U.S. Bank Nat'l Ass'n v. Kahn Prop. Owner, LLC

206 A.D.3d 851

172 N.Y.S.3d 25

U.S. BANK NATIONAL ASSOCIATION, etc., plaintiff,

v.KAHN PROPERTY OWNER, LLC, et al., defendants third-party plaintiffs-appellants, et al., defendants;

LNR Partners, LLC, et al., third-party defendants,

Stan Gale, et al., third-party defendants-respondents.

2019–11613

Index No. 609493/16

Supreme Court, Appellate Division, Second Department, New York.

Argued—March 24, 2022

June 15, 2022

Law Offices of Joshua L. Dratel, P.C., New York, NY (Pollack Pollack Isaac & DeCicco, LLP [Brian J. Isaac ], of counsel), for defendants third-party plaintiffs-appellants.

Farrell Fritz, P.C., Uniondale, NY (James M. Wicks, Franklin C. McRoberts, and John C. Stellakis of counsel), for third-party defendants-respondents.

VALERIE BRATHWAITE NELSON, J.P., ANGELA G. IANNACCI, PAUL WOOTEN, JOSEPH A. ZAYAS, JJ.

DECISION & ORDER

In an action, inter alia, to foreclose a mortgage, the defendants third-party plaintiffs, Kahn Property Owner, LLC, Gary Melius, Oheka Catering I, LLC, and Oheka Management, LLC, appeal from an order of the Supreme Court, Suffolk County (Elizabeth H. Emerson, J.), dated September 4, 2019. The order, insofar as appealed from, granted those branches of the motion of the third-party defendants Stan Gale and Gale International, LLC, which were pursuant to CPLR 3211(a) to dismiss the third-party causes of action alleging tortious interference with contract, breach of fiduciary duty, constructive fraud, breach of the duty to negotiate in good faith, and fraud in the inducement insofar as asserted against them.

ORDERED that the order is affirmed insofar as appealed from, with costs.

The defendant third-party plaintiff Kahn Property Owner, LLC (hereinafter Kahn), is the owner of certain property in Suffolk County known as Oheka Castle. The defendant third-party plaintiff Gary Melius is the principal of Kahn and of the defendants third-party plaintiffs Oheka Catering I, LLC, and Oheka Management, LLC, which operate Oheka Castle. The plaintiff commenced this action, inter alia, to foreclose a mortgage on the property against, among others, Kahn, Melius, Oheka Catering I, LLC, and Oheka Management, LLC (hereinafter collectively the defendants). The defendants commenced a third-party action against the third-party defendant Gale International, LLC, a real estate development company, and its owner, the third-party defendant Stan Gale (hereinafter together the Gale defendants), as well as against the loan servicer for the subject mortgage loan, the third-party defendant LNR Partners, LLC (hereinafter LNR), and its alleged parent company, the third-party defendant Starwood Capital Group, LLC (hereinafter Starwood).

The amended third-party complaint asserted third-party causes of action, inter alia, to recover damages for tortious interference with contract, breach of fiduciary duty, constructive fraud, breach of the duty to negotiate in good faith, and fraud in the inducement. The amended third-party complaint alleged that Melius had planned to build condominiums on the land surrounding Oheka Castle, and Gale approached him with a proposal to redesign a neighboring country club and its golf course to be incorporated into the condominium community, with Oheka Castle as the clubhouse. The amended third-party complaint further alleged that Gale fraudulently represented that he could use his connections with LNR and Starwood to handle any pending lender-related issues concerning the underlying mortgage loans, which had been declared by the plaintiff to be in default. It further alleged that Gale, acting in bad faith, caused the breakdown of the development deal by attempting to interject objectionable terms into the deal, as part of a scheme between the Gale defendants, the plaintiff, LNR, and Starwood to obtain for themselves ownership of Oheka Castle at a discount.

The Gale defendants moved, inter alia, pursuant to CPLR 3211(a)(7) to dismiss the third-party causes of action alleging tortious interference with contract, breach of fiduciary duty, constructive fraud, breach of the duty to negotiate in good faith, and fraud in the inducement insofar as asserted against them. The defendants opposed the motion. By order dated September 4, 2019, the Supreme Court granted the Gale defendants’ motion, and the defendants appeal.

In assessing a motion to dismiss a complaint for failure to state a cause of action pursuant to CPLR 3211(a)(7), a court must "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" ( Leon v. Martinez, 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511 ).

"The elements of a cause of action alleging tortious interference with contract are: (1) the existence of a valid contract between the plaintiff and a third party, (2) the defendant's knowledge of that contract, (3) the defendant's intentional procurement of a third-party's breach of that contract without justification, and (4) damages" ( Nagan Constr., Inc. v. Monsignor McClancy Mem. High Sch., 117 A.D.3d 1005, 1006, 986 N.Y.S.2d 532 ; see Palmieri v. Perry, Van Etten, Rozanski & Primavera, LLP, 200 A.D.3d 785, 787, 160 N.Y.S.3d 67 ). Further, the complaint must specifically allege that the contract would not have been breached but for the defendant's conduct (see Barry's Auto Body of NY, LLC v. Allstate Fire & Cas. Ins. Co., 190 A.D.3d 807, 810, 140 N.Y.S.3d 246 ; Ferrandino & Son, Inc. v. Wheaton Bldrs., Inc., LLC, 82 A.D.3d 1035, 1036, 920 N.Y.S.2d 123 ).

Here, insofar as asserted against the Gale defendants, the third-party cause of action alleging tortious interference with contract alleged that the Gale defendants willfully disrupted the business and contractual relationship between the defendants and the plaintiff, causing the plaintiff to breach various mortgage loan documents, declare the mortgage loan to be in default, and accelerate the mortgage loan. However, accepting the facts alleged in the amended third-party complaint as true and according the defendants the benefit of every possible favorable...