Opinion
Index No. 700167/2021 Motion Seq. No. 1
01-07-2022
ASCENT DEVELOPMENT LLC and TIEN VOMINH, each individually and derivatively on behalf of nominal defendant 30-38 29TH STREET LLC, Plaintiff, v. 30-38 29TH STREET LLC, SRS REALTY, LLC, JOHN AND JANE DOES 1 THROUGH 10 and XYZ 123 LLCs, Defendants.
Unpublished Opinion
Motion Date August 31, 2021
DECISION/ORDER
Joseph Risi Judge
The following papers read on this motion by defendants 30-38 29th Street LLC and SRS Realty LLC for an order dismissing the complaint in its entirety pursuant to CPLR §§3016(b) and 3211(a)(1), (3) and (7).
| Papers Numbered | |
| Notice of Motion-Affirmation-Affidavit-Exhibits-Memorandum of Law................................................................................................. | EF13-20 |
| Opposing Affirmation-Exhibits-Memorandum of Law ..................... | EF 24-26 |
| Reply Memorandum of Law............................................................... | EF 28 |
Upon the foregoing papers, the motion is determined as follows:
Plaintiffs Ascent Development LLC ("Ascent") and Tien Vominh ("Vominh") allege in their amended verified complaint that they are members of SRS Realty LLC ("SRS") and that non-party Amit Veeramachaneni ("Veeramachaneni") is the managing member of SRS. It is alleged that SRS is the sole member of 30-38 29th Street LLC ("30-38"), and therefore is controlled by Veeramachaneni. It is alleged that 30-38 was formed on July11, 2017 to develop property at 30-38 29th Street, Astoria, New York. Plaintiffs allege that on August 31, 2017, Vominh and Ascent made an initial capital contribution for their membership in SRS, and by extension in 30-38. It is alleged that with respect to 30-38, Veeramachaneni has breached the operating agreements, refused to provide disclosure of relevant financial documents to the plaintiffs, and refused to acknowledge or make the proper accounting entries to reflect plaintiffs' personal expenditures of approximately $120000 for project payroll and overhead for the 30-38 project, as documented in a written agreement, and in contravention of said contracts. Plaintiffs also alleged the defendants owe them an agreed upon developer fee of $263,113.43 with respect to the 30-38 project; that the developer fee is calculated according to an agreement among SRS members to compensate Vominh and Ascent with an agreed upon percentage of the project cost, as reflected in various SRS and 30-38 accounting statements commissioned by Veeramachaneni; and that Veeramachaneni has refused to acknowledge said obligation, refused to disclose accounting records or closing statements with a new lender and refused to confirm whether said developer fee has been memorialized in the relevant budget.
The amended verified complaint alleges causes of action for declaratory judgment, to recover damages for breach of contract; to appoint a receiver, a derivative cause of action on behalf of 30-38 to impose a constructive trust/recoupment, a derivative cause of action on behalf of 30-38 for breach of fiduciary duty/corporate waste, for an accounting, for a preliminary and permanent injunction, and for dissolution.
Contrary to plaintiffs' assertions, the service by e-filing of the amended verified complaint does not require the dismissal of the within motion as moot. As the moving defendants have elected in their reply to apply their motion to dismiss to the amended complaint which was e-filed on the same day as the opposing papers and superseded the original complaint, this Court will consider defendants' motion as directed against the amended complaint (see Sobel v Ansanelli, 98 A.D.3d 1020, 1022 [2d Dept 2012]; Union State Bank v Weiss, 65 A.D.3d 584, 585 [2009]; Ferguson v Sherman Sq. Realty Corp., 30 A.D.3d 288 [1st Dept 2006]; Terrano v Fine, 17 A.D.3d 449 [2d Dept 2005]; 49 W. 12 Tenants Corp. v Seidenberg, 6 A.D.3d 243, 243 [1st Dept 2004]; Livadiotalos v Tzitzikalakis 302 A.D.2d 369 [2d Dept 2003]; Sage Realty Corp. v Proskauer Rose LLP, 251 A.D.2d 35, 38 [1st Dept 1998]).
"To succeed on a motion to dismiss pursuant to CPLR 3211(a)(1), the documentary evidence that forms the basis of the defense must be such that it resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff's claim" (Harounian v Harounian, 198 A.D.3d 734 [2d Dept 2021], quoting Teitler v. Pollack &Sons, 288 A.D.2d 302, 302 [2d Dept 2001]; see Goshen v Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326, [2002]; Leon v Martinez, 84 N.Y.2d 83, 87 [1994]; Xia-Ping Wang v Diamond Hill Realty, LLC, 116 A.D.3d 767, 767-68 [2d Dept 2014]). Materials that clearly qualify as "documentary evidence" include "documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are 'essentially undeniable'" (Sands Point Partners Private Client Group v Fidelity 78 Natl. Title Ins. Co., 99 A.D.3d 982, 984 [2d Dept 2012], quoting Fontanetta v John Doe 1, 73 A.D.3d 78, 83-84 [2d Dept 2010]; see Xia-Ping Wang v Diamond Hill Realty, LLC, 116 A.D.3d at 767-68).
A party may move to dismiss one or more causes of action on the grounds that "the party asserting the cause of action has not legal capacity to sue" (CPLR §3211[a][3]). Capacity to sue concerns a litigant's power to appear and bring its grievance before the court (see Community Bd. 7 of Borough of Manhattan v Schaffer, 84 N.Y.2d 148, 1551994]; Nicke v Schwartzapfel Partners, P.C., 148 A.D.3d 1168, 1170 [2d Dept 2017]; Caprer v Nussbaum, 36 A.D.3d 176, 181 [2d Dept 2006]).
On a motion to dismiss pursuant to CPLR §3211(a)(7), "the standard is whether the pleading states a cause of action" (Sokol v Leader, 74 A.D.3d 1180, 1180- 1181[2d Dept 2010], and, "[i]n considering such a motion, the court must accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (id. at 1181[internal quotation marks omitted]; see Leon v Martinez, 84 N.Y.2d 83, 87-88 [1994]). When the moving party submits evidentiary material in support of his or her motion, "the criterion then becomes 'whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one'" (Sokol v Leader, 74 A.D.3d at 1181-1182, quoting Guggenheimer v Ginzburg, 43 N.Y.2d 268, 275 [1977]). However, "a motion to dismiss pursuant to CPLR 3211(a)(7) must be denied 'unless it has been shown that a material fact as claimed by the pleader to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it'" (Sokol v Leader, 74 A.D.3d at 1182, quoting Guggenheimer v Ginzburg, 43 N.Y.2d at 275; see Houtenbos v Fordune Assn., Inc., A.D.3d 2021 NY Slip Op 06678 [2d Dept 2021]).
This Court finds that the amended verified complaint does not, as defendants argue, improperly combine individual and derivative claims. Although each cause of action of the amended complaint refers to the "plaintiffs", only the fourth and fifth causes of action are brought as derivative claims.
"[M]embers of a limited liability company (LLC) may bring derivative suits on the LLC's behalf" (Tzolis v Wolff, 10 N.Y.3d 100, 10 [2008]). In order to maintain a derivative cause of action, a plaintiff must be a member of the LLC (see Harounian v Harounian, 198 A.D.3d 734; Jacobs v Cartalemi, 156 A.D.3d 605, 607 [2d Dept 2017]; Herman v Herman, 122 A.D.3d 506, 507 [2014]]).
Here, section 3 of SRS's original operating agreement entitled "Members", provides that Veeramacheneni and Shah were its initial members, with Veeramacheni having "35 Membership Units" and Shah having "65 Membership Units". SRS's amended operating agreement dated October 2018, replaced section 4 of the original operating agreement and sets forth the powers of its managing member; identifies Veeramachaneni as its managing member; and identifies Veeramachanenei, Sudha Shah and Tien Vominh as its members, and said individuals signed the amended agreement. The 2018 amended operating agreement, however, made no changes to Section 3 of the original operating agreement. Ascent is not mentioned in either of SRS's operating agreements and it does not appear as a signatory to the amended agreement.
SRS's operating agreements and 30-38's operating agreement conclusively establish that Ascent is not a member of either SRS or 30-38. Ascent, in opposition, has failed to demonstrate that it is a member of either SRS or 30-38. Therefore, as Ascent lacks the capacity to bring a derivative cause of action on behalf of 30-38, that branch of the motion which seeks to dismiss Ascent's derivative causes of action, including the fourth and fifth causes of action, is granted (see Harounian v Harounian, 198 A.D.3d at 734; cf. Tzolis v Wolff, 10 N.Y.3d 100).
That branch of the motion which seeks to dismiss Ascent's first cause of action for declaratory judgment is granted. As Ascent is not a member of SRS, no judicial controversy exists between these parties with regard to Ascent's percentage interest in said entity.
This Court finds that a justiciable controversy exists between Vominh and SRS as to whether Vominh has a percentage interest in said limited liability company. However, the remainder of Vominh's claims set forth in the first cause of action regarding "the propriety of accounts payable of the corporate entities, the Plaintiffs' rights to repayment under corporate documents and law, the amount and funding of each party's capital account and accounting protocols being applied to same and the failure of defendants to make available for inspection documents probative of these rights and obligations, which document production is required by law" is duplicative of the cause of action for an accounting. As to these claims, declaratory relief serves no purpose, as Vominh has adequate alternative remedies (see JMF Consulting Group II, Inv. v Beverage Marketing USA, Inc., 97 A.D.3d 540, 542 [2d Dept 2021]). Therefore, that branch of defendants' motion which seeks to dismiss the first cause action, is granted solely to the extent that it seeks declaratory relief other than that pertaining to its interest in SRS.
"The essential elements of a breach of contract cause of action are 'the existence of a contract, the plaintiff's performance pursuant to the contract, the defendant's breach of his or her contractual obligations, and damages resulting from the breach'" (Canzona v Atanasio, 118 A.D.3d 837, 838 [2d Dept 2014], quoting Dee v Rakower, 112 A.D.3d 204, 208-209 [2d Dept 2013]; see Reznick v Bluegreen Resorts Mgt., Inc., 154 A.D.3d 891, 893 [2d Dept 2017]. "Generally, a party alleging a breach of contract must 'demonstrate the existence of a . . . contract reflecting the terms and conditions of their . . . purported agreement'" (Mandarin Trading Ltd. v Wildenstein, 16 N.Y.3d 173, 181-182 [2011], quoting American-European Art Assoc. v Trend Galleries, 227 A.D.2d 170, 171 [1st Dept1996]). "It is axiomatic that '[w]ithout [an] agreement . . . there can be no contract [and] [w]ithout a contract there can be no breach of the agreement'" (Schaffe v SimmsParris, 82 A.D.3d 867, 868 [2d Dept 2011], quoting Franklin v Carpinello Oil Co., 84 A.D.2d 613, 613 [3d Dept 1981]). A complaint that offers only conclusory allegations without pleading the pertinent terms of the purported agreement requires a court to speculate as to the parties involved and the conditions under which the alleged contract was formed (see Mandarin Trading Ltd. v Wildenstein, 16 N.Y.3d at 182). "In order to state a cause of action to recover damages for a breach of contract, the plaintiff's allegations must identify the provisions of the contract that were breached" (Reznick v Bluegreen Resorts Mgt., Inc., 154 A.D.3d at 891, quoting Barker v Time Warner Cable, Inc., 83 A.D.3d 750, 751 [2d 2011]; see Canzona v Atanasio, 118 A.D.3d at 839). Further, vague allegations suggesting that there may have been an agreement do not suffice (see Theaprin Pharms., Inc. v Conway, 137 A.D.3d 1254, 1255 [2d Dept 2016]). Here, plaintiffs' allegations are insufficient to state a claim for breach of contract, as they fail state whether they entered into an agreement with SRS or 30-38, and fail to identify the provisions of the contract that were allegedly breached. Therefore, that branch of defendants' motion which seeks to dismiss the second cause of action for breach of contract pursuant to CPLR §3211(a)(7), is granted.
That branch of defendants' motion which seeks to dismiss the third cause of action for the appointment of a receiver or some other unspecified equitable remedy, is granted. "The appointment of a receiver is not a form of ultimate relief that can be awarded in a plenary action, but rather, is limited as a provisional remedy (see CPLR §6401 [a]) or as an aid in post-judgment enforcement (see CPLR §5228)" (Jacobs v Cartalemi, 156 A.D.3d 605, 608 [2d Dept 2017], quoting Old Republic Natl. Tit. Ins. Co. v Cardinal Abstract Corp., 14 A.D.3d 678, 680-681 [2d Dept 2005]).
That branch of defendants' motion which seeks to dismiss the fourth derivative cause of action for a constructive trust/recoupment is granted. The essential elements for the imposition of a constructive trust are (1) a confidential or fiduciary relationship, (2) a promise, (3) a transfer in reliance thereon, and (4) unjust enrichment (see Simonds v Simonds, 45 N.Y.2d 233 [1978]; Sharp v Kosmalski, 40 N.Y.2d 119 [1976]; Doria v Masucci, 230 A.D.2d 764, 765 [2d Dept 1996]). As the amended verified complaint fails to plead the elements of a promise, a transfer in reliance thereon and unjust enrichment, it fails to state a cause of action for the imposition of a constructive trust (see Miller v Falco, 170 A.D.3d 707 [2d Dept 2019]; Igneri v Igneri, 125 A.D.3d 813,814 [2d Dept 2015]).
That branch of the motion which seeks to dismiss the fifth derivative cause of action for breach of fiduciary duty/corporate waste is granted. "The elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant's misconduct" (Palmetto Partners, L.P. v AJW Qualified Partners, LLC, 83 A.D.3d 804, 807-08 [2d Dept 2011], quoting Rut v Young Adult Inst., Inc., 74 A.D.3d 776, 777 [2d Dept 2010]; see Robert I. Gluck, M.D., LLC v Kenneth M. Kamler, M.D., LLC, 74 A.D.3d 1167 [2d Dept 2010]). A cause of action sounding in breach of fiduciary duty must be pleaded with the particularity required by CPLR §3016(b) (see (Palmetto Partners, L.P. v AJW Qualified Partners, LLC, 83 A.D.3d at 807-08; Winston Chiu v Man Choi Chiu, 71 A.D.3d 621, 623 [2d Dept 2010]; Tsutsui v Barasch, 67 A.D.3d 896, 898 [2d Dept 2009]). Here, the derivative claim by Vominh on behalf of 30-38 fails to plead with particularity factual allegations supporting a claim for breach of a fiduciary duty by SRS or its managing member, non-party Veeramacheni.
That branch of the motion which seeks to dismiss the sixth cause of action for an accounting is granted. The complaint fails to state a cause of action for an accounting, as plaintiff Vominh has failed to allege that he made a demand for an accounting, that the SRS and the nominal defendants are in possession of the books and records of SRS's or 30-38's, and that they failed or refused to provide such an accounting (see Mawere v Landau, 130 A.D.3d 986, 990 [2d Dept 2015]; NAB Constr. Corp. v New York City Paper Mill, 265 A.D.2d 312 [2d Dept 1999]).
That branch of the motion which seeks to dismiss the seventh cause of action for a preliminary and permanent injunction, is granted. A preliminary injunction is a provisional remedy and not a cause of action that can be raised in a complaint (see CPLR §6001; Gross v Chambre [Supreme Ct, Rockland County 2017], 2017 NY Slip Op 32828 [U], 2017 NY Misc. Lexis 5368; 319 Smile Corp. v Forman Fifth LLC [Supreme Ct, New York County 2005], 2005 NY Slip Op 30608 [U], 2005 NY Misc. Lexis 8639).
To the extent that plaintiff seeks a permanent injunction, "[t]o sufficiently plead a cause of action for a permanent injunction, a plaintiff must allege that there was a 'violation of a right presently occurring, or threatened and imminent,' that he or she has no adequate remedy at law, that serious and irreparable harm will result absent the injunction, and that the equities are balanced in his or her favor" (Aponte v Estate of Aponte, 172 A.D.3d 970, 974 [2d Dept 2019], quoting Caruso v Bumgarner, 120 A.D.3d 1174, 1175 [2d Dept 2014], quoting Elow v Svenningsen, 58 A.D.3d 674, 675 [2d Dept 2009]). "'A permanent injunction is a drastic remedy which may be granted only where the plaintiff demonstrates that it will suffer irreparable harm absent the injunction'" (Merkos L'Inyonei Chinuch, Inc. v Sharf, 59 A.D.3d 403, 408 [2d Dept 2009], quoting Icy Splash Food &Beverage, Inc. v Henckel, 14 A.D.3d 595, 596 [2d Dept 2005]; see Ponte v Estate of Ponte, 172 A.D.3d at 974; Matter of Long Is. Power Auth. Hurricane Sandy Litig., 134 A.D.3d 1119, 1120 [2d 2015]). Here, the complaint fails to sufficiently allege that a permanent injunction is necessary to protect the plaintiff from a threatened or probable risk posed by the defendants or that monetary damages would be inadequate compensation (Ponte v Estate of Ponte, 172 A.D.3d 970, 974 [2d Dept 2019]; see generally Massaro v Jaina Network Sys., Inc., 106 A.D.3d 701, 703 [2d 2013]).
That branch of defendants' motion which seeks to dismiss the eighth cause of action for judicial dissolution of SRS and 30-38, is granted. An application for judicial dissolution of a LLC company must be made by or for a member of the LLC (see Limited Liability Company Law §702). With regards to 30-38, plaintiffs have failed to demonstrate that they are members of 30-38, and do not seek to act on behalf of its sole member SRS. Plaintiffs, therefore, lack the capacity to seek dissolution of 30-38 (see 762 Park Place Realty LLC, v Lehrer, 161 A.D.3d 1135 [2d Dept 2018]).
With regards to SRS, plaintiff Ascent has failed to establish that it is a member of SRS, and therefore lacks the capacity to seek judicial dissolution (see Limited Liability Company Law § 702; 762 Park Place Realty LLC, v Lehrer, 161 A.D.3d 1135). With regards to plaintiff Vominh, the complaint fails to state a cause of action for judicial dissolution of SRS pursuant to Limited Liability Company Law §702 based on his allegations of oppressive conduct and exclusion from participating in or receiving any benefit of the business or financial activities of the LLC (see Matter of Kassab v Kasab, 137 A.D.3d 1135, 1137 [2d Dept 2016]; Doyle v Icon, LLC, 103 A.D.3d 440 [2d Dept 2013]). Vominh's allegations concerning the operating agreement, if true, establish that the stated purpose of the LLC, "to own, operate, lease, develop, invest in and manage real estate" did not include the plaintiff's participation in management decisions (see Matter of Kassab v Kasab, 137 A.D.3d at 1137; Matter of Eight of Swords, LLC, 96 A.D.3d 839, 840 [2d Dept 2012]). In addition, Vominh's allegations, if true, would not establish that "the management of the entity is unable or unwilling to reasonably permit or promote the stated purpose of the entity to be realized or achieved, or [that] continuing the entity is financially unfeasible" (Matter of 1545 Ocean Ave., LLC, 72 A.D.3d 121, 131 [2d Dept 2010]; see Barone v Sowers, 128 A.D.3d 484 [2d Dept 2015]; Doyle v Icon, LLC, 103 A.D.3d 440 [2d Dept 2013]). Plaintiff has not alleged any facts demonstrating that it is not possible for the LLC to maintain and fulfill its purpose in accordance with the operating agreements. Further, plaintiff's allegation that liquidation is necessary for him to receive a fair return and repayment of reimbursable sums, if true, would show that the LLC is financially feasible (see Matter of Kassab v Kasab, 137 A.D.3d at 1137; Doyle v Icon, LLC, 103 A.D.3d 440 [2013]). Finally, plaintiffs' reliance on the dissolution proceeding in Matter of 47th Rd. LLC (Supreme Ct, Queens County 2017, 2017 NY Slip Op 50196 [U]), is clearly misplaced, as here the business purpose of defendant SRS is clearly stated in its operating agreements.
In view of the foregoing, that branch of the motion which seeks to dismiss plaintiffs' complaint in its entirety is denied as to Vominh's first cause of action for declaratory judgment solely to the extent that said cause of action seeks a declaration with respect to Vominh's interest in SRS. The remainder of the first cause of action and the second, third, fourth, fifth, sixth, seventh and eighth causes of action are dismissed in their entirety.
This is the decision and order of the Court.