5506-40 Linden Blvd Brooklyn LLC v. Linden 40 LLC

5506-40 Linden Blvd Brooklyn LLC v Linden 40 LLC 2024 NY Slip Op 31760(U) May 21, 2024 Supreme Court, Kings County Docket Number: Index No. 512113/2022 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 05/21/2024 02:03 PM INDEX NO. 512113/2022 NYSCEF DOC. NO. 158 RECEIVED NYSCEF: 05/21/2024

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS: CIVIL TERM: COMMERCIAL 8 - - - - - - - - - - - - · ... - - - - - - - - - - - - ~ -------- -- X 5506-40 LINDEN BLVD BROOKLYN LLC, 5507-58 LINDEN BLVD BROOKLYN LLC,. 5508-9S LINDEN BLVD BROOKLYN LLC, 5509-130 MARTENSE STREET BROOKLYN LLC, 5510-345 LEFFERTS BLVD. BROOKLYN LLC, and 5511-777 ST. MARKS Decis·iori and Order AVENUE BROOKLYN LLC, Plaintiffs, - against - Index No. 512113/2022 LINDEN 40 LLC, LINDEN 58 LLC, LINDEN 95 LLC, MARTENSE 130. LLC, LEFFERTS BLVD 345 LLC, ST. MARKS REALTY, LLC, and EDWARD LIFSHITZ; May 21, 2024 Defendants, --·- ·--· --- . -· -·--·· -·---· ·---- ··---·- . ----.--- ... -x.

PRESENT: HON, LEON RUCHELSMAN Motion Seq. #4

The defendants have moved pursuant to CPLR §3211 seeking to dismiss the second ani.ended complaint. The plaintiff has opposed the motion. Papers were submitteci by the parties and arguments held. After reviewing all the arguments this court now makes the following determination.

As recorded in the prior order, on June 26, 2015 the parties entered into a purchase and sale agreement w:hereby the plainti.ffs agreed to purchase properties from the defendants located at 40 Linden Boulevard, 58 Linden Boulevard, 95 Linden Boulevard, 130 Martense Street, ~45 Lefferts Boulevard and 777 St. Marks Avenue all in .Brooklyn. Paragraph JO (al Of the agreement states. that the '\Seller represents that it o.r its predecessors have registered c!,ll residential apartment units located at the Premises with The Division of Housing, Community a:nq. Renewctl

("DHCR") arid re-registered the same prior to July 1, 2014; to Seller's knowledge, the rents set forth on Schedule B annexed hereto do not exceed the maximum legal rent which may be collected from any tenants of the Premises pursuant to the Leases'' (see, contract of Sale, S[30(a) [NYSCEF Doc. No. 16]).

The plaintiffs commenced this lawsuit alleging the defendants rnisrepresented the correct rents for various apartments. Specifically, the amended complaint alleges that the defendants misrepresented the allowable rent fo.t seven apartments in four Of the buildings out of three hundred ancl. eighty apartments. The prior decisions dismissed the fraud cause of action and also dismissed all causes 0£ action as to def~ndant Lifshitz. The plaintiff filed a second amended complaint and the defendants have how moved seeking to dismiss it as well. As noted, the motion is opposed.

Conclusions of Law It is well sett:Led that upon a motibh to dismiss the court must deterrrtine, accepting the allegations of the complaint as true, whether the party can succeed upon any reasonable view of those facts (Perez. v. Y & M Transportation Corporation, 21:9 AD3d 1449, 19E NYS3d i45 [2d Dept., 2023]). Further, ali the allegations in. the complaint .are deeimed true and all reasonable inferences may be drawn in favor of the plaintiff (Archival Inc .•

v. 177 Realty Corp., 220 AD3d 909, 198 NYS2d 567 [2d Dept., 2023]). Whether the complaint will later survive a motion for summary judgment, or whether the plciintiff will ultimately be able to prove its claims, of course, plays no part in the determination of a pre~discovery CPLR §3211. motion to d.:i..smiss (see, Lam v. Weiss, 219 A.D3d 713, 195 NYS3d 488 [2d Dept., 2023]).

Section 'l43© of the Purchase arid Sale agreement states that defendant ''representations and warranties shall survive Closing for a period of one hurid:ted eighty (180) days (the "Survival Period")" (see, Purchase arid Sale Agreement, §43© [NYSCEF Doc.

No. 16]). The plaintiff ,does not dispute the efficacy of tliat clause bµt rather argues the claims a:te riot based upon the Purchase and Sale Agreement but rather they ar~ based on warranties in the deed which provides for delivery of the property free of any encumbrances. Indeed, the plaintiff cites to West 90th owners Corporation v. Schlechter, l37 AD2d 456i 525 NYS2 d 33 (1 st Dept . , 19 88] which held that "a deed with such a covenant constitutes, in a sense, rwt only a reaffirmation of the earlier contractual representation, but it also repr:esents a new and different commitment'' (id) . Therefore, "the covenant construed in Real Property Law §253(6) is an agreement of indemnification ... of a type not contained in the contract of sale, Thus., plciintiff' s right to indemnification arose for the

However, this entire argument is premised upon the court's e.arlier det~rminatio n that rnisrepr.eserita tioi"Ls concerning' the .terit roll constitute encumbrances . The plaintiff asserts that because o.f co:Liater-al estoppel or res judicata or- law ,of the. case·, the defend.ants are barred f.r·om re.-litig_ating that issue.. and thus cannot dismiss the case based upon that prior determinatio n.

"Res j iJ.dicia.ta- is a. -doctrine that comprises both. -claim ._preclusion ~nd issue p:t;'_.eclusi;on whii:;:h is. .also known as collateral .estoppel (see, Paramount Pictures Corporation v. Allianz Risk Transfer AG_, ·31 NY3d 64, 73 .-NYS3d 472 [20.18] ). . "To esta~l-ish claim preclusion, a party must show.: (1) .a final judgment on the merits, (2") identity o"r .priv'ity of parties, and (3") identity o·f· -claims.· in the two ·actions;, ( id) . In this q1s-e the p:tior · determination deriying tJ1e motion to dismiss the indemhif icatich.

-.claim wets not a firial :}udgement o·n .the -.m:_erit;;; and ·th,µs cl.a.im preclu_s,ion is i.n:applicable . Collateral estOpJ?el or issue preclu;sion gener"a1ly prevents a party frqm re.litigating an issue in a subseqµ.~nt c;J..ction that w-as cl.early raicsed and. decided.

against that party (Simmons v. Trans Express Inc., 37 NY3d.. 107, i4·8 NYS3d 17 8 2021]) .. Further, "'t.he doct.-rihe of· the 'law -of the case' is-a rule of practice, a:n articulation of sound poliqy that, when an issue is once j_udicially deti?rmined, that shonld be

.4

Of course, these doctrines do not prohibit any party from seeking to reargue any determination of the court. No;r can they prever:rt resolving issues that are raised pursuant t.o an amended complaint even if the portion seeking review is not being amended. To the extent this can be deemed a motion to reargue the court will permit such arguments. This i.s espec,ially true where the court finds such arguments compelling.

The court held that an improper or misrepresented rent roll can be considered an encumbrance since it reduces the value of the property. That determination did riot fully consider the definition of an incUmbrance. It is true, as explained in the prior decision, that "every diminution of whatever kind or degree of the ownership in fee simple absolute, other than a highway easement, is an encu:mbrance 11 (see, New York Law and Practice of Real Property, §.22: 2.2, Chapter 22. Marketable Title, D: Encumbrances [June 2022 Update]). That definition does not mean that anything which can affect·the value of the property is an: encumbrance. Ratherr an encumbrance "is any right to or interest in.the land subsisting in another, to the diminution: of its value, although consistent with the power to pass the fee by the conveyance. The term includes whatever charges obstruct, burden,

Allied Chemical Corp., [587 F. Supp 1205 [N. D. Cal. 1984]).

Moreover, wetlands designation is not an encumbrance (Bear Fritz Land Co. v. Kachemak Bay Title Agency, Inc., 920 P2d 759 [Alaska 1996], Frimberqer v. Anzellotti, 25 Conn.App. 401, 594 A2d 1029 [1991], Truck Southt Inc. v. Patel, 339 S~C. AO, 528 SE2d 424 [2000] ) .

There are no cases that hold the mere misrepresentation of rent rolls constitutes a:h encumbrance and the court should not have endorsed such an expansive understanding of encumbrances.

Inde_ed, endorsing such an expansive understanding of an encumbrance could result in far-reaching and unintended results.

For example, misrepresentations about the salaries paid to workers, which would increase expenses and reduce the value of the property thereby·could also be termed an encumbrance. There is no precedent for sucl-i a wide interpretation of an encumbrance.

Therefore, there can be no relief flowing £rom the deeds with covenants that the transfer of larid wa:s free of encumbrances.

Therefore, the only basis in which the plaintiff can maintain any relief is via the p:urchase and sale agreement which bars any such action more than180 days after the closing. There is no dispute no notices of any improper rental amounts were sent to the defendants within that time frame. Therefore, the

Consequently, the motion seeking to dismiss the second amended complaint is granted in its entirety.

So ordered.

ENTER:

DATED: May 21, 2024 Brooklyn N.Y. lion. Leon Ruthelsman JSC