Opinion
96 Civ. 9218 (WK)
November 16, 2000
Ronald J. Katter, Esq., New York, New York, For Plaintiff.
Nicholas Griseto, St. Louis, Missouri, Defendant Pro se.
MEMORANDUM ORDER
BACKGROUND
In January 1994, plaintiff Brittany Dying and Printing Corporation ("Brittany"), a company that dyes and prints designs on fabric, entered a joint venture agreement with defendant Nicholas L. Griseto ("Griseto"), a seller of finished fabrics to clothing manufacturers. Pursuant to the joint venture Griseto would gather orders for finished fabrics, while Brittany obtained the raw materials, filled the orders, shipped the fabric to the customers and forwarded the invoices to Griseto. The invoices were financed through a factor, Congress Talcott Corp. ("Congress").
The joint venture agreement was entered into by Brittany and Griseto, who it appears signed the agreement in his individual capacity. However, Griseto participated in the joint venture through his company, Via Condotti, Inc. ("Via Condotti"), of which he was the president and the sole shareholder. The factoring agreement between Via Condotti and Congress was signed by Griseto in his capacity as president. Through this agreement, Congress purchased the accounts receivable of the joint venture and agreed to act as the factor with respect to collection of the accounts. Even though Congress entered into the factoring agreement with Griseto as the named account party, because the invoices under the joint venture listed Griseto as the seller, it was agreed to by a letter signed by Griseto addressed to Congress dated January 21, 1984 that Congress would actually pay all proceeds to Brittany and not to Griseto.
All joint venture invoices created by Brittany had stickers (hereinafter "factor sticker") stating: "Pay only in U.S. funds to CONGRESS TALCOTT CORPORATION P.O. BOX 8500 So. 4350, PHILA., PA 19178-4350. This account and the merchandise covered hereby is assigned and is payable only to CONGRESS TALCOTT CORPORATION, to whom notice must be given of any merchandise returns or any claims for shortage, non-delivery or otherwise."
Under the factoring agreement, Congress agreed to accept so much of the joint venture's accounts as it deemed creditworthy. Congress also agreed, with Griseto's full knowledge and consent, as an accommodation, based on its longstanding commercial relationship with Brittany, to collect and remit to Brittany monies upon accounts eligible to be factored under the factoring agreement.
I. The Pico Invoices
Robinson Manufacturing Company, Inc. ("Robinson") was the joint venture's largest customer. Pico Manufacturing Sales Corp. ("Pico") acted as Robinson's purchasing agent. During the joint venture, Brittany filed numerous orders, through Pico for Robinson, for printing and/or dyeing finished fabric. Filling these orders required substantial work and expense, including purchasing griege goods, dying fabric, manufacturing rotary screens (molds used to create designs for fabric) printing designs on fabric, making invoices and shipping goods.
Consistent with the parties' obligations under the joint venture, Brittany prepared the invoices, had factor stickers affixed to them, and sent them to Griseto. The invoices were then to be sent by Griseto to Pico for payment. From the beginning of the joint venture up until about June 1996, Griesto submitted these invoices to Pico, who in turn made payments to Congress.
Beginning around June 1996, Griseto took the factor stickers off the invoices. By doing this, Griseto, rather than Congress, could collect and receive the entire payment from Pico. With the invoices now in his company's name, Griseto diverted approximately $27,000.00. Brittany asserts that they are entitled to this amount in full since it is equivalent to the direct cost they incurred in manufacturing the rotary screens.
II. The Delpark Invoices
Griseto obtained an order for the joint venture from Delpark, Inc. ("Delpark").
Even though Congress did not find Delpark creditworthy, it agreed to factor the Delpark's invoices as a favor to Brittany. In addition, one Mr. Craig Litt, the principal of Pico who had introduced Delpark to the joint venture, agreed to act as a guarantor on the debt.
Based on the agreement of Congress to collect the payment on the Delpark invoices, the assurances of Mr. Litt, and Griseto's representation that he would send the invoice to Delpark with the factor sticker attached, Brittany filled the order to Delpark.
Thereafter, Brittany submitted an invoice, with the factor sticker attached, in the amount of $30,048.35, to Griseto, who was supposed to send the invoice to Delpark for payment. Instead Griseto attached different Via Condotti invoices and submitted them to Delpark. On or about October 1, 1996, Griseto accepted the $30,048.35 from Mr. Litt as payment on the Delpark invoices. However, Griseto never paid any portion of these funds to Brittany or Congress.
III. Unpaid Advances
Upon Brittany's discovery of the conversion and fraud, it terminated the joint venture. At the time of the termination, in addition to owing Brittany on the invoices, Griseto owed Brittany $151,158.39 in unpaid advances.
IV. The Current Case
Brittany brought this action on December 6, 1996 against Griseto and his company Via Condotti for misappropriation of its money during the handling of a joint venture between the parties. Specifically, the Complaint alleges claims for conversion, fraud, fraudulent concealment, breach of fiduciary duty and breach of contract, as well as for default on a loan agreement arising out of the joint venture. Griseto and Via Condotti, who were at the time represented by counsel, submitted an Answer followed by an Amended Answer and Counterclaims. Griseto and Via Condotti were represented by Kreindler and Relkin until June 9, 1997 when we granted Kreindler and Relkin's motion to withdraw as counsel. On October 12, 1998 Brittany filed a motion to strike defendants' Amended Answer and for a default judgment against Griseto and Via Condotti. We held a hearing on this motion on January 12, 1999. On February 2, 1999 we issued a default judgment against defendant Via Condotti and Ordered that the amended answer and defendants' counterclaims be stricken. Plaintiff's motion addressed by that Order had also requested a default judgment against Griseto, but we held that motion in abeyance.
Defendants made thirteen counterclaims against Brittany and one Mr. Jack Edreich, a shareholder and officer of Brittany, all of which were dismissed by our February 2, 1999 order. When we refer to "Brittany," we are referring to Brittany Dyeing Printing Corp. and Jack Edreich collectively.
Now before us is the plaintiff's motion for summary judgment against the remaining defendant, Griseto.
DISCUSSION
To oppose a summary judgment motion, the non-moving party must, through affidavits, pleadings, depositions or admissions, assert specific facts which place material questions at issue. Clayton v. City of New York (S.D.N.Y. 1984) 596 F. Supp. 355, 360.
Summary judgment cannot be defeated by relying on conclusory statements or by claiming that affidavits in a motion supporting summary judgment are not credible. Gottlieb v. County of Orange (2d Cir. 1996) 84 F.3d 511, 518-19. Unsworn statements cannot be considered as evidence in opposition to summary judgment. See Burns v. New York State Dept. (S.D.N.Y. 1989) 1989 WL 90803 at 3.
Griseto has not submitted any affidavit in support of his opposition to Brittany's motion. He has submitted letters to the Court, but letters do not qualify as the requisite sworn statements. The fact that Griseto is pro se does not alter the requirements or the standards for defeating a summary judgment motion, he is still required to provide more than unsworn denials and assertions. Perez v. Metropolitan Correctional Center Warden (S.D.N.Y. 1998) 5 F. Supp.2d 208, 211 (while the court has an obligation to read pro se party's supporting papers liberally and to interpret them to make the strongest arguments they suggest, bald assertions, completely unsupported by evidence, are not sufficient to overcome motion for summary judgment).
Based on Brittany's motion papers and the fact that Griseto has failed to raise a triable issue of fact in what he has submitted to the Court, we grant Brittany's motion for summary judgment.
I. Griseto's Individual Liability and Liability for Via Condotti
Brittany's claims against Griseto are in his individual capacity, for conversion, fraud and fraudulent concealment, as well as for his actions as president and controlling person of Via Condotti, for the joint venture claims. To hold Griseto liable for the joint venture claims, Brittany has to show that Via Condotti's corporate veil should be pierced.
The Second Circuit has set forth several factors which aid in determining whether Griseto dominated Via Condotti in such a way that warrants piercing the corporate veil:
(1) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like,
(2) inadequate capitalization,
(3) whether funds are put in and taken out of the corporation for personal rather than corporate purposes,
(4) overlap in ownership, officers, directors, and personnel,
(5) common office space, address and telephone numbers of corporate entities,
(6) the amount of business discretion displayed by the allegedly dominated corporation,
(7) whether the related corporations deal with the dominated corporation at arms length,
(8) whether the corporations are treated as independent profit centers,
(9) the payment or guarantee of debts of the dominated corporation by other corporations in the group, and
(10) whether the corporation in question had property that was used by other of the corporations as if it were its own."
Wm. Passalacqua Builders, Inc., et. al. v. Resnick Developers South, Inc., et.al. (2d Cir. 1991) 933 F.2d 131, 139.
Griseto was the president and sole shareholder of Via Condotti and admitted to this Court on January 12, 1999 that Via Condotti was defunct and had no assets. He signed the joint venture agreements in what appears to be his individual capacity. Even though he may have participated in the joint venture agreement through Via Condotti, it seems that Griseto was acting under the guise of Via Condotti. Griseto cannot act individually and then hide behind the shield of this corporation which he controls. For these reasons, we hold Griseto liable for Via Condotti's actions.
II. Breach of the Joint Venture Agreement
In order for there to be breach of contract liability, plaintiff must show that there was an agreement between the parties, a breach by defendant and damages as a result of this breach. Van Brunt v. Rauschenberg (S.D.N.Y. 1992) 799 F. Supp. 1467, 1470.
Brittany performed under the agreement by filling orders and providing invoices with factor stickers to Griseto. Brittany argues that Griseto breached the joint venture agreement in three ways: (1) by removing the factor stickers from the Pico invoices thereby directing their payment to Via Condotti; (2) by rewriting the Delpark invoices, also without factor stickers, thereby diverting their payment to himself; and (3) by not repaying Brittany monthly advances that were part of a revolving loan. Brittany is claiming damages in the amount of $27,000 on the Pico invoices, $30,048.35 on the Delpark invoices and $151,158.39 for the monthly advances. Since Griseto breached the joint venture agreement, causing damage to Brittany as a result, Griseto is liable for breach of contract.
II. Conversion of Proceeds
Conversion occurs when: (1) plaintiff has legal ownership or the immediate superior right of possession to the property; and (2) defendant interferes with the plaintiff's ownership of that property. Republic of Liberia v. Bickford (S.D.N.Y. 1992) 787 F. Supp. 397.
Griseto converted proceeds from the Pico and Delpark invoices by accepting payment on them. The invoices were supposed to be payable to Congress who would remit the money to Brittany. Griseto was only entitled to share in the profits after Brittany had deducted its expenses from the invoice payment. Brittany had an immediate superior interest to Griseto in the proceeds of the invoices in order to pay its expenses, plus a right to half of the profits after expenses. Griseto's interference with Brittany's superior rights constitutes conversion.
C. Breach of Fiduciary Duty
Parties to a joint venture agreement owe each other a fiduciary duty, a duty which exists independent of the joint venturer's duty to fulfill his contractual obligations. ESI, Inc. v. Coastal Power Prod. Co. (S.D.N Y 1998) 995 F. Supp. 419, 434.
As a party in the joint venture, Griseto owed Brittany fiduciary duties of loyalty and honesty. Griseto's misappropriation of the funds from the invoices breached this duty.
D. Fraud and Fraudulent Concealment
To establish a claim of fraud or fraudulent concealment, Brittany must show by clear and convincing evidence that: (1) the defendant made a representation of material fact or had a duty to disclose that it failed to meet; (2) the defendant knew the representation or omission was false; (3) the defendant acted with scienter, the intent to defraud; (4) the plaintiff relied on the representation or omission in a justifiable manner; and (5) as a result, plaintiff was damaged. Chanayil v. Gulati (2d. Cir. 1999) 169 F.3d 168, 171.
Griseto's actions constitute fraud and fraudulent concealment. The joint venture created a duty to disclose. Griseto submitted the Pico and Delpark orders to Brittany which represented that these were sales for the joint venture and that Griseto would act pursuant to the agreement. Griseto's representation that he would submit the invoices with the factor sticker was material to Brittany's decision to fill the orders. The removal of the factor stickers on the Pico invoices and creating new Via Condotti invoices and pocketing the proceeds constitutes fraud. Brittany reasonably relied on Griseto's representations to its detriment by filling the orders yet never receiving payment for its out of pocket expenses and costs. As a result of Griseto's actions, Brittany did not get reimbursed or paid.
E. Third-Party Beneficiary Liability
New York, in adopting the Restatement (Second) of Contracts, finds an intended beneficiary when recognition of a right to performance in the beneficiary is necessary to effectuate the intentions of the contracting parties and the situation indicates that the promisee intends to give the beneficiary the benefit of the promised performance. Oost-Lievense v. North American Consortium, P.C. (S.D.N.Y. 1997) 969 F. Supp. 874.
Griseto wrote Congress a letter, dated January 21, 1994, which states "[t]his letter will act as our permanent instruction to pay all future proceeds under our maturity factoring agreement with Congress to Brittany Dyeing and Printing Corp." This letter agreement demonstrates that Brittany was the intended third-party beneficiary of the factoring agreement Griseto had with Congress. Brittany was damaged by the breach of the factoring agreement, and Griseto is liable to Brittany as a third-party beneficiary.
F. Accounting
The right to accounting is established if plaintiff can prove a fiduciary relationship, joint venture or other specific circumstances that would warrant such relief. Weinrich v. Sandhaus (S.D.N.Y. July 24, 1989) 1989 WL 130641 at *2. Since Griseto and Brittany were parties to a joint venture, Brittany is entitled to an accounting from Griseto regarding his proceeds from the joint venture.
CONCLUSION
Having concluded on the papers before us that there is no material issue of fact in dispute, we grant Brittany's motion for summary judgment in the amount of $208,206.74.
However, we hold entry of this decision in abeyance for a period of sixty days, during which time we will consider any sworn statements defendant may offer in answer to plaintiff's motion, which we will consider as still before us, provided that defendant's submission is accompanied by a reasonable explanation for its delay. Since we excused his original counsel in June 1997 Griseto has asserted that he has tried, but been unsuccessful, in obtaining a lawyer. We consistently granted him extra time for this purpose. However, we never specifically instructed him that failure to get a lawyer would require him to answer Brittany's motion pro se. We therefore assume that he might have taken such action had he been so instructed.
SO ORDERED.