Opinion
No. 100993/2009.
2010-07-1
GLAZE, INC., Plaintiff, v. COACH CHOICE APPAREL, INC., Choice Closeout, LLC, and Randall Raskin, Defendants.
Steven H. Rochkind, Esq. of Joelson & Rochkind, for defendants. Jennifer M. Blum, Esq., for plaintiff.
Steven H. Rochkind, Esq. of Joelson & Rochkind, for defendants. Jennifer M. Blum, Esq., for plaintiff.
O. PETER SHERWOOD, J.
This is an action to recover monies owed for goods sold and delivered. Defendants move for an order: (1) pursuant to CPLR § 1003 to dismiss the complaint against Randall Raskin and Coach's Choice Apparel, Inc. on the grounds of misjoinder and (2) pursuant to CPLR § 8501 directing plaintiff to post security for costs in this action. Plaintiff Glaze, Inc. (“plaintiff” or “Glaze”) opposes defendants' motion and cross moves for an order granting it leave to amend the complaint, inter alia, to add Merrill Lynch Commercial Financial Corp. as successor-in-interest to plaintiff.
Glaze, a New Jersey Corporation, is a wholesaler of novelty goods and merchandise (Affidavit of Randall Raskin in Support of the Motion [Raskin Aff.], at p. 1; Affidavit of Bihari Lund in Opposition to Motion and in Support of Cross Motion [Lund Aff.], ¶ 2). Coach Choice Apparel, Inc. (“Coach's Choice”) is a wholesaler of apparel at reduced prices. Defendant Randall Raskin (“Raskin”) is the sole member of Coach's Choice. In 2004, Raskin, together with a partner Stuart Cohen, created Choice Closeouts, LLC (“Choice”) as a distinct business entity for the purpose of selling novelty items and hard goods, but not apparel (Raskin Aff. at p. 2). Neither Coach's Choice or Choice have any tangible assets, but rather acted as middlemen by buying goods and having them delivered directly to their customers ( id. at pp. 2–3).
At the time Glaze began doing business with Choice it had just opened for business and did not have a credit history (Raskin Aff. at p. 2; Lund Aff. ¶ 3). Plaintiff contends that because of Choice's lack of credit history and Coach's Choice long-standing credit history, it agreed to do business with Choice as long as Coach's Choice would guarantee all credit extended to and all bills incurred by Choice. On that basis, plaintiff contends that most documents, bills and invoices were issued to both Coach's Choice and Choice and that payments were made by either business entity. Defendants acknowledge that the first invoice was co-billed to both Coach's Choice and Choice because of Choice's lack of credit history. However, they contend further that all orders were placed by Choice and that plaintiff during the course of its business dealings with Choice would incorrectly bill both Coach's Choice and Choice (Raskin Aff. p. 2). Defendants claim that all bills were paid by Choice ( id.).
On January 26, 2009, Glaze commenced this action against Coach's Choice, Choice and Raskin seeking to recover the sum of $24,676.53 alleged to be due and owing for goods and merchandise sold and delivered to defendants between February 20, 2006 and December 4, 2006, plus interest and costs, including attorneys' fees. The complaint alleges four causes of action sounding in breach of contract, goods sold and delivered, account stated and the fourth cause of action against Raskin only claiming that he acted in his individual capacity in dealing with Glaze and is, therefore, personally liable.
Issue was joined by service of defendants' answer on or about April 13, 2009, in which it generally denied the allegations of the complaint, raised numerous affirmative defenses, including lack of jurisdiction, that Coach's Choice and Raskin were improper parties, and timely rejection of goods and counterclaimed for punitive damages claiming that the action as against Rankin was malicious, in bad faith and without a factual basis.
Defendants now move to strike Coach's Choice and Raskin as misjoined party defendants, order plaintiff to post security for costs and impose costs for frivolous litigation as against Raskin. Defendants contend that there is no basis for the action against Raskin individually as no orders were placed on his behalf nor did he personally guarantee any orders, invoices or other obligations of the corporate defendants. Defendants also contend that there is no basis for the action against Coach's Choice as all orders were placed on behalf of Choice, an entity completely distinct from Coach's Choice, and only the first invoice was correctly billed to Coach's Choice as Choice had not yet established credit. Defendants submit documentation in the form of invoices, canceled checks and Choice's running account of payments to demonstrate that only Choice was involved in the transactions with Glaze.
Glaze opposes the motion and cross moves for leave to amend the complaint. Plaintiff's counsel contends that the action when commenced “misnamed” Glaze as plaintiff, rather than naming its successor in interest, Merrill Lynch Commercial Financial Corp. (“MLCFC”). Glaze has defaulted in its obligations due MLCFC, a secured creditor, and, as such, MLCFC is entitled to collect all outstanding accounts receivable, rights to payment and contract rights of Glaze. While claiming to be seeking to merely amend the caption to name the correct plaintiff, the proposed amended complaint amplifies the allegations of the original complaint and contains new allegations regarding the nature of plaintiff's relationship with Coach's Choice and Choice and allegations that Glaze would not do business with Choice, due to its lack of credit history, unless Coach's Choice agreed to be equally responsible for all bills and invoices due and owing to Glaze by Choice. The fourth cause of action in the proposed amended complaint as against Raskin is essentially a new cause of action alleging that Choice was dissolved by Raskin without notice to Glaze as one of its creditors and that Raskin is personally liable for monies owed to Glaze by Choice under New York's Business Corporation Law § 719.
In reply, defendants contend that Choice, as a limited liability company, is not governed by the Business Corporation Law. They repeat their position that Raskin cannot be held personally liable for the debt of either Coach's Choice or Choice as he did not purchase goods for his own use and never agreed to guarantee payment. The mere fact that he was a member of the corporate defendants is not sufficient to render him liable for the corporate debt. Defense counsel contends that he brought these facts to the attention of plaintiff's counsel several times in an effort to have the action discontinued against Raskin. Accordingly, defense counsel asks the court to impose costs against plaintiff for frivolous litigation. Defendants oppose the cross motion contending that it is not merely a supplemental pleading but an entirely new pleading which brings in a new party and asserts new causes of action. Defendants contend that they would be prejudiced if an amendment is permitted at this stage as it would render the discovery conducted to date moot and require the discovery process to begin anew.
It is well settled that leave to amend shall be freely granted provided the amendment is not plainly lacking in merit and does not cause prejudice or surprise to the non-moving parties ( see,CPLR x 3025[b]; McCaskey, Davies and Assocs. v. New York City Health & Hosps. Corp., 59 N.Y.2d 755 [1983];Fahey v. County of Ontario, 44 N.Y.2d 934 [1978] ). Mere lateness in seeking such relief is not in itself a barrier to obtaining judicial leave to amend ( see, Ciarelli v. Lynch, 46 AD3d 1039 [3d Dept.2007] ). Rather, when unexcused lateness is coupled with significant prejudice to the other side, denial of the motion for leave to amend is justified ( see, Edenwald Contracting Co. v. City of New York, 60 N.Y.2d 957, 958 [1983] ).Prejudice in this context is shown where the nonmoving party is “hindered in the preparation of his case or has been prevented from taking some measure in support of his position” (Loomis v. Civetta Corinno Const. Co., 54 N.Y.2d 18, 23 [1981] ).
Here, there is no evidence in the record that any party would be prejudiced by plaintiff's amendment of the complaint or would be hindered in the preparation of their defense. The correction in the name of the plaintiff is essentially ministerial as MLCFC, as a secured creditor, simply stands in the shoes of Glaze and no allegations are asserted other than on behalf of Glaze with respect to the transactions at issue. CPLR § 2001 permits the correction of a mistake in pleading unless a substantial right of the defendant would be prejudiced ( see, Sullivan v. FC Bruckner Assocs., LP, 62 AD3d 417 [1st Dept 2009] ). Defendants' claim of prejudice is wholly without merit. The record is abundantly clear that the granting of relief in the nature of amending the caption will not prejudice a substantial right of the defendants as any claims or defenses they have against Glaze are unaffected by the substitution of MLCFC as the named plaintiff and, therefore, any discovery conducted to date would not be rendered academic. Although, as defendants correctly allege, the proposed amended complaint contains new factual allegations and an essentially new cause of action against Rankin, the new allegations essentially amplify the allegations of the original complaint in order to clarify the nature of plaintiff's claims against both corporate defendants.
Turning then to defendants' claim that Coach's Choice and Raskin have been misjoined in this action, CPLR § 1003 provides that the court may correct a misjoinder of parties on motion of any party, or, on its own motion, at any stage of the action, on just terms. The Court concludes at this early stage of the litigation that the allegations of the proposed amended complaint sufficiently state claims against defendant Coach's Choice. Therefore, defendants' motion to dismiss as against this entity on the grounds of misjoinder should be denied.
However, the record is not sufficient to hold Raskin liable in his individual capacity. It is generally accepted that “it is perfectly legal to incorporate for the express purpose of limiting the liability of the corporate owners” (Matter of Morris v. New York State Dept. Of Taxation & Fin., 82 N.Y.2d 135, 140 [1993] and such rule “is equally applicable to a corporation with a single shareholder” (Worthy v. New York City Hous. Auth., 21 AD3d 284, 287 [1st Dept 2005] ). Therefore, ordinarily, a corporate officer is not personally liable for actions taken in furtherance of the corporate business under the well-settled rule that “an agent for a disclosed principal will not be personally bound unless there is clear and explicit evidence of the agent's intention to substitute or superadd his personal liability for, or to, that of his principal” ‘ ( id. at 266, quoting Savoy Record Co. v. Cardinal Export Corp., 15 N.Y.2d 1, 4). In addition, a member of a limited liability company is statutorily exempt from individual liability for acts taken on behalf of the company or for the company's obligations ( see,Limited Liability Company Law § 609; Retropolis, Inc. v. 14th St. Development LLC, 17 AD3d 209, 210 [1st Dept 2005] ). Nothing in this record is sufficient to show that Raskin acted in his individual capacity with respect to any of the transactions at issue or in any manner purposefully agreed to accept personal responsibility for the obligations of either Coach's Choice or Choice or their performance in the transactions with Glaze. Nor are the conclusory allegations of the proposed amended complaint sufficient to state a claim against Raskin under Business Corporation Law § 719 with respect to the alleged dissolution of Choice.
The defendants' remaining issues concerning the posting of security for costs and the imposition of sanctions for frivolous litigation are found by the court to be without merit.
Accordingly, it is hereby
ORDERED that defendants' motion to dismiss on the ground of misjoinder is granted to the extent that the complaint is dismissed in its entirety as against defendant Randall Raskin, with costs and disbursements to said defendant as taxed by the Clerk of the Court, and the Clerk is directed to enter judgment accordingly in favor of said defendant; and it is further
ORDERED that the action is severed and continued against the remaining defendants; and it is further
ORDERED that plaintiff's cross motion for leave to amend the summons and complaint is granted and the amended summons and complaint in the form annexed to the moving papers shall be deemed to have been served upon service by cross movant of a copy of this order with notice of entry; and it is further
ORDERED that defendants shall serve an answer to the amended complaint or otherwise respond thereto within twenty(20) days of said service; and it is further
ORDERED that the action shall bear the following caption:
_________________________X
MERRILL LYNCH COMMERCIAL FINANCIAL CORP., as Successor in Interest to GLAZE, INC., a New Jersey Corporation, Index No. 100993/2009 Plaintiff,
-against
COACH'S CHOICE APPAREL, INC. and CHOICE CLOSEOUT, LLC, Defendants.
_________________________X
and it is further
ORDERED that the cross movant shall serve a copy of this order with notice of entry upon the County Clerk (Room 141B) and the Clerk of the Trial Support Office (Room 158), who are directed to mark the court's records to reflect the change in the caption herein; and it is further
ORDERED that counsel for the parties are directed to appear for a preliminary conference in Room 341, 60 Centre Street, on August 11, 2010, at 9:30 a.m.
This constitutes the decision and order of the court.