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Greater Bright Light Home Care Services, Inc. v. Jeffries-El

Supreme Court of New York, Second Department

June 14, 2017

Greater Bright Light Home Care Services, Inc., et al., plaintiffs,
v.
Joseph Jeffries-El, defendant, El Equity Corporation, appellant-respondent, Sandsport Data Services, Inc., respondent-appellant, HSBC Bank USA, formerly known as Marine Midland Bank, respondent (and other titles). Index No. 27552/99

          Cordova & Schwartzman, LLP, Garden City, NY (Jonathan B. Schwartzman and Debra L. Cordova of counsel), for appellant-respondent.

          Ruskin Moscou Faltischek, P.C., Uniondale, NY (Douglas J. Good and Lois Blaykas of counsel), for respondent-appellant.

          Anthony DiPaolo, P.C., Queens Village, NY (Jeannie Bergsten of counsel), for respondent.

          RUTH C. BALKIN, J.P., L. PRISCILLA HALL, SANDRA L. SGROI, BETSY BARROS, JJ.

          DECISION & ORDER

         Appeal and cross appeal from an order of the Supreme Court, Kings County (David I. Schmidt), dated October 29, 2014. The order, insofar as appealed from, denied the motion of the defendant El Equity Corporation for summary judgment on its cross claims and awarding it punitive damages and attorneys' fees, granted that branch of the cross motion of the defendant Sandsport Data Services, Inc., which was for summary judgment dismissing the first cross claim of El Equity Corporation, and granted the cross motion of the defendant HSBC Bank USA, formerly known as Marine Midland Bank, for summary judgment dismissing the third cross claim of El Equity Corporation. The order, insofar as cross-appealed from, denied that branch of the cross motion of the defendant Sandsport Data Services, Inc., which was for summary judgment dismissing the second cross claim of El Equity Corporation.

         ORDERED that the order is affirmed, with one bill of costs to the defendant HSBC Bank USA, formerly known as Marine Midland Bank, payable by the defendant El Equity Corporation.

         In or around August 1998, the plaintiff Greater Bright Light Home Care Services, Inc. (hereinafter GBL), allegedly entered into an agreement with the City of New York, acting through the Human Resources Administration (hereinafter HRA), to provide home care services to certain Medicaid-eligible individuals (hereinafter the Home Care Contract). For these services, GBL was paid by checks from the New York State Department of Health's Medicaid Management Information System (hereinafter MMIS). The Home Care Contract required GBL to secure a $1.2 million line of credit to fund its operation. The defendant El Equity Corporation (hereinafter El Equity) allegedly agreed to extend the line of credit to GBL, and, in exchange, El Equity was entitled to a finance fee of $120, 000 per year, or $10, 000 per month.

         El Equity, GBL, and Marine Midland Bank (hereinafter Marine) entered into an agreement dated March 5, 1999 (hereinafter the Escrow Agreement). Under the terms of the Escrow Agreement, all checks issued by MMIS to GBL as reimbursement for services provided by GBL under the Home Care Contract (hereinafter MMIS checks) were required to be deposited into a specific account established by GBL at Marine (hereinafter the Escrow Account). Marine was required to receive and deposit the MMIS checks into the Escrow Account, and to disburse the funds in accordance with a formula set forth in the Escrow Agreement. In particular, Marine was required to disburse part of the MMIS funds into an account established by El Equity at Marine for the purpose of receiving its finance fee of $10, 000 per month.

         The Escrow Agreement required GBL to instruct MMIS in a signed writing that the defendant Sandsport Data Services, Inc. (hereinafter SDS), a licensed service bureau with the New York State Department of Health, was the sole party authorized to receive GBL's MMIS checks. GBL was also required to instruct SDS, in a separate signed writing, to deposit all MMIS checks into the Escrow Account, and that SDS was not permitted to deposit MMIS checks into any other account unless and until it received written instructions signed by both GBL and El Equity. GBL entered into a separate agreement with SDS, in which SDS agreed that it would pick up all MMIS checks on a weekly basis and deposit them into the Escrow Account (hereinafter the SDS Agreement). Additionally, under the SDS Agreement, SDS was not permitted to deposit MMIS checks into any account other than the Escrow Account unless and until it received written instructions signed by both GBL and El Equity.

         In August 1999, GBL, together with the plaintiff Greater Bright Light Baptist Church, commenced this action against SDS, HSBC Bank USA, formerly known as Marine Midland Bank (hereinafter HSBC), El Equity, and El Equity's vice president, Joseph Jeffries-El. The complaint alleged, inter alia, that El Equity never advanced the $1.2 million line of credit to GBL. El Equity asserted cross claims against SDS alleging conversion and breach of contract, and a cross claim against HSBC alleging aiding and abetting conversion. El Equity alleged that SDS had picked up four MMIS checks from the HRA and delivered those checks directly to GBL, instead of depositing the checks into the Escrow Account as required under the SDS Agreement. El Equity further alleged that HSBC had assisted GBL in setting up a new account to accept the diverted MMIS checks, and that HSBC accepted deposits of MMIS checks into the new account from GBL.

         El Equity moved for summary judgment on its cross claims against SDS and HSBC, and awarding it punitive damages and attorneys' fees. SDS and HSBC separately cross-moved for summary judgment dismissing the cross claims asserted against each of them. The Supreme Court granted that branch of SDS's cross motion which was for summary judgment dismissing the first cross claim, which alleged conversion, and granted HSBC's cross motion for summary judgment dismissing the third cross claim, which alleged aiding and abetting conversion. The court denied that branch of SDS's cross motion which was for summary judgment dismissing the second cross claim, which alleged breach of contract, denied that branch of El Equity's motion which was for summary judgment on that cross claim, and referred the matter to a Judicial Hearing Officer for a hearing on the amount of damages, if any, sustained by El Equity as a result of SDS's breach of the SDS Agreement. The court also denied those branches of El Equity's motion which were for summary judgment awarding it punitive damages and attorneys' fees. El Equity appeals, and SDS cross-appeals.

         As an initial matter, contrary to SDS's contention, El Equity has the capacity to maintain its cross claims against SDS and HSBC. In support of its cross motion, SDS presented evidence demonstrating that, in June 2002, El Equity was dissolved by proclamation. A dissolved corporation may not carry on new business (see Business Corporation Law § 1005 [a][1]) and no longer has the right to commence an action in the courts of this State, except in specific circumstances permitted by statute (see MMI Trading, Inc. v Nathan H. Kelman, Inc., 120 A.D.3d 478, 479). Business Corporation Law § 1006 provides, in relevant part, that a dissolved corporation "may continue to function for the purpose of winding up the affairs of the corporation, " and that "[t]he dissolution of a corporation shall not affect any remedy available to or against such corporation, its directors, officers or shareholders for any right or claim existing or any liability incurred before such dissolution." A corporation therefore "continues to exist after dissolution for the winding up of its affairs, and a dissolved corporation may sue or be sued on its obligations, including contractual obligations and contingent claims, until its affairs are fully adjusted" (Cava Constr. Co., Inc. v Gealtec Remodeling Corp., 58 A.D.3d 660, 661). Here, the MMIS checks at issue were allegedly transferred in or around July 1999 and August 1999, and El Equity asserted its cross claims against SDS and HSBC in or about May 2000. El Equity is permitted to pursue its cross claims against SDS and HSBC in the course of winding up its affairs (see MMI Trading, Inc. v Nathan H. Kelman, Inc., 120 A.D.3d at 479; Moran Enters., Inc. v Hurst, 66 A.D.3d 972, 975; J. Sackaris & Sons, Inc. v Onekey, LLC, 60 A.D.3d 733, 734). Additionally, under the circumstances presented, including that El Equity had previously attempted to settle its counterclaims against GBL and the causes of action asserted by GBL against it, SDS failed to demonstrate that El Equity no longer maintained the capacity to assert its cross claims in 2013, when El Equity moved for summary judgment (see generally Moran Enters., Inc. v Hurst, 66 A.D.3d at 975; Cava Constr. Co., Inc. v Gealtec Remodeling Corp., 58 A.D.3d 660; cf. Lance Int., Inc. v First Nat. City Bank, 86 A.D.3d 479).

         In support of its motion for summary judgment, El Equity submitted, inter alia, various letters, copies of HSBC bank account statements, copies of purported MMIS checks and deposit slips for those checks, and alleged excerpts from the deposition testimony of Diana B. Wooten, an officer of GBL. The Supreme Court should not have considered this evidence in support of El Equity's motion because El Equity failed to submit this evidence in admissible form (see HSBC Mtge. Servs., Inc. v Royal, 142 A.D.3d 952; Ulster County, N.Y. v CSI, Inc., 95 A.D.3d 1634; Marks v Robb, 90 A.D.3d 863; Unifund CCR Partners v Youngman, 89 A.D.3d 1377; Marmer v IF USA Express, Inc., 73 A.D.3d 868; Pandey v Parikh, 57 A.D.3d 634; Xikis v Xikis, 43 A.D.3d 1040). However, the copies of the Escrow Agreement and the SDS Agreement, submitted by El Equity in support of its motion, were in admissible form because they were both acknowledged (see John Deere Ins. Co. v GBE/Alasia Corp., 57 A.D.3d 620, 621-622; see generally Fairlane Fin. Corp. v Greater Metro Agency, Inc., 109 A.D.3d 868, 870). Additionally, the copy of SDS's responses to El Equity's first set of interrogatories, also submitted in support of El Equity's motion, was sworn to and in admissible form (see generally United Bank v Cambridge Sporting Goods Corp., 41 N.Y.2d 254, 264; Smith v Kuhn, 221 A.D.2d 620, 621).

         The evidence in admissible form submitted by El Equity demonstrated, prima facie, that it was an intended third-party beneficiary of the SDS Agreement, and that SDS breached that agreement. " A non-party [to a contract] may sue for breach of contract only if it is an intended, and not a mere incidental, beneficiary'" (Town of Huntington v Long Is. Power Auth., 130 A.D.3d 1013, 1014, quoting East Coast Athletic Club, Inc. v Chicago Tit. Ins. Co., 39 A.D.3d 461, 463). However, " the identity of a third-party beneficiary need not be set forth in the contract or, for that matter, even be known as of the time of its execution'" (Encore Lake Grove Homeowners Assn., Inc. v Cashin Assoc., P.C., 111 A.D.3d 881, 883, quoting MK W. St. Co. v Meridien Hotels, 184 A.D.2d 312, 313). "A party asserting rights as a third-party beneficiary must establish (1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for [its] benefit and (3) that the benefit to [it] is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate [it] if the benefit is lost" (Nanomedicon, LLC v Research Found. of State Univ. of N.Y., 112 A.D.3d 594, 596 [internal quotation marks omitted]). " In determining third-party beneficiary status it is permissible for the court to look ...


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