Opinion
941 Index No. 260677/16E Case No. 2023–00978
10-31-2023
In the Matter of Frank BERISHA, Petitioner–Appellant, v. 4042 EAST TREMONT CAFE´ CORP. doing business as "Tosca Cafe´," etc., et al., Respondents–Respondents.
Law Offices of Bernard D'Orazio & Associates, P.C., New York (Bernard D'Orazio of counsel), for appellant. Kenneth J. Gorman, P.C., New York (Kenneth J. Gorman of counsel), for respondents.
Law Offices of Bernard D'Orazio & Associates, P.C., New York (Bernard D'Orazio of counsel), for appellant.
Kenneth J. Gorman, P.C., New York (Kenneth J. Gorman of counsel), for respondents.
Kern, J.P., Friedman, Kennedy, Pitt–Burke, JJ.
Order, Supreme Court, Bronx County (Andrew J. Cohen, J.), entered February 6, 2023, which denied judgment as a matter of law on the petition, unanimously modified, on the law, to dismiss the claims under Debtor & Creditor Law §§ 273–a, 276, and 276–a, the de facto merger and aiding and abetting fraudulent transfer claims, and the request for punitive damages, and otherwise affirmed, without costs.
Issues of fact exist precluding summary determination of the applicability of veil-piercing or alter ego principles to impute liability to respondent Hasim "Eddie" Sujak (Eddie) (see generally Cortlandt St. Recovery Corp. v. Bonderman, 31 N.Y.3d 30, 47, 73 N.Y.S.3d 95, 96 N.E.3d 191 [2018] ; Tap Holdings, LLC v. OrixFin. Corp., 109 A.D.3d 167, 174, 970 N.Y.S.2d 178 [1st Dept. 2013] ). Even if an individual is not a record owner of a corporation, he may nonetheless be found to be an "equitable owner" and alter ego thereof if he "dominated and controlled [it] to such an extent that [he] may be considered its equitable owner[ ]" ( Roohan v. First Guar. Mtge., LLC, 97 A.D.3d 891, 891, 948 N.Y.S.2d 200 [3d Dept. 2012] ; see Freeman v. Complex Computing Co., 119 F.3d 1044, 1051 [2d Cir. 1997] ). As such, it is not dispositive that petitioner was not a record owner of respondents Tosca Coal Burning Oven, Inc. (Tosca Coal) or 4042 East Tremont Cafe´ Corp. (4042 East), as he may still be found to be an equitable owner thereof.
On the issue of domination and control, petitioner submitted evidence that Eddie paid Tosca Coal and 4042 East's legal bills and made legal decisions on Tosca Coal's behalf in the underlying personal injury action; purported in numerous contexts to represent or have an interest in the restaurant even after Tosca Coal or 4042 East took over; personally transferred the restaurant's furniture, fixtures, equipment and other assets to close family members without payment or possibly even documentation in Tosca Coal's case; was identified as a restaurant manager in other lawsuits even after Tosca Coal took over; hired at least one 4042 East employee and possibly one Tosca Coal employee; signed vendor checks on behalf of (in respondent Adis Radoncic's name) and was responsible for payroll at 4042 East; and was an authorized signatory on 4042 East's bank account. In opposition, respondents submitted evidence that Eddie merely provided assistance to his brother and brother-in-law in running Tosca Coal and 4042 East, for which he was paid a salary, that he did not control these entities, that he never forged checks, that he paid the legal bills because the other entities were now all defunct, and that the former employee who accused Eddie of forgery had motive to lie. The issue of domination and control thus depends on a credibility determination that cannot be made at this stage.
On the issue of use of domination and control to defraud, petitioner submitted evidence that Eddie attempted to make Tosca Coal judgment-proof by orchestrating the transfer of the restaurant business (including goodwill, furniture, equipment, etc.) from that entity to 4042 East, for no consideration to a close family member, and shuttering Tosca Coal as soon as it looked like it would be joined in the personal injury action (see Grigsby v. Francabandiero, 152 A.D.3d 1195, 1197, 58 N.Y.S.3d 835 [4th Dept. 2017] ). The earlier transfer from respondent Tosca Cafe´ Inc. to Tosca Coal is irrelevant to fraudulent intent as it predated the events that gave rise to the subject judgment (see Carlyle, LLC v. Quik Park 1633 Garage LLC, 160 A.D.3d 476, 477, 75 N.Y.S.3d 139 [1st Dept. 2018] ). In opposition, respondents submitted evidence suggesting an alternative reason for the transfer – i.e., family issues. Which narrative is accepted depends on a credibility determination that cannot be made at this stage.
Petitioner's reliance on the law of the case doctrine is misplaced. This Court reversed the prior order of Justice Sherman on the law, obviating the need to evaluate the relevant factual findings (see Matter of 4042 E. Tremont Cafe Corp. v. Sodono, 177 A.D.3d 456, 456–458, 112 N.Y.S.3d 122 [1st Dept. 2019] ). The findings of the Supreme Court are not binding on this Court (see Martin v. Cohoes, 37 N.Y.2d 162, 165, 371 N.Y.S.2d 687, 332 N.E.2d 867 [1975] ).
Issues of fact exist with respect to the tortious interference with enforcement of judgment claim for the same reasons outlined above (see generally Strachman v. Palestinian Auth., 73 A.D.3d 124, 128, 901 N.Y.S.2d 582 [1st Dept. 2010] ). Issues of fact also exist with respect to the amount of damages for this claim (see id. ).
The de facto merger doctrine may not be employed to impute liability to 4042 East because petitioner has failed to allege continuity of ownership between Tosca Coal and 4042 East – an essential element of a de facto merger (see Matter of New York City Asbestos Litig., 15 A.D.3d 254, 256–257, 789 N.Y.S.2d 484 [1st Dept. 2005] ).
The Debtor and Creditor Law claims must fail for lack of a conveyance (see Debtor & Creditor Law §§ 273–a, 276, and 276–a ). We held on a prior appeal that the re-leasing of the restaurant space did not constitute a conveyance and that for the transaction evidenced by the promissory note to constitute a conveyance from a judgment debtor to 4042 East "would require piercing the corporate veil twice: to find that Sujak is the same as Tosca Coal or Tosca Cafe´, Inc. and to find that Radoncic is the same as 4042 East Tremont" (see Matter of 4042, 177 A.D.3d at 458, 112 N.Y.S.3d 122 ). Even if Eddie is the alter ego of Tosca Coal, there are still no allegations of veil-piercing with respect to Radoncic and 4042 East.
The aiding and abetting a fraudulent transfer claim must fail for failure to allege that Eddie was a transferee or beneficiary of the fraudulent conveyance (see generally Federal Deposit Ins. Corp. v. Porco, 75 N.Y.2d 840, 842, 552 N.Y.S.2d 910, 552 N.E.2d 158 [1990] ; BBCN Bank v. 12th Ave. Rest. Group Inc., 150 A.D.3d 623, 624, 55 N.Y.S.3d 225 [1st Dept. 2017] ; Priestley v. Panmedix, Inc. , 2021 WL 1331368, *7-8, 2021 N.Y. Misc. LEXIS 1617, *23–24 [Sup. Ct., N.Y. County, Apr. 9, 2021], mod on other grounds 202 A.D.3d 417, 419, 163 N.Y.S.3d 1 [1st Dept. 2022] ). The mere removal of property from the reach of a creditor "is not misconduct so ‘gross and wanton’ as to justify an award of punitive damages" ( Blakeslee v. Rabinor, 182 A.D.2d 390, 392–393, 582 N.Y.S.2d 132 [1st Dept. 1992], lv denied 82 N.Y.2d 655, 602 N.Y.S.2d 804, 622 N.E.2d 305 [1993] ).
We note, as there will be further proceedings below, that the answer of Tosca Coal should not be considered – at least unless and until that entity seeks and obtains leave to answer at this late stage.