Court Opinion

ID: 9965022
Source: CourtListenerOpinion
Date Created: 2024-05-01 15:10:13.031347+00
Date Added: 2024-06-11T08:24:39.704581
License: Public Domain

iintoo Courtland Bronx N.Y., L.P. v Wenger
               2024 NY Slip Op 31482(U)
                      April 25, 2024
           Supreme Court, New York County
        Docket Number: Index No. 151947/2023
                  Judge: Andrew Borrok
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 This opinion is uncorrected and not selected for official
                       publication.
 [FILED: NEW YORK COUNTY CLERK 04/25/2024 04:19 P~                                                                       INDEX NO. 151947/2023
  NYSCEF DOC. NO. 48                                                                                               RECEIVED NYSCEF: 04/25/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 53
            ----------------------------------------------------------------------------------- X

             IINTOO COURTLAND BRONX NEW YORK, L.P.,                                                  INDEX NO.          15194 7/2023

                                                          Plaintiff,                                                    05/15/2023,
                                                                                                     MOTION DATE        11/29/2023
                                                - V -

             DANIEL WENGER, MAVA LAW PLLC                                                            MOTION SEQ. NO.      001 002

                                                          Defendant.
                                                                                                       DECISION+ ORDER ON
                                                                                                             MOTION
            ----------------------------------------------------------------------------------- X

            HON. ANDREW BORROK:

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 8, 9, 10, 11, 12, 13,
            14, 15, 16, 17, 18, 19,20,21,22,23,24,25,26,27,28,29,30, 31,32, 33,34,35, 36
            were read on this motion to/for                                                         DISMISSAL

            The following e-filed documents, listed by NYSCEF document number (Motion 002) 38, 39, 40, 41, 42,
            43,44,45
            were read on this motion to/for                                              JUDGMENT - DEFAULT

            Upon the foregoing documents, the Defendant Daniel Wenger's motion to dismiss (Mtn. Seq.

            No. 001) is denied. The Plaintiffs motion for default judgment (Mtn. Seq. No. 002) against the

            Defendant Mava Law, PLLC, is granted.

            By way of background, Courtlandt Development LLC (CDL) is the owner of two buildings (the

            Properties) located in the Bronx, New York (NYSCEF Doc. No. 1, ,i 12). In February 2020,

            pursuant to a Preferred Equity Agreement (the PEA; NYSCEF Doc. No. 14) entered into by the

            Plaintiff, CDL, AB Capstone LLC (Capstone), and AMI Capital Holdings LLC (AMI), the

            Plaintiff was to acquire 28.12% of the membership interest in CDL (NYSCEF Doc. No. 1, ,i,i 8,

            11). The PEA was signed by the Plaintiff and by one Meir Babaev, as the Managing Member of

            CDL, AMI, and Capstone (id., at i19).
             151947/2023 IINTOO COURTLAND BRONX NEW YORK, LP. vs. WENGER ESQ., DANIEL ET AL                              Page 1 of 10
             Motion No. 001 002

                                                                           1 of 10
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 [FILED: NEW YORK COUNTY CLERK 04/25/2024 04:19 P~                                                INDEX NO. 151947/2023
  NYSCEF DOC. NO. 48                                                                      RECEIVED NYSCEF: 04/25/2024

            As relevant to the instant suit, by letter (the Opinion Letter; NYSCEF Doc. No. 16), dated April

            20, 2020, from Mr. Wenger to the Plaintiff, Mr. Wenger (as an attorney with the Defendant

            Mava Law, PLLC) issued an Opinion of Counsel Letter representing to the Plaintiff that he and

            Mava Law, as counsel to Capstone, AMI, and CDL, had reviewed all documents that he

            "deemed necessary as a basis for the opinions hereafter expressed" in the Opinion Letter. In

            other words, in his Opinion Letter, Mr. Wenger indicated that he had done the due diligence that

            he deemed appropriate to give the opinions in his Opinion Letter and did not otherwise limit his

            opinion based on the documents that were provided to him or otherwise carve-out any reliance or

            exposure that he might have based on information not known to him. To wit, the Opinion Letter

            provides:

                                                                                 April 20, 2020

                                               OPINION OF COUNSEL

                   iintoo of Courtlandt Bronx LP

                   Re: Preferred Contribution in the amount of $4,500,000 (the "Preferred
                   Contribution"), secured by that certain personal guaranty of Meir Babaev dated
                   February 25, 20020 (the "Guaranty")

                   Ladies and Gentlemen:

                   We are counsel to AB CAPSTONE LLC, a New York limited liability company
                   ("Developer"), AMI CAPITAL HOLDINGS LLC a New York limited liability company
                   ("Developer Investor") and COURTLANDTDEVELOPMENTLLC, a New York limited
                   liability company, (the "LLC"), and we are delivering this opinion in connection with the
                   Preferred Equity Agreement including the Personal Guaranty of Meir Babaev annexed
                   thereto, dated as of February 25, 2020 (the "Agreement"), by and between iintoo
                   Courtlandt Bronx New York LP ("iintoo") and Developer, Developer Investor and the
                   LLC respectively.

                   In that connection, we have examined the originals, or copies certified to our satisfaction,

             151947/2023 IINTOO COURTLAND BRONX NEW YORK, LP. vs. WENGER ESQ., DANIEL ET AL       Page 2 of 10
             Motion No. 001 002

                                                         2 of 10
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 [FILED: NEW YORK COUNTY CLERK 04/25/2024 04:19 P~                                              INDEX NO. 151947/2023
  NYSCEF DOC. NO. 48                                                                      RECEIVED NYSCEF: 04/25/2024

                   of the Agreement and such corporate records of Developer, Developer Investor and the
                   LLC, and certificates of public officials and of officers of Developer, Developer Investor
                   and the LLC and have made such examinations of law, as we have deemed necessary as
                   a basis for the opinions hereinafter expressed. We have assumed the due execution and
                   delivery of the Agreement by iintoo.

                   Based upon the foregoing, we are of the following opinion:

                       1. Developer is a limited liability company duly incorporated, validly existing and in
                          good standing under the laws of the State of New York

                       2. Developer has the corporate power to execute and deliver the Agreement and to
                          perform its obligations under the Agreement and has taken all necessary corporate
                          action to authorize such execution and delivery and performance of such
                          obligations.

                       3. Developer Investor is a limited liability company duly incorporated, validly
                          existing and in good standing under the laws of the State of New York.

                       4. Developer Investor has the corporate power to execute and deliver the Agreement
                          and to perform its obligations under the Agreement and has taken all necessary
                          corporate action to authorize such execution and delivery and performance of
                          such obligations.

                       5. LLC is a limited liability company duly incorporated, validly existing and in good
                          standing under the laws of the State of New York.

                       6. LLC has the corporate power to execute and delver the Agreement and to perform
                          its obligations under the Agreement and has taken all necessary corporate action
                          to authorize such execution and delivery and performance of such obligations.

                       7. Investor's, Developer's and Developer Investor's respective interests in the LLC
                          have been duly issued in accordance with the Agreement.

                       8. Annexed hereto are the official corporate documents of the LLC fully signed by
                          the Member(s) of the LLC, and any and all other relevant documents constituting
                          the incorporation, charter, and organizational documents of the LLC, including
                          but not limited to the following:

                           (a) Certificate of Formation of Courtlandt Development LLC
                           (b) Articles of Organization of Courtlandt Development LLC
                           (c) Employer Identification Number
                           (d) Certificate of Publication
                           (e) Amended and Restated Operating Agreement of Courtlandt Development
                               LLC

             151947/2023 IINTOO COURTLAND BRONX NEW YORK, LP. vs. WENGER ESQ., DANIEL ET AL    Page 3 of 10
             Motion No. 001 002

                                                         3   of 10
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 [FILED: NEW YORK COUNTY CLERK 04/25/2024 04:19 P~                                                INDEX NO. 151947/2023
  NYSCEF DOC. NO. 48                                                                      RECEIVED NYSCEF: 04/25/2024

                       9. The execution and delivery of the Agreement by Developer, Developer Investor's
                          and LLC and Developer's, Developer Investor's and LLC's performance of its
                          obligations under the Agreement do not violate or conflict with any provision of
                          its charter or by-laws (or comparable constitutional documents) or of any law,
                          rule or regulation applicable to it. Further, execution and delivery of the
                          Agreement by Developer, Developer Investor and/or LLC will not violate, or
                          cause the default under, any provision of any mortgage, indenture, note,
                          instrument, contract, member agreement or other agreement to which the
                          Developer, Developer Investor and/or LLC is a party or which is or purports to be
                          binding upon the Developer, Developer Investor and/or LLC or any of its
                          property or assets, and will not result in the creation or imposition of any lien,
                          charge or encumbrance on, or security interest in, any of such properties pursuant
                          to the provisions of such mortgage, indenture, note, instrument, contract,
                          shareholder agreement or other agreement.

                       10. The Agreement is the legal, valid and binding obligation of Developer, Developer
                           Investor and the LLC is enforceable against each in accordance with the terms
                           thereof, subject to applicable bankruptcy, insolvency and similar laws affecting
                           creditors' rights generally, and subject, as to enforceability, to general principles
                           of equity (regardless of whether enforcement is sought in a proceeding in equity
                           or at law).

                       11. No consent, authorization, license, or approval of or registration or declaration
                           with, any federal or state governmental authority is required in connection with
                           the execution, delivery or performance of the Agreement by Developer,
                           Developer Investor, and/or the LLC.

                       12. To our knowledge, there is no action, suit or proceeding pending or threatened in
                           writing against the Developer, Developer Investor and/or the LLC that challenges
                           the validity or enforceability of, or seeks to enjoin the performance of, the
                           Agreement.

                       13. The execution, delivery and performance of this Agreement and/or the Personal
                           Guaranty by the Principal( s) of the Principal's Personal Guarantee, will not violate
                           any provision of any existing law or regulation, or any order or decree of any
                           court, arbitrator, governmental authority, bureau or agency, or of the articles of
                           organization or operating agreement of the Guarantor, and will not violate, or
                           cause the default under, any provision of any mortgage, indenture, note,
                           instrument, contract, member agreement or other agreement to which the
                           Guarantor is a party or which is or purports to be binding upon the Guarantor or
                           any of his property or assets, and will not result in the creation or imposition of
                           any lien, charge or encumbrance on, or security interest in, any of such properties
                           pursuant to the provisions of such mortgage, indenture, note, instrument, contract,
                           shareholder agreement or other agreement

             151947/2023 IINTOO COURTLAND BRONX NEW YORK, LP. vs. WENGER ESQ., DANIEL ET AL       Page 4 of 10
             Motion No. 001 002

                                                         4   of 10
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 [FILED: NEW YORK COUNTY CLERK 04/25/2024 04:19 P~                                                                INDEX NO. 151947/2023
  NYSCEF DOC. NO. 48                                                                                     RECEIVED NYSCEF: 04/25/2024

            (NYSCEF Doc. No. 16 [emphasis added]).

            Based on this Opinion Letter, on which the Plaintiff reasonably relied, the Plaintiff understood

            that (i) CDL had the corporate authority to execute the PEA, and (ii) the Plaintiff's interest in

            CDL had been duly issued in accordance with the PEA's terms (NYSCEF Doc. No. 1, ,i 15).

            After the closing In July 2020, the parties entered into a second agreement (i.e., the Preferred

            Equity Redemption Agreement [the PERA; NYSCEF Doc. No. 17]) pursuant to which CDL

            agreed to redeem the Plaintiff's investment for $2,060,000 in three separate installment payments

            (NYSCEF Doc. No. 31, ,i 15). The Plaintiff received the first payment without incident.

            However, when it did not receive the second payment, the Plaintiff learned for the first time that

            the opinion of Counsel reflected in the Opinion Letter was false; Mr. Babaev had restructured

            CDL and as a result, the Plaintiff's interest in CDL was not properly issued (NYSCF Doc. No. 1,

            ,i,i 19-26 -- although it may be enforceable nonetheless).

            The Plaintiff thus brought this lawsuit alleging negligent misrepresentation (id., ,i 28-32). 1 Mr.

            Wenger moved to dismiss, arguing (i) the Plaintiff's fail to plead the requisite intent by Mr.

            Wegner because Mr. Babaev concealed certain documents from him, (ii) the Opinion Letter

            cannot be the proximate cause of the Plaintiff's loss because the payments are due under the

            1
             The Plaintiff has pursued arbitration and brought several other lawsuits in connection with the transactions at issue
            here, including iintoo Courtland Bronx New York LP v. Courtlandt Development LLC, AB Capstone LLC, Meir
            Babaev, and CDL MM LLC, Index No. 650373/2022; iintoo Courtland Bronx New York LP v. Cornerstone Land
            Abstract, Index No. 611590/2022; iintoo Courtland Bronx New York LP v. Courtlandt Development LLC and Citi
            Real Estate Funding, Inc., Index No. 812898/2022E; iintoo Courtland Bronx New York LP v. Meir Babaev, B3
            Courtlandt Development LLC, AB Capstone LLC, and AMI Capital Holdings LLC, Index No. 704141/2023; and a
            previously-filed action against Mr. Wenger, now voluntarily discontinued, iintoo Courtland Bronx New York LP v.
            Mava Law PLLC and Daniel Wenger, Esq., Index No. 653155/2022 (the Prior Wenger Action and, collectively
            with the other actions listed herein, the Related Actions).
                151947/2023 IINTOO COURTLAND BRONX NEW YORK, LP. vs. WENGER ESQ., DANIEL ET AL                    Page 5 of 10
                Motion No. 001 002

                                                                  5 of 10
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 [FILED: NEW YORK COUNTY CLERK 04/25/2024 04:19 P~                                                             INDEX NO. 151947/2023
  NYSCEF DOC. NO. 48                                                                                  RECEIVED NYSCEF: 04/25/2024

            PERA, not the PEA, (iii) the Plaintiff is estopped from maintaining that the Opinion Letter is

            false because its allegations in the Related Actions that the Plaintiff is due its interest in CDL

            pursuant to the PEA amount to an acknowledgment of the Opinion Letter's accuracy and (iv) this

            case must be dismissed as duplicative of another action. 2 These arguments fail.

            A claim for negligent misrepresentation requires the plaintiff to demonstrate (i) the existence of a

            special or privity-like relationship imposing a duty on the defendant to impart correct

            information to the plaintiff, (ii) that the information was incorrect, and (iii) reasonable reliance

            on the information (JA.O. Acquisition Corp. v Stavitsky, 8 NY3d 144, 148 [2007], quoting

            Parrott v Coopers & Lybrand, 95 NY2d 479, 484 [2000] and Murphy v Kuhn, 90 NY2d 266, 270

            [1997]). An attorney has a relationship approaching privity with a third-party when that attorney

            issues an opinion letter in connection with a transaction for the purpose ofreliance by the third-

            party, such as the Opinion Letter authored by Mr. Wenger in this case (Geoffrey A. Orley

            Revocable Tr. U/A/D 1/26/2000 v Genovese, 18 CIV. 8460 (ER), 2020 WL 611506, at *10

            [SDNY Feb. 7, 2020], citing Prudential Ins. Co. ofAm. v Dewey, Ballantine, Bushby, Palmer &

            Wood, 80 NY2d 377, 385 [1992]).

            Simply put, Mr. Wenger is incorrect that he is entitled to dismissal based on his argument that

            the Plaintiff failed to allege the requisite intent, i.e., that Mr. Wenger knew or should have

            known that the representations in the Opinion Letter were false (Mandarin Trading Ltd. v

            Wildenstein, 16 NY3d 173, 181 [2011]). As discussed above, Mr. Wenger's Opinion Letter does

            2
                The Defendant acknowledges that the Prior Wenger Action has been voluntarily discontinued without prejudice
            (see NYSCEF Doc. No. 4, in Index No. 653155/2022) and thus has abandoned its argument that this case must be
            dismissed as duplicative (NYSCEF Doc. No. 36, at 11).
                151947/2023 IINTOO COURTLAND BRONX NEW YORK, LP. vs. WENGER ESQ., DANIEL ET AL                Page 6 of 10
                Motion No. 001 002

                                                                 6   of 10
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 [FILED: NEW YORK COUNTY CLERK 04/25/2024 04:19 P~                                                 INDEX NO. 151947/2023
  NYSCEF DOC. NO. 48                                                                       RECEIVED NYSCEF: 04/25/2024

            not say that his opinion is based on and is limited to the actual documents that he reviewed.

            Rather, the language of the Opinion Letter indicates that it was Mr. Wenger who performed the

            necessary due diligence of documents he "deemed necessary" and did so "to [his] satisfaction"

            (NYSCEF Doc. No. 16, at 1). It is thus not correct that the lawsuit fails based on lack of intent

            because Mr. Wenger's client, Mr. Babaev, allegedly hid documents from Mr. Wenger when Mr.

            Wenger was preparing the Opinion Letter (NYSCEF Doc. No. 9, at 16-17). Mr. Wenger did not

            indicate that his opinion was based solely on the list of documents he relied on. As such Mr.

            Wenger cannot say, taking the allegations as true as the Court must at this stage of the litigation,

            that he is entitled to dismissal.

            To be clear, as set discussed above, the Opinion Letter does not purport to indicate that it is

            issued solely on the basis of certain documents provided to Mr. Wenger and does not otherwise

            seek to limit reliance based thereon. In fact, the Opinion Letter actually does the opposite

            (NYSCEF Doc. No. 16, at 1). Stated differently, opinion letters generally contain carveouts for

            the items not reviewed and do not contain a general due diligence undertaking that forms the

            predicate for the opinions expressed. Due diligence is generally limited to the documents

            reviewed, and the opinion expressed is based on those documents. This letter, as set forth above,

            does not do that and in fact expresses a general opinion upon which Plaintiff reasonably relied.

            Mr. Babaev's alleged actions in concealing documents from Mr. Wenger also does not mean that

            the Opinion Letter was not the proximate cause of the Plaintiffs alleged harm. The purpose of

            the Opinion Letter was that the Plaintiff could rely on it. If the Opinion Letter was not to be

            relied on by the Plaintiff, it would not have been issued to the Plaintiff. And, in fact, the Opinion

             151947/2023 IINTOO COURTLAND BRONX NEW YORK, LP. vs. WENGER ESQ., DANIEL ET AL        Page 7 of 10
             Motion No. 001 002

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 [FILED: NEW YORK COUNTY CLERK 04/25/2024 04:19 P~                                                     INDEX NO. 151947/2023
  NYSCEF DOC. NO. 48                                                                           RECEIVED NYSCEF: 04/25/2024

            Letter could have carved out or limited who could rely on it. In addition, the Court notes that it

            is irrelevant that the payments are due under the PERA and not the PEA. The point of the

            Opinion Letter was to induce Plaintiff to enter the transaction and it is the PEA that put Plaintiff

            in the position that the Plaintiff now finds itself in - i.e., where its right to its interest in CDL is

            at issue. Thus, the Opinion Letter is the proximate cause of the Plaintiff's alleged harm

            notwithstanding that the payments are due pursuant to the subsequent redemption PERA

            agreement. In other words, the Plaintiff has adequately alleged (i) a duty on Mr. Wenger's

            behalf to impart accurate information, (ii) that the Opinion Letter was false and Mr. Wenger

            knew or should have known this to be the case; and (iii) that the Plaintiff reasonably relied on the

            Opinion Letter in entering into the PEA and later the PERA, and (iv) its falsity proximately

            caused the Plaintiff's harm. Accordingly, the motion is denied.

            For the avoidance of doubt, the Plaintiff is not judicially estopped from maintaining that the

            Opinion Letter is false. A party is judicially estoppel when the Court relies on the alleged

            inconsistency in rendering a judgment or otherwise adopts the prior allegedly inconsistent

            position in some manner (Matter of Stewart v Chautauqua County Bd. of Elections, 14 NY3d

            139, 150 [2010]). The record before the Court does not establish that this has occurred and the

            Plaintiff must be entitled to pursue both alternatives.

            The Plaintiff's motion for a default judgment against the Defendant Mava Law, PLLC, is granted

            as unopposed. Pursuant to CPLR 3215, the Plaintiff has adduced evidence of (i) an alleged

            default, with an affidavit of merit (NYSCEF Doc. No. 38), (ii) proof of service of the Summons

             151947/2023 IINTOO COURTLAND BRONX NEW YORK, LP. vs. WENGER ESQ., DANIEL ET AL            Page 8 of 10
             Motion No. 001 002

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 !FILED: NEW YORK COUNTY CLERK 04/25/2024 04: 19 PMI                                                INDEX NO. 151947 / 2023
  NYSCEF DOC. NO. 48                                                                         RECEIVED NYSCEF: 04 / 25 / 2024

            and Complaint (NYSCEF Doc. No. 42), and (iii) an additional mailing (NYSCEF Doc. No. 43).

            The Plaintiff may submit judgment on notice.

            The Court has considered the parties' remaining arguments and found them unavailing.

            Accordingly, it is hereby

            ORDERED that the Defendant Daniel Wenger' s motion to dismiss (Mtn. Seq. No. 001) is

            denied; and it is further

            ORDERED that the Defendant shall serve an answer within 30 days; and it is further

            ORDERED that the parties shall appear for a preliminary conference on June 3, 2024, at

            11 :30am; and it is further

            ORDERED that the Plaintiffs motion for default judgment (Mtn. Seq. No. 002) is granted; and it

            is further

            ORDERED that the Plaintiff shall submit judgment on notice (sfc-part53@nycourts.gov).

                    4/25/2024
                      DATE                                                      ANDREW BORROK, J.S.C.
             CHECK ONE:                 □ CASE DISPOSED              0   NON-FINAL DISPOSITION

                                        □ GRANTED         □ DENIED   0   GRANTED IN PART          □ OTHER
             151947/2023 IINTOO COURTLAND BRONX NEW YORK, L.P. vs. WENGER ESQ., DANIEL ET AL       Page 9 of 10
             Motion No. 001 002

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  NYSCEF DOC. NO. 48                                                                      RECEIVED NYSCEF: 04/25/2024

                                                        -            □ SUBMIT ORDER
             APPLICATION:

             CHECK IF APPROPRIATE:
                                     B  SETTLE ORDER

                                        INCLUDES TRANSFER/REASSIGN   □ FIDUCIARY APPOINTMENT   □ REFERENCE

             151947/2023 IINTOO COURTLAND BRONX NEW YORK, LP. vs. WENGER ESQ., DANIEL ET AL    Page 10 of 10
             Motion No. 001 002

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