Black Car & Livery Ins., Inc. v H & W Brokerage, Inc.
Annotate this CaseDecided on March 8, 2007
Supreme Court, Nassau County
Black Car and Livery Insurance, Inc., JUDITH G. BIEDERMANN AND YONESH BIEDERMANN, Plaintiffs,
against
H & W Brokerage, Inc. LARRY WALLACH, WILLIAM WALLACH, CHARLIE CRAFA, , Defendants.
8615-04
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.
Defendant Charles Crafa ("Crafa") moves to dismiss the amended complaint. Plaintiffs cross-move to enter a default judgment against Crafa. Plaintiffs also seek to amended the caption to properly name the Corporate Plaintiff as H & W Black Car, Taxi [*2]& Livery Insurance Brokerage, Inc. a/s/t Black Car & Livery Insurance Brokerage, Inc.
BACKGROUND
FACTUAL
Black Car and Livery Insurance Inc. ("Black Car") was an insurance broker in the business of obtaining automobile insurance for medallion taxis, livery service cars, "black cars" and limousines. Judith Biedermann and Yonesh Biedermann (collectively "Biederman") were the principals of Black Car.
H & W Brokerage, Inc. ("H & W") was also an insurance broker in the same or a similar business to Black Car.
By agreement dated February 14, 2000, Black Car purchased the right to earn the commissions on the renewal of approximately 1,200 insurance policies for which H & W was the broker. All of these policies were renewable in February 2000.
Pursuant to the terms of the agreement, Black Car was to receive the commissions earned on February 2000 renewal of the former H & W policies. Black Car did not assume, and was not responsible for, payment of premiums on any policies H & W had obtained for its customers in prior years. All payments received by Black Car were to be used to pay premiums on the policies being renewed in February 2000.
The customers for whom H & W and Black Car obtained insurance did not make payment directly to the insurance carriers. The customers would pay the premiums to the broker. The broker would then remit payment to the carrier.
Crafa was H & W's managing agent. As managing agent, Crafa received the premium payments from H & W's customers and remit the premiums to the insurance companies through whom H & W had obtained coverage.
Black Car retained Crafa as its managing agent to oversee the renewal of the H & W policies. As Black Car's managing agent, Crafa received the premiums and remitted payment to the insurance companies. When remitting payment, Crafa would advise the insurance carrier of the amount of each payment to be applied to each policy.
Plaintiffs allege that Crafa received money in payment of policies being renewed in February 2000 and directed the payments to be applied to premiums due from H & W. As a result, Black Car and Biederman did not earn the commissions on the renewal of these policies. This resulted in Biederman not having sufficient funds to pay their obligations in connection with the February 14, 2000 agreement. When Biederman and Black Car defaulted, H & W entered a judgment against Biederman on a confession of judgment that was given by Biederman as security for payment of their obligations on the February 14, 2000 agreement.
Crafa resigned as Black Car's general manager on May 25, 2000. When Black Car and Biedermann's accountants reviewed Crafa's records, they discovered that Crafa had been using funds received to pay renewal premiums to pay premiums owed by H & W for the prior year. Black Car and Biedermann allege Crafa provided them with fraudulent records to cover up his use of Black Car funds to pay H & W expenses.
B.PROCEDURAL
By order dated November 9, 2004, this Court dismissed the action against [*3]William Wallach, The action was voluntarily discontinued against Larry Wallach. H & W has not appeared.
By order dated June 27, 2006, this Court granted Plaintiff's motion for leave to serve an amended complaint alleging a cause of action for fraud against Crafa. The order indicated the amended complaint would be deemed served upon service of a copy of the order with notice of entry.
C.CURRENT MOTIONS
1.Crafa's motion to dismiss
Crafa moves to dismiss the amended complaint. This motion addresses an unusual issue nearly 3 years into this litigation. Who is the proper Plaintiff?
Crafa asserts Black Car lack standing to bring this action since it is not and has never been a corporation organized and existing pursuant to the laws of the State of New York.
Black Car & Livery Insurance Brokerage, Inc. was a incorporated in New York in September 1997. It was dissolved by proclamation on December 29, 2004 for failure to pay its franchise taxes.
H & W Black Car, Taxi & Livery Insurance Brokerage Inc. was also incorporated in New York In September 1997. It was dissolved by proclamation on December 29, 2004 for failure to pay its franchise taxes.
Crafa further argues that if either Black Car & Livery Insurance Brokerage, Inc. or H & W black Car, Taxi & Livery Insurance Brokerage, Inc. are the proper Plaintiff in this action, their dissolution deprives them of the right to maintain this action.
The contract by which Black Car acquired the right to earn the premiums on the renewal of the H & W policies was between Black Car and Livery Insurance, Inc., a New York Corporation, as Purchaser and H & W Brokerage, Inc., a New York corporation as Seller. The agreement also states that Yonesh Biederman and Judith Biederman are the principals of Black Car.
Crafa's W-2 for the year 2000 indicates he was employed by H & W Black Car, Taxi & Livery Ins.
Crafa asserts that since Black Car and Livery Insurance, Inc., the named Plaintiff has never had a corporate existence, it cannot maintain this action.
2.Plaintiff's Cross-motion
Plaintiff cross-move for leave to enter a default judgment against Crafa since he has not served an answer to the amended complaint. Although not stated as a demand for relief in the notice of motion, in the motion papers, Plaintiffs seek leave to amend the caption of the action to name H & W Black Car, Taxi & Livery Insurance Brokerage, Inc. a/s/t Black Car & Livery Insurance Brokerage, Inc. as the Plaintiff.
DISCUSSION
D.CRAFA'S MOTION TO DISMISS
Crafa does not indicate the specific section of CPLR 3211 pursuant to which he is moving. In this case, Crafa moves to dismiss on the grounds that Black Car did not exist at the time the transaction which gives rise to this litigation occurred. An action brought on behalf of a corporation that did not exist at the time when the conduct complained of occurred fails to state a cause of action. Rainbow Hospitality [*4]Management, Inc. v. Mesch Engineering, P.C., 270 AD2d 906 (4th Dept. 2000). Since this is the basis of Crafa's motion, the motion will be treated as on made pursuant to CPLR 3211(a)(7). Id.
Black Car never existed. Plaintiff concedes that Black Car, as named in the caption is not the proper Plaintiff. Therefore, the action brought on its behalf must be dismissed unless Black Car has either de jure, de facto or corporation by estoppel status.
Black Car does not have de jure status.
A corporation's existence begins when its certificate of incorporation is filed by the Department of State. Business Corporation Law §403. A corporation that does not exist cannot enter into a contract. See, Kiamesha Development Corp. v. Guild Properties, Inc., 4 NY2d 378 (1958); and 183 Holding Corp. v. 183 Lorraine Street Assocs., 251 AD2d 386 (2nd Dept. 1998).
A corporation that has been incorporated by in compliance with the statutory requirements has de jure status. 14 NY Jur2d Business Relationships
§133. A corporation that has been dissolved has de jure status for the purposes of winding up its affairs. See, County Tweeds, Inc. v. Clyde Fashions, Limited, 286 App.Div. 491 (1st Dept. 1995). A corporation that has been dissolved by proclamation also has de jure status to sue after dissolution regarding claims arising prior to dissolution involving the winding up of corporate business. Race Safe Systems, Inc. v. Indy Racing League, 251 F. Supp. 2d 1106 (E.D.NY, 2003); and School of Music of the Brooklyn Free Musical Society v. Moritt, 145 NYS2d 645 (Sup.Ct., Kings Co., 1955). Since Black Car is not and never was a de jure corporation, it may not maintain this action on this basis.
Black Car also has no right to maintain this action as a de facto corporation. To be a de facto corporation, the corporation must establish it made a colorable attempt to comply with the statutes governing incorporation and that it has used the corporate name in transacting business. Stevens v. Episcopal Church History Co., 140 App.Div. 570 (1st Dept. 1910). Black Car does not have de facto status because it never attempted to comply with the statutory requirements regarding incorporation. See, Business Corporation Law Article 4.
"If neither of the parties [to a suit] is aware that corporate status has not been achieved, then corporation by estoppel may apply (Fletcher, Cyclopedia of Corporations §3890 [2006])." Boslow Family Limited Partnership v. Glickenhaus & Co., 7 NY3d 664, 668 (2006). See also, Timberline Equipment Co, Inc. v. Davenport, 267 Or. 64 (1973). In this case, Biederman, who are alleged to be the principals in Black Car, must have been aware that Black Car was not incorporated. They knew or should have known that Crafa was being paid by H & W Black Car, Taxi and Livery Insurance Brokerage, Inc.
The doctrine of corporation by estoppel has been applied only in cases where a Defendant is seeking to avoid liability on a contract from which the Defendant benefitted. Id. In this case, the only cause of action viable and pending is a cause of action for fraud. See, Black Car and Livery Ins., Inc. v. H & W Brokerage, Inc., 12 Misc 3d 1175(A) (Sup.Ct. Nassau Co. 2006) ("Black Car 2") and Black Car and Livery Ins., Inc. v. H & W Brokerage, Inc.,10 Misc 3d 1075(A), (Sup.Ct. Nassau Co. 2006) ("Black Car 1"). [*5]
Therefore, to the extent recovery is sought on behalf of Black Car, the action must be dismissed.
E.Plaintiff'S CROSS-MOTION
1.Default Judgment
Plaintiff cross-moves for leave to enter a default judgment on the amended complaint. CPLR 3215 permits a party to obtain a default judgment against a Defendant who defaults in appearance. An application for leave to enter a default judgment must be supported by proof of service of the summons and complaint, an affidavit made by a person with actual knowledge of the facts surrounding the claim and proof of the default. CPLR 3215(f). See, Siegel, New York Practice 4th §295. The party seeking a default judgment must establish the existence of a prima facie cause of action against the defaulting party. Joosten v. Gale, 129 AD2d 531 (1st Dept. 1987).
Plaintiffs motion for leave to enter a default judgment must be denied because Crafa is not in default. By order dated June 27, 2006, this Court granted Plaintiffs leave to serve an amended complaint alleging a cause of action for fraud. See, Black Car 2, supra . The order indicated that the proposed amended complaint would be deemed served upon service of a copy of the order with notice of entry. The order was entered on June 30, 2006. The order with notice of entry was served on July 25, 2006.
It is the practice of this Court to send copies of its decisions to counsel for all parties who have appeared in an action. Therefore, a copy of this Court's June 27, 2006 order was mailed to John Servider, Esq., ("Servider") counsel for Defendant Charles Crafa. Servider did not wait until the service of this Court's June 27, 2006 order to serve an answer. On or about July 5,2006, Servider served an answer to the amended complaint. See, Exhibit B to Defendant's motion to dismiss. The court will not and cannot hold Crafa in default because he served an answer in advance of the date upon which its service was required.
Additionally, even if Crafa has not served an answer, the motion would have to be denied. A motion for leave to enter a default judgment must be supported by an affidavit of merit made by a party to the action establishing the existence of a prima facie action. Henriquez v. Purins, 245 AD2d 337 (2nd Dept. 1997). The fraud claim is premised upon allegations that Crafa false and misleading documents and statements which covered up his use of Black Car funds to pay H & W debts. See, Black Car 2, supra . The affidavit of Judith Biederman submitted in support of the motion is devoid of any factual allegations regarding the alleged fraud.
A verified complain may be used instead of an affidavit. CPLR 103(u). However, the amended complaint is not verified. See, CPLR 3020(a).
Finally, service of a motion to dismiss extends the time to answer until ten days after the service of the order deciding the motion with notice of entry. CPLR 3211(f). The motion to dismiss has not been decided. Therefore, Defendants time to answer has not yet run.
Since Defendant has served an answer to the amended complaint and since the papers submitted by Plaintiffs in support of their motion to fail to establish a prima facie case, the motion for leave to enter a default judgment against Crafa must be denied.
2.Motion to Amend/Correct
Plaintiff requests leave to amend the caption to name as Plaintiff H & W Black Car, [*6]Taxi & Livery Insurance Brokerage Inc. a/s/t Black Car & Livery Insurance Brokerage Inc.
Any suggestion that this relief was granted in this Court's decision in Black Car 2 is meritless.[FN1] The only relief requested by Plaintiff in Black Car 2 was leave to serve an amended complaint. Plaintiff did not request leave to correct or amend the caption. The only relief granted by this Court was leave to serve an amended complaint alleging a cause of action for fraud against Crafa. The proposed amended complaint annexed to the motion papers reflects the name of the Plaintiff as Black Car and Livery Insurance, Inc. The first time any mention was made of an entity known as H & W Black Car, Taxi * Livery Insurance Brokerage Inc. in connection with this action is in this motion.
Plaintiffs did not specifically request leave to amend the caption to reflect the proper Plaintiff is H & W Black Car, Taxi & Livery Insurance Brokerage Inc.,
CPLR 2215 requires the cross-movant to indicate the relief requested in the Notice of Cross-motion. See, Siegel, New York Practice 4th §249. However, this defect will be overlooked when the party's intention to seek such relief is clear from a reading of the papers. See, Fox Wander West Neighborhood Assoc. Inc. v. Luther Forest Community Assoc. Inc., 178 AD2d 871 (3rd Dept. 1991); and Guggenheim v. Guggenheim, 109 AD2d 1012 (3rd Dept. 1985).
Plaintiff clearly requested leave to correct the caption in the affidavit and affirmation submitted in support of the cross-motion.
Plaintiff asserts the Book Renewal Rights Purchase Agreement dated February 14, 2000 ("Agreement") incorrectly named Black Car and Livery Insurance, Inc. as the purchaser. The purchaser was actually Black Car & Livery Insurance Brokerage, Inc. Black Car & Livery Insurance Brokerage, Inc. filed a certificate of amendment changing the corporate name to H & W Black Car, Taxi & Livery Insurance Brokerage Inc. See, Business Corporation Law Article 8.
CPL5 305(c) which permits the amendment of a summons is inapplicable to this motion since it permits the summons to be amended "...if a substantial right of a party against whom the summons issued is not prejudiced." In this case, Plaintiff seeks to amend the summons to correct the name of the Plaintiff, not the Defendant.
The misnaming of the Plaintiff is a non-prejudicial mistake which it should be permitted to correct. See, Cutting Edge, Inc. v. Santora, 4 AD3d 867 (4th Dept. 2004); and Covino v. Alside Aluminum Supply Co., 42 AD2d 77 (4th Dept. 1973); and CPLR 2001. Such an application is one to correct the error (See, CPLR 2001) and for leave to serve an amended complaint (See, CPLR 3025(b). Frankart Furniture Staten Island, Inc. v. Forest Mall Assocs., 159 AD2d 322 (1st Dept. 1990).
While Plaintiff's explanation relating to the misnaming of Plaintiff is certainly plausible, the papers submitted in support of the cross-motion are inadequate to support the granting Plaintiff leave to amend the caption and the complaint to correct the error..
A motion for leave to serve an amended pleading must be supported by an affidavit of merit made by a person with personal knowledge of the facts involved in the proposed amendment and/or evidentiary proof supporting the proposed amendment. Zaid Theatre Corp. v. Sona Realty Co., 18 AD3d 352 (1st Dept. 2005); and Morgan v. Prospect Park Assocs. Holdings, [*7]L.P., 251 AD2d 306 (2nd Dept. 1998). The affidavit of merit and evidentiary proof must be as would be submitted in connection with a motion for summary judgment. Abbott v. Herzfeld & Rubin, 202 AD2d 351 (1st Dept. 1994); and Hickey v. National League of Professional Baseball Clubs, 169 AD2d 685 (1st Dept. 1991). The motion must also be supported a copy of the proposed amended pleading. Ferdinand v. Crecca & Blair, 5 AD3d 538 (2nd Dept. 2004).
The "affidavit of merits" of Judith Biederman does contain sufficient factual information to support the amendment. Biederman does not aver that she was a principal of Black Car & Livery Insurance Brokerage, Inc. She does not allege the Agreement incorrectly named Black Car & Livery Insurance Inc. as the purchaser. Her affidavit does not state that the proper name of the purchaser was Black Car & Livery Insurance Brokerage, Inc. The parties fail to provide appropriate documentary evidence, to wit: a copy of the Certificate of Amendment filed with the Department of State by Black Car & Livery Insurance Brokerage, Inc. by which it changed its name to H & W Black Car, Taxi & Livery Insurance Brokerage, Inc.
The proposed amended complaint fails to allege any facts regarding the misnaming of the purchaser in the Agreement or the Biederman's relationship to the proper Plaintiff. The proposed amendment fails to make any allegations about Black Car & Livery Insurance Brokerage, Inc. changing its name to H & W Black Car, Taxi & Livery Insurance Brokerage, Inc.
To the extent the motion is supported by the affirmation of Plaintiff's attorney, such allegations are inadequate to support the proposed amendment. Mohan v. Hollander, 303 AD2d 473 (2nd Dept. 2003).
The proposed amendment also incorrectly names the Plaintiff. H & W Black Car, Taxi & Livery Insurance Brokerage, Inc. is not the successor to Black Car & Livery Insurance Brokerage , Inc. They are actually the same corporation.
The only difference is the corporate name which was allegedly changed.
Accordingly, it is,
ORDERED, that Defendant's motion to dismiss the complaint is granted; and it is further
ORDERED, that Plaintiff's motion for leave to enter a default judgment is denied: and it is further
ORDERED, that Plaintiff's application to correct the caption to name H & W Black Car, Taxi & Limousine Insurance Brokerage, Inc. as the Plaintiff is denied with leave to renew upon proper papers within twenty days of the date of this order.
This constitutes the decision and order of this Court.
Dated: Mineola, NY_____________________________
March 8, 2007Hon. LEONARD B. AUSTIN, J.S.C.
Footnotes
Footnote 1:. The Court has reviewed the papers submitted in connection with Black Car 1 and Black Car 2 in deciding this motion.
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