Opinion
7735/10.
Decided March 16, 2011.
Forchelli, Curto, Deegan, Schwartz, Mineo, Cohn Terrana, LLP, Uniondale, New York, Attorney for Plaintiff.
Defendants moved to dismiss plaintiffs claims pursuant to CPLR § 3211. The court has converted defendants' motion into a CPLR § 3212 motion for summary judgment under pursuant to CPLR § 3211(c). Defendants have also requested sanctions pursuant to 22 NYCRR § 130-1.1, for frivolous conduct.
The Wharf @ Jude Thaddeus Landing Inc. D/B/A Water's Edge Restaurant (hereinafter "THE WHARF) commenced this action for damages arising out of abuse of process, malicious prosecution, damages pursuant to CPLR § 6315, tortuous interference, prima facie tort, and fraudulent misrepresentation. The claims arise out of an action for foreclosure SPCP Group LLC v. JJF Garage Inc. d/b/a, et al.
Pursuant to defendants' motion, a receiver was appointed to collect all rents, as well as manage and operate the Wharf restaurant, which was located on JJF Garage's property. Plaintiff contends that they have been unduly harmed by such appointment. In the present action, plaintiff, The Wharf, alleges the aforementioned claims under the theory that, as they were not a party to the foreclosure action, they should not have been subjected to the authority of the receiver. As defendant had applied for and was granted such control and operation of plaintiff's restaurant, plaintiff claims damages for the alleged negligent maintenance and operation by the receiver of its restaurant.
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. Winegrad v. New York Univ. Med. Center, 64 NY2d 851, 853. "Failure to make such prima facia showing requires a denial of the motion, regardless of the sufficiency of the opposing papers." Sheppard-Mobley v. King , 10 AD3d 70 , 74 (2nd Dept. 2004); Alvarez v. Prospect Hosp., 68 NY2d 320, 324 (1986); Winegrad . 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 v. Prospect Hosp. supra at 324. The evidence presented by the opponent of summary judgment must be accepted as true and must be given the benefit of every reasonable inference. See, Demishick v. Community Houseing Management Corp., 34 AD3d 518, 521 (2nd Dept. 2006) citing Secof v. Greens Condominium, 158 AD2d 591 (2nd Dept. 1990).
Defendant has submitted memorandums of law, affidavits, and affirmations supporting its motion to dismiss, and further has produced supplemental briefs in an attempt to provide the support necessary to overcome the heightened burden of summary judgment. However, plaintiff has not submitted any documents in addition to those submitted in opposition to defendants' motion to dismiss. Therefore plaintiff is relying on its previous submission to the court opposing defendants' motion to dismiss. Hence, if defendants have made a prima facie showing of entitlement to judgment as a matter of law on any one of the six claims, defendants' must be granted summary judgment on those claims respectively.
Even assuming the truth of the facts pleaded, and allowing for every favorable inference to determine whether any cognizable legal theory can be discerned, under the circumstances extant, there is no basis to sustain plaintiff's claims for abuse of process, malicious prosecution, damages arising out of CPLR § 6315, tortious interference, prima facie tort, and fraudulent misrepresentation. Skoloff v. Harriman Estates Development Corp., 96 NY2d 409, 414 (2001).
A cause of action for abuse of process has three essential elements: 1) regularly issued process, either civil or criminal; 2) an intent to do harm without excuse or jusitification; and 3) use of process in a perverted manner to obtain a collateral objective. Curiano v. Suozzi, 63 NY2d 113, 116 (1984); Panish v. Steinberg , 32 AD3d 383 (2nd Dept. 2006). The process used must involve an unlawful interference with one's person or property. Island Federal Credit Union v. Smith , 60 AD3d 730 , 733 (2nd Dept. 2009).
Plaintiff has adequately pled facts supporting a regularly issued process. Application for the appointment of a receiver is such a regularly issued civil process. Furthermore, plaintiff has supported his allegation that use of the receiver was perverted by the fact that the Wharf restaurant was not party to the original foreclosure action, and therefore shouldn't have been liable for rents to be collected by a receiver. However, relevant to the claim of abuse of process is the requirement of intent to do harm'.
Plaintiff supports their allegation that defendants acted maliciously by pointing to their own allegations in their complaint, stating that defendants made an application for the appointment of a receiver with no legal or factual support. (Plaintiff's Memorandum of Law in opposition to defendants motion to dismiss, p. 5 ¶ 4). Plaintiff's arguments are conclusory at best. They are not supported by any facts, and moreover they fail to address defendants' argument that defendants made this application with a good faith belief that the restaurant was the alter ego of the owner of the mortgaged premises. Defendants have supported their argument by showing numerous commonalities between the Wharf, JJF Garage, and Thadius Partners 1 (the corporation which purchased the property in question from JJF Garage), supporting a good faith belief that defendant SPCP would have been able to pierce the corporate veil and obtain relief for its foreclosure action through appointment of a receiver to control and manage the Wharf. Morris v. New York State Dept. of Taxation and Finance, 82 NY2d 135, 141 (NY 1993). Those commonalities include; the fact that the owner of the Wharf, the owner of Thadius Partenrs 1 and the 51% owner of JJF Garage were all the same person, that SPCP had the right to approve any tenancy for the mortgaged premises of JJF Garage and JJF never felt the need to consult SPCP in allowing the Wharf to "rent" the premises; that the Wharf operated by using equipment, machinery and fixtures which SPCP held a security interest in; that the Wharf never paid for their use of this secured collateral; that the Wharf utilized a liquor license of John Ferrara, one of the personal guarantors of the mortgage by JJF; that the Wharf was formed after the foreclosure action begun; that the rent being paid to JJF by the Wharf was below market value; that the lease between the mortgagor JJF and the Wharf was a one page document; and because JJF later sold the property to Thaddeus Partners 1. These commonalities provide defendants with a good faith defense to any abuse of prosecution claim, as clearly they were reasonable in their belief that the Wharf could be liable for actions taken against JJF Garage, as they were seemingly one and the same.
Moreover, plaintiff's argument that defendants' use of ex parte process indicates bad faith, is inaccurate. Defendants were entitled to submit their application ex parte as the Mortgage agreement waived any requirement for notice under provision 7.2, paragraph (e) of the Mortgage Agreement between JJF Garage and SPCP. Clinton Capital Corp. v. One Tiffany Place Developers, Inc., 112 A.D. 911 (2nd Dept. 1985). Actually, ex parte applications require a good faith basis. 22 NYCRR § 202.7(d). Therefore the fact that the court thought it appropriate to appoint the receiver is further evidence that there was such a good faith basis for making this application.
Plaintiff's claim for malicious prosecution must also fail.
The elements of the tort of malicious prosecution of a civil action are as follows:
(1) prosecution of a civil action against the plaintiff, (2) by or at the instance of the defendant, (3) without probable cause, (4) with malice, (5) which terminated in favor of the plaintiff, and (6) causing special injury" ( Castro v. East End Plastic, Reconstructive Hand Surgery, P.C., 47 AD3d 608, 609, 850 N.Y.S.2d 483; see Furgang Adwar, LLP v. Fiber-Shield Indus., Inc. ,55 AD3d 665, 666, 866 N.Y.S.2d 250). "The favorable termination element must be established by evidence that the court passed on the merits of the charge or claim . . . under such circumstances as to show . . . nonliability,' or evidence that the action was abandoned under circumstances which fairly imply the plaintiff's innocence'" ( Castro v. East End Plastic, Reconstructive Hand Surgery, P.C., 47 AD3d at 609, 850 N.Y.S.2d 483, quoting Pagliarulo v. Pagliarulo, 30 AD2d 840, 840, 293 N.Y.S.2d 13). Hudson Valley Marine Inc. v. Town of Cortlandt , 79 AD3d 700 , 703 (2d Dept. 2010).At issue here are the elements of malice'.
Malice requires a finding of "conscious falsity". Hornstein v. Wolf, 109 AD2d 129, 133 (2nd Dept. 1985). "in order to set forth a cause of action to recover damages for malicious prosecution, more than conclusory, unsubstantiated allegations are necessary." Hornstein v. Wolf, supra at 133. Whereas there was no finding of intent to do harm under the abuse of process claim, there is also no conscious falsity'. Defendants had a good faith belief that the application was proper, as the owner of the Wharf had operated his other companies in such a way as to imply they were interrelated. Where the owner and operator of a corporation abuses the privilege of doing business in the corporate form to perpetrate a wrong or injustice, piercing the corporate veil is appropriate. Morris v. New York State Dept. of Taxation and Finance, 82 NY2d 135, 141 (NY 1993). Although this court does not rule on whether piercing the corporate veil would be appropriate here, there certainly is enough support for defendants' argument that they had a good faith belief the Wharf would be liable for actions against JJF Garage.
Plaintiff's claim for damages arising out of subsection 6315 of Civil Practice Law and Rules must also fail. Prior to the granting of preliminary relief, plaintiffs may be required to give an undertaking such that in the event they lose the underlying action, they will pay defendants' costs and damages that were sustained by the injunction. Reingold v. Bowins , 34 AD3d 667 , 668 (2nd Dept. 2006). However;
It is well settled that "the undertaking is the source of liability and, therefore, absent an undertaking there is no right, short of an action for malicious prosecution, to recover for damage resulting from the issuance of court process" ( Preston Corp. v Fabrications Enters., supra, at 397-398)
Whereas defendants' motion for summary judgment must be granted on plaintiff's malicious prosecution claim, and where no bond was ordered be posted by defendants in conjunction with the appointment of the receiver, plaintiff has no claim under CPLR 6315. RS Paralegal Recovery Services, Inc. v. Poughkeepsie Sav. Bank F.S.B., 190 AD2d 660, 661 (2nd Dept. 1993).
Tortious interference with contractual relations includes: (1) the existence of a contract between the plaintiff and a third party, (2) the defendant's knowledge of the contract, (3) the defendant's intentional inducement of the third party to breach or otherwise render performance impossible, and (4) damages to the plaintiff" ( Bayside Carting v. Chic Cleaners, 240 AD2d 687, 688, 660 N.Y.S.2d 23. Anesthesia Assoc. of Mt. Kisko LLP v. Northern Westchester Hosp. Center, 59 AD3 473, 475 (2nd Dept. 2009). At issue here are the third and fourth elements.
The third element requires that defendants intentionally made performance of the lease between JJF Garage and the Wharf impossible. Plaintiff claims defendants did this by wrongly making an application for appointment of a receiver. Plaintiff argues that by appointing the receiver performance on the lease was made impossible because plaintiff could no longer use the premises. Defendants appointed the receiver as per the contractual provision in the mortgage, which gives SPCP the right to appoint a receiver to collect rents upon default by JJF Garage. (Defendants' Motion To Dismiss, Exhibit C, the Mortgage, p. 27, ¶ 6). However, "In such an action, the motive for the interference must be solely malicious, and the plaintiff has the burden of proving this fact." M.J. K. CO., INC. et al. v. Mathew Bender and Company, INC., 220 AD2d 488, 490 (2nd Dept. 1995).
As previously stated, defendants acted without malicious intent in moving the court to appoint a receiver. They did so with a good faith belief that such an action was appropriate. Plaintiff's intermingling of its legal entities, and its liberal transference of property, formed the basis for a reasonable belief that the Wharf should be liable for the foreclosure action against JJF Garage. Therefore, summary judgment must also be granted for defendants against plaintiff's claim of tortuous interference of contractual relations.
A prima facie tort requires: "(1) intentional infliction of harm, (2) causing special damages, (3) without excuse or justification, (4) by an act or series of acts that would otherwise be lawful." Curiano v. Suozzi, 63 NY2d 113, 116 (NY 1984). Once again there has been no showing of intent to inflict harm upon plaintiff. Plaintiff has only pointed to conlcusory statements made in the complaint that defendants intended to injure plaintiff by making an ex parte application for a receiver without support for such an action. As stated above, defendants have met their prima facie burden for summary judgment by arguing that receivers may be appointed ex parte. Furthermore, defendants had reason to believe that the application was appropriate as the owner of the Wharf, Thadius Partners 1, and the majority shareholder of JJF Garage were all the same person, and were treated as alter egos of one another. Morris v. New York State Dept. of Taxation and Finance, supra at 141.
Plaintiff's claim of fraudulent misrepresentation must also fail. "To recover damages for fraudulent misrepresentation, a plaintiff must prove (1) a misrepresentation or an omission of material fact which was false and known to be false by the defendant, (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely upon it, (3) justifiable reliance of the plaintiff on the misrepresentation or material omission, and (4) injury ( see Lama Holding Co. v. Smith Barney, 88 NY2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370; Jablonski v. Rapalje ,14 AD3d 484, 487, 788 N.Y.S.2d 158). Bernardi v. Spyratos , 79 AD3d 684 , 687 (2nd Dept. 2010).
Plaintiff's claim arises from defendant SPCP's offer to sell the JJF Garage property, which was in foreclosure, to Mr. Weiser (owner and operator of the Wharf) and Mr. Ferrara (partial owner of JJF Garage), prior to the formation of the Wharf. Plaintiff alleges that because of defendants' offer, it had spent money in removing lis pendens and improving the general quality of the property. Plaintiff argues that defendant made this offer fraudulently, in order to induce plaintiff into improving the quality of property defendants held a mortgage on.
An offer is rejected unless its terms are accepted as proposed. Keryakos Textiles, Inc. v. CRA Development, Inc., 167 AD2d 738 (3rd Dept. 1990). It is well settled in contract law that where an offer has been rejected, the offer expires. Keryakos Textiles Inc. v. CRA Development Inc., supra at 738.
Defendant has pleaded sufficient information to indicate that, although they had made an offer, that offer had been revoked. Defendants accurately point to Mr. Weiser's own affidavit submitted in opposition to SPCP's application for the appointment of a receiver. "Rather than proceeding with the purchase of the Real Property in January 2008, I decided to wait and let the foreclosure run its course, with the possibility that I would bid on the Real Property at a foreclosure sale." (Defendants motion to dismiss, Ex. H-2, at ¶ 15). Furthermore, plaintiff's memorandum in opposition to defendants' motion reiterates plaintiff's rejection of defendant SPCP's offer. The pleading states that Mr. Weis did so in order to form the Wharf, which could lease the property, and potentially purchase it. At no time has plaintiff argued it accepted defendants offer. Plaintiff argues only that its actions never constituted a rejection.
Plaintiff points to its undertakings to renovate the property and restore its title, as circumstantial evidence of its intent to take advantage of SPCP's offer. However, as defendant has correctly plead, plaintiff rejected their offer when it made clear that it would rather wait for the foreclosure to run its course in order to bid on the property at the foreclosure sale. Plaintiff argues that its decision to wait until after the foreclosure was over set a time period for the closing of the offer. At best this new schedule would be considered a counteroffer as it contains new terms. Counteroffers are considered a rejection and renewed offer with different terms. "It is a fundamental principle of contract law that a valid acceptance must comply with the terms of the offer . . . and, if qualified with conditions it is equivalent to a rejection and counteroffer." ( Roer v. Cross County Med. Center Corp., 83 AD2d 861, 441 N.Y.S.2d 844; see Robison v. Sweeney, 301 AD2d 815, 753 N.Y.S.2d 583; Lamanna v. Wing Yuen Realty, 283 AD2d 165, 724 N.Y.S.2d 54; Ronan v. Valley Stream Realty, Co., 249 AD2d 288, 670 N.Y.S.2d 885). Woodwrd v. Tan Holding Corp. 32 AD3d 467 , 470 (2nd Dept. 2006).
Although plaintiff's actions are circumstantial evidence that plaintiff intended to accept defendants' offer all along, it is insufficient to create a genuine issue of fact as to whether the offer was validly relied on. The offer was clearly rejected, as Mr. Weisser's own affidavit has stated, and any actions by plaintiff after that rejection are meaningless.
Plaintiff has alleged six different claims against three defendants respectively; SPCP Group, LLC, Mahadeva PLLC, and Ms. Angela Dobrowsky. As Mahadeva PLLC and Ms. Angela Dobrowsky are being sued in their capacity as agents for SPCP, claims against them will only remain where there is both a genuine issue of fact as to whether the actions taken by them created liability for SPCP under each claim, and they further acted negligently as agents on behalf of SPCP. "An agent who signs an agreement on behalf of a disclosed principal will not be held liable for its performance unless the agent clearly and explicitly intended to substitute his personal liability for that of his principal." Yellow Book of NY Inc. v. Shelley , 74 AD3d 1333 (2nd Dept. 2010). Otherwise, an agent can only be found liable for acts of affirmative negligence or wrongdoing. Jones v. Archibald, 45 AD2d 532, 535 (4th Dept 1974) (citing Greco v. Levy, 282 NY 575 (1939). "The fact that an agent acts for a disclosed principal will not relieve him of liability for his negligent acts, even though the principal may also be liable." Jones v. Archibald, 45 AD2d 532, 535 (4th Dept 1974) (citing Berg v. Hoffman, 275 NY 132, 134, 9 N.E.2d 806, 807).
Defendant Mahadeva, PLLC, is a law firm, which rendered legal advice and acted as counsel to defendant SPCP Group, LLC. Defendant Angela Dobrowsky is employed as a consultant at Silver point Capital, LP, an investment manager for defendant SPCP. As such both of these entities were acting as agents of SPCP when they submitted applications for a receiver to manage and operate the Wharf restaurant. Furthermore, neither party has denied the existence of such an agency relationship.
Plaintiff alleges that Mahadeva and Dobrowsky knew that there was no legal or factual basis for a receiver to be appointed to control and operate the Wharf restaurant since the Wharf was never party to the original foreclosure action. Plaintiff supports its claim by pointing to the lack of law cited by defendants as well as the fact that the receiver has since been removed. However, as this court has found no genuine issue of material fact on any of the six claims argued by plaintiff, summary judgment must be found on behalf of defendants Dobrowski and Mahadeva as well since their liability in these claims are predicated on some underlying wrong doing by the principle which caused damage for which relief can be sought. Otherwise, Ms. Dobrowski and Mahadeva's negligence is irrelevant.
Accordingly, the motion for summary judgment is granted and the complaint is dismissed as to all plaintiff's claims pursuant to CPLR § 3212.
However, defendants' request for sanctions must be denied. Sanctions are appropriate where conduct by the opposing party is frivolous. 22 NYCRR § 130-1.1(c).
For purposes of this Part, conduct is frivolous if
(1) it is completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law;
(2) it is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or
(3) it asserts material factual statements that are false.
Frivolous conduct shall include the making of a frivolous motion for costs or sanctions under this section. In determining whether the conduct undertaken was frivolous, the court shall consider, among other issues the circumstances under which the conduct took place, including the time available for investigating the legal or factual basis of the conduct, and whether or not the conduct was continued when its lack of legal or factual basis was apparent, should have been apparent, or was brought to the attention of counsel or the party. 22 NYCRR § 130-1.1(c).
Plaintiff's action is clearly not frivolous as it correctly asserts that a receiver should have never been appointed to operate the Wharf. The Wharf was not a party to the foreclosure action SPCP submitted against JJF Garage. Where a party is not named in the foreclosure action, they cannot be affected by an order appointing a receiver to collect rents from premises on subject property. Peoples Sav. Bank of New York v. D P Realty Corp., 96 AD2d 899 (2nd Dept. 1983).
Whereas plaintiff was correct in asserting that their restaurant should never have been subject to the authority of a receiver, plaintiff has not made any factual or legal misstatements. Further defendants have provided no evidence of a malicious intent by plaintiff to harass or injure defendant by these claims. Lastly, although many of plaintiff's allegations were found to be unsupported, they were never proven to be factually incorrect. Defendant is directed to settle judgment on notice.
This constitutes the decision and order of this court.