Plaintiff, Index No: Motion Seq. No: 1 Submission Date: 10/25/10
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1 SUPREME COURT-STATE OF NEW YORK SHORT FORM ORDER Present: HON. TIMOTHY S. DRISCOLL Justice Supreme Court x JEWELS BY VIGGI, LTD., TRIAL/IAS PART: 22 NASSAU COUNTY -against- Plaintiff, Index No: Motion Seq. No: 1 Submission Date: 10/25/10 MEGHNA MEHTA, VlKAS MEHTA, and ARNAV SAI HOSPITALITY, LLC, Defendants x Papers Read on this Motion: Notice of Motion, Affirmation in Support, Affidavit in Support and Exhibits... Memorandum of Law in Support... This matter is before the cour on the motion by Plaintiff Jewels by Viggi, Ltd. ("JBV" or Plaintiff' ) fied on September and submitted on October For the reasons set forth below, the Cour grants Plaintiffs motion to the extent that the Cour grants Plaintiff judgment against Defendants Meghna Mehta and Vikas Mehta in the sum of$ on the Sixth Cause of Action in the Complaint, plus interest at the statutory rate from April but denies Plaintiffs motion for judgment against Defendant Amav Sai Hospitality, LLC. 1 The Defendants are listed in a different order in the caption on the motion papers than in the caption of the complaint. The Cour is using the caption as it appears in the complaint.
2 A. Relief Sought BACKGROUND CPLR disbursements. Plaintiff moves for an Order awarding Plaintiff judgment on the Complaint, pursuant to 3215, and for an assessment of damages by the Cour, together with costs and Defendants Vikas Mehta ("Vikas ), Meghna Mehta ("Meghna ) and Amav Sai Hospitality, LLC ("LLC") (collectively "Defendants ) have not appeared or submitted any response to the instant motion. B. The Paries' History The Complaint (Ex. 1 to Apelboim Aff.) alleges as follows: JBV is a New York corporation that is in the business of designing and sellng high-end jewelry. JBV' s principal place of business is located at 65 Middle Neck Road, Great Neck, New York ("Store ). Vikas and Meghna ("Individual Defendants ) are individuals residing in the State of New Jersey and the LLC was formed, and has its principal place of business in, the State of New York. The Individual Defendants are the sole owners and officers of the LLC. On or about December 1, 2008, the Individual Defendants met with Dan Arbusman Arbusman ), the president of JBV, at the Store. They advised Arbusman that they knew of a third-par buyer who was interested in purchasing a high-end diamond ring ("Ring ). The Individual Defendants asked JBV to provide them with the Ring on a consignment basis, which JBV agreed to do. On December 11, 2008, the Individual Defendants picked up the Ring from the Store and agreed that its sale price was $ The paries agreed that the Individual Defendants would either sell the Ring and pay JBV the $ sale price, or retu the Ring to JBV if they could not sell it. Shortly after the Ring was delivered to the Individual Defendants, Mehta advised JBV that he had sold the Ring to the third par and would pay JBV the sum of $ The Individual Defendants made two initial payments to JBV totaling $ Between Januar and April of2009, the Individual Defendants repeatedly assured JBV that they would pay the $ balance. The Individual Defendants gave Arbusman eight (8) separate checks ("Checks ), all of which were dishonored. Three (3) ofthose checks were drawn on the account of the Individual Defendants and five (5) ofthose checks were drawn on
3 the account of the LLC. The final check was dated April 24, Plaintiff provides copies of the Checks which contain ban notations reflecting that they were dishonored due to a stop payment order or closed account. Mehta represented to JBV that the LLC was owned by the Individual Defendants, and that its main asset was a hotel located in upstate New York. Plaintiff alleges that the Individual Defendants used LLC as their alter ego. Plaintiff alleges, fuher, that the Individual Defendants falsely represented to JBV that they would complete a wire transfer of $ into JBV' s ban account as parial payment of the $ debt. That transfer never took place. The Individual Defendants also falsely represented to JBV that they had given the Ring to a third par, and it was subsequently stolen from the third par. JBV' s insurer allegedly investigated this claim and concluded that the Ring, in fact, was lost as a result of a criminal or dishonest act of Defendant Mehta. JBV has made several demands for payment but Defendants have failed to pay the $ balance to Plaintiff. The Complaint contains seven (7) causes of action: 1) for the dishonored Checks pursuant to Uniform Commercial Code ("UCC") ~ ) fraud in the inducement, 3) fraud 4) conversion, 5) unjust enrichment, and 6) breach of contract. Plaintiff seeks judgment against all Defendants on the theory that the Individual Defendants are the alter egos of the LLC. Plaintiff also seeks punitive damages. In his Affdavit in Support dated September , Arbusman affirms the truth of the allegations in the Complaint. He avers that the Checks were all dishonored either because payment was stopped, they were issued on a closed account or the account on which they were issued had insufficient fuds. As of the date of his Affirmation, the Defendants stil owed JBV the sum of $235,000. Arbusman asks the Cour to grant Plaintiffs motion for a default judgment against the Defendants, jointly and severally, plus interest, costs, and attorney s fees. In his Affirmation in Support, counsel for Plaintiff affrms that the Defendants were served with copies of the sumons and complaint and provides Affidavits of Service in support (Exs. 1 2 and 3 to Apelboim Aff.), as well as Affirmations of Additional Notice pursuant to CPLR (g).
4 B. The Paries' Positions Plaintiff submits that it has demonstrated its right to a default judgment by establishing that 1) Defendants have failed to pay JBV the balance of $ for the Ring that Plaintiff sold to Defendants; and 2) Defendants were served with the Complaint and failed to answer or appear in ths action. A. Default Judgment RULING OF THE COURT Rule 12 of Rules of the Commercial Division of the Supreme Court, titled Non-Appearance at Conference " provides as follows: The failure of counsel to appear for a conference may result in a sanction authorized by section of the Rules of the Chief Administrator or section of this Par including dismissal, the striking of an answer, an inquest or direction for judgement, or other appropriate sanction. CPLR ~ 3215(a) permits a par to seek a default judgment against a Defendant who fails to make an appearance. The moving par must present proof of service of the sumons and the complaint, affidavits setting forth the facts constituting the claim, the default, and the amount due. CPLR ~ 3215 (t); Allstate Ins. Co. v. Austin 48 AD.3d 720 (2d Dept. 2008). The moving also make a prima facie showing of a cause of action against the defaulting par. par must Joosten v. Gale 129 A. 2d 531 (lst Dept. 1987). Although a defaulting defendant is deemed to have admitted all the allegations in the complaint, the legal conclusions to be drawn from such proof are reserved for the Supreme Cour' s determination. McGee v. Dunn 75 AD.3d (2d Dept. 2010), quoting Venturella-Ferretti v. Ferretti 74 A. 3d 792 (2d Dept. 1992) and citing, inter alia CPLR (b). There is no mandatory ministerial duty to enter a default judgment against a defaulting par. Id. citing Resnick v. Lebovitz 28 A.D.3d 533, 534 (2d Dept. 2006), quoting Gagen v. Kipany Prods. 289 AD.2d (2d Dept. 2006) (internal citations omitted). Instead, the cour must determine whether the motion was supported with enough facts to enable the cour to determine that a viable cause of action exists. Id. quoting Woodson v. Mendon Leasing Corp. 100 N. Y.2d 62, 71 (2003). In determining whether the plaintiff has a viable cause of action, the cour may consider the complaint, affdavits, and affrmations submitted by
5 the plaintiff. Id. at 625, quoting Litvinskiy v. May Entertainment Group, Inc. 44 AD.3d (2d Dept. 2007). To establish a cause of action for breach of contract, one must demonstrate: 1) the existence of a contract between the plaintiff and defendant, 2) consideration, 3) performance by. the plaintiff, 4) breach by the defendant, and 5) damages resulting from the breach. Furia 116 AD.2d (2d Dept. 1986). See also JP Morgan Chase v. JH Electric, 69 D.3d 802 (2d Dept. 2010) (complaint sufficient where it adequately alleged existence of contract, plaintiffs performance under contract, defendant' s breach of contract and resulting damages), citing, inter alia, Furia, supra. The essential inquiry in any action for unjust enrichment is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered. Such a claim is undoubtedly equitable and depends upon broad considerations of equity and justice. Generally, cours will determine whether 1) a benefit has been conferred on defendant under mistake of fact or law; 2) the benefit stil remains with the defendant; and 3) the defendant's conduct was tortious or fraudulent. Paramount Film Distributing Corp. v. New York 30 N. Y.2d (1972). Plaintiff may not maintain an action for unjust enrichment where the matter in dispute is governed by an express contract. Scavenger, Inc. v. Interactive Software Corp., 289 2d 58 (1st Dept. 2001). To establish a prima facie case for fraud, plaintiff must allege that 1) defendant made a representation as to a material fact; 2) such representation was false; 3) defendant intended to deceive plaintiff; 4) plaintiff believed and justifiably relied upon the statement and was induced by it to engage in a certain course of conduct; and 5) as a result of such reliance plaintiff sustained pecuniar loss. Ross v. Louise Wise Services, Inc. 8 N. Y.3d 478, 488 (2007). ucc ~ (2010) Effect of Instrument on Obligation for Which It Is Given (1) Unless otherwise agreed where an instruent is taken for an underlying obligation (a) the obligation is pro tanto discharged if a ban is drawer, maker or acceptor of the instruent and there is no recourse on the instruent against the underlying obligor; and (b) in any other case the obligation is suspended pro tanto until the instruent is due Furia
6 or if it is payable on demand until its presentment. If the instruent is dishonored action may be maintained on either the instruent or the obligation; discharge of the underlying obligor on the instrument also discharges him on the obligation. (2) The taking in good faith of a check which is not postdated does not of itself so extend the time on the original obligation as to discharge a surety. C. Piercing the Corporate Veil Generally, a corporation exists independently of its owners, who are not personally liable for the corporation s obligations. Moreover, individuals may incorporate for the express purose oflimiting their liability. East Hampton v. Sand pebble, 66 A.D.3d 122, 126 (2d Dept. 2009), citing Bartle v. Home Owners Coop. 309 N.Y. 103, 106 (1955) and Seuter v. Lieberman, 229 AD.2d (2d Dept. 1996). The concept of piercing the corporate veil is an exception to this general rule, permitting, under certain circumstances, the imposition of personal liability on East Hampton 66 AD. 3d at 126, citing Matter owners for the obligations of their corporations. of Morris v. NY.S. Dept. Of Taxation 82 N. 2d 135, (1993). A plaintiff seeking to pierce the corporate veil must demonstrate that a cour should intervene because the owners of the corporation exercised complete domination over it in the transaction at issue. Plaintiff must further demonstrate that, in exercising this complete domination, the owners of the corporation abused the privilege of doing business in the corporate form, thereby perpetrating a wrong that caused injur to plaintiff. East Hampton, 66 AD.3d at 126, citing, inter alia, Love v. Rebecca Dev., Inc. 56 A. 3d 733 (2d Dept. 2008). In determining whether the owner has " abused the privilege of doing business in the corporate form," the Court should consider factors including 1) a failure to adhere to corporate formalities 2) inadequate capitalization, 3) commingling of assets and 4) use of corporate funds for personal use. East Hampton 66 AD.3d at 127, quoting Milennium Constr., LLC v. Loupolover, 44 A:D.3d 1016, (2d Dept. 2007). These principles are equally applicable to limited liabilty companies. See Retropolis Inc. v. Street Dev. LLC 17 A.D.3d (1 st Dept. 2005), subseq. app. at 19 AD. 3d 199 (1st Dept. 2005), (2005). rearg. den N. Y. App. Div. LEXIS (2005), app. den. 6 N.Y.3d 702
7 D. Application of these Principles to the Instant Action The Cour grants Plaintiff judgment against Defendants Vikas Mehta and Meghna Mehta jointly and severally, on the Sixth Cause of Action of the Complaint, in the sum of $ plus interest at the statutory rate, from April 24, 2009, the date of the final Check tendered by the Individual Defendants. See CPLR ~ 5001(b). The Court declines to award Plaintiff judgment against Defendant Amav Sai Hospitality, LLC in light of the fact that 1) this Defendant was not involved in the negotiations and agreement regarding the Ring; and 2) Plaintiff has not alleged suffcient facts from which the Cour can conclude that the LLC is the alter ego of the Individual Defendants such that it would be appropriate to impose liabilty against the LLC under these circumstances. In addition, given the absence of any agreement regarding the payment of counsel fees, the Court denies Plaintiff s application for an award of attorney s fees. All matters not decided herein are hereby denied. This constitutes the decision and order of the Cour. Submit judgment on notice. DATED: Mineola, NY December 14, 20 I 0 ls. ENTE DEC NASSAU COUNTY COUNTY CLERK' S OFFICE
Plaintiff NIM, LLC, SUPREME COURT-STATE OF NEW YORK SHORT FORM ORDER Present: 5c- HON. TIMOTHY S. DRISCOLL Justice Supreme Court
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