Some of the most interesting cases we post about on this blog are, of course, the ones where there is more than meets the eye.
On the surface, today’s case—Bapaz NYC West St Group LLC v. Assa Properties Inc., 2026 NY Slip Op 03061 (1st Dept May 14, 2026)—appears to address a simple legal question: whether a non-party co-purchaser of an LLC membership interest can intervene in a lawsuit after judgment against the seller was entered in favor of the plaintiff co-purchaser.
Both the Supreme Court and the First Department said no, which might seem puzzling at first. How can it be that a co-purchaser lacks the “real and substantial interest” required to intervene, especially when it was a party to the very contract at the center of the litigation?
But, push past the surface and we find something very familiar to business divorce practitioners: strategic legal tactics; never-say-die attorneys; kitchen-sink style avoidance of a nearly $3 million judgment; and a Court that sees straight through those attempted legal maneuvers.
The Real Estate Transaction
The transaction at the heart of this dispute involved entities owned or controlled by New York real estate investor Salim Assa (no stranger to this blog) on the owner / seller-side, and Bapaz NYC West 46th St Group LLC, controlled by David Israeli on the purchaser-side. Also on the purchaser-side is the attempted intervenor, NYC 46th Street LLC, indirectly controlled by Ben Suky (more on him later).
The company (i.e., defendant West 46th Street Investors LLC) owned two properties at 334–336 West 46th Street in Manhattan. Assa indirectly held a 99% membership interest in the Company through defendant West 46th Street Equity LLC. Assa also managed the Company through defendant West 46th Street Management Corp., which owned the remaining 1% interest.
On November 5, 2015, the Assa-controlled Equity LLC entered into an agreement to sell a 49% interest in the Company for $1 million to plaintiff Bapaz and non-party NYC 46. The Assignment and Assumption Agreement, executed the same day, split the purchased interest: NYC 46 got 31.36% (for $0), and Bapaz got 17.64%. Bapaz paid the entire $1 million purchase price, plus an additional $700,000 toward the anticipated purchase of the remaining 51% in the Company from the Assa-controlled entities.
Assa personally guaranteed all claims arising from any breach of the Seller’s representations and warranties.
Misrepresentations Galore
As it turned out, Assa and Suky were already well acquainted with one another, as Assa had originally acquired the 46th Street properties from the Suky-controlled predecessor entity in a bankruptcy sale. Assa and Suky had also been partners in several other unrelated real estate deals.
More importantly, Assa represented to Bapaz that the seller-entity owned its interest in the Company free and clear.
In reality, non-party Abraham Lavi claimed an ownership interest in the Company based on a separate 2013 agreement in which Mr. Lavi purchased a 20% interest in exchange for a $1,250,000 payment. Defendants did not disclose the true nature of this transaction, instead mischaracterizing it to Bapaz as an “interest free loan.”
Apparently, there was even a TRO issued by Justice James d’August in New York County Supreme Court restraining Assa from selling any portion of Equity LLC’s interest. The TRO was issued while the parties were still negotiating the purchase of the remaining 51% interest (and after the payment of the purchase price + the $700,000 payment), all unbeknownst to Bapaz.
Bapaz Commences Suit Against Assa and the Assa-Controlled Entities
Eventually, Bapaz discovered the truth.
Although the Lavi litigation ultimately settled (meaning that the restriction on sale of the interest was lifted), a material misrepresentation is still a material misrepresentation.
Accordingly, Bapaz sued in May 2018, alleging breach of contract and breach of the guaranty, together with a request that the court declare NYC 46 had no ownership interest in the Company, among other claims. The case landed on the desk of New York Commercial Division Justice Andrew Borrok.
In a February 2019 order, Justice Borrok dismissed the declaratory judgment claim, holding that that agreements demonstrate that NYC 46 purchased a 31.36% interest in the Company. Justice Borrok otherwise permitted the breach of contract and breach of guaranty claims to proceed.
Meanwhile, as the lawsuit progressed further, the real properties themselves were sold at a loss. On November 3, 2021, Assa, acting as managing member of the Company, sold the two properties—which carried an $11,500,000 mortgage—for just $7,745,625.
Bapaz Obtains a $2.98 Million Award on Summary Judgment
On March 12, 2024, following cross-motions for summary judgment, Justice Borrok granted Bapaz summary judgment on its breach of contract claim against the corporate defendants, and breach of guaranty against Assa individually.
The Court entered a judgment in favor of Bapaz in the amount of $2,984,758.45, representing the $1 million purchase price, and the $700,000 payment toward the purchase of the remaining 51% interest, together with pre-judgment interest.
The Appeal and Reargument (or, Be Careful What You Wish For)
The Defendants appealed the judgment, now represented by new counsel. Defendants raised, for the first time on appeal, that Bapaz’s recovery amounted to rescission of the Purchase Agreement and therefore required non-party NYC 46’s consent under Denker v Twentieth Century-Fox Film Corp. (10 NY2d 339, 345 [1961] [“Rescission may not be sought by one of several parties joined as an entity in a contract without the consent or against the objections of the others”]), which consent was never sought nor obtained from NYC 46.
The First Department modified the judgment, vacating that portion of the award representing the $700,000 payment, and directing a trial on the corporate defendants’ liability for that amount, while affirming the $1 million breach of guaranty award as against Assa individually.
The First Department also addressed, and denied, Defendants’ new rescission argument. But in so doing, the court included an erroneous factual assertion that NYC 46 had “stipulated that it held its interest only indirectly through” Bapaz.
Defendants moved to reargue, pointing out (correctly) that nothing in the record supported the “stipulation” language. No doubt, they hoped that the appellate court would not only correct the record, but also take another look at Defendants’ rescission argument.
Well, the First Department did grant reargument, but handed Defendants a far less favorable decision on reargument.
The revised order removed the incorrect language and replaced it with:
As plaintiff does not seek rescission, the motion court did not grant rescission, and the judgment appealed from is for money damages, NYC 46th Street LLC’s consent is not necessary.
Defendants, again, moved to reargue, but leave to reargue was denied.
The First Department, thus, slammed the door shut on Defendants’ rescission argument.
NYC 46’s Motion to Intervene
Enter NYC 46, now represented by the same counsel representing Assa & Co.
On February 3, 2025, NYC 46 moved to intervene under CPLR 1012 and 1013, and upon intervention, to vacate the summary judgment order on the basis that the court’s award of damages in an amount of the entire purchase price “could be read to strip NYC 46 of its 31.36% membership interest,” which would conflict with the court’s 2019 dismissal order acknowledging NYC 46’s 31.36% ownership interest.
In a tidy decision and order, Justice Borrok denied the motion on multiple grounds.
The Court first held that the two orders do not conflict. The dismissal order dismissed a claim seeking a declaratory judgment that NYC 46 had no ownership interest in the Company. The summary judgment order granted Bapaz’s breach of contract and breach of guaranty claims. But, the summary judgment order did not impact NYC 46’s ownership interest.
Justice Borrok further held that NYC 46’s membership interests in the Company was “academic” (read: worthless) as the properties had been sold at a loss years ago, leaving only the corporate shell. As such, NYC 46 does not have a “real and substantial interest” in the outcome of this litigation.
Finally, the court noted that NYC 46’s motion was untimely. Judgment had been entered more than a year earlier, and counsel for NYC 46 had a filed a notice of appearance much earlier in the case and had been receiving all court notifications in the case—a not-so-subtle reference to the fact that the Assa-defendants and NYC 46 share the same counsel.
The First Department (Unsurprisingly) Affirms.
NYC 46 appealed. The First Department unanimously affirmed.
Where the trial court deftly sidestepped the underlying rescission argument in NYC 46’s intervenor motion, the First Department was considerably more direct, pointedly rejecting the argument as “meritless.”
The Appellate Court reiterated that although intervention is to be liberally granted, such relief requires a “real and substantial interest in the outcome of the proceeding.” Aiming straight for the heart of NYC 46’s argument, the First Department held:
Although Supreme Court’s order awarded plaintiff breach of contract damages in the amount of the purchase price, there was no rescission of the purchase agreement, and therefore, no requirement that the proposed intervenor return its acquired membership interest.
The court, then, pointed to its own prior holding on Defendants’ reargument motion, in which the court already found that “the judgment appealed from was one for money damages.”
As NYC 46’s membership interest was not at issue, NYC 46 had no real and substantial interest in the outcome of the litigation to warrant intervention.
Intervention denied.
Takeaways
Sometimes, you gotta give counsel points for creativity even if results don’t follow.
Faced with a nearly $3 million money judgment against his clients, incoming counsel spotted a hook: the damages award was based on the purchase price. In a certain light, it might appear as though the court gave back the money and unwound the deal (i.e., rescission). And if the award can be characterized as rescission, then under Denker, the co-purchaser’s consent was required.
It is the kind of creative argument that sounds better the first time you hear it than the fourth… which is the number of times it was raised and rejected in this case.
So while on its face, the intervenor motion was about protecting NYC 46’s 31.36% membership interest, it was not a huge leap to view the repeat rescission arguments as creating procedural complications and delaying collection of a money judgment against Assa personally.
That said, had the facts been slightly different, the rescission argument might have had legs. The guaranty (expressly made a part of the Purchase Agreement) contained a clause providing that Assa’s maximum liability under the guaranty, “shall be to unwind the Transaction and return the Purchase Price to the Purchaser.” Query as to the interplay of the guaranty (signed by Assa individually) and the Purchase Agreement (signed by Assa as Managing Member of the seller-entity), where the Purchase Agreement does not contain this remedy provision.
But, the court never needed to reach that issue because Bapaz never requested rescission in its pleadings, nor was rescission litigated during the 6 years before judgment was entered in the case. As we’ve explored before on this blog, election of remedies—a choice made at the very outset of the lawsuit—is a low-key critical decision and can be outcome-determinative (see Frank McRoberts’ post: Damages or Rescission? When Electing Fraud Remedies Choose Wisely, where a defrauded LLC investor who proved fraud recovered nothing after electing rescission against the wrong party).
Here, it is hard to see any scenario in which Bapaz does not eventually come out on top. But its election of remedies at the outset may have saved it another round or two (or three) of additional litigation along the way.