Howard v. Pooler
Decision Date | 12 June 2020 |
Docket Number | CA 18-01322,1012 |
Citation | 126 N.Y.S.3d 824,184 A.D.3d 1160 |
Parties | William HOWARD, Suing in the Right of Archer Rd. Vista LLC, William Howard, Individually, and Westside Development of Rochester, Inc., Plaintiffs-Respondents, v. Gary L. POOLER, Defendant-Appellant, Archer Rd. Vista LLC, and Gary L. Pooler, as Manager of Archer Rd. Vista LLC, Intervenors-Appellants. (Appeal No. 1.) |
Court | New York Supreme Court — Appellate Division |
It is hereby ORDERED that the order so appealed from is modified on the law by vacating the tenth ordering paragraph, and as modified the order is affirmed without costs.
Memorandum: In appeal No. 1, defendant, Gary L. Pooler, and intervenors, Archer Rd. Vista LLC (the LLC) and Gary L. Pooler, as manager of Archer Rd. Vista LLC, appeal from an order that, inter alia, awarded William Howard, suing in the right of Archer Rd. Vista LLC, and William Howard, individually (plaintiff), damages totaling more than $1.2 million against defendant. In appeal No. 2, defendant and the intervenors appeal from an order that appointed a receiver for the dissolution of the LLC. Inasmuch as the parties raise no contentions concerning that order, we dismiss appeal No. 2 (see Golf Glen Plaza Niles, Il. L.P. v. Amcoid USA, LLC , 160 A.D.3d 1375, 1376, 76 N.Y.S.3d 307 [4th Dept. 2018] ). In appeal No. 3, defendant and the intervenors appeal from an order and judgment that awarded plaintiff attorneys' fees and disbursements against defendant.
Plaintiff and defendant founded the LLC for the purpose of furthering the development of a residential subdivision. The LLC purchased approximately 300 acres of land in the Town of Chili, which plaintiff and defendant intended to develop into approved real estate lots and sell to builders. Pursuant to the operating agreement of the LLC, defendant owned 60% of the membership interests and 50% of the voting interests in the LLC, and was designated as the manager of the LLC. Plaintiff owned the remaining 40% membership interests and 50% voting interests in the LLC, and was primarily responsible, under the operating agreement, for the sale of the lots to builders. Plaintiff is one of the owners of plaintiff Westside Development of Rochester, Inc. (Westside), and the operating agreement provides that Westside would have a sewer easement and the use of certain land owned by the LLC for wetland mitigation. In addition, the operating agreement provides that plaintiff's real estate company, which is a nonparty to this action, would serve as the exclusive listing agent for each of the LLC lots, provided that it met a minimum sales quota of 15 lots per year.
Approximately five years after the LLC was founded, defendant, acting in his role as manager of the LLC, removed plaintiff and plaintiff's real estate company from their respective roles under the operating agreement of overseeing lot sales and serving as the exclusive listing agent. Subsequently, plaintiffs commenced this action, asserted thirteen causes of action for, inter alia, breach of contract and breach of fiduciary duty, and sought, inter alia, monetary damages, injunctive relief, removal of defendant as manager of the LLC, and dissolution of the LLC. The intervenors filed a verified complaint against plaintiffs seeking injunctive relief and cancellation of the notice of pendency.
Plaintiffs moved for partial summary judgment against defendant with respect to liability on three derivative causes of action on behalf of the LLC, specifically the first cause of action, for breach of contract, the seventh, for breach of fiduciary duty, and the eighth, for an accounting. In a March 2016 order from which defendant did not timely appeal, Supreme Court granted the motion with respect to the first and eighth causes of action, and also granted the motion with respect to the seventh cause of action insofar as that cause of action is based on the allegations of defendant's self-dealing, commingling of assets, and misappropriation of the LLC revenue.
Thereafter, the court conducted a bench trial on damages for those causes of action as well as on liability and damages for the remaining causes of action. In the resulting order, which is the subject of appeal No. 1, the court ordered, as relevant here, defendant to pay damages to plaintiff individually in connection with the fourth cause of action, alleging a breach of the covenant of good faith and fair dealing on behalf of plaintiff individually. The court further awarded damages on those derivative causes of action for which liability had been previously established in the March 2016 order. The court ordered that the LLC would be dissolved and that an independent receiver would be appointed to oversee the dissolution of the LLC. Finally, the court ordered defendant "to pay damages to [plaintiff] in connection with attorneys' fees incurred by [plaintiff] as a derivative plaintiff acting on the [LLC's] behalf" and the court directed plaintiffs' counsel to submit an affirmation establishing the amount of attorneys' fees incurred. As noted above, the court subsequently entered the order that is the subject of appeal No. 2, which appointed an independent receiver, and the order and judgment that is the subject of appeal No. 3, which awarded plaintiff $249,312.75 in attorneys' fees and $38,905.68 in disbursements, with leave to seek additional attorneys' fees and costs incurred in enforcement of the judgment.
Contrary to the contentions of defendant and the intervenors at oral argument and in their post-argument submissions, the order in appeal No. 1 is not "one that disposes of all of the causes of action between the parties in the action or proceeding and leaves nothing for further judicial action apart from mere ministerial matters" ( Burke v. Crosson , 85 N.Y.2d 10, 15, 623 N.Y.S.2d 524, 647 N.E.2d 736 [1995] ; see Abasciano v. Dandrea , 83 A.D.3d 1542, 1544, 924 N.Y.S.2d 696 [4th Dept. 2011] ). Here, "[a]lthough all of the substantive issues between the parties were resolved, the order was facially nonfinal, since it left pending the assessment of attorneys' fees--a matter that plainly required further judicial action of a nonministerial nature" ( Burke , 85 N.Y.2d at 17, 623 N.Y.S.2d 524, 647 N.E.2d 736 ). Further, plaintiffs' "request for attorneys' fees was an integral part of each of the asserted causes of action rather than a separate cause of action of its own," and therefore that issue cannot be implicitly severed from the other issues ( id. ). Thus, the order in appeal No. 1 does not constitute a " ‘final order’ " within the meaning of CPLR 5501 (a) (1) and does not bring up for our review any prior non-final order, including the March 2016 order ( Abasciano , 83 A.D.3d at 1544, 924 N.Y.S.2d 696 ). Contrary to the intervenors' contention in their post-argument submission that the order in appeal No. 1 is final with respect to their complaint, the causes of action asserted therein arise out of "the same ... continuum of facts [and] out of the same legal relationship as the unresolved causes of action" ( Burke , 85 N.Y.2d at 16, 623 N.Y.S.2d 524, 647 N.E.2d 736 ). Similarly, we cannot construe either the subsequent order in appeal No. 2, which appointed a receiver and directed certain actions "until the [LLC] is dissolved" (cf. Matter of FR Holdings, FLP v. Homapour , 154 A.D.3d 936, 936, 63 N.Y.S.3d 89 [2d Dept. 2017] ), or the order and judgment in appeal No. 3, which was limited to awarding attorneys' fees and disbursements to plaintiff in his individual capacity, as final judgments within the meaning of CPLR 5501 (a) (1).
Thus, our review of these appeals is limited to addressing only those contentions addressed to the merits of the orders and the order and judgment from which timely appeals have been taken. With respect to the merits of those contentions in appeal No. 1, inasmuch as this is a determination after a nonjury trial, our scope of review is as broad as that of the trial court. Nonetheless, " ‘the decision of the fact-finding court should not be disturbed upon appeal unless it is obvious that the court's conclusions could not be reached under any fair interpretation of the evidence, especially when the findings of fact rest in large measure on considerations relating to the credibility of witnesses’ " ( Thoreson v. Penthouse Intl. , 80 N.Y.2d 490, 495, 591 N.Y.S.2d 978, 606 N.E.2d 1369 [1992], rearg denied 81 N.Y.2d 835, 595 N.Y.S.2d 397, 611 N.E.2d 298 [1993] ; see Cianchetti v. Burgio , 145 A.D.3d 1539, 1540-1541, 44 N.Y.S.3d 293 [4th Dept. 2016], lv denied 29 N.Y.3d 908, 2017 WL 2367333 [2017] ).
Contrary to the contentions of defendant and the intervenors, the court properly concluded that plaintiff's alleged failure to make an initial capital contribution to the LLC in the manner required by the LLC's operating agreement did not preclude plaintiff from pursuing the breach of contract claims asserted in his individual capacity. We find no reason to disturb the court's factual determination, based in part on the court's consideration of defendant's credibility, that defendant and the LLC waived any alleged non-compliance with the operating agreement's requirement that plaintiff's initial contribution be in cash (see generally Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgt., LP , 7 N.Y.3d 96, 104, 817 N.Y.S.2d 606, 850 N.E.2d 653 [2006] ; Town of Mexico v. County of Oswego , 175 A.D.3d 876, 878, 107 N.Y.S.3d 221 [4th Dept. 2019] ).
Defendant further contends that the court erred in the amount of damages awarded in connection with the derivative breach of fiduciary duty cause of action, on which liability had previously been imposed, because there was no showing that the LLC was harmed by his misconduct. We reject that contention. Disgorgement of profit is an appropriate remedy for a breach of fiduciary duty even where the corporation has not been damaged directly by the misconduct (see Diamond v....
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