City of Long Beach v Janow Assoc., LLC

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City of Long Beach v Janow Assoc., LLC 2012 NY Slip Op 30368(U) January 31, 2012 Supreme Court, Nassau County Docket Number: 2502-11 Judge: Timothy S. Driscoll Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. .......................................................... ......... ...... ................................. ....... ... .... ... ... ...... ...... .... ...... .... ...... .. [* 1] SUPREME COURT - STATE OF NEW YORK SHORT FORM ORDER Present: HON. TIMOTHY S. DRISCOLL Justice Supreme Court ------------------------------------------------------------------- x CITY OF LONG BEACH, Plaintiff, TRIAL/IAS PART: 16 NASSAU COUNTY Index No: 2502- Motion Seq. Nos. 1, 2 and 3 Submission Date: 11/14/11 -againstJANOW ASSOCIATES, LLC; SHORE ROAD DEVELOPMENT PARTNERS, LLC; SHORE ROAD SUPERBLOCK, LLC; iST AR FM LOANS, LLC and PHILIP PILEVSKY, Defendants. ------------------------------------------------------------------- x The following papers having been read on these motions: Notice of Motion, Affirmation in Support and Exhibits............. Affirmation in Opposition and Exhibits................................. Reply Affirmation in Further Support, Reply Affidavit in Further Support and Exhibits..................... Notice of Motio D... ......... ... ... ...... Affirmation in Support and Exhibits....................................... Memorandum of Law in Support................................................... Affirmation in Opposition and Exhibits................................ Memorandum of Law in Opposition...................................... Reply Memorandum of Law Respo n din g Affirma tio n........ ...... ..... OSC, Affrmation in Support and Exhibit................................ Affirmation in Opposition and Exhibit.................................... This matter is before the Cour for decision on 1) the motion fied Pilevsky (" Pilevsky ) on April 1 by Defendant Philip , 2011 , 2) the motion fied by Defendants iStar FM Loans LLC [* 2] and Shore Road- Long Beach Superblock , LLC (collectively " iStar Defendants ) on June 23 , 2011 , August 18 and 3) the Order to Show Cause filed by the iStar Defendants on 2011 , all of which were submitted on November 14 , 2011 , following oral argument before the Court. For the reasons set forth below , the Cour 1) grants the motion by Defendant Pilevsky for judgment dismissing the Complaint , declares that Plaintiff has no contractual claims against Pilevsky, and denies leave to replead , except with respect to the 19th cause of action against Pilevsky, based upon an alleged fraudulent conveyance , regarding which the Court grants leave to replead within 60 days of the date of this Order; 2) determines the iStar Defendants motion as follows: a) dismisses all contractual claims pursuant to the contractual provisions of the initial contract of sale , amendments and survival letter , and denies leave to replead; b) dismisses all claims for failure to comply with the Urban Renewal Plan , with leave to replead specific breaches of the Urban Renewal Plan only within 60 days ofthe date of this Order; and c) dismisses the 19th cause of action , with leave to replead within 60 days of the date of this Order; and d) dismisses the claim for unjust enrichment and denies leave to replead; and 3) denies the Order to Show Cause seeking an Order cancelling the Notice of Pendency. BACKGROUND A. Relief Sought Defendant Pilevsky moves for an Order , pursuant to CPLR 3211(a)(I), dismissing the Verified Complaint (" Complaint" ) with prejudice. The iStar Defendants move for an Order , pursuant to CPLR 3211(a)(1) and (7), dismissing the Complaint. The iStar Defendants also move for an Order , pursuant to Article 65 of the CPLR cancellng the Notice of Pendency. Plaintiff City of Long Beach (" City" ) opposes the motions. B. The Paries ' History The Court previously set forth a detailed description of this action , including the allegations in the Complaint , the paries ' positions and certain relevant contractual principles , in a prior Order of the Court dated October 5 , 2011 (" Prior Order ) that directed oral argument on Defendants ' motions. The Court incorporates the Prior Order by reference herein as though set forth in its entirety. [* 3] As noted in the Prior Order , Plaintiff sought to have a 6-acre parcel of vacant oceanfront propert known as the " Superblock" developed through a comprehensive Urban Renewal Plan. It conducted a blight study and issued a request for proposals. Defendant Janow Associates LLC (" Janow ), an entity owned solely by Pilevsky, was selected as the designated developer for the construction of a luxury hotel and condominium complex. Thereafter , the City entered into a contract of sale dated November 7 2001 with Janow. According to the contract , the purchase price was $11 000 000. Four separate amendments to the contract of sale were executed. The first three amendments were executed by the City and Janow. The fourth amendment was executed by the City and Shore Development Partners , LLC (" Shore LLC" ), Janow s assignee. Shore LLC was owned 50% by Janow , and 50% by JELB Long Beach Associates , LLC, an entity of which Pilevsky owned 50%. The second and fourth amendments expressly state that the provisions therein shall surive the closing. The purchase price in the Second Amendment was increased to include the cost of acquiring all of the Superblock properties. The City commenced a condemnation proceeding and acquired title to the separate parcels that make up the " Superblock" propert pursuant to a vesting order dated April 4 , 2006. A number of the property owners contested the valuations of their parcels , and those disputes continue in litigation. Pilevsky executed a guaranty in favor of the City dated September 7 , 2005 , purs uant to which he agreed to guarantee the closing on the contract for the sale of the Superblock, and payment of the Appraised Value. Although no definition of Appraised Value is contained in the Guaranty itself, the Guaranty provides that the terms used therein were to have the meanings ascribed to them in the Second Amendment. On this issue the Second Amendment (Ex. 4 to Diamant Aff. in Supp. ) provides as follows at paragraph l(a): (a) " Appraised Value " shall mean the aggregate amount that the Seller is required to deposit with the Cour within ninety (90) days ofthe time of the Nassau County Clerk' s entry of the signed vesting order, filing of the acquisition map and of Seller s taking title to the Propert, plus the aggregate amount of actual payments as advance payment(s) plus applicable interest if the same is requested by the existing owner(s) or the propert and/or claimants ("the Propert Owners ), or demanded , as the case may be. ), [* 4] By letter dated May 31 , 2006 , Pilevsky agreed to a modification of the guaranty. In the modification (Ex. 9 to Diamant Aff. in Supp. ), he guaranteed that the closing would be in accordance with the Third Amendment , and that he would guarantee payment of the Appraised Value on or before October 31 , 2006. The Third Amendment (Ex. 5 to Diamant Aff. in Supp. inter alia modified the Purchase Price to include: (iii) The Condemnation Costs , to be payable at Closing, plus the Agreed Value of the S40re Road Parcel , the Stated Value (as hereinafter defined) of the Tax Deed Parcel , plus the Additional Consideration (as hereinafter defined), less the Down Payments , and subject to the adjustments and prorations set forthin Section 4 of the 2001 Contract and elsewhere in the Contract, if any (the " Closing Balance and (iv) The balance of the purchase Price , to be paid as and when determinations with the various Property Owners have been effectuated, as more paricularly described in the Contract. Third Amendment at 3(a) The closing took place on October 30 , 2006 , and the deed from the City to Shore LLC was delivered and recorded. The deed contained a covenant that the purchaser , its successors and assigns would comply with the Urban Renewal Plan. The City and Shore LLC executed a Surival Letter on the day of the closing, to expressly agree that varous obligations , including the payment of " condemnation costs " and future payments to the individual propert found in the Second , Third and Fourh Amendments would survive the owners, closing oftitle. Pilevsky did not execute the Survival Letter in his individual capacity. To finance the project , Shore LLC entered into a loan agreement with Fremont Investment & Loan (" Fremont" ). This loan was in the original principal amount of $51 , 500, 000 and was secured by a mortgage on the " Superblock" propert. The loan , or some part thereof was personally guaranteed by Pilevsky. At the closing Fremont wired a check in the amount of $38, 703, 061.65 to the City s account. Fremont apparently went out of business and its assets were assigned to iStar. Sometime thereafter Shore LLC defaulted on the loan and defaulted on its suriving contractual obligations. Instead of commencing foreclosure proceedings , iStar accepted a Bargain and Sale Deed Without Covenants in lieu of foreclosure pursuant to which the grantor was Shore LLC [* 5] and the grantee was Shore Superblock , an affliate of iStar. This deed , given in lieu of foreclosure , is dated May4 , 2009. It does not contain a covenant requiring compliance with the Urban Renewal Plan. At the time of this transfer by deed , the City alleges , iStar released Pilevsky from his personal guaranty of all or par of the original loan amount to Janow. C. The Paries ' Positions The Cour incorporates the Prior Decision herein by reference. RULING OF THE COURT Standards for Dismissal A complaint may be dismissed based upon documentary evidence pursuant to CPLR ~ 3211(a)(1) only if the factual allegations contained therein are definitively contradicted Yew Prospect, LLC by the evidence submitted or a defense is conclusively established thereby. v. Szulman 305 AD. 2d 588 (2d Dept. 2003); Sta-Bright Services, Inc. v. Sutton l7 AD. 3d 570 (2d Dept. 2005). In addition , it is well settled that a motion interposed pursuant to CPLR ~3211 (a)(7), which seeks to dismiss a complaint for failure to state a cause of action , must be denied if the factual allegations contained in the complaint constitute a cause of action cognizable at law. Guggenheimer v. 98 N. Realty Co. Ginzburg, 43 N. Y.2d 268 (1977); 511 W 232 Owners Corp. v. Jennifer 2d 144 (2002). When entertaining such an application , the Cour must liberally construe the pleading. In so doing, the Court must accept the facts alleged as true and accord to the plaintiff every favorable inference which may be drawn therefrom. Leon Martinez 84 N. Y.2d 83 (1994). On such a motion , however , the Cour wil not presume as true bare legal conclusions and factual claims which are flatly contradicted by the evidence. Palazzolo v. B. Herrick, Feinstein 298 A. D.2d 372 (2d Dept. 2002). Contract Interpretation The Court incorporates the Prior Order herein by reference. C. Fraudulent Conveyances Pursuant to Debtor and Creditor Law (" DCL" ) ~ 272 , fair consideration is given when in exchange for such property or obligation , as a fair equivalent therefore , and in good faith propert is conveyed or an antecedent debt is satisfied. " Conveyances that satisfy an antecedent debt made while the debtor is insolvent are neither fraudulent nor otherwise improper , even if [* 6] Town of Southampton v. Chiodi 75 AD. their effect is to prefer one creditor over another. 604 (2d Dept. 2010), quoting v. Ultramar Energy Chase Manhattan Bank 191 AD. 2d 86 90- (1 st Dept 1993). This general rule , however is not a license to engage in sham transactions in furtherance of such a preference. Matter of The CIT Group/ Commercial Services Inc 25 AD. 3d Jamaica Avenue Limited Partnership, 301 v. rearg. den. , 302 (1st Dept. 2006), 1602006 Y. App. Div. LEXIS 6386 (1st Dept. 2006). Both insolvency and lack of fair consideration are prerequisites to a finding of constructive fraud under DCL ~ 273 , and the burden of proof is on the pary conveyance. Joslin D. Lopez 309 AD. 2d v. 837 , challenging the 838 (2d Dept. 2003). Non- Paries to an Agreement Non- paries to an agreement are not generally bound thereby. Equites Group, LLC v. Pine Equity NY, Inc. 27 AD. 3d 323 (1 st Dept. 2006); v. Game of New York, Inc. agreement purorts to Manhattan Real Estate National Survival 169 AD.2d 760 (2d Dept. 1991). Although an NSG of LI Corp, bind successors and assigns of the paries to the agreement , an assignee or successor wil not be bound to the terms of a contract absent an affrmative assumption of the Amalgamated Transit Union Local 1181 , AFL- CIO duties in the contract. 45 AD. 3d 788 , 790 (2d Dept. 2007); see also Silman v. v. City of New York Twentieth Century- Fox Film Corp, 3 Y.2d 395 , 402 (1957). E. Covenants Runing with the Land Affirmative covenants may be enforced against subsequent holders ofthe originally burdened land whenever it appears that I) the original grantor and grantee intended such a result; 2) there has been a continuous succession of conveyances between the original covenantor and the par now sought to be burdened; and 3) the covenant "touches " or " concerns " the land to a Harrison v. Westview substantial degree. 2010), quoting F. Nicholson v. Properties, LLC 79 A. DJd 1198 , 1200 (3d Dept. 7 N. Y.2d 240 , 245 (1959). 300 Broadway Realty Corp., Uniust Enrichment To recover under a theory of quasi contract , the plaintiff must be able to prove that performance was rendered for the defendants, resulting in their unjust enrichment. It is not enough to show that the defendants consented to the improvements or received a benefit from the plaintiff's activities. Outrigger Construction Co. , lnc v. Bank Leumi Trust Co of New York [* 7] 240 AD. 2d G. 382 (2d Dept 1997). Notice of Pendency When the court entertains a motion to cancel a notice of pendency, it neither assesses the likelihood of success on the merits , nor considers material beyond the pleading itself; the cour' analysis is to be limited to the pleading Dept. 2010), citing Corp v. 0 & H. Nastasi Y Equity Corp,. v. s face. Ewart Nastasi 26 AD. 3d v. 32 , Ewart 78 AD. 3d 992 , 992- 993 (2d 36 (2d Dept. 2005), quoting 5303 Realty 64 N. Y.2d 313 321 (1984). Application of these Principles to the Instant Action I. Pilevsky Motion The documentary evidence presented establishes thatPilevsky s obligations , pursuant to his guaranty and the letter dated May 31 , 2006 , ended at the closing. To the extent that the City argues that Pilevsky s guarantee of the Appraised Value included costs which the paries knew could not be determined at the time of the closing, it was incumbent on the City to document any continuing personal liability on the part of Pi lev sky. There is , however , no document executed by Pilevsky in his individual capacity that extends his liability past the closing. Under these circumstances , the documentar evidence directly contradicts the City' s claim that Pilevsky owed contractual obligation for post- closing costs , and conclusively disposes of Plaintiffs contractual claims against Pilevsky. Accordingly, the Court dismisses those claims and denies leave to replead any contractual claims against Pilevsky individually. The Court dismisses the 19 cause of action against Pilevsky because the City has failed to allege the required elements of the debtor s insolvency and lack of fair consideration for the deed given in lieu of foreclosure. As noted in the Prior Order , the 19th cause of action , asserted against all Defendants , alleges that the deed given in lieu of foreclosure from Shore LLC to Shore Superblock was a fraudulent conveyance. As to Pilevsky, the City alleges that his reward for deeding away the " Superblock" propert par of the original loan of$SI was that he was released from his guaranty of all or SOO OOO to Janow. Pilevsky argues that the deed given in lieu of foreclosure was a conveyance made for fair consideration because it satisfied the antecedent debt of $51 , 500 000. The Court grants leave to replead this cause of action within sixty (60) days of the date of this Order , but cautions the City that there must be ,a factual basis for any claim of lack of fair consideration. The Court notes that Shore LLC' s debt to iStar in the amount [* 8] of nearly $54 000. 000 was satisfied by the deed given in lieu of foreclosure. II. Motion by iStar Defendants The Cour dismisses all causes of action seeking contractual payments from iStar or Shore Superblock pursuant to the original contract of sale , amendments or surival letter. In light of the absence of any contractual document obligating iStar or Shore Superblock to pay the obligations evidenced by the original contract of sale, amendments or survival letter , and the absence of any express assumption of the alleged contractual duties , these causes of action must be dismissed. This Court, however , agrees with the City that the covenant to comply with the terms of the Urban Renewal Plan "touches " or " runs " with the land; indeed the Urban Renewal Plan is the genesis of all of the City' s actions in obtaining bids from developers, granting the bid to Janow litigating the values of the individual parcels , selling the property to Shore LLC , and planing for redevelopment of the blighted area. Shore Superblock notes , however , that there are no provisions in the Urban Renewal Plan that require any pary to affirmatively develop the Superblock Propert, or to do by a paricular date , and argues that Plaintiff has not alleged any specific breach of the Urban Renewal Plan , requiring dismissal of the 22nd cause of action. Moreover , although iStar insists that it is only a lender , the City argues that iStar engaged with hore Superblock , Pilevsky and Shore LLC in an elaborate procedure to transfer title in a way that avoided performance of all surviving contractual obligations. The Court concludes that the Complaint does not adequately plead these causes of action. Accordingly, the Court dismisses all causes of action based on iStar and/or Shore Superblock' s breach of the Urban Renewal Plan, without prejudice to the City' s right to replead specific breaches of the Urban Renewal Plan. The Cour dismisses the supra for the reasons discussed 19 cause of action, based on an alleged fraudulent conveyance with respect to Pilevsky. The Court grants Plaintiffleave to replead , but reminds Plaintiff of the cautionary language used by the Court with respect to repleading this cause of action. The 20 cause of action alleges that Shore Superblock " has been unjustly enriched by the Urban Renewal process and should , through the equitable powers of the cour , be made to stand in the shoes of (Shore LLCJ with regard to any and all Urban Renewal Plan and contractual liability to the (City)" (Compl. at 107). The City alleges that Shore Superblock is " the passive [* 9] beneficiar to the City s efforts to assemble several smaller parcels through Urban Renewal into perhaps the most valuable single parcel of oceanfront propert on the Eastern Seaboard" at (id. 106). The Cour has already determined that , to the extent that the City can allege specific breaches of the Urban Renewal Plan , it may allege such breaches against Shore Superblock. the extent that the City seeks any kind of contractual payments from Shore Superblock and iStar however , such payments are bared. It is not enough to show that these Defendants received a benefit from the City' s activities; the City must be able to prove that performance was rendered for the Defendants resulting in their unjust enrichment , which the City canotdo. Accordingly, the Cour dismisses any claim for unjust enrichment against iStar and Shore Superblock , with prejudice. II. Order to Show Cause Regarding Notice of Pendency at this juncture , denies the motion for an Order cancellng the notice of pendency. Given that the Cour has granted the City leave to replead claims that wil affect the The Court , use of the " Superblock" property, and in the absence of evidence that the City is not acting in good faith or has an ulterior motive , the Court denies the motion. All matters not decided herein are hereby denied. This constitutes the decision and order of the Court. The Court reminds counsel for the paries of their required appearance before the Cour for a conference on Februar 23, 2012 at 9:30 a. DATED: Mineola , NY Januar 31 , 2012 ENTI;RED FFR 03 2012 NASSAU COUNTY COUNTY CLERK' S OFFICE

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