Baldasano v. Bank of New York
| Decision Date | 18 June 1991 |
| Citation | 174 A.D.2d 457,571 N.Y.S.2d 242 |
| Parties | Vincent BALDASANO, et al., Plaintiffs-Appellants, v. The BANK OF NEW YORK, successor to Long Island Trust Co., et al., Defendants-Respondents, and Barry Trupin, Rothschild Registry Properties Corp., et al., Defendants. |
| Court | New York Supreme Court — Appellate Division |
Before ROSENBERGER, J.P., and KUPFERMAN, KASSAL and RUBIN, JJ.
Order, Supreme Court, New York County (Francis N. Pecora, J.), entered October 15, 1990, which granted the motion by defendants Intercontinental Monetary Corp., Mutual Life Insurance Company of New York and The Bank of New York to dismiss the complaint against them pursuant to CPLR 3211(a)(1), (2) and (5) for failure to state a cause of action and on grounds of res judicata and collateral estoppel, unanimously reversed, on the law and the facts, and the motion is denied, without costs.
Sarasota Plaza Associates, a New York limited partnership, is essentially a tax shelter whose sole asset is a Sarasota Florida office building known as United First Federal Plaza, which is said to have been purchased by the general partner, Sarasota Management Corp., for $22,763,000. Units in the limited partnership were offered for sale for $97,928 each pursuant to a prospectus dated September 18, 1984. Of the purchase price per unit, only $1,835 was payable in cash with the balance payable by promissory note.
Plaintiffs, who are limited partners, allege, inter alia, that the general partner was controlled by one Barry Trupin and was part of the Rothschild Group of companies, including defendants Rothschild Registry Properties Corp. and North American Associates, Inc., and that the property had been purchased from third parties for only $15.2 million and then been transferred from other Rothschild Group entities to Sarasota Management Corp. for the increased price. The subsequent use of the inflated purchase price in calculating the tax shelter benefits, it is alleged, rendered those statements in the prospectus materially false.
Sarasota Management Corp., the general partner, received 167 promissory notes executed by limited partners, in the aggregate amount of $11,583,750.63, which it then transferred, apparently without consideration, to North American Associates, Inc., which, in turn, transferred the notes to Rothschild Registry Properties Corp., again without consideration.
In December 1984, Intercontinental Monetary Corp. (IMC) purchased all of Sarasota Plaza Associates' promissory notes from Rothschild Registry Properties Corp. for $11,087,749.94. IMC, which was in the business of acting as a clearing house for limited partnership notes and had previously made such purchases with respect to ten other Rothschild Group limited partnerships, then pledged the notes as security for repayment of a more than $11 million loan from Mutual of New York (MONY), with IMC retaining equitable title to the notes. Defendant Bank of New York (BNY) is the successor to the Long Island Trust Co., which was retained by MONY as agent and/or trustee in collecting payments on the notes from the limited partners.
Plaintiffs further allege that Sarasota Management Corp. then obtained mortgages on the basis of the inflated purchase price and that these inflated mortgages ultimately led to the foreclosure of the property, when the rental income was insufficient to pay the inflated mortgage debt on the property.
In September 1988, in a Florida state court action, 33 of the limited partners, including 14 of the 29 plaintiffs herein, succeeded in ousting Sarasota Management Corp. as general partner and replacing it with a new general partner, 1390 Management Corp., controlled by one of the limited partners, Marilyn Snodell, not a party to this action.
In January 1989, the new general partner allegedly discovered looting of partnership assets, including the $11 million obtained from IMC and an additional $3.3 million in bogus "loans" to the...
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