mod SHORT FORM ORDER SUPREME COURT - STATE OF NEW YORK Present: HON. UTE WOLFF LALLY. Justice TRIAL/ las, PART 10 NASSAU COUNTY FARRELL FRITZ, P. C., -against- Plaintiff (s), MOTION DATE: 9/5/06 INDEX NO. : 17632/05 SEQ. NO. 3, 4 ROBERT ZELMA, DESIREE ZELMA, MITCHELL JACOBSON and KATHY JACOBSON, Defendant (s) The following papers read on this motion to dismiss: Notice of Motion/ Order to Show Cause.......... Notice of Cross Motion... Answering Affidavits. Replying Affidavits. Briefs:... 4-13 - 14a Upon the foregoing papers, it is ordered that this motion by plaintiff for an order pursuant to CPLR 1006 (f): (i) discharging Farrell Fritz as a stakeholder from all liability to all parties to this action; (ii) permitting Farrell Fritz to deposit the sum $315, 000 plus interest that has accrued thereon; and (iii) awarding Farrell Fritz its expenses, costs and disbursements incurred as stakeholder is granted as to items (i) and (ii) and denied as to item (iii). Cross -motion by defendant Robert Zelman for an order pursuant to CPLR 3212 (e) dismissing the cross-claim of interpleader claimants/defendants Mitchell Jacobson and Kathy Jacobson to the extent that it seeks damages in excess of the amount of the down payment is granted. sellers, or about May, 2005, Mitchell and Kathy Jacobson, entered into a contract of sale with Robert Zelman and
Farrell v Zelman - 2 - Index No. 17632/05 Desiree Zelman, as purchasers. Farrell Fritz is counsel to the Jacobsons and represented the Jacobsons in connection with the subj ect residential contract of sale. Farrell Fritz, as the seller s attorneys, was designated the escrowee and the down payment in the amount of $315, 000. 00 was deposited in a segregated bank account at Bank of America. For reasons more fully set forth in our short form order dated May 2, 2006, the closing did not occur. On November 1, 2005, Farrell Fritz received notice from the Jacobsons demanding payment of the down payment based upon the Zelmans ' default under the contract. On this same date, Farrell Fritz gave notice to the Zelmans of the Jacobsons ' demand. On November 3, 2005, Farrell Fritz received an objection from the Zelmans claiming that they have not defaulted under the contract. On November 4, 2005, Farrell Fritz brought the within interpleader action into Court, and upon such payment, to be discharged from any further liability to any of the parties to the action. seeking, inter alia, to pay the down payment On or about December 9, 2005, the Jacobsons served an answer to the interpleader action and interposed cross-claims against the Zelmans. On or about January 4, 2006, Robert Zelman answered the Jacobsons ' cross-claims. On or about May 10, 2006, Desiree Zelman answered the interpleader complaint and the Jacobson s cross-claims pursuant to our short form order dated May 10, 2006. Farrell Fritz as interpleader stakeholder/plaintiff now seeks an order: permitting it to pay into this Court the amount of the down payment, discharging it from liability by reason of that payment, and awarding it its expenses, costs and disbursements incurred by stakeholde " which are alleged to be $8, 725. 00. Ini tially, this Court notes that Desiree Zelman has not submitted any papers in response to the motion and cross-motion. While Robert Zelman does not oppose Farrell Fritz s motion to the extent that it seeks an order permitting it to deposit the amount of the down payment into court and discharging it from liability as stakeholder by reason of that payment. Robert Zelman does obj ect
Farrell v Zelman - 3 - Index No. 7632/05 Farrell Fritz request for an order directing payment of its expenses, costs and disbursements, i. e., its attorneys ' fees. Mr. Zelman argues that the parties ' agreement does not provide for the recovery of such fees, and even if it did, Farrell Fritz forfeited its right to recover such fees by the representation of the sellers, the Jacobsons, in this action. In view of the foregoing, the portions of the motion which seek an order discharging Farrell Fritz as a stakeholder from all liability and permitting Farrell Fritz to deposit the sum of $315, 000. 00 into the court is granted. As to the branch of the motion which seeks expenses, costs and disbursements, such relief is denied. Paragraph 6 (e) of the contract provides that " (e) scrowee, any member of its firm shall be permitted to act as counsel for Seller in any dispute as to the disbursement of the Downpayment or any other dispute between the parties whether or not escrowee is in possession of the Downpayment and continues to act as escrowee. Paragraph 6 (a) of the contract provides, in relevant part, that Farrell Fritz, as escrowee, has the " right at any time to deposit the Downpayment and the interest thereon with the Clerk in the county in which the premises are located and shall give notice of such deposit to seller and purchaser. Upon such deposit or other shall be disbursement in accordance with this paragraph, escrowee relieved and discharged of all further obligations and responsibili ties hereunder. Paragraph 6 (b) of the contract addresses the Escrowee to indemnification and states as follows: The parties acknowledge that Escrowee is acting solely as stakeholder at their request and for their convenience and that Escrowee shall not be liable to either party for any act or omission on its part unless taken or suffered in bad faith or in willful disregard of this contract or involving gross Seller negligence on the part of the Escrowee. and purchaser lointlv and severally (with s right
Farrell v Zelman - 4 - I ndex No. 1 7 6 3 2 / 0 5 riqht of contribution) aqree to defend (by attorneys selected by Escrowee), indemnify and costs, claims and expenses (includinq hold Escrowee harmless from and aqainst all fees) incurred in duties hereunder, except with respect to actions or omissions taken or suffered by Escrowee in bad faith or reasonable attorneys connection with the performance of the Escrowee willful disreqard of this contract invol vinq qross neqliqence on the part Escrowee (emphasis added) Farrell Fritz, as escrowee, is not entitled to its attorneys ' fees under the parties ' agreement. Ltd. v AGS (74 NY2d 487, In Hooper Assocs., at Computers, Inc., 491), the Court of Appeals recognized that " (i)t is not uncommon for parties to a contract to include a promise by one party to hold the other harmless for a particular loss or damage and counsel fees are but another form of damage which may be indemnified in this way (citations omitted). " The court cautioned, " (i) nasmuch as a promise by one party to a contract however, that to indemnify the other for attorneys ' fees incurred in litigation parties between them is contrary to the well-understood rule that ' fees, the court should not are responsible for their own attorneys infer a party s intention to waive the benefit of the rule unless the intention to do so is unmistakably clear form the language the promise (Id. at 492). The court further concluded that under the language and purpose of the parties ' contract at issue there, fees the indemnification clause did not apply to attorneys incurred in prosecuting a suit against the seller for claims under the contract, but only to suits brought by third parties. Fritz, as The contract at issue expressly states that Farrell all Escrowee, is entitled to indemnification only with respect to " costs, claims and expenses including reasonable attorneys ' fees) incurred in connection with the performance of Escrowee s duties hereunder. " " When the language of a contract is unambiguous, a court will enforce the plain meaning rather than rewrite the agreement, and its meaning may be determined as a matter of law
Farrell v Zelman - 5 Index No. 17632/05 the basis of the writing alone without resort to extrinsic evidence (H. Fox Co. v Blumenfield, 24 AD3d 722) quoting Levitt v Computer Assoc. Intern Inc.., 306 AD2d 251, lv to app den. 1 NY3d 508; see also W. W. Assoc. v Giancontieri, 77 NY2d 157, 162). There is no provision in the parties contract of sale Fritz, awarding attorneys ' fees in the event of a dispute. Farrell sellers. " Had the the escrowee, is also counsel for the defendant escrowee law firm truly been a disinterested stakeholder, (its) legal fees under 6 (b)) would presumably have been nominal in nature, as they either sat quietly on the sidelines waiting for a court order as to whom this money they were holding should be transferred, or brought a simple stakeholder proceeding to obtain discharge under CPLR 1006 (f)" Glazer v Jack Seid Sylvia Seid see also National Cold Storage 2003 WL 22757710; Revocable Trust, Co. v Tiya Caviar 52 Misc. 2d 289). Co., simple stakeholder In this case, Farrell Fritz did commence a " proceeding However, Farrell Fritz is not seeking nominal damages but rather attorneys ' fees in the amount of $8, 725. 00. Given these expenses, costs circumstances, the branch of the motion which seeks and disbursements is denied. Turning to Robert Zelman s cross-motion for partial summary judgment dismissing the cross-claim of interpleader claimants/defendants Mitchell Jacobson and Kathy Jacobson to the payment, such relief extent it seeks damages in excess of the down is granted. Paragraph 23 (a) of the subj ect contract of sale states as follows: If Purchaser defaults hereunder, Seller sole remedy shall be to receive and return the Downpayment as liquidated damages, it being agreed that Seller damages in case of Purchasers default may be impossible to ascertain and the Downpayment constitutes a fair. and reasonable amount of damages under the circumstances and it is not a penalty.
Farrell v Zelman - 6 Index No. 17632/05 The rule regarding the viability of liquidated damages is clearly explained in Truck Rent- Center, Inc. v puri tan Forms 2nd Inc.. 41 NY2d 420 at pages 423-424. Liquidated damages constitute the compensation which, the parties have agreed, should be paid in order to satisfy any loss or injury flowing from a breach of their contract (citation omitted). In effect, a liquidated damage provision is an estimate, made by the parties at the time they enter into their agreement, of th extent of the injury that would be sustained as a result of breach of the agreement (citation omitted). Parties to a contract have the right to agree to such clauses, provided that the clause is neither unconscionable nor contrary to public policy provisions for liquidated it would be difficul t, if not actually of actual (citation omitted). damages have value in those si tua tions where impossible to calculate the amount damage. (emphasis added) In applying these principles to the case at bar, this court finds that the amount stipulated by the parties as liquidated damages bears a reasonable relation to the amount of actual harm suffered by plaintiff. The liquidated damage clause set forth in ~23 (a) is not a penalty "grossly disproportionate to the probable loss " and should, therefore, be upheld (Id. at 425; see also Bates Advertising USA, Inc. v 498 Seventh, LLC, 291 AD2d 179, lv to app dism. 98 NY2d 671; see also Federal Realty Ltd. Partnership v Choices Women' s Med. Ctr., 289 AD2d 439). Significantly, the Jacobsons never address the sole basis for Mr. Zelman s motion, i. e., that pursuant to paragraph 23 (a) of the contact, Jacobsons ' sole remedy in the event of a default is retention of the downpayment as liquidated damages. Instead, the Jacobsons argue that this motion is premature as an issue of fact exists as to whether Robert Zelman contributed to the entry of the order to show cause which was signed by Justice Laura Visitacion- Lewis in Supreme Court, New York County. This order temporarily
Farrell v Zelman - 7 Index No. 17632/05 restrained Robert Zelman and/or anyone acting on his purchasing, contracting, or otherwise acquiring property located at 1885 Muttontown, New York. alia, behalf from residential Notwithstanding the fact inter that the court previously held, that the Jacobsons have raised a triable issue of fact with respect to Robert Zelman s actions, which may have caused or failed to prevent the issuance of the temporary restraining order, " such determination does not preclude the grant of partial summary judgment to Robert Zelman based upon the liquidated damage provisions set forth in paragraph 23 (a) of the contract. Given the plain and unambiguous language set forth paragraph 23 (a) of the contract (see H. Fox Co. v Blumenfeld, 24 AD3d 722) the liquidated damage clause should be upheld. Accordingly, Robert Zelman cross -motion for summary judgment dismissing the cross-claim of the Jacobsons to the extent it seeks damages in excess of the down payment is granted. In view of the foregoing. the motion is granted to the extent that Farrell Fritz is discharged as stakeholder from all liability and may deposit the sum of $315, 000 into court and the cross motion is granted in its entirety. Dated: OCT 2 0 2006 n )) UMj/ ENTERED OCT 2 5 2006 NAIIU COUN OUNT OII!K' S 8PCE farrell. oct