Opinion
No. 17649/04.
2010-09-21
Bruce P. JEFFER, as Personal Representative of the estate of Rosalind Jeffer, individually and derivatively on behalf of Nominal, Defendant, Norman L. Jeffer Community Chapels, Inc., Plaintiff, v. David JEFFER, Defendant, and Norman L. Jeffer Community Chapels, Inc., Nominal Defendant.
Richard M. Asche, Esq., for Nominal, Nominal, Defendant/Plaintiff. Frederick L. Sosinsky, Esq., for Intervenor Plaintiffs.
Richard M. Asche, Esq., for Nominal, Nominal, Defendant/Plaintiff. Frederick L. Sosinsky, Esq., for Intervenor Plaintiffs.
Guy S. Halperin, Esq., for Defendant.
JACK M. BATTAGLIA, J.
Non-parties Margot Jeffer and Arnold Jeffer, through their counsel, move for an order “granting leave ... to file their Intervenor Complaint.” (Notice of Motion dated June 7, 2010.) The Intervenor Complaint accompanying the motion would add as defendants two other non-parties, Daniel Chellemi and Beatrice Chellemi. Neither the Notice of Motion nor counsel's Affirmation in Support of Motion to File Intervenor Complaint states whether intervention is sought as of right pursuant to CPLR 1012 or by permission pursuant to CPLR 1013.
This intra-family action was commenced on June 4, 2004 by the now-deceased matriarch, Rosalind Jeffer, as a special proceeding pursuant to Business Corporation Law § 624 to permit her to examine the books and records of Norman L. Jeffer Community Chapels, Inc. (“Jeffer Inc.”) In addition to the corporation, David Jeffer, Petitioner's son and President of the corporation, was a Named Respondent. In a decision and order dated August 18, 2005, Hon. Diana A. Johnson apparently granted the Petition, ordering “the production by defendant David Jeffer, of the complete record of the Rosalind Jeffer Trust for inspection by Rosalind Jeffer, her attorneys, and members of the Jeffer Family,” and assigning the matter to a Judicial Hearing Officer, presumably to supervise implementation.
Rosalind Jeffer died on December 31, 2005, and on January 25, 2006, another son, Bruce P. Jeffer, was issued Letters of Administration by the Circuit Court for Sarasota County, Florida. Mr. Jeffer subsequently moved, pursuant to CPLR 1015(a), to be substituted as personal representative of his mother's estate, and, pursuant to CPLR 3025(b), for leave to amend the Petition. In a decision and order dated August 7, 2006, Hon. Diana A. Johnson granted both motions, in the process converting the special proceeding to an action, as authorized by CPLR 103(c).
The Amended Complaint dated March 3, 2009 purports to allege six causes of action. Three of the alleged causes of action (the Second, Third, and Fourth) seek a declaration on various grounds that a trust purportedly created by a document entitled “Rosalind Jeffer Trust” dated January 18, 1997 is void. The document transfers to the Trust, for which defendant David Jeffer is named trustee, stock owned by Ms. Jeffer in Jeffer Inc. The other three alleged causes of action assert claims presumably pursuant to the Business Corporation Law. The First again seeks examination of the corporation's book and records, presumably pursuant to Business Corporation Law § 624, which, apparently, did not take place after Justice Johnson's August 2005 order. The Fifth and Sixth assert derivative claims, presumably pursuant to Business Corporation Law § 626, for waste of corporate assets and breach of fiduciary duty.
Defendant David Jeffer moved pre-answer for dismissal of all or part of each of the alleged causes of action, citing variously CPLR 3211(a)(1), (a)(3), (a)(5), and (a)(7). Defendant's primary contentions were that the causes of action that allege that the Rosalind Jeffer Trust is void are barred by applicable statutes of limitation, and that the causes of action asserted pursuant to the Business Corporation Law must fail because Plaintiff does not have standing to assert them because of the transfer of Rosalind Jeffer's stock in the corporation to the Trust.
Finding that, on the record presented and without disclosure, Defendant's motion was premature, this Court, in a Decision and Order dated October 19, 2009, denied the motion “with leave to renew after appropriate disclosure.”
As noted, movants do not state that they are seeking intervention as of right pursuant to CPLR 1012, and their papers do not purport to make the requisite showing ( seeCPLR 1012[a].) The motion will be considered, therefore, under CPLR 1013, permitting intervention “when the person's claim or defense and the main action have a common question of law or fact.” “Whether intervention is sought as a matter of right under CPLR 1012(a), or as a matter of discretion under CPLR 1013, is of little practical significance since a timely motion for leave to intervene should be granted, in either event, where the intervenor has a real and substantial interest in the outcome of the proceedings.” ( See Wells Fargo Bank, Natl. Assn. v. McLean, 70 AD3d 676, 677 [2d Dept 2010].) “In exercising its discretion, the court shall consider whether the intervention will unduly delay the determination of the action or prejudice the substantial rights of any party.” (CPLR 1013.)
The proposed Intervenor Complaint purports to assert seven causes of action, only two of which would operate against the proposed additional defendants. The Intervenor Complaint alleges that Margot Jeffer, Arnold Jeffer and defendant David Jeffer are siblings, and that Margot and Arnold are beneficiaries of the Rosalind Jeffer Trust. The First Cause of Action seeks a declaration that the Trust is valid. The Second, Third and Fourth Causes of Action allege that defendant David Jeffer breached fiduciary duties as either Trustee of the Trust or the majority shareholder of Jeffer Inc., or both, in connection with the transfer of real property located at 4620 Fort Hamilton Parkway, Brooklyn, owned by the corporation. Under the Second Cause of Action, the intervenors seek David Jeffer's removal as Trustee and their appointment as co-trustees.
The Fifth Cause of Action seeks dissolution of Jeffer Inc. pursuant to Business Corporation Law § 1104–a, alleging oppressive actions and looting, waste and conversion by David Jeffer. The Sixth and Seventh Causes of Action allege unjust enrichment by Daniel Chellemi, chief executive officer of Jeffer Inc., and Beatrice Chellemi, its bookkeeper, and seek return of monies from them. In addition, the Intervenor Complaint generally seeks punitive damages, as well as costs and attorney fees.
Counsel's Affirmation does not set forth the course of proceedings in the action since the Court's October 19, 2009 Decision and Order (intervenors, of course, would not have participated), but states that the intervenors “would waive any further deposition of David Jeffer.” ( See Affirmation in Support of Motion to File Intervenor Complaint at 3.) Neither Daniel Chellemi nor Beatrice Chellemi was served with notice of the motion.
Defendant David Jeffer opposes the motion on the ground that it is not “timely” ( seeCPLR 1013), in that the intervenors would have been aware of this litigation since at least September 2004 when each executed an affidavit for submission to the court, and have not provided a reasonable explanation for the delay ( see Nassau Point Prop. Owners Assn. v. Tirado, 29 AD3d 754, 758 [2d Dept 2006]; Vacco v. Herrera, 247 A.D.2d 608, 608 [2d Dept 1998].) But the record is clear that, until the Amended Complaint was filed in March 2009, the litigation was limited to a claim for access to the corporate books and records of Jeffer Inc., and the Court did not rule on Defendant's motion to dismiss, which stayed disclosure ( seeCPLR 3214[b] ), until October 2009. This motion was made on June 9, 2010.
Whether or not any of the claims of the intervenors is barred by a statute of limitations is another matter ( see Matter of Greater N.Y. Health Facilities Assn. v. DeBuono, 91 N.Y.2d 716, 721 [1998] ), and has not been raised in opposition to this motion.
Nor does Defendant contend that the intervenors do not have a “real and substantial interest in the outcome of the proceedings” ( see Wells Fargo Bank, Natl. Assn. v. McLean, 70 AD3d at 677) as beneficiaries of a Trust that owns shares of Jeffer Inc. ( SeeCPLR 1012[a][3]; Loewentheil v. O'Hara, 30 AD3d 360, 361 [1st Dept 2006]; In re Waxman, 96 A.D.2d 908 [2d Dept 1993].) The controlling issues, therefore, are whether the intervenors' claims and the main action “have a common question of law or fact,” and whether “intervention will unduly delay the determination of the action or prejudice the substantial rights of any party.” ( SeeCPLR 1013.)
The First through the Fourth Causes of Action in the Intervenor Complaint clearly present questions of law and fact that are raised by the Amended Complaint. The First Cause of Action, which seeks a declaration that the Trust is valid, is the mirror-image as to the relief sought of the Second, Third, and Fourth Causes of Action of the Amended Complaint, which seek a declaration that the Trust is not valid. The Second, Third, and Fourth Causes of Action of the Intervenor Complaint, alleging breach of fiduciary duties in connection with the transfer of allegedly valuable real property owned by Jeffer Inc., seem fairly encompassed by, or at least clearly related to, the Fifth and Sixth Causes of Action of the Amended Complaint, asserting derivative claims on behalf of Jeffer Inc. for breach of fiduciary duty.
To the extent that Defendant opposes the motion for lack of commonality or the prospect of undue delay, his contentions relate primarily, if not solely, to the Sixth and Seventh Causes of Action of the Intervenor Complaint, which would operate only against the two proposed additional defendants. (Affirmation in Opposition to Motion for Leave to Intervene and Join Additional Defendants ¶¶ 12, 17–19, 28.) As to prejudice, Defendant's sole contention is that “[t]he Proposed Intervenors will suffer no prejudice if their motion to intervene is denied,” since “[t]hey can simply pursue the claims asserted in their proposed intervenors' complaint in a separate action” ( id. ¶ 29.) The availability of an alternative to the proposed intervenor is certainly relevant, but not dispositive. ( See Hanover Ins. Co. v. Northwest Assocs., 248 A.D.2d 672, 674 [2d Dept 1998]; Matter of Pier v. Board of Assessment Review of Town of Niskayuna, 209 A.D.2d 788, 789 [3d Dept 1994].) The controlling issue under the statute is not prejudice to the intervenors if the motion is denied, but “prejudice [to] the substantial rights of any party” ( seeCPLR 1013) if the motion is granted.
The Fifth through Seventh Causes of Action of the Intervenor Complaint, however, seem just as clearly materially unrelated to the pending action. Although, taken literally, the statute's requirement for “a” common issue of law and fact might be met, particularly as to the claim for dissolution of Jeffer Inc. based upon alleged diversion of a valuable corporate asset ( seeBusiness Corporation Law § 1104–a [a][2] ), issues that are not “common” predominate. As to the claim for dissolution, judicial determinations beyond diversion are mandated ( seeBusiness Corporation Law § 1104–a [b] ), including the consequences of dissolution for a third-party employee or creditor ( see Matter of Burack [I. Burack, Inc.], 137 A.D.2d 523, 527 [2d Dept 1988].)
Most obviously, the proposed claims for unjust enrichment against the putative additional defendants, Daniel Chellemi and Beatrice Chellemi, raise substantial and difficult issues that are not now part of this action, including whether the intervenors have standing to assert them and whether they are time-barred, and would permit disclosure by and from the additional defendants that will necessarily delay determination of the action.
Indeed, the Court has been cited to no authority holding that intervenors themselves may add additional parties, and the Court has not found any. Generally, “when an intervenor becomes a party to an action, whether as of right or in the court's discretion, he or she becomes an original party for all intents and purposes.” (Love v.. Perales, 222 A.D.2d 661, 662 [2d Dept 1995]; see also Matter of Crabtree v. New York State Div. of Hous. & Community Renewal, 294 A.D.2d 287, 290 [1st Dept 2002], aff'd99 N.Y.2d 606 [2003];New York Cent. R.R. Co. v. Lefkowitz, 19 A.D.2d 548 [2d Dept 1963].)
Amendment of a pleading to add a party defendant is governed by CPLR 1003, “Nonjoinder and misjoinder of parties,” and CPLR 3025, “Amended and supplemental pleadings.” “Motions for leave to amend pleadings should be freely granted, absent prejudice or surprise directly resulting from the delay in seeking leave, unless the proposed amendment is palpably insufficient or patently devoid of merit.” (Tyson v. Town Ins. Co., NY, 68 AD3d 977, 979 [2d Dept 2009]; see also Bonavita v. McNicholas, 72 AD3d 859, 859 [2d Dept 2010].) Where, as here, a cause of action would be added, the sufficiency of the proposed pleading is reviewed under the standard applied to a motion to dismiss under CPLR 3211(a)(7) for “fail[ure] to state a cause of action.” ( See Lucido v. Mancuso, 49 AD3d 220, 225 [2d Dept 2008].) Although “[n]o evidentiary showing of merit is required,” the court must determine whether the proposed amendment is palpably insufficient or patently devoid of merit. ( See id. at 229 [emphasis added].)
Intervenors make no showing that the proposed causes of action against Daniel Chellemi and Beatrice Chellemi are not palpably insufficient or patently devoid of merit. As to prejudice or surprise, although a putative additional defendant need not be given notice of the motion ( see Levykh v. Laura, 274 A.D.2d 418 [2d Dept 2000] ), where there is no notice, and where, as here, the defendant is not already a party, the movant must make some showing of no prejudice or surprise. There is no such showing here.
Particularly in light of the intervenors' waiver of any further examination before trial of defendant David Jeffer, the assertion of the claims found in the First through Fourth Causes of Action of the Intervenor Complaint should not “unduly delay the determination of the action or prejudice the substantial rights of any party” ( seeCPLR 1013.) The Court reserves, of course, its authority to supervise disclosure pursuant to CPLR Article 31.
The motion is granted to the extent that within thirty (30) days after the date of this Decision and Order, which is being mailed this date to the parties' and intervenors' counsel, Margot Jeffer and Arnold Jeffer may file and serve an Intervenor Complaint in the form of Exhibit A to the Affirmation in Support of Motion to File Intervenor Complaint, but without the alleged Fifth Cause of Action (¶¶ 31–33), Sixth Cause of Action (¶¶ 34–39), or Seventh Cause of Action (¶¶ 40–41), and without the related paragraphs of the “wherefore” clause.