Sherman v Mulerman

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[*1] Sherman v Mulerman 2018 NY Slip Op 50061(U) Decided on January 18, 2018 Supreme Court, Kings County Rivera, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 18, 2018
Supreme Court, Kings County

Sam Sherman, individually and on behalf of Saba Realty Partners, LLC, Plaintiff,

against

Alex Mulerman, Branislava Silver and Apex Car & Limousine Service, Inc., Defendants.



6183/11



Attorneys for Plaintiff

White & Wolnerman, PLLC

David Wolnerman, Esq.

950 Third Avenue, 11th Floor

New York, New York 10022

(212) 308-0667

Attorney for the Defendants

Malvina Lin, P.C.

Malvina Lin, Esq.

1203 Avenue J, Suite 4B

Brooklyn, New York 11230

(718) 377-3500
Francois A. Rivera, J.

Recitation in accordance with CPLR 2219 (a) of the papers considered on the joint notice of motion by the defendants Alex Mulerman (hereinafter Mulerman), Branislava Silver (hereinafter Silver) and Apex Car & Limousine Service, Inc (hereinafter Apex) (jointly the defendants) filed on October 11, 2016, under motion sequence number eighteen for an order pursuant to CPLR 3212: (1) granting summary judgment in their favor on the issue of liability and dismissing the complaint of Sam Sherman (hereinafter Sherman); (2) granting summary [*2]judgment in their favor on the issue of liability on their five counterclaims as asserted against Sherman; and (3) awarding pre-judgment interest, costs, disbursements and reasonable attorney's fees. Sherman has opposed the motion.



- Notice of motion

- Affirmation in support

Exhibits A-ZZ

Memorandum of law in support

Memorandum of law in opposition

Sherman's cross motion to dismiss the defendants' counterclaims

Affirmation in support of Sherman's cross motion

Exhibits A-VV

Reply affirmation

BACKGROUND

On March 18, 2011, Sherman commenced the instant action for a declaratory judgment and money damages by filing a summons with notice with the Kings County Clerk's office. On May 6, 2011, Sherman served a complaint on all the defendants. The defendants interposed a joint answer with counterclaims dated June 6, 2011. Sherman served a reply to counterclaims dated June 7, 2011.

The complaint alleges eighteen allegations of fact in support of two causes of action. The first cause of action is for a judgment vacating a lease executed by Mulerman and Silver, as landlords and as members of Saba Realty Partners, LLC. (hereinafter Saba) with Apex as tenant (hereinafter the subject lease) and declaring the lease as void pursuant to Limited Liability Law § 411. The subject lease was for a commercial real property known as 579 Smith Street, Brooklyn, New York and also known as 400 Hamilton Avenue (hereinafter the subject property) and the subject property was the sole income producing asset of Saba. The second cause of action is for money damages.

By decision and order dated May 5, 2017, the Court, among other things, granted the defendants leave to interpose an amended answer with counterclaim. The proposed amended answer was dated December 26, 2015 and Sherman was deemed to be served with the amended answer when he was served with motion seeking such leave. By reply to the amended answer with counterclaim dated April 19, 2016, Sherman joined issue.

The amended answer with counterclaims contained two hundred and twenty four (224) allegations of fact in support of eleven affirmative defenses and five counterclaims. The affirmative defenses included, failure to state a cause of action, lack of standing, unclean hands, statute of limitations, statute of frauds, release and payment, failure to mitigate damages, lack of proximate causation, lack of consideration, defendants' freedom from liability, and failure to join a necessary party.

The first and second counterclaim were based on Sherman's alleged breach of contract and breach of fiduciary duty. The third counterclaim was for breach of fiduciary duty and quantum meruit. The fourth counterclaim was for breach of fiduciary duty and contribution. The fifth counterclaim was for breach of contract and breach of fiduciary duty and contribution.

By decision and order dated May 5, 2017, the Court also decided the respective parties other motions as follows. Sherman's motion for an order compelling discovery was denied [*3]pursuant to CPLR 2214 (c) for failure to annex the Preliminary Conference order. Defendants' cross motion for sanctions was scheduled for a hearing to commence on June 6, 2017 at 10 a.m. The parties thereafter stipulated to withdraw the defendants' cross motion for sanctions. Sherman's cross motion seeking to amend the complaint was denied for failure to demonstrate a reasonable explanation for the lengthy delay and because the proposed amendment complaint was patently devoid of merit. That portion of Sherman's cross motion seeking to dismiss defendant's counterclaims was denied pursuant to CPLR 2214 (c) for failure to annex the answer with counterclaim that he was seeking to dismiss. However, the cross motion was rendered academic because the Court granted the moving defendants motion for leave to amend their answer. The Court reserved decision on the defendants' instant motion for summary judgment.



LAW AND APPLICATION

It is well established that summary judgment may be granted only when it is clear that no triable issue of fact exists (Alvarez v Prospect Hospital, 68 NY2d 320 [1986]). The burden is upon the moving party to make a prima facie showing that he or she is entitled to summary judgment as a matter of law by presenting evidence in admissible form demonstrating the absence of any material facts (Giuffrida v Citibank, 100 NY2d 72 [2003]).

A failure to make that showing requires the denial of that summary judgment motion, regardless of the adequacy of the opposing papers (Ayotte v Gervasio, 81 NY2d 1062 [1993]). If a prima facie showing has been made the burden shifts to the opposing party to produce evidentiary proof sufficient to establish the existence of material issues of fact (Alvarez, 68 NY2d at 324).

A party opposing a motion for summary judgment is obligated 'to lay bare his proofs' to sufficiently demonstrate, with admissible evidence, that a triable issue of fact will exist (Friends of Animals, Inc. v Associated Fur Manufacturers, Inc., 46 NY2d 1065 [1979]). A genuine issue of fact may not be demonstrated by using mere conclusions, expressions of hope or unsubstantiated allegations or assertions (Amatulli v Delhi Constr. Corp., 77 NY2d 525 [1991]).

Pursuant to CPLR 3212 (b) a court will grant a motion for summary judgment upon a determination that the movant's papers justify holding, as a matter of law, that there is no defense to the cause of action or that the cause of action or defense has no merit. Further, all of the evidence must be viewed in the light most favorable to the opponent of the motion (People ex rel. Spitzer v Grasso, 50 AD3d 535, 544 [1st Dept 2008]; citing Marine Midland Bank v Dino & Artie's Automatic Transmission Co., 168 AD2d 610 [2nd Dept 1990]).



Defendants' CPLR 3212 Motion to Dismiss the Complaint

The defendants seek dismissal of the first cause of action based on the following reasoning. Sherman allegedly consented to a rental rate of $6,000.00 a month by Apex on the subject lease without imposing any obligations or requirements. Consequently the defendants execution of subject lease cannot constitute self dealing. Secondly, the subject lease was a condition for reinstating an outstanding loan that was in default and foreclosure. Mulerman, therefore, was acting as a reasonably prudent manger in entering into the subject lease.

In opposition Sherman contends that he and Mulerman are managing members of Saba by virtue of an operating agreement (hereinafter the LLC agreement) and that in accordance with the LLC agreement Saba's decisions had to be agreed to by him and Mulerman. He averred that Mulerman and Silver leased the subject property to Apex on November 9, 2010, without his [*4]consent. Sherman also contended that based on Mulerman and Silver's financial interest in Apex the subject lease was void pursuant to Limited Liability Law § 411. Finally, Sherman averred that he has sustained monetary damages based on Mulerman and Silver's self dealing and freezing him out of Saba's decision making process.

The defendants annexed the LLC agreement as exhibit X to their motion papers. The agreement unequivocally provides that Sherman and Mulerman are Saba's managing members and that all decisions of the business and affairs of Saba must be made by the consent of both managing members. The operating agreement of a limited liability company (LLC) governs the relationships among members and the powers and authority of the members and manager. McKinney's Limited Liability Company Law § 417 (see LNYC Loft, LLC v Hudson Opportunity Fund I, LLC, 154 AD3d 109 [1st Dept 2017]).

The defendants seek dismissal of the second cause of action for monetary damages on the basis that the act of entering into the subject lease provided a benefit to Saba and, therefore, Sherman will be unable to prove monetary damages.

The defendants neither contend nor demonstrate that Liability Company Law § 411 is inapplicable to the instant action. Nor do they contend nor demonstrate that Sherman voted in accordance with Limited Liability Company Law § 411 to approve the subject lease. The fact that Sherman may not have expressed opposition to a monthly rent of $6000.00 by Apex after the subject lease was executed, does not refute his claim that it was executed without his consent. The defendants merely raise triable issues of fact as to whether Sherman ratified the lease by his alleged acts or omissions after the lease was executed. Moreover, Sherman has averred in his affidavit in opposition that he explicitly opposed the execution of the subject lease both orally and in writing.

Inasmuch as the defendants do not eliminate all material issues of fact on Sherman's lack of consent to the subject lease, the motion to dismiss the first cause of action is denied without regard to the sufficiency of Sherman's opposition papers (Santopetro v Devine Mercy R.C. Parish, 155 AD3d 1080 [2nd Dept 2017] citing, Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).

The defendants seek dismissal of the second cause of action for monetary damages based on the contention that the subject lease only resulted in a benefit to Saba and could not possibly result in any monetary damage to Sherman. They further argue that Sherman will be unable to prove that he sustained any monetary damages.

It is accurate to say that the complaint does not expressly indicate what monetary damages Sherman sustained due to the defendants' alleged self dealing. However, it is also accurate to say that the defendants did not seek any clarification or specificity of Sherman's claim for monetary damages pursuant to CPLR 3024 (a) or 3042 (a). The defendants now seek to dismiss the claim for monetary damages because they contend he will be unable to prove any compensable loss.

A party seeking summary judgment has the burden of establishing prima facie entitlement to judgment as a matter of law by affirmatively demonstrating the merit of a claim or defense and not by simply pointing to gaps in the proof of an opponent (see Nationwide Prop. Cas. v Nestor, 6 AD3d 409, 410 [2nd Dept 2004]). The defendants have not met their burden to show that they did not engage in self dealing without Sherman's consent. Nor have they met their burden to [*5]show that Sherman sustained no compensable loss by their alleged self dealing.

Accordingly, their motion to dismiss the second cause of action is also denied without regard to the sufficiency of Sherman's opposition papers (Santopetro v Devine Mercy R.C. Parish, 155 AD3d 1080 [2nd Dept 2017] citing, Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).



Defendants' CPLR 3212 Motion on their Counterclaims

The defendants seek summary judgment in their favor on the issue of liability on the five counterclaims asserted against Sherman. The first and second counterclaim are for Sherman's alleged breach of contract and breach of fiduciary duty. The third counterclaim is for breach of fiduciary duty and quantum meruit. The fourth counterclaim is for breach of fiduciary duty and contribution. The fifth counterclaim is for breach of contract and breach of fiduciary duty and contribution.

The elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant's misconduct (Baldeo v Majeed, 150 AD3d 942 [2nd Dept 2017]). A fiduciary relationship arises between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation (Pergament v Roach, 41 AD3d 569 [2nd Dept 2007]).

The issue of whether a defendant breached a fiduciary duty to a plaintiff usually cannot be determined as a matter of law on a summary judgment motion. Determinations as to whether the activities of a defendant were undertaken in good faith for a legitimate corporate purpose and whether other means were available depend not only on an analysis of the objective facts but as well in part on an appraisal of the defendant's motives, involving as they will issues of credibility (see Bonnie Briar Country Club, Inc. v Bonnie Briar Syndicate, Inc., 260 AD2d 336 [2nd Dept 1999]). Good faith or bad faith as the guide or the test of fiduciary conduct is a state or condition of mind—a fact—which can be proved or judged only through evidence (Id.).

The elements of a breach of contract are the existence of a contract, the plaintiff's performance under the contract, the defendant's breach of that contract and resulting damages (Palmetto Partners, L.P. v AJW Qualified Partners, LLC, 83 AD3d 804, 807 [2nd Dept 2011]). Causes of action sounding in unjust enrichment and quantum meruit cannot be maintained if there is a valid, enforceable contract governing the same subject matter underlying the action (Rayham v Multiplan, Inc, 153 AD3d 865 [2nd Dept 2017]).

To sustain a cause of action for contribution, the party asserting the claim is required to show that ... a duty was owed to the plaintiffs as injured parties and that a breach of that duty contributed to the alleged injuries (Eisman v Vill. of E. Hills, 149 AD3d 806 [2nd Dept 2017] citing Guerra v St. Catherine of Sienna, 79 AD3d 808 at 809 [2nd Dept 2010]). The critical requirement ... is that the breach of duty by the contributing party must have had a part in causing or augmenting the injury for which contribution is sought (Eisman, 149 AD3d at 806 citing Nassau Roofing & Sheet Metal Co. v Facilities Dev. Corp., 71 NY2d 599, 603 [1988]).

As Sherman has correctly stated in his affidavit in opposition, the defendants and Sherman have presented conflicting facts, competing narratives, and over eighty documents on the issues pertaining to defendants five counterclaims. The conflicting facts alone raise triable issues of fact as to whether Sherman breached any agreement or fiduciary duty to the defendants. [*6]Also, the defendants moving papers do not adequately explain the basis of their cause of action for contribution. Moreover, the defendants cannot move for damages under quantum meruit where there is a valid, enforceable contract governing the same subject matter. Accordingly, the defendants did not meet their prima facie showing of entitlement to judgment on their counterclaims asserted against Sherman.



Defendants' Motion For Interest, Costs, Disbursements and Attorney's Fees

Defendant is seeking an order granting pre-judgment interest, costs, disbursements and reasonable attorney's fees. Under CPLR 5001, prejudgment interest upon damage awards in specified categories of actions at law, such as breach of contract actions, is to be computed, generally, from "the earliest ascertainable date the cause of action existed" (CPLR 5001[a], [b]). CPLR 5001 also vests courts with discretion as to the award of prejudgment interest in actions of an equitable nature (Mahoney v Brockbank, 142 AD3d 200 [2nd Dept 2016]).

CPLR 8106 provides that costs upon a motion may be awarded to any party, in the discretion of the court, and absolutely or to abide the event of the action. CPLR 8101 provides that the party in whose favor a judgment is entered is entitled to costs in the action, unless otherwise provided by statute or unless the court determines that to so allow costs would not be equitable, under all of the circumstances. The party to whom costs are awarded is entitled to recover reasonable and necessary expenses as are taxable according to course and practice of the court, by express provision of law or by order of the court (CPLR 8301[a]).

The defendants have not obtained a judgment in their favor on any branch of the instant motion and are, therefore, not entitled to pre-judgment interest pursuant to CPLR 5001, costs pursuant to either CPLR 8101 or 8106; disbursements pursuant CPLR 8301.

"Under the general rule, attorney's fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule" (Pickett v 992 Gates Ave. Corp., 114 AD3d 740 [2nd Dept 2014] citing Hooper Assoc. v. AGS Computers, 74 NY2d 487, 491 [1989]). Here, the defendants have offered no factual or legal basis for an award of attorney's fees. CONCLUSION

Alex Mulerman, Branislava Silver and Apex Car & Limousine Service, Inc's motion for an order pursuant to CPLR 3212 granting summary judgment in their favor on the issue of liability and dismissing the complaint is denied.

Alex Mulerman, Branislava Silver and Apex Car & Limousine Service, Inc's motion for an order pursuant to CPLR 3212 granting summary judgment in their favor on the issue of liability on the five counterclaims is denied.

Alex Mulerman, Branislava Silver and Apex Car & Limousine Service, Inc's motion for an order awarding pre-judgment interest, costs, disbursements and reasonable attorney's fees is denied.

The foregoing constitutes the decision and order of this Court.



Dated: January 18, 2018

Hon. Francois A. Rivera

J.S.C.

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