Kwan v HFZ Capital Group, LLC 2024 NY Slip Op 33482(U) October 1, 2024 Supreme Court, New York County Docket Number: Index No. 651518/2023 Judge: Lyle E. Frank 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. 651518/2023 NYSCEF DOC. NO. 179 RECEIVED NYSCEF: 10/01/2024
SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. LYLE E. FRANK PART 11M Justice ----------------------------------------------------------------- ----------------X INDEX NO. 651518/2023 JENNY KWAN, DOUBLE J BRYANT PARK 25 LLC,DOUBLE J BRYANT PARK 27, LLC, 02/06/2024, MOTION DATE 03/07/2024 Plaintiff, MOTION SEQ. NO. 004 005 - V -
HFZ CAPITAL GROUP, LLC,HFZ BRYANT PARK OWNER LLC,20 WEST 40 BRYANT PARK OWNER LLC,ZIEL DECISION + ORDER ON FELDMAN, NIR MEIR, MOTION
Defendant. ------------------------------------------------------------------- --------------X
The following e-filed documents, listed by NYSCEF document number (Motion 004) 104, 105, 106, 107, 108,109,110,111,112,131,132,133,134,135,136,137,138,140,143,145,146,147,148,149,150, 151, 152, 153, 154, 155, 167, 170, 172, 174 were read on this motion to/for DISMISSAL
The following e-filed documents, listed by NYSCEF document number (Motion 005) 113, 114, 115, 116, 117,118,119,120,121,122,123,124,125,126,127,128,129,130,139,141,144,156,157,158,159, 160,161,162,163,164,165,166,168,171,173,175 were read on this motion to/for DISMISS
Background
Plaintiffs Double J Bryant Park 25 LLC ("DJ25") and Double J Bryant Park 27 LLC
("DJ27," and with "DJ25", the "DJ Parties"), allege they have the right to purchase Units 25A &
27A at the building located at 16 West 40th Street, New York, New York pursuant to agreements
entered into with HFZ Bryant Park Owner LLC ("HFZ Owner") in 2018. Subsequently, the
parties entered into amendments to the agreements and there is a dispute as to whether the DJ
Parties were fraudulently induced into entering into those amendments.
The Amended Complaint alleges that Defendant Ziel Feldman signed a guarantee
associated with the above transactions.
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Bryant Park Funding 100, LLC ("BPF") previously moved to intervene in this action.
The other defendants are 20 West 40 Bryant Park Owner LLC ("Owner"), HFZ Capital Group,
LLC ("HFZ Capital"), HFZ Bryant Park Owner LLC ("HFZ Sponsor"), Ziel Feldman
("Feldman")(Owner, HFZ Capital, HFZ Sponsor, Feldman, HFZ Owner, and Feldman are
collectively the "HFZ Defendants") and Nir Meir ("Meir").
The amended complaint alleges various causes of action including breach of contract,
breach of personal guarantee, constructive trust, and unjust enrichment. Some of the causes of
action are alleged based on an alter ego theory.
In motion sequence number 4, BPF moves to dismiss the Amended Complaint. In motion
sequence number 5, HFZ Capital Group, LLC, HFZ Bryant Park Owner LLC, 20 West 40
Bryant Park Owner LLC and Ziel Feldman moved to dismiss the Amended Complaint.
Discussion
Veil Piercing
There is no separate cause of action alleged seeking to pierce the corporate veil.
Nevertheless, to the extent some of the causes of action in the Amended Complaint rely on
allegations of veil piercing, the Amended Complaint has sufficient allegations to survive a
motion to dismiss because the Amended Complaint is not "totally devoid of solid, nonconclusory
allegations" (International Credit Brokerage Co. v Agapov. 249 AD2d 77, 78, 671 NYS2d 64,
65 [1st Dept 1998], quoting Sequa Corp. v Christopher, 176 AD2d 498, 574 NYS2d 565 [1st
Dept 1991]). For instance, the Amended Complaint alleges the (1) HFZ Defendants share
officers, directors, and decision makers; (2) HFZ Capital controls both HFZ Sponsor and HFZ
Owner; and (3) all defendants had the same address, phone number, and key employees. These
nonconclusory allegations are sufficient for the purposes of a motion to dismiss.
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Breach of Contract
The elements of a cause of action for breach of contract are "the existence of a contract,
the plaintiff's performance thereunder, the defendant's breach thereof, and resulting damages"
(Noto v. Planck, LLC, 228 A.D.3d 516,516,212 N.Y.S.3d 637, 638 (!81 Dept. 2024) quoting
Harris v. Seward Park Haus. Corp., 79 A.D.3d 425,426, 913 N.Y.S.2d 161 [1st Dept. 2010]).
The Amended Complaint alleges there is a contract for each apartment, performance by Plaintiff
(in the form of delivery of money), breach, and damages. Therefore, the Amended Complaint
alleges a breach of contract. The alter ego allegations connect the defendants who were not
actual parties to the contracts to the breach of contract.
Defendants' arguments regarding limitations of remedy cannot be resolved at this
juncture because the Amended Complaint alleges that the limitation of remedy provisions were
obtained via fraud. Similar to how an amendment containing a release of remedies may be
invalidated for any of "the traditional bases for setting aside written agreements, namely, duress,
illegality, fraud, or mutual mistake" (Kaja Invs., LLC v. 2170-2178 Broadway, LLC, 39 Misc. 3d
385, 392, 958 N.Y.S.2d 577 [Sup. Ct. 2013], aff'd, 114 A.D.3d 433, 979 N.Y.S.2d 529 (2014)
quoting Mangini v McClurg, 24 NY2d 556, 563 [1969]), the agreement on limitation ofremedies
can similarly be invalidated on the same basis. Therefore, dismissal based on the terms of the
amendment to the contract is not appropriate at this time.
In addition, specific performance, a contract remedy, will not be dismissed at this time.
There are issues of fact as to whether Defendants self-created the breach or failed to act in good
faith. In such a circumstance, Defendants would not be permitted to rely on the clauses limiting
Plaintiffs remedies (Naso v. Haque, 289 A.D.2d 309, 309-310, 734 N.Y.S.2d 214 [2 nd Dept.
2001 ])("Where, as here, a provision in a contract for the sale of real property provides that in the
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event the seller is unable to convey title in accordance with the terms of the contract, the seller's
obligation to the buyer is limited to refunding the amount payable on account of the purchase
price and paying the net costs of examining title, that limitation 'contemplates the existence of a
situation beyond the control of the parties' and implicitly requires the seller to act in good
faith").
Constructive Trust
The elements of a cause of action for a constructive trust are "( 1) a confidential or
fiduciary relationship; (2) a promise; (3) a transfer in reliance thereon; and (4) unjust
enrichment" Matter ofNewman, 214 N.Y.S.3d 354, 361 (1 st Dept. 2024) quoting Sharp v.
Kosmalski, 40 N.Y.2d 119, 121 (1976). The Amended Complaint fails to allege a confidential or
fiduciary relationship.
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Kwan v HFZ Capital Group, LLC 2024 NY Slip Op 33482(U) October 1, 2024 Supreme Court, New York County Docket Number: Index No. 651518/2023 Judge: Lyle E. Frank 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. 651518/2023 NYSCEF DOC. NO. 179 RECEIVED NYSCEF: 10/01/2024
SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. LYLE E. FRANK PART 11M Justice ----------------------------------------------------------------- ----------------X INDEX NO. 651518/2023 JENNY KWAN, DOUBLE J BRYANT PARK 25 LLC,DOUBLE J BRYANT PARK 27, LLC, 02/06/2024, MOTION DATE 03/07/2024 Plaintiff, MOTION SEQ. NO. 004 005 - V -
HFZ CAPITAL GROUP, LLC,HFZ BRYANT PARK OWNER LLC,20 WEST 40 BRYANT PARK OWNER LLC,ZIEL DECISION + ORDER ON FELDMAN, NIR MEIR, MOTION
Defendant. ------------------------------------------------------------------- --------------X
The following e-filed documents, listed by NYSCEF document number (Motion 004) 104, 105, 106, 107, 108,109,110,111,112,131,132,133,134,135,136,137,138,140,143,145,146,147,148,149,150, 151, 152, 153, 154, 155, 167, 170, 172, 174 were read on this motion to/for DISMISSAL
The following e-filed documents, listed by NYSCEF document number (Motion 005) 113, 114, 115, 116, 117,118,119,120,121,122,123,124,125,126,127,128,129,130,139,141,144,156,157,158,159, 160,161,162,163,164,165,166,168,171,173,175 were read on this motion to/for DISMISS
Background
Plaintiffs Double J Bryant Park 25 LLC ("DJ25") and Double J Bryant Park 27 LLC
("DJ27," and with "DJ25", the "DJ Parties"), allege they have the right to purchase Units 25A &
27A at the building located at 16 West 40th Street, New York, New York pursuant to agreements
entered into with HFZ Bryant Park Owner LLC ("HFZ Owner") in 2018. Subsequently, the
parties entered into amendments to the agreements and there is a dispute as to whether the DJ
Parties were fraudulently induced into entering into those amendments.
The Amended Complaint alleges that Defendant Ziel Feldman signed a guarantee
associated with the above transactions.
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Bryant Park Funding 100, LLC ("BPF") previously moved to intervene in this action.
The other defendants are 20 West 40 Bryant Park Owner LLC ("Owner"), HFZ Capital Group,
LLC ("HFZ Capital"), HFZ Bryant Park Owner LLC ("HFZ Sponsor"), Ziel Feldman
("Feldman")(Owner, HFZ Capital, HFZ Sponsor, Feldman, HFZ Owner, and Feldman are
collectively the "HFZ Defendants") and Nir Meir ("Meir").
The amended complaint alleges various causes of action including breach of contract,
breach of personal guarantee, constructive trust, and unjust enrichment. Some of the causes of
action are alleged based on an alter ego theory.
In motion sequence number 4, BPF moves to dismiss the Amended Complaint. In motion
sequence number 5, HFZ Capital Group, LLC, HFZ Bryant Park Owner LLC, 20 West 40
Bryant Park Owner LLC and Ziel Feldman moved to dismiss the Amended Complaint.
Discussion
Veil Piercing
There is no separate cause of action alleged seeking to pierce the corporate veil.
Nevertheless, to the extent some of the causes of action in the Amended Complaint rely on
allegations of veil piercing, the Amended Complaint has sufficient allegations to survive a
motion to dismiss because the Amended Complaint is not "totally devoid of solid, nonconclusory
allegations" (International Credit Brokerage Co. v Agapov. 249 AD2d 77, 78, 671 NYS2d 64,
65 [1st Dept 1998], quoting Sequa Corp. v Christopher, 176 AD2d 498, 574 NYS2d 565 [1st
Dept 1991]). For instance, the Amended Complaint alleges the (1) HFZ Defendants share
officers, directors, and decision makers; (2) HFZ Capital controls both HFZ Sponsor and HFZ
Owner; and (3) all defendants had the same address, phone number, and key employees. These
nonconclusory allegations are sufficient for the purposes of a motion to dismiss.
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Breach of Contract
The elements of a cause of action for breach of contract are "the existence of a contract,
the plaintiff's performance thereunder, the defendant's breach thereof, and resulting damages"
(Noto v. Planck, LLC, 228 A.D.3d 516,516,212 N.Y.S.3d 637, 638 (!81 Dept. 2024) quoting
Harris v. Seward Park Haus. Corp., 79 A.D.3d 425,426, 913 N.Y.S.2d 161 [1st Dept. 2010]).
The Amended Complaint alleges there is a contract for each apartment, performance by Plaintiff
(in the form of delivery of money), breach, and damages. Therefore, the Amended Complaint
alleges a breach of contract. The alter ego allegations connect the defendants who were not
actual parties to the contracts to the breach of contract.
Defendants' arguments regarding limitations of remedy cannot be resolved at this
juncture because the Amended Complaint alleges that the limitation of remedy provisions were
obtained via fraud. Similar to how an amendment containing a release of remedies may be
invalidated for any of "the traditional bases for setting aside written agreements, namely, duress,
illegality, fraud, or mutual mistake" (Kaja Invs., LLC v. 2170-2178 Broadway, LLC, 39 Misc. 3d
385, 392, 958 N.Y.S.2d 577 [Sup. Ct. 2013], aff'd, 114 A.D.3d 433, 979 N.Y.S.2d 529 (2014)
quoting Mangini v McClurg, 24 NY2d 556, 563 [1969]), the agreement on limitation ofremedies
can similarly be invalidated on the same basis. Therefore, dismissal based on the terms of the
amendment to the contract is not appropriate at this time.
In addition, specific performance, a contract remedy, will not be dismissed at this time.
There are issues of fact as to whether Defendants self-created the breach or failed to act in good
faith. In such a circumstance, Defendants would not be permitted to rely on the clauses limiting
Plaintiffs remedies (Naso v. Haque, 289 A.D.2d 309, 309-310, 734 N.Y.S.2d 214 [2 nd Dept.
2001 ])("Where, as here, a provision in a contract for the sale of real property provides that in the
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event the seller is unable to convey title in accordance with the terms of the contract, the seller's
obligation to the buyer is limited to refunding the amount payable on account of the purchase
price and paying the net costs of examining title, that limitation 'contemplates the existence of a
situation beyond the control of the parties' and implicitly requires the seller to act in good
faith").
Constructive Trust
The elements of a cause of action for a constructive trust are "( 1) a confidential or
fiduciary relationship; (2) a promise; (3) a transfer in reliance thereon; and (4) unjust
enrichment" Matter ofNewman, 214 N.Y.S.3d 354, 361 (1 st Dept. 2024) quoting Sharp v.
Kosmalski, 40 N.Y.2d 119, 121 (1976). The Amended Complaint fails to allege a confidential or
fiduciary relationship. In opposition to the motion to dismiss, Plaintiff argues that a loan
converted to a down payment among related companies with common control constitutes a
special relationship. The Court does not agree that those facts make out the elements of a special
relationship for the purposes of a constructive trust. Therefore, the constructive trust cause of
action is dismissed.
Breach of Contract Against Feldman
Defendant Feldman moves to dismiss the claim against him for breach of guaranty
agreements because the guaranty agreements only obligated Feldman to guaranty payment of
indebtedness of particular notes which Feldman claims were converted thereby extinguishing the
notes and his obligations. However, the guarantees state that Feldman's obligation is not
discharged as a result of performance that effectuates a fraudulent transfer. There are issues of
fact regarding whether the transaction in this case were effectively a fraudulent transfer.
Therefore, Feldman's motion to dismiss the breach of contract claim against him must be denied.
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Unjust Enrichment
Defendants move to dismiss the unjust enrichment claim on the grounds that there is a
valid contract between the parties. Since Plaintiffs do not deny the existence of at least one
enforceable agreement regarding the amounts allegedly paid in the unjust enrichment claim, the
claim is duplicative and must be dismissed ( Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70
N.Y.2d 382, 388-89, 521 N.Y.S.2d 653,656 [1987] ["The existence of a valid and enforceable
written contract governing a particular subject matter ordinarily precludes recovery in quasi
contract for events arising out of the same subject matter."]).
Accordingly, it is hereby
ORDERED the sixth, seventh, and eleventh causes of action seeking a constructive trust
are dismissed;
ORDERED the ninth and tenth causes of action for unjust enrichment are dismissed; and
ORDERED the remainder of the relief requested in motions to dismiss are denied.
10/1/2024 DATE LYLE E. FRANK, 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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