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`Short Form Order
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`NEW YORK SUPREME COURT - QUEENS COUNTY
`
`Present: HONORABLE MARGUERITE A. GRAYS (cid:9)
`Justice
`
`IAS PART 4
`
`Index
`PETER TRIANTAFELLIOU, individually and as a No.: 701414/2018
`Member of 23-15 ASTORIA BOULEVARD
`REALTY LLC, a New York Limited Liability (cid:9)
`Company and as a Member of AB BUILDING (cid:9)
`MANAGEMENT, LLC, a New York Limited
`Liability Company, (cid:9)
`
`Motion
`Dated: May 15, 2018
`
`Motion
`Cal. No.: 17
`
`Motion
`Seq. No.: 1
`
`Plaintiff(s), (cid:9)
`
`-against-
`
`GEORGE MILTIADOUS, KONSTANTINOS
`TSIVADES, ELISA VET TZOUMAKA,
`ATHANASIOS TSIVADES, ROSEMARIE
`TZIVADES, MITSI REALTY LLC, and ELIT
`GREEN BUILDERS CORP.
`
`Defendant(s).
`
`The following papers numbered 1 - 7 read on this motion by defendants to dismiss
`the first cause of action of the complaint (which seeks judicial dissolution of 23-15 Astoria
`Boulevard Realty LLC ["Astoria LLC"], and AB Building Management LLC ["AB
`Building"]); to dismiss the second cause of action (breach of fiduciary duty/self-dealing); to
`dismiss the third cause of action for conversion; to dismiss the fourth cause of action for
`unjust enrichment, pursuant to CPLR §3212; for a counter-declaration upon the fifth cause
`of action that defendants both own and are entitled to a 50% ownership interest in Astoria
`LLC pursuant to written agreement of the parties; and for sanctions against plaintiffs (not
`their counsel), pursuant to 22 NYCRR Part 130, for frivolous conduct.
`
`Notice of Motion - Affidavits - Exhibits (cid:9)
`Answering Affidavits - Exhibits (cid:9)
`Reply Affidavits (cid:9)
`
`Papers
`Numbered
`
`
`
`
`
`
`1-4
`5-6
`7
`
`Upon the foregoing papers it is ordered that the motion is determined as follows:
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`Plaintiffs in this action for, inter alia, judicial dissolution of a limited liability
`corporation seek damages based upon defendants' alleged conduct in diverting corporate
`funds for personal gain and allegedly failing to invest at least $2.4 million in order to earn
`their 50% interest in Astoria LLC. The complaint alleges the following: that in or about
`October 2011, Astoria LLC was formed, at which time Peter Triantafellou ("plaintiff')
`owned 100% of the interest therein. In or about April 2012, by Assignment and Assumption
`Agreement, plaintiff transferred ten percent (10%) of his interest in Astoria LLC to Mitsi
`Realty, and maintained the remaining 90% interest in Astoria LLC. This Assignment and
`Assumption Agreement was executed on behalf of Mitsi Realty by George Miltiadous,
`improperly sued herein as George Miltiadous ("Miltiadous) and Konstantinos Tsivadis,
`improperly sued herein as Konstantinos Tsivadis ("Konstantinos") .
`
`Pursuant to Article III of the Astoria LLC Operating Agreement, the purpose of
`Astoria LLC was to: "own, develop and manage a thirty-two (32) to thirty-six (36) unit rental
`apartment building (the "Project"), on certain property located at 23-15 and 23-19 Astoria
`Boulevard, Astoria, New York ("premises"), and to engage in any and all business activities
`permitted under the laws of the State of New York". By Purchase and Development
`Agreement dated March 3, 2012 ("Purchase and Development Agreement"), Astoria LLC,
`plaintiff, Miltiadous and Konstantinos agreed to develop the premises. The Purchase and
`Development Agreement afforded Miltiadous and Konstantinos the ability to own fifty (50%)
`of Astoria LLC if they performed work with a value of $2,400,000 into the Project, as
`provided in sections 7.02 and 12.02 thereof Section 9.01 of the Purchase and Development
`Agreement required the work of defendants Miltiadous and Konstantinos to be done in nine
`(9) increments, and the membership interest of Miltiadous and Konstantinos would increase
`incrementally also.
`
`Miltiadous and Konstantinos retained Ent Green, a company owned by Elisavet
`Tzoumaka, to perform all or part of the Project. Mitsi Realty was formed on or about March
`16,2012, with Miltiadous and Konstantinos as its members. By Assignment and Assumption
`Agreement dated January 1, 2013, Miltiadous and Konstantinos transferred their respective
`fifty percent interests in Mitsi Realty to Elisavet Tzoumaka and Rosemarie Tzivades
`("Rosemarie"). By Assignment and Assumption Agreement dated September 2, 2014,
`Rosemariepurportedly transferred her 50% interest in Mitsi Realty to Athanasios Tsidades,
`improperly sued herein as Athanasios Tsidades ("Athanasios"). In either April or September
`2014, the membership interests of Miltiadous and Konstantinos pursuant to the Purchase and
`Development Agreement were transferred to Elisavet and Athanasios. On or about
`September 2014, the Operating Agreement for Mitsi Realty was amended to add all
`defendants as members thereof By Assignment of Developers' Interest dated September 19,
`2014, plaintiff and all defendants transferred all rights, title and interest from Miltiadous and
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`Konstantinos to Mitsi Realty. Subsequently, plaintiff contends, Miltiadous and Konstantinos
`misrepresented that they performed work valuing at least $2,400,000. Based on said
`misrepresentations, Miltiadous and Konstantinos allegedly induced plaintiff to enter into an
`Assignment and Assumption Agreement (the "Assignment and Assumption Agreement"),
`whereby plaintiff was required to transfer forty percent (40%) of plaintiffs ownership
`interest in Astoria LLC to Mitsi Realty, and not to Miltiadous and Konstantinos. The
`Assignment and Assumption Agreement was dated November 5, 2015. Also on November
`5, 2015, plaintiff and all defendants, now as members of Mitsi Realty, executed a
`Memorandum of Understanding (the "Memorandum of Understanding"), whereby once again
`plaintiff reaffirmed the fifty percent (50%) ownership interest of Miltiadous and
`Konstantinos. Plaintiff alleges that this too was based upon the misrepresentations of
`Miltiadous and Konstantinos that they had indeed performed work valued at $2,400,000.
`Paragraph 4[a] of the Memorandum of Understanding provides that the parties reaffirm
`plaintiff s rights to "audit, review and inspect all books, records, checking accounts and
`invoices to establish the actual cost for construction of [the Project1".
`
`The third agreement, dated November 5, 2015, was the "First Amendment to Limited
`Liability Company Operating Agreement of 23-15 Astoria Boulevard Realty LLC" (the "First
`Amendment"), which once again acknowledged that plaintiff and Mitsi Realty each owned
`fifty percent (50%) interest in Astoria LLC. Plaintiff alleges that this too was based upon
`defendants' misrepresentations.
`
`On or about April 27, 2015, Athanasios, Elisavet and plaintiff formed AB Building
`and executed an Operating Agreement therefor. The purpose of AB Building was generally
`to manage the Premises.
`
`Astoria LLC (as executed by plaintiff), and Mitsi Realty (as executed by Elisavet and
`Athanasios) executed a Survival Agreement dated August 18, 2016, which inter cilia,
`included a provision that plaintiff "shall have the right to inspect and receive copies of any
`and all invoices and statements related to the hard and soft costs for the construction of [the
`Premises]".
`
`Plaintiff alleges that defendants failed to invest $2,400,000 into the Project, and that
`defendants improperly made payments from at least Astoria LLC and AB Building to
`themselves without plaintiffs approval. Plaintiff also alleges that defendants failed to
`perform the work for the Project and seek incremental ownership interests pursuant to the
`terms of the Purchase and Development Agreement. Plaintiff alleges that defendants failed
`to ask for the increased ownership interest until they ran out of money and desired another
`loan. Plaintiff further alleges that defendants have refused to provide documentation to
`plaintiff relating to the Project and refused to provide certain tax returns for at least Astoria
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`LLC and AB Building. Plaintiff submits that defendants wrongfully took deductions for tax
`purposes for several years, as they do not and did not maintain a fifty percent (50%)
`ownership interest in Astoria LLC and AB Building. Moreover, plaintiff alleges that
`defendants have wrongfully misappropriated not less than five hundred thousand dollars
`($500,000), from at least Astoria LLC and AB Building.
`
`The complaint further alleges that defendants Miltiadous and Konstantinos have
`refused to provide financial documents to plaintiff; refused to allow plaintiff access to certain
`bank accounts and funds; refused to provide plaintiff with access to any of the AB Building
`escrow accounts where tenants' security deposits are kept; and that defendants caused
`plaintiff to become liable for at least one construction loan that was allegedly procured under
`false pretenses.
`
`Plaintiffs commenced the instant action seeking, inter alia, judicial dissolution of
`Astoria LLC and AB Building. Defendants filed the instant motion seeking summary
`dismissal of several causes of action alleged in the complaint, as well as for sanctions against
`plaintiff (and not plaintiffs counsel). Plaintiffs oppose the motion.
`
`Discussion
`
`1. (cid:9)
`
`Dissolution:
`The branch of the motion which is to dismiss the first cause of action for judicial
`dissolution of 23-15 Astoria and AB Building, is granted.
`
`Limited Liability companies in New York are creatures of a statute known as the
`Limited Liability Company Law ("LLCL"). Such companies are defined as "an
`unincorporated organization of one or more persons having limited liability ... other than a
`partnership or trust" (LLCL 102(m) ). Pursuant to LLCL §203(d), "[a] limited liability
`company is formed at the time of the filing of the initial articles of organization with the
`department of state or at any later time specified in the articles of organization ... This filing
`of the articles of organization shall, in the absence of actual fraud, be conclusive evidence
`of the formation of the limited liability company as of the time of filing or effective date if
`later ... A limited liability company formed under this chapter shall be a separate legal entity,
`the existence of which as a separate legal entity shall continue until the cancellation of the
`limited liability company's article of organization."
`
`LLCL §417 mandates that the members of a limited liability company adopt an
`operation agreement which is defined in LLCL §102(u) as "any written agreement of the
`members concerning the business of a limited liability company and the conduct of its
`affairs." LLCL §417(a) mandates that the operating agreement contain "provisions not
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`inconsistent with law ... relating to (i) the business of the limited liability company, (ii) the
`conduct of its affairs and (iii) the rights, powers, preferences, limitations or responsibilities
`of its members [and] managers." Notwithstanding the mandate of LLCL §417, the absence
`of an operating agreement does not render company action void or voidable but simply
`subjects it to governance by the default provisions of the LLCL (see In re Eight of Swords,
`LLC, 96 AD3d 839 112012]).
`
`Article 7 of the Limited Liability Company Law governs dissolution of a company.
`LLCL §701 provides that where dissolution is addressed in the operating agreement,
`dissolution occurs, first, upon the latest date on which the company is to dissolve under the
`terms of the articles of organization or operating agreement, or upon the happening of an
`event set forth therein or upon the entry of a decree ofjudicial dissolution pursuant to LLCL
`§702 (see LLCL §701). LLCL §702 governs judicial dissolution and provides as follows:
`"[o]n application by or for a member, the supreme court in the judicial district in which the
`office of the limited liability company is located may decree dissolution of a limited liability
`company whenever it is not reasonably practicable to carry on the business in conformity
`with the articles of organization or operating agreement" (LLCL §702). Where an operating
`agreement does not address certain topics, appellate case authorities have instructed that a
`limited liability company is bound by the "default" requirements set forth in the LLCL (see,
`In re 1545 Ocean Ave., LLC, 72 AD3d 121 [2010]). Accordingly, where there is no operating
`agreement, or where one exists but does not provide for dissolution, the provisions of LLCL
`§702 alone, control, the company's dissolution (see, id.; Natanel v Cohen, 43 Misc3d 1217
`[Sup.Ct. Kings County 20141; see, also In re the Sieni v Jamsfab, LLC, 2013 WL 3713604
`[Sup Ct. Suffolk County 2013]).
`
`In 1545 Ocean Avenue, LLC, supra, the Appellate Division, Second Department
`examined the proper interpretation to be accorded the statutory standard "not reasonably
`practicable". As no New York cases had interpreted the statutory standard (but see Seligson
`v. Russo, 16 AD3d 253 [2005] interpreting the same language in Partnership Law §63(1)(d)),
`relying on the decision of the Delaware Chancery Court in Red Sail Easter Ltd. Partners, LP
`v Radio City Music Hall Products, Inc (1992 WL 251380, 5-6[1992] ), the Court noted that
`mere disagreements between partners regarding accounting are insufficient to warrant
`dissolution (1545 Ocean at 128). Rejecting the applicability of the more flexible statutory
`standards for judicial dissolution of both corporations and partnerships, the Court cited
`Matter of Horning v Horning Construction, LLC (12 Misc3d 402, 413 [2006] ), in which, in
`the absence of an operating agreement, the court dismissed the petition for dissolution
`brought primarily to provide an exit-strategy for the disenchanted member, holding that
`LLCL §702 establishes a "more stringent" standard In re 1545 Ocean Ave., LLC., (72 AD3d
`at 127). Rejecting petitioner's claim that dissolution was warranted by the parties' deadlock,
`in 1545 Ocean, the Appellate Division, Second Department expressly held: "for dissolution
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`of a limited liability company pursuant to Limited Liability Company Law §702, the
`petitioning member must establish, in the terms of the operating agreement or articles of
`incorporation, that (1) the management of the entity is unable or unwilling to reasonably
`permit or promote the stated purpose of the entity to be realized or achieved, or (2)
`continuing the entity is financially unfeasible" In re 1545 Ocean Ave., LLC., (72 AD3d at
`131). Thus, a petitioner seeking dissolution must demonstrate that the limited liability
`company is "unable to function as intended or that it is failing financially" (id at 129).
`
`Here, plaintiffs' contentions in the complaint that "the financial conditions of 23-15
`Astoria and AB Building are unsound" and that "continuing the entity is financially
`unfeasible", are belied by the record indicating that the company is not failing financially and
`is, in fact, thriving and expected to become even more financially successful. The record
`indicates that the Project is a completed and fully rented 37-unit upscale rental property
`producing a Net Operating Income of $70,000 per month which is expected to increase as
`the commercial units comprising of 10,000 square feet are fully leased. The documentary
`evidence further indicates that the only viable disputes between the two 50% membership
`groups is Triantafellou's recent refusal to co-sign checks for some $9,000 of "Management
`fees" in the context of a $15 million building producing a current rent roll in excess of $1.2
`million and slated to increase when the commercial units come "on line".
`
`Contrary to the plaintiffs' contention, the Court in 1545 Ocean Avenue Realty, LLC,
`supra, specifically cautioned that a limited liability company is to be distinguished from both
`a corporation and a partnership in that the standard for dissolution of a limited liability
`corporation is more stringent (72 AD3d at 127).
`
`Plaintiffs have also failed to show that the continued operation of 23-15 Astoria and
`AB Building is unfeasible ( see, In re 1545 Ocean Ave., LLC., supra).
`
`Accordingly, the branch of the motion which is to dismiss the First cause of action of
`the complaint is granted.
`
`2. (cid:9)
`
`Breach of Fiduciary Duty/Self Dealing:
`The branch of the motion which is to dismiss the Second cause of action of the
`complaint, which alleges breach of fiduciary duty/self-dealing, is denied. The defendants
`failed to establish their prima facie entitlement to summary judgment dismissing the second
`cause of action to recover damages for breach of fiduciary duty/self dealing. The elements
`of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of
`a fiduciary relationship; (2) misconduct by the defendant and (3) damages directly caused by
`the defendant's misconduct (see Rut v Young Adult Inst., Inc., 74 AD3d 776, 777 [2010];
`Kurtzman v Bergstol, 40 AD3d 588, 590 [2007]).
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`The, second cause of action alleges that defendants "fraudulently induced" plaintiff
`into certain agreements, and that defendants engaged in self dealing. As relevant, CPLR
`§3016(b) provides that where a cause of action or defense is based upon fraud, "the
`circumstances constituting the wrong shall be stated in detail." Specifically, CPLR §3016(b)
`states: "Where a cause of action or defense is based upon misrepresentation, fraud, mistake,
`wilful default, breach of trust or undue influence, the circumstances constituting the wrong
`shall be stated in detail." This rule does not require the impossible, recognizing that a
`plaintiff cannot be expected to plead details that are exclusively within the defendants'
`knowledge (Pludeman v N Leasing Sys., Inc., 10 NY3d 486, 494 [2008], quoting Lanzi v
`Brooks, 43 NY2d 778, 780 [1977]; Jered Contr. Corp. v New York City Tr. Auth., 22 NY2d
`187, 194 [1968]). The rule "requires only that the misconduct complained of be set forth in
`sufficient detail to clearly inform a defendant with respect to the incidents complained of"
`(Pludeman at 494). The purpose of the pleading requirement of CPLR §3016(b), is to inform
`a defendant with respect to the incidents complained of ( see Pludeman v N. Leasing Sys.,
`Inc., 10 NY3d 486,491 [2008]). Critical to a fraud claim is that a complaint allege the basic
`facts to establish the elements of the cause of action. Although under CPLR §3016(b) the
`complaint must sufficiently detail the allegedly fraudulent conduct, that requirement should
`not be confused with unassailable proof of fraud (Id.). Necessarily, then, CPLR §3016(b)
`may be met when the facts are sufficient to permit a reasonable inference of the alleged
`conduct (see, Polonetsky, 97 NY2d at 55 [alleged facts sufficient to permit a jury to "infer
`(defendant's) knowledge of or participation in the fraudulent scheme"]; Jered, 22 NY2d at
`194; Lanzi? 43 NY2d at 780). Here, the "particulars" are aptly noted in the instant case in
`paragraphs 17 through 51of the complaint.
`
`Furthermore, the Court finds that the conflicting allegations of the parties have created
`issues of fact and credibility which prelude summary judgment on the cause of action for
`breach of fiduciary duty/self dealing (see, Nesenoffv Dinerstein & Lesser, P. C., 5 AD3d 746,
`747 [2004]; see generally Tunisonv D.1 Stapleton, Inc., 43 AD3d 910 [2007] (A motion for
`summary judgment "should not be granted where the facts are in dispute, where conflicting
`inferences may be drawn from the evidence, or where there are issues of credibility").
`
`3. (cid:9)
`
`Conversion:
`The branch of the motion which seeks to dismiss the cause of action for conversion
`is denied. Defendants' affidavits, in which they merely aver that they never misappropriated
`any monies with respect to the relevant transactions, are insufficient to demonstrate prima
`facie entitlement to judgment as a matter of law dismissing the conversion cause of action
`insofar as asserted against them (see, Greenway Plaza Off Park-1 v. Metro Constr. Set-vs.,
`4 AD3d 328, 329-330 [2004]). Thus, without regard to the sufficiency of the opposition
`papers, the defendants are not entitled to dismissal of the conversion cause of action pursuant
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`to CPLR §3212 (see, Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; N.
`Shore Architectural Stone, Inc. v Am. Artisan Coast., Inc., 153 AD3d 1420, 1422 [20171).
`
`Unjust Enrichment:
`The branch of the motion which is to dismiss the unjust enrichment cause of action
`is granted. An unjust-enrichment cause of action is a quasi-contract claim that is "imposed
`by equity to prevent injustice, in the absence of an actual agreement between the parties
`concerned" (IDT Corp. v Morgan Stanley Dean Witter & Co., 12 NY3d 132, 142 [2009]
`[emphasis added], rearg denied 12 NY3d 889 [2009]; see, also Georgia Malone & Co., Inc.
`v Rieder, 19 NY3d 511, 516 [2012]). Accordingly, when the relationship between parties is
`governed by an enforceable contract, recovery under the theory of unjust enrichment is
`precluded (see, IDT Corp., 12 NY3d at 142; Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70
`NY2d 382, 388-89 [1987]).
`
`Declaration Regarding Defendants' Ownership Interest:
`The branch of the motion which seeks a counter declaration upon the fifth cause of
`action of the complaint, that defendants own and are entitled to own a 50% ownership
`interest in Astoria LLC, is denied. The central issue in this lawsuit is whether defendants
`invested the required $2.4 million threshold in the projects to achieve a 50% ownership
`interest, as required in the various agreements between the parties. While defendants have
`submitted copies of various agreements indicating that plaintiff consented to defendants'
`50% ownership interest in Astoria LLC, plaintiff submitted evidence that his alleged
`"consent" was based upon misrepresentations made by defendants. Plaintiffs and the
`defendants' documentary evidence, including sharply conflicting affidavits and affirmations
`raise triable issues of fact precluding summary judgment on this cause of action (McEvoy
`v Garcia, 114 AD2d 401 [1985]).
`
`In any event, defendants failed to make a prima facie showing that they met the
`threshold $2.4 million investment in order to be entitled to a 50% ownership interest as
`provided in the agreements between the parties (see, generally Winegrad v New York Univ.
`Med. Ctr. 64 NY2d 851 [1985]).
`
`Sanctions:
`The branch of the motion which seeks to sanction plaintiffs (not plaintiffs' counsel),
`is denied. The imposition of financial sanctions is authorized by 22 NYCRR §130-1.1 (a).
`Among the types of conduct which will be be considered frivolous are those determined to
`be "completely without merit in law" or "undertaken primarily to delay or prolong the
`resolution of the litigation, or to harass or maliciousi injure another" (22 NYCRR §130-1.1
`[c] [1], [2]; Glenn v Annunziata, 53 AD3d 565, 566 [2008]; see, Ofman v Campos, 12 AD3d
`581 [2004]; Stow v Stow, 262 AD2d 550 [1999]). The imposition of sanctions is not
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`appropriate here, as there is no indication that plaintiffs position is completely frivolous and
`without merit (see, Benishai v Benishai, 83 AD3d 420, 420 [1st Dept 2011]; Matter of L &
`M Bus Corp. v New York City Dept. of Educ., 83 AD3d 432, 433 [1st Dept 2011] ).
`
`7. (cid:9)
`
`Conclusion:
`The branch of the motion to dismiss the First cause of action of the complaint which
`seeks judicial dissolution of 23-15 Astoria Boulevard Realty LLC and AB Building
`Management LLC, is granted.
`
`The branch of the motion to dismiss the Second cause of action of the complaint,
`which alleges breach of fiduciary duty/self-dealing, is denied.
`
`The branch of the motion which seeks to dismiss the Third cause of action for
`conversion is denied.
`
`The branch of the motion to dismiss the Fourth cause of action for unjust enrichment,
`is granted.
`
`The branch of the motion which seeks a declaration upon the Fifth cause of action of
`the complaint, that defendants own and are entitled to own a 50% ownership interest in
`Astoria LLC, is denied.
`
`The branch of the motion which seeks to sanction plaintiffs (not plaintiffs' counsel),
`is denied.
`
`Dated: (cid:9)
`
`SEP 1 o 2018
`
`FILED
`
`SEP 1 8 2018
`
`COUNTY CLERK
`QUEENS COUNTY
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