Smith v. Dilorenzo

2024 NY Slip Op 30843(U)

• Court: New York Supreme Court, Kings County
• Decided: March 14, 2024
• Status: Unpublished

Opinion

Smith v Dilorenzo 2024 NY Slip Op 30843(U) March 14, 2024 Supreme Court, Kings County Docket Number: Index No. 507146/2020 Judge: Leon Ruchelsman Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. FILED: KINGS COUNTY CLERK 03/14/2024 03:17 PM INDEX NO. 507146/2020 NYSCEF DOC. NO. 113 RECEIVED NYSCEF: 03/14/2024

SUPBEME COURT OF THE STATE OT NEW YORK COUNTY OF KINGS : CIVIL TERM: COMMERCIAL 8 ------ --------- ----------------- - -- --x THOMAS SMITH, individually, and derivatively on behalf of A. AUTOMATIC SPRINKLER Decision and order INSTALLATIONS, INC:. , Plaintiffs, Index No. 507146/2020

-against- HELEN DILORENZO, March 14~ 2024 Def e ndar1t ., . --. ---- .. · . ---- . -·--· .: -- . - . --. -- ,-.-.----·- .--x·· PRESENT: HON. LEON RUCHELSMAN Motion Seq. #5 E< #<6

The plaintiff has moved seeking to amend the complaint

pursuant to CPLR §3025. the plaintiff also moves for sanctions

against the defendant. The defendant opposes both motions.

Papers were submitted by the parties and arguments held. After

reviewing all the arguments this co'urt ri.ow makes the following

determination.

According to the complaint, the defendant company A.

Automatic Sprinkler Installations Inc., was incorporated by the

plaintiff Thomas Smith and the defendant Helen Dilo.renzo in 2008.

The company 'fas engaged in fire suppressing contracting and a

majority shareholder of any such company must possess a fire

suppressing contractors license. Although at the time of

incorporation the defendant did not possess such license she

ultimately secured one i.11. 2.018. The complaint alleges that since

that time the defendant has essentially e:xcluded the pl.;:i.iptiff

from the books an.ct re.cords of the cbrripa:ny and has diverted assets

a:nd profits. The compiaint asserts causes of action for the

breach of fidµciary duty, .conversion, faithless servant, a

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tjeclar:-atory judge;ment, µnju.st enrichmen.t_i: constructive and actual

fraudulent. transfers .and to:ttious interference with business

operations. The plaint.ff£ now seeks to amend the complaint a:nd .add indi vi~uals the plaintiff" all.e.ig_es ·-h_ave: assisted the def eridant

in committing all of the above causes of action. Specifically ,

the ·plaintiff seeks to· add ·Ray ou·ffy, Sr., Ray Duffy, Jr .. ; Kare.en

Duffy ·p.pd Vanessa Dilorenzo·. Furt_her, the p,l.a:i,nti!f seek!? to a,dd

1358 Utica LLC. This .is the entity that purchased the property

_of the co:i::poratio.;n and this· corpor-ation, is equally owned by the

plaintiff and defenda.nt. The plaintiff seeks to add this entity

anct·then dissolve it artd sell the property. As noted, the motion

is o.pp:osed. ·

·Conclusions of Law

It i.s wel.1 settled that a request to amend a pleading

shall be freely given unless the proposed amendment wouid

unfa-ir.ly pr.ejudi.ce or s.u:rprise the -oppos-;in:g party, -.or is palpably

insuffici~nt or ~atently devoid of me~it (Adduci v. 182~ Park

.Place LLC, 1°76 A03d 65'8", 107 NYS3d 69d [2d Dept.; -2019]) -; The.

decis·;Lon wh.ether to g:rant s·.Uch leave is. with.in the court's sounc;:l.

discr'etion and such determination . will not lightly be set aside

(Ravnikar v. Skyline Cred"i t-Ride Inc., 7 9-- "AD3d 1118, 9i3 NY.S2d

339 [2d Dept~., 201.0 J.).. Therefo.re, when exercising that

discretion the court should con.sider whether the· party see·k.:i..ng

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the amendment was aware of the fac.ts upon which the request is

based and whether a reasonable excuse for any delay has been

ptesentedand whether any prejudice will result (Cohen v. Ho, 38

AD3d 705, 83~ NYS2d 542 [2d Dept., 2007]).

The proposed a.mended complaint only substantively mentions

the proposed defendants by name one time. The proposed amended

complaint alleges that \'acting at the behest and direction of

DiLorenzo each of Duffy, Sr.~ Duffy 1 Jr.i K~ Duffy and V~

DiLorenzo (together, the "Additional Defendants"), assisted

DiLorenzo in preventing Smitl1 from inspecting A. Automatic's

books and records" (see, Amended Complaint, 'lI64 [NYSCEF Doc. N6.

91] ) . Howe~er, that allegation . is so vague . and devoid of any

information that it can hardly sustain any .'.3Crutiny that it has

any merit. It does not describe, with a minimum of explanation,

what these defendants, all relatives of defendant Dilorenzo, did

to El.ssist the defendant in committing the alleged improper acts.

They do not describe any tortious conduct at all.

Turning to the ::,;pecific causes .of action applicable to the

proposed additional defendants, the faithless servant doctrine

was first coined in Herman v. Branch Motor Express Co., 67 Misc2d

444t 323 NYS2d 794 [Civil court Of the City of New York, 1971]

where the court stated "a servant who is faithless to his master

on Tuesday thereby forfeits the wages he earned on Monday'' {id).

The doctrine states that an agent who owes a duty of fidelity to

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·a principal and i_s faithles--s i:p. t,h.;l.t dut,.y thereby fo:rfeits

comperi.sation due (see, Pha:nsalkar v .. Anderson Weinroth & Company

L.P., 344 F3d 184 [2d Cir. z·o:b3J;. Further, pursuant to the

doct.rine the employer i_s. entitle,d_ to a r.et:urri of any coritpensation

paid to an employee during the period o·f her disloyalty (CARCO

_GROUP. The. .• v. Maconachy. 7T8 F3.d 72 I 2d Cir. 201.J] , see.,. al-s.o ,.

~orres v. Gristede 1 s Operating Corp.I 62~ F.Supp2d 447 [S~D.N.Y. 2.008].). The proposed amended complaint alleges that ''each

additional -defenc:fant was a f.-aithie·ss se:i;.vant fqr :E.;l.i-ling· to abide

by the dec:i!3.ions_ o.f corporat.~ ownership" anq by acting to benefit themselves a:t the expense of· the ·co·rporation ('see, Amended Coin.plaint,- :<['1[123-127 [_NYSCEF Doc . .No. 9,lj}. -Those .pp.ragraphs do 0

not describe any condu.ct at a,11 that could give rise to any ciaim

they- ·were fa-ithles-s s.ervants .. The .alle-gatio.ps are. ·wholly

c.onclu.sory, .accusing them o.J- .acted faitblessly.,_ without

explaining any of their conduct wherein an exarninati.on of their

f-a i thl"e s sne.s s cou.l d be- -s cru.tinize.ct. The propo·sed arn,end~d

~omplaint does allege.that the defendartt arid the proposed

add.i tional defendants ·opened another entity called Empire State

·.Fire: $.ptink.l-er corp.; [here.in";:3:fter 'Empire' ] , howeve:r, the

proposed amended-Com plaint fails to connect any faithless conduct

to Bmpire' s be.nefi t . ~ More;!over ;_ there is no evidence eatab.11shing that the .proposed deferidants were working for Empire while still

employed by the A. Automatic. Ihdeed, any such ·evidence tends to

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show the opposite, namely that the propos,ed defendants beg:an

working for Etnpi:te only after A. Auto:tnatic ceased operations

(see, Affidavit of Helen Dilorenzo, 124 [NYSCEF Doc. No. 101]).

Turning to the proposed cause of action of aiding and

abetting the breach of a fiduciary duty, a party seeking to

allege this caµse of action must demonstrate a f'iduciary duty was

owed, there was a breach of that duty and t_he party contributed substantial assistance in effecting the breach (see, Yuko Ito v.

Suzuki, 57 AD3d 2.05, 869 NYS2d 28 [1st Dept., 2008]) . In Baron

v. Galasso, 83 AD3d 626, 921, NYS2d 100 [2d Dept., 2011] the

sustainability of the cause of action was defined as whether the

other party knowingly induced or participated in toe breach.

Again, the proposed amended complaint fails to allege any

conduct the additional defendants en::ga:ged in to aid the defendant

Diloren,zors breach. As noted, conclusory allegations are

insufficient to allege any such tortioi.ls conduct,

The fifth cause of action alleges a declaratQry judgement

that the defehdaht "DiLorenzo failed to. observe important

corporate formalities and commingled the assets, operations,

activities, and management of each of A. Automatic and Empire

such that A.. Automatic and Empire have no distinct corporate

existence separate from the other entity 0 - (see, Amended

Complaint, '3[136 [NYSCEF Doc. No. 9.1]). Howe:ver, that wouid

require A. J\utornatic :to pierce its own . corporate. . veil to assert

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that Dilorenzo, and by extension Empire, are all one intermingled

entity. Notwithstanq.ing the legal infirmities of such an

expedient, there are insufficient allegations in the proposed

amended complaint to establish the necessary elements. "A

plaintiff must do more than merely allege that [defendant]

engaged in improper acts or acted in 'bad faith' while

representing the corporation" {East Hampton: Union Free School

District v. Sandpebble Builders Inc., 16 NY3d 775, 919 NYS2d 496

[2011]}. Rather, the plaintiff must allege facts demonstrating

such dominion over the corporation and that "through such

dominci.tion, abused the privilege of doing business in the

corporate form to perpetuate ct wrong or injustice against the

plaintiff SLICh that a court in equity will intervene" (Oliveri

Construction Corp.; v. WN weaver Street LLC, 144 AD3d 765, 41

NYS3d 59 [2d Dept., 2016]). "Factors to be considered in

determining whether an individual has abused the privilege of

doing business in the corporate or LLC form include the f.ailure

to. adhere to [corporate or] LLC formalities, inadequate

capitaliz<:i.tion, commingling Of assets, and the persona.l use of

[corporate or] ·LLC funds" (see, Gramma s v. Lockwood Associates

LLC, 9.S AD3d 1073, 944 NYS2d 623 [2d Dept., 2012] ) . Thus, mere

conclusory statements that the individual dominated the

corporation ate insufficient to defeat a motion to dismiss (AHA

Sales Inc., v. Creative Bath Products Inc.,. 58 AD3d 6, 867 NYS2d

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169 [2d Dept., 2008l) ..

The proposed causes of action seeking unjust enrichment

and actual and constructive fraudulent transfers. are duplicative

of the o"ther causes of action, namely breach of fiduciary duty,.

conversion and faithle,ss servant applied to deferi.dant Helen

Dilorenzo.

The last new·causeof action alleges tortious interference with contracts. The elements of a cause of action alleging

tortious interference with.contract are: (1) the existE=nce of a

valid contract between the pl.aintiff and a third party, (2) the

defendant's knowledge of that contract, (3) the defendant's

intentional procurement of a. third:-'party' s breac::h of that

contract without justification, and {4) damages (Anethsia

Associates of Mount Kisco, LLP v. Northern Westchester Hospital

Center, 59 AD3d 473, 873 NYS2d 679 [2d Dept., 2009]). Further,

the plaintiff muSt specifically allege that 'but for' the

defendant's conduct there would have been no breach of the

contract (White Knight of Flatbush. LLC v. Deacons of Dutch Congregations of Flatbush, 159 AD3d 939, 72 NYS3d 551 [2d Dept;,

2018]). The proposed amended complaint does not allege any

breach bf any contract$ at all.

Therefore, based on the foregoing, the motion seeking to

amend the complaint as noted above is denied in its entirety.

Without opposition, the motion seeking to add a claim for

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dissdlution of 1358 Utica LLC is granted.

The plain.tiff's further move seeking sanctions or contempt

against the defendant for her failure to comply with an dtder

dated June 12, 2020. It is well settled tl1at where a court has

jurisdiction an order of the court must be obeyed (Woiste·ncraft

v. Sassower, 212 AD2d 598, 623 NYS2d 7 [2d Dept., 1995]). Thus,

"a party is obligated to cdrttply with a court ordet, however,

incorrect the party may consicter that order to be, until that

order is set aside, either by appeal or otherwise, so long as the

court issU:.ing the order had jurisdiction to do so" (Gloveman

Realty Corp. , v. Jeffreys, 2 9 AD3d 858, 815 NYS2d 687 [2d Dept.,

2006] ) . The factual discrepancies in this case do riot support

any finding any court order was violated. Indeed, every

allegation the order was violated is disputed with evidence

presented by the defendant that no sU:ch violation of the order

occµrred. At this juncture the court cannot conclude the

defendant irrefutably violated the court order. Therefore, the

motion seeking any sanction or contempt is. denied.

So ordered.

ENTER:

DATED: March 14-, 2024 Brooklyn N~Y. !'[on, Leon Ru'?l:l.n 8.

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