Opinion
114259/09.
Decided August 24, 2010.
LEON H. CHARNEY, NEW YORK, NEW YORK, ATTORNEY FOR THE PLAINTIFF.
GLENN BACKER, ESQ., NEW YORK, NEW YORK, ATTORNEY FOR THE PLAINTIFF.
KATTEN MUCHIN ROSENMAN LLP, NEW YORK, NEW YORK, ATTORNEY FOR THE DEFENDANT.
This action arises from a dispute involving the breach of a commercial lease (the "Lease"). Plaintiff, L. Charney 1410 Broadway, LLC (the "Landlord"), entered into the Lease with defendant, Whaling Mfg Co. Inc ("Whaling Mfg."), to lease unit 1906 (the "Unit"), located at 1410 Broadway, New York, New York (the "Building"). Defendant, Whaling Distributors, Inc. ("Distributors"), is currently operating Whaling Mfg.'s business. Plaintiff raises various claims for breach of contract, seeking rent, additional rent, liquidated damages, accelerated rent owed, and attorney's fees.
Distributors now moves, pre-answer, to dismiss each of the causes of action asserted in the Complaint based upon documentary evidence and failure to state a cause of action [CPLR § 3211 (a)(1), (7)]. Plaintiff opposes the motion to dismiss in its entirety. Since defendant's motion is directed at the sufficiency of the pleadings, the court accepts the facts as alleged by plaintiff as true, affording them the benefit of every possible favorable inference. EBC I, Inc v. Goldman, Sachs Co. , 5 NY3d 11 , 19 (2005); Sokoloff v. Harriman Estates Development Corp., 96 NY2d 409, 414 (2001); P.T. Bank Central Asia v. ABN AMRO Bank NV, 301 AD2d 373, 375-76 (1st Dept. 2003). Furthermore, since this motion is also based upon documentary evidence ( see Zanett Lombardier, Ltd. v. Maslow , 29 AD3d 495 [1st Dept. 2006]), the evidence provided must definitively dispose of plaintiff's claims ( Bronxville Knolls Inc. v. Webster Town Center Partnership, 221 AD2d 248 [1st Dept. 1995]).
The following facts are accepted as true:
Facts Presented and Arguments Considered
Plaintiff and Whaling Mfg. entered into the Lease on November 17, 2006, in which Plaintiff agreed to lease Whaling the Unit for a five-year period. On March 7, 2008, and again on March 26, 2008, plaintiff notified Whaling Mfg. that it was in default of the Lease and owed plaintiff $365,556.99 for failure to pay rent and additional rent, and for failure to occupy the Unit. On April 23, 2008, plaintiff terminated the Lease and re-entered the Premises. On August 4, 2008, plaintiff secured a new tenant for the Unit and entered into a new lease agreement, and the new tenant began paying rent on September 15, 2008.
Plaintiff alleges that Distributors acquired the interest of Whaling Mfg. and/or has merged with Whaling Mfg. and is, therefore, responsible for the amount owed under the Lease. Plaintiff argues that Distributors is the alter ego of Whaling Mfg. since it has the same address and products as Whaling Mfg. and has a similar name.
Distributors contends that non-party, Capstone Capital Group I, LLC and Capstone Business Credit ("Capstone"), entered into a financing and factoring arrangement, in which Capstone extended financing to Whaling Mfg. Distributors states that it was assigned all of Capstone's rights, by Capstone, pursuant to an "Assignment of Loan Documents" (the "Assignment") dated July 20, 2008, a copy of which is provided to the court. The Assignment provides that Capstone, as assignor, and Distributors, as assignee, has been assigned "all of such Assignor's right, title and interest under, in and to all agreements and other documents ascribed to such Assignor . . ."
Distributors further contends that after receiving all rights to Whaling Mfg., it commenced a strict foreclosure proceeding pursuant to U.C.C. § 9-620, in which Whaling Mfg. surrendered its assets to Distributors in partial satisfaction of the debt it owed to Distributors. The Surrender Agreement, dated July 21, 2008 (a copy of which is provided to the court), is signed by James Pavao, President of Whaling Mfg. and Peter Cannold, Vice President of Distributors.
The Surrender Agreement provides, in relevant part:
2.1 No Liabilities Assumed by the Secured Party. Anything in this Agreement or the Surrender Letter to the contrary notwithstanding, the Secured Party shall not assume, nor in any way be liable or responsible for, any liabilities or obligations of Debtor. Without limiting the generality of the foregoing, the Secured Party shall not assume or be liable for any of the following:
. . .
(b) any liability or obligation under contracts and other agreements to which Debtor is a party or by or to which it or its assets, properties or rights are bound or subject including but not limited to any mortgage, collective bargaining agreement, or other agreement;
. . .
(d) any liabilities claims and obligations of any kind or nature accruing with respect to or in connection with the ownership of the Transferred Assets or operation of the Business on, prior to or after the Closing.
Distributors also provides a copy of the "Bill of Sale and Assignment" (the "Bill of Sale"), dated July 21, 2008, signed by James Pavao, President of Whaling Mfg. and Peter Cannold, Vice President of Distributors.
The Bill of Sale provides, in relevant part:
3. Notwithstanding anything contained in the Bill of Sale to the Contrary, Transferee does not, and shall not, be obligated to assume any liabilities or obligations of Transferor arising under or in connecting with the Assets or Transferor's Business.
Distributors, based on the documents provided, denies plaintiff's allegation that Distributors is an alter ego of Whaling Mfg.
Discussion
In deciding whether the complaint must be dismissed, the court is not required to decide whether plaintiff has pled claims that it will eventually succeed on. Rather, the court has to broadly examine the complaint to see whether, from its four corners, "factual allegations are discerned which taken together manifest any cause of action cognizable at law." Guggenheimer v. Ginzburg, 43 NY2d 268 (1st Dept. 1977). Consequently, unless disproved through, for example, documentary evidence [CPLR § 3211 (a)(1)], or the complaint fails to set forth a cognizable cause of action [CPLR § 3211 (a)(7)], the complaint should be preserved until issue has been joined and the claims are ready for a dispositive motion or trial.
Applying this standard, plaintiff asserts facts, which even when accepted as true, do not support the causes of action it has asserted against Distributors in light of the documentary evidence (the Surrender Agreement and Bill of Sale), which conclusively disproves those claims.
In order to state a cause of action for breach of contract, the pleading must allege the existence of a valid and enforceable agreement, due performance by plaintiff, and a failure of performance by defendant, resulting in damages ( see Furia v Furia, 116 AD2d 694, 695 [2d Dept 1986]). Here, the documentary evidence establishes that Distributors was not a party to the Lease; nor did it assume any obligations under the Surrender Agreement or Bill of Sale. The Surrender Agreement and Bill of Sale specifically provide that Distributors shall not assume, nor in any way be liable or responsible for any of Whaling Mfg.'s liabilities or obligations.
Furthermore, the court rejects plaintiff's argument that Distributors is an alter-ego of Whaling Mfg. In order to plead a proper cause of action to impose "alter-ego" liability, a plaintiff must allege that: [1] the owners of the corporation exercised complete domination of the corporation in respect to the transactions at issue; and [2] such domination was used to commit a fraud or otherwise resulted in wrongful or inequitable consequences causing plaintiff's injury. Retropolis, Inc. v. 14th Street Development, LLC , 17 AD3d 209 (1st Dept. 2005).
Here, the facts establish by the irrefutable documentary evidence, that Distributors is a creditor who came in and took over Whaling Mfg.'s business. There is no evidence to suggest that Distributors is an alter-ego of Whaling Mfg. The fact that Distributors has a similar name and allegedly sells a similar product is not enough to impose alter-ego liability. Plaintiff terminated the Lease and re-entered the Premises on April 23, 2008. This occurred months before Distributors was assigned rights to the Lease under the Assignment on July 20, 2008. Furthermore, pursuant to the filed certificates of registration, Distributors has different officers and directors than Whaling Mfg.
Conclusion
In accordance with the foregoing, defendant, Whaling Distributors, Inc.'s motion for the pre-answer dismissal of the complaint, based on the documentary evidence and for failure to state a cognizable cause of action, is granted and the complaint is dismissed against defendant, Whaling Distributors, Inc.
It is hereby
Ordered that the Clerk shall enter judgment in favor of defendant, Whaling Distributors, Inc., against plaintiff, L. Charney 1410 Broadway, LLC, dismissing the complaint against it; and it is further
Ordered that the action against defendant, Whaling Mfg. Co. Inc., shall continue; and it is further
Ordered that a preliminary conference against the remaining defendant, Whaling Mfg. Co. Inc., will take place on October 7, 2010 at 9:30a.m., in Part 10, 60 Centre Street, Rm. 232; and it is further
Ordered that any relief requested that has not been addressed has nonetheless been considered and is hereby expressly denied; and it is further
Ordered that this constitutes the decision and order of the court.