Schneider v. Ben Krupinski Builder LLC
| Decision Date | 15 September 2020 |
| Docket Number | INDEX No. 605318/2020,MTN. SEQ. Nos. 001 MD,002 MD,003 MG |
| Citation | 2020 NY Slip Op 35271 (U) |
| Parties | SCOTT SCHNEIDER, Plaintiff, v. BEN KRUPINSKI BUILDER LLC and BEN KRUPINSKI GENERAL CONTRACTOR, LLC, Defendants. |
| Court | New York Supreme Court |
WESTERMAN BALL EDERER MILLER ZUCKER & SHARFSTEIN, LLP PLAINTIFF'S ATTORNEY
SHORT FORM ORDER
Upon the E-file document list numbered 5 to 70 read on plaintiff's motion for an Order, pursuant to CPLR 602, consolidating this action with the special proceeding entitled Ben Krupinski General Contractor, Inc. v. Schneider, Index No. 6716/2018; on plaintiffs Order to Show Cause for an Order, pursuant to CPLR 2201, staying this action until thirty days after the Appellate Division, Second Department renders a decision on plaintiffs pending appeal in the action entitled Ben Krupinski General Contractor, Inc. v. Schneider, Index No. 6716/2018, or in the alternative, pursuant to CPLR 3217 (b) discontinuing this action without prejudice; on defendant's cross-motion for an Order, pursuant to CPLR 3212, granting summary judgment dismissing the plaintiffs causes of action alleging violations of Debtor Creditor Law §§ 273, 274, and 275 and the declaratory judgment cause of action; it is
ORDERED that the respective motions (motion sequences 001, 002, and 003) are consolidated for purposes of a determination herein; and it is further
ORDERED that plaintiffs motion for an Order, pursuant to CPLR 602, consolidating this action with the special proceeding entitled Ben Krupinski General Contractor, Inc. v. Schneider, Index No. 6716/2018, is hereby DENIED for the reasons set forth herein; and it is further
ORDERED that plaintiffs motion for an Order, pursuant to CPLR 2201, staying this action until thirty days after the Appellate Division, Second Department renders a decision on plaintiffs pending appeal in the action entitled Ben Krupinski General Contractor, Inc. v. Schneider, Index No. 6716/2018, or in the alternative, pursuant to CPLR 3217 (b), discontinuing this action without prejudice, is hereby DENIED for the reasons set forth herein; and it is further
ORDERED that defendants' motion for summary judgment dismissing plaintiffs causes of action alleging violations of Debtor Creditor Law §§ 273, 274, and 275 and the declaratory judgment cause of action, is hereby GRANTED for the reasons set forth herein.
Plaintiff Scott Schneider ("plaintiff1 or "Schneider") commenced this action on March 5, 2020, by the filing of a summons and complaint. Issue was joined on May 22, 2020, through the service and filing of an answer by defendants Ben Krupinski Builder LLC ("BKB") and Ben Krupinski General Contractor, Inc. ("BKGC") (collectively referred to herein as "defendants"). In this action, plaintiff seeks to set aside the August 31, 2018 sale of certain assets of BKGC to BKB (the "subject asset sale"). Plaintiff alleges that the subject asset sale violates Sections 273, 274, and 275 of the New York Debtor Creditor Law ("DCL"). Plaintiff asserts that he is a creditor of BKGC due to his filing of a demand for arbitration on December 4, 2018 (the "arbitration"), over three months after the closing of the subject asset sale. The arbitration demand arises from Schneider's claim that the construction project at his residence located at 6 Pine Point, Lloyd Harbor, New York (the "subject residence"), which was performed by BKGC (the "subject project"), was defective, resulting in pervasive leaks and requiring extensive remedial work. Schneider also seeks a declaration that defendant BKB, as the successor to BKGC, is liable to plaintiff for all debts and obligations allegedly due and owing from BKGC to plaintiff. According to the complaint, Schneider and his wife moved into the subject residence in September of 2010 and have lived there ever since. The Court notes that in a special proceeding commenced by BKGC to stay the arbitration, entitled Ben Krupinski General Contractor, Inc. v. Schneider, Index No. 6716/2018 (the "prior special proceeding"), this Court ruled on May 6, 2020 that the subject project was substantially complete in 2010 and that Schneider's claims for breach of contract against BKGC expired in 2016.
Defendants now move for summary judgment on plaintiffs fraudulent conveyance and declaratory judgment counts and submit, inter alia, an attorney affirmation, the sworn affidavit of Stratton Schellinger, the sworn affidavit of Robert E. White, a copy of the pleadings, newspaper articles, the asset purchase agreement, promissory note, security agreement, guaranties, amended and restated agreements, and a memorandum of law. Plaintiff opposes the motion and submits, inter alia, an attorney affirmation, interrogatories, AIA document, assignment agreement, construction punch list, electronic mail communications, and construction payment. Defendants reply by attorney affirmation. In support of their motion for summary judgment dismissing the complaint, defendants argue that the subject sale was not to defraud creditors but was precipitated by the untimely passing of Bernard J. Krupinski, who was the president and sole shareholder of BKGC. According to the sworn affidavit of Robert White, the executor of the Estate of Bernard J. Krupinski, Mr. Krupinski's certified public accountant for over thirty years, and the new president of BKGC, BKGC and BKB "specifically structured the sale to keep BKGC in financial health for years to come." Mr. White avers it was imperative to assure the completion of at least 15 major ongoing construction projects of BKGC, as its good will was a major contributor to the success of the corporation. Mr. White further avers that the sole beneficiary of Mr. Krupinski's estate was his granddaughter, who was seventeen years old at the time of his passing, and that it was in her best interest to sell certain of the assets of BKGC rather than turn over the management of the construction company to her. According to Mr. White, both Stratton Schellinger and Ray Harden were long-time construction managers for BKGC and to ensure a smooth and seamless transition, Schellingerand Harden created BKB shortly after Mr. Krupinski's death. BKGC and BKB negotiated the subject asset sale over the course of several months and both were represented by counsel during all phases of the transaction.
Mr. White explains that the subject asset sale included not only certain assets of BKGC but also assets of the affiliated company Ben Krupinski Builders & Associates, Inc. ("BKBA"). Mr. White further avers that the asset purchase agreement dated as of August 31, 2018 between BKGC and BKBA as sellers and BKB as purchaser (the "asset purchase agreement"), which he signed on behalf of BKGC, involved a heavily negotiated purchase price that would be paid over a five-year period based upon the net income of BKB. According to Mr. White, the formula, contained in section 2.05 of the asset purchase agreement, was designed to ensure that BKGC would "continue to have an income stream for at least the next five years" and promoted "a healthy cash flow" to BKGC. Specifically, BKGC was guaranteed a payout of fifty-percent of BKB's net income for the first three years and forty-percent of BKB's net income for the final two years. According to Mr. White, the parties arrived at the formula and the scope of the assets to be included in and excluded from the sale after extensive negotiations. Ultimately, the sale of BKGC was of certain selected assets of the company as defined in section 2.01 of the asset purchase agreement, those being, work in progress under executory contracts, certain equipment, name, goodwill and the business phone number. Mr. White explains that the contract between BKGC and Schneider was not included, as it was not an ongoing project, having ben substantially completed ten years earlier and the Schneiders moved into the subject residence in September of 2010. As to the liabilities being assumed by BKB, those were listed in section 2.03 of the asset purchase agreement and included "all liabilities and obligations arising under or relating to the assigned contracts." Inasmuch as the BKGC and Schneider contract was not an assigned contract listed in the asset purchase agreement, BKB did not assume any liabilities arising from the subject project completed in 2010. Mr. White further explains that BKGC extended a revolving line of credit in the amount of two million dollars to BKB to fund BKB's operating costs, which was secured by a promissory note and security agreements from BKB, as well as personal guaranties from Schellinger and Harden. The line of credit accrued interest at a rate often-percent per annum. According to Mr. White, the personal guaranties "protected BKGC's right to a future income stream" and ensured "the payment of the obligation to BKGC, and thus BKGC's ability to generate income, even if BKB fails." Mr. White avers that the purchase formula and the extension of credit to BKB "were intended to ensure that both entities remain solvent, going concerns."
According to the sworn affidavit of Mr. Schellinger, who signed the asset purchase agreement on behalf of BKB, he and Ray Harden worked for many years as construction managers for BKGC. Shortly after Mr. Krupinski's death on June 2, 2018, they formed BKB on June 26, 2018 and offered to purchase BKGC from the Estate in order to save the company they helped Mr Krupinski build, Schellinger avers that BKB...
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