Invacare Supply Group, Inc. v Englander
Annotate this CaseDecided on March 31, 2008
Supreme Court, Nassau County
Invacare Supply Group, Inc., Plaintiff,
against
David Englander a/k/a David O. Englander a/k/a David K. Englander and Jack Englander, Individually and Doing Business under the Name Ultracare, Defendants.
11275-07
COUNSEL FOR PLAINTIFF
Helfand & Helfand, Esqs.
60 East 42nd Street
New York, New York 10165
COUNSEL FOR DEFENDANTS
Law Offices of J. Henry Nierman
168-02 Jewel Avenue
Flushing, New York 11365
Leonard B. Austin, J.
This action was commenced by the filing of a summons and complaint in the office of the Nassau County Clerk on June 28, 2007. The complaint alleges four causes of action sounding in breach of contract, account stated, attorneys fees and fraud in the inducement.
In order to induce Plaintiff, a medical supply distributor, to enter into a series of [*2]transactions to sell medical supplies to Defendants, David completed and submitted to Plaintiff a credit application dated May 18, 2005. He did so on behalf of an entity "Ultracare Inc." He executed the credit application as the president of Ultracare Inc. On the application, David stated that Ultracare Inc. was established on June 1, 2000 and was incorporated in New York. Further, he represented that both Ultracare Inc.'s federal tax identification number as well as his own social security number were xxx-xx-xxxx.
Based on the credit application, Plaintiff, at various times from July through December 2005, delivered goods totaling $42,441.58 to Ultracare. No payments have been made with regard to those shipments. That is the basis of the first cause of action sounding in breach of contract.
On January 18, 2006, an invoice was forwarded to Ultracare at the address indicated on the credit application setting forth the balance then due together with finance charges pursuant to the credit application. Subsequently, it would appear that the finance charge was withdrawn leaving the balance of $42,441.58.
Plaintiff alleges that but for the representations made in the credit application by David, it would not have entered into it the relationship and sold goods to Defendants.
DISCUSSION
A.Proper Parties
The threshold issue to be determined in this matter is whether the individual Defendants, David and Jack are properly named, as opposed to Ultracare Inc. their putative corporation. In support of the motion to dismiss, David argues that the goods were shipped to Ultracare by Plaintiff and that Ultracare was invoiced therefor. In addition, it was Ultracare that submitted the credit application upon which the business relationship with Plaintiff was established.
Ordinarily, a corporate officer is not personally liable for the obligations of the corporation when he/she enters into a contract unless "there is a clear and explicit evidence" of his/her intention to do so. Worthy v. New York City Housing Auth., 21 AD3d 284, 286 (1st Dept. 2005). See also, Metropolitan Switch Board Co., Inc. v. Amici Assoc., Inc., 20 AD3d 455 (2nd Dept. 2205); and Gordon v. Teramo & Co., Inc., 308 AD2d 432 (2nd Dept. 2004). However, that rule is abrogated when the purported corporation does not exist. Such is the case here.
The documentary evidence submitted by Plaintiff in opposition to this motion demonstrates that while Ultracare Inc. was incorporated in Delaware on June 21, 2000, it was declared "void" on March 1, 2002 by reason of its failure to pay its corporation tax. Further, since David indicated on the credit application that Ultracare Inc. is a domestic corporation, a search of the New York Department of State records of corporate filings was conducted by the Court. There is no corporate entity domestic or foreign registered in the office of the New York Department of State under the name "Ultracare, Inc." There is, however, a corporation is dated incorporated known as Ultracare Supplies Inc. That corporation is still viable and active in New York. However, that is not the name under which David established a relationship with Plaintiff.
In New York Law, a corporation which has been dissolved is to be viewed as "legally dead". Lorisa Capital Corp. v. Gallo, 119 AD2d 99 (2nd Dept. 1986). A person who "purport(s) to act on behalf of the corporation which (has) neither a de jure nor a de facto existence" is "personally responsible toward the obligation which he incurred". Brandes Meat Corp. v. Cromer, 146 AD2d 666, 667 (2nd Dept. 1999). See, Lodato v. Greyhawk North America, LLC, [*3]89 AD3d 496 (2nd Dept. 2007); and Pennsylvania Building Co. v. Schaub, 14 AD3d 365 (1st Dept. 2005).
The serious issue as to whether David and Jack are personally liable herein cannot be disposed of by this motion. This is particularly true when Defendants have not responded to Plaintiff's opposition by the service of a reply to refute the records of the Delaware and New York authorities. If David and Jack cannot establish the existence of a viable corporate entity which bears the responsibility for the contract, they cannot escape personal liability. Brandes Meat Corp. v. Cromer, supra.
B.Defendants' Dismissal Motion
At the outset, it is noted that the moving papers addressed only the liability of David and Jack. There seems to be a concession on their part that there was, in fact, a viable contract and that the credit application is suspect as suggested in the complaint. Here, Defendants have not identified any particular cause of action against which they moved. Nor have they identified upon what section of CPLR 3211 (a) they rely upon for their application to dismiss.
It would appear that Defendants rely upon CPLR 3211 (a)(1) (documentary evidence) and (7) (failure to stay the cause of action). Where, as here, the motion to dismiss for failure to state a cause of action is addressed to the action in its entirety, the motion must be denied if any of the causes of action is found to be legally sufficient. Anand v. Soni, 215 AD2d 420 (2nd Dept. 1995); and Maritarano Construction Corp. v. Briar Contracting Corp., 104 AD2d 1028 (2nd Dept. 1984).
1.Documentary Evidence
Dismissal based upon documentary evidence is only appropriate when the moving party can demonstrate that the documentary evidence presented conclusively establishes a defense to the cause of action, as a matter of law. Goshen v. Mutual Life Ins. Co. of New York, 98 NY2d 314 (2002); and Leon v. Martinez, 84 NY2d 83 (1994). See also, 730 J & J LLC v. Fillmore Agency, Inc., 303 AD2d 486 (2nd Dept. 2003); and Boca v. Beth-el of Great Neck, 303 AD2d 346 (2nd Dept. 2003).
Here, the documentary evidence, if anything, points to the individual liability of David and Jack in the absence of any proof that Ultracare is a viable Delaware or New York corporation. In fact, Plaintiff has annexed various proofs that Ultracare Inc. does not exist. Accordingly, dismissal on the ground of documentary evidence is inappropriate.
2.Failure to State a Cause of Action
Given the fact that the motion is addressed to the totality of the complaint, sustaining any of the four causes of action was denial of the motion. Anand v. Soni, supra. In analyzing whether any cause of action is viable, the court should look to the four corners of the pleadings to determine whether "factual allegations are discerned which taken together manifest any cause of action cognizable at law." Polonetsky v. Better Homes Depot, 97 NY2d 46, 54 (2001), quoting Guggenheimer v. Ginzburg, 43 NY2d 268, 275 (1977). In addition, the court must accept as true all of the facts alleged in the complaint together with any submissions of fact which are made in opposition to the motion. 511 West 23rd Street Owners Corp. v. Jennifer Realty Co., 98 NY2d 144 (2002); and Sokoloff v. Harriman Estates Development Corp., 96 NY2d 409 (2001). The court must give the allegations made in the complaint every favorable inference which may be drawn from the pleading. Leon v. Martinez, supra; Dye v. Catholic [*4]Med. Center of Brooklyn & Queens, Inc., 273 AD2d 193 (2nd Dept. 2000).
With regard to the first cause of action, a cause of action for breach of contract must plead the terms of the contract, consideration, performance by Plaintiff and breach by Defendant causing Plaintiff to sustain damages. Furia v. Furia, 116 AD2d 694 (2nd Dept. 1986). It does not appear that Defendants dispute that a viable cause of action for a breach of contract has been stated. Rather, they argue that they are not personally responsible. That is, Defendants do not apparently dispute the fact that they ordered goods pursuant to the credit application, goods were delivered and accepted (Uniformed Commercial Code § 2-607) and they were not paid for.
Based upon the acknowledgment of the breach of contract claim and its having been appropriately pled, the first cause of action cannot be dismissed. As noted, the analysis should stop there. Anand v. Soni, supra. However, it is appropriate to note that Plaintiff has appropriately pled an account stated. See, Nebraska Land, Inc. v. Debt Collections, Inc., 303 AD2d 662 (2nd Dept. 2003).
Likewise, based upon the undisputed credit application a prima facie showing for attorney's fees under the third cause of action has been made as well.
Finally, with regard to the fourth cause of action alleging fraud and the inducement, a prima facie claim under this theory is made when plaintiff alleges that the defendant made a material misrepresentation which was false and known to be false when it was made, for the purpose of inducing plaintiffs justifiable reliance causing damage. Lama Holding Co. v. Smith Barney Inc., 88 NY2d 413 (1996); and Channel Master Corp. v. Aluminum Limited Sale, Inc., 4 NY2d 403 (1958). In their moving papers, defendants suggest, in passing, that the fourth cause of action is duplicative of the breach of contract cause of action and, therefore, should be dismissed. See, First Bank of Americas v. Motor Car Funding Inc., 257 AD2d 287 (1st Dept. 1999). Here, Plaintiff has more than adequately pled that it was induced to enter into the relationship with Defendants based upon the false allegations set forth in the credit application. Accordingly, this cause of action must also survive.
3.Sanctions
The court may impose sanctions upon a party or an attorney who engages in frivolous conduct. According to NYCRR 130-1.1(a). Frivolous conduct is that which sets forth arguments lacking merit in law and cannot be supported by a reasonable extension, modification or reversal of existing law, if it is designed to harass or maliciously injure another, or if it makes material statements of fact which are false. 22 NYCRR 130-1.1(c). Determination of sanctions is left to the sound discretion of the Court. Wagner v. Goldberg, 293 AD2d 527 (2nd Dept. 2002).
Here, with each cause of action having been sustained, Defendants' claim that this action is frivolous is, in and of itself frivolous, by definition.
Since there is no application for sanctions against Defendants, the Court will not consider an award of sanctions to Plaintiff. However, Defendants are reminded that 22 NYCRR 130-1.1(c) defines frivolous conduct as seeking sanctions without any basis.
Accordingly, it is,
ORDERED, that Defendants' motion to dismiss this action and for sanctions is denied; and it is further, [*5]
ORDERED, that counsel for the parties shall appear for a preliminary conference on May 15, 2008 at 9:30 a.m.
This constitutes the decision and Order of the Court.
Dated: Mineola, NY_____________________________
March 31, 2008Hon. Leonard B. Austin, J.S.C.
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