Karp v Madison Realty Capital L.P.

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Karp v Madison Realty Capital L.P. 2021 NY Slip Op 32324(U) November 15, 2021 Supreme Court, Kings County Docket Number: Index No. 513756/21 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: 1] KINGS COUNTY CLERK 11/15/2021 03:10 PM INDEX NO. 513756/2021 NYSCEF DOC. NO. 74 RECEIVED NYSCEF: 11/15/2021 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS: CIVIL TERM: COMMERCIAL 8 -- .-·--·--- ·---· -- .------.---------.--------- ·.x ELI KARP, HELLO NOSTRAND LLC, 271 LENOX LLC AND HELLO FLATBUSH LLC, Decision and brder Plaintiffs, Index No. 513756/21 - against MADISON REALTY CAP!TF,.L, L. P., JOSHUA B. ZEGEN, MARK GORMLEY, 1580 NOSTRAND AVENUE LLC, 1357 F:LATBUSH AVENUE 1 LLC, BROOKLYN THREE LLC, MRC RE HOLDINS II LLC, 2 71 LENOX LENDER LLC, and FULTON STREET LENDER LLC, November 15, 2021 Defendants, ------------- ---- --- ---------- - .. - - - - X PRESENT~ HON. LEON RUCHELSMAN The defendants have moved pursuant to CPLR §3211 seeking to dismiss the complaint on the grounds it fails to state any cause of action. The plaintiffs filed an amended complaint and also opposed the motion. Papers were submitted by the parties and .after reviewing all the arguments this court now makes the following determination. On December 6, 2017 the plaintiff Hello Nostrand entered into a loan agreement with non-party Prophet Mortgage Opportunities LP whereby Hello Nostrand borrowed $ 63,. 000 ,000 for a construction project located at 1580 Nostrand Avenue in Kings County. To secure the ndtes unde.rlying ·s.uch l,oan the plaintiff .executed mortgages. and .se91.1rity .agreements. Oh J1.1ne 7, 2019 defend.ant Mp..disbn Realty Capital LP purchased the lo.an. do.cuments frotn Prophet. .The first complaint provides great detail. explaining how the defend.ants essentially eng.aged in predatory 1 of 7 [*FILED: 2] KINGS COUNTY CLERK 11/15/2021 03:10 PM NYSCEF DOC. NO. 74 INDEX NO. 513756/2021 RECEIVED NYSCEF: 11/15/2021 lending practices and manufactured defaults against the plaintiffs. That complaint alleged causes of action for fraud, breach of contract and a breach of the covenant of good faith and ·.tair dealing. to dismiss. On August 10, 2021 the defendants filed a motion: On September 15, 2021 the plaintiff file,d a stipulation adjourning the return date of the motion to October 18, 2021 and required opposition papers by October 1, 2021. On October 5, 2021 defend.ant's counsel notified plaintiff's counsel that no opposition had yet been filed. The plaintiff's counsel responded that they were under the belief the opposition: papers were due on October 8. Plaintiff's counsel indicated he would file tbem within a few days and afford defendant's counsel ample time in ~hlch to file a reply. Plain:tiff~s counsel did not file opposition within a few days. However, on October 15f 2021 filed an amended complaint as well as a cross-motion see·king to disqualify defendant's counsel. Further, on October 18, 2021 the plaintiff opposed. therrtotion to dismiss. The court afforded defendants counsel an opportunity to reply to the cippbsiticin to the motion to dismiss. Conclusions of Law It is well settled that upon a motion to dismiss the court must determine, a-ccepting the allegations of the countep::l.aim as true, whether the party can succeed upon any reasonable view of those facts (Da:vids v. State, 159 AD3d .987, 74 NYS3d 288 [.2o. 2 2 of 7 [*FILED: 3] KINGS COUNTY CLERK 11/15/2021 03:10 PM NYSCEF DOC. NO. 74 Dept., 2018]). INDEX NO. 513756/2021 RECEIVED NYSCEF: 11/15/2021 Further, the allegations of the counterclaim ate deemed true and all reasonable inferences may be drawn in favor of the plai11tiff (Dunleavy v. Hilton Hall Apartments Co., LLC, 14 AD3d 479, 789 NYS2d 164 [2d Dept,, 2005]) . Whether the counterclaim will later survive a motion for summary judgment, or whether the party 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, EBC I, Inc. v. Goldman Sachs & Co., 5 NY3d 11, 799 NYS2d 170 [2005]). It is further well settled that to succeed upon a claim of breach of contract the plaintiff must establish the existence of a contract, the plaintiff 1 s performance, the defendant's breach and resulting damages (Harris v. Seward Park Housing Corp., 79 AD3d 425, 913 NYS2d 161 [Pt Dept., 2010}). First, the amended complaint was filed late and without cotirt approval. Thus, it need not be borisidered. Notwithstanding the lateness of the opposition to the motion to dLsmiss the court will address the merits of the arguments contained in the motion to di.smiss and the opposition. The plaintiff executed a forbearance agreement which governs the claims asserted in this case. Paragraph 4 of the agreement states th.at "the Borrower and Guarantpr her.eby acknowledge a1:1.d agree that they haye no offsets, defenses, claims( or counterclaims against the Lender, its predecessors in interes.t, 3 3 of 7 [*FILED: 4] KINGS COUNTY CLERK 11/15/2021 03:10 PM NYSCEF DOC. NO. 74 INDEX NO. 513756/2021 RECEIVED NYSCEF: 11/15/2021 or any of their respective parents, subsidiaries, c1ffiliates, members, managers, partners, agents, officers, principals, directors, shareholders, employees, attorneys, representatives,. servicers, participants, predecessors, successors, assigns, or any person holding an interest in the Existing Loan... with respect to the Existing Loan, the Existing Loan Documents, or the . . Existing Loan Obligations, including, without limitation, the Existing Default, or otherwise, and that if the Borrower or the Guarantor now have, or ever did have, any offsets, defenses, claims, or counterclaims whatsoever against the Lender Parties, whether known or unknown, foreseen or unforeseen (regardless of by whom raised), at law or in equity (ot mixed), from the beginning of the world through the Effective Date and through the tirne of execution o:E this Agreement, all of them are hereby expressly WAIVED, and the Borrower and Guarantor each hereby remises; RELEASES, acquits, and discharges the Lender Parties from any lia!Jility therefor" (Id). The plaintiffs do not really argue the above clause bars the breach of contract and breach of good faith and fair dealing causes of action. Instead the plaintiff assert the amended complaint addresses claims that are not governed by such waiver .and release clauses arn;f that the amended complaint yalidly ass e:rts such c la.ims . prior court approval. However, the amended c:omp1 ai nt required .A m.otidn. to dismiss tha.t is acid.resse.ci to 4 4 of 7 [*FILED: 5] KINGS COUNTY CLERK 11/15/2021 03:10 PM NYSCEF DOC. NO. 74 INDEX NO. 513756/2021 RECEIVED NYSCEF: 11/15/2021 the merits o.f a case requires opposl tion to the motion and such opposition cannot take the form of an amended pleading (Livadiotakis v. Tzitzikalokisr 302 AD2d 369, 753 NYS2d 898 [2d Dept., 2003]). The arguments presented in the opposition that plaintiff's counsel failed to inform them of such waiver a.nd release clauses and failed to explain to them the consequences of such clauses does not undermine their applicability since a party that signs and agrees to a contract is generally presumed to know the contents of the contract and to have assented to its terms (Choung v. Allstate Insurance Co., 283 AD2d 468, 724 NYS2d 882 [2d Dept., 2001]). The plaintiffs might have .malpractice claims against their counsel if all the allegations in this regard prove true, however, as notedj there is no basis upon which to impugn the waiver and release clauses themselves. Therefore, the motion seeking to dismiss the breach o.f contract and breach Of good faith and fair dealing causes of action are granted. Turning to the fraud claim, it is well settled that to successfully plead fraud the claims must be plead with particularity (Lee Dodge Inc., v. Sovereign Bank, 1007, 51 NYS3d 531 [2d Dept., 2017]}. N .A., 148 AD3d Thus, to successfully plead fraud the pleadings must contain allegations of a repre.s.entation of a material fact, fa.lsity, $Cienter, reliance arid ihj ury (Moore v. Liberty Power Gorp .• LLC ~ 72 .AD3d 660, 89:7 NYS2d 72.3 [2d Dept.,. 20i0]) . Further, the elleg.ations must be 5. 5 of 7 [*FILED: 6] KINGS COUNTY CLERK 11/15/2021 03:10 PM INDEX NO. 513756/2021 NYSCEF DOC. NO. 74 RECEIVED NYSCEF: 11/15/2021 "stated in detail'' (CPLR §3016 (b)) and must include dates, details and items to the extent relevant (.§.§.§., Orchid Construction Corp., v. Gottbetter, 89 AD3d 708, 932 NYSZd 100 [2d Dept., 2011]). In this; case, essentially, the plaintiff argue the defendants made various promises to the plaintiff and failed to fulfill those promises. As noted; specifically, the complaint alleges that '\on July 1, 2019, during a meeting at defendant Madison Capital offices, defendants Madison Capital, Zegen, and Gormley represented to plaintiff Karp that they would assist him to complete the Nostrand Project,,, would work with him to upsize the Loan, and would provide him with requested loan advances" (.§.§.§., Complaint 'li 335) . Further the complaint asserts, that ''Instead, defendants Zegen and Gormley intended to engage in a. fraudulent scheme of delaying the· funding of the Nostrand Project to prevent its timely completion to rnariufacture an alleged default by plaintiff Hello Nostrand on the Loan; to trigger . . millions 0£ dollars in default interests at the default interest rate of 24%; and ultimately to obtain ownership of the building with the commencement of a foreclosure proceeding Complaint ·gi 337) • (see, However, it is well settled that "although fraud rna:y exi.st in the. inducement -of a contract, where, as .here, it is based solely on the. fai,lure to perform a promised future act, plaintiff's remedy lies in an action on the ct>ht.ract" (see, 6 6 of 7 [*FILED: 7] KINGS COUNTY CLERK 11/15/2021 03:10 PM NYSCEF DOC. NO. 74 INDEX NO. 513756/2021 RECEIVED NYSCEF: 11/15/2021 Locascio v. James V. Acquavella M.-D, P.C,., 185 AD2d 689, 586 NYS2d 78 [4 th Dept., 1992]). Thus; to assert a rhisrepresentation, the misrepresentation must concern a: present fact, not a future promise (see, Scialdone v. Stepping Stones Associates L.P., 148 AD}d 953, 50 NYS2d 413 [2d Dept., 2017]). The complaint in this case does not allege a:ny misrepresentation of any present fact. Rather, it solely conce_rns itself with promises made to the plaintiffs that were not kept. Therefore, the motion seeking to dismiss the fraud claim is granted. consequently, the motion seeking to dismiss the complaint is granted and the cross--motion seeking to disqualify defendant's counsel is now moot. So ordered. ENTER DATED: November 15, 2021 Brooklyn N.Y. Hon. Le6n.Ruchelsrnan JSC 7 7 of 7

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