This action involves a dispute between real estate investors based on an oral agreement pursuant to which Plaintiff invested $400,000 in defendant 235 East 4th Street, LLC (235), shortly before 235's acquisition of a building and property located on the lower eastside of Manhattan (the Property or the Project). In the Amended Complaint (Complaint), Plaintiff alleges that she has not received the equity interest, distributions, and other consideration she was promised in exchange for her investment, and seeks a declaration that she has a 25.80% direct equity interest in 235, that her distributions should be recalculated to reflect that interest, and other damages.

In the counterclaims to the first action, 235 seeks a declaration that Plaintiff is not, and has never been, a member of 235, and money damages for her alleged refusal to execute and comply with the obligations of 235's operating agreement. In the second action (Index No. 601199/05), 235 East 4th Street Management LLC (Management), the Managing Member of 235, also seeks a declaration that Plaintiff is not a member, the return from Plaintiff of all distributions she has received from it to date, and damages due to Plaintiff's refusal to execute documents necessary to its efforts to refinance the Property on behalf of 235.

Here, Defendants ^[FN1] move for partial summary judgment for the previously-described declaration. They also move for the alternative relief of dismissal of Plaintiff's first and fourth causes of action, for a greater equity interest in 235, so that The LLCs ^[FN2] can continue to carry Plaintiff at the respective 10% and 21.43% interests which they have, to date, recorded in their books and records. Defendants also seek dismissal of the seventh, eighth, ninth, and twelfth causes of action of the Complaint. Plaintiff cross-moves for partial summary judgment in her favor on the third, eleventh, thirteenth, and fourteenth causes of action of the Complaint.

In the Complaint, Plaintiff alleges that in or about 1998, she was approached by defendants Sam Liebman and Neil Tepper about an investment in the Property and told that, in addition to available mortgage financing, Liebman and Tepper would raise, through the sale of units in 235 to "outside" investors (Outside Investors), $1.2 million necessary to purchase the Property. In exchange for the $1.2 million, the Outside Investors were to receive a total of 30% of the equity of the Property through their ownership of units of 235, with Management owning the remaining 70% of the equity of the Property.

Plaintiff claims that she was told, and relied on the representation, that because she was contributing $400,000, representing one-third of the total monies to be raised from the sale of the 235's units, she would receive:

"a pro rata portion of the total 30% equity interest in the Property to be allocated to the [*2]Units (based on the actual aggregate monies raised in the Offering and used for the purchase of the Property) and an additional 21.43% equity interest in [Management] . . . .

(Complaint, at 7, ¶ 15).

Plaintiff further alleges that she was advised by the Defendants that if the full $1.2 million was not raised from the sale of the units, Liebman and Tepper would either purchase the unsold units, or lend 235 the balance of the proceeds needed to complete the $1.2 million offering. Thus, Plaintiff alleges that, whether as an investment or a loan, Liebman and Tepper were supposed to, at the time of closing on the Property, fund any shortfall in raising the $1.2 million with their own funds, even if they had to personally borrow from others to do so. In reliance on these representations, Plaintiff asserts that she invested in 235.

Plaintiff contends that the total amount raised in the offering at or prior to January 11, 1999 closing on the Property was not $1.2 million. Instead of funding the shortfall in raising the $1.2 million with their own funds, however, Plaintiff alleges that Liebman and Tepper borrowed $499,000 from defendant Daniel Perla Associates, LP (Perla), at an interest rate of 14% per annum, mortgaged the Property, and thereafter used 235's funds to service the loan (the Perla Loan).

Plaintiff alleges that in December 1999, Liebman and Tepper prepared a "Confidential Private Placement Memorandum" (Private Placement Memorandum) with respect to the terms and conditions of the $1.2 million offering to Outside Investors, which together with Defendants' representations to her, constitute a binding and enforceable contract between Plaintiff and 235, entitling her to 25.80% of the equity of 235 (Complaint, at 12). Plaintiff further alleges that 235 has breached that contract by treating her as a 10% equity holder, and that she is entitled to judicial declaration that she holds 25.80%, not 10%, of the equity of 235. In the fourth cause of action, Plaintiff seeks the same declaration based on a misrepresentation theory.

In the third cause of action of the Complaint, Plaintiff alleges that Defendants later sold certain units in 235, owned by Management, at a $50,000 premium. Plaintiff alleges that notwithstanding that she holds a 21.43% membership interest in Management, Defendants took the $50,000 premium for themselves and did not share it with her, and that she has thus incurred damages of $10,715 ($50,000 x .2143).

In the seventh and eighth causes of action of the Complaint, Plaintiff alleges that Liebman and Tepper did not give to 235, or distribute to its owners, $150,000 that was held in escrow, and later returned to them by the Property's first mortgagee. Instead, Plaintiff alleges that Defendants kept the money, and/or used it for the benefit of other persons or entities unrelated to 235. Plaintiff seeks an accounting and damages.

In the ninth cause of action of the Complaint, Plaintiff alleges that when Liebman and Tepper raised money from her, they promised that they would make up any shortfall in the $1.2 million to be raised through the offering with their own funds knowing that they did not intend to do so. Plaintiff contends that Liebman, Tepper and Perla intentionally concealed from her, and the other 235 unitholders, that they would not use their own funds to cover the shortfall, but would instead use 235 to service the Perla Loan, and the Property to secure it. Plaintiff alleges that these representations and omissions were material, and made by Defendants to deceive Plaintiff, and that she and the other 235 unitholders were deceived and injured by them. Plaintiff [*3]seeks $250,000 in compensation for damages.

In the eleventh cause of action of the Complaint, Plaintiff claims that Defendants did not pay to her a portion of funds from a refinancing on the Property, effected in December 2003, that she was promised pursuant to a memorandum dated January 4, 1999 (the January 4, 1999 Memorandum).

In the twelfth cause of action, Plaintiff claims that she is entitled to dissolution of 235 and Management pursuant to New York Limited Liability Company Law (LLCL) § 702.

In the thirteenth cause of action of the Complaint, Plaintiff claims that she is entitled to an annual minimum distribution from 235 of $40,000, that Liebman and Tepper have wrongfully withheld these distributions, and that she is thus entitled to damages of $40,000, plus interest, from the date that each distribution should have been made.

In the fourteenth cause of action, plaintiff alleges that at the time of the closing on the Property, Liebman, Tepper and non-party Kinsey did not give Plaintiff her 21.43% share of a $75,000 distribution made by Management.

It is undisputed that on December 8, 1998, Liebman, Tepper and Kinsey formed 235 and executed an operating agreement (The First 235 Operating Agreement), which provides that each of the three has a one-third membership interest in 235. On December 29, 1998, Liebman, Tepper and Kinsey formed Management to serve as the managing member of 235. At that time, Liebman, Tepper and Kinsey also prepared and signed an operating agreement for Management (The Management Operating Agreement). The Management Operating Agreement provides that Plaintiff has a 21.43% membership interest in Management, with the remaining aggregate interest in the LLC divided equally among Liebman, Tepper, and Kinsey (26.19% each).^[FN3]

Liebman gave Plaintiff the January 4, 1999 Memorandum, mentioned in the eleventh cause of action of the Complaint. On January 11, 1999, 235 closed on the Property and at about that time, Plaintiff transferred $400,000 into an account controlled by 235. Thereafter, over time, over 20 others, whose interests have been recorded in 235's books, invested $800,000 for the remaining equity units in 235.

On a date not specified, but after Plaintiff's investment and the purchase of the Property, Liebman swears that an operating agreement for 235, dated October 20, 1999 (The Second 235 Operating Agreement), was circulated to all members of 235 who, except for Plaintiff, executed it by signing a signature page entitled "Adoption of Limited Liability Company Agreement for 235" (the Adoption Form). The Adoption Form states a specific membership interest in units, and by signing it, the signer confirms that he or she has acquired that number of units. Despite Defendants' requests that she do so and, Liebman swears, their inquiries as to whether Plaintiff was in or out of the deal, Plaintiff declined to sign the Second 235 Operating Agreement.^[FN4] At her examination before trial (EBT), Plaintiff testified that she has refused to sign The LLC's operating agreements because they do not reflect the terms upon which she agreed to invest.Since 1999, the books and records of 235 and Management reflect that Plaintiff has had [*4]10% and 21.43% ownership interests, respectively, in The LLCs. As Management is the 70% owner of 235, a 21.43% interest in Management is a 15% interest in 235 (.70 x .2143). Also undisputed is Liebman's sworn statement that Plaintiff has received and filed tax returns using IRS K-1 schedules (K-1s) issued by The LLCs that reflect the membership interests described above, and that she has received and cashed distribution checks from 235 calculated on that basis.

To meet their burden on summary judgment, Liebman swears that he discussed the investment project with Plaintiff prior to her investment and provided to her a memorandum outlining potential terms, were she to make a $350,000 investment. Liebman further swears that because Plaintiff requested more equity in consideration of a larger investment, he gave her the January 4, 1999 Memorandum, which reflects the terms of her $400,000 investment. Liebman swears that Plaintiff invested $400,000 in 235 on or about January 11, 1999.^[FN5]

According to Liebman, the January 4, 1999 Memorandum confirms that Plaintiff was promised 25% of the deal. This 25% interest, Liebman states, is represented by Bobrow's 10% interest as a unitholder of 235, and her 15% interest in 235 through Management. Liebman submits copies of excerpts from The LLCs' books and records, which he states have recorded these interests since 1999.

Liebman also swears that when it was completed, although he does not provide the date it was completed, but only the date the financial projections therein were finalized, December 11, 1998, he gave Plaintiff a copy of a prospectus, which he states was prepared to solicit investor interest (the Prospectus). The Prospectus is briefly mentioned in the January 11, 1999 Memorandum.

Liebman further swears that because Plaintiff later refused to sign the operating agreements for The LLCs, notwithstanding that they made repeated requests for her to do so, Defendants did not know whether Plaintiff was or was not "in the deal" and, in what he characterizes as "the absence of any . . . subscription" for her interest, whether to treat her as a member or a lender (Liebman Aff., 19). Liebman does not specify when these refusals or requests were made, but submits a March 4, 2002 letter to Plaintiff's counsel requesting that she sign The LLCs' respective operating agreements.

In opposition to the Defendants' motion, and in support of her own, Plaintiff swears that in and around December 1998, Liebman and Tepper told her that they were raising $1.2 million for the purchase of the Property, which they led her to believe would represent one-third of the monies Defendants were actually raising from Outside Investors for the purchase of the Property. Plaintiff also swears that she was "led to believe" that, in return for her investment of one-third of the total $1.2 million Offering, she would receive one-third of the underlying equity in the [*5]Property (33%), not one-third of the 30% of the equity offered to Outside Investors (10%).

Plaintiff states that she was informed by the individual Defendants that, to the extent that there would be any "shortfall" in raising the $1.2 million from Outside Investors for the purchase of the Property at closing, Liebman and Tepper would fund it themselves through either investing in or, at their own expense, lending money to 235. Plaintiff contends that unbeknownst to her at the time of the closing on the Property, only $35,000 was raised from other investors, and her $400,000 investment was approximately 92% of the total $435,000 raised, and virtually all of the money "at risk" at closing.

Plaintiff states that, instead of investing their own funds in 235, or loaning the company the money to cover the shortfall in raising the $1.2 million dollars at the time of closing, Defendants borrowed $499,000 from Daniel Perla Associates, LP, encumbered the Property with a Mortgage, and used 235's funds to service the Perla Loan. Thus, Plaintiff swears, because Tepper and Liebman did not live up to their word, 235's funds were used to fund their personal obligations, causing the company to waste tens of thousands of dollars.

Plaintiff states that she received the January 4, 1999 Memorandum from Defendants at or around the time that the she invested the $400,000 with them, and that it outlines what the Defendants concede was allotted to her for her investment. Plaintiff further states that "[a]s it turned out (and presumably to appease me since I told them that I should receive one-third of the entire deal since my investment was, by far, the largest single investment in the Syndication and was the first monies in'), I was allotted an additional 21.43% of Management" (Pl. Aff., ¶ 7).According to Plaintiff, the 21.43% interest in Management demonstrates that she received, at minimum, a 15% indirect ownership interest in the Property, and a total of 25% of the total equity of the deal. Plaintiff states that the January 4, 1999 Memorandum also confirms that Liebman and Tepper agreed that she would receive the eight, nine, and ten percent returns indicated therein and, based on the 25% equity interest in the Property allotted to her, 25% of the proceeds from the refinancing of a loan on the Property. Plaintiff states that the terms of her agreement are, to some extent, supported by the Prospectus, which provides that the total offering to Outside Investors was $1.2 million, and recites the terms of her "priority return," but which she first saw only years after making her investment.

Plaintiff swears that months after both the closing on the Property and the solicitation of her funds, Liebman and Tepper apparently prepared drafts of, but never completed, the Private Placement Memorandum setting forth the terms of the Project. Plaintiff states that neither she nor the other investors received a copy of the Private Placement Memorandum, but that its contents support the eight, nine and ten percent annual returns to which she claims entitlement. Plaintiff states that the Private Placement Memorandum also supports her contention that Defendants promised that they would themselves make up any shortfall in obtaining the $1.2 million outside funding because it states that if all of the 35 units were not sold to Outside Investors, and the full $1.2 million not raised, the Managing Member would " purchase the balance of the units'" or " lend to the Company the balance of the proceeds to complete the Offering'" (Pl. Aff., at 15). Although Plaintiff quotes from this document, and despite that it appears to have been produced at Liebman's EBT, she has not submitted a copy of it, or a reason for not submitting it.

Plaintiff states that while she has not signed The LLCs' operating agreements, because [*6]they do not reflect what she believed to be her percentage ownership in The LLCs, she has never indicated that she was not a member of the two companies. Prior to her commencement of this action, Plaintiff maintains, Defendants did not seriously take the position that she was not a member of, or holder of an equity interest in, the Property.

The Defendants' Motion

The Defendants move for summary judgment on their claim for a declaration that Plaintiff is not a member of The LLCs. In order to obtain summary judgment, the movant must establish its claim sufficiently to warrant a court's directing judgment in its favor, as a matter of law, through the tender of admissible evidentiary proof (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). Where the movant meets its burden, the party opposing the motion must set forth admissible evidentiary proof in support of his or her claim that material triable issues of fact exist (Zuckerman, 49 NY2d at 562).

Defendants state that they "expanded" membership in 235 by preparing and circulating to its members the Second 235 Operating Agreement, which provides that

"the Members other than the Managing Member shall contribute to the capital of the Company a total of $1,200,000 which shall be subscribed for in units of $34,285.71, or such other amounts as the Managing Member may elect to accept. Each $34,285.71 unit (or proportionate part thereof with respect to units of a lesser amount (hereinafter, "Units") shall be subscribed for and contributed by each Member in cash or by check upon execution of this Limited Liability Company Agreement."

Defendants argue that New York's Limited Liability Company Law (the LLCL) §§ 417 and 602 require execution of and compliance with a limited liability company's (LLC) operating agreement as a prerequisite to membership. They further argue that they are entitled to a declaration that Plaintiff did not become a member of 235 or Management under the LLCL because after their preparation and circulation of The LLCs' respective operating agreements to her, their requests that she sign, and their inquiries to her as to whether she was in or out of the deal, Plaintiff has not signed the Adoption Form or the Management Operating Agreement. Defendants thus advocate characterizing the $400,000 Plaintiff tendered to 235 as a loan, the unwinding of what they label as her "purported investment," and the return to her of $400,000, with interest, and minus prior distributions, and the dismissal of her claims for lack of standing.Plaintiff argues that there is nothing in the LLCL that makes status as a member in an LLC dependent upon the execution of the operating agreement, and that numerous documents, including tax forms and schedules, prepared by Defendants and transmitted to Plaintiff confirm her 25% equity interest in The LLCs, and demonstrate her status as a member of both of them. Consequently, Plaintiff argues, Defendants have acknowledged her membership status through their conduct, and should not now be permitted to cash out, at cost, her valuable equity interest in the Property. [*7]

In support of their motion, Defendants rely on LLCL §§ 417 (a), 602 (a) (2) and 602 (b) (1). LLCL § 417 (a) provides that members "shall adopt a written operating agreement," but it does not require that they adopt one that does not accurately reflect their ownership interest.^[FN6] In fact, there is no penalty in the LLCL for a member's failure to adopt an operating agreement (see Villi v O'Caining-Villi, 10 Misc 3d 1060(A) [Sup Ct, Westchester County 2005]; Matter of Spires v Lighthouse Solutions, LLC, 4 Misc 3d 428, 431 [Sup Ct, Monroe County 2004]; see also Merrell-Benco Agency, LLC v HSBC Bank USA, 20 AD3d 605,607 [3d Dept 2005]). In addition, because LLCL § 417 (a)'s plain language speaks of a "member's" adoption of the LLC's operating agreement, the statute merely provides that those that are members shall adopt an agreement, not that its fulfillment is a prerequisite for membership.

Defendants' reliance on LLCL § 602 (a) (2) is also unpersuasive. That provision concerns no more than the date upon which a member becomes a member.^[FN7]

LLCL § 602 (b) provides that a person may become a member of an LLC on the effective date of the initial articles of organization, in the case of initial members (White, 5 NY Business Entities ¶ L602.01 [14 ed]).^[FN8] After such filing, others may be admitted to the LLC as members; such admission, however, requires compliance with the LLC's operating agreement (LLCL § 402 [c]; LLCL § 602; White, 5 NY Business Entities ¶ L602.01]). Where the operating agreement makes no provision for the admission of new members, however, a member may be admitted on receiving the vote or written consent of a majority in interest of the members (LLCL § 402 [c]; LLCL § 602; White, 5 NY Business Entities ¶ L602.01). In other words:

"The operating agreement may set forth the requirements for membership. A person becomes a member of an LLC (i) upon formation of the LLC, [or] (ii) after formation either by acquiring the membership interest directly from the LLC or by assignment or transfer from an existing member . . . . The operating agreement may specify what percentage of membership interests must approve the issuance [*8]of an interest to a non-member, and absent such specification, a majority in interest of the members is required to approve the issuance."

In addition, Liebman swears, and Defendants' position is, that the terms of the parties' agreement are contained in the January 4, 1999 Memorandum. Defendants also advance this position in their Rule 19-a Statement.^[FN10] The Second 235 Operating Agreement states that it is "made as of October __, 1999," approximately 10 months after Defendants claim that the parties made their agreement. As Defendants' position is that the January 4, 1999 Memorandum states the terms pursuant to which Plaintiff made her investment and they accepted her money, their attempt to make the Second 235 Operating Agreement a required subscription agreement, where the January 4, 1999 Memorandum does not mention that document is unpersuasive.

Furthermore, the First 235 Operating Agreement permits the three initial members of the company to take actions without a meeting. Defendants' position is that the January 11, 1999 Memorandum states the terms of Plaintiff's investment, and Defendant Liebman swears that the true and correct copies of excerpts that Defendants submit from The LLCs' books and records, which they are required to keep pursuant to law (LLCL § 1102),^[FN11] record Plaintiff as holding a 10% unitholder interest in 235 and a 21.43% interest in Management since 1999. Moreover, according to Defendants, Plaintiff received and filed tax returns using K-1s, issued by The LLCs, which reflect the interests described above, as well as distribution checks, from The LLC's, calculated on the basis of 10% unitholder interest in 235 and the 21.43% interest in Management. The Prospectus, upon which Defendants rely, describes the investment interests made by those who contributed the $1.2 million dollars in outside funds to 235 as membership interests. [*9]Defendants' submissions thus support Plaintiff's claim of a 10% and 21.43% membership interest in The LLCs. In fact, based on the Defendants' provision to her of the K-1s, Plaintiff argues for an estoppel against Defendants' assertion that she is not a member.

As to Management, the factual position taken by the Defendants is that the parties agreed that Plaintiff was to have an ownership interest in that LLC, and, according to the documentation they have submitted, she was an initial member.^[FN12] Defendants point to nothing in the LLCL that would support the unwinding or effective forfeiture of Plaintiff's interest in Management.

Thus, the only evidence that Defendants have submitted demonstrates that Plaintiff is an owner, and the file of the New York County Clerk in this matter (Brobrow v Liebman, Index No. 601132/04) reveals that Defendants admitted in a previous Rule 19-a response that Plaintiff "is the owner (directly or indirectly) of a 25% economic interest in the total equity of 235," indicating that the position that Defendant have taken in this action is that Plaintiff is an owner.^[FN13] The owners of an LLC are its members (see Willoughby Rehabilitation and Health Care Center, LLC v Webster, 13 Misc 3d 1230(A) [Sup Ct, Nassau County 2006] ["A limited liability company is hybrid business entity having attributes of both a corporation and a partnership. Its owners are its members"]; Landa v Herman, 9 Misc 3d 1125(A) [Sup Ct, NY County 2005] ["An LLC combines the corporate limitation on personal liability of the owners (who are called 'members') with the partnership's operating and management flexibility by its members . . ." (internal quotation marks omitted)]; cf Exchange Point LLC v United States Securities and Exchange Commission, NYLJ, June 17, 1999, at 36, col 6 [SD NY, Schwartz, J.] ["[r]ather than having general partners and limited partners as a limited partnership does . . . the owners of a Delaware LLC are designated as members"].^[FN14] On this record, Defendants have not demonstrated entitlement to a declaration that, pursuant to the LLCL, Plaintiff is not now and has never been a member (Winegrad v New York University Medical Center, 64 NY2d 851, 853 [1985]).

In their alternative argument, to dismiss the first and fourth causes of action of the Complaint, Defendants argue that the record, including the Prospectus, the January 4, 1999 Memorandum, and The LLCs undisputed books and records, establish that Plaintiff received precisely the interests to which she is entitled, and that there is no evidence to support Plaintiff's assertion that she did not receive what she was promised, or that Liebman and Tepper took an interest in 235 or Management improperly (Def. Moving Memo. of Law, at 10).^[FN15] Furthermore, [*10]as previously discussed, there is no dispute that Defendants have recorded Plaintiff's interest as a membership interest in 235's books and records, and that prior to the commencement of this suit, Plaintiff received the economic benefits of those interests.^[FN16] Consequently, Defendants argue that the evidence conclusively establishes that Plaintiff has received all the percentage interest in 235 to which she is entitled, and that the books and records of The LLCs further establish that Plaintiff received those interests.^[FN17]

In opposition, Plaintiff argues that there is a material issue of fact concerning the terms of her agreement and her understanding with Defendants Liebman and Tepper under which she invested $400,000. Plaintiff swears that she was "led to believe" that she would receive one-third of the underlying equity in the Property, and not one-third of the 30% share of the entity that was sold to the Outside Investors, that is, a 10% in the underlying equity (Pl. Aff., ¶ 7). She further swears that Defendants "led [her] to believe" that her $400,000 investment would represent one-third of the monies defendants were actually raising from Outsider Investors for the purchase of the Property (id., ¶ 6).

At summary judgment, the non-moving party must lay bare her proofs (Corcoran Group, Inc. v Morris, 107 AD2d 622 [1st Dept], affd 64 NY2d 1034 [1985]). Although Plaintiff swears that Defendants led her to believe that she could be getting a one-third of the underlying equity in 235 East 4th Street, purchased by 235, in exchange for $400,000, she does not so much as state a specific representation made to her by any defendant prior to her investment. Instead, Plaintiff argues that documents she never saw before tendering the $400,000, for example, the Private Placement Memorandum, which she has not provided, and the Prospectus, confirm a representation she never actually states was made by the Defendants.^[FN18]

At this juncture, plaintiff may no longer merely conclude or allege that she was led to believe something, as unsubstantiated or bald conclusory allegations or assertions, even where believable, and shadowy semblances of an issue will not suffice to defeat summary judgment (S.J. Capelin Associates, Inc. v Globe Mfg. Corp., 34 NY2d 338 [1974]; Zuckerman v New York, 49 NY2d at 562). In other words, Plaintiff needs to have stated here the representations which she claims were misleading, and upon which she relied. She does not do so.^[FN19] Thus, her assertions are devoid of evidentiary facts and insufficient to defeat summary judgment (Grullon v City of New York, 297 AD2d 261, 263-264 [1st Dept 2002]).

As Plaintiff has not submitted any admissible evidence that any defendant made a representation to her that she would receive one-third of the equity in the Property, reliance [*11]cannot follow. In addition, she cannot claim justifiable reliance where, through the exercise of ordinary diligence, she could have obtained information about potential "cash" contributions made by other investors or members before the closing.

Finally, Plaintiff argues that her percentage ownership interest in the property should be adjusted to give her the full benefit of her bargain. Fraud damages, however, are not intended to provide a victim with "benefit of the bargain damages," and are limited to indemnifying the injured party for the actual losses sustained, that is, "out-of-pocket" damages (Lama Holding Co. v Smith Barney Inc., 88 NY2d 413 [1996]; 164 Mulberry Street Corp. v Columbia University, 4 AD3d 49, 60 [1st Dept 2004] ["compensatory damages are limited to provable pecuniary losses correlating with out-of-pocket losses" (internal citations omitted)]), and a victim of fraud may not recover the benefit of an alternative agreement overlooked in favor of the fraudulent one (Kensington Publishing Corp. v Kable News Co., 100 AD2d 802, 802 [1st Dept 1984] [stating that victim of fraud may not recover the benefit of an alternative agreement overlooked in favor of the fraudulent one]).

Plaintiff's contract claim for a larger equity interest fares no better. Defendant Liebman swears that plaintiff tendered the $400,000 based on the terms contained in the January 4, 1999 Memorandum. In opposition, plaintiff does not provide admissible evidence of a promise made to her by any of the Defendants that she would receive one-third of the equity in the Property in exchange for $400,000. Plaintiff's subjective beliefs about the interest she should have received are not a substitute for specific terms of an agreement.

In addition, in her opposition papers and at oral argument, Plaintiff explains that her claim is that having taken virtually all of the economic risk of the deal, her ownership percentage in the deal should be adjusted. The agreement the parties have, however, is the one they made, and not one that a party, or a court, believes they would have made with better knowledge of the facts, as it is hornbook law that a court cannot fashion an agreement for parties into which they did not themselves enter.^[FN20] Accordingly, crediting Plaintiff's statement that she incurred additional risk (S.J. Capelin Associates, 34 NY2d at 342), to the extent that she could prove the value of such damages at trial, her remedy would be for money damages only.

On reply, Defendants raise a statute of frauds argument based on the alleged oral agreement. The Complaint makes clear that Plaintiff asserts an oral agreement concerning her interests in the LLC. Defendants did not advance a statute of frauds defense in their moving papers, and the amended answer does not contain a statute of frauds defense. On a summary judgment motion, arguments advanced for the first time in reply papers are entitled to no consideration (Clearwater Realty Co. v Hernandez, 256 AD2d 100 [1st Dept 1998]). Moreover, the statute of frauds must be pled as an affirmative defense. Defendants have not sought to [*12]amend their answer, and the failure to plead the statute of frauds as an affirmative defense is deemed a waiver of the affirmative defense (CPLR 3211 (e); 23/23 Communications Corp. v General Motors Corp., 257 AD2d 367, 367 [1st Dept 1999]; Gottlieb v Gurrieri, 5 Misc 3d 1004(A) [Sup Ct, Nassau County 2004]).^[FN21]

So at this juncture, Plaintiff maintains that she has at least the 10% and 21.43% membership interests in 235 and Management respectively, but her claim for a greater interest in those entities fails, while Defendants, unpersuasive in their efforts to "unwind" Plaintiff's interests pursuant to the LLCL or in light of their conduct over the years on behalf of The LLCs, seek to limit Plaintiff to precisely the same interests. In the first and fourth causes of action, Plaintiff requested a declaration. Where no question of fact is raised, but only a question of law or statutory interpretation is presented on a motion to dismiss a declaratory judgment action, the court may render a determination and declare the rights of the parties (Spilka v Town of Inlet, 8 AD3d 812, 813 [3d Dept 2004]). In addition, where a party is unsuccessful in a declaratory judgment action, the determination should not be a judgment of dismissal, but rather the appropriate declaration of the rights of the parties (Lanza v Wagner, 11 NY2d 317, 222 [1962]). Defendants' request for dismissal of the first and fourth causes of action of the Complaint is thus granted, and Defendants are entitled to a declaration that Plaintiff is a member of The LLCs, at the respective 10% and 21.43% ownership interests described above.^[FN22]

Defendants move to dismiss the seventh, eighth and ninth causes of action of the Complaint. As previously discussed, in the seventh and eighth causes of action, Plaintiff seeks an accounting and the return of certain mortgage escrow proceeds in the amount of $150,000, which Plaintiff alleges Liebman and Tepper took for themselves or others, that should have gone to 235, or been distributed to 235's owners. In the ninth cause of action, Plaintiff alleges that, as part of their scheme to obtain a larger equity interest in the property, prior to making her investment, Liebman and Tepper knowingly misrepresented to her that they would make up the shortfall in the offering with their own funds, knowing that they would instead use 235 to service the Perla Loan.

In their moving papers, neither Liebman nor Tepper's affidavits address the Perla Loan, or the $150,000 discussed in the seventh and eighth causes of action in their respective affidavits. In fact, the Defendants merely address the seventh and eighth causes of action by referring to my earlier decision on the motion to dismiss, and otherwise do not address the Complaint, or tender sufficient evidence to eliminate any material issues of fact from the case (Winegrad, 64 NY2d at 853). Regardless of the sufficiency of the opposition papers, failure to make a prima facie showing requires denial of the motion (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). [*13]Accordingly, Defendants' motion to dismiss the seventh and eighth causes of action of the Complaint is denied.

As to the ninth cause of action, in support of their motion, Defendants point to the Prospectus and a memorandum from Liebman to Kinsey and Tepper, and argue that their documents conclusively establish that the Perla Loan had been contemplated and confirmed as early as November 1998 (Def. Memo. of Law, at 11). They also state that the Prospectus supports their position that the Defendants only received the "sweat equity" interests to which they were entitled. Where Plaintiff alleges that, knowing it was untrue, Defendants represented to her that they intended to use their own funds to cover any shortfall in raising the $1.2 million dollars for closing on the property, in order to obtain her investment funds, a demonstration that Defendants did not intend to use their own funds, does not dispose of factual issues.^[FN23] In addition, that the Prospectus may support Defendants' position is not dispositive.

A different result is found where Defendants submit Plaintiff's EBT testimony that she could not, in hindsight, determine whether or not she would have invested in the project had she known about the Perla Loan and mortgage, and indicates that she merely would not have "acquiesced" to its terms. To prevail on a misrepresentation claim, a party must demonstrate that she relied on a false representation made by the Defendants (see Lama Holding Co., 88 NY2d at 421). Plaintiff's EBT testimony demonstrates that she cannot establish a requisite element of her claim. Plaintiff does not contend otherwise, but instead asserts that Defendants Liebman and Tepper, as managers of 235, have violated LLCL § 409, in that they have breached a fiduciary duty to 235 by using its assets for their own purposes.

The claim plaintiff asserts here, which speaks to an injury to the company, is a derivative action; recovery would belong to 235, not Plaintiff. Plaintiff has not brought her claim as a derivative action, and may not, on summary judgment, transform a fraudulent misrepresentation claim into a breach of fiduciary duty claim, and a direct claim into a derivative one. As Plaintiff raises no other argument in opposition, the ninth cause of action of the Complaint is dismissed.

Defendants move for summary judgment on the twelfth cause of action for dissolution of the company. LLCL § 702 provides that:

"On application by or for a member, the supreme court in the judicial district in which the office of the limited liability company is located may decree dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement."

In support of their motion, Defendants point to Plaintiff's EBT testimony that she does not seek dissolution of 235, and knew of no reason to believe that the company is either failing financially, or cannot function as intended. As Plaintiff is not the movant, and does not run 235, her knowledge about its financial or operational state is irrelevant. As Plaintiff also testified that she does not seek dissolution of 235, however, and does not oppose Defendants' motion, the [*14]motion is granted, and the twelfth cause of action of the Complaint is dismissed.

The Plaintiff's Motion

Plaintiff moves for summary judgment on the third, eleventh, thirteenth and fourteenth causes of action of the Complaint. Plaintiff states that Defendants concede that the January 4, 1999 Memorandum contains the terms of her investment, and seeks certain distributions and payments outlined in her Complaint. Defendants contend that Plaintiff must establish that she is a member before she is entitled to any distributions. They also claim that there are triable issues of fact relating to Plaintiff's alleged failure to cooperate with the Property's refinancing and that Plaintiff has already made a summary judgment motion, which I determined was premature. Without explanation, Defendants argue that the motion is still premature, but do not point to or even assert that there is outstanding discovery.

While "[m]ultiple summary judgment motions in the same action should be discouraged in the absence of a showing of newly discovered evidence or other sufficient cause" (Flomenhaft v Fine Arts Museum of Long Is., 255 AD2d 290 [2d Dept 1998] [internal quotation marks and citations omitted]; see Giganti v Town of Hempstead, 186 AD2d 627, 628 [2d Dept 1992]), a subsequent summary judgment motion may be properly entertained when "it is substantively valid and [when] the granting of the motion will further the ends of justice while eliminating an unnecessary burden on the resources of the courts" (Detko v McDonald's Rests. of NY, 198 AD2d 208, 209 [2d Dept 1993]).

Early on in this action, Plaintiff moved for summary judgment on the eleventh cause of action of the Complaint, in response to Defendants' pre-answer motion to dismiss. I denied the motion at that early juncture because the parties had not had an opportunity to conduct discovery concerning Defendants' contentions regarding possible offset to Plaintiff concerning the refinancing proceeds. There is now no dispute that discovery is complete, and determining Plaintiff's motion will aid judicial economy.

Regarding her motion for summary judgment on the eleventh and thirteenth causes of action, Plaintiff argues that her affidavit demonstrates that there is no genuine issue of fact with respect to her right to receive a pro rata share of the mortgage refinance proceeds of $152,816 and her preferred "priority return" of 10% per annum, and that her motion should be granted because Defendants have not seriously disputed her right to these monies.

In her affidavit, Plaintiff swears that Defendants' obligation to pay these monies to her are set forth in the documents which formed the basis for her initial investment,^[FN24] and that the January 4, 1999 Memorandum, which Defendants gave to her, confirms that she was entitled to a proportionate share of the proceeds in the amount of $152,816. Regarding the refinancing, the January 4, 1999 Memorandum states that "[a]ny refinance proceeds will be split equally, 50% to the limited partners and 50% to the general partners." In paragraph 30 of her Rule 19-a statement, Plaintiff states that the refinance generated $152,816 that belongs to her pursuant to the terms of the parties' agreement.

Defendants do not dispute Plaintiff's contentions (see Def. Rule 19-a Resp.), but merely assert that Plaintiff is not entitled to distribution of these funds to her where she had not demonstrated that she is a member. As the issue of Plaintiff's membership interest has been [*15]resolved,^[FN25] and where Defendants rely on the January 11, 1999 Memorandum as a statement of the terms of the parties' agreement, and Plaintiff does the same, there is no issue of fact and Plaintiff's motion is granted.

The situation concerning the thirteenth cause of action of the Complaint is similar. The January 4, 1999 Memorandum also provides for the distributions, and Defendants provide no admissible evidence to demonstrate that Plaintiff is not entitled to them. Accordingly, Plaintiff is also granted summary judgment on the thirteenth cause of action.

Concerning the third cause of action, Plaintiff points to her affidavit, in which she swears that she is the holder of a 21.43% membership interest in Management and states that there is no dispute that following the closing, Liebman and Tepper caused the transfer of approximately $75,000 from 235 to Management, and also caused Management to sell certain of the units at a premium and split the $50,000 profit between them. To support her contentions concerning these transactions, Plaintiff cites to spreadsheets entitled "Recap of Fees Owed," appended as exhibits to her affidavit. " The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case'" (Finkelstein v Cornell University Medical College, 269 AD2d 114, 117 [1st Dept 2000] [citation omitted]) and "failure to make such showing requires denial of the motion, regardless of the sufficiency of the opposing papers" (Winegrad, 64 NY2d at 853 [citation omitted]; Alvarez v Prospect Hosp., 68 NY2d at 324). Plaintiff's statement that Liebman and Tepper caused the transfer of $75,000 to Management, and her citation to documents for which she has neither provided foundation nor explanation are insufficient to meet her summary judgement burden. Accordingly, Plaintiff's motion for

summary judgment on the third and fourteenth causes of action of the Complaint is denied.The parties are directed to settle an order and judgment in accordance with the foregoing opinion.

Dated: ____________________

_______________________________

J.S.C.