37-18 N. Blvd. LLC v Kings Overseas Corp.
Annotate this CaseDecided on September 18, 2014
Supreme Court, Queens County
37-18 Northern Boulevard LLC, Plaintiff,
against
Kings Overseas Corp. d/b/a KINGS INTERNATIONAL COMPANY, KINGS WEAR INC., "XYZ CORP." 1-5; "JOHN and JANE DOE" 1 - 5, Defendants.
17189/2013
Robert J. McDonald, J.
The following papers numbered 1 to 18 were read on this motion by defendant, Kings Wear Inc., for an order pursuant to CPLR 3211(a)(1) and 3211(a)(7) dismissing the plaintiff's complaint on the ground of a defense founded on documentary evidence and on the ground that the complaint fails to state a cause of action against said defendant; and the plaintiff's cross-motion for an order pursuant to CPLR 3025(b) granting plaintiff leave to amend the complaint:
Papers
Numbered
Notice of Motion-Affirmation-Exhibits-Memorandum of Law......1 - 6
Cross-Motion-Affirmation-Exhibits............................7 - 12
Affirmation in Opposition to Cross-Motion...................13 - 15
Plaintiff's Reply Affirmation...............................16 - 18
Plaintiff, 37-18 Northern Boulevard LLC, commenced this action against the defendants by filing a summons and verified complaint on September 13, 2013 and an amended verified complaint on March 5, 2014. Plaintiff is the owner of a commercial building located at 37-18 Northern Boulevard, Long Island City, New York ("premises"). The complaint alleges that Kings Overseas Corp. d/b/a Kings International Company ("Kings Overseas") is a tenant in the premises having signed a lease with the plaintiff. The complaint also alleges that Kings Wear Inc. ("Kings Wear"), although not a signatory of the lease, is an alter ego and/or successor-in-interest of defendant Kings Overseas.The complaint alleges that Kings Overseas entered into a written lease agreement on May 1, 2010 for a term of five years and two months commencing May 1, 2010 and ending on June 30, 2015 for Suite 421 of the Premises. It is alleged that both defendants Kings Overseas and Kings Wear made rent payments for the premises.
Plaintiff asserts that the defendants defaulted on rent payments beginning on November 1, 2010 and failed to pay the plaintiff a sum in excess of $231,846.17 representing unpaid rent, additional rent and additional costs due and owing through September 2013. It is stated that the defendants vacated the premises on September 30, 2013. Further, plaintiff alleges that because the defendants vacated the premises prior to the expiration of the lease, the plaintiff will incur further damages in the amount of $60,483.25 through June 30, 2015. Based on the above, plaintiff asserts causes of action for breach of the lease, unjust enrichment, account stated, and damages for fixtures negligently or intentionally removed from the premises. The complaint alleges that Kings Wear, as an alter ego of the defendant Kings Overseas, is liable to the plaintiff in the amount of $306,429.42, representing unpaid rent, additional rent, renovation fees, broker's fees, and additional costs due and owing through June 30, 2015.
The lease submitted by the movant shows that it was entered into by the plaintiff (landlord) and Kings Overseas Corp. d/b/a Kings International Company (tenant) on May 1, 2010.
Kings Wear now moves to dismiss the plaintiff's complaint against it on the ground that Kings Wear is not a named tenant on [*2]the lease and the plaintiff claims no privity of contract with Kings Wear. Kings Wear asserts that the complaint fails to state a cause of action against it as the complaint merely states in conclusory terms that Kings Wear is an alter ego of Kings Overseas and does not provide sufficient factual evidence of same. Counsel asserts that the single statement in the complaint that Kings Wear made three rent payments is insufficient to state a cause of action for piercing the corporate veil or alter ego liability. Defendant asserts that the complaint alleges no domination or control of Kings Overseas by Kings Wear and provides no facts suggesting that Kings Wear abused the privilege of the corporate form so as to perpetuate an injustice against the plaintiff, which are the hallmarks of alter ego liability (citing Tap Holdings, LLC v Orix Fin. Corp., 109 AD3d 167 [1st Dept. 2013]; Broadway 26 Waterview, LLC v Bainton, McCarthy & Siegel, LLC, 94 AD3d 506 [1st Dept. 2012]; Etex Apparel, Inc. v Tractor Intl. Corp., 83 AD3d 587 [1st Dept. 2011]; Abelman v Shoratlantic Dev. Co., 153 AD2d 821 [2d Dept. 1989][mere conclusory statements that an entity is an "alter ego" of a corporation are insufficient to sustain a cause of action against it]; Foster v Island Estates at Shoreham, Inc., 2012 NY Slip Op 31930(U)[Sup Ct. Suffolk Co. 2012]). With respect to the allegation of successor-in-interest liability, defendant asserts that the amended complaint makes no allegations that Kings Wear expressly or impliedly assumed any obligations of Kings Overseas or that the two entities consolidated or merged, or that Kings Wear is a mere continuation of Kings Overseas. Accordingly, Kings Wear moves to dismiss the complaint against it pursuant to CPLR 3211(a)(7) and (a)(1) for failing to state a cause of action.
In response to the motion, the plaintiff submits a proposed second amended verified complaint and cross-moves to amend the verified complaint by preserving the initial complaint's causes of action but amending the caption to add "Kings Wear Inc. d/b/a Kings International Company" and to amend the substantive paragraphs of the complaint to state that Kings Wear conducted business at the Premises and used the address of the premises as its business address; that Kings Overseas Corp did not conduct any business at the premises; that Kings Wear assumed the lease obligations of Kings Overseas Corp by obtaining and listing itself as the primary insured party for the premises; that Debra Feldstein the CEO of Kings Wear Inc., was the primary contact person between defendants and plaintiff; that Debra Feldstein was responsible for making rent payments to the plaintiff; and that Kings Wear Inc. was in charge of the construction and build out of the premises. Defendant asserts that pursuant to CPLR 3025(b) a party may amend its pleading by leave of court as long as there [*3]is no prejudice to the adverse party. Defendant contends there will be no prejudice to the defendant as a result of the amendment as issue was joined in February 2014 and discovery has not yet commenced.
Kings Wear opposes the plaintiff's motion to amend the complaint on the ground that the proposed amendments are palpably insufficient as a matter of law and devoid of merit. In addition, defendant asserts that even with the amendments the complaint still fails to state a cause of action against Kings Wear as an alter ego or successor-in-interest to Kings Overseas.
Upon review and consideration of the defendant's motion to dismiss the complaint, plaintiff's cross-motion to amend the complaint, the defendant's affirmation in opposition and the plaintiff's reply thereto, this Court finds as follows:
The cross-motion by the plaintiff for an order granting leave to amend the complaint pursuant to CPLR 3025 is granted.
CPLR Section 3025(b) provides:
"Amendments and supplemental pleadings by leave. A party may amend his pleading, or supplement it by setting forth additional or subsequent transactions or occurrences, at any time by leave of court or by stipulation of all parties. Leave shall be freely given upon such terms as may be just including the granting of costs and continuances."
In the absence of significant prejudice or surprise to the opposing party, leave to amend a pleading should be freely given (see CPLR 3025[b]; Edenwald Contr. Co. v City of New York, 60 NY2d 957 [1983]; Russo v Lapeer Contr. Co., Inc, 84 AD3d 1344 [2d Dept. 2011]), unless the proposed amendment is palpably insufficient or patently devoid of merit (see Bernardi v Spyratos, 79 AD3d 684 [2d Dept. 2010]; Martin v Village of Freeport, 71 AD3d 745 [2d Dept. 2010]; Malanga v Chamberlain, 71 AD3d 644 [2d Dept. 2010]; Uadi, Inc. v Stern, 67 AD3d 899 [2d Dept. 2009]); Lucido v Mancuso, 49 AD3d 220 [2d Dept. 2008]) and provided the amendment does not prejudice or surprise the opposing party (see Douglas Elliman, LLC v Bergere, 98 AD3d 642 [2012]).
Here, the proposed amendments are not palpably insufficient or devoid of merit, and there is no prejudice to defendants in allowing the plaintiff to amend the complaint at this early stage of the proceedings. The defendants will not be prejudiced as the plaintiff is asserting the same causes of action which have been [*4]previously asserted.
Given that the Court has permitted the amendment of the complaint to assert addition factual predicates, the issue remains as to whether the complaint now sufficiently sets forth a cause of action for alter ego or successor-in-interest liability.
It is well settled that in considering a motion to dismiss for failure to state a cause of action pursuant to CPLR 3211[a][7]), the pleadings must be liberally construed. The sole criterion is whether, from the complaint's four corners, factual allegations are discerned which taken together manifest any cause of action cognizable at law (Leon v Martinez, 84 NY2d 83 [1994]; Guggenheimer v Ginzburg, 43 NY2d 268 [1977]; Rochdale Vil. v Zimmerman, 2 AD3d 827 [2d Dept. 2003]). The facts pleaded are to be presumed to be true and are to be accorded every favorable inference, although bare legal conclusions as well as factual claims flatly contradicted by the record are not entitled to any such consideration (see Morone v Morone, 50 NY2d 481 [1980]; Gertler v Goodgold, 107 AD2d 481 [1st Dept. 1985], affirmed 66 NY2d 946, [1985]). The Court's role is limited to determining whether the pleading states a cause of action, not whether there is evidentiary support to establish a meritorious cause of action (see EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11[2005]; Guggenheimer v Ginzburg, 43 NY2d 268 [1977]; Sokol v Leader, 74 AD3d 1180 [2d Dept. 2010]). When evidentiary material is considered, the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one (Guggenheimer v Ginzburg, supra at 275).
"To make out a cause of action for liability on the theory of piercing the corporate veil because the corporation at issue is the defendant's alter ego, the complaining party must, above all, establish that the owners of the entity, through their domination of it, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against the party asserting the claim such that a court in equity will intervene" (Tap Holdings, LLC v Orix Fin. Corp., 109 AD3d 167 [1st Dept. 2013]; also see Anderson St. Realty Corp. v. RHMB New Rochelle Leasing Corp., 243 AD2d 595 [2d Dept. 1997][piercing the corporate veil requires a showing that (1) the one corporation exercised complete domination of the other with respect to the transaction attacked, and (2) that such domination was used to commit a wrong against the plaintiff which resulted in the plaintiff's injury]). In addition, "the corporate veil will be pierced to achieve equity, even absent fraud, when a corporation has been so dominated by an individual or another corporation and its separate entity so ignored that it primarily transacts the [*5]dominator's business instead of its own and can be called the other's alter ego" (Fernbach, LLC v Calleo, 92 AD3d 831 [2d Dept. 2012]).
"A corporation may have successor liability if: (1) the successor corporation expressly or impliedly assumed the predecessor's tort liability, (2) there was a consolidation or merger of seller and purchaser, (3) the purchasing corporation was a mere continuation of the selling corporation, or (4) the transaction was entered into fraudulently to escape such obligations" (Kasem v. BNC Stor., LLC, 30 AD3d 469 [2d Dept. 2006]).
Here, although Kings Overseas was the only signatory on the lease, this court finds that the factual allegations contained in the second amended complaint are sufficient to plead a cause of action against Kings Wear for alter ego and successor-in- interest liability. Those allegations include the fact that Kings Wear made certain payments of rent, that Kings Overseas did not conduct any business at the premises, that Kings Wear held itself out as the entity responsible for the premises using the address of the premises as its business address, that the CEO of Kings Wear made the rental payments to the plaintiff, and that Kings Wear listed itself as the primary insured party for the premises. Further, it is alleged that defendants caused injury to the plaintiff by stopping payment of rent and breaching the lease (see Island Seafood Co. v Golub Corp., 303 AD2d 892 [3rd Dept. 2003]). Since the plaintiff seeks to hold the defendant liable under a theory of piercing the corporate veil, the fact that the defendant did not sign the subject lease does not establish that the plaintiff failed to state a cause of action against Kings Wear. Thus, this Court finds that the amended complaint adequately states facts sufficient to plead a cause of action for an alter ego relationship and sufficiently states cause of action to hold Kings Wear liable under the lease under a theory of piercing the corporate veil and successor-in-interest liability (see Gateway I Group v Park Ave. Physicians, P.C., 62 AD3d 141 {2d Dept. 2009]; Pellarin v Moon Bay Dev. Corp., 29 AD3d 553 [2d Dept. 2006]).
Accordingly, for all of the above stated reasons it is hereby,
ORDERED, that plaintiff's cross-motion for leave to amend the complaint is granted, and the proposed amended complaint in the proposed form annexed to the cross-moving papers shall be deemed served upon service of a copy of this order with notice of entry thereof; and it is further,
ORDERED, that the defendants shall serve an answer to the amended complaint within 20 days from the date of said service, and it is further,
ORDERED, that the defendants' motion for an order dismissing the causes of action for alter ego and successor-in-interest liability based upon documentary evidence and for failure to state a cause of action is denied in its entirety.
Dated: September 18, 2014
Long Island City, NY
___________________
ROBERT J. MCDONALD
J.S.C.
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