Intelligent Prod. Solutions, Inc. v. Morstan Gen. Agency, Inc.

Decision Date04 December 2014
Docket NumberNo. 067995/2014.,067995/2014.
Citation5 N.Y.S.3d 328 (Table)
PartiesINTELLIGENT PRODUCT SOLUTIONS, INC., Plaintiff, v. MORSTAN GENERAL AGENCY, INC., Defendant.
CourtNew York Supreme Court

Meyer, Suozzi, English et al, Garden City, Attorneys for Plaintiff.

Thompson Bukher, LLP, New York, Attorneys for Defendant.

Opinion

THOMAS F. WHELAN, J.

ORDERED that those portions of this motion (No.001) by the defendant wherein it seeks an order dismissing the complaint served due to the plaintiff's failure to join a necessary party is considered under CPLR 3211(a)(10) and 1001 and is denied; and it is further

ORDERED that those portion of this motion by the defendant for an order compelling arbitration of the claims interposed by the plaintiff and for a stay of this action pending an award is considered under CPLR 7503 and is denied; and it is further

ORDERED that the remaining portions of this motion by the defendant wherein it seeks an award of costs and attorneys fees and/or monetary sanctions is considered under 22 NYCRR Pat 130–1 and is denied; and it is further

ORDERED that the court declares that Single Entry Systems, Inc., is a necessary party defendant to this action and orders that it be summons to court by the plaintiff's service upon Single Entry Systems, Inc. the summons, complaint and a copy of this order pursuant to CPLR 311, within forty-five days of the date of this order; and it is further

ORDERED that a preliminary conference shall be held herein on Friday, February 20, 2015 at 9:30 a.m. in the courtroom of the undersigned located in the Supreme Court Annex Building of the Courthouse at One Court Street, Riverhead, New York 11901, at which, the court shall ascertain circumstances of the parties and of this action in light of the directives and other terms of this order and such other matters as may be brought before the court.

The plaintiff commenced this action by the filing of a summons and complaint on September 30, 2014. Therein, the plaintiff charges the defendant with being the alter ego of a company known as Single Entry Systems, Inc., [hereinafter SES] with whom the plaintiff contractually agreed to work with in the development, testing and upgrading of certain computer software applications known as Expert Insure and Expert Inspect and to retain the plaintiff to provide program management services to SES. After providing such services for approximately a year, SES advised the plaintiff in September of 2014 that it had no money to pay for services already performed and was considering the remedy of bankruptcy.

The complaint contains two causes of action by which the plaintiff seeks recovery from defendant Morstan of the sum of $465,450.00 in unpaid services it performed for SES. In the First cause of action, the plaintiff claims to have stated an account in which it is owed the sum of $465,450 by SES for services performed. In the Second, defendant Morstan is alleged to have been unjustly enriched by the services performed by the plaintiff. Recovery from the defendant Morstan is premised upon a piercing of the corporate veil of SES. In this regard, defendant Morstan is alleged to be an 80% shareholder of SES and it allegedly operates out of the same offices as does SES. The two corporations are alleged to have overlapping directors, officers and employees and co-mingled assets and liabilities.

Prior to answering, the defendant interposed the instant motion by which it seeks various forms of relief. Therein, the defendant claims that the plaintiff's failure to join SES as a party defendant is motivated by the plaintiff's desire to avoid the consequences of the arbitration clause that is set forth in the software development and maintenance contract between the plaintiff and SES. The defendant thus seeks dismissal of the complaint pursuant to CPLR 3211(10) on the grounds that the plaintiff failed to join a necessary party. Alternatively, the defendant seeks to compel arbitration and a stay of this action pursuant to CPLR 7503(c) and the imposition of sanctions, costs and fees against the plaintiff or its counsel.

The plaintiff opposes the motion to which opposition the defendant has replied. For the reasons stated, the motion is denied, except to the extent of the declarations and directives regarding the joinder of SES as a party defendant to this action.

It is well settled law that claims for the imposition of liability against a defendant that rest upon allegations that such defendant is liable to the plaintiff because it is an alter ego of another entity who has not been joined as a defendant, renders the non-joined entity a necessary party (see Mannucci v. Missionary Sisters of Sacred Heart of Jesus, 94 AD3d 471, 941 N.Y.S.2d 493 [1st Dept 2012] ; Corman v. LaFountain, 38 AD3d 706, 835 N.Y.S.2d 201 [2d Dept 2007] ). Indeed, a stand alone claim for recovery from a purportedly dominant alter ego entity is considered legally insufficient since New York does not recognize a separate cause of action to pierce the corporate veil (see DiMauro v. United, LLC, ––– AD3d ––––, 2014 WL 5638775 [2d Dept 2014] ; Gaetano Dev. Corp. v. Lee, 121 AD3d 838, 2014 WL 5151404 [2d Dept 2014] ; Rosen v. Kessler, 51 AD3d 761, 761, 856 N.Y.S.2d 861 [2d Dept 2008] ; Hart v. Jassem, 43 AD3d 997, 998, 843 N.Y.S.2d 121 [2d Dept 2007] ). Instead, corporate veil piercing is an equitable doctrine which allows a corporation's separate legal existence to be disregarded so as to attach liability to its operatives ordinarily insulated therefrom by the corporate form, so to prevent fraud and achieve equity (see Morris v. New York State Dept. of Taxation and Finance, 82 N.Y.2d 135, 603 N.Y.S.2d 807 [1993] ; Queens West Dev. Corp. v. Nixbot Realty Assoc., 121 AD3d 903, 2014 WL 5151295 [2d Dept 2014] ; Flushing Plaza Assoc. # 2 v. Albert, 102 AD3d 737, 738, 958 N.Y.S.2d 713 [2d Dept 2014] ; Baccash v. Sayegh, 53 AD3d 636, 639, 862 N.Y.S.2d 564 [2d Dept 2008] ).

By this motion, the defendant seeks dismissal of the complaint, not on legal insufficiency grounds, but upon grounds that the plaintiff's failure to join as a party defendant, SES, warrants dismissal of this action pursuant to CPLR 3211(a)(10) which provides for dismissal whenever “the court should not proceed in the absence of a person who should be a party. The defendant contends that dismissal of the complaint is warranted since SES is a necessary party under controlling case authorities such as those cited above and the plaintiff failed to join it.

However, dismissal for failure to join a necessary party is proper only in very limited circumstances as a motion for such dismissal necessarily invokes application of the joinder provisions set forth in CPLR 1003 and 1001. These rules authorize a court to dismiss a complaint where a necessary party has not been joined only after it has determined that such party is indeed necessary and that is not subject to the jurisdiction of the court except upon its voluntary submission thereto or consent (see CPLR 1001[b] ; Windy Ridge Farm v. Assessor of Town of Shandaken, 11 NY3d 725, 726–727, 864 N.Y.S.2d 794 [2008] ). If jurisdiction can be obtained only by the entity's consent or voluntary appearance “the court, when justice requires, may allow the action to proceed without [the entity] being made a party (Swezey v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 19 NY3d 543, 950 N.Y.S.2d 293 [2013] ; see CPLR 1003 ; 1001). Any such determination to proceed must be based upon the court's consideration of five numerated statutory factors set forth in CPLR 1001(b) (see id. ).

Here, the defendant established that SES, which is the allegedly dominated dummy corporation and the party...

To continue reading

Request your trial
3 cases
  • In re McCaffrey
    • United States
    • U.S. Bankruptcy Court — Northern District of New York
    • 30 Agosto 2023
    ... ... In re Weiss-Wolf, Inc. , 60 B.R. 969, 975 (Bankr ... S.D.N.Y ... E.D.N.Y. 2022) (quoting Intelligent Prod. Sols., ... Inc. v. Morstan Gen ... ...
  • Goli Realty Corp. v. Halperin
    • United States
    • New York Supreme Court
    • 5 Diciembre 2014
    ...5 N.Y.S.3d 328 (Table)GOLI REALTY CORP., Plaintiff(s)v.John HALPERIN; Peter Halperin; SPJ, LLC ; Amerada Hess Corporation, Defendant(s).No. 41574/2010.Supreme Court, Suffolk County, New York.Dec. 5, 2014.Joseph A. Salvi, Esq, Southampton, attorney for defendants.Dwayne S. Wagner, Esq., West......
  • Manicchio v. Classic Summit, LLC
    • United States
    • New York Supreme Court
    • 5 Diciembre 2014

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT