Noonan v Matone

[*1] Noonan v Matone 2012 NY Slip Op 52149(U) Decided on November 15, 2012 Supreme Court, Kings County Lewis, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 15, 2012
Supreme Court, Kings County

James K. Noonan, Plaintiff,

against

John Matone, Kathleen Matone, and 461 Bayridge Avenue Realty Corp., Defendant.



5741/2011



Plaintiff Attorney: Thomas Torto, Esq

Defense Attorney: Caruso, Caruso & Branda

Yvonne Lewis, J.

Defendants John Matone, Kathleen Matone and 461 Bayridge Avenue Realty Corp. ("461 BRARC"), move for an order, pursuant to CPLR 3211 (a) (5), dismissing the instant action on the grounds that the causes of action asserted are barred by each of res judicata, collateral estoppel, the statute of frauds, and the applicable statute of limitations. Plaintiff James K. Noonan cross-moves for an order, pursuant to CPLR 3025 (b), granting him leave to amend the verified complaint and include a cause of action seeking the imposition of a constructive trust on certain assets of 461 BRARC.

Background

James K. Noonan commenced the instant action by filing a summons with notice on March 14, 2011. The defendants subsequently appeared and demanded a complaint. In the verified complaint, dated June 13, 2011, the plaintiff alleges in essence that at relevant times, he was the sole shareholder of 461 BRARC. He contends that John and Kathleen Matone invested in or lent sums to the corporation but were never 461 BRARC shareholders or owners. Alternatively, the plaintiff claims that he was the "true" or beneficial owner of 461 BRARC, which was nominally owned by either John or Kathleen Matone or both.

He further alleges that, on or about May 18, 2005, John Matone, acting as a purported officer of 461 BRARC, wrongfully caused the corporation to sell its main asset: a 20-family multiple dwelling apartment building, located at 461 Bay Ridge Avenue in Brooklyn. The plaintiff claims entitlement to the sale proceeds; but, he maintains [*2]that John and Kathleen Matone have wrongfully assumed nominal control of 461 BRARC and, consequently, have caused the corporation to withhold from the plaintiff any portion of the sale proceeds. The verified complaint asserts causes of action alleging breach of contract, unjust enrichment, breach of fiduciary duty and conversion; the pleading demands judgment and seeks damages against the defendants for their alleged wrongful acts.

On or about July 11, 2011, and in lieu of an answer, the defendants served and filed the instant motion to dismiss. In response, the plaintiff has opposed the defendants' motion and cross-moved for leave to amend the verified complaint to add a cause of action seeking the imposition of a constructive trust on the proceeds from the subject sale.

Arguments Advanced by The defendants

In support of their motion to dismiss, the defendants assert that the instant action is the plaintiff's latest of several attempts to relitigate a long dispute between James Noonan and the Matones concerning control of 461 BRARC and ownership of the subject building. The defendants claim the subject dispute has already been adjudicated.

1) The 2003 Action

The defendants first note the action commenced by John and Kathleen Matone on behalf of themselves and 461 BRARC (Matone v Sycamore Realty Corp., Sup Ct, Kings County, index No. 21270/03); in that action, John and Kathleen Matone asserted that they were the sole shareholders of 461 BRARC. They also asserted in that action that although the plaintiff herein was never a shareholder or officer of 461 BRARC, he had recently executed a deed purportedly transferring the subject property from 461 BRARC to Sycamore Realty Corporation ("SRC")—a corporation wholly owned by the plaintiff herein.

SRC did not timely interpose an answer; John and Kathleen Matone subsequently moved for a default judgment against it. The plaintiff herein then cross-moved for summary judgment dismissing the action. By order dated January 9, 2007 (Matone v Sycamore Realty Corp., 14 Misc 3d 1217[A], 2007 NY Slip Op 50061[U] [2007]), this court granted the motion for a default judgment against SRC and denied the cross motion for summary judgment. In so deciding, this court noted, as relevant to the instant action, that:

"the defendant (Mr. Noonan) now contradicts his earlier sworn representations, as contained in his answer to the plaintiff's complaint; to wit, that he has never been a shareholder or officer of 461 Bay Ridge Avenue Realty Corporation, and wherein he never denied the allegation that the Matones were the sole shareholders of said corporation . . . [t]his change in position is critical and appears to this court to be nothing short of a feigned attempt to create false issues of fact with regard to the matters of corporate ownership . . ." (Id. at *5).

By order and judgment dated February 16, 2007, this court set aside the subject deed ostensibly transferring the building to SRC and [*3]granted John and Kathleen Matone leave to enter judgment against SRC. John and Kathleen Matone subsequently did so; the judgment was upheld after SRC appealed (Matone v Sycamore Realty Corp., 50 AD3d 978 [2008], lv denied 11 NY3d 715 [2009]).[FN1]

2)The 2004 Action

In 2004, SRC and James Noonan filed an action (Sycamore Realty Corp. v Matone, Sup Ct, Kings County, index No. 24354/04) against John and Kathleen Matone, seeking an order validating the disputed deed. SRC and the plaintiff also filed a notice of pendency encumbering the subject property.In that action, the plaintiff claimed that he was the sole shareholder of 461 BRARC since its inception. John and Kathleen Matone moved to dismiss the 2004 action on several grounds, including that the action was barred by res judicata and collateral estoppel. By order dated December 10, 2004, this court granted the motion, vacated the notice of pendency, and dismissed the 2004 summons and complaint pursuant to CPLR 3211 (a) (1), (3), (4) & (5).

3)The 2005 Action

While the first two actions were pending, the plaintiff, as an ostensible officer of 461 BRARC, again executed a deed, dated August 27, 2004, purporting to transfer the subject property to Siegreich Realty Corp. ("Siegrich") by its officer, Sergio Morales. Thereafter, John and Kathleen Matone executed a deed, on behalf of 461 BRARC and dated May 18, 2005, ostensibly transferring the subject property to Enterprise Bay Ridge, LLC ("Enterprise"). Upon learning of this transfer, the plaintiff and SRC commenced another action (Sycamore Realty Corp. v Matone, Sup Ct, Kings County, index No. 15956/05) against Enterprise and John and Kathleen Matone, seeking, among other things, an order: (1) setting aside the transfer of the subject building to Enterprise; and (2) declaring that SRC is the title owner of the building. Enterprise interposed an answer that contained counterclaims asserted against Siegreich and its officer; the counterclaims sought, among other things, a judgment declaring that Enterprise is the sole owner of the subject building.

Subsequently, John and Kathleen Matone moved to dismiss the 2005 action. By order dated October 28, 2005, this court (among other things) granted their motion and dismissed the action pursuant to CPLR 3211. Thereafter, Enterprise moved for summary judgment on its counterclaim, asserting that, based on the doctrines of collateral estoppel and law of the case, Siegreich and Sergio Morales are, as a matter of law, precluded from challenging that Enterprise is the exclusive owner of the subject property. By order dated May 18, 2010, this court granted Enterprise's motion. As relevant to the instant action, this court noted that:""[c]ollateral estoppel precludes a party from relitigating in a subsequent action or proceeding an issue raised [*4]in a prior action or proceeding and decided against that party or those in privity (Buechel v Bain, 97 NY2d 295, 303 [2001]). Pursuant to the doctrine of law of the case, judicial determinations made during the course of litigation before final judgment is entered may have preclusive effect provided that the parties had a full and fair opportunity to litigate the initial determination' (Sterngass v Town Bd. of Town of Clarkstown, 43 AD3d 1037, 1037).

The previous decisions and orders of this court in this action and the related actions have firmly put to rest any question as to the Matones' ownership of 461 BRARC and the lack of any power or authority in Noonan to convey the subject property or act on the corporation's behalf. Throughout the course of this litigation, Noonan had a full and fair opportunity to argue this ownership issue" (Sycamore Realty Corp. v Matone, 27 Misc 3d 1227[A], 2010 NY Slip Op 50928[U] [2010], at *3 [emphasis added]).[FN2]

4)The Instant Action

The defendants argue that the instant action is also barred by the doctrine of res judicata. The defendants note that they successfully dismissed two complaints, filed by the plaintiff herein, that alleged that the plaintiff had an ownership interest in 461 BRARC. They claim that, in each instance, John and Kathleen Matone produced evidence that they alone are the shareholders of the subject corporation. They further claim that the plaintiff's present action is likewise premised on an alleged ownership interest in 461 BRARC. Since the plaintiff had several opportunities to litigate this question in the prior actions, and since the instant action necessarily includes the issue of the plaintiff's alleged true or beneficial ownership of 461 BRARC, the defendants conclude that the instant action is barred by res judicata.

Alternatively, the defendants argue that the instant action is barred by collateral estoppel. They maintain that every issue of law relevant to the instant action has been litigated in the prior actions and decided against either the plaintiff or parties in privity with the plaintiff, such as SRC. Indeed, note the defendants, the facts alleged in the instant verified complaint are identical to facts alleged in the plaintiff's affirmation in opposition, dated December 4, 2009, to the motion to dismiss the 2005 action. The defendants state that to permit the instant action to go forward would necessarily require relitigation of prior issues decided against the plaintiff in the prior actions. Therefore, conclude the defendants, the plaintiff's current claims are barred by collateral estoppel.

Also in the alternative, the defendants argue that each cause of action asserted in the verified complaint is barred by an applicable statute of limitations. First, the defendants note the plaintiff's [*5]claims of unjust enrichment, breach of contract and conversion; the defendants claim that these claims are subject to a six-year limitations period. The defendants contend that these alleged claims accrued when John and Kathleen Matone commenced the 2003 action and asserted that they—and not the plaintiff—were the exclusive owners of 461 BRARC and the subject building. Thus, reason the defendants, the plaintiff had until 2009 to timely assert these claims. Alternatively, the defendants assert that these three claims accrued on December 10, 2004, when this court dismissed the plaintiff's 2004 action; the plaintiff would then have had until 2010 to timely bring the instant claims.Lastly, the defendants note that the verified complaint includes an allegation of breach of fiduciary duty and seeks money damages; the defendants assert that this claim would accrue on the same date as the others, and is subject to a three-year limitations period. In any event, conclude the defendants, the instant action, commenced on March 14, 2011, is time-barred.

Lastly, and again in the alternative, the defendants argue the plaintiff's breach of contract claim is barred by the General Obligations Law. The defendants note that the plaintiff alleges the existence of an oral agreement made around the time when 461 BRARC was formed; this purported agreement between the plaintiff and John Matone provided that John Matone would be the nominal sole shareholder of 461 BRARC but would nevertheless acknowledge that the plaintiff was the "real" or beneficial owner of the corporation (and, indirectly, the subject building). The defendants claim that this agreement, if it existed, was incapable of being performed within a year of formation and is, therefore, unenforceable unless in writing and subscribed by the party to be charged with performance. Since the verified complaint does not state that this agreement was reduced to writing, the defendants contend that the breach of contract claim must thus be dismissed. For these reasons, defendants submit that this court should grant their motion and dismiss the action pursuant to CPLR 3211 (a) (5).

Arguments Advanced by The plaintiff

In opposition to the defendants' contentions, and in support of his motion for leave to file and serve an amended complaint, the plaintiff first asserts that the defendants have not demonstrated entitlement to an order dismissing the complaint. Specifically, the plaintiff contends that the defendants merely reiterate that the prior actions have decided that the plaintiff did not own or control of 461 BRARC.The plaintiff argues that, irrespective of any ownership or control, he is nevertheless entitled to proceeds from the sale of the subject building.

The plaintiff next claims that this court, by order dated April 29, 1997 in an action entitled Keller v Matone (Sup Ct, Kings County, index No. 14821/96), has already determined that the plaintiff was the president of 461 BRARC. The plaintiff asserts that in all subsequent litigation concerning 461 BRARC, John Matone and his attorneys have used disingenuous litigation tactics to mislead this court about who owned or [*6]controlled 461 BRARC. He concludes that the defendants should not now be permitted to challenge the determination in Keller v Matone.

Additionally, the plaintiff contends that one of the prior actions was dismissed based on alleged documentary evidence of the "true" ownership of 461 BRARC. The plaintiff characterizes the alleged documentary evidence as flawed and dubious. In any event, argues the plaintiff, the alleged documentary evidence should not be considered in light of this court's determination that he was the president of 461 BRARC in Keller v Matone.

The plaintiff also challenges the alleged preclusive effect of the 2003 action. He notes that the judgment entered against SRC in the 2003 action was a default judgment. The plaintiff further notes that the 2003 action sought only to set aside the deed transferring the subject building from 461 BRARC to SRC. Therefore, argues the plaintiff, the 2003 action did not necessarily decide any issues concerning ownership or control of 461 BRARC; the plaintiff reasons that he is thus not precluded from presently litigating these issues merely because of the default judgment entered against SRC in the 2003 action. Similarly, the plaintiff claims that the 2003 action was discontinued as against him without prejudice. The plaintiff also notes that the resolution of the 2003 action did not involve a finding on the merits against him. For these reasons, the plaintiff concludes that the defendants may not claim res judicata or collateral estoppel based on any aspect of the 2003 action.

Furthermore, the plaintiff asserts that the defendants' motion to dismiss must be denied because the plaintiff's proposed amended complaint contains a well-pleaded cause of action seeking the imposition of a constructive trust on the proceeds of the sale of the subject building. The plaintiff claims that the verified complaint contains sufficient detail establishing that he and John Matone had a fiduciary relationship in connection with the subject building; the plaintiff also offers correspondence concerning 461 BRARC which "thoroughly undermines the Matones". The plaintiff also cites examples of his behavior concerning the operation 461 BRARC that would be inconsistent with John and Kathleen Matone's ownership of the company. The plaintiff reiterates that he has thus established that John and Kathleen Matone were merely passive investors in the subject property, and it was he who was the beneficial (if not true) owner of 461 BRARC and the subject property. Therefore, reasons the plaintiff, John and Kathleen Matone would be unjustly enriched if they were permitted to retain the entire proceeds of the subject sale. Instead, claims the plaintiff, John and Kathleen Matone should not be permitted to retain any amount in excess of their investment.[FN3]

Lastly, the plaintiff argues that the defendants' statute of frauds and statute of limitations defenses lack merit. First, the [*7]plaintiff claims that the statute of frauds is not a defense to an action seeking the imposition of a constructive trust on assets. Next, the plaintiff contends that the limitations period for an action seeking a constructive trust is six years, measured from the time of the alleged wrongful act. Here, asserts the plaintiff, the defendants wrongfully withheld funds from the sale of the subject property, which occurred on May 18, 2005. Therefore, reasons the plaintiff, the instant action, commenced by filing the summons with notice on March 14, 2011, is timely.[FN4] The plaintiff concludes that since this court must afford the verified complaint and proposed amendment all favorable inferences, this court should deny the defendants' motion to dismiss the verified complaint and grant the plaintiff's motion for leave to serve and file the proposed amended complaint.

Discussion

The court grants the defendants' motion and dismisses the verified complaint with prejudice. First, the court notes that all of the plaintiffs allegations result from the formation, operation and ownership of 461 BRARC, as well as the sale of the subject building to Enterprise; therefore, the instant action is barred under the doctrine of res judicata, or claim preclusion. The courts of the State of New York must employ "transactional analysis approach to res judicata" (83-17 Broadway Corp. v Debcon Fin. Servs., Inc., 39 AD3d 583, 584 [2007]). The main rule of this approach provides that "once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy" (O'Brien v City of Syracuse, 54 NY2d 353, 357 [1981]; see also Goldstein v Massachusetts Mut. Life Ins. Co., 32 AD3d 821 [2006]; Matter of Hunter, 4 NY3d 260, 269 [2005]; New Horizons Invs. v Marine Midland Bank, 248 AD2d 449 [1998]. Moreover, res judicata applies not only to the parties of record in prior actions but also to those in privity with them (Matter of State of New York v Seaport Manor A.C.F., 19 AD3d 609, 610 [2009]; see also Watts v Swiss Bank Corp., 27 NY2d 270 [1970]). Lastly, res judicata precludes relitigation not only of claims that were raised in prior actions, but also all claims which could have been raised in the prior actions as well (Xiao Yang Chen v Fischer, 6 NY3d 94, 100 [2005]).

Every fact alleged and cause of action asserted in the instant verified complaint relate to two essential claims: (1) that the plaintiff is either the sole shareholder of 461 BRARC or is the "true" or beneficial owner of the corporation;[FN5] and (2) that John Matone [*8]wrongfully caused 461 BRARC to sell the subject building to Enterprise on May 18, 2005. This court notes that the claim that the plaintiff was the "true" or beneficial owner of 461 BRARC could have, and thus should have, been asserted in any of the three preceding actions between these parties.[FN6] Moreover, this court notes that the sale of the subject building preceded the 2005 action; thus, any claim that the plaintiff was entitled to the proceeds from the alleged wrongful sale could have, and thus should have, been asserted in the 2005 action. The addition of a claim for a constructive trust on the sale proceeds is no different. Thus, under the doctrine of res judicata, all claims in the verified complaint (and the proposed amended complaint) are barred because they all relate to the same transactions concerning (at the very least) the 2005 action (see e.g. Marinelli Assoc. v Helmsley-Noyes Co., 265 AD2d 1, 5 [2000]). Contrary to the plaintiff's suggestion, "a judgment by default which has not been vacated is conclusive for res judicata purposes" (83-17 Broadway Corp., 39 AD3d at 585, citing Rosendale v Citibank, 262 AD2d 628 [1999]; Silverman v Leucadia, Inc., 156 AD2d 442 [1989]; Rizzo v Ippolito, 137 AD2d 511 [1988]). However, even if this court accepts the plaintiff's argument that the resolution of the 2003 action has no res judicata effect, the court notes that another judgment—specifically, the judgment in favor of Enterprise in the 2005 action—explicitly states that the plaintiff had no authority or interest with respect to 461 BRARC or the subject building. Thus, the motion must be granted and the verified complaint dismissed on the ground of res judicata.

Similarly, the court denies the plaintiff's cross motion for leave to serve and file an amended verified complaint. Generally, leave to amend pleadings should be freely granted (CPLR 3025; see also Keller v Supreme Indus. Park, LLC, 293 AD2d 513, 514 [2002]; Nissenbaum v Ferazzoli, 171 AD2d 654 [1991]). However, a proposed amended pleading that lacks merit does not warrant such leave (Ripepe v Crown Equipment Corp., 293 AD2d 462, 463 [2002], lv dismissed 98 NY2d 765 [2002]).Lastly, the authority to grant leave to amend a pleading is committed to the sound discretion of the trial court (Edenwald Contr. Co. v City of New York, 60 NY2d 957 [1983]; see also Murray v City of New York, 43 NY2d 400, 404-405 [1977]).

Here, since the judgment entered in the 2005 action bars relitigation of all claims relating to the sale of the subject building, the plaintiff's proposed amendment is barred, "even if based upon different legal theories or seeking a different remedy" (Vigilotti v North Shore Univ. Hosp., 24 AD2d 752, 753-754 [2005]). Simply put, the fact that the plaintiff now seeks the imposition of a constructive trust [*9]instead of other relief does not render the doctrine of res judicata inapplicable.

Although the remaining branches of the motion to dismiss are moot, this court discusses them in the interest of completeness. Contrary to the defendants' allegations, the doctrine of collateral estoppel does not bar the plaintiff's present action, since the issue of a fiduciary relationship between the plaintiff and John Matone with respect to 461 BRARC and its assets has not been decided in the prior actions.Collateral estoppel "applies if the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action, and the plaintiff had a full and fair opportunity to litigate the issue in the earlier action" (Parker v Blauvelt Volunteer Fire Co., 93 NY2d 343, 349 [1999] [emphasis added]). Since the instant claims are not identical to those decided in the prior actions, collateral estoppel does not apply. The doctrine of res judicata, however, is distinguishable; res judicata "operates to preclude the renewal of issues actually litigated and resolved in a prior proceeding as well as claims for different relief which arise out of the same factual grouping or transaction and which should have or could have been resolved in the prior proceeding" (Luscher v Arrua, 21 AD3d 1005, 1006-1007 [2005] [emphasis added]).

Next, the statute of frauds (General Obligations Law § 5-701) may bar the plaintiff's breach of contract cause of action but would not apply to a cause of action seeking the imposition of a constructive trust (see e.g. Crown Realty Co. v Crown Hgts. Jewish Community Council, 175 AD2d 151, 151-152 [1991]). Also, the limitations period for a constructive trust cause of action is six years (CPLR 213 [1]) which runs from the occurrence of the wrongful act (see e.g. Tampa v Delacruz, 77 AD3d 910 [2010]; see also 75 NY Jur 2d Limitations and Laches § 204). Therefore, the plaintiff correctly notes that the instant action is timely; the alleged wrongful act occurred in May of 2005 and this action was commenced in March of 2011.

Lastly, this court acknowledges that the instant action is the third action commenced by the plaintiff against John Matone concerning ownership—"true" or otherwise—of 461 BRARC, and the second action relating to 461 BRARC's sale of the subject property to Enterprise. The plaintiff is hereby advised that further action attack on the judgments of this court in the prior actions may be considered vexatious or frivolous litigation conducted in bad faith; this court may award costs or sanctions as a consequence (see e.g. Congel v Malfitano, 61 AD3d 807 [2009]).

Conclusion

In sum, the motion of defendants John Matone, Kathleen Matone, and 461 Bayridge Avenue Realty Corp. for an order, pursuant to CPLR 3211 (a) (5), dismissing the verified complaint on the ground that the claims are barred by res judicata is granted, and the verified complaint is dismissed with prejudice. The cross motion of plaintiff John K. Noonan [*10]for an order, pursuant to CPLR 3025, granting him leave to file and serve an amended complaint is denied.

The foregoing constitutes the decision, order and judgment of the court.

E N T E R,

_____________________________

yvonne lewis, J.S.C. Footnotes

Footnote 1: The 2003 action has a long subsequent procedural history that is not relevant to the instant dispute between plaintiff and defendants.

Footnote 2: This court entered judgment in favor of Enterprise on September 8, 2010; Siegreich has subsequently filed notices of appeal challenging both the order granting summary judgment in favor of Enterprise and the subject judgment.

Footnote 3: The verified complaint also seeks punitive damages.

Footnote 4: The plaintiff makes no arguments regarding the other causes of action—breach of contract, unjust enrichment, breach of fiduciary duty and conversion—in the verified complaint.

Footnote 5: Contrary to the plaintiff's suggestion, and as the defendants correctly point out, the court in Keller never "determined" that the plaintiff was an officer of 461 BRARC; the court merely referenced an affidavit of service that described the plaintiff as president of the corporation. The plaintiff mischaracterizes that reference to an affidavit of service as a finding of the court.

Footnote 6: Indeed, this court's May 18, 2010 order in the 2005 action stated (apparently prematurely) that all questions concerning ownership of 461 BRARC were "firmly put to rest".