Toledo v Sabharwal

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Toledo v Sabharwal 2018 NY Slip Op 32657(U) October 11, 2018 Supreme Court, New York County Docket Number: 653234/2017 Judge: David Benjamin Cohen 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 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. DAVID BENJAMIN COHEN PART 58 Justice -----------------------------------------------------------------------------------X SONIA TOLEDO, INDEX NO. 653234/2017 Plaintiff, MOTION DATE MOTION SEQ. NO. -vNISHA SABHARWAL, MOHIT SABHARWAL, PADMA DEOGUN, VASTRA INC, PEACOCK THRONE LLC, OM VASTRA LLC, OM VASTRA MIAMI LLC 8/22/2017 001 DECISION AND ORDER Defendant. -----------------------------------------------------------------------------------X The following e-filed documents, listed by NYSCEF document number 12, 13, 14, 15, 16, 17, 23, 24, 26,27, 28, 29 were read on this application to/for Dismiss Upon the foregoing documents, it is Motion to dismiss is granted in part and denied in part. Defendants Nisha and Mohit Sabharwal (individually "Nisha" and Mohit") arc wife and husband. Padma Deogun ("Padma") is the mother or Nisha. The various corporate entities arc allegedly controlled by Nisha or Mohit. The crux or this matter is that plaintiff Sonia Toledo alleges that defendants engaged in a long-term fraud by selling her fake jewelry, by taking her real jewelry and returning it with fake pieces and by tricking her into having defendants perform services for plaintiff based on false pretenses. Plaintiff claims that all defendants engaged in duplicity by pretending to care about her, telling her that she was part of the family. inviting her to family functions and having her participate in social gatherings in furtherance or an elaborate fraudulent scheme. Specifically, the Complaint 653234/2017 TOLEDO, SONIA M vs. SABHARWAL, NISHA Motion No. 001 1 of 11 Page 1 of 11 [*FILED: 2] NEW YORK COUNTY CLERK 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 details that based upon her reliance of defendants' trustworthiness plaintiff either purchased or had work performed on pieces of jewelry and paid defendants in cash and checks over one million dollars for the various pieces over the years. The first cause of action is for fraud against individual defendants Nisha, Mohit and Padma. The second cause of action is for fraudulent concealment against Nisha, Mo hit and Padma. The third cause of action is for fraud perpetuated via civil conspiracy against Nisha, Mohit and Padma. The fourth cause of action is for aiding and abetting fraud against Mohit and Padma. The fifth cause of action is for conversion against Nisha, Mohit and Padma. The sixth cause of action is for unjust enrichment against all defendants. The seventh cause of action is for intentional fraudulent conveyance against Nisha, MohiL Padma, OM Vastra LLC, OM Yastra Miami LLC and Peacock Throne LLC. The eighth cause of action is for constructive fraudulent conveyance against all defendants. The instant motion is brought on behalf of all defendants and seeks an order ( 1) dismissing all claims in their entirety against OM Vastra LLC and OM Vastra Miami, LLC: (2) dismissing the first cause of action as against Mo hit and Padma; (3) dismissing the second cause of action as against Mohit and Padma: (4) dismissing the third cause of action in its entirety; (5) dismissing the fourth cause of action in its entirety; (6) dismissing the fitth cause of action in its entirety \vith respect to Mohit and Padma along with claims concerning transactions from the period of on or before June 12, 2014: (7) dismissing the sixth cause of action as against MohiL OM Vastra LLC, and OM Vastra Miami, LLC; (8) dismissing the seventh cause of action in its entirety; and (9) dismissing the eighth cause of action in its entirety. When deciding a motion to dismiss pursuant to CPLR ~3211, the court should give the pleading a ·'liberal construction, accept the facts alleged in the complaint to be true and afford the plaintiff the benefit of every possible favorable inference'' Uando111'. Kroll Laborntory 653234/2017 TOLEDO, SONIA M vs. SABHARWAL, NISHA Motion No. 001 2 of 11 Page 2of11 [*FILED: 3] NEW YORK COUNTY CLERK 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 .~/Jecio/ists. Inc., INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 22 NY3d 1, 5-6 [2013]; Faison '" Lewis, 25 NY3d 220 [2015 j). Ho\vcver, if a complaint fails within its four corners to allege the necessary clements of a cause of action. the claim must be dismissed (Andre Strishak & Associates, P. C. v. Hewlett Packard & Co., 300 J\D2d 608 [2d Dept 2002]). Under CPLR § 3211 ( a)(7), the court .. accepts as true the facts as alleged in the complaint and aftidavits in opposition to the motion, accords the plaintiff the benefit of every possible favorable inference. and determines only whether the facts as alleged manifest any cognizable legal theory'· (Elmaliach v Bank of China Ltd, 110 AD3d 192, 199 [1st Dept 2013 j (quoting Sokolo//'v Horrinwn Estates JJei·. Corp., 96 NY2d 409, 414 [2001J)). /\s a threshold, defendants incorrectly state that there is no personal jurisdiction over OM Vastra LLC and OM Vastra Miami, LLC under CPLR §321 l(a)(8). Although these two businesses arc Florida entities with principal addresses in Florida, plaintiff properly states an alter-ego liability claim since '·plaintiff is generally required to allege complete domination of the corporation in respect to the transaction attacked and that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiiTs injury" (Bahy Phm Jlolding Co., LLC \'.Kellwood Co., 123 J\D3d 405. 407 [1st Dept 2014] [internal quotation marks omitted]). The Complaint properly alleges domination of these entities, and that they are alter-egos of defendant. Moreover, '\vherc personal jurisdiction exists over a defendant, jurisdiction over his alter-ego is proper as weir' (Tronsasia Commodities Del. i· ,\'ewlead J\1EG. LLC, 45 Misc 3d l 2 l 7(A), [NY Sup. 2014 ]). Therefore, personal jurisdiction does not present an obstacle to this claim. Similarly, the Vastra defendants and Peacock Throne LLC may be held liable for all causes of action for which Nisha, Mohit, and Padma arc liable based on their claimed rcspcctiw alter-ego status. 653234/2017 TOLEDO, SONIA M vs. SABHARWAL, NISHA Motion No. 001 3 of 11 Page 3 of 11 [*FILED: 4] NEW YORK COUNTY CLERK 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 The first cause or action alleges fraud against all defendants. The motion seeks dismissal of this cause of action as to Mo hit and Padma. When a plaintiff brings a cause or action based upon rr~1ud ... the circumstances constituting the wrong shall be stated in detail .. (CPLR 3016 I b I) . .. The purpose of section 30](J (b)\ pleading requirement is to inform a defendant with respect to the incidents complained or:· thus. ··1w]e kt\e cautioned that section 3016 (b) should not be so strictly intnprcted as to pren~nt an othenvise valid cause or action in situations where it may be impossible to state in detail the circumstances constituting a fraud'" (Pludenwn Li:u.1i11?, .\is, i· Northern Inc .. 10 NY3d -J.86. -J.91 [2008]. What is "'[c]ritical to a fraud claim is that a cornplai11t allege the basic facts to establish the elements of the cause of action ... and although under CJ>LR 3016 (b) '·the complaint must sufficiently detail the alkgedly fraudulent conduct. that requirement should not be confused \Vi th unassailable proof of fraucr· (id at -J.92). ··Necessarily. then. section 3016 (b) may be met when the facts are sufficient to permit a n.~asondble inference or the alleged cunducr· (id). The elements of a cause or action for fraud require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance. justifiable reliance by the plaintiff~ and damages (Eurycleia Partners, LP i• SevFard & Kissel. LLP, 12 NY3d 553 [20091). Further, .. instead of an affirmative misrepresentation, a fraud cause or action may be predicated on acts or concealment vvhcre the defendant had a duty to disclose material information" (Kau/inan i• Cohen, 307 J\02d 113, 119-20 llst Dept 2003j). Therefore. to state a claim of fraudulent concealment, a plaintiff must plead all of the elements of fraud and allege that the defendant had a duty to disclose material information and failed to do so (P. T Bank Cem. ,,Jsia v ABN AMRO Bank A'. V., 301 J\D2d 373, 376 [1st Dept 2003 J). Therefore, .. concealment with intent to defraud of facts which one is duty-bound in honesty to disclose is of 653234/2017 TOLEDO, SONIA M vs. SABHARWAL, NISHA Motion No. 001 4 of 11 Page 4of11 [*FILED: 5] NEW YORK COUNTY CLERK 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 the same legal effect and significance as affirmative misrepresentations or fact" (No.who ( 'orp. v Har/red Realty Corp., 287 NY 290, 295 [ 1942]). The Complaint alleges that each of the individual defendants affirmatively participated in the fraud by either making statements or by concealing facts for which they had superior knowledge. With respect to the first cause of action for fraud. there arc three components to the claim: I) the fake jewelry sold by Nisha; 2) "gifts" given to plaintiff for the purpose of having plaintiff pay defendants to work on them; and 3) passing off inferior material as precious material while working on plaintiff's je\velry and swapping precious stones with fakes. The first cause of action is dismissed as to Mohit. The Complaint often lumps Mohit in with the other defendants, however, none of the facts suggest that Mohit ever made a single representation. While the Complaint states that Mohit attended lunches vvith plaintiff, falsely professed to consider plaintiff as part of the family. invited plaintiff to his home and for vacation, and generally participated in the alleged scheme, none of these alleged facts arc a material representations of fact that gives rise to a claim for fraud. Further, the Complaint docs not contain any statement by Mohit other than that he considered plaintiff part of the family. This statement is unconnected to plaintiffs claim to have relied on a separate statement by Nisha about the authenticity of the jewelry. Similarly, the Complaint contains no statements by Mohit regarding the gifts that needed work and the other work performed on plaintiffs own pieces. In fact, with respect to the gifts, the Complaint only alleges instances where plaintiff, Nisha and Padma were having lunch, making no mention of Mohit being at said lunches. The facts addressing the work performed on plaintiffs own pieces arc similarly de\ oid of any statc1rn:nts made by Mohit. Further, to the extent that plaintiff alleges fraud as part of a conspiracy or arising from Mohit's failure to tell plaintiff about the scheme, the 653234/2017 TOLEDO, SONIA M vs. SABHARWAL, NISHA Motion No. 001 5 of 11 Page 5of11 [*FILED: 6] NEW YORK COUNTY CLERK 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 fraud cause of action must be dismissed as to Mohit as duplicative of the causes of action for aiding and abetting and fraudulent concealment. I Iowever. the motion to dismiss the first cause of action as to Padma is denied. The Complaint contains sufficient allegations of statements made by Padma, including her involvement in discussions about the authenticity of the jewelry, her statements when making the gifts, and her swapping real precious material with fake material, so that plaintiff has properly stated the elements of fraud against Padma. The motion to dismiss the second cause of action against Mohit and Padma is denied. A duty to disclose may arise ··under the special facts doctrine where one party· s superior knowledge of essential facts renders a transaction without disclosure inherently unfair" (Jana L. 1·. W l 29th St. Reol!y Corp., 22 J\D3d 274, 277 [1st Dept 2005 J [internal quotation marks omitted]). A party is considered to ha\'e superior knowledge in a transaction when the material facts were peculiarly within the knowledge of one party and that information could not easily have been discovered by the other party through the exercise of ordinary intelligence (id at 278). For the reasons stated above plaintiff has properly pied that defendants Mo hit and Pad ma improperly concealed facts for which they had superior knowledge relating to the transactions with the jewelry. The motion to dismiss the third cause of action for civil conspiracy against Nisha, Mohit and Padma is granted. New York docs not recognize an independent cause of action for conspiracy to commit fraud (Hoeffner v Orrick, !Ierringlon & Su!cliffe LLP, 85 AD3d 457 [1st Dept 2011 J). The motion to dismissing the fourth cause of action against Mo hit and Padma for aiding and abetting fraud is denied. To properly plead aiding and abetting fraud, a plaintiff must .. allege 653234/2017 TOLEDO, SONIA M vs. SABHARWAL, NISHA Motion No. 001 6 of 11 Page 6 of 11 [*FILED: 7] NEW YORK COUNTY CLERK 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 the existence of the underlying fraud. actual knowledge, and substantial assistance .. (Oster v. Kir.1chner. 77 A.D.3d 51. 55 [ P 1 Dept 201 O]) ... Actual knowledge need only be pleaded generally. cognizant, particularly at the pre-discovery stage, that a plaintiff lacks access to the very discovery materials which \vmdd illuminate a defendant's state or mind" (id.). Plaintiff has met her burden or alleging that Mohit and Padma knew orNisha's fraudulent scheme and affirmatively assisted in the fraud. The motion to dismiss the fiith cause of action for conversion against Nisha, Mohit and Padma is granted in part. J\ conversion takes place when someone, intentionally and without authority. assumes or exercises control over personal property belonging to someone else, interJCring with that person's right of possession (( 'o/m·i10 1· .\'e1r York Orgun Donor Set work. Inc .. 8 >\Y3d 43 [2006]). Two key elements of conversion are (1) plaintiffs possessory right or interest in the property (Pierpoint v Hoyt, 260 NY 26 [ 1932]; Seventh Regiment Fund, 98 NY2d at 259). and (2) defondant's dominion over the property or interference with it, in derogation of plaintiffs rights (Employers' Fire Ins. Co. v Cullen, 245 NY 102 [1927J. Conversion in New York is governed by a three-year statute of limitations (CPLR §214(3 ); Vigilant Ins. Co. ofAm. v Hous. Auth. of City of El Paso, Tex., 87 NY2d 36 [1995]). Indeed, plaintiff acknowledges that conversion is subject to a three-year statute of limitations. Therefore. all claims before June 12. 2014 arc barred by the applicable statute or limitations. With respect to the claims aiter June 12, 2014, plaintiff alleges that defendant Nisha stole plaintilTs jewelry on several occasions, as well as misappropriated the jewelry by fraudulently convincing plaintiff it was of significant value and replacing valuable jewelry with fake jc\velry and has not returned the missing pieces. Accordingly. plaintiff has stated a cause of action for conversion against Nisha. Moreover. to the extent that the Complaint alleges that Mohit and 653234/2017 TOLEDO, SONIA M vs. SABHARWAL, NISHA Motion No. 001 7 of 11 Page 7 of 11 [*FILED: 8] NEW YORK COUNTY CLERK 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 Padrna ~1ct.:d INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 as coconspirators. may hm e the jewelry, and substantially assisted in furtheri11g the conversion, the Complaint has properly asserted an aiding and abetting conversion claim against them (see Oster,, Kirschner, 77 J\03d 51 [1st Dept 2010] [reversing court's decision to dismiss the ··aiding and abetting con\·ersion'· claim]). The motion to dismiss the sixth cause of action against MohiL OM Yastra LLC. and OM Vastra Miami, LLC for unjust enrichment is denied. To state a claim of unjust enrichment, the plaintiff must allege "that (1) the defendant was enriched, (2) at plaintif1's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered'" (Georgia Afalone & Co., Inc. v Rieder, 19 NY3d 511 [2012]). Plaintiff alleges that defendant Mohit made a wire transfer to a car dealership in florida with money taken from plaintiff. and that the entire fraudulent scheme was for all of defendants' benefits. Taking these allegations as true, plaintiff has stated a cause of action for unjust enrichment against Mo hit. Moreover, as stated earlier, OM Vastra LLC and OM Vastra Miami, LLC are potentially liable based upon their alter ego statuses. The Complaint alleges that defendants Nisha and Mo hit were the sole owners of the corporations that vvere used to receive allegedly fraudulent funds, and that all of the defendants allegedly transferred their assets to the corporations in order to avoid liability to their creditors. The seventh and eighth causes of action related to alleged fraudulent conveyances. The SC\ enth cause of action alleges intentional fraudulent conveyance -- under Debtor and Creditor Law§ 276. To properly plead this cause of action, a '"claimant must allege that (1) the thing transferred has value of which the creditor could have realized a portion of its claim; (2) that this thing was transferred or disposed of by the debtor and (3) that the transfer was done with actual intent to defraud" (Clwmhers v rVeinstein, 44 Misc 3d 1224(/\) lNY Sup 2014], o/f'd, 135 J\D3d 653234/2017 TOLEDO, SONIA M vs. SABHARWAL NISHA Motion No. 001 8 of 11 Page 8of11 [*FILED: 9] NEW YORK COUNTY CLERK 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 450 [I st Dept 2016 J [internal quotation marks omitted!). Under Debtor and Creditor Law ~ 276, a creditor is permitted to rely on ··badges of fraud" to infer intent. Circumstances leading to these ·'badges of fraud" can be the "close relationship between the parties to the alleged fraudulent transaction; a questionable transfer not in the usual course of business; inadequacy of the consideration; the transferor's knowledge of the creditor's claim and the inability to pay it: and retention of control of the property by the transferor .. subsequent to the transaction ( vVall St. Assocs. v. Brods·ky, 257 AD2d 526, 529 [1st Dept 1999]). The eighth cause of action alleges constructive fraudulent conveyance under Debtor and Creditor Laws§§ 273, 274 and 275 ... In New York, constructive fraud encompasses any transfer which 1) is made by an insolvent or renders the transferor insolvent (DCL § 273); 2) is made after the docketing of a judgment or during the pendency of an action which results in a money judgment (id. at§ 273-a); 3) leaves the transferor with unreasonably small capital with which to carry out his business (id. at§ 274): or 4) is made at a time that the transferor intends to incur other ckbts beyond his ability to repay(§ 275). as long as such transfer is made ··without a fair consideration'' (id at§§ 273-75)" (Taherna Preferred Funding 11, Ltd. v Advance Realty Grp. LLC, 45 Misc 3d 1204(A) l"NY Sup. Ct. 2014]). Actual intent to defraud is not necessary for constructive fraud, yet lack of fair consideration is. There are "two indicia of fair consideration for conveyed property: the adequacy of what is given in exchange for it and good faith'' (Sardis v. Frunkel, 113 AD3d 13 5, 141 [1st Dept 2014 ]). Moreover, when a conveyance renders property to be significantly undercapitalized or a debtor to become insolvent, there is a reasonable inference of fraud (ABN AMRO Bank. NV. v. MBIA Inc., 17 NY3d 208 [2011 ]). \Vhile defendants argue that plaintiff docs not state with specificity where the money \\ cnt that was allegedly obtained through a fraudulent con\'cyance. dismissal at this stage based 653234/2017 TOLEDO, SONIA M vs. SABHARWAL, NISHA Motion No. 001 9 of 11 Page 9of11 [*FILED: 10] NEW YORK COUNTY CLERK 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 upon CPLR 3016 would be inappropriate. Plaintiff detailed a scheme that alleges that defendants conveyed a significant amount of their assets to corporations with intent to defraud their creditors and avoid obligations; that the conveyances were without fair consideration in return: and that defendants did so with knowledge of plaintiff's claims against them. In pleading intentional fraudulent conveyance under Debtor and Creditor Law§ 276, a plaintiff must allege the overall fraudulent scheme in detail and fraudulent intent may be fairly inferred from such details (Mar. Midland Bank v Zurich Ins. Co., 263 AD2d 3 82, 382-83 [1st Dept 1999]). Here, there is a reasonable inference supporting a claim that defendants transferred their assets fraudulently. further, claims for fraudulent conveyances under Debtor and Creditor Law§§ 273, 274. and 275 ''arc not subject to the particularity requirement of CPLR 3016. because they are based on constructive fraud" (Ridinger v West Chelsea Dev. Partners LLC. 150 J\D3d 559. 560 [!st Dept 2017]; Matier of Application o[City ofSyracuse Indus. Dev. Agency. 156 AD3d 1329 f4th Dept 2017], rearg denied suh nom. Maller of' City a/Syracuse Indus. Del'. Agency, 160 J\D3d 1506 [4th Dept 2018], and Iv to appeal dismissed, 2018 NY Slip Op 83088 [NY Sept. 13, 20 l 8J; see also Wall St. Assocs. v. Brodsky, 257 J\D2d 526, 529 [1st Dept 1999]; Gateway I Group, Inc. v Park Ave. Physicians, P.C., 62 AD3d 141 l2d Dept 2009]). Therefore, defendants' motion to dismiss the seventh and eighth causes of action is denied. It is therefore ORDERED that the motion to dismiss is granted to the extent that the first cause of action is dismissed as to Mohit: and it is further ORDERED that the motion to dismiss is granted to the extent that the third cause of action is dismissed as to Nisha, Mohit and Padma: and it is further ORDERED that the motion to dismiss the fifth cause of action as against Nisha, Mohit and Padma is granted in pai1 and all claims prior to June 12, 2014 arc dismissed; and it is further 653234/2017 TOLEDO, SONIA M vs. SABHARWAL, NISHA Motion No. 001 10 of 11 Page 10of11 [*FILED: 11] NEW YORK COUNTY CLERK 10/17/2018 09:32 AM NYSCEF DOC. NO. 30 INDEX NO. 653234/2017 RECEIVED NYSCEF: 10/17/2018 ORDERED that the motion to dismiss is denied in all other respects. 10111/2018 DATE CHECK ONE: APPLICATION: CHECK IF APPROPRIATE: DAVID BENJAMIN COHEN, J.S. ~ CASE DISPOSED GRANTED D § NON-FINAL DISPOSITION DENIED SETTLE ORDER GRANTED IN PART D OTHER D REFERENCE SUBMIT ORDER INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT HON. DAVID B. COHEN J.S.C. 65323412017 TOLEDO, SONIA M vs. SABHARWAL, NISHA Motion No. 001 11 of 11 Page 11 of 11

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