Heller v Frota Oceanica E Amazonica, S.A.

[*1] Heller v Frota Oceanica E Amazonica, S.A. 2007 NY Slip Op 52387(U) [18 Misc 3d 1103(A)] Decided on December 17, 2007 Supreme Court, Kings County Rivera, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through December 21, 2007; it will not be published in the printed Official Reports.

Decided on December 17, 2007
Supreme Court, Kings County

Kenneth Heller and Kenneth Heller, P.C., Plaintiffs

against

Frota Oceanica E Amazonica, S.A., as successor to Frota Oceanica Brasileira, S.A., Omnium Agencies, Inc., United States Fidelity and Guaranty Company, as successor to St. Paul Fire and Marine Insurance Company, Defendants



38282/06

Francois A. Rivera, J.

By order to show cause filed on December 13, 2006, plaintiffs moves pursuant to CPLR §6201, under sequence number one for an order of attachment of the appeal bond in the sum of $32,983,181.59 dated May 31, 2003, issued by United States Fidelity and Guaranty Company (hereinafter USFGC) to secure defendant Frota Oceanica E Amazonica, S.A (hereinafter Frota) in an action entitled S.M. Pires et al v. Frota Oceanic Brasileira, S.A. et al., Index No. 23829/76. Plaintiffs also seeks an order finding quasi in rem jurisdiction has been obtained over defendant Frota. Plaintiffs also seek an order directing the Sheriff of the City of New York or of any County of the State of New York to attach the aforementioned bond.

By cross motion filed on February 2, 2007, under motion sequence number two, the defendants jointly move pursuant to CPLR §3211(a)(4), (7) and (8) to dismiss the complaint. In the alternative, they move pursuant to CPLR §503 to change of venue of the instant action to Bronx County. Specifically, both Omnium Agencies Inc (hereinafter OAI) and USFGC seeks dismissal of the complaint pursuant to CPLR §3211(a)(7) on the basis that no cause of action is stated against them. Defendant Frota seeks dismissal pursuant to CPLR §3211(a)(8) claiming that plaintiffs have not served the complaint upon them. All defendants also seek dismissal of the complaint pursuant to CPLR §3211(a)(4) because the claims in the instant complaint may only properly be brought in the Pires action in Bronx County.

Motion Papers

Plaintiffs' motion papers on motion sequence number one consist of their affidavit and thirteen annexed exhibits. It is noted that Kenneth Heller brings the action individually in his personal capacity as prior counsel to S.M. Pires and on behalf of the professional corporation in [*2]which he was the principal lawyer. The first exhibit is a copy of the appeal bond in the sum of $32,983,181.59 dated May 31, 1995, issued by St. Paul Fire and Marine Insurance Company to secure defendant Frota in favor of S.M. Pires and Virginia Pires in an action entitled S.M. Pires et al v. Frota Oceanic Brasileira, S.A. et al., Index No. 23829/76 (hereinafter the Pires action). The second exhibit is a rider to the aforementioned bond, filed with the New York County Clerk's office on June 25, 2003, which substituted the surety from St. Paul Fire and Marine Insurance Company to USFGC. The third exhibit is the summons and complaint of the instant action filed with the Kings County Clerks office on December 13, 2006. The fourth exhibit is a decision of the Appellate Division First Department issued May 1, 1990 in the Pires action,161 AD2d 129 [1st Dept 1990], 1991 AMC 550. The fifth exhibit is a copy of the verdict sheet followed by a copy of a final judgment in the aforementioned Pires action. The sixth exhibit is a decision of the Appellate Division First Department issued June 24, 1997 in the Pires action, 240 AD2d 323 [1st Dept 1997]. The seventh exhibit is Justice Greenfield's decision and order dated December 22, 1998, awarding plaintiffs attorney fees in the amount of five million four hundred thousand dollars ($5,400,000.00) in the Pires action. The eighth exhibit is a decision of the Appellate Division First Department issued November 27, 2001 vacating Justice Greenfield's decision and remanding the matter on the issue of attorney fees payable to the plaintiffs as opposed to plaintiffs' counsel. The ninth exhibit is a decision of Justice Cahn dated April 4, 2000, in the Pires action.[FN1] The tenth exhibit is described as the Appellate Division First Department decision in the Pires action issued November 27, 2001, 288 AD2d 126.[FN2] The eleventh exhibit is a decision of the State of New York Court of Appeals decided on April 2, 1998 in the Pires action. The twelfth exhibit is a decision of the State of New York Court of Appeals decided on July 9, 1998 in the Pires action which denied Frota's motion for leave to appeal and imposed sanction. The thirteenth exhibit is a transcript of a proceeding before Justice Greenfield in the Pires action dated August 28, 1989.

Defendants cross motion papers on motion sequence number two consist of the following documents in the order presented. There is an affirmation of Thomas Stiles, their attorney denominated as an affirmation in support of the cross motion. There are two letters containing Thomas Stiles letterhead one signed and one unsigned. [FN3] There is an affirmation of William [*3]Byrne, the former president of OAI [FN4]. There is also an affirmation of Thomas Stiles denominated as opposition to the order to show cause. This annexed affirmation is a duplicate of a separate submission to plaintiffs and the court denominated as defendants' opposition to plaintiffs's order to show cause for an order of attachment. Its contents are therefore described below.

Defendants' opposition papers to plaintiffs' motion sequence number one contains the affirmation of their counsel and six annexed exhibits.[FN5] The first exhibit is a decision and order by the Appellate Division First Department dated June 24, 1997 in the Pires action reversing and remanding the matter of an award of attorney fees to the plaintiffs. The second exhibit is a decision and order by the Appellate Division First Department dated November 27, 2001, reversing an award of attorney fees to plaintiffs' counsel as opposed to the plaintiffs directly. The third exhibit is a decision and order by the Appellate Division First Department dated May 4, 2004 affirming Justice Cahn's order denying plaintiffs' motion for summary judgment and ordering the issue of attorney fees to be heard before a referee. The fourth exhibit is a decision of Supreme Court Justice Karen Smith of the New York County, dated January 10, 2005, denying Ms. Pires' motion and cross motion. The fifth exhibit is a certified transcript of a proceeding before New York State Supreme Court Justice Sallie Manzanet of Bronx County which occurred on October 27, 2006 in the matter of S. M. Pires against Brasileria, et al, bearing index number 1437/06. Exhibit seven is transcript of a proceeding which occurred before Honorable James C. Hauser on May 31, 2006 in the Circuit Court of the Ninth Judicial District of Orange County, Florida under case no. 03-3440-0.

Plaintiffs' affidavit in opposition to defendants' cross-motion, sequence number two, consists of Kenneth Heller's affidavit and eighteen annexed exhibits. Exhibit 1 is a copy of the instant order to show cause without their annexed exhibits. Exhibit 2 is an order to show cause by Virgina Pires under index number 38583/06. Exhibit 3 is a copy of cross-motion filed by the defendants under index number 38583/06. Exhibit 4 is another copy of the Appellate Division First Department decision annexed to plaintiffs' instant order show cause as exhibit 8. Exhibit 5 is another copy of Justice Cahn's decision, dated April 4, 2000, in the Pires action, referenced in plaintiffs's instant order show cause as exhibit 9. Exhibit 6 is another copy of the Appellate Division First Department decision in the Pires action issued November 27, 2001, referenced in plaintiffs's instant order show cause as exhibit 10. Exhibit 7 is another copy of the Appellate Division First Department decision in the Pires action issued April 2, 1998, referenced in plaintiffs's instant order show cause as exhibit 11. Exhibit 8 is another copy of the decision of the State of New York Court of Appeals decided on July 9, 1998 annexed to plaintiffs' instant order show cause as exhibit 12. Exhibit 9 is another copy of Justice Greenfield's decision and order, dated December 22, 1998, in the Pires action annexed to plaintiffs' instant order to show cause as exhibit 7. Exhibit 10 is a one page excerpt of a transcript. Exhibit 11 purports to be a [*4]corporate document of Frota. Exhibit 12 is an decision pertaining to defendants counsel unrelated to the instant motion. Exhibit 13 is another copy of the underlying complaint in the instant action. Exhibit 14 is an examination before trial in an unidentified matter unrelated to the instant motion. Exhibit 15 is notice from the State of New York Insurance Department advising of its receipt of the service of the summons, complaint and request for judicial intervention of the instant action on behalf of USFGC, in accordance with Insurance Law §1212. Exhibit 16 is another copy of the appeal bond annexed to plaintiffs's instant order show cause as exhibit 1. Exhibit 17 is another copy of the rider to the aforementioned bond, annexed to plaintiffs's instant order show cause as exhibit 2. Exhibit 18 is a transcript of a proceeding in the Pires action conducted before Justice Tolub on May 15, 2006.

LAW AND APPLICATION

PLAINTIFFS' MOTION

The court will first address plaintiffs' motion for an order of attachment. An order of attachment is a device whereby a plaintiff effects a seizure of a defendant's property, with the sheriff taking constructive and sometimes actual hold of it under the terms of the order. The device in New York practice is supplied by Article 62 of the CPLR. It operates on only the property of the defendant, not on his person (Siegel, New York Practice 4th edition §313).

The order of attachment always serves a security purpose, since the property attached is held by the sheriff, actually or constructively, to apply to the plaintiffs's judgment in the action if the plaintiff should win. But it can also serve a jurisdictional purpose. It is the device New York uses to implement the "quasi in rem" category of jurisdiction. There are two requirements to make out a case for an order of attachment. Both are stated in CPLR 6201 (Siegel, New York Practice 4th edition §314).

First, the plaintiff must be seeking a money judgment from the defendant. Second, the plaintiff must satisfy one of the five numbered paragraphs of CPLR 6201. The list of five items is for the most part self-explanatory. In addition to the money demand, the plaintiff must show that:

1. The defendant is a nondomiciliary residing without the state, or is a foreign corporation not qualified to do business in the state; or

2. The defendant resides or is domiciled in the state but cannot be personally served despite diligent efforts to do so; or

3. The defendant, with intent to defraud creditors or frustrate the enforcement of a judgment that might be rendered in the plaintiff's favor, has assigned, disposed of, encumbered, or secreted property, or removed it from the state, or is about to do any of those acts; or

4. The action is by a crime victim suing the perpetrator for damages caused by the crime;

5. The cause of action is based on a judgment, decree or order of a court of the United States or of any other court which is entitled to full faith and credit in this state, or on a judgment which qualifies for recognition under the provisions of article 53.

A party seeking a pre-judgment attachment in New York must show, "by affidavit and such other written evidence as may be submitted, that there is a cause of action, that it is probable that plaintiff will succeed on the merits, that one or more grounds for attachment provided in CPLR §6201 exist and that the amount demanded from the defendant exceeds all counterclaims known to the plaintiff." (Elliot Associates, L.P., v. Republic of Peru, 948 F. Supp 1203 [SDNY 1996]). The granting of a pre-judgment attachment is discretionary and even when [*5]the statutory requisites are met, the order may be denied.(see Sylmark Holdings Ltd. v. Silicone Zone Intern, Ltd., 5 Misc 3d 285 [NY Sup 2004] citing Elliot Associates, L.P., v. Republic of Peru, supra. 1211]).

On a motion for attachment, evidence tending to support the allegations of the complaint must be found in the papers upon which the attachment is based and affidavits in support of an attachment must contain evidence from which the court can determine that the ultimate facts stated in the pleading can be substantiated (Miller Bros. Const. Co., Inc. v. Thew Shovel Co., 248 AD 150, [1st Dept 1936]).

In the instant case, plaintiffs seek an attachment as a security device and also as a jurisdictional device to obtain quasi in rem jurisdiction over defendant Frota. Where attachment serves a jurisdictional purpose, constitutional prerequisites must be satisfied. First, plaintiffs must demonstrate that the defendant has at least minimum contacts with New York State (International Shoe Co. v. State of Wash., Office of Unemployment Compensation and Placement, 326 U.S. 310, 66 S.Ct. 154). Second, where the only basis of jurisdiction is the property sought to be attached, such property must have a relationship to the cause of action asserted by plaintiffs. (Shaeffer v. Heitner, 433 U.S. 186). Plaintiffs' motion papers do not offer any proof that defendant Frota has minimum contacts with New York State and that the property sought to be attached relates to the cause of action asserted by plaintiffs. Therefore, using an attachment to obtain a quasi in rem jurisdiction over defendant Frota is not constitutionally appropriate in this case.

Plaintiffs also moves for an order of attachment relying on the first ground provided in Section 6201 of the Civil Practice Law and Rules of New York. The plaintiffs alleges that defendant Frota is "a foreign corporation which, based upon review of the New York Department of State corporate records, is not licensed to do business in New York." However, in order to obtain a warrant of attachment, it is necessary for plaintiffs to show, not merely to allege, that defendant is a foreign corporation (American Trading Co. v. Bedouin Steam Nav. Co., 48 Misc. 624, [N.Y.Sup.App.Term 1905]). Plaintiffs are not a principals of Frota and, as such, his allegations of non residence is not presumed to be made on personal knowledge ( see Miller v. Jones, 152 NYS 739 [N.Y.Sup.App. Term 1915]) . Furthermore, plaintiffs have also failed to provide evidence that defendant Frota is indeed a foreign corporation that is not qualified to do business in New York State. Plaintiffs neither attaches a copy of the New York Department of State corporate records, nor do they inform the court whether defendant Frota filed an application with the Secretary of State of New York for a certificate of authority to do business in New York.

Although attachment is statutorily created, it is a harsh remedy that must only be granted upon the exercise of extreme care by the court (Glazer & Gottlieb v. Nachman, 234 AD2d 105 [1st Dept 1996]). Strict compliance with the statutory requirements is mandated (Glazer & Gottlieb v. Nachman,234 AD2d 105 [1st Dept 1996]).Even if a plaintiff satisfies the statutory requirements, attachment may be denied in the court's discretion (Elliot Associates, L.P. v. Republic of Peru, 0948 F. Supp 1203 [SDNY 1996]).

It is noted that plaintiffs seek to attach the appeal bond issued by USFGC to secure defendant Frota on appeal in an action entitled Pires v. Frota Oceanica Brasileira. While "any debt or property against which a money judgment may be enforced as provided in section CPLR [*6]§ 5201 is subject to attachment" (CPLR 6202), only assets and not liabilities can be attached (Underwriters Bank, Inc. v. First Chicago International Banking Corp., 47 Misc 2d [NY Sup. Ct. 1965]), affirmed by Ingersoll Rand Financial Corp. v. First Chicago International Banking Corp., 20 NY2d 923, [1967]).Therefore, attachment of the appeal bond is inappropriate because the appeal bond secured a debt owed by, not a debt owed to Frota, or, in other words, the appeal bond is a liability and not an asset of Frota. For all the foregoing reasons, plaintiffs' application for an attachment is denied..

DEFENDANT'S MOTION

All defendants jointly move pursuant to CPLR §3211(a)(4) and (7) to dismiss the complaint, or in the alternative, to change of venue of the instant action to Bronx County pursuant to CPLR §503. Both OAI and USFGC seeks dismissal of the complaint pursuant to CPLR §3211(a)(7) on the basis that no cause of action is stated against them. Defendant Frota seeks dismissal pursuant to CPLR §3211(a)(8) claiming that plaintiffss did not serve the complaint upon them.

CPLR § 3211. Motion to dismiss. (a) Motion to dismiss cause of action. A party may move for judgment dismissing one or more causes of action asserted against him on the ground that: 4. there is another action pending between the same parties for the same cause of action in a court of any state or the United States; the court need not dismiss upon this ground but may make such order as justice requires; or7. the pleading fails to state a cause of action; or

8. the court has not jurisdiction of the person of the defendant..

The court will deal with Frota's motion to dismiss the complaint pursuant to

CPLR §3211(a)(8) based on lack of jurisdiction. Although plaintiffs allege in their underlying complaint that OAI is authorized to accept service of process for Frota, Frota denies same and plaintiffs offer no evidence to support this allegation. There is, therefore, no dispute that unless the service of the pleadings on OAI constitutes service to Frota, that plaintiffs have not personally served Frota in this action. Indeed, that is one of the reasons why plaintiffs seek to establish quasi in rem jurisdiction over Frota There is no dispute that the plaintiffs have not personally served Frota in this action. Inasmuch as the court is denying plaintiffs application for quasi in rem jurisdiction, the court lacks personal jurisdiction over Frota. Their motion to dismiss the complaint on that basis is therefore granted.

The court will next deal with OAI and USFGC's motion to dismiss the complaint pursuant to CPLR §3211(a)(7) on the basis that no cause of action is stated against them. This is a pre-answer motion to dismiss. A motion for an accelerated judgment of dismissal pursuant CPLR §3211(a)(7) may utilize affidavits and other forms of proof to attack the merits of a cause of action. To succeed on the motion, the defendants must convince the court that nothing the plaintiffs can reasonably be expected to prove would help; that the plaintiffs just do not have a claim (Siegel, New York Practice 3d ed §265 [1999[).

In assessing a motion under CPLR§ 3211(a)(7) however, a court may freely consider affidavits submitted by the plaintiffs to remedy any defects in the complaint (Rovello v. Orofino Realty Co., 40 NY2d 633, 635 [1976]) and the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one (Guggenheimer v. Ginzburg, 43 NY2d 268, [*7]275 [1977]).

Inasmuch as defendant seeks pre-answer relief, the court may not convert the motion to a summary judgment application pursuant to CPLR §3212 absent prior notice to all parties (Moustafis v. Osbourne, 18 AD3d 723 [2nd Dept 2005]). The court is not converting the motion.

Plaintiffs complaint alleges fifty one allegations of fact in support of three causes of action. The first cause of action is against all defendants for supplemental attorney fees in connection with plaintiffs' legal representation of a seamen named S.M. Pires in a maritime maintenance and cure action. The second cause of action is against all defendants for pre-verdict interest on all prior damage awards. The third cause of action is against all defendants for punitive damages based on the allegations in the complaint.

Plaintiffs allegations of fact pertaining to OAI and USFGC are as follows. OAI is the exclusive North American Steamship agent for Frota. USFGC is an insurer and surety company that was purchased by and merged with St. Paul Fire and Marine Insurance Company (hereinafter St. Paul) and which has assumed certain of St Paul's debts and obligations under various litigation and appeal bonds.

Plaintiffs allegations of fact allege prior litigation involving Frota and plaintiffs' client, Pires. Plaintiffs further allege that they obtained a favorable judgment on behalf of their client against defendant Frota. The prior complaint yielding the favorable judgment did not name OAI or USFGC as parties. The prior judgment was not against OAI or USFGC. Plaintiffs' complaint alleges an agency relationship between OAI and Frota. The complaint, however, does not allege any transactions or occurrences by OAI which would support a claim for supplemental attorney fees due from them. Similarly, the allegations of fact pertaining to USFGC do not allege any transactions or occurrences by them to support a claim for attorneys fees due from them.

It is well settled in New York that a prevailing party may not recover attorney's fees from a losing party except where authorized by statute, agreement, or court rule (U.S. Underwriters Ins. Co. v. City Club Hotel, LLC, 3 NY3d 592, 597 [2004]). Furthermore, attorney fees may not be awarded in the absence of a statute expressly authorizing their recovery, or an agreement or stipulation to that effect by the parties (see Feeney v. Licari, 131 AD2d 539 [2nd Dept. 1987]).

General Obligation Law § 5-701(a)(2) provides that every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking is a special promise to answer for the debt, default or miscarriage of another person.

In order for plaintiffs to have a cause of action for attorney fees against OAI, as the alleged agent of Frota, plaintiffs must allege facts showing Frota's liability for attorney fees and must demonstrate OAI's written agreement to answer and be responsible for Frota's liability.

The same analysis applies to USFGC. Plaintiffs complaint makes no allegations of fact supporting the direct liability of USFGC for attorney fees due to the plaintiffs. Nor does the complaint allege any basis to find them liable for legal fees as an obligations of defendant Frota. In opposition to the motion, plaintiffs offered nothing to address these deficiencies in the complaint.

Turning to the second cause of action for pre-judgment interest, there can be no doubt that if OAI and USFGC have no liability for the judgment and/or attorney fees plaintiffs are due from Frota, they are also not liable for any pre judgment interest accruing on same.

The court now turns to plaintiffs' third and final cause of action for punitive damages. It [*8]is noted that this claim relies on the same allegation of fact that were alleged to support the first two causes of action. It is well settled that no separate cause of action for punitive damages lies for pleading purposes (Paisley v. Coin Device Corp., 5 AD3d 748,749 [2nd Dept 2004]. A demand or request for punitive damages is parasitic and possesses no viability absent its attachment to a substantive cause of action (Yong Wen Mo v. Ming Chan, 17 AD3d 356, 359 [2nd Dept 2005]). Therefore, a claim for punitive damages is not a separate cause of action but merely constitutes an element of single total claim for damages (Benjamin Park v. YMCA of Greater New York Flushing, 17 AD3d 333 [2nd Dept 2005]). When allegations pertaining to compensatory damages are contained in a portion of a complaint denoted as a second cause of action for punitive damages, it is to be treated as part of the first cause of action (Hobush v. Consolidated Rail Corp., 117 AD2d 927 [3rd Dept 1986]). The court will treat plaintiffs' pleading alleging punitive damages to be part of the first and second cause of action. Inasmuch as those two causes of action are dismissed, the claim for punitive damages fails as well. OAI and USFGC's motion to dismiss the complaint for failure to state an action against them is granted.

Based on the court's decision and order to dismiss the complaint against all defendants, namely, Frota, OAI and USFGC, defendants cross- motion to change venue or to transfer the instant action to Bronx County is rendered moot.

The foregoing constitutes the decision and order of this court

__________________________________x

J.S.C. Footnotes

Footnote 1:Although the plaintiffs reference exhibit 9 as Justice Cahn's decision, there is no exhibit 9. Furthermore, Justice Cahn's decision is actually annexed as exhibit 10 in the attachments. This irregularity will be disregarded pursuant to CPLR §2001.

Footnote 2:Once again plaintiffs reference an exhibit number that does not match the exhibit annexed. Exhibit 10 is referenced in plaintiffs's affidavit as the Appellate Court decision in the Pires action, issued on November 27, 2001, 288 AD2d 126. The referenced exhibit however is already annexed as exhibit 8. This irregularity will also be disregarded pursuant to CPLR §2001. However after Justice Cahn's decision there is a transcript of a proceeding before Justice Cahn dated July 18 2003 that is not referenced or explained. It will therefore be disregarded.

Footnote 3:The third paragraph of Mr. Thomas Stiles first affirmation references as an annexed exhibit A, a letter which he describes as correspondence he sent to a judge in the Pires action. He does not state the name of the judge and has no exhibit containing such an exhibit marking. . He further states that the Pires action was transferred to the Bronx and references annexed exhibit B to support this contention. Once again, there is no exhibit containing such a marking.

Footnote 4:As previously indicated these documents are already annexed in duplicate in the defendant's cross-motion.

Footnote 5:As previously indicated these documents are already annexed in duplicate in the defendant's cross-motion.