On August 26, 2026, the Second Department issued a decision in 853 Lexington, LLC v. JB Lexington, LLC, 2026 NY Slip Op. 05066, holding that a bona fide purchaser for value defeated a quiet title action, explaining:
The plaintiff commenced this action against the defendant JB Lexington, LLC (hereinafter JB Lexington), and another defendant, pursuant to RPAPL article 15 to quiet title to certain real property located in Brooklyn and to impose a constructive trust on that property. The plaintiff was the owner of the property until it was sold to JB Lexington in August 2019. The amended complaint alleged that the plaintiff’s managing director, Yechezkel Strulovitch, effectuated a “sham sale” of the property in collusion with JB Lexington to “fraudulently dispossess” the plaintiff of the property. In support of its allegations, the plaintiff annexed to the amended complaint an operating agreement entered into in June 2013. Pursuant to the 2013 operating agreement, CSRE, LLC, owned 54% of the plaintiff and 853 Lexington Operations, LLC, owned the remaining 46% of the plaintiff.
. . .
Pursuant to Real Property Law § 266, the title of a bona fide purchaser for value is protected unless that purchaser had previous notice of the fraudulent intent of the immediate grantor, or of the fraud rendering void the title of such grantor. To establish itself as a bona fide purchaser for value, a party has the burden of proving that it purchased the property for valuable consideration and did not have knowledge of facts that would lead a reasonably prudent purchaser to make inquiry. If the purchaser fails to use due diligence in examining the title, the purchaser is chargeable, as a matter of law, with notice of the facts which a proper inquiry would have disclosed.
Here, JB Lexington established, prima facie, that it purchased the property for valuable consideration without actual or constructive notice of Strulovitch’s alleged lack of authority to execute the sale. JB Lexington submitted evidence demonstrating that the purchase price of the property was $3,850,000 and that it made payments to the plaintiff and to third parties at the plaintiff’s direction as consideration for the property. Additionally, JB Lexington’s submissions demonstrated that Strulovitch was cloaked with the apparent authority to sell the property. Strulovitch was the only organizer listed on the plaintiff’s articles of organization filed with the New York State Department of State, and no managers or members were listed therein. Moreover, Strulovitch provided JB Lexington with a 2012 operating agreement listing himself as the plaintiff’s only member and further attested in a seller’s affidavit that he was the plaintiff’s only member and that the composition of the plaintiff had not changed.
Although the plaintiff contends that the 2013 operating agreement was the operating agreement in effect at the time of sale, the plaintiff does not contend that the 2013 operating agreement had been filed with the State or provided to JB Lexington before the sale. As such, under the circumstances, JB Lexington’s reliance upon Strulovitch’s apparent authority to sell the property pursuant to the 2012 operating agreement was reasonable.
(Internal quotations and citations omitted).
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