Opinion
No. 500103/10.
2012-09-10
Alexander MESEONZNIK, Plaintiff, v. Vladimir GOVORENKOV, Aminach USA, VVG Enterprises, Inc., J & I Tax Services, Inc., Defendants.
Robert Bondar, Esq., Brooklyn, for plaintiff. Nigar Djaliliva, Esq., William Z. Schneider & Associates, P.C., Brooklyn, for defendants Vladimir Govorenkov and VVG Enterprises, Inc.
Robert Bondar, Esq., Brooklyn, for plaintiff. Nigar Djaliliva, Esq., William Z. Schneider & Associates, P.C., Brooklyn, for defendants Vladimir Govorenkov and VVG Enterprises, Inc.
Glenn R. Marshall, Esq., New York, for defendant J & I Tax Services, Inc.
CAROLYN E. DEMAREST, J.
In this action by plaintiff Alexander Meseonznik (plaintiff) against defendants Vladimir Govorenkov (Govorenkov), Aminach USA (Aminach), VVG Enterprises, Inc. (VVG), and J & I Tax Services, Inc. (J & I), Govorenkov and VVG (collectively, defendants) alleging that Govorenkov fraudulently dissolved corporations in which he was a 50% shareholder and seeking to recover his alleged share of the business revenue, profits, and damages, Govorenkov and VVG, in motion sequence no. 4, cross-move (in response to plaintiff's motion under motion sequence no. 3) for an order granting them sanctions in the form of reimbursement by plaintiff of their expenses and attorneys' fees pursuant to 22 NYCRR 130–1.1, and granting them a protective order pursuant to CPLR 3103. Govorenkov and VVG, in motion sequence no. 5, move for an order granting them summary judgment, pursuant to CPLR 3212, dismissing plaintiff's second amended complaint as against them. Plaintiff, in motion sequence no. 8, cross-moves for summary judgment in his favor as against Govorenkov and VVG on the second, third, sixth, and tenth causes of action of his second amended complaint pursuant to CPLR 3212. Plaintiff, in motion sequence no. 9, cross-moves (in response to J & I's cross motion, under motion sequence no. 7, which sought summary judgment dismissing plaintiff's third, fourth, and fifth causes of action as against it) for summary judgment in his favor as against J & I on the third and fifth causes of action of his second amended complaint pursuant to CPLR 3212.
BACKGROUND
On January 18, 2000, M.G.V.S Enterprises, Inc. (MGVS) was incorporated as a domestic corporation, to do the business of furniture distribution. Plaintiff and Govorenkov, along with another person, were initially each a 33.33% shareholder of MGVS. Later in 2000, MGVS opened a retail furniture store in Brooklyn named EuroCase, which operated until 2002, when it was bought out by an investor, and profits from the sale were distributed in equal shares among the three shareholders. After paying off the third shareholder, plaintiff and Govorenkov became equal 50% shareholders of MGVS. Plaintiff was the president of MGVS, and Govorenkov became its vice-president.
Plaintiff thereafter learned of a new line of furniture manufactured in Israel by a company called Aminach Bedding & Furniture Manufacturing, Ltd. (Aminach–Israel), and became interested in distributing and selling Aminach–Israel's furniture in New York. Plaintiff alleges that he offered Govorenkov the opportunity to invest in selling this furniture with him, and Govorenkov agreed. In 2004, plaintiff negotiated the terms of the distributorship agreement with Aminach–Israel, and was able to obtain an exclusive distributorship agreement with Aminach–Israel. Although this exclusive distributorship agreement was in plaintiff's name alone, plaintiff offered it for the joint benefit of himself and Govorenkov, and he and Govorenkov agreed to sell Aminach–Israel's furniture through MGVS.
Plaintiff negotiated the terms of a real property lease with Neck Road One Realty, LLC (Neck Road) for a term beginning on February 1, 2003 and continuing to January 31, 2008, to be used for Aminach as a retail furniture store in Brooklyn, located at 2252 East 17th Street. The lease was signed by plaintiff, as an officer of MGVS, and he personally guaranteed MGVS's performance under the terms of the lease.
Plaintiff and Govorenkov leased a second location for an Aminach store at 50 Quentin Road, in Brooklyn, but the business did not perform well and they sold it and equally distributed the proceeds from the sale. Plaintiff and Govorenkov allegedly distributed the profits from the Aminach store operations equally on a regular basis. According to plaintiff, his primary role in MGVS was to promote the Aminach business through communications with the manufacturer, supervise sales, oversee client relations, and handle business advertising, whereas Govorenkov was mostly involved with the day-to-day operations of the warehouse and inventory management.
Plaintiff alleges that he wished to expand and open more Aminach locations in Florida, California, and several more in the New York area, to meet his annually increasing sales volume obligations under the exclusive distributorship agreement with Aminach–Israel, but Govorenkov disagreed with these expansion plans and only wanted to be involved in the existing business location for Aminach at East 17th Street in Brooklyn. Plaintiff claims that he offered Govorenkov the sum of $375,000 to purchase his share of MGVS, but Govorenkov declined. Thereafter, plaintiff, acting alone, opened several more Aminach stores located in Florida, Queens, Long Island, and New Jersey, in which he was the sole proprietor. It is undisputed that neither MGVS nor Govorenkov had any interest in plaintiff's other business locations. Plaintiff asserts, however, that he nevertheless remained a 50% shareholder in the Aminach store in Brooklyn, which was owned by MGVS.
Plaintiff alleges that in 2006, he and Govorenkov began having disagreements about the business and how it should be developed and managed, and Govorenkov refused to pay him his share of the profits, stating that he no longer considered him to be his partner. According to plaintiff, Govorenkov then allegedly removed him from Aminach's business bank accounts and changed the locks on the store doors, effectively excluding him from the business.
Plaintiff claims that without his knowledge or consent, Govorenkov, with the assistance of J & I, an accounting firm which had previously been retained to provide tax preparation and bookkeeping services for MGVS, caused the dissolution of MGVS on May 25, 2006. J & I obtained the consent of the New York State Department of Taxation and Finance to dissolve MGVS and then prepared a certificate of dissolution for MGVS in plaintiff's name, as the president of MGVS. MGVS's certificate of dissolution stated that MGVS elected to dissolve, and that the dissolution was authorized at a meeting of shareholders by vote of the holders of two-thirds of all the outstanding shares entitled to vote. Such certificate of dissolution only listed plaintiff as an officer and director of MGVS.
Plaintiff asserts that Govorenkov fraudulently executed this certificate of dissolution for MGVS by signing his name, and submitted this certificate to the State of New York Department of State for filing. It is undisputed that plaintiff never signed this certificate of dissolution, and Govorenkov admits to signing plaintiff's name to this certificate on February 28, 2006, but claims that he signed it with plaintiff's knowledge and consent. The certificate of dissolution stated that it was subscribed on February 28, 2006 by the undersigned who affirmed that the statements made therein were true under the penalties of perjury. Plaintiff claims that he had no knowledge that this certificate was prepared or filed with the New York Department of State. The return address for the filed and stamped certificate of dissolution was listed as c/o J & I.
From 2006 until 2008, the Aminach store continued to be operated by Govorenkov, under the entity M & G, a New York corporation which had been formed by plaintiff and Govorenkov in 2003, and which had been dormant until 2006, when it began operating this store. Plaintiff and Govorenkov were 50% shareholders of M & G; plaintiff was its president and Govorenkov was its vice-president, as reflected by a 2005 income tax return for M & G and an application for Registration as a Sales Tax Vendor, both prepared by J & I. No bulk sale transfer form for the transfer of MGVS's assets to M & G was ever completed or submitted by Govorenkov or J & I, nor was any Notification of Sale mailed to the Department of Taxation and Finance. Plaintiff claims that he was kept completely in the dark regarding the transfer of Aminach assets from MGVS to M & G by Govorenkov and J & I despite the fact that he was a 50% shareholder and president of both MGVS and M & G. Plaintiff further claims that after this transfer of assets from MGVS to M & G in 2006, Govorenkov acted as a 100% owner of Aminach and MGVS and operated the Aminach store profitably in 2006 and 2007.
On the 2006 income tax return for M & G, prepared by J & I, Govorenkov was listed as the vice-president on the front of the document, but Schedule D, which is attached thereto, and which was also prepared by J & I, removed plaintiff from the list of M & G's shareholders and listed only Govorenkov as a shareholder of M & G. It also listed Govorenkov as the president of M & G and reflected that Govorenkov received compensation from M & G in 2006. Plaintiff claims, however, that he never received compensation from M & G in 2006 or 2007.
On December 31, 2007, J & I prepared a certificate of dissolution for M & G in the name of Govorenkov only, as president of M & G, despite the fact that Govorenkov was the vice-president and not the president of MGVS. The certificate of dissolution for M & G only listed Govorenkov as an officer and director of M & G and stated that M & G elected to dissolve and that the dissolution was authorized at a meeting of shareholders by vote of the holders of two-thirds of all the outstanding shares entitled to vote. M & G's certificate of dissolution, which was subscribed by Govorenkov, as president of M & G, on December 31, 2007, stated that Govorenkov affirmed that the statements made therein were true under the penalties of perjury. In April 2008, J & I obtained the consent of the New York State Department of Taxation and Finance to dissolve M & G. After obtaining such consent, Govorenkov filed M & G's certificate of dissolution with the New York State Department of State, returnable to J & I, and M & G was formally dissolved on June 23, 2008. Plaintiff claims that such dissolution was without his knowledge or consent.
From 2008 until the present time, the Aminach store has been operated by Govorenkov under VVG, a corporation formed by Govorenkov in January 2008, and of which Govorenkov is the sole shareholder and the president. No bulk sale transfer form for the transfer of M & G's assets to VVG was ever completed or submitted by Govorenkov or J & I, and no notification of sale was mailed to the New York State Department of Taxation and Finance. Plaintiff claims that (as had occurred with the transfer from MGVS to M & G) he was kept completely in the dark regarding the alleged transfer of Aminach's assets from M & G to VVG, despite the fact that he was a 50% shareholder of M & G and its president. In 2008, Govorenkov entered into a new lease with Neck Road for the 17th Avenue property previously leased by MGVS on essentially the same terms, substituting VVG for MGVS.
On March 24, 2010, plaintiff brought this action against defendants. Defendants served their respective answers. On February 16, 2011, plaintiff's motion, under motion sequence no. 1, to amend his complaint was granted, and on September 28, 2011, plaintiff's motion, under motion sequence no. 2, for leave to serve a second amended complaint was granted without opposition.
Plaintiff's second amended complaint alleges 11 causes of action. Plaintiff's first cause of action seeks a judgment: declaring that he is a one-half owner of Aminach's Brooklyn store; directing Govorenkov to amend any documents filed with any government agency in connection with Aminach to reflect his ownership interest; distributing dividends and business profits from the operation of Aminach's Brooklyn store from 2006, with interest; enjoining defendants from taking any action to misappropriate his ownership interests; and awarding him attorney's fees. Plaintiff's second cause of action alleges a claim of conversion, asserting that Govorenkov fraudulently dissolved MGVS and M & G, and transferred these assets to VVG, assuming sole ownership over monies and assets belonging to him. Plaintiff's third cause of action asserts a claim of fraudulent misrepresentation/forgery, alleging that Govorenkov forged his name on the certificate of dissolution for MGVS, and that J & I prepared and received the allegedly forged certificate of dissolution for MGVS, without alerting him to the fact that it was being dissolved and without his consent as a 50% shareholder and the president of MGVS. Plaintiff's fourth cause of action for tortious interference with prospective business advantage, asserts that Govorenkov and J & I acted in concert when they fraudulently caused the dissolutions of MGVS and M & G, denying him the benefits of these businesses, and that such actions were undertaken for the sole purpose of harming him.
Plaintiff's fifth cause of action for negligence alleges that J & I owed a duty of care to him by virtue of being retained for the purpose of tax preparation and bookkeeping services for MGVS and M & G, and that J & I breached this duty of care when: it failed to alert him to information that was incorrect or incomplete; it prepared documents of dissolution for MGVS and M & G for submission to the New York Department of State and New York Department of Taxation knowing that he had no knowledge of these documents and that he had not given his consent to the preparation or filing of these documents; and by refusing to provide him with any information, documents, or records regarding these events when, after learning that Govorenkov had unlawfully dispossessed him from ownership of MGVS and M & G, he demanded them. Plaintiff's sixth cause of action for breach of fiduciary duty alleges that Govorenkov breached his fiduciary duty to him by: failing to account to him for any benefits derived from MGVS and M & G since 2006; engaging in self-dealing; using his position of control to exclude him from the business premises and company bank accounts; and causing the fraudulent dissolution of MGVS, without his knowledge or consent. Plaintiff's seventh cause of action seeks an accounting by Govorenkov of business records, profit and loss statements, bank records, and other financial materials. Plaintiff's eighth cause of action seeks attorney's fees. Plaintiff's ninth cause of action seeks an injunction and protective order, returning 50% ownership of Aminach to him. Plaintiff's tenth cause of action seeks the imposition of a constructive trust in his favor with respect to Aminach's assets and profits. Plaintiff's eleventh cause of action alleges a claim of unjust enrichment based upon Govorenkov's removal of him from the Aminach store lease, Govorenkov's failure to pay him his share of profits and distributions from 2006, and Govorenkov's failure to repay him for his contributions to the business.
Defendants served amended answers in response to the amended complaint. Govorenkov and VVG, in their amended answer, interposed six counterclaims, including a first counterclaim for breach of contract and a second counterclaim for fraud.
Plaintiff, under motion sequence no. 3, moved for an order granting him: (1) additional time to file a note of issue in this action, (2) pursuant to CPLR 3124, compelling certain disclosure requested by him, (3) pursuant to CPLR 3126, striking Govorenkov and VVG's answer for their alleged willful failure to disclose information, and (4) pursuant to CPLR 3211, dismissing Govorenkov and VVG's first and second counterclaims against him for failure to state a cause of action. Govorenkov and VVG, in response, under motion sequence no. 4, moved for sanctions, pursuant to 22 NYCRR 130–1.1, and for a protective order pursuant to CPLR 3103. By an order dated February 22, 2012, the court granted plaintiff's motion, under motion sequence no. 3, to the extent that it extended plaintiff's time to file his note of issue until February 29, 2012, and dismissed Govorenkov's first and second counterclaims for failure to state a cause of action. The court reserved decision on the discovery issues contained in motion sequence no. 3 and motion sequence no. 4, pending a framed issue trial of the liability of defendants to plaintiff, which was scheduled to be held on June 4, 2012.
Plaintiff filed his note of issue on February 27, 2012. Govorenkov and VVG, thereafter, under motion sequence no. 5, moved for summary judgment dismissing plaintiff's complaint as against them. By order dated May 16, 2012, a motion, under motion sequence no. 6, by Govorenkov and VVG, pursuant to CPLR 3025(b), for leave to file amended counterclaims was denied, after argument. On June 6, 2012, the court denied a cross motion by J & I, under motion sequence no. 7, for summary judgment dismissing plaintiff's third, fourth, and fifth causes of action as against it. Plaintiff, under motion sequence no. 8, then cross-moved for summary judgment in his favor as against Govorenkov and VVG with respect to his second, third, sixth, and tenth causes of action of his second amended complaint pursuant to CPLR 3212. Plaintiff, in motion sequence no. 9, cross-moves for summary judgment in his favor with respect to his third and fifth causes of action as against J & I.
DISCUSSION
Motion Sequence No. 4
Govorenkov and VVG, in support of their cross motion, under motion sequence no. 4, seek the imposition of sanctions against plaintiff, pursuant to 22 NYCRR 130–1.1, based upon plaintiff's conduct with regard to certain relief that was sought by him in his motion, under motion sequence no. 3, which they characterize as “frivolous.”
On September 16, 2010, plaintiff had served a Combined Demands for Discovery and Inspection upon Govorenkov. On October 28, 2010, Govorenkov complied with these demands, but objected to plaintiff's demand therein for: purchase orders that Aminach had issued to Aminach–Israel for the years 2001 through 2010; customs clearance receipts for all containers shipped from Aminach–Israel to Govorenkov and Aminach from 2001 through 2010; and all sales receipts for Aminach from 2001 to the present, as being “overly broad, unduly burdensome, and/or oppressive.” Govorenkov and VVG did not comply with these demands.
By letter dated December 14, 2011, plaintiff's attorney was advised by the court that pursuant to the compliance conference held that morning, if any party sought any outstanding discovery, a motion to compel should be made expeditiously. By a Notice to Produce Documents also dated December 14, 2011, plaintiff demanded that Govorenkov and VVG produce: copies of the purchase orders for merchandise they issued to Aminach–Israel for the years 2006 through the present time; copies of the customs clearance receipts for all containers shipped from Aminach–Israel to them and Aminach from 2006 through the present time; and copies of all sales receipts for Aminach from 2006 to the present.
Plaintiff e-filed motion sequence no. 3, which sought, among other relief, an order pursuant to CPLR 3124, compelling disclosure requested by him in his Notice to Produce Documents, and, pursuant to CPLR 3126, striking Govorenkov and VVG's answer for willful failure to disclose this information. Plaintiff's attorney, in support of motion sequence no. 3, asserted that he had made a good faith effort to avoid the necessity of that motion by speaking with Ms. Djalilova, Esq., the attorney for Govorenkov and VVG, at the compliance conference on December 14, 2011, and had agreed to limit his demands for the period from 2001 to the present (as sought in his original demand) to the period 2006 to the present (as reflected in the December 14, 2011 Notice to Produce Documents). Plaintiff's attorney affirmed that Ms. Djalilova, Esq. still rejected his demands as overly broad, unduly burdensome, and oppressive, which, he asserted, precipitated the need for that discovery motion. Plaintiff's attorney stated that he had sent the Notice to Produce Documents to Govorenkov and VVG on December 14, 2011, with the pared-down request for records, in order to avoid unnecessary motion practice, but despite efforts to notify and consult with Ms. Djalilova, Esq. on this issue, it could not be resolved.
Govorenkov and VVG, in motion sequence no. 4, now argue that plaintiff's conduct with respect to his discovery demand in motion sequence no. 3 was frivolous because plaintiff waited over a year from his first demand, in his Combined Demand for Discovery and Inspection, dated September 16, 2010 before making the motion. Govorenkov and VVG admit that plaintiff had sought this discovery in his prior demand, but contend that since plaintiff did not pursue that demand or file a motion to compel with respect to it for a year, his motion to compel is rendered frivolous.
Govorenkov and VVG further contend that motion sequence no. 3 was frivolous because at the time that plaintiff filed that motion, to compel discovery, there was no outstanding discovery, and plaintiff had improperly served them with that motion prior to serving a discovery demand. Specifically, Govorenkov and VVG assert that while plaintiff had filed that motion electronically on December 16, 2011, his notice of motion and his Notice to Produce Documents were first received by them in the mail on December 19, 2011. Govorenkov and VVG contend that service of this demand, simultaneously with the motion to compel, without affording them the opportunity under CPLR 3122 to respond or object to this demand, was improper. Govorenkov and VVG argue that plaintiff's motion to strike their answer based upon non-compliance with discovery when there was no outstanding discovery at the time that plaintiff filed that motion warrants the imposition of sanctions.
Pursuant to NYCRR 130–1.1(a), “[t]he court, in its discretion, may award to any party or attorney in any civil action or proceeding before the court, except where prohibited by law, costs in the form of reimbursement for actual expenses reasonably incurred and reasonable attorney's fees, resulting from frivolous conduct as defined in this Part.” 22 NYCRR 130–1.1(c) defines conduct as “frivolous” if: “(1) it is completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law; (2) it is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or (3) it asserts material factual statements that are false.”
Pursuant to 130 NYCRR 130–1.1(c), “[i]n determining whether the conduct undertaken was frivolous, the court shall consider, among other issues, the circumstances under which the conduct took place, including the time available for investigating the legal or factual basis of the conduct, and whether or not the conduct was continued when its lack of legal or factual basis was apparent, should have been apparent, or was brought to the attention of counsel or the party.”
Govorenkov and VVG contend that plaintiff's conduct in seeking the discovery relief sought by him in motion sequence no. 3 was without merit, in violation of the discovery rules imposed under CPLR article 31, and undertaken primarily to delay or prolong the resolution of this litigation. They, therefore, demand an award of reimbursement of expenses and reasonable attorneys' fees.
In addressing this cross motion, the court notes that CPLR 3101(a) requires the disclosure of all evidence material and necessary in the prosecution of an action. Furthermore, parties are under a continuing obligation to supplement their responses to discovery demands ( seeCPLR 3101[h] ), and while plaintiff did not immediately seek compliance when Govorenkov and VVG objected to his earlier demand, there is no showing that plaintiff waived this demand for discovery. Rather, as noted above, plaintiff brought such motion after being advised by the court that he should bring a motion to compel any outstanding discovery. In addition, while plaintiff e-filed the motion prior to Govorenkov and VVG's receipt of the demand, they were already aware of plaintiff's demand due to plaintiff's effort to resolve this discovery issue prior to bringing the motion when he agreed to pare down his demand to a shorter time period, i.e., from 2006 to the present, instead of from 2001 to the present, and Govorenkov and VVG rejected this pared down demand on the same grounds, precipitating the need for his motion under motion sequence no. 3 to compel such discovery. Consequently, the court does not find that plaintiff engaged in “frivolous” conduct as defined by 22 NYCRR 130–1.1. Govorenkov and VVG's request for sanctions is denied.
Govorenkov and VVG, in their cross motion, also seek a protective order, arguing that in order for plaintiff to be entitled to the review of purchase orders, custom clearance receipts, and sales receipts, he must first seek an order for an accounting (which is one of plaintiff's causes of action herein), and cannot obtain such information, which is fiscal in nature, by serving a demand for discovery. As discussed above, the court, by order dated February 22, 2012, reserved decision on this discovery issue raised in motion sequence no. 3 and motion sequence no. 4, pending a framed issue trial of the liability of Govorenkov and VVG to plaintiff. Upon reflection, however, and in light of the concession that plaintiff was president and a 50% shareholder in both MGVS and M & G, plaintiff is entitled to obtain these records. Accordingly, the motion for a protective order is denied.
Motion Sequence No. 5
In support of their motion for summary judgment, under motion sequence no. 5, Govorenkov and VVG argue that plaintiff's second amended complaint must be dismissed as a matter of law because plaintiff, throughout such complaint, refers to himself and Govorenkov as both shareholders and partners interchangeably. Govorenkov and VVG assert that plaintiff is claiming 50% ownership of a business entity, without specifying whether this business entity is a partnership or a corporation. Govorenkov and VVG contend that Govorenkov and plaintiff were not partners once they formed the corporations, MGVS and M & G, and that a joint venture may not be carried on by individuals through a corporate form. Govorenkov and VVG argue that, therefore, while plaintiff seeks a one-half ownership interest in the retail furniture store Aminach, he cannot seek this interest as a partner, but must assert his entitlement to any interest through corporate law since he and Govorenkov were shareholders of the corporations through which the store operated.
With respect to this argument, it is noted that although earlier case law had held that a joint venture cannot be carried out by individuals through the corporate form, this rule has been qualified to permit the individuals to continue to operate under the terms of a partnership agreement between themselves as long as third parties, such as creditors, are not involved and the enforcement joint venture agreement does not conflict with the corporation's functioning ( see Matter of Hochberg v. Manhattan Pediatric Dental Group, P.C., 41 AD3d 202, 204 [1st Dept 2007]; Richbell Info. Servs. v. Jupiter Partners, 309 A.D.2d 288, 299–300 [1st Dept 2003]; Blank v. Blank, 222 A.D.2d 851, 852 [3d Dept 1995] ). Thus, plaintiff's characterization of his relationship with Govorenkov as partners, despite their formation of corporations as a conduit to conduct their furniture business, does not constitute a basis for dismissal.
Govorenkov and VVG further argue that since MGVS and M & G were corporations, in which each of them was a 50% shareholder, plaintiff was required to name these corporations as defendants in this action and bring this action as a derivative action pursuant to Business Corporation Law § 626. Govorenkov and VVG assert that since plaintiff's claims are based upon Govorenkov's fraudulently dissolving MGVS and M & G and his transfer of their assets to VVG, such a claim of misappropriation of corporate assets may not be addressed in this action by plaintiff as a shareholder in his individual capacity. They contend that plaintiff could only bring this action in the names of these corporations in a derivative action because the damages claimed by him belong to these corporations.
Govorenkov and VVG argue that although MGVS and M & G are now dissolved, Business Corporation Law § 1006(a)(4) permits a dissolved corporation to “sue or be sued in all courts and participate in actions and proceedings, ... in its corporate name.” Govorenkov and VVG note that the Court of Appeals held, in Independent Inv. Protective League v. Time, Inc. (50 N.Y.2d 259, 264 [1980],rearg. denied50 N.Y.2d 1059 [1980] ), that since Business Corporation Law § 1006(b) provides that “[t]he dissolution of a corporation shall not affect any remedy available to ... [its] shareholders for any right or claim existing ... before such dissolution,” “the rights and remedies of the shareholders existing prior to dissolution are viewed as if the dissolution never occurred,” and that, as a result, a “corporate dissolution in itself cannot preclude a qualified plaintiff from being deemed a shareholder at the time of bringing the [derivative] action” ‘ ( id., quoting Business Corporation Law § 626[b] ). Govorenkov and VVG, therefore, argue that despite the dissolutions of MGVS and M & G, plaintiff was required to bring his claims as a derivative action.
Govorenkov and VVG's reliance upon Independent Inv. Protective League (50 N.Y.2d at 264) for the proposition that plaintiff was required to bring this action derivatively, rather than in his individual capacity, is misplaced. The Court of Appeals, in Independent Inv. Protective League (50 N.Y.2d at 264), merely held that “the corporate dissolution in itself cannot preclude a qualified plaintiff from being deemed a shareholder”; it did not state that a “qualified plaintiff” is required to bring a derivative action to enforce his individual rights.
Govorenkov and VVG rely upon Matter of Maki v. Estate of Ziehm (55 A.D.2d 454 [3d Dept 1977] ) in arguing that an action for a misappropriation of corporate assets must be brought as a derivative action. In Matter of Maki (55 A.D.2d at 456), a derivative action was found to be the appropriate vehicle to retrieve for the corporation therein assets which had been misappropriated by one of the shareholders after its dissolution. The Appellate Division, Third Department, in Matter of Maki (55 A.D.2d at 456), in so finding, determined that a derivative action was necessary in order to protect the creditors of the dissolved corporation since the petitioner-shareholder therein could not be permitted to circumvent the rights of creditors by maintaining a direct action, the potential benefits of which would inure solely to himself ( see also Venizelos v. Oceania Mar. Agency, 268 A.D.2d 291, 292 [1st Dept 2000] [observing that “the reason for the rule requiring that damages generally be awarded to the corporation in suits brought by shareholders, even when the corporation is closely held, is to prevent impairment of the rights of the corporation's creditors whose claims may be superior to those of the innocent shareholder”] ). Here, in contrast, there is no suggestion that creditors' rights are implicated, particularly given the substantial lapse of time since the corporate dissolutions were effected. In this case, the only party claimed to be injured is the plaintiff.
In Abrams v. Donati (66 N.Y.2d 951, 953 [1985],rearg. denied67 N.Y.2d 758 [1986] ), the Court of Appeals held that a shareholder has no individual cause of action “[f]or a wrong against a corporation ... though he [or she] loses the value of his [or her] investment or incurs personal liability in an effort to maintain the solvency of the corporation.” An exception exists, however, where the wrongdoer has breached a duty owed to a shareholder independent of any duty owing to the corporation ( see Herbert H. Post & Co. v. Sidney Bitterman, Inc., 219 A.D.2d 214, 225 [1st Dept 1996] ). Thus, where a wrongdoer has breached an obligation to a shareholder which is independent of any duty owing to the corporation, the shareholder has an individual cause of action ( see Fellner v. Morimoto, 52 AD3d 352, 353–354 [1st Dept 2008] ). Consequently, a shareholder may maintain an individual, as distinguished from a derivative, action against directors, officers, or another shareholder for wrongs constituting a direct fraud on him or her ( see Craven v. Rigas, 85 AD3d 1524, 1527 [3d Dept 2011], appeal dismissed17 NY3d 932 [2011] ).
As to recovery for the alleged harm, “[i]t is the general rule that, because a shareholders' derivative suit seeks to vindicate a wrong done to the corporation through enforcement of a corporate cause of action, any recovery obtained is for the benefit of the injured corporation ( Glenn v. Hoteltron Sys., 74 N.Y.2d 386, 392 [1989];see alsoBusiness Corporation Law § 626 [e] ). “Where, however, the plaintiff sues in an individual capacity to recover damages resulting in harm, not to the corporation, but to individual shareholders, the suit is personal, not derivative, and it is appropriate for damages to be awarded directly to those shareholders” (Glenn, 74 N.Y.2d at 392;see also Geltman v. Levy, 11 A.D.2d 411, 413 [1st Dept 1960] ).
In Yudell v. Gilbert (2012 WL 3166788, 2012 N.Y. Slip Op 05896, *4 [1st Dept Aug. 7, 2012] ), the Appellate Division, First Department, recently adopted the test the Supreme Court of Delaware developed in Tooley v. Donaldson, Lufkin & Jenrette, Inc. (845 A.2d 1031, 1039 [Del.2004] ), finding the Tooley test to be “consistent with New York law” with “the added advantage of providing a clear and simple framework to determine whether a claim is direct or derivative.” Under Tooley (845 A.2d at 1035), a court, in determining whether a claim is direct or derivative, considers: “(1) who suffered the alleged harm (the corporation or the stockholders); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders individually).”
Here, under the test enunciated in Tooley, and pursuant to New York case law, plaintiff has standing to assert his claims since it is plaintiff who suffered the alleged harm and would receive the benefit of any recovery or other remedy. Indeed, in Craven (85 AD3d at 1527, quoting Albany–Plattsburgh United Corp. v. Bell, 307 A.D.2d 416, 419 [3d Dept 2003], lv dismissed and denied1 NY3d 620 [2004] [internal quotation marks and citations omitted] ), in addressing a claim of fraud, the Appellate Division, Third Department, recently held that “the pertinent inquiry, under the law of ... New York ... is whether the thrust of the plaintiff's action is to vindicate his personal rights as an individual and not as a stockholder on behalf of the corporation.' “ The Appellate Division, Third Department, in Craven (85 AD3d at 1527), found that the plaintiff therein had standing to pursue his individual claim for fraud where “the fraud alleged did not harm the corporation, but affected the plaintiff directly in the sale of his interest in [the corporation]” ( see also Marine Midland Bank–E. N.A. v. Prel–Albany, 50 A.D.2d 996, 997 [3d Dept 1975] [holding that since any harm caused by an alleged forced purchase of a corporation was inflicted upon the individuals who were the stockholders and not upon the corporation itself, “any possible cause of action arising therefrom belong[ed] to these individual shareholders”] ).
In Collins v. Telcoa Intl. Corp. (283 A.D.2d 128, 134 [2d Dept 2001] ), a case analogous to that here, the Appellate Division, Second Department, held that the plaintiff therein, a minority shareholder of two closely held corporations, had adequately stated an individual cause of action for conversion where he alleged that the shareholders had wrongfully exercised dominion and control over his share of the proceeds arising from the sale of the assets of the two closely held corporations to two other corporations, without informing him of the sale, and that, after this improper sale of the corporate assets was completed, one of the shareholders had absconded with his share of the proceeds of the sale. The Appellate Division, Second Department, in Collins (283 A.D.2d at 133), also upheld individual claims for breach of fiduciary duty. Similarly, in Venizelos (268 A.D.2d at 292), the Appellate Division, First Department, upheld individual claims for breach of fiduciary duties owed to the plaintiffs independent of the duties that were owed to a holding company, since the plaintiffs therein were “not seeking to vindicate their rights as stockholders but to recover their share of the ... assets, which was stolen from them.”
In Fellner (52 AD3d at 353–354), upon facts also analogous to those alleged herein, the Appellate Division, First Department, upheld an individual cause of action for the imposition of a constructive trust where the plaintiff alleged that certain profits and business opportunities, rightfully belonging to an entity the plaintiff and the defendant had formed to carry out their business partnership, were improperly diverted to the defendant and a corporation, without consideration, thereby unjustly enriching the defendant and that corporation, an entity in which the plaintiff had no interest.
In Tornick v. Dinex Furniture Indus. (148 A.D.2d 602, 603 [2d Dept 1989] ), the Appellate Division, Second Department, found that in an action seeking an accounting, the plaintiff, a former shareholder of a corporate defendant, had stated a cause of action against the defendant officers and directors in their individual capacities for redress of an alleged wrong personal to him where he had alleged that in order to deprive him of his share of the corporation's profits, the defendants had caused the corporation to offer him an inadequate price for his stock, and when he declined to sell, the defendants had redistributed his shares among themselves without compensating him for such shares. In so holding, the Appellate Division, Second Department, in Tornick (148 A.D.2d at 603 [internal quotation marks and citation omitted] ) found that “[t]he fact that a particular act of directors may constitute a wrong to the corporation which may be righted ordinarily on behalf of the corporation does not bar a stockholder from having redress if that act effects a separate and distinct wrong to him independently of the wrong to the corporation.” It observed that “[r]edress of this latter wrong is available to [a plaintiff] personally despite the right of a present stockholder to redress the wrong in a derivative action so far as it relates to the corporation' “ ( id., quoting Hammer v. Werner, 239 App.Div. 38, 44 [2d Dept 1933] ).
Here, plaintiff seeks damages based upon his deprivation of distributions from, and appreciation of, the business in which he invested significant resources, labor, and time. Plaintiff thus seeks to recover damages for the alleged harm resulting to him, as opposed to harm to MGVS and M & G, and for which he would receive the benefit of any recovery or remedy ( see Yudell, 2012 N.Y. Slip Op 05896, *4;Glenn, 74 N.Y.2d at 392). Plaintiff alleges that Govorenkov breached a duty owed to him independent of any duty owed to MGVS and M & G, and that Govorenkov's actions constituted a direct fraud on him ( see Craven, 85 AD3d at 1527). Thus, plaintiff, by his allegations that Govorenkov fraudulently dissolved MGVS and M & G, transferring their assets to VVG, and extinguishing any interest he had in MGVS and M & G by converting his 50% of shares in these corporations, has sufficiently asserted that Govorenkov committed a separate and distinct wrong to him for which he may sue individually by way of this direct action. Consequently, Govorenkov and VVG's motion for summary judgment dismissing plaintiff's second amended complaint as against them must be denied.
Motion Sequence No. 8
Plaintiff's cross motion, under motion sequence no. 8, seeks summary judgment in his favor on his second cause of action for conversion, third cause of action for fraudulent misrepresentation/forgery, sixth cause of action for breach of fiduciary duty, and tenth cause of action for the imposition of a constructive trust as against Govorenkov and VVG. Plaintiff argues that Govorenkov's affidavit (annexed to Govorenkov and VVG's motion for summary judgment) contains material admissions of fact that entitle him to judgment as a matter of law on these causes of action.
Specifically, plaintiff points to Govorenkov's statement, in his affidavit, that he “may have signed” the certificate of dissolution for MGVS. Plaintiff asserts that this statement by Govorenkov should be treated as a party admission and a statement against interest. Plaintiff further points to Govorenkov's testimony, at his deposition, that it “could be” and that “it is possible” that he signed plaintiff's name, but that if he did sign it, it was only with plaintiff's consent (Govorenkov's Dep. Transcript at 80, 172). Plaintiff argues that Govorenkov has no defense for signing his name to MGVS's certificate of dissolution.
Plaintiff further points to the fact that Govorenkov signed M & G's certificate of dissolution as its president, when, in fact, he was the vice-president, and not the president, of M & G, and, as such, lacked the authority to dissolve M & G. Plaintiff contends that Govorenkov has no defense for doing so, that he did this to deprive him of his 50% interest in M & G, and that this shows that Govorenkov is liable to him as a matter of law.
Govorenkov, in opposition to plaintiff's cross motion, explains that he and plaintiff operated their retail furniture business through MGVS until May 2006 and subsequently they operated it through M & G until July 2007, when plaintiff allegedly departed to California. Govorenkov claims that plaintiff had used MGVS in order to obtain an immigration status in the United States, and that in early 2006, plaintiff had informed him that he no longer needed MGVS for his immigration matter and that MGVS was, therefore, dissolved. Govorenkov admits that he signed plaintiff's name to the certificate of dissolution for MGVS, but claims that he did so solely at plaintiff's direction and with his full knowledge and authorization.
Plaintiff denies this, and attests that this dissolution was completely without his knowledge or consent. He contends that Govorenkov's assertion that he consented to having his name signed by him should carry no weight.
Govorenkov attempts to support his claim that plaintiff had knowledge of the dissolution of MGVS by his submission of an MGVS check, dated April 7, 2006, that was signed by plaintiff, made payable to M & G, and a withdrawal slip, dated April 12, 2006, for the balance of funds in MGVS's business account. Plaintiff, however, claims that the writing on this check and withdrawal slip, other than his signatures, belongs to Govorenkov, and that he had signed blank checks ahead of time so that MGVS could pay its bills in his absence. Govorenkov further claims that plaintiff continued to be involved in the day-to-day activities of the business, after it began to be operated via M & G and subsequent to the time the certificate of dissolution for MGVS was obtained in May 2006. Plaintiff disputes this, and claims that in 2006, he and Govorenkov had disagreements which resulted in his ouster from the Aminach store in Brooklyn.
Govorenkov additionally claims that plaintiff withdrew funds from the business account of MGVS for gambling, and has annexed copies of withdrawals from MGVS's account that were made in Atlantic City, New Jersey, and in Las Vegas, Nevada, in 2006. Govorenkov asserts that plaintiff's operation of Aminach stores in other locations, his gambling addiction, and his alleged refusal to pay Govorenkov back monies that plaintiff allegedly borrowed from him, resulted in the deterioration of his and plaintiff's business relationship, and that he and plaintiff decided to part ways on July 1, 2007 when plaintiff stated that he intended to move to California. According to Govorenkov, at that time, plaintiff told him that he did not care what happened to their company, that he and plaintiff calculated that plaintiff was only owed $3,250 by their company, and that he gave this sum to plaintiff, who never returned to the store thereafter. Govorenkov also claims that, to this day, he is paying off a credit line obtained in 2006 under M & G's name for $75,000, and that plaintiff never made any payments toward this business loan.
Govorenkov asserts that he never heard from plaintiff after the fall of 2007 and had no means of communicating with him because plaintiff did not provide him with his contact information after moving to California. Plaintiff claims, however, that he maintained his New York cell phone number for a long time after he moved to California. Govorenkov further asserts that in 2008, the lease for the Aminach store in Brooklyn had already expired when he entered into the new lease with the landlord under the name of VVG. Govorenkov also asserts that when he dissolved MGVS on June 23, 2008, he did not know where to find plaintiff and that plaintiff did not make any inquiries about the corporate activities of MGVS after moving to California. Plaintiff denies this, and asserts that he never gave his permission or consent to this dissolution. Plaintiff claims that despite this factual dispute, he is entitled to summary judgment on his second, third, sixth, and tenth causes of action as against Govorenkov and VVG.
Insofar as plaintiff's cross motion seeks summary judgment in his favor on his second cause of action for conversion, it is noted that conversion “is an unauthorized exercise of dominion and control over property by someone other than the owner, where such control interferes with and is in defiance of the superior possessory right of the owner or another person” (Miller v. Marchuska, 31 AD3d 949, 950 [3d Dept 2006]; see also Collins, 283 A.D.2d at 134;Kranz v. Town of Tusten, 236 A.D.2d 675, 676 [3d Dept 1997]; Meese v. Miller, 79 A.D.2d 237, 242 [4th Dept 1981] ). In seeking summary judgment as to this claim, plaintiff asserts that from the time MGVS was dissolved, Govorenkov has taken all profits for himself, in the form of salary, distributions, and payments. Plaintiff claims that Govorenkov engaged in conversion, as a matter of law, by unlawfully excluding him from their jointly owned business and, by, without permission or authority, assuming and exercising the rights of sole ownership over the monies, properties, assets, opportunities, and business rightfully belonging to him.
Plaintiff's claim for conversion, however, is necessarily dependent upon his version of the facts, which, as set forth above, is vehemently disputed by Govorenkov. Since Govorenkov asserts that he did not unlawfully exclude plaintiff from the business, and that his exercise of control over the business was with plaintiff's permission and authority, triable issues of fact exist, which preclude summary judgment in plaintiff's favor on this claim. “It is not the function of a court deciding a summary judgment motion to make credibility determinations or findings of fact, but rather to identify material triable issues of fact” (Vega v. Restani Constr. Corp., 18 NY3d 499, 505 [2012];see also Sillman v. Twentieth Century–Fox Film Corp., 3 N.Y.2d 395, 404 [1957],rearg. denied3 N.Y.2d 941 [1957] [noting that in deciding a motion for summary judgment “issue-finding, rather than issue-determination, is the key to the procedure” (internal quotation marks and citation omitted) ] ).
Plaintiff's third cause of action for fraudulent misrepresentation/forgery, as asserted against Govorenkov, alleges that Govorenkov forged his name on the certificate of dissolution for MGVS, resulting in its dissolution on May 25, 2006, and that Govorenkov fraudulently executed the certificate of dissolution for MGVS with the intent to defraud and deceive him, resulting in damages to him.
It is well established that “forgery” is but one species of fraud' “ (Piedra v. Vanover, 174 A.D.2d 191, 194 [2d Dept 1992] ). “[A] forgery is defined by the common law to be the fraudulent making of a writing to the prejudice of another's rights ... or the making malo animo of any written instrument for the purpose of fraud and deceit” ' ( id., quoting Marden v. Dorthy, 160 N.Y. 39, 53 [1899] ). It is “[t]he false making of an instrument which purports on its face to be good and valid for the purpose for which it was created, with the design to defraud” (Piedra, 174 A.D.2d at 194 [internal quotation marks and citation omitted] ). Govorenkov, however, while admitting that he signed plaintiff's name, asserts that plaintiff had given him the authority to do so, thereby raising a factual issue as to whether he did so with the intent to defraud plaintiff. In addition, J & I's representative, Mr. Gendler, testified, at his deposition, that plaintiff had asked him to dissolve MGVS, raising a question of fact as to this issue. Moreover, Govorenkov's assertions that plaintiff continued to participate in the business, after MGVS's dissolution, although disputed by plaintiff, raises material triable issues of fact and credibility, which cannot be resolved on this cross motion ( see Vega, 18 NY3d at 505).
Plaintiff further asserts, in his cross-moving papers, that the certificate of dissolution with respect to M & G was also fraudulent because Govorenkov was the vice-president, and not the president, of M & G, and, as such, lacked the authority to dissolve M & G, and that he signed the certificate of dissolution as its president in order to deprive him of his 50% share of the business. Notably, however, plaintiff's third cause of action does not actually contain any allegation with respect to M & G, but only asserts fraud with respect to MGVS. In addition, Govorenkov raises issues of fact regarding plaintiff's departure to California and whether he intended to retain an interest in M & G after doing so. Thus, in view of the outstanding questions of fact raised, summary judgment in plaintiff's favor on his third cause of action must be denied.
As to plaintiff's sixth cause of action for breach of fiduciary duty, plaintiff alleges that he had a fiduciary relationship with Govorenkov. It has been held that “in a close corporation, the relationship between the shareholders vis-a-vis each other is akin to that between partners” which imposes a high degree of fidelity and good faith (Matter of T.J. Ronan Paint Corp., 98 A.D.2d 413, 421 [1st Dept 1984] ). In addition, Govorenkov, as an officer of the corporations, owed a fiduciary duty to plaintiff as a shareholder ( see Tornick, 148 A.D.2d at 603). Plaintiff alleges that Govorenkov breached the fiduciary duty he owed to him by signing the certificates of dissolution without his knowledge or consent and by transferring the business assets into VVG, a corporation solely under his control. Since such alleged breach of fiduciary duty is necessarily dependent upon unresolved triable issues of fact, summary judgment in favor of plaintiff on his sixth cause of action must be denied ( see Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 [1986];Zuckerman v. City of New York, 49 N.Y.2d 557, 562 [1980] ).
With respect to plaintiff's tenth cause of action, it is noted that “a constructive trust may be imposed when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest” (Sharp v. Kosmalski, 40 N.Y.2d 119, 121 [1976] [internal quotation marks and citation omitted] ). The elements generally required for imposition of a constructive trust are: “(1) a confidential or fiduciary relation, (2) a promise, (3) a transfer in reliance thereon and (4) unjust enrichment” ( id.; see also Cruz v. McAneney, 31 AD3d 54, 59 [2d Dept 2006] ). These factors are applied flexibly ( see Simonds v. Simonds, 45 N.Y.2d 233, 241 [1978];Cruz, 31 AD3d at 59).
Plaintiff asserts that he had a fiduciary relationship with Govorenkov, and that Govorenkov has been unjustly enriched by transferring the assets of the furniture business which he owned with Govorenkov to VVG. Plaintiff contends that Govorenkov's share in VVG must be impressed with a constructive trust for the collection of one-half of the proceeds of this business that rightfully belong to him, as well as past profits and business assets. If plaintiff's assertions are ultimately proven, a constructive trust would be an appropriate remedy. However, inasmuch as material and triable issues of fact exist as to whether Govorenkov improperly transferred any interest belonging to plaintiff to VVG, summary judgment in plaintiff's favor on his tenth cause of action must be denied ( see Alvarez, 68 N.Y.2d at 324;Zuckerman, 49 N.Y.2d at 562).
Motion Sequence No. 9
Plaintiff, in cross motion sequence no. 9, seeks summary judgment on his third cause of action for fraudulent misrepresentation/forgery and his fifth cause of action for negligence as against J & I, who, as noted above, were the accountants who prepared the documents for the dissolution of both MGVS and M & G. “In order to establish accounting fraud, the plaintiff must show representation of material fact, falsity, scienter, reliance, and damages” (Barrett v. Freifeld, 77 AD3d 600, 601 [2d Dept 2010] ).
In support of his cross motion with respect to his third cause of action, plaintiff argues that J & I aided and abetted and participated in the fraud perpetrated upon him by Govorenkov. “In order to plead properly a claim for aiding and abetting fraud, the complaint must allege: (1) the existence of an underlying fraud; (2) knowledge of this fraud on the part of the aider and abettor; and (3) substantial assistance by the aider and abettor in achievement of the fraud” ' (Stanfield Offshore Leveraged Assets, Ltd. v. Metropolitan Life Ins. Co., 64 AD3d 472, 476 [1st Dept 2009], lv denied13 NY3d 709 [2009], quoting UniCredito Italiano SPA v. JPMorgan Chase Bank, 288 F Supp 2d 485, 502 [SD N.Y.2003] ). “[A]ctual knowledge of the fraud may be averred generally” (In re Worldcom, Inc. Sec. Litig., 382 F Supp 2d 549, 560 [SD N.Y.2005] [internal quotation marks omitted] ). Substantial assistance exists “where (1) a defendant affirmatively assists, helps conceal, or by virtue of failing to act when required to do so enables the fraud to proceed, and (2) the actions of the aider/abettor proximately caused the harm on which the primary liability is predicated” (Stanfield Offshore Leveraged Assets, Ltd., 64 AD3d at 476, quoting UniCredito Italiano SPA, 288 F Supp 2d at 502).
Here, it is undisputed that J & I filed for the consent to dissolve MGVS and M & G with the New York Department of Finance and Taxation, and when it received consent to dissolve these corporations, it prepared the certificates of dissolution for MGVS and M & G. As discussed above, Govorenkov signed both certificates of dissolution, one in plaintiff's name and one in his own. As discussed above, while Govorenkov claims that he had permission to dissolve MGVS, this is denied by plaintiff.
While J & I claims that plaintiff requested it to draft these documents and to assist in the closing of MGVS, plaintiff claims that he never authorized J & I to draft these documents or that he even had knowledge of the plans to dissolve MGVS. Plaintiff further points out that in 2006, when MGVS became the owner of Aminach, J & I prepared income tax returns for MGVS, and that J & I listed Govorenkov as a sole shareholder and the president of MGVS on the 2006 tax return and did not mention plaintiff on such return. Plaintiff states that he never authorized J & I to take him off the company's books and that he never relinquished his corporate title as the president of M & G. Plaintiff claims that J & I performed these acts without his authorization and in collusion with Govorenkov.
Plaintiff further asserts that when J & I prepared M & G's certificate of dissolution in 2008, it had actual knowledge that he was the president of M & G, but offers no explanation as to why his name was omitted from the certificate of dissolution. Plaintiff asserts that at no time did J & I attempt to contact him to ask if the dissolution was authorized.
Plaintiff also asserts that when he contacted J & I to obtain the records and documents related to his business, J & I rejected his demand for documents. Mr. Gendler, an officer of J & I, testified at his deposition that he never gave plaintiff these records although plaintiff was his client, and that he could not find MGVS's file although he had never lost a client's file before (Mr. Gendler's Dep. Transcript at 107, 126). J & I, however, in opposition to plaintiff's cross motion, states that when plaintiff appeared at its offices in early 2010, and demanded the records of the corporations, plaintiff was told that it would take some time to locate, and that all of these records were later provided to plaintiff's attorney when he requested them.J & I asserts that plaintiff never made any contact with it or Govorenkov for approximately four years and that, during that time, Govorenkov ran the business.J & I relies upon Business Corporation Law § 1006, which provides that “[t]he dissolution of a corporation shall not affect any remedy available to or against such corporation, its directors, officers or shareholders for any right or claim existing or any liability incurred before such dissolution.” J & I argues that its preparation of the dissolution documents, therefore, cannot provide a basis for plaintiff's claims against it since such dissolution did not affect any remedy available to plaintiff. Such argument, however, is unavailing since the crux of plaintiff's claims is that such dissolution was effectuated to deprive him of his interest in the corporations, resulting in damages to him. As a result of the dissolutions, plaintiff cannot simply compel distributions from the corporations, but was required to resort to this action to enforce his right to such distributions and to take back his share of the business. Plaintiff thus claims that he was substantially injured by the dissolutions which were allegedly wrongfully facilitated by J & I.
J & I, in opposing plaintiff's cross motion, further contends that while it recalls that it was plaintiff who requested the dissolution of MGVS, even if it was Govorenkov who requested such dissolution, it was Govorenkov, and not J & I, which deprived plaintiff of the proceeds of the business, and that plaintiff failed to inform J & I of his claims of continued ownership and entitlement for four years (until 2010). J & I argues that it had no duty to find out if plaintiff knew or cared that Govorenkov was dissolving M & G in 2008. Plaintiff, however, contends that since he did not know that the corporations were being dissolved and of J & I's alleged complicity in effectuating such dissolutions, he had no reason to contact J & I. Plaintiff argues that, as J & I's client, it had a duty to disclose such dissolutions to him since it knew of his interest in these corporations.
J & I claims, however, that its role in each of the two corporate dissolutions was merely clerical and done at the direction of one or both of the other parties to this action. J & I asserts that it had no information indicating that Govorenkov did not have the authority to act on behalf of the corporation as he had been doing since its formation. J & I contends that it merely prepared papers at the direction of Govorenkov, who has admitted executing the dissolution forms. J & I further asserts that, as is its custom, it had prepared the dissolution documents using the instructions and information given to it by the client. J & I claims to have given the prepared forms to Govorenkov with a return envelope addressed to the corporation, care of J & I, and asserts that it was up to Govorenkov to execute the form and mail it to the Department of State for filing. J & I states that after preparing the certificate of dissolution and giving it to Govorenkov for execution and submission, it did not see who executed it as such execution was not done in its presence. J & I thus contends that while plaintiff alleges that it knew or should have known that the document was forged, since it was forged after it left its possession, it did not have the opportunity to observe such forgery. J & I notes that it did not execute or forge any documents itself.
In view of the sharply disputed issues of fact as to J & I's knowledge of Govorenkov's alleged fraud, its participation in such alleged fraud, and whether it substantially assisted in such alleged fraud, plaintiff has not demonstrated his entitlement to judgment as a matter of law on his fraud claim as against J & I. Thus, summary judgment in plaintiff's favor on his third cause of action must be denied ( see Alvarez, 68 N.Y.2d at 324;Zuckerman, 49 N.Y.2d at 560).
As to plaintiff's fifth cause of action for negligence, it is noted that “[a] claim of professional negligence requires proof that there was a departure from the accepted standards of practice and that the departure was a proximate cause of the injury” ‘ (Herbert H. Post & Co. v. Sidney Bitterman, Inc., 219 A.D.2d 214, 223 [1st Dept 1996], quoting Georgetti v. United Hosp. Med. Ctr., 204 A.D.2d 271, 272 [2d Dept 1994] ). Here, plaintiff was J & I's client both individually and as president of MGVS and M & G. As such, J & I owed plaintiff a duty of appropriate professional care as his personal and corporate accountant ( see Caprer v. Nussbaum, 36 AD3d 176, 198 [2d Dept 2006] ). Plaintiff alleges that J & I breached this duty by departing from the accepted standard of professional practice, proximately causing damages to him.
Plaintiff, in seeking summary judgment on his fifth cause of action, contends that J & I was negligent per se by engaging in the unauthorized practice of law pursuant to Judiciary Law § 478 and incorrectly preparing legal documents, i.e., the certificates of dissolution. Plaintiff, however, has failed to cite to any authority that the preparation of certificates of dissolution constitutes the unauthorized practice of law, and it does not appear that J & I thereby engaged in such unauthorized practice.
Plaintiff further asserts that J & I incorrectly prepared the certificates of dissolution for MGVS and M & G since they did not contain the name and address of each of its officers or directors as required by Business Corporation Law § 1003. Plaintiff also asserts that J & I was negligent by failing to inform him of the dissolutions when it allegedly became aware that they were based upon incorrect information, and that it knew or should have known that plaintiff had no knowledge of these dissolutions or had not given his consent to the filings of the dissolution documents.
While these allegations are sufficient to allege a viable claim of negligence as against J & I, plaintiff has failed to demonstrate his entitlement to judgment as a matter of law on his fifth cause of action for negligence. Rather, material and triable issues of fact exist concerning whether J & I was negligent so as to preclude summary judgment in plaintiff's favor on his fifth cause of action ( see Alvarez, 68 N.Y.2d at 324;Zuckerman, 49 N.Y.2d at 560).
CONCLUSION
Accordingly, Govorenkov and VVG's cross motion, under motion sequence no. 4, is denied insofar as it seeks sanctions pursuant to 22 NYCRR 130–1.1, and is denied as premature insofar as it seeks a protective order. Govorenkov and VVG's motion, under motion sequence no. 5, for summary judgment dismissing plaintiff's complaint as against them is denied. Plaintiff's cross motion, under motion sequence no. 8, for summary judgment in his favor as against Govorenkov and VVG on his second, third, sixth, and tenth causes of action, is denied. Plaintiff's cross motion, under motion sequence no. 9, for summary judgment in his favor as against J & I on his third and fifth causes of action, is denied.
This constitutes the decision and order of the court.