Schultz v. Martinez

Schultz v Martinez 2024 NY Slip Op 31542(U) April 30, 2024 Supreme Court, New York County Docket Number: Index No. 655430/2023 Judge: Joel M. Cohen 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. 655430/2023 NYSCEF DOC. NO. 16 RECEIVED NYSCEF: 04/30/2024

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 03M ----------------------------------------------------------------------------------- X HARVEY SCHULTZ, ANDREA SCHULTZ, SASHA INDEX NO. 655430/2023 TEHRANI, Plaintiffs, MOTION DATE 02/29/2024 - V - MOTION SEQ. NO. 001 ANTHONY R. MARTINEZ, NOKAMA EQUITIES, LLC, DECISION+ ORDER ON Defendants. MOTION ----------------------------------------------------------------------------------- X HON. JOEL M. COHEN: The following e-filed documents, listed by NYSCEF document number (Motion 001) 7, 8, 9, 10, 11, 12, 13, 14, 15 were read on this motion for DEFAULT JUDGMENT Plaintiffs Harvey Schultz, Andrea Schultz and Sasha Tehrani ("Plaintiffs"), move for an Order pursuant to CPLR 3215 for entry of a default judgment against Defendant Nokama Equities, LLC (the "Company") and Anthony Martinez (collectively, "Defendants") on liability for the relief demanded in Plaintiffs' Complaint dated October 31, 2023, and setting an inquest to determine damages.

According to the Complaint, Mr. Martinez induced Plaintiffs to invest approximately $520,000 with the Company, by promising Plaintiffs that the Company would sell its real estate interests and that Plaintiffs' investment would be liquidated in a five-to-seven-year time frame (NYSCEF 1 ,J,J2-6). When Mr. Martinez failed to sell the real estate interests, Plaintiffs sought dissolution of the Company. Mr. Martinez vigorously opposed the claim, and the court found that Mr. Martinez could and would "carry on the business in accordance with the ... Operating Agreement." (id. at ,J,J9-12). Thereafter on March 7, 2019, Plaintiffs withdrew as members of

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1 of 5 [* 1] INDEX NO. 655430/2023 NYSCEF DOC. NO. 16 RECEIVED NYSCEF: 04/30/2024 the Company, triggering their right "to an amount equal to the value of the Member's Membership Interest in the Company, to be paid over a period not to exceed five years together with interest" pursuant to the express terms of the Company's Operating Agreement (NYSCEF 2 § 12.2(b)). However, Mr. Martinez has failed to pay the Plaintiffs, refuses to communicate with them regarding a payment schedule or plan, and has profited from the increased value of the real estate between March 7, 2019 and the present day (NYSCEF 1 ,J,Jl 1-12, 97). Plaintiffs have now asserted claims for declaratory judgment, breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, breach of fiduciary duty, conversion, constructive trust, equitable accounting, and temporary receivership (NYSCEF 1).

The time for the Defendants to answer has expired (January 12, 2023), and Defendants have not answered or otherwise moved with respect to the Summons and Complaint in this action. 1 For the reasons described below, the motion for default judgment is granted in part.

Plaintiffs have submitted unrebutted evidence demonstrating compliance with the requirements of CPLR 3215 through the Affirmation of Siddartha Rao, Esq. dated February 29, 2024 (NYSCEF 11), and the Affidavit of Harvey Schultz, sworn to on February 26, 2024 (NYSCEF 13), together with the exhibits annexed thereto (NYSCEF 14-15), including the Complaint setting forth the facts establishing Plaintiffs' claims. Plaintiffs also submitted proof that service of summons and complaint was made upon Defendants (see NYSCEF 5-6). No opposition has been filed.

INDEX NO. 655430/2023 NYSCEF DOC. NO. 16 RECEIVED NYSCEF: 04/30/2024

Therefore, Plaintiffs' motion for default judgment is granted as to ( 1) the claims for declaratory judgment, constructive trust, and equitable accounting; and (2) liability only on Plaintiffs' breach of contract claim and unjust enrichment claim. 2 The Court directs the parties to an inquest, before a Special Referee, to hear and make a recommendation to the Court as to an equitable accounting and the amount of damages, if any, to which Plaintiffs are entitled under their breach of contract and unjust enrichment claims.

Defendants may seek a vacatur of the instant default judgment if it can satisfy the requirements of CPLR § 5015, CPLR § 317, or any other relevant law.

Accordingly, it is ORDERED that Plaintiffs' Motion for default judgment against Defendants is GRANTED IN PART as to Plaintiffs' claims for declaratory judgment, breach of contract, unjust enrichment, constructive trust, and equitable accounting; the motion is otherwise denied; it is further ADJUDGED and DECLARED that the Company's operating agreement requires Mr. Martinez and the Company to provide a payment schedule based on the value of the Plaintiffs'

INDEX NO. 655430/2023 NYSCEF DOC. NO. 16 RECEIVED NYSCEF: 04/30/2024 membership interests as of March 7, 2019 with the final payment to be made no later than March 7, 2024; it is further ORDERED AND ADJUDGED that a constructive trust is granted imposing an equitable trust upon the Company and its interests, making Mr. Martinez an equitable trustee for the benefit of Plaintiffs; it is further ORDERED that this matter is directed to an Inquest before a Special Referee who shall hear and make a recommendation to the Court as to (1) an equitable accounting; and (2) Plaintiffs' damages, if any, on the breach of contract and unjust enrichment claims; and it is further ORDERED that the powers of the JHO/Special Referee to determine shall not be limited further than as set forth in the CPLR; and it is further ORDERED that this matter is hereby referred to the Special Referee Clerk (Room 119 M, 646-386-3028 or [email protected]) for placement at the earliest possible date upon the calendar of the Special Referees Part (Part SRP), which, in accordance with the Rules of that Part (which are posted on the website of this Court at www.nycourts.gov/supctmanh at the "Local Rules" link), shall assign this matter to an available Special Referee to determine as specified above; and it is further ORDERED that Plaintiffs' counsel shall serve a copy of this order with notice of entry on Defendants within five days and that counsel for Plaintiffs shall, after thirty days from service of those papers, submit to the Special Referee Clerk by fax (212-401-9186) or email an Information Sheet (which can be accessed at http://www.nycourts.gov/courts/ljd/supctmanh/refpart-infosheet-10-09.pdf) containing all the information called for therein and that, as soon as practical thereafter, the Special Referee Clerk

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This constitutes the Decision and Order of the Court.

4/30/2024 DATE JOEL M. COHEN, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION GRANTED □ DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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