Mun Sang Suk v. Lee, 2009 NY Slip Op 31368(U) (N.Y. Sup. Ct. 6/12/2009), 018953-008.

• Decision Date: 12 June 2009
• Docket Number: Motion Seq. No. 1.,Motion Seq. No. 2.,018953-008.,Motion Seq. No. 3.
• Citation: 2009 NY Slip Op 31368
• Parties: MUN SANG SUK, YEUNG OK SUK and 552 W. 24<SUP>th</SUP> ST. ASSOCIATES, INC., Plaintiffs, v. DANIEL LEE, PINE VILLAGE GROUP CORP., PARADIGM CREDIT CORP., ROOSEVELT AVENUE CORP., YOUNG SOOK YOO, S&C INVESTORS LLC and DENNIS A. HERMAN, Defendants.
• Court: New York Supreme Court

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2009 NY Slip Op 31368(U)

MUN SANG SUK, YEUNG OK SUK and 552 W. 24^th ST. ASSOCIATES, INC., Plaintiffs, v. DANIEL LEE, PINE VILLAGE GROUP CORP., PARADIGM CREDIT CORP., ROOSEVELT AVENUE CORP., YOUNG SOOK YOO, S&C INVESTORS LLC and DENNIS A. HERMAN, Defendants.

018953-008.

Motion Seq. No. 1.

Motion Seq. No. 2.

Motion Seq. No. 3.

Supreme Court, Nassau County.

June 12, 2009.

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TIMOTHY S. DRISCOLL, Judge.

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This matter is before the Court on the a) motion filed by Defendants Paradigm Credit Corp. ("Paradigm"), S&C Investors LLC ("S&C"), and Dennis A. Herman ("Herman") on December 5, 2008 and submitted before this Court on May 8, 2009,¹ for an Order, pursuant to CPLR §§ 3211(a)(1), (5), (7) and 3016(b), dismissing the Plaintiffs' amended complaint ("Complaint"), b) cross motion filed by Plaintiffs on January 7, 2009 and submitted before this Court on May 8, 2009, for an Order, inter alia, pursuant to CPLR § 3211(a)(4) to dismiss the foreclosure action that the Defendants commenced in the Supreme Court of New York County or, alternatively, to consolidate the actions and direct that the actions proceed in this Court, and c) motion filed by Plaintiffs on February 18, 2009 and submitted before this Court on May 13, 2009, for leave to amend the Complaint to add 552 W. 24^th LLC as an additional plaintiff in this action.

For the reasons set forth below, the Court: 1) grants the motion of Defendants Paradigm, S&C and Herman to dismiss the Complaint (Motion Sequence # 1) and dismisses the Complaint in its entirety as to those Defendants; 2) denies, as moot, Plaintiffs' cross motion (Motion Sequence # 2), in light of the Court's dismissal of the Complaint; and 3) denies, as moot, Plaintiffs' motion for leave to amend the Complaint, in light of the Court's dismissal of the Complaint.

BACKGROUND

A. Relief Sought

Defendants Paradigm Credit Corp., S&C Investors LLC, and Dennis A. Herman move for an Order, pursuant to CPLR §§ 3211(a)(1), (5), (7) and 3016(b), dismissing the Plaintiffs' Amended Complaint.

Plaintiffs Mun Sang Suk, Yeung Ok Suk, and 552 W. 24^th St. Associates, Inc. cross move for an Order, pursuant to CPLR § 3211(a)(4), dismissing a related action commenced in Supreme Court New York County, titled Paradigm Credit Corp., S&C Investors, LLC, and Dennis A. Herman v. Pine Village Group Corp., Young Sook Yoo, New York State Department of Taxation and Finance, Mun Sang Suk, Yeung Ok Suk, 552 W. 24^th St. Associates, Inc., New York City Department of Environmental Protection (DEP), et. al, Index No.: 603163/08, or

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alternatively, for an Order, pursuant to CPLR § 602(b), removing said New York County action to Nassau County, and consolidating it for all purposes with this pending Nassau County matter.

Plaintiffs also move for an Order, pursuant to CPLR § 3025(b), permitting them to amend their Complaint to add 552 W. 24^th LLC as a plaintiff in this action.

B. The Parties' History

This action involves the development of a condominium building on a property that the Plaintiffs originally owned. Plaintiffs Mun Sang Suk ("M. Suk"), Yeung Ok Suk ("Y. Suk") (collectively referred to herein after as "the Suks") and 552 W. 24^th St. Associates, Inc. ("552 Associates") seek, inter alia, to void the conveyance of the property located at 552-554 W. 24^th Street, New York, New York (hereinafter referred to as "the Property") to Defendant Pine Village Group Corp. ("Pine Village") and to void the Loan Assumption Agreement which provides for a Consolidated Mortgage, dated May 20, 2008, securing Defendant Paradigm Credit Corp.'s ("Paradigm's") $6,500,000 loan to Pine Village. According to the Complaint, Plaintiff 552 Associates conveyed the Property to Pine Village, an entity controlled by Defendant Daniel Lee ("Lee"). Plaintiffs now seek, inter alia, to void the conveyance as well as Paradigm's mortgage now encumbering the Property.

The Complaint alleges the following underlying facts, which the Court must accept as true. Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275 (1977) (motion made pursuant to CPLR § 3211 requires the court to accept as true the allegations of the complaint):

Plaintiffs Mun Sang Suk and Yeung Ok Suk are husband and wife. The Suks are the sole shareholders of Plaintiff 552 W. 24^th St. Associates, Inc. The sole asset of 552 Associates is a parcel of real property located in Manhattan, New York with a street address of 552-554 W. 24^th Street, New York, New York. The Suks wanted to develop the Property by adding a condominium building. However, they lacked the expertise in real estate to develop the Property on their own.

Defendant Daniel Lee, who is apparently well known in the Korean American community, is a real estate developer and investor. He is also the principal of Defendant Roosevelt Avenue Corp. ("Roosevelt"), a New York corporation. The Suks advised Lee of their desire to develop the Property. Lee proposed that he purchase the stock of 552 Associates from the Suks and that, as part of the consideration of the stock sale, the Suks would take title to the

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first two floors of the condominium building. Plaintiffs claim that the total agreed-upon consideration for the transaction was $18 million with the condominium units to be conveyed upon the completion of the construction. To memorialize the transaction, the Suks, 552 Associates and Daniel Lee executed a series of documents including:

1. Stock Purchase Agreement: Dated January 24, 2008. Pursuant to this Agreement, the Suks agreed to sell 200 shares of issued and outstanding capital stock in 552 Associates to Lee for the sum of $8 million. It was agreed that Lee would pay the $8 million price by:

(1) assuming an existing $5 million mortgage on the Property;

(2) paying $1 million at closing; and

(3) making two installments of $1 million each, the first due on March 31, 2008, and the second due on June 1, 2008.

2. Loan Agreement: Dated January 28, 2008. Pursuant to this Agreement, the Suks agreed to lend Lee and 552 Associates $10 million for the sole purpose of constructing and developing the condominium building (the "Loan"). Upon completion of the condominium building, in lieu of repayment of the principal amount of the loan, Lee and 552 Associates were obligated to convey to the Suks the first two floors of the condominium building.

3. Promissory Note: The Loan Agreement was accompanied by a Promissory Note in the total principal amount of $960,000.00. Pursuant to the Loan Agreement and the Promissory Note, Lee and 552 Associates were obligated to pay to the Suks $40,000.00 per month during the period during which the condominium building was under construction and until title was conveyed to the first two floors of the condominium building.

4. and 5. Security Agreement and Stock Pledge Agreement: The obligations under the Loan Agreement and the Stock Purchase Agreement were secured by a Security Agreement and a Stock Pledge Agreement. Pursuant to these agreements, the stock and all the assets of 552 Associates (namely the Property) would be returned to the Suks if Lee defaulted on his obligations.

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Plaintiffs allege that Lee failed to make the payments he was required to make. Specifically, they claim that Lee paid only $300,000.00 of the $1 million installment that was to be paid on March 31, 2008. Further, Plaintiffs claim that Lee also advised them that he would be unable to pay the $1 million installment due on June 1, 2008. Plaintiffs also assert that Lee was unable to obtain the requisite construction financing and thus could not commence construction of the condominium building.

Plaintiffs allege that in April 2008, Defendant Paradigm Credit Corp., a New York corporation, together with Lee, approached the Suks and allegedly represented to them that Paradigm was willing to extend to Lee the interim financing to pursue the development of the Property. Plaintiffs allege that Paradigm advised them that, in order to obtain the interim financing, the transaction had to be changed from a Stock Purchase Agreement to a conveyance from 552 Associates to a new entity that Lee had formed. That entity was Defendant Pine Village Group Corp. That is, 552 Associates would convey the Property (not its stock) to Defendant Pine Village, whose principal was Lee.

Plaintiffs allege that Lee and Paradigm advised them that the transaction needed to be changed in name only for Paradigm's financing purposes. Plaintiffs claim that Lee and Paradigm represented to them that all other aspects of the transaction would remain the same; that is, the Suks would be fully compensated pursuant to the terms of the Stock Purchase Agreement and Loan Agreement. Plaintiffs claim that, based upon the representations of Lee and Paradigm, and without understanding the meaning and intent of the documents, M. Suk, as president of 552 Associates, signed an Agreement for Purchase and Sale as well as a Bargain and Sale Deed dated May 20, 2008. Notwithstanding the fact that the Suks would be entitled to $18 million pursuant to the Loan Agreement and the Stock Purchase Agreement, the sole consideration for the Bargain and Sale Deed was $5 million, which Pine Village would pay by assuming the $5 million mortgage. Plaintiffs allege that, were it not for the representations that Lee and Paradigm made to Plaintiffs, they would not have entered into the Loan Assumption Agreement on May 20, 2008.

The Loan Assumption Agreement represents Paradigm's agreement to provide a $6.5 million mortgage loan. The Loan Assumption Agreement, dated May 20, 2008, was entered into between Pine Village as "Borrower" and Paradigm as "Lender." 552 Associates was referred to

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as the "Prior Owner" and the Suks were referred to as the "Prior Guarantor." Collectively, 552 Associates and the Suks were referred to as the "Original Borrowers." Daniel Lee was identified as the "New Guarantor."

Pursuant to the Loan Assumption Agreement, as of May 20, 2008, the principal...