Opinion
Index No. 652299/2023
08-23-2024
LOTUS CAPITAL PARTNERS, LLC, Plaintiff, v. SB YEN'S MANAGEMENT GROUP, INC. a/k/a SB YEN MANAGEMETN GROUP and SU-MEI YEN, Defendants.
Unpublished Opinion
PRESENT: HON. NANCY M. BANNON Justice.
DECISION + ORDER ON MOTION
NANCY M. BANNON, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21,22, 23, 24, 25, 26 were read on this motion to/for DISMISS.
I. INTRODUCTION
The plaintiff, Lotus Capital Partners, LLC ("Lotus"), a real estate capital advisory firm, seeks payment for services allegedly rendered in negotiating the restructuring of a loan agreement between defendant SB Yen Management Group, Inc. a\k\a SB Yen Management Group ("SB Yen") and non-party lender Capital Source Delphi CRE Funding, LLC/ACORE Capital Mortgage, LP ("ACORE"). Lotus asserts two causes of action sounding in quantum meruit and unjust enrichment. The defendants now move pursuant to CPLR 3211 (a)(5) and NY General Obligations Law (GOL) § 5-701 (a)(10) to dismiss the complaint in its entirety as barred by the statute of frauds, and, pursuant to CPLR 3211(a)(7), to dismiss the complaint as against the individual defendant, SB Yen's CFO, Su-Mei Yen, for failure to state a claim against her in her individual capacity. Lotus opposes the motion. The motion is granted in part.
II. BACKGROUND
The following facts, taken from the allegations in Lotus's complaint, as supplemented by the affidavit of Faisal Ashraf, Lotus's founder and managing partner, and the exhibits thereto, are accepted as true for the purposes of this motion. In March 2021, SB Yen engaged Lotus via written fee agreement to negotiate the restructuring of a loan obtained from non-party lender, Acore, which Lotus successfully negotiated. At some point after that first loan restructuring transaction closed, and the parties' initial written agreement expired, SB Yen determined that it needed to pursue a second restructuring of the Acore loan. It requested that Lotus pursue and negotiate this second restructuring, which Lotus agreed to do, though no new written fee agreement was executed between the parties.
Lotus thereafter performed significant services, over the course of several months, negotiating the terms of a second restructuring of the Acore loan. Throughout this period, Lotus was in regular communication with SB Yen, providing updates regarding the status of negotiations. In emails exchanged in April 2022 between Ashraf, on behalf of Lotus, and Su-Mei Yen, on behalf of SB Yen, Ashraf expressly stated that Lotus expected to be compensated for successfully restructuring the Acore loan. Su-Mei Yen, in response, did not address the issue of compensation, but acknowledged that Lotus was "represent[ing] [SB Yen] on Acore's matter." In a May 2022 email to Ashraf, SB Yen's counsel again acknowledged Lotus's "ongoing efforts to restructure" the Acore loan, and provided Ashraf with information regarding related matters that Ashraf should be aware of in connection with Lotus's "pending discussions with ACORE[.]" In July 2022, Ashraf emailed Su-Mei Yen to present the loan modification terms that Lotus had successfully negotiated with Acore. In an August 2022 email, Su-Mei Yen informed Ashraf that SB Yen was on the verge of closing on the second loan restructuring with Acore and expressed a desire "to compensate LOTUS for its efforts" in negotiating the restructuring. SB Yen subsequently closed on the second restructuring of the Acore loan but did not compensate Lotus for its services in negotiating the loan modification.
On May 11, 2023, Lotus commenced this action asserting two causes of action against both SB Yen and Su-Mei Yen sounding in quantum meruit and unjust enrichment, and seeking payment of at least $700,000 for the services allegedly rendered in negotiating the second restructuring, plus interest and attorneys' fees. Both causes of action are alleged against both the corporate and the individual defendant, who Lotus alleges, "upon information and belief" is the "CFO and sole beneficial owner of SB Yen." This motion ensued.
III. DISCUSSION
When assessing the adequacy of a pleading in the context of a motion to dismiss under CPLR 3211(a)(7), the court's role is "to determine whether [the] pleadings state a cause of action." 511 W. 232nd Owners Corp, v Jennifer Realty Co., 98 N.Y.2d 144, 151-52 (2002). To determine whether a cause of action is adequately stated, the court must "liberally construe" the pleading, accept the facts alleged in it as true, accord it "the benefit of every possible favorable inference, and determine only whether the facts, as alleged, fit within any cognizable legal theory. Id. at 152; see Romanello v Intesa Sanpaolo, S.p.A., 22 N.Y.3d 881 (2013); Simkin v Blank, 19 N.Y.3d 46 (2012); Hurrell-Harrinq v State of New York, 15 N.Y.3d 8 (2010); Leon v Martinez, 84 N.Y.2d 83 (1994). "The motion must be denied if from the pleading's four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law." 511 W. 232nd Owners Corp, v Jennifer Realty Co., supra, at 152 (internal quotation marks omitted); see Leon v Martinez, supra; Guqqenheimer v Ginzburg, 43 N.Y.2d 268 (1977).
General Obligations Law § 5-701, which codifies New York law regarding the statute of frauds, provides, in relevant part, that:
(a) Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking ... (10) Is a contract to pay compensation for services rendered in negotiating a loan, or in negotiating the purchase, sale, exchange, renting or leasing of any real estate or interest therein, or of a business opportunity[.]GOL § 5-701 (a)(10). The statute defines "negotiating" to "include [] procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction." Id. The provision expressly applies "to a contract implied in fact or in law to pay reasonable compensation[]" Id. The statute thus extends to claims for quantum meruit and unjust enrichment, as "both are claims under 'a contract implied ... in law to pay reasonable compensation.'" Snyder v Bronfman, 13 N.Y.3d 504, 508 (2009).
As alleged in the complaint, the services for which Lotus now seeks payment were all performed in pursuit and furtherance of the second loan restructuring it was negotiating with Acore on SB Yen's behalf. Therefore, the statute of frauds is applicable and any agreement pertaining to those services must be evidenced by a writing to be enforceable. However, the writing requirement is "less exacting" with respect to quantum meruit/unjust enrichment claims for the reasonable value of services rendered. See Sonenshine Partners, LLC v Duravant LLC, 191 A.D.3d 567, 568-69 (1st Dept. 2021); Chapman, Spira & Carson, LLC v Helix BioPharma Corp., 115 A.D.3d 526, 528 (1st Dept. 2014). For such claims, '"a sufficient memorandum need only evidence the fact of plaintiff's employment by defendant to render the alleged services.' The obligation to pay reasonable compensation is then implied." Davis & Mamber, Ltd, v Adrienne Vittadini, Inc., 212 A.D.2d 424, 424-25 (1st Dept. 1995), quoting Morris Cohon & Co. v Russell, 23 N.Y.2d 569, 575-76 (1969); see Chapman, Spira & Carson, LLC v Helix BioPharma Corp., supra; Kalfin v U.S. Olympic Comm., 209 A.D.2d 279, 281 (1st Dept. 1994). As such, while there was no formal written fee agreement between the parties in connection with the second loan restructuring, the emails referenced in the complaint and submitted in opposition to the present motion, which acknowledge Lotus's "efforts" in "represent[ing]" SB Yen in negotiations with Acore, are sufficient to satisfy the applicable statute of frauds. See Morris Cohon & Co. v Russell, supra: Sonenshine Partners, LLC v Duravant LLC, supra: Chapman, Spira & Carson, LLC v Helix BioPharma Corp., supra; Davis &Mamber, Ltd, v Adrienne Vittadini, Inc., supra; Kalfin v U.S. Olympic Comm., supra.
Therefore, the defendants' motion is denied to the extent it seeks dismissal of the complaint in its entirety as barred by the statute of frauds. The motion is granted, however, to the extent it seeks dismissal of the complaint as against Su-Mei Yen individually.
It is well settled that a "corporation exists independently of its owners, as a separate legal entity, [and] that the owners are normally not liable for the debts of the corporation[.]'" Joan Hansen &Co., Inc, v Everlast World's Boxing Headquarters Corp., 296 A.D.2d 103, 109 (1stDept. 2002), quoting Morris v New York State Dept, of Taxation and Finance, 82 N.Y.2d 135, 140 (1993). '"Generally, a plaintiff seeking to pierce the corporate veil must show that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiffs injury.'" Sutton 58 Assocs. LLC v Pilevsky, 189 A.D.3d 726, 729 (1st Dept. 2020), quoting Cortlandt St. Recovery Corp, v Bonderman, 31 N.Y.3d 30, 47 (2018).
In its complaint, in regard to Su-Mei Yen, Lotus alleges only, "upon information and belief' that Su-Mei Yen is the "CFO and sole beneficial owner of SB Yen." Where an allegation is based only upon information and belief, "without the slightest reference to the source of the information or the grounds for the belief" (Zelnik v Bidermann Indus. U.S.A., 242 A.D.2d 227, 228 [1st Dept. 1997]), it is insufficient to constitute proof of facts necessary to support any claim. Absent factual allegations that would warrant piercing the corporate veil, which Lotus does not assert here, the complaint must be dismissed as against defendant Su-Mei Yen individually. See Sutton 58 Assocs. LLC v Pilevsky, 189 A.D.3d 726 (1st Dept. 2020); Sheridan Broad. Corp, v Small, 19 A.D.3d 331 (1st Dept. 2005). Even if Lotus had alleged a basis for imposing individual liability, it fails to allege any other basis for liability on either claim as against SuMei Yen.
To state a cause of action for quantum meruit, a plaintiff must allege "(1) the performance of services in good faith, (2) the acceptance of the services by the person to whom they are rendered, (3) an expectation of compensation therefor, and (4) the reasonable value of the services." Fulbright & Jaworski, LLP v Carucci, 63 A.D.3d 487, 489 (1st Dept. 2009). Similarly, "[t]he elements of a claim for unjust enrichment are that plaintiff conferred a benefit upon the defendant, and the defendant obtained such benefit without adequately compensating plaintiff." Alpert v M.R. Beal & Co., 162 A.D.3d 491, 492 (1st Dept. 2018). A cognizable claim for unjust enrichment requires a plaintiff to demonstrate that (i) the other party was enriched, (ii) at that party's expense, and (iii) "it is against equity and good conscience to permit the [other part/ to retain what is sought to be recovered." Paramount Film Distrib. Corp, v State, 30 N.Y.2d 415, 421 (1972) (citations omitted).
Lotus does not allege that its work in negotiating the second loan restructuring was performed for Su-Mei Yen individually or that she accepted any services from Lotus in her personal capacity, that it had a reasonable expectation of compensation from Su-Mei Yen personally, that Su-Mei Yen was personally enriched by Lotus's work or that said work was of any value to Su-Mei Yen independent of its value to the corporate defendant which Lotus itself acknowledges was the actual borrower on the Acore loan. For the same reason, it cannot be reasonably argued that it would be "against equity and good conscience to permit [Su-Mei Yen] to retain what is sought to be recovered" (Paramount Film Distrib. Corp, v State, supra at 421) since Lotus has not shown that she retained anything in her individual capacity.
In short, "[t]he complaint does not state factual allegations that [Su-Mei Yen] acted other than in [her] corporate capacity as a principal of [SB Yen]." Nuntnarumit v Lyceum Partners LLC, 165 A.D.3d 532, 533 (1st Dept. 2018) (affirming dismissal of unjust enrichment claim against corporate principal); see Hakim v Hakim, 99 A.D.3d 498, 502 (1st Dept. 2012) (dismissing causes of actions for quantum meruit and unjust enrichment against corporate principal where services were allegedly provided only to the corporation and not to the principal individually); Fulbright & Jaworski, LLP v Carucci, supra.
IV. CONCLUSION
Accordingly, upon the foregoing papers, it is
ORDERED that the defendants' motion to dismiss the complaint is granted to the extent it seeks dismissal as against defendant Su-Mei Yen individually and the complaint is dismissed in its entirety as against that defendant only, and the motion is otherwise denied; and it is further
ORDERED that the action is severed and continued as against the remaining defendant SB Yen Management Group, Inc.; and it is further
ORDERED that the remaining defendant, SB Yen Management Group, Inc. a\k\a SB Yen Management Group, shall serve and file an answer to the complaint within twenty (20) days after service of a copy of this order with notice of entry; and it is further
ORDERED that the parties shall appear for a preliminary conference on November 7, 2024, at 11:30 a.m., to be held via Microsoft Teams, and it is further
ORDERED that the Clerk shall mark the file accordingly.
This constitutes the Decision and Order of the court.