Preview:

[*1]


Decided on January 14, 2013
Supreme Court, Kings County
C & B Enterprises USA, LLC, and Abraham Rosenberg, an individual and as managing member of C & B Enterprises USA, LLC, Plaintiffs,

against

Phyllis Koegel, New York City Department of Finance, Defendants.
Phyllis Koegel, individually, and derivatively on behalf of C & B
Enterprises USA, LLC, Defendant, Counterclaim and Third -Party
Plaintiffs Abraham Rosenberg, individually and as Member of C & B
Enterprises USA, LLC, Plaintiffs and Counterclaim Defendants - and -
Mark Rosenberg (a/k/a Chaim Rosenberg) Third -Party Defendant.










500089/12

Attorney for Third Party Plaintiff:
Jeffrey Kret, Esq.
466 Central Avenue, Suite 200A
Cedarhurst, NY 11516-2402

Attorney for Third Party Defendant Mark Rosenberg:
Evan M. Newman, Esq.
Stahl & Zelmanovitz
747 Third Avenue, Suite 33B
New York, NY 10017
Carolyn E. Demarest, J.
The following papers read on this motion:NYSCEF Doc. Nos.:
Notice of Motion, Affirmation in Support, Exhibits, Memorandum of Law, Affirmation of Service36-43
Affirmation in Opposition44
In this action, brought by plaintiff Abraham Rosenberg ("Abraham") individually and derivatively on behalf of C & B Enterprises USA, LLC ("C & B"), third-party defendant Mark Rosenberg ("Mark") moves, pursuant to CPLR 3211 (a) (1), (5), and (7), to dismiss the five causes of action, including fraud, breach of fiduciary duty, and declaratory judgment, that defendant and third-party plaintiff Phyllis Koegel ("Koegel"), individually and derivatively on behalf of C & B, asserted against him in her third-party complaint.


BACKGROUND
C & B is a New York limited liability company that was formed on or about March 4, 2003 to purchase and build an apartment building at 728A Rogers Avenue, Brooklyn, New York (the "Property"). Koegel alleges that she founded the LLC jointly with Mark, with whom she was close
personal friends, and that they initially each owned a 50% membership interest.[FN1] In his complaint, Abraham, Mark's brother, who received Mark's interest in the LLC on or about August 26, 2010, contends, to the contrary, that Mark was the sole member of C & B at the time it was formed and that "Koegel had nothing to do with C & B's purchase of the Property." Abraham alleges that Mark performed contracting work on several of Koegel's properties over a 12-year period, that Koegel knew about Mark's interest in C & B by virtue of their friendship, and that, when their relationship grew hostile, Koegel claimed to have a 50% ownership of the LLC "[i]n an apparent attempt to extort Mark" and to "assassinate [his] character and destroy his reputation."
On February 4, 2010, Koegel purportedly signed and filed with the Office of the City Register a "Sundry Agreement" and a "Declaration of Covenants and Restrictions" (collectively, the "Filings"), in which she claimed that she was a 50% member and managing member of the LLC and declared that the Property could not be sold, transferred, or encumbered without her permission. Abraham claims that he discovered the Filings in or about February 2010 when he and Mark [*2]attempted to refinance the Property. Abraham alleges that "[a]t no point was Koegel ever an owner of C & B nor was she ever its managing member," and that, accordingly, the Filings "were filed without any authority and are completely fraudulent." On January 17, 2012, Abraham commenced this action, seeking, individually and derivatively on behalf of C & B, damages for conversion, trespass, private nuisance, tortious interference with a prospective business relationship, and slander of title; judgment cancelling the Filings; a declaration that Koegel is not, and never was, a member or managing member of C & B; and a permanent injunction barring Koegel from holding herself out to be a member or managing member of C & B.
While Koegel initially did not timely interpose an answer, by order dated May 2, 2012, upon Abraham's motion for default judgment, which was withdrawn on the condition she remove the Filings against the Property, the Court granted her an extension of time to answer the complaint. On May 12, 2012, Koegel interposed an answer, which she amended on June 1, 2012 to include a counterclaim and a third-party complaint. On June 4, 2012, upon Koegel's motion by order to show cause, the Court issued a temporary restraining order barring Abraham from further encumbering or
transferring the Property pending a hearing.[FN2] On October 26, 2012, upon conclusion of the preliminary injunction hearing, the Court vacated the temporary restraining order, finding that remaining issues of fact prevented a finding that Koegel was likely to prevail on the merits of her third-party action and that her delay in acting mitigated against a finding of imminent and irreparable harm for which money damages would not suffice.
In Koegel's third-party complaint, she alleges that Mark exploited her trust and stole her investment in order to satisfy his business and personal debts. Koegel claims that, on or about March 14, 2003, she and Mark opened a bank account in the name of C & B, co-signing as "Members/Managers"; that, on or about March 17, 2003, she made an initial capital contribution to the account of $140,500; and that, on March 19, 2003, C & B closed on the Property, tendering the entire purchase price in cash withdrawn from the LLC's account. Koegel further alleges that, at Mark's insistence that he needed funds to develop the Property, between 2003 and 2007, she took out three home equity lines of credit and withdrew $160,000 in cash to invest in C & B. Koegel claims that Mark requested that she provide him checks made out to "cash" or "Mark's Quality Designs," another company that Mark owns in full, because he was secretly using her money to pay his own creditors. Koegel also alleges that Mark pressured her into issuing him personal loans and, in July 2007, convinced her to list the Property for sale through a realtor, via a listing agreement that they both signed. The realtor was purportedly unable to find a purchaser.
Koegel claims that, in late 2007, after she told Mark that she could no longer afford to issue him any more personal loans, Mark met with Esther Fettman ("Fettman"), a real estate investor, and, without authority to do so and without Koegel's knowledge or consent, granted Fettman a membership interest in C & B in exchange for a short-term investment. Koegel claims that Mark converted some or all of these funds in order to pay his own debts and that she, as an owner of a 50% membership interest, never received any part of such funds. Fettman sold her interest back to the LLC in or about June 2009, which, Koegel claims, upon information and belief, was a preemptive settlement after Fettman discovered Mark's purportedly fraudulent and illegal actions and threatened [*3]legal action against him.
Koegel further alleges that, on January 14, 2008, without her knowledge or consent, Mark took out a $1,000,000 mortgage against the Property from Pearl Equities, LLC ("Pearl"), a nontraditional investment firm that employed one of Fettman's relatives. Koegel claims that Mark agreed to egregious terms, including 14% interest for six months, with a possible extension of six months for an additional $3,000 plus 14% interest, because he was unable to obtain mortgage financing through a conventional lending institution due to his excessive debt and various defaults. Koegel alleges that, in connection with the Pearl mortgage, Mark fraudulently represented, on various documents, that Fettman and he were the sole members of C & B and that he was managing member and presented a falsified operating agreement that did not make any reference to Koegel or her 50% membership interest in the LLC. Koegel further alleges that, on or about May 21, 2008, Mark obtained an additional $250,000 mortgage against the Property from Abraham Stern and Jacob Stern, making the same representations about C & B's membership and using the same falsified operating agreement. Koegel claims that Mark diverted some or all of the funds from both mortgages to pay down his own personal and business debts and that he did so without her knowledge or consent and without distributing any funds to her.
Koegel claims that, in or about December 2009, she first discovered that Mark had mortgaged the Property and sent him a cease and desist letter demanding that he immediately repay the unauthorized mortgage loans, which he failed to do. On or about August 26, 2010, without notice to or consent from Koegel, Mark transferred his interest in C & B to his brother Abraham. Koegel alleges that this transfer was without consideration and was an attempt to hide his assets from creditors and his ex-wife and to prevent Koegel from obtaining information about his fraudulent actions on behalf of C & B. Abraham contends that he has spent over $1,000,000 on the Property since receiving what he claims is 100% of the LLC and that he "transformed it from a vacant lot into a fully functioning residential development consisting of a seven family dwelling and a four story building." Abraham alleges that he brought this action in part to cancel the Filings because he seeks to refinance the Property. Koegel claims that Abraham has never discussed the terms of the refinance with her or shown her a proposed refinancing agreement.
Koegel's third-party complaint asserts five causes of action against Mark.[FN3] The first cause of action alleges that Mark breached his fiduciary duty to Koegel by executing documents without authorization, failing to disclose all material facts about C & B to her, and failing to hold a vote or obtain her prior consent, in violation of Limited Liability Company Law ("LLC Law")

Download 2013_50094.pdf

New York Law