Opinion
8702/05.
Decided March 14, 2006.
Meiselman, Denlea, Packman, Carton Eberz, P.C., White Plains, New York, Attorneys for plaintiff.
Margolis Law Firm, Roseland, New Jersey, Attorneys for Defendants.
This action arises out of a dispute between former business partners as to the proceeds from a settlement of an unrelated lawsuit. Plaintiff Ernesto Salerno contends that he is entitled to fifty percent of the proceeds pursuant to written agreements between the parties and commenced this lawsuit to recover the withheld amount of $61,156.95. His complaint alleges causes of action for breach of contract, conversion, unjust enrichment, and an accounting. Defendants have asserted a number of affirmative defenses as well as counterclaims for a declaratory judgment and contract reformation. Plaintiff moves herein for summary judgment in his favor and for dismissal of the counterclaims.
Although plaintiff's notice of motion states that plaintiff seeks summary judgment in his favor pursuant to CPLR 3212 and dismissal of defendants' counterclaims pursuant to CPLR 3211, the parties have fully addressed the merits of the claims and counterclaims in regard to summary judgment.
Plaintiff and defendant Odoardi were co-shareholders, each holding a 50% capital interest, of defendant Nanuet Chrysler Plymouth Jeep Eagle, Inc. (the "Dealership"). On September 12, 2003, Salerno and Odoardi entered into a letter agreement (the "Letter Agreement") which outlined the terms by which Salerno would sell his interest in the Dealership to Odoardi. (Plaintiff's Ex. A) Salerno and Odoardi subsequently entered into a stock purchase agreement dated November 4, 2003 for the sale of Salerno's 50% capital stock interest in the Dealership (the "Stock Purchase Agreement"). (Plaintiff's Ex. B) The sale became effective as of January 12, 2004.
At the time of these two agreements, the Dealership was a party to a pending lawsuit entitled, Nanuet Chrysler Plymouth Jeep, Inc. v. DaimlerChrysler Corporation (the "Chrysler litigation"). In regard to how the proceeds, if any, from the Chrysler litigation were to be distributed, the Letter Agreement provides in paragraph 18 as follows:
Purchaser acknowledges that there is currently a lawsuit pending which is entitled Nanuet Chrysler Plymouth Jeep, Inc. v. DaimlerChrysler Corporation. In the event that Nanuet receives proceeds as a result of this lawsuit, by settlement, judgment or otherwise, Purchaser shall promptly pay fifty percent (50%) of said proceeds to Seller. Purchaser shall pay fifty percent (50%) of all expenses actually incurred by Nanuet as a result of said lawsuit, within thirty (30) days of receipt of proof of same from Purchaser.
The Stock Purchase Agreement, which attached the previous Letter Agreement, contains a nearly identical provision at paragraph 22. The Stock Purchase Agreement also provides that in the event of a conflict between that agreement and/or the by-laws of the Dealership and the Letter Agreement, the Letter Agreement's terms shall control (Ex. B, ¶ 23).
Subsequently, in or around May 2005, as a result of a settlement in the Chrysler litigation, Odoardi and the dealership received $531,178.15 in proceeds (the "Chrysler litigation proceeds"). Out of those proceeds, defendants paid the amount of $204,432.13 to Salerno, leaving a difference of $61,156.95 between the amount defendants paid and one-half of the proceeds ($265,589.08). Plaintiff contends that he is entitled to the full 50% of the proceeds based on the unambiguous terms of the Letter Agreement and the Stock Purchase Agreement. Defendants, however, claim that Odoardi is entitled to more than his 50% share of proceeds based on the Shareholders Agreement entered into on March 9, 2000 and the intention of the parties.
In support of his motion, plaintiff argues that the terms of the Letter Agreement and the Stock Purchase Agreement are clear and unambiguous, and that the intent of the parties must be found within the four corners of the contract. Plaintiff further contends that it is clear from the agreements that the parties intended to divide the Chrysler litigation proceeds in half, without any offsets, carve-outs, or regard to extrinsic formulas. Therefore, according to plaintiff, defendants cannot use extrinsic or parol evidence to show a different intent. Additionally, plaintiff asserts that the Shareholders Agreement upon which defendants rely was expressly terminated and canceled by the parties. Pursuant to the Stock Purchase Agreement at paragraph 25(k), all prior agreements, except the Letter Agreement, among the parties regarding the disposition of their shares of stock in the Dealership or any other subject addressed [in the Stock Purchase Agreement] are rescinded or rendered void and of no effect.
In opposition, defendants do not dispute the existence of the agreements or the fact that they paid plaintiff less than 50% of the Chrysler litigation proceeds. Rather, defendants claim that the amount of the proceeds paid was proper because the Letter Agreement and the Stock Purchase Agreement refer only to those damages recovered in the Chrysler litigation for the period during which plaintiff was a shareholder in Nanuet, as reduced by profit participation to which Odoardi was entitled pursuant to the Shareholders Agreement with plaintiff. Defendants state that since plaintiff only had an interest in the dealership through the end of 2003, plaintiff suffered no economic loss as a result of Chrysler's unlawful practices after that and is not entitled to the proceeds for any period after 2003. The second basis for reduction of the division of the proceeds alleged by defendants is that the Shareholders Agreement provided that Odoardi would receive additional compensation of 10% of the monthly profits of the Dealership up to $1,000,000 per annum. Defendants contend that since Chrysler's conduct resulted in reduced net profits, Odoardi is entitled to 10% of the funds as if they had been received in the normal course of the Dealership's business.
Whether a writing is ambiguous is a question of law to be resolved by the court ( see W.W.W. Assocs. v. Giancontieri, 77 NY2d 157). The intent of the parties to a contract can be determined as a matter of law without a trial where that intent is discernible from the four corners of an unambiguously-worded agreement ( see Hartford Acc. Indem. Co. v. Wesolowski, 33 NY2d 169; Funding Partners v. RIT Auto Leasing Group, 288 AD2d 431). Thus, the interpretation of an unambiguous contract provision is a function for the court, and matters extrinsic to the agreement may not be considered when the intent of the parties can be gleaned from the face of the instrument ( Chimart Assocs. v. Paul, 66 NY2d 570; Teitelbaum Holdings v. Gold, 48 NY2d 51). When the parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms, and evidence outside the four corners of the document as to what was really intended but unstated or misstated is inadmissible to add to or vary the writing ( W.W.W. Assocs. v. Giancontieri, supra). Furthermore, extrinsic and parol evidence is not admissible to create an ambiguity in a written agreement which is complete and clear and unambiguous upon its face ( id.). Where, however, the language is susceptible of varying but reasonable interpretations, the parties may submit extrinsic evidence as an aid in construction, and the resolution of the ambiguity is for the trier of fact ( see State of New York v. Home Indem. Co., 66 NY2d 669; Siegel v. Golub, 286 AD2d 489).
In the instant case, the Court finds that there is no uncertainty or ambiguity in the terms of the agreements. Both the Letter Agreement and the Stock Purchase Agreement clearly provide in almost identical terms that Odoardi, as the purchaser of the Dealership, shall pay 50% of the Chrysler litigation proceeds to the seller, Salerno. Furthermore, the Stock Purchase Agreement clearly terminated and canceled the Shareholders' Agreement upon which defendants rely to justify their retention of part of the proceeds. In any event, the Letter Agreement and the Stock Purchase Agreement clearly divide the Chrysler litigation proceeds in half, and do not make any provision for adjustments according to any additional compensation (i.e., 10% of monthly net profits) that Odoardi may have been receiving pursuant to the Shareholders Agreement. Moreover, Odoardi's contention that it was intended for Salerno to receive a portion of the proceeds that was proportionate to his ownership (i.e. Salerno should not receive any portion of the 2004 proceeds because his ownership was terminated then) is contradicted by the plain language of the Agreements. When the provision governing distribution of the Chrysler litigation proceeds was drafted, the Chrysler litigation was still pending and it was clearly contemplated by the parties that Salerno would no longer be a shareholder if and when the funds from the resolution of the case were received. Nonetheless, no provision to divide the proceeds according to ownership interest was included in the Agreements. Based on the foregoing, plaintiff has made a prima facie showing of entitlement to judgment as a matter of law based on the clear and unambiguous terms of the subject Agreements.
Once the proponent of a motion for summary judgment has made a prima facie showing of entitlement to judgment as a matter of law, the party opposing the motion must demonstrate by admissible evidence the existence of a triable issue of fact in order to defeat the motion ( see CPLR 3212; Alvarez v. Prospect Hosp., 68 NY2d 320; Zuckerman v. City of New York, 49 NY2d 557). Defendants have failed to meet their burden on this motion. Defendants' contentions that the Agreements intended to include a division based on any additional compensation received by Odoardi or based on the percentage of time each owned the Dealership do not raise triable issues of fact as to the intentions of the parties inasmuch as the Agreements are unambiguous, and extrinsic or parole evidence may not add to or vary the unambiguous terms of an agreement or create an ambiguity where none exists ( W.W.W. Assocs. v. Giancontieri, supra; Chimart Assocs. v. Paul, supra).
Defendants have asserted two counterclaims. The first counterclaim seeks a declaratory judgment and is based on the same arguments raised in opposition to plaintiff's motion. Therefore, for the reasons stated above, defendants are not entitled to a judgment declaring that the amount that defendants paid to plaintiff as his share of the Chrysler litigation proceeds is correct.
Defendants' second counterclaim, sought in the alternative, seeks a reformation of the Letter Agreement and the Stock Purchase Agreement on the grounds that the intent of the parties was that the disposition of the subject proceeds would take place as if the funds had been received in the years for which Nanuet incurred the damages, and that the agreements are silent as to the means and manner of the accounting for the proceeds. Reformation is permitted where there is proof of mutual mistake or fraud ( Chimart Assocs. v. Paul, supra). There is a heavy presumption that a deliberately prepared and executed written instrument manifests the true intention of the parties ( id.; Backer Mgt. Corp. v. Acme Quilting Co., 46 NY2d 211, 219). Therefore, a proponent of reformation must show, by clear and convincing evidence, not only that mutual mistake or fraud exists, but exactly what was really agreed upon between the parties ( Chimart Assocs. v. Paul, supra; Backer Mgt. Corp. v. Acme Quilting Co., supra; Lacoparra v. Bellino, 296 AD2d 480).
Here, plaintiff has demonstrated that, through the clear and unambiguous language of the Letter Agreement and the Stock Purchase Agreement, it was the intention of the parties to equally divide the Chrysler litigation proceeds, without set-offs or consideration of other factors. Moreover, the Agreements at issue were part of a transaction involving counseled parties dealing at arm's length. In opposition to the motion, defendants have failed to come forward with evidence or even allegations sufficient to raise a triable issue of fact as to whether the parties had actually reached an agreement to distribute the proceeds otherwise (mutual mistake), or whether as a result of fraud, the Agreements did not express the true intentions of the parties.
Accordingly, plaintiff's motion for summary judgment is granted on his breach of contract cause of action, and defendants' counterclaim for reformation is dismissed. Defendants' counterclaim which seeks a declaratory judgment as to the rights and obligations of the parties is determined as follows:
It is ordered and adjudged that plaintiff is entitled to payment by defendants in the amount of $61,156.95 as and for the remainder of his share of the Chrysler litigation proceeds pursuant to the Letter Agreement and the Stock Purchase Agreement.
The foregoing constitutes the Decision and Order of this Court.