Crescentini v Slate Hill Biomass Energy, LLC

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Crescentini v Slate Hill Biomass Energy, LLC 2012 NY Slip Op 31412(U) May 21, 2012 Supreme Court, Nassau County Docket Number: 601383/11 Judge: Stephen A. Bucaria Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. ....... .......... [* 1] SHORT FORM ORDER SUPREME COURT - STATE OF NEW YORK Present: ORIGINAL HON. STEPHEN A. BUCARIA Justice TRIAL/lAS , PART NASSAU COUNTY KEIKO CRESCENTINI INDEX No. 601383/11 Plaintiff -against- MOTION DATE: March 23 , 2012 Motion Sequence # 001 , 002 , 003 004 , 005 SLATE HILL BIOMASS ENERGY , LLC LORETTA OLIVA , ROBERT GIORDANO and LEONARD C. ALOI Defendants. The following papers read on this motion: Order to Show Cause................................. XX Notice of Motion....................................... XX Cross- Motion............................................. X Affirmation! Affidavit in Opposition.......... Supplemental Affirmation in Support........ X Reply Affirmation................. ..... Memorandum of Law.................................. X XXX Motion by plaintiff for preliminary injunctive relief against defendants Slate Hil Biomass Energy, LLC (" Slate ), Loretta Oliva , and Robert Giordano as set forth in the Temporary Restraining Order (" TRO" ) dated December 9 , 2011 denied , on the conditions continued pending further order of the court. , is set forth below. The TRO is Motion by plaintiff for an order directing that service of the summons and verified [* 2] CRESCENTINI Index no. 601383/11 complaint by made on defendant Giordano by publication pursuant to CPLR 315 , or in the alternative eranted in the alternative. Plaintiff is directed to submit a proposed order of publication pursuant to CPLR 308( 5), and in accordance with CPLR 316, within 10 days of service or receipt of a copy of this order. , in a manner directed by the Court pursuant to CPLR 308(5), is Motion by defendants Slate and Loretta Oliva for judgment dismissing the complaint denied pursuant to CPLR 3211(a)(1) and (a)(7), and CPLR 3016(b), is Motion by defendants Slate and Oliva for an order vacating and dissolving the denied moot. temporary restraining order dated December 9 , 2011 , is as Cross-motion by defendant Leonard Aloi for judgment dismissing the complaint denied pursuant to CPLR 3211(a)(1) and (a)(7), and CPLR 3016(b), is Backeround Plaintiff is a 79 year-old woman , with no family or heirs , who began a friendship with defendant Oliva in March , 2009. Ms. Oliva is estimated to be thirt years younger than plaintiff. She assisted plaintiff with many personal and household tasks. Plaintiff describes this in the complaint as a " campaign to take over " her estate and " isolate " her " from all her remaining friends , her driver , bankers , accountants , and lawyers " (complaint , par 13). On December 2 2010 , defendant Oliva created Slate. Oliva advised plaintiffthat Slate was seeking funding of several milion dollars for a waste to energy project ("the project" and she introduced plaintiff to defendant Aloi. According to plaintiff, Oliva told her that Aloi , an attorney, would represent her for estate planning, and help her to give Oliva 500 000 to fund the project. The money would be secured by a mortgage on propert upstate ("the Wawayanda propert" ), that was currently owned by defendant Oliva and her cousin , defendant Giordano. Plaintiff states that Oliva assured her the propert was worth more than $1 500 000. 2011. Defendants Oliva and Giordano deeded the Wawayanda propert to Slate. Plaintiff paid the full amount of$1 , 500 000 , and took back a mortgage securing the loan in that amount. Oliva executed the mortgage (Exhibit 2 to plaintiff s moving papers) and a promissory balloon note(Exhibit 4 to plaintiff s moving papers) as the managing member of Slate. No appraisal was sought for the Wawayanda The closing took place on January 13 [* 3] CRESCENTINI Index no. 601383/11 propert prior to the closing, and no guaranty of the mortgage or note was obtained. The maturity date of the mortgage is January 11 2016 , while principal and interest of 8% per anum is due on the note on December 31 , 2015. The funds were wired to defendant Aloi' s account , and disbursed pursuant to Oliva instrctions. According to the complaint , checks written at the closing resulted in payments of$639 , 305. 55 to Oliva or on her behalf, $613 305.45 to Giordano or on his behalf, and approximately $247, 000 for miscellaneous expenses , leaving Slate with no funds available to conduct business (complaint, par. 24- 35). Plaintiff and Slate also entered into the Slate Biomass Project Agreement "the Project Agreement" (Exhibit 5 to the moving papers). Pursuant to this Project Agreement Slate would secure a loan or sell part of the propert, at which time it would repay plaintiffthe sum of $1 500 000. However Slate had no obligation to get the necessary approvals for the construction of the project and " in process at any time its sole discretion " could discontinue the application in which event Crescenti (sic) shall not be entitled to any payment" (Project Agreement , par. 2). Plaintiff alleges that she had a fallng out with Oliva in August, 2011 , when Oliva suggested that she and plaintiff get married , so that Oliva could control plaintiffs estate. Plaintiff declined. Proceedines Herein This action was commenced in December , 2011. Plaintiff alleges claims against Slate Oliva , Giordano and Aloi for equitable rescission ofthe mortgage and fraud. She also alleges claims against Aloi , individually, for breach of fiduciary duty and legal malpractice. Plaintiff obtained a temporary restraining order against Slate , Oliva and Giordano , dated December 2011. Plaintiff seeks preliminary injunctive relief against Slate , Oliva , and Giordano , in an 500 000. Slate and Oliva move for judgment dismissing the complaint pursuant to CPLR 3211(a)(1) and (a)(7), and CPLR 3016(b). attempt to prevent dissipation of the $1 Although Aloi served an answer with eighteen affirmative defenses and a counterclaim , he also makes a cross-motion for dismissal on the same grounds as Slate and Oliva. Giordano apparently has not been served , and for this reason , plaintiff seeks an order directing service [* 4] CRESCENTINI Index no. 601383/11 on Giordano by publication. Slate and Oliva seek an order pursuant to CPLR 6314 , vacating the temporary restraining order herein against Oliva , on the grounds that it is onerous and punitive. Before considering the injunctive relief at issue , the Court first turns to the dismissal motions pursuant to CPLR 3211(a)(1) and (a)(7), and CPLR 3016 (b). CPLR 3211 Standard On a motion to dismiss pursuant to CLR 3211 , the facts as alleged must be accepted as true , the pleader must be accorded the benefit of every favorable inference , and the court Samiento Arnav Industries. Inc. Retirement Trust v v World Yacht Inc. 10 NY3d 70 Steiner. LLP 96 NY2d 300 303 (2001)). On a 3211 must determine only whether the facts as alleged fit within any cognizable theory , 79 (2008); Brown. Ravsman. Millstein. Felder motion the court may consider affidavits to remedy pleading problems Sarfliss v Maflarell 12 NY3d 527 , 530 (2009)). Where documentar evidence definitively contradicts the plaintiff s factual allegations and conclusively disposes of the plaintiff s claim , dismissal pursuant to CPLR 3211 (a)( 1) is M Fund Moore. LLC. 52 AD3d 811 (2 Snvder v Voris. Berardino v Ochlan 2 AD3d 556 (2 Dept Inc. v Carter 31 AD3d 620 (2 2003)). The document must utterly refute the plaintiffs factual allegations , thereby Goshen v Mutualldns. Co. of New York 98 NY2d 314 , 326 (2002)). Dept 2008); Martini warranted Dept 2006); establishing a defense as a matter oflaw (see The criterion on a motion pursuant to CPLR 3211(a)(7) is whether the pleader has a (Leon v Martinez 84 NY2d 83 , 88 (1994)). cause of action R 3016(b) Dismissal Standard CPLR 30 16(b) requires that where a cause of action is based upon fraud the circumstances constituting the wrong shall be stated in detail." A pleading alleging fraud must set fort basic facts to establish the elements of a fraud claim. CPLR 30 16(b) is satisfied where the facts alleged are sufficient to permit a reasonable inference of the alleged Pludeman v Northern Leasinfl Svs.. Inc. 10 NY3d 486 , 491- 492 (2008)). misconduct [* 5] CRESCENTINI Index no. 601383/11 The Motion and Cross-Motion to Dismiss At the outset , the Court notes that defendant Aloi' s answer was served on February 2012 , and his cross-motion for dismissal was served on March 15, 2012. Under these circumstances defendant Aloi' s cross-motion to dismiss the complaint is untimely, because Bowes v Healv, Diaz v DiGiulio 29 AD3d 623 (2 Dept 2006)). In addition , the AD3d 566 (2 Court notes that the exhibits identified by defendant Aloi were not attached to his affidavit and the cross-moving papers do not address the claims against him for breach of fiduciar duty and legal malpractice. Indeed , it is unclear on which document defendant Aloi relies for it was not made before service of his responsive pleading was required Dept 2007); his request for dismissal based upon documentar evidence. For all of these denied reasons defendant Aloi' s cross-motion to dismiss the complaint is summarily Plaintiff claims that timeliness is also an issue for the dismissal motion by defendants Slate and Oliva. Plaintiffs attorney argues that a 60- day extension of time to answer granted in court on December 13 , 2011 , expired on February 11 , 2012 , and the motion papers are dated February 13 , 2011. However counsel for defendants disputes the due date , and points out that in any event, papers due on Saturday, February 11 2012 would be timely if served on Monday, February 13, 2012 (McKinneys ' General Construction Law 25-a(1)). Under these circumstances the motion by defendants Slate and Oliva is not untimely. To properly plead a cause of action to recover damages for fraud , the plaintiff must Scott v Fields allege a representation of material fact , falsity, scienter 92 AD3d 666 (2 Dept 2012)). Plaintiffs complaint herein contains the following relevant allegations: , reliance and injury (1) Oliva convinced plaintiff to loan Oliva and/or Slate $1 500 000 for a project to make energy and or recycle waste on premises Oliva owns with defendant Giordano (complaint , pars 7 and 17); (2) Oliva represented to plaintiff that the subject premises were worth in excess of $1 , 500 000 (complaint par 18); (3) upon information and belief the premises is not valued at more than $435 000 (complaint par 17); [* 6] Index no. 601383/11 CRESCENTINI by Oliva , executed a project agreement which fails to obligate Slate to perform any construction whatsoever on the premises (complaint, par. 22); (4) Slate , (5) at the closing, $1 500, 000 were disbursed pursuant to Oliva s instructions , leaving Slate no funds to conduct business (complaint, par 35); (6) Oliva s friend , defendant Aloi , represented plaintiff in the transaction , in which he never obtained an appraisal of the premises , nor obtained any guaranty to secure repayment (complaint , pars. 14 , 26 and 27); and (7) plaintiff seeks damages in the sum of $1 500 000 , plus interest (complaint Wherefore clause , par (b)). In addition , the complaint contains allegations that permit a reasonable inference of scienter , and justifiable reliance , such as plaintiffs age , her new- found friendship with Oliva and her dependence upon Oliva. Overall , the Court finds that the second cause of action for fraud contains the requisite specificity, when the pleading is read as a whole. The allegations in the complaint suffice to allege a cause of action for fraud against Slate, Oliva, and Aloi for the purposes ofCPLR 3016(b) and CPLR 3211(a)(7). Defendants Slate and Oliva challenge the first cause of action for equitable rescission pursuant to CPLR 3211(a)(1). They argue that the note and the mortgage between plaintiff and Slate act as a complete defense. They insist there has been no violation of the note and the mortgage , and plaintiff admits this. As plaintiff points out , the mortgage and the note do not call for any action until the time of repayment , which is years down the road. In any event , equitable rescission is not to compensate for a wrong, but to undo the wrong and put the parties in the status quo (In re Teller s Estate 277 AD 937 (4 Dept 1950)). To grant rescission is to declare the contract status quo (Schwartz v void from its inception and to put or National Computer Corp.. 42 AD2d 123 , 125 (1st Dept 1973)). restore the parties to the Considering the complaint and all evidentiary materials submitted , including the GGEC Letter of Intent (Exhibit 1 to plaintiff s moving papers), in the light most favorable to plaintiff, the complaint does state a cause of action for rescission of the subject mortgage because plaintiff essentially alleges that the mortgage is a sham that was used to defraud her of$I 500 000 (complaint par 41). Defendants ' argue that the remedy of rescission is [* 7] CRESCENTINI Index no. 601383/11 unavailable because the underlying allegations of fraud in the first cause of action are inadequate; this argument must be rejected. The complaint , read as a whole , contains adequate allegations of fraud as set forth above. Based on the foregoing, the motion by defendants Slate and Oliva for judgment dismissing the complaint pursuant to CPLR denied in its entirety. 3211(a)(I) and (a)(7), and CPLR 3016(b), is The Standard for Preliminary Injunctive Relief To be entitled to a preliminary injunction , a movant must establish (1) the likelihood of success on the merits , (2) irreparable injury absent the granting injunction , and (3) a balancing of of the preliminary Aetna Ins. Co. v Doe v Axelrod. 73 NY2d 748 , 750 (1988): 91- Gold Capasso 75 NY2d 860 Road. LLC v Cross-Deeflan Realty Corp.. 93 AD3d 649 (2 Dept 2012)). Although the pending a trial , the remedy Trump on the Ocean LLC v is considered a drastic one Ash. 81 AD3d 713 , 715 (2 Dept), lvapp dsmd 17 NY3d 875 (2011)). equities in the movant's favor (see 54 862 (1990); purpose of a preliminary injunction is to preserve the status quo , which should be used sparingly Economic loss , which is compensable by money damages , does not constitute HMutledfle. LtC v City of New York. 90 AD3d 1026 , 1028 (2 Dept Trump on the Ocean LLC Rowland v Dushin 82 AD3d 738 , 739 (2 EdCia Corp. v McCormack 44 AD3d 991 993 (2 Dept 2007)). A preliminary irreparable injury 2011); at 716; Dept 2011); injunction may not be obtained to preserve assets as security for a potential money judgment Dinner Fatima v Twenty Seven- Twenty Four Realty Corp 65 AD3d 1079 (2 21 AD3d 777 , 778 (1 Club Corp. v Hamlet on Olde Ovster Bav Homeowners Assn. Inc. Dept 2009); Dept 2005)), Plaintiff's Motion for a Preliminary Injunction Plaintiff has shown that $1 500, 000 was disbursed at the closing to , or on behalf of defendants Giordano and Oliva. Plaintiffs appraiser , Mr. Palumbo , has disclosed his finding that an application for a variance for the project was removed from the agenda ofthe Town of Wawayanda Planning Department on two occasions , and has not been resubmitted. In short , plaintiffhas shown that no progress has been made with respect to the construction of the project for which she made the loan of$I 500 000. Moreover Slate has no obligation to take any action at all to move forward with the project. Mr. Palumbo also provides some evidence that Slate s propert is worth less than 1/3 of the loan amount. On this record plaintiff has shown a likelihood of success on the merits on her claims for equitable [* 8] CRESCENTINI Index no. 601383/11 rescission of the mortgage and fraud. In this Court' s opinion , a balancing of the equities tips in plaintiffs favor. The issue presented is whether plaintiff has shown irreparable injury, when the remedy she seeks is return of the monies she loaned to Slate. Plaintiff s concern , that the monies wil be long gone by the time of judgment, is the concern of many litigants. It does Fatima not justify granting the extraordinary remedy of a preliminary injunction However , it appears that plaintiff may be entitled to an order of attachment on the ground that defendant Oliva assigned , disposed of, or secreted propert with the intent to frustrate enforcement of a judgment rescinding plaintiff s mortgage (CPLR g 6201 (3)). On such a motion for an order of attachment , the court may issue a temporary restraining order prohibiting a garnishee, including defendant Oliva , from transferring specific assets (CPLR g 6210). As a matter of equity, the court may impose reasonable restrictions upon defendant as a condition of denying plaintiff s application for a preliminary injunction. Because plaintiff loaned $1.5 milion , and it appears that the value of the propert on which plaintiff has a mortgage is $435 000 , it appears that plaintiff has been defrauded of 065, 000. Accordingly, plaintiffs motion for a preliminary injunction is denied , on condition that defendant Oliva offers plaintiff additional security in the amount of 065 000. The additional security may take the form of a bond from a reputable surety, mortgages on defendant Oliva s other properties, or a combination thereof. The temporary restraining order issued by the court on December 9 , 2011 , and subsequently modified by the court to allow defendants each to expend up to $35 000 of their personal funds , is continued pending approval by the court of the additional security to be provided by the defendants. No undertaking of the plaintiff shall be required as a condition of the temporary restraining order. The Motion for Service by Publication Plaintiff has been unsuccessful in her attempts to serve process upon defendant Giordano. Plaintiffs process server was told by defendant Oliva that Giordano s address , as set forth on the documents that are the subject of this action, is a business address where he does not reside. Furthermore , the propert at that address is listed for sale by Ms. Oliva. The process server further states that he conducted "an extensive search in the computer/internet database " but that he has not located Robert Giordano because his name is extremely common. For this reason , plaintiff seeks leave to serve defendant Giordano by publication. )). [* 9] CRESCENTINI Index no. 601383/11 Service by publication should be a last resort because it is " the method of notice least attention the pendency of judicial proceedings Contimortflafle Corp v Isler 48 AD3d 732 , 734 (2 Dept 2008), quoting Boddie v Connecticut 401 US 371 (1971); Siegel New York Practice g107 , at201- 202 (5th calculated to bring to potential defendant's ed. Service by publication pursuant to CPLR 315 , is permissible by court order in an Contimortflafle at 734). This is not action described in CPLR 314 action. Nevertheless , service by publication may be permissible by court order pursuant to CPLR 308(5) where the movant has shown that service is impracticable under 308(1), (2), and (4). This impracticabilty standard does not require the movant to show that (In re Kaila 64 AD3d 647 Contimortflafle , namely, an in rem actions in rem service has been attempted pursuant to CPLR 308 (1), (2) and (4) Dept 2009); As it appears that plaintiff is unable to attempt service pursuant to CPLR 308( 1), (2), and (4), because she is aware of no other address for Mr. Giordano , impracticabilty has been shown. The Court authorizes service by publication in the Poughkeepsie Journal and Long Island Newsday. Plaintiff is directed to submit a proposed order of service by publication in accordance with CPLR 316 , within 10 days of service or receipt of a copy of this order. Dated MAY 21 2012 ENTERED MAY 24 2012 NASIAU tVUI'* IV COUNTY CLERK' S OFFICE

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