Sealy v Clifton LLC

[*1] Sealy v Clifton LLC 2008 NY Slip Op 52165(U) [21 Misc 3d 1124(A)] Decided on October 20, 2008 Supreme Court, Kings County Hinds-Radix, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 October 20, 2008
Supreme Court, Kings County

Daryl Sealy, Plaintiff,

against

Clifton LLC, and GLORIA ALSTON as ADMINISTRATRIX OF THE ESTATE OF CHARLIE ALSTON a/k/a CHARLES ALSTON, Defendants.



13785/08

Sylvia O. Hinds-Radix, J.

Upon the foregoing papers, defendants move for an order, (1) pursuant to CPLR 3211 (a) (3) dismissing the complaint on the grounds that the party asserting the cause of action lacks legal capacity to sue; (2) pursuant to CPLR 3211 (a) (7) dismissing the complaint on the grounds that the complaint fails to state a cause of action and (3) pursuant to CPLR 6501 and 6514 cancelling the notice of pendency filed by plaintiff. Plaintiff Daryl Sealy ("plaintiff") cross-moves for an order, allowing him to amend his complaint and to serve a supplemental summons. In a separate order to show cause, defendants move for an order advancing the return date of defendants' motion scheduled for July 31, 2008.

Factual Background

Plaintiff commenced an action against defendants seeking a judgment of partition of the property known as Units A and B, Block 1903, Lots 1001 and 1002 located at 446 Myrtle Avenue in Brooklyn, New York. In his complaint, plaintiff alleges that defendant Clifton LLC is a Limited Liability Company ("Clifton LLC") duly organized under the laws of the State of New York on or about October 14, 1997, with its principal place of business at 446 Myrtle Avenue, Brooklyn, New York. Plaintiff and Charlie Alston were the only two members of Clifton LLC, both owning a 50% interest in the company pursuant to an operating agreement executed by the parties. Charlie Alston passed away on or about December 10, 2006 and Gloria Alston was appointed as Administratrix of his Estate. Plaintiff seeks a judgment of partition of the property located at 446 Myrtle Avenue in Brooklyn, and if partition cannot be had without prejudice, he requests that the property be sold, and the proceeds be divided pursuant to the ownership interest [*2]of the parties. Plaintiff alleges that he has a 50% ownership interest of the net proceeds by virtue of his 50% interest in Clifton LLC. Plaintiff also seeks the appointment of a referee for the sale of the property. On May, 2, 2008, plaintiff filed a notice of pendency against the subject property.

Defendants brought the instant motion seeking, among other things, to dismiss the plaintiff's complaint and for an order cancelling the notice of pendency filed by plaintiff. In support of the relief sought in their motion, defendants contend that the property cannot be partitioned because it is owned by a corporation and will continue to be owned by the corporation. The court notes that defendants have failed to produce a copy of articles of incorporation or by-laws evidencing that Clifton LLC was incorporated. Defendants also assert that any judgment rendered herein, would not affect title to the property, and as such, the instant matter is not subject to a notice of pendency. Further, defendants assert that plaintiff lacks the capacity to sue, and fails to state a cause of action in partition.

Plaintiff opposes the defendants' motion and cross-moves to amend his complaint to add causes of action to judicially wind up the affairs of Clifton LLC and to have the court appoint a receiver or liquidating trustee for that purpose. In his affidavit in support of the cross-motion, plaintiff points out that the "defendant herein is not a corporation but a LLC." Plaintiff also contends that pursuant to an operating agreement, he and Charlie Alston were 50% owners and equal partners of the assets of Clifton LLC which gives him a one-half interest in the property. He adds that they both contributed $10,000 to Clifton LLC. Plaintiff further contends that the purpose of the LLC was to purchase investment property so as to derive income. In addition, plaintiff asserts that on August 2, 1999, Clifton LLC purchased two commercial condominium units, known as Unit A and Unit B located at 446 Myrtle Avenue in Brooklyn, and are still owned by Clifton LLC. According to plaintiff, Clifton LLC has been dissolved pursuant to an operating agreement entered into between the parties. Annexed to plaintiff's cross-motion, is a copy of the operating agreement, which provides in section 14.3, that the company shall be dissolved:

"Upon the death, retirement, resignation, expulsion or bankruptcy

of a Member or the occurrences of any other event which terminates

the continued membership of a Member in the Company, unless the

remaining Members, within ninety (90) days after the event or

occurrence, unanimously elected to continue the business of the

Company pursuant to the terms of this Agreement."

Plaintiff contends that he has not and does not elect to continue the business of the company.

He alleges that he was frozen out of the business in late 2000; that Charlie Alston cut him out of the business although he had a relationship with him; that over the years he demanded from Charlie Alston an accounting of and distribution of Clifton LLC funds but the offer was refused; and that he is not aware of and has not received any rental income or other distribution from the company. Plaintiff also alleges that he has been sued by the administrator of the Estate of Charlie Alston for return of monies, and therefore, judicial intervention is necessary to wind up the affairs of Clifton LLC. Plaintiff further maintains that his 50% ownership interest in Clifton LLC gives him the right to partition. He requests that the court maintain the lis pendens to [*3]ensure that the "property is not sold out from under him."

Plaintiff's Motion to Amend the Complaint

It is well settled that leave to amend a pleading should be freely granted "unless the amendment sought is palpably improper or insufficient as a matter of law or unless prejudice or surprise directly results from delay in seeking such amendment" (Barnes v County of Nassau, 108 AD2d 50, 52; see also DeGradi v Coney Island Medical Group, P.C., 172 AD2d 582).

In opposition to plaintiff's cross-motion to amend the complaint, defendants argue that the cross-motion seeking amendment is an effort by plaintiff to avoid pitfalls of the first complaint upon which the motion to dismiss and to cancel the notice of pendency is being made. Defendants further argue that the complaint is defective and the defect cannot be cured with the subsequent filing of an amended complaint. Defendants assert that the notice of pendency cannot stand based upon plaintiff's purported amended complaint. To support this argument, defendants cite to 5303 Realty Corp. v 0 & Y Equity Corp. (64 NY2d 313, 320 ) where plaintiff attempted to cure a defective complaint with an amended complaint in order to sustain a notice of pendency. This court notes that defendant's argument wholly misconstrues the holding of 5303 Realty Corp. Although it is true that a subsequent amended complaint cannot be used to justify an earlier notice of pendency, "[t]his derives from the ancient concern that would-be purchasers obtain adequate notice of the risk to the property's title" (5303 Realty Corp., 64 NY2d at 320-321). 5303 Realty Corp. is distinguishable from the instant case since the actual subject of the conveyance was stock and not a transfer of title to real property (Id. 324). Thus, the Court of Appeals, in 5303 Realty Corp. held that the complaint therein, on its face, did not directly affect title to or the possession of land (Id. 321). Defendants further argue that the amended complaint is an action for damages for being removed from the business, and as such, it is barred under the three year statute of limitations pursuant to CPLR 214(4). In addition, defendants argue that lacheswouldbar plaintiff from exercising any equitable "right" as alleged. Based on a review of the motion papers, defendants have failed to establish that any prejudice or surprise would result from granting the proposed amendment. The mere fact that the proposed amendment may defeat the defendants' motion to dismiss the complaint is an insufficient basis for denying leave to amend (see Burack v Burack, 122 AD2d 101, 103). Accordingly, plaintiff's motion to amend the complaint is granted.

Cancellation of the Notice of Pendency

The court now turns to that part of defendants' motion seeking an order cancelling the notice of pendency filed by plaintiff. As an initial matter, the filing of a notice of pendency is proper "in any action in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property" (CPLR 6501). To this end, the court is not to investigate the underlying transaction in determining whether a complaint comes within the scope of CPLR 6501; rather, the court's analysis is to be limited to the face of the pleadings (5303 Realty Corp. v O & Y Equity Corp., 64 NY2d 313, 321 [1984]; Rajic v Sarokin, 214 AD2d 663 [1995]; Pizzurro v Pasquino, 201 AD2d 635 [1994]). In the instant case, plaintiff is seeking relief which would affect title to property, and the likelihood of success on the merits is irrelevant to determining the validity of the notice of pendency (Interboro Operating Corp., v. Commonwealth Security Mtge. Corp., 269 NY56; Brox v Riker, 56 APP Div 388, 391). Pursuant to CPLR 6514, any aggrieved party may move for a court order to vacate a notice of [*4]pendency. CPLR 6514(a) sets forth the basis for mandatory cancellation and subsection (b) sets forth the discretionary grounds for cancellation. Pursuant to CPLR 6514 (a) the court must cancel the notice of pendency, if service of a summons has not been completed within the time limited by section 6512; or if the action has been settled, discontinued or abated; or if the time to appeal from a final judgment against the plaintiff has expired; or if enforcement of a final judgment against the plaintiff has not been stayed pursuant to section 5519. Defendants do not allege any of the foregoing factors which would mandate cancellation of the notice of pendency under CPLR 6514(a). Pursuant to CPLR 6514(b), the court may cancel a notice of pendency if the procedures prescribed in Article 65 have not been followed or if the action has not been commenced or prosecuted in good faith (Israelson v Bradley, 308 NY 511). In light of the issues of fact raised by the differing versions of the facts as argued by the parties, defendants in the instant case, have failed to establish that plaintiff's action herein was commenced or prosecuted in bad faith (see, Stewart v. Sternberg, 120 AD2d 661). Further, from a review of the face of the complaint, plaintiff alleges claims to real property in which he seeks to protect his 50% interest. Accordingly, the court will not exercise its discretion to cancel the notice of pendency pursuant to CPLR 6514(b), and as a result, the notice of pendency remains unaffected by the amendment of plaintiff's complaint.

conclusion

In sum, the motion by plaintiff for an order, allowing him to serve an amended complaint is granted. Plaintiff shall serve his amended complaint within twenty (20) days of service of a copy of this order, with notice of entry. That part of defendants' motion for an order, dismissing the complaint on the grounds that the party asserting the cause of action lacks legal capacity to sue is denied, since plaintiff, has standing to commence the instant action. That part of defendants' motion for an order, dismissing the complaint on the grounds that the complaint fails to state a cause of action is denied with leave to renew after discovery, as it does not appear that any significant discovery has been undertaken. That part of defendants' motion for an order, cancelling the notice of pendency filed by plaintiff is denied.

The court has considered defendants' remaining contentions and finds them to be rendered moot either by the disposition of this action or without merit.

The foregoing constitutes the decision and order of the court.

E N T E R,

J. S. C.