Motion for Summary Adjudication in Leonard Usa, Llc v. 391 Leonard St. Llc, Michael Ricatto| Trellis.Law

On April 19, 2017 a Motion-Secondary was filed involving a dispute between Leonard Usa, Llc, and 391 Leonard St. Llc, Michael Ricatto, for Commercial Division in the District Court of Kings County.

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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF KINGS
---------------------------------------------------------------------------------x
: Index No.
LEONARD USA, LLC : 507688/2017
:
Plaintiff, :
:
-against- :
:
391 LEONARD ST. LLC and MICHAEL RICATTO, :
:
Defendants. :
:
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DEFENDANTS’ MEMORANDUM OF LAW IN FURTHER SUPPORT
OF THEIR MOTION TO DISMISS AND IN OPPOSITION
TO PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT

Jeffrey A. Cohen, Esq.
Flaster/Greenberg P.C.
427 Bedford Road, Suite 390
Pleasantville, NY 10570
Tel: (856) 382-2240
Attorneys for Defendants
Jeff.Cohen@flastergreenberg.com

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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .......................................................................................................... ii
I. PRELIMINARY STATEMENT ........................................................................................... 1
II. STATEMENT OF FACTS .................................................................................................... 2
A. Markowitz and Leonard USA Never Closed on the Property
and Forfeited the $1.7 Million Dollars Because Leonard USA
Breached the Contract .................................................................................... 3
B. The Contract Contained Numerous Provisions Providing for a
Transfer, Assignment, and Assumption of Leases and Others
Tenant Obligations ......................................................................................... 3
C. Leonard USA Forfeited the Funds to 391 Leonard, and 391
Leonard Is Still a Solvent Company .............................................................. 4
III. LEGAL ARGUMENT ........................................................................................................... 5
A. Plaintiff’s Motion for Partial Summary Judgment Should Be
Denied Because There Are Numerous Genuine Issues of
Material Fact in Dispute, and Discovery Has Yet to Begin,
Rendering the Motion Utterly Premature. ..................................................... 5
1. Leonard USA Breached the Contract Because It Never Elected to Close on the
Property Since Leonard USA Lacked Sufficient Funding. ........................................... 6
2. Plaintiff’s Interpretation of the Contract Requiring Defendants to Deliver the
Property Free and Clear of All Leases Is Incorrect Because the Contract Also
Contains Contradictory Provisions Regarding the Transfer and Assignment of
Leaseholds and Tenant Obligations. ............................................................................. 7
B. Defendant Ricatto Should Be Dismissed from this Action and
Counts Two, and Four through Nine Should Be Dismissed
Against 391 Leonard Because the Complaint’s Conclusory
Allegations Fail to State Viable Causes of Action......................................... 9
1. Unjust Enrichment – Second Cause of Action .................................................... 9
2. Attorney’s Fees Pursuant to the Agreement – Third Cause of Action .............. 10
3. Debtor and Creditor Law § 273-a – Fourth Cause of Action ............................ 10
4. Debtor and Creditor Law §§ 273, 274, and 275 – Fifth, Eighth, and Ninth
Causes of Action ......................................................................................................... 11
5. Debtor and Creditor Law §§ 276 and 276-a – Sixth and Seventh Causes of
Action .......................................................................................................................... 12
IV. CONCLUSION .................................................................................................................... 13

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TABLE OF AUTHORITIES

Page(s)
FEDERAL CASES

Jackson v. Odenat,
9 F. Supp. 3d 342, 365 (S.D.N.Y. 2014) .................................................................................11

Mitchell v. Garrison Protective Servs., Inc.,
819 F.3d 636 (2d Cir. 2016).....................................................................................................11

STATE CASES

1000 N. of N.Y. Co. v. Great Neck Med. Assocs.,
7 A.D.3d 592 (2nd Dep’t 2004) .................................................................................................8

Amico v. Melville Volunteer Fire Co.,
39 A.D.3d 784 (2nd Dep’t 2007) ...............................................................................................5

Baron v. Galasso,
83 A.D.3d 626 (2nd Dep’t 2011) .............................................................................................12

Bettan v. Geico Gen. Ins. Co.,
296 A.D.2d 469 (2nd Dep’t 2002) .............................................................................................9

Black Car & Livery Ins., Inc. v. H & W Brokerage, Inc.,
28 A.D.3d 595 (2nd Dep’t 2006) .............................................................................................10

Cooper, Bamundo, Hecht & Longworth, LLP v. Kuczinski,
14 A.D.3d 644 (2nd Dep’t 2005) ...............................................................................................9

E. Hampton Union Free Sch. Dist. v. Sandpebble Builders, Inc.,
66 A.D.3d 122 (2009), aff’d, 16 N.Y.3d 775, 944 N.E.2d 1135 (2nd Dep’t
2011) ....................................................................................................................................9, 10

Elliot v. Cty. of Nassau,
53 A.D.3d 561 (2nd Dep’t 2008) ...............................................................................................5

Gaetano Dev. Corp. v. Lee,
121 A.D.3d 838 (2nd Dep’t 2014) ...........................................................................................12

Gruenfeld v. City of New Rochelle,
72 A.D.3d 1025 (2nd Dep’t 2010) .............................................................................................5

Hutchinson v. Sheridan Hill House Corp.,
26 N.Y.3d 66, 41 N.E.3d 766 (N.Y. 2015) ................................................................................5

Rapone v. Di-Gara Realty Corp.,
22 A.D.3d 654 (2nd Dep’t 2005) ...............................................................................................8

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Ray v. Ray,
108 A.D.3d 449 (1st Dep’t 2013) ............................................................................................12

S.E.M. Sec. Sys., Inc. v. Earl Lorence Enterprises,
120 A.D.3d 1211 (2nd Dep’t 2014) ...........................................................................................5

Swartz v. Swartz,
145 A.D.3d 818 (2nd Dep’t 2016) ...........................................................................................13

STATE STATUTES

Debtor and Creditor Law §§ 273, 274, and 275 ............................................................................11

Debtor and Creditor Law § 273-a ..................................................................................................10

Debtor and Creditor Law §§ 276 and 276-a ............................................................................12, 13

RULES

CPLR 3016(b) ..........................................................................................................................12, 13

CPLR 3211(a)(7) ...............................................................................................................11, 12, 13

CPLR 3211(c) ..................................................................................................................................5

CPLR 3212(b) ..............................................................................................................................5, 8

CPLR § 3211(a)(7) ..........................................................................................................................2

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I. PRELIMINARY STATEMENT

Defendants 391 Leonard St. LLC (“391 Leonard”) and Michael Ricatto (“Ricatto”)

(collectively, “Defendants”) submit this memorandum of law in further support of their motion

to partially dismiss the complaint and in opposition to Plaintiff, Leonard USA, LLC’s

(“Plaintiff” or “Leonard USA”) motion for partial summary judgment.

As set forth in Defendants’ initial memorandum of law, Plaintiff brought this action in a

malicious and transparent attempt at retaliation for a similar action that has been pending for

over two years in the Supreme Court of New York, County of New York. Plaintiff’s action is

meritless and should be partially dismissed for the reasons set forth in Defendants’ initial

memorandum of law.

Now, in an effort to force the Defendants to expend additional resources, Plaintiff has

filed an untimely and extremely premature cross-motion for partial summary judgment, even

though there are numerous issues of material fact in dispute, and discovery has yet to begin.

Plaintiff’s allegations are directly refuted by the Affidavit of Michael Ricatto (“Ricatto

Aff.”), the Second Affidavit of Michael Ricatto (“Ricatto Second Aff.”), the Affidavit of Joseph

Treff, Esq. (“Treff Aff.”), and the agreement between the parties. Ricatto and Treff have both

testified that Plaintiff failed to close on the property at 405 Leonard Street, Brooklyn, New York

(the “Property”), despite Defendant 391 Leonard being ready, willing, and able, and Plaintiff did

not seek a return of its $1.7 million dollars for numerous years because Plaintiff was cognizant of

the fact that it defaulted under the Purchase and Sale Agreement (the “Contract”).

Plaintiff alleges that it could not close on the Property because the Contract required the

Property to be delivered free and clear of all tenants and leases. Even assuming arguendo

Plaintiff genuinely sought to have the Property delivered free and clear of all tenants and leases,

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which it did not, 391 Leonard still never had the obligation or opportunity to do so unless and

until Plaintiff notified Defendants that it was ready, willing and able to close on the Property,

which again it did not. Furthermore, the Contract actually contradicts Plaintiff’s assertion

regarding delivering the Property free and clear, as it also provides an assignment and

assumption of leases from seller to buyer, and specifically lists the leases on a schedule attached

to the Contract. See Ricatto Second Aff., Exhibit 1, at ¶ 6(b) and p. 19. Moreover, the Contract

accounts for the transfer of existing leases and tenant obligations from buyer to seller in six

different places. See id. at ¶ 1(e), ¶ 6(b), ¶ 7(b), ¶ 8(a)(i), ¶ 8(c), and ¶ 8(d). Between the

Contract and the sworn testimony of Michael Ricatto and Joseph Treff, Esq., it is evident that

there are numerous genuine issues of material fact in dispute, and Plaintiff’s motion for partial

summary judgment should be denied in its entirety.

Accordingly, Defendants’ respectfully request that the Court deny Plaintiff’s motion for

partial summary judgment in its entirety, grant Defendants’ motion, dismiss all claims against

Mr. Ricatto, and dismiss Counts Two, and Four through Nine against 391 Leonard, pursuant to

CPLR § 3211(a)(7).

II. STATEMENT OF FACTS

On December 5, 2012, 391 Leonard entered into the Contract with Leonard USA,

whereby, among other things, 391 Leonard agreed to sell the Property to Leonard USA. Leonard

USA remitted a total of $1.7 million (in two installments) to 391 Leonard (the “Funds”),

pursuant to the Contract, which served as a security deposit for the Property, to provide Leonard

USA an exclusive period to be the purchaser of the Property, and an obligation on behalf of

Leonard USA to close on the Property. Statement of Undisputed Material Facts ¶¶ 1-2.

Section 2 of the Contract specifically provides that: “If [Leonard USA] shall default in

the performance of any of Purchaser’s obligations in [the Contract] and/or shall fail to close title

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pursuant to the terms of [the Contract] for any reason, then Seller will be entitled to retain the

[Funds] as liquidated damages for any such default.” 391 Leonard transferred the Funds to an

escrow account maintained by its legal counsel, Treff & Lowly, Pllc. Id. at ¶¶ 3-4.

A. Markowitz and Leonard USA Never Closed on the Property and Forfeited
the $1.7 Million Dollars Because Leonard USA Breached the Contract

Sam Markowitz, the principal of Leonard USA, and their legal counsel Louis Tratner,

Esq. (“Tratner”) never inquired about whether, or when, the Property would be vacant.

Markowitz, Leonard USA, and Tratner never requested that the Property be vacated to proceed

with the closing and never requested that the closing proceed. Markowitz, Leonard USA, and

Tratner never stated that they were ready, willing and able to close on the Property. Id. at ¶¶ 5-7.

In or about December of 2012, 391 Leonard was ready, willing, and able to close on the

Property. In or about December of 2012 and the first few months of 2013, Ricatto spoke directly

with Markowitz who told him on at least three occasions that: (1) he was not going to close on

the Property; (2) he did not obtain the funding to pay the final purchase price and close; and (3)

he was forfeiting the $1.7 million deposit. Tratner also told Defendants’ legal counsel, Joseph

Treff, Esq. (“Treff”) that Leonard USA was not going to close on the Property, and thus,

Leonard USA was in default under the Contract. In addition, Tratner stated that Leonard USA

was not seeking return of the Funds and understood that the Funds were to be forfeited pursuant

to Section 2 of the Contract. Treff also heard Markowitz state that Leonard USA was not going

to close on the Property, Leonard USA could not get the funding to pay the remainder of the

purchase price and that Markowitz would not be entitled to return of the Funds. Id. at ¶¶ 8-12.

B. The Contract Contained Numerous Provisions Providing for a Transfer,
Assignment, and Assumption of Leases and Others Tenant Obligations

Pursuant to the Contract, 391 Leonard was under no obligation to remove the tenant from

the Property until Leonard USA indicated that it was ready, willing, and able to close on the

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Property. The Contract provides that the Purchaser agrees to purchase “[t]he interest of Seller, as

landlord, in all leasehold estates created by those certain leases that are described in the Schedule

of Leases attached [to the Contract] as Schedule ‘A’.” The Contract provides for an assignment

and assumption of leases, “assigning to Purchaser all of Seller’s right, title and interest in and to

the Leases and the rents thereunder, which Purchaser shall execute to evidence its assumption of

rights and obligations thereunder.” At closing, the Purchaser was obligated to deliver the

executed Assignment and Assumption of leases, and Tenant Notices, to the Seller. The Contract

provides for an apportionment of present and future rents from an existing tenant on the

Property. Id. at ¶¶ 13-17.

Even if Markowitz wanted to obtain the Property free and clear of all leasehold estates,

there was no obligation on 391 Leonard’s part to comply with this request because Markowitz

said that he was not closing on the Property. Pursuant to the Contract, 391 Leonard was under

no obligation to remove the tenant from the Property until Leonard USA indicated that it was

ready, willing, and able to close on the Property. Id. at ¶¶ 18-19.

C. Leonard USA Forfeited the Funds to 391 Leonard, and 391 Leonard Is Still a
Solvent Company

In reliance upon the representations of Leonard USA, 391 Leonard retained the Funds for

the Property, pursuant to Section 2 of the Contract. From 2013 to 2016, Leonard USA did not

ask for the Funds to be returned or assert any claim of right to the money. Id. at ¶¶ 20-21.

391 Leonard still owns the Property. 391 Leonard does not have any debts and is a

solvent company. 391 Leonard receives monthly rent checks of approximately $10,000.00 from

the current tenant at the Property. 391 Leonard was not a party to any lawsuits for money

damages and did not have any judgments docketed against it at any time that money was

transferred from 391 Leonard to Ricatto. Id. at ¶¶ 22-25.

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III. LEGAL ARGUMENT

A. Plaintiff’s Motion for Partial Summary Judgment Should Be Denied Because
There Are Numerous Genuine Issues of Material Fact in Dispute, and
Discovery Has Yet to Begin, Rendering the Motion Utterly Premature.

Plaintiff’s motion for partial summary judgment must be denied because there are

numerous genuine issues of material fact in dispute, and moreover, the motion is utterly

premature as the parties have not yet started to conduct discovery. At this stage, Plaintiff has

moved for partial summary judgment pursuant to CPLR 3211(c), which allows for a party to

submit evidence that converts a motion to dismiss into one for summary judgment.

Pursuant to CPLR 3212(b), a court shall only grant a motion for summary judgment if

“upon all papers and proof submitted, the cause of action or defense shall be established

sufficiently to warrant the court as a matter of law in directing judgment in favor of any party.”

In examining a motion for summary judgment, the court must assess whether the defendant has

made a “prima facie showing of entitlement to judgment as a matter of law before the burden

shifts to the party opposing the motion to establish the existence of a material issue of fact.”

Hutchinson v. Sheridan Hill House Corp., 26 N.Y.3d 66, 79, 41 N.E.3d 766, 774 (N.Y. 2015).

However, a motion for summary judgment must “be denied if any party shall show facts

sufficient to require a trial of any issue of fact.” CPLR 3212(b); see also S.E.M. Sec. Sys., Inc. v.

Earl Lorence Enterprises, 120 A.D.3d 1211, 1214 (2nd Dep’t 2014) (denying summary

judgment for plaintiff for failure to establish the absence of material issues of fact).

Moreover, New York courts have consistently denied summary judgment motions as

premature when discovery has not yet taken place. See Gruenfeld v. City of New Rochelle, 72

A.D.3d 1025, 1026 (2nd Dep’t 2010) (denying motion for summary judgment as premature since

discovery had not yet been conducted); Elliot v. Cty. of Nassau, 53 A.D.3d 561, 563 (2nd Dep’t

2008) (denying summary judgment as premature because no discovery had taken place); Amico

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v. Melville Volunteer Fire Co., 39 A.D.3d 784, 785 (2nd Dep’t 2007) (“A party should be

afforded a reasonable opportunity to conduct discovery prior to the determination of a motion for

summary judgment”).

Here, the sworn testimony of Ricatto and Treff, as well as the ambiguities in the Contract,

all establish numerous genuine issues of material fact in dispute. In addition, since discovery has

not yet occurred, Plaintiff’s motion is untimely and premature. Accordingly, Plaintiff’s motion

for partial summary judgment must be denied.

1. Leonard USA Breached the Contract Because It Never Elected to Close on
the Property Since Leonard USA Lacked Sufficient Funding.

Plaintiff’s allegations regarding 391 Leonard’s breach of the Contract are directly

rebutted by the sworn testimony of Michael Ricatto and Joseph Treff, Esq. Plaintiff alleges that

391 Leonard breached the Contract when it indicated that it could not deliver the Property free

and clear of all leases and tenants. Plaintiff’s Opposition, NYSCEF Doc. No. 20, at 5. In fact, it

was Leonard USA that breached the Contract by failing to close on the Property and pay the final

purchase price as required by the Contract. See Contract, attached to Second Ricatto Aff. as Ex.

1, at ¶ 3(b) and ¶ 4. Both Markowitz, the principal of Leonard USA, and his attorney Tratner

stated that they were not closing on the Property.

In or about December of 2012 and the first few months of 2013, Ricatto spoke directly

with Markowitz who told him on at least three occasions that: (1) he was not going to close on

the Property; (2) he did not obtain the funding to pay the final purchase price and close; and (3)

he was forfeiting the $1.7 million deposit. Second Ricatto Aff. ¶ 9. In addition, Treff heard

Markowitz state that Leonard USA was not going to close on the Property, Leonard USA could

not get the funding to pay the remainder of the purchase price and that Markowitz would not be

entitled to return of the Funds. Treff Aff. ¶ 14.

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Tratner also told Treff that Leonard USA was not going to close on the Property, and

thus, Leonard USA was in default under the Contract. Id. at ¶ 12. In addition, Tratner stated that

Leonard USA was not seeking return of the Funds and understood that the Funds were to be

forfeited pursuant to Section 2 of the Contract. Id. at ¶ 13.

Accordingly, there are numerous genuine issues of material fact in dispute regarding the

parties’ behavior after executing the Contract. As such, summary judgment would be wildly

inappropriate, especially in favor of the Plaintiff at the commencement of the action before any

discovery has taken place.

2. Plaintiff’s Interpretation of the Contract Requiring Defendants to Deliver
the Property Free and Clear of All Leases Is Incorrect Because the
Contract Also Contains Contradictory Provisions Regarding the Transfer
and Assignment of Leaseholds and Tenant Obligations.

Defendants have presented evidence that Plaintiff never elected to close on the Property

because Plaintiff lacked funding, and thus, Defendants could not possibly have breached the

Contract. However, even assuming that Plaintiff elected to close on the Property, which it

NEVER did, Plaintiff cherry-picked a few provisions from the Contract, while ignoring other

relevant language. Plaintiff alleges that the Contract mandated that the Property be delivered

free and clear of all leases and tenants, and 391 Leonard breached the Contract by failing to

deliver it in this manner. However, the very same Contract in six different places accounts for

the transfer and assignment of leaseholds and tenants obligations. For example:

The Contract provides that the Purchaser agrees to purchase “[t]he interest of
Seller, as landlord, in all leasehold estates created by those certain leases that are
described in the Schedule of Leases attached [to the Contract] as Schedule ‘A’.”
Second Ricatto Aff., Ex. 1, at ¶ 1(e).

The Contract provides for an assignment and assumption of leases, “assigning to
Purchaser all of Seller’s right, title and interest in and to the Leases and the rents
thereunder, which Purchaser shall execute to evidence its assumption of rights and
obligations thereunder.” Id. at ¶ 6(b).

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At closing, the Purchaser was obligated to deliver the executed Assignment and
Assumption of leases, and Tenant Notices, to the Seller. Id. at ¶ 7(b).

The Contract provides for an apportionment of present and future rents from an
existing tenant on the Property. Id. at ¶ 8(a)(i), 8(c), and 8(d).

Since the Contract clearly contains provisions that contradict Plaintiff’s very premise for

summary judgment, the motion must be denied. It is well settled that when the language of a

contract is unclear, ambiguous, or susceptible to multiple interpretations, “its construction

presents a question of fact which may not be resolved by the court on a motion for summary

judgment.” 1000 N. of N.Y. Co. v. Great Neck Med. Assocs., 7 A.D.3d 592, 593 (2nd Dep’t

2004); see also Rapone v. Di-Gara Realty Corp., 22 A.D.3d 654, 656 (2nd Dep’t 2005) (denying

summary judgment where terms of contract are unclear and in dispute).

In addition, it is illogical to suggest that 391 Leonard should have removed its paying

tenant from the Property before Plaintiff informed Defendants that it was ready willing and able

to close, and the closing occurred. Not only is there no obligation under the Contract, but it does

not make any business sense to remove a tenant paying thousands of dollars in monthly rent

before the final sale of the Property had been consummated. If Leonard USA had actually

elected to close on the Property, 391 Leonard would have been tasked with removing the tenant

by the date of closing, but not before that time. If, as here, Leonard USA failed to close, but

Defendants had vacated the tenants prematurely, Defendants would be left to suffer significant

undue financial hardship caused by the loss of the tenant(s).

Accordingly, Defendants have put forth numerous issues of material fact in dispute that

warrant the denial of Plaintiff’s motion for partial summary judgment. See CPLR 3212(b).

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B. Defendant Ricatto Should Be Dismissed from this Action and Counts Two,
and Four through Nine Should Be Dismissed Against 391 Leonard Because
the Complaint’s Conclusory Allegations Fail to State Viable Causes of
Action.

Plaintiff’s opposition fails to counter the binding case law put forward by Defendants as

to why each of these causes of action must be dismissed. Instead, Plaintiff relies on a “piercing

the corporate veil theory” (which it failed to plead) in an effort to buttress its unsubstantiated

allegations. All claims against Defendant Ricatto in Plaintiff’s Complaint should be dismissed

for failure to state a cause of action because they rely on conclusory allegations that are

insufficiently pled and are directly refuted by the Affidavit of Michael Ricatto. In addition,

Counts Two, and Four through Nine of the Complaint should be dismissed against Defendant

391 Leonard for the same reasons.

1. Unjust Enrichment – Second Cause of Action

It is black letter law that when a party asserts a claim for breach of contract and a claim

for unjust enrichment to recover “damages for events arising from the same subject matter that is

governed by an enforceable contract[,]” the unjust enrichment claim should be dismissed as

duplicative. Bettan v. Geico Gen. Ins. Co., 296 A.D.2d 469, 470 (2nd Dep’t 2002); see also

Cooper, Bamundo, Hecht & Longworth, LLP v. Kuczinski, 14 A.D.3d 644, 645 (2nd Dep’t

2005). In its response, Plaintiff did not cite any case law or seek to dispute the mandatory

authority. Instead, Plaintiff suggested that the claim should be allowed to exist “in the

alternative” despite binding case law providing that it must be dismissed. Accordingly, binding

case law warrants that the unjust enrichment claim should be dismissed as to all Defendants.

In addition, Plaintiff is not permitted to assert an “unjust enrichment” claim against a

member of an LLC as an end-around to pierce the corporate veil. See E. Hampton Union Free

Sch. Dist. v. Sandpebble Builders, Inc., 66 A.D.3d 122, 126, (2009), aff'd, 16 N.Y.3d 775, 944

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N.E.2d 1135 (2nd Dep’t 2011) (“A plaintiff seeking to pierce the corporate veil must

demonstrate that a court in equity should intervene because the owners of the corporation

exercised complete domination over it in the transaction at issue and, in doing so, abused the

privilege of doing business in the corporate form, thereby perpetrating a wrong that resulted in

injury to the plaintiff”). Here, Plaintiff has pled no such allegations that would rise to the level

of piercing the corporate veil, and it is improper for Plaintiff to set forth new allegations for the

first time in its opposition to Defendants’ motion to dismiss. Accordingly, the unjust enrichment

claim must be dismissed. See id. at 128-29 (“The policy inherent in allowing individuals to

conduct business in the corporate form so as to shield themselves from personal liability would

be seriously threatened were we to allow an insufficient cause of action to survive, at least to the

summary judgment stage, merely on the plaintiff's hope that something will turn up.”).

2. Attorney’s Fees Pursuant to the Agreement – Third Cause of Action

Ricatto was not a party to the Contract, and this cause of action must be dismissed against

him personally. See Contract, attached to Ricatto Aff. as Exhibit 1 at 17-18; see also Black Car

& Livery Ins., Inc. v. H & W Brokerage, Inc., 28 A.D.3d 595, 595 (2nd Dep’t 2006) (breach of

contract cause of action properly dismissed as to defendant who was not a party to the

agreement). Plaintiff did not dispute this binding case law in its response, but instead,

improperly suggested that all claims should be sustained under a “piercing the corporate veil”

theory which was not pled in the initial complaint. Accordingly, the law is clear, and this cause

of action must be dismissed as to Ricatto.

3. Debtor and Creditor Law § 273-a – Fourth Cause of Action

In order to establish a cause of action under DCL § 273-a, a plaintiff must show: “(1) that

the conveyance was made without fair consideration; (2) that the conveyor is a defendant in an

action for money damages or that a judgment in such action has been docketed against him; and

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(3) that the defendant has failed to satisfy the judgment.” Mitchell v. Garrison Protective Servs.,

Inc., 819 F.3d 636, 641 (2d Cir. 2016). This claim must be dismissed because Plaintiff has failed

to plead elements two and three. See Complaint at ¶¶ 39-43. In Plaintiff’s opposition, it did not

even attempt to defend this claim. Clearly, Plaintiff realizes that it failed to plead elements two

and three, there are no facts to support those elements, and this claim must be dismissed pursuant

to CPLR 3211(a)(7).

4. Debtor and Creditor Law §§ 273, 274, and 275 – Fifth, Eighth, and Ninth
Causes of Action

Under DCL §§ 273-275, a party challenging a conveyance as constructively fraudulent

must allege that the conveyance was made without fair consideration and resulted in one of the

following: (1) the conveyor was rendered insolvent as a result of the conveyance (§ 273); (2) the

conveyor was left with unreasonably small capital (§ 274); or (3) the conveyor intended or

believed that it would incur debts beyond its ability to repay when those debts matured (§ 275).

See Jackson v. Odenat, 9 F. Supp. 3d 342, 365 (S.D.N.Y. 2014) (internal quotation omitted).

The Ricatto Affidavit submitted in support of Defendants’ initial memorandum of law

establishes that 391 Leonard was not rendered insolvent by any transfers, does not have

unreasonably small capital, still owns the property which is worth well above $1.7 million

dollars, does not have any debts, and earns monthly income from a current tenant. Ricatto Aff.

at ¶¶ 11-13. Plaintiff’s unfounded allegations alleged upon “information and belief” must be

disregarded.

In its opposition Plaintiff states that this issue “is a matter of fact to be determined by

these proceedings and is not a valid cause to dismiss.” Plaintiff’s Opposition, at 9-10. The

defendants have submitted sworn testimony to refute Plaintiff’s specious allegations. In

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response, Plaintiff has offered no sworn testimony on the subject, as, tellingly, there is no

mention of the solvency of 391 Leonard in the Affirmation of Sam Markowitz.

Although the court generally assumes that all factual allegations in a plaintiff’s pleading

are presumed to be true, threadbare legal conclusions are not afforded the same benefit. See

Baron v. Galasso, 83 A.D.3d 626, 628 (2nd Dep’t 2011) (“Bare legal conclusions asserted in a

complaint… are not presumed to be true). Plaintiff failed to plead any factual allegations in

support of these legal conclusions, and instead, merely recited the elements of the various causes

of action while substituting in the parties at hand. Accordingly, the pleading is deficient on its

face, the affidavit refutes any basis for these claims, and these causes of action should be

dismissed as to all Defendants pursuant to CPLR 3211(a)(7).

5. Debtor and Creditor Law §§ 276 and 276-a – Sixth and Seventh Causes of
Action

In its response, Plaintiff incorrectly states: “Defendants argue that Plaintiff has not

alleged any factual information to support an allegation that defendants are debtors of plaintiffs.”

Plaintiff’s Opposition at 11. Defendants made no such argument in their initial memorandum of

law. See Memorandum of Law in Support of Defendants’ Motion to Dismiss, NYSCEF Doc.

No. 8, at 9-10.

Instead, Defendants argued that Plaintiff’s allegations regarding fraud lack the

particularity required by CPLR 3016(b). See Ray v. Ray, 108 A.D.3d 449, 451–52 (1st Dep’t

2013) (finding general statements of suspicious timing and hasty actions alongside conclusory

language regarding fraud were insufficient to support a cause of action for actual intent to

defraud); Gaetano Dev. Corp. v. Lee, 121 A.D.3d 838, 840 (2nd Dep’t 2014) (dismissing claims

under DCL §§ 276 and 276-a because the causes of action were not pleaded with sufficient

particularity).

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In order to establish a cause of action under DCL § 276, a plaintiff must claim that a

conveyance was fraudulent because it was made “with actual intent, as distinguished from intent

presumed in law, to hinder, delay, or defraud either present or future creditors.” However, this

cause of action “must be pleaded with sufficient particularly pursuant to CPLR 3016(b).” Swartz

v. Swartz, 145 A.D.3d 818, 826 (2nd Dep’t 2016). CPLR 3016(b) requires that when a cause of

action is based upon fraud, the allegations must be stated in detail.

Plaintiff’s conclusory allegations that recite the elements for the cause of action without

providing any additional detail or factual support do not meet this heightened burden.

Plaintiff failed to plead with sufficient particularity to sustain these causes of action, and

accordingly, the Sixth and Seventh Causes of Action should be dismissed as to all Defendants

pursuant to CPLR 3211(a)(7).

IV. CONCLUSION

For all the foregoing reasons, Defendants respectfully request that the Court deny

Plaintiff’s cross-motion for partial summary judgment, grant Defendants’ motion, dismiss all

claims against Ricatto, and dismiss Counts Two, and Four through Nine against 391 Leonard.

Dated: Pleasantville, New York
June 30, 2017

Respectfully submitted,

FLASTER/GREENBERG P.C.

By:__________________________
Jeffrey A. Cohen
Flaster/Greenberg P.C.
427 Bedford Road, Suite 390
Pleasantville, NY 10750
Tel.: (856) 382-2240
Attorney for Defendants

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Case Info

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Ruchelsman, Hon Track Judge’s New Case

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Document Filed Date

July 05, 2017

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April 19, 2017

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Motion-Secondary: Leonard Usa, Llc v. 391 Leonard St. Llc, Michael Ricatto

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