The opinion
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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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
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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.
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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
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