Opinion
No. 6826/2012.
2012-10-10
Gary DON, Plaintiff, v. Amadeus BROGER, Fiona K. Hetzner, Andrei Kim, Alexander Khabas, Extra Place America LLC, et.al., Defendants.
Jeffrey E. Michels, Esq., New York, for Plaintiff. James Montgomery, Esq., New York, for Defendants.
Jeffrey E. Michels, Esq., New York, for Plaintiff. James Montgomery, Esq., New York, for Defendants.
DAVID I. SCHMIDT, J.
In this action, Plaintiff seeks compensatory and punitive damages, a declaratory judgment, constructive trust and periodic accountings from the defendants for the breaches of their joint venture agreement and fiduciary duties to the plaintiff. Defendants here move to dismiss the plaintiff's complaint in its entirety.
FACTS
In late March, 2011, defendant Amadeus Broger met with plaintiff to ask him to participate in a joint venture to open a restaurant—bar in lower Manhattan to be called “Extra Place”. It was anticipated that an initial capital investment of $500,000. would be required to develop the project. According to the plaintiff, he met with Broger several times and in May, 2011 it was agreed that Broger would be in charge of the day to day operations of “Extra Place” and plaintiff would bring in the majority of the initial financing. Plaintiff also was to be involved in the marketing and expansion of the restaurant into a chain, would be a signatory of the lease and a guarantor of the rental payments, in addition to obtaining the liquor license, and being involved in the construction of the restaurant. Broger was to bring in $100,000. of the initial capitalization from his fiancé, defendant Fiona Hetzner, and two unnamed others who worked at Credit Suisse (defendants John and Jane Doe). Plaintiff was to provide the remaining $400,000 of which $300,000 would come from investors that plaintiff would bring in, and plaintiff would invest $100,000 from his own funds. The plaintiff brought in two investors, defendants Andrei Kim and Alexander Khabas, who each contributed $150,000. Plaintiff thereby provided for $300,000 of the $400,00 that was to be his capital contribution to the joint venture.
The plaintiff and his investors were to have a 55% share of the corporation that would be formed, “Extra Place America, LLC”, (27 % to plaintiff and 27% shared by Kim and Khabas) and Broger and his investors would have a 45% share. By August, a lease agreement for the restaurant had been negotiated. The potential landlord (Avalon Bay) required that the principals of the venture show their agreement to the terms of the lease agreement before entering into lease. On August 3, 2011, the plaintiff signed a Memorandum of Discussion containing the terms of the lease. On August 4, 2011, Broger sent a draft operating agreement to the plaintiff and other defendants. Plaintiff then provided his financial statement and credit report directly to Avalon Bay's agent, and discussed with the broker the possibility of leasing an adjacent space for the projected expansion of the restaurant.
At a meeting in mid-August, 2011, plaintiff was asked to pay in his $100,000 contribution. Plaintiff contended that the money was not needed at that time as the lease had not yet been signed and there were no construction costs as of yet.
Thereafter, the defendants cut plaintiff out of the joint venture entirely. Defendants Kim and Khabas between them paid in an additional $25,000 each and the defendants incorporated the business without informing or including the plaintiff. Kim became the “managing member” (Kim affidavit) and Khabas became the Chief Financial Officer (Khabas affidavit). The defendants then entered into a lease of the premises with Avalon Bay.
Defendants do not dispute these assertions, although they deny that a joint venture agreement was created. They contend that there was only an agreement to agree, which never blossomed into an enforceable agreement, particularly as plaintiff failed to come up with his share of the initial investment required. Plaintiff claims that it was agreed that at his option, the $100,000 he was to invest from his own funds could be paid out as needed when expenses for the project arose and that he was not required to make an initial lump sum contribution.
MOTION TO DISMISS
Defendants move to dismiss the complaint on the grounds of CPLR R 3211(a) 1, a defense is founded upon documentary evidence and CPLR R 3211(a) 7, the pleading fails to state a cause of action. In the body of their motion, defendants further contend that the oral agreement/ joint venture alleged by the plaintiff was terminable at will, unenforceable under the Statute of Frauds and that the alleged joint venture was succeeded by the corporation formed by the defendants and plaintiff's causes of action with regard to the joint venture do not survive the formation of the corporation.
A joint venture is generally a business undertaking by two or more parties engaged in a single business enterprise for profit ( Grammercy Equities Corp. v. Dumont, 72 N.Y.2d 560,565 [Ct.App., 1988], citing Foreman v. Lumm, 214 A.D. 579 [1st Dept, 1925]; Richbell Info Services v. Jupiter Partners, 309 A.D.2d 288 [1st dept., 2003] ).
There is no dispute with regard to the facts alleged by the plaintiff, and on a motion to dismiss the plaintiff is entitled to the benefit of all favorable inferences arising from such facts (see, e.g., Pinkava v. Yurkiw, 64 AD3d 690 [2d Dept., 2009] citing Leon v. Martinez, 84 N.Y.2d 83, 86–87),
The facts as set forth by the parties establish that the parties entered into an oral agreement and/or joint venture to form a corporation that would own and operate a bar—restaurant with the intent that it should be expanded into a chain of restaurants. The documents submitted by the parties support the plaintiff's allegations with sufficient detail to support the plaintiff's characterization of the agreement as a joint venture, and defendants have not presented any law or facts to support their contention that the complaint should be dismissed upon a defense founded upon documentary evidence pursuant to CPLR 3211(a)1. (See Richbell Info. Servs. v. Jupiter Partners, L.P, 309 A.D.2d 288 [1st Dept., 2003]; Cobble Hill Nursing Home v. Henry & Warren Corp., 74 N.Y.2d 475, 483 [Ct.App., 1989] ), The documentary evidence in no way utterly refutes the plaintiff's allegations and establishes a defense as a matter of law. See, e.g., Goshen v. Mut Life Ins. Co ., 98 N.Y.2d 314, 326 (Ct.App., 2002).
Defendants claim that the oral contract alleged by the plaintiff was for an indefinite duration, thereby both terminable at will and violative of the GOL 5–701(a)(1), the Statute of Frauds, as the agreement, by its terms, was not to be performed within one year. “An oral agreement to create a partnership for an indefinite period does not violate the Statute of Frauds, but it only creates a partnership “at-will' (See Wahl v. Barnum, 116 N.Y. 87, 97 (1st Dept., 1889); Shandell v. Katz 95 A.D.2d 742,743 (1st Dept., 1983)” (defendants' memorandum of law in support of motion to dismiss, p. 2). See also, Moses v. Savedoff, 96A.D.3d 466 (1st Dept., 2012); Pugilese v. Mondello, 57 AD3d 637, 639 (2d Dept., 2008); RTC Properties, Inc v. Bio Resources, Ltd. (1st Dept., 2002) lv. den. 99 N.Y.2d 531 (Statute of Frauds inapplicable to joint venture agreement). Moreover, the plaintiff's undisputed partial performance of his obligations unequivocally referable to the contract preclude dismissal of the complaint on statute of fraud grounds ( Pinkava v. Yurkiw, 63 AD3d 690,[2d Dept., 2009]; Luft v. Luft, 52 AD3d 479 [2d Dept., 2008] ).
In Foster v. Kovner, 44 A.D. 323 (1st Dept., 2007), an action for violation of an oral joint venture and compensation agreement, the court found that although the underlying allegations did not support plaintiff's breach of contract cause of action, plaintiff may proceed upon a theory of quasi-contract and maintain causes of action that typically arise out of contractual relationships such as unjust enrichment, breach of fiduciary duty and promissory estoppel. See also Zuccarini v. Ziff–Davis Media, 306 A.D.2d 404 (2003), Farash v. Sykes Datatronics, 59 A.D.2d 917 (2003).
Bamira v. Greenberg, 256 A.D.2d 237 (1st Dept., 1998) involves an action for damages based upon defendant's alleged misappropriation of an opportunity to purchase shares in a corporation yet to be formed. As in the present case, the putative partners were to seek investors for the venture. Plaintiff alleged that after he brought in an investor, the defendant purchased shares with that investor and then hid the transaction by operating under the aegis of a corporation formed for that purpose. The court found that these allegations were sufficient to support causes of action for breach of good faith and fair dealing, breach of fiduciary duty and theft of partnership opportunity.
To state a cause of action to impose a constructive trust, a plaintiff must allege “(1) a confidential or fiduciary relation, (2) a promise, (3) a transfer in reliance thereon and (4) unjust enrichment” (Pereira v. Glicker, 61 AD3d 948, 949 [2d Dept., 2009]; Cerabano v. Price, 7 AD3d 479, 480 [2d Dept., 2004]; Levy v. Moran, 270 A.D.2d 314, 315 [2d Dept., 2000] ). Plaintiff has raised issues of fact with regard to the requisite elements of this cause of action, the fiduciary duty arising from the partnership agreement ( Foster v. Kovner, supra ); the promise to include the plaintiff in the corporation to be formed; the provision of a significant amount of the venture's financing through bringing in Kim and Khabas as investors, as well as the time and effort plaintiff expended in furtherance of the venture; and unjust enrichment in the defendants' accepting the fruits of plaintiff's labors without recompense, the extent of which will require an accounting to determine (Shandell v. Katz, 95 A.D.2d 742 [1st Dept ., 1983] ).
A claim for punitive damages may be sustained in tort cases for breach of fiduciary duty alleging a conscious act that willfully and wantonly disregards the rights of another (Schubert v. Marwell, 218 A.D.2d 693 [2d Dept., 1995]; Don Buchwald & Assoc. Inc. v. Rich, 281 A.D.2d 329 [1st Dept., 2001] ). The complaint here satisfies this criteria.
Defendants also contend that plaintiff's fifth cause of action for a declaratory judgment is unnecessary and inappropriate where plaintiff has an adequate remedy in another form of action such as breach of contract (Artech Info Sys., LLC v. Tee, 280 A.D.2d 117 [1st Dept., 2001] ). Inasmuch as the plaintiff has raised issues of fact sufficient to proceed on his remaining causes of action, the cause of action for a declaratory judgment is dismissed.
Accordingly, defendants' motion to dismiss is denied except as granted as to plaintiff's fifth cause of action for a declaratory judgment.
The court, having considered the parties' remaining contentions, finds them to be without merit. All relief not expressly granted herein is denied.
This constitutes the decision and order of this court.