Kahn Prop. Owner, LLC v. Fruchthandler

202 N.Y.S.3d 896

KAHN PROPERTY OWNER, LLC ; and Cold Spring Hills Development, LLC, Plaintiffs,

v.Yehoshua Lieb FRUCHTHANDLER; Oheka Development LLC; FBE Limited III, LLC d/b/a FBE Limited, LLC and Cold Spring Country Club, Inc., Defendants.

Index No. 622421/2021

Supreme Court, Suffolk County, New York.

Decided on October 30, 2023

JASPAN SCHLESINGER LLP, Attorneys for the Plaintiffs, 300 Garden City Plaza, 5th Floor, Garden City, NY 11530

HERRICK FEINSTEIN LLP, Attorneys for Defendants Yehoshua Lieb Fruchthandler, Oheka Development LLC, FBE Limited III, 2 Park Avenue, New York, NY 10016

FARRELL FRITZ, P.C., Attorney for Defendants Yehoshua Lieb Fruchthandler, FBE Limited III and Cold Spring Country Club, 100 Motor Parkway, Suite 138, Hauppauge, NY 11788

DANIEL LOGAN MILLMAN, ESQ., Attorney for Defendant Cold Spring Country Club, Inc., 500 N. Broadway, Suite 153 Jericho, NY 11753

AVRUTINE & ASSOCIATES, PLLC, Attorneys for Defendant Cold Spring Country Club, Inc., 2116 Merrick Avenue, Suite 2004, Merrick, NY 11566

James Hudson, J.

The case at bar is an action sounding in breach of contract and tortious interference with prospective economic advantage. Plaintiffs seek monetary damages in addition to a declaratory judgment. Specifically, Kahn seeks,

... a declaration as to its easement over (a) East Gate Drive and (b) those portions of property owned by the Club which abut (i) the westerly side of East Gate Drive, and (ii) the easterly side of East Gate Drive, for the purposes of widening East Gate Drive as may be required by the municipal authorities and thereafter for the purposes of ingress, egress, and installation and maintenance of utilities. (NYSCEF Doc No. 1).

The defendants Yehoshua Lieb Fruchthandler, Oheka Development LLC, and FBE Limited entered a general denial and listed certain affirmative defenses. (NYSCEF Doc No. 38).

The defendant Cold Spring Country Club, Inc. (hereinafter referred to as "CSCC") asserts a counterclaim for a declaratory judgment, pursuant to RPAPL Article 15, that CSCC be awarded sole and complete possession of the realty at issue and that the Court find plaintiff Kahn "... has no legal right or authority to utilize defendant's property ... other than for limited vehicular access for deliveries only." (NYSCEF Doc No. 43).

The factual allegations were set forth in the Court's decision of August 23rd, 2022. For the sake of completeness (the Court apologizes for the redundancy) they will be repeated.

In 2021 the plaintiffs entered into a contract to sell a 4.19-acre parcel of land to the defendant, Oheka Development LLC. Oheka Development has its main office at the same location as defendant FBE Limited LLC (hereinafter referred to as "FBE"). Defendant Yehoshua Lieb Fruchthandler is the principal and authorized signatory for Oheka Development. The Contract contains Section 23, which is named "Confidentiality and Press Releases." It provides that "Purchaser's obligations under this Section 23.01 shall survive the termination of this Contract." The specific language relied upon by plaintiffs is as follows:

The items and their contents made available to Purchaser pursuant to or in connection with this Contract ... are sometimes referred to herein as the ‘Confidential Information’ ... Without Seller's prior written consent, Purchaser: (a) shall not divulge to any third party (other than its advisors, consultants, attorneys, accountants, partners, prospective investors, members and lenders) any of the Confidential Information ... (b) shall ensure that the Confidential Information is disclosed only to such of Purchaser's officers, directors, employees, consultants, attorneys, accountants, engineers, architects, investors and lenders, as have actual need for the Confidential Information; (c) shall act diligently to prevent any further disclosure of the Confidential Information; and (d) shall, if the Closing Date does not occur, promptly return to Seller or destroy (without keeping copies) all Confidential Information delivered to Purchaser. Purchaser's obligations under this Section 23.01 shall survive the termination of this Contract.

The purpose of the parties’ agreement was to construct a luxury condominium complex. The Contract was subject to a condition precedent namely: the purchase an additional 13.74 acres of property (hereinafter referred to as the "Club Land") from the defendant CSCC on or before March 20th, 2021 (Contract Section 3 ). This event, however, did not occur. The plaintiffs then terminated the Contract and located another purchaser.

The plaintiffs allege that the defendants, in retaliation for the plaintiffs having terminated the Contract, used confidential information learned while they were in Contract with the plaintiffs to purchase the Club Land. The confidential information consists of "... all aspects of the development plan ... and especially the fact that the Club property was to comprise a significant portion of the new development." The plaintiffs state that they did not give permission for the defendants to use this information. The plaintiffs further allege that the defendants are utilizing the confidential information in an attempt to buy the plaintiffs’ mortgage from its lender, disrupt the plaintiffs’ business, and foreclose against Oheka Castle.

The realty purportedly owned by CSCC includes "The Spur." This is the "sole access between the Kahn property and East Gate Drive." (Affidavit of Mr. Melius, p. 6 ¶23 NYSCEF Doc No. 81). Plaintiffs claim an easement to traverse East Gate Drive. The plaintiffs allege that because of a stone arch at the West Gate entrance, East Gate Drive is the sole tradesman's access to Oheka Castle. The plaintiffs aver that if the defendants are successful in purchasing the Club Land, Oheka Castle will be prevented from utilizing the easement and will be unable to conduct business. The plaintiffs also contend that they have secured development rights from the Town of Huntington necessary to build the proposed condominiums. The granting of these development rights by the municipality is being challenged by the defendant CSCC in a separate Article 78 proceeding under Index No. 609827/2023.

Moreover, plaintiffs allege that in the event FBE purchases the Club Land, the value of plaintiffs’ development rights will be diminished, and that the defendants have impermissibly interfered with the plaintiffs’ ability to sell the development rights to any other buyer.

In the Court's decision of August 23rd, 2022 the defendants’ motion to dismiss the complaint was denied save to the limited extent of striking the first and second causes of action. (Page 8, Para 1). The third and fourth causes of action were allowed to proceed.

The defendant CSCC now seeks a preliminary injunction against plaintiffs. The proposed relief would enjoin the plaintiffs:

(1) "from utilizing any portion of that certain property owned by defendant Cold Spring Country Club Inc. described in Exhibit "A" to CSCC's verified answer to amended complaint with counterclaim ... for vehicular or pedestrian access to Kahn's property with the exception of vehicles making deliveries," and

(2) "from proceeding with any additional approval processes from the Town of Huntington and/or commencing construction, demolition and/or any other related work in connection with a proposed condominium complex ..."

In addition to affidavits of the parties’ principals, counsel have submitted documentary exhibits (referred to here by their NYSCEF Document numbers) to assist the Court in its review.

The defendants/movants have offered:

NYSCEF Doc No. 58 affidavit of Douglas Solow; NYSCEF Doc No. 58, Huntington Town Board resolution; NYSCEF Doc No. 60, the amended complaint; NYSCEF Doc No. 61, CSCC answer/counterclaim; NYSCEF Doc No. 62, answer of FBE defendants; NYSCEF Doc No. 63, site plan; NYSCEF Doc No. 64, property map; NYSCEF Doc No. 65, deeds to the "Spur"; NYSCEF Doc No. 66, photographs of the property in question; NYSCEF Doc No. 86, title policy for the "Spur."

In response, the plaintiffs have tendered: NYSCEF Doc No. 70, a letter of intent concerning a Loan; NYSCEF Doc No. 72, a topographical survey; NYSCEF Doc No. 73, a property map based upon surveys conducted on December 23, 1967 and May 20, 1971; NYSCEF Doc No. 74, a copy of the Town of Huntington Local Law No. 25-1997; NYSCEF Doc No. 75, declaration of covenants and restrictions; NYSCEF Doc No. 76, a copy of a Town of Huntington intra-office memorandum dated May 9, 1997; NYSCEF Doc No. 77, indenture made by Realty Associates, Inc. to Rolling Hills Realty Co., Inc.; NYSCEF Doc No. 78, letter dated October 11, 2022; and NYSCEF Doc No. 79, letter dated November 22, 2022.

Prior to its analysis, the Court would like to extend its gratitude to Mssrs. Avrutine and Armentano for the defendants as well as Mr. Schlesinger, and Mses. Gerson, Freeman, and Perna-Plank for plaintiffs. Their thoughtful prose and exceptionally well researched briefs honored the Court.

As stated in the case Merling v. Ash Dev., LLC , 198 A.D.3d 743, 156 N.Y.S.3d 257 (2d Dept. 2021) :

The party seeking a preliminary injunction must demonstrate (1) a likelihood of success on the merits, (2) danger of irreparable harm in the absence of an injunction, and (3) a balance of the equities in favor of the injunction. (see 159 Smith, LLC v. Boreum Hill Prop. Holdings, LLC , 191 A.D.3d 741, 742, 141 N.Y.S.3d 486 [2d Dept. 2021] ; Arcamone—Makinano v. Britton Prop., Inc. , 83 A.D.3d 623, 624, 920 N.Y.S.2d 362 [2d Dept. 2011] ). The purpose of a preliminary injunction is to preserve the status quo until a decision is reached on the merits. ( 159 Smith, LLC v. Boreum Hill Prop. Holdings, LLC , 191 A.D.3d at 742 [141 N.Y.S.3d 486] [internal quotation marks omitted]; see Arcamone—Makinano v. Britton Prop., Inc. , 83 A.D.3d at 624, 920 N.Y.S.2d 362 [2d Dept. 2011] ).

Given the drastic nature of a motion under CPLR 6301, the burden of proof in such an application is clear and convincing evidence ( EdCia...