PDK Labs, Inc. v. G.M.G. Trans W. Corp.

• Citation: 2012 N.Y. Slip Op. 08706,101 A.D.3d 970,957 N.Y.S.2d 191
• Parties: PDK LABS, INC., appellant, v. G.M.G. TRANS WEST CORP., et al., respondents.
• Decision Date: 19 December 2012
• Court: New York Supreme Court Appellate Division

101 A.D.3d 970

957 N.Y.S.2d 191

2012 N.Y. Slip Op. 08706

PDK LABS, INC., appellant,

v.G.M.G. TRANS WEST CORP., et al., respondents.

Supreme Court, Appellate Division, Second Department, New York.

Dec. 19, 2012.

Bradley S. Gross, New York, N.Y., for appellant.

Pezold, Smith, Hirschmann & Selvaggio, LLC, Huntington, N.Y. (Raymond A. Selvaggio of counsel), for respondents.

ANITA R. FLORIO, J.P., RUTH C. BALKIN, PLUMMER E. LOTT, and ROBERT J. MILLER, JJ.

In an action, inter alia, to recover damages for conversion, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Suffolk County (Emerson, J.), dated December 16, 2010, as denied its application for leave to enter judgment against the defendants G.M.G. Trans West Corp., Edmund Giza, and John Coviello on the issue of liability, upon their defaults in appearing or answering, granted those branches of the defendants' cross motion which were to vacate the defaults of the defendants G.M.G. Trans West Corp., Edmund Giza, and John Coviello in appearing or answering the complaint, to extend the time for those defendants to appear and answer pursuant to CPLR 2004 and 3012(d), and to dismiss the complaint pursuant to CPLR 3211(a) insofar as asserted against the defendants Edmund Giza, John Coviello, and Ronald Horowitz for failure to state a cause of action, and denied, as academic, its motion pursuant to CPLR 306–b to extend the time to serve the summons and complaint upon the defendant Ronald Horowitz.

ORDERED that on the Court's own motion, the notice of appeal from so much of the order as denied the plaintiff's application for leave to enter judgment against the defendants G.M.G. Trans West Corp., Edmund Giza, and John Coviello on the issue of liability, upon their defaults in appearing or answering, is treated as an application for leave to appeal, and leave to appeal from that portion of the order is granted ( seeCPLR 5701[c] ); and it is further,

ORDERED that the order is modified, on the law and in the exercise of discretion, (1) by deleting the provision thereof granting that branch of the defendants' cross motion which was to dismiss the complaint insofar as asserted against the defendants Edmund Giza and John Coviello, and substituting therefor a provision denying that branch of the defendants' cross motion, and (2) by deleting the provision thereof denying, as academic, the plaintiff's motion pursuant to CPLR 306–b to extend the time to serve the summons and complaint upon the defendant Ronald Horowitz, and substituting therefor a provision denying the plaintiff's motion on the merits; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.

The plaintiff hired the defendant G.M.G. Trans West Corp. (hereinafter GMG) to transport, from New York to California, certain over-the-counter pharmaceuticals manufactured by the plaintiff. The complaint alleged that, once GMG took possession of the pharmaceuticals, it demanded payment for amounts allegedly owed to it by the plaintiff. When the plaintiff refused to pay, GMG refused to transport the pharmaceuticals and stored them in an undisclosed warehouse. The plaintiff demanded that GMG either deliver the pharmaceuticals to California or return them to the plaintiff, but GMG did not comply with the plaintiff's demand.

The plaintiff commenced this action asserting one cause of action against GMG, two of its principals, Edward Giza and John Coviello, and its attorney, Ronald Horowitz. The plaintiff effected service upon GMG, Edmund Giza, and John Coviello. However, the plaintiff failed to complete service with respect to Ronald Horowitz.

GMG, Giza, and Coviello failed to timely appear or answer the complaint. The plaintiff interposed an application for leave to enter judgment against those defendants on the issue of liability, upon their defaults in appearing or answering. The defendants cross-moved to vacate the defaults of GMG, Giza, and Coviello, to extend their time to appear and answer pursuant to CPLR 2004 and 3012(d), and to dismiss the complaint pursuant to CPLR 3211(a)(7) insofar as asserted against the individual defendants. The defendants also, inter alia, cross-moved to dismiss the complaint insofar as asserted against Horowitz pursuant to CPLR 3211(a)(8) for lack of personal jurisdiction. Thereafter, the plaintiff moved pursuant to CPLR 306–b to extend the time to serve the summons and complaint upon Horowitz.

The Supreme Court denied the plaintiff's application for leave to enter a default judgment against GMG, Giza, and Coviello, and granted that branch of the defendants' cross motion which was to vacate their defaults. The Supreme Court also granted that branch of the defendants' cross motion which was to dismiss the complaint pursuant to CPLR 3211(a)(7) insofar as asserted against the individual defendants. Furthermore, the Supreme Court denied, as academic, the plaintiff's motion pursuant to CPLR 306–b to extend the time to serve the summons and complaint upon Horowitz and denied that branch of the defendants' cross motion which was to dismiss the complaint insofar as asserted against the defendant Ronald Horowitz pursuant to CPLR 3211(a)(8) for lack of personal jurisdiction.

The defaults of GMG, Giza, and Coviello in appearing or answering the complaint were properly excused given the lack of any prejudice to the plaintiff resulting from the short two-week delay, the lack of willfulness on the part of these defendants who defaulted in appearing, the existence of potentially meritorious defenses, and the public policy favoring the resolution of cases on the merits ( see Zeccola & Selinger, LLC v. Horowitz, 88 A.D.3d 992, 993, 931 N.Y.S.2d 536;Feder v. Eline Capital Corp., 80 A.D.3d 554, 555, 914 N.Y.S.2d 659;Stuart v. Kushner, 39 A.D.3d 535, 536, 833 N.Y.S.2d 187;Schonfeld v. Blue & White Food Prods. Corp., 29 A.D.3d 673, 674, 814 N.Y.S.2d 711). Accordingly, the Supreme Court providently exercised its discretion in denying the plaintiff's application for leave to enter judgment against these defendants on the issue of liability, upon their defaults in appearing or answering, and in granting those branches of the defendants' cross motion which were to vacate the defaults of those defendants in appearing or answering the complaint and to extend their time to appear and answer ( seeCPLR 2004, 3012[d] ).

However, the Supreme Court erred in granting that branch of the defendants' cross motion which was to dismiss the complaint pursuant to CPLR 3211(a)(7) insofar as asserted against the individual defendants. “A party may move for judgment dismissing one or more causes of action asserted against [it] on the ground that ... the pleading fails to state a cause of action” (CPLR 3211[a] [7] ). “When assessing the adequacy of a complaint in light of a CPLR 3211(a)(7) motion to dismiss, the court must afford the pleadings a liberal construction, accept the allegations of the complaint as true and provide plaintiff ... ‘the benefit of every possible favorable inference’ ” ( AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 5 N.Y.3d 582, 591, 808 N.Y.S.2d 573, 842 N.E.2d 471, quoting Leon v. Martinez, 84 N.Y.2d 83, 87, 614 N.Y.S.2d 972, 638 N.E.2d 511). “Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss” ( EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 19, 799 N.Y.S.2d 170, 832 N.E.2d 26).Rather, a court must “determine only whether the facts as alleged fit within any cognizable legal theory” ( Leon v. Martinez, 84 N.Y.2d at 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511;see Sokoloff v. Harriman Estates Dev. Corp., 96 N.Y.2d 409, 414, 729 N.Y.S.2d 425, 754 N.E.2d 184).

Here, the complaint alleges a single cause of action to recover damages for conversion against each of the individual defendants. “Conversion is the unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights” ( State of New York v. Seventh Regiment Fund, 98 N.Y.2d 249, 259, 746 N.Y.S.2d 637, 774 N.E.2d 702 [internal quotation marks omitted] ). “[T]o establish a cause of action in conversion, the plaintiff must show legal ownership or an immediate superior right of possession to a specific identifiable thing and must show that the defendant exercised an unauthorizeddominion over the thing in question ... to the exclusion of the plaintiff's rights” ( Batsidis v. Batsidis, 9 A.D.3d 342, 343, 778 N.Y.S.2d 913 [internal quotation marks omitted]; see Castaldi v. 39 Winfield Assoc., 30 A.D.3d 458, 458, 820 N.Y.S.2d 279).

“A corporate officer may be liable for torts committed by or for the benefit of the corporation if the officer participated in their commission” ( Hamlet at Willow Cr. Dev. Co., LLC v. Northeast Land Dev. Corp., 64 A.D.3d 85, 116, 878 N.Y.S.2d 97;see Aguirre v. Paul, 54 A.D.3d 302, 304, 862 N.Y.S.2d 580;Retropolis, Inc. v. 14th St. Dev. LLC, 17 A.D.3d 209, 211, 797 N.Y.S.2d 1;Greenway Plaza Off. Park–1 v. Metro Constr. Servs., 4 A.D.3d 328, 329–330, 771 N.Y.S.2d 532). Accordingly, “[a]n individual, even though acting for a corporation of which he is an officer, may be held liable for conversion” ( Melnick v. Sable, 11 A.D.2d 1075, 1075, 206 N.Y.S.2d 825;see Hinkle Iron Co. v. Kohn, 229 N.Y. 179, 184, 128 N.E. 113;Goldstein v. Guida, 74 A.D.3d 1143, 1144, 904 N.Y.S.2d 117;Ingram v. Machel & Jr. Auto Repair, 148 A.D.2d 324, 325, 538 N.Y.S.2d 539;Prudential–Bache Sec. v. Golden Larch–Sequoia, 118 A.D.2d 487, 488, 500 N.Y.S.2d 1;McCrea v. McClenahan, 131 App.Div. 247, 248, 115 N.Y.S. 720;see also14A N.Y. Jur. 2d, Business Relationships § 777).

However, “[a] director or...