MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS
Defendant Consolidated Edison Company of New York, Inc. (“Con Edison”) moved to dismiss portions of the adversary complaint (“Complaint”) filed by the debt- or, Andrew Velez Construction, Inc. (“Debtor” or “Velez”). Velez was the general contractor on a major construction project for Con Edison in Brooklyn, New York (the “Project”). The Project experienced delays and substantial cost overruns, as well as changes in the scope of the work. Each side asserts that the other committed prepetition defaults under the contract. On December 8, 2006, Con Edison moved to accelerate the Debtors time to assume or reject the executory construction contract. After an initial hearing on the motion, and before a scheduled evidentiary hearing, Con Edison and Velez resolved the matter with Velez rejecting the contract on January 31, 2007. (Case No. 06-12765, ECF No. 18). On May 16, 2007, Velez filed the Complaint naming Con Edison and The Switzer Group, Inc. (“Switzer”) as defendants (Adv. Proc. 07-01706, ECF No. 1). Switzer, the Project architect, answered the Complaint so the
DISCUSSION
A. Standards Governing a Motion to Dismiss
Con Edison’s motion to dismiss is based on Fed.R.Civ.P. 12(b)(6), made applicable in adversary proceedings by Fed. R. Bankr.P. 7012, for failure to state a claim upon which relief can be granted. Con Edison also moves to dismiss some claims under Fed.R.Civ.P. 9(b), made applicable to adversary proceedings by Fed. R. Bankr.P. 7012, for failure to plead fraud .with particularity.
In reviewing a motion to dismiss under Rule 12(b)(6), “a court merely assesses the legal feasibility of the complaint, and does not weigh the evidence that may be offered at trial.”
In re Bayou Group, LLC,
“In resolving a Rule 12(b)(6) motion the Court may consider ‘documents attached to the complaint as exhibits, or incorporated in it by reference, to matters of which judicial notice may be taken or to documents on which the plaintiff relied in bringing suit.’ ”
Id.
(quoting
Mosello v. ALI, Inc. (In re Mosello),
In any claim alleging fraud, Rule 9(b) requires that in “all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.” Fed.R.Civ.P. 9(b);
see also In re Marketxt Holdings Corp.,
With these principles in mind, the Court will address the counts of the Complaint that Con Edison seeks to dismiss.
B. Count I — Fraudulent Conveyance Under § 548 of the Bankruptcy Code
1. Section 548(a)(1)(A)
Con Edison contends that Count I— seeking relief based on alleged fraudulent transfers — must be dismissed because it (a) fails to state a claim upon which relief may be granted, and (b) fails to plead fraud with particularity. Specifically, Con Edison contends that the Complaint has no allegations whatsoever concerning the
“A claim for actual fraudulent transfer pursuant to § 548(a)(1)(A) or applicable State law must satisfy the requirements of Rule 9(b) of the Federal Rules of Civil Procedure.” In re Verestar, Inc., 343 B.R. 444, 459-60 (Bankr.S.D.N.Y.2006). “To establish a claim for actual fraudulent transfer under § 548(a)(1)(A), a plaintiff must plead facts showing that the transfer was made by the defendant with the intent to hinder, delay or defraud present or future creditors of the transferor.” Id. at 468.
With respect to the issue of pleading “intent,” the court in Bayou Group, LLC recently stated:
As is clear from the statutory language (“if the debtor ... made such transfer ... with actual intent.”), the claim of actual fraud looks only to the fraudulent intent of the transferor/debtor. Neither the language of Code Section 548(a)(1)(A) nor the case law requires the plaintiff to allege or prove that the transferee had any intent to hinder, delay or defraud or any knowledge of the transferor’s fraudulent intent. Although the knowledge or innocence of the transferee is irrelevant to a plaintiffs claim based on the transferor’s intent to “hinder, delay, or defraud,” it is central to the defendant-transferee’s affirmative defense under Section 548(c).
Velez argues in opposition to the motion that Con Edison intended to hinder, delay or defraud other creditors of Velez and that Con Edison’s intent should be imputed to Velez. The opposition brief argues that the Con Edison contract represented over 90% of Velez’s business, giving Con Edison an effective economic stranglehold over Velez and enabling Con Edison to force Velez to follow Con Edison’s directions. Cases hold that the intent of the transferee is imputed to the transferor only in extraordinary circumstances where the transferee controls the transferor.
See In re Marketxt Holdings Corp.,
Both parties here rely on
In re Adler.
The court in
In re Adler,
Similarly, in this case, the Debtor cannot establish that the relationship between the Debtor and Con Edison is one that would permit the application of the dominion and control theory. Con Edison and the Debt- or are independent entities. Con Edison had no ownership interest in Velez and the two companies shared no common officers or directors. From the original contract between the parties and the subsequent Modification Agreement, both referenced in the Complaint and appearing elsewhere in the Court record
(see
Case No. 06-12765, ECF No. 4, Exhibits 3, 4 and 5), and therefore properly considered on this motion to dismiss,
see In re Bayou Group, LLC,
The Court also concludes that leave to amend should be denied because the amendment would be futile.
Milanese v. Rusir-Oleum Corp.,
If Count I was based solely on § 548(a)(1)(A), the claim would be dismissed in its entirety. But the Debtor also asserts a claim under § 548(a)(1)(B) based on an alleged constructive fraudulent transfer.
2. Section 548(a)(1)(B)
Con Edison did not move to dismiss Count I to the extent that it alleges a constructive fraudulent transfer. Therefore, this portion of Count I remains in the case. A brief discussion of the claim may help shape future proceedings. A claim under § 548(a)(1)(B) is “based on the transferor’s financial condition and the sufficiency of the consideration provided by the transferee, and not on the basis of fraud.”
In re Verestar, Inc.,
To establish a claim for constructive fraudulent transfer under § 548(a)(1)(B), a plaintiff must allege facts showing that (i) the debtor had an interest in the property; (ii) a transfer of that interest occurred within the prescribed time period; (iii) the debtor was insolvent at the time of the transfer or became insolvent as a result thereof; and (iv) the debtor received less than reasonably equivalent value in exchange for such transfer.
Id.
(citing
BFP v. Resolution Trust Corp.,
As discussed during the hearing, the parties are encouraged to confer and suggest other alternatives that might lead to a prompt adjudication of this claim. Bifurcation of issues or claims with early trial on some issues alone may be possible if judicial efficiency will be served. But piecemeal litigation is often not to anyone’s advantage, and certainly may not be in the
C. Count II — Turnover Under § 542
Con Edison moves to dismiss Count II for failure to state a claim under § 542 of the Bankruptcy Code. Con Edison asserts that it is unclear whether the Debtor is seeking turnover of its alleged “legal and equitable interest in its substantial claims” against Con Edison of the “sums owing Velez under the terms of the [Contract].” Con Edison further argues that the Debtor cannot receive turnover of the legal and equitable interest in claims that were waived in exchange for the Modification Agreement because they are not property of estate, and will only be so if the Debtor prevails on its alleged fraudulent transfers claims. Additionally, Con Edison argues that the Debtor cannot receive turnover of the sums allegedly owed under the terms of the contract because § 542(b) only provides for turnover of an undisputed debt.
As with its response to the fraudulent transfer claims, Debtor has responded by raising new factual matters that are not alleged in the Complaint. The Debtor’s response alleges that while there are disputed claims, Con Edison holds over $1,000,000 in undisputed funds, held as “retention” under the contract, which funds Debtor contends constitute property of the estate and therefore are subject to turnover. Con Edison’s reply first correctly notes that none of these new facts are alleged in the Complaint — indeed, the turnover claim in the Complaint is not focused on undisputed “retention.” Con Edison also argues that all of the amounts held as retention are properly being held under the terms of the contract and, therefore, are not subject to recovery in a turnover action.
Section 542 of the Bankruptcy Code provides for turnover of property of the estate:
(a) Except as provided in subsection (c) or (d) of this section, an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.
(b) Except as provided in subsection (c) or (d) of this section, an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 543 of this title against a claim against the debtor.
11 U.S.C. § 542.
“[P]roperty that has been fraudulently or preferentially transferred does not become property of the estate until it has been recovered.”
Savage & Assocs., P.C. v. Mandl (In re Teligent Inc.),
Section 542(b) provides for turnover of undisputed debts. “It is settled law that the debtor cannot use the turnover provisions to liquidate contract disputes or otherwise demand assets whose title is in dispute.”
Hirsch v. London S.S. Owners’ Mut. Life Ins. Ass’n Ltd. (In re Seatrain Lines, Inc.),
The Debtor essentially acknowledged during argument that Count II of the Complaint, as drafted, fails to state a turnover claim. The issue remains whether Debtor can assert a proper turnover claim for alleged undisputed “retention.” Con Edison argues that it has a contractual right to withhold all of the retention, and, therefore, all of the retention is disputed. The Court is not prepared to say at this point that Velez cannot state a claim for some undisputed retention amount. Therefore, Count II will be dismissed with leave to amend.
D. Counts I and Counts III & IV— §§ 273 and 275 of the N.Y. Debtor & Creditor Law and §§ 544 and 550 of the Bankruptcy Code
Con Edison contends that Count I, which relies on § 548 of the Bankruptcy Code, and Counts III and IV, which rely on §§ 273
2
and 275
3
of the N.Y. Debtor
&
The liability of a transferee of an avoided transfer under § 544
4
or 548 is governed by § 550 of the Bankruptcy Code. Section 550 establishes that a trustee is permitted to recover “the property transferred, or, if the court so orders, the value of such property....” 11 U.S.C. § 550(a). Section 550(a) is intended to restore the estate to the financial condition that it would have enjoyed if the transfer had not occurred.
Hirsch v. Gersten (In re Centennial Textiles, Inc.),
1. Declaratory Relief
With respect to Count I, Con Edison seeks to dismiss the request for de
2. Monetary Damages
Con Edison further seeks to dismiss the Debtor’s request for monetary damages under Counts I, III and IV.
5
However, § 550(a) does not provide for the recovery of monetary damages for a voidable transfer and case law does not support an award of monetary damages.
See Morris v. Kansas Drywall Supply Company, Inc. (In re Classic Drywall, Inc.),
E. Counts V and VI § 276 and § 276(a) of New York Debtor & Creditor Law
Con Edison moves to dismiss, pursuant to Fed.R.Civ.P. 9(b), the claims asserted under § 276
6
and § 276-a
7
of the New
Con Edison asserts that the allegations of fraud that the Debtor made for the first time in its opposition brief — that Con Edison was in such a position of dominance over the Debtor to control the Debtor’s property and that such dominance and control over the Debtor justifies imputing the transferee’s intentional fraud to the transferor — should not be considered because it is an allegation outside of the four corners of the Complaint.
See Newman & Schwartz v. Asplundh Tree Expert Co., Inc.,
As with Count I, the issue here is whether to permit Velez leave to amend. The same reasoning that precludes imputation of the transferee’s intent with respect to Count I, requiring dismissal without leave to amend, applies here as well. 9 See Section B, swpra, at 8. Therefore, Counts V and VI are dismissed without leave to amend.
F. Count VII — Fraudulent Inducement
Count VII alleges fraudulent inducement with respect to the negotiation and execution of the Modification Agreement. Velez contends that Con Edison fraudulently induced it to execute the Modification Agreement by misrepresenting its true intent not to pay in accordance with the Contract. Complaint at ¶ 82 (“Con Edison had no intention of paying the Debtor as promised when it entered into the Modification Agreement.”). Con Edison contends that Count VII of the Complaint is devoid of any information required by Rule 9(b) and is merely du-plicative of Count VIII (breach of contract). Velez’s opposition brief did not address this argument.
To satisfy Rule 9(b), a plaintiff must ordinarily specify the time, place, speaker, and content of the alléged misrepresentations.
See Caputo v. Pfizer, Inc.,
Here, the Complaint merely states that:
“As a result of Con Edison’s numerous misrepresentations and material breaches of the agreement, including, but not limited to, Con Edison’s failure to authorize and/or make payments to Velez as required by the Agreement, Velezincurred substantial costs, damages and delay as a result of such breaches.”
Complaint at ¶ 79.
The Complaint does not set forth the time, place or specific statement upon which the allegation of fraudulent inducement is based. Further, nowhere in the Complaint is there an identification of the person making such misrepresentations. Finally, the Debtor does not plead the events giving rise to a strong inference that the defendant had intent to defraud, knowledge of the falsity, or a reckless disregard for the truth. For these reasons, Velez has failed to plead fraudulent inducement with the particularity demanded by Rule 9(b). Therefore, Count VII may be dismissed on this basis alone.
In addition, however, Count VII should be dismissed because it is du-plicative of Count VTII. The predicate for fraud in the inducement in Count VII is the allegation that “Con Edison had no intention of paying Velez as promised.” Under New York law, “where a fraud claim arises out of the same facts as plaintiffs breach of contract claim, with the addition only of an allegation that defendant never intended to perform the precise promises spelled out in the contract between the parties, the fraud claim is redundant and plaintiffs sole remedy is for breach of contract. In other words, simply dressing up a breach of contract claim by further alleging that the promisor had no intention, at the time of the contract’s making, to perform its obligations thereunder, is insufficient to state an independent tort claim.”
Telecom Intern. America, Ltd. v. AT & T Corp.,
G. Count XI — Lost Profits
Con Edison asserts that Count XI should be dismissed pursuant to Rule 12(b)(6) because New York law does not recognize an independent claim or cause of action for lost profits, arguing that lost profits are only recoverable as a remedy for a breach of contract or the commission of a tortious act.
See LTV Aerospace & Def. Co. v. Thomson-CSF, S.A. (In re Chateaugay),
H. Counts XV and XVI — Quantum Me-ruit and Unjust Enrichment
Con Edison contends that since there is a written contract covering this dispute,
Under New York law, the existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter.
Clark-Fitzpatrick, Inc. v. Long Island R. Co.,
Velez argues that at this stage of the case it should be permitted to plead in the alternative.
See Berk v. Tradewell, Inc.,
No. 01 Civ. 9035,
I. Counts IX — Trust Fund Violations Under New York Lien Law Article 3-A
Count IX of the Complaint seeks recovery from Con Edison for trust fund violations pursuant to New York Lien Law Article 3-A (the “Lien Law”). The Debtor asserts that, pursuant to the provisions of the Lien Law, sums to be paid to the Debtor and its subcontractors and suppliers, or any full or partial satisfactions thereof, constitute trust funds to be applied to the payment of claims of the Debt- or and all subcontractors and suppliers which accrued during the construction project. The Debtor further claims that Con Edison has applied the trust funds previously held or now being held for purposes other than paying the claims of the Debtor and subcontractors and suppliers on the Project, constituting unauthorized, unjustified, and improper payments and diversions of trust funds by operation of law.
Debtor’s opposition brief argues that dismissal of the Lien Law claim on a motion to dismiss would defeat the purpose and intent of Article 3-A of the Lien Law and the protections it affords contractors like the Debtor.
Count IX of the Complaint is premised upon the Debtor’s assertion that the Lien Law imposes a trust upon amounts allegedly due the Debtor and/or its subcontractor by an owner for work performed. Lien Law § 70(5) provides:
5. The assets of the trust of which the owner is a trustee are the funds received by him and his rights of action for payment thereof
A. under a building loan contract;
B. under a building loan mortgage or a home improvement loan;
C. under a mortgage recorded subsequent to the commencement of the improvement and before the expiration of four months after the completion of the improve- ■ ment;
D. as consideration for a conveyance recorded subsequent to the commencement of the improvement and before the expiration of four months after the completion thereof;
E. as consideration for, or advances, secured by, an assignment of rents due or to become due under an existing or future lease or tenancy of the premises that are the subject of the improvement, or of any part of such premises, if the assignment is executed subsequent to the commencement of the improvement and before the expiration of four months after the completion of the improvement or if it is executed before the commencement of the improvement and an express promise to make an improvement, or an express representation that an improvement will be made, is contained in the assignment or given in the transaction in which the assignment is made;
F. as proceeds of any insurance payable because of the destruction of the improvement or its removal by fire or other casualty, except that the amount thereof required to reimburse the owner for premiums paid by him out of funds other than trust funds shall not be deemed part of the trust assets;
G. under an executory contract for the sale of real property and the improvement thereof by the construction of a building thereon.
N.Y. Lien Law § 70(5).
It is settled law that only funds originating from one of the seven sources enumerated in Lien Law § 70(5) qualify as owner trust funds.
Bristol, Litynski, Wojcik, P.C. v. Elliott,
The Debtor relies on
Wildman & Bernhardt Const, Inc. v. BPM Associates, LB,
J. Counts X — Defamation
In Count X, Velez alleges that Con Edison made two defamatory statements— that (1) Velez “defaulted on its obligations under the Agreement,” Complaint at ¶ 100, and (2) Velez “misappropriated Project funds,” id. Con Edison moves to dismiss Count X for failure to state a cause of action for defamation under New York law. With respect to the first of the two alleged defamatory statements — Velez “defaulted on its obligations under the Agreement” — Con Edison argues that Velez is required to plead who made the statement, to whom the statement was made, and when it was made. Additionally, Con Edison argues that Velez is required to allege “special damages,” because the statement is not defamatory per se. Con Edison asserts that because the Debtor did not identify actual economic or pecuniary loss and did not relate alleged losses to the alleged defamatory statements, it does not meet the pleading requirements for defamation under New York law.
With respect to the second statement— Velez “misappropriated Project funds”— Con Edison does not dispute for purposes of the motion that the statement is defamatory per se, but Con Edison argues that Velez is required to plead who made the statement, to whom the statement was made, and when it was made. Con Edison acknowledges that special damages do not need to be alleged for statements that are defamatory per se.
Velez argues that defamatory statements need only be plead with sufficient specificity to put the defendants on notice and allow Con Edison to adequately form a responsive pleading. With respect to the statement that Velez “misappropriated Project funds,” Velez argues that it does not have to allege special damages since the statements made by Con Edison were defamatory per se. Velez argues that this alleged statement would be a death knell to its future business opportunities.
Under New York law, a claim for defamation requires “an adequate identifi
Further, a claim for defamation requires the plaintiff to allege special damages unless the statement is defamatory
per se. See Tufano v. Schwartz,
Count X of the Complaint states that “Con Edison falsely advised numerous individuals and entities including, but not limited to: (a) Gilbert Rivera; (b) Congressman Edolphus Towns’ representative Karen Johnson; (c) Serafín Mariel; (d) Attri Roofing; and (e) Armando Rodriguez that Velez defaulted in its obligation under the Agreement and misappropriated Project funds.” Complaint at ¶ 100. The Debtor claims that it has and will continue to sustain damages due to the defamatory statements, but Velez acknowledged during argument that the Complaint does not allege “special damages.”
Applying the applicable pleading standards, Velez has failed to state a claim for defamation under New York law. While Velez has identified to whom the alleged statements were made, it has not identified who made the statements or when they were made. To the extent that special damages are required, Velez has also failed to plead such damages. During the argument, Velez’s counsel represented that Velez can now identify the “who” and “when” requirements. Therefore, Count X is dismissed with leave to amend. While it is unclear whether Velez can allege special damages resulting from the first alleged defamatory statement, it will be given an opportunity to do so.
CONCLUSION
For the foregoing reasons, Con Edison’s motion to dismiss is granted in part and denied in part, with leave to amend granted as to certain of the dismissed claims but not as to others. Velez shall file an amended complaint within 10 days after the date of this opinion. Con Edison shall file its response to the amended complaint within 10 days thereafter. In the event that Con Edison files a motion to dismiss
IT IS SO ORDERED.
Notes
. It is not clear from reading the Complaint whether Velez intended to assert a fraudulent transfer claim based on actual fraud. But Con Edison moved to dismiss on that basis and Velez’s opposition to the motion argued that it intended to assert such a claim. Velez’s counsel also confirmed during argument that Velez intended to assert a claim based on actual fraud.
. Section 273 of the New York Debtor & Creditor law provides:
Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.
N.Y. Debtor & Creditor Law § 273.
. Section 275 of the New York Debtor & Creditor law provides:
Every conveyance made and every obligation incurred without fair consideration when the person making the conveyance or entering into the obligation intends or believes that he will incur debts beyond hisability to pay as they mature, is fraudulent as to both present and future creditors.
N.Y. Debtor & Creditor Law § 275.
. Section 544 of the Bankruptcy Code sets forth the trustee’s powers to avoid liens and transfers. The powers granted by this section enable the trustee to avoid transfers and liens on the debtor's property that could have been avoided by a creditor under the applicable local law. 11 U.S.C. § 544. Section 544(b), however, does not contain any substantive provisions that determine when a transfer is voidable, and instead incorporates and makes applicable nonbankruptcy law.
Hirsch v. Gersten (In re Centennial Textiles, Inc.),
. In footnote 4 of Con Edison's memorandum of law it also seeks to dismiss the request for monetary damages for Count V under § 276 of New York Debtor & Creditor Law under the same theory.
. Section 276 of the New York Debtor & Creditor Law, Conveyance made with intent to defraud, provides:
Every 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.
N.Y. Debtor & Creditor Law § 276.
.Section 276-a of the New York Debtor Creditor Law, which provides Attorneys' fees in action or special proceeding brought under § 276, provides:
In an action or special proceeding brought by a creditor, receiver, trustee in bankruptcy, or assignee for the benefit of creditors to set aside a conveyance by a debtor, where such conveyance is found to have been made by the debtor and received by the transferee with actual intent, as distinguished from intent presumed in law, tohinder, delay or defraud either present or future creditors, in which action or special proceeding the creditor, receiver, trustee in bankruptcy, or assignee for the benefit of creditors shall recover judgment, the justice or surrogate presiding at the trial shall fix the reasonable attorney’s fees of the creditor, receiver, trustee in bankruptcy, or as-signee for the benefit of creditors in such action or special proceeding, and the creditor, receiver, trustee in bankruptcy, or as-signee for the benefit of creditors shall have judgment therefore against the debtor and the transferee who are defendants in addition to the other relief granted by the judgment. The fee so fixed shall be without prejudice to any agreement, express or implied, between the creditor, receiver, trustee in bankruptcy, or assignee for the benefit of creditors and his attorney with respect to the compensation of such attorney.
N.Y. Debtor & Creditor Law § 276-a.
. Debtor’s opposition brief asserts the following: “[T]he Con Edison project was the primary source of the Debtor’s income when the transfer occurred; the receivables due from Con Edison constituted over 92% of the Debt- or’s accounts receivables. Con Edison was aware of the fact that the Debtor was in dire need of capital from the project when Con Edison presented the Release to the Debtor. Con Edison knew that the Debtor had no choice but to sign the Release. Con Edison also knew that by requiring the Debtor to use the retainage funds to pay obligations that had yet to be incurred, instead of the obligations that gave rise to the retainage in the
. The Debtor asserts that even if it failed to plead Con Edison’s actual fraudulent intent, Con Edison’s fraudulent intent can be proven by circumstantial evidence or “badges of fraud.” Badges of fraud involve circumstances so commonly associated with fraudulent transfers that there presence gives rise to an inference of fraudulent intent. Badges of fraud include:
(1) the lack or inadequacy of consideration;
(2) the family, friendship or close associate relationship between the parties; (3) the retention of possession, benefit or use of the property in question; (4) the financial condition of the party sought to be charged both before and after the transaction in question; (5) the existence or cumulative effect of a pattern or series of transactions or course of conduct after the incurring of debt, onset of financial difficulties, or pen-dency or threat of suits by creditors; and (6) the general chronology of the events and transactions under inquiry.
In re Marketxt Holdings Corp.,
But Con Edison’s (poorly) alleged fraudulent intent is not relevant. It is Velez’s intent as transferor that controls.