Stang LLC v. Hudson Square Hotel, LLC
| Decision Date | 07 June 2017 |
| Docket Number | Index No. 653600/2015 |
| Citation | 2017 NY Slip Op 31243 (U) |
| Parties | STANG LLC, suing in its own capacity and in the name of and right of HUDSON SQUARE HOTEL, LLC, et al., Plaintiffs, v. HUDSON SQUARE HOTEL, LLC, et al., Defendants. |
| Court | New York Supreme Court |
2017 NY Slip Op 31243(U)
STANG LLC, suing in its own capacity and in the
name of and right of HUDSON SQUARE HOTEL, LLC, et al., Plaintiffs,
v.
HUDSON SQUARE HOTEL, LLC, et al., Defendants.
Index No. 653600/2015
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 45
RECEIVED: June 8, 2017
June 7, 2017
NYSCEF DOC. NO. 385
DECISION AND ORDER
Mot. Seq. 012-013
HON. ANIL C. SINGH, J.:
In this action for, inter alia, fraud, judgment declaring that the sale of the property to Hudson Canal LLC is void, constructive trust, and an accounting, defendants Hudson Canal LLC ("Hudson Canal") and its managing member, Joel Braver ("Braver" and together with Hudson Canal "Defendants"), move pursuant to CPLR 3212 for summary judgment dismissing all of Stang LLC's ("Stang"), 489 Southwest Canal St., Inc.'s ("Southwest Canal") and Avihu Gerafi's ("Gerafi" and together with Southwest Canal Inc. and Stang, "plaintiffs") claims, pursuant to CPLR 5501 and 6514, canceling the Notice of Pendency filed by plaintiff and sanctions. Plaintiffs' oppose.
Motion sequences 012 and 013 are consolidated for disposition.
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This action relates to the alleged unauthorized and fraudulent transfer by BB Max LLC, Room 45, LLC, Five Boys One Girl, LLC, Four Girls One Boy, LLC and Z Dream, LLC (collectively, the "LLC Defendants") to Hudson Canal of the parcel of real property located at 219-233 Hudson Street a/k/a 489/493 Canal Street (the "Property"). Complaint ("Compl"), ¶1. In February 2013, Hudson Square Hotel LLC ("Hudson Square Hotel") was formed for the purpose of developing a boutique hotel at the property. Initially, the property was owned by Southwest Canal Inc., which was wholly owned by Gerafi.
In order to generate revenue to build the hotel, Gerafi agreed to convey the property to Hudson Square Hotel, and in return, Gerafi received $2.5 million, and Stang, which was also wholly owned by Gerafi would receive a 30% membership interest in Hudson Square Hotel. Each of the LLC Defendants were recruited to and agreed to make a cash contribution of $3 million each in exchange for a 10% membership interest in Hudson Square Hotel. See Operating Agreement, Exh. A. The remaining 20% of the membership interest was held and to be sold to future investors. Compl. ¶54. On October 9, 2013, believing that all contributions had been made, Southwest Canal conveyed the property to Hudson Square Hotel and the First Amendment to Agreement of Members of Hudson Square Hotel LLC Operating Agreement (the "Operating Agreement") was entered into by and among the parties. Id. ¶57.
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Pursuant to the Operating Agreement, HSH Construction, Inc. ("HSH") was to act as Managing Member of Hudson Square Hotel with Gibly and Gerafi as the sole managing members of HSH. Id. ¶59. After it had become clear that Hudson Square Hotel was unable to raise the capital needed to develop the property, Gerafi offered to purchase the remaining 70% of Hudson Square Hotel's membership interest for $5.5 million, which was rejected. On September 18, 2015, a written consent (the "Written Consent") was signed by the LLC Defendants and purports to authorize defendant Maldini as the authorized signatory. See Gerafi Affidavit, Exh. G. On September 21, 2015, the LLC Defendants sold the property to Hudson Canal for $13,250,000, without the knowledge of Stang. Compl. ¶2.
On October 7, 2015, Stang and Gerafi were notified for the first time of the sale of the property to Hudson Canal. The sale was allegedly consummated without proper notice to the members or a vote, as allegedly required by the Operating Agreement. Id. ¶80. Defendants' contend that the Operating Agreement and Written Consent permitted the sale because the Operating Agreement only required a majority vote of the members. See Operating Agreement ¶8(b) (a simple majority is needed to exercise "all decision making authority and power, major and/or minor, with respect to the Company..."). It is also alleged that Maldini did not have any authority to convey the property as Managing Member. Compl. ¶86.
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On October 29, 2015, plaintiffs filed a notice of pendency against the property. In this motion, defendants seek a motion for summary judgment dismissing all of plaintiffs' claims asserted against Hudson Canal and Braver, the cancelling of the Notice of Pendency and sanctions.
The standards for summary judgment are well settled. "The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case." Winegrad v. New York University Medical Center, 64 N.Y.2d 851, 853 (1985). Despite the sufficiency of the opposing papers, the failure to make such a showing requires denial of the motion. See id. Summary judgment is a drastic remedy and should only be granted if the moving party has sufficiently established that it is warranted as a matter of law. See Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 (1986).
Moreover, summary judgment motions should be denied if the opposing party presents admissible evidence establishing that there is a genuine issue of fact remaining. See Zuckerman v. City of New York, 49 N.Y.2d 557, 560 (1980). "In determining whether summary judgment is appropriate, the motion court should draw all reasonable inferences in favor of the nonmoving party and should not pass
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on issues of credibility." Garcia v. J.C. Duggan, Inc., 180 A.D.2d 579, 580 (1st Dept 1992), citing Assaf v. Ropog Cab Corp., 153 A.D.2d 520, 521 (1st Dept 1989). The courts role is "issue-finding, rather than issue-determination." Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 404 (1957) (internal quotations omitted).
Defendant's motion for summary judgment on plaintiffs' cause of action for judgment declaring that the sale of the property to Hudson Canal is void (sixth cause of action), the imposition of a constructive trust against the property (seventh cause of action), and a preliminary and permanent injunction enjoining Hudson Canal from encumbering and/or alienating the property (ninth cause of action) is granted.
Defendants' seek summary judgment on the basis that the sale of the property was duly authorized by a majority of Hudson Square Hotel's membership interests, and is therefore valid. Plaintiffs argue that the sale of the property to Hudson Canal is voidable because the Written Consent required unanimous consent, not majority consent.
To determine the meaning of a contract, a court looks to the intent of the parties as expressed by the language they chose to put into their writing. Ashwood Capital, Inc. v OTG Mgt., Inc., 99 A.D.3d 1 (1st Dept 2012); Bank of Tokyo-
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Mitsubishi, Ltd., N.Y. Branch v Kvaerner a.s, 243 A.D.2d 1, 6 (1st Dept 1998). A clear, complete document will be enforced according to its terms. Ashwood Capital, 99 A.D.3d at 7. When the parties have a dispute over the meaning, the court first asks if the contract contains any ambiguity, which is a legal matter for the court to decide. Id. Whether there is ambiguity "is determined by looking within the four corners of the document, not to outside sources." Kass v Kass, 91 N.Y.2d 554, 566 (1998). A contract is not ambiguous if, on its face, it is definite and precise and reasonably susceptible to only one meaning. White v Continental Cas. Co., 9 N.Y.3d 264, 267 (2007); Greenfield v Philles Records, 98 N.Y.2d 562, 569 (2002). An ambiguous contract is one that, on its face, is reasonably susceptible of more than one meaning. Chimart Assoc. v Paul, 66 N.Y.2d 570, 573 (1986).
As a preliminary matter, although Hudson Square Hotel could engage in any lawful business, its purpose was to "create, construct and own a boutique hotel." Operating Agreement, p. 2; see also Written Consent, p. 1 ("WHEREAS the Premises was acquired for the intended purpose of developing same into a boutique hotel..."). Plaintiffs' argue that when read in context of Section 8(b) of the Operating Agreement, the whereas clause makes clear that decisions requiring majority consent refers only to the day-to-day decisions regarding operating the hotel and cannot refer to the selling of the property. However, "recitals in a contract, such as whereas clauses, are merely explanations of the circumstances surrounding the execution of
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the contract, and are not binding obligations unless referred to in the operative provisions of the contract." 17A C.J.S. Contracts §403 (2017); see also Lexington Ins. Co. v. Combustion Engineering, Inc., 264 A.D.2d 319, 322 (1st Dept 1999) (finding that a whereas clause will not expand the meaning of the contract to include insurance policies that were not specifically identified in the contract).
Although not binding, this court finds the reasoning in Manitaras v. Beusman, index no. 17227/07 (Sup. Ct. Westchester Cnty., Nov. 26, 2007) aff'd 56 A.D.3d 735 (2d Dept 2008) persuasive. In Manitaras, plaintiff sought a declaration from the court finding that under the LLC operating agreement, the members could not sell the LLC's sole asset, the property. Id. at *2. The operating agreement itself, and not the whereas clause stated that the purpose of the LLC was to "own and operate the property." Id. The court found that since the operating agreement is silent on whether members can sell the property, the court must look to Limited Liability Company Law ("LLCL") §402(d)(2), which provides that the "vote of at least a majority in interest of the members" may approve the sale of the property. Id. at *3.
The Second Department affirmed this decision finding that where the majority of interested members approve the sale of all the assets of a limited liability company, the sale is...
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