                          State of New York
                   Supreme Court, Appellate Division
                      Third Judicial Department
Decided and Entered: June 23, 2016                     521842
________________________________

TEODORO MALDONADO et al.,
                    Appellants-
                    Respondents,
      v                                     MEMORANDUM AND ORDER

ALAIN DiBRE et al.,
                    Respondents-
                    Appellants.
________________________________


Calendar Date:   April 25, 2016

Before:   Lahtinen, J.P., Rose, Lynch, Clark and Aarons, JJ.

                             __________


      Tabner, Ryan & Keniry, LLP, Albany (Thomas R. Fallati of
counsel), for appellants-respondents.

      Deily & Glastetter, LLP, Albany (John D. Rodgers of
counsel), for respondents-appellants.

                             __________


Lynch, J.

      Cross appeal from an order of the Supreme Court (Nolan,
Jr., J.), entered April 27, 2015 in Saratoga County, which
granted defendants' motion to dismiss plaintiffs' second amended
complaint.

      Plaintiffs Teodoro Maldonado and Steven Maldonado (and a
third person not a party to this action) owned and operated
Nissan of Saratoga, LLC, an automobile dealership located in the
Town of Malta, Saratoga County. In 2009, when the dealership
began to experience significant financial difficulties, the
Maldonados sought assistance from defendants Alain DiBre and
Patrick DiBre, who owned and operated several other Nissan
                              -2-                521842

dealerships. Although an agreement was not reached directly
after this initial contact, in May 2010, immediately prior to the
entry of an order of seizure by the dealership's secured lender,
the DiBres and Maldonados negotiated a complex transaction
wherein the DiBres paid them $2,000,000 for the assets and real
estate of the dealership and transferred the acquisitions to two
newly formed business entities, defendants Saratoga Springs
Nissan LLC and 2906 Rt 9 Realty LLC (hereinafter collectively
referred to as the LLCs). As part of this transaction, the
DiBres and Maldonados executed a membership agreement and an
operating agreement wherein it was agreed that the DiBres would
own 80% and the Maldonados would own 20% of the LLCs. Further,
the DiBres loaned the Maldonados the money necessary to purchase
their interests in the LLCs, and the Maldonados both signed
promissory notes as part of the transaction wherein they agreed
to repay $226,200 in quarterly installments to defendant AP
Management Group, Inc., an entity owned by the DiBres. Pursuant
to a hypothecation agreement, the Maldonados each granted to AP a
security interest in their 10% ownership rights in the LLCs –
referred to as units — and agreed that, upon any default in
payments under the promissory notes, AP would receive all
dividends and distributions that the Maldonados would otherwise
be entitled to as members and could also sell their respective
units at either a public or private arm's-length sale.

      The membership agreement called for Saratoga Springs Nissan
LLC to make a monthly guaranteed payment in the amount of $25,000
to a management company operated by the Maldonados. This
guaranteed payment was distinct from the cash distributions
provided for in the operating agreement. As to the latter, it
was agreed that the DiBres would serve as the dealership's
operating managers with the authority – "from time to time in
such manner as [they] determined" – to distribute cash flow in
proportion to each member's interest in the LLCs. Following the
creation of the LLCs, Teodoro Maldonado continued to work at the
dealership as the general manager and Steven Maldonado ran the
pre-owned division of the dealership. It is not disputed that,
in January 2011, the DiBres terminated the Maldonados and forced
them off the dealership property, that no monthly guaranteed
payment has been made since January 2011 and that the Maldonados
stopped making the quarterly loan payments beginning with the
                                -3-              521842

payment due in February 2011.

      In March 2011, plaintiffs commenced this action seeking to
recover their monthly management fees and share of profits,
asserting causes of action for, among other things, breach of the
operating and membership agreements, fraudulent inducement,
breach of fiduciary duty and for an accounting. Defendants
answered and interposed several counterclaims and affirmative
defenses. In October 2011, defendants moved to dismiss five of
the 11 causes of action in the amended complaint – namely, the
first (fraudulent inducement), second (breach of contract),
fourth (unjust enrichment), fifth (prima facie tort) and seventh
(Labor Law) claims – based on allegations that the Maldonados
were entitled to continued employment and were fraudulently
induced to sell their business to the DiBres. In March 2012,
Supreme Court granted the motion, holding, among other things,
that the sale of the Maldonados' dealership was "the alternative
to simply going out of business" and that the Maldonados'
employment at the dealership was an at-will arrangement.

      In October 2012, Supreme Court granted plaintiffs'
application to enjoin AP's sale of the Maldonados' units in the
LLCs and directed plaintiffs to post an undertaking in the amount
of $50,000. Plaintiffs were unable to obtain a bond, even after
Supreme Court granted an extension, and, in March 2014, the court
vacated the preliminary injunction. This Court denied
plaintiffs' subsequent application for a stay and, in May 2014,
AP sold the Maldonados' units to the DiBres.1 Thereafter, we
denied defendants' motion to dismiss the appeal as moot and
conditionally dismissed the appeal for failure to prosecute
unless plaintiffs timely perfected the appeal. Plaintiffs failed
to do so and we dismissed the appeal.2 In the meantime, Supreme


    1
        Because plaintiffs challenged the legitimacy of the sale,
we do not agree with defendants' argument that plaintiffs' claims
are moot.
    2
        Defendants now argue that plaintiffs should be precluded
from raising claims that could have been raised in the prior
appeal. Although "a prior dismissal for want of prosecution acts
                              -4-                521842

Court permitted plaintiffs to serve a second amended complaint,
and, in April 2015, the court granted defendants' motion to
dismiss the remaining causes of action set forth therein, finding
that these claims were derivative and that, upon the sale of the
Maldonados' ownership interests in the LLCs, they lost standing
to continue the action. Plaintiffs now appeal, bringing up for
review Supreme Court's prior order of dismissal (see CPLR 5501
[a] [1]; 5701 [a] [1]).3

      A derivative suit may be commenced by a member of a limited
liability company on behalf of such limited liability company
when recovery is sought for damages to the entity (see Tzolis v
Wolff, 10 NY3d 100, 103 [2008]). A direct or individual claim
may exist, however, if the "plaintiff suffered the alleged harm
individually, and he [or she] would receive the benefit of any
recovery" (Scott v Pro Mgt. Servs. Group, LLC, 124 AD3d 454, 454
[2015]; see Gjuraj v Uplift El. Corp., 110 AD3d 540, 540 [2013]).
When considering the sufficiency of a complaint, "[t]he pertinent
inquiry is whether the thrust of the plaintiff's action is to
vindicate his [or her] personal rights as an individual and not


as a bar to a subsequent appeal as to all questions that were
presented on the earlier appeal . . ., an appellate court has the
authority to entertain a second appeal in the exercise of its
discretion, even where a prior appeal on the same issue has been
dismissed for failure to prosecute" (Faricelli v TSS Seedman's,
94 NY2d 772, 774 [1999] [internal quotation marks and citations
omitted]). Here, we exercise our discretion to consider the
arguments that plaintiffs have raised on this appeal with respect
to the sale of their units.
    3
        Plaintiffs do not challenge the dismissal of the first,
fifth and seventh causes of action. Further, although
defendants' arguments with regard to the alternative grounds for
dismissal are properly before us, because defendants were not
aggrieved by the order appealed from, their cross appeal is
dismissed (see Ullmannglass v Oneida, Ltd., 121 AD3d 1371, 1372 n
2 [2014]).
                               -5-                521842

as a stockholder on behalf of the corporation" (Albany-
Plattsburgh United Corp. v Bell, 307 AD2d 416, 419 [2003]
[internal quotation marks and citation omitted], lv dismissed and
denied 1 NY3d 620 [2004]; see Craven v Rigas, 85 AD3d 1524, 1527
[2011], lv dismissed 17 NY3d 932 [2011]). If the individual
claim is "confused" or "embedded" within the derivative claim,
then it must be dismissed (Serino v Lipper, 123 AD3d 34, 40
[2014]; see Abrams v Donati, 66 NY2d 951, 953-954 [1985]; Yudell
v Gilbert, 99 AD3d 108, 115 [2012]).

      In support of the breach of fiduciary duty cause of action,
plaintiffs allege that defendants withheld profit distributions
and diverted profits, withheld management fees, used corporate
property for personal use, mismanaged the dealership, caused a
reduction in the value of plaintiffs' units, sold the dealership
without sharing profits with plaintiffs and failed to disclose
profits belonging to the dealership. By their eighth and ninth
causes of action, plaintiffs allege that the LLCs have not
accounted for property held in trust for plaintiffs.

      We agree with Supreme Court's determination that the breach
of fiduciary duty cause of action, based primarily on corporate
mismanagement, misuse of corporate property and diversion of
corporate funds, is a derivative one (see Jobson v Progno, 100
AD3d 1407, 1407-1408 [2012]; Craven v Rigas, 85 AD3d at 1527;
Albany-Plattsburgh United Corp. v Bell, 307 AD2d at 419.4
Similarly, because any right that plaintiffs have to an
accounting of monies due to and diverted from the LLCs is derived
from their membership in the LLCs, we agree with Supreme Court's
determination that the eighth and ninth causes of action are
derivative and not direct (see Yudell v Gilbert, 99 AD3d at 114).
Accordingly, because plaintiffs' units were sold, Supreme Court
properly determined that they did not have standing to proceed on
the derivative third, eighth, ninth, tenth and eleventh causes of
action (see Herman v Herman, 122 AD3d 506, 507 [2014]; Ciullo v


     4
        To the extent that plaintiffs' breach of fiduciary duty
cause of action may include direct claims, they are improperly
embedded within the derivative claims (see Abrams v Donati, 66
NY2d at 953; Yudell v Gilbert, 99 AD3d at 115).
                              -6-                521842

Orange & Rockland Utils., 271 AD2d 369, 369 [2000], lv denied 95
NY2d 760 [2000]; Rubinstein v Catacosinos, 91 AD2d 445, 446-447
[1983], affd 60 NY2d 890 [1983]). Here, the LLCs were not
dissolved but sold in accordance with the operating agreement
and, if there was any remedy for the derivative claims, it would
belong to the purchaser of the units, not plaintiffs (see Hanna v
Lyon, 179 NY 107, 110-111 [1904]; compare Independent Inv.
Protective League v Time, Inc., 50 NY2d 259, 264 [1980]).
Accordingly, under the circumstances, we agree with Supreme Court
that even if, as plaintiffs claim, the loss of the units was not
voluntary, they still would not have standing to pursue
derivative claims.

      We turn next to plaintiffs' causes of action for breach of
contract and the duplicative claim for a declaratory judgment.5
These causes of action are premised upon allegations that
defendants improperly terminated them from their employment with
the dealership and that defendants mismanaged the dealership and
diverted and withheld profits that should have been payable to
plaintiffs. Supreme Court dismissed plaintiffs' breach of
contract cause of action pursuant to CPLR 3211 (a) (1) and 3211
(a) (7) as part of its March 2012 order.

      On a motion to dismiss pursuant to CPLR 3211, we construe
the pleadings liberally, accept the allegations in the complaint
to be true, give plaintiffs the benefit of any favorable
inferences and "determine only whether the facts as alleged fit
within any cognizable legal theory" (Leon v Martinez, 84 NY2d 83,
87-88 [1994]; Mesiti v Mongiello, 84 AD3d 1547, 1548-1549
[2011]). However, "factual allegations and legal conclusions
that are inherently incredible or flatly contradicted by
documentary evidence" are not deemed to be true (Zito v New York
City Off. of Payroll Admin., 130 AD3d 1326, 1328 [2015] [internal
quotation marks and citations omitted]). Dismissal pursuant to
CPLR 3211 (a) (1) may be warranted if there is documentary
evidence that conclusively establishes a defense to a claim as a


    5
        In support of the sixth cause of action for a declaratory
judgment, plaintiffs allege that defendants have deprived them of
their rights under the operating and membership agreements.
                              -7-                521842

matter of law (see New York State Workers' Compensation Bd. v
Consolidated Risk Servs., Inc., 125 AD3d 1250, 1256 [2015]; see
also Leon v Martinez, 84 NY2d at 88).

      Applying this standard, we find that Supreme Court properly
dismissed plaintiffs' breach of contract and declaratory judgment
causes of action premised on the termination of plaintiffs'
employment at Saratoga Springs Nissan LLC. Where there is no
defined term of employment, it is considered "to be a hiring at
will which may be freely terminated by either party at any time
for any reason or even for no reason" (Murphy v American Home
Prods. Corp., 58 NY2d 293, 300 [1983]; see Coffey v
Tetragenetics, Inc., 40 AD3d 1247, 1248 [2007]). An employee who
is also a minority shareholder also may be discharged at will
where, as here, there is an agreement that his or her shares can
be repurchased upon termination of his or her employment for any
reason (see Ingle v Glamore Motor Sales, 73 NY2d 183, 188
[1989]). Here, plaintiffs identify no contractual provision that
requires defendants to employ them for any defined period nor is
there any provision that limits defendants' right to discharge
plaintiffs (see Coffey v Tetragenetics, Inc., 40 AD3d at 1248).
As it is conceded that there was no written employment agreement,
plaintiffs' claim – raised for the first time in Teodoro
Maldonado's affidavit responding to defendants' motion to
dismiss – that there was an oral agreement entitling them to
remain employed as long as the dealership remained profitable
does not alter our conclusion that plaintiffs were at will
employees (see Woss, LLC v 218 Eckford, LLC, 102 AD3d 860, 862
[2013]).

      As for plaintiffs' claims that defendants breached the
operating and membership agreements by withholding management
fees and profit distributions and diverting profits, the
documentary evidence supports dismissal as well. It is axiomatic
that a "contract is to be construed in accordance with the
parties' intent, which is generally discerned from the four
corners of the document itself. Consequently, a written
agreement that is complete, clear and unambiguous on its face
must be enforced according to the plain meaning of its terms"
(MHR Capital Partners LP v Presstek, Inc., 12 NY3d 640, 645
[2009] [internal quotation marks and citation omitted]). On a
                              -8-                521842

motion to dismiss pursuant to CPLR 3211, we must construe the
applicable agreements as a whole, not adopt a construction that
would render any provision meaningless and "give full meaning and
effect to the material provisions" (Beal Sav. Bank v Sommer, 8
NY3d 318, 324-325 [2007] [internal quotation marks and citation
omitted]).

      Here, the operating agreement expressly provided that the
DiBres had "sole[] and exclusive[]" authority to control and
manage the dealership. With respect to the cash distributions,
the operating agreement provided that distributions were not
obligatory but were determined by the DiBres, at their sole
discretion. Similarly, although the membership agreement
provided that there would be initial monthly payments in the
amount of $25,000 for "services rendered," the agreement also
specified that the DiBres had the sole discretion to determine
whether, when and in what amount this fee was to be paid.
Further, the promissory note, hypothecation agreement and cross
guaranty, all referenced within the operating agreement, are
clear that plaintiffs had an unequivocal, unqualified obligation
to repay the loan given by the DiBres. Plaintiffs expressly
agreed to pledge the units as collateral to secure the loan and,
upon plaintiffs' undisputed default under the note, defendants
were free to sell the units. Accordingly, even if, as plaintiffs
claim, defendants' conduct precipitated their default, we find
that their breach of contract claims are belied by the
documentary evidence.

      Finally, inasmuch as this dispute involves the application
and interpretation of written agreements, Supreme Court properly
dismissed plaintiffs' unjust enrichment claim (see IDT Corp. v
Morgan Stanley Dean Witter & Co., 12 NY3d 132, 142 [2009]).
We have considered the parties' remaining contentions and find
them to be either without merit or not necessary to resolve in
light of our determination.

     Lahtinen, J.P., Rose, Clark and Aarons, JJ., concur.
                        -9-                  521842

ORDERED that the cross appeal is dismissed, without costs.

ORDERED that the order is affirmed, without costs.




                       ENTER:




                       Robert D. Mayberger
                       Clerk of the Court
