Piroozian v Homapour

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Piroozian v Homapour 2012 NY Slip Op 31188(U) April 19, 2012 Sup Ct, Nassau County Docket Number: 11152-11 Judge: Timothy S. Driscoll 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- STATE OF NEW YORK SHORT FORM ORDER Present: HON. TIMOTHY S. DRISCOLL Justice Supreme Court ------------------------------------------------------------------- x IMANUEL PIROOZIAN, Plaintiff TRIAL/IAS PART: 16 NASSAU COUNTY Index No: 11152- Motion Seq. No: 1 Submission Date: 3/2/12 -against- SHAHRIAR HOMAPOUR and HIGGINS AVE LLC, Defendants. -------------------------------------------------------------------- x Papers Read on this Motion: Notice of Motion , Affirmation in Support, Affidavit in Support and Exhibits............................................................. Memorandum of Law in Support.............................................................. Affidavit in Opposition Affirmation and Memorandum in Opposition and Exhibits................ Reply Affirmation and Reply Affidavit............................................. This matter is before the court on the motion by Defendants Shahriar Homapour Homapour ) and Higgins Ave LLC (" Company Defendants ) fied December 14 , 2011 and submitted March 2 , 2012. For the reasons set forth below , the Court 1) denies Defendants motion to dismiss the first and second causes of action in the Complaint; and 2) grants Defendants ' motion to dismiss the third cause of action in the Complaint. BACKGROUND A. Relief Sought Defendants move for an Order , pursuant to CPLR Company Law (" LLCL" 3212(a) and Limited Liability 409(a), granting Defendants summary judgment dismissing the complaint. Plaintiff lmanuel Piroozian (" Piroozian " or " Plaintiff' ) opposes the motion. [* 2] B. The Paries ' History The Verified Complaint (" Complaint" ) (Ex. A to Roth Aff. in Supp. ) alleges as follows: Plaintiff and Homapour are members of the Company. On or about Februar 19 , 2010 Plaintiff and Defendants entered into an agreement ("Agreement" ) that provided for the distribution of the Company s net income , from January 1 2010 , to the paries as follows: Plaintiff would receive 371' % and Homapour would receive 621' %. The Company operated a warehouse in Queens County, New York (" Building ). The Agreement did not include distributions made from events that were addressed in a separate Queens Warehouse Division agreement dated Februar 2 2010 (" Warehouse Agreement" In response to a demand by Plaintiff, Homapour issued a statement that listed the Company s income and expenses for the year 2010. Homapour represented the Company income to be $798 363. 32 for that period , and furher represented the expenses to be $472 338. , leaving a net income of $326 024.40. In the first cause of action , Plaintiff alleges that he is entitled to $122 259.15 representing 37% of the net income , which Homapour has refused to pay him. Plaintiff alleges that this constitutes a breach of the paries ' Agreement. In the second cause of action , Plaintiff seeks an accounting of the Company s finances , which Homapour has allegedly refused to provide. In the third cause of action , Plaintiff alleges that Homapour breached his duty to manage the Building and secure tenants for the units in the Building, resulting in vacancies in the Building. Plaintiff seeks damages in the amount of $90 000. In their Verified Answer (Ex. C to Roth Aff. in Supp. ), Defendants deny many of the allegations in the Complaint. They also assert eight (8) affirmative defenses: 1) Plaintiff has failed to state a claim on which relief can be granted; 2) Plaintiffs claims are barred by the Business Judgment Rule; 3) Plaintiff lacks standing and/or capacity to maintain this action; 4) Plaintiffs claims are derivative in nature , and should have been asserted on the Company behalf; 5) Plaintiff s allegations plead a wrong to the Company only and , therefore , Plaintiff may only sue derivatively and not individually; 6) Plaintiffs claims are bared by the Company Operating Agreement, as amended; 7) Plaintiff s equitable claims are barred by the doctrine of unclean hands; and 8) Defendants have defenses based on documentar evidence. In support of Defendants ' motion , Homapour affirms that he and Plaintiff are brothers- in- law who also have a business relationship which has involved the formation of multiple entities to purchase real estate and make mortgage loans. As reflected by the Company s Aricles of ). ..... [* 3] Organization (Ex. D to Homapour Aff. in Supp. ), Plaintiff and Homapour formed the Company to purchase propert (" Propert" ) located at 133- 05 32 Avenue, Queens , New York. On or about May 26 , 2004 , Plaintiff and Homapour executed the Operating Agreement (id. at Ex. C) to memorialize their rights and obligations with respect to the Company. Initially, Plaintiff and Homapour each held a 50% interest in the Company, and were each designated as the Company s Managing Members. In 2006 , the prior owner of the Propert commenced an action in Queens County to recover title to the Propert (" Queens Action ). Due to a deterioration in their relationship and their desire not to continue in business together , in Februar of 20 10 , Plaintiff and Homapour entered into the Warehouse Agreement (Ex. E to Homapour Aff. in Supp. ). Plaintiff and Homapour also amended and modified the Operating Agreement by executing the First Amendment to the Operating Agreement (" First Amendment" (id. at Ex. F). The First Amendment includes a provision stating that Plaintiff " hereby resigns as Managing Member of the Company. " Homapour submits that , in light of that resignation , Homapour remains the sole Managing Member of the Company and possesses the sole authority to determine the distribution of profits , leasing of the Building and other matters related to the Company s daily operations. Homapour affrms that , in light of the Queens Action , the Company faces significant financial liability. Homapour determined that the distribution of profits was not in the Company s interest as it may be required to remit significant funds to the plaintiff in the Queens Action if the plaintiff prevails in that Action. With respect to Plaintiff s allegations regarding the Company s ban accounts , Homapour affirms that he determined that it was appropriate to close the Company s former account , on which Plaintiff was a signatory, and open a new account on which Homapour , the sole Managing Member , is the sole signatory. Homapour aVers , further , that he opened' a new Company account to prevent Plaintiff from continuing to improperly transfer the Company s assets , as Plaintiff allegedly did in connection with the paries ' prior sale , through a corporation they owned , of propert located in Brooklyn, New York (" Brooklyn Property Homapour alleges that , as reflected by the email provided (Ex. H to Homapour Aff. in Supp. ), Plaintiff approved the sale of the Brooklyn Property but subsequently claimed , through his attorney, that the contract of sale was entered into without Plaintiff s knowledge or consent (id. at Ex. I). Shortly before the closing on the Brooklyn Property, Homapour discovered that , on July 21 , 2010 , Plaintiff fraudulently [* 4] transferred a fifty (50%) percent interest in the Brooklyn Property from the corporation to himself (id. , as reflected by the deed provided at Ex. L). Homapour alleges that Plaintiff completed this transfer without Homapour s knowledge or consent , and for purorted consideration of $1 0 000 although the Brooklyn Property was valued at over $500, 000. As a result of Plaintiff s malfeasance , on or about October 22 , 2010 , Plaintiff was required to execute a deed transferring the fifty (50%) percent interest back to the corporation , as reflected by the deed provided (id. at Ex. N). The sale of the Brooklyn Propert was subsequently completed. Homapour affrms , fuher , that following the closing on the Brooklyn Propert, Plaintiff improperly withdrew the sum of $12 602. 00 from the corporation s ban account , using counter checks , allegedly to prevent Homapour from discovering the withdrawal. Homapour also disputes Plaintiff s allegation that he has not been provided with access to the Company s books and records. Homapour also affirms , however , that he has been " overly protective " of the Company s books of records based on his concerns that, in light of Plaintiff s prior fraudulent conduct the books and records would be doctored , not returned to me, or copied and distributed to third paries without my consent in order to have (the Propert) 35). evaluated for sale and create uncertainty for existing tenants " (Homapour Aff. in Supp. at Homapour affirms , further , that Plaintiffs allegations regarding the Company s failure to lease the Propert are untrue , and asserts that Plaintiff has attempted to undermine Homapour authority as Managing Member of the Company. Homapour avers that Plaintiff requested that a real estate broker evaluate the Propert for sale , despite the fact that the Company does not wish to sell the Property. Moreover , since August 2010 , portions of the Propert have been leased to two separate tenants , as reflected by the leases provided (Ex. P to Homapour Aff. in Supp. In opposition , Plaintiff affrms that from 2004 to Januar 2010 , regular distributions were made to Homapour and Plaintiff. Plaintiff provides a statement of the Company s accountant (Ex. 1 to Piroozian Aff. in Opp. ) reflecting those distributions , as well as a K- 1 statement reflecting sums to which Plaintiff was entitled in 2010, but which he has not received. Plaintiff affirms that it was not until he advised Homapour in or about 2009 that he wished to end their parnership that Homapour claimed that it was necessar to set the Company s assets aside ostensibly to protect the Company in the event that it was held liable in the Queens Action. Plaintiff describes Defendant' s explanation for not distributing Plaintiffs share of the Company s profits as " pure speculation and conjecture (id. at 11), and notes that distributions continued for several years following the filing of the Queens Action in 2006. [* 5] Plaintiff also contends that Defendant did , in fact, enter into the contract of sale regarding the Brooklyn Propert without Plaintiff s knowledge , noting that Homapour retained a different attorney than the corporation usually retained , and affirming that Homapour ignored all of Plaintiff s requests for an accounting. Plaintiff provides correspondence from 2010 and 2011 (Ex. 2 to Piroozian Aff. in Opp. ) reflecting his requests foran accounting, all of which were ignored. Plaintiff concedes that he transferred the 50% interest , as alleged by Homapour , but says that he did so because he did not trust Homapour to give him his share of the proceeds from the sale of the Brooklyn Property. With respect to Homapour s allegation that Plaintiff improperly withdrew funds , Plaintiff affirms that he withdrew only funds to which he was entitled. Plaintiff affirms that in March of 2010 , Homapour withdrew $4 000 without Plaintiff s consent , and that the paries ultimately received equal amounts from the sale of the Brooklyn Propert. C. The Paries ' Positions Defendants submit that 1) Plaintiff lacks standing to maintain this action because the causes of action are derivative in nature , but Plaintiff has sued individually; and 2) Plaintiff s claims are bared by the business judgment rule , which clearly applies to Homapour s decisions regarding the distribution of profits , opening and closing of ban accounts and leasing of the Propert. Plaintiff opposes Defendants ' motion , submitting that Plaintiffs allegations are clearly not derivative , but rather a claim by one individual against another individual , based on Plaintiffs claim that Homapour failed to distribute profits to Plaintiff. Plaintiff notes inter alia that 1) the First Amendment describes the agreement as one between the individuals; and 2) the Warehouse Agreement refers repeatedly to the two individuals. Plaintiff submits that his rights flow from the breach ofthe duty owned by Homapour to Plaintiff, not to the Company. Plaintiff also argues that there are issues of fact precluding summar judgment regarding whether Homapour s business decisions were defensible under the business judgment rule. By way of example , Plaintiff contends that Homapour s claim that withholding profits was necessar to protect the Company in the event that it was found liable in the Queens Action is implausible and speculative. In reply, Defendants submit inter alia that 1) Plaintiff has failed to provide evidence in support of his claim that , because he is seeking to redress a wrong to him personally, rather than to the Company, he may bring this action in his personal capacity; 2) in light of the fact that [* 6] Homapour has established his good faith reasons for his decision not to distribute the Company profits , and given Defendant's failure to establish the existence of a triable issue of fact Defendants have demonstrated their right to judgment; and 3) in light of the fact that Plaintiffs papers do not dispute Homapour s recitation of the facts regarding the third cause of action related to the leasing of the Property, these issues are deemed admitted and Defendants are entitled to judgment on the third cause of action. RULING OF THE COURT Summar Judgment Standards On a motion for summar judgment , it is the proponent' s burden to make a prima facie showing of entitlement to judgment as a matter of law , by tendering sufficient evidence to JMD Holding Corp. v. Congress demonstrate the absence of any material issues of fact. Financial Corp. 4 N. 3d 373 , 35 N. Y.2d 361 (1974). The Andre v. Pomeroy, 384 (2005); showing, prima facie Court must deny the motion if the proponent fails to make such a Liberty Taxi regardless of the sufficiency of the opposing papers. v. Mgt. Inc. Gincherman AD.3d 276 (1st Dept. 2006). If this showing is made , however , the burden shifts to the par opposing the summar judgment motion to produce evidentiar proof in admissible form Alvarez sufficient to establish the existence of material issues of fact that require a trial. Prospect Hospital wil not defeat 68 N. Y.2d 320, 324 (1986). Mere conclusions or unsubstantiated allegations the moving pary v. Zuckerman s right to summar judgment. City of New York 49 N. Y.2d 557 562 (1980). B. Business Judgment Rule The business judgment rule bars judicial inquiry into actions of corporate directors taken in good faith and in the exercise of honest judgment in the lawful and legitimate furherance corporate purposes. Matter of LEXIS 4966 , * 2 (S. citing v. Owen wil not 1"/ v. Rochdale Cooperative Group, Ltd. Auerbach Y. 2008), quoting v. Altman 2008 U. S. Dist. Bennett 47 N. Y.2d 619, 629 (1979) and Hamilton 44 AD. 3d 452 (1st Dept. 2007). The business judgment rule , however protect a decision that is the product of fraud , self- dealing or bad faith. Patrickv. Allen 355 F. Supp. 2d 704 710 (S. Id., quoting Y. 2005). To ear the protection of the business judgment rule , directors must do more than merely avoid fraud , bad faith and se1fdealing. Id. citing v. Hanson Trust PLC ML SCM Acquisition, Inc. 781 F.2d 264 , 274 (2d Cir. 1986). The business judgment rule protects directors who act with " due care " and conscientious fairness. Id. at * 3 , citing Hanson Trust , supra quoting Alpert v. 28 Wiliams St. [* 7] Corp. 63 N. Y.2d 557 569 (1984). In other words , a director who exercises reasonable diligence in gathering and considering material information , who makes an informed decision after a reasonable investigation , wil be protected from liability, even if the decision turns out to be Id. unwise or inexpedient. Polltz (1990), quoting C. v. citing Levandusky v. One Fifh Ave. Apt. Corp. 75 N. Y. 2d 530 , 538 Wabash R. R. Co. 207 N. Y. 113 , 124 (1912). Actions against Corporations For a wrong against a corporation a shareholder has no individual cause of action , though he loses the value of his investment or incurs personal liability in an effort to maintain the v. Abrams solvency of the corporation. Donati 66 N. 2d 951 953 (1985). Exceptions to that rule have been recognized when the wrongdoer has breached a duty owed to the shareholder Id. independent of any duty owing to the corporation wronged. Allegations of mismanagement or diversion of assets by offcers or directors to their own enrichment without more, however plead a wrong to the corporation only, for which a shareholder may sue derivatively but not Id. individually. The pertinent inquiry is determining whether an individual has standing to assert a claim is whether the thrst of the plaintiffs action is to vindicate his personal rights as an individual and not as a stockholder on behalf of the corporation. 1524 , 1527 (3d Dept. 2011), quoting 419 (3d Dept. 2003), Albany- Plattsburgh United Corp. v. Craven v. Rigas 85 AD. Bell 307 AD. 2d 416 Iv. dism. and den. 1 N. Y.3d 620 (2004) (internal quotation marks and citations omitted). D. Application of these Principles to the lnstant Action The Court denies Defendants ' motion to dismiss the first and second causes of action in the Complaint , based on the Cour' s conclusion that 1) the first cause of action sufficiently alleges that the thrust of the Plaintiff s action is to vindicate his personal rights as an individual and not as a stockholder on behalf of the corporation in that Plaintiff alleges that Homapour breached an agreement between Homapour and Plaintiff providing for the payment of certain distributions to Plaintiff; 2) in light of the conflicting affidavits , and in consideration of Plaintiff s allegation that the distributions continued for several years following the fiing of the Queens Action , there exist issues of fact regarding the applicability of the business judgment rule; and 3) in light of the conflicting affidavits , there exist issues of fact regarding whether Homapour provided Plaintiff with an adequate accounting of the Company s books and records. The Court grants Defendants motion to dismiss the third cause of action in light of Homapour s affirmations and supporting documentation regarding the leasing of the Property, [* 8] and Plaintiffs failure to refute those assertions. All matters not decided herein are hereby denied. This constitutes the decision and order of the Cour. The Cour reminds the parties of their required appearance before the Court for a Preliminar Conference on May 24 , 2012 at 9:30 a. ENTER DATED: Mineola , NY April 19, 2012 HON. TIMOTHY S. DRISCO ENTERED APR 24 2012 MAI&AU COuHTY COUNTY CLIRK" OFFiCE

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