Citibank, N.A v. Hello Flatbush LLC

Background

Hello Flatbush LLC borrowed $15 million from Cantor Commercial Real Estate Lending, L.P. in February 2020 and gave a promissory note and mortgage securing the loan. Eli Karp signed a guaranty. The mortgage covered a commercial building at 1357 Flatbush Avenue in Brooklyn and Hello Flatbush’s personal property. The loan and related documents were later assigned to Citibank, N.A.

Hello Flatbush stopped making loan payments in September 2023. After notices of default and a demand for payment, Citibank filed this foreclosure action in December 2023 against Hello Flatbush, Karp, and the New York City Environmental Control Board. Hello Flatbush also brought four crossclaims against Karp: breach of contract, breach of fiduciary duty, contribution, and indemnification.

Citibank moved for summary judgment against Hello Flatbush and Karp. Summary judgment is a ruling without a trial when the record shows no genuine dispute over a fact that could affect the result. Karp separately moved for summary judgment against Citibank and Hello Flatbush.

Citibank’s Foreclosure Claim Against Hello Flatbush

The court granted Citibank’s motion for summary judgment against Hello Flatbush. Under New York law, a foreclosure plaintiff must provide the mortgage, the unpaid note, evidence of default, and—when standing is disputed—evidence that it held or had been assigned the note when the action began.

Citibank provided the note, the mortgage, three written mortgage assignments, the loan agreement, and the loan history. The court held that the assignments’ references to the notes were sufficient to show assignment of the underlying debt. It also found that a declaration from Anne Heslop, an asset resolution specialist for the loan servicer Midland Loan Services, established that Citibank possessed the original note when the action began.

The court rejected Hello Flatbush’s objections to the evidence. It concluded that the loan records could be presented in admissible form at trial, including as business records, and that Heslop had sufficient knowledge and authority to testify about them. The court also found that Hello Flatbush’s default was undisputed.

Hello Flatbush argued that the original lender, Cantor, should have investigated two missing documents concerning 1355 Flatbush Mezz LLC, which held a 99.5% membership interest in Hello Flatbush. The court rejected that argument. Hello Flatbush did not dispute that Karp had authority to act for the company or that 1355 Flatbush Mezz LLC had authority to participate in the loan. The court concluded that Cantor had no duty to investigate further and that Hello Flatbush had not identified a genuine factual dispute concerning a valid defense.

Claims Involving Eli Karp and Citibank

The court denied Karp’s motion for summary judgment against Citibank. Karp argued that he should be removed because Citibank had not asserted a separate claim for breach of the guaranty. The court first noted that Karp’s required factual statement contained no record citations, which independently supported denial of his motion.

The court also rejected Karp’s argument on the merits. Under New York law, a foreclosure plaintiff may name a guarantor to preserve the ability to seek a deficiency judgment after a foreclosure sale. Citibank had named Karp for that purpose, and the court held that he was properly included as a defendant even though Citibank had not asserted a separate claim against him.

The court also denied Citibank’s motion for summary judgment against Karp. Citibank acknowledged that it had not brought a separate guaranty claim against him. Because Citibank was not asserting a claim against Karp in this action, the court held that there was nothing to decide on Citibank’s motion against him.

Hello Flatbush’s Crossclaims Against Karp

The court granted in part and denied in part Karp’s motion for summary judgment against Hello Flatbush.

The court refused to grant summary judgment on the breach-of-contract crossclaim. Hello Flatbush argued that it was an intended third-party beneficiary of Karp’s settlement agreement with iCross Funds 4, LLC because the agreement included provisions intended to keep Hello Flatbush operating and required the transfer of information needed to operate it. The court held that these provisions raised a factual question about whether the settlement parties intended to benefit Hello Flatbush.

The court also refused to grant summary judgment on the breach-of-fiduciary-duty crossclaim. Hello Flatbush contended that Karp controlled the company and breached duties to it by entering into the $15 million loan without ensuring that the company had fully authorized the transaction. The court found genuine factual disputes about Karp’s control and the alleged duty. It held that the claim survived at this stage.

The court held that the contribution crossclaim failed as a matter of law. New York contribution claims are limited to tort-based actions involving personal injury, injury to property, or wrongful death. Citibank’s underlying case was a foreclosure action, not a tort action, so Hello Flatbush could not seek contribution for that case.

The court treated the indemnification crossclaim as abandoned because Hello Flatbush did not respond to Karp’s argument that the relevant agreements contained no indemnification provision in Hello Flatbush’s favor. The court stated that the claim was out of the case.

Caption and Remaining Proceedings

The court granted Citibank’s motion to amend the caption and remove the unserved defendants identified as “JOHN DOE NO. 1 THROUGH JOHN DOE NO. XXX.” The New York City Environmental Control Board was in default, but the court stated that the pending request for default judgment against it would be addressed separately.

The order states that Citibank’s motion for summary judgment was granted in part and denied in part, and Karp’s motion for summary judgment was granted in part and denied in part. The parties were directed to meet and propose dates for a trial on the remaining issues during November or December 2025, or January 2026.