Irvin v. Jones

Decision Date13 December 2012
Docket NumberNo. 2942–12.,2942–12.
Citation966 N.Y.S.2d 346,38 Misc.3d 1203,2012 N.Y. Slip Op. 52337
PartiesBarbara IRVIN individually and as General Partner of the Irvin Family Limited Partnership, Plaintiffs, v. Thomas JONES and Jones, Little & Co., CPAS, LLP, Defendants.
CourtNew York Supreme Court

OPINION TEXT STARTS HERE

Vandenberg & Feliu, LLP, New York, for Plaintiffs.

Landman, Corsi, et. al., New York, for Defendants.

THOMAS F. WHELAN, J.

Upon the following papers numbered 1 toread on this motion for partial dismissal of the plaintiff's complaint; Notice of Motion/Order to Show Cause and supporting papers 1–6; and 7–8 (Memo of Law in Support ); Notice of Cross Motion and supporting papers; Answering papers 9–10 (Memo of Law in Opposition); Replying Affidavits and supporting papers 11–12 Reply Memo of Law; Other; and after hearing counsel in support and opposed to the motion it is,

ORDERED that this motion (# 003) by the defendants for an order dismissing the FIRST and THIRD causes of action and a portion of the SECOND cause of action set forth in the plaintiffs' amended complaint is considered under CPLR 3211(a) and is granted.

This action arises out of the purported misdeeds of the defendants who were retained as accountants in 2002 by the now deceased husband (George) of the plaintiff, Barbara Irvin, to perform personal financial accounting services ( see Amended Complaint ¶ 8, attached as Exhibit A to affirmation of defense counsel Jacobs). The services included monthly personal bill payment, bookkeeping and tax reporting services for Mr. & Mrs. George Irvin. Sometime after such retention, the health of George Irvin deteriorated to such an extent that plaintiff Barbara Irwin took over the role of interfacing with the defendants with respect their performance of these accounting duties ( see Amended Complaint ¶¶ 8–9.

In June of 2005, the Irvins, together with their two adult daughters, Barnett and Di Lonardo, formed the plaintiff partnership, entitled the Irvin Family Limited Partnership [hereinafter “IFP”]( see Amended Complaint ¶ 10). Under the terms of the partnership agreement, George and Barbara were named as general partners while the two daughters were named as limited partners. The purpose of the partnership was to provide a vehicle by which the Irvins' personal finances were managed. Upon the death of George Irvin in February 2008, plaintiff Barbara Irwin allegedly assumed the role of sole general partner of the plaintiff IFP and allegedly “placed total responsibility for managing the IRF with the Defendants ( see Amended Complaint ¶ 11). Defendants are further alleged to have “controlled every aspect of Mrs. Irvin's finances” ( see Amended Complaint ¶ 12).

In paragraphs 15–30 and 46–56 of the amended complaint, the defendants are charged with self-dealing and breaches of fiduciary duties as they purportedly “utilized Mrs. Irvin's funds to benefit themselves at Mrs. Irvin's detriment” ( see Amended Complaint ¶ 15). Such conduct began as early as August of 2003, when the defendants allegedly made loans and other payments totaling some $721,000 to various entities with “connections to the defendants ( see Amended Complaint ¶¶ 12–19). In 2004, the defendants allegedly caused the Irvins to borrow money from Jones related entities the proceeds of which were used to fund loans to other of such entities ( see Amended Complaint ¶ 21). Also in 2004, the defendants' used Irvin funds totaling $200,000.00 to invest in the development of a residential spec house in Watermill, New York, which investment was lost in 2009 when the house was sold without repayment of the $200,000.00 “loan” ( see Amended Complaint ¶¶ 22–23). The defendants are further charged with self dealing in orchestrating the November of 2006 investment of some $3,312,000.00 of IFP plaintiff's assets in an office building in Cincinnati, Ohio ( see Amended Complaint ¶ 24). This “TIC” investment was allegedly made without the defendants' engagement in due diligence and with knowledge that it was an ill-suited and imprudent investment for the IFP ( see Amended Complaint ¶¶ 25–28). The defendants are further charged with other defalcations with respect to this investment, including the making of false and misleading statements regarding the availability an exit strategy two years prior to the end of IFP's receipt of positive returns on such investment that occurred in the second half of 2010 ( see Amended Complaint ¶¶ 29–30).

The defendants are further charged with “defective services” in connection with the preparation of tax returns for the years 2006 and 2007 that culminated in the filing of at least one tax lien against the residential real property of plaintiff Barbara Irvin situated in Westhampton Beach, New York (see Amended Complaint ¶¶ 31–40 and 59–67). Damages for all losses associated with alleged imprudent investments that are the subject of the FIRST cause of action and those attributable to faulty tax services that resulted in tax liabilities for the years 2006 and 2007 of not less than $134,795.11 are alleged to have been incurred by reason of the defendants' professional malpractice ( see Amended Complaint ¶ 67)..

At some unidentified time, Di Lonardo allegedly learned that the defendants failed to timely pay her mother's monthly household bills ( see Amended Complaint ¶ 42). On September 17, 2009, plaintiff Barbara Irvin allegedly discovered “some of the Defendants' mismanagement” and thus appointed her daughter Di Lonardo attorney-in-fact to act on the individual plaintiff's behalf with respect to matters of personal finance ( see Amended Complaint ¶ 42). In such capacity, Di Lonardo immediately terminated the defendants' engagement as manager of the Mrs. Irvin's monthly expenses ( see Amended Complaint ¶ 42). On October 21, 2011, Di Lonardo terminated the defendants as “accountants and financial advisors” to the estate of George Irvin and the trust plaintiff, IFP, except with respect to resolving the issue of the liability arising under the 2006 and 2007 tax returns filings of plaintiff, Barbara Irvin ( id.).

The amended complaint contains three causes counts or causes of action. In the FIRST, the defendants are charged with breaching fiduciary duties owing to the individual plaintiff. The conduct complained of includes advising, permitting, orchestrating and undertaking to invest the personal monies belonging to plaintiff Barbara Irvin in the unwise, unsuitable and imprudent investments identified in paragraphs 1–30 and 41–42 of the amended complaint. They are further charged with misleading plaintiff Barbara Irvin into making unfavorable loans and in investing in the TIC. Plaintiff Barbara Irvin demands recovery of damages in amounts equal to lost capital expenditures including the $200,000.00 invested in the Watermill spec house, the interest paid on funds borrowed from the Jones related entities together with all lost returns on loans made to such entities as well as the value of lost capital and lost opportunities by reason of her investment in the TIC building and punitive damages.

In the SECOND cause of action, the plaintiff Barbara Irvin charges the defendants with professional malpractice with respect the defalcations alleged in paragraphs 31–40 and 42 of the amended complaint. Money damages incurred by reason of the 2006 and 2007 tax filings in the amount of $134,795.11 and the recovery of all lost investments and some lost opportunities are demanded. In the THIRD and last cause of action advanced in the complaint, the plaintiffs charge the defendants with the duty to render an accounting of all investments, monies or holdings managed, invested, redeemed paid or otherwise disbursed by the defendants on behalf of or in the name of the plaintiffs since 2002.

By the instant motion, the defendants seek dismissal of all claims except those portions of the malpractice claims set forth in the SECOND cause of action that arise from the purportedly negligent preparation of the 2006 and 2007 personal income tax returns of plaintiff Barbara Irvin. For the reasons stated below the motion is granted.

The legal standard to be applied in evaluating a motion to dismiss pursuant to CPLR 3211(a)(7) is whether “the pleading states a cause of action, not whether the proponent of the pleading has a cause of action” (Marist College v. Chazen Envtl. Serv., 84 AD3d 1181, 923 N.Y.S.2d 695 [2d Dept 2011], quoting Sokol v. Leader, 74 AD3d 1180, 1180–1181, 904 N.Y.S.2d 153 [2d Dept 2010] ). On such a motion to dismiss, the court must accept the facts alleged in the pleading as true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory ( see Goshen v. Mutual Life Ins. Co. of NY, 98 N.Y.2d at 314, 326, 746 N.Y.S.2d 858 [2002];Leon v. Martinez, 84 N.Y.2d 83, 87, 614 N.Y.S.2d 972 [1994] ). However, bare legal conclusions and factual averments flatly contradicted by the record are not presumed to be true ( see Simkin v. Blank, 19 NY3d 46, 945 N.Y.S.2d 222 [2012] );Khan v. MMCA Lease, Ltd., 100 AD3d 833, 2012 WL 5870341 [2d Dept 2012]; U.S. Fire Ins. Co. v. Raia, 94 AD3d 749, 942 N.Y.S.2d 543 [2d Dept 2012]; Parola, Gross & Marino, P.C. v. Susskind, 43 AD3d 1020 [2d Dept 2007] ).

Where a party offers evidentiary proof on a motion pursuant to CPLR 3211(a)(7) and such proof is considered but the motion has not been converted to one for summary judgment, “the criterion is whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one, and, unless it has been shown that a material fact as claimed by the pleader to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it ... dismissal should not eventuate” (Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275, 401 N.Y.S.2d 182 [1997];see Bua v. Purcell & Ingrao, P.C., 99 AD3d 843, 952 N.Y.S.2d 592 [2d Dept 2012]; Jannetti v. Whelan, 97 AD3d 797,...

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