Light v Boussi (2008 NY Slip Op 51212(U))

Light v Boussi

2008 NY Slip Op 51212(U)

Decided on June 19, 2008

Supreme Court, Kings County

Demarest, J.

Published by New York State = Law=20 Reporting Bureau pursuant to Judiciary Law =A7 = 431.

This opinion is uncorrected = and will=20 not be published in the printed Official=20 Reports.

In this action by plaintiff Berel Light (plaintiff) for an = accounting, the=20 imposition of a constructive trust, an award of money damages, and an = order=20 compelling dissolution of defendant 10-18 Church Avenue Holdings, Inc. = (10-18,=20 Inc.), defendants Samuel Boussi a/k/a and Shmuel Boussi (Boussi) and = 10-18, Inc.=20 (collectively, defendants) move for summary judgment dismissing = plaintiff's=20 complaint on the grounds that plaintiff does not have legal capacity to = sue and=20 plaintiff is judicially estopped from asserting the claims in the = complaint.=20

On August 31, 2006, plaintiff filed this action against defendants.=20 Plaintiff's complaint alleges that 10-18, Inc. was formed in August = 1995, that=20 he and Boussi agreed to be equal shareholders in 10-18, Inc., and that = on=20 January 31, 1996, 10-18, Inc. acquired real property located at 1371 = 36th=20 Street, in Brooklyn, New York. Plaintiff's complaint further alleges = that from=20 the inception of 10-18, Inc. in 1995, Boussi has failed to maintain = corporate=20 formalities, provide him with notice of corporate meetings, resolutions, = authorizations, and transactions, and [*2]provide him=20 with any financial information. Plaintiff's complaint also alleges that = Boussi=20 has failed to give him his purported 50% share of the revenue and = profits of=20 10-18, Inc., and that Boussi has wasted and dissipated corporate assets. = Plaintiff seeks a judgment determining that he and Boussi are equal = shareholders=20 of 10-18, Inc., an accounting, an imposition of a constructive trust = upon the=20 1371 36th Street real property, an award of monetary damages equal to = the=20 revenue and profits from 10-18, Inc. allegedly due to him, an order = compelling=20 the judicial dissolution of 10-18, Inc., and an injunction restraining = Boussi=20 from dissipating or transferring any assets of 10-18, Inc.=20

Defendants have interposed an answer to plaintiff's complaint, = denying the=20 allegation that plaintiff ever had a shareholder interest in 10 -18, = Inc. The=20 answer also asserts eight affirmative defenses, including the eighth = affirmative=20 defense that plaintiff lacks legal capacity to sue, and the fourth = affirmative=20 defense that plaintiff's claims are barred by the doctrine of judicial = estoppel.=20

Defendants' instant motion is based upon the grounds asserted in = their eighth=20 and fourth affirmative defenses that plaintiff lacks legal capacity to = sue and=20 that his claims are barred by the doctrine of judicial estoppel. These = defenses=20 are predicated upon the undisputed fact that in November 1998, plaintiff = and his=20 wife filed a voluntary bankruptcy petition under Chapter 11 of the = Bankruptcy=20 Code, District of New Jersey. The Bankruptcy petition included a sworn = affidavit=20 from plaintiff and his wife listing all of their assets, including their = ownership of four parcels of real property and the names of four = corporations in=20 which they held a shareholder interest. 10-18, Inc., however, was not = listed by=20 plaintiff in the bankruptcy petition as a corporation in which he had a=20 shareholder interest. Indeed, there is no mention of 10-18, Inc. = anywhere in=20 plaintiff's bankruptcy petition. By a final decree of the Bankruptcy = Court dated=20 October 24, 2002, plaintiff's bankruptcy case was closed, and the = Trustee was=20 discharged.=20

It is well settled that "[u]pon the filing of a voluntary bankruptcy=20 petition, all property which a debtor owns or subsequently acquires, = including a=20 cause of action, vests in the bankruptcy estate" (DeLarco v = DeWitt, 136=20 AD2d 406, 408 [1988] (citing 11 USC =A7 541 [a] [1], [7]); see also = Hansen v=20 Madani, 263 AD2d 881, 882 [1999]; Reynolds v Blue Cross of = Northeastern=20 NY, 210 AD2d 619, 619-620 [1994]; Matter of C & M Plastics=20 [Collins], 168 AD2d 160, 161 [1991]). "In addition, title to the = debtor's=20 property will remain in the bankruptcy estate unless the property is = listed in=20 the schedule of assets filed with the [bankruptcy] court or otherwise = deemed=20 abandoned" (Hansen, 263 AD2d at 882; see also Matter of C = & M=20 Plastics [Collins], 168 AD2d at 161; DeLarco, 136 AD2d at = 408).=20 Therefore, " a debtor's failure to list a legal claim as an asset in his = or her=20 bankruptcy proceeding causes the claim to remain the property of the = bankruptcy=20 estate and precludes the debtor from pursuing the claim on his or her = own=20 behalf" (123 Cutting Co. v Topcove Assoc., 2 AD3d 606, = 607=20 [2003], quoting Strokes Elec. & Plumbing v Dye, 240 AD2d 919, = 920=20 [1997]; see also Whelan v Longo, 7 NY3d 821, 822 = [2006];=20 Dynamics Corp. of Am. v Marine Midland Bank-N.Y., 69 NY2d 191, = 196-197=20 [1987]; Bajanov v Grossman, 36 AD3d 572, 573 [2007]; = Weitz v=20 Lewin, 251 AD2d 402, 402 [1998]; Bromley v Fleet Bank, 240 = AD2d 611,=20 611-612 [1997]).=20

Thus, under principles of federal bankruptcy law, even if it were = true that=20 plaintiff had a shareholder interest in 10-18, Inc., upon the filing of = the=20 bankruptcy petition, that alleged interest, if it existed, became the = property=20 of the bankruptcy estate (see Hansen, 263 AD2d at 882; = Bromley,=20 240 AD2d at 611; Reynolds, 210 AD2d at 620). As a result of = plaintiff's=20 failure to [*3]list his alleged shareholder = interest,=20 that alleged asset did not revert back to plaintiff upon the conclusion = of his=20 bankruptcy case(see 123 Cutting Co., 2 AD3d at 607; = Hansen, 263=20 AD2d at 882; Weitz, 251 AD2d at 402; Strokes Elec. & = Plumbing,=20 240 AD2d at 920). Consequently, plaintiff now lacks legal capacity to = assert=20 claims based upon his alleged interest in 10-18, Inc. (see Whelan v=20 Longo, 7 NY3d at 822; Bajanov, 36 AD3d at 573; 123 Cutting = Co., 2 AD3d at 607; Hansen, 263 AD2d at 882-883; = Weitz, 251=20 AD2d at 402; Bromley, 240 AD2d at 612).=20

Plaintiff, in opposition to defendants' motion, claims that he = inadvertently=20 failed to list 10-18, Inc. in the bankruptcy petition, and contends that = such=20 failure has no affect on his ownership interest in 10-18, Inc. This = contention=20 is devoid of merit. It does not matter whether "the debtor has = intentionally or=20 fraudulently" failed to disclose an asset (Dynamics Corp. of Am., = 69 NY2d=20 at 197-198). As a result of the failure to schedule the asset, = plaintiff's=20 interest remained the property of the bankruptcy estate and does not = revert back=20 to the debtor upon the conclusion of the bankruptcy case (see = id.;=20 Hansen, 263 AD2d at 882; Strokes Elec. & Plumbing, 240 = AD2d at=20 920). Summary judgment dismissing plaintiff's complaint is, therefore, = mandated=20 as a matter of law based upon plaintiff's lack of legal capacity to sue=20 (see CPLR 3211 [a] [3], 3212 [b]; 123 Cutting Co., 2 AD3d = at 607;=20 Hansen, 263 AD2d at 882-883).=20

Defendant is also entitled to summary judgment based upon the ground = of=20 judicial estoppel, which prevents a party who asserted a factual = position in one=20 action from taking an inconsistent position in subsequent litigation = (see=20 e.g. Black v White & Case, 280 AD2d 407, 408 [2001]; = McCaffrey v=20 Schaefer, 251 AD2d 300, 301 [1998]). Under the doctrine of judicial=20 estoppel, a discharged debtor who fails to list an asset in his or her = prior=20 bankruptcy proceeding is precluded from asserting claims based on = ownership of=20 that asset (see e.g. Madden v Corey, 251 AD2d 257, 258 [1998];=20 Manhattan Ave. Dev. Corp. v Meit, 224 AD2d 191, 192 [1996]; = Cafferty v=20 Thompson, 223 AD2d 99, 102 [1996]). Thus, inasmuch as plaintiff = failed to=20 disclose any alleged shareholder interest in 10-18, Inc. in his = bankruptcy=20 petition or at any time during his bankruptcy proceeding, he is = precluded, under=20 the doctrine of judicial estoppel, from asserting the claims herein = based upon=20 an alleged ownership of an interest in 10-18, Inc. (see Manhattan = Ave. Dev.=20 Corp., 224 AD2d at 192; Cafferty, 223 AD2d at 102).=20

Plaintiff, in opposing defendants' motion, attempts to rely upon this = court's=20 February 28, 2007 order, which denied defendants' earlier motion to = dismiss=20 because it was unsupported by any affidavit from a party. Plaintiff = argues that=20 the denial of that motion is now the law of the case because defendants = had=20 raised the issue that documentary evidence, in the form of plaintiff's=20 bankruptcy petition, demonstrated plaintiff's allegation that he is a = 50%=20 shareholder in 10-18, Inc. to be false.=20

Plaintiff's argument must be rejected. The law of the case doctrine = "is=20 inapplicable where, as here, a summary judgment motion follows a motion = to=20 dismiss . . . as the scope of review applicable to each motion is = distinct" (Bernard v Grenci, 48 AD3d 722, 724 [2008]; see also Riddick v City of New York, 4 AD3d = 242, 245=20 [2004]; Gannone v Wittman, 232 AD2d 298, 298 [1996]). = Furthermore,=20 defendants' earlier motion to dismiss was not based upon the legal = arguments of=20 lack of capacity to sue and judicial estoppel and, thus, these legal = arguments=20 were not previously considered by the court.=20

Plaintiff further argues that despite his failure to list his claimed = ownership interest in 10-18, Inc. in the bankruptcy petition, = defendants' motion=20 should be denied because the question of his ownership interest in = 10-18, Inc.=20 raises a factual dispute. He asserts that he raised the initial [*4]money necessary to acquire the real property = and that=20 he invested funds in the acquisition of that property. Plaintiff also = asserts to=20 have pledged his ownership interest in 10-18, Inc. to secure a = $25,000,000 loan=20 from Ahron Rosenfeld to him. The factual dispute raised by these = assertions=20 (which are denied by defendants), however, are without moment since the=20 viability of plaintiff's claims, as discussed above, rests upon a = determinative=20 question of law (see Dynamics Corp. of Am., 69 NY2d at = 196-197;=20 Cafferty, 223 AD2d at 101).=20

Accordingly, defendants' motion for summary judgment dismissing = plaintiff's=20 complaint, is granted.=20