Upper W. St. LLC v Upper W. Member LLC

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Upper W. St. LLC v Upper W. Member LLC 2004 NY Slip Op 30384(U) September 17, 2004 Supreme Court, New York County Docket Number: 103153/04 Judge: Marcy Friedman Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNT"Y - - PART 57 UPPER WEST ST.1lt, Index No.: 103153/04 against UPPER WEST :ME Plaintiffts), ,.. DECISION/ORDER ER LLC, et al., ·In thi~ action, P' aintiff Upper West St. U..C seeks to enjoin the sale of certain real property located in do ·ntown Manhattan or, alternatively, to recover profits allegedly due upon the saJe of the property The amended complaint alleges causes of action for fraud on a creditor, breach of contract, and fraudulent conveyance~ Defendants Upper West Member LLC, Abraham Leser, AAL Realty, LL , 18 West LLC, Lower DAC U..C, SW Realty Holdings LLC, and New 19 West, LLC ("defen ants") make this pre-answer motion pursuant to CPLR 3211 to dismiss the amended complain on various grounds, including documentary evidence and failure to state a cause of action. The complaint lieges the following: Plaintiff owned a 17 percent interest in real property which consist d of the 14th - 35th floors of 19 West Street a/k/a 18-20 West Street in Manhattan (the "Prope y"). On July 19, 2001, plaintiff exchanged its 17 percent interest in the Property for an undilut d 17 percent in~erest in 18 West LLC, a company formed to own the Property. On the same date, plaintiff sold its 17 percent interest in 18 West LLC to Upper West Member LLC pursuant o the terms of an agreement ("buy-out agreement") which provided that [* 2] plaintiff was entitled, ip addition to payment of $1.5 million, to 8.5 percent of any profit made "in connection with thy sale of the Property as a whole, or as condominium units." Also on the same date, 18 West ujc encumbered the Property with an $11 million mortgage, which was I used by defendant Les~r to acquire property consisting of the 1st - 13th floors of 19 West Street I a/k/a 18-20 West Stree'.t in Manhattan. On January 22, 2004, 18 West LLC agreed to sell the I Property to defendant lew 19 West LLC for $27 million, the exact amount due on the two outstanding mortgages' on the Property. As to the first c use of action, for fraud 1, while the court finds, as discussed below, that plaintiff has stated a cl ·m for breach of contract, plaintiff has not alleged a separate cause of action for fraud. "A fr ud claim that only restates a: breach of contract claim may not be maintained." Orix C) dit Alliance v Hable Co., 256 AD2d 114, 115 [1 51 Dept1998].) ''Thus, a , viable claim of fraud c nceming a contract must allege misrepresentations of preseJlt facts (rather than merely of future i tent) that were collateral to the contract and which induced the allegedly defrauded party to entl into the contract." ffiLl Here, plaintiff does not allege that it was fraudulently induced to enter into the buy-out agreement at issue but ather that defendants' encumbrance of the property deprived plaintiff of its ability to make a pr ,fit. Nor does plaintiff claim that there was a misrepresentation of present facts collateral to. the c ntract. (See id. Compare Schondorf v Brookville Energy Partners. L.P.! 303 AD2d 396 [2d De t 2003].) The court therefore finds that the complaint does not state a claim for fraud. 1 Although plaint ff denominates its first cause of action as "fraud on a creditor," its opposition papers make clear that th claim is one for ordinary fraud. 2 [* 3] The court does1findthat plaintiff has stated a breach of contract claim based on the I implied covenant of gqod faith and fair dealing. It is well recognized that "[i]mplicit in all contracts is a covenan~ of good faith and fair dealing in the course of contract perfonnance. * * * This embraces a pledgf that 'neither party shall do anything which will have the effect of i i destroying or injuring (he right of the other party to receive the fruits of the contract'." (Dalton v I I Educ. Testing Serv., 8, NY2d 384, 389 [1995][intemal citation omitted].) Thus, "even an explicitly discretion contract right may not be exercised in bad faith so as to frustrate the. other party's right to the hen fit under the agreement." CRichbell Info. Servs .. Inc. v Jupiter Partners. L.P., 309 AD2d 288, 3 2 [1st Dept 2003].) In the instant c, se, plaintiff alleges that defendants encumbered the property so as to deprive plaintiff of its bility to make a profit on the sale of the property. (See Amended Complaint 'fl'1I 48-50.) I hese allegations are sufficient to withstand the motion to dismiss. , In so holding, t e court rejects defendants' apparent argument that the agreement itself demonstrates that theli can be no breach of contract claim because plaintiff's entitlement to a profit under the agree,ent was contingent, and no profit was realized. This argument neither1 addresses nor override a claim based on the covenant of good faith and fair dealing. This is thus not a case in which do umentary evidence on its face demonstrates the absence of a claim as a matter of law. Nor is the brea h of contract claim barred by plaintiff's consent to the mortgage. Plaintjff' s claim is not hat the mortgage was obtained without authorization but that the mortgage was used to cquire property for the benefit of defendants rather than to improve the 3 [* 4] ., . . value of the Property i~ which plaintiff had an interest. 2 I As to the third cause of action, defendants argue that no claim for fraudulent conveyance may be made in the abfence of an unsatisfied final judgment against the party conveying the . property. However, c9ntrary to defendants' argument, a claim for fraudulent conveyance may be asserted even where there is no final judgment. (See Debtor and Creditor Law § 276.) I I Accordingly, dismiss, of the claim is not required on that basis. Defendants do rot ~therwise set forth any basis or cite any legal authority to support dismissal of the cause ff action for fraudulent conveyance. Defendants do not address whether I there was a conveyan~fl o_r plaintiff is a creditor within the meaning of the Debtor and Creditor Law. Thus, while the~ appears to be a serious question as to whether plaintiff has alleged a claim for fraudulent ~Tveyance, defendants have not demonstrated on this record that plaintiffs If claim fails as a matter law.3 . . Accordingly, tle motion is granted only to the extent that it is ORDERED thj1 the first cause of action is severed and dismissed; and it is further ORDERED tha~ the action shall continue as to the remaining causes of action. This constitute the decision and order of the court. September 17, 004 Der 0 4 2004 MARCY IVEWyoR., Cl.ER " While defendan s also argue that therJb~<Df'BICJ!each of contract because there was no sale of the property, they fail to ite any authority that a contract of sale is insufficient to support a breach of contract claim. 2 3 The court notes hat defendants do not argue on this motion that the claims were not properly asserted against any part cular individual defendant, but rather focus generally on the sufficiency of the causes of action. 4

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