Bd. of Managers of 87-89 Leonard St. Condo. v. Leonard St. Owner
| Decision Date | 29 September 2022 |
| Docket Number | Index No. 151532/2019,Motion Seq. No. 002 |
| Citation | 2022 NY Slip Op 33275 (U) |
| Parties | BOARD OF MANAGERS OF 87-89 LEONARD STREET CONDOMINIUM, SUING ON BEHALF OF ITS UNIT OWNERS, Plaintiff, v. LEONARD STREET OWNER, LLC, MARC RAVNER, BENJAMIN SHAOUL, GRASSOMENZIUSO ARCHITECTS Defendant. |
| Court | New York Supreme Court |
MOTION DATE 09/13/2021.
DECISION + ORDER ON MOTION
The following e-filed documents, listed by NYSCEF document number (Motion 002) 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 41 were read on this motion to/for DISMISSAL
In this action for breach of contract, fraud in inducement, breach of fiduciary duty, and fraudulent conveyance, defendants Leonard Street Owner, LLC, Marc Ravner, and Benjamin Shaoul move pursuant to CPLR 3211(a)(1) and (7) for an order dismissing plaintiff Board of Managers of 87-89 Leonard Street Condominium's second cause of action for fraud in inducement, fourth cause of action for breach of fiduciary duty, fifth to seventh causes of action for fraudulent conveyances, and claim for attorney's fees. Plaintiff opposes the motion.
The condominium's board of managers, on behalf of the condominium and the unit owners (plaintiff), brings this action alleging construction defects in a luxury condominium building located at 87-89 Leonard Street, New York, New York (the Building). The defendants are Leonard Street Owner, LLC (Sponsor) - the sponsor and developer of the Building; Marc Ravner and Benjamin Shaoul (individual defendants - principals of the Sponsor (together with Sponsor, the moving defendants), and Grasso-Menziuso Architects, P.C. (Grasso) - the architect for the Building, who has yet to appear in this action.
According to the Complaint, the Building is a "150-year-old landmarked cast-iron building" in Manhattan and was first acquired by non-party Go Cat Go, LLC in 2004 to be renovated and converted into a "meticulously restored" seven-unit condominium (NYSCEF # 15 - Complaint, ¶¶ 1, 12). In 2011, Go Cat Go, LLC formed a company that had "substantially and/or nearly completed" the renovation work. In 2014, Sponsor acquired the Building from that company with the intention of completing the project (id., ¶ 13-18). After acquiring the Building on June 2, 2014, Sponsor filed the Offering Plan on June 23, 2014 (id., ¶ 19) which contained a Sponsor's Certification signed by Sponsor and both individual defendants, and an Architect's Certification signed by Grasso (id., ¶ 8-9, 28-29). Using the Offering Plan as a promotional tool, the moving defendants began a marketing campaign for the sale of the seven units in or around January 2015 (id., ¶¶ 32-33).
Plaintiff alleges that the Building suffered from a multitude of material defects, exhibited poor workmanship, shoddy construction practices, and was not at all representative of what the Sponsor depicted in the Offering Plan (id., ¶ 35). The Complaint lists the exterior and interior defects in the Building. For example, there are numerous cracks, voids, openings, and missing bricks while the Offering Plan described the Building's exterior as having "no visible cracks, bowing, horizontal or vertical displacement or other structural issues" and that "[a]ny noted areas of visual cracking [had] been repaired" (id., ¶ 51-52); the Building's windows lack proper waterproofing and flashing while the Offering Plan represented that Sponsor "remediated damaged wood and installed weather-proofing at the in-situ windows" (id., ¶ 54-55); the fire escape had an incorrect pitch and was in a deteriorated and unsafe state while the Offering Plan stated otherwise (id., ¶ 56); the main roof and terraces were improperly installed and was defective, and the warranty provided in the Offering Plan was never delivered, causing water infiltrating inside the Building (id., ¶ 60-64); the cellar and subcellar were wet and damaged while the Offering Plan described that "there is no evidence of dampness in the cellar or sub-cellar" (id., ¶ 69-71); and there was a crack in the Building's foundation on the wall that caused water infiltration into a unit's storage, although the Offering Plan described that the Building's "existing foundation [was] in fair condition" (id., ¶¶ 73-76). Plaintiff also alleges in detail that, as opposed to what the Offering Plan depicted, there were defects in the mechanical equipment, the plumbing equipment and the electrical system (id., ¶¶ 89-106). Further, plaintiff alleges that the Building violated applicable building codes and industry standards in various ways (id., ¶¶ 59, 62, 65, 67, 99, 103, 105).
In addition, plaintiff alleges that because the movant defendants assigned project managers to frequently visit the construction site, communicate with, and monitor the project's contractors, subcontractors, and materialmen, the moving defendants were "fully aware" of the construction defects and nonconformities. Yet the moving defendants concealed these defects and nonconformities from "unsuspecting purchasers of the Units" (id., ¶ 37). Despite their knowledge of the construction defects, Sponsor filed the Offering Plan "when the Project was nearly complete, and/or during the completion of the Building's construction and well before the closing on the sale of a Unit" (id., ¶¶ 37-38, 121), and used the Offering Plan "[t]o lure prospective purchasers into paying millions of dollars for the Units" (id., ¶ 119). After the renovation was complete and before any sales were consummated, the moving defendants continued to market the units without correcting the false descriptions in the Offering Plan despite amending the Plan at least fourteen times (id., ¶¶ 38, 123-125). Moreover, according to the Complaint, the moving defendants concealed the defects and nonconformities, to wit, by coating over the exterior's deficiencies rather than addressing them (id, ¶¶ 122, 147, 150).
From the first closing on the sale of a unit to October 12, 2018, Sponsor controlled the board of managers and the three seats on the board, which were filled with Sponsor affiliates including both individual defendants (id., ¶¶ 43, 49). During this period, the individual defendants allegedly refused to address these defects and code violations, which they knew, despite the unit owners complaints and repair demands (id., ¶¶ 46-48, 145-151). In addition, after paying off a loan with the sale proceeds, Sponsor distributed the remaining sale proceeds to individual defendants and other Sponsor affiliates, retaining little, if any, of the proceeds for the Building (id., ¶¶ 162-166). Plaintiff asserts that the distributions "were made without fair consideration" and "were not made at the set or agreed upon intervals for distribution," which rendered the Sponsor insolvent (id., ¶¶ 168, 171).
On February 12, 2019, plaintiff commenced this action by filing a summons with notice naming Sponsor as the sole defendant (NYSCEF # l). On October 23, 2020, plaintiff filed an amended summons with notice adding individual defendants and Grasso as parties (NYSCEF # 4). The Complaint, filed on July 22, 2021, asserts seven causes of action, including (1) breach of contract against the Sponsor; (2) fraud in inducement against Sponsor and the individual defendants; (3) fraud in inducement against Grasso; (4) breach of fiduciary duty against the individual defendants; (5) constructive fraudulent conveyance while insolvent under Debtor and Creditor Law (DCL) §§ 273 and 278; (6) constructive fraudulent conveyance causing unreasonably small capital under DCL §§ 274 and 278; and (7) intentional fraudulent conveyance under DCL §§ 276 and 278 (NYSCEF # 15). Instead of answering the complaint, Sponsor and the individual defendants move to dismiss all the claims against them except the first cause of action for breach of contract.
On a motion to dismiss pursuant to CPLR 3211 (a)(7), the court must "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference," and "determine only whether the facts as alleged fit into any cognizable legal theory" (Siegmund Strauss, Inc. v E. 149th Realty Corp., 104 A.D.3d 401, 403 [1st Dept 2013]). Significantly, "whether a plaintiff... can ultimately establish its allegations is not taken into consideration in determining a motion to dismiss" (Phillips S. Beach LLC v ZC Specialty Ins. Co., 55 A.D.3d 493, 497 [1st Dept 2008], lv denied 12 NY3d 713 [2009]). Additionally, "to withstand dismissal, a plaintiff may submit opposing affidavits which can be considered to amplify the pleadings" (M& E 73-75, LLC v 57Fusion LLC, 189 A.D.3d 1, 5 (1st Dept 2020], lv dismissed 38 N.Y.2d 1086 [2021]). Additionally, "[i]n those circumstances where the legal conclusions and factual allegations are flatly contradicted by documentary evidence, they are not presumed to be true or accorded every favorable inference" (Morgenthow & Latham v Bank of N.Y. Co., Inc., 305 A.D.2d 74, 78 [1st Dept 2003]). However, dismissal based on documentary evidence under CPLR 3211(a)(1) may result "only where 'it has been shown that a material fact as claimed by the pleader ... is not a fact at all and ... no significant dispute exists regarding it'" (Acquista v N.Y. Life Ins. Co., 285 A.D.2d 73, 76 [1st Dept 2001] [internal citation and quotation omitted]).
The moving defendants seek dismissal of the fraud in inducement claim, arguing that (1) plaintiff fails to allege predicate facts in sufficient detail, (2) the fraud claim duplicates plaintiffs breach of contract claim, and (3) the fraud claim cannot be sustained against individual defendants based on the Sponsor's Certification. The moving...
To continue reading
Request your trial