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Court Decides Case Involving Probate and Bankruptcy Proceedings

A Probate Lawyer said in this Estate action, the defendant moves to dismiss the plaintiff’s complaint or in the alternative an order staying the action as against him. The co-defendant cross-moves to dismiss the plaintiff’s complaint or in the alternative an order staying the action against her. The co-defendants cross- move to dismiss the plaintiff’s complaint as against them, as well as an award of costs and disbursements. The motions are granted to the extent that this matter shall be stayed pending the completion of the federal bankruptcy proceedings.

A Estate lawyer said that the defendant is a principal of a Company that has its principal place of business at New York. It is acknowledged that co-defendant was a member of company. But in support of her cross-motion to dismiss, she submits a copy of an Agreement of Sale dated June 8, 2012 wherein Defendant agrees to buy her portion of the company.

The plaintiff alleges that on or about July 27, 2011, the company entered into an agreement (Treasury Management Agreement). This agreement set forth the terms of the company’s use of Funds Transfer/Wire and Remote Check Deposit Service. The funds transfer service allowed the company to make wire transfers from its accounts with the plaintiff to accounts held at other banks. The remote check deposit service allowed Richmond Wholesale to scan and deposit checks remotely from it’s office.

Westchester County Probate Lawyer said it is alleged that between November 1, 2012 and November 14, 2012 the company and the named defendants utilized accounts held at the plaintiff institution and third-party accounts in a check-kiting scheme. A check-kiting scheme is a form of check fraud where the “check kiter” maintains accounts at two or more separate banks and passes checks, or wire transfers, between them to obtain unauthorized credit from each bank during the time it takes the checks to clear, which is known as the “float time.” This scheme may continue as long as the check kiter continues to deposit checks, or wire transfers, in both banks and both banks believe there are sufficient funds in their respective accounts to cover the checks or wire transfers.

Suffolk County Probate Lawyers said that between November 1, 2012 and November 13, 2012 the company issue approximately $31,000,000 in checks drown on third-party accounts and deposited into the plaintiff’s institution. All or nearly all of the checks were signed by defendant. And all or nearly all of the checks were deposited remotely using the defendant’s online user ID. Concurrently, Richmond Wholesale initiated wire transfers and issued checks from accounts held with the plaintiff to third party accounts.

On November 20, 2012 the plaintiff commenced a special proceeding in aid of arbitration in the Supreme Court for the State of New York, New York County.

On December 11, 2012 defendant confessed judgment on behalf of Richmond Wholesale in favor of the plaintiff in the amount of $13,522,540.05 plus interest and costs by affidavit.

The confession of judgment was entered in the Richmond County Clerk’s Office on December 14, 2012. That same day Flushing commenced a special proceeding seeking to attach defendant’s assets, and on December 17, 2012 commenced an additional action by summary judgment in lieu of complaint to collect under a guaranty allegedly signed by defendant.

On or about December 19, 2013, Capital One commenced an action against defendant in the United States District Court for the District of New Jersey.

The plaintiff’s complaint contains the following nine causes of action: 1) Fraud against all defendants; 2) Aiding and Abetting Fraud against all defendants; 3) Civil Conspiracy against all defendants; 4) Breach of Contract; 5) Indemnification; 6) Tortious Interference with contract against all defendants; 7) Unjust Enrichment against all defendants; 8) Conversion; and 9) Aiding and Abetting Conversion against all defendants.

Each of the defendants cite the involuntary bankruptcy of Richmond Wholesale as grounds to stay this action. The Bankruptcy Code provides for an automatic stay as follows: (a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of– (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; (2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; (4) any act to create, perfect, or enforce any lien against property of the estate; (5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title.

The defendantseach argue that the this matter should be stayed pursuant to aforementioned section of the Bankruptcy Code arguing that the plaintiff is pursuing the owners of Richmond Wholesale under a theory that they are its “alter-ego” without joining Richmond Wholesale as a party defendant. The defendants Khan and Hussain argue that the Appellate Division, First Department’s decision in a case. In that case the Appellate Division affirmed the trial court’s dismissal of a complaint with leave to replead in an action against the defendants as alter-egos of a corporation where the corporate defendant was not made a party.

In order to pierce the corporate veil it is necessary to show first, that the owners exercised complete domination of the corporation in respect to the alleged transaction; and secondly, that such domination was used to commit a fraud or wrong against the plaintiff which resulted in the plaintiff’s injury.

The plaintiff concedes that at least three of the causes of action alleged against the defendants constitute an alter-ego theory of liability. Consequently, motions are granted to the extent that this matter is stayed pending either the resolution of the bankruptcy proceeding; or the lifting of the automatic stay by the federal bankruptcy judge to allow this action to move forward.

The cross-motion to dismiss made by the employees of the company shall be held in abeyance pending the lifting of the automatic stay by the federal bankruptcy court.

Accordingly, it is hereby: ORDERED, that the motion made by Defendant and cross-motion by co defendant is granted to the extend that this action is stayed pending the removal of the stay by the federal bankruptcy judge in the federal bankruptcy action involving Company.

An estate should be divided in accordance with what the law provides, here in Stephen Bilkis and Associates, we will inform and advise you on how an estate should be properly divided and distributed. Our Richmond County Estate Attorneys will tell these matters, once their services are engaged. For other matters, you can also consult our Richmond County Probate Lawyers.

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