SHORT FORM ORDER SUPREME COURT, STATE OF NEW YORK COUNTY OF NASSAU. GATLYNN HOLDINGS, INC., Plaintiff. against

Transcription

1 , ) SHORT FORM ORDER SUPREME COURT, STATE OF NEW YORK COUNTY OF NASSAU GATLYNN HOLDINGS, INC., Plaintiff Trial/IAS Part 21 Index No Sequence No. 01, 02 Submit Date 11/16/06 against VINCENZO MAGGIO and MICHELE MAGGIO Defendants The following papers read on this motion: Notice of Motion/Order to Show Cause... X Notice of Cross-Motion... X Answering Affidavits... Replyin g Affidavits Briefs: Plaintiff's/Petitioner s Defendan tires po n den t' s... PRESENT: HON. JOSEPH P. SPINOLA This motion by plaintiff Gatlyn Holdings, Inc. for inter alia an order pursuant to CPLR 3212 granting it summary judgment requiring defendants' specific performance of a real estate contract for the sale of propert located at 1-7 Sunrise Highway, Freeport, N. ; and, in the alternative, an order pursuant to CPLR 2304 quashing the judicial subpoena duces tecum dated February , and striking demands numbered 5 and 6 from the Notice of Discovery and Inspection dated March , is granted to the extent provided herein. This cross-motion by defendants for an order pursuant to CPLR 3212 granting them summary judgment dismissing the complaint is denied. The plaintiff in this action seeks inter alia the specific performance of a real estate contract for the sale of premises located at 1-7 Sunrise Highway, Freeport, NY

2 dated June 29, The defendant sellers have interposed four counterclaims. As and for their first counterclaim and affirmative defense, they allege that the plaintiff breached the contract by failing to close within the prescribed time period, thereby forfeiting its deposit. As and for their second counterclaim and affirmative defense, defendants allege that plaintiffs president and majority shareholder, George Gavalas, Esq., is the tre part in interest; that he engaged in ethical violations by representing both plaintiff and them in connection with the sale; and, that in so doing, Gavalas breached the contract thereby relieving them of their contractual obligations and forfeiting plaintiff s deposit. As and for their third counterclaim and affirmative defense, defendants allege that when he entered the contract, Gavalas fraudulently misrepresented that the plaintiff would be ready, wiling and able to close within the prescribed time period, thereby making him guilty of unclean hands and precluding it from enforcing the contract. Again, defendants seek to retain the deposit. As and for their fourth affirmative defense, defendants allege that their alleged failure to comply with the requirement(s) of the contract was not a material breach and did not excuse the plaintiff s contractual obligation to close within the prescribed time period. As and for their fourh counterclaim, defendants seek to recover attorney s fees. As and for their fifth affirmative defense, defendants allege that the plaintiff breached the contract by, inter alia failing to be ready, wiling and able close within the prescribed time period and by failng to actually close within the prescribed time; forcing them to retain independent counsel; exposing them to liability for a broker s commission; and, fiing a lis pendis. The pertinent facts are as follows: George Gavalas, Esq., is the president and majority shareholder of plaintiff Gatlynn Holdings, Inc. He alleges that the defendants contacted him in early 2005 to ascertain his possible interest in purchasing their commercial propert at 1-7 Sunrise Highway in Freeport. Nothing substantive evolved and the defendants listed their propert for sale with a broker. Gavalas alleges that the defendants told him that he was listed as an excluded purchaser so that no commission would be due if he ultimately purchased their property. Gavalas further alleges that sometime later, the defendants contacted him and told him that they had been offered $ , but they would net only $ after the broker s commission was paid. At that point, Gavalas offered defendants $ , which netted them more money since Gavalas was presumably a purchaser excluded from the broker s listing agreement. Defendants accepted Gavalas offer. Gavalas further alleges that he advised the defendants to retain their own lawyer but that they steadfastly refused, electing to have him represent both plaintiff as purchaser and them as sellers. Gavalas prepared the contract dated June 29, 2005 and in so doing, incorporated the following language:

3 The Sellers herein and purchaser each acknowledge that the Law Office of George M. Gavalas, has performed legal services for each part in the past and presently. Each part acknowledges that this may pose a conflict of interest and.. each part voluntarly waives suc t is furt understood that George M. Gavalas is representing himself as purchaser of the propert. The parties agree that George M. Gavalas shall draft the contract of sale; order title; and draft the deed and transfer documents and calculate the adjustments at closing (emphasis supplied). A closing date of on or about August 10, 2005 was set forth. Plaintiff made a $ deposit. In light of the defendants' failure to produce necessary documentation for plaintiff the contract was amended on September 6, 2005, at which time plaintiff released the $ deposit for defendants ' use. The September amendment provides that (tjhe Seller shall provide Purchaser with all necessary documentation in its possession to assist Purchaser in the procurement of a mortgage including but not limited to profit/loss statements, rent rolls and Schedule E (with respect to the Premises) to Sellers ' 2004 Federal Income Tax Return, as applicable" and the "(sjeller shall provide Purchaser with all documents by and between Seller and Garden City Properties, Inc., including but not limited to the listing agreement which excludes George Gavalas as a purchaser. " A new closing date of October 20, 2005 was set forth. When information from defendants stil remained outstanding on September , the contract was amended a second time. Plaintiff provided an additional $ towards the deposit and the closing date was changed to October 31, 2005 "or such later date in accordance with paragraph " Paragraph 4 provides: (tjhe Seller acknowledges that he has not yet provided the Schedule "E" profit/loss statement-income/expense schedule as required under the September 6, 2005 amendment which has caused a delay to purchaser. Seller further acknowledges that this information has been requested many times since the execution of the contract. It is expressly agreed that the closing wil take place on or about thirt (30) days from the date Seller provides the requested Schedule "E" profit/loss statement - income expense schedule. Again, the defendants also agreed to provide the plaintiff with documents between it and the broker, including any listing which excluded Gavalas as a purchaser. The following day, at Maria Maggio s behest, the following notations were handwritten by Gavalas at

4 the bottom of the Second Amendment: 9/28/05 Received full year of electric bils for property Received statement of water expenses from 1/04 - recent bil 2004 Insurance Lavell & Mantove 2005 Insurance Sellers stil agree to provide: Vilage taxes bil from 2004 Oil costs for 2004 Gas bils since conversion Gavalas initialed where the received documents were listed and defendant Michele Maggio signed where the documents that the Sellers stil agreed to provide were listed. On November , the defendants retained Lee M. Albin to represent them in connection with the sale. That day, Mr. Albin advised Gavalas in writing that a date was set for closing, i., December , and that "Time was of the Essence." Albin forewarned that if the plaintiff failed to close that day, defendants would retain their deposit. By letter dated December 5, 2005, Gavalas rejected Albin s attempt to make Time of the Essence" on the grounds that defendants had not provided him with Schedule E to their income tax return or some other profit/loss schedule with respect to the premises, (ii) listing agreements between the sellers and Garden City Properties, and (iii) gas and oil bils for the premises." Gavalas furher noted that the Vilage of Freeport had refused to issue a Certificate of Occupancy in view of outstanding violations, thereby further complicating his ability to close. Gavalas retained Chrstopher Rosado, Esq., to represent him in connection with the sale. The next day, December , Albin forwarded Gavalas the defendants' Schedule E which had been annexed to their 2004 tax return. Pursuant to Paragraph 4 of the Second Amendment, plaintiff was then required to close within 30 days, i.e., by January Albin nevertheless refused to postpone the closing scheduled by him for December 16, When plaintiff failed to close that day, Albin declared the plaintiff in default and advised that its deposit would be retained by defendants. Plaintiff commenced this action on December seeking, inter alia specific performance. The plaintiff purchaser presently seeks summary judgment. In the alternative, plaintiff seeks to strike various discovery demands. The defendants in response seek summary judgment dismissing the complaint.

5 , _, "' On a motion for summary judgment pursuant to CPLR 3212, the proponent must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact." Sheppard- Mobley King, 10 AD3d 70, 74 (2d Dept. 2004), affd. as mod., 4 NY3d 627 (2005), citing Alvarez Prospect Hosp., 68 NY2d (1986); Wine grad New York Univ. Med. Ctr, 64 NY2d (1985). " Failure to make such primafacie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers. Sheppard-Mobley King supra, at p. 74; Alvarez Prospect Hosp. supra Wine grad New York Univ. Med. Ctr. supra. Once the movant' s burden is met, the burden shifts to the opposing party to establish the existence of a material issue of fact. Alvarez Prospect Hosp. supra, at p In support of plaintiff s application for specific performance, Gavalas avers that he was not in default when he refused to close on the firm closing date set by Albin because the defendants had not yet complied with the contract' s requirement that they produce Schedule E as required by paragraph 4 of the Second Amendment, thereby precluding them from compellng a closing. Defendants, however, via an affidavit of defendant Michele Maggio, allege that the handwritten notations at the bottom of the Second Amendment dispensed with the requirement of Paragraph 4. Indeed, while Gavalas denies, Michele attests that Gavalas specifically agreed as such. In view of the fact that Gavalas represented the defendants in connection with this sale and more specifically, when the Second Amendment was made, an issue of fact exists as to whether defendants were required to produce Schedule E in order to trigger the 30 day period in which plaintiff could be required to close. Accordingly, whether the defendants properly set a firm closing date of December 16, 2006, and whether plaintiff breached the contract by failing to close that day present issues of fact. ( A In ethical violation wil not, in and of itself, create a duty that gives rise to a cause of action that would otherwise not exist at law. Shapiro McNeil, 92 NY2d (1998) citing Drago Buonagurio, 46 NY2d 778, (1978); see also Radio Engineering Industres. Inc. Denton, 30 AD3d 672 (3d Dept. 2006). Gavalas ' alleged violations of the Disciplinary Code by representing plaintiff and the defendants in connection with the sale does not constitute a breach of contract. Defendants ' second counterclaim and affirmative defense are dismissed. Gavalas ' allegedly false representation that he would be ready to close within 30 days when he entered the contract does not state a claim as " a ' cause of action to recover damages for fraud wil not arise when the only fraud alleged relates to a breach of contract.' " Valentin Chong AD3d, 2007 WL (2d Dept. 2007) quoting Rosen Watermil Dev. C011., 1 AD3d (2d Dept. 2003); see also Ross DeLorenzo, 28 AD3d 631, 636 (2d Dept. 2006). Moreover a present intent to deceive must be alleged and a mere misrepresentation of an intention to perform under the

6 , " ' " contract is insufficient to allege fraud. Ross DeLorenzo supra, at p. 636, quoting WIT Holding C011. Klein, 282 AD2d (2d Dept. 2001). Defendants ' third counterclaim and affirmative defense are dismissed. Assuming, arguendo that defendants were required by the contract to produce Schedule E as a precursor to setting a closing date, defendants ' failure to do so was a material breach of the contract. Defendants ' fourth affirmative defense is dismissed. Defendants ' fourth counterclaim which seeks attorneys fees is dismissed as attorneys fees are not authorized by either the parties ' agreement or law. See Baker Health Management Systems. Inc., 98 NY2d 80, 88 (2002), rearg den., 98 NY2d 728 affd., 298 F. 3d 146 (2 Cir. (N. J 2002). Via a subpoena duces tecum dated February , defendants seek the production of the bank statements and cancelled checks of Gavalas ' operating and escrow accounts and Gavalas' escrow ledger book and deposit slips for the period January 1, 2005 to January 30, While defendants allegedly need these documents to establish whether Gavalas deposited the deposit funds in his escrow account, in view of the fact that the defendants themselves personally received the $ in deposit funds that is not an issue here. In that same subpoena, defendants seek " (ajny and all written agreements involving all or part interest in Plaintiff s sale and purchase of said premises known as Lot: 55, Section: 409 Block: 101 of the Tax Map Designation " and "(a)ny and all correspondence other materials, papers or things within Attorney George Gavalas custody, possession, or control which pertain in any manner to the above-referenced action;" and (a Jny and all written agreements, memorandum, documents involving plaintiffs sale or partnership of an interest of the subject premises." That information is not relevant to any of the viable claims in this action. Item No., however, which seeks (a)ny and all written commitments from a bank and/or lender in connection with obtaining proceeds to purchase defendants' commercial building located at 1-7 West Sunrise Highway, Freeport, New York, 11520, also known as Lot: 55 Section: 409 Block: 101 of the Tax Map Designation" seeks information which, while not dispositive, is relevant to plaintiff s ability to close. Items 1-6 and 8 of the defendants ' subpoena duces tecum dated February are stricken. Via a Notice of Discovery and Inspection dated March , defendants seeks production of "(b )ank statements and cancelled checks of plaintiff during the period January 1, 2005 through December and January and February 2006 (and) Federal income tax returns and New York State Franchise Tax Retus from the inception of plaintiff s incorporation to the present; Plaintifr s corporate filing receipt, articles of incorporation; record of names and addresses of plaintiff s shareholders; record of names and addresses of plaintiffs corporate officers; deeds to all real propert owned by plaintiff and executory contracts to purchase; minutes of all corporate meetings both general and special from date of incorporation to present; and, any other document correspondence or writing, not specifically sought in the foregoing discovery requests pertaining to the subject matter of this litigation." Again, these items are not relevant to

7 the claims in this action. Items 1-6 and 8 of the Notice of Discovery and Inspection dated March are stricken. This constitutes the decision and order of the Court. Dated: February ENTERED COUNT MA AU COUNTY Cl'...e