Lentini v 219 W. 20th Str. Corp.

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Lentini v 219 W. 20th Str. Corp. 2018 NY Slip Op 32181(U) September 5, 2018 Supreme Court, New York County Docket Number: 160470/2016 Judge: Eileen Bransten Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: 1] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NE\V YORK: LAS PART 3 -------------------------------------------X \VILLI/\1\t1 V. LENTfNI, individually, and derivatively as a shareholder on behalf of 219 WEST 20TH STREET CORPORA.TION, Index No. 160470i2016 Plaintiffs, Motion Sequence No, 003 - against 219 WEST 20TH STREET CORPORATION, and JOSEPH C. LENTINI, Defendants. -------------------------------------------X BRANSTEN~ ~r.: Plaintiff\Villiam V. Lentini brings this action individually and de1ivatively on behalf of plaintift: and nomhial defendant, 219 West 20th Street Corporation (219 Corp.), a joint real estate venture that \Villiam Lentini embarked on with his brother, defendant Joseph C, Lentini (collectively referred to as the "Brothers"). The five-count complaint asserts claims for: (1) an accounting; (2) a declaratory judgment as to vViHiam Lentini5s percentage ownership in 219 Corp.; (3) unjust enrichment; (4) quantum memit; and (5) dissolution of219 Corp. In the second amended answer, Joseph Lentini asserts 32 direct and derivative counterclaims relating to four entities-\Villiam Capital Associates, Inc. (\VCA), 219 Corp.~ Vector Whippany Associates, LP (Vector), ALL LLC (ALL LLC}-----and a condominium, located at 210 Crown Oaks \Vay, Longwood, Florida (Crown Oaks or Condominium). The counterclaims are frJr breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, il-aud, fraudulent concealrnenti unjust enrich.rnent, conversion, accounting and waste. 2 of 39 [*FILED: 2] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \Villiam v. Lentini v. 219 W. 20th St. Corp (16047012016) Page 2 of38 \Villiam Lentini now moves, pursuant to CPLR 3211, to dismiss the counterclaims. According to \Villia:m Lentini~ he and Joseph Lentini are equal owners of 219 Corp,, a closely held corporation that they formed with the intention of developing and managing a residential building located at 219 West 20th Street, New York, New York (the "Premises"). Vvilliam Lentini alleges that "no stock certificates have ever been issued by the Corporation and there is now a dispute as to the principal owners' percentage interest in the corporation based upon the material disparity in capital contributions and responsibilities for the supervision and management of the . '' (".omp ]amt, . ~ii """'0 • C'.orporatmn. In the second amended answer, Joseph Lentini raises numerous affirmative defenses and asserts 32 counterclaims relating to four different entities and one property. Unless indicated othenvise, the following facts are taken from the second amended answer and are presumed to be tme for purposes of the instant motions. A. \VCA \VCA is a closely hdd Nevv York corporation engaged in "the financing, purchase, sale and leasing of real estate." Counterclaims, ir 56. \Villiam Lentini alleges, in his 3 of 39 [*FILED: 3] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \Villiam v. Lentini v. 219 \V. 20th St Corp ,060470/2016) Page 3 of38 afiidavit in suppmi of the motion to dismiss, that he is, and always has been, the sole shareholder of'NCA, However, Joseph Lentini alleges that, since 1973, he and \Villiam Lentini have been equal shareholders in \VCA and that, as consideration for his ownership interest, he "contributed his time and experience to \¥CA at a reduced salary." Id, ii 58. In his affidavit in opposition, Joseph Lentini alleges that, when he joined WCA, "[Joseph Lentini] \Vas already a successful real estate broker and investor in [his] own right" and "[a]s such, [he] never would have been induced to leave a lucrative situation to join w'CA without \¥illiam Lentini's representation that [he] would he a 50~·€) owner of the cornpany." Joseph Lentini aft~ i1" 4. In addition, Joseph Lentini points to a 1997 foreclosure action that \VCA. brought, entitled iYilliam Capital Associates, Inc. v River Square Realty Corp., et al., in the Supreme Court, New York County, under index No. ll 1801il997 (River Square Litigation). In that action, WCA submitted: (I) posttrial, joint proposed findings, describing \VCA as "a corporation owned by \¥illiam and Joseph" (Joseph Lentini aff, ~ 6 and exhibit A at 1); and (2) a statement from vVCA 's accountant; assening that "William Capital, Inc, (William V. Lentini & Joseph C Lentini) advanced $20,380.72" to the defendant-debtor during the pendency of the River Square Litigation. Id., exhibit H, schedule D. Vv'CA ultimately prevailed and the court rendered a judgment in the amount of $569,025.66" The fate of these proceeds underlies some of Joseph Lentini's counterc1aim.s, 4 of 39 [*FILED: 4] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 'vVO 20th St. Corp (160470/2016) Page 4 of38 Joseph Lentini alleges that he and \Villiam Lentini agreed to "obtain an accounting of their respective debits and credits with respect to their vmious joint ventures and assets," before distributing the proceeds fi."om the River Square Litigation. Counterclahn, ~ 91. They directed their long-standing accountants to place the fonds in an escrow account and not to distribute them until the accounting was completed. No accounting took place and Joseph Lentini alleges that vVilliam Lentini has made several unauthorized transfers from the escrow account, \vhile denying Joseph Lentini access to \hlCA's books and records. In addition, Joseph Lentini alleges that he and \Villfarn Lentini "agreed to fond a pension account through \VCA in which they would have equal pension value and benefits," but that "Joe's pension account was not properly funded at that same level as Bill's despite the parties' agreement to the contrary.'' Id,,~ 58, According to Joseph Lentini} the Brothers also agreed to share vVCA 's revenues and liabilities equally and agreed that each \Vas entitled to reimbursement of expenses incuffed in the furtherance of \VCA's interests~ '"subject to the proviso that each Brother would defer a given reimbursement in the event taking same might impair \VCA's ability to pay its legitimate expenses." Id.,~ 64. Joseph Lentini allegedly used his personal funds to pay WCA 's liabilities and contributed substantial time and energy to the advancement of its interest Joseph Lentini avers that he "deferred receipt of sahny; bonus and/or expense reimbursement paym_ents under the belief: engendered and fostered by [Vifilliam Lentini]; 5 of 39 [*FILED: 5] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \Villimn v. Lentinj v. 219 W. 20th St. Corp (160470/2016) Page 5 of38 that taking said payment would have, at the time they came due and owing to hi:m, :rendered \VCA unah1e to meet all of its legitimate financial obligations." Id., ~ 66. Joseph Lentini asserts counterclaims for: (1) breach of contract against \Vi111am Lentini and \VCA; (2) breach of the covenant of good faith and fair dealing against 'William Lentini and WCA; (3) breach of fiduciary duty against vVilliam Lentini; (4) fraud against 'William Lentini; (5) fraudulent concealment against \Viniarn Lentini; (6) mljust emichment against "'V\lilliam Lentini; and (7) conversion against William Lentini. B. 219 Corg. Joseph Lentini alleges that: 219 West 20'h Street i\ssociates (219 Assoc.) is a New York general partnership, which "has governed the business relationship between and among the Brothers as owners of 219 Corp." (id., if 159); he and vViJliam Lentini hold equal ownership interests in both entities; and, "[i]n practice, the Brothers have treated 219 Corp. and 219 Assocs. as a single entity (219 Corp. and 219 Assocs. are hereinafter referred to collectively as '219').,, ." Id., ii 162. According to Joseph Lentini~ he and V>/illiam Lentini have had the following "mutual understanding[ s] and agreement[ s]" :relating to 219: "that each is entitled to receive fifty percent (50%) of all of 219' s net revenue, subject to the proviso that each Brother would defor receipt of a given payment in the event taking same might impair 219's ability to pay its expenses" (id., ii i 63); "that each must equally bear all of 219's expenses and 1iabflities on a 50%:i basis" (id., ii 164); 6 of 39 [*FILED: 6] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 W. 20'11 St Corp (160470/2016) Page 6of38 and "'that each is entitled to be reimbursed, in full, for legltirnate expenses incuffed by them individua11y in fortheling their mutual interests in 219." Id.,~ 165, In addition, Joseph Lentini alleges "it was [his] understanding that, unlike \VCA, 219's funds would not be used to fund-\vhether through the payment of capital contributions, the payment of expenses, or otherwise--any of the Brothers' other ventures." Id,~[ 175. Joseph Lentini avers that on numerous occasions he has used personal funds to pay 219's expenses and that he ••has deforred receipt of pay1nent of any kind from 219 whether from salary\ bonus and/or expense reimbursement payments under the beliefengendered and fostered by Bill - that taking said payment would have rendered 219 unable to meet an of its financial obligations to third parties!' Jd,, 1"[ 171. In addition, Joseph Lentini alleges that \Villimn Lentini: 1nade unauthorized use of219's fond .. to pay expenses of entities unrelated to 219 and its business" (id.,~ l80); wasted 219's assets by intentionally failing to pay property taxes on the Premises, causing 219 to "incur[] liability in the form of interest and additional monetary penalties, and , , , forc[ing it] to expend significant sums to redeem the [Premises] from tax lien sale" (id.,~ 185); obtained funding from third parties to make um1ecessary improvements to the Premises; on April 1, 2012, ••caused 219 to incur a $300,000 liability in the fonn ofa purported 'mortgage' secured by the [Prernises], with Bill as the purported mortgage lender" (id, 1"[ 189); "applied 219's available cash on hand to make dist1ibutions rather than apply that money to outstanding debt obligations" (id., ~r 192); and misappropriated "219 funds for 7 of 39 [*FILED: 7] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM INDEX NO. 160470/2016 NYSCEF DOC. NO. 131 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 W. 20th St Corp ( 160470/2016) Page 7 of38 his own personal benefif' (ido, ~1194), including to pay personal credit card hiHs and attorneys' foes. Lastly, Joseph Lentini alleges that he and \Villiam Lentini each have a son who occupies an apartment at the Premises and that each son's apartment consists of N'O units. However, \Villiam Lentini has allegedly "'gone to great lengths, and incurred great expense to 219, to provide a larger apartment" for his son (id., il 199), by '"embark[ing] upon an irrational, obsessive and costly campaign to (a) renovate an apartment damaged by fire ... and (b) evict the tenant presently residing there " .. !'Id., ~ 200. Joseph Lentini alleges that \Vilifam Lentini has refused to account to him for 219's funds and has denied him access to 219's books and records. Joseph Lentini asserts the following 219~related counterclaims: accounting (eighth counterclaim); breach of contract (ninth counterclaim); breach of the implied covenant of good faith and fair dealing (tenth counterclaim); breach of fiduciary duty (eleventh counterclaim); fraud (twelfth counterclaim); unjust enrichment (thirteenth counterclaim); conversion (fourteenth counterclaim); waste (fifteenth counterclaim); and fraudulent concealment (sixteenth counterclaim), C, Vector Vector is a New Jersey limited partnership formed in 19840 In 1988, 20 vVhippany, Inc., a New Jersey corporation, became a general partner of Vector, while 8 of 39 [*FILED: 8] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 W. 2ffh St Corp (160470/2016) Page 8 of38 \ViHiarn Lentini and Joseph Lentini were its limited partners" In 1994, 20 vVhippany, Inc. became Vector's sole general partner and the Brothers its sole limited partners. \Villfam Lentini and Joseph Lentini allegedly each hold a 5()!% ownership interest in 20 \l./hippany, Inc., as we11 as in Vector. "Vector owned and leased commercial real estate located at 20 \Vhippany Road, J\tforristown, New Jersey (the 'Vector Property')." Counterclaims,~] 272. According to Joseph Lentini, "[a]t some point prior to l 994, the tenant of the Vector Property stopped making its lease payments" (id., 4! 285) and "Bill unilaterally refused to make mortgage payments due and owing on the Vector Property." Id., ir 287. This caused the Vector Property to go into foreclosure. By 1994, Vector \Vas allegedly embroiled in five New Jersey state court actions and filed for chapter 11 bankruptcy (state court actions together with the bankmptcy, "] 994 Litigations"), According to Joseph Lentini, \ViUiam Lentini "needlessly increased the length and cost" of these litigations (id, 1[ 289) and "spent excessive amounts of money on multiple law finns that obtained no results for Vector." Id., ~r 290. One of the law firms that W'illiam Lentini had retained, Dillon, Bitar & Luther, LLC, filed an action for unpaid foes against Vector and each of the Brothers individually in 2011 ("Fee Dispute"). According to Joseph Lentini, \.Villiam Lentini "recklessly and unilaterally retained Fox Rothschild" to defend the suit (id., ii 292), only to have "recklessly and unilaterally settled the Fee Dispute, .. for an exorbitant sum of money." Id.,, 293. 9 of 39 [*FILED: 9] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 '1'.f. 20th St Corp (160470/2016) Page 9 of38 Joseph Lentini aHeges that these decisions were made over his objections and that \Vflliam Lentini has denied hi:m access to Vector's books and accounts and declined to account for its funds. Joseph Lentini asserts the following Vector-related counterclaims: breach of contract (seventeenth counterclaim); breach of the implied covenant of good faith and fair dealing (eighteenth counterclairn); breach of fiduciary duty (nineteenth counterclairn); ux~just enrichment (twentieth counterclaim); and fraudulent concealment (t\:venty-first counterclain:1). Joseph Lentini alleges that ALL LLC was formed in 2000 as a Florida limited company that mvned and operated a self-storage facility in Dunnellon, Florida. Joseph Lentini was a member of ALL LLC. William Lentini was not. Nonetheless, Joseph Lentini alleges that the "Brothers had an agreement between and among them.selves that they and [Joseph Lentini's son] coHective1y held a one third (1/3) ownership interest in [ALL LLC]" (Counterclaims, ii 331} and that they had an equal right to all distributions and were equafly responsible for expenses. Joseph Lentini alleges that he used his personal funds to pay ALL LLC~s expenses, He also states that, upon the sale ofthe self- storage facility, \Villiam Lentini received a $213, 122.09 distribution. Id, iI340. In addition, vVilliam Lentini allegedly received other distributions from ALL LLC, totaling $47~953.78. Id. ~343. Joseph Lentini avers that he never received his share of these 10 of 39 [*FILED: 10] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 William V, INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 Lentini V, 219 vV. 20th St Corp (160470/2016) Page 10 of38 <listri.butions and asse1is counterclaims for: breach of contract (twenty-second counterclaim); breach of the implied covenant of good faith and fair dealing (twenty-third counterclaim); breach of fiduciary duty (twenty-fi:mrth counterclairn); unjust enrichment (twenty-fifth counterclaim); conversion (twenty-sixth cmmterclaim); and fraudulent concealment (nventy-seventh counterclaim). Joseph Lentini alleges that, on August 2, 1983, he and W1Iliarn Lentini bought the Florida Condmninium, intending it as a winter home for their parent Instead~ the property allegedly turned into "a base of operations for [the Brothers'] various joint business ventures in Florida." Counterclaims, ii 392. .A.ccording to Joseph Lentini, he and \Villiam Lentini agreed that they were equal owners of Crown Oaks and "'that each would be entitled to receive an equal one half ( 1/2) share of all of any and all rents that might be generated by Crown Oaks" (id.,~ 394) and that they "would jointly pay for Crown Oaks' expenses through an entity jointly and equally owned by the Brothers, to wit, WCA." Id, 41396, "Joe has [allegedly] expressed to Bill his desire to rent-out Crmvn Oaks so as to generate income for the benefit of both of the Brothers." Id, 41399. However, \Villiam Lentini has refused to do so and, "[n]otwithstanding the fact that Crown Oaks sits vacant, Bi11 also refuses to tum off the utilities to the Condominium." 11 of 39 [*FILED: 11] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 Wil.iiam v, Lentini v, 219 W. 20th St. Corp (160470/2016) Page 11of38 Joseph Lentini asserts the following Crown Oaks-related counterclaims: breach of contract (twenty-eighth counterclaim); breach of the implied covenant of good faith and fair dealing (twenty-ninth counterclairn); unjust enrichment (thi1iieth counterclaim); waste (thirty-first counterclaim); and frauduknt concealrnent (thirty-second counterclaim). "[O]n a motion to dismiss a complaint for failure to state a cause of action, the complaint rnust be construed in the light most favorable to the plaintiff and all factual allegations must be accepted as true." Allianz Underwriters Ins, Co. v. Landnwrk Ins, Co., 13 A.D3d 172, 174 (1st Dept 2004). The court is not pem11tted "to assess the merits of the complaint or any ofits factual a11egations, but only to determine it~ assuming the trnth of the facts alleged, the complaint states the elements of a legally cognizable cause of action," Skillgames, LLC v Brody,] A.D3d 247, 250 (1st Dept 2003), "However, factual allegations that do not state a viable cause of action, that consist of bare legal conclusions, or that are inherently incredible or clearly contradicted by documentary evidence are not entitled to such consideration." Id. An "affidavit 'may be used freely to preserve inmifully pleaded, but potentially meritorious~ claims,"' Thornas v. Thomas, 70 A.D.Jd 588, 591 (1st Dept 2010), quoting Rovella v. Orofino Realty Co., 40 N.Y.2d 633, 635 (1976), 12 of 39 [*FILED: 12] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 W. 20th SL Corp ( 160470/2016) Page 12of38 'Where the motion to dismiss is based on documentary evidence, "the documentary evidence [must] utterly refute[] [the] factual allegations, conclusively establishing a defonse as a matter oflaw." Goshen v. 1\1utua! Life ins. Co. ~lN Y, 98 N.Y.2d 314, 326 (2002), "To qualify as 'docu.mentary,' the paper's content must be essentially undeniable and ... , assuming the verity of [the paper] and the validity of its execution, will itself support the ground on which the motion is based.'' Amsterdam Hospitality Group, LLC v lviarshall-Alan Assoc., Inc., 120 A.D3d 431, 432 (1st Dept 2014). The paxties dispute whether Joseph Lentini has standing to bring derivative claims on ¥/CA 's behalf, In addition, \Villiam Lentini contends that claims asserted against, or on behalf of, non-party WCA are not properly interposed in this action. Joseph Lentini counters that such counterclaims are properly interposed, because \VCA is a person that he represents within the meaning of CPLR 3019 (a). In addition, the parties dispute whether the WCA-based counterclaims are sufficiently pleaded or time-barred. \\Then a claim is brought derivatively, "Business Corporation Law [BCL] § 626 (b) mandates that [the] shareholder[] " .. must demonstrate that [he] mvned stock both when the la\vsuit \Vas brought and at the time of the trnnsaction(s) of which [he] complain[s].9' Pessin v. Chris-Cn~ft Indus., 181A.D.2d66, 70 (1st Dept 1992). The contemporaneous ownership rule "is to be strictly enforced." Honzmva Holding Co. v. 13 of 39 [*FILED: 13] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William Vo Lentini Y. 219 vV< 20th St Corp (16047012016) Page 13 of38 lfiro Enter. US4, 291A.D.2d318, 318 (lst Dept 2002). "[T]he mere fact that the corporation did not issue any stock ce1iificates does not preclude a finding that [a person] has the rights of a shareholder." Afatter of Pappas v Corfian Enters., Ltd., 22 Misc. 3d 1l13(A), 2009 NY Slip Op 50109(U), *3 (Sup Ct, Kings County 2009) (Battaglia) J.)~ (~t.Td 76 A,D.3d 679 (2d Dept 201 O); see also Estate of Purnell v. LH Radiologists, P. C, 90 N.Y 2d 524, 532 (1997) (finding that, although not issued a stock certificate~ the Plaintiff was, in fact, a shareholder in the corporation). "[I]t is the payment, or the obligation to pay for shares of stock, accepted by the corporation, that creates both the shares and their ownership." See United States Radiator Corp. v. State oflv'evv' York, 208 N.Y. 144, 149-150 (1913). "[L]abor or services actually received by or performed for the corporation" constitutes "[c]onsideration for the issue of shares." BCL § 504 {a). However, a claimants' "fail[ure] to ai1ege any basis upon which he might claim an actual, equitable or beneficial interest in any [corporate] shares" "\Vill result in dismissal for lack of standing. Ta! v. 1\falekan, 305 A.D.2d 281, 282 (1st Dept 2003); see also Roy v v'i~yntrub, 15 Misc. 3d I 127(A), 2007 NY Slip Op 50868(U), *6 (Sup Ct, Nassau County 2007)~ citing Barr v rVackman, 36 N,Y.2d 371 (1975) ("failure to satisfy the , .. contemporaneous ownership require:ment . , . is such a fundamental lack of capacity that it results in failure to state a cause of action"). Pursuant to CPLR 3019 (a), ;.[a] counterclaim may he any cause of action in favor of one or more defendants or a person whom a defendant represents against one or more 14 of 39 [*FILED: 14] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM INDEX NO. 160470/2016 NYSCEF DOC. NO. 131 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 W. 20th St. Corp (160470/2016) Page 14 of .38 c.(HJnterc.!~11111 ~ rnay~ ()!11}~ ~.-.".',f.'. ' ... (lst. (stati11~~ 178 C(H1nterc.lai1ri (}f cr{JS.S---·c.ia.I111 sI1ail {~.: e.··.'':...,·=~.··,~ ..',·'.·,f~.:.:.',·.',',_'t' '.,~> .·:_~.• ,:·' ..• -.~' • '-.'.·.' ,:·,··.~,_' . ··.'.,· .' "'-·',.. ••-...'' .• ~-: (_' -.. .·_!,) • '.''": .•-~' • , ..... ..' ,:~,_.,·,·,•.•. ,.·.·, ·. ,;_·.".°'·~.' •".·••· •,'_.' · '.,; _·:',. .,(":;; ~~.,;· ~··:'l._'11, ,.,···" .. :~,·?. -..·.~,) .. :E,· ___ '\' ·..:'~·. ',, .:.. ·' '-'" "'i.. '-:': ..:::io. ,•..,. " • ..:::-."·' ._')t.t~}d~.·~_it-..t~,: ..u.t~- ~ .-::-..·-.. ....~ ~ ...". .l~~ ..... .-~ ·~ ., .::::...-.r..,· •. ~,' ...,..., .:....,.. J..!il,.·.::"t\.!.U.J (.S,()~~.t ~~ ..Ltt_) ..,. •..., ' . Clalil1S .. ".".·"~.·., !,··.: •. ·,·'.'. (~\,.,_,··.···.'t".t", -:,·,·_,,·,,·,.\~.--.~.·,·" "..:..~, ..... :~'-·"-)\ ...~ _.,--.·,.:_i..,,, ' .. :·,·:·•,",·".·.,.-:,· , ,__ 1," .-,, -1,", t'-'.Sj} •", ,.-, ,.J ,. . . . . 1'~",·~ ., .•::- <~..L ... ~J:, .~.£ . . .,,,., .·: -. . . . .,. .:::-..,. . ;.:.: \"'-'-. •'' ·.it"',·._:,. ',·.: ~·-~,».,., ~ .·~ ._<\..,.... "')'.;,·,.,. ,!,-:'"""' :\ .·'"!, ...,· ,.,., ......-.:.-.. .-~ ,·:>. .-~ ): :'.~ ~' ~ ......,.. , ~ ~' ''.--..s_.~.LLt-..:)(. ,Lt'-.8-'-..·A~.~~-..·tI~.·U, . ,.-~ .. '(~t~} ~.,..,_ ...t-·~~J.~.(~.1t..·t~H.-S.-..... ..:::t.i;)~:-:.h:'t~. )"· -...,,..._.._~;} :;.;, ':~- ~,-,...·,·."·:,','.,:~.-,",'? . ,_--•• ~..·.,;·.: -...·",::;-:-·:.'...::-:;; ",'..,·.·.~~"'::.,.~ 15 of 39 .-1 . -. • • [*FILED: 15] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 ~William v. Lentini v. 219 \V, 20th St. Corp (160470/2016) Page 15 of38 has an ownership interest in V>/CA is not before the court on the instant?. pre-answer motion to dismiss. Joseph Lentini need only allege a basis upon which he may claim "an actual, equitable or beneficial interest in any [WCAJ shares," vvhich he has done. Tai, 305 A.D.2d at 282; see also Shut Kam Chan v. Louis, 303 A.Dold 151, 152 (1st Dept 2003) (applying the CPLR 3211 [a] [7] standard of revievv to find that plaintiffs '•uncontroverted allegation that, as achninistratrix of her husbandis estate, she ha[d] a 50% interest in [the corporation], [\vas] sufiicient to give her standing to bring the ... derivative suit"), 1 \Villiam Lentini points to various documents to support his assertion that he is, and always has been, WCA's sole shareholder. Specifically, he provides copies of: (1) his WCA stock certificate, dated August 1, 1969, showing that he holds l 00 of 200 authorized no par shares (see William Lentini aff, exhibit C); (2) a Single Stockholder Corporate Designation of Banking Authority Application for ¥/Cl'>., dated December 27, 2007 (.~ee id., exhibit D); (3) a Form 1120 (Schedule G) of\VCA's 2015 federal tax return (see id., exhibit E); and (4) two faxes that William Lentini allegedly sent to Joseph 1 Notably, \VCA represented to the court in the River Square Litigation that Joseph Lentini and \Villiam Lentini were equal shareholders in WCA, which serves as evidence of"conduct among the parties reflecting ... status for an as equal shareholders." Afatter o.lEstate (f Purnell v. LH Radiologists, 90 N.Y.2d 524, 532 (1997) (finding that "[t]he omission of issuance of stock certificates to petitioners [did] not displace [an] array of evidence whkh support[ed] shareholder status ... "). However, on the instant motion, the court may not "assess the merits ... of [thest~] factual allegations .... " Skillgarnes, LLC, 1 A.D.3d 247, 250 (1st Dep't 2003), 16 of 39 [*FILED: 16] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \VHliam v. Lentini v. 219 \V. 20th St Corp (160470/2016) Page 16 of38 Lentini in 2001 and 2003, advising Joseph Lentini that he has no authority to act on \VCA.'s behalf Id at exhibits F and G. However, none of these documents "utterly refute[] plaintiffs factual allegations .... 11 Goshen v. 1vfut. Life Ins. Co. ofN Y, 98 N.Y.2d 314, 326 (2002). The stock ce1tificate demonstrates vVilliam Lentini's shareho1der status, without disproving Joseph Lentlni's. See Kun v. Fulop, 71 A.D.3d 832, 833 (2d Dept 2010) (internal quotation marks and citation omitted) C'[t]he mere fact that the corporation did not issue any stock certificates [to an individual] does not preclude a finding that [the individual] has the rights of a shareholder'} The various financial documents also fail to establish vViHiam Lentini's sole ownership as a matter of law, because "corporate and personal tax returns, bank loan documents, and financial statements .. , . even when filed \Vith goven1ment agencies, are 'not in and of [themselves] determinative."' See 1t1atter ofPappas, 22 Misco 3d l 113(A), 2009 NY Slip Op 50109(U) at *5, quoting 1\1atter of Heisler v. Gingras, 90 N.Y.2d 682, 688 (1997); see also Matter ofE<>iate of Purnell v. LHRadiologists, 90 KY.2d 524, 532 (1997); 1t1atter l?f Bhanji v. Baluch, 99 A.D.3d 587, 587---588 (1st Dept 2012), Finally, William Lentini's faxes are not "essentially undeniable," and as such do not constitute docU1nentary evidence. See Amsterdarn Hospitality Group, LLC v. Aiarshall-Alan Assoc., 120 A.D.3d 431~ 432 (1st Dept 2014). For the foregoing reasons, Joseph Lentini has sufficiently alleged his shareholder status in support of his derivative claims. 17 of 39 [*FILED: 17] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v, Lentini v. 219 \V. 20th St Corp (160470/2016) Page 17of38 Nonetheless, the counterclaims relating to WCA rnust be dismissed, because they are not properly interposed in the instant action. The first and second counterclaims, for breach of contract and breach of the implied covenant of good faith and fair dealing against \Villiam Lentini and \VCA, must be dismissed with respect to "WTCA, because Joseph Lentini failed to serve a summons and the second amended answer on 'vVCA pursuant to CPLR 3019 (d) and 3012 (a), See State ofNeiv York v hiternational Asset Recovery Cmp,, 56 A.D3d 849, 854 (3d Dept 2008) (dismissing counterclaim against non-parties, where the non-parties <vvere not served with a summons and the answer asserting the counterclaim against them); see also Linzer v. Bal, 184 J'vlisc. 2d 132, 136 (Clv. Ct, NY County 2000) (dismissing com1terdaimpursuant to CPLR 3019 [d] and 3012 [a], where respondent failed to serve a non-party to the action against whom the counterclaim was asserted). The remaining derivative counterdaims for breach of fiduciary duty, fraud, fraudulent concealment, unjust enrichment and conversion (counterclaims three through seven, respectively) belong to \VCA, which "[has] an existence separate and distinct from that of'' Joseph Lentini, Billy v. Consolidated lvfach Tool Corp., 51 N .Y.2d 152i 163 (1980). WCA is not a pa11y in this action" Therefore, counterclaims seeking to validate its rights are not properly asserted in the instant action. See Cherney, 178 .A.D.2d at 264; see also Bramex Assoc., 149 A.D2d at 385; Meier v, Holmes, 282 A.D, 1030, 1030 (1st Dept 1953) (dismissing derivative cow1terclaim, as 18 of 39 [*FILED: 18] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \\li11iam v. Lentini v. 219 W. 20th St Corp {160470/2016) Page 18 of38 one not properly interposed in that action, where the corporation was not a party to the action). In addition, Joseph Lentini impen11issib1y commingles his direct and derivative claims. GeneraHy, "[i]fthere is any harm caused to the individual, ... then the individual may proceed with a direct action. On the other hand~ even where an individual ham1 is claimed, if it is confused 1,vith or embedded in the harm to the corporation, it cannot separately stand." Serino v. Lipper, 123 A.D.3d 34, 40 (lst Dept 2014). Claims based on the lost value of a shareholder's investment are "quintessentially[] derivative claim[s] .. , .'' ld. at 41. Here, Joseph Lentini asserts the sixth counterclaim, for unjust enrichment, individually and derivatively on behalf of vVCA. See Second Amended Ansv-,.rer at 30. In addition, the first and second counterc1aims, which purport to be direct claims, cmnmingle allegations of harm to the corporation with those to Joseph Lentini. For instance, the first counterclaim alleges that \¥illlam Lentini '"fail[ed] to fund Joe's Pension Account on a pro rata basis~' (Counterclaim, ii 107); \Villiam Lentini diverted V./CA funds for personal expenses (id., 1109); and, as a result Joseph Lentini. "as a shareholder of \VCA, has suffered substantial monetary damages!' Id., , 117.. The breach of the implied covenant of good faith and fair dealing claim essentiaHy duplicates these allegations, See id, irir 118-122. ·where, as here, claims "confuse a shareholder1s derivative and individual rights/' such claims must be dismissed, Abrarns v. Donati, 66 N.Y.2d 951, 953 (1985); see also Yudell v. Gilbert~ 19 of 39 99 A.D.3d 108, 115 (1st Dept 2012). [*FILED: 19] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \Villiam v. Lentini v. 219 Vv'. 201h St Corp (160470/2016) Page 19 of38 Therefore, the first~ second and sixth counterclaims are dismissed on this additional ground, For the foregoing reasons, counterclaims one through seven are dismissed. B. 2J9.__C_Qrp_, In addition to an accounting, the eighth counterclaim seeks dissolution of 219 Corp., pursuant to BCL § 1104 (see second amended answer at 38). 'WilHam Lentini contends that, because his first and fifth causes of action seek the same rdiet:. the . counterclaim should be dismissed as duplicative. \Villfa.m Lentini does not cite any authority for this proposition, nor could the court locate any. i\ccordingly, to the extent that the instant motion seeks dismissal of the eighth counterclaim, it is denied. (ii) \Villiam Lentini contends that the ninth counterclaim fails to sufficiently state the terms of the alleged agreement and its breach. In addition, he contends that 219 Corp, vvould be the correct counterparty to the alleged agreement \Vith Joseph Lentini. Joseph Lentini counters by citing to the allegations of the second amended answer. To state a claim fix breach of contract, a party must allege "the existence of a contract, [his] perfo1111ance thereunder~ the [opponent's] breach thereof: and resulting 20 of 39 [*FILED: 20] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \Villiam v. Lentini v, 219 \V. 20th St. Corp (160470/2016) Page 20 of38 damages.n Harris v Se1vard Park Haus. Cmp,~ 79 A.D.3d 425, 426 (lst Dept 2010). «Vague and condusory allegations are insufficient to sustain a breach of contract cause of action." A1arino v. Vunk, 39 A.D.3d 339, 340 (1st Dept 2007); see also }.iandarin Trading Ltd. v. J!Vildenstein, 16 N. Y .3 d 173, 182 (2011) (dismissing breach of contract claim because~ plaintiff"only offer[ed] condusory allegations without pleading the pertinent terms of the purported agreement, [leaving the court] to speculate as to the parties involved and the conditions under which [the] alleged ... contract[s] [were] formed"); ,Matter of Sud v. Sud~ 211 A.D.2d 423, 424 (1st Dept 1995) (internal citations omitted) (dismissing a breach of contract claim due to "plaintiffs failure to allege, in nonconclusory language, as required, the essential tenns of the parties' purported contract, including the specific provisions of the contract upon which liability (\Vas] predicated [and] whether the alleged agreement was, in fact, written or oral"). Here, the counterclaim for breach of contract is based on Joseph Lentini's "'understanding that. .. 219' s funds would not be used to fond ... any of the Brothers' other ventures" (counterclaim, if 175) and the Brothers' "express and/or implied mutual agreements vvith respect to 219" (id., ~ 214 ), including that: each would "receive :fifty percent (50%) of all of219's net revenue, subject to the proviso that each Brother would defer receipt of a given payment in the event taking same might impair 219's ability to pay its expenses" (id., il 163); they would share 219's expenses equally; and that they 21 of 39 [*FILED: 21] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 W. 20th St Corp (160470/2016) Page 21 of38 would be entitled to reimbursement for all personal expenses incurred on behalf of 219. See id, ,-r,-r 164, 165. The pleading fa.ils to state "in nonconclusory language .. , the essential tern1s of the parties' ... contract, including those specific provisions of the contract upon which liability fa predicated, whether the alleged agreement was, in fact, written or oral, and the rate of compensation." See Caniglia v. Chicago Trilmne-Neiv YorkNeivs .~yndicate, Inc., 204 A.D.2d 233, 234 (1st Dept 1994) (disrnissing, without leave to rep1ead, a breach of contract claim due to plaintiff's failure to allege those essential elements in the pleading); see also }vlatter ofS'ud v. Sud, 211 A.D.2d 423, 424 (1st Dept 1995). FailuTe to adequately describe the puqmrted contract is grounds, in and of itself, for the dismissal of these claims. In one particularly vague allegation, the second amended answer with counterclaims fails to even allege the existence of an agreement, and merely states that "it 1vas Joe's understanding that .. , 219 's funds '.vould not he used to fund 0 •• any of the Brothers' other venmres." Id., il I 75 (emphasis added). In addition, it is unclear whether the Brothers entered the alleged agreements in their individual or representative capacities. Ivforeover, the repeated reference to "express and/or implied mutual agreements with respect to 219" (id., 4141213-222), conflates 219 Corp. and 219 Assoc., leaving the court "to speculate as to the parties involved and the conditions under which [these] alleged ... contract[s] [were] formed!' lvfandarin Trading Ltd., I 6 N,Y.3d at 22 of 39 [*FILED: 22] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 W11liam v. Lentini v. 219 \V. 20 111 SL Corp ,{160470/2016) Page 22 of 38. 182. Therefore, these vague allegations are insufficient to sustain the counterclaim for breach of contract. See tvfarino, 39 A.D3d at 340; Alatter of Sud, 211 A.D2d at 424; Caniglia, 204 A.D2d at 234. In addition, to the extent that Joseph Lentini alleges that he was entitled to a pro rata share 219 Co:rp's revenue, provided that such payment would not irnpair 219's ability to pay its expenses (see Counterclaims, ii 163), he never alleges that 219 could meet its expenses. He, therefore, fails to allege an essential element of the claim, namely~ breach. See Harris, 79 AD3d at 426. Accordingly~ (iii) the ninth counterclaim is dismissed Breach of the Imnlied Covenant of Good Faith and Fair Dealilm tTenth •""""""""""""""""""""""""""""""""""""""""""""......._...................,..,..,..,..,..,..,..,..,..............................................~ .....................H>>>>>>>>>>>>>>>>>>>>>>>•••••••••••••••••••••••••••••••••••••••••'y.•••':..•••••••••••••••• C.m:mt~.r9.1~i.m.l The parties dispute whether the tenth counterclaim for breach of the implied covenant of good faith and fafr dealing is duplicative of the breach of contract claim, A dairn for breach of the implied covenant of good faith and fair dealing \Vill be dismissed ><as duplicative of the breach-of-contract claim, [where] both claims arise fi:om the same facts and seek the identical damages for each a11eged breach." A mean Holdings. Inc, v Canadian Imperial Bank of Commerce, 70 AD3d 423, 426 (1st Dept 2010). Here, the tenth counterclaim makes no attempt to state an independent claim. Instead, it references the allegations of the breach of contract claim and seeks identical relief: Compare Counterclaims 1f,210-223, with Counterclailns, 224-228. The tenth 23 of 39 [*FILED: 23] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 Wilfom1 v. Lentini v. 219 Vi. 20th St. Corp ( 160470/2016) Page 23 of 38 counterclaim is, therefore, dismissed as duplicative. See Amcan Hc1ldings, inc., 70 A.. D.3d at 426. (iv) Breach ofFiduciar\· Dutv and Conversion fEleventh Counterclaim and £QJ!!1Ysmtl~ Counterclaim, _resnectiy~b:J ·""""""""""""""""""""""""~~~~~~~~~~~~~~~~~~~~~~~~~~v~~~~~~~~~~~~~,,.·.~~~~~~~~~~---···········----··----··------------:~------------~~~~~~~~------------~~----~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~----~~----~~--~~~--------------- \Villiam Lentini contends that the eleventh counterclaim must be dismissed, because it fails to detail the acts and/or omissions constituting the alleged breach of fiduciary duty, as required by CPLR 3016 (b). In addition, he contends that, as an equal partner in the venture who chose not to participate in its management, Joseph Lentini may not now challenge \Villiam Lentini's decisions. Lastly, vVilliam Lentini contends that, to the extent the claim is derivative, fr falls, because Joseph Lentini alleges personal injury only. Joseph Lentini counters that the factual allegations are sufficiently specific and supp01i a derivative claim. He also argues that whether he and \Villiam Lentini had equal control over 219 Corp. is in dispute and not a matter for the court on the instant motion. The paiiies also dispute whether the second amended answer states a claim for conversion. To establish a breach of fiduciary duty claim, a plaintiff must allege: ( l) the existence of a fiduciary relationship; (2) misconduct by the defendant; and (3) damages. Buny v. 1\1adison Park 011ner LLC, 84 A.D.3d 699, 700 (1st Dept 2011). Shareholders in a closely held corporation owe each other a fiduciary duty. Global }dins. & lvietals Corp. v. Holme, 35 A.DJd 93, 99 (1st Dept 2006). Additionally, corporate officers and 24 of 39 [*FILED: 24] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 ' INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \\/illiam v. Lentini v . .219 vV. 20t.1i St Corp (160470/2016) . Page 24 of38 directors owe a fiduciary duty to the corporation, id. "'[T]he circumstances constituting the wrong [must] be stated in detail." CPLR 3016 (b). Conversion is "'the unauthorized assumption and exercise of the right of ownership over [property] belonging to another to the exclusion of the owner1s rights." Thyrojf v Nationwide A:fut. Ins, Co.~ 8 N.Y.3d 283, 289 (2007) (inte11ial quotation marks and citations omitted). "'Where the property [alleged to have been converted] is money, it must be specifically identifiable and be subject to an obligation to be returned or to be othenvise treated in a particular manner. Thus, conversion occurs when funds designated for a particular purpose are used for an unauthorized purpose." Lemle v, Lemle, 92 A.D.3d 494~ 497 (lst Dept 2012) (internal quotation marks and citations omitted) Here, the second amended ar1s\ver sufficiently states clairns for breach of fiduciary duty and conversion. Specifically, it aHeges that \Villiam Lentini incurred additional debt on the property held by 219 Corp., without a valid business purpose and with ·\Villiam Lentini acting as the lender. Counterclaims, i!il" 189-193. It also alleges that \Villiam Lentini used corporate assets for: personal expenses. such as credit card bills and legal foes (id.,~~ 194-195, 248); the benefit of his son (id., i;i! 196-203); and the benefit of unrelated entities. Id., ~~ I 80-183. These allegations sufficiently state the acts and/or omissions constituting William Lentini's alleged breach of fiduciary duty, as well as the conversion claim against \~lil!iam Lentini. S'ee Lernle, 92 A.D.3d at 497 (stating that it \Vas error to dis:rniss conversion and breach of fiduciary duty clairnsi where the complaint 25 of 39 [*FILED: 25] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 \V, 20111 St. Corp .(160470/2016) Page 25 of38 alleged "that plaintiffs siblings ( l) falsified loan docurnents so as to eliminate millions of dollars in principal and interest they owed to the corporation; (2) used coqmrate fi1nds to pay for personal vacation, shopping and other non-business-related expenses; and (3) used corporate funds to pay excessive compensation and benefits to themselves and other individuals who did tittle or no v,rork for the corporation;'). William Lentini's contention, that Joseph Lentini alkges injury to himself only and, therefore, cammt sue on 219 Corp' s behalf: is without me1it The second amended complaint alleges that "'[William Lentini] has improperly diluted [Joseph Lentini's] interest in 219" (id.,,-; 191) and that ~'[Joseph Lentini], as a shareholder of [219 Corp.], has suffered substantial monetary damages." Id., if 233. Because the alleged damages stem fr01n the lost value of Joseph Lentini's investment in 219 Corp., they are derivative, See Serino, 123 A,D3d at 41; see also rVo{fv Rand, 258 A.D.2d 401, 403 (1st Dept 1999) (finding that sharehoider of dosed corporation, suing for the "'recovery of corporate assets and profits diverted from her in that status, , . , entitlf ed] her to sue only derivatively'} Therefore, Joseph Lentini is entitled to bring the breach of fiduciary duty claim on 219 Corp,' s beha1 f. In addition, the same holds true for counterclaims twelve through sixteen, which allege the same damages as counterclaim eleven. To the extent that \Villiam Lentini relies on Levine v Levine, 184 A.D.2d 53, 59 (1st Dept 1992), for the proposition that a partner who does not participate in the management of the business, cannot later chaHenge the wisdom of the decisions made in 26 of 39 [*FILED: 26] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 : ~ INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \Vmiam v. Lentini v. 219 .· (160470/2016) \"-r 20th St Corp Page 26 of38 his absence, his reliance fa misplaced, In Levine, the court decided a motion for summary judgment which determined that the business judgment rule precluded plaintiffs' breach of fiduciary duty claim against their partners. I 84 A.D2d at 58-59. It specifically found that the defondants were not personally interested in the complained-of trnnsactlons, See id. at 59~60. A "pre-discovery disrnissal of pleadings in the name of the business judgment rule is inappropriate where[, as here,] those pleadings suggest that the directors did not act in good faith!' Lemle, 92 A.D3d at 497 (internal quotation marks and citations ornitted). Therefore, Levine is inapplicable. Accordingly, the motion to dismiss the eleventh and fourteenth counterclaims is denied. (v) .f!ff\-!QJ~IHLfrn:q~µJ~nt.C.9n~-~-g,1nwnt ..\Tw~lfih..C.QJlK!!~n~!!iimJ!rrct__S!~.t~-~.n1h Counterclaim. resnectivel v l.. .............................................................. ................................................ ·---~~~~~~~~~~~~~~~ ~ The parties dispute whether the fraud-based claims are pleaded with requisite particularity. · "To make a prima fade claim of fraud~ a complaint must allege misrepresentation or concealment of a material fact, falsity, sdenter on the pmt of the wrongdoer, justifiable reliance and resulting injury.j' Basis Yield Alpha Fund (;.\,faster) v Goldman Sachs Group, Inc., 115 A.D.3d 128, 135 (1st Dept 2014). \Vhere the fraud claim ls based on fraudulent concealment, a plaintiff must also show that the defendants had a duty to disclose material information based on a fiduciary relationship or under the special facts 27 of 39 [*FILED: 27] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \Villiam v. Lentini v. 219 \V. 20'h St Corp . (160470/2016) Page 27 of38 doctrine. P. T Bank Cent. Asia, N. Y Branch v ABN AA1RO Bank NV, 301 A.D.2d 373, 376 (1st Dept 2003), A fiduciary relationship exists between shareholders ofa closed corporation, Global }dins. & !Yfetals Cm7;., 35 A.D3d at 99. Additionally, corporate officers and directors owe a fiduciary duty to the corporation. Id, "[TJhe circumstances constituting the [fraud] shall be stated in detail!' CPLR 3016 (b), A party "'need only provide sufficient detail to infonn defondarrts of the substance of the claims." Km4rnan v Cohen, 307 A.D.2d 113, 120 (1st Dept 2003) (stating that a fraud claim should not have been dis1n.issed where plaintiffs '"failed to specify the exact date, tirne or the precise contents of [alleged] misrepresentations, nor indicated how they came to rely on [the] statern.ents'~). Here, in support of the fraud claim, the second amended answer alleges that: ••Bm made numerous representations of material fact to Joe, including, without limitation, the representation that the Brothers' capital account balances in 2 l 9 Corp. and 219 Assocs. were equal" (Counterclaims, the time he made them" (id.~ iJ 236); "the aforementioned representations were false at if 237); '"[a]s [\Villiam Lentini's] younger brother and life- long business paitner, [Joseph Lentini] justifiably relied upon the aforementioned representations made by [\Villiam Lentini]" (id., il 238); and, "[Joseph Lentini], as a shareholder [of] 219 Corp. has suffered substantial monetary damages." ld., if 23 9. In support of the fraudulent concealment claim, the second amended answer states that "Bill lrnew and/or should have known that his acts and omissions with respect to 219 Corp. as 28 of 39 [*FILED: 28] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 \V. 20th St. Corp ·• (1604 70/2016) Page 28 of38 alleged herein - including, without limitation, his unauthorized \Yithdrawal and/or use of 219 Corp. funds for own personal expenses, constituted material information to Joe, as an equal shareholder of the corporation.'' id., i: 256. In addition, it alleges that "[t]hrough his deliberate concealment as alleged herein, Bill induced Joe to trust Bill and to provide funds, mnong other things, under the good-faith ---· albeit mistaken ---· belief that Bill had, at aH relevant times, acted in Joe's best interests \<.rith respect to 219 Corp." Id.,~ 261. These allegations state the requisite elements of the fraud-based clairns and "provide suflident detail to infonn [plaintiffs] of the substance of the claims," despite failing to allege detafls, such as when the alleged misrepresentations and omissions were made. Kmifman, 307 i\.D.2d at l20, Accordingly, the motion to dismiss the twelfth m1d sixteenth counterclaims is denied, The parties dispute whether the unjust enrichment counterclaim should be dismissed as duplicative of the other counterclaims. '"[U]njust enrichment is not a catchall cause of action to be used when others fail. It is available only in unusual situations \vhen, though the defendant has not breached a contract nor cmmnitted a recognized tort, circumstances create an equitable obligation running from the defendant to the plaintiff ... i\n unjust enrichment claim is not available where it simply duplicates~ or replaces, a conventional contract o:r tort claim . [I]f plaintiffs' other claims are defective, an unjust enrichment claim cannot remedy the defects." 0 29 of 39 • [*FILED: 29] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v, Lentini v. 219 W. 20'h St. Corp ,(160470/2016) Page 29 of38 Corsello v Verizon l'ioY:, Inc., 18 N. Y.3d 777~ 790-791 (2012) (emphasis added). }fore, the unjust enrichment claim is based on the same facts as the preceding counterclaims and seeks identical damages as the claims for breach of fiduciary dutyi waste and conversion. Compare Counterclaims 11229-234~ 245-254 with Counterclaims,,, 241-244. The thirteenth counterclaim is, therefore, dismissed as duplicative. See Corsello, 18 N.Y.3d at 790-79L William Lentini contends that the fifteenth counterclaim must he dismissed because partners may not seek recovery against each other for the consequences of their management decision. In additioni he argues thati to the extent the claim is based on a 2012 1oan, it is time-barred. Joseph Lentini counters that \Viniam Lentini is mistaken about the pertinent law. Here, the Court initially notes that 219 Corporation and 219 Associates were governed as a single entity. Counterclaims 1162. vVhile the Counterclaims allege that the 219 Associates ran the corporation, the parties' rights under their partnership agreement cannot conflict with the corporation1s functioning, See Hochberg v. A1anhattan Pediatric Dental Grp., P.C., 41A.D.Jd202~ 204 (1st Dept 2007). Therefore, a six-year statute of limitations applies to "an action by or on behalf of a corporation against a present or fonner director, officer or stockholder ... to recover damages for waste ...." CPLR 213 30 of 39 [*FILED: 30] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 .. INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 "William v, Lentini v. 219 \V. 20th St. Corp ,(160470/2016) Page 30 of38 (7). Therefore, to the extent that the claim is based on the 20121oan (see Counterclaims, ii 189), it is not time-barred. To the extent that \Vllliam Lentini relies on Levine, 184 A.D2d 53, to argue that Joseph Lentini carmot challenge his decisions, that reliance is misplaced. In Levine, the court determined that the business judgment rule preclµded plaintiffs' breach of fiduciary duty claim under New York's partnership laws. 184 A.D2d at 58-59. Sirn.ilarly, \Villiam Lentini's reliance on Krulwich v Posner, for the proposition that "partners may not claim against each other for the consequences of management decisions they make or fail to make," mistakenly ignores the context of that pronouncement 291AD2d301, 303 (lst Dept 2002} The court inKrulwich \Vas, again, addressing the rights of the parties under the Partnership Law. See id It specifically noted that the result would have been different had the parties chosen to form a limited partnership and to vest control in one partner, to the exclusion of the other. See id. To the extent that the Counterclaims address 219 Corporation~ a New York corporation which is properly governed by a certificate of incorporation and corporate bylaws pursuant to BCL §402, neither authority is persuasive given that both 'Wflliam Lentini and Joseph Lentini rely on pminership law rather than corporate law. Therefi:m::, neither Levine nor Krulwich are applicable such that they would require dismissal of the claim. 31 of 39 [*FILED: 31] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 W. 20th St Corp ,(160470/2016) Page 31 of38 Accordingly, the motion to dismiss the fifteenth counterclaim, seeking damages for waste, is denied. C Vector <Seventeenth throm~h Twentv-First Counterclaim! --------------------::-....-----------------------------------------------··""·······----------------.. --------------------------------------------------------~"-· \Villiam Lentini contends that all of the counterclaims, which stern from the 1994 Litigations and the 2011 Fee Dispute~ are time-barred. In addition, he argues that the Fee Dispute is not actionable, because '"partners may not claim against each other frff the consequences of management decisions they make or fail to make." Kru!wich v. Posner, 291 A.D.2d, 301, 303(1 st Dept 2002). Joseph Lentini counters that the Fee Dispute is not time-barred. A six-year statute oflimitations applies to causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment and fraudulent concealment. See CPLR 213 ( l), (2), (8). \v11ere a claim for breach of fiduciary duty seeks a "purely monetary" remedy, it is governed by the three-year statute oflimitations. IDT Corp. v lvforgan Stanl<:y Dean Witter & Co.~ 12 NY3d 132, 139 (2009); CPLR 214 (4). «Where, however, the relief sought is equitable in nature, the sixyear limitations period of CPLR 213 (1) applies." Id. Generally, the actions' commencernent date "marks the timeliness of the counterclaims," Proskauer Rose Goetz & Afendelsohn v. Afunaoi 270 A.D.2d 150, 151 (1st Dept 2000); see CPLR 203 (d). 32 of 39 [*FILED: 32] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 I \ INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 nr·11· · ' v. "-')19_ W. ""')Qih S _, vy 1 mm v.· I..entm1 '· t Corp (160470/2016) Page 32 of38 To the extent that the claims fiJr breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment and fraudulent concealment are based on the Fee Dispute, they are not time-barred. The Fee Dispute took place in 2011, whereas the instant action was commenced in 2016, well within the six~year statute of limitations. 2 See ProskauerRose Goetz & Afendelsohn, 270 A.D.2d at 151; CPLR 213 (1), (2), (8). Because Joseph Lentini '"primarily seeks damages", however, the breach of fiduciaxy duty claim is barred by the three-year statute of limitationso See JDT Corp. Vo }Jorgan Stanley Dean Witter Co, 12 N.Y3d 132, 139 (2009). · Lastly, as explained above, the comt in Ki·uhvich \.vould have reached a different result if the parties had chosen to form a limited partnership. See 291 A.D.2d at 303 (stating· "'had the pmiies wanted to relieve [a party] of all management authority, they had merely to organize as a ll:rnlted partnership~ designating only [another party] as general partner). Vector is such a limited partnership, with William Lentini and Joseph Lentini as its sole limited partners. While it is alleged that they O\vn an equal interest in Vector's general partner, 20 Whippany, Inc.i it is unclear whether they have equal control over that entity. Therefore, Kruhvich does not mandate dismissal of the Vector-related counterclaims. Accordingly, the motion to dismiss the Vector-related counterclaims is granted 1.vith respect to the nineteenth counterclaim only. 2 Notably, these counterclaims are identical to counterclaims alleged in the original answer. 33 of 39 [*FILED: 33] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 ' ' INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 W. 201h SL Corp . (160470/2016) Page 33 of38 \Villiam Lentini points out that Joseph Lentini seeks proceeds from the 2006 sale of ALL LLC's self-storage facility. Therefore, he argues, the ALL LLC-related counterciaims-------for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, unjust enrichment, conversion and fraudulent conceahnent~are time-barred under the longest, applicable statute o:flimitations. Joseph Lentini does not dispute the accuracy of this assessment, but rather contends that ,_it would be inequitable" not to view ALL LLC ''as part of the larger and continuing business venture of the Brothers that should be included within the accounting both sides have now requested." De±endants' brief at 21. Here, the applicable statutes of limitations are either three or six years. See CPLR 213 (1), (2), (8); CPLR 214 (3), (4). As it is undisputed that Joseph Lentini's A.LL LLCrelated counterclaims arose in 2006, the twenty-second, twenty-third, twenty-fourth, twenty-fifth, twenty~sixth and twenty-seventh counterclaims are dismissed as timebarred. 34 of 39 [*FILED: 34] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM INDEX NO. 160470/2016 NYSCEF DOC. NO. 131 ' ' RECEIVED NYSCEF: 09/06/2018 r:i:r1·t• I . . - ')1(\ vv 1 ian1 v. Lentlm v .· "" .~ ,.,(160470/2016) st. (',orp vv. •')(th "" ) ~ UT Page 34 of 38 (i) 12I~.~-~11J?.f.GQXAtrg~t~D.~LB..r~g~h_.Qf_1h~.JmnE~~LC9Y~rnn;itQfQQQtl:-:fgi.th ..~D.~i Fair Dealim~ fTwentv-Efohth Counterclaim and ......Tvvenh·-Ninth .................... ..................................................................................................."'.... ...."""""""""""""""""""""""""""""""""""""""""""""'""""""""""""""" "..,,,....... ..... .................. ........... ..,,,. .. ~ """""""....._ ~,,,,,, ,~ ,,, W111iam Lentini contends that the twenty-eighth and twenty-ninth counterclaims for breach of contract and breach of the implied covenant of good faith and fair dealing fail to state a claim and that the latter is duplicative of the former. Joseph Lentini counters that, under the liberal standards of a pre-answer motion to dismiss, both counterclaims are sufficiently pleaded. Here, the breach of contract claim alleges that "Bill breached the Brothers' express and/or implied mutual agreements \:\'lth respect to Crown Oaks, by, among other things, failing to share vvith Joe aU financial infon11ation concerning Crm<.rn Oaks in Bill's possession" (Counterclaims, ii 407) and "failing to pay to Joe his rightful and lawful share of all income earned on account of Crown Oaks" (id., ~ 408). Joseph Lentini fails to provide anything beyond vague and conclusory allegations of a contract. Glaringly absent from the pleading is the allegation that the Brothers agreed to use Crmvn Oaks as an investment property. Joseph Lentini's "vague and conclusmy allegations are insufficient to sustain a breach of contract cause of action." A1arino v. Vunk, 39 A.D.3d 339 5 340 (1st Dept, 2007). The counterclaim is, therefore, dismissed. The breach of the implied covenant of good faith and fair dealing counterclaim is based on "Bill's [alleged] disavowa] of Joe's ownership interest in Crown Oaks." 35 of 39 [*FILED: 35] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v, Lentini v, 219 W, 20th St Corp ,(1604 70/2016) Page 35of38 Counterclaims,~[ 416. It is dismissed as duplicative of the failed breach of contract claim, A mean Holdings, Inc., 70 A,D.3d 423, 426 (1st Dept, 2010), Therefore, the nventy-eighth and twenty-ninth counterclaims are disrnissed. To state a claim for unjust emichment, a party must allege "that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other paiiy to retain what is sought to be recovered" Georgia lv!alone & Co. v, Rieder, 19 N.Y3d 511, 516 (2012). \Villiam Lentini contends that the thirtieth counterclaim fails to state the elements of an unjust enrichment claim, as it makes no attempt to explain how Vv'illiam Lentini has been enriched at Joseph Lentini's expense, or how this was m~just Indeed, the counterclaim "consist[ s] of bare legal conclusions" and makes no effort to state the elements of unjust enrichment at alL Skillgarnes, LLC, 1A.D.3d247, 250 (1st Dept, 2003); see Counterclaims,~[~[ 419-422. Therefore, the thirtieth counterclaim is dismissed. (iii) \Villiam Lentini contends that the thi1ty-first counterclaim must be dismissed because the Condominium has not suffered any damage. Joseph Lentini counters that \Villiam Lentini' s refusal to rent out the Condominium to generate income, as well as his 36 of 39 [*FILED: 36] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 William v. Lentini v. 219 'v\l. 20th St. Corp (160470/2016) Page 36 of38 refusal to turn off the utilities of the vacant unit constitute misuse and neglect of the . ~ \Vaste fa any ~'destruction, misuse, alteration, or neglect of premises by one lawfully in possession thereof to the prejudice of the , .. interest therein of another.,' Gilman v Abagnale, 235 A.D2d 989, 991 (3rd Dept, 1997). However, not every omission or act of neglect constitutes waste. See Staropoli v. Staropoli, 180 A.D.2d 727, 727-728 (2d Dept, 1992) (finding "no showing that the failure to repaint caused damage to the stmcture, and thus, [the] failure to repaint the home [was] not . , . the ty"J)e of 01nission or neglect which constitutes waste"). Here, Joseph Lentini neither aHeges physical damage to the Condominium nor alleges that he is contributing to the cost of utilities. Joseph Lentini completely fails to show that the premises have been destroyed, misused, or neglected in any fashion. Compare Gilman v. Abagnale, 235 A.D.2d 989, 991 (3d Dept 1997) with Counterclaims ir426 (alleging a failure to tum off utilities and refusal to rent out the condominium property). Joseph Lentini has not pleaded, and cannot show, that the decisions made by \Villiam Lentini have prejudiced Joseph Lentini at alL As such, Joseph Lentini has failed to state a claim for vvaste. See Staropoli v. Staropoli, 180 A.D.2d,727, 727-728 (2d Dept, 1992). Therefore, the thirty-first counterclaim is dismissed. 37 of 39 [*FILED: 37] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 \Vi!1iarn v. Lentini v. 219 \V. 20th St Coq.'I (160470/2016) Page 37 of38 (iv) The thiliy~second counterclaim for fraudulent concealment makes no attempt to provide factual allegations in support of the claims much less to plead them ·with specificity, See Counterclaims, im 427-437. It consists entirely of condusory allegations of wrongdoing and is, therefore, dismissed. Skillgames, l,LC v. Brody 1A.D.3<l247, 250 (1st Dept, 2003). F. ··················--------------·~--.----------· Leave to Rei"Jlead Lastly, to the extent that Joseph Lentini seeks leave to amend the second amended answer) to correct any teclmical grounds for dismissal, the request is denied. .A. court will reject a request to replead where it is "unsupported by facts that would cmTect deficiencies in the pleadings and thereby render [its] claims actionable.'' Kocourek v Boaz Allen Hamilton Inc., 85 AD3d 502, 503 ( l st Dept 2011) (internal quotation marks and citation ornitted); see also IJ·avelers Ins. Co. v. Ferco, Inc., 122 AD2d 718, 719-720 (lst Dept 1986) C'[a]lthough leave to amend is freely given pursuant to CPLR 3025 (b), when leave is sought to amend pleadings properly dismissed pursuant to CPLR 3211 (a), the court must be satisfied that there are sufficient grounds to support the proposed amended pleadings"). Here) Joseph Lentini has neither cross-moved to amend nor has he provided a redline copy of any proposed amencb:nent to the counterclaims. Accordingly, 38 of 39 [*FILED: 38] NEW YORK COUNTY CLERK 09/06/2018 03:27 PM NYSCEF DOC. NO. 131 INDEX NO. 160470/2016 RECEIVED NYSCEF: 09/06/2018 Willimn v, Lentini v. 219 W. 20th St. Corp ' ,(160470/2016) Page 38 of 38 leave to replead is denied at this tirne, however, should Joseph Lentini seek to amend the counterclaims at a later time then he is instructed to bring a fonnal n:10tion. Accordingly, it is hereby ORDERED that the Plaintiffs motion to dismiss the Counterclaims is GRANTED IN PART and the first, second, third, fourth, fifth, sixth, seventh, ninth, tenth, thirteenth, nineteenth, twenty-second, twenty-third, t'vventy-fourth, twenty-fifth, twenty-sixth, twenty-seventh, twenty-eight, twenty-ninth, thirtieth, thirty-first, and thirty-second counterclaims of the second amended answer are dismissed; and it is further ORDERED that plaintiffs are directed to serve an answer to the second amended ans\ver with counterclaims within 20 days after service of a copy of this order with notice of entry, Dated: ENTER: 39 of 39

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