Etage Real Estate LLC v Stern

2024 NY Slip Op 31864(U)

May 15, 2024

Supreme Court, New York County

Docket Number: Index No. 656322/2019

Judge: Arthur F. Engoron

Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York

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This opinion is uncorrected and not selected for official

publication.
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NYSCEF DOC. NO. 170 RECEIVED NYSCEF: 05/15/2024

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SUPREME COURT OF THE STATE OF NEW YORK 

NEW YORK COUNTY 

PRESENT: HON. ARTHUR F. ENGORON 

Justice 

-------------------X 

ETAGE REAL ESTATE LLC, DAVLA CONSULTING, INC., 

Plaintiffs, 

- V -

MICHAEL STERN, DAVID JURACICH, 

Defendants. 

-------------------X 

PART 

INDEX NO. 656322/2019 

MOTION DATE 08/21/2023 

MOTION SEQ. NO. 005 

DECISION + ORDER ON 

MOTION 

37 

The following e-filed documents, listed by NYSCEF document number (Motion 005) 140, 141, 142, 143, 

144,145,146,147,148,149,150,151,152,153,154,155,156,157,160,161,162,163,164,165,166, 

167 

were read on this motion to AMEND PLEADINGS 

Upon the forgoing documents, after oral argument on April 8, 2024, and for the reasons stated 

hereinbelow, plaintiffs' motion, pursuant to CPLR 3025, to amend the complaint and to grant the 

so-ordering of certain subpoenas ad testificandum and duces tecums is granted. 

Background 

On May 1 7, 2017, plaintiffs, Etage Real Estate LLC ("Etage") and Dav la Consulting, Inc. 

("Davla"), sued non-party DJJMS in Supreme Court, New York County, Index No. 

652659/2017. NYSCEF Doc. No. 91. On July 25, 2019, after multiple defaults in that action by 

DJJMS, the Clerk entered $746,588.84 in judgments against DJJMS: $144,795.62 in favor of 

Etage, $579,182.47 in favorofDavla, and $22,580.75 in legal fees,jointly and severally (the 

"Underlying Judgment"). NYSCEF Doc. No. 90. 

On October 18, 2019, plaintiffs commenced the instant action against defendants, Michael Stem 

and David Juracich, asserting two causes of action essentially seeking to hold defendants liable 

for the Underlying Judgment by piercing DJJMS's corporate veil. NYSCEF Doc. No. 1. 

The facts at the heart of all this are: defendants each have a 50% interest in DJJMS; DJJMS has 

an interest in nonparty 105 West 57th Street Holdings, LLC ("Holdings"); and Holdings, of 

which defendant Stem was a managing member, had an interest, allegedly worth $18,000,000, in 

certain property located at 105-107 West 57th Street, but transferred that interest, for zero 

consideration, to nonparty 111 West 57th FE LLC. 

In a Decision and Order dated September 22, 2021 (the "Prior Decision"), this Court: quashed a 

subpoena issued by plaintiff as "extremely overbroad," granted plaintiffs cross-motion for 

summary judgment and, accordingly, denied a request to unseal parts of the record as moot. 

NYSCEF Doc. No. 114. 

656322/2019 ETAGE REAL ESTATE LLC vs. STERN, MICHAEL 

Motion No. 005 

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On December 29, 2022, the Appellate Division, First Department, reversed the Prior Decision, 

noting ''that a claim for veil piercing is not a standalone cause of action" and, "[i]n any event, 

piercing the corporate veil is a fact-laden claim not well suited for summary judgment 

resolution." Etage Real Estate LLC v Stem, 211 AD3d 632,632 (1st Dept 2022). Further, the 

First Department did not find "sufficient, undisputed facts to show that defendants exercised 

complete domination ofDJJMS," or that, "as a matter of law there was a failure to adhere to 

corporate formalities, inadequate capitalization, commingling of assets, and use of corporate 

funds for personal use," to warrant veil piercing. Id. at 633 (internal quotations and citations 

omitted). 

The First Department also held, inter alia, that as "Holdings' transfer of the property at issue is 

tantamount to a transfer by DJJMS of its interest in Holdings, such transfer would constitute a 

breach of the consulting agreements, but 'a simple breach of contract, without more, does not 

constitute a fraud or wrong warranting the piercing of the corporate veil."' Etage at 634 (internal 

citation omitted). 

Plaintiffs now move, pursuant to CPLR 3025(b) and ( c ), to amend their complaint, and for the 

Court to so-order two modified versions of the subpoenas quashed by the Prior Decision. 

NYSCEF Doc. No. 140. 

Plaintiffs' proposed amended complaint includes three causes of action to hold defendants liable 

for the debts ofDJJMS and to pierce the corporate veil: (1) "on the ground of fraud, material 

misstatements of fact, improper submission of false and inflated financial statements to obtain 

loans and a fraudulent scheme to delay plaintiff from exercising its rights and obtain judgment 

against DJJMS"; (2) pursuant to Debtor and Creditor Law§ 276-a; and (3) on the ground that 

defendants lured plaintiffs into the underlying transaction through the production of false 

financial statements, thus violating New York Penal Law§ 175.45. NYSCEF Doc. No. 143. 

In support, plaintiffs argue that leave to amend should be freely given, especially as the proposed 

amended complaint is specifically crafted to conform to the First Department's decision and the 

documentary evidence produced to date, and so should not prejudice or surprise defendants. 

Plaintiffs also argue that their new proposed subpoenas are curtailed in scope from the ones this 

Court previously found extremely overbroad and should help adduce facts necessary to show 

defendants dominate and control DJJMS sufficient to pierce the corporate veil. 

In opposition, defendants argue that the motion should be denied because, inter alia, the 

proposed amended complaint: would not survive a motion to dismiss; still has a cause of action 

to pierce the corporate veil, which the First Department has noted is not a standalone cause of 

action; fails to address the First Department's point that, while non-party Holdings' transfer of 

property would constitute a breach of the consulting agreements, a "simple breach," without 

more, does not warrant piercing a corporate veil; has a second cause of action that does not assert 

a claim against the alleged transferor in the in the underlying real estate deal; cited a New York 

Penal Law provision that does not provide plaintiffs a private right of action and, further, any 

such action would be untimely. Defendants also argue against so-ordering the instant subpoenas 

656322/2019 ETAGE REAL ESTATE LLC vs. STERN, MICHAEL 

Motion No. 005 Page 2of4 

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because they are overbroad and because plaintiffs failed to file a 22 NYCRR 202. 7 affirmation of 

good faith. 

In reply, plaintiffs cite Matter of Morris v New York State Dept. of Taxation and Fin., 82 NY2d 

135, 140 (1993) (internal citations and quotations omitted), for the general rule that "[b]roadly 

speaking, the courts will disregard the corporate form, or, to use accepted terminology, pierce the 

corporate veil, whenever necessary to prevent fraud or to achieve equity," and argue that, here, 

the Court should allow plaintiff to amend the complaint in the interest of equity. 

Plaintiffs further argue, inter alia, that: they are not asserting piercing the corporate veil as a 

separate, standalone cause of action but, instead, as a means to enforce the Underlying Judgment 

or as a means to enforce any judgment obtained under the new causes of action; the First 

Department reversed the Prior Decision, a motion for summary judgment, simply to allow more 

facts to be ascertained; and that the proposed second and third causes of action incorporate 

Debtor and Creditor and Penal Law claims as reasons for piercing the corporate veil and are 

therefore timely, pursuant to Solow v Dom. Stone Erectors, Inc., 229 AD2d 312, 313 (1st Dept 

1996) ("As the action is one to enforce a judgment against defendants who, if plaintiff prevails 

on the piercing question, will be treated as a single personality, it is governed by the 20-year 

Statute of Limitations of CPLR 211 (b) with respect to all defendants and is therefore timely."). 

Discussion 

CPLR 3025(b) provides, in relevant part, that "[a] party may amend his or her pleading, or 

supplement it by setting forth additional or subsequent transactions or occurrences, at any time 

by leave of court or by stipulation of all parties. Leave shall be freely given upon such terms as 

may be just including the granting of costs and continuances." 

Generally, leave to amend should be "granted in the absence of evidence of substantial prejudice 

or surprise or that the proposed amendments were palpably insufficient or patently devoid of 

merit." JPMorgan Chase Bank, N.A. v Low Cost Bearings N.Y. Inc., 107 AD3d 643,644 (1st 

Dept 2013) (internal citations and quotations omitted). However, a "proposed amendment that 

cannot survive a motion to dismiss should not be permitted." Scott v Bell Atl. Corp., 282 AD2d 

180, 185 (1st Dept 2001), aff d as mod sub nom. Goshen v Mut. Life Ins. Co. of New York, 98 

NY2d 314 (2002). 

In deciding a motion to dismiss, the Court will "liberally construe the complaint, and accept as 

true the facts alleged in the complaint and any submissions in opposition to the dismissal motion. 

We also accord plaintiffs the benefit of every possible favorable inference." 511 W. 232nd 

Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 151-52 (2002). 

Here, as the proposed amended complaint would neither prejudice nor surprise defendants and, 

liberally construed, is neither devoid of merit nor futile, the Court will grant plaintiffs leave to 

amend. The amended complaint seeks to pierce the corporate veil not as a standalone cause of 

action but as a means to enforce the other causes of action and the Underlying Judgment. 

Further, the Court will so.;.order and annex to this Decision and Order plaintiff's proposed 

subpoenas, amended so that the sixth item of the demand on Aaron Cywiak is for "Copies of all 

656322/2019 ETAGE REAL ESTATE LLC vs. STERN, MICHAEL 

Motion No. 005 Page3 of4 

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financial statements for Michael Stem ... " instead of "Copies of all financial statements and 

related Documents for Michael Stem ... " 

Conclusion 

Plaintiffs' motion for leave to amend their complaint is hereby granted, the proposed 

supplemental summons and amended complaint, annexed as Exhibit A-3 to the moving papers 

(NYSCEF Doc. No. 144), are hereby deemed served and filed. 

5/15/2024 

DATE 

CHECK ONE: 

APPLICATION: 

CHECK IF APPROPRIATE: 

MAY 16 2024 

CASE DISPOSED 

GRANTED □ DENIED 

SETTLE ORDER 

INCLUDES TRANSFER/REASSIGN 

656322/2019 ETAGE REAL ESTATE LLC vs. STERN, MICHAEL 

Motion No. 005 

HON.~ENGORON 

ARTHUR F. ENGORON, J.S.C. 

NON-FINAL DISPOSITION 

GRANTED IN PART 

SUBMIT ORDER 

FIDUCIARY APPOINTMENT 

□ OTHER 

□ REFERENCE 

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