Shvartser v. Lekser

Citation: 330 F. Supp. 3d 356Docket: Civil Action No. 18-473 (JDB)

Court: Court of Appeals for the D.C. Circuit; September 13, 2018; Federal Appellate Court

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The motion for reconsideration by lender defendants Snowpoint Capital, LLC and SP Funding 452, LLC regarding the Court's preliminary injunction in favor of plaintiff Konstantin Shvartser is denied. The case involves a dispute between Shvartser and his daughter, Evelina Lekser, who jointly purchased a property in Washington, D.C. in 2008. After delays in renovations, Shvartser sought to sell the property in 2015, prompting Lekser to allegedly forge a power of attorney to refinance the property, resulting in an $800,000 loan from the lenders, which she used to pay off an existing mortgage but kept the remaining funds. Shvartser filed a complaint against Lekser in 2016, alleging fraud and breach of contract, and subsequently initiated this related case in February 2018 after the lenders proposed foreclosure due to Lekser's default. The Court granted a temporary restraining order followed by a preliminary injunction after concluding that Shvartser had demonstrated a likelihood of success on the merits, particularly concerning the forged power of attorney, which would render the deed of trust void under District of Columbia law. Additionally, the Court recognized that the impending foreclosure posed a significant risk of irreparable harm to Shvartser's property rights. The lenders' arguments, including reliance on equitable subrogation and Lekser's ownership interest, were rejected as legally unsound.

The Court determined that the balance of equities favored Shvartser, as the harm to his property rights was greater than any inconvenience to the lender defendants, who would face delays in recovering the loan and potential complications if a mediation certificate expired. The public interest also slightly favored Shvartser, emphasizing the importance of protecting innocent property owners from fraud. Consequently, the Court granted Shvartser a preliminary injunction against the lenders' foreclosure. The lender defendants are now seeking reconsideration of this decision, arguing for an evidentiary hearing to assess the validity of Shvartser's testimony regarding a forged power of attorney and claiming that the Court erred in stating they could not foreclose on Lekser's interest if the power of attorney was fraudulent. Shvartser has responded to this motion, which is now fully briefed. The Court must decide on the appropriate legal standard for this reconsideration, leaning towards the less stringent Federal Rule of Civil Procedure 54(b) rather than Rule 59(e), which is typically reserved for final judgments. Rule 59(e) allows for motions to alter judgments under specific circumstances, but it is not meant for relitigating previously settled matters.

Interlocutory orders can be revised at any time prior to a final judgment on all claims and parties' rights. Under Fed. R. Civ. P. 54(b), the standard for reconsideration is more flexible than the "high threshold" set by Rule 59(e), allowing for changes "as justice requires." Reconsideration is appropriate if a court has misinterpreted a party's position, made an error in understanding, or if there has been a significant change in law or facts since the issue was presented. However, a Rule 54(b) motion cannot be used to reargue previously ruled facts or to introduce new arguments that could have been made earlier. There is a split among courts regarding whether Rule 54(b) or Rule 59(e) applies to requests for reconsideration of preliminary injunction orders. In this instance, despite noting the lack of briefing on the matter, the court opted to apply the more lenient Rule 54(b) standard.

The lender defendants argued that the court erred by assuming that Mr. Shvartser had not executed the 2015 power of attorney and contended that an evidentiary hearing was warranted due to this contested factual issue. They cited precedent that necessitates an evidentiary hearing when genuine material facts are disputed. Nonetheless, the court found that the lender defendants did not sufficiently raise credible issues regarding Shvartser's credibility or the facts related to the preliminary injunction, as their references to Shvartser's credibility were minimal and did not substantiate their claims.

Shvartser's quiet-title claim is likely to fail because Ms. Lekser acted as his agent and fiduciary regarding the property. The lender defendants cannot rely on inconsistencies in Shvartser's deposition testimony raised for the first time in their reconsideration motion, as they did not mention these in their opposition. Under Rule 54(b), reconsideration cannot be used to present new theories or arguments that could have been made earlier. The Court denied the lender defendants' motion for reconsideration regarding their claim to foreclose on Ms. Lekser's one-half interest in the property, rejecting their argument that a fraudulent power of attorney could still validate the deed of trust. The Court emphasized that a deed of trust is void if the power of attorney is a forgery, and dismissed the defendants' claim that exceptions apply when the forger is a joint owner, citing lack of authority under D.C. law. The lender defendants' new citations from out-of-circuit cases were not previously presented and did not adequately justify reconsideration. Ultimately, the Court maintained that the interest protected by the preliminary injunction was Shvartser's right to dispose of his property interest, a fundamental aspect of property ownership.

Foreclosure on Lekser's one-half interest would violate Shvartser's ownership rights since the lender defendants, as lienholders, would control the sale, undermining Shvartser's rights, including his absolute right to partition the property. Shvartser has already secured a partition order from the Court, indicating that any foreclosure attempt would disrupt the established status quo and interfere with this order. The purpose of a preliminary injunction is to maintain the parties' relative positions until a trial occurs, which is currently delayed due to unsuccessful mediation attempts. The Court denies the lender defendants' motion for reconsideration, noting that while Maryland law is respected in D.C., it is not binding, and thus the lender defendants' arguments regarding D.C. law do not warrant revisiting the preliminary injunction. The Court acknowledges Shvartser's readiness for a trial but emphasizes that progress has stagnated. A separate order reflecting this denial has been issued.