Ideal Supply Co. v. Interstate Fire Prot., Inc.

Decision Date25 February 2020
Docket NumberIndex No. 652809/2013
Citation2020 NY Slip Op 30546 (U)
PartiesIDEAL SUPPLY CO., INC., Plaintiff, v. INTERSTATE FIRE PROTECTION, INC., PETER M. MIRZ, RICHARD W. TULLY, JR., MYRON BELLOVIN, INTERSTATE MECHANICAL SERVICES, INC. and PACE PLUMBING CORP., Defendants.
CourtNew York Supreme Court

DAVID B. COHEN, J.S.C.:

Motions bearing sequence numbers 016, 017, 018 and 019 are consolidated herein for disposition. In its Second Amended Verified Complaint, dated July 4, 2015 (NY St Cts Elec Filing [NYSCEF] Doc No. 102 [complaint]), plaintiff Ideal Supply Co., Inc. asserts that it provided plumbing supplies, materials and fixtures to defendant Interstate Fire Protection, Inc. (IFP) for a series of construction projects that IFP conducted in New York City in 2011 and 2012 (complaint ¶ 13).

Plaintiff maintains that it has not been paid $545,726.88 for materials it provided for IFP's projects. Plaintiff alleges that various general contractors managed these projects and paid IFP in full but IFP and its officers, specifically defendants Peter M. Mirz (Mirz), Richard W. Tully, Jr. (Tully), and Myron Bellovin (Bellovin), diverted these funds for their own use and failed to pay plaintiff for its materials (id. ¶ 11).

During the period at issue, Mirz was president of IFP (id. ¶ 3), Tully was president of defendant Interstate Mechanical Services, Inc. (IMS) (id. ¶ 4), and Bellovin is alleged to have been an officer and/or shareholder of IFP and IMS (id. ¶ 5). Bellovin, however, denies holding such positions (Answer to Second Amended Complaint of IMS, Tully and Bellovin [IMS answer] [NYSCEF Doc No. 166], ¶ 5). IMS and defendant Pace Plumbing Corp. (Pace) are corporate entities that allegedly joined in defendants' scheme to defraud plaintiff and other IFP creditors and to prevent their collection of IFP's lawful debt (complaint ¶¶ 6-7, 207-209).1

Plaintiff alleges that IFP, through Mirz, Tully, and Bellovin, defrauded and otherwise violated its duties to plaintiff by transferring assets and contracts to IMS and Pace below fair value (id. ¶¶ 205), with the intent to bilk IFP's creditors, including plaintiff (id. ¶¶ 206-07).

Plaintiff asserts its first two causes of action, for a trust fund accounting and diversion of trust funds, under article 3-a of New York's Lien Law, against IFP, Mirz, Tully, and Bellovin "(individually and personally), joint and severally" (id. ¶¶ 145-76). As its third cause of action, plaintiff repeats its claim for diversion of trust funds against Mirz, Tully and Bellovin "personally" (id. ¶¶ 177-79). Plaintiff, however, does not assert a claim against Pace or IMS for alleged "knowing participa[tion] in the diversion" of these trust funds (see Teman Bros. v New York Plumbers' Specialties Co., 109 Misc 2d 197, 200 [Sup Ct, New York County 1981] [citing Lien Law §§ 72 [1] and 77 [3][a][1]).

Plaintiff asserts its fourth and fifth causes of action against IFP, for subcontract balance and breach of contract, respectively (id. ¶¶ 180-91).

Plaintiff purports to assert a claim for quantum meruit as its sixth cause of action, and account stated as its seventh cause of action, but page 24 of the complaint, on which the end of the quantum meruit claim and the beginning of the account stated claim were presumablyintended to appear, is missing from the pdf copy of the complaint plaintiff filed with NYSCEF (Doc No. 102), and in copies of that pleading filed in these motions (see exhibit A to Coren aff [NYSCEF Doc No. 308]).2 Plaintiff has not sought to correct this omission.

As its eighth cause of action, plaintiff asserts a claim of fraud against all defendants, including Pace (complaint ¶¶ 204-09).

Except for IFP, which has not appeared, each defendant has answered the complaint and has asserted affirmative defenses.3 Defendants Mirz, Tully, Bellovin and IMS have also asserted cross-claims for contribution, contractual indemnification and common law indemnification. In these cross-claims, Mirz, Tully, Bellovin and IMS assert that both plaintiff and their co-defendants should be held obligated to indemnify them and to contribute to any liability imposed on them. Plaintiff characterizes these cross-claims, insofar as they are directed against plaintiff, as counterclaims and generally denies defendants' allegations.

Discussion

To prevail on a summary judgment motion, the movant must produce evidentiary proof in admissible form sufficient to warrant the direction of summary judgment in its favor (GTF Mktg. v Colonial Aluminum Sales, 66 NY2d 965, 967 [1985]; see also Stonehill Capital Mgt. LLC vBank of the W., 28 NY3d 439, 448 [2016], quoting Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986] [proponent of summary judgment "'must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact'"]). If the moving party fails to make a prima facie showing of its entitlement to summary judgment, the motion must be denied, regardless of the sufficiency of the opposing papers (William J. Jenack Estate Appraisers and Auctioneers, Inc. v Rabizadeh, 22 NY3d 470, 475 [2013]).

Once this showing is made, the burden shifts to the opposing party to submit proof in admissible form sufficient to raise a question of fact requiring a trial (Kosson v Algaze, 84 NY2d 1019, 1020 [1995]).

In deciding a motion for summary judgment, the court must view the evidence in the light most favorable to the non-movant (Branham v Loews Orpheum Cinemas, 8 NY3d 931, 932 [2007]). Party affidavits and other proof must be examined closely "because summary judgment is a drastic remedy and should not be granted where there is any doubt as to the existence of a triable issue" (Rotuba Extruders v Ceppos, 46 NY2d 223, 231 [1978] [citation and internal quotation marks omitted]). Still, "only the existence of a bona fide issue raised by evidentiary facts and not one based on conclusory or irrelevant allegations will suffice to defeat summary judgment" (id.).

Pace's Motion for Summary Judgment (Motion Sequence No 016)

Pace moves for summary judgment, pursuant to CPLR 3212, to dismiss the eighth cause of action for fraud, the sole cause of action asserted against it, "on the ground that there are no triable issues of fact" (Pace's Notice of Motion [NYSCEF Doc No. 386]). Pace also seeks to join the motions filed by its codefendants insofar as such motions also seek dismissal of plaintiff's eighth cause of action (id.). Plaintiff opposes.

To prevail, Pace must "show. . . that the cause of action. . . has no merit" (CPLR 3212[b]). Pace may meet this burden by establishing "'a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact'" (William J. Jenack Estate Appraisers and Auctioneers, Inc., 22 NY3d at 475, quoting Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). "This burden is a heavy one and on a motion for summary judgment, 'facts must be viewed in the light most favorable to the non-moving party'" (William J. Jenack Estate Appraisers and Auctioneers, Inc., 22 NY3d at 475 quoting Vega v Restani Constr. Corp., 18 NY3d 499, 503 [2012] [citation and internal quotation marks omitted]).

Paraphrasing Justice Ostrager's November 4, 2016 decision and order, at 9 (NYSCEF Doc No 217), Pace notes that, "in order to state a claim for fraud a plaintiff must allege 'a material misrepresentation of fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by plaintiff and damages'" (reply affirmation of Jeffrey Klarsfeld, Esq., executed January 30, 2019 [Klarsfeld affirmation] [NYSCEF Doc No. 570], ¶ 8, quoting Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]).

Pace asserts that plaintiff's eighth cause of action must fail because it has not alleged the elements of common law fraud, much less adduced facts to support such a claim. Specifically, Pace maintains plaintiff does not allege that Pace made any misrepresentation of fact, or that plaintiff ever relied, justifiably or otherwise, on such misrepresentation. Plaintiff also does not claim that Pace ever intended to induce plaintiff's reliance, or that it otherwise acted with scienter (Klarsfeld affirmation ¶¶ 8-9).

In opposition, plaintiff concedes these points but asserts that Pace employed the wrong standard of review, contending that plaintiff's eighth cause of action is for equitable fraud ratherthan common law fraud (see affirmation of Albert A. Hatem, Esq., executed January 15, 2019 [Hatem affirmation opposing Pace's motion] [NYSCEF Doc No. 524], ¶ 13).4 Plaintiff further asserts that Pace's transaction with IFP, to buy "some portion" of its assets, was made at an unfair "low ball" discount, as a means to shift assets to Mirz's new employer and thereby defraud IFP's creditors, with Pace's knowledge (id. ¶¶ 20-21).

In its reply, Pace asserts that plaintiff's arguments are an invention, with no basis in fact. Pace denies plaintiff's contention that it bought all or substantially all of Pace's assets, purportedly worth between $1.2 million and $1.4 million, for only $60,000. Pace alleges it bought only certain assets from IFP, worth about $120,000, and that it paid the purchase price by check in the amount of $60,000 and by setting off certain debts it owed to IFP, for the balance.

Equitable fraud does not fit these circumstances. First, the authorities on which plaintiff relies to claim equitable fraud do not involve private parties seeking redress, but instead are civil prosecutions brought by New York's attorney general under the Martin Act (see Klarsfeld affirmation, ¶ 10 [discussing People v Credit Suisse Sec. (USA) LLC, 31 NY3d 622 [2018], Matter of Badem Bldgs. v Abrams, 70 NY2d 45 [1987], and People v Federated Radio Corp., 244 NY 33 [...

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