Opinion
INDEX NO. 652757/2015
03-29-2019
140 W. 57TH STREET BUILDING LLC., Plaintiff, v. ANGELICA BERRIE, RUSS TEDDY BEAR INVESTMENTS INC.,CHARLES LAHTI, CHARLES LAHTI STUDIO INC.,188 LAFAYETTE LLC,CHARLES LAHTI POPUP, CHARLES LAHTI POPUP 188 LAFAYETTE, CHARLES LAHTI POPUP AT GALERIE, KATE'S PAPERIE LLC., KATE'S PAPERIE LTD, K.P. LLC., Defendants.
NYSCEF DOC. NO. 284 PRESENT: HON. ARTHUR F. ENGORON Justice MOTION DATE 01/03/2019 MOTION SEQ. NO. 005
DECISION AND ORDER
The following e-filed documents, listed by NYSCEF document number (Motion 005) 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 171, 172, 173, 174, 175, 204, 205, 206, 207 were read on this motion for SUMMARY JUDGMENT. Upon the foregoing documents, it is hereby ordered that the motion by defendants Charles Lahti and Charles Lahti Studio Inc. d/b/a Charles Lahti Popup@188 Lafayette (collectively, "Lahti") for summary judgment is granted, and plaintiff's cross-motion to compel and/or strike is denied.
Background
This action, with a prolonged history of litigation, arises out of plaintiff's most recent attempt to enforce a $2.1 million judgment entered in its favor against certain defendants herein. On October 14, 2015, pursuant to obligations due under a commercial lease for space rented at 140 W. 57th Street, plaintiff obtained a judgment against defendants Kate's Paperie, LLC, Kate's Paperie Ltd. and K.P. LLC (the "Kate's defendants") in the sum of $2,156,165.17 (the "Judgment"). Subsequent to plaintiff obtaining the Judgment, the Kate's defendants and Lahti entered into a license agreement for Lahti to operate a pop-up store at 188 Lafayette, a location leased by the Kate's defendants. Plaintiff has since interposed causes of action against Lahti, alleging, generally, that Lahti conspired with the Kate's defendants to help the Kate's defendants evade payment of the Judgment. This Court previously dismissed some of plaintiff's causes of action, leaving seven claims remaining against Lahti: conspiracy to commit fraudulent conveyances (fourth cause of action) and violations of Debtor and Creditors Law §§ 273, 274, 275, and 276 (fifth, sixth, seventh, eighth, ninth, and fourteenth causes of action). Lahti now moves, pursuant to CPLR 3212, for summary judgment, arguing that the property plaintiff alleges was fraudulently transferred belonged to Lahti, not to a judgment debtor. Plaintiff opposes Lahti's motion, and cross-moves, pursuant to CPLR 3124 and 3126, to compel Lahti to provide supplemental responses to plaintiff's discovery demands, or, in the alternative, to strike Lahti's answer. Plaintiff principally argues that Lahti's motion should be denied as it is premature and plaintiff is entitled to additional discovery to substantiate its allegations.
The Debtor/Credit Law Claims
Plaintiff asserts that Lahti has violated Debtor and Creditors Law §§ 273, 273-a, 274, 275, and 276. The respective statutes read as follows:
Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.NY Debt. & Cred. Law § 273.
Every conveyance made without fair consideration when the person making it is a defendant in an action for money damages or a judgment in such an action has been docketed against him, is fraudulent as to the plaintiff in that action without regard to the actual intent of the defendant, if after final judgment for the plaintiff, the defendants fails to satisfy the judgment.NY Debt. & Cred. Law § 273-a.
Every conveyance made without fair consideration when the person making it is engaged or is about to engage in a business or transaction for which the property remaining in his hands after the conveyance is an unreasonably small capital, is fraudulent as to the creditors and as to other person who become creditors during the continuance of such business or transaction without regard to his actual intent.NY Debt. & Cred. Law § 274.
Every conveyance made and every obligation incurred without fair consideration when the person making the conveyance or entering into the obligation intends or believes that he will incur debts beyond his ability to pay as they mature, is fraudulent as to both present and future creditors.NY Debt. & Cred. Law § 275.
Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.NY Debt. & Cred. Law § 276.
Discussion
This Court's function on a summary judgment motion is issue finding, not issue determination. See Farias v. Simon, 122 AD3d 466, 468 (1st Dep't 2014) ("A court's function on a motion for summary judgment involves issue finding rather than issue determination"). Because summary judgment is a drastic remedy, it should not be granted where triable issues of fact exist, even if such issues are only "arguable" or "debatable." See Stone v Goodson, 8 NY2d 8, 12-13 (1960) ("It now seems well established that if the issue is fairly debatable a motion for summary judgment must be denied."). "The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case." Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 (1985). Once that burden is met, the opponent must tender evidence in admissible form "sufficient to require a trial of material questions of fact on which he rests his claim ...mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient." Zuckerman v City of New York, 49 NY2d 447, 562 (1980). Lahti argues it is entitled to summary judgment because the property plaintiff alleges was fraudulently transferred indisputably belonged to Lahti, and that the NY Debtor and Creditor Laws (collectively, the "DCL") are inapplicable to parties who were neither transferees of the assets nor beneficiaries of the conveyance. This Court agrees. The license agreement between Lahti and the Kate's defendants allows Lahti to utilize a section of the Kate's defendants' store at 188 Lafayette Street to sell Lahti's artwork, in exchange for the Kate's defendants receiving 50% of the proceeds of the sales. Accordingly, this Court finds that the Kate's defendants received fair consideration under the terms of the license agreement. Further, there is nothing to substantiate plaintiff's claim that personal property at 188 Lafayette was transferred from the Kate's defendants to Lahti, other than the ipse dixit allegations of plaintiff. The Court finds plaintiff's argument that it is entitled to more discovery to substantiate its claim to be unpersuasive. In its demand for a bill of particulars, Lahti asks plaintiff to
Set forth in detail the basis for the allegation in paragraph 12 of the Complaint that the fraud, conspiracy to commit civil fraud, conspiracy to commit fraudulent conveyances, and other conduct alleged in the Complaint was concocted by each of the Lahti Defendants with the specific intent of avoiding paying the judgment and avoiding paying Creditor and identify any writing evidencing same."Lahti's Demand for Bill of Particulars, ¶ 6, NYSCEF Doc. No. 115. In response, plaintiff affirmed the following:
The Lahti Defendants were aware of Debtor's obligation to Plaintiff, and entered into an agreement, whereby produce and art
work of the Lahti Defendants and assets would be sold in Debtor's place of business and Debtor and the Lahti Defendants would in some fashion share in the proceeds. The Lahti Defendants were aware of the judgment and obligation. The proceeds of the sale of the property and art work owned by the Lahti Defendants went to Debtor, notwithstanding the judgment and notwithstanding that the Lathi [sic] Defendants knew and were aware of this judgment and obligation.Plaintiff's Response to Lahti's Demand for Bill of Particulars, ¶ 6, NYSCEF Doc. No. 116. Accordingly, by plaintiff's own admission, Lahti was engaged in selling its own assets in the Kate's defendants' place of business. Under New York Law, a creditor may only recover for the fraudulent transfer of the debtor's assets from the defendants who are either transferees of the assets, or beneficiaries of the conveyance. Federal Deposit Ins. Corp. v Porco, 75 NY2d 840, 842 (1990); Loreley Fin. (Jersey) No. 4 Ltd. v UBS Ltd., 123 AD3d 413, 414 (1st Dep't 2014) (finding that company is not a proper defendant on a fraudulent conveyance claim where company was not a transferee or beneficiary thereof). Further, as "[i]t is the intent of the transferor and not the intent of the transferee that is dispositive under DCL §276" plaintiff's claims should be properly directed to the Kate's defendants, not Lahti. In re Sharp Int'l Corp. 281 BR 506, 522 (Bankr. EDNY 2002). Accordingly, plaintiff's DCL claims against Lahti are hereby dismissed. "[I]t is well settled that New York does not recognize an independent civil tort of conspiracy." Hoeffner v Orrick, Herrington & Sutcliffe LLP, 85 AD3d 457, 458 (1st Dep't 2011). Consequently, plaintiff's fourth cause of action alleging conspiracy to violate the DCL is also dismissed. As Lahti has demonstrated his entitlement to summary judgment, plaintiff's cross motion to compel Lahti to furnish supplemental discovery, or, in the alternative, to strike its answer is denied.
Conclusion
For the reasons set forth herein, the motion by defendants Charles Lahti and Charles Lahti Studio Inc. d/b/a Charles Lahti Popup@188 Lafayette for summary judgment is granted, plaintiff's cross-motion is denied, and the clerk is hereby ordered to enter judgment accordingly. 3/29/2019
DATE
/s/ _________
ARTHUR F. ENGORON, J.S.C.