The opinion of the court was delivered by: ROBERT W. SWEET
Defendant Marcello Vallenzano ("Vallenzano") has filed an Order to Show Cause against Plaintiff judgment-creditor Brian Peterson ("Petersen") seeking to vacate the restraint placed by Plaintiff on Abco Pool Distributors Inc.'s ("Abco Pool") National Bank of New York City bank account number 075 773 724 (the "bank account"). Defendant also moves for sanctions to be awarded against Petersen. In turn, Petersen opposes Vallenzano's Order to Show Cause to vacate the restraint and cross moves for an order imposing a constructive trust on the property and assets of Abco Pool and to set aside the transfer of Defendant's property and assets to Abco Pool. Abco Pool has submitted a memorandum in support of Vallenzano's Order to Show Cause to vacate the restraining order and in opposition to Petersen's cross motion.
For the reasons set forth below, Vallenzano's Order to Show Cause seeking to vacate the restraint is denied as is his motion seeking sanctions. Petersen's cross motion imposing a constructive trust on Vallenzano and Abco Pool as an improper conveyance by a defendant is granted.
Petersen is a citizen of California and a judgment creditor of Abco Tek Technologies, Inc. ("Abco Tek").
Vallenzano, a New York resident, was the former President of Abco Pool.
Abco Pool, a New York corporation with offices in New York, was formally dissolved by the Secretary of State on March 25, 1981. Stephen Scarpetti ("Scarpetti") is allegedly the current President of Abco Pool.
Prior Proceedings and Facts
The prior proceedings and facts in this action are fully set forth in the previous opinions of this Court, familiarity with which is assumed. See Peterson v. Vallenzano, No. 88 Civ. 5346, 1991 U.S. Dist. LEXIS 180 (S.D.N.Y. Jan. 9, 1991) ("Petersen I"); Petersen v. Vallenzano, No. 89 Civ. 5346, 1992 U.S. Dist. LEXIS 6922 (S.D.N.Y. May 21, 1992) ("Petersen II"); Petersen v. Vallenzano, 996 F.2d 303 (2d Cir. 1993) ("Petersen III"). Only those facts relevant to the instant motions are presented below.
In 1987, Petersen obtained a judgment of $ 200,000 against Abco Tek in a jury trial before the Southern District of New York. Although the judgment was affirmed on appeal on October 17, 1988, it remains unsatisfied. Petersen filed this action on August 8, 1989, against Vallenzano for the amount of the judgment.
Petersen filed a second motion for summary judgment in May of 1990 seeking to pierce Abco Tek's corporate veil in order to hold Vallenzano personally liable for the judgment. On January 9, 1991, the Court denied Petersen's motion as there still existed a question of material fact concerning whether Vallenzano had used Abco Tek's funds for personal ends. See "Petersen I, " No. 88 Civ. 5346, 1991 U.S. Dist. LEXIS 180 (S.D.N.Y. Jan. 9, 1991).
In February 1992, after additional discovery, Petersen filed a second motion for summary judgment seeking to pierce the corporate veil and to hold Vallenzano personally liable for the judgment. That motion was granted in May of 1992, Petersen II, No. 89 Civ. 5346, 1992 U.S. Dist. LEXIS 6922 (S.D.N.Y. May 21, 1992), and affirmed in a memorandum opinion by the Second Circuit on May 26, 1993, Petersen III, 996 F.2d 303 (2d Cir. 1993).
Since that time, additional discovery proceedings against Vallenzano have revealed a relationship between Vallenzano and Abco Pool. In June of 1993, Petersen restrained Abco Pool's bank account at the National Bank of New York. Petersen's subpoena of the bank revealed Vallenzano to be the sole signatory and President of Abco Pool as late as May, 1993. See Pl.'s Ex. D.
Abco Pool has cross-moved in support of Vallenzano's motion, contending that on May 26, 1990 he consummated an Operating Agreement
(the "Agreement") with Stephen Scarpetti. Scarpetti Aff. at 8. This Agreement included the following provisions:
Vallenzano would become Vice President of Abco Pool and was thereafter placed under the direction of Scarpetti, the new President of Abco Pool. Vallenzano was to lend his time, leased vehicles, telephone and credit cards used by Abco Pool. In turn, Abco Pool agreed to provide office space to Vallenzano to conduct his business.
Vallenzano was to be a signatory on Abco Pool's bank account.
Abco Pool allegedly agreed to deduct $ 80.00 per week from the $ 80,000 debt owed to it by Vallenzano. In the event Abco Pool showed a profit, Vallenzano was to be credited 5% of that profit ...