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EXHIBIT C
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF KINGS
JOSEPH HERTZ,
PLAINTIFF,
Index No. 517800/2020
-AGAINST-
COMPLAINT
SAMUEL HERTZ, individually, SAMUEL HERTZ as
Executor of the ESTATE OF MIRA HERTZ, KARA 1
REALTY CO. LLC, LANA REALTY CO. LLC, CORES
REALTY CORPORATION, GODER REALTY
CORPORATION, WOLMIR REALTY CORP., 93
UNDERHILL REALTY CORP., and JOSAM REALTY
CORP.,
DEFENDANTS.
("Plaintiff"
Plaintiff JOSEPH HERTZ or "Joseph"), by his attorneys, Peter Reilly
& Associates, LLC as and for his Complaint against the defendants SAMUEL HERTZ
("Samuel"), Individually and as Executor of the ESTATE OF MIRA HERTZ (the
"Estate"), KARA REALTY CO. LLC ("Kara Realty"), LANA REALTY CO. LLC
("Lana Realty"), CORES REALTY CORPORATION ("Cores Realty"), GODER
REALTY CORPORATION ("Goder Realty"), WOLMIR REALTY CORP. ("Wolmir
Realty"), 93 UNDERHILL REALTY CORP. ("Underhill Realty") and JOSAM REALTY
CORP. ("Josam Realty"), alleges as follows.
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NATURE OF THE CASE
1. By this action, Plaintiff seeks a declaratory judgment that two agrccmcñts
dated March 20, 2012 and September 9, 2014 (collectively, the "Agreements") are null
and void. These Agreements concern the transfer of ownership interests in seven closely
held family companies, loan forgiveness, and cash payments fTom Samuel to Joseph
totaling millions of dollars. Alternatively, Plaintiff seeks an order rescinding the
Agreements. The basis for the relief sought herein is that none of the transactions
referenced in the Agreements ever took place. No consideration has been exchañged and
equitable and legal title to the stock and membership interests at issue remain with the
respective parties as if the Agreements were never signed.
2. The closing pursuant to which the transactions were to be consummated
was scheduled to take place on September 23, 2014 (the "Closing"). This Closing did not
happen on this date when it was discovered that an attorney absconded with escrowed
funds that were to be distributed at the Closing. The Closing has never been rescheduled.
3. Plaintiff is now engaged in estate planning which involves, among other
things, the transfer of his ownership interest in each of the Defendant entities to a trust
(the "Trust"). Samuel, however, has periodically taken the position that the Agreements
have some inchoate residual legal effect despite the fact that none of the transactions
referenced in the Agreements took place and that he has continuously sought to
renegotiate material terms of the 2014 Agreement.
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4. To ensure the validity of the steps being taken in connection with the
transfer of his ownership interests to the Trust and quiet title as respects the membership
interests in the Defendant Entities, Plaintiff brings the instant action.
PARTIES
5. Plaintiff Joseph Hertz maintains a primary residence and domiciliary at 108
SW 8th St., Hallandale Beach, Florida 33009 and is a citizen of the State of Florida.
6. Defendant Samuel Hertz maintains a primary residence and domiciliary at .
24 Polhemus Place, Brooklyn, New York 11215 and is a citizen of the State of New
York.
7. Defendant Samuel Hertz is also the alleged Executor of the Estate of Mira
Hertz, pursuant to a purported Last Will and Testament dated November 28, 2008. Ms.
Hertz, the mother of Samuel and Joseph, died on April 27, 2015. At the time of her
death, Ms. Hertz resided at 35 Prospect Park West, Apartment 6D, Brooklyn, New York
and was a citizen of the State of New York.
8. Defendant Kara Realty is a New York Limited Liability Company with its
principal place of business at Brooklyn, New York.
9. Defendant Lana Realty is a New York Limited Liability Company with its
principal place of business at Brooklyn, New York.
10. Defendant Cores Realty is a New York Corporation with its principal place
of business at Brooklyn, New York.
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11. Defendant Goder Realty is a New York Corporation with itsprincipal place
of business at Brooklyn, New York.
12. Defendant Wolmir Realty is a New York Corporation with itsprincipal
place of business at Brooklyn, New York.
13. Defendant Underhill Realty is a New York Corporation with its principal
place of business at Brooklyn, New York.
14. Defendant Josam Realty is a New York Corporation with itsprincipal place
of business at Brooklyn, New York.
VENUE
15. Plaintiffs designate Kings County as the place of trial. Venue is proper in
Kings County pursuant to CPLR § 503 and § 507.
BACKGROUND
16. The Hertz family owns substantial real estate holdings in Brooklyn, New
York.
17. Several of these properties are held by the seven entities named above as
Defendants: to wit, Kara Realty, Lana Realty, Cores Realty, Goder Realty, Wolmir
Realty, Underhill Realty and Josam Realty (collectively, the "Hertz Entities"). Joseph
and Samuel hold interests in the Hertz Entities as set forth below:
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. . Joseph Hertz Samuel Hertz
Company and Respective Ownershm
Kara Realty Co., LLC 50% 50%
Lana Realty Co. LLC 50% 50%
Cores Realty Corporation 50% 50%
Goder Realty Corporation 50% 50%
Wolmir Realty Corporation 50% 50%
93 Underhill Realty Corp. 50% 50%
Josam Realty Corp.
29.25% 29.25%
Agreement to Transfer Interests
18. In or about 2012, Joseph and Samuel decided to divide their interests in the
Hertz Entities and ultimately reached an understanding about how to do so.
19. This understanding was first outlined in a Memorandum of Understanding
parties'
dated March 20, 2012 (the "MOU"). More than two years later, the
was further reduced to in an agreement dated September 9, 2014
understanding writing
(the "2014 Agreement"), which superseded all prior agreements and dealt with additional
Hertz family issues.
20. Joseph, Ms. Hertz, Samuel and the Hertz Entities are each parties to the
2014 Agreement, a true of which is annexed hereto as Exhibit "1".
copy
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21. Samuel and Ms. Hertz never delivered a copy of the 2014 Agreemeñt
bearing their signatures to Joseph. Joseph, however, did execute the 2014 Agreement
and, in September 2014, was ready to consummate the transactions contemplated the
by
agreement.
22. Pursuant to the 2014 Agreement, Cores Realty, Goder Realty, Wolmir
Realty, Underhill Realty and Josam Realty were to be merged into a newly formed
holding corporation (the "Holding Corp."). See Id., ¶ B.
23. The newly formed Holding Corp. was to redeem and purchase a certain
number of Joseph's shares of the newly formed Holding Corp. for $4,160,743, which
would include $1,904,680 to be used to repay obligations that Joseph or his entities owed
to certain Hertz Entities.
24. Under the 2014 Agreement, Joseph would transfer his remaining shares in
the Holding Corporation, except for 1%, to Samuel in exchange for: i) 49% of Samuel's
membership interest in Kara Realty and Lana Realty (thus leaving Joseph with 99% of
the memberships interests in these two LLCs); ii) Samuel's contribution of $2,290,000 to
Kara Realty; iii) Samuel's contribution of $1,390,000 to Lana Realty; and, iv) a cash
"D"
payment from Samuel to Joseph of $940,502. See Id., ¶¶ and "E".
25. As part of the transaction, Ms. Hertz agreed to assume certain debts owed
by Joseph, Samuel, Kara Realty, Lana Realty and non-parties Sterling Empire LLC as
listed on the books and records of non-party Samjo Realty Corp. (hereafter "Samjo").
26. Ms. Hertz further agreed to surrender her interest in an overseas bank
account at Hapoalim Bank leaving Joseph the sole holder of that account.
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The Mira Hertz Purported Trust
27. Upon information and belief, beginning in or about 2008, Samuel managed
all of Ms. Hertz's fiñañces, including but not limited to, her substantial interests in the
family businesses of Samjo and Josam.
28. Upon information and belief, in or about 2008, Samuel convinced Ms.
Hertz that she needed to chañge her estate plan in order to reduce her estate taxes and to
avoid conflict within the family after she died.
29. Upon information and belief, Samuel suggested that Ms. Hertz establish
trusts and a will naming Samuel as the sole trustee and beneficiary, and to transfer eight
percent of non-party Samjo Realty Corp. ("Samjo") from Ms. Hertz to Samuel.
30. Upon information and belief, Samuel arranged multiple meetings for Ms.
Hertz to meet with his personal tax attorney, Scott Eisenmesser, Esq., a reember of the
law firm of Rivkin Radler LLP in Uniondale, New York.
31. Upon information and belief, Samuel drove Ms. Hertz to Mr.
Eisenmesser's offices on multiple occasions to discuss her estate plan with Mr.
Eisenmesser.
32. Samuel was present at the meetings when Mr. Eisenmesser met with Ms.
Hertz and discussed estate planning with her.
33. Upon information and belief, Mr. Eisenmesser drafted a purported will for
Ms. Hertz naming Samuel as Executor and sole beneficiary and two trust agreemeñts.
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34. One of the trusts prepared by Samuel's attorney and allegedly signed by
Agreement"
Ms. Hertz is entitled the "Mira Hertz Revocable Trust dated November 26,
2008 (the "Mira Trust").
35. The Mira Trust provides in relevant part:
"... Settlor [Mira Hertz] hereby transfers to the trustees the property set
forth in schedule A hereto annexed and it is hereby agreed,that the trust
estate shall be held by the Trustee, IN TRUST for the uses and purposes
forth:"
and subject to the terms and conditions hereinafter set
36. Schedule A of the Mira Trust provides:
Schedule of property transferred pursuant to Trust Agreement dated the
26th day of November, 2008 between MIRA HERTZ as Settlor and MIRA
HERTZ as Trustee.
All the property that I presently own.
(Emphasis provided.) Id.
37. Thus, by the terms of the Mira Trust, Ms. Hertz transferred all of her
interest in the Hertz Entities and bank accounts, indeed all of her property, to this trust in
2008.
38. At the time the parties entered into the Agreements, Ms. Hertz had no
ownership interest in the Hertz Entities or bank accounts identified in those agreerñêñts.
39.. Joseph was never told of the Purported Trust prepared by Mr. Eisenmesser
and was unaware of the trust at the time he entered into the Agreements.
40. Conversely, Samuel and Ms. Hertz had actual knowledge of the Mira Trust
and were intimately aware of itsterms when entering into the Agreerñêñts.
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Theft of Escrow Funds
41. To accumulate cash for the transaction, each of the Hertz Entities had
engaged in financing transactions using its property as collateral. The funds from the
financing transactions-totaling $5,769,281.17-were sent to David S. Frankel, Esq., to
attorneys'
be placed in his escrow account and thereafter distributed as the parties
directed. A substantial portion of the funds in Frankel's escrow were to be used to pay
cash due Joseph at closing.
42. As the parties would subsequently learn, Mr. Frankel stole these escrow
funds prior to the scheduling closing. (He was disbarred in 2015, and, in 2017, pleaded
guilty to Grand Larceny in the First Degree. He was sentenced to three to nine years in
prison for his crimes.)
43. The parties first discovered Mr. Frankel's theft of the escrow funds as they
prepared for the September 23, 2014 closing. The Closing did not proceed and was never
rescheduled.
44. Despite the theft of escrow funds, Samuel and Ms. Hertz (or the Estate) had
adequate resources to close on the Agreement, in September 2014 and thereafter.
Nonetheless, they failed to do so.
45. Rather than close, Samuel repudiated the 2014 Agreement and offered new
terms.
46. By correspondence dated October 2, 2017, Samuel stated that he did not
have the to consummate the transaction contemplated the 2014 Agreement.
money by
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47. He stated by email: "After you sign off on the final does, I will go to Chase
and get about 2.2M and send it to you. I will need a payoff period for the about
remaining
2.8M."
Samuel asked for a quarterly or monthly payment schedule for the approximately
2.8 million dollar balance that would be due.
48. Joseph rejected this offer and insisted that, if the parties were to
consummate a transaction, it would have to be on the identical terms and conditions set
forth in the 2014 Agreement.
49. In or about March of 2018, Samuel offered to pay Joseph $5 million in
cash over 30 years at 3 1/2% interest. Joseph also rejected this proposal and again
insisted that any transaction must be at the same terms and conditions as those in the
2014 Agreement.
50. None of the transactions referenced in the 2014 Agreement went forward.
parties'
Since 2014, the ownership interests in the Hertz Entities have not changed. The
Holding Corporation was not formed. Joseph has received no consideration for any of
parties'
the promises made in the 2014 Agreement. The efforts to consummate the
transactions referenced in the 2014 Agreement effectively ended when Attorney Frankel
stole the escrowed funds.
51. Despite the foregoing and the fact that Samuel has never attempted to
schedule a closing under the 2014 Agreement since September 2014, he continues from
parties'
time-to-time to take the position that the agreement has some bearing on the
rights concerning the Hertz Entities and other subjects referenced in the 2014 Agreement.
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In all instances when Samuel or his agents have taken such a position, Joseph or his
agents have rejected the notion.
52. Until recently, Samuel's posturing regarding the 2014 Agreement had no
parties'
real world impact. The relationships vis-a-vis the properties remamed
unaffected. However, with Joseph now in the process of transferring all of his property
interests to a trust, including his interests in the Hertz Properties, it is imperative that any
uncertainly regarding the legal viability of the Agreeñients be resolved.
FIRST CAUSE OF ACTION
(Declaratory Judgment: The Agreements are Null and Void)
53. Plaintiff repeats and realleges each and every allegation above in
paragraphs 1 through 52 as ifset forth at length herein.
54. Joseph is entitled to a declaratory judgment declaring that the Agreements
are null and void. It has been over six years since the scheduled Closing under the 2014
Agreement was aborted after Attorney Frankel's theft of escrowed funds. The parties
have taken none of the steps contemplated by the 2014 Agreement to transfer their
interests in the Hertz Entities or do anything else contemplated by this agreement.
55. Samuel and Ms. Hertz refused to close on the 2014 Agreement despite due
demand in 2014 and 2015 and their having the opportunity and resources to do so.
56. Pursuant to the Agreement Joseph was to be paid $5,101,245 in cash at
closing for his interests in the contemplated Holding Corp. He has not been paid any
consideration.
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57. Pursuant to the Agreemcñt, Joseph was to receive ninety-nine percent
ownership of Kara Realty and Lana Realty. Samuel and Joseph continue to be 50/50
owners of these LLCs, as they were in 2012.
58. Pursuant to the Agreement, Kara Realty was to receive a contribution of
$2,290,000 from Samuel. It has not received this contribution.
59. Pursuant to the Agreement, Lana Realty was to receive a contribution of
$1,390,000 from Samuel. It has not received this contribution.
60. Equitable and legal title in the Hertz Entities remams with the Plaintiff,
Samuel and the Estate, as if the 2014 Agreement had never been signed.
61. Joseph's, Samuel's andMs. Hertz's taxes reflect that equitable and legal
title to the Hertz entities remains unchanged, as ifthe 2014 Agreement had never been
signed.
62. Joseph's, Samuel's and Ms. Hertz's shareholder and incmber liability
remain unchañged, as if the 2014 Agreement had never been signed.
63. Samuel continues to have signing authority on accounts maintained by Kara
Realty and Lana Realty.
64. To date, no consideration datsoever has been exchañged between the
parties.
65. The failures of Samuel and Ms. Hertz to close on the Agreement and failure
to pay any of the agreed consideration set forth in the Agreemeñt constitutes a failure of
consideration under the Agreement.
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66. Likewise, their failure to schedule a closing under the 2014 Agreement
demonstrates unequivocally that they have abandoned it despite Samuel periodically
parties'
taking the position that it has some residual influence on the interests in the
various subject matters addressed in the prior agreement, including the Hertz Entities.
67. The facts alleged herein depict a present, ripe and justiciable controversy as
to the rights and other legal relations of the parties and Plaintiff, and Plaintiff has no
remedy at law.
68. Declaratory judgment is appropriate to resolve whether each of the
Agreements is null and void.
SECOND CAUSE OF ACTION
(Declaratory Judgment: Abandanment)
69. Plaintiff repeats and realleges each and every allegation above in
paragraphs 1 through 68 as if set forth at length herein.
70. Since Attorney Frankel stole the escrow funds, all of the parties to the 2014
Agreement conducted themselves as ifthe agreement is no longer valid in accordance
with its terms. The closing initially scheduled for Septerñber 2014 has never been
rescheduled. The status quo has not changed. Neither the Estate, Samuel nor Joseph has
attempted to enforce the 2014 Agreement. The conduct of the parties to the 2014
Agreement has been mutual, positive, unequivocal, and inconsistent with the intent to be
bound by the terms of such agreement.
71. This case presents a present, ripe and justiciable controversy as to the rights
and other legal relations of the parties, and Plaintiff has no remedy at law.
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72. Declaratory judgment is appropriate to resolve whether the parties to the
2014 Agreement have abandoned it.
THIRD CAUSE OF ACTION
(Claim in the Alternative: Rescission)
73. Plaintiff repeats and realleges each and every allegation above in
paragraphs 1 through 72 as if set forth at length herein.
74. In the event it is determined that either of the Agreements is not null and
void or abandoned, such agreement should be rescinded.
75. Under the Agreements, Joseph, Samuel, Ms. Hertz and the Hertz Entities
agreed to transfer certain interests held by them in the Hertz Entities.
76. Despite due demand, Samuel and Ms. Hertz have failed and refused to
close on the terms negotiated in the Agreements.
77. Samuel has repeatedly stated that he is unable to close on the 2014
Agreement (which superseded the MOU) on its stated terms. Instead, Samuel has
demañded new terms and refused to transfer interests in the Hertz Entities unless Joseph
agrees to these new terms.
78. Some of the new terms proposed by Samuel are paying Joseph $2.2 million
at and $2.8 million over time. This proposal was not agreeable.
closing
79. Samuel also offered to Joseph $5,000,000 over thirty years at 3.5%
pay
interest. This proposal was also not agreeable.
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80. Samuel and Ms. Hertz breached the 2014 Agreemêñt to schedule
by failing
a closing and only offering to go forward with the matters addressed in this agreement if
the parties renegotiated its terms.
81. Ms. Hertz also breached the 2014 Agreement by falsely representing that
she was authorized to enter into it.
82. Specifically, in paragraph 1 of the 2014 Agreement Ms. Hertz represented
that she was fully empowered and authorized to enter into the 2014 Agreement,
compromise the claims raised therein, and issue the releases provided for in the
agreement.
83. Ms. Hertz's representations in paragraph 1 were false in that, on or about
November 26, 2008, Ms. Hertz had transferred all of her property to the Mira Trust,
including her interest in the various Hertz Entities. She therefore
Preview
FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF DOC. NO. 100 RECEIVED NYSCEF: 07/01/2021 EXHIBIT C FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYSCEF : 07/01/2021 02 / 16/ 202 1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS JOSEPH HERTZ, PLAINTIFF, Index No. 517800/2020 -AGAINST- COMPLAINT SAMUEL HERTZ, individually, SAMUEL HERTZ as Executor of the ESTATE OF MIRA HERTZ, KARA 1 REALTY CO. LLC, LANA REALTY CO. LLC, CORES REALTY CORPORATION, GODER REALTY CORPORATION, WOLMIR REALTY CORP., 93 UNDERHILL REALTY CORP., and JOSAM REALTY CORP., DEFENDANTS. ("Plaintiff" Plaintiff JOSEPH HERTZ or "Joseph"), by his attorneys, Peter Reilly & Associates, LLC as and for his Complaint against the defendants SAMUEL HERTZ ("Samuel"), Individually and as Executor of the ESTATE OF MIRA HERTZ (the "Estate"), KARA REALTY CO. LLC ("Kara Realty"), LANA REALTY CO. LLC ("Lana Realty"), CORES REALTY CORPORATION ("Cores Realty"), GODER REALTY CORPORATION ("Goder Realty"), WOLMIR REALTY CORP. ("Wolmir Realty"), 93 UNDERHILL REALTY CORP. ("Underhill Realty") and JOSAM REALTY CORP. ("Josam Realty"), alleges as follows. 1 FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYSCEF: 07/01/2021 02/16/2021 NATURE OF THE CASE 1. By this action, Plaintiff seeks a declaratory judgment that two agrccmcñts dated March 20, 2012 and September 9, 2014 (collectively, the "Agreements") are null and void. These Agreements concern the transfer of ownership interests in seven closely held family companies, loan forgiveness, and cash payments fTom Samuel to Joseph totaling millions of dollars. Alternatively, Plaintiff seeks an order rescinding the Agreements. The basis for the relief sought herein is that none of the transactions referenced in the Agreements ever took place. No consideration has been exchañged and equitable and legal title to the stock and membership interests at issue remain with the respective parties as if the Agreements were never signed. 2. The closing pursuant to which the transactions were to be consummated was scheduled to take place on September 23, 2014 (the "Closing"). This Closing did not happen on this date when it was discovered that an attorney absconded with escrowed funds that were to be distributed at the Closing. The Closing has never been rescheduled. 3. Plaintiff is now engaged in estate planning which involves, among other things, the transfer of his ownership interest in each of the Defendant entities to a trust (the "Trust"). Samuel, however, has periodically taken the position that the Agreements have some inchoate residual legal effect despite the fact that none of the transactions referenced in the Agreements took place and that he has continuously sought to renegotiate material terms of the 2014 Agreement. 2 FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NY S CE F DOC. DOC . NO. NO. 100 13 RECEIVED RECE I VE D NYSCEF: NY S CE F: 07/01/2021 02/16/2021 4. To ensure the validity of the steps being taken in connection with the transfer of his ownership interests to the Trust and quiet title as respects the membership interests in the Defendant Entities, Plaintiff brings the instant action. PARTIES 5. Plaintiff Joseph Hertz maintains a primary residence and domiciliary at 108 SW 8th St., Hallandale Beach, Florida 33009 and is a citizen of the State of Florida. 6. Defendant Samuel Hertz maintains a primary residence and domiciliary at . 24 Polhemus Place, Brooklyn, New York 11215 and is a citizen of the State of New York. 7. Defendant Samuel Hertz is also the alleged Executor of the Estate of Mira Hertz, pursuant to a purported Last Will and Testament dated November 28, 2008. Ms. Hertz, the mother of Samuel and Joseph, died on April 27, 2015. At the time of her death, Ms. Hertz resided at 35 Prospect Park West, Apartment 6D, Brooklyn, New York and was a citizen of the State of New York. 8. Defendant Kara Realty is a New York Limited Liability Company with its principal place of business at Brooklyn, New York. 9. Defendant Lana Realty is a New York Limited Liability Company with its principal place of business at Brooklyn, New York. 10. Defendant Cores Realty is a New York Corporation with its principal place of business at Brooklyn, New York. 3 FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYSCEF: 07/01/2021 02/16/2021 11. Defendant Goder Realty is a New York Corporation with itsprincipal place of business at Brooklyn, New York. 12. Defendant Wolmir Realty is a New York Corporation with itsprincipal place of business at Brooklyn, New York. 13. Defendant Underhill Realty is a New York Corporation with its principal place of business at Brooklyn, New York. 14. Defendant Josam Realty is a New York Corporation with itsprincipal place of business at Brooklyn, New York. VENUE 15. Plaintiffs designate Kings County as the place of trial. Venue is proper in Kings County pursuant to CPLR § 503 and § 507. BACKGROUND 16. The Hertz family owns substantial real estate holdings in Brooklyn, New York. 17. Several of these properties are held by the seven entities named above as Defendants: to wit, Kara Realty, Lana Realty, Cores Realty, Goder Realty, Wolmir Realty, Underhill Realty and Josam Realty (collectively, the "Hertz Entities"). Joseph and Samuel hold interests in the Hertz Entities as set forth below: 4 FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYSCEF: 07/01/2021 02/16/2021 . . Joseph Hertz Samuel Hertz Company and Respective Ownershm Kara Realty Co., LLC 50% 50% Lana Realty Co. LLC 50% 50% Cores Realty Corporation 50% 50% Goder Realty Corporation 50% 50% Wolmir Realty Corporation 50% 50% 93 Underhill Realty Corp. 50% 50% Josam Realty Corp. 29.25% 29.25% Agreement to Transfer Interests 18. In or about 2012, Joseph and Samuel decided to divide their interests in the Hertz Entities and ultimately reached an understanding about how to do so. 19. This understanding was first outlined in a Memorandum of Understanding parties' dated March 20, 2012 (the "MOU"). More than two years later, the was further reduced to in an agreement dated September 9, 2014 understanding writing (the "2014 Agreement"), which superseded all prior agreements and dealt with additional Hertz family issues. 20. Joseph, Ms. Hertz, Samuel and the Hertz Entities are each parties to the 2014 Agreement, a true of which is annexed hereto as Exhibit "1". copy 5 FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 ...--- . ..--- -.... ---. ... -, ... -. . NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYSCEF: 07/01/2021 02/16/2021 21. Samuel and Ms. Hertz never delivered a copy of the 2014 Agreemeñt bearing their signatures to Joseph. Joseph, however, did execute the 2014 Agreement and, in September 2014, was ready to consummate the transactions contemplated the by agreement. 22. Pursuant to the 2014 Agreement, Cores Realty, Goder Realty, Wolmir Realty, Underhill Realty and Josam Realty were to be merged into a newly formed holding corporation (the "Holding Corp."). See Id., ¶ B. 23. The newly formed Holding Corp. was to redeem and purchase a certain number of Joseph's shares of the newly formed Holding Corp. for $4,160,743, which would include $1,904,680 to be used to repay obligations that Joseph or his entities owed to certain Hertz Entities. 24. Under the 2014 Agreement, Joseph would transfer his remaining shares in the Holding Corporation, except for 1%, to Samuel in exchange for: i) 49% of Samuel's membership interest in Kara Realty and Lana Realty (thus leaving Joseph with 99% of the memberships interests in these two LLCs); ii) Samuel's contribution of $2,290,000 to Kara Realty; iii) Samuel's contribution of $1,390,000 to Lana Realty; and, iv) a cash "D" payment from Samuel to Joseph of $940,502. See Id., ¶¶ and "E". 25. As part of the transaction, Ms. Hertz agreed to assume certain debts owed by Joseph, Samuel, Kara Realty, Lana Realty and non-parties Sterling Empire LLC as listed on the books and records of non-party Samjo Realty Corp. (hereafter "Samjo"). 26. Ms. Hertz further agreed to surrender her interest in an overseas bank account at Hapoalim Bank leaving Joseph the sole holder of that account. 6 /~ nf 1O FILED: ... ....-. KINGS ...... COUNTY ..- CLERK ,.--...-- 07/01/2021 09:36 PM INDEX NO. 526061/2019 - .....,- - - - - . . .- -.. NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYSCEF: 07/01/2021 02/16/2021 The Mira Hertz Purported Trust 27. Upon information and belief, beginning in or about 2008, Samuel managed all of Ms. Hertz's fiñañces, including but not limited to, her substantial interests in the family businesses of Samjo and Josam. 28. Upon information and belief, in or about 2008, Samuel convinced Ms. Hertz that she needed to chañge her estate plan in order to reduce her estate taxes and to avoid conflict within the family after she died. 29. Upon information and belief, Samuel suggested that Ms. Hertz establish trusts and a will naming Samuel as the sole trustee and beneficiary, and to transfer eight percent of non-party Samjo Realty Corp. ("Samjo") from Ms. Hertz to Samuel. 30. Upon information and belief, Samuel arranged multiple meetings for Ms. Hertz to meet with his personal tax attorney, Scott Eisenmesser, Esq., a reember of the law firm of Rivkin Radler LLP in Uniondale, New York. 31. Upon information and belief, Samuel drove Ms. Hertz to Mr. Eisenmesser's offices on multiple occasions to discuss her estate plan with Mr. Eisenmesser. 32. Samuel was present at the meetings when Mr. Eisenmesser met with Ms. Hertz and discussed estate planning with her. 33. Upon information and belief, Mr. Eisenmesser drafted a purported will for Ms. Hertz naming Samuel as Executor and sole beneficiary and two trust agreemeñts. 7 FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYSCEF: 07/01/2021 02/16/2021 34. One of the trusts prepared by Samuel's attorney and allegedly signed by Agreement" Ms. Hertz is entitled the "Mira Hertz Revocable Trust dated November 26, 2008 (the "Mira Trust"). 35. The Mira Trust provides in relevant part: "... Settlor [Mira Hertz] hereby transfers to the trustees the property set forth in schedule A hereto annexed and it is hereby agreed,that the trust estate shall be held by the Trustee, IN TRUST for the uses and purposes forth:" and subject to the terms and conditions hereinafter set 36. Schedule A of the Mira Trust provides: Schedule of property transferred pursuant to Trust Agreement dated the 26th day of November, 2008 between MIRA HERTZ as Settlor and MIRA HERTZ as Trustee. All the property that I presently own. (Emphasis provided.) Id. 37. Thus, by the terms of the Mira Trust, Ms. Hertz transferred all of her interest in the Hertz Entities and bank accounts, indeed all of her property, to this trust in 2008. 38. At the time the parties entered into the Agreements, Ms. Hertz had no ownership interest in the Hertz Entities or bank accounts identified in those agreerñêñts. 39.. Joseph was never told of the Purported Trust prepared by Mr. Eisenmesser and was unaware of the trust at the time he entered into the Agreements. 40. Conversely, Samuel and Ms. Hertz had actual knowledge of the Mira Trust and were intimately aware of itsterms when entering into the Agreerñêñts. 8 O nf 1Q FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYSCEF: 07/01/2021 02/16/2021 Theft of Escrow Funds 41. To accumulate cash for the transaction, each of the Hertz Entities had engaged in financing transactions using its property as collateral. The funds from the financing transactions-totaling $5,769,281.17-were sent to David S. Frankel, Esq., to attorneys' be placed in his escrow account and thereafter distributed as the parties directed. A substantial portion of the funds in Frankel's escrow were to be used to pay cash due Joseph at closing. 42. As the parties would subsequently learn, Mr. Frankel stole these escrow funds prior to the scheduling closing. (He was disbarred in 2015, and, in 2017, pleaded guilty to Grand Larceny in the First Degree. He was sentenced to three to nine years in prison for his crimes.) 43. The parties first discovered Mr. Frankel's theft of the escrow funds as they prepared for the September 23, 2014 closing. The Closing did not proceed and was never rescheduled. 44. Despite the theft of escrow funds, Samuel and Ms. Hertz (or the Estate) had adequate resources to close on the Agreement, in September 2014 and thereafter. Nonetheless, they failed to do so. 45. Rather than close, Samuel repudiated the 2014 Agreement and offered new terms. 46. By correspondence dated October 2, 2017, Samuel stated that he did not have the to consummate the transaction contemplated the 2014 Agreement. money by 9 FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYSCEF: 07/01/2021 02/16/2021 47. He stated by email: "After you sign off on the final does, I will go to Chase and get about 2.2M and send it to you. I will need a payoff period for the about remaining 2.8M." Samuel asked for a quarterly or monthly payment schedule for the approximately 2.8 million dollar balance that would be due. 48. Joseph rejected this offer and insisted that, if the parties were to consummate a transaction, it would have to be on the identical terms and conditions set forth in the 2014 Agreement. 49. In or about March of 2018, Samuel offered to pay Joseph $5 million in cash over 30 years at 3 1/2% interest. Joseph also rejected this proposal and again insisted that any transaction must be at the same terms and conditions as those in the 2014 Agreement. 50. None of the transactions referenced in the 2014 Agreement went forward. parties' Since 2014, the ownership interests in the Hertz Entities have not changed. The Holding Corporation was not formed. Joseph has received no consideration for any of parties' the promises made in the 2014 Agreement. The efforts to consummate the transactions referenced in the 2014 Agreement effectively ended when Attorney Frankel stole the escrowed funds. 51. Despite the foregoing and the fact that Samuel has never attempted to schedule a closing under the 2014 Agreement since September 2014, he continues from parties' time-to-time to take the position that the agreement has some bearing on the rights concerning the Hertz Entities and other subjects referenced in the 2014 Agreement. 10 1A n f- 1Q FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 -...--.... .......- --........ ,..--.-. ...., ..,...--... . . ..., .., NYSCEF NY SCEF DOC. DOC . NO. NO. .100 13 RECEIVED RECE1VED NYSCEF: NY SCEF: 07/01/2021 02/16/2021 In all instances when Samuel or his agents have taken such a position, Joseph or his agents have rejected the notion. 52. Until recently, Samuel's posturing regarding the 2014 Agreement had no parties' real world impact. The relationships vis-a-vis the properties remamed unaffected. However, with Joseph now in the process of transferring all of his property interests to a trust, including his interests in the Hertz Properties, it is imperative that any uncertainly regarding the legal viability of the Agreeñients be resolved. FIRST CAUSE OF ACTION (Declaratory Judgment: The Agreements are Null and Void) 53. Plaintiff repeats and realleges each and every allegation above in paragraphs 1 through 52 as ifset forth at length herein. 54. Joseph is entitled to a declaratory judgment declaring that the Agreements are null and void. It has been over six years since the scheduled Closing under the 2014 Agreement was aborted after Attorney Frankel's theft of escrowed funds. The parties have taken none of the steps contemplated by the 2014 Agreement to transfer their interests in the Hertz Entities or do anything else contemplated by this agreement. 55. Samuel and Ms. Hertz refused to close on the 2014 Agreement despite due demand in 2014 and 2015 and their having the opportunity and resources to do so. 56. Pursuant to the Agreement Joseph was to be paid $5,101,245 in cash at closing for his interests in the contemplated Holding Corp. He has not been paid any consideration. 11 11 of 1O FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NY S CE F DOC. DOC . NO. NO. 100 13 RECEIVED RECE IVED NYSCEF: NY SCE F: 07/01/2021 02/16/2021 57. Pursuant to the Agreemcñt, Joseph was to receive ninety-nine percent ownership of Kara Realty and Lana Realty. Samuel and Joseph continue to be 50/50 owners of these LLCs, as they were in 2012. 58. Pursuant to the Agreement, Kara Realty was to receive a contribution of $2,290,000 from Samuel. It has not received this contribution. 59. Pursuant to the Agreement, Lana Realty was to receive a contribution of $1,390,000 from Samuel. It has not received this contribution. 60. Equitable and legal title in the Hertz Entities remams with the Plaintiff, Samuel and the Estate, as if the 2014 Agreement had never been signed. 61. Joseph's, Samuel's andMs. Hertz's taxes reflect that equitable and legal title to the Hertz entities remains unchanged, as ifthe 2014 Agreement had never been signed. 62. Joseph's, Samuel's and Ms. Hertz's shareholder and incmber liability remain unchañged, as if the 2014 Agreement had never been signed. 63. Samuel continues to have signing authority on accounts maintained by Kara Realty and Lana Realty. 64. To date, no consideration datsoever has been exchañged between the parties. 65. The failures of Samuel and Ms. Hertz to close on the Agreement and failure to pay any of the agreed consideration set forth in the Agreemeñt constitutes a failure of consideration under the Agreement. 12 FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYsCEF: 07/01/2021 02/16/2021 66. Likewise, their failure to schedule a closing under the 2014 Agreement demonstrates unequivocally that they have abandoned it despite Samuel periodically parties' taking the position that it has some residual influence on the interests in the various subject matters addressed in the prior agreement, including the Hertz Entities. 67. The facts alleged herein depict a present, ripe and justiciable controversy as to the rights and other legal relations of the parties and Plaintiff, and Plaintiff has no remedy at law. 68. Declaratory judgment is appropriate to resolve whether each of the Agreements is null and void. SECOND CAUSE OF ACTION (Declaratory Judgment: Abandanment) 69. Plaintiff repeats and realleges each and every allegation above in paragraphs 1 through 68 as if set forth at length herein. 70. Since Attorney Frankel stole the escrow funds, all of the parties to the 2014 Agreement conducted themselves as ifthe agreement is no longer valid in accordance with its terms. The closing initially scheduled for Septerñber 2014 has never been rescheduled. The status quo has not changed. Neither the Estate, Samuel nor Joseph has attempted to enforce the 2014 Agreement. The conduct of the parties to the 2014 Agreement has been mutual, positive, unequivocal, and inconsistent with the intent to be bound by the terms of such agreement. 71. This case presents a present, ripe and justiciable controversy as to the rights and other legal relations of the parties, and Plaintiff has no remedy at law. 13 FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NYSCEF: 07/01/2021 02/16/2021 72. Declaratory judgment is appropriate to resolve whether the parties to the 2014 Agreement have abandoned it. THIRD CAUSE OF ACTION (Claim in the Alternative: Rescission) 73. Plaintiff repeats and realleges each and every allegation above in paragraphs 1 through 72 as if set forth at length herein. 74. In the event it is determined that either of the Agreements is not null and void or abandoned, such agreement should be rescinded. 75. Under the Agreements, Joseph, Samuel, Ms. Hertz and the Hertz Entities agreed to transfer certain interests held by them in the Hertz Entities. 76. Despite due demand, Samuel and Ms. Hertz have failed and refused to close on the terms negotiated in the Agreements. 77. Samuel has repeatedly stated that he is unable to close on the 2014 Agreement (which superseded the MOU) on its stated terms. Instead, Samuel has demañded new terms and refused to transfer interests in the Hertz Entities unless Joseph agrees to these new terms. 78. Some of the new terms proposed by Samuel are paying Joseph $2.2 million at and $2.8 million over time. This proposal was not agreeable. closing 79. Samuel also offered to Joseph $5,000,000 over thirty years at 3.5% pay interest. This proposal was also not agreeable. 14 FILED: KINGS COUNTY CLERK 07/01/2021 09:36 PM INDEX NO. 526061/2019 ... . .-.- -.... --.- --, ... , . . .- .... NYSCEF NYSCEF DOC. DOC. NO. NO. 100 13 RECEIVED RECEIVED NYSCEF: NY SCEF: 07/01/2021 02/16/2021 80. Samuel and Ms. Hertz breached the 2014 Agreemêñt to schedule by failing a closing and only offering to go forward with the matters addressed in this agreement if the parties renegotiated its terms. 81. Ms. Hertz also breached the 2014 Agreement by falsely representing that she was authorized to enter into it. 82. Specifically, in paragraph 1 of the 2014 Agreement Ms. Hertz represented that she was fully empowered and authorized to enter into the 2014 Agreement, compromise the claims raised therein, and issue the releases provided for in the agreement. 83. Ms. Hertz's representations in paragraph 1 were false in that, on or about November 26, 2008, Ms. Hertz had transferred all of her property to the Mira Trust, including her interest in the various Hertz Entities. She therefore