Dimauro v. Untied LLC

• Decision Date: 08 January 2013
• Docket Number: Index No.: 58165/12
• Citation: Dimauro v. Untied LLC, 2013 NY Slip Op 33776(U), Index No.: 58165/12 (N.Y. Sup. Ct. Jan 08, 2013)
• Parties: JOSEPH DIMAURO and JOSEPH DIMAURO, AS TRUSTEE OF THE DiMAURO TRUST UNDER AGREEMENT DATED SEPTEMBER 28, 1984, AS AMENDED BY AMENDED AGREEMENT OF TRUST, DATED June 11, 1987, Plaintiffs, v. UNTIED LLC, AGNES NANCY VARSAMES, PAUL A. VARSAMES, LOUIS VARSAMES, JOHN VARSAMES, JEAN VARSAMES, INDIVIDUALLY AND AS BENEFICIARY OF THE JEAN VARSAMES IRREVOCABLE TRUST, PAUL VARSAMES DEVELOPMENT, LLC and ANV ESTATES, LLC, Defendants.
• Court: New York Supreme Court

2013 NY Slip Op 33776(U)

JOSEPH DIMAURO and JOSEPH DIMAURO,AS TRUSTEE OF THE DiMAURO TRUSTUNDER AGREEMENT DATED SEPTEMBER 28, 1984,AS AMENDED BY AMENDED AGREEMENT OF TRUST,DATED June 11, 1987, Plaintiffs, v. UNTIED LLC, AGNES NANCY VARSAMES,PAUL A. VARSAMES, LOUIS VARSAMES,JOHN VARSAMES, JEAN VARSAMES,INDIVIDUALLY AND AS BENEFICIARY OF THEJEAN VARSAMES IRREVOCABLE TRUST,PAUL VARSAMES DEVELOPMENT, LLCand ANV ESTATES, LLC, Defendants.

Index No.: 58165/12

SUPREME COURT: STATE OF NEW YORK COUNTY OF WESTCHESTER

RECEIVED NYSCEF: January 9, 2013

January 8, 2013

NYSCEF DOC. NO. 31

DECISION & ORDER

ADLER, J.

The following papers numbered 1 to 70 were read on defendants' motion to dismiss the complaint pursuant to CPLR §3211(a)(1), (5) and (7):

Papers Numbered

Notice of Motion; Affidavit of Paul A. Varsames;

Exhibits

1-30

Memorandum of Law in Support

31

Affidavit in Opposition of Joseph DiMauro;

Affidavit of Mark C. Durkin, Esq.; Exhibits

32-51

Memorandum of Law in Opposition; Exhibits

52-66

Reply Affirmation of Brian T. Belowich, Esq.; Exhibits

67-69

Reply Memorandum of Law

70

This action arises out of an agreement entered into on or about March 17, 2000, between plaintiff and defendant United LLC ("United") for the construction of a single-family dwelling located at 18 Wrights Mill Road in the Town of North Castle, New York. A prior action for breach of contract and negligence in the performance of the construction agreement (Index No.: 8139/05) was dismissed by the Supreme Court, Westchester County (Bellantoni, J.) on December 13, 2005 based upon the existence of an arbitration clause in the agreement.

Following the issuance of an arbitration award in favor of plaintiff, a petition pursuant to CPLR §7510 was brought to confirm the arbitration agreement (Index No.: 14323/11). The unopposed application was granted by this Court by Decision and Order dated November 30, 2011. On May 16, 2012, plaintiff commenced this post-judgment action seeking a declaration that certain conveyances and transfers by defendant United to defendants Agnes Nancy Varsames, Paul A. Varsames, Louis Varsames, John Varsames, and Jean Varsames were fraudulent, void and a nullity.

It is alleged in the complaint that on or about November 18, 2004, plaintiff informed defendant United of his claim for improper and negligent design and construction of the residence. It is further alleged that on or about May 18, 2005, plaintiff commend an action in the Supreme Court, Westchester County seeking approximately $3.5 million in damages. As stated above, that action was dismissed on December 13, 2005.

Plaintiff contends that, based upon United's knowledge of plaintiff's claims, the following conveyances of funds from United's bank account maintained at Provident Bank during the period from July 11, 2005 to August 15, 2006 were fraudulent and made in an effort to "cover up and conceal the right, title and interest of United. These conveyances are represented by checks dated: (1) July 18, 2005 in the amount of$125,000.00 made payable to defendant Paul Varsames; (2) May 23, 2006 in the amount of $125,000.00 made payable to defendant Paul Varsames; (3) May 23, 2006 in the amount of $50,000.00 made payable to defendant Louis Varsames; (4) August 15, 2006 in the amount of $122,000.00 made payable to defendant Paul Varsames; (5) August 15, 2006 in the amount of $125,000.00 made payable to defendant Louis Varsames; (6) August 15, 2006 in the amount of $122,000.00 made payable to defendant John Varsames; and (7) August 15, 2006 in the amount of $122,000.00 made payable to defendant Jean Varsames Irrevocable Trust.

Defendants now seek to dismiss the first and second causes of action insofar as the allegations therein relate to the above-referenced transfers on the ground that any claims related thereto are barred by the applicable statute of limitations.

On a motion to dismiss a cause of action as barred by the statute of limitations, "a defendant bears the initial burden of establishing prima facie that the time in which to sue has expired" (Tsafatinos v. Wilson Elser Moskowitz Edelman & Dicker, LLP, 75 A.D.3d 546, 903 N.Y.S.2d 907, quoting Savarese v. Shatz, 273 A.D.2d 219, 220, 708 N.Y.S.2d 642 [internal quotations omitted]). "Only if the defendant makes such a prima facie showing does the burden then shift to the plaintiff to aver evidentiary facts establishing that the case falls within an exception to the statute of limitations" (Philip F. v. Roman Catholic Diocese of Las Vegas, 70 A.D.3d 765, 766, 894 N.Y.S.2d 125, quoting Savarese v. Shatz, 273 A.D.2d 219 [internal quotations omitted]), "or that a question of fact exists as to whether an exception applies (Id. at 766, citing Santo B. v. Roman Catholic Archdiocese of N.Y., 51 A.D.3d at 957, 861 N.Y.S.2d 674).

Defendants contend that any claims with respect to these transfers are barred by the applicable three-year statute of limitations set forth in Limited Liability Company Law §508(c). Pursuant to Limited Liability Company Law §508, a limited liability company is prohibited from making any distributions to a member to the extent that it exceeds the fair market value of the assets of the limited liability company (LLCL §508[a]). Any member who receives a distribution in violation of the provisions of subdivision (a) and who was aware at the time that the distribution violated the provisions thereof, is liable to the limited liability company for the amount of the distribution (LLCL §508[b] [emphasis added]). However, "unless otherwise agreed, a member who receives a wrongful distribution from a limited liability company shall have no liability after the expiration of three years from the date of the distribution" (LLCL §508[c]).

Contrary to defendants' contention, the plain language of the statute indicates that its provisions apply to actions maintained on behalf of a limited liability company against a member thereof who receives a distribution that exceeds the fair market value of the assets of the limited liability company and who is aware of that fact at the time he or she receives the distribution. Moreover, defendants have not cited any case law in support of their contention that the provisions of Limited Liability Company Law §508 apply to actions brought by third-party creditors.¹

In the alternative, defendants move to dismiss the first and second causes of action pursuant to CPLR §3211(a)(1) based on a defense founded upon documentary evidence. To succeed on a motion pursuant to CPLR §3211(a)(1), the documentary evidence must "utterly refute" the plaintiff's factual allegations, "conclusively establishing a defense as a matter of law" (Midorimatsu, Inc. v. Hui Fat Co.., 99 A.D.3d 680, 681-682, 951 N.Y.S.2d 570, quoting Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 [internal quotations omitted]; Snyder v. Voris, Martini & Moore, 52 A.D.3d 811, 812, 860 N.Y.S.2d 622). In order to qualify as "documentary," the "evidence must be unambiguous and of undisputed authenticity" (Fontanetta v. John Doe 1, 73 A.D.3d 78, 86, 898 N.Y.S.2d 569). While documents reflecting out-of-court transactions such as mortgages, deeds and contracts clearly qualify as "documentary evidence," (Cives Corp. v. George A. Fuller Co., Inc., 97 A.D.3d 713, 714, 948 N.Y.S.2d 658, quoting Fontanetta v. John Doe 1, 73 A.D.3d at 83 [internal quotations omitted]), affidavits and deposition testimony do not (Fontanetta v. John Doe 1, 73 A.D.3d at 86). Moreover, only if the documentary evidence disproves a material allegation of the complaint is dismissal warranted (see Snyder v. Voris, Martini & Moore, 52 A.D.3d at 812, citing Weiss v. TD Waterhouse, 45 A.D.3d 763, 847 N.Y.S.2d 94).

Although not specifically plead in the complaint, in opposition to defendant's motion plaintiff states that the claims asserted in the first and second causes of action are claims of constructive fraud under DCL §273, §273-a and §274, as well as a claim for actual fraud under DCL §276.

In order to state a claim pursuant to DCL §273, a plaintiff must establish that the debtor made a conveyance, that it was insolvent prior to the conveyance or rendered insolvent thereby, and that the conveyances were made without fair consideration (Wall St. Assoc. v. Brodsky, 257 A.D.2d 526, 528, 684 N.Y.S.2d 244). "A finding of constructive fraud * * * may thus be predicated upon proof of insolvency and lack of fair consideration, without a showing of actual motive or intent to defraud" (Zanani v. Meisels, 78 A.D.3d 823, 824, 910 N.Y.S.2cd 533, quoting American Panel Tec. v. Hyrise, Inc., 31 A.D.3d 586, 587, 819 N.Y.S.2d 768) [internal quotations omitted]). The insolvency element can be sufficiently made out from a complaint where it is alleged that the defendant debtor was judgment-proof when plaintiff attempted to enforce its judgment (Id.). Lastly, the "[f]airness of the consideration is a question of fact and an intra-family transaction places a heavier burden on defendant to demonstrate fairness" (Id.).

Similarly, under DCL §274 a plaintiff is required to allege that defendant fraudulently made "conveyance[s] * * * without fair consideration," which left the defendant with "unreasonably small capital."

A claim pursuant to DCL §276 addresses actual fraud and does not require proof of unfair consideration or insolvency (Wall St. Assoc. v. Brodsky, 257 A.D.2d at 529). Additionally, "[d]ue to the difficulty of proving actual intent to hinder, delay, or defraud creditors, the pleader is allowed to rely on 'badges of fraud' to support his case, i.e., circumstances so commonly associated with fraudulent transfers that their presence gives rise to an inference of intent" (Id., quoting Pen Pak Corp. v. LaSalle Natl. Bank ofChicago, 240 A.D.2d 384, 386, 658 N.Y.S.2d 407 [internal quotations omitted]; see also Steinberg v. Levine, 6 A.D.3d 620). Examples of such circumstances include a close relationship between the...