Birkla v Cincinnati Terrace Assoc., LLC 2024 NY Slip Op 34365(U)
December 16, 2024
Supreme Court, Kings County Docket Number: Index No. 503919/2024 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 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS : CIVIL TERM: COMMERCIAL 8 ------ --- -- ---- --------------------- -x ANTHONY BIRKLA, BTRKLA INVESTMENT GROUP, LLC, AND CINCINNATI DEVELOPMENT III LLC,
Plaintiff/ Decision and order
- against - Index No~ 503S19/2024
CINCINNATI TERRACE ASSOCIATES, LLC, CINCINNATI TERRACE PLAZA, LLC, EZRA UNGER, AND TBG FUNDING LLC, Defendants., Dece~ber 16, 2024 - - - - - - >. · - - - - - .. - - - - - - - - - - - - - - - . - - - - - - - - . ---·x EZRA UNGER,
Third-Party .Plaintiff,
-against-
TBG FUNDING LLC:, CINCINNATI TERRACE PROPERTY ASSOCIATES HOLDINGS, LLC, YIELDSTREET INC, CHARLES SCHARF, ALLAN J. WEISS, VICTOR STREICHER, JOEL GOLDBERGER, WILLY BEER,
Third-Party Defendants.
- ....-- .---· .. -· -·-·--· --- .---·-------- ·--- ··--.-x CINCINNATI TERRACE MEMBER LLC, Second Third-Party Plaintiff, -against-
TBG FUNDING LLC, CINCINNATI TERRACE PROPERTY ASSOCIATES HOLDINGS, LLC, YIELDSTREET INC, CHARLES SCHARF, ALLAN J. WEISS, VICTOR STREICHER, JOEL GOLDBERGER, WILLY BEER,
Second Third-Party Defendants.
- -·- ._ - - - - - - - - - - - - - - - - . - - - - -.- - - - - - - - - - -·-. ·- X PRESENT: HON. LEON RUCHELSMAN Motion Seq. #2, #3,
#4., #-5 & #6
The. c:iefendant TBG Funding LLC has moved pursuant t.o CPLR
§3211 seeking to dismiss the fifth and sixth causes of action. The defendant TBG and third patty defendant Yieidstreet Inc.,
1 of 12
[* 1]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
have moved seeking to dismiss the third party cQmplaint. The third party plaintiff has moved seeking to amend the complaint arid the third party defendants have moved seeking. to disrniss the third party complaint. The motions have been opposed respectively. Papers have been submitted by the parties and arguments held. After reviewing all the arguments this court now makes the following determination.
According to the amended complaint, on June J, 2018 .an entity called Cincinnati Development III LLC operated by pli:l.intiff Anthony Birkla, as purchaser, entered into an agreement with Cincinnati Terrace Plaza LLC to purchase property located at
15 W. Sixth Street, Cincinnati, Ohio. on June 9, 2021 Cincinnati Terrace Plaza LLC declarecl bankrµptcy and pursuant to that
bankruptcy an auction of the property was conducted and third defendant TBG Funding LLC, who held a mortgage in the property was entitled to credit bid the amount of its debt. TBG assigned
its rights to the credit bid to an entity called Hamilton Land Reutilization Corporation [hereinafterHLRCJ pursuant to an
agreement dated August 8, 2022 which required HLRC to pay TBG the sum of one million dollars. The plaintiffs guaranteed that payment to TBG. Thus, essentially, TBG a.llowed HLRC to purchase the prope.ri:.y at a bankruptcy auct.ion and then tran$Jer the property ta: the plaintiffs. Inde.ed, the property was ultimately trahsfe.rred to Cincinnati Oe,velopme_nt III LLC:. Tne plaintiffs
2
2 of 12
[* 2]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
now allege that upoh receiving the property they v,1ere not aware of outstanding energy bills in the amount of $724,588.73. They allege that TBGhad an obligation to inform HLRC of these outstanding hills a·hd the failure to do so w0 s a material omission under the guaranty. This action was instituted and the plaintiffs have asserted causes of action for breach of contract, breach of warra:nty, a breach of gqod faith and fair dealing and negligent misrepresentation, As rioted, TBG held a mortgage on the Ohio property following a loa•n made to defenciant Cincinnati Terrace Associates LLC. TBG successfully sought foreclosure of that mortgage in Ohio and obtained a judgement. A third party action has been filed against TBG by Ezra Unger the managing member of Cincinnati Terrace Associates LLC. The third party action alleges that Cincinnati Development III LLC interfered with the ownership rights of Cincinnati Terrace Associates by filing an improper notice of pendendy, The third party complaint alleges causes of action. against:: TBG for breach 9£ contract and fraud. The basis for the breach of contr:act claim is the allegation that an affiliate o.f TBG did not extend Unger and his entities an extens~On in which to participate in a buy~back agreement. TJ-ie basis for the fraud claim is the allegation TBG
prohibit.e:dUtiger from adj.udicat:ing its claims in a :religious forum and misrepresented the nature of the foreclosure to earn.
.higher interest. imprope.rly.
3
3 of 12
[* 3]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
TBG has now moved seeking to dismiss the two causes of action .of the original complaint and the third party complaint. As noted, the motions are opposed.
Conclusions of Law
It is well settled that upon a motion to dismiss the court
must determine, accepting the: allegations of the complaint as true, whether the party can succeed upon any reasoriable view of those facts (Perez v. Y & M Transportation Corporation, 219 AD3d 1449, 196 NYS3d 145 [2d Dept., 2023]). Further, all the allegations in the complaint are deemed true and all reasonable inferences may be drawn in favor .of the plaintiff (Archival Inc.; v. 1 77 Realty Corp., 220 AD3d 90 9, 198 NYS2d 5 67 [ 2d Dept., 2023]). Whether the complaint will later survive a motion for s.ummary judgment, or whether the plaintiff Will ultimately be
able to prove its claims, of course, plays no part in the determination of a pre-discovery CPLR §3211 motion to dismiss
(see, Lam v. Weiss, 219 AD3d 713, 195 NYS]d 488 [2d Dept., 2023]) ,
It is well settled that to support a claim for negl.igeht misrepresenta·tion, the plaintiff must demonstrate the existence of a special relationship imposing a duty upon the defendant to impart correct information, that the information was :Lncorreot and there was rea.sonable reliance upon the information (Ginsburg Deve lobmertt Companies LLC v. Carbone, 134 AD~d 8 9 0, 2 2 NYSJ d 4 85
4
4 of 12
[* 4]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
[ 2d Dept., 2015 l) . Likewise;, this cause of action can he based upon an omission (Abu Dhabi Commercial Bank v. Morgan Stanley &
Company, 910 F.Supp2d 543 [S.D.N.Y. 2012}). However, n.q such omission occurred in this case. The assignment agreement between
TBG andHLRC which then inured to the plaintiffs states that HLRC "has adequate information concerning the business and financial condition Of the Borrower and the Property as to make an informed decis;ion regarding, the purchase of the Credit Bid and has independently and without reliance upon the Assignor undertaken its own inspection, review and evaluation of the Loan Documents, the Foreclosure Judgment and the Bankruptcy Litigation and has not, in any way, r,elied upon any assurances, representations or warranties, express or implied, oral or written, made by the Assignor or any of its officers, agents or employees of any kind, and based on such information as the Assignee haS deemed appropriate, made its own analysis and decision to purchase the Credit Bid" (see, Assignment of Bid Agreement, 'Il:3 (a) [NYSCEE' Doc. No. 3] ) . Thus, "where a party specifically disclaims_ reliance upon a representation in a contract, that party cannot, in a subsequent action for fraud, assert it was fraudulently induced to enter into the contra.ct by the very representation it has
disclaini.ed" (Grumman Allied Industries Inc .• V; Rohr Industries __
Inc., 748 F2d '729 [2d Cir 1984], see , ais.o, Danann Realty Corp. v. Harris, 5 N':(2d 317, 184 NYS2d 599 [195.9J).. This. same
5
5 of 12
[* 5]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
limitation applies in cases of negligent misrepresentation as well which share common features with fraud and are Often analyzed together (see, Mayaquez S.A., Citibank N.A,, 2022 WL 901627 [S.D.N.Y. 2022]). Therefore, the plaintiffs cannot allege TBG "omitted'; the existence o:f any energy bills when H.LRC expressly agreed they had all the information they needed to purchase the credit bid and did not; in any way, base its decision upon any assurances, representations or warranties of TBG. Furthermore, "in order for Plaintiffs' fraud"""'based claims to be barred, therefore, Def:endant must show that the non-reliance clauses at issue are "adequately specific"-meaning that they contain "explicit disclaimers" of the ":particular representationsf' that form the basis of Plaintiffs' fraud claims'' {see, Le Metier Beauty Investment Partners-LLC v. Metier Tribeca: LLC, 2'015WL 769573 [S.D.N.Y. 2015]). Thus; when misrepresentations are alleged concerning the financial stability of the entity in question then merely disclaiming "any misrepresentations" will be too general to preclude any claims of misrepresentation ( id) . rn this case; the substance of HLRC' s hon-reliance, namely the financial condition of 1:he property, perfectly tracks the claims, alleged here, unpaid energy bills.
HLRG claimed that i t had a:11. the information. it needed concerning the financial condition of the property .and wa.s not reiying upon ..
any of TBG' s warranties i.n any i~ay, That is surely speci£iQ
6
6 of 12
[* 6]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
since it relates to the financial condition of th~ property.
The first amended complaint alleges that "Plaintiffs could not have, with reasonable diligence, discovered these utility bills, given that the Property w·a-s subject to a bankruptcy proceeding in state court and financed through the Cincinnati fort Authority, yet no claim for the Duke bills was ever presentec:l or disclosed to Plaintiffs at any point in the bankruptcy pr·oceedingl' (see, Fi rs t Amended Comp la int; '][24 [NY SCE F Doc. No. 19]). However, that allegation entirely contradicts the thrust of the assignment agreement wherein HLRC specifically asserted there was no further irtforrita:tion they needed to accept the assignment. Indeed, if the plaintiffs would be permitted to pursue c1airils against TJ3G then the representations of the assignee HLRC contained in the assignment agreement would be rendered entirely hollow, an untenable position.
Likewise, the cause of action alleging a brea·ch Of the
covenant of good.faith and fair dealing on the grounds Tl:3G failed to deliver the property free of any encumbrances is similar.ly
without merit. As noted, HLRC accepted the property pursuant to their own internal investigations about its financial stability. No ·cause of action is possible against TBG.
Th~re£ore, b?sed on the fo~egoing the motio~ seeking to di.smiss the negligent misrepresentation claim a:rtd_ the breach of th_e cove:nant of good faith an_d fa.i.r dealing asserted agair1st TBG
7
7 of 12
[* 7]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
is granted.
Turning to the motion seeking to dismiss the third party complaint, it is well settled that such third party complaint may only be filed against one "who is or may be liable to that defendant for all or part of the plaintiff's claim against that defendant" (CPLR §1007). The practice cortu:nentaries exp,lain that "in essence, impleader supports claims based on a right of reimbursement; in whole or in part, for the damages that the .defendant may owe the plaintiff. Thus, some form of claim-over lia,bility is a prerequisite to impleaderf' {see, Practice Commentaries, Cl007:3 Scope of Impleader under CPLR 1007). Th
George Cohen Agency Inc., v. Donald s. Perlman Agency Inc., 51 NY2d 358, 434 NYS2d 189 [1980] the Court of Appeals noted that
third party practice has "grown beyond its early limitations and should now l:ie seen primarily as a tool for economical resolution of interrelated lawsuits" (id). However, the Practice commentaries note that "it bears emphasizing, ho.wever, that CPLR 1007 does not authorize the jOinde:t of claims or parties simply on the basis of comrrion questions of law or fact raisecl by related transactions or occurrences" (id). Thusf even where cl~ims are related, if the causes of action of the third pa,rty complaint have nothing to do with the claims a.sse.rted aga:inst the defendant in the main action then the third party complaint · is impro.per (.Gaiasso, Lartqion:e & Better, LLP v. Liotti, ..81 Ab3d 8$0, 917
8
8 of 12
[* 8]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
NYS2d 664 [2d Dept., 2011 J) . Therefore, the motion seeking to dismiss the third party complaint is granted, The next question that must be addressed is whether the court, in its discretion, should Sever the third party complaint and permit the claims to proceed as an independent action (see, Qosina Corp., v. C&N Packaging Tnc., 96 Ab3d 1032, 946 NYS2d 308 [2d Dept.; 2012]). Thus, the court must .evaluate whether the causes of action contained within the third party complaint would survive a motion to dismiss.
Res judicata is a doctrine that comprises both claim . .
preclusion and issue preclusioh ~hich is also known as collateral estoppel (see, Paramount Pictures Corporation v. Allianz Risk Transfer AG, 31 NY3d 64, 73 NYS3d 472 [2018]). "Tb establish claim preclusion, a party must Show: (1} a final judgment on the merits, (2) identity or privity of parties, and (3) identity of claims in the two actions" (id). Collateral estoppal or issue preclusion generally prevents a party from relitigating an issue in a subsequent action that was cl.ea.rly raised and decided against that party (Simmons v. Trans Express Inc., 37 NY3d 107, 148 NYS3d 178 20211).
The defendants argue that the claims sought in the third party complaint are b.arred sirice they could have been raised in the foreclosure action wherein TBG. fo:reclose.d upon .a mortgage of Cincir;i:IJ.at:i Ter.race Associates [her¢inafter 'CTA'] . Cincinnati
9 of 12
[* 9]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
Terrace Member LLC [hereinafter 'TCM'] the second third party plaintiff and the entity owned by Ung.er the third party plaintiff asserts it had no privity with CTA and in the for.eclosure action could not raise any of the issues rais1::::d here:. However, in the foreclosure action Unger submitted an affidavit ih opposition to the motion seeking summary judgement. The first paragraph states that "I am the Managing Member of Cincinnati Terrace Member LLC ("Terrace Member"). As Terrace Member's Managing Member, I was heavily involved with Terrace Member's purchase of Cincinnati Terr ace Associates, LLC ( i• CTA" ) , and the real property that is the subject of this action. Additionaliy, I was heavily involved in negotiating the financing for those purchases with TBG Funding, LLC ("TBG") '' ( see, A,ffidavi t of Ezra Unger, fill of Affidavit dated February 5; 2020 [NYSCEF Doc. No. 40]). Further, Stephen Friedman counsel f·or CTM also submitted an affidavit in opposition to the motion for summary judgement in the foreclosure action (see, NYSCEF Doc. No. 54).
Unger downplays the· significance of these affidavits by arguing:· that "the foreclosure action was not Unger/CTM Casie in any legal or functional sense" (see, Affirmation in Opposition, ':II32 [NYSCEF Doc. No. 50] ) . While it is true that Unger' s affida:vi t in the forec.losure action focused. upon othe:r issues, nev:er:the less, it is ina c.cura te to po rt ro3:y :Unger as s b:me ohe without any privity with CTA.. In fact, Friedman's af:Eidavit,
JO
10 of 12
[* 10]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
discussions and negotiations with a commercial lender, TBG funding, LLC ("TBG''), to help finance the acquisition of the membership interests, and TBG agreed to provide the financing to Member for the acquisition of the membership interests and the Property" (.~, :Affidavit of Stephen Friedman, ·•J[S [NYSCEF Doc. No. 54]). The mere fact Unger chose to focus upon arguments related to the characterization of payments. made and whether they Constituted interest does not mean: Unger could not have also raised issues regarding the 1:luy-back agreement. Surely, Unger had the ability and the ptivity to make such arguments. Consequently, Unger is barred from raising these issues at this time.
Thus, the three causes of action are consequently barred by the determination of the foreclosure 9 ction. Therefore, there are no grounds in which to sever these causes of action.
Likewise, the motion filed by defendant Weiss seeking to dismiss the fraud cause of ac:::tion asserted against h.im in the third party complaint and the. mo.tions filed by defertdants Scharf, Streicher, Goldberger and Beer seeking to dismiss the third party complaint are all granted.
Next, the motion seeking to amend the third party complaint to assert claims against Wachtel Missry LLP ::Ls deni.ed .. Likewise,
the request to add CTM as a nominal. defendant is denied. Moreover, the request to sever the action is denied. All thes.e
11
11 of 12
[* 11]
FILED: KINGS COUNTY CLERK 12/16/2024 09:18 AM INDEX NO. 503919/2024 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 12/16/2024
Moreover, the request to sever the action is denieq.. All these claims are barred by the doctrine of res judicata:, So orclered.
ENTER:
DATED: Deee~ber 16, 2024
Brooklyn, NY Hon .. ·Leon.Ruclfu.lsmari JSC
i2
12 of 12
[* 12]