Black Car & Livery Ins., Inc. v H & W Brokerage, Inc.

[*1] Black Car & Livery Ins., Inc. v H & W Brokerage, Inc. 2006 NY Slip Op 50078(U) [10 Misc 3d 1075(A)] Decided on January 23, 2006 Supreme Court, Nassau County Austin, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 23, 2006
Supreme Court, Nassau County

Black Car and Livery Insurance, Inc., JUDITH G. BIEDERMANN AND YONESH BIEDERMANN, Plaintiffs,

against

H & W Brokerage, Inc. LARRY WALLACE, WILLIAM WALLACH, CHARLIE CRAFA, , Defendants.



COUNSEL FOR PLAINTIFF Altman & Altman, Esqs. 1009 East 163rd Street Bronx, New York 10459 COUNSEL FOR DEFENDANT (for Charles Crafa) John A. Servider, Esq. 65-12 69th Place Middle Village, New York 11379



COUNSEL FOR PLAINTIFF

Altman & Altman, Esqs.

1009 East 163rd Street

Bronx, New York 10459

COUNSEL FOR DEFENDANT

(for Charles Crafa)

John A. Servider, Esq.

65-12 69th Place

Middle Village, New York 11379

Leonard B. Austin, J.

Plaintiffs move for leave to serve an amended complaint. Defendant Charlie Crafa opposes the motion and moves to dismiss on the grounds the complaint fails to state a cause of action or, alternatively, for summary judgment.[FN1]

BACKGROUND

Plaintiff Black Car and Livery Insurance Inc. ("Black Car") is an insurance broker in the business of obtaining automobile insurance for medallion taxis, livery service cars, "black cars" and limousines. Plaintiffs Judith G. Bierdermann and Yonesh Biedermann (collectively "Biedermann") are the principals of Black Car.

Defendant H & W Brokerage, Inc. (" H&W") was an insurance broker in the same or similar business as Black Car.

By Book Renewal Rights Purchase Agreement ("Purchase Agreement") dated February 14, 2000, Black Car and Biedermann purchased the right to earn commissions on approximately 1,200 insurance policies on which H&W was the broker. All of these policies were to be renewed in February, 2000.

The purchase price for the renewal rights to these policies was $750,000. Payment due under the Purchase Agreement was to be made as follows: $100,000 was paid on the execution of a letter of intent dated February 9, 2000; $150,000 was paid at closing; and the balance of $500,000 was to be paid pursuant to a promissory note executed by Biedermann and guaranteed by Black Car. The note was due and payable in full on April 30, 2000. As security for the note, Biedermann executed a confession of judgment to H&W which permitted H&W to enter a judgment against Biedermann should they default on the payment of the promissory note.

The purchase price was to be reduced by any amounts previously or subsequently received by H&W in payment of the premiums "...on any insurance policy the rights to which are purchased" under the Purchase Agreement. The parties agreed to cooperate with each other to determine the adjustments to the purchase price which occurred after the closing.

The purchase agreement was signed on behalf of H & W by Charles M. Crafa who is sued herein as Charlie Crafa ("Crafa").

Disputes arose between Biedermann and H&W regarding the adjustments to be [*2]made to the purchase price. The purchase price was never adjusted as provided in the Purchase Agreement.

Plaintiffs allege that Crafa was the managing agent of H&W. In this capacity, he received the premium payments from H&W's customers and made the payment of the premiums to the insurance companies through whom H & W had placed insurance.

After the closing, Black Car retained Crafa as its general manager to oversee the renewal of the H&W policies. As Black Car's managing agent, Crafa collected the premiums from the customers and paid the premiums to the insurance companies.

Pursuant to the Purchase Agreement, Black Car was to receive the commissions earned on the February 2000 renewals of the policies transferred by H & W. Black Car did not assume, and was not responsible for, the payment of premiums due on insurance policies obtained by H & W for the prior year. All money received by Black Car from previous clients of H & W was to be applied to the premiums on the renewal of the policies.

Plaintiffs allege that Crafa received money on the renewal of the former H&W policies. Crafa then sent checks to the insurance companies which issued the policies and directed that they apply those payments to sums owed by H&W in payment of premiums on the prior year's policies.

As a result of applying this money to pay prior year's premiums, Black Car did not earn sufficient commissions and did no have enough money to pay the promissory note when it came due. Black Car and Biedermann had anticipated using the money received as commissions on the renewal of the policies to pay the note. As a result, Black Car and Biedermann defaulted on the note and H & W entered a judgment against Biedermann on the confession of judgment.

The complaint alleges five causes of action. The first and second causes of action are for breach of contract. The third cause of action alleges fraud. The fourth cause of action sounds in breach of fiduciary duty. The fifth is for "tortuous (sic) breach of contract."

Plaintiff moves for leave to serve an amended complaint. Crafa moves to dismiss the complaint pursuant to CPLR 3211 or, in the alternative, for summary judgment pursuant to CPLR 3212.

DISCUSSION

A. CPLR 3211(a)(7) - Standard

CPLR 3211(a)(7) permits the court to dismiss a complaint that fails to state a cause of action.

When deciding such a motion, the court must determine whether the Plaintiff has a legally cognizable cause of action and not whether the action has been properly pled. Guggenheimer v. Ginzburg, 43 NY2d 268 (1977); Rovello v. Orofino Realty Co., 40 NY2d 633 (1976); Well v. Yeshiva Rambam, 300 AD2d 580 (2nd Dept. 2002); and Frank v. DaimlerChrysler Corp., 292 AD2d 118 (1st Dept. 2002). The complaint must be liberally construed, and Plaintiff must be given the benefit of every favorable inference. Leon v. Martinez, 84 NY2d 83 (1994); and Paterno v. CYC, LLC, 8 AD2d 544 (2nd Dept. 2002). The court must also accept as true all of the facts alleged in the complaint and [*3]any factual submissions made in opposition to the motion. 511 West 232rd Street Owners Corp. v. Jennifer Realty Co., 98 NY2d 144 (2002); Sokoloff v. Harriman Estates Development Corp., 96 NY2d 409 (2001); and Also Enterprises, Ltd. v Premier Lincoln-Mercury, Inc., 11 AD3d 493 (2nd Dept. 2004).

If, from the facts alleged in the complaint and the inferences which can be drawn from the facts, the court determines that the pleader has a cognizable cause of action, the motion must be denied. Sokoloff v. Harriman Estates Development Corp., supra; and Stucklen v. Kabro Assocs., 18 AD3d 461 (2nd Dept. 2005).

While factual allegations contained in the complaint are deemed true, legal conclusions and facts contradicted on the record are not entitled to a presumption of truth. In re Loukoumi, Inc., 285 AD2d 595 (2nd Dept. 2001); and Doria v. Masucci, 230 AD2d 764 (2nd Dept. 1996).

B. Summary Judgment - Standard

Summary judgment is a drastic remedy which will be granted only when the movant established that there are no triable issues of fact. Andre v. Pomeroy, 35 NY2d 361 (1974). See also, Mosheyev v. Polevsky, 283 AD2d 469 (2nd Dept., 2001); and Akseizeer v. Kramer, 265 AD2d 365 (2nd Dept., 1999).

The party seeking summary judgment must make a prima facie showing of entitlement to judgment as a matter of law. Alvarez v. Prospect Hosp., 68 NY2d 320 (1986); and Zuckerman v. City of New York 49 NY2d 557 (1980). See also, Aiello v. Garcia, 224 AD2d 467 (2nd Dept., 1996).

Once the movant has established a prima facie entitlement to judgment as a matter of law, the party opposing the motion must come forward with proof in evidentiary form establishing the existence of triable issues of fact or must demonstrate an acceptable excuse for its failure to do so. Zuckerman v. City of New York, 49 NY2d 557 (1980); and Davenport v. County of Nassau, 279 AD2d 497 (2nd Dept., 2001); and Bras v. Atlas Construction Corp., 166 AD2d 401 (2nd Dept., 1991).

The function of the court in deciding a motion for summary judgment is to determine if triable issues of fact exist. Matter of Suffolk County Dept. of Social Services v. James M., 83 NY2d 178 (1994); and Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395 (1957). A motion for summary judgment should be denied if the Court has any doubt as to the existence of a triable issue of fact. Freese v. Schwartz, 203 AD2d 513 (2nd Dept., 1994); and Miceli v. Purex Corp., 84 AD2d 562 (2nd Dept., 1984).

When deciding a motion for summary judgment, like a motion pursuant to CPLR 3211 (a)(7), the court must view the evidence in a light most favorable to the non-moving party and must give the non-moving party the benefit of all reasonable inferences which can be drawn from the evidence. Negri v. Stop & Shop, Inc., 65 NY2d 625 (1985); and Louniakov v. M.R.O.D. Realty Corp., 282 AD2d 657 (2nd Dept., 2001). However, mere conclusions of law or fact are insufficient to defeat a motion for summary judgment. Banco Popular North America v. Victory Tax Mgt., Inc., 1 NY3d 381 (2004).

C. First Cause of Action

The first cause of action is designated as a cause of action for breach of contract. After incorporating the general factual allegations contained in the complaint, the cause [*4]of action alleges that Defendants caused Plaintiffs to enter into a contract to purchase H & W's business at an inflated price and to execute the confession of judgment.

One may not maintain an action for breach of contract against a party with whom they are not in privity. La Barte v. Seneca Resources Corp., 285 AD2d 974 (4th Dept. 2001); and M. Paladino, Inc. v. J. Lucchese & Sons Contracting Corp., 247 AD2d 515 (2nd Dept. 1998).

When a corporate officer signs an agreement in his or her corporate capacity, the corporate officer will not be held personally liable on the contract unless he or she personally binds him or herself. Metropolitan Switch Board Co., Inc. v. Amici Assocs., Inc., 20 AD3d 455 (2nd Dept. 2005); and Maranga v. McDonald & T. Corp., 8 AD2d 351 (2nd Dept. 2004). While Crafa signed the Purchase Agreement, he did so in his capacity as the representative of H & W.

Since Crafa did not sign the contract in his personal capacity and the complaint does not allege the existence of a contract between any of the Plaintiffs and Crafa, the first cause of action fails to state a cause of action against Crafa and must be dismissed.

D. Second Cause of Action

This cause of action is also designated as one for breach of contract. It alleges that the Defendants violated the implied duty of good faith and fair dealing.

Implicit in every contract is a covenant of good faith and fair dealing. Dalton v. Educational Testing Service, 87 NY2d 384 (1995); and Rowe v. Great Atlantic & Pacific Tea Company, Inc., 46 NY2d 62 (1978); and Skillgames, LLC v. Brody, 1 AD3d 247 (1st Dept. 2003); and 1-10 Industry Assocs, LLC v. Trim Corporation of America, 297 AD2d 630 (2nd Dept. 2002). See also, Wood v. Lucy Lady Duff - Gordon, 222 NY 88 (1917). The covenant provides that "...the undertaking of each promisor in a contract must include any promise which a reasonable person in the position of the promisee would be justified in understanding were included (5 Williston, Contracts [rev ed, 1937], § 1293, p 3682)." Rowe v. Great Atlantic & Pacific Tea Company, Inc., supra at 69. The covenant of good faith and fair dealing requires that contracting parties will not take any action which will have the effect of destroying the rights of the other party to receive the benefit of the contract. 511 West 232rd Street Owners Corp. v. Jennifer Realty Co., supra; and Dalton v. Educational Testing Service, supra.

However, no contractual provision can be implied that is inconsistent with the terms of the agreement. Murphy v. American Home Products Corp., 58 NY2d 293 (1983). The implied covenant of good faith and fair dealing does not create any obligations beyond those stated in the contract. Sutton Assocs. v. Nexis-Lexis, 196 Misc 2d 30 (Sup.Ct., Nassau Co. 2003).

A separate cause of action for breach of the implied covenant of good faith and fair dealing is duplicative of the a cause of action for breach of contract. Jacobs Private Property, LLC v. 450 Park LLC, 22 AD3d 347 (1st Dept. 2005); and Cerberus International, Ltd. v. Banctec, Inc., 16 AD3d 126 (1st Dept. 2005).

Thus, this cause of action is duplicative of the first cause of action. Since the first cause of action fails to state a cause of action against Crafa, the second cause of action likewise fails to state cause of action and must be dismissed. [*5]

E. Third Cause of Action

The third cause of action is designated as a claim for fraud. After incorporating the factual allegations relevant to all of the causes of action, the complaint alleges that Crafa, acting in concert with Larry Wallach, William Wallace and H & W, defrauded Plaintiffs by inducing them to enter into the Purchase Agreement and execute the confession of judgment for a sum in excess of the real value of the accounts being purchased.

CPLR 3016(b) requires that fraud be plead in detail. The elements of common law fraud are "representation of a material existing fact, falsity, scienter, deception and injury." Channel Master Corp. v. Aluminum Limited Sales Inc., 4 NY2d 403, 407 (1958). See also, Dalessio v. Kressler, 6 AD2d 57 (2nd Dept. 2004).

A contract is not fraudulently induced if the misrepresentation could have been discovered through the exercise of reasonable inspection or due diligence. Danann Realty Corp. v. Harris, 5 NY2d 317 (1959); and Cohen v. Cerier, 243 AD2d 670 (2nd Dept., 1997). See also, Philip Credit Corp. v. Regents Health Grp., Inc., 953 F. Supp. 482 (SDNY 1997); and Pappas v. Harrow Stores, Inc., 140 AD2d 501 (2nd Dept. 1988).

To survive a motion to dismiss, the complaint must make factual allegations sufficient to support each element of a cause of action for fraud. Kaufman v. Cohen, 307 AD2d 113 (1st Dept. 2003); and Monaco v. New York Univ. Med. Ctr., 213 AD2d 167 (1st Dept. 1995).

The complaint in this action does not allege that Crafa made any factual statements regarding the value of H & W upon which Plaintiff's relied to their detriment.

Therefore, the third cause of action fails to state a cause of action and must be dismissed.

F. Fourth Cause of Action

The fourth cause of action alleges that Crafa and the co-Defendants breached their fiduciary duty by inducing Plaintiffs to enter into the Purchase Agreement and the confession of judgment.

A fiduciary relationship exists when one party "...reposes confidence in another and relies on the other's superior expertise or knowledge (citations omitted)." WIT Holding Corp. v. Klein, 282 AD2d 527, 529 (2nd Dept. 2001). Arm's length business transactions do not give rise to fiduciary relationships. Id. at 529. See also, Wiener v. Lazard Freres & Co., 241 AD2d 114 (1st Dept. 1998).

The transaction which gives rise to this litigation was an arm's length business deal in which Black Car was purchased H & W's business. Black Car was in the same or a similar business as H & W. The complaint does not allege that Black Car or the Biedermanns were relying upon Crafa's superior expertise or knowledge of this business. In fact, the complaint specifically alleges that Black Car "...was a leading insurer of car service companies and black cars" in the New York metropolitan area." (See Complaint ¶ 7.) The same complaint alleges that Judith and Yonesh Biedermann are the principals of Black Car. These allegations establish that Black Car and Biedermann had and have expertise and knowledge in this field and that they were not relying upon Crafa's special expertise or superior knowledge.

Since the complaint fails to establish the existence of a fiduciary relationship between Plaintiffs and Crafa with regard to the sale of the business, the complaint fails [*6]to state a cause of action and must be dismissed.

G. Fifth Cause of Action

This cause of action is labeled as one for "tortuous (sic) breach of contract." No such cause of action exists. A breach of contract claim does not give rise to a separate cause of action in tort unless the defendant breached a legal duty that is separate and apart from the defendant's contractual obligations. Clark-Fitzpatrick v. Long Island Rail Road Co., 70 NY2d 382 (1987); Old Republic National Title Ins. Co. v. Cardinal Abstract Corp., 14 AD3d 678 (2nd Dept. 2005); and Muldoon v. Blue Water Pool Services, Inc., 7 AD3d 496 (2nd Dept. 2004).

Plaintiffs herein do not allege that the Defendants violated any legal duties owed beyond those established by their contractual relationship.

A cause of action exists for tortious interference with contract may be alleged. A cause of action for tortious interference with contract requires the plaintiff plead the existence of a contract between the plaintiff and a third party, the defendant's knowledge of the contract, the defendant's intentional inducement of the third party to breach the contract and damages sustained by plaintiff as a result of the breach.

Kronos , Inc. v. AVX Corp., 81 NY2d 90 (1993); and Bernberg v. Health Management Systems, Inc., 303 AD2d 348 (2nd Dept. 2003).

In this case, a contract existed between Plaintiffs and H & W. Crafa knew of the contract. However, the complaint does not allege that Crafa induced anyone to breach that contract.

In actuality, the fifth cause of action purports to allege a cause of action to pierce the corporate veil. This cause of action alleges that H & W was set up as a shell corporation and that the Court should pierce the corporate veil to hold the Defendants personally liable for H & W's obligations. This cause of action fails because there is no evidence that H & W violated the terms of the contract. Under the terms of the Purchase Agreement, H & W transferred to Black Car the right, interest and opportunity to issue, and be the broker on, insurance policies that arose or were to be renewed in

H & W's business after January 31, 2000.

H & W transferred those policies, or the right to earn commissions on those policies, to Black Car. The basis of Plaintiffs' action is that Crafa, while employed by Black Car, used Black Car funds to pay H & W obligations.

A cause of action for piercing the corporate veil is dependent upon the existence of corporate liability to the Plaintiff. The liability of the corporation is then imposed upon the principals of the corporation because of abuse or misuse of the corporate form.

In order to pierce the corporate veil, the plaintiff must prove the owners of the corporation completely dominated the corporation in regard to the transaction involved and that the domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff being damaged. Matter of Morris v. New York State Dept. of Taxation and Finance, 82 NY2d 135 (1993); and Old Republic National Title Ins. Co. v. Moskowitz 297 AD2d 724 (2nd Dept., 2002). In making the determination as to whether to pierce the corporate veil, the court must determine whether a corporate officer or principal to be held liable (1) exerted domination and control over corporation which is so complete that the corporation has no separate mind, will or existence of its own; (2) [*7]used this domination and control to commit fraud or wrong or any other dishonest or unjust act; and (3) whether injury or unjust loss resulted to Plaintiff from said control and wrong. Bowles v. Errico, 163 AD2d 771 (3rd Dept., 1990); See also Maggio v. Becca Construction Co., Inc. 229 AD2d 426 (2nd Dept., 1996).

In this case, Plaintiffs have not established the existence of any liability of H & W to Plaintiff on any of the causes of action pled. Since H & W is not liable to Plaintiffs on any of the causes of actions, Crafa cannot be held liable as a principal of H & W. The complaint fails to state a cause of action and must be dismissed.

H. Plaintiffs' Cross-Motion for Leave to Serve an Amended Complaint

A motion for leave to serve an amended complaint should be granted in the absence of prejudice or surprise resulting from delay. Fahey v. County of Ontario, 44 NY2d 934 (1978); and Northbay Construction Co., Inc. V. Bauco Construction Corp., 275 AD2d 310 (2nd Dept. 2000); and CPLR 3025(b). The party opposing the amendment must demonstrate that there will be actual prejudice in permitting the service of an amended pleading. Edenwald Contracting Co., Inc. v. City of New York, 60 NY2d 957 (1983); Holchendler v. We Transport, Inc., 292 AD2d 568 (2nd Dept. 2002); and O'Neal v. Cohen, 186 AD2d 639 (2nd Dept. 1992).

The determination of whether to deny or permit an amendment to the pleadings is one addressed to the discretion of the court. Liendo v. Long Island Jewish Med. Ctr., 273 AD2d 445, (2nd Dept. 2000); and Henderson v. Gulati, 270 AD2d 308 (2nd Dept. 2000).

The party seeking leave to serve an amended pleading must make an evidentiary showing establishing merit to the proposed amendment. Joyce v. McKenna Associates, Inc., 2 A.D.3rd 592 (2nd Dept. 2003); and Morgan v. Prospect Park Associates Holdings, L.P., 251 AD2d 306 (2nd Dept. 1998). The evidentiary showing establishing merit must be made by one with actual knowledge of the facts surrounding the proposed amendment. Morgan v. Prospect Park Associates Holdings, L.P., Id.; and Frost v. Monter, 202 AD2d 632 (2nd Dept., 1994).

The court will not consider the merits of the proposed amendment unless the proposed amendment is insufficient as a matter of law or totally devoid of merit. Sunrise Plaza Associates, L.P. v. International Summit Equities Corp., 288 AD2d 300 (2nd Dept. 2001); and Norman v. Ferrara, 107 AD2d 739 (2nd Dept. 1985); See also, Siegel, New York Practice 4th §237.

The motion to amend the complaint herein is supported by an attorney's affirmation. The court must deny a motion for leave to serve an amended complaint when the sole "factual" support for the amendment is contained in an affirmation made by an attorney who lacks personal knowledge of the facts regarding the proposed amendment. Mohan v. Hollander, 303 AD2d 473 (2nd Dept. 2003); Morgan v. Prospect Park Assocs. Holdings, L.P., 251 AD2d 306 (2nd Dept. 1998); and Hospital v. Messier, 32 AD2d 596 (3rd Dept. 1969). See gen'lly, Zuckerman v. City of New York, supra. See also, Siegel, New York Practice 4th §237. Plaintiffs' attorney in this litigation did not represent Black Car or the Biedermanns in connection with the Purchase Agreement. Therefore, he does not have personal knowledge of the facts surrounding this matter.

A verified complaint may be used in lieu of an affidavit of merit if the verification is made by the party. See, Pampalone v. Giant Building Maintenance, Inc., 17 AD3d 556 [*8](2nd Dept. 2005); Goodman v. New York City Health & Hospitals Corp., 2 AD3d 581 (2nd Dept. 2003); and CPLR 105(u). Plaintiffs claim that the proposed amended complaint is verified.

A verification is a statement under oath that the pleading is true, except as to matters alleged upon information and belief, and as to those matters, the parties believe them to be true. CPLR 3020(a). Despite this designation, the proposed amended complaint is not verified since it does not contain either a corporate verification made by an officer or director of Black Car or an personal verification made by Judith or Yonesh Biedermann. Therefore, the proposed amended complaint cannot be considered as a sworn statement establishing the merits of the proposed amendment.

A motion for leave to serve an amended complaint must be denied when the application is not supported by an affidavit made by one with personal knowledge of the facts. Mohan v. Hollander, surpa; Clark v. Foley, 240 AD2d 458 (2nd Dept. 1997); and Polak v. Schwenk, 115 AD2d 142 (3rd Dept. 1985). On this basis alone, the motion for leave to serve an amended complaint must be denied.

Nevertheless, the proposed amended complaint alleges three causes of action, fraud, breach of fiduciary duty and breach of contract. The fraud and breach of contract actions in the proposed amended complaint seek a different amount of damages than is alleged in any of the causes of action alleged in the complaint. There is no explanation in the motion papers by a person with actual knowledge regarding indicating how the damages sought in these proposed causes of action are calculated.

While the breach of fiduciary duty cause of action in the proposed amended complaint seeks the same amount of damages as was sought in the third, fourth and fifth causes of action in the original complaint, neither the complaint nor the motion papers offers an explanation of this demand for damages.

When a party seeks to amend the complaint to seek a different amount or different measure of damages, the motion must contain an affidavit made by someone with actual with knowledge of the facts explaining the basis of the damages now being sought. See., Saldivar v. I. J. White Corp., 9 AD3d 357 (2nd Dept. 2004); and Lopez v. Alexander, 251 AD2d 297 (2nd Dept. 1998). The papers submitted to this Court do not

contain a sworn statement made by anyone with person knowledge of the facts indicating the method used to determine damages on any of the causes of action.

Accordingly, it is,

ORDERED, that the motion of Defendant Crafa to dismiss the complaint is granted; and it is further,

ORDERED, that Plaintiffs' motion for leave to serve an amended complaint is denied with leave to renew upon proper papers within thirty (30) days of the date of this order. In the event that Plaintiff fails to make the application to renew as provided for herein with the time established by this Order, this action is dismissed.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY _____________________________

January 23, 2006 Hon. LEONARD B. AUSTIN, [*9]J.S.C. Footnotes

Footnote 1:By order dated November 9, 2004, this Court dismissed the action against the Defendant William Wallach. By Stipulation of Discontinuance dated September 30, 2005, the action was discontinued against the Defendant Larry Wallach. H & W has not appeared in this action.