Opinion
Index No. 531507/2023 Motion Seq. No. 4 NYSCEF Doc. No. 103
11-19-2024
ADRIANE HARTILL, PAUL DISCAL, DISCALA and GERARD: Plaintiffs, v. JOHN NUNZIATA & ARTHUR NUNZIATA, Defendants, -and- 156 AINSLIE ST., LLC, Nominal Defendant,
Unpublished Opinion
DECISION AND ORDER
Hon. Leon Ruchelsman, JSC
The plaintiffs have moved seeking an injunction restraining the., defendants from utilizing corporate funds to defend this action. The defendants have opposed the motion. papers were submitted by the parties and arguments held. After reviewing all the arguments this court now makes the following determination.
As recorded, in prior orders, Andrew Nunziata the father of defendant John Nunziata and the grandfather of all three plaintiffs owned property located at 156 Ainslie Street in Kings County.. Upon Andrew's passing the property was inherited by Andrew's children, defendant John Nunziata, Maria Discala, and Arthur Nunziata. Thus, on December 12, 2006 John created an entity called 156 Ainslie LLC which comprised of one asset, namely the property located at that address which was equally owned by John and Arthur and Maria. Maria passed away on July 7, 2007. The children of Maria:, the plaintiff's herein, have asserted ownership interests in the entity. They commenced this lawsuit seeking a declaratory judgement and an equitable accounting and claims against John for breaching his duty to the entity. The defendants counterclaimed asserting the plaintiff's are not members of the entity and thus cannot pursue any claims. The plaintiffs now move Seeking to restrain the defendants from utilizing corporate funds to defend this action. As noted the motion is Opposed.
Conclusions of Law
CPLR §6301, as it pertains to this case, permits the court to issue a preliminary injunction "in any action... where the; plaintiff has demanded and would be entitled to a judgement restraining defendant from the commission or the continuance of an act, which, if committed of continued during the pendency of the action, would produce injury to the plaintiff" (id). A party seeking a preliminary injunction "must demonstrate a probability of success on the merits, danger of irreparable injury in the absence of the injunction and a balance of the equities in its favor" (Nobu Next Door, LLC v. Fine Arts Hosing, Inc., 4 N.Y.3d 839, 800 N.Y.S.2d 48 [2005], see also, Alexandru v. Pappas, 68 A.D.3d 690, 890 N.Y.2d 593 [2d Dept., 2009]). Further, each of the above elements must be proven by the moving party with "clear and convincing evidence" (Liotta v. Mattone, 71 A.D.3d 741, 900 N.Y.S.2d 62 [2d Dept., 2010.].), Moreover, the plaintiff also seeks to impose upon the defendants a mandatory injunction requiring chem to return corporate funds utilized to pay attorney's fees or for other purposes.
A mandatory injunction is rarely granted and only under unusual circumstances to maintain the status quo pending trial (Matos v. City of New York, 21 A.D.3d 936, 801 N.Y.S.2d 610 [2d Dept., 2005]). Thus, where a party is engaged in unlawful conduct which is continuous then a mandatory injunction is proper (Rosenthal v. Helfer, 136 Misc.2d 9, 516 N.Y.S.2d 1020 [Civil Court New York County, 1987]). Moreover, where a party acts deliberately and intentionally which affects the plaintiff's rights or where the party engages in unlawful conduct which is capable of repetition then a mandatory injunction requiring the party to cease is likewise proper (Marcus v. Village of Mamaroneck, 283 NY 325, 28 N.E.2d 856 [1940], Rombom v. Weberman, 2002 WL 1461890 [Supreme Court Kings County 2002]).
In this case the plaintiff has not presented any evidence that mandating the defendant return, the funds, is of such unusual circumstances as to warrant the imposition of the injunction (Zoller v. HSBC Mortgage Corp., (USA), 135 A.D.3d 932, 24 N.Y.S.3d 168 [2d Dept., 2016]), In Spectrum Stanford LLC v. 400 Atlantic Title LLC, 162 A.D.3d 615, 81 N.Y.S.3d 5[1st Dept., 2018] the court stated that "a mandatory injunction should not be granted, absent extraordinary circumstances, where the status quo Would be disturbed and the plaintiff would receive the ultimate relief sought, pendente lite" (id). Therefore, based on the foregoing, the motion seeking to require the return of attorney's fees or other funds is denied..
Turning to the request to enjoin the defendants from continuing to use corporate funds for the defense of this action, it is well settled that pursuant to BCL §724 an officer of a corporation may be paid legal fees from the funds of the corporation where such officer has presented genuine issues of material fact Concerning the allegations filed against him (see, BCL §722). However, as the court noted in Petition of Levitt, 109 A.D.2d 502, 492 N.Y.S.2d 736 [1st Dept., 1985] "in the usual dissolution proceeding, where the corporation appears as a nominal party and the proceeding amounts to a dispute between the shareholders, corporate funds may not be used in payment of counsel fees for the individual shareholders" (id).. Thus, Matter of Rappaport, 110 A.D.2d 639, 487 N.Y.S.2d 376 [2d Dept., 1985], Reinschreiber v. Lipp, 70, A.D.2d 595, 416 N.Y.S.2d 31 [2d Dept., 1979], Application of Cantelmo, 278 A.D. 800, 104 N.Y.S.2d 282 [1st Dept, 1951] and Park Inn Ford Inc., v. Willis, 249 A.D.2d 307, 671 N.Y.S.2d 288 [2d Dept., 1998] all denied the request for attorney's fees in cases where the essential dispute was really between individuals. However, in Sequa Corp, v. Gelmin, 828 F.Supp. .203 [S.D.N,¶, 1993] the court correctly permitted legal fees pursuant to BCL §724 since the corporation was actively engaged in the dissolution petition (see, The Unresolved Tension Between the 1979 Amendments to the BCL and Shareholder Agreements in Close Corporations, New York State Bar Journal, February 1995).. In this case, although this is not a dissolution proceeding, the lawsuit is really one between individuals whereby the corporation is merely a nominal party. The corporation is not actively involved in this lawsuit in any capacity. Therefore, it is improper for individuals to utilize corporate funds to defend (or prosecute) this action.
Therefore, based on the foregoing, the motion seeking to enjoin the defendants from utilizing corporate funds, to pay for the defense of this action is granted.
So ordered.