Sedlak v Point Lookout Fish Dock, Inc.

[*1] Sedlak v Point Lookout Fish Dock, Inc. 2007 NY Slip Op 51191(U) [15 Misc 3d 1147(A)] Decided on June 7, 2007 Supreme Court, Nassau County Austin, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 7, 2007
Supreme Court, Nassau County

Gary Sedlak, Plaintiff,

against

Point Lookout Fish Dock, Inc., ROLF J. LARSON, BRUCE P. LARSON, MICHAEL G. MIHALE and GERALD R. RAYMON, Defendants.



2347-07



COUNSEL FOR PLAINTIFF

Michael T. Sucher, Esq.

26 Court Street, Suite 2412

Brooklyn, New York 11242

COUNSEL FOR DEFENDANT

Bracken & Margolin, LLP

One Suffolk Square, Suite 2412

Islandia, New York 11749

Leonard B. Austin, J.

Plaintiffs Gary Sedlak ("Sedlak") moves for the appointment of a receiver for Defendant Point Lookout Fish Dock, Inc. ("Fish Dock').

BACKGROUND

Fish Dock owned a wholesale fish business in Point Lookout. Defendants Rolf J. Larson, Bruce P. Larson, Michael G. Mihale and Gerald R. Raymon (collectively "Individual Defendants") were the principals and owners of the outstanding shares of Fish Dock.

Sedlak, through his corporation, A&A Seafood, Inc. ("Seafood") had worked as the general manager of Fish Dock for approximately ten years prior to August 2006.

The Individual Defendants also are alleged to own the Point Lookout Clam Bar. ("Clam Bar"). Clam Bar is alleged to owe a significant sum of money to Fish Dock. Sedlak further alleges Fish Dock is owed money from STIRS, a fishing boat owned by one or more the Individual Defendants.

In or about November 2006, the Individual Defendants and A&A Fish, Inc. entered into a contract pursuant to which the Individual Defendants transferred their shares in Fish Dock to A&A Fish, Inc.

Although the contract named A&A Fish, Inc. as the purchaser of the Individual Defendants' shares of Fish Dock, Sedlak alleges the purchaser should have been A&A Seafood, Inc. ("Seafood").

Sedlak commenced this action seeking to have the contract pursuant to which the Individual Defendants transferred their shares in Fish Dock to A&A Fish, Inc. rescinded because of mutual mistake and fraud.

On this motion, Sedlak seeks the appointment of a receiver for Fish Dock during the pendency of the action. Sedlak asserts that Fish Dock has substantial accounts receivable, rights to the business location and rights to commercial vehicles. Fish Dock also has substantial debts.

Sedlak alleges that, at the present time, no one is managing Fish Dock. As a result, its accounts receivable are not being collected, its property is being neglected and its taxes and other obligations are not being paid. Sedlak seeks the appointment of a receiver to take possession of Fish Dock's property during the pendency of the action.

The Individual Defendants oppose the motion asserting that Sedlak lacks standing to seek the appointment of a receiver. They assert that the only party with standing to bring the application is Seafood, the purported purchaser of the Fish Dock shares.[FN1]

In an effort to remedy this defect, with the service of the reply papers, Sedlak served a supplemental summons and amended complaint naming Seafood as a party Plaintiff.

DISCUSSION[*2]

A.Standing

CPLR 1003 permits a party to an action to add a party without leave of court provided the supplemental summons and amended complaint was is served (1) within 20 days after serving the original summons and complaint, (2) any time prior to the expiration of the time to respond to the summons or (3) within 20 days after service of a pleading responsive to the summons. See, Siegel, New York Practice 4th §138.

The supplemental summons and amended complaint were served on April 2, 2007. The Individual Defendants' answer is dated March 16, 2007.[FN2] The exact date upon which it was served is not indicated. Assuming the Individual Defendants' answer was served on March 16, 2007, the supplemental summons and amended complaint were served naming Seafood as a party Plaintiff was served less than 20 days after the service of the Individual Defendants answer. Thus, it is timely.

B.Receiver

Individual Defendants' opposition to Sedlak's application for the appointment of a receiver is premised upon Sedlak's lack of an apparent interest in the property. However, Seafood, as the purported purchaser of Fish Dock stock, has an apparent interest in the property. Thus, it is the proper party to seek the appointment of a receiver.

CPLR 6401 permits the appointment of a temporary receiver to preserve specific identifiable property that is the subject of the action. Siegel, New York Practice 4th §332.

The party seeking a temporary receiver must establish that funds or the property are in danger of being materially injured or destroyed. Secured Capital Corp. of NY v. Dansker, 263 AD2d 503 (2nd Dept. 1999). Fish Dock's property is in danger of being injured or destroyed. No one is presently managing or controlling Fish Dock's property. Fish Dock closed its operation on January 15, 2007. At that time, the Individual Defendants delivered to Sedlak a box containing Fish Dock's corporate papers, a stock certificate issued to A&A Fish, Inc. and corporate minutes reflecting the shareholders' approval of the transfer of the stock. Sedlak rejected tender of the stock and returned the stock and corporate papers to the Individual Defendants. Thereafter, the Individual Defendants re-occupied Fish Dock's premises and began operating a new business, Jones Inlet Fish Company, at that location.

As a result, no one is presently managing the assets of Fish Dock. Fish Dock is alleged to have accounts receivable, a possible interest in a leasehold and a possible interest in commercial vehicles.Fish Dock is also alleged to have creditors who are not being paid.

A temporary receiver is appointed for the benefit of the moving party or a specific third party. McLaughlin, Practice Commentaries, McKinney's Cons. Laws of NY, Book 7B, CPLR C6401:3.

There is an inherent inconsistency in Plaintiffs' application. An application for a temporary receiver can be made only by one who has an apparent interest in the property that is the subject of the action. If Seafood and Sedlak take the position that they never acquired title to the shares of Fish Dock, then Seafood does not have an apparent interest in the property that is the subject of this action. Siegel, New York Practice 4th §333; and CPLR 6401(a).

On the other hand, if Seafood owns the shares of Fish Dock and is bringing this action to [*3]set aside the transaction by which it became the owner of those shares, then it presently has the right to manage the affairs of Fish Dock and does not need the appointment of a receiver.

In either circumstance, a receiver would be inappropriate.

Accordingly, it is,

ORDERED, that Plaintiff's motion for an order appointing a temporary receiver for the property of Point Lookout fish Dock, Inc. is denied.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY_____________________________

June 7, 2007Hon. LEONARD B. AUSTIN, J.S.C. Footnotes

Footnote 1:The contract which Plaintiff seeks to rescind involves the sale of Fish Dock. The contract names the Individual Defendants, as seller, and A&A Fish, Inc., as purchaser. In ¶ 57 of the complaint, Sedlak alleges that the name of A&A Fish, Inc. as purchaser was a mistake. The purchaser should have been Seafood.

Footnote 2:Although Fish Dock is named as a Defendant in this action, it has not appeared.