An inquest was held on November 1, 2019 as to damages and attorneys' fees against Defendant Peter Skyllas, who failed to appear.^[FN1] For the reasons stated herein, this Court awards to Plaintiff J.H. Capital LLC a/k/a JH Capital LLC ("JH Capital") damages against Defendant Peter Skyllas in the amount of $295,403.08 plus $35,349.95 in reasonable attorneys' fees and disbursements, pursuant to New York Debtor and Creditor Law § 276-a, for this action seeking [*2]to enforce the judgment of this Court dated December 12, 2016 and filed December 13, 2016 in the County Clerk's Office.

At the inquest, Mr. John Hanson a/k/a John Jarecki, a lender of capital to and the sole owner of Plaintiff JH Capital, testified on behalf of that entity. Mr. Hanson testified that JH Capital was formed solely to lend money to Titan P & H LLC ("Titan"). On November 19, 2010, a promissory note was signed between JH Capital, as lender, and Illya Trincher on behalf of Titan, as the sole and managing member of Titan, in the amount of $800,000. (Plaintiff's Ex. 1). The amount of monthly payment, due on the promissory note was $4,000, but the note contained a right to prepay the principal due in increments of $100,000. (Id. at ¶¶ 3 [b], 4). Mr. Hanson testified that some payments were made on the promissory note, however, the payments stopped in 2015.

By summons and notice of motion for summary judgment in lieu of complaint, JH Capital sued Titan to recover the remaining balance due on the promissory note in the amount of $265,000 plus interest at 6% per year from June 1, 2015, plus legal fees and costs, in Supreme Court, New York County, in an action titled J.H. Capital LLC aka JH Capital LLC v Titan P & H LLC, Index No. 653872/2016.^[FN2] (See Index No. 653872/16, NYSCEF Doc. Nos. 1, 4). In that action, JH Capital obtained a judgment, inclusive of costs and legal fees, for a total amount of $295,403.08. (Plaintiff's Ex. 2). Mr. Hanson's attorney obtained a judgment against Titan on JH Capital's behalf at his request because, in 2015, Titan became bankrupt. At that time, Mr. Trincher's co-owner of Titan, Defendant Skyllas, moved all of Titan's business and assets to Core Plumbing & Heating, LLC ("Core"). Mr. Trincher assured Mr. Hanson that Titan and Core were the same company. When Core was formed in December 2015 (see Plaintiff's Ex. 6), none of the judgment, which is being sought from Defendant Skyllas in this action, had been paid.

The Court admitted a letter that indicated Defendant Skyllas' option to purchase 50% of the membership interest of Titan for the option of $1.00 and a bank check in said amount. (Plaintiff's Ex. 3 [Letter dated April 6, 2012, from Defendant Skyllas to Mr. Trincher]). Mr. Hanson testified that Defendant Skyllas entered into this agreement to be 50/50 partners with Mr. Trincher in Titan to eliminate some debts that Defendant Skyllas had, prior to the date when either Mr. Trincher or Defendant Skyllas had asked Mr. Hanson to lend money to Titan. Similarly, Defendant Skyllas' Employment Agreement with Titan, dated April 28, 2010, also contained this option agreement. (Plaintiff's Ex. 4).

Mr. Hanson testified that Defendant Skyllas did not want to be a record owner of Titan because he had substantial debts which he did not want to report to the Internal Revenue Service and he was afraid that the government would seize his assets. Mr. Hanson also testified that Defendant Skyllas owed money to loan sharks and creditors at high interest rates and that Skyllas was concerned that these debts would affect Titan. Mr. Hanson further testified that Defendant Skyllas' compensation package, which appeared to be included in his Employment Agreement, was actually written after his Employment Agreement had been signed. (Plaintiff's Ex. 4 at pp. 3-4). According to his Employment Agreement, Defendant Skyllas received an annual salary of $156,000 per year plus 25% profits in his second year and 40% of profits thereafter. (Id. at p. 1). This broke down to $33,793 per month in salary, which was different [*3]than the $13,000 per month as noted in Defendant Skyllas' compensation package. (Id. at p. 3). Mr. Hanson testified that this differential in salary between Defendant Skyllas' Employment Agreement and compensation package created a tax liability that caused Titan to default on the promissory note. Mr. Hanson further testified that while Titan appeared to be a profitable company, Titan never showed a profit because Defendant Skyllas repeatedly removed assets from Titan.^[FN3]

Mr. Hansen also testified that Defendant Skyllas hired Titan employees to work for him in order to repay personal debts that he owed. These employees appeared to be fictitious individuals or at least individuals who did not show up to work on a regular basis. For example, Defendant Skyllas hired one employee who had no plumbing experience and another employee who ran a poker game in New York to whom Defendant Skyllas personally owed money. In an electronic mail that was admitted into evidence, an employee, Joseph Ragazzini, who was never seen at a particular job site and was not turning in his job tickets was inquired about and Defendant Skyllas responded by saying he wanted him to be his "right hand man." (See Plaintiff's Ex. 5 at 1 [Email dated July 5, 2012 at 7:51 p.m. from Don McCalmont at Titan]). Mr. Hanson also testified that Defendant Skyllas ordered materials and charged jobs, such as a plumbing job for $1 million, at cost to repay debts. However, Mr. Hanson testified that if such jobs were being properly billed for normal fees, the $1 million plumbing job would be billed at $2 million, which would be enough to pay off the remainder of the amount due and owing on the promissory note. Mr. Hanson further testified that Defendant Skyllas had a son, daughter and new spouse employed by Titan. In addition, he and his family used company cars for personal use, although Mr. Hanson was unsure if Defendant Skyllas used Titan's assets to pay for his personal mortgage.

On December 2, 2015, Core was incorporated as a domestic liability company by Defendant Skyllas (Plaintiff's Ex. 6) and Titan's ongoing jobs and assets were transferred to Core by Defendant Skyllas (Plaintiff's Ex. 8). Mr. Hanson testified that payments for Titan's ongoing jobs were being transferred to Core and this continued without interrupting Titan's business. However, no fees or profits were being paid to JH Capital. Mr. Hanson learned from Mr. Trincher how assets were being transferred from Titan to Core, that Defendant Skyllas transferred assets like this with a prior company to avoid creditors and that they would work out the remaining amount due on the promissory note. Mr. Trincher again reassured Mr. Hanson that Core was supposed to be the same company as Titan, just under a different name and Mr. Trincher believed that he was an owner of Core when he was not.

After Core was formed, checks made out to Titan were deposited into Core accounts and Titan's accounts receivable were transferred to Core for no consideration. (See Plaintiff's Exs. [*4]13, 14). As an example, the accounts receivable for Columbia University, which comprised 90% of Titan's business, were paid to Core. (See Plaintiff's Ex. 7). The total amount invoiced was $130,953.79. (Id.). Once the jobs for Columbia University were completed, no funds were paid to JH Capital. Additionally, an email from Stewart Lask, the accountant for Titan and Core, indicated that Core received approximately $800,000 in funds of Titan's accounts receivable in February 2016, demonstrating that some of Titan's clients had been taken over by Core. (Plaintiff's Ex. 11).^[FN4] Even if the funds had been paid to Titan, instead of Core, Mr. Hanson believed that the amount outstanding on the promissory note would remain unpaid in order to avoid paying the remainder of the balance due and owing on the note.

As a result of Defendant Skyllas' actions, Mr. Hanson testified that Titan became insolvent as of January 2016. Accordingly, Plaintiff JH Capital asks this Court to find that (1) Defendant Skyllas intentionally and willingly caused Titan to become insolvent in order to avoid paying his own debts as well as the remaining balance owed on the promissory note in the amount of the judgment, $295,403.08; (2) that Defendant Skyllas continuously exercised full dominion and control over Titan during the entirety of Titan's existence such that he should be held personally responsible for the full amount of the judgment; and (3) award JH Capital reasonable attorneys' fees for litigating this action in the amount of $50,000.

Plaintiff commenced this lawsuit sounding in four causes of action against Defendant Skyllas: alter ego theory, fraudulent conveyance — insolvency, fraudulent conveyance — without fair consideration and intent to defraud creditor.

"In order to state a claim for alter-ego liability plaintiff is generally required to allege 'complete domination of the corporation . . . in respect to the transaction attacked' and 'that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff's injury.'" (Baby Phat Holding Co., LLC v Kellwood Co., 123 AD3d 405, 407 [1st Dept 2014], quoting Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 141 [1993]). A decision to pierce the corporate veil in a particular instance depends on the attendant facts and circumstances to determine when such relief would be equitable. (Id.). "Allegations that corporate funds were purposefully diverted to make it judgment proof or that a corporation was dissolved without making appropriate reserves for contingent liabilities are sufficient to satisfy the pleading requirement of wrongdoing which is necessary to pierce the corporate veil on an alter-ego theory." (Id. at 407-08).

Here, Plaintiff prevailed in proving that Titan owes it a debt via the judgment that was issued by this Court (Edmead, J.) in the amount of $295,403.08. Further, the allegations in the Verified Complaint, supplemented by Mr. Hanson's testimony, are sufficiently pleaded to support Plaintiff's claim that Defendant Skyllas is an alter ego of Titan. Mr. Hanson's testimony indicated that Defendant Skyllas deposited payments from numerous specific transactions that were originally payable to Titan into Core accounts and transferred Titan's accounts receivable to Core for no consideration. (See Plaintiff's Exs. 7, 11, 13, 14). In doing so, Defendant Skyllas [*5]exercised complete domination and control over Titan. (See Baby Phat Holding Co., LLC, 123 AD3d at 407). Having transferred an amount more than adequate to pay off the remaining balance due and owing on the promissory note to Plaintiff, the Court finds that Defendant Skyllas is liable for the debts of Titan based on an alter ego theory.

Further, Defendant Skyllas disregarded corporate formalities by using Titan's company property, such as company cars, for his personal use, employing family members at Titan and using Titan's funds to pay off his personal debts. (See id.; Intl. Credit Brokerage Co., Inc. v Agapov, 249 AD2d 77, 78 [1st Dept 1998]). In addition, Mr. Hanson testified that Defendant Skyllas maintained Titan in such a way that it was never adequately capitalized so as to actualize a profit or in fact pay Plaintiff the remaining balance due on the promissory note. Instead, Defendant Skyllas transferred all of Titan's assets to Core, which caused Titan to become judgment proof, thereby supporting an alter ego theory of liability such that Defendant Skyllas perpetrated a wrong or injustice against Plaintiff, "thus warranting intervention by a court of equity." (Baby Phat Holding Co., LLC, 123 AD3d at 407). Accordingly, Defendant Skyllas is liable for the full amount of the $295,403.08 judgment against Titan.

Though allegations of actual fraud are not necessary to hold Defendant Skyllas liable for the full amount of the judgment against Titan on an alter ego theory (see id. at 407), he is also liable for the full amount of the judgment under a fraudulent conveyance theory.

New York Debtor and Creditor Law § 272 provides that "fair consideration" is given in return for property or a monetary obligation when either (a) "in exchange for such property, or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or an antecedent debt is satisfied," or when (b) "such property, or obligation is received in good faith to secure a present advance or antecedent debt in amount not disproportionately small as compared with the value of the property, or obligation obtained." Debtor and Creditor Law §§ 272 [a], [b]. Additionally, according to Debtor and Creditor Law § 273-a:

Every conveyance made without fair consideration when the person making it is a defendant in an action for money damages or a judgment in such an action has been docketed against him, is fraudulent as to the plaintiff in that action without regard to the actual intent of the defendant if, after final judgment for the plaintiff, the defendant fails to satisfy the judgment.

Further, Debtor and Creditor Law § 273 provides that "[a] conveyance that renders the conveyor insolvent is fraudulent as to creditors without regard to actual intent, if the conveyance was made without fair consideration." (CIT Group/Commercial Servs., Inc. v 160-09 Jamaica Ave. Ltd. Partnership, 25 AD3d 301, 302 [1st Dept 2006]). Conveyances made without fair consideration are also fraudulent "when the conveyor 'intends or believes that he will incur debts beyond his ability to pay as they mature.'" (Id., quoting Debtor and Creditor Law § 275). "Under Debtor and Creditor Law § 276, '[e]very conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.'" (Id. at 303 [alterations in original]). These transactions are marked by certain "'badges of fraud,' which include the close relationship among the parties to the transaction, the inadequacy of consideration, [the judgment creditor's] knowledge of [the judgment debtor's] claims and its inability to pay them, and the timing of the transfer[s]." (Id.).

With respect to Plaintiff's second cause of action, fraudulent conveyance under an [*6]insolvency theory, Mr. Hanson's testimony makes it apparent that Defendant Skyllas intentionally transferred and/or conveyed assets from Titan to Core to render Titan insolvent. As a result of the fraudulent conveyances discussed supra, Defendant Skyllas caused Titan to lack capitalization and the ability to pay its debts when due. In fact, Mr. Hanson testified that when certain of Titan's debts became due, such as its payments on the promissory note, Titan was unable to pay such debts. Because the transfer of assets from Titan to Core by Defendant Skyllas were fraudulent conveyances under the Debtor Creditor Law, which rendered Titan insolvent and unable to pay its debts, Defendant Skyllas should be held liable to Plaintiff for the full amount of the $295,403.08 judgment against Titan.

With respect to Plaintiff's third cause of action, fraudulent conveyance without fair consideration, it is apparent, based upon Mr. Hanson's testimony, that Defendant Skyllas caused Titan to make transfers, in the form of its accounts receivable, and monetary conveyances, in the form of payments due on the promissory note, to Core without fair consideration as that term is defined by Debtor and Creditor Law § 272. Further, it is indisputable that the transfers of accounts receivable from Titan to Core were made after the judgment in 2016 was rendered against Titan and that Defendant Skyllas' actions, as testified to by Mr. Hanson, caused Titan to become insolvent and unable to pay its debts.

Accordingly, "the conveyances here involved were made when the person making them was a defendant in an action for money damages; final judgment was rendered in favor of [the] plaintiff[ ] in that action; and the respective defendants have failed to satisfy the judgment." (Cabrera v Ferranti, 89 AD2d 546, 546 [1st Dept 1982]). Thus, pursuant to Debtor and Creditor Law § 273-a, Defendant Skyllas is liable for the full amount of the $295,403.08 judgment against Titan under this legal theory. (See id.).

With respect to Plaintiff's fourth cause of action, intent to defraud creditor, Defendant Skyllas is also liable for the judgment against Titan under this theory of liability. Mr. Hanson credibly testified that Defendant Skyllas intentionally transferred funds from Titan to Core to avoid paying creditors in violation of Debtor and Creditor Law § 276. Mr. Hanson also testified that Defendant Skyllas had previously transferred assets from different entities in the same manner in order to avoid paying creditors and other debts. Accordingly, Defendant Skyllas is also liable for the full amount of the $295,403.08 judgment against Titan under an intent to defraud creditor theory of liability.

With respect to attorneys' fees, under New York law, parties to a litigation are responsible for their own attorneys' fees "unless an award is authorized by agreement between the parties, statute or court rule." (Hooper Assoc., Ltd. v AGS Computers, Inc., 74 NY2d 487, 491 [1989]). In such an instance, only the prevailing party may collect attorneys' fees. (Id.). The practice commentary to the CPLR specifically states that "the purpose of an award of costs is to reimburse a successful litigant for the[ir] expenses." (See CPLR Art. 82; see also CPLR 8201-8202, 8301).

In awarding attorneys' fees, the Court must take into consideration proof of billing and the quantum meruit value of the services rendered by counsel. (See Bankers Fed. Sav. Bank FSB v Off W. Broadway Devs., 224 AD2d 376, 378 [1st Dept 1996]). Among the factors to be considered when setting appropriate attorneys' fees are: the "time and labor required, the difficulty of the questions involved, and the skill required to handle the problems presented; the lawyer's experience, ability and reputation; the amount involved and benefit resulting to the [*7]client from the services." (In re Freeman's Estate, 34 NY2d 1, 9 [1974]).

Here, Plaintiff's attorney, Mr. Richard Rosenzweig, Esq., testified that he was admitted to practice in 1991 in the Appellate Division, First Department. Since that time, he practiced commercial litigation and corporate work at several law firms and is now a solo practitioner. Mr. Rosenzweig testified that his typical hourly rate is $350 per hour, but he reduced his rate for this case to $300 per hour. He further testified that the retainer agreement was signed in January 2017, but he did not have a copy to produce at the inquest.

Instead, Mr. Rosenzweig submitted a client ledger of all the work he performed on behalf of Plaintiff in this lawsuit since January 2017, which includes at least five depositions, motion practice, preparing for this inquest, two summary judgment motions and numerous court appearances. Mr. Rosenzweig testified that he sometimes used another attorney, a Ms. Ilene H. Cohen, Esq., for court coverage when he could not make a court appearance, for which he charged $150 in disbursements. He further testified that he spent 132 hours working on this case. Of the $49,888.98 that was previously billed, $43,815 in fees and $6,073.98 in disbursements, Mr. Rosenzweig testified that Mr. Hanson paid $47,248.98, which left $2,640 outstanding. He further testified that he personally enters his time at the end of the day and maintains contemporaneous time records. Mr. Rosenzweig also testified that there is additional work, including the November 1, 2019 inquest, for which Mr. Hanson has yet to be billed.

Based upon the foregoing, this Court awards reasonable attorneys' fees and disbursements in the amount of $35,349.95.^[FN5]

Upon consideration of the testimony presented, the credibility to be accorded to the witnesses and a review of all of the exhibits admitted into evidence, this Court awards to Plaintiff JH Capital damages against Defendant Skyllas in the amount of $295,403.08 plus $35,349.95 in reasonable attorneys' fees and disbursements, pursuant to New York Debtor and Creditor Law § 276-a, for this litigation to enforce the judgment of this Court dated December 12, 2016 and filed December 13, 2016 in the County Clerk's Office.

It is hereby

ORDERED that the Clerk is directed to enter judgment in favor of Plaintiff J.H. Capital LLC a/k/a JH Capital LLC and against Defendant Peter Skyllas in the amount of $295,403.08 in damages plus $35,349.95 in reasonable attorneys' fees and disbursements; and it is further

ORDERED that interest on the judgment on damages shall be calculated by the Clerk at the statutory rate, without costs; and it is further

ORDERED that Plaintiff shall serve a copy of this Decision and Order with Notice of Entry upon all parties entitled to notice.

This constitutes the Decision and Order of this Court.