Birkla v. Cincinnati Terrace Assoc., LLC

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.,

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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

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[ 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

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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

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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

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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

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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

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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

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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

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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

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Footnotes

[1] of 12 [* 1] 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] 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]