Sansum v Fioratti

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Sansum v Fioratti 2006 NY Slip Op 30394(U) November 22, 2006 Supreme Court, New York County Docket Number: Judge: Barbara R. Kapnick Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. ANNED ON 1112712006 [* 1 ] /I BARBARA R. KAPNICK ORK - NEW YORK COUNTY SUPREME COURT OF THE STATE OF N E W PRESENT: PART I>-- 0604989/200 1 SANS IJM, JAMES MONI ROSE VS FIORA I TI, HELEN CONS I ANTINO MOTION DATE 1 SEQ 5 AM END 005 MOTION SEQ. NO. MOTION CAL. NO. The following papers, nurnberea .I TO were r m u UII this motion to/for PAPERS NUMBERED Notice of Motion/ Order to Show Answering Affidavits - Exhibits I ause - Affidavits - Exhibits ... Replying Affidavits Cross-Motion: Dated: Check one: FINAL DISPOSITION Check if appropriate: DO NOT POST -. - _. . - _ . - - 1 REFERENCE 7 -U/Y I I 1 [* 2 ] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 12 X _ _ - - - _ _ - - - _ _ _ - - - _ I - - - - - - - - - - - - - - - - - - - - - JAMES MONTROSE SANSUM, DECISION/ORDER Index No. 604989/01 Motion Seq. No. 005 Plaintiff, -againstHELEN COSTANTINO FIORATTI and ARIANNA FIORATTI LORETO, Defendants - and - L ANTIQUAIRE and THE CONNOISSEUR, INC., Nominal and Additional Counterclaim-Defendants. In this action, plaintiff James Montrose Sansum seeks damages against defendant Helen Costantino Fioratti for breach of fiduciary d u t y (first cause of action) and the dissolution of L Antiquaire Antiquaire , the Company or the and the Connoisseur, Inc. ( L Corporation ) (second cause of action) . T h e origina Comp1aint demands judgment as f o l : (1) on t h e first cause of acti on, an or(de I Fioratti to acco nt to plaintiff for all mon ies she from her wrongful diversions of Company assets and revenues and all items of the Company s inventory Fioratti has removed to her houses; (ii) imposing a constructive trust on such monies and items; and (iii) awarding plaintiff judgment in the amount of a n y portion of such monies and items found to be due to plaintiff by reason of h i s shareholding in the Company; and [* 3 ] (2) on the second cause of action, a final order dissolving the Company and appointing a receiver of its property and effects. The defendants have asserted counterclaims against the plaintiff, inter alia, for an accounting, to impose a constructive trust on certain assets and property in the plaintiff's possession, custody or control, and for damages arising out of fraud and breach of contract. Plaintiff now moves for an order: (i) granting it leave to serve a Verified Amended Complaint, and (ii) disqualifying the firm of Morelli & Gold, L . L . P . from continued representation of the defendants herein.' Defendants oppose the motion and cross-move for an order awarding sanctions against plaintiff and his counsel, Thomas D. Shanahan and Shanahan and directing & Associates, for making a frivolous motion the plaintiff and his counsel to reimburse the defendants for the costs and expenses, including attorneys' fces, incurred by the defendants in connection with this matter. 1 This motion was brought soon after plaintiff retained his t h i r d attorney in the c o u r s e of this protracted litigation. 2 [* 4 ] Plaintiff s proposed Amended Complaint seeks to cure certain defects in the original Complaint, which failed to name or serve L Antiquaire as a defendant, even though it sought its dissolution., The proposed Amended Complaint a l s o pleads plaintiff s claims for breach of fiduciary duty and an accounting which were alleged in the original complaint as a single cause of action, as separate causes of action. In addition, the proposed Amended Complaint seeks to assert additional causes of action against the defendants and to name Morelli & Gold, L.L.P. as an additional party defendant based upon the firm s purported multiple representation of the plaintiff and the defendants in the execution of L Antiquaire s Stockholders Agreements ( the Agreements ) . Specifically, plaintiff s proposed Amended Complaint contains claims against defendants L Antiquaire, Fioratti and Loreto f o r breach of contract (first cause of action), breach of fiduciary d u t y (second cause of action), an accounting (third cause of action), - 2 L Antiquaire has already appeared herein as a nominal and additional counterclaim defendant . 3 Plaintif ¬ contends that he believed that Carl Morelli, a partner of the firm, \\wasacting not only on behalf of the corporation, but also on behalf of Helen and Arianna Fioratti, and therefore on my behalf as a corporate stockholder and officer . I 3 [* 5 ] (fourth cause of breach of duty of good faith and fair dealing action), unjust enrichment (fifth cause of action) and for a declaratory judgment that the items of artwork, books and other possessions currently in his possession but which defendants claim are owned by L'Antiquaire are the sole legal property of plaintiff. (sixth c a u s e of action). The proposed Amended Complaint also seeks to assert claims against all the defendant-s, as well as the law firm, f o r fraud and intentional misrepresentation (seventh cause of action) arid a declaratory judgment declaring certain provisions of the Agreements to be invalid, unconscionable and unenforceable as a mattes of law on the grounds that: (1) Morelli Gold, & intentionally and L.L.P. wrongfully induced plaintiff to waive his right to counsel; (ii) plaintiff did Agreements; not understand the substantive contents of the (iii) plaintiff was not provided with competent and unbiased legal advice by Morclli & Gold, L . L . P . p r i o r to executing the Agreements; and (iv) t h e conduct of t h e firm and the collective defendants was p a r t of an intentional pattern and scheme intended to minimize the value of plaintiff's minority interest in the Corporation and unduly and oppressively limit his transfer of that interest and professional growth (eighth cause of action). Finally, the proposed Amended Complaint seeks to assert a claim against defendants L' Antiquaire, 4 Fioratti and Loreto for a [* 6 ] declaratory judgment declaring that an inventory of specific items (annexed as Exhibit "C" to the Amended Complaint) are the property the personal property of defendants Fioratti and Loreto) for purposes of valuation, an accounting and determining the and assets of L'Antiquaire (and not financial worth of plaintiff's minority interest in the Corporation (ninth cause of action) and an order dissolving the Corporation and appointing a receiver of its property and effects (tenth cause of action). "Leave to amend a pleading should be 'freely given' (CPLR 3025[b]) 'as a matter of discretion in the absence of prejudice or surprise' (citations omitted), although to conserve judicial resources, examination of the underlying merit of the proposed (citation omitted) . " Zaid Theatre Corp. v. amendment is mandated Sona R e a l t v Co., 18 A.D.3d 352, 354-355 (1st Dep't 2005). Leave to amend a complaint, including leave to name an additional party defendant, "should be denied where the claim is palpably insufficient". Manhattan Real Estate Equities Group LLC v. Pine E q u i . t v NY, Inc., 27 A.D.3d 323 (1st Dep't 2006). The second, t h i r d , fourth, sixth, ninth and tenth causes of action of the proposed Amended Complaint at least set f o r t h viable causes of action. Accordingly, plaintiff is granted leave to assert these proposed causes of action. 5 [* 7 ] Defendants, however, argue that plaintiff should not be granted leave to interpose the first cause of action which alleges that defendants breached the Agreements by refusing to compensate plaintiff for his six-percent ownership interest in the Company because the Agreements do not require them to buy out his interest in the Company when, as occurred here, the plaintiff voluntarily terminated his employment. Plaintiff has not refuted this argument and/or submitted any evidentiary proof in support of this claim. Therefore, that portion of the motion seeking to interpose the proposed first cause of action is denied. Defendants next argue that plaintiff should not be granted leave to interpose the proposed fifth cause of a c t i o n for unjust enrichment which alleges that plaintiff h a s incurred substantial liability for back tax obligations, including interest and penalties, as a result of defendants' alleged conduct, on the ground that plaintiff has not set forth any factual or legal basis f o r this claim. The proposed Amended defendants "specifically Complaint, minimized 6 however, estate does allege that tax and other tax [* 8 ] consequences to evade payment to State and local governments rendering the minority interest of Sansum v o i d of minority value. 4 Thus, this Court finds that the fifth cause of action is not patently insufficient on its f a c e and plaintiff may assert that claim herein. Defendants strenuously oppose those portions of the motion seeking to assert claims a g a i n s t the law f i r m on the grounds that said claims, which a r i s e out of the execution of the Agreements not later than June 1998, are barred by the applicable three-year Statute of Limitations back' (see, CPLR 5 214 [6]), and do not 'relate to the claims asserted against defendants in the original Complaint, which makes no reference to the Agreements. Defendants further argue that plaintiff had no b a s i s to believe that Mr. Morelli or his firm was personally representing him since there was never any retainer agreement between plaintiff and the firm, or even a n y communications between them, and further since 4 In f a c t , it appears that during t h e pendency of this action, defendants Fioratti and L'Antiquaire pleaded guilty to both felony and misdemeanor charges of tax evasion and preparing and filing false instruments, including tax returns, with t h e State of New Y o r k . In addition, plaintiff himself pleaded guilty to not properly reporting income on his t a x returns, falsifying business records and petty larceny for two pieces of artwork which plaintiff contends are not a t issue in this lawsuit. 7 [* 9 ] Section 8 of each of the Agreements specifically provides as follows: SECTION 8 Attorney s Representation The parties all acknowledge that L ANTIQUAIRE s counsel, MORELLI & GOLD, L L P , prepared this Agreement on behalf of and in the course of his representation of L ANTIQUAIRE, and that : THE PARTIES HAVE BEEN ADVISED BY MORELLI & GOLD, L L P THAT A CONFLICT EXISTS AMONG THEIR INDIVIDUAL INTERESTS; AND THE PARTIES HAVE BEEN ADVISED BY MORELLI & GOLD, LLP TO SEEK THE ADVICE OF INDEPENDENT COUNSEL; AND THE PARTIES HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT COUNSEL; AND THE PARTIES HAVE RECEIVED NO REPRESENTATIONS FROM MOKELLI 6: GOLD, LLP ABOUT THE TAX CONSEQUENCES OF THIS AGREEMENT; AND THE PARTIES HAVE BEEN ADVISED BY MORELLI & GOLD, L L P THAT THIS AGREEMENT MAY HAVE TAX CONSEQUENCES; AND THE PARTIES HAVE BEEN ADVISED BY MORELLI & GOLD, LLP TO SEEK THE ADVICE OF INDEPENDENT TAX COUNSEL; AND THE PARTIES HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT TAX COUNSEL. Plaintiff now claims that he did not read the Agreements prior to signing them, and that he did not fully understand the Agreements when he ultimately read them. However, it is well settled that [a] party who executes a contract is presumed to know its contents and to assent to them (citation omitted). Holcomb v. TWR Express, Inc., 11 A.D.3d 513, 514 (2nd Dep t 2004). Moreover, in the instant case, there can be no dispute that plaintiff, a Harvard graduate, with a Masters degree in art history 8 [* 10 ] from the Cooper-Hewitt Museum/Parsons School of Design, was literate in the English language and understood these terms. Thus, plaintiff must certainly be bound by the Agreements, including the above-quoted provision which was typed in capital letters, notwithstanding his claim that he did See, Agreements and was unaware of their terms. not read the Gillman v. Chase Manhattan Bank, N.A., 73 N.Y.2d 1 (1988). Therefore, plaintiff s proposed seventh and eighth causes of action against the defendants and Morelli & Gold, L.L.P. clearly lack merit and may not be asserted herein. Finally, plaintiff moves to disqualify Morelli & Gold, L . L . P from representing the defendants in this action. It is well settled that a party s entitlement to be represented in ongoing litigation by counsel of its choosing \\isa valued right and ariy restrictions must be carefully scrutinized . S & S Hotel Ventures Limited Partnership v. 777 S . H . C o r p . , 69 N.Y.2d 437, 443 (1987). The Court of Appeals has observed that [d]isqualification may be required only when it is likely that the testirnony to be given by the witness is necessary (citation omitted). Testimony may be relevant and even highly useful but still not strictly necessary. A finding of necessity takes into account such factors as the 9 [* 11 ] significance of the matters, weight of the testimony, and availability of other evidence (citations omitted). S & S Hotel Ventures Limited Partnership v. 777 S.H. Corp., s u p r a at 446. See a l s o , Talvv v. American Red Cross in Greater New York, 205 A.D.2d 143, 152 (1st Dep't 1994); aff'd 87 N.Y.2d 826 (1995). Plaintiff contends that Morelli & Gold, L.L.P. must be disqualified in t h i s case because the firm was involved in the drafting of the Agreements and has an interest in seeing that t h e y are upheld. Plaintiff further asserts that he intends to call Mr. Morelli as a witness for numerous purposes, including how the Shareholder Agreements came 'to be drafted with the provisions they include which plaintiff claims are unfavorable to him, and to subpoena communications between Mr. Morelli and the defendants pertaining to the Agreements and previous tax advice provided to the defendants. However, Mr. Morelli's partner, Richard L. Gold, Esq., t h e attorney at the firm who is handling this litigation, denies that the firm provided L'Antiquaire's In any tax advice to defendants concerning sales, income or other tax obligations. addition, plaintiff has not made a showing that any testimony to be offered by Mr. Morelli is "necessary" and/or would be prejudicial t o defendants (see,Plotkin 10 v. Interco Development [* 12 ] Corp., 137 A.D.2d 671 [2nd D e p t 1988]), or that any knowledge he possesses cannot be revealed through other evidence. Accordingly, that portion of the motion seeking an o r d e r of disqualification is denied. Defendants cross-motion for sanctions is also denied in the discretion of this C o u r t . L.L.P. However, the law firm of Morelli & Gold, is awarded $500.00 for costs it incurred in opposing that portion of the motion seeking to name it as a defendant to this action, which shall be paid one half by plaintiff a n d one h a l f by plaintiff s counsel w i t h i n 20 days of entry of this order. Plaintiff may serve and file an Amended Complaint in accordance with this Decision/Ordcr within 30 days of entry of t h i s order. Defendants shall serve an Answer to the Amended Complaint within 20 d a y s of said service. A status conference shall be held in IA Part 12, Street, Room 341 on February 7, 2007 at 9 : 3 0 a.m. ,,P,i, %. 60 <3 c%+ftGp, T h i s constitutes the decision and order of ,$hi/s C o u r t . Date : Nvme:, oebr& 2 006 Barba-ra R. Kapnick - J.S.C. ? %

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