DCL.

68. Savoy Management's transfers of the proceeds of the Property Tax

Refund to defendants Stem and White Acre were without good faith as defined in the

DCL.


defendants Stem and White Acre occurred at a time when Savoy Management had,

intended or believed it would incur debts beyond its ability to pay.

70. Savoy Management's transfers of the proceeds of the Property Tax Refund

to defendants Stem and White Acre left Savoy Management with unreasonably small

capital to remain in business.


defendants Stem and White Acre were made with the actual intent to hinder, delay or

defraud creditors of Savoy Management including Plaintiff.


defendants Stern and White Acre were received with the actual intent to hinder, delay or

defraud creditors of Savoy Management including Plaintiff.

{00066263.1}

10



defendants Stem and White Acre violated DCL §§273, 273-a, 274, 275, 276, 277, 278

and/or 279.


defendants Stem and White Acre should be declared void or voidable and be set aside, and

judgment should be entered against defendants Stem and White Acre as transferees, and any

other defendants found to have been beneficiaries of the transfers to defendants Stem and

White including but not limited to defendant SSHC in an amount equal to each transfer with

interest

from the dates of each Transfer7; or alternatively, a judgment should be fashioned in any

manner

permitted by law necessary to enforce the setting aside of the transfers herein including, but

not limited to imposition of a constructive trust over the transferred proceeds.

AS AND FOR A FOURTH CAUSE OF ACTION

75. Plaintiff repeats, reiterates and realleges each and every allegation contained in

paragraphs "l" through "74" inclusive, with the same force and effect as if set forth at length.

76. Plaintiff is entitled to an award of reasonable legal fees against the

defendants pursuant to DCL §276-a.

WHEREFORE, Plaintiffs demand judgment as follows:

ON THE FIRST CAUSE OF ACTION:

A. Judgment setting aside the Other Transfers to defendants Tuscany, White Acre, and

Tivoli and non-party Frydman & Co. as having violated the DCL; and awarding entry of a

7 Limited only to the extent that the combined award against any defendant (exclusive of damages under DCL §276-a) does not exceed the amount of the judgment due (plus interest) against Savoy Little Neck.(00066263. l )

11


;

money judgment against defendants Tuscany, White Acre and Tivoli as transferees, and any

other defendants found to have been beneficiaries of the transfers to defendants Tuscany,

White Acre, Tivoli and non-party Frydman & Co. in an amount equal to each transfer [see

Schedule

"A"] with interest from the dates of each Transfer8 or alternatively, a judgment should be

fashioned in any manner permitted by law necessary to enforce setting aside of the

transfer(s) herein including, but not limited to imposition of a constructive trust over the

transferred proceeds.

ON THE SECOND CAUSE OF ACTION:

B. Judgment setting aside the transfer of the Property Tax Refund to defendant Savoy

Management as having violated the DCL; and awarding entry of a money judgment against

Savoy Management as transferee, and any other defendants found to have been

beneficiaries of

the transfers to defendant Savoy Management in an amount equal to each transfer with interest

from the dates of each Transfer9; or alternatively, a judgment should be fashioned in any

manner

permitted by law necessary to enforce setting aside of the transfer(s) herein including, but

not limited to imposition of a constructive trust over the transferred proceeds.

ON THE THIRD CAUSE OF ACTION:

C. Judgment setting aside Savoy Management's transfers of the proceeds of the

Property Tax Refund to defendants Stern and White Acre as having violated the DCL; and

awarding entry of a money judgment against defendants Stern and White Acre as

transferees, and any other


9 Limited only to the extent that the combined award against any defendant (exclusive of damages under DCL §276-a) does not exceed the amount of the judgment due (plus interest) against Savoy Little Neck.{00066263 .1)

12


;

defendants found to have been beneficiaries of the Savoy Management transfers to defendants

Stem and White including but not limited to defendant SSHC in an amount equal to each

transfer

with interest from the dates of each Transfer 10

or alternatively, a judgment should be fashioned

in any manner permitted by law necessary to enforce setting aside of the transfer(s) herein

including, but not limited to imposition of a constructive trust over the transferred

proceeds. ON THE FOURTH CAUSE OF A CTION:

D. Judgment against each of the defendants pursuant to DCL §276-a awarding

reasonable legal fees, in an amount to be determined by the Court.

ON ALL CAUSES OF ACTION:

E. The costs and disbursements of this action.

F. For such other, further and different relief as to this Court may seem just and proper.

Dated: New York, New YorkSeptember 27, 2010 Yours, etc.,

STRASSBERG & STRASSBERG, P.C.

By: '.,L_A EL 1l--Todd Strassberg, Esq.

57 West 38th Street, 8th Floor New York, New York 10018 (212) 736-9500

IO Limited only to the extent that the combined award against any defendant (exclusive of damages under DCL§276-a) does not exceed the amount of the judgment due (plus interest) against Savoy Little Neck.

(00066263. I }13


SCHEDULE "A" to Complaint

North Fork Bank ("NFB") checking AJC#9054011102 (Savoy Little Neck Operating Account)

"Other Transfers"

Date of Check/Wire or intra-bank Date Check Paid Payee/Transferee account no.Transfer or transfer made Check #

05/04/04 05/04/0405/06/04 05/06/0405/06/04 05/06/0405/06/04 05/06/0405/06/04 05/06/04

05/11/04 05/11/0405/12/04 05/12/0405/18/04 05/18/0406/07/04 06/07/0406/10/04 06/10/0406/14/04 06/14/0406/14/04 06/14/0406/14/04 06/14/0406/14/04 06/14/04

Amount$10,000.00 NFB NC#905421218 (White Acre Equities, LLC)$29,768.76 NFB NC#905421218 (White Acre Equities, LLC)$29,038.06 NFB NC#905421218 (White Acre Equities, LLC)$12,100.00 NFB NC#9054020079 (Frydman & Company)$11,500.00 NFB NC#9054019659 (Tuscany Builders, LLC)

$10,000.00 NFB NC#905421218 (White Acre Equities, LLC)$11,000.00 NFB NC#905421218 (White Acre Equities, LLC)$2,000.00 NFB NC#90542121 8 (White Acre Equities, LLC)$28,329.88 NFS NC#905421218 (White Acre Equities, LLC)$27,582.85 NFB NC#905421218 (White Acre Equities, LLC)$34,981.82 NFB NC#905421218 (White Acre Equities, LLC)$31,438.20 NFB NC#905420020 (Tivoli Partners, LLC)$30,000.00 NFB NC#9054020079 (Frydman & Company)$40,000.00 NFB NC#905421218 (White Acre Equities, LLC)

North Fork Bank checking A/C#9054019865 (Savoy Little Neck Payroll Account)9/2/04 9/2/04 $3,008.97 NFS NC#905421218 (White Acre Equities, LLC}

North Fork Bank checking AJC#905401 9840 (Savoy Management Corp. Operating Account)

$722,265.43 Deposited - Savoy Little Neck09/30/04

10/1/0410/04/0410/06/0410/14/04

09/30/0410/1/04

10/15/0610/12/0410/15/04

Property Tax Refund$65,000.00 NFB NC#905421218 (White Acre Equities, LLC)

1465 $425,000.00 Mitchell Stern1467 $154,299.14 Lyford Holdings, Ltd.1469 $85,000.00 Armstrong Management Corporatfon

{00066263.l}

14


RELEVANT SECTIONS OF THEAGREEMENTOF SAVOY LITTLE NECK ASSOCIATES LIMITED PARTNERSHIP

, A NEW YORK LIMITED PARTNERSHIP

SECTION 1

THE PARTNERSHIP

1.4 Term. The term of the Partnership shall commence on the date that this Agreement is executed, provided that the certificate of limited partnership is expeditiously executed and filed in the office of the Secretary of State of New York in accordance with the Act and shall continue until the earlier of (i) December 31, 2030, or (ii) the date upon which the Partnership's entire Interest in all the Property.

1.6 Definitions. Capitalized words and phrases used in this Agreement have the following message:

(b) "Affiliate" means, with respect to any Partner, any person or entity directly or indirectly controlling, controlled by or under common control with such Partner.

(g) "General Partner" means any Partner whose name is set forth in Section2.1 hereof. "General Partners" means all such Partners.

U) "Limited Partner" means any Partner whose name is set forth on Schedule A attached hereto and made a part hereof and any other person who is admitted as an additional or substituted Limited Partner. "Limited Partners" means all such Partners.

(k) "Liquidating Event" has the meaning set forth in Section 11.

(m) "Partners" means a11 of the General Partner and Limited Partners. "Partner" means any one of the Partners.

(p) "Property" means that certain parcel of land, together with all improvements thereon, located at 5515 Little Neck Parkway, Little Neck, New York, as more particularly described in the Purchase Agreement.

SECTION II

DISSOLUTION AND WINDING UP

11.1 A. Liquidating Events The Partnership shall dissolve and commence winding up and liquidating upon the first to occur of any of the following (each a "Liq uidating Event");

{00066263.1)

15

Supreme Court Records Online Library - page 16 of rn

Section 1.4;(a) the date for ending of the term of the Partnership as provided in

(b) the happening of any other event that, in the judgment of the General Partner makes it unlawful, impossible, or impractical to carry on the business of the Partnership;

(c) the bankruptcy of the sole General Partner unless all the Limited Partners, within thirty (30) days after receiving notice thereof, appoint a successor General Partner;

(d) any event which causes there to be no General Partner, unless all the Limited Partners, within thirty (3) days thereafter appoint a successor General Partner;

(e) interest in the Property.

the date upon which the Partnership shall dispose of its entire

11.2 Winding U p. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership's business and affairs. The General Partner (or, in the event there is no remaining General Partner, any Partner or liquidator elected by holders of 60% in Interest of the Limited Partners) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership's liabilities and assets. The Partnership assets shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom and any cash of the Partnership, to the extent sufficient therefore, shall be applied and distributed in the following order:

(a) First, to the payment and discharge of all of the Partnership's debts and liabilities to creditors (including to the Limited Partners after unaffiliated creditors) other than the General Partner or reserves therefore and for contingencies as determined by the General Partner or liquidator;

{00066263.1}16


h

h

To

·• ' the wi is hereby admitted.

8 JO 8l aBed - i11e1q11 aunuo sp1mati ,.mo::, awa1dns

Plaintiff,

-against-

LYFORD HOLDINGS, LTD., MITCHELL STERN, SAVOY MANAGEMENT CORPORATION, SAVOY SENIOR HOUSING CORP.,JACOB FRYDMAN, WHITE ACRE EQUITIES, LLC, TUSCANY BUILDERS, LLC, TIVOLI PARTNERS LLC, and SAVOY LITTLE NECK ASSOCIATES, L.P.,

Defendant.

AMENDED VERIFIED COMPLAINT

STRASSBERG & STRASSBERG, P.C.Atto n 1 f

By: ,- l. \ / { V Todd Strassberg, Esq.

57 West 381 Street, 8th FloorNew York, New York 10018

(2 I 2) 736-9500

Dated,

Attomey(s) for

[ ]Notice ofEntry that the within is a true copy of anduly entered in the office of the Clerk of the within named Court on

[ ] Notice of Settlement that an OrderHON.on 19 at

of which the within is a true copy will be presented for settlement to the one of the Judges of the within named Court, atM.

Dated, Yours, etc.

To:

STRASSBERG & STRASSBERG, P.C.Attorneys for Plaintiff57 West 381 Street, gth Floor New York, New York 10018 (212) 736-9500

SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY

PRESENT: PART 11

Index Number :

100005/2009 PECKAR &

ABRAMSON , P.C.

vs.LYFORD HOLDINGS, LTD.

SEQUENCE NUMBER :001

DISMISS ACTION

INDEX NO .

MOTION OATE

MOTION SEQ,1\10.

MOTION CAL, NO.

,n this motion to/for -------

PAPERS N UMBl;REQ.

Notice of Motion/ Order to Show Cause - Affidavits - Exhibits ...

Answering Affidavits - Exhibits

-------------

Check one: FINAL DISPOSITION

Check if appropriate: DO NOT POST

J .S.C.

X NON-FINAL DISPOSITION

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 11- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --XPECK.AR & ABRAMSON, P.C.,

Plaintiff,

-against-

LYFORD HOLDINGS, LTD., MITCHELL STERN, SAVOY MANAGEMENT CORPORATION, SAVOY SENIOR HOUSING CORP., JACOB FRYDMAN, WHITE ACRE EQUITIES, LLC, TUSCANY BUILDERS, LLC, TIVOLI PARTNERS, LLC,and SAVOY LITTLE NECK ASSOCIATES, L.P.,

Defendants.- - - - - - - - - - - - - - - - - - - - - - - - -·-----------------XMADDEN, J.:

Index No . .100005/09

In 2006, plaintiff Peckar & Abramson, P.C. (P&A) obtained a default

judgment against defendant Savoy Little Neck Associates, L.P. (Savoy Little Neck) for legal

services rendered, which judgment remains unsatisfied. In this action, P&A alleges that Savoy

Little Neck "wrongfully' distributed and/or transferred the money to various entities, including

its general and limited partners, prior to fulfilling its obligation to pay P&A the money that it

was

owed, and asse1ts several causes of action seeking the recovery of such funds, in order to collect

on the judgment.

Defendants Savoy Little Neck, Lyford Holdings, Ltd. (Lyford), Savoy

Management Corporation (Savoy Management), Savoy Senior Housing Corp. (SSHC), Jacob

Frydman., White Acre Equities, LLC (White Acre}, Tuscany Builders, LLC (Tuscany) and Tivoli

Partners LLC (Tivoli)' now move, pursuant to CPLR 3211 {a) (3), (5) and (7), for an order

Defendant Mitchell Stem is the only defendant who does not move to dismiss thecomplaint.

dismissing the complaint on the grounds that P&A has no legal capacity to sue, the statute of

limitations has expired, and the pleading fails to state a cause of action.

BACKGROUND

Accepting the allegations of the complaint as true (Leon v Martinez, 84 NY2d 83

[1994]), the following facts emerge: defendant Savoy Little Neck and non-party Savoy Boro Park

Associates, L.P. (Savoy Boro Park), a related entity, were each in the business of running assisted

living facilities (Complaint, ,r 19). Savoy Little Neck operated pursuant to an Agreement of

Limited Partnership dated December 23, 1998, and amendments thereto (id., 112). At a certain

point, Savoy Little Neck purchased property located at 55-15 Little Neck Parkway, Little Neck,

New York (the Property), which it converted into an assisted living facility (id., ,r 13).

Savoy Little Neck is one of more than a dozen entities operated by defendant

Frydman, an attorney, who is also an owner and/or indirect beneficiary of each related entity

(id.). All defendants other than Savoy Little Neck either owned limited partnership interests in

Savoy Little Neck, or were controlled by Frydman (either directly or via entities Frydman

controlled) (id.,,20)- Frydman was a limited partner of Savoy Little Neck (id.,,r 21).

Defendant SSHC was the managing member of non-party Alata Knoll, LLC, the corporate

general partner of Savoy Little Neck and Savoy Boro Park (id., ,i 15, 22}.

In 2003, P&A, a law firm, was engaged by Savoy Little Neck and Savoy Boro

Park for legal services ( id., 19). Although Savoy Little Neck and Savoy Boro Park entered

into an agreement to pay P&A's outstanding legal fees over a period of time, Savoy Little Neck

failed to make payments required under that agreement. On April 5, 2004, P&A commenced an

action entitled Peckar & Abramson P. C. v Savoy Little Neck Assocs_, L.P. and Savoy Boro Park

2

Assocs., L.P. (Sup Ct, NY County, Index No. 105621/04) for breach of contract (id., ,r 14). On

February 22, 2006, judgment was entered against Savoy Little Neck in the amount of

$237,731.75, which judgment remains unsatisfied (id., ,i r 16-17). P&A asserts that, as a result, it

is a creditor of Savoy Little Neck pursuant to Article 10 of the New York Debtor and Creditor

Law (id., 18).

P&A contends that, after commencement of the underlying action, Savoy Little

Neck sold the assisted living facility, and made other payments and transfers to or for the benefit

of defendants. According to P&A, these transfers, which occurred over a period of six months,

were designed to avoid the P&A judgment, and/or controvert the express terms of the Savoy

Little Neck partnership agreement.

Specifically, P&A alleges that, in June 2004, Savoy Little Neck conveyed the

Property to an unrelated entity, CRP Little Neck, L.P. (id., 124). As of the day the Property was

sold, Savoy Little Neck was insolvent, and its major remaining asset was a claim for a property

tax refund (id.,,r 25). According to P&A, the sale of the facility is a "liquidating event"

under the Savoy Little Neck partnership agreement (id., I47). Savoy Little Neck then made

numerous

payments to defendants (Complaint, 128; see id., Ex A).

Prior to the commencement of the underlying action, Savoy Little Neck

maintained three checking accounts at North Fork Bank (NFB): an operating account, a payroll

account and a checking account ( id.,,26). Frydman was a signatory on all NFB checking

accounts (id., 127). In the 10 days before the sale of the Property, Savoy Little Neck depleted

several hundred thousand dollars from its NFB checking account, and transferred the cash therein

, to defendants White Acre, Tivoli, Tuscany, and non-party Frydman & Co. (id., ,i 29; see id., Exh ,

3

A). On September 2, 2004, Savoy Little Neck depleted the NFB payroll account by transferring

the remaining balance of $3,008. 97 to White Acre, after which the account was closed (id.,,r 30).

On September 24, 2004, the Department of Finance of the City of New York

issued a property tax refund check payable to Savoy Little Neck in the amount of $722,365.43

(the Property Tax Refund) (id., 32). On September 30, 2004, the Property Tax Refund check,

which was endorsed "Savoy," was deposited into the "Operating" account of Savoy

Management, an entity related to Savoy Little Neck (id., 1r 33, 37). Within 15 days after

deposit, all proceeds of the Property Tax Refund were depleted, leaving the Savoy Management

operating account with a negative balance (id., 138).

From the Property Tax Refund proceeds, Savoy Management transferred

$425,000 to defendant Mitchell Stem, $154,299.14 to defendant Lyford, the majority (49.5%)

limited partner of Savoy Little Neck, and $65,000 to defendant White Acre (id., 139).

According to Schedule A attached to the complaint, (which indicates that $722,265.43 as

opposed to $722,365.43 was deposited in the account), the transfer to White Acre was made on

October I , 2004, the transfer to Lyford was made on October 12, 2004, and the transfer to

Mitchell Stem was made on October 15, 2004 and another $85,000 was transferred to non-party

Armstrong Management Corporation on October 15, 2004. P&A asserts that, in addition to the

$65,000 paid from the Property Tax Refund, Savoy Little Neck also transferred additional funds

to White Acre, allegedly making the total transfers to White Acre in excess of the amount of the

unsatisfied judgment (id., i!44).

The complaint contains six causes of action. The first cause of action alleges a

violation of Savoy Little Neck's limited partnership agreement. The second cause of action

4

alleges a violation of New York Revised Limited Partnership Act (RLPA) § 121-607. The

remaining four causes of action allege violations of the New York Debtor and Creditor Law

(DCL). The third, fourth and fifth causes of action claim violations of DCL §§ 273, 273-a, 274,

275, 276, 277, 278 and/or 279. The sixth cause of action alleges a violation of DCL § 276-a.

ANALYSIS

The first cause of action alleges a breach of contract claim against defendants

based on Savoy Little Neck's limited partnership agreement (the LP Agreement). P&A

maintains that, under the terms of the LP Agreement, Savoy Little Neck's June 2004 sale of the

Property constituted a "Liquidating Event," and P&A was an "unaffiliated creditor" entitled to be

paid before defendants from the proceeds of the Property Tax Refund. Defendants seek

dismissal of this cause of action on the ground that P&A lacks legal capacity to bring this clairn,

because it was not a party to the LP Agreement, and the complaint does not claim that P&A was

a third-party beneficiary of the LP Agreement. During oral argument, P&A consented to the

withdrawal of the first cause of action, and as such, it is dismissed.

In the second cause of action, P&A claims that defendants violated RLPA § 12 l-

607 by knowingly accepting wrongful distributions from the partnership. However, RLPA

§ 121-607 (c) specifically states:

Unless otherwise agreed, a limited partner who receives a wrongful distribution from a limited partnership shall have no liability under this article or other applicable law for the amount of thedistribution after the expiration of three years from the date of the distribution

Here, the complaint alleges that the complained-of distributions occurred between

May and October 2004. The complaint was not filed until December 2008, more, than four years

5

after the date of the alleged wrongful distributions, and at oral argument P&A conceded that this

claim was untimely.

The third, fourth, fifth and sixth causes of action are all brought pursuant to the

DCL, and are based upon the allegation that "all defendants, other than Savoy Little Neck, either

owned limited partnership interests in Savoy Little Neck or were controlled by Frydman (directly

or via entities Frydman controlled) (Complaint, ,r 20). Defendants argue that P&A's claims

against Savoy Little Neck's limited partners brought pursuant to the DCL are time-barred by

section J 21-607 (c), asserting that the three year statute of limitations contained in RLPA § 121-

607 (c) applies to all of P&A's claims arising from asserted "wrongful distributions."

In opposition to the motion, P&A argues that the longer six-year statute of limitations

governing fraudulent conveyances under the DCL applies to the third, fourth, fifth and sixth

causes of action, and not the three year time limit under RLPA § 12-607 (c). P&A alternatively

contends that the three-year limitations period in RLPA § 12-607 (c) applies only where the

limited partnership is the plaintiff, and does not apply to "innocent creditors" like P&A2.who

step into the shoes of the limited partnership.

At issue here is the interpretation of RLPA § 12-607 and, in particular, whether the three-

year statute of limitations provided under subsection (c) relates to claims, like those at issue

here, which are brought by a creditor to recover under the DCL. RLPA § 121-607 provides:

2In reply, P&A asserts that in the second cause of action, P&A seeks recovery for payments of wrongful distributions by "stepping into the shoes of ' Savoy Little Neck whereas in the fraudulent conveyance claims (i.e. the third, fourth, and fifth causes of action) P&A seeks to recover "in its own right." Whatever the legal significance of this distinction, the court need not address it since as explained herein the three-year statute of limitations under RLPA § 121- 607(c) applies to any claim against a limited partner who receives a wrongful distribution.

6

(a) A limited partnership shall not make a distribution to a partner to the extent that, at the time of the distribution, after giving effect to the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their partnership interests and liabilities for which recourse of creditors is limited to specified property of the limited partnership, exceed the fair market value of the assets of the limited partnership, except thatthe fair market value of property that is subject to a liability for which the recourse of creditors is limited shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds that liability.

(b) A limited partner who receives a distribution in violation of subdivision (a) of this section, and who knew at the time of the distribution that the distribution violated subdivision (a) of this section, shall be liable to the limited partnership for the amount of the distribution. A limited partner who receives a distribution in violation of subdivision (a) of this section, and who did not know at the time of the distribution that the distribution violated subdivision (a) of this section, shall not be liable for the amount of the distribution. Subject to subdivision (c) of this section, this subdivision shall not affect any obligation or liability of a limited partner under a partnership agreement or other applicable lawfor the amount of a distribution.

(c) Unless otherwise agreed, a limited partner who receives a wrongful distribution from a limited partnership shall have no liability under this article or other applicable law for the amount of the distribution after the expiration of three years from the date of the distribution.

(emphasis supplied).

In Williamson v Culbro Corp. Pension Fund, 41 AD3d 229 (1st Dept 2007], lv denied,

10 NY3d 702 (2008], the Appellate Division, First Department considered whether claims

for unjust enrichment and money had and received asserted by a successor liquidating trustee

on behalf of a partnership to recover distributions allegedly wrongful paid to defendants

were governed by the three-year statute of limitations prov1ded by PA § 12l-607(c). The

trial

7

court decision found that subdivision (c) did not apply because section 121-607 limits the three

year period to wrongful distributions described in subdivisions (a) and (b), that is those

distributions which would render the partnership insolvent and were received by a partner

knowingly that such distribution would lead to insolvency.

The First Department rejected the trial court analysis writing that it was "contrary to [the

statute's] plain language" and that "the limitation period applies when a limited partner recei ves

a 'wrongful distribution.' The term 'wrongful' is plain and refers not only to distributions

thatrender a partnership insolvent, but any improper distribution. Moreover, the subdivision

states that the limited partner receiving a 'wrongful distribution' shall have no liability after

three years 'under this article or other applicable law.'" 41 AD3d at 331. The First

Department explained that "while subdivision (b) makes a limited partner liable for a

violation of subdivision (a) only to the extent that the limited partner knew the distribution

rendered the partnership insolvent, it expressly states that this does not affect 'liability of a

limited partner under a partnership agreement or other applicable law for the amount of a

distribution' but such liability is 'subject to subdivision(c)."' The court then wrote "[i]t is

hard to imagine how this sentence can mean anything other than that the limited partner's

liability for distributions 'under

the partnership agreement or other applicable law' is subject to the three-year statute of

limitations."Id. at 232.

Moreover, while Williamson did not involve claims under the DCL, the First Department

cited with approval the decision in Matter of Die Fliedermaus LLC, 323 BR 101, 108 [SD NY

2005], in which the Bankruptcy Court interpreted the almost identical language in § 508 of the

· Limited Liability Company Law, a sister statute based upon the RLPA, and found that

8

"[w]rongful is a broad term and the common understanding of the term would include

distributions that could be recovered as either constructive or intentional fraudulent conveyances

under the DCL, or as distributions based on an alleged breach of an LLC operating agreement."

Accordingly, based on Williamson, the court finds that the causes of action based on violation

of the DCL are governed by the three-year statute of limitations contained in RLPA § 12-607

(c).

In addition, contrary to P&A' s assertion, Williamson is not "factually dissimilar"

because it involved claims by the partnership itself against former partners, and not claims by

"innocent creditors" of the partnership. The plaintiff in Williamson was not the partnership, but

a liquidating trustee. Such a liquidating trustee may assert claims on behalf of the partnership,

but the true beneficiaries of such claims are creditors, who are first in line for any resulting

distributions (see RLPA § 121-804); see also Mastel v Petryc/..'1·, _ Misc 3d _, 885

NYS2d 397 [Sup Ct, NY County 2009] [claims of plaintiff, a former employee who was essentially

a creditor of defendant, for fraudulent conveyance under the DCL, were barred by three-year

limitation set forth in LLCL § 508 (c)]; see also Walker, Limited Liability Companies &

Partnerships § 7:11 [1 West's NY Prac Series 2002 and Supp 2008] ["A member who

knowingly receives a wrongful distribution is not liable to the LLC or to creditors after three

years from the date of distribution''] [interpreting identical language in Limited Liability

Company Law § 508 (c)J [emphasis added]).

Plaintiff further contends that the three-year statute of limitations only applies to

claims asserted by the partnership itself, on the ground that the phrase "liable to the limited

partnership" in subdivision (b) of 121-607 should be grafted onto subdivision (c). However, a

plain reading of the statute reveals that there is no limitation in subdivision (c) to the application

9

of the three-year statute of limitation, as to either to the type of claim or the claimant. As the

First Department noted in Williamson, the Legislature's use of qualification in one section of the

statute, and its failure to use such qualifications in another section, represents a deliberate choice

that should not be disregarded (see Williamson v Culbro Corp. Pension Fund, 41 AD3d 229,

supra [reversing trial courts's determination that subdivision (c) did not apply because section

121-607, when read as a whole, limits the three-year period to wrongful distributions made to

withdrawing partners that rendered the partnership insolvent]).

P&A next argues that allegedly fraudulent transfers of the proceeds of the Property

Tax Refund do not constitute ''distributions" within the meaning of RLPA, and therefore the

three year statute of limitations does not apply. At issue here are the transfers which are the

subject of the third and fourth causes of action of the complaint which allege that the proceeds

of Property

Tax Refund were transferred on September 24, 2004, into an operating account of Savoy

Management, an entity related to Savoy Little Neck, without consideration, and that in October

2004 in what the complaint labels as "the Little Neck Final Distribution," another transfer was

made to defendants which was also allegedly made without consideration. The moving

defendants identified in Schedule A of the complaint as receiving this Final Distribution are

White Acre and Lyford.3

The term "distribution" is defined under RLPA § 121-101 to mean "the transfer of

property by a limited partnership to one or more of its partners." P& A argues that since the

proceeds of Property Tax Refund were transferred to White Acre arid Lyford by Savoy

3Defendant Mitchell Stem, who is not moving to dismiss, is also alleged to have received part of the final distribution. '

10

Management and not by the limited partnership, i.e. Savoy Little Neck, that the transfers do not

qualify as distributions. This argument is unavailing as the mere fact that a limited partnership

uses a related entity as a conduit to transfer property is insufficient to take it out of the definition

of distribution. Significantly, the facts, as pleaded, make clear that the proceeds were in Savoy

Management's operating account for approximately 15 days, and that the proceeds remained in

the account until they were distributed to the limited partners.

P.A. next argues that certain transfers in the complaint were not distributions but

were returns on capital subject to Partnership Law § 106(4). This argument is also unavailing.

Although a limited partner receiving a return on capital is liable to the partnership for any

sum necessary to discharge the partnership's liability to its creditors, the return of capital

from a partnership is nonetheless considered a distribution. Whitley v. Klauber, 51 NY2d 555,

563 [1980]; see also, Rand LLC v. Young, 384 BR 94 [D NJ 2008][noting that "the typical

nature of a distribution is the distribution of profits or the return of capital]; Mostel v Petrycki,

_ Misc 3d ' 2009 NY Slip OP 29363 [Sup Ct, NY County 2009] [return to defendant

managing manager of limited company of $300,000 of his invested capital was "distribution"

under LLCL

§ 508].

P&A also argues that the transfers were not distribution as they were made to Savoy

Management to pay business expenses and debts, and asserts that Savoy Management received

$360,650 for payment of a business debt and $361,715.43 without consideration. Notably, this

argument is contrary to the facts as alleged in support of the third and fourth causes of action

under the DCL. These causes of action are not based on an allegation that Savoy Capital

received money for a business debt or otherwise retained the proceeds from the Property Tax

11

Refund, but instead, that Savoy Management transferred such proceeds to White Acre, Lyford,

Mitchell Stern and a nonparty. Thus, based on the allegations in the complaint, the transfers of

the proceeds of Property Tax Refund constitute distributions within the meaning of RLPA.4

Accordingly, as P&A's claims for relief based on violations of DCL are outside the

applicable three-year period provided under RLPA § 12607 (c), these claims must be dismissed

as time-barred.

In view of the above, it is hereby

ORDERED that the motion to dismiss is granted and the complaint is hereby

severed and dismissed as against moving defendants Lyford Holdings, Ltd., Savoy Management

Corporation, Savoy Senior Housing Corp., Jacob Frydman, White Acre Equities, LLC, Tuscany

Builders, LLC, Tivoli Partners LLC and Savoy Little Neck Associates, L.P., and the Clerk is

directed to enter judgment in favor of said defendants; and it is further

ORDERED that the action shall continue as against defendant Mitchell Stem and

the remaining parties shall appear for a preliminary conference on January 7, 2010 at 9:30 am.

Dated: December 2009

4While the complaint alleges that Savoy Little Neck and Frydman provided Lyford with a spreadsheet entitled "Little Neck Distribution" indicating that $360,650 of the Property Tax Refund was used to pay a Construction Management fee (Complaint, 41), this allegation is not used as a basis for the DCL claims, and there is no allegation that Savoy M.!111agement was paid this fee or that it retained any part of Property Tax Refund.

12

Documents

Peckar _ Abramson vs. Lyford Holdings, Et Al