Board of Mgrs. of 45 E. 22nd St. Condominium v. 45 E. 22nd St. Prop. LLC

Board of Mgrs. of 45 E. 22nd St. Condominium v 45 E. 22nd St. Prop. LLC 2025 NY Slip Op 30444(U) February 4, 2025 Supreme Court, New York County Docket Number: Index No. 652530/2023 Judge: James d'Auguste 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. 652530/2023 NYSCEF DOC. NO. 276 RECEIVED NYSCEF: 02/04/2025

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: Hon. James d'Auguste PART 55 Justice -------------------X INDEX NO. 652530/2023 BOARD OF MANAGERS OF 45 EAST 22ND STREET CONDOMINIUM, MOTION DATE

Plaintiff, 002 003 004 MOTION SEQ. NO. 005 006

45 EAST 22ND STREET PROPERTY LLC, IAN BRUCE EICHNER, THE CONTINUUM COMPANY, MADISON DECISION + ORDER ON REALTY CAPITAL, L.P., 45 EAST 22ND STREET 1 LLC, HILL WEST ARCHITECTS, LLP MOTION

Defendants. ----------------·---X

The following e-filed documents, listed by NYSCEF document number (Motion 002) 21, 22, 23, 24, 25, 26,27,28,29, 30,31,32, 33, 34,35,36,37, 38,39,40,41,42,43,44,45,46,47,48,49,50,51,52, 53,54,55,56,57,58, 59,60,61,63,65,66,67, 76, 77, 78, 79,80,81,82, 83,84,85,86,88,89,90, 91, 92, 93, 94,109,110,111,112,113,114,115,116,117,118,119,120,121,122,123,124,125, 126,127,128,129,130,131,132,133,134,135,136,137,138,139,140,141,142,144,145,146, 147,148,149,150,151,152,153,154,155,156,256,257,258,259,260,261,262,263,264,265, 266,267,268,269 were read on this motion to/for PREL INJUNCTION/TEMP REST ORDR

The following e-filed documents, listed by NYSCEF document number (Motion 003) 69, 70, 71, 72, 73, 74, 75,108,157,174,175,176,177,178,179,182,184,211,212,213,214,215,216,217,218,219, 220,221,222 were read on this motion to/for DISMISSAL

The following e-filed documents, listed by NYSCEF document number (Motion 004) 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 158,183,210,241,242 were read on this motion to/for DISMISS

The following e-filed documents, listed by NYSCEF document number (Motion 005) 159, 160, 161, 162, 163,164,180,236,237,238,239,240,244,248,249,252 were read on this motion to/for DISMISSAL

The following e-filed documents, listed by NYSCEF document number (Motion 006) 165, 166, 167, 168, 169,170,171,172,173,181,223,224,225,226,227,228,229,230,231,232,233,234,235,245, 246,247,250,251,253,254,255 were read on this motion to/for DISMISSAL

Upon the foregoing documents, it is

652530/2023 BOARD OF MANAGERS OF 45 EAST 22ND STREET CONDOMINIUM vs. 45 EAST Page 1 of6 22ND STREET PROPERTY LLC ET AL Motion No. 002 003 004 005 006

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INDEX NO. 652530/2023 NYSCEF DOC. NO. 276 RECEIVED NYSCEF: 02/04/2025

Motion Sequences 002, 003, 004, 005, and 006 are consolidated for disposition.

In Motion Sequence 002, plaintiff Board of Managers of 45 East 22 nd Street

Condominium a/k/a The Madison Square Park Tower ("Board of Managers") move for a

preliminary injunction, seeking to restrain 45 East 22nd Street Property LLC, Ian Bruce Eichner,

the Continuum Company LLC, Madison Realty Capital, L.P., and 45 East 22nd Street 1 LLC

(collectively, "Distribution Defendants") from using, distributing, removing, transferring,

pledging, or disposing of any proceeds of the sale of Unit 52AB pending determination of

plaintiffs claims in this action. In the alternative, plaintiff moves pursuant to DCL § 276

seeking to attach the sum of $9,420,180 from the proceeds of the sale of Unit 52AB pending

determination of plaintiffs claims. Madison Realty Capital, L.P. and 45 East 22nd Street 1 LLC

(lender and collectively "Madison Defendants"); Ian Bruce Eichner and The Continuum

Company LLC (developer); and 45 E 22nd Street Property LLC ("Sponsor") oppose the motion.

On July 28, 2023, the Court ordered the parties to place the proceeds of the sale of Unit 52AB

into escrow pending resolution of this motion except for fees owed to the sales agent and

outside broker, legal fees, RMU overage, transfer taxes, and recording fees. Further, the Court

invited the parties to file supplemental submissions to expand on arguments originally raised in

the motion seeking an injunction. In Motion Sequence 003, the Madison Defendants move to

dismiss the amended complaint. In Motion Sequence 004, Hill West Architects LLP f/k/a

Goldstein Hill & West Architects, LLP ("Hill West") moves to dismiss the amended complaint.

In Motion Sequence 005, defendant Eichner moves to dismiss the third and sixth causes of

action. In Motion Sequence 006, Sponsor moves to dismiss the first, second, third, and sixth

causes of action. Plaintiff opposes the respective motions to dismiss. The motions are resolved

as follows.

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INDEX NO. 652530/2023 NYSCEF DOC. NO. 276 RECEIVED NYSCEF: 02/04/2025

Plaintiff Board of Managers claims that the subject building, located at 45 East 22nd

Street ("subject building"), contains numerous deficiencies, defects, and deviations from the

Condominium Offering Plan ("Offering Plan") that requires at least $9 million in remedial work

- both to bring the building up to code and to conform with other provisions of the Offering

Plan. NYSCEF Doc. No. 22, at p.2. Despite the required remediation, plaintiff alleges that the

sponsor, developer, and Madison defendants orchestrated a scheme to strip the sponsor, a single

purpose entity controlled by the developer, of assets and render it insolvent while repaying the

developer and other equity investors. Therefore, plaintiff believes that the unit owners of the

subject building will have no recourse to recover for the building's allegedly defective

manufacture and design. Unit 52AB was one of the remaining units owned by the sponsor, and

the Court ordered the proceeds of the sale to be placed in escrow pending resolution of this

action - in which the plaintiff seeks damages from the various defendants for the alleged defects.

For this reason, the plaintiff seeks a preliminary injunction on distribution of the sale proceeds in

escrow, as these funds are the remaining asset from which plaintiff can recover.

Plaintiff has met its burden for a preliminary injunction. Plaintiff has demonstrated its

likelihood of success on the merits by presenting a prima facie case against the various

defendants for both primary categories of the causes of action - breach of contract and fraudulent

conveyances/voidable transactions. In the Offering Plan, the sponsor is required to "construct

the Building in accordance with all applicable Laws and codes and Department of Buildings

('DOB') Plans and Specifications as well as the provisions of the Plan" and "correct, repair or

replace all defects in the construction of the Building and its appurtenances and the Units, or in

the installation or operation of any appliances, fixtures or equipment in the same ... if such

defects are due to improper workmanship or material substantially at variance with the Plans and

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INDEX NO. 652530/2023 NYSCEF DOC. NO. 276 RECEIVED NYSCEF: 02/04/2025

Specifications." NYSCEF Doc. No. 32, at pp. xii, 95. Plaintiff has submitted extensive

supporting evidence of defects and deviations in violation of the Offering Plan. In addition, as

detailed in paragraphs 134-175 of the amended complaint (NYSCEF Doc. No. 30), plaintiff has

presented a timeline of transactions that establish a prima facie case for fraudulent conveyances

to repay preferred investors while rendering the sponsor insolvent in the face of increasingly

apparent financial obligations. Although defendants highlight that, as a general matter, a

plaintiff cannot show irreparable harm to warrant a preliminary injunction if a plaintiff can be

compensated through money damages, an exception applies if the Court finds that the purpose of

the injunction is to prevent defendants from improperly transferring assets to make ultimate

recovery impossible. See Winchester Glob. Tr. Co. Ltd. v Donovan, 58 AD3d 833, 834 [2d Dept

2009]. This exception applies in the present action, as one of plaintiffs core claims is the

defendants engaged in a scheme to pay themselves back while rendering the sponsor judgment-

proof. As the funds have been secured in escrow, the balance of the equities remains in

plaintiff's favor. Defendants seek immediate distribution of the funds from escrow, which would

leave plaintiff with limited avenues for redress against the sponsor (essentially de minimis assets

that the sponsor still owns) in the event of a final determination of defendants' liability.

As analyzed supra, defendants have not demonstrated their entitlement to dismissal of the

action. Plaintiff has sufficiently plead the various causes of action against each defendant. In

Motion Sequence 004, Hill West, a defendant that is not subject to the preliminary injunction

motion, moves to dismiss the action against them. Hill West was the architect of the subject

building; plaintiff has sufficiently plead that they could be liable to plaintiff if the building was

improperly designed and in violation of applicable building codes. In addition, despite Hill

West's contentions that the Martin Act bars the action against them, fraud claims based on

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alleged affirmative misrepresentations in the Offering Plan are not barred. Bd. of Managers of S.

Star v WSA Equities, LLC, 140 AD3d 405 [1st Dept 2016]. Therefore, the motions to dismiss

are denied.

Accordingly, it appearing to this Court that a cause of action exists in favor of the

plaintiff and against the defendants and that the plaintiff is entitled to a preliminary injunction on

the ground that the plaintiff has demanded and would be entitled to a judgment restraining the

defendant from the commission or continuance of an act, which, if committed or continued

during the pendency of the action, would produce injury to the plaintiff, as set forth in the

aforesaid decision, it is

ORDERED that the undertaking is fixed in the sum of $500,000.00 to be posted within

30 days of this order and conditioned that the plaintiff, if it is finally determined that it was not

entitled to an injunction, will pay to the defendant all damages and costs which may be sustained

by reason of this injunction; and it is further,

ORDERED that defendants, their agents, servants, employees and all other persons acting

under the jurisdiction, supervision and/or direction of defendant, are enjoined and restrained,

during the pendency of this action, from doing or suffering to be done, directly or through any

attorney, agent, servant, employee or other person under the supervision or control of defendant

or otherwise, any of the following act: distributing the funds placed into escrow following the

sale of Unit 52AB in the building located at 45 East 22nd Street per the order of this Court dated

July 28, 2023 (NYSCEF Doc. No. 94) absent further order of this Court, and it is further,

ORDERED that the motions to dismiss (Motion Sequence 003, 004, 005, and 006) are

denied, and it is further,

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INDEX NO. 652530/2023 NYSCEF DOC. NO. 276 RECEIVED NYSCEF: 02/04/2025

ORDERED that the parties are hereby directed to appear for a preliminary conference in

Part 55 on March 5, 2025 with a 10:00am check-in.

The constitutes the decision and order of the Court.

2/4/2025 DATE James d'Auguste, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED □ DENIED GRANTED IN PART 0 OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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