Preview
FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946
NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021
STATE OF NEW YORK
SUPREME COURT COUNTY OF SARATOGA
WEN MEI LU, CHIN CHUNG LIN LU,
LI HUA LU AND LU HOLDING, LLC
Plaintiffs,
Index No: 2016-2946
-against-
RJI No.: 45-1-2016-1480
WEN YING GAMBA, YUEN HSIANG LU,
and CHUEN LOU, LLC
Defendants.
Defendants'
Memorandum of Law in Suppert of
Motion to Continue the Receivership
Preliminary Statement
Plaintiffs commenced this action against their family asserting a variety of theories all of
which are targeted at obtaining ownership of two parcels of real property in Saratoga, and one in
Guilderland. Throughout the pendency of this action, the Saratoga Properties have been under
Receivership. A jury trialwas conducted before this Honorable Court. At the conclusion of the
trial,the Jury awarded judgment in favor of plaintiffs. Prior to the verdict, defendants made an
application for a directed verdict arguing, among other things, that they were entitled to judgment
as a matter of law on the issue of "unclean hands". At the conclusion of the trial, defendants
renewed their application for a directed verdict and this Honorable Court set a briefing schedule
requiring the motion to be filed by September. In the interim, plaintiffs filed a proposed judgment
including a provision for the discharge of the Receiver, Defendants objected to the discharge of
the Receiver and now file the present Order to Show Cause requesting that the Receiver remain in
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place pending resolution of the Post-Trial Motion and, if necessary, for long enough to permit
defendants to request that the Appellate Division maintain the Receiver during the pendency of
any appeal.
As argued in greater detail below, the Receivership should be continued during the
pendency of this matter since, among other things, defendants have strong legal arguments that are
likely to result in a reversal of the jury's verdict. Further, discharging the receiver would be
manifestly prejudicial at this stage. In fact, the Receiver was requested by plaintiffs who, at that
time, acknowledged that need for a receiver to protect the status quo. Over the course of this
litigation, the parties have sharply disagreed with the manner in which the properties should be
handled.
If the Receivership were to be terminated, itis evident that defendants could be irreparable
hârmed by the decisions that plaintiffs may make with respect to the properties. For example, one
of the properties is vacant currently. If the receivership is ended, plaintiffs may enter a long-term
lease or take other action that would leave the property encumbered. These very coñcerns were
foisted plaintiffs in support of their application for the initial appointment of the Receiver and
by
nothing has changed except the proverbial "shoe is on the other foot". Aside from this, the
Receiver has collected substantial rent over the pendency of this action and those funds should not
be released to plaintiffs until the issues are conclusively resolved in their favor after resolution of
the post-trial motions and, ifnecessmy, the appeal. Indeed, even has of the filing of this motion
plaintiffs and Duo have already kñôwh;gly circumvented the Receiver and personally collected
rent from the Duo property in direct violation of the current Receivership order [Exhibit, Emails].
In short, there is a significant likelihood that the verdict will be overturned by post-trial motion
and/or appeal and defendants would be irreparably harmed if the receivership is terminated.
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Argument
L The Receiver desld be continued or, at the very least, defendañts should have
the opportunity to maintain the continuity of the Receivership until the
Appellate Division has the opportunity to rule on the matter.
Under the applicable provisions of the CPLR, this Honorable Court has the discretion to
maintain the Receivership after the judgment. It is respectfully submitted that the Receivership
should be mâlntained or, at the very least, that Pursuant to CPLR 6401(c), "[a] temperary
receivership shall not continue after final judgment unless otherwise directed by the court".
Pursuant to CPLR 6405, which provides as follows: "Upon motion of any party or upon its own
initiative, the court which appointed the receiver may remove him at any time". Plaintiffs seek to
circumvent the motion necessary to remove the Receiver with a simple provision of the proposed
judgment. Since plaintiffs are a party requesting the removal, CPLR 6405 requires a formal
motion. Regardless, this Honorable Court has the discretion to maintain the Receivership and, for
the reasons set forth below, it issubmitted that itshould.
A. The Receiver should be maintained to ensure the status quo:
Itis respectfully submitted that the receiver should be maintained through post trialmotions
and, if necessary, an appeal to maintain the status quo (see Nelson v Nelson, 99 AD2d 917; Bank
of Am., N.A. v Oneonta L.P., 97 AD3d 1023). It isrespectfully submitted that the Receiver should
be maintained in this case for several reasons. First, this Honorable Court has n3aintained a
Receiver for the properties over the pendency of this action. As such, it has already been
determined as a matter of law that the circumstances of this case warrant the imposition of a
receivership. As plaintiffs themselves put itwhen they sought to continue the Receiver after the
firstAppeal, "the circumstances have not changed in any way since the Appellate Division held
that a preliminary injunction and temporary receivership are necessary, such that the Appellate
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here"
Division's findings [on the Receivership] are the law of the case and binding [Exhibit A,
Crain Affirmation in Support, at ¶ 12]. Simply put, to continue the receivership will "maintain the
status quo while the parties [continue to] litigate a complicated family dispute, and will conserve
parties"
the resources of both the Court and the [Exhibit A, Crain Affirmation in Support, at ¶ 17],
"The receivership has allowed the parties to navigate [various] dispute[s] without the need for
role"
judicial intervention, due largely in part to Mr. Harper's authoritative [Exhibit A, Crain
Affirmation in Support, at ¶ 14]. As plaintiffs put itwhen they were seeking an injunction and the
receivership, "[d]estruction and material alterations to real property, during the pendency of a
law"
dispute regarding ownership, constitute irreparable harm as a matter of [Exhibit A, Crain
Affirmation in Support, at ¶ 143].
In this case, nothing has changed except a verdict was rendered by the July. As discussed
below, defendants have extraordinarily strong appellate and post-trial arguments that are likely to
result in reversal, Simply put, the Receivership should continue in this case until there is finality.
Moreover, over the last six years the Receiver has collected substantial funds which plaintiffs seek
to have disbursed, The funds should be maintained by the Receiver to ensure that they are available
to the prevailing party in this action.
Defendants will be harmed if the is ended. If the is
irreparably Receivership receivership
ended, plaintiffs will then be left to their own devices to make decisions that will have lasting
impacts on the properties, For instance, the Hibachi Property is vacant. Plaintiffs could make
material changes to the property or to have itencumbered by a tenant, Similarly, plaintiffs are
seeking the immediate ejectment of Wen Fu Lu from the house located in back of Hibachi where
he has resided for the last six years. Wen Fu Lu has been renting the home behind the Hibachi
Property from the Receiver. It issubmitted that itwould be unjust and harmful if Wen Fu Lu were
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to be ejected immediately fiom his home for the last six years. This Honorable Court should
maintain the status quo to protect Wen Fu Lu as well. Put plainly, all defendants are looking for
is the continued iñãnagement by the Receiver that has already taken place for the lastseveral years
so that the meritorious legal defenses remaining may be adjudicated, Indeed, as discussed below,
the post-trial motion and/or an appeal are likely to result in the reversal of the jury's verdict.
B. Defendants maintain a strong likdiheed to succeed on the merits:
Aside from the verdict, nothing has otherwise changed. Despite the verdict, defendants
maintain a significant likelihood of success on the merits in this case. With respect to the verdict,
there are issues to be addressed on appeal and post-trial motions that are likely to result in the
reversal of the verdict. Most significantly in this regard, the issue of unclean hand is one that
defendants are entitled to judgment as a matter of law on. As this Court is acutely aware, plaintiffs
trust"
casimitted perjury with respect to the very "constructive agreement that they seek to
judicially enforce by this judgment.
Defendant Wen Ying Gamba sued for a constructive trust on these very same properties in
1995. At trial in this action, plaintiffs admitted that they lied under oath about the ownership of
defend"
those properties "to against Wen Ying Gamba's claims, At that time, they testified that
their father purchased the properties with his own money and was the sole owner, In this case,
they testified that Mr. Lu was never an owner of the properties and that itwas plaintiffs and Wen
Ying Gamba's money that was used to purchase them. These circumstances amount to "unclean
hands"
as a matter of law entitling defendants to judgment as a matter of law. There is simply no
argument asserted by plaintiffs to the contrary.
hands'"
Itis well settled that "[a] party seeking an equitable remedy must not have 'unclean
(Columbo v Colunbo, 50 AD3d 617; citing Kopsidas v Krokos. 294 AD2d 406, 407). "[W]hen
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equitable relief is sought 'moral considerations of fundamental importance require that the litigant
hands'"
come into court with clean (Thomoson v 76 Coro., 37 AD3d 450, 453). The defense of
unclean hands is established where the proponent sufficiently deiliciistrãted "that the plaintiff
facts"
engaged in the ceiicealment of material (Golden Eagle Capital Coro. v Paramount Mgt.
Group, 88 AD3d 646; Forman v Guardian Life Ins. Co. of Am., 76 AD3d 886, 889). Since
plaintiffs have unclean hands, "any claim [they] may have against [defendants] based upon the
barred"
remedy of unjust enrichment is (Melius v Breslin, 46 AD3d 524).
As it relates to the present case, plaintiffs testified that they transferred the properties at
keeping"
issue to their father for "safe to protect them from defendant Gamba's claims of
owilerslilp against said properties sounding in constructive trust. Thereafter, plaintiffs admittedly
testified several times that the properties were owned by their father and that they had only been
kept in defendant Gamba's name as part of a longstanding family practice of placing the names of
children on deeds for various reasons. Credited their testimony in the present action, plaintiffs
"promise"
have admitted that they eñgãged in a fraudulent scheme to conceal the family of
equity"
ownership in exchange for "sweat to thwart Wen Ying Gamba's claim. Itis submitted that
hands"
this scheme constitutes "unclean as a matter of law. Further, as discussed below, plaintiff's
conduct in the 1990s litigation also renders their position in this action barred by the doctrine of
estoppel against inconsistent judicial positions.
"Germane to this situations is a line of cases where a plaintiff transfers property to the
defendant, usually a relative, to defeat the interests of a third party, also usually a relative, and then
the defendant, who has not been injured by the transaction, raises the doctrine when the plaintiff
property"
sues to reclaim the transferred (Yula Yula, 115 AD2d 475, citing Pattison v Pattison,
301 NY 65; Levy v Baverman, 24 AD2d 430; Pierce v Pierce, 253 App. Div, 445). Under such
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circumstances, ithas been "explicitly held that itis erroneous to require a showing of injury on the
doctrine"
defendant's part to invoke the (Yula Yula, 115 AD2d 475, citing Farino v Farino, 88
AD2d 902). It is well settled that "the plaintiff's unclean hands in participating in a course of
conduct of deception and deceit is an effective bar to all of the causes of action in the complaint,
lien"
including the cause of action for the interposition of an equitable (Wang v Wong, 163 AD2d
300). "Having êñgaged in a fraudulent scheme involving the conveyance of the premises, the
plaintiff has forfeited his right, in law or equity, to protection or recourse in a dispute involving
scheme"
his accomplices in that very (Wang v Wong, 163 AD2d 300; see also Sayres v Decker
Auto Co., 239 NY 73).
hands'
It has been repeatedly held that 'unclean bars a claim for constructive trust where,
as here, "the plaintiff's admitted involvement in [an] alleged scheme whereby title to the subject
to the * * *
property, in which he claims to have an ownership interest, was conveyed defendant
creditors"
in order to place the property beyond the reach of the plaintiff's judgment (Dolny v
Borck, 61 AD3d 817, citing Festinger v Edrich, 32 AD3d 412, 414 [assets transferred to protect
against fraud proceeding]: Wong v Wong, 293 AD2d 387; Farino v Farino, 88 AD2d 902 ["The
conduct of the plaintiff in concealing his assets for the purpose of escaping the enforcement of his
obligation to support his wife, is as much contrary to good morals, sound public policy, and the
spirt and letter of our laws, as the concealment of assets of a debtor for the purpose of defeating
the just claims of his creditors, neither is entitled to the aid of a court of equity"]).
In their testimony, plaintiffs uneheshedly confessed that they were involved in a scheme to
trust"
hide the alleged "constructive arrangement from defendant Gamba for years. The fruits of
their labors resulted in the settlement of the 1990s Hither House litigation which included Gamba
surrendering any rights she had under the very arrangement that plaintiffs now seek to enforce.
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"The real property whose reconveyance plaintiff sues for was admittedly alienated by plaintiff in
the first instance to it beyond the reach of [a claimant in] litigation. Under such
keep
circumstances, the relief sought was correctly denied as a matter of public policy to protect the
court"
(Wong v Wong, 293 AD2d 387; see also Jossel v Meyers 212 AD2d 55, 57-58; Walker v
Walker, 289 AD2d 225 [property deeded to wife to avoid creditors constituted inclean hands in
constructive trust]). "Given the plaintiff's admitted involvement in this alleged arrangement to
convey the property to frustrate his creditors in the collection of their legitimate debts, his claim
that [the Grantee] should now be compelled to convey titleto the premises to him pursuant to the
hands"
terms of that arrangeiñent is barred by the doctrine of unclean (Dolny v Borck, 61 AD3d
817).
plaintiffs'
Moreover, the fact that Mr. Lu may have known of scheme to hide the
hands"
arrangement is of no protection to the plaintiffs from the preclusive impact of the "unclean
doctrine. "[T]he question of whether [the recipient of title] knew of the fraudulent purpose of the
irrelevant"
transaction is (Dolny v Borck, 61 AD3d 817, citing Pattison v Pattison, 301 NY 65, 72;
Vasquez v Zambrango, 196 AD2d 840). "Having engaged in a fraudulent scheme involving the
conveyance of the premises, the plaintiff has forfeited his right, in law or equity, to protection or
scheme"
recourse in a dispute involving his accomplices in that very (Wang v Wong, 163 AD2d
hands'
300, 302). Stated differently, "[r]elief is denied under the 'clean doctrine, 'not as a
plaintiff'"
protection to a defendant, but as a disability to the (Farino v Farino, 88 AD2d 902,
quoting Reiner v North Amer. Newsoacer Alliance. 259 NY 250, 256).
Recovery of the assets in such circumstances is prohibited "as a matter of public policy in
court"
order to protect the integrity of the (Farino v Farino, 88 AD2d 902, citing Pattison v Pattison,
* * *
301 NY 65). "The allegations of the complaint represent a nefarious transfer and agreeinent
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B524,1)
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defraud"
as part of an immoral scheme to (Farino v Farino, 88 AD2d 902). "[S]ound public policy,
and the spirt and letter of our laws [prohibits] the concealmeñt of assets of a debtor for the purpose
creditors"
of defeating the just claims of his (Farino v Farino, 88 AD2d 902, quoting Bascombe v
Sargent, 195 Misc 328, 329-330). "To discourage and deter such immoral conduct, the maxim
applies not only to the immediate participants in the transaction, but also to those claiming through
transferor"
or under them such as the heirs of the (Farino v Farino, 88 AD2d 902).
* * * hands'"
"[B]y her own admissions the plaintiff does not come into court with 'clean
(Farino v Farino, 88 AD2d 902, citing Hines v Hines, 8 AD2d 804; Palumbo v Palumbo, 55 Misc2d
264, 265-266). It isanticipated that plaintiff will attempt to argue that they should nonetheless be
permitted to rely on the equitable doctrine given the fact that claim to have expended anhatantial
Plaintiffs'
funds and efforts towards the properties since they were conveyed in 1993. logic in this
regard is circular. Once the equitable remedy is barred, itis barred. Further, expending effort and
plaintiffs'
funds towards the properties does not revive the equitable claims where, as here, hands
are unclean. "Here, for the same reasons, the deed transfer was fraudulent, and any funds expended
fraud" 32"d
by plaintiffs were in furtherance of that (One St. Corp. v Stewart, 70 Misc.3d 1058).
The present case is analogous to Festinger v Edrich, 32 AD3d 412. In Festinger, the
plaintiff sought the imposition of a constructive trust against his sister. The plaintiff alleged that
he funded the purchase of real property which his sister acquired in 1994, with the understanding
that she would hold the property for his benefit. He further alleged that he transferred large
amounts of personal property and cash to his sister for safekeeping. At the time, he was the subject
of federal criminal fraud prosecutions which resulted in his obligation to pay restitution. The Court
found, among other things, that the equitable claim of constructive trust was not available on these
facts (Festinger v Edrich, 32 AD3d 412). As was the case in Festinger, plaintiffs in this case admit
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safe"
that they transferred the properties to "keep them from Gamba's constructive trust claim.
Thereafter, if their testimony in this action is credited, they engaged in a pattern of perjurious
behavior to conceal the very same arrangement they now seek to enforce. If this situation does
not constitute "unclean hands", nothing does.
"Where, as here, an action is brought to compel reconveyance of property which,
* * * immoral
admittedly, was transferred with intent to defraud the basis of such suit is and one
aid"
to which equity will not lend its (Farino v Farino, 88 AD2d 902).
"[P]laintiff conceded that he voluntarily participated in a scheme whereby title to the
subject property, in which he claims to have an ownership interest, was conveyed to the
* * * order
defendant Phillip Borck and Marilyn Borck in foreclosure in to place the
beyond the reach of the plaintiff's judgment creditors, while the paintiff retained
property
the beneficial ownership of the premises. Given the plaintiff's admitted involvement in
this alleged arrangement to convey the property to frustrate his creditors in the collection
of their legitimate debts, his claim that the Borcks now should be compelled to convey title
to the premises to him pursuant to the terms of that arrangement is barred by the doctrine
hands"
of unclean
(Dolny v Borck, 61 AD3d 817; see also Festinger v Edrich, 32 AD3d 412).
Along these same lines, plaintiffs are precluded from recovery based upon the doctrine of
judicial estoppel. "The doctrine of judicial estoppel or estoppel against inconsistent positions
precludes a party from taking a position in one legal proceeding which is contrary to that which he
changed"
or she took in a prior proceeding, simply because his or her interests have (Festinger v
Edrich, 32 AD3d 412; citing Ford Motor Credit Co. Colonial Funding Corp, 215 AD2d 435;
Kimco of NY v Devon, 163 AD2d 573, 558). In Festinger v Edrich, (32 AD3d 412), the Appellate
Division held that the doctrine applied where the plaintiff claimed that he had no assets before the
United States District Court in 2000. "In this case, the plaintiff's claim of an ownership interest
in the subject real and personal property since the 1990s is manifestly at odds with his
representations to the United States District Court that he had no money or assets, thereby
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action"
warranting the dismissal of this (Festinger v Edrich, 32 AD3d 412). The Appellate
odds"
Division found that that representation was "manifestly at with the plaintiff's rep1onoutations
in the Festinger case that he was an equitable owner of the properties at issue in that case. In the
plaintiffs'
case at bar, testimony that there was a constructive trust arrangement in place since the
odds"
1970s, was "manifestly at with their testimony in the 1990s litigation that no such
Plaintiffs'
arrangement existed. testimony is irreconcilable and constitutes unclean hands.
plaintiffs'
Further, position in this case is barred by the doctrine of inconsistent judicial positions.
Aside from this, plaintiff was permitted to call the owner of Duo restaurant as a witness at
trial. Defendants were not provided with any notice of this witness prior to the trial as he was not
disclosed. As such, defendants were denied the opportunity to depose the witness or otherwise
witness'
prepare for the testimony. Worse yet, in the context of the receivership Duo had a long
of subpoenas and not responding to demands for information requested by
history ignoring
defendants. Defendants attempted to serve a subpoena for documentation on Duo, but itsprocess
server was told that the owner that ultimately testified "had not worked there for years". In light
of this, defendants never received a response to its subpoena prior to the testimony of the surprise
witness. As ifall of this were not enough, even after the verdict Duo has continued to demonstrate
its utter disregard for the orders of this Honorable Court. In this respect, after the verdict Duo
asked the Receiver to let them know who they should pay rent to. In no uncertain terms, the
Receiver told Duo to pay the Receiver the July rent pursuant to the Receivership order [Exhibit,
8 Email Chain]. Duo acknowledged this, then paid the rent to plaintiff directly in direct
July
contravention of the order. While this separate matter does not constitute an appellate issue at this
time, itabsolutely underscores the problem with the surprise testimony of Duo. Duo had a history
defendants'
of non-compliance and disobedience with proper demands and was, and continues to
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be, obstructive to defendants. Defendants were denied an opportunity to prepare to for the witness
or to have a response to itssubpoena.
In addition to this, plaintiff was permitted to have Patty Lu avoid personally testifying and
witness"
to rely solely upon her deposition as an "unavailable without making the necessary
evidentiary showing. In this respect, plaintiff produced an uncertified and unsworn brief, redeoted,
letter from a Physician's Assistant to excuse her personal appearance. Defendants were also
denied a missing witness charge on thiswitness. It issubmitted that this was also reversable error.
As can readily be seen, defendants are likely to succeed on the merits.
C. The equities are in favor of maintaining the Receiver:
The equities also are in favor of defendants As noted above, plaintiffs are currently the
beneficiary of a verdict that allows them to enforce an oral agreement that they disavowed the
defendants'
existence of, to detriment in the 1995 litigation. When it was in their interest,
plaintiffs testified that the agreement did not exist, obtained a settlement, and now changed their
position. This is not equitable. Moreover, all defendants seek with the present application is the
same restrictions that were placed on them for the past six years. Over the course of this litigation,
defendants were the titled owners of the property, but were subjected to the restrictions of the
Receivership. Now that the shoe is on the other foot, all defendants seek is the same protection of
the status quo that was accorded to plaintiffs. It isrespectfully submitted that the equities dictate
that the receivership should be maintained.
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H. Alternatively, this Hon6ral)le Court shenM at the very least keep the Receiver
in place for a period of time long ensu;;h to allow for defendants to filea Notice
of Appeal and request the continuation of the Receiver from the Appcilate
Division.
As a final matter, if this Honorable Court is inclined to dischaige the Receiver, defendants
iespectfully request a TRO preventing the Receiver from disbursing any funds collected, or from
taking any action with respect to the property until defendants have the opportunity to filea notice
of appeal and an application for a continued receivership before the Appellate Division.
Defendants simply seek a full and fair opportunity to ensure the continuity of the receivership.
Conclusion
WHEREFORE, defendants respectfully request that this Honorable Court: (1) GRANT an
order continuing the imposition of the Receivership pending resolution of the Post-Trial Motion
and, if necessary, the Appeal from the Judgment; and (2) GRANT such other and further relief as
it deems just proper.
Dated: July 14, 2021
Albany, New York
Yours, etc.,
PHELAN, PHELAN & DANEK, LLP
By:
TIMOTHY S. BRENNAN
Attorneys for Defendants
WEN YING GAMBA, YUEN
HSIANG LU and WEN FU LU
300 Great Oaks Blvd., Suite 315
Preview
FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 STATE OF NEW YORK SUPREME COURT COUNTY OF SARATOGA WEN MEI LU, CHIN CHUNG LIN LU, LI HUA LU AND LU HOLDING, LLC Plaintiffs, Index No: 2016-2946 -against- RJI No.: 45-1-2016-1480 WEN YING GAMBA, YUEN HSIANG LU, and CHUEN LOU, LLC Defendants. Defendants' Memorandum of Law in Suppert of Motion to Continue the Receivership Preliminary Statement Plaintiffs commenced this action against their family asserting a variety of theories all of which are targeted at obtaining ownership of two parcels of real property in Saratoga, and one in Guilderland. Throughout the pendency of this action, the Saratoga Properties have been under Receivership. A jury trialwas conducted before this Honorable Court. At the conclusion of the trial,the Jury awarded judgment in favor of plaintiffs. Prior to the verdict, defendants made an application for a directed verdict arguing, among other things, that they were entitled to judgment as a matter of law on the issue of "unclean hands". At the conclusion of the trial, defendants renewed their application for a directed verdict and this Honorable Court set a briefing schedule requiring the motion to be filed by September. In the interim, plaintiffs filed a proposed judgment including a provision for the discharge of the Receiver, Defendants objected to the discharge of the Receiver and now file the present Order to Show Cause requesting that the Receiver remain in (A0548524,1} 1 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 place pending resolution of the Post-Trial Motion and, if necessary, for long enough to permit defendants to request that the Appellate Division maintain the Receiver during the pendency of any appeal. As argued in greater detail below, the Receivership should be continued during the pendency of this matter since, among other things, defendants have strong legal arguments that are likely to result in a reversal of the jury's verdict. Further, discharging the receiver would be manifestly prejudicial at this stage. In fact, the Receiver was requested by plaintiffs who, at that time, acknowledged that need for a receiver to protect the status quo. Over the course of this litigation, the parties have sharply disagreed with the manner in which the properties should be handled. If the Receivership were to be terminated, itis evident that defendants could be irreparable hârmed by the decisions that plaintiffs may make with respect to the properties. For example, one of the properties is vacant currently. If the receivership is ended, plaintiffs may enter a long-term lease or take other action that would leave the property encumbered. These very coñcerns were foisted plaintiffs in support of their application for the initial appointment of the Receiver and by nothing has changed except the proverbial "shoe is on the other foot". Aside from this, the Receiver has collected substantial rent over the pendency of this action and those funds should not be released to plaintiffs until the issues are conclusively resolved in their favor after resolution of the post-trial motions and, ifnecessmy, the appeal. Indeed, even has of the filing of this motion plaintiffs and Duo have already kñôwh;gly circumvented the Receiver and personally collected rent from the Duo property in direct violation of the current Receivership order [Exhibit, Emails]. In short, there is a significant likelihood that the verdict will be overturned by post-trial motion and/or appeal and defendants would be irreparably harmed if the receivership is terminated. {A0548524.1) 2 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 Argument L The Receiver desld be continued or, at the very least, defendañts should have the opportunity to maintain the continuity of the Receivership until the Appellate Division has the opportunity to rule on the matter. Under the applicable provisions of the CPLR, this Honorable Court has the discretion to maintain the Receivership after the judgment. It is respectfully submitted that the Receivership should be mâlntained or, at the very least, that Pursuant to CPLR 6401(c), "[a] temperary receivership shall not continue after final judgment unless otherwise directed by the court". Pursuant to CPLR 6405, which provides as follows: "Upon motion of any party or upon its own initiative, the court which appointed the receiver may remove him at any time". Plaintiffs seek to circumvent the motion necessary to remove the Receiver with a simple provision of the proposed judgment. Since plaintiffs are a party requesting the removal, CPLR 6405 requires a formal motion. Regardless, this Honorable Court has the discretion to maintain the Receivership and, for the reasons set forth below, it issubmitted that itshould. A. The Receiver should be maintained to ensure the status quo: Itis respectfully submitted that the receiver should be maintained through post trialmotions and, if necessary, an appeal to maintain the status quo (see Nelson v Nelson, 99 AD2d 917; Bank of Am., N.A. v Oneonta L.P., 97 AD3d 1023). It isrespectfully submitted that the Receiver should be maintained in this case for several reasons. First, this Honorable Court has n3aintained a Receiver for the properties over the pendency of this action. As such, it has already been determined as a matter of law that the circumstances of this case warrant the imposition of a receivership. As plaintiffs themselves put itwhen they sought to continue the Receiver after the firstAppeal, "the circumstances have not changed in any way since the Appellate Division held that a preliminary injunction and temporary receivership are necessary, such that the Appellate (A0548524.1 ) 3 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 here" Division's findings [on the Receivership] are the law of the case and binding [Exhibit A, Crain Affirmation in Support, at ¶ 12]. Simply put, to continue the receivership will "maintain the status quo while the parties [continue to] litigate a complicated family dispute, and will conserve parties" the resources of both the Court and the [Exhibit A, Crain Affirmation in Support, at ¶ 17], "The receivership has allowed the parties to navigate [various] dispute[s] without the need for role" judicial intervention, due largely in part to Mr. Harper's authoritative [Exhibit A, Crain Affirmation in Support, at ¶ 14]. As plaintiffs put itwhen they were seeking an injunction and the receivership, "[d]estruction and material alterations to real property, during the pendency of a law" dispute regarding ownership, constitute irreparable harm as a matter of [Exhibit A, Crain Affirmation in Support, at ¶ 143]. In this case, nothing has changed except a verdict was rendered by the July. As discussed below, defendants have extraordinarily strong appellate and post-trial arguments that are likely to result in reversal, Simply put, the Receivership should continue in this case until there is finality. Moreover, over the last six years the Receiver has collected substantial funds which plaintiffs seek to have disbursed, The funds should be maintained by the Receiver to ensure that they are available to the prevailing party in this action. Defendants will be harmed if the is ended. If the is irreparably Receivership receivership ended, plaintiffs will then be left to their own devices to make decisions that will have lasting impacts on the properties, For instance, the Hibachi Property is vacant. Plaintiffs could make material changes to the property or to have itencumbered by a tenant, Similarly, plaintiffs are seeking the immediate ejectment of Wen Fu Lu from the house located in back of Hibachi where he has resided for the last six years. Wen Fu Lu has been renting the home behind the Hibachi Property from the Receiver. It issubmitted that itwould be unjust and harmful if Wen Fu Lu were (A0548524.1} 4 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 to be ejected immediately fiom his home for the last six years. This Honorable Court should maintain the status quo to protect Wen Fu Lu as well. Put plainly, all defendants are looking for is the continued iñãnagement by the Receiver that has already taken place for the lastseveral years so that the meritorious legal defenses remaining may be adjudicated, Indeed, as discussed below, the post-trial motion and/or an appeal are likely to result in the reversal of the jury's verdict. B. Defendants maintain a strong likdiheed to succeed on the merits: Aside from the verdict, nothing has otherwise changed. Despite the verdict, defendants maintain a significant likelihood of success on the merits in this case. With respect to the verdict, there are issues to be addressed on appeal and post-trial motions that are likely to result in the reversal of the verdict. Most significantly in this regard, the issue of unclean hand is one that defendants are entitled to judgment as a matter of law on. As this Court is acutely aware, plaintiffs trust" casimitted perjury with respect to the very "constructive agreement that they seek to judicially enforce by this judgment. Defendant Wen Ying Gamba sued for a constructive trust on these very same properties in 1995. At trial in this action, plaintiffs admitted that they lied under oath about the ownership of defend" those properties "to against Wen Ying Gamba's claims, At that time, they testified that their father purchased the properties with his own money and was the sole owner, In this case, they testified that Mr. Lu was never an owner of the properties and that itwas plaintiffs and Wen Ying Gamba's money that was used to purchase them. These circumstances amount to "unclean hands" as a matter of law entitling defendants to judgment as a matter of law. There is simply no argument asserted by plaintiffs to the contrary. hands'" Itis well settled that "[a] party seeking an equitable remedy must not have 'unclean (Columbo v Colunbo, 50 AD3d 617; citing Kopsidas v Krokos. 294 AD2d 406, 407). "[W]hen {A0548524.1} 5 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 equitable relief is sought 'moral considerations of fundamental importance require that the litigant hands'" come into court with clean (Thomoson v 76 Coro., 37 AD3d 450, 453). The defense of unclean hands is established where the proponent sufficiently deiliciistrãted "that the plaintiff facts" engaged in the ceiicealment of material (Golden Eagle Capital Coro. v Paramount Mgt. Group, 88 AD3d 646; Forman v Guardian Life Ins. Co. of Am., 76 AD3d 886, 889). Since plaintiffs have unclean hands, "any claim [they] may have against [defendants] based upon the barred" remedy of unjust enrichment is (Melius v Breslin, 46 AD3d 524). As it relates to the present case, plaintiffs testified that they transferred the properties at keeping" issue to their father for "safe to protect them from defendant Gamba's claims of owilerslilp against said properties sounding in constructive trust. Thereafter, plaintiffs admittedly testified several times that the properties were owned by their father and that they had only been kept in defendant Gamba's name as part of a longstanding family practice of placing the names of children on deeds for various reasons. Credited their testimony in the present action, plaintiffs "promise" have admitted that they eñgãged in a fraudulent scheme to conceal the family of equity" ownership in exchange for "sweat to thwart Wen Ying Gamba's claim. Itis submitted that hands" this scheme constitutes "unclean as a matter of law. Further, as discussed below, plaintiff's conduct in the 1990s litigation also renders their position in this action barred by the doctrine of estoppel against inconsistent judicial positions. "Germane to this situations is a line of cases where a plaintiff transfers property to the defendant, usually a relative, to defeat the interests of a third party, also usually a relative, and then the defendant, who has not been injured by the transaction, raises the doctrine when the plaintiff property" sues to reclaim the transferred (Yula Yula, 115 AD2d 475, citing Pattison v Pattison, 301 NY 65; Levy v Baverman, 24 AD2d 430; Pierce v Pierce, 253 App. Div, 445). Under such (A0548524.1] 6 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 circumstances, ithas been "explicitly held that itis erroneous to require a showing of injury on the doctrine" defendant's part to invoke the (Yula Yula, 115 AD2d 475, citing Farino v Farino, 88 AD2d 902). It is well settled that "the plaintiff's unclean hands in participating in a course of conduct of deception and deceit is an effective bar to all of the causes of action in the complaint, lien" including the cause of action for the interposition of an equitable (Wang v Wong, 163 AD2d 300). "Having êñgaged in a fraudulent scheme involving the conveyance of the premises, the plaintiff has forfeited his right, in law or equity, to protection or recourse in a dispute involving scheme" his accomplices in that very (Wang v Wong, 163 AD2d 300; see also Sayres v Decker Auto Co., 239 NY 73). hands' It has been repeatedly held that 'unclean bars a claim for constructive trust where, as here, "the plaintiff's admitted involvement in [an] alleged scheme whereby title to the subject to the * * * property, in which he claims to have an ownership interest, was conveyed defendant creditors" in order to place the property beyond the reach of the plaintiff's judgment (Dolny v Borck, 61 AD3d 817, citing Festinger v Edrich, 32 AD3d 412, 414 [assets transferred to protect against fraud proceeding]: Wong v Wong, 293 AD2d 387; Farino v Farino, 88 AD2d 902 ["The conduct of the plaintiff in concealing his assets for the purpose of escaping the enforcement of his obligation to support his wife, is as much contrary to good morals, sound public policy, and the spirt and letter of our laws, as the concealment of assets of a debtor for the purpose of defeating the just claims of his creditors, neither is entitled to the aid of a court of equity"]). In their testimony, plaintiffs uneheshedly confessed that they were involved in a scheme to trust" hide the alleged "constructive arrangement from defendant Gamba for years. The fruits of their labors resulted in the settlement of the 1990s Hither House litigation which included Gamba surrendering any rights she had under the very arrangement that plaintiffs now seek to enforce. (A0548524.1 } 7 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 "The real property whose reconveyance plaintiff sues for was admittedly alienated by plaintiff in the first instance to it beyond the reach of [a claimant in] litigation. Under such keep circumstances, the relief sought was correctly denied as a matter of public policy to protect the court" (Wong v Wong, 293 AD2d 387; see also Jossel v Meyers 212 AD2d 55, 57-58; Walker v Walker, 289 AD2d 225 [property deeded to wife to avoid creditors constituted inclean hands in constructive trust]). "Given the plaintiff's admitted involvement in this alleged arrangement to convey the property to frustrate his creditors in the collection of their legitimate debts, his claim that [the Grantee] should now be compelled to convey titleto the premises to him pursuant to the hands" terms of that arrangeiñent is barred by the doctrine of unclean (Dolny v Borck, 61 AD3d 817). plaintiffs' Moreover, the fact that Mr. Lu may have known of scheme to hide the hands" arrangement is of no protection to the plaintiffs from the preclusive impact of the "unclean doctrine. "[T]he question of whether [the recipient of title] knew of the fraudulent purpose of the irrelevant" transaction is (Dolny v Borck, 61 AD3d 817, citing Pattison v Pattison, 301 NY 65, 72; Vasquez v Zambrango, 196 AD2d 840). "Having engaged in a fraudulent scheme involving the conveyance of the premises, the plaintiff has forfeited his right, in law or equity, to protection or scheme" recourse in a dispute involving his accomplices in that very (Wang v Wong, 163 AD2d hands' 300, 302). Stated differently, "[r]elief is denied under the 'clean doctrine, 'not as a plaintiff'" protection to a defendant, but as a disability to the (Farino v Farino, 88 AD2d 902, quoting Reiner v North Amer. Newsoacer Alliance. 259 NY 250, 256). Recovery of the assets in such circumstances is prohibited "as a matter of public policy in court" order to protect the integrity of the (Farino v Farino, 88 AD2d 902, citing Pattison v Pattison, * * * 301 NY 65). "The allegations of the complaint represent a nefarious transfer and agreeinent {A054 B524,1) 8 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 defraud" as part of an immoral scheme to (Farino v Farino, 88 AD2d 902). "[S]ound public policy, and the spirt and letter of our laws [prohibits] the concealmeñt of assets of a debtor for the purpose creditors" of defeating the just claims of his (Farino v Farino, 88 AD2d 902, quoting Bascombe v Sargent, 195 Misc 328, 329-330). "To discourage and deter such immoral conduct, the maxim applies not only to the immediate participants in the transaction, but also to those claiming through transferor" or under them such as the heirs of the (Farino v Farino, 88 AD2d 902). * * * hands'" "[B]y her own admissions the plaintiff does not come into court with 'clean (Farino v Farino, 88 AD2d 902, citing Hines v Hines, 8 AD2d 804; Palumbo v Palumbo, 55 Misc2d 264, 265-266). It isanticipated that plaintiff will attempt to argue that they should nonetheless be permitted to rely on the equitable doctrine given the fact that claim to have expended anhatantial Plaintiffs' funds and efforts towards the properties since they were conveyed in 1993. logic in this regard is circular. Once the equitable remedy is barred, itis barred. Further, expending effort and plaintiffs' funds towards the properties does not revive the equitable claims where, as here, hands are unclean. "Here, for the same reasons, the deed transfer was fraudulent, and any funds expended fraud" 32"d by plaintiffs were in furtherance of that (One St. Corp. v Stewart, 70 Misc.3d 1058). The present case is analogous to Festinger v Edrich, 32 AD3d 412. In Festinger, the plaintiff sought the imposition of a constructive trust against his sister. The plaintiff alleged that he funded the purchase of real property which his sister acquired in 1994, with the understanding that she would hold the property for his benefit. He further alleged that he transferred large amounts of personal property and cash to his sister for safekeeping. At the time, he was the subject of federal criminal fraud prosecutions which resulted in his obligation to pay restitution. The Court found, among other things, that the equitable claim of constructive trust was not available on these facts (Festinger v Edrich, 32 AD3d 412). As was the case in Festinger, plaintiffs in this case admit (A0548524.1 } 9 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 safe" that they transferred the properties to "keep them from Gamba's constructive trust claim. Thereafter, if their testimony in this action is credited, they engaged in a pattern of perjurious behavior to conceal the very same arrangement they now seek to enforce. If this situation does not constitute "unclean hands", nothing does. "Where, as here, an action is brought to compel reconveyance of property which, * * * immoral admittedly, was transferred with intent to defraud the basis of such suit is and one aid" to which equity will not lend its (Farino v Farino, 88 AD2d 902). "[P]laintiff conceded that he voluntarily participated in a scheme whereby title to the subject property, in which he claims to have an ownership interest, was conveyed to the * * * order defendant Phillip Borck and Marilyn Borck in foreclosure in to place the beyond the reach of the plaintiff's judgment creditors, while the paintiff retained property the beneficial ownership of the premises. Given the plaintiff's admitted involvement in this alleged arrangement to convey the property to frustrate his creditors in the collection of their legitimate debts, his claim that the Borcks now should be compelled to convey title to the premises to him pursuant to the terms of that arrangement is barred by the doctrine hands" of unclean (Dolny v Borck, 61 AD3d 817; see also Festinger v Edrich, 32 AD3d 412). Along these same lines, plaintiffs are precluded from recovery based upon the doctrine of judicial estoppel. "The doctrine of judicial estoppel or estoppel against inconsistent positions precludes a party from taking a position in one legal proceeding which is contrary to that which he changed" or she took in a prior proceeding, simply because his or her interests have (Festinger v Edrich, 32 AD3d 412; citing Ford Motor Credit Co. Colonial Funding Corp, 215 AD2d 435; Kimco of NY v Devon, 163 AD2d 573, 558). In Festinger v Edrich, (32 AD3d 412), the Appellate Division held that the doctrine applied where the plaintiff claimed that he had no assets before the United States District Court in 2000. "In this case, the plaintiff's claim of an ownership interest in the subject real and personal property since the 1990s is manifestly at odds with his representations to the United States District Court that he had no money or assets, thereby {A0548524.1} 10 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 action" warranting the dismissal of this (Festinger v Edrich, 32 AD3d 412). The Appellate odds" Division found that that representation was "manifestly at with the plaintiff's rep1onoutations in the Festinger case that he was an equitable owner of the properties at issue in that case. In the plaintiffs' case at bar, testimony that there was a constructive trust arrangement in place since the odds" 1970s, was "manifestly at with their testimony in the 1990s litigation that no such Plaintiffs' arrangement existed. testimony is irreconcilable and constitutes unclean hands. plaintiffs' Further, position in this case is barred by the doctrine of inconsistent judicial positions. Aside from this, plaintiff was permitted to call the owner of Duo restaurant as a witness at trial. Defendants were not provided with any notice of this witness prior to the trial as he was not disclosed. As such, defendants were denied the opportunity to depose the witness or otherwise witness' prepare for the testimony. Worse yet, in the context of the receivership Duo had a long of subpoenas and not responding to demands for information requested by history ignoring defendants. Defendants attempted to serve a subpoena for documentation on Duo, but itsprocess server was told that the owner that ultimately testified "had not worked there for years". In light of this, defendants never received a response to its subpoena prior to the testimony of the surprise witness. As ifall of this were not enough, even after the verdict Duo has continued to demonstrate its utter disregard for the orders of this Honorable Court. In this respect, after the verdict Duo asked the Receiver to let them know who they should pay rent to. In no uncertain terms, the Receiver told Duo to pay the Receiver the July rent pursuant to the Receivership order [Exhibit, 8 Email Chain]. Duo acknowledged this, then paid the rent to plaintiff directly in direct July contravention of the order. While this separate matter does not constitute an appellate issue at this time, itabsolutely underscores the problem with the surprise testimony of Duo. Duo had a history defendants' of non-compliance and disobedience with proper demands and was, and continues to (A0548524.1} 11 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 be, obstructive to defendants. Defendants were denied an opportunity to prepare to for the witness or to have a response to itssubpoena. In addition to this, plaintiff was permitted to have Patty Lu avoid personally testifying and witness" to rely solely upon her deposition as an "unavailable without making the necessary evidentiary showing. In this respect, plaintiff produced an uncertified and unsworn brief, redeoted, letter from a Physician's Assistant to excuse her personal appearance. Defendants were also denied a missing witness charge on thiswitness. It issubmitted that this was also reversable error. As can readily be seen, defendants are likely to succeed on the merits. C. The equities are in favor of maintaining the Receiver: The equities also are in favor of defendants As noted above, plaintiffs are currently the beneficiary of a verdict that allows them to enforce an oral agreement that they disavowed the defendants' existence of, to detriment in the 1995 litigation. When it was in their interest, plaintiffs testified that the agreement did not exist, obtained a settlement, and now changed their position. This is not equitable. Moreover, all defendants seek with the present application is the same restrictions that were placed on them for the past six years. Over the course of this litigation, defendants were the titled owners of the property, but were subjected to the restrictions of the Receivership. Now that the shoe is on the other foot, all defendants seek is the same protection of the status quo that was accorded to plaintiffs. It isrespectfully submitted that the equities dictate that the receivership should be maintained. (A0548524.1} 12 of 14 FILED: SARATOGA COUNTY CLERK 07/14/2021 03:25 PM INDEX NO. 20162946 NYSCEF DOC. NO. 278 RECEIVED NYSCEF: 07/14/2021 H. Alternatively, this Hon6ral)le Court shenM at the very least keep the Receiver in place for a period of time long ensu;;h to allow for defendants to filea Notice of Appeal and request the continuation of the Receiver from the Appcilate Division. As a final matter, if this Honorable Court is inclined to dischaige the Receiver, defendants iespectfully request a TRO preventing the Receiver from disbursing any funds collected, or from taking any action with respect to the property until defendants have the opportunity to filea notice of appeal and an application for a continued receivership before the Appellate Division. Defendants simply seek a full and fair opportunity to ensure the continuity of the receivership. Conclusion WHEREFORE, defendants respectfully request that this Honorable Court: (1) GRANT an order continuing the imposition of the Receivership pending resolution of the Post-Trial Motion and, if necessary, the Appeal from the Judgment; and (2) GRANT such other and further relief as it deems just proper. Dated: July 14, 2021 Albany, New York Yours, etc., PHELAN, PHELAN & DANEK, LLP By: TIMOTHY S. BRENNAN Attorneys for Defendants WEN YING GAMBA, YUEN HSIANG LU and WEN FU LU 300 Great Oaks Blvd., Suite 315