Perrotti v Becker, Glynn, Melamed & Muffly LLP

[*1] Perrotti v Becker, Glynn, Melamed & Muffly LLP 2009 NY Slip Op 52798(U) Decided on December 14, 2009 Supreme Court, New York County Bransten, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 14, 2009
Supreme Court, New York County

Gustavo Perrotti, Plaintiff,

against

Becker, Glynn, Melamed and Muffly LLP, As Escrow Agent; Richard N. Chassin, As Escrow Agent; Jorge Garcia-Garcia; Flavio De Azevedo Lobato; Fronteer Capital Holdings, Inc.; Swiss Capital (Cayman) LTD.; Swiss Capital Alternative Investments Ltd.; Southport Capital Alternative Investments Ltd., and Arawak Capital Financial Advisors, LLC, Defendants.



603496/08

 

Attorneys on the matter were Jordan E. Stern, Esq. of Becker, Glynn, Melamed & Muffly LLP for the moving defendants and Andrew B. Schultz for the plaintiff.

Eileen Bransten, J.

In this action involving a dispute over a stock purchase agreement, motion sequence numbers 001 and 002 are consolidated for disposition.

In motion sequence number 001 defendants Becker, Glynn, Melamed and Muffly LLP ("Becker, Glynn") and Richard N. Chassin ("Chassin") move to dismiss the complaint as against themselves.

In motion sequence number 002, defendants Jorge Garcia-Garcia ("Garcia") and Flavio de Azevedo Lobato ("Lobato") move to dismiss the complaint as against themselves.

Plaintiff Gustavo Perrotti ("Perrotti") opposes dismissal and cross moves to amend his complaint to add, among other things, a cause of action for fraud.

Background

This action revolves around a May 11,2006 Stock Buyout and Consulting Agreement ("Agreement") between Perrotti, defendants Fronteer Capital Holdings ("Fronteer"), Swiss Capital (Cayman) Ltd. ("SCC"), Swiss Capital Alternative Investments Ltd. ("SCA"), Garcia, Lobato and non-party Linda Macarena ("Macarena").[FN1] Perrotti sold his shares in Fronteer, SCA and SCC to Garcia and Lobato for "the aggregate sum of $2,155,750" (Original Complaint ["Complaint"]) at & 13). Perrotti claims that Becker, Glynn and Chassin, in a separate Stock Pledge and Escrow Agreement, dated May 11, 2006 ("Escrow Agreement") were to hold in escrow "the stock being sold by plaintiff Perrotti, and any ownership indicia for such stock, as security and collateral ... "(Complaint, & 14).

Perrotti commenced this action in 2008. He alleges that Becker, Glynn and Chassin violated the Escrow Agreement "by failing to maintain plaintiffs security, the subject stock and/or indicia of stock ownership" (id., & 20) and characterizes its conduct as amounting to "bad faith" and "gross negligence" (id., & 21).

Perrotti further claims that the payments under the Agreement were to be made to "Perrotti (for himself and as assignee of 'Linda Macarena Consultancy')" (id., & 16). He alleges that Garcia and Lobato ceased all payments to him in January 2007, having paid only $424,550, resulting in a remaining debt of $1,731,200. At some point, the three companies involved in the Agreement failed, and are now in liquidation in the Cayman Islands.

Perrotti faults Garcia and Lobato, as well as all of the corporate defendants, with breach of the Agreement, by failing to pay the remaining $1,731,200 on the contract. He alleges that Garcia and Lobato "used the five defendant corporations as an 'alter ego,' and dominated and controlled the corporations for their own benefit, so that the corporate 'veil' should be pierced and these two individuals should be held jointly and severally liable ..."[FN2] (Complaint, & 25).

Analysis

Motions to Dismiss

On a CPLR 3211 motion to dismiss, the court must "accept as true the facts as alleged in the complaint and submissions in opposition to the motion, accord plaintiffs the benefit of every possible favorable inference and determine only whether the facts as alleged fit within any cognizable legal theory" (Sokoloff v Harriman Estates Development Corp., 96 NY2d 409, 414 [2001]; see also Leon v Martinez, 84 NY2d 83 [1994]. A motion brought pursuant to CPLR 3211 (a) (1) "may be granted where 'documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law' " (Held v Kaufman, 91 NY2d 425, 430-431 [1998], quoting Leon v Martinez, 84 NY2d at 88; Foster v Kovner, 44 AD3d 23, 28 [1st Dept 2007] [the "documentary evidence must resolve all factual issues and dispose of the plaintiff's claim as a matter of law"]).

Becker, Glynn & Chassin's Motion to Dismiss

Becker, Glynn and Chassin maintain that the Agreement required Becker, Glynn to maintain "certain indicia of stock ownership" known as "share transfer forms representing all of the shares of Fronteer and all of the SCC shares purchased by [Garcia and Lobato]" (Memorandum of Law, at 1-2), and that Becker, Glynn has done so and continues to do so. What are purported to be filled-out copies of these forms were presented to the court at oral argument. There are three forms, all of which include the signatures of Garcia and Lobato representing the various transfer of shares. As a result, Becker, Glynn and Chassin requested that Perrotti withdraw his complaint, but he refused. Further, Becker, Glynn and Chassin maintain that Chassin, as an individual, has nothing to do with the Escrow Agreement, which he allegedly signed solely on behalf of Becker, Glynn.

"Where a contract ... is unambiguous, 'its interpretation is a matter of law and effect must be given to the intent of the parties as reflected by the express language of the agreement' " (National Granite Title Insurance Agency, Inc. v Cadlerock Properties Joint Venture, 5 AD3d 361, 362 [2d Dept 2004], quoting Riley v south somers Development Corp., 222 AD2d 113, 117 [2d Dept 1996]). "Contracts which are clear and unambiguous should be enforced according to their plain meaning" (Cellular Telephone Co. v 210 East 86th Street Corp., 44 AD3d 77, 83 [1st Dept 2007]).

Under the Escrow Agreement, Becker, Glynn was obligated to hold in escrow "duly executed share transfer forms representing all of the shares of Fronteer and all of the SC Cayman shares purchased by them under Section 2 of the Buyout and Consulting Agreement ... [emphasis added]" (Agreement, Article 1, 1.1). There is no mention of holding in escrow actual shares, certificates, or any other specific indicia of stock ownership. Although Perrotti baldly claims that Becker, Glynn must have released the share transfer forms in order for the liquidation of the Cayman companies to proceed, Becker, Glynn has shown, by documentary evidence on oral argument, that it still maintains the filled-out share transfer forms. Becker, Glynn & Chassin have established that the documentary evidence wholly contradicts the allegations made in the Complaint and the proposed amended complaint, and that, as a result, there has been no breach of the Escrow Agreement. Becker, Glynn and Chassin's motion to dismiss the complaint as to themselves is thus granted.

The cause of action as against Chassin is dismissed for the additional reason that Perrotti has failed to show that Chassin signed the Escrow Agreement in his individual capacity, rather than as an agent for Becker, Glynn. "Where a 'document [is] executed by him' " (Siciliano v Forchelli & Forchelli, 17 AD3d 343, 345 [2d Dept 2005], quoting Gold v Royal Cigar Company, 105 AD2d 831, 832 [2d Dept 1984]). Perrotti has stated no basis upon which to include Chassin in this action.

Garcia and Lobato's Motion to Dismiss

Garcia and Lobato claim that the Agreement contained two parts: a stock purchase agreement, and a separate consulting services agreement. They argue that, under the Agreement, [*2]they purchased Perrotti's interest in the stock for only $67,750, to be paid in several installments. Garcia and Lobato maintain that they have paid every installment due under the Agreement up to the present time and that they intend to continue to do so.

In moving to dismiss, they rely on section 7 of the Agreement, which deals with an alleged consulting arrangement (described as the "Consultancy"). Pursuant to section 7 of the Agreement, Macarena "agrees to provide consulting services to Fronteer, [SCC] and [SCA] ... for a term of five years. Such services shall include introductions to potential investors, advice on investment opportunities, analysis of operational matters and such other services as Fronteer, [SCC] and [SCA] shall request from time to time" (Agreement, 7 [a]). Section 7 further requires an initial payment of $130,000 for the consulting services, and numerous installment payments, which add up to an overall total of $2,088,000. By this language, the Agreement appears to obligate Fronteer, SCC and SCA to pay the bulk of the Agreement's delineated collateral to Perrotti's chosen consultant, Macarena, without any obligation on the part of Garcia and Lobato to pay the enumerated consultancy fees, and without any obligation to pay Perrotti himself at all. Garcia and Lobato point out that section 7 only requires payments to be made by the three corporations to Macarena, as an obligation separate and apart from their own obligation to pay Perrotti for the purchase of his stock

Perrotti counters that all of the payments required under the Agreement were for the purchase of his stock, and that the three corporations are but "alter egos" of Garcia and Lobato, warranting piercing the "corporate 'veil' " to reach Garcia and Lobato individually for repayment of the Agreement's entire consideration (Complaint, & 25). It is noteworthy that the Agreement requires the "prior written consent of the parties" to any assignment (Agreement, 12 [1]). Perrotti does not offer any proof of a written authorization to an assignment of Macarena's rights under the Agreement to himself, as grounds for any rights under section 7 of the Agreement.

The language of the Agreement is very clear. There are two separate obligations set forth: one, to pay Perrotti approximately $70,000 for the cost of the shares of the various companies, and two, to pay Macarena over $2 million for consulting fees. The two obligations are separate and distinct and do not entitle Perrotti to over $2 million as alleged in the Complaint. The fact that partial payment of fees over $67,000 was made to Perrotti individually is of no moment, as he himself has chosen to style himself as the assignee of Macarena, to whom all payments were to be made (Complaint, & 16). His new contention, that he was always meant to be the sole recipient of the Agreement's consideration, is obviated by the Agreement. Thus, Perrotti has no cause of action for breach of contract against Garcia or Lobato.

In paragraph 25 of the complaint, Perrotti alleges that Garcia and Lobato "each personally used the five defendant corporations as an 'alter ego,' and dominated and controlled the corporations for their own benefit," calling for piercing the corporate veil to hold them individually liable for wrongs committed by the corporations. In order to "pierce the corporate veil," a plaintiff must show that " '(1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiffs injury' " (Sheridan Broadcasting Corporation v Small, 19 AD3d 331, 332 [1st Dept 2005], quoting Matter of Morris v New York State Department of Taxation and Finance, 82 NY2d 135, 141 [1993]).

Perrotti has not alleged anything that would show domination of the five corporations, and has certainly failed to allege "with the requisite 'particularized statements detailing fraud or other corporate misconduct,' " that would suffice to pierce the corporate veil (Sheridan Broadcasting, 19 AD3d at 331, quoting Sheinberg v 177 E. 77 Inc., 248 AD2d 176,177 [1st Dept 1998]). Thus, Perrotti's second cause of action in the Complaint is dismissed and Garcia and Lobato's motion to dismiss is granted.[FN3]

Perrotti's Cross-Motion to Amend

CPLR 3025 (b) provides that "[l]eave to amend a pleading should be freely granted unless the proposed amendment is palpably insufficient or patently devoid of merit, and will not prejudice or surprise the opposing party" (Trataros Construction v New York City Housing Authority, 34 AD3d 451,452-453 [2d Dept 2006]). Such leave is "within the sound discretion of the trial court" (Vollbrecht v Jacobson, 40 AD3d 1243, 1247 [3d Dept 2007]). Perrotti seeks to amend his complaint to plead, among other things, a cause of action for fraud in the inducement. He claims that he was offered an original copy of the Agreement in which the $2 million plus was set forth as the purchase price for the sale of the stock. He then claims that Garcia and Lobato presented him with a second form of the Agreementthe one he signedthat they allegedly represented to him contained the same purchase terms as the original draft (i.e., the over $2 million purchase price), but also contained unrelated changes that were meant for Garcia and Lobato's sole benefit, but which would not materially change the Agreement, or harm Perrotti in the slightest. He maintains that, apparently without reading this version of the Agreement, he signed the document, having believed Garcia and Lobato's allegedly false represetations as to the changes made thereto.[FN4]

The cross motion to amend the complaint to add a claim for fraud is denied as Perrotti has failed to allege such a cause of action against Garcia and Lobato. Fraud requires a showing of a representation of "a material existing fact, falsity, scienter, deception and injury" (New York University v Continental Insurance Company, 87 NY2d 308, 318 [1995] [internal quotation marks and citation omitted]; see also Serino v Lipper, 47 AD3d 70 [1st Dept 2007]). Each of these elements must be pled with particularity (CPLR 3016 [b]; Papp v Debbane, 16 AD3d 128 [1st Dept 2005]).

When Perrotti signed the Agreement, he was fully capable of reading it, to see for himself what it contained; yet, he allegedly failed to do so. If the oral misrepresentations made to a party to a contract are "meaningfully contradicted" by the subsequent writing, reliance on the oral representations is unreasonable (Societe Nationale D'Exploitation Industrielle des Tabacs et Allumettes v Salomon Brothers International Limited, 249 AD2d 232, 233 [1st Dept 1998]; see also Sandcham Realty Corp. v Taub, 299 AD2d 220, 221 [1st Dept 2002][reliance on prior oral representations contradicted by express terms of the written agreement is "unjustifiable as a matter of law"]; Daily News, L.P. v Rockwell International Corporation, 256 AD2d 13, 14 [ 1 st Dept 1998] [a conflict between an oral representation and the subsequent written words of an agreement "negates a claim of a reasonable reliance upon the oral representation [internal quotation marks and citation omitted]"). Therefore, Perrotti has failed to allege a cause of action based on fraud in his proposed amended complaint.

In his proposed amended pleading, Perrotti also attempts to bring in defendant Southport Capital Alternative Investments Ltd. ("Southport") on the theory that Garcia and Lobato "each dominated and controlled SCC1, and caused Southport to be its successor in interest" (Complaint, & 52). Perrotti is apparently attempting once again to "pierce the corporate veil." These allegations are unavailing, however, as they, like the previous arguments in favor of veil piercing are completely unsubstantiated.

The causes of action for breach of contract against Becker, Glynn and Chassin in the proposed amended complaint, now styled as actions for "bad faith" and "gross negligence" would fail as well for lack of merit.

None of the allegations in the proposed amended complaint can be sustained. They are too conclusory, and, as mentioned above are conclusively defeated by the documentary evidence.

Accordingly, it is

ORDERED that the motions to dismiss by Becker, Glynn and Chassin (001) and Garcia and Lobato (002) are granted, and the complaint is hereby dismissed as to these parties with costs and disbursements as taxed by the Clerk of the Court upon the submission of an appropriate bill of costs, and it is further

ORDERED that Perrotti's cross-motion to amend the complaint is denied.

This constitutes the Decision and Order of the Court.

Dated: New York, New York

December 14, 2009

/s/

Hon. Eileen Bransten

Footnotes

Footnote 1:Linda Macarena is described only as a "Panamanian company." Garcia Memorandum of Law, at 2

Footnote 2:

Footnote 3:Perrotti has failed to revisit this claim in his proposed amended complaint and has, in fact, reduced the caption of the action to remove Fronteer, SCA, and Arawak from the case.

Footnote 4:In bringing this claim, Perrotti is retreating from his position that the consultancy fees were to be paid to Macarena (as the Agreement says), but that he was to receive the payments as Macarena's assignee. Perrotti now claims that he was always entitled to be paid directly.