JAG Orthopedics, P.C., Plaintiff, against AJC Advisory ...€¦ · AJC Advisory Corp., Lydia...

7/27/2015 JAG Orthopedics, P.C. v AJC Advisory Corp. (2015 NY Slip Op 51111(U))

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[*1]JAG Orthopedics, P.C. v AJC Advisory Corp.

2015 NY Slip Op 51111(U)

Decided on July 21, 2015

Supreme Court, Kings County

Demarest, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law§ 431.

This opinion is uncorrected and will not be published in the printed OfficialReports.

Decided on July 21, 2015 Supreme Court, Kings County

JAG Orthopedics, P.C., Plaintiff,

against

AJC Advisory Corp., Lydia Vecchio Ferrante, ThomasFerrante, John Coscia, Angelo Coscia, John marinelli,

Alexander Krutiey, and Santandar Bank, N.A., Defendants.

511414/14

Attorneys for Plaintiff:

Charles I. Epstein, Esq.

http://www.courts.state.ny.us/reporter/



27 Warren Street, Suite 304

Hackensack, NJ 07601

Attorney for Defendant:

Ilana Sable, Esq.

Internicola Law Firm

1000 South Ave., Suite 104

Staten Island, NY 10314

Carolyn E. Demarest, J.

The following efiled papers read herein:Papers Numbered

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed44, 4547, 48,53, 5663



Opposing Affidavits (Affirmations)51, 3137, 3843,6872, 73

Reply Affidavits (Affirmations)[*2]

Memorandum of Law and Reply Memorandum of Law49, 7955, 78

Other PapersSecond Amended Complaint76

Defendants AJC Advisory Corp. (AJC), John Coscia, Angelo Coscia, andAlexander Krutiy (collectively referred to as the AJC Defendants) move for an order:(1) pursuant to CPLR 3211 (a) (1) and CPLR 3211 (a) (7) and 3016 (b), dismissing thecomplaint as against them; and (2) awarding the AJC Defendants fees, costs andsanctions based on the frivolous and meritless causes of action alleged against the AJCDefendants (Motion Sequence No. 2). Defendant Santander Bank, N.A., (Santander)moves for an order, pursuant to CPLR 3211 (a) (7), dismissing the complaint for failing

to state a cause of action (Motion Sequence No. 3).[FN1]

PLEADINGS

Plaintiff's claims against defendants arise out its allegations that defendant LydiaVecchio Ferrante, plaintiff's officer manager from September 2009 to June 2014,misappropriated/embezzeled hundreds of thousands of dollars from plaintiff by: (1)writing checks to herself well in excess of her monthly salary of $4,000; (2) obtaining,without authorization from plaintiff, a debit/credit card tied to plaintiff's checkingaccount and charging items for her own personal use; (3) forging the signature ofplaintiff's owner and president, Andrew Miller, M.D., on checks made out in her name,and (4) misappropriating funds from a checking account that plaintiff had closed priorto the misappropriation. Santander's liability is premised on its alleged failure to close achecking account in plaintiff's name from which Ferrante appropriated funds and also



its processing checks forged by Ferrante made out to Ferrante. The AJC Defendants'liability is primarily premised on their [*3]failure to inform plaintiff of Ferrante'smisappropriation of plaintiff's assets that was evident from financial records submittedto the AJC Defendants for them to prepare plaintiff's taxes.

According to the second amended complaint, plaintiff, a provider of orthopedicservices, hired Lydia Ferrante in September 2009, and in her role as office manager, shewas, among other things, in charge of billing, payment of office bills, and receiving andreconciling bank statements (Second Amended Complaint at ¶¶ 1213). In order to

carry out these duties, plaintiff made Ferrante [FN2] an authorized signatory on itschecking account (the 4933 account) with Santander (Second Amended Complaint at ¶15). In August 2013, Dr. Miller went to a Santander branch and requested that it closethe 4933 account and that it transfer the funds in that account to a new account forplaintiff (the 0089 account) opened by Dr. Miller (Second Amended Complaint at ¶¶1819, 29). Although plaintiff gave Ferrante a check book relating to the new 0089account, Ferrante was not given any authority to write checks on that account, whichauthority was only maintained by Dr. Miller (Second Amended Complaint at ¶ 20).

In or around July 2014, Dr. Miller went to a Santander branch to order new checksfor the 0089 account, and discovered that the last check number in the check book did

not correspond with Santander's records (Second Amended Complaint at ¶ 21).[FN3]

Upon a review of Santander's bank statements relating to the 0089 account, Dr. Millerdiscovered that Ferrante had taken checks from the back of the check book and forgedhis signature on 16 checks made out to Ferrante, beginning with a check datedSeptember 20, 2013, and ending with a check dated June 6, 2014 (Second AmendedComplaint at ¶ 26). At or around the same time, Dr. Miller found out that, despite hisrequest made in August 2013 that Santander close the 4933 account, Santander neverclosed the 4933 account and that a balance of $4,058.03 had remained in that account(Second Amended Complaint at ¶¶ 2930). In addition, he discovered that in February2014, Ferrante had written checks to herself from the 4933 account, and thereaftermade additional deposits and debits from the 4933 account, ending only in July 2014when that account was finally closed (Second Amended Complaint at ¶ 30).



In the same time period, Dr. Miller requested that AJC, the entity employed byplaintiff to prepare its tax returns, provide him with copies of tax documents andplaintiff's ledgers and other documents received by it in order to prepare plaintiff's taxes(Second Amended Complaint at ¶ 31). In the tax returns, AJC had described Ferrante'scredit card purchases as materials for plaintiff's orthopedic practice, and treated them asdeductions for tax purposes and plaintiff's ledgers and other documents showed thatFerrante had paid [*4]herself significantly more than her $50,000 annual salary(Second Amended Complaint at ¶¶ 3334). Dr. Miller also discovered that AJC issued1099's instead of W2 forms and never filed a tax return on plaintiff's behalf for the2012 tax year, only filing a tax return for the 2013 tax year after plaintiff hadterminated AJC's services (Second Amended Complaint at ¶¶ 32, 35 and SecondAmended Complaint at Fifth Cause of Action ¶ 4).

Based on this factual background and plaintiffs additional allegations that AJCfailed to inform plaintiff of Ferrante's misappropriation of plaintiff's assets and that shehad written numerous checks to herself and to cash well in excess of her salary,plaintiff has pled causes of action against AJC for breach of contract (fifth cause ofaction). Relying on the same essential allegations, plaintiff has also alleged causes ofaction against AJC and its owner/tax preparer John Coscia, independent tax preparerAngelo Coscia and employee/tax preparer Alexander Krutiy premised on malpractice,fraud and breach of fiduciary duty (respectively, the six, seventh and eighth causes ofaction in the Second Amended Complaint). Regarding Santander, plaintiff has pled acause of action premised on breach of contract (ninth cause of action), based onSantander's failure to close the 4933 account and allowing plaintiff to withdraw theremaining funds, and pled a cause of action (tenth cause of action) based on Santander'sprocessing and paying the forged checks with respect to the 0089 account.

MOTION TO DISMISS

Defendants now move to dismiss based on documentary evidence (CPLR 3211 [a][1]) and for failure to state a cause of action (CPLR 3211 [a] [7]). In considering amotion to dismiss for failing to state a cause of action under CPLR 3211 (a) (7), the



pleading is to be afforded a liberal construction (CPLR 3026), and the court shouldaccept as true the facts alleged in the complaint, accord plaintiff the benefit of everypossible inference, and only determine whether the facts, as alleged, fit within anycognizable legal theory (see HurrellHarring v State of New York, 15 NY3d 8, 20[2010]; Leon v Martinez, 84 NY2d 83, 8788 [1995]). Although evidentiary materialmay be considered in determining the viability of a complaint, the complaint should notbe dismissed unless defendant has established "that a material fact alleged by theplaintiff is not a fact at all and that no significant dispute exists regarding it" (Stewart vNew York City Tr. Auth., 50 AD3d 1013, 1014 [2d Dept 2008] [internal quotationmarks and citations omitted]; see also Lawrence v Miller, 11 NY3d 588, 595 [2008];Nunez v Mohamed, 104 AD3d 921, 922 [2d Dept 2013]). Similarly, a motion to dismisspursuant to CPLR 3211 (a) (1) may be granted "only where the documentary evidenceutterly refutes plaintiff's factual allegations, conclusively establishing a defense as amatter of law" (Goshen v Mutual Life Ins. Co. of NY, 98 NY2d 314, 326 [2002]; Harrisv Barbera, 96 AD3d 904, 905 [2d Dept 2010]). To qualify as documentary evidence,printed materials "must be unambiguous and of undisputed authenticity" (Fontanetta vJohn Doe 1, 73 AD3d 78, 86 [2d Dept 2010]; see Flushing Sav. Bank, FSB vSiunykalimi, 94 AD3d 807, 808 [2d Dept 2012]).

AJC DEFENDANTS' MOTION

Initially, the court addresses the portion of the AJC Defendants' motion seeking[*5]dismissal of plaintiff's malpractice claim against them. "A claim of professionalnegligence requires proof that there was a departure from the accepted standards ofpractice and that the departure was a proximate cause of the injury" (Bruno v Trus Joista Weyerhaeuser Bus., 87 AD3d 670, 672 [2d Dept 2011]; see also Schwartz v Leaf,Salzman, Manganelli, Pfiel & Tendler, LLP, 123 AD3d 901, 902 [2d Dept 2014];Kristina Denise Enters., Inc. v Arnold, 41 AD3d 788, 788 [2d Dept 2007]). The AJCDefendants' primary contention regarding the malpractice claim is that they weresimply hired to prepare plaintiff's income taxes, not to audit plaintiff's books or to act asbookkeepers, and as such, had no duty to discover or report Ferrante'smisappropriations. Plaintiff's claim, however, is not that the AJC Defendants were hired

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to discover or ferret out Ferrante's wrongdoing through an audit or a financial review,[FN4] but rather, that information in plaintiff's ledgers and the financial informationused by the AJC Defendants in order to prepare the tax returns raised questions aboutthe propriety of Ferrante's payments to herself such that they had a duty to informplaintiff of the questionable practices. Based upon the Affidavit of Gary Hoffman, alicensed tax preparer and tax accountant, describing the standards applicable to taxpreparers such as defendants, these allegations sufficiently plead a departure fromaccepted accounting practices (see 1136 Tenants' Corp. v Rothenberg & Co. (36 AD2d804 [1st Dept 1971], affd 30 NY2d 585 [1972]) ("even if defendant were hired toperform only writeup' services, it is clear, beyond dispute, that it did become awarethat material invoices purportedly paid by Riker were missing, and, accordingly, had aduty to at least inform plaintiff of this. But even this it failed to do. Defendant was notfree to consider these and other suspicious circumstances as being of no significanceand prepare its financial reports as if same did not exist"); see also Collins v Esserman& Pelter, 256 AD2d 754, 756757 [3d Dept 1998]; Board of Trustees of IBEW Local 43Elec. Contrs. Health & Welfare, Annuity & Pension Funds v D'Arcangelo & Co., LLP,124 AD3d 1358, 1359 [4th Dept 2015]; Hall & Co. v Steiner & Mondore, 147 AD2d225, 228 [3d Dept 1989]).

The AJC Defendants argument that they may not be held liable for malpracticebecause plaintiff made Ferrante its agent in dealing with the AJC Defendants isimproperly raised for the first time in reply (see U.S. Bank N.A. v Sarmiento, 121 AD3d187, 208 [2d Dept 2014]; Congel v Malfitano, 61 AD3d 809, 810 [2d Dept 2009]).Even if this argument could be seen as a response to arguments raised by plaintiff in itsopposition papers, plaintiff's giving Ferrante the responsibility for "interacting" withAJC on plaintiff's behalf (Second Amended Complaint at ¶ 13) does not, in itself,vitiate AJC's duty to plaintiff, as in performing the tax preparation services on plaintiff'sbehalf, Ferrante's improper conduct was undoubtedly recognizable as adverse toplaintiff's interests (see Schwartz, 123 AD3d at 902903; Capital Wireless Corp. vDeloitte & Touche, 216 AD2d 663, 666 [3d Dept 1995]; see also Collision PlanUnlimited, Inc. v Bankers Trust Co., 63 NY2d 827, 830 [1984]; 1136 [*6]Tenants'Corp., 36 AD2d at 804805; 2A NY Jur 2d, Agency and Independent Contractors §

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103). Similarly, while it appears that plaintiff's own negligence in monitoring Ferranteenabled Ferrante to continue her scheme for several years, the pleadings do not show itto be the sole proximate cause of the loss since such negligence does not appear to haveimpeded the AJC Defendants performance of their duties in reviewing plaintiff's taxmaterials (see Collins, 256 AD2d at 757).

Accordingly, plaintiff's allegations sufficiently plead a departure from acceptedaccounting practices. In addition, this alleged failure to inform plaintiff of theimproprieties apparent from the financial record certainly could be seen as a proximatecause of damages suffered in that plaintiff, if it had earlier knowledge of Ferrante'smisdeeds, may have been able to prevent some of her misconduct (see Collins, 256AD2d at 756758; see also Kocak v Egert, 280 AD2d 335, 336 [1st Dept 2001]; CAEIndus. v KPMG Peat Marwick, 193 AD2d 470, 473 [1st Dept 1993]; cf. Leigh Mgt.Assoc. v Weinstein, 251 AD2d 225, 226 [1st Dept 1998]).

The AJC Defendants also assert that the complaint must be dismissed as againstthe individual defendants because plaintiff has failed to allege facts demonstrating theirindividual liability. The second amended complaint itself simply states that John Coscia

was the owner and president of AJC and that Angelo Coscia [FN5] and AlexanderKrutiy were employees of AJC, without identifying their roles in reviewing plaintiff'sdocuments or preparing the tax returns. These allegations are insufficient todemonstrate the liability of these individuals because an employee or evenowner/president of a corporation may only be held liable in tort based on his or her ownactive fault or negligent supervision of another employee (see Oviedo v Weinstein, 102AD3d 844, 847 [2d Dept 2013]; Keital v Kurtz, 54 AD3d 387, 392 [2d Dept 2008];Ecker v Zwaik & Bernstein, 240 AD2d 360, 361362 [2d Dept 1997]; Connell vHayden, 83 AD2d 30, 4959 [2d Dept 1981]; see also Salazar v Sacco & Fillas, LLP,114 AD3d 745, 747 [2d Dept 2014]).

Nevertheless, in opposition to the motion, plaintiff has submitted copies of the taxreturns supplied by AJC, which showed that Alex Krutiy prepared the 2010 and 2011tax returns and that Angelo Coscia prepared the 2012 tax return. In the context of thispreanswer motion to dismiss, where it is sufficient to base an allegation of individual

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liability on inferences drawn from a person's position and responsibilities, this evidencethat Angelo Coscia and Alex Krutiy performed AJC's tax preparer functions forplaintiff is a sufficient basis to infer their involvement in the alleged malpractice (seePludeman v Northern Leasing Sys., Inc., 10 NY3d 486, 492493 [2008]; Selechnik vLaw Off. of Howerd R. Birnbaach, 82 AD3d 1077, 1079 [2d Dept 2011]; DDJ Mgt.,L.C.C. v Rhone Group, L.C.C., 78 AD3d 442, 443 [1st Dept 2010]). On the other hand,as the complaint does not allege that John Coscia was in any way involved inperforming or supervising the tax preparation work at issue, and [*7]plaintiff, inopposition to the motion, has failed to provide any basis to infer the involvement ofJohn Coscia, the complaint must be dismissed as against him (see Salazar, 114 AD3d at747).

The motion to dismiss by AJC Defendants must be granted as to the seventh causeof action for fraud, which as alleged, duplicates the malpractice claim.

The eighth cause of action for breach of fiduciary duty, premised upon defendants'failure to disclose and concealment of its own awarness of the illegal acts and diversionof plaintiff's assets by Ferrante, is actionable (see Nate B. & Frances SpingoldFoundation v Wallin, Simon, Black & Co., 184 AD2d 464 [1st Dept 1992]; Lavin vKaufman, Greenhut, Lebowitz & Forman, 226 AD2d 107 [1st Dept 1996]). While theaccountantclient relationship does not generally implicate a fiduciary duty, where, ashere, the complaint alleges the failure to advise the client of known improprietiesrevealed in records necessarily reviewed in the course of serving the client, to the extentthat complicity in the fraud perpetrated by an employee is suggested, a fiduciary dutyarises and may have been breached (id.). However, dismissal of the eight cause ofaction is also warranted as the allegations duplicate the professional malpractice causeof action (see Schwatz, 123 AD3d at 902).

The fifth cause of action for breach of contract is also duplicative of themalpractice cause of action to the extent that it is premised on allegations that AJC

failed to perform its services in a professional, nonnegligent manner [FN6] (Kvetnaya vTylo, 49 AD3d 608, 609 [2d Dept 2008]). That aspect of the breach of contract actionbased on the assertion that AJC failed to file a return for the 2012, and did not file the

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2013 return until after its services were terminated, however, is properly considered asa breach of contract, and is not duplicative of the malpractice claim (see New York StateWorkers' Compensation Bd. v SGRisk, LLC, 116 AD3d 1148, 1153 [3d Dept 2014]).

Finally, with respect to the AJC Defendant's request that plaintiff be sanctioned forfrivolous conduct, the court finds that, while several of plaintiff's causes of action mustbe dismissed, they are not so devoid of merit as to warrant sanctioning plaintiffpursuant to 22 NYCRR 1301.1 (see Global Events LLC v Manhattan Ctr. Studios, Inc.,123 AD3d 449, 450 [1st Dept 2014]; Stone Mtn. Holdings, LLC v Spitzer, 119 AD3d548, 550551 [2d Dept 2014]).

SANTANDER'S MOTION

Santander, among other things, alleges that the ninth cause of action relating toSantender's failure to close the 4933 account, which was initially pled as negligence,but is now pled as a breach of contract cause of action in the second amendedcomplaint, fails to properly plead a breach of contract. The relationship between a bankand its customer [*8]holding a deposit account is that of a debtor and creditor, and fromthis relationship the law implies a contract between a bank and its customer requiringthe bank to pay money from a depositor's account only upon the depositor's order (seeStella Flour & Feed Corp. v National City Bank of NY, 285 App Div 182, 184 [1st Dept1954], affd 308 NY 1023 [1955; see also Gibralter Realty Corp. v Mount Vernon TrustCo., 276 NY 353, 356 [1938]; Middle East Banking Co. v State Street Bank Int., 821F2d 897, 901902 [2d Cir 1987]). Given this duty, the allegations that Santander failedto follow plaintiff's direction to close the account, which failure allowed Ferrante towithdraw money from the account, states a cause of action in breach of contract (seeGeneral Apparel Sales Corp. v Chase Manhatten Bank, N.A., 321 F Supp 891, 894[SDNY 1970]; see also Commonwealth Motor Parts v Bank of Nova Scotia, 44 AD2d375, 379 [1st Dept 1974]). Since such a common law contractual claim is not faciallyinconsistent with the requirements of the Uniform Commercial Code (UCC), it is notbarred by the UCC (id; see also Fisher & Mandell LLP, 632 F3d 793, 797798 [2d Cir2011]; Elden v Merrill Lynch, Pierce, Fenner & Smith Inc., 2011 WL 1236141 * 10




[SDNY 2011]).[FN7]

Plaintiff's tenth cause of action in which it alleges that Santander improperly paidthe checks forged by Ferrante with respect to the 0089 account in violation of its UCCobligations likewise states a valid cause of action. "The Uniform Commercial Codefastens strict liability on a bank that charges against its customer's account any item'that is not properly payable'" (Monreal v Fleet Bank, 95 NY2d 204, 207 [2000]; seeUCC 4401; see also Clemente Bros. Contr. Corp. v HafnerMilazzo, 23 NY3d 277,283284 [2014]). "A check bearing a forgery of the customer's signature is an item' notproperly payable' and therefore may not be charged against the customer's account"(Monreal, 95 NY2d at 207; see UCC 3404 [1]; UCC 4104 [1] [g]; UCC 4401 [1]; seealso Clemente Bros. Contr. Corp., 23 NY3d at 284). Plaintiff's factual allegations aresufficient to make out a prima facie cause of action in light of these requirements.

Santander, however, further asserts that both the ninth and tenth causes of actionmust be dismissed because of the reciprocal duties imposed on a bank's customer byUCC 3406 and UCC 4406. Under UCC 3406, a bank will be excused from the strictliability imposed for paying on a forged check where the customer's own negligencecontributes to allowing the alteration to the check and the bank pays the check in goodfaith despite exercising due diligence. UCC 4406, in essence, provides that a bank willnot be held liable for paying on forged or unauthorized signatures where the bank hassent statements of account to the customer and the customer fails to timely notify thebank of the unauthorized items. Both UCC 3406 and UCC 4406, however, aredefenses that must be affirmatively pleaded by a defendant (see Royal Ins. Co. of Am. vCitibank, 306 AD2d 158, 159 [1st Dept 2003]; Five [*9]Towns Coll. v Citibank, 108AD2d 420, 426 [1st Dept 1985]; Eldon, 2011 WL 1236141 * 6; Weafri Well Servs.,Co., Ltd. v Fleet Bank, N.A., 2000 WL 1472724 [SDNY 2000]; CPLR 3018(b)). Assuch, plaintiff bears no burden to disprove such defenses in order to plead a cause ofaction and the absence of allegations regarding such defenses in no way affects thesufficiency of the second amended complaint at issue here (CAE Indus., 193 AD2d at473; Holland v Fulbert, Inc., 49 AD2d 86, 9192 [3d Dept 1975], appeal dismissed 39NY2d 772 [1976]; see also TIAA Global Invs.., LLC v One Astoria Sq. LLC, 127 AD3d75, 89 [1st Dept 2015]). Santander's motion, to the extent that it is premised on CPLR

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3211 (a) (7), must thus be denied.

To the extent that Santander's motion may be considered as a CPLR 3211 (a) (1)motion premised on documentary evidence despite its failure to identify that ground fordismissal in its motion papers (see Dean R. Pelton Co. v Moundsville Shopping Plaza,173 AD2d 201, 201 [1st Dept 1991] [court may treat motion as having designatedcorrect ground where opposing party has not been prejudice by failure to designate thecorrect ground]), its papers fail to demonstrate its entitlement to dismissal based onUCC 3406 and UCC 4406.

With respect to UCC 3406, a bank cannot establish a defense under that section ifit fails to show that it acted in good faith and in accordance with reasonable commercialstandards (Mouradian v Astoria Fed. Sav. & Loan, 91 NY2d 124, 131 [1997]; R.A.Contr. Co. v JP Morgan Chase Bank, N.A., 109 AD3d 600, 601 [2d Dept 2013]; RoyalIns. Co. of Am., 306 AD2d at 159). Santander has submitted no documentary proof thatit followed reasonable commercial standards in the handling of either of plaintiff'saccounts. Concededly, the allegations in the second amended complaint may besufficient to demonstrate that, among other things, plaintiff's own negligence inallowing Ferrante access to checkbooks contributed to Ferrante's forgeries and herability to access the closed account (see Carmine Rest. v Citibank, 300 AD2d 149, 149[1st Dept 2002]). Nevertheless, in the absence of evidence showing that Santanderfollowed reasonable commercial standards, Santander's papers fail to conclusivelyestablish its entitlement to a defense based on documentary proof premised on UCC 3406 (see Mouradian, 91 NY2d at 131; R.A. Contr. Co., 109 AD3d at 601; Royal Ins.Co. of Am., 306 AD2d at 159; see also Lindsay v Pasternack Tilker Ziegler WalshStanton & Romano LLP, ___ AD3d ___, 2015 NY Slip Op 04819 [2d Dept 2015];Fontanetta, 73 AD3d at 86).

Santander's papers with respect to UCC 4406 are also defective. A defense underUCC 4406 is premised on a bank sending out statements of account and a customer'sfailure to discover an item paid based on his or her unauthorized signature and timelynotify the bank after discovery thereof (UCC 4406 [1] and [2]; Clemente Bros. Contr.Corp., 23 NY3d at 284). This bar does not apply if the customer establishes that the

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bank failed to exercise ordinary care in paying the item or items (UCC 4406 [3];Clemente Bros. Contr. Corp., 23 NY3d at 284). Regardless of a bank's failure toexercise ordinary care, however, UCC 4406 (4) " bars a customer's claim for recoveryon a wrongfully paid item when the customer fails to report the irregularity within oneyear after the bank provides the statement and item" [*10](Clemente Bros. Contr.Corp., 23 NY3d at 284). This one year limitation contained in UCC 4406 can beshortened by agreement between the bank and the customer (Clemente Bros. Contr.Corp., 23 NY3d at 288290).

Although Santander, among other things, asserts that its customer agreement withplaintiff relating to the accounts shortened UCC 4406 (4)'s one year time within which

plaintiff had to report an irregularity in the accounts to 30 days,[FN8] Santander hasfailed to demonstrate that the relevant bank statements were "made available" toplaintiff for purposes of UCC 4406(1) or (2), within the one year period provided byUCC 4406 (4), or the shorter 30 day period contained in the purported customeragreement (see Clemente, 23 NY3d at 286287; Estate of Merna v Simuro, 74 AD3d1277, 1278 [2d Dept 2010]; Pippo v Fleet Bank, N.A., 2002 NY Slip Op 50052 * 56[U] [Sup Ct, Albany County 2002]). In this respect, the attachment of a few bankstatements to the affirmation of Santander's counsel, who does not purport to havepersonal knowledge of Santander's banking practices or its records (see Morales, 51AD3d at 96), simply fails to demonstrate that the statements were mailed or otherwise"made available" (see Pippo, 2002 NY Slip Op 50052 * 6; UCC 1201 [36]; see alsoNocella v Fort Darborn Life Ins. Co. of NY, 99 AD3d 877, 878 [2d Dept 2012]; cf.

Matter of Ray, 24 Misc 3d 285, 287289 [Sur Ct, Kings County 2009]).[FN9] Plaintiffdoes not otherwise concede receipt of the statements. Without proof that the statements

were sent or otherwise made available,[FN10] Santander has not presented documentaryevidence [*11]showing that UCC 4406 (1) or (2) may serve as a bar to plaintiff's UCCclaim or that the claim is untimely under UCC 4406 (4) or the shorter time allowedunder the purported account agreement (see Lindsay, ___ AD3d at ___, 2015 NY SlipOp 04819; Fontanetta, 73 AD3d at 86; see also Fairlane Financial Corp. v GreaterMetro Agency Inc., 109 AD3d 868, 870 [2d Dept 2013]; NYCTL 19982 Trust vSantiago, 30 AD3d 572, 573 [2d Dept 2006]).

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Accordingly, the AJC Defendants' motion (Motion Sequence No. 2) is granted tothe extent that: (1) the seventh (fraud) and eighth (breach of fiduciary duty) causes ofaction are dismissed; (2) the fifth cause of action (breach of contract) is dismissed withrespect to all the allegations contained therein except for the allegation that the AJCDefendants breached their agreement by failing to file a tax return for the 2012 taxyear; and (3) the complaint is dismissed in its entirety as against defendant John Cosciaand the action is severed accordingly. The AJC Defendants' motion is otherwise denied.

Santander's motion (Motion Sequence No. 3) is denied.

This constitutes the decision and order of the court.

E N T E R,

J. S. C.

Footnotes

Footnote 1:The court will apply the defendants' respective motions to the secondamended complaint, which plaintiff filed and served after the defendants made theirrespective motions to dismiss, in light of the defendants request, made in their replypapers, that their motions be applied to the second amended complaint (see Sobel vAnsanelli, 98 AD3d 1020, 1022 [2d Dept 2012]). The court notes that plaintiff shouldhave sought leave to amend the amended complaint since a party is only entitled toamend a complaint once as of course (CPLR 3025 [a]). Nevertheless, the court willignore this defect as a mere irregularity since the second amended complaint makes noprejudicial substantive changes to the action as against the AJC Defendants, andSantander has not objected to this defect with the second amend complaint in its replypapers (see State Univ. Constr. Fund v Aetna Cas. & Sur. Co., 169 AD2d 52, 54 [3dDept 1991]; Felix v Tischler, 73 AD2d 609, 609 [2d Dept 1979], overruling on othergrounds recognized Dauernheim v Lendlease Cars, Inc., 202 AD2d 624, 625 [2d Dept1994]; CPLR 2001).

Footnote 2:All references to Ferrante without a surname relate to defendant LydiaFerrante.

Footnote 3:Dr. Miller terminated Ferrante's employment with plaintiff in or aroundJune 2014, when he discovered some of Ferrante's misconduct (Second Amended



Complaint at ¶¶ 2728).

Footnote 4:Indeed, plaintiff does not allege that the AJC Defendants were hired for anypurposes other than preparing plaintiff's federal and state tax returns.

Footnote 5:John Coscia states in his affidavit in opposition that Angelo Coscia, who ishis father, is an independent contractor for AJC.

Footnote 6:In this regard, the assertions that AJC filed improper tax returns,improperly issued 1099 forms instead of W2 forms, and failed to inform plaintiff ofFerrante's misappropriations, are, in essence, assertions that AJC failed to perform itsservices in a professional manner as set forth in the sixth cause of action formalpractice.

Footnote 7:The court notes that plaintiff's mislabeling of this claim as a negligencecause of action in the prior complaints would not have been a bar to the courtconsidering it a cognizable cause of action (Commonwealth Motor Parts, 44 AD2d at379).

Footnote 8:The purported account agreement, which is attached as an exhibit to anaffirmation by Santander's counsel, is merely a copy of a generic customer agreementand is not self authenticating, is not signed by plaintiff, or elsewhere conceded byplaintiff to govern the relationship between it and the Santander. The affirmation ofSantander's counsel, made without personal knowledge, provides no evidentiary basisto find that the customer agreement was in effect during the relevant time periods orthat the agreement was ever provided to plaintiff (see Morales v Coram MaterialsCorp., 51 AD3d 86, 96 [2d Dept 2008]; see also Fairlane Financial Corp. v GreaterMetro Agency Inc., 109 AD3d 868, 870 [2d Dept 2013]; NYCTL 19982 Trust vSantiago, 30 AD3d 572, 573 [2d Dept 2006]). Plaintiff's opposition papers, however,do not specifically address the issue of whether the account agreement governs theaccounts at issue. As the motion must be denied in any event, the court has made nodecision regarding the applicability of the agreement to plaintiff's accounts.

Footnote 9:In any event, even if such an affidavit had been presented, it probablywould not be considered as documentary proof for purposes of a 3211 (a) (1) motion(see Flushing Sav. Bank, FSB, 94 AD3d at 808).

Footnote 10:Counsel for plaintiff sufficiently raised the issue of whether Santandersent out the account statements in paragraph 35 of his affirmation in opposition to themotion. The court also notes that Miller's statements, in an unsworn and undated"certification" submitted in opposition to Santander's motion, may be considered an




admission that he, acting on behalf of plaintiff, reviewed the statements and copies ofthe checks at issue sometime in June or July 2014 and thus his statements may beconsidered an admission that the statements were made available at that time. In thissame certification, Miller also asserts that in July 2014 he filled out a report with theassistance of a Santander assistant branch manager, advising the bank of the forgedchecks relating to the 0089 account and the misappropriation of funds from the 4933account. As such, any concession in this "certification" that the statements were madeavailable in June or July of 2014 does not establish the untimeliness of the claim asMiller also suggests that, at least from Miller's conceded date that the statements weremade available, he made a timely notice or report of the items improperly paid (seeRobinson v Motor Xpresss, Inc. v HSBC Bank, USA, 37 AD3d 117, 122124 [2d Dept2006]; cf. New Gold Equities Corp. v Chemical Bank, 251 AD2d 91, 9192 [2d Dept1998]). It is further noted that, in his Affirmation in Opposition, plaintiff's counsel,Charles Epstein, Esq., states that until 2013, plaintiff's checkbook and bank statementswere sent directly to the home of L. Ferrante. The bank provides evidence that "allstatements were directed to the JAG office" beginning in August 2013.

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