Opinion
No. 8424/12.
2013-01-11
INFRA–METALS CO., Plaintiff, v. METRO STRUCTURAL STEEL, INC. d/b/a “Gotham Cranes, John Russo, Joseph Russo, Metro Erectors, Inc., Metro Steel Fabricators, Inc., Metro Steel Inc., and Metro Equipment, Inc., Defendants. All Lock & Glass Service, Inc., Plaintiff, v. Satellite Auto Glass Inc., Defendants.
Shanker Law Group, Mineola, NY, attorney for plaintiff. Miller Law Offices, Lawrence, NY, attorney for defendant.
Shanker Law Group, Mineola, NY, attorney for plaintiff. Miller Law Offices, Lawrence, NY, attorney for defendant.
DAVID SCHMIDT, J.
Upon the foregoing papers, defendants Metro Structural Steel, Inc. d/b/a “Gotham Cranes” (MSS), John Russo, Joseph Russo, Metro Erectors, Inc., Metro Steel Fabricators, Inc., Metro Steel Inc. and Metro Equipment, Inc. move for an order pursuant to CPLR 3211(a)(1) and CPLR 3016(b), and Business Corporations Law 1312(a), dismissing the plaintiff Infra–Metals Co.'s action in its entirety.
Factual Background
Plaintiff Infra–Metals Co., (hereinafter, plaintiff or Infra), a corporation incorporated in the state of Georgia, sells structural steel goods throughout the United States. Plaintiff's principal place of business is located in Wallingford, Connecticut. Defendant MSS, a corporation based in New York, was a customer of the plaintiff during 2005 to 2010. Defendants John Russo and Joseph Russo (the Russo defendants) were shareholders, directors and officers of MSS at the relevant time. In or about August 2010, plaintiff brought an action in this court against MSS (Index No. 20963/10) for the balance due on the sale of certain structural steel and related goods/services (2010 Action). In or about September, plaintiff and MSS entered into a Stipulation of Settlement in connection with the 2010 Action. Pursuant to the Stipulation, MSS agreed to pay the plaintiff the sum of $255,646.40 in equal weekly payments of 1,000 for approximately two years beginning December 1, 2010, followed by a balloon payment of $151,646.40. MSS only payed 33,000.00 of the settlement amount and later defaulted on the remaining balance. MSS filed a Certificate of Dissolution on November 3, 2010. As a result of MSS's default, a judgment was entered against MSS in the 2010 Action on October 11, 2011 in the principal sum of $227,161.40.
The plaintiff subsequently commenced the within action against the defendants on or about April 11, 2012, alleging fraudulent conveyance of the assets of MSS. In the complaint, the plaintiff specifically alleges that the Russo defendants knowingly transferred without consideration all of MSS's assets to defendants Metro Erectors, Inc., Metro Steel Fabricators Inc., Metro Steel, Inc. and Metro Equipment, Inc. (the corporate defendants) (the Transfer). As a result, the plaintiff alleges that no assets remain in MSS's possession from which plaintiff may enforce the underlying judgment. Plaintiff further alleges that the Transfer was made with the actual intent to hinder, delay or defraud MSS's ability to pay the settlement amount in violation of sections 273, 273–a, 274, 275 and 276 of Article 10 of the New York Debtor and Creditor Law and should therefore be deemed fraudulent and void. In essence plaintiff argues that the Russo defendants used the corporate defendants as vehicles for carrying out a fraudulent conveyance that rendered MSS without sufficient assets to pay the settlement amount. In the second cause of action, plaintiff also seeks to recover attorneys fees. Defendants now move for an order, pursuant to CPLR 3211(a)(1) and CPLR 3016(b), and Business Corporations Law 1312(a), dismissing the plaintiff's action in its entirety.
Discussion
Business Corporations Law (BCL) § 1312(a).
Defendants allege that the action should be dismissed pursuant to Business Corporations Law (BCL) § 1312(a). BCL § 1312(a) provides that “[a] foreign corporation doing business in this State without authority shall not maintain any action or special proceeding in this state unless and until such corporation has been authorized to do business in this state.” Here, the defendants argue that the plaintiff, a Georgia Corporation, was and, is doing business in the State of New York by selling goods in New York to MSS and by negotiating contracts in New York. In this regard, defendants maintain that the plaintiff sold approximately five million dollars worth of goods to MSS during 2005 through 2010. In support of this contention, defendants have submitted a copy of a spreadsheet which purportedly lists payments MSS made to the plaintiff. Defendants further maintain that the plaintiff's business in New York is systematic and pervasive. In support of this contention, the defendants point out that the plaintiff's LinkedIn web page indicates that it employs a sales manager in the greater New York City area. Additionally, defendants submit a printout from the website of Reliance Steel & Aluminum Co., in which the plaintiff is listed as a member of the Reliance corporate family.
In opposition, plaintiff has submitted the affidavit of William Petipas, a corporate officer of Infra. Petipas avers that Infra was incorporated in the state of Georgia and has a principal place of business located in Wallingford, Connecticut. He further states that the plaintiff sells structural steel goods throughout the United States, and that MSS, which is based in New York, was a customer of the plaintiff. While plaintiff admits that it sold and delivered certain structural steel goods to MSS during the time 2005 through 2010, it maintains that one of its sales representatives located in Connecticut took the MSS orders from its Wallingford, Connecticut office. Petipas averred that Infra does not own property in New York, has no bank account, office or storefront in New York and no employees. Rather, the plaintiff asserts that its activities in New York are limited to sales and delivery of merchandise. Plaintiff therefore argues that BCL 1312(a) is not applicable to it.
Business Corporation Law § 1312(a) “constitutes a bar to the maintenance of an action by a foreign corporation” in New York if that corporation is found to be “doing business” here without having obtained the requisite authorization to do so (Airline Exch. v. Bag, 266 A.D.2d 414, 415 [1999] ). The question of whether a foreign corporation is “doing business” in New York “must be approached on a case-by-case basis with inquiry made into the type of business being conducted” (Alicanto, S.A. v. Woolverton, 129 A.D.2d 601, 602 [1987] ). In order for a court to find that a foreign corporation is “doing business” in New York within the meaning of Business Corporation Law § 1312(a), “the corporation must be engaged in a regular and continuous course of conduct in the State” (Commodity Ocean Transp. Corp. of N.Y. v. Royce, 221 A.D.2d 406, 407 [1995] ). A defendant relying upon Business Corporation Law § 1312(a) as a statutory barrier to a plaintiff's lawsuit “bears the burden of proving that the [plaintiff] corporation's business activities in New York were not just casual or occasional,' but so systematic and regular as to manifest continuity of activity in the jurisdiction' “ (S & T Bank v. Spectrum Cabinet Sales, 247 A.D.2d 373, 373 [1998],quoting Peter Matthews, Ltd. v. Robert Mabey, Inc., 117 A.D.2d 943, 944 [1986] ). Absent sufficient evidence to establish that a plaintiff is doing business in this state, “the presumption is that the plaintiff is doing business in its State of incorporation ... and not in New York” (Cadle Co. v. Hoffman, 237 A.D.2d 555 [1997] ).
Applying these principles to the instant matter, the court is of the opinion that the plaintiff's activities in New York were not representative of the type of regular, systematic and continuous business which constitutes the doing of business within the meaning and intent of BCL 1312(a). In essence, the court finds that the defendants have failed to make a showing that the plaintiff conducted continuous activities essential to its corporate business. The documents submitted by the defendants purportedly evidencing payments that MSS made to plaintiff in or about 2005 through 2009 in exchange for goods sold fails to demonstrate that the plaintiffs business in New York was systematic and pervasive during the relevant time period. Additionally, that fact that Infra's web page lists that it has a Sales Manager/Tubing & Pipe Product Manager for the Greater New York City Area is insufficient. Defendants have merely submitted a copy of a web page. There has been absolutely no showing that plaintiff's sales manager was stationed in New York or that he regularly and continuously solicited business in New York. Moreover, the fact that another company, Reliance Steel & Aluminum Co., which operates internationally, refers to Infra as a member of its corporate family, on its web page is still insufficient to constitute “doing business” in New York State within the context of section 1312 of the Business Corporation Law.
In opposition, the plaintiff has submitted evidence that Infra maintains no office or storefront in New York; it has no New York bank account, holds no real estate or personal property here; and has no employees regularly into the State to perform or oversee services. Plaintiff maintains that it merely sells its products to New York State companies, with the aid of sales persons who are based regionally in Connecticut. In this regard, plaintiff contends that the structural steel sales to MSS were negotiated by an employee who works out of an office in Connecticut.
Contrary to the defendants' contention, their motion papers did not establish, prima facie, that plaintiff was doing business in New York at the relevant time ( see International Fuel and Iron Corp. v. Donner Steel Co., 242 N.Y. 224, 229–231 [1926] ). Although there is evidence that the plaintiff sold and shipped to MSS millions of dollars worth of its product into New York, it neither maintained an office, a telephone, or a sales representative in New York. Nor did the defendants establish that it did any advertising in New York. Under these circumstances, “there is no showing that plaintiff conducted continuous activities in [New York] essential to its corporate business” (Von Arx A.G. v. Breitenstein, 52 A.D.2d 1049, 1050, [1976]affd. 41 N.Y.2d 958 [1977] ). Thus, on the present record, the court finds that the defendants have failed to meet their burden of proving that plaintiff conducted systematic and regular business activities here essential to its corporate business ( see Alicanto, S.A. v. Woolverton, 129 A.D.2d 601 [1987];Sirois Leather v. Lea–Suede Corp., 44 A.D.2d 815 [1974] ).
Finally, the court notes that the purpose of Business Corporation Law § 1312(a) is “to regulate foreign corporations which are doing business' within the State [and] not ... to enable the avoidance of contractual obligations” (Von Arx AG. v. C.J. Breitenstein Co., 41 N.Y.2d at 960). Accordingly, the presumption that the plaintiff does business, not in New York but in its state of incorporation has not been overcome ( see S & T Bank v. Spectrum Cabinet Sales, Inc., 247 A.D.2d 373 [1998];Construction Specialties v. Hartford Ins. Co., 97 A.D.2d 808 [1983] ).
CPLR 3016(b)Next, defendants contend that plaintiff's fraudulent conveyance claim is not pleaded with sufficient particularity, as required by CPLR 3016(b), and as such must be dismissed. In this regard, the defendants argue that the plaintiff has failed to set forth any specific facts that support its conclusory allegations of fraudulent conduct with respect to its fraudulent conveyance claim.
Pursuant to New York law, a claim for fraudulent conveyance exists where the transferor makes the transfer without fair consideration and: the transferor is or will be rendered insolvent as a result ( seeDebtor and Creditor Law § 273); or is a defendant in an action for money damages ( see id.§ 273–a); or is in business and, after the conveyance, is undercapitalized ( see id. § 274); or intends to, or believes that it will, incur debt beyond its ability to pay ( see id. § 275); or makes the transfer with an intent to hinder, delay, or defraud present or future creditors ( see id. § 276). In order to state a legally viable claim for relief from a fraudulent conveyance, a plaintiff must demonstrate that the defendant is indebted to the plaintiff ( see id. §§ 273, 273—a, 274, 275, 276).
Here, plaintiff's fraudulent conveyance claim alleges that MSS, with the full knowledge and participation of the Russo defendants, transferred without consideration all of its assets to defendants Metro Erectors, Inc., Metro Steel Fabricators, Inc., Metro Steel Inc ., and Metro Equipment, Inc., thereby causing MSS to become insolvent and unable to satisfy its obligation under the Stipulation Settlement agreement. Plaintiff further alleges that the transfer was made with the actual intent to hinder, delay or defraud creditors of MSS, including the plaintiff. Plaintiff specifically alleges that the transfer of assets violated sections 273, 273–a, 274, 275 and/or 276 of New York Debtor and Creditor Law (DCL).
Contrary to defendants' assertion, the court finds that the plaintiff has alleged adequate facts with sufficient particularity in support of the fraudulent conveyance claim. To the extent that the fraudulent conveyance claim arises out of alleged violations of DCL §§ 273, 273–a, 274, and 275, the heightened pleading requirement set forth in CPLR 3016(b) is not applicable because these sections do not require proof of an actual intent to defraud ( see Gateway I Group, Inc. v. Park Ave. Physicians, P.C., 62 AD3d 141, 149–150 [2009];Menaker v. Alstaedter, 134 A.D.2d 412, 413 [1987] ). Although section 276 does require that the plaintiff prove that the defendants acted with intent to defraud, thereby making CPLR 3016(b) applicable, the court is inclined to deny defendants' motion to dismiss at this time. It is clear that the parties have not yet conducted pre-trial discovery, and the facts regarding any transfers of MSS's assets are exclusively within the knowledge of the defendants. In this regard, the court notes that CPLR 3211(d) allows for latitude in pleading requirements for facts unavailable to the non-movant. Accordingly, that branch of defendants' motion to dismiss plaintiff's claim pursuant to CPLR 3016(b) is denied.
CPLR 3211(a)(1)Next, defendants argue that the action should be dismissed pursuant to CPLR 3211(a)(1) because a defense is founded upon the documentary evidence. In support of this contention, the defendants refer to paragraph 9 of the Stipulation Agreement which reads as follows:
Plaintiff shall look only to Defendant [MSS] to enforce the terms of the stipulation and under no circumstances shall plaintiff seek recovery from Defendant's officers, directors, shareholders, agents, employees, affiliates or assigns, except in the event of fraudulent conduct by same. (Emphasis supplied).
Defendants contend that the foregoing language conclusively establishes that the plaintiff knew at the time it executed the stipulation that MSS had affiliates and/or assigns and that it knowingly waived recovery of the Stipulation amount against them in exchange for MSS's agreement to make payments as set forth in the agreement. Defendants further contend that the Stipulation was made after long and contentious negotiations and that the express limitation of paragraph 9 was a material term that MSS demanded to be included. Defendants therefore argue that the inclusion of paragraph 9 constitutes evidence that MSS was initially concerned about its ability to pay the Stipulation settlement amount and, therefore, did not engage in any fraudulent conduct when it was ultimately unable to do so. Defendants also submit copies of transactions of Metro Steel Fabricator's account which they claim constitutes evidence that the defendant corporations actually transferred money to MSS during the years 2010 and 2011, which defendants maintain were used to pay the Stipulation settlement as well as the salaries and other obligations of MSS. Defendants contend that based upon the foregoing language set forth in the Stipulation, as well as the documentary evidence, it is clear that the defendants did not engage in fraudulent transfers, and that a breach of the Settlement by MSS does not give rise to any claim sounding in fraud.
A motion pursuant to CPLR 3211(a)(1) to dismiss a complaint based on documentary evidence “may be appropriately granted only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law” (Goshen v. Mutual Life Ins. Co. of NY, 98 N.Y.2d 314, 326 [2002];see Leon v. Martinez, 84 N.Y.2d 83, 88 [1994];Long v. Allen AME Transp. Corp., 43 AD3d 1114 [2007];Sheridan v. Town of Orangetown, 21 AD3d 365 [2005];Scadura v. Robillard, 256 A.D.2d 567 [1998] ).
Here, the court finds that the fraudulent conveyance cause of action is not definitively refuted by any documentary evidence presented by the defendants. Although Paragraph 9 of the Stipulation states that the plaintiff may only recover from MSS, it explicitly made an exception for fraudulent conduct which is precisely what the plaintiff alleges against MSS and the remaining defendants herein. Similarly, the documentary evidence of purported payments/transfers between defendant Metro Steel Fabricators and MSS during 2010 and 2011 does not definitely dispose of the plaintiff's allegation that the defendants engaged in fraudulent transfers of MSS assets to the corporate defendants. Therefore, that branch of the defendants' motion which is to dismiss the plaintiff's complaint pursuant to CPLR 3211(a)(1) is denied.
Additionally, the court rejects defendants' argument that plaintiff's action as against MSS should be dismissed as duplicative because the plaintiff has already maintained a claim against MSS for breach of the stipulation agreement. Contrary to defendants' assertion, the plaintiff's fraudulent conveyance claim was not previously asserted against MSS in any other action.
Finally, plaintiff's request that the court grant summary judgment in its favor at this early stage of the action is also denied. Under the circumstances of this case, where it is undisputed that no discovery has yet taken place, and the plaintiff has failed to show a sufficient basis in the record to grant judgment on the fraudulent conveyance claim as matter of law, summary judgment is denied as premature ( see Zuckerman v. City of New York, 49 N.Y.2d 557, 562 [1980] ).
In sum, defendants' motion to dismiss is denied in its entirety, and the plaintiff's request for summary judgment in its favor is also denied as premature.
The foregoing constitutes the decision and order of the court.