5506-40 Linden Blvd Brooklyn LLC v. Linden 40 LLC

2024 NY Slip Op 31760(U)

• Court: New York Supreme Court, Kings County
• Decided: May 21, 2024
• Status: Unpublished

Opinion

5506-40 Linden Blvd Brooklyn LLC v Linden 40 LLC 2024 NY Slip Op 31760(U) May 21, 2024 Supreme Court, Kings County Docket Number: Index No. 512113/2022 Judge: Leon Ruchelsman 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. FILED: KINGS COUNTY CLERK 05/21/2024 02:03 PM INDEX NO. 512113/2022 NYSCEF DOC. NO. 158 RECEIVED NYSCEF: 05/21/2024

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS: CIVIL TERM: COMMERCIAL 8 - - - - - - - - - - - - · ... - - - - - - - - - - - - ~ -------- -- X 5506-40 LINDEN BLVD BROOKLYN LLC, 5507-58 LINDEN BLVD BROOKLYN LLC,. 5508-9S LINDEN BLVD BROOKLYN LLC, 5509-130 MARTENSE STREET BROOKLYN LLC, 5510-345 LEFFERTS BLVD. BROOKLYN LLC, and 5511-777 ST. MARKS Decis·iori and Order AVENUE BROOKLYN LLC, Plaintiffs, - against - Index No. 512113/2022 LINDEN 40 LLC, LINDEN 58 LLC, LINDEN 95 LLC, MARTENSE 130. LLC, LEFFERTS BLVD 345 LLC, 777 ST. MARKS REALTY, LLC, and EDWARD LIFSHITZ; May 21, 2024 Defendants, --·- ·--· --- . -· -·--·· -·---· ·---- ··---·- . ----.--- ... -x. PRESENT: HON, LEON RUCHELSMAN Motion Seq. #4

The defendants have moved pursuant to CPLR §3211 seeking to

dismiss the second ani.ended complaint. The plaintiff has opposed

the motion. Papers were submitteci by the parties and arguments

held. After reviewing all the arguments this court now makes the

following determination.

As recorded in the prior order, on June 26, 2015 the parties

entered into a purchase and sale agreement w:hereby the plainti.ffs

agreed to purchase properties from the defendants located at 40

Linden Boulevard, 58 Linden Boulevard, 95 Linden Boulevard, 130

Martense Street, ~45 Lefferts Boulevard and 777 St. Marks Avenue

all in .Brooklyn. Paragraph JO (al Of the agreement states. that the '\Seller represents that it o.r its predecessors have

registered c!,ll residential apartment units located at the

Premises with The Division of Housing, Community a:nq. Renewctl

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("DHCR") arid re-registered the same prior to July 1, 2014; to Seller's knowledge, the rents set forth on Schedule B annexed

hereto do not exceed the maximum legal rent which may be

collected from any tenants of the Premises pursuant to the

Leases'' (see, contract of Sale, S[30(a) [NYSCEF Doc. No. 16]).

The plaintiffs commenced this lawsuit alleging the

defendants rnisrepresented the correct rents for various

apartments. Specifically, the amended complaint alleges that the

defendants misrepresented the allowable rent fo.t seven apartments

in four Of the buildings out of three hundred ancl. eighty

apartments. The prior decisions dismissed the fraud cause of

action and also dismissed all causes 0£ action as to def~ndant

Lifshitz. The plaintiff filed a second amended complaint and the

defendants have how moved seeking to dismiss it as well. As

noted, the motion is opposed.

Conclusions of Law

It is well sett:Led that upon a motibh to dismiss the court

must deterrrtine, accepting the allegations of the complaint as

true, whether the party can succeed upon any reasonable view of

those facts (Perez. v. Y & M Transportation Corporation, 21:9 AD3d

1449, 19E NYS3d i45 [2d Dept., 2023]). Further, ali the

allegations in. the complaint .are deeimed true and all reasonable

inferences may be drawn in favor of the plaintiff (Archival Inc .•

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v. 177 Realty Corp., 220 AD3d 909, 198 NYS2d 567 [2d Dept.,

2023]). Whether the complaint will later survive a motion for

summary judgment, or whether the plciintiff will ultimately be

able to prove its claims, of course, plays no part in the

determination of a pre~discovery CPLR §3211. motion to d.:i..smiss

(see, Lam v. Weiss, 219 A.D3d 713, 195 NYS3d 488 [2d Dept.,

2023]).

Section 'l43© of the Purchase arid Sale agreement states that

defendant ''representations and warranties shall survive Closing

for a period of one hurid:ted eighty (180) days (the "Survival

Period")" (see, Purchase arid Sale Agreement, §43© [NYSCEF Doc.

No. 16]). The plaintiff ,does not dispute the efficacy of tliat

clause bµt rather argues the claims a:te riot based upon the

Purchase and Sale Agreement but rather they ar~ based on

warranties in the deed which provides for delivery of the

property free of any encumbrances. Indeed, the plaintiff cites

to West 90th owners Corporation v. Schlechter, l37 AD2d 456i 525

NYS2 d 33 (1 st Dept . , 19 88] which held that "a deed with such a

covenant constitutes, in a sense, rwt only a reaffirmation of the

earlier contractual representation, but it also repr:esents a new

and different commitment'' (id) . Therefore, "the covenant

construed in Real Property Law §253(6) is an agreement of

indemnification ... of a type not contained in the contract of

sale, Thus., plciintiff' s right to indemnification arose for the

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first time _µpon delivery of the deed at closi"iig" arid is nt,t bound

by the 180 di?,y survival period.

However, this entire argument is premised upon the court's

e.arlier det~rminatio n that rnisrepr.eserita tioi"Ls concerning' the .terit

roll constitute encumbrances . The plaintiff asserts that because

o.f co:Liater-al estoppel or res judicata or- law ,of the. case·, the

defend.ants are barred f.r·om re.-litig_ating that issue.. and thus cannot dismiss the case based upon that prior determinatio n.

"Res j iJ.dicia.ta- is a. -doctrine that comprises both. -claim ._preclusion ~nd issue p:t;'_.eclusi;on whii:;:h is. .also known as collateral

.estoppel (see, Paramount Pictures Corporation v. Allianz Risk

Transfer AG_, ·31 NY3d 64, 73 .-NYS3d 472 [20.18] ). . "To esta~l-ish

claim preclusion, a party must show.: (1) .a final judgment on the

merits, (2") identity o"r .priv'ity of parties, and (3") identity o·f·

-claims.· in the two ·actions;, ( id) . In this q1s-e the p:tior ·

determination deriying tJ1e motion to dismiss the indemhif icatich.

-.claim wets not a firial :}udgement o·n .the -.m:_erit;;; and ·th,µs cl.a.im

preclu_s,ion is i.n:applicable . Collateral estOpJ?el or issue

preclu;sion gener"a1ly prevents a party frqm re.litigating an issue

in a subseqµ.~nt c;J..ction that w-as cl.early raicsed and. decided.

against that party (Simmons v. Trans Express Inc., 37 NY3d.. 107, i4·8 NYS3d 17 8 2021]) .. Further, "'t.he doct.-rihe of· the 'law -of the

case' is-a rule of practice, a:n articulation of sound poliqy

that, when an issue is once j_udicially deti?rmined, that shonld be

.4

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the end of the matter as far as Judges and courts of co-ordinate

jurisdiction are concerned 1 " (Strujah v. Glehcord Building Corp.,

137 AD3d 1252, 29 NYS3d 398 [2d Dept., 2016]) .

Of course, these doctrines do not prohibit any party from

seeking to reargue any determination of the court. No;r can they

prever:rt resolving issues that are raised pursuant t.o an amended

complaint even if the portion seeking review is not being amended. To the extent this can be deemed a motion to reargue

the court will permit such arguments. This i.s espec,ially true

where the court finds such arguments compelling.

The court held that an improper or misrepresented rent roll

can be considered an encumbrance since it reduces the value of

the property. That determination did riot fully consider the

definition of an incUmbrance. It is true, as explained in the

prior decision, that "every diminution of whatever kind or degree

of the ownership in fee simple absolute, other than a highway

easement, is an encu:mbrance 11 (see, New York Law and Practice of

Real Property, §.22: 2.2, Chapter 22. Marketable Title, D:

Encumbrances [June 2022 Update]). That definition does not mean

that anything which can affect·the value of the property is an:

encumbrance. Ratherr an encumbrance "is any right to or interest

in.the land subsisting in another, to the diminution: of its

value, although consistent with the power to pass the fee by the

conveyance. The term includes whatever charges obstruct, burden,

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or impair the use of the lano, depreciate its value, or impede

its transfer, such as a lien, a servitude, or an easement" (id),

Thus, ah encumbrance affects title and is ''specifically used to

designate a restriction on title and is defined as 'a right other

than an ownership interest in real property. The term includes

mortgages and other liens on real property'" {see, In re Windsor

Park Nurs:ing Home, 18 M.isc3d 964, 850 NYS2d 342 (Supreme Court

Queens County 2008] ) • ThU:s, a zoning ordinance, which rec_:pilates the use of property is not an encumbrance (Voorheesville Rod and

Gun Club Inc. ,v. E.W. Tompkins Company Inc., 82 NY2d 564, 606

NYS2d 132 [1993]). Likewise, building code violations which may

affect the physical condition and the economic value of the

property are not encumbrances '™' Stockton Mortgage, Inc. v. Tope, 233 Cal.App4th 437, 183 Cal.Rptr3d 186 [3d Dist. 2014],

Mccrae v. Giteles, 253 So2d 260 [Fla. Dist. Ct. App. 3d Dist.

1971], Monti v. Tangora, 99 Ill.App3ct· 57 5, 425 NE2d 597 [ 4th

Dist'. 1981]). Moreover, a notice of pendency does not create an

encumbrance upon property (Bank of America N.A., v. 3301 Atlahtic

LLC, 2012 WL 2529196 [EDNY 2012]). Further, in Whaley v. First

American Title Co. of Mid-West, 2004 WL 316978 [Tennessee Court

of Appeals 2004] the court held ah improper subdivision ciid nOt

constitute an encumbrance because an encumbrance concerns issues

of ownership and an improper subdivision pertains to the value of

the property. Finally, other 'issues which can reduce the value

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of the property a:re also not encumbrances. For example, the

existence of hazardous materials is not an encumbrarn;~e (U. S; v ..

Allied Chemical Corp., [587 F. Supp 1205 [N. D. Cal. 1984]).

Moreover, wetlands designation is not an encumbrance (Bear Fritz

Land Co. v. Kachemak Bay Title Agency, Inc., 920 P2d 759 [Alaska

1996], Frimberqer v. Anzellotti, 25 Conn.App. 401, 594 A2d 1029

[1991], Truck Southt Inc. v. Patel, 339 S~C. AO, 528 SE2d 424 [2000] ) .

There are no cases that hold the mere misrepresentation of

rent rolls constitutes a:h encumbrance and the court should not

have endorsed such an expansive understanding of encumbrances.

Inde_ed, endorsing such an expansive understanding of an

encumbrance could result in far-reaching and unintended results.

For example, misrepresentations about the salaries paid to

workers, which would increase expenses and reduce the value of

the property thereby·could also be termed an encumbrance. There

is no precedent for sucl-i a wide interpretation of an encumbrance.

Therefore, there can be no relief flowing £rom the deeds with

covenants that the transfer of larid wa:s free of encumbrances.

Therefore, the only basis in which the plaintiff can

maintain any relief is via the p:urchase and sale agreement which

bars any such action more than180 days after the closing. There

is no dispute no notices of any improper rental amounts were sent

to the defendants within that time frame. Therefore, the

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plaintiff it> constrained from pursuing this action.

Consequently, the motion seeking to dismiss the second

amended complaint is granted in its entirety.

So ordered.

ENTER:

DATED: May 21, 2024 Brooklyn N.Y. lion. Leon Ruthelsman JSC

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