Opinion
26206/06.
Decided June 19, 2008.
David I. Grauer, Esq., Attorney for Plaintiff.
Eli Feit, Esq., Heller, Horowitz Feit, P.C, Attorney for Defendant.
In this action by plaintiff Berel Light (plaintiff) for an accounting, the imposition of a constructive trust, an award of money damages, and an order compelling dissolution of defendant 10-18 Church Avenue Holdings, Inc. (10-18, Inc.), defendants Samuel Boussi a/k/a and Shmuel Boussi (Boussi) and 10-18, Inc. (collectively, defendants) move for summary judgment dismissing plaintiff's complaint on the grounds that plaintiff does not have legal capacity to sue and plaintiff is judicially estopped from asserting the claims in the complaint.
On August 31, 2006, plaintiff filed this action against defendants. Plaintiff's complaint alleges that 10-18, Inc. was formed in August 1995, that he and Boussi agreed to be equal shareholders in 10-18, Inc., and that on January 31, 1996, 10-18, Inc. acquired real property located at 1371 36th Street, in Brooklyn, New York. Plaintiff's complaint further alleges that from the inception of 10-18, Inc. in 1995, Boussi has failed to maintain corporate formalities, provide him with notice of corporate meetings, resolutions, authorizations, and transactions, and provide him with any financial information. Plaintiff's complaint also alleges that Boussi has failed to give him his purported 50% share of the revenue and profits of 10-18, Inc., and that Boussi has wasted and dissipated corporate assets. Plaintiff seeks a judgment determining that he and Boussi are equal shareholders of 10-18, Inc., an accounting, an imposition of a constructive trust upon the 1371 36th Street real property, an award of monetary damages equal to the revenue and profits from 10-18, Inc. allegedly due to him, an order compelling the judicial dissolution of 10-18, Inc., and an injunction restraining Boussi from dissipating or transferring any assets of 10-18, Inc.
Defendants have interposed an answer to plaintiff's complaint, denying the allegation that plaintiff ever had a shareholder interest in 10-18, Inc. The answer also asserts eight affirmative defenses, including the eighth affirmative defense that plaintiff lacks legal capacity to sue, and the fourth affirmative defense that plaintiff's claims are barred by the doctrine of judicial estoppel.
Defendants' instant motion is based upon the grounds asserted in their eighth and fourth affirmative defenses that plaintiff lacks legal capacity to sue and that his claims are barred by the doctrine of judicial estoppel. These defenses are predicated upon the undisputed fact that in November 1998, plaintiff and his wife filed a voluntary bankruptcy petition under Chapter 11 of the Bankruptcy Code, District of New Jersey. The Bankruptcy petition included a sworn affidavit from plaintiff and his wife listing all of their assets, including their ownership of four parcels of real property and the names of four corporations in which they held a shareholder interest. 10-18, Inc., however, was not listed by plaintiff in the bankruptcy petition as a corporation in which he had a shareholder interest. Indeed, there is no mention of 10-18, Inc. anywhere in plaintiff's bankruptcy petition. By a final decree of the Bankruptcy Court dated October 24, 2002, plaintiff's bankruptcy case was closed, and the Trustee was discharged.
It is well settled that "[u]pon the filing of a voluntary bankruptcy petition, all property which a debtor owns or subsequently acquires, including a cause of action, vests in the bankruptcy estate" ( DeLarco v DeWitt, 136 AD2d 406, 408 (citing 11 USC § 541 [a] [1], [7]); see also Hansen v Madani, 263 AD2d 881, 882; Reynolds v Blue Cross of Northeastern NY, 210 AD2d 619, 619-620; Matter of C M Plastics [Collins], 168 AD2d 160, 161). "In addition, title to the debtor's property will remain in the bankruptcy estate unless the property is listed in the schedule of assets filed with the [bankruptcy] court or otherwise deemed abandoned" ( Hansen, 263 AD2d at 882; see also Matter of C M Plastics [Collins], 168 AD2d at 161; DeLarco, 136 AD2d at 408). Therefore, "a debtor's failure to list a legal claim as an asset in his or her bankruptcy proceeding causes the claim to remain the property of the bankruptcy estate and precludes the debtor from pursuing the claim on his or her own behalf" ( 123 Cutting Co. v Topcove Assoc. , 2 AD3d 606 , 607, quoting Strokes Elec. Plumbing v Dye, 240 AD2d 919, 920; see also Whelan v Longo , 7 NY3d 821 , 822; Dynamics Corp. of Am. v Marine Midland Bank-N.Y., 69 NY2d 191, 196-197; Bajanov v Grossman , 36 AD3d 572 , 573; Weitz v Lewin, 251 AD2d 402, 402; Bromley v Fleet Bank, 240 AD2d 611, 611-612).
Thus, under principles of federal bankruptcy law, even if it were true that plaintiff had a shareholder interest in 10-18, Inc., upon the filing of the bankruptcy petition, that alleged interest, if it existed, became the property of the bankruptcy estate ( see Hansen, 263 AD2d at 882; Bromley, 240 AD2d at 611; Reynolds, 210 AD2d at 620). As a result of plaintiff's failure to list his alleged shareholder interest, that alleged asset did not revert back to plaintiff upon the conclusion of his bankruptcy case( see 123 Cutting Co., 2 AD3d at 607; Hansen, 263 AD2d at 882; Weitz, 251 AD2d at 402; Strokes Elec. Plumbing, 240 AD2d at 920). Consequently, plaintiff now lacks legal capacity to assert claims based upon his alleged interest in 10-18, Inc. ( see Whelan v Longo, 7 NY3d at 822; Bajanov, 36 AD3d at 573; 123 Cutting Co., 2 AD3d at 607; Hansen, 263 AD2d at 882-883; Weitz, 251 AD2d at 402; Bromley, 240 AD2d at 612).
Plaintiff, in opposition to defendants' motion, claims that he inadvertently failed to list 10-18, Inc. in the bankruptcy petition, and contends that such failure has no affect on his ownership interest in 10-18, Inc. This contention is devoid of merit. It does not matter whether "the debtor has intentionally or fraudulently" failed to disclose an asset ( Dynamics Corp. of Am., 69 NY2d at 197-198). As a result of the failure to schedule the asset, plaintiff's interest remained the property of the bankruptcy estate and does not revert back to the debtor upon the conclusion of the bankruptcy case ( see id.; Hansen, 263 AD2d at 882; Strokes Elec. Plumbing, 240 AD2d at 920). Summary judgment dismissing plaintiff's complaint is, therefore, mandated as a matter of law based upon plaintiff's lack of legal capacity to sue ( see CPLR 3211 [a] [3], 3212 [b]; 123 Cutting Co., 2 AD3d at 607; Hansen, 263 AD2d at 882-883).
Defendant is also entitled to summary judgment based upon the ground of judicial estoppel, which prevents a party who asserted a factual position in one action from taking an inconsistent position in subsequent litigation ( see e.g. Black v White Case, 280 AD2d 407, 408; McCaffrey v Schaefer, 251 AD2d 300, 301). Under the doctrine of judicial estoppel, a discharged debtor who fails to list an asset in his or her prior bankruptcy proceeding is precluded from asserting claims based on ownership of that asset ( see e.g. Madden v Corey, 251 AD2d 257, 258; Manhattan Ave. Dev. Corp. v Meit, 224 AD2d 191, 192; Cafferty v Thompson, 223 AD2d 99, 102). Thus, inasmuch as plaintiff failed to disclose any alleged shareholder interest in 10-18, Inc. in his bankruptcy petition or at any time during his bankruptcy proceeding, he is precluded, under the doctrine of judicial estoppel, from asserting the claims herein based upon an alleged ownership of an interest in 10-18, Inc. ( see Manhattan Ave. Dev. Corp., 224 AD2d at 192; Cafferty, 223 AD2d at 102).
Plaintiff, in opposing defendants' motion, attempts to rely upon this court's February 28, 2007 order, which denied defendants' earlier motion to dismiss because it was unsupported by any affidavit from a party. Plaintiff argues that the denial of that motion is now the law of the case because defendants had raised the issue that documentary evidence, in the form of plaintiff's bankruptcy petition, demonstrated plaintiff's allegation that he is a 50% shareholder in 10-18, Inc. to be false.
Plaintiff's argument must be rejected. The law of the case doctrine "is inapplicable where, as here, a summary judgment motion follows a motion to dismiss . . . as the scope of review applicable to each motion is distinct" ( Bernard v Grenci , 48 AD3d 722 , 724; see also Riddick v City of New York , 4 AD3d 242 , 245; Gannone v Wittman, 232 AD2d 298, 298). Furthermore, defendants' earlier motion to dismiss was not based upon the legal arguments of lack of capacity to sue and judicial estoppel and, thus, these legal arguments were not previously considered by the court.
Plaintiff further argues that despite his failure to list his claimed ownership interest in 10-18, Inc. in the bankruptcy petition, defendants' motion should be denied because the question of his ownership interest in 10-18, Inc. raises a factual dispute. He asserts that he raised the initial money necessary to acquire the real property and that he invested funds in the acquisition of that property. Plaintiff also asserts to have pledged his ownership interest in 10-18, Inc. to secure a $ 25,000,000 loan from Ahron Rosenfeld to him. The factual dispute raised by these assertions (which are denied by defendants), however, are without moment since the viability of plaintiff's claims, as discussed above, rests upon a determinative question of law ( see Dynamics Corp. of Am., 69 NY2d at 196-197; Cafferty, 223 AD2d at 101).
Accordingly, defendants' motion for summary judgment dismissing plaintiff's complaint, is granted.
This constitutes the decision, order, and judgment of the court.