Opinion
28859/10
10-19-2011
Samuel L. Hagan II, P.C. D/B/A Hagan, Coury & Associates, Plaintiff, v. J.P. Morgan Chase Bank, N.A., T.D. Bank, N.A., Successor to Commerce Bank, N.A., The Cutting Room, LLC, Steve Walter A/K/A Steve Walters, and Chris Noth, , Defendants.
Attorney for Plaintiff (pro se): William J. Coury, Esq. Hagan, Coury & Associates, P.C. Attorney for Defendant JP Morgan Chase: Christopher Anderson, Esq. Stagg, Terenzi, Confusione & Wabnik, LLP Attorney for Defendant TD Bank: Barry Glickman, Esq. Zeichner Ellman & Krause LLP Attorney for Defendants The Cutting Room, LLC and Steve Walter: Daniel Olivieri, Esq. Attorney for Defendant Chris Noth: Lee A. Weiss, Esq. Brown Woods George LLP
Attorney for Plaintiff (pro se): William J. Coury, Esq. Hagan, Coury & Associates, P.C.
Attorney for Defendant JP Morgan Chase: Christopher Anderson, Esq. Stagg, Terenzi, Confusione & Wabnik, LLP
Attorney for Defendant TD Bank: Barry Glickman, Esq. Zeichner Ellman & Krause LLP
Attorney for Defendants The Cutting Room, LLC and Steve Walter: Daniel Olivieri, Esq.
Attorney for Defendant Chris Noth: Lee A. Weiss, Esq. Brown Woods George LLP
Carolyn E. Demarest, J.
In this action by plaintiff Samuel L. Hagan II, P.C. d/b/a Hagan, Coury & Associates (plaintiff) to recover monetary damages, defendant JP Morgan Chase Bank, N.A. s/h/a J.P. Morgan Chase Bank, N.A. (JP Morgan Chase) moves for an order, pursuant to CPLR 3211 (a) (1), (5), and (7), dismissing plaintiff's complaint as against it. Defendant TD Bank, N.A. (TD Bank) joins in JP Morgan Chase's motion to dismiss, and cross-moves for an order, pursuant to CPLR 3211 (a) (5) and/or (7), dismissing plaintiff's complaint in its entirety as against it. Defendants the Cutting Room, LLC and Steve Walter a/k/a Steve Walters cross-move for an order dismissing plaintiff's complaint as against them, pursuant to CPLR 3211 (a) (1), (5), and (7), and dismissing plaintiff's tenth, eleventh, and twelfth causes of action, pursuant to CPLR 3016 (b) for failure to plead fraud with sufficient particularity.
Plaintiff's original complaint named the Cutting Room as a defendant in addition to the Cutting Room, LLC, and both the Cutting Room, LLC and the Cutting Room have joined in the cross motion. Steve Walter has attested to the fact that the Cutting Room does not exist and has never existed, and plaintiff's amended complaint and its subsequent papers have deleted the Cutting Room from the caption of its action as a named defendant (retaining only the Cutting Room, LLC, Walter, and Noth, individually and doing business as the Cutting Room).
BACKGROUND
According to the complaint, in December 2006, the Cutting Room, LLC, and its two co-owners, Steve Walter and Chris Noth, retained plaintiff, a law firm, in connection with a landlord/tenant dispute. The Cutting Room, LLC was a tenant of certain premises where it operated a restaurant and cabaret, and its landlord required it to provide evidence of its assets prior to entering into further negotiations. Plaintiff alleges that in order to continue negotiations with the landlord, the Cutting Room, LLC, Walter, and Noth entered into an agreement with plaintiff, whereby they were to provide it with $121,152.73, which plaintiff would deposit into its escrow account for use in entering into a settlement with the Cutting Room, LLC's landlord. Plaintiff further alleges that, pursuant to this agreement, upon the request of Walter and Noth, plaintiff would release the $121,152.73 to a payee designated by them, whose identity was yet to be determined.
On or about December 20, 2006, Walter and Noth delivered a check drawn by the Cutting Room, LLC on its checking account at TD Bank (then Commerce Bank, N.A.) in the sum of $121,152.73 payable to plaintiff. On December 22, 2006, plaintiff made out a deposit slip in the amount of $121,152.73 and deposited this check into its escrow IOLA account maintained by it at JP Morgan Chase. However, according to the complaint, JP Morgan Chase, the depositary bank, due to an error in encoding the check, mistakenly encoded it in the amount of $12,152.73, rather than the actual face amount of $121,152.73, and presented the check to the drawee bank, TD Bank. TD Bank paid the encoded amount to JP Morgan Chase, and debited the Cutting Room, LLC's checking account only in the amount of $12,152.73. JP Morgan Chase received this sum and then credited plaintiff's account only in that amount. TD Bank never paid, and JP Morgan Chase never received, the check's face value amount of $121,152.73.
Encoding means that the bank wrote the amount on the check in computer-readable magnetic ink, which permitted automated processing.
Thereafter, plaintiff alleges that negotiations with the Cutting Room, LLC's landlord were not completed by plaintiff, but by Walter's father, who paid the landlord directly in settlement of the dispute between the Cutting Room, LLC and its landlord. On or about February 13, 2007, in order to pay back Walter's father, the Cutting Room, LLC, Walter, and Noth demanded that plaintiff return the funds in the sum of $121,152.73. Plaintiff, believing that it had received the full amount of the $121,152.73 check from the Cutting Room, LLC, complied with this demand, and issued a check in the sum of $121,152.73 to the Cutting Room, LLC from its IOLA account at JP Morgan Chase. The Cutting Room, LLC deposited the check and retained this $121,152.73 sum.
On June 23, 2010, plaintiff was notified by JP Morgan Chase that the IOLA account had insufficient funds to cover a check presented for payment. Plaintiff arranged for a transfer of funds to its IOLA account to make sure that all of its checks would be paid, and engaged a CPA firm to conduct a full audit of the account to discover the reason for the shortfall. The audit revealed that the shortfall was caused solely by JP Morgan Chase's erroneous processing of the check deposit for $121,153.73 by crediting it for only $12,153,73 on December 23, 2006, resulting in a discrepancy in the amount of $109,000. By letter dated August 5, 2010 to JP Morgan Chase, plaintiff demanded the return of the $109,000. JP Morgan Chase did not return this sum.
On November 23, 2010, plaintiff filed this action against JP Morgan Chase, TD Bank, the Cutting Room, LLC, and Walter and Noth, individually and doing business as the Cutting Room (collectively, defendants). Plaintiff's complaint alleged 12 causes of action. Thereafter, on April 7, 2011, plaintiff filed an amended complaint, adding a thirteenth and fourteenth cause of action.
Plaintiff's first cause of action alleges that by providing the subject check, Walter, Noth, and the Cutting Room, LLC contracted with it to provide full payment in the sum of $121,152.73, and that they breached this contract. Plaintiff's second cause of action alleges that defendants are liable for negligence. Plaintiff's third cause of action asserts that defendants are liable for prima facie tort. Plaintiff's fourth cause of action alleges that defendants are liable in the amount of $109,000 for unjust enrichment. Plaintiff's fifth cause of action asserts that defendants are liable for breach of contract because they were contractually obligated yet failed to provide plaintiff with the full sum of the subject check. Plaintiff's sixth cause of action seeks an equitable and constructive trust for $109,000 based upon defendants' alleged unjust enrichment. Plaintiff's seventh cause of action asserts that Walter, Noth, and the Cutting Room, LLC, are liable to it for breach of contract by improperly accepting the $121,152.73 and failing to return the remaining $109,000. Plaintiff's eighth cause of action alleges a claim of conversion based upon defendants' unauthorized dominion over the $109,000 in funds. Plaintiff's ninth cause of action claims that defendants are liable to it on the grounds of money had and received and violation of bailor/bailee laws by acting negligently as bailors of the funds and improperly distributing those funds and/or failing to account for them. Plaintiff's tenth cause of action appears to assert a claim of fraud against Walter, Noth, and the Cutting Room, LLC based upon their insistence that plaintiff was obligated to provide them with the full $121,152.73 sum. Plaintiff's eleventh cause of action seeks to pierce the veil of the Cutting Room, LLC, alleging fraud, so as to hold Walter and Noth liable for the Cutting Room, LLC's liabilities to it. Plaintiff's twelfth cause of action against the Cutting Room, LLC, Walter, and Noth alleges that Walter and Noth were fraudulently conveyed the property of the Cutting Room, LLC in violation of the Debtor and Creditor Law. Plaintiff's thirteenth cause of action against TD Bank alleges that, pursuant to UCC 4-302 , TD Bank, as the payor bank, is strictly liable to pay it the full sum of $121,152.73 for failing to fully pay, timely return, or send notice that it had dishonored the subject check. Plaintiff's fourteenth cause of action asserts that JP Morgan Chase and TD Bank are liable to it for gross negligence and seeks punitive damages due to the encoding error on the check.
DISCUSSION
JP Morgan Chase's Motion to Dismiss
JP Morgan Chase's motion seeks dismissal of those causes of action of plaintiff's complaint, which are asserted against it, the second, third, fourth, fifth, sixth, eighth, ninth, and fourteenth causes of action. JP Morgan Chase asserts that these causes of action are barred by the documentary evidence, are time-barred by the applicable statute of limitations, and fail to state cognizable causes of action as against it, and must, therefore, be dismissed pursuant to CPLR 3211 (a) (1), (5), and (7). Plaintiff's opposition papers fail to set forth any specific arguments with respect to the dismissal of any of its causes of action asserted as against JP Morgan Chase except for its fifth cause of action for breach of contract.
Plaintiff's second cause of action for negligence is subject to the three-year statute of limitations set forth in CPLR 214 (4) (see Lucchesi v Perfetto, 72 AD3d 909, 911 [2d Dept 2010]). Thus, since such claim accrued on the date of the injury, which in this case, was the date of deposit, December 22, 2006, and plaintiff did not commence this action until November 23, 2010, the claim is time-barred and must be dismissed (see CPLR 3211 [a] [5]).
Plaintiff's third cause of action for prima facie tort is also subject to the three-year statute of limitations contained in CPLR 214 (4) (see Stacom v Wunsch, 173 AD2d 401, 401 [1st Dept 1991]). Therefore, since any prima facie tort would also have occurred on the date of deposit, December 22, 2006, and plaintiff did not commence this action until November 23, 2010, this claim is time-barred and must be dismissed (see CPLR 3211 [a] [5]).
As to plaintiff's fourth cause of action for unjust enrichment, the statute of limitations for a cause of action for unjust enrichment is six years (see CPLR 213 [1]; Coombs v Jervier, 74 AD3d 724, 724 [2d Dept 2010]; Sirico v F.G.G. Prods., Inc., 71 AD3d 429, 434 [1st Dept 2010]). However, it is well established that in order "[t]o prevail on a claim of unjust enrichment, a party must show that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered" (Old Republic Natl. Tit. Ins. Co. v Luft, 52 AD3d 491, 491-492 [2d Dept 2008]; see also Cruz v McAneney, 31 AD3d 54, 59 [2d Dept 2006]). Here, plaintiff has not alleged how JP Morgan Chase was unjustly enriched at the expense of the plaintiff since JP Morgan Chase did not receive any additional funds as a result of its error. Thus, plaintiff's fourth cause of action for unjust enrichment also fails to state a cognizable cause of action as against JP Morgan Chase and must be dismissed (see CPLR 3211 [a] [7]).
Plaintiff's sixth cause of action seeks a constructive trust for $109,000 against JP Morgan Chase, alleging that it was unjustly enriched by refusing to return this amount and that it holds this amount under circumstances that it should not retain it. "A cause of action to impose a constructive trust is governed by a six-year statute of limitations, which begins to run upon the occurrence of the wrongful act giving rise to a duty of restitution" (Bodden v Kean, 86 AD3d 524, 525 [2d Dept 2011]; see also CPLR 213 [1]). However, "[i]n order to state a cause of action to impose a constructive trust, a plaintiff must allege (1) a confidential or fiduciary relationship, (2) a promise, (3) a transfer in reliance thereon, and (4) unjust enrichment" (Zane v Minion, 63 AD3d 1151, 1152 [2d Dept 2009]; see also Simonds v Simonds, 45 NY2d 233, 242 [1978]; Nastasi v Nastasi, 26 AD3d 32, 37 [2d Dept 2005]). Here, there is no fiduciary relationship between JP Morgan Chase and plaintiff (see Greenberg, Trager & Herbst, LLP v HSBC Bank USA, 73 AD3d 571, 572 [1st Dept 2010]), and plaintiff also has not shown any promise by JP Morgan Chase or transfer in reliance thereon, or unjust enrichment to JP Morgan Chase. Plaintiff's sixth cause of action, thus, fails to state a viable claim for a constructive trust against JP Morgan Chase, requiring dismissal (see CPLR 3211 [a] [7]).
Plaintiff's eighth cause of action for conversion is governed by the three-year statute of limitations contained in CPLR 214 (3), which runs from the date the conversion took place (see Bernstein v La Rue, 120 AD2d 476, 477 [2d Dept 1986]). Therefore, since plaintiff deposited the check with JP Morgan Chase on December 22, 2006, its conversion claim accrued at that time. Consequently, plaintiff's conversion claim is time-barred due to plaintiff's failure to commence this action until November 23, 2010, and it must be dismissed (see CPLR 3211 [a] [5]).
Plaintiff's ninth cause of action for negligent bailment alleges that JP Morgan Chase violated the bailment law and acted negligently as bailor of the funds. A claim that JP Morgan Chase acted negligently is subject to the three-year statute of limitations of CPLR 214 (4) and is time-barred (see CPLR 3211 [a] [5]). Moreover, the legal relationship between a depositor and a bank is a contractual one of creditor and debtor (see Bank Leumi Trust Co. of NY v Block 3102 Corp.,180 AD2d 588, 589 [1st Dept 1992]). There is no bailor-bailee relationship between plaintiff and JP Morgan Chase upon which plaintiff could base a bailment contract ( but see Baratta v Kozlowski, 94 AD2d 454, 463 [2d Dept 1983] (applying a six-year statute of limitations upon the finding that a bailment contract was created when plaintiff entrusted his bonds to the bank). Thus, plaintiff's ninth cause of action is time-barred and, in any event, fails to state a viable cause of action against JP Morgan Chase and must be dismissed (see CPLR 3211 [a] [7]).
With respect to plaintiff's fifth cause of action for breach of contract, JP Morgan Chase contends that plaintiff's Account Agreement with it bars its claims. On December 23, 2003, plaintiff signed a Chase Business Signature Card (the signature card) in connection with its IOLA account, in which it certified that it had "received and agrees to the Terms and Conditions for Business Accounts and the Business Banking Card Agreement, currently in effect and as may be amended for the type of account and services it has selected." JP Morgan Chase has annexed a copy of the signature card, executed by plaintiff, and has also annexed a copy of the booklet, entitled "Terms and Conditions for Business Accounts and Services" (the Account Agreement), which its Operations Risk Control Analyst, Kevin Finley, in his sworn affidavit, attests was in effect and governed plaintiff's account at the time plaintiff executed the signature card. The Account Agreement (at page 21) provided, in pertinent part, as follows:
"15. Claims Against the BankThe Account Agreement (at page 11) further provided, in pertinent part, as follows:
Any claim which you may have against the Bank arising from accounts or services which are the subject of these Terms and Conditions, unless a shorter period of time is expressly provided, must be brought within two (2) years of the incurrence of the cause of action."
"19. Periodic Statements and AdvicesStatement, advice or "You shall not institute any legal proceeding or action against the Bank for any claim which you may have regarding any such error, discrepancy or irregularity, including, but not limited to, unauthorized or missing drawer's signature or alteration, non-receipt of an expected Statement or advice or that any indorsement was unauthorized, improper, or missing unless: i) you have given the written notice as provided above; and ii) such legal proceeding or action has been commenced: a) within one (1) year after the date when such Statement or advice was mailed, transmitted, or made available to you in the case of an unauthorized or missing drawer's signature or any alteration on the face or back of an Item; or b) within eighteen (18) months in the case of anunauthorized, improper, or missing indorsement, an Item payable to you that was improperly negotiated by the Bank, or a deposit not properly credited to your account . . ." (emphasis added).
We will send you monthly or periodic statements (Statements') (which may include a record of transactions and canceled Items), or advices to the address in our records for you, and you are considered to have received the Statements upon mailing, whether or not you actually receive them. You shall exercise reasonable care and promptness in examining the Statement or advice . . . You shall notify the Bank in writing within sixty (60) calendar days of the mailing or transmission of the Statement or advice, or from the time the Statement or advice is made available to you . . . of any errors, discrepancies or irregularities, including, but not limited to, unauthorized or missing drawer's signature or alteration, unauthorized transfers or withdrawals of funds by wire or otherwise, or of the non-receipt of an expected credit . . . You shall provide the Bank with all information necessary for the Bank to investigate the alleged error, discrepancy or irregularity. You shall bring no action and the Bank will not be liable for any loss, damage or expense sustained by you unless you so notify the Bank in writing of any error, discrepancy or irregularity in the Statement or advice within the time periods set forth herein.
Kevin Finley attests that the Account Agreement was subsequently amended, effective September 15, 2006 (the Amended Account Agreement). JP Morgan Chase has annexed a copy of the Amended Account Agreement, which provided (at page 27), in pertinent part, as follows:
"You agree to reconcile your statement promptly upon receipt . . . [I]f your Account statement contains any errors, you agree to notify us in writing of such . . . error within 30 days of the date on which . . . the Account statement that contained a description of the . . . error, was mailed, transmitted or otherwise made available to you . . . Failure to report an . . . error . . . within the 30-day time frame set forth above . . . shall be deemed conclusive proof that you failed to exercise reasonable care and promptness in examining the items and statements of the affected Account and in notifying us of the . . .
error. You agree that such items and errors shall therefore be fully enforceable against you and you shall have no claim against us for same and shall be barred from bringing any action against us that is in any way related to the . . . errors" (emphasis added).
Kevin Finley attests that plaintiff's December 2006 statement, on which the $12,152.73 deposit appeared, was mailed to plaintiff at the address it designated via first class mail on or before January 10, 2007, and it is undisputed that plaintiff received this statement. Plaintiff did not commence this action until November 23, 2010, nearly four years later, and, thus, did not notify JP Morgan Chase of the alleged error within either the 60-day time limit imposed by the Account Agreement or the 30-day time limit imposed by the Amended Account Agreement.
Plaintiff opposes dismissal of its fifth cause of action for breach of contract, arguing that it is timely because it brought its action within the six-year statute of limitations applicable to breach of contract actions. Plaintiff contends that the shortened statute of limitations contained in the Account Agreement (which JP Morgan Chase asserts contains the controlling contractual terms between it and plaintiff due to its incorporation into the contractual agreement contained in the signature card) is inapplicable to its breach of contract claim.
Samuel Hagan, a member of plaintiff, in his affirmation in opposition to JP Morgan Chase's motion, asserts that on November 3, 1993, plaintiff had initially opened a business escrow account at JP Morgan Chase, and that he was the only signatory, and that on or about December 23, 2003, plaintiff added one of its partners, William Coury, as a signatory to the existing escrow account. Hagan specifically admits that on December 23, 2003, he and Coury signed the signature card on behalf of plaintiff. Coury, in his affirmation, also admits that he signed the signature card. As noted above, the signature card set forth that plaintiff agreed to the terms of the Account Agreement and amendments to it.
Hagan and Coury, however, deny that they or plaintiff ever received the Account Agreement or the Amended Account Agreement and cannot be bound by the terms of these agreements because it never consented to inform JP Morgan Chase about any discrepancy in the account within any particular time period.
Such argument is unavailing. Since plaintiff specifically acknowledged receiving a copy of the Account Agreement in the signature card, which was executed by it, plaintiff is estopped from now claiming non-receipt of the Account Agreement or ignorance of its contents (see Dietrich v Chemical Bank, 115 Misc 2d 713, 715 [1981], affd 92 AD2d 786 [1st Dept 1983]; Brian Wallach Agency v Bank of NY, 75 AD2d 878, 879 [2d Dept 1980]).
In addition, while plaintiff admits that Hagan and Coury signed the signature card, on behalf of plaintiff, on December 23, 2003, plaintiff points to the fact that the agreement annexed to JP Morgan Chase's moving papers is entitled "Terms and Conditions for Business Accounts and Services," rather than just "Terms and Conditions for Business Accounts," as referenced in the signature card. Plaintiff argues that it is, therefore, not the same agreement referenced in the signature card.
Such argument is unavailing. As stated above, Kevin Finley has attested, in his sworn affidavit, that the booklet annexed to JP Morgan Chase's moving papers was, in fact, the Terms and Conditions for Business Accounts in effect at the time plaintiff signed the signature card. Furthermore, the "introduction" to this 2003 booklet specifically stated that it contained the Terms and Conditions for the account and constituted an agreement between the depositor and JP Morgan Chase, and that by signing the signature card, the depositor thereby agreed to these Terms and Conditions. The fact that the title of this booklet also included the words "and Services" simply refers to the inclusion, in the booklet, of information about the services provided by JP Morgan Chase and does not negate the validity of the Terms and Conditions.
Plaintiff also notes that the signature card refers to a Business Banking Card Agreement, which has not been submitted by JP Morgan Chase. However, since plaintiff does not allege that its IOLA account had a bank card, a Business Banking Card Agreement does not appear applicable here.
Plaintiff further argues that the Account Agreement and the Amended Account Agreement were not incorporated by reference into the signature card, and that it is, therefore, not bound by the shortened statute of limitations period. Such argument must be rejected. As set forth above, the signature card expressly stated that plaintiff had agreed to the terms of the Account Agreement and any amendment to it.
Plaintiff further relies upon Chiacchia v National Westminster Bank (124 AD2d 626, 628 [2d Dept 1986]) for the proposition that a "paper to be incorporated into a written instrument by reference must be so referred to and described in the instrument that the paper may be identified beyond all reasonable doubt," and contends that the signature card did not identify the Account Agreement beyond a reasonable doubt. Such reliance on Chiacchia (124 AD2d at 628), however, is misplaced since in that case, the bank customer signed a safety deposit box rental agreement which contained "no direct reference to, or description of" the agreement that the bank therein had sought to enforce. Here, in contrast, the signature card specifically referenced the Account Agreement, and, thus, there is no bona fide issue of fact that its terms were incorporated into the agreement contained in the signature card and that it was to be read and its terms applied in conjunction with it (see Perl v Smith Barney, 230 AD2d 664, 665 [1st Dept 1996]; Brian Wallach Agency v Bank of NY,75 AD2d at 879; Dietrich v Chemical Bank, 115 Misc 2d 713, 715 [Sup Ct, New York 1981], affd 92 AD2d 786 [1st Dept 1983]).
Plaintiff further claims that there is an internal ambiguity within the Account Agreement which creates an issue of fact. Specifically, plaintiff questions why the cover page of the Account Agreement has a 2003 copyright stamp while the following page bears a 2001 copyright stamp. JP Morgan Chase explains, however, that the second page merely showed an amendment pertaining to CD accounts, which was incorporated into the 2003 Account Agreement. Furthermore, both the last page of the Account Agreement, which contained a 10/03 notation, and Finley's affidavit establish that this Account Agreement was the version in effect as of October 2003.
Since such amendment pertains only to CD accounts, it is also irrelevant to the pertinent terms of the Account Agreement that are at issue in this action.
Plaintiff argues that the incorporation of the Amended Account Agreement would be inequitable because JP Morgan Chase would retain unlimited power to rewrite the terms of its IOLA account at any time without proper notice to plaintiff and the opportunity to dispute such an amendment. Such argument, however, is unavailing since even assuming that plaintiff was not given notice of this amendment and even if the Amended Account Agreement were not applied, it is undisputed that plaintiff did not provide JP Morgan Chase with notice of the discrepancy within the 60-day period that was required by the Account Agreement prior to its amendment.
Plaintiff additionally contends that its breach of contract cause of action did not accrue until JP Morgan Chase refused to correct its error in 2010, and that its claim, is, therefore, timely since it was filed within five months of the accrual of its cause of action. Such contention is without merit. Pursuant to CPLR 206 (a) (2), "where there was a deposit of money to be repaid only upon a special demand . . . the time within which the action must be commenced shall be computed from the demand for repayment or return." Here, however, plaintiff's claim is not based upon JP Morgan Chase's failure to pay it monies which it held in its account, but, rather, is based upon a sharply defined breach, JP Morgan Chase's error in encoding a check. Plaintiff was apprised of the error in its December 2006 statement. Thus, its right to make a demand for proper credit and its claim accrued at that time, and any subsequent demand and refusal of payment by JP Morgan Chase does not extend the accrual date of the statute of limitations (see Williams v Clark, 281 A.D. 916, 916-917 [3rd Dept 1953]).
Plaintiff also argues that this is not the kind of error contemplated by the 30-day or 60-day notice provisions contained in the Account Agreement and the Amended Account Agreement. Plaintiff contends that these provisions do not specifically mention an encoding error, and should be limited to errors concerning JP Morgan Chase's "failure to draw on its account or to draw on its account without authorization."
Plaintiff cites to SOS Oil Corp. v Norstar Bank of Long Is. (76 NY2d 561, 568-570 [1990]), an analogous case where the Court of Appeals addressed plaintiff's statutory claim under UCC 4-302 against a payor bank due to an encoding error by the same bank, acting also as a depositary bank. In SOS Oil Corp. (76 NY2d at 570), the Court of Appeals affirmed the lower courts' granting of summary judgment to plaintiff, finding Norstar as payor bank strictly liable under UCC 4-302 . As a defense, the appellant bank claimed plaintiff had failed to notify it of the error within the shortened statute of limitations established by the bank's "corporate resolution." The Court noted that, because the appellant bank was liable as a payor bank under UCC 4-302 , the shortened notification time limits contained in the corporate resolution were not controlling as they only applied to claims against Norstar in its role as a depositary bank. Thus, as JP Morgan Chase acted as plaintiff's depositary bank, SOS does not support plaintiff's claim that UCC 4-302 precludes enforcement of the shortened limitations period contained in the Account Agreement. The Court further noted that it was "not called upon to decide whether the time limitations of that paragraph [of the corporate resolution] could ever be a valid restriction on a customer's claim."
In fact, courts have routinely enforced bank agreements containing clauses shortening the statutory time by which a customer must provide notice to the bank and commence an action (see Josephs v Bank of NY, 302 AD2d 318, 318 [1st Dept 2003]; Peter Marino, Ltd. v Bank of NY, 250 AD2d 485, 486 [1st Dept 1998]; Retail Shoe Health Commn. v Manufacturers Hanover Trust Co.,160 AD2d 47, 50 [1st Dept 1990]). UCC article 4 generally controls rights between depositors and banks. Under the UCC, "[t]he effect of the provisions of . . . [a]rticle [4] may be varied by agreement except that no agreement can disclaim a bank's responsibility for its own lack of good faith or failure to exercise ordinary care or can limit the measure of damages for such lack or failure" (UCC 4-103 [1]). A shortened statute of limitations is not an agreement disclaiming a bank's responsibility for its own lack of good faith or failure to exercise ordinary care, or limiting the bank's measure of damages for such failure. Thus, the shortened notification provisions contained in the Account Agreement are enforceable. Because plaintiff failed to notify JP Morgan Chase of its error within the requisite time period, plaintiff's fifth cause of action for breach of contract is barred by the very terms of the contract it seeks to enforce.
Plaintiff's argument that the amended complaint renders JP Morgan Chase's motion moot is without merit (see Terrano v Fine, 17 AD3d 449, 449 [2d Dept 2005]; Livadiotakis v Tzitzikalakis, 302 AD2d 369, 370 [2d Dept 2003]). A motion to dismiss an action as time-barred is addressed to the merits and may not be defeated by an amended pleading (see Terrano, 17 AD3d at 449; Livadiotakis, 302 AD2d at 370). Moreover, plaintiff's fourteenth cause of action for gross negligence, which it has added in its amended complaint as against JP Morgan Chase fails to state a viable cause of action. Gross negligence "is conduct that evinces a reckless disregard for the rights of others or smacks' of intentional wrongdoing" (Colnaghi, U.S.A. v Jewelers Protection Servs., 81 NY2d 821, 823-824 [1993]). Plaintiff fails to allege any facts that establish that JP Morgan Chase intentionally wronged plaintiff so as to constitute gross negligence, and this claim is also time-barred (see CPLR 214 [4]). Dismissal of this claim, is, therefore, mandated (see CPLR 3211 [a] [5], [7]).
Plaintiff also argues that its complaint as against JP Morgan Chase should not be dismissed because TD Bank may have a viable cross claim as against it. TD Bank, however, has not asserted a cross claim against JP Morgan Chase and actually joins in JP Morgan Chase's motion to dismiss. The Cutting Room, LLC, Walter, and Noth likewise argue that JP Morgan Chase's motion should not be granted because of a potential cross claim they may have against JP Morgan Chase. Such argument is devoid of merit since these defendants have not asserted any cross claim against JP Morgan Chase. TD Bank's Motion to Dismiss
In turning to TD Bank's cross motion, it is noted that plaintiff's second cause of action for negligence, third cause of action for prima facie tort, fourth cause of action for unjust enrichment, fifth cause of action for breach of contract, sixth cause of action for unjust enrichment, eighth cause of action for conversion, ninth cause of action for negligent bailment, thirteenth cause of action for UCC violations, and fourteenth cause of action for gross negligence are asserted as against TD Bank. Plaintiff's second, third, eighth, ninth and fourteenth causes of action brought against TD Bank are dismissed as time-barred under the three-year statute of limitations applicable to these claims, for the same reasons they were dismissed as to JP Morgan Chase (see CPLR 3211 [a] [5]). Moreover, the fourth and sixth causes of action for unjust enrichment brought against TD Bank are also dismissed for the same reasons they were dismissed as to JP Morgan Chase: plaintiff's failure to plead facts to support a claim that TD Bank was unjustly enriched (see CPLR 3211 [a] [7]).
Plaintiff's fifth cause of action for breach of contract as against TD Bank must also be dismissed as plaintiff was a depositor at JP Morgan Chase, not TD Bank, and had no contractual relationship with TD Bank (see CPLR 3211 [a] [7]).
Plaintiff contends that its complaint as against TD Bank should not be dismissed because its amended complaint renders TD Bank's motion moot. Such contention is devoid of merit. Plaintiff's fourteenth cause of action for gross negligence has already been dismissed as time-barred. As for plaintiff's thirteenth cause of action, which alleges statutory liability by TD Bank pursuant to UCC 4-302 , the court notes that UCC 4-302 imposes distinct accountability on payor banks by providing as follows:
"In the absence of a valid defense such as breach of a presentment warranty (subsection [1] of Section 4-207), settlement effected or the like, if an item is presented on and received by a payor bank the bank is accountable for the amount of . . . a demand item other than a documentary draft whether properly payable or not if the bank, in any case where it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it or, regardless of whether it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight deadline."Therefore, "[a]bsent certain defenses, a payor bank . . . may by the operation of UCC 4-302 be held accountable to a payee for the amount of a check presented for immediate payment when it fails to pay, return or send notice of dishonor before the midnight deadline-that is, midnight of the next banking day following the banking day on which the bank receives the check" (SOS Oil Corp., 76 NY2d at 567; see also UCC 4-104 [1] [h]). Consequently, UCC 4-302 makes the payor bank fully accountable where it has paid less than the face amount of the instrument (see SOS Oil Corp., 76 NY2d at 567).
While it is undisputed that the check and deposit slip were in all respects regular and accurate, and that TD Bank retained the check past its midnight deadline, which would render it, under UCC 4-302 , accountable for the face amount of the check, this UCC claim is untimely brought. While plaintiff argues that the statute of limitations period would be six years for this claim, this argument is without merit. As this claim is a statutory UCC claim, and not a breach of contract claim, the applicable period of limitations is the three-year statute of limitations set forth in CPLR 214 (2), which defines the period to commence actions to recover upon liability created or imposed by statute (see Banca Commerciale Italiana, New York Branch v Northern Trust Intern. Banking Corp.,160 F3d 90, 95 [2d Cir 1998]). Thus, since plaintiff commenced this action well after this three-year statute of limitations period expired, its thirteenth cause of action as against TD Bank must be dismissed as time-barred (see CPLR 3211 [a] [5]). The Cutting Room, LLC and Walter's Motion to Dismiss
Here, unlike in SOS Oil Corp., JP Morgan Chase, rather than TD Bank, was responsible for the encoding error. Although UCC 4-302 imposes a heavier burden upon payor banks than upon depositary banks, if liability were imposed upon TD Bank, the UCC 4-302 defenses, which explicitly include breach of a presentment warranty, would have permitted it, as the payor bank to pass liability on to JP Morgan Chase, as the depositary bank that made the encoding error (see SOS Oil Corp., 76 NY2d at 567, fn. 2).
UCC 4-302 contains no specific provision identifying the applicable statute of limitations for a claim thereunder. Although the recommended Uniform Commercial Code contains UCC 4-111, which provides that any action arising out of Article 4 must be commenced within three years of the action's accrual, such provision has not been enacted by New York.
As noted above, plaintiff's first through twelfth causes of action are asserted as against the Cutting Room, LLC, Walter, and Noth. Walter and the Cutting Room, LLC, by their cross motion, seek dismissal of all of these causes of action pursuant to CPLR 3211 (a) (1), (5), and (7), or, in the alternative, seek dismissal of plaintiff's tenth, eleventh and twelfth causes of action on the basis that fraud is not pleaded in these claims with sufficient particularity.
"On a motion to dismiss the complaint pursuant to CPLR 3211 (a) (7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Breytman v Olinville Realty, LLC, 54 AD3d 703, 703-704 [2008]; see also Leon v Martinez, 84 NY2d 83, 87 [1994]). A motion to dismiss pursuant to CPLR 3211 (a) (7) will fail if, "taking all facts alleged as true and according them every possible inference favorable to the plaintiff, the complaint states in some recognizable form any cause of action known to our law" (Shaya B. Pac., LLC v Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 AD3d 34, 38 [2006]).
Plaintiff's first cause of action for breach of contract alleges that the Cutting Room, LLC, Walter, and Noth breached their contract by failing to make full payment of the $121,152.73 check. However, it is undisputed that the Cutting Room, LLC's check was payable in this amount and that plaintiff did not breach its obligation to provide plaintiff with a check for the full amount. Rather, plaintiff failed to receive full payment on this check due to JP Morgan Chase's error. Furthermore, to the extent that this cause of action alleges a breach of contract claim based upon the Cutting Room, LLC's agreement to pay plaintiff this full sum, it is duplicative of plaintiff's seventh cause of action for breach of contract. Therefore, dismissal of plaintiff's first cause of action is required (see CPLR 3211 [a] [7]).
With respect to plaintiff's seventh cause of action for breach of contract, plaintiff alleges that the Cutting Room, LLC, Walter, and Noth breached their contract by failing to provide the full $121,152.73 sum. In the alternative, plaintiff alleges that Walter, Noth and the Cutting Room, LLC contracted to accept the return of the same sum that they had provided to plaintiff, and thus breached their contract by improperly accepting plaintiff's $121,152.73 check and failing to return the $109,000 difference. Plaintiff has adequately pleaded its seventh cause of action for breach of contract as against the Cutting Room, LLC by alleging the existence of a contract between it and the Cutting Room, LLC, its performance under the contract, the Cutting Room, LLC's breach of the contract, and its resulting damages (see JP Morgan Chase v J.H. Elec. of New York, Inc., 69 AD3d 802, 803 [2d Dept 2010]).
The Cutting Room, LLC and Walter argue that since the entity that was involved in the transaction with plaintiff was the Cutting Room, LLC, a limited liability company, this action must be dismissed as against Walter, individually, as he had nothing to do with this transaction. Walter has submitted his affidavit, in which he states that all transactions in this matter were conducted through the Cutting Room, LLC.
The moving defendants contend that in order for plaintiff to be able to enforce any contractual agreement between it and them, it would have had to have been in writing pursuant to General Obligations Law § 5-701. The Statute of Frauds, however, does not require that an agreement between an attorney and client regarding escrow funds be in writing (see Rudnick v Tuckman, 1 AD2d 269, 272 [1st Dept 1956]). While Walter argues that the agreement between him and plaintiff is barred by the Statute of Frauds because it is an agreement to answer for the debt of another (i.e., the Cutting Room, LLC) pursuant to General Obligations Law § 5-701 (a) (2), there are issues of fact as to whether Walter agreed to be primarily responsible with respect to the payment of the $121,153.73 sum (see Lederer v King, 214 AD2d 354, 354 [1st Dept 1995]).
The Cutting Room, LLC and Walter also note that, pursuant to 22 NYCRR 1215.1, all legal engagements between attorneys and their clients must have a written retainer or letter of engagement, and argue that plaintiff's breach of contract claim against them is barred by this court rule since there was no writing involving Walter. Such argument is unavailing since the monies at issue are not plaintiff's legal fees, and it is undisputed that plaintiff was retained to represent the Cutting Room, LLC, which gave plaintiff the subject funds to be held in its escrow account.
Walter further contends that, as an officer of the Cutting Room, LLC, he may not be held liable for a breach of contract allegedly committed by his employer, the Cutting Room, LLC, without sufficient facts set forth in the complaint that he committed independent tortious conduct (see Murtha v Yonkers Child Care Assn., 45 NY2d 913, 915 [1978]), and that the complaint must also evidence that he manifested malice or illegality toward plaintiff (see Foster v Churchill, 87 NY2d 744, 750 [1996]). Walter asserts that he did not commit the requisite independent tortious conduct required to sustain a cause of action against him individually. Walter claims that he did not do anything to cause the error in the monies which plaintiff received from the check and that he did not profit from it directly.
It is well settled, however, that where individual business owners ignore or abuse the corporate form, courts will preclude them from hiding behind such form in order to shield themselves from personal liability to third parties by applying the doctrine of piercing the corporate veil (see infra pp. 35-37 (11th Cause of Action); Shisgal v Brown, 21 AD3d 845, 848 [1st Dept 2005]; Matter of Island Seafood Co. v Golub Corp., 303 AD2d 892, 893-894 [3d Dept 2003]; Williams Oil Co. v Randy Luce E-Z Mart One, 302 AD2d 736, 739-740 [3d Dept 2003]). The complaint against Walter cannot be dismissed at this time.
Plaintiff's second cause of action must be dismissed. Plaintiff has not stated a viable claim of negligence as against the Cutting Room, LLC or Walter (see Comack v VBK Realty Assoc., Ltd., 48 AD3d 611, 612 [2d Dept 2008]; CPLR 3211 [a] [7]). In any event, the claim is barred by the three-year statute of limitations which governs negligence claims (see Castle Oil Corp. v Thompson Pension Empl. Plans, Inc., 299 AD2d 513, 515 [2d Dept 2002]; CPLR 214 [4] and 3211 [a] [5]).
As to plaintiff's third cause of action for prima facie tort, it is noted that a claim of prima facie tort is not a catch-all for the redress of grievances that are not actionable on their merits (see Curiano v Suozzi, 63 NY2d 113, 118 [1984]). In order to establish a claim for a prima facie tort, a plaintiff must allege the following elements: "(1) intentional infliction of harm, (2) causing special damages, (3) without excuse or justification, (4) by an act or series of acts that would otherwise be lawful" (Id. at 117). Since plaintiff has failed to allege any of these requisite elements, dismissal of plaintiff's third cause of action is mandated (see CPLR 3211 [a] [7]).
The Cutting Room, LLC and Walter further argue that plaintiff's fourth cause of action for unjust enrichment is barred because it depends on proof of a contract which is barred by the Statute of Frauds. Such argument is fallacious as the equitable claim of unjust enrichment does not depend upon the existence of a writing.
"A cause of action for unjust enrichment arises when one party possesses money or obtains a benefit that in equity and good conscience they should not have obtained or possessed because it rightfully belongs to another" (Mente v Wenzel, 178 AD2d 705, 706 [3d Dept 1991]). The essence of an unjust enrichment cause of action is that one party is in possession of money or property that rightly belongs to another (see Clifford R. Gray, Inc. v LeChase Constr. Servs., LLC, 31 AD3d 983, 988 [3d Dept 2006]). Here, plaintiff has pleaded these elements. It is undisputed that the Cutting Room, LLC received $109,000, to which it was not entitled, from plaintiff, at plaintiff's expense. As for Walter, plaintiff is entitled to pursue its claim of unjust enrichment against Walter individually under the same piercing the corporate veil arguments relied upon in plaintiff's seventh cause of action for breach of contract.
"Although the existence of a valid and enforceable contract governing a particular subject matter generally precludes recovery in quasi contract (see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]; Lum v New Century Mtge. Corp., 19 AD3d 558, 559-560 [2005]), where there is a bona fide dispute as to the existence of a contract or the application of a contract in the dispute in issue, a plaintiff may proceed upon a theory of quasi contract as well as breach of contract, and will not be required to elect his or her remedies" (Goldman v Simon Prop. Group, Inc., 58 AD3d 208, 220 [2d Dept 2008]; see also Hochman v LaRea, 14 AD3d 653, 654-655 [2d Dept 2005]; Zuccarini v Ziff-Davis Media, 306 AD2d 404, 405 [2d Dept 2003]; Old Salem Dev. Group v Town of Fishkill, 301 AD2d 639, 639 [2d Dept 2003]; Parkash v Utilisave Corp., 295 AD2d 330, 330 [2d Dept 2002]). Therefore, plaintiff may properly plead unjust enrichment as an alternative claim to its breach of contract claim (see Zuccarini, 306 AD2d at 405). Moreover, as the statute of limitations for a cause of action for unjust enrichment is six years (see CPLR 213 [1]; Coombs, 74 AD3d at 724; Sirico, 71 AD3d at 434), and such period of limitations had not yet run when plaintiff commenced this action, plaintiff's fourth cause of action is timely. Thus, plaintiff has adequately alleged its fourth cause of action for unjust enrichment against the Cutting Room, LLC and Walter.
Walter asserts, however, that he was not unjustly enriched because plaintiff has not shown that any monies went to him, individually. Walter states that he only received salary from the Cutting Room, LLC and that he received no assets from the Cutting Room, LLC after it closed. Walter claims that the Cutting Room, LLC received the monies and used it for business expenses, and then went out of business.
The Cutting Room, LLC and Walter assert that the Cutting Room, LLC has been a defunct limited liability company since the filing of its dissolution on August 24, 2009, as evidenced by the filing receipt and the final tax return for 2009. The Cutting Room, LLC and Walter state that it is obvious from the Cutting Room, LLC's final tax return, which shows no income, and a loss of $6,090, that there were no assets whatsoever left in the Cutting Room, LLC by the end of 2009. Whether Walter personally benefitted from the Cutting Room, LLC's alleged unjust enrichment is an issue of fact. At this juncture, plaintiff has adequately pled the elements of an unjust enrichment claim, and dismissal of the fourth cause of action is not warranted.
Although plaintiff's fifth cause of action for breach of contract states that it is asserted jointly and severally as against all defendants, it is actually directed at JP Morgan Chase and TD Bank, and it is otherwise duplicative of plaintiff's seventh cause of action for breach of contract against the Cutting Room, LLC, Walter, and Noth. Thus, dismissal of plaintiff's fifth cause of action against the Cutting Room, LLC and Walter is warranted (see CPLR 3211 [a] [7]).
As noted, with respect to plaintiff's sixth cause of action, a cause of action to impose a constructive trust is governed by a six-year statute of limitations, which accrues "upon the occurrence of the wrongful act giving rise to a duty of restitution" (Coombs, 74 AD3d at 724 [internal quotation marks and citations omitted]) and requires allegations of (1) a confidential or fiduciary relationship, (2) a promise, (3) a transfer in reliance thereon, and (4) unjust enrichment (Zane v Minion, 63 AD3d at 1152). Although this claim is not time-barred, because the Cutting Room, LLC owes no fiduciary duty or duty of confidentiality to plaintiff, and plaintiff's payment to the Cutting Room, LLC was not made in reliance upon any promise, the requisite elements for the imposition of a constructive trust are not satisfied (see Sharp, 40 NY2d at 121; Ewart v Ewart, 78 AD3d 992, 993 [2d Dept 2010]). Consequently, dismissal of plaintiff's sixth cause of action must be granted (see CPLR 3211 [a] [7]).
With respect to plaintiff's eighth cause of action for conversion, the tort is governed by a three-year statute of limitations (see CPLR 214 [3]), which generally accrues at the time when the alleged conversion takes place (see Sporn v MCA Records, 58 NY2d 482, 488-489 [1983]; Two Clinton Sq. Corp. v Friedler, 91 AD2d 1193, 1194 [4th Dept 1983]). Plaintiff's complaint alleges that on or about February 13, 2007, it tendered the $121,152.73 to the Cutting Room, LLC and it wrongfully retained this sum. Since plaintiff's claim accrued at that time, and it did not file this action until November 23, 2010, nine months after the three-year statute of limitations had lapsed, its eighth cause of action for conversion is time-barred and must be dismissed (see CPLR 3211 [a] [5]).
Plaintiff's ninth cause of action for negligent bailment fails to state a viable cause of action against the Cutting Room, LLC and Walter since there was no bailor-bailee relationship between plaintiff and them. "The determination as to whether the relationship is one of bailor and bailee turns on whether there is a relinquishment of exclusive possession, control and dominion over the property." (Hutton v Pub. Stor. Mgt., Inc., 177 Misc 2d 540, 541 [App Term 1998]). Here, plaintiff believed that it owed the Cutting Room, LLC $121,152.73 and tendered that amount as repayment. No bailment relationship arose as it was not entrusting its property to the Cutting Room, LLC. Moreover, a claim that Walter and the Cutting Room, LLC acted negligently is subject to the three-year statute of limitations of CPLR 214 (4) and is time-barred (see CPLR 3211 [a] [5]). Dismissal of this cause of action is, therefore, mandated (see CPLR 2311 [a] [5] and [7]).
The Cutting Room, LLC and Walter contend that plaintiff has failed to adequately plead its tenth and eleventh causes of action for fraud and its twelfth cause of action for fraudulent conveyance, with sufficient particularity pursuant to CPLR 3016 (b). To plead a cause of action for fraud, plaintiff must allege "a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages" (Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559). The Court of Appeals has further held that the heightened pleading requirement of CPLR 3106 (b) "is satisfied when the facts suffice to permit a reasonable inference' of the alleged misconduct" (id. quoting Pludeman v. Northern Leasing Sys., Inc., 10 NY3d 486, 492 [2008]).
Specifically, the Cutting Room, LLC and Walter argue that plaintiff's tenth cause of action for fraud is duplicative of its breach of contract cause of action because, like its breach of contract cause of action, it is premised on the Cutting Room, LLC's failure to deliver the proper monies due under the contract. The Cutting Room, LLC and Walter further argue that plaintiff's tenth cause of action fails to plead reliance and is improperly premised on promises of future performance. The Cutting Room, LLC and Walter maintain that no specific statements made by them caused the error at issue, and that plaintiff created its own problems by not balancing its IOLA bank account and by forwarding an improper amount of money to the Cutting Room, LLC.
These arguments are rejected. In its tenth cause of action, plaintiff alleges that Walter, individually, and the Cutting Room, LLC were aware that only $12,152.73 had been deducted from the Cutting Room, LLC's checking account, but despite this knowledge, Walter and the Cutting Room, LLC contacted plaintiff and demanded payment of the full $121,152.73 sum. Plaintiff further alleges that Walter and the Cutting Room, LLC knew their claim to be false but induced plaintiff to believe that it was obligated to pay this full sum, and that in reliance on their representations that the full sum of the check had been paid to plaintiff and that they were entitled to the return of this sum, plaintiff paid the Cutting Room, LLC the full $121,152.73. Thus, this claim asserts a viable cause of action for fraud and false misrepresentation, independent of plaintiff's breach of contract claim, since it alleges, with sufficient particularity pursuant to CPLR 3016 (b), that, independent of the contract, the Cutting Room, LLC and Walter misled and deceived plaintiff into believing that it was obligated to pay $121,152.53.
Walter asserts, however, that due to poor bookkeeping procedures used, the bookkeeper only made entries based on the bank statements received from TD Bank, and, therefore, only entered the amount of the negotiated check in the sum of $12,152.73 from the bank statement. Walter states that this resulted in the error not being discovered by him and the Cutting Room, LLC, and that there are no facts that would support plaintiff's allegations that he or the Cutting Room, LLC committed any fraud. Walter asserts that he did not attempt to hide the error from plaintiff and that plaintiff itself blames poor bookkeeping for failing to detect the error.
Plaintiff, though, maintains that it is inconceivable that Walter could have been unaware that his limited liability company suddenly had four times the assets that it was expecting to have in its account. Plaintiff has submitted a copy of a bank transaction printout for the Cutting Room, LLC, which it obtained from the Cutting Room, LLC s accountant, which shows that only $12,152.73 had been deducted from the Cutting Room, LLC's checking account, rather than the $121,152.73, as written on the Cutting Room, LLC's check. Plaintiff contends that this demonstrates that the Cutting Room, LLC and Walter had actual notice of the error. Plaintiff asserts that although Walter must have known that only $12,152.73 had been deducted from the Cutting Room, LLC's account, he demanded that it provide him with $121,152.73. These allegations are sufficient to sustain the tenth cause of action for false misrepresentation and fraud as against him individually under the theory of piercing the corporate veil (see Dana v Shopping Time Corp., 76 AD3d 992, 994 [2d Dept 2010]).
Plaintiff's eleventh cause of action asserted against Walter and Noth seeks to pierce the veil of the Cutting Room, LLC, alleging that these defendants used domination and control of the Cutting Room, LLC to commit a fraud or other wrong against plaintiff, in contravention of its rights, by abusing the privilege of doing business in the limited liability company form, inadequately capitalizing the Cutting Room, LLC, commingling personal and limited liability company funds; using the Cutting Room, LLC for personal business, stripping the Cutting Room, LLC of assets in anticipation of its impending liability without the intention of repayment, and perpetrating a wrong on plaintiff in failing to notify it of the error with respect to the check and/or rectify the error.
In this cause of action, plaintiff asserts that Walter is in the process of personally using the goodwill associated with the Cutting Room, LLC because an article in the New York Post reported that Walter had signed a new lease on East 32nd Street in Manhattan using the Cutting Room name in November 2010, after the Cutting Room, LLC had been dissolved in August 2009. Plaintiff states that this shows that Walter is still doing business by using the Cutting Room, LLC's name and/or its goodwill, and is doing business personally under the Cutting Room, LLC's name, which supports its claim that the veil of the Cutting Room, LLC should be pierced. Walter asserts that the New York Post article is false and that this never occurred. Walter further asserts that the Cutting Room "name" has been trademarked by someone named Greg Morris in 2007 and that he opened up a club using the Cutting Room name on January 11, 2011 in California. Walter's assertions, however, simply raise issues of fact, which must be explored through discovery.
Plaintiff has already served the Cutting Room, LLC's accountant with a subpoena, and plaintiff asserts that the accountant will likely provide relevant evidence as to how the Cutting Room, LLC's income was used and distributed. Plaintiff claims that such evidence will support its claims to pierce the veil of the Cutting Room, LLC and impose individual liability upon Walter.
Although piercing the corporate veil does not constitute an independent cause of action, plaintiff can state a claim of fraud against Walter individually for intentionally inadequately capitalizing the Cutting Room, LLC in order to avoid returning plaintiff's overpayment. Under the doctrine of piercing the corporate veil, "equity will intervene to pierce the corporate veil' and permit the assertion of claims against the individuals who control the corporation, in order to avoid fraud or injustice" (Damianos Realty Group, LLC v Fracchia, 35 AD3d 344, 344 [2d Dept 2006]; see also Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 140-141 [1993]). "Generally, piercing the corporate veil requires a showing that the individual defendants (1) exercised complete dominion and control over the corporation, and (2) used such dominion and control to commit a fraud or wrong against the plaintiff which resulted in injury" (Damianos Realty Group, LLC, 35 AD3d at 344; see also Matter of Morris, 82 NY2d at 141; Seuter v Lieberman, 229 AD2d 386, 386 [2d Dept 1996]). The party seeking to pierce the corporate veil must further establish that the "controlling corporation [or person] abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against a party such that a court in equity will intervene" (Weinstein v Willow Lake Corp., 262 AD2d 634, 635 [2d Dept 1999]).
"Veil piercing is a fact-laden claim" that is not well suited for resolution upon a motion to dismiss (Damianos Realty Group, LLC, 35 AD3d at 344, quoting First Bank of Ams. v Motor Car Funding, 257 AD2d 287, 294 [1st Dept 1999]; see also Forum Ins. Co. v Texarkoma Transp. Co., 229 AD2d 341, 342 [1st Dept 1996]). "Before dismissal can be granted, plaintiff is entitled to obtain necessary discovery to ascertain whether there are grounds to pierce the corporate veil (see First Bank of Ams., 257 AD2d at 294; Aubrey Equities v SMZH 73rd Assocs., 212 AD2d 397, 398 [1st Dept 1995]). Here, plaintiff has adequately alleged that veil-piercing is warranted, and the issue of whether Walter so dominated the Cutting Room, LLC as to justify a piercing of the limited liability company veil is not ripe for determination at this early pre-answer stage of the action, prior to affording plaintiff an opportunity to engage in discovery (see Ledy v Wilson, 38 AD3d 214, 215 [1st Dept 2007]; Berry Packing Corp. v Atlantic Veal Corp., 302 AD2d 417, 418 [2d Dept 2003]; Board of Mgrs. of Regal Walk Condominium I v Community Mgt. Servs. of Staten Is., 226 AD2d 414, 415 [2d Dept 1996]; Toroy Realty Corp. v Ronka Realty Corp., 113 AD2d 882, 883 [2d Dept 1985]).
It is noted that although only this eleventh cause of action contains veil-piercing allegations, veil-piercing is applicable to all the causes of action where individual liability is alleged. As there is no cause of action to pierce the corporate veil independent of an otherwise viable cause of action, and the legal claims contained in the eleventh cause of action are redundant of other causes of action, the eleventh cause of action is dismissed; however, the allegations in support of piercing the veil are retained in the complaint as the factual predicate for the other claims alleged against the individual defendants. Thus, dismissal of plaintiff's fourth, seventh, and tenth causes of action for unjust enrichment, breach of contract, and fraud as against Walter under a theory of veil piercing must be denied at this juncture (see Peery v United Capital Corp., 84 AD3d 1201, 1202-1203 [2d Dept 2011]). The allegations in those causes of action, if supported, could establish a basis upon which to pierce the veil of the Cutting Room, LLC (see Gateway I Group, Inc. v Park Ave. Physicians, P.C., 62 AD3d 141, 145-147 [2d Dept 2009]; Love v Rebecca Dev., Inc., 56 AD3d 733, 733-734 [2d Dept 2008]; International Credit Brokerage Co. v Agapov, 249 AD2d 77, 78 [1st Dept 1998]).
Plaintiff's twelfth cause of action alleges that the Cutting Room, LLC transferred its assets to Walter with the intent to hinder, delay, or defraud it pursuant to Debtor and Creditor Laws §§ 273, 274, 275, 276 and 278. At this stage, no discovery has been conducted and Walter has not disclosed what has become of the Cutting Room, LLC's assets. These facts are exclusively under the control of the Cutting Room, LLC and Walter. In addition, the allegations in plaintiff's twelfth cause of action sufficiently set forth a claim under the Debtor and Creditor Law, and such claim is pleaded with particularity sufficient to satisfy CPLR 3016 (b) (see Peery v United Capital Corp., 84 AD3d 1201, 1204 [2d Dept 2011]; Gateway I Group, Inc. v Park Ave. Physicians, P.C., 62 AD3d 141, 150 [2d Dept 2009]; Marine Midland Bank v Zurich Ins. Co., 263 AD2d 382, 382-383 [1st Dept 1999]; Wall St. Assoc. v Brodsky, 257 AD2d 526, 529 [1st Dept 1999]). Therefore, dismissal of plaintiff's twelfth cause of action must be denied (see Parsons & Whittemore v Abady Luttati Kaiser Saurborn & Mair, 309 AD2d 665, 665 [1st Dept 2003]).
CONCLUSION
Accordingly, JP Morgan Chase's motion to dismiss plaintiff's complaint as against it is granted. TD Bank's cross motion to dismiss plaintiff's complaint as against it is also granted. The Cutting Room, LLC and Walter's cross motion to dismiss plaintiff's complaint as against them is granted with respect to their first, second, third, fifth, sixth, eighth, ninth, and eleventh causes of action, and is denied with respect to their fourth, seventh, tenth, and twelfth causes of action.
This constitutes the decision and order of the court.
ENTER,
J.S.C.