Medical Prods., Inc. v Goldstein

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Medical Prods., Inc. v Goldstein 2012 NY Slip Op 31175(U) April 19, 2012 Supreme Court, Nassau County Docket Number: 22530/09 Judge: Robert A. Bruno 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. -------------------------------------------------------------------------)( [* 1] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NASSAU PRESENT: HON. ROBERT A. BRUNO, J. TRIAL/IAS PART 20 INDEX No. : 22530/09 Motion Date: 02/27/12 Motion Sequence: 001, 002 MEDICAL PRODUCTS, INC., Plaintiff, -against- RICHAR GOLDSTEIN, IRA GOLDSTEIN, DECISION & ORDER Defendants. Papers Numbered Sequence #001 Notice of Motion , Affidavit , Affirmation & E)(hibits ........................................ Sequence #002 Notice of Cross Motion...................................................................................... 2 Affidavit in Reply and Opposition ..................................................................... 3 Reply to Opposition........................................................................................... 4 Upon the foregoing papers , it is ordered that this motion is decided as follows: Defendants request an Order to dismiss complaint in its entirety pursuat to CPLR 3211(a)(7). Plaintiff opposes said application and requests an Order for this Cour to deny the defendants ' motion to dismiss the complaint in its entirety and granting plaintiffs cross motion for sumar judgment against the defendants in its entirety and awarding judgment against the defendants in the sum of $93 030. 95 with statutory interest thereon from October 19 2009 , plus reasonable attorneys ' fees. Motion by defendants , Richard Goldstein and Ira Goldstein for an Order of this Court pursuant to CPLR 3211(a)(7) dismissing the complaint of the plaintiff, is denied. Cross motion by plaintiff, Medical Products , Inc. for an Order of this Cour, granting Summar Judgment 3212 , awarding judgment against the defendants , in the , pursuant to CPLR amount of $93, 030. , is denied. By way of background, a breach of contract action regarding corporate entity, S. Medical Products , of which defendant Ira Goldstein was the sole operating offcer , director and shareholder , was heard before this Cour. Plaintiff was awarded a money judgment against the corporation and such judgment has not been satisfied in that fuds are stil due and owing to the plaintiff. Plaintiff then commenced , in November 2009 the underlying action seeking a declaratory judgment that the transfers of fuds by the subject corporate entity to the defendants Page 1 [* 2] Medical Products v. Goldstein Inde)( No. : 22530/09 are fraudulent conveyances pursuant to the relevant sections of the Debtor and Creditor Law , and seeking judgment against the individual defendants , plus costs and disbursements. FACTS Medical Products to purchase supplies and it received shipment of such supplies during the time period of November , 2005 through September , 2006. According to the defendants , the corporation was unable to continue makng payments to Medical Products due to the loss its sole customer. Shortly thereafter , the corporation ceased doing business. There is dispute as to the solvency of A. Medical Products , Inc. according to the defendants , contracted with the corporation. Plaintiff brought an action against the corporation before ths Cour under the caption SA Medical Products, Inc. Inde)( No. 17000/07, and obtained a Medical Products money judgment against the corporation in the amount of $90 222. 63. According to defendants the plaintiffs restrained the corporate ban account and levied the amount of$12 000. , Inc. v. Plaintiff, through its investigation , uncovered that disbursements were made from the corporation to the defendants , and other paries , and it concluded that the defendants were using corporate finds for their personal use and diverting fuds for puroses of avoiding payment of the judgment. ARGUMENTS The plaintiff argues that defendants have intermingled the corporate assets with personal assets. Such is evinced by S. A. Medical Products ' issuance of checks for payments of personal e)(penses, and to the defendants themselves. The total amount of such disbursements , based on the documentar evidence of statements from the corporation s Ban of America account, is $188 569. 75. As such , the corporation s insolvency was caused by fraudulent conveyances of its cash assets. Plaintiff submits as supporting evidence: results of a NYS Deparent of State , Division of Corporations corporate search indicating plaintiffs and S. A. Medical Products , Inc.'s corporate e)(istence; a copy of this Cour' s Judgment issued to plaintiffs against SA Medical Products , Inc. ; copies of the pleadings; the transcript of E)(amination Before Trial of Richard Goldstein , and copies of the corporate Ban of America record. plaintiffs allegations are conclusory therefore insufficient to sustain its causes of action. It is noted that they did not attach any documentar evidence e)(cept the plaintiffs complaint to support its motion to dismiss. Defendants argue that the and are Page 2 [* 3] Medical Products v. Goldstein Inde)( No. : 22530/09 DISCUSSION DEFENDANT"S MOTION TO DISMISS As there is no supporting evidence , defendants ' motion is based on the suffciency of the complaint. When a motion is based on a failure to state a cause of action, the complaint' s legal sufficiency is judged solely on the face of the allegations and no consideration of the facts alleged in support of the motion will be permitted. Said another way, the Cour' s scope of review is narow and it is limited to ascertaining Hogan as to whether the pleading states any cognzable cause of action ( see v. New York State Offce of Mental Health 115 AD2d 638 (2nd Dept 1985)) In determining a motion to dismiss pursuat to CPLR 3211 (a) (7), "the sole criterion is whether the pleading states a cause of action , and if from its four corners factual allegations are discerned which taken together manfest any cause of action cognizable at law a motion for dismissal will fail" (see & G General Const., Inc. 56 AD3d 526 (2 Dept 2008)). Heffez v. Furher , on a motion to dismiss for failure to state a cause of action , the complaint must be liberally constred in the light most favorable to the plaintiffs and all factual allegations must Holly v. Pennysaver Corp. 98 AD2d 570 (2 Deptl984), Wayne S. v be accepted as tre (see County of Nassau, Dept. of Social Servs. 83 AD2d 628(2nd Dept 1981)). The nonmoving par is granted the benefit of every possible favorable inference Mann 83 AD3d 793 (2 (see Kopelowitz Co., Inc. Dept 2011)). CPLR ~3013 , states in relevant par , " statements in a pleading shall be suffciently paricular to give the cour and paries notice of the transactions or series of transactions or occurences , intended to be proved and the material elements of each cause of action or defense. " According to the commenta following the statute: (t)he basic requirement.is that the pleading be ' sufficiently paricular ' to give ' notice to the other side of the ' transactions ' or ' occurences ' as seen by the pleader. As long as the pleading may be said to give such ' notice , in whatever terminology it chooses , this aspect of the CPLR 3013 requirement is satisfied... the practitioner need only see to it that the material elements are somewhere verbalized within the four corners of the complaint v. (citing Gershon Goldberg, 30 AD3d , 372 (2 Dept 2006))... Often today, a pleading is sustained with a mere reminder that the other side can get what fuher detal is needed from the disclosure devices.. Sometimes the bil and the disclosure devices are cited together as covering gaps that the liberalization of pleadings is thought to have opened. (citing Serio v. Rhulen , 24 AD3d 1092 (3 Dept 2005; Pernet v. Peabody Eng g Corp. 20 AD2d 781 (15t Dept 1964))... ( see Practice Commentaies , CPLR ~3013 , Patrick M. Connors , C3013:2 , C3013:3 , C3013:8) Page 3 [* 4] Medical Products v. Goldstein Inde)( No. : 22530/09 Furher , as provided in David Siegel' , New York Practice: All pleadings must be liberally construed... Under the CPLR , if a cause of action can be spelled out from the four corners of the pleading, a cause of action is stated and no motion lies under CPLR (~)3211(a)(7) based on a failure to plead one.... (the cour wants) only to know whether it states a cause of action-any cause of action. If it does , it' s an acceptable CPLR pleading.. .It' s not necessar that the claim pleaded be given any paricular name. It can even be named wrong... It' s suffcient if the pleading alleges any notice is the cause of action that the law recognizes and on which it offers relief.. Giving key. It has sometimes even been held under the CPLR that if the other par has gotten the requisite notice from some other source in the case , such as statements wrtten on the sumons itself, the notice requirement may be deemed satisfied... CPLR (~)3026 says that pleadings shall be liberally constred. Even more significantly, it adds that " (d)efects shall be ignored if a substatial right of a par is not prejudiced" ( see N. Y. Prac. ~ 208 (5th ed. New York Practice David D. Siegel, Chapter 9. A. Basic Rules of Pleading). Here , the complaint alleges: that plaintiffs were awarded a judgment against the subject corporation , the balance of which is outstading; that a special relationship e)(ists between the corporate entity and the two defendants; that S. A. Medical Products Inc.'s corporate business was not conducted in a maner consistent with corporations; and that the corporation conveyed fuds to the defendants with intent of frstrating and/or hindering payment of the subject judgment. As stated in the foregoing, the cour' s inquiry is limited to ascertning whether the pleading states any cause of action , and not whether there is evidentiar support for the Heffez v. & G Holly v. Pennysaver Corp. 98 AD2d 570 (2nd Dept1984), complaint ( see General Const. , Inc. 56 AD3d 526 (2nd Dept 2008)). contention , the allegations of the complaint Prestige suffciently set forth causes of action under the Debtor and Creditor Law (see Caterers, Inc. v. Siegel, 88 AD3d 679 (2nd Dept 2011)). Viewing the complaint liberally and in the light most favorable to plaintiff, this Cour finds it suffciently paricularzed to sustain an action for piercing the corporate veil and assigning personal liabilty to defendant. Defendant , as Accordingly, contrar to the defendants ' sole shareholder, is alleged to have e)(ercised complete dominion and control corporation and to have fraudulently conveyed corporate assets to avoid the corporation obligations to the plaintiff ( see 9 East 38th Street Associates, L.P. v. over the George Feher Associates 226 AD2d 167 (1st Dept 1996)). Further, based on the defendants ' verified answer , there is no evidence of prejudice in that they tendered specific responses to the allegation as set forth by the plaintiff, and such responses certnly evince notice. As to the cause of action under DCL ~273, " (e)very conveyance made ... by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made ... without a fair consideration. " Plaintiff sets fort that the Page 4 .. [* 5] Medical Products v. Goldstein Inde)( No. : 22530/09 corporation did not follow the formalities and/or requirements of corporate e)(istence , failed to adequately fud the corporation , and whatever fuds were disbursed , were paid to the two defendants , one of which was the sole shareholder of the corporation. Defendants argue that these allegations are merely conclusory as they are not specific. Under the prevalent policy of "notice pleading" embodied in CPLR Aricle 30 , a pleading need only " give notice of the event out of which the grievance arses " (Siegel , N. Y. Prac ~ 208 , at 301 (4th ed) ). Under the prior Civil Practice Act , a pleader was required to state " facts " but was not 10 NY3d 486 (2008) ). v. Northern Leasing Sys., required to produce " evidence " ( see Pludeman CPLR ~3016(b) provides that an action for fraud must be pled " with paricularty, including specific dates and items , if necessar and insofar as practicable. However , the pleading requirements of the statute do not e)(tend to every potential detail , but , rather, have the purose of informing the defendants of incidents complained of. Furermore , CPLR ~3211(d) allows for v. Plude man latitude in pleading requirements for facts unavailable to the plaintiff ( see Northern Leasing Sys. supra ). The cause of action under DCL ~273-a, which provides that " ( e ) very conveyance made without fair consideration when the person making it is a defendant in an action for money damages or a judgment in such an action has been docketed against him , is fraudulent as to the plaintiff in that action without regard to the actu intent of the defendant if, after final judgment for the plaintiff, the defendant fails to satisfy the judgment" , has also been suffciently pleaded. Defendants , by their failure to offer any arguents or proofs related to the fairness of the consideration for the challenged transfers , canot prevail on a motion to dismiss this cause of action. Plaintiff also alleges causes of action pursuant to Debtor and Creditor Law ~~ 274 275 and 276 , in that defendants acted with intent to defraud it as its creditor. The sections provide that conveyances made and every obligation incured with actul intent , as distinguished from intent presumed in law , to hinder, delay, or defraud either fraudulent as to both present and futue Mair, P. 309 AD2d 665 (1st Dept 2003)). creditors( see Parsons present or futue creditors , is Whittemore v. Abady Luttati Kaiser Saurborn Generally, conclusory allegations of fraud will not be suffcient (CPLR ~3016(bD; However , it is suffcient to plead facts that would allow a reasonable inference of the alleged fraud. Where concrete facts are within the knowledge of the par charged with fraud , it would work a potentially unecessar injustice to dismiss a case at an early stage where any pleading deficiency might be cured later in the proceedings (see Paolucci v. Mauro 74 AD3d 1517 (3rd Dept 2010)). Historically, it was accepted that the general allegation that a conveyance or transfer of Page 5 .. ' [* 6] Medical Products v. Goldstein Inde)( No. : 22530/09 made with the intent to hinder, delay, and defraud creditors is broad and sweeping in its operation and effect. It involves many elements , and may, before it can be deemed established , require proof of many other facts and circumstaces , which may be given in propert was Citizens ' Nat. without inserting them in the pleading (see Hodges 30 NYS at 447 ( Sup Ct , Saratoga County, 3rd Dept 1894)). As such , plaintiff is not required to provide any fuher detail supporting its allegations at this early stage of the litigation. evidence under the general charge , Bank v. the plaintiff generally has no obligation to demonstrate evidentiar facts to support the allegations contained in the complaint" even if those allegations alone , though fitting see Stuart the general requirements to pierce the corporate veil , are insufficient for judgment ( v. Rye Countr Store, 296 AD2d 455 , 456 (2nd Dept 2002)). Realty Co. At ths point, This Cour has considered the defendants ' other arguments and has determined that they are unavailing. Accordingly, the motion to dismiss , is denied. PLAITIFFS' CROSS MOTION The stadards for sumar judgment are well settled. A Cour may grant sumar judgment where there is no genuine issue of a material fact, and the moving par is; therefore entitled to sumar judgment as a matter of law (Alvarez v. Prospect Hosp. 68 NY2d 320 (1986)). Thus , when faced with a sumar judgment motion , a cour' s task is not to weigh the evidence or to make the ultimate determine whether or not there determination as to the truth of the e)(ists a genuine issue for trial (Miler matter; its tak is to Journal-News , 211 v. AD2d 626(2nd Dept. 1995)). The burden on the par moving for sumar judgment is to demonstrate a prima facie entitlement to judgment as a matter of law by tendering sufficient evidence to demonstrate the absence of material issue of fact (Ayotte v. Gervasio 81 NY2d 1062 (1993)). If this initial burden has not been met, the motion must be denied without regard to the sufficiency of the opposing papers ( Alvarez v. Prospect Hospital 68 NY2d 320 supra; Miceli v. Purex 84 AD2d 562 (2d Dept. 1981)). Once the this initial burden has been met by movant, the burden shifts to the par opposing the motion to submit evidentiar proof in admissible form , sufficient to create material issues of fact requiring a trial. Piercing the corporate veil is an equitable doctrine which allows cours to disregard the corporate form whenever necessar to prevent fraud and hold corporate owners liable for the corporations New York State Dept. Fin. , 82 Robin Operating Corp. 3 A. 3d 769 , 771 (2004) ). This is a fact-based determination which generally requires a showing that the owners e)(ercised complete domination of the corporation with respect to the transaction or matter at issue , and used that control to perpetrate a fraud or wrong against the plaintiff which led to the plaintiffs injur ( see ' obligations ( see 2d 135, State of New York Matter of Morris v. of Taxation v. Page 6 .. ' [* 7] Medical Products v. Goldstein Inde)( No. : 22530/09 Moskowitz 297 AD2d 724 , 725 (2 Tsagarakis 202 AD2d 552 (2 Dept 1994)). Old Republic Natl. Tit. Ins. Co. Co. De pt 2002); Hyland Meat The par seeking to pierce the corporate veil must establish that the owners , through their domination , abused the privilege of doing business in the corporate form to perpetrate a v. TriHeim wrong or injustice against that par such that a cour in equity will intervene (see Lakes Ford Mercury, Inc. 25 A.3d 901 (3rd Dept 2006)). The decision whether to pierce the corporate veil in a given instance depends on the paricular facts and circumstaces. As already stated herein , veil-piercing is a fact- laden claim that is not well suited for sumar judgment v. Fracchia 35 AD3d 344 (2nd Dept 2006)). resolution ( see Damianos Realty Group, LLC Under the doctrine of fraudulent conveyance , cours have noted that direct evidence of fraudulent intent is often elusive. Therefore , intent may be inferred from facts and circumstaces v. Levine 6 AD3d 620 (2nd Dept Steinberg that are usually present in fraudulent transfers ( see 2004)). Such facts and circumstaces include but are not limited to , the close relationship among the paries to the transaction , the inadequacy of the consideration, the transferor s knowledge of the creditor s claims and the transferor s inabilty to pay them , and the retention of control of v. K.P. Brien-Kreitzberg Associates propert by the transferor after the conveyance (see Dempster v. Overview Equities, Inc. 4 AD3d 495 (2nd Dept Inc. 218 AD2d 519 (1st Dept1995); 2004)). Although the record does indicate a close relationship between the corporate entity and the defendants the record is devoid of evidence that there was any actual conveyance of moneta assets for puroses of rendering S. A. Medical Products , Inc. insolvent or for the puroses of diverting fuds to avoid creditors. In order to establish the e)(istence of a constrctively fraudulent conveyance , the plaintiff creditor must prove that the conveyances by the subject corporation were made without " fair consideration" (Debtor and Creditor Law ~ 273-a). The question of what constitutes fair consideration is generally one of fact, to be Wagman v. determined under the circumstances of the paricular case (see Lagno 141 AD2d 720 Dept 1988)). fraud Insolvency and lack of fair consideration are prerequisites to a finding of constrctive under ~273 , and the burden of proving these elements is upon the par challenging the Lopez 309 AD2d 837(2nd Dept 2003)). Here , the evidence indicates that there were substatial checks written against the account up until August , 2007; however , it only indicates , at this point , that the defendants elected to issue payment to other paries as opposed to plaintiff. conveyance ( see Joslin v. It is noted that there is pertinent information and/or documenta evidence that was not available to the plaintiffs at that time of the instat motion; the amount Ira Goldstein was paid as income reported to the appropriate state and federal agencies , and the quarerly corporate Page 7 .. . [* 8] Medical Products v. Goldstein Inde)( No. : 22530/09 business filings, prepared by its accountant. It is also noted that defendant , Richard Goldstein maintas that the corporate business records were stored in computers that the defendants " got rid of' ( Notice of Motion, Eilbit F , Tr. Richard Goldstein, p. 25 , In. 15-24. yet established that the judgment debtor s assets were or conveyed without fair consideration; that a transfer was par made while its action against the judgment debtor was stil pending; that the transfer rendered the judgment debtor insolvent; that circumstaces suggest the judgment debtor acted with actual intent to defraud, or tht the assets were secreted , disposed of, commingled or e)(pended for the WBP 43 AD3d 1023 (2nd Dept DeCola 50 AD3d 693 (2nd Dept 2008)). Cent. Associates In sum , the plaintiff actuly conveyed to another Riback personal use by the defendants ( see , LLC has not v. 2007), Margulis, v. Accordingly, the defendats ' motion to dismiss is denied. The plaintiffs denied. The matter is to be set for a conference in ths par on May 22 2012. cross motion is All matters not decided herein are DENIED. This constitutes the decision and order of this Cour. Dated: April 19 , 2012 Mineola, New York EN T E R: ENTER':'" APR NAIIAU 23 2012 COU, 41 Y CIUTY eLl.' OfFICE F:\DBCISIONS 20 I 2\MICAL PRODUCTS y GOLDSTEIN - motion 1 &: 2 - 2- 27- 12. Page 8

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