Maya NY, LLC v Hagler

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[*1] Maya NY, LLC v Hagler 2012 NY Slip Op 50646(U) Decided on April 3, 2012 Supreme Court, New York County Fried, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 3, 2012
Supreme Court, New York County

Maya NY, LLC, Plaintiff,


Daryl Hagler, N.E. Development, LLC and Washington Partners, LLC, Defendants.


For Plaintiff:

Ginsberg & Burgos, PLLC

12 E. 49th St., 30th floor

New York, NY 10017

(Christina N. Burgos

Chris Deubert)

For Defendants:

Goldberg & Rimberg PLLC

115 Broadway, 3d floor

New York, NY 10006

(Steven A. Weg)

Bernard J. Fried, J.

This action arises from two separate transactions whereby a predecessor of plaintiff Maya NY, LLC (Maya), allegedly loaned $250,000 to defendant N.E. Development, LLC (NE Development) (the loan agreement), and invested $202,500 in defendant Washington Partners, LLC (Washington) (the investment agreement). Defendant Daryl Hagler (Hagler), who allegedly performed accounting services for both Maya and its predecessor, as well as for Maya's president, Ofer Shaul (Shaul), is allegedly an investor in both NE Development and Washington. Hagler allegedly solicited both transactions, and orally guaranteed both the loan and the investment agreement, both of which are entirely oral. As of September 30, 2010, Maya is allegedly owed outstanding principal and interest of $161,667.34 on the loan, and $202,500 on the investment agreement.

Defendants move for an order dismissing the second, third, fourth, fifth, seventh, eighth, [*2]ninth, tenth, and eleventh causes of action, variously, on statute of frauds (General Obligations Law § 5-701 [a] [2]) and timeliness grounds, or for failure to state a cause of action (CPLR 3211 [a] [7]). While the notice of motion does not list the sixth cause of action, it is included in the arguments of both sides as being part of the motion.

The amended complaint contains eleven causes of action. Defendants have established their prima facie entitlement to judgment as a matter of law, except with respect to the ninth cause of action, as set forth below, by submitting the affirmations of Steven A. Weg and Daryl Hagler, and the exhibits thereto, shifting the burden to Maya to demonstrate the existence of a triable issue of fact (see Winegrad v New York University Medical Center, 64 NY2d 851 [1985]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). With the exception of part of the ninth cause of action, Maya has failed to demonstrate the existence of a triable issue of fact on the challenged causes of action.

Defendants' motion for summary judgment dismissing the second and eighth causes of action is granted, as barred by the statute of frauds. Those causes of action seeks to impose personal liability upon Hagler, based on his alleged oral guaranty of the loan agreement. Absent a sufficient showing of partial performance, the alleged oral guaranty is barred by General Obligations Law § 5-701, captioned, "[a]greements required to be in writing," which provides, as pertinent: [e]very 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 ... if such agreement, promise or undertaking ... (2) [i]s a special promise to answer for the debt, default or miscarriage of another person


For partial performance to be sufficient to take the agreement out of the purview of the statute of frauds, it must be "unequivocably referable" to the alleged oral agreement (see Wilkenfeld v Rowen, 262 AD2d 28, 29 [1st Dept 1999]). It is not sufficient ... that the oral agreement gives significance to plaintiff's actions. Rather, the actions alone must be unintelligible or at least extraordinary, explainable only with reference to the oral agreement [citations omitted and internal quotation marks omitted]

(Baytree Associates, Inc. v Forster, 240 AD2d 305, 307 [1st Dept 1997]).

Maya has failed to submit sufficient evidence to create a factual issue on partial performance of the alleged oral guaranty. Maya submits two checks from Hagler, made out to Shaul personally, not to Maya, each for $25,000, one in 2006 and one in 2007 (Ex. A to Shaul aff.), neither of which in any way references the loan agreement. Maya has not demonstrated that these two checks are "unequivocably referable" to the alleged guaranty, and would be intelligible or explainable only with reference to the alleged oral guaranty. Shaul is not even a party to either transaction.

The motion for summary judgment dismissing the third cause of action, sounding in unjust enrichment, against Hagler and NE Development, is granted, on timeliness grounds. The payment to NE development occurred in June 2004 more than six years prior to the commencement of this action.

Hagler's motion for summary judgment dismissing the fourth and tenth causes of action, [*3]which seek, respectively, to pierce the corporate veil or impose liability based upon the theory of alter ego for NE Development and Washington Partners, is granted. In order to "pierce the veil," the plaintiff must show that an individual defendant exercised domination with respect to the transaction in question and that such domination was used to commit a fraud against the plaintiff. Unsubstantiated allegations are not sufficient to defeat a defendant's motion for summary judgment, and the [plaintiff does] not provide evidence of any factors which would justify holding [Hagler] individually liable (internal citations omitted)

(Berenger v 261 West LLC, ___ AD3d ___ , 2012 NY Slip Op 00738 *6 [1st Dept 2012]).A party opposing a motion for summary judgment must lay bare its proofs.(see Johnson v Phillips, 261 AD2d 269, 270 [1ST Dept 1999]). Conclusory allegations are insufficient to raise a triable issue of fact (see Scheichet & Davis, PC v. Nohavicka, ___AD3d___, 2012 NY Slip Op 01763 [1st Dept 2012]). Plaintiff has failed to make a sufficient evidentiary showing of the elements required for piercing the corporate veil, including "showing that the individual defendants (1) exercised complete dominion and control over the corporation, and (2) used such dominion and control to commit a fraud or wrong against the plaintiff which resulted in injury" (Damianos Realty Group, LLC v Fracchia, 35 AD3d 344, 344 [2d Dept 2006]). The conclusory allegations in the amended complaint, without more, are insufficient to demonstrate the existence of a question of fact.

Hagler's motion for summary judgment dismissing the fifth and eleventh causes of action, which sound in accounting malpractice, with respect to the loan agreement and the investment agreement, respectively, is granted on statute of limitations grounds, and for failure to state a cause of action.

"Accountants have a duty to perform within the scope of their professional accounting standards, which generally go beyond simple auditing and bookkeeping" (Friedman v. Anderson, 23 AD3d 163, 165 [1st Dept 2005]). To establish accounting malpractice, plaintiff must demonstrate that the accountant failed to exercise due care and materially deviated from recognized and accepted professional standards for accountants, and that such deviation proximately caused plaintiff's injuries (see Kristina Denise Enterprises v Arnold, 41 AD3d 788, [2d Dept 2007] ). Plaintiff's submissions are silent as to the standard of care and any deviation, other than to argue that an accountant's furnishing of financial management and planning advice, including investment recommendations, is widely recognized throughout the accounting profession to be part of the typical services rendered by professional accountants. In other words, imparting financial advice regarding client investments is an integral part of accounting today

(Friedman v Anderson, 23 AD3d 163, 165 [1st Dept 2005]).

The applicable professional standards for accountants are set forth in the practice and ethical rules promulgated by the American Institute of Certified Public Accountants (AICPA) ... . Specifically, Rule 201 of the AICPA Code of Professional Conduct provides that accountants shall obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to any professional services performed. The AICPA extends to any professional services [*4]performed, not limited to just traditional accounting services (internal quotation marks and citations omitted).

(id. at 165 n.1).

Plaintiff's submissions are insufficient to establish the standard and any deviation. Maya simply alleges that Hagler performed accounting services for it, its president, and some related entities in 2005. Maya does not set forth the scope or terms of that engagement. Maya does not allege the applicable standard, or that Hagler did not obtain sufficient relevant data with respect to the two investment opportunities.

Maya's causes of action for accounting malpractice are time-barred under the three year statute of limitations (CPLR § 214[6]), that accrued upon the client's receipt of the accountant's work product (see Ackerman v. Price Waterhouse, 84 NY2d 535, 541 [1994]) unless Maya can demonstrate continuous representation. The amended complaint alleges that Hagler placed the funds for the loan in 2004, and for the investment in 2005. Thereafter, Hagler allegedly delivered checks from NE Development to Shaul through 2008. This action was commenced in 2010.

In order to toll the running of the statute of limitations under the continuous representation doctrine as applied to accountants, Maya must demonstrate that Hagler continued representing Maya in the specific matter directly under dispute (see Zaref v Berk & Michaels, P.C., 192 AD2d 346, 347-348 [1st Dept 1993]), and that there was "a mutual understanding of the need for further representation on the specific subject matter ..." (McCoy v Feinman, 99 NY2d 295, 306 [2002]). The accountant's "failure to take action or provide services necessary to protect a client's or patient's interests does not, standing alone, constitute representation or treatment for purposes of tolling the Statute of Limitations" (see Shumsky v Eisenstein, 96 NY2d 164, 168 [2001]).

Maya has failed to satisfy its burden of proving continuous representation. It has not sufficiently pleaded the terms of its engagement of Hagler as an accountant, with the result that it is not possible to discern what, if any, the understanding of Hagler and Maya was as to the terms of Hagler's representation, and whether there was a mutual understanding that Hagler would continue to perform accounting services with respect to the two agreements.Maya's submission of a short form order and the complaint in another action involving Hagler, in which summary judgment on the accounting malpractice cause of action was denied, is not dispositive in this action, inasmuch as that action involves a different plaintiff, and only the complaint and the short form order have been submitted. In any event, it is at best a holding of a court of coordinate jurisdiction and is neither law of the case nor collateral estoppel.

Hagler's motion to dismiss the sixth cause of action, sounding in conversion, is granted on timeliness grounds, because the delivery of the $250,000 allegedly converted occurred in June 2004, more than six years prior to the commencement of this action. There is no merit to Maya's argument that there is what would amount to a discovery rule, tolling the statute in conversion actions.

The motion of Washington Partners to dismiss the seventh cause of action on the ground that it fails to satisfy the one-year provision of the statute of frauds is denied. That section provides: [e]very 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:1. By its terms is not to be performed within one year from the making thereof[*5]

(GOL § 5-701).

The investment agreement, as alleged in the amended complaint, required repayment of the principal of the loan, and an unspecified return on investment, within twelve months of the making of the investment. Thus, by its terms, the investment agreement could be performed within one year. The fact that investments were made over a period longer than one year is immaterial. The one-year provision of the statute of frauds is "narrowly construed and applied only to contracts which, by their terms, have absolutely no possibility of full performance within one year ..." (Marini v. D'Apolito, 162 AD2d 391, 393 [1st Dept 1990] ).

With respect to the ninth cause of action, Maya has sufficiently pleaded its prima facie case for unjust enrichment, and neither Hagler nor Washington Partners has demonstrated that any equity investment was made in Washington Partners, or that either it or Hagler was not unjustly enriched. The cause of action is untimely, however, for all except the final alleged payment of $15,000 on December 15, 2008.

Accordingly, it is

ORDERED that the motion for summary judgment by defendants Daryl Hagler, N.E. Development, LLC, and Washington Partners, LLC, is granted, to the extent of dismissing the second, third, fourth, fifth, sixth, seventh, eighth, tenth, and eleventh causes of action, in their entirety; and it is further

ORDERED that the motion to dismiss the ninth cause of action as untimely, and for failure to state a cause of action, is granted only to the extent of dismissing it with respect to

the first two payments, which were made more than six years prior to the commencement of this action, and the motion is otherwise denied.




J. S. C.