Court Opinion

ID: 9952461
Source: CourtListenerOpinion
Date Created: 2024-03-19 20:09:04.120039+00
Date Added: 2024-06-11T14:39:39.454094
License: Public Domain

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
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 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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  NYSCEF DOC. NO. 113                                                     RECEIVED NYSCEF: 03/14/2024

            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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  NYSCEF DOC. NO. 113                                                 RECEIVED NYSCEF: 03/14/2024

           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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  NYSCEF DOC. NO. 113                                                              RECEIVED NYSCEF: 03/14/2024

           ·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
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