Opinion
Index No. 654714/2022
01-08-2024
1754 WEEKS AVE LLC, Plaintiff, v. Dwayne BREWSTER, Anthony S. Chilliest, and Donaldson & Chilliest, LLP, Defendants.
In May 2022, plaintiff, 1754 Weeks Ave LLC (buyer), and defendant Dwayne Brewster (seller), closed on a piece of property located at 1754 Weeks Avenue in the Bronx. Plaintiff and Brewster entered into a holdback escrow agreement, under which defendants Anthony Chilliest and Donaldson & Chilliest, LLP (together the escrowee), would hold in escrow $200,000 from the sale of the property to encourage removal of the tenants residing at the premises at the time of closing. The escrow agreement provided that if "for any reason" after 180 days the tenants remained on the property, Brewster would return the escrow funds to plaintiff.
The tenants remained in the building after 180 days had elapsed from the closing date. Plaintiff requested the return of the escrow funds. Chilliest refused the request. In his refusal, Chilliest argued that the escrow agreement contains a condition precedent requiring that a holdover proceeding be commenced before plaintiff becomes eligible for the return of the $200,000.
Plaintiff brought this action in December 2022 asserting four causes of action: (i) breach of contract against Brewster, (ii) breach of contract against Chilliest, (iii) a declaratory judgment against all defendants, and (iv) breach of fiduciary duty against Chilliest.
Defendants now move to dismiss the complaint under CPLR 3211 (a) (1) and (a) (7). Plaintiff cross-moves to convert defendants’ motion to dismiss into one for summary judgment under CLPR 3211 (c) and, in turn, for summary judgment to be granted in plaintiff's favor on each of its causes of action. Plaintiff asks this court to disqualify Chilliest and D&C from appearing as counsel and to award plaintiff its reasonable attorney fees.
Defendants’ motion is denied. Plaintiff's cross-motion for summary judgment is granted; its request for disqualification is denied as academic; and its request for attorney fees is denied.
DISCUSSION
I. Defendants’ Motion to Dismiss
Defendants move to dismiss plaintiff's complaint under both CPLR 3211 (a) (1) and (a) (7). The motion is denied.
Under CPLR 3211 (a) (1), "a dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." ( Alden Global Value Recovery Master Fund, L.P. v KeyBank N.A. , 159 AD3d 618, 621 [1st Dept 2018] [internal quotation marks omitted].) Under CPLR 3211 (a) (7), a motion to dismiss "for failure to state a cause of action must be denied if the factual allegations contained within the four corners of the pleading manifest any cause of action cognizable at law." ( M & E 73-75, LLC v 57 Fusion LLC , 189 AD3d 1, 5 [1st Dept 2020].)
Defendants rely on the escrow agreement, which qualifies as documentary evidence for purposes of CPLR 3211 (a) (1). (See Fontanetta v Doe , 73 AD3d 78, 84-85 [2d Dept 2010] [discussing definition of "documentary evidence"].) Defendants argue that the escrow agreement contains a condition precedent requiring plaintiff to bring a holdover proceeding to evict the remaining tenants before an obligation to return the $200,000 to plaintiff will arises. This court disagrees.
The agreement provides that "[i]n the event[ ] one or more of the current tenants remain in possession after ninety (90) days then a holdover proceeding shall be commenced and prosecuted against the remaining Tenants ...." (NYSCEF No. 23 at ¶ 3.) The agreement also provides that "[i]f for any reason any one or more of the current Tenants remain in possession for more than 180 days from the Closing, then in such event Seller agrees to forfeit the remaining balance of the Escrow Amount as liquidated damages to the Purchaser." (Id. at ¶ 4.)
Defendants contend that the word "shall" in this provision "unequivocally required an eviction process to be commenced" before Brewster would need to forfeit any funds. (NYSCEF No. 31 at ¶¶ 11, 12.) But the word "shall" in ¶ 3 does not connect it to ¶ 4's discussion of the conditions under which the funds must be forfeited to plaintiff. (NYSCEF No. 23 at ¶ 4.) There is no " ‘unmistakable’ conditional language such as ‘if,’ ‘unless and until,’ or ‘null and void’ " that makes satisfying the proceeding-commencement requirement in ¶ 3 a condition precedent to the escrow-forfeiture requirement of ¶ 4. (See VXI Lux Holdco S.A.R.L v SIC Holdings, LLC , 171 AD3d 189, 194 [1st Dept 2019], quoting Oppemheimer & Co. v Oppenheim , 86 NY2d 685, 688, 691 [1995].)
In any event, the language of the agreement, although requiring an eviction proceeding to be brought, does not specifically require plaintiff to bring the proceeding—only to cover its costs. (See NYSCEF No. 23 at ¶ 3.) Defendants argue, relying on RPAPL 721, that given the sale of the property, they could not maintain a holdover proceeding against the remaining tenants, and that only plaintiff could do so. But Housing Court records reflect that in December 2022—after the expiration of the 180-day period—Donaldson & Chilliest brought holdover proceedings against the remaining tenants in the name of plaintiff. (See 1754 Weeks Avenue LLC v Celar , Index No. LT-300007-23 [Civ Ct, Hous Part, Bronx County 2022]; 1754 Weeks Avenue LLC v Garcia , Index No. LT-300020-23 [Civ Ct, Hous Part, Bronx County [2022].) Defendants do not explain why it would have been impossible for Donaldson & Chilliest to have done so earlier—before 180 days had elapsed from closing.
This court may take judicial notice of the filings submitted in the Housing Court proceedings. (See RGH Liquidating Trust v Deloitte & Touche LLP , 71 AD3d 198, 207 [1st Dept 2009], revd on other grounds 17 NY3d 397 [2011].)
II. Plaintiff's Cross-Motion
Plaintiff cross-moves for summary judgment, to disqualify Chilliest and D&C from appearing as counsel, and for an award of attorney fees. The cross-motion is granted in part and denied in part.
a. CPLR 3211 (c)
Plaintiff cross-moves under CPLR 3211 (c) to convert defendants’ motion to dismiss into one for summary judgment. Defendants do not object to this conversion. (See NYSCEF No. 31.) Because the only issue in this case is the interpretation of part of the escrow agreement and no discovery is needed, the case is "appropriate for the expeditious disposition of the controversy." ( CPLR 3211 [c].) Plaintiff's motion to convert Defendants motion to dismiss claim into a motion for summary judgment is granted.
b. Summary Judgment on Plaintiff's Cause of Action for Declaratory Judgment
Plaintiff seeks summary judgment on all four of its causes of action. The court grants plaintiff summary judgment on its declaratory-judgment claim. The motion is denied as academic with respect to the remaining claims.
Under CPLR 3001, a court has discretion to "render a declaratory judgment, having the effect of a final judgment as to the rights and other legal relations of the parties ...." ( CPLR 3001.) In the context of contracts, "[a] declaratory judgment is a useful tool for providing clarity as to parties’ obligations." ( 159 MP Corp. v Redbridge Bedford, LLC , 33 NY3d 353, 363 [2019].)
Defendants argue that declaratory judgment is not appropriate here because plaintiff can seek relief under a different traditional cause of action. (NYSCEF No. 31 at 7, citing Cityside Archives, LLC v Greenspoon Marder LLP , 2020 NY Slip Op 30154 [U], at *6 [Sup Ct, NY County 2019].) This court concludes, though, that granting declaratory judgment here is a "useful and necessary" way to resolve the parties’ dispute in this case. (James v. Alderton Dock Yards , 256 NY 298, 305 [1931].)
The contract of sale and escrow agreement delineate the parties’ rights and obligations. Section 16 (d) of the contract of sale provides as a condition precedent to closing that the premises be delivered "in broom clean condition, vacant and free of leases or tenancies." And the escrow agreement's terms are clear that "if for any reason" the property is not vacant within 180 days of the closing, the $200,000 (or remainder of the funds) should be released back to the plaintiff. Moreover, as discussed above, no condition precedent mandates that a holdover proceeding be commenced by plaintiff before the funds are returned. Plaintiff is entitled to a declaration that defendants are required to return the $200,000 to it.
Plaintiff is also entitled to prejudgment interest on the escrowed funds. (See St. Stephen Cmty. A.M.E. Church v 2131 8th Ave., LLC , 123 AD3d 642, 642—643, [1st Dept. 2014].) Interest runs from the end of the 180-day period (November 21, 2022); that is when defendants became obligated to release the remainder of the money in escrow. (See Advanced Retail Mktg., Inc. v. News Am. Mktg. FSI, Inc., 303 AD2d 231, 231 [1st Dept 2003] [holding that prejudgment interest on a wrongfully withheld contractual payment begins to accrue on the due day of the payment].)
c. Plaintiff's Cross-Motion to Disqualify Chilliest and D&C From Appearing as Counsel
Given this court's grant of summary judgment on plaintiff's declaratory-judgment claim, plaintiff's motion to disqualify Chilliest and D&C from appearing as counsel in this action is denied as academic.
d. Plaintiff's Cross-Motion for Attorney Fees
Finally, plaintiff requests an award of attorney fees. Plaintiff's request is denied.
Under New York law, "a prevailing party may not recover attorneys’ fees from the losing party except where authorized by statute, agreement or court rule." ( Fiduciary Ins. Co. of Am. v Med. Diagnostic Servs., P.C. , 150 AD3d 498, 498 [1st Dept 2017].) The parties’ escrow agreement does not provide that a party may recover attorney fees in the event of a dispute. And the underlying contract of sale does not provide for attorney fees in the circumstances of this action. Rather, it permits an award of fees only with respect to (i) bad-faith conduct by the escrowee in connection with the downpayment (NYSCEF No. 12 at ¶ 6); or (ii) as indemnification arising out of a breach of the parties’ mutual representations that they did not deal with real estate brokers in connection with the sale (id. at ¶ 27). Nor does plaintiff identify a different statutory, regulatory, or contractual basis for the award of fees.
Accordingly, it is
ORDERED that plaintiff's motion to dismiss is denied; and it is further
ORDERED that the branch of plaintiff's cross-motion seeking to convert defendants’ motion to dismiss into a motion for summary judgment is granted; and it is further
ORDERED that the branch of plaintiff's cross-motion seeking summary judgment on plaintiff's declaratory-judgment claim is granted, and the branches of plaintiff's cross-motion seeking summary judgment on plaintiff's remaining claims are denied as academic; and it is
ADJUDGED AND DECLARED that defendant Brewster has forfeited the balance of the escrowed funds as of November 21, 2022, and that defendant Chilliest, as escrowee, is required within 14 days of service of a copy of this order with notice of its entry to release the balance of the escrowed funds, as of November 21, 2022, plus interest on those funds at the statutory rate running from November 21, 2022, to plaintiff; and it is further
ORDERED that the branch of plaintiff's cross-motion seeking to disqualify Chilliest and D&C from appearing as counsel is denied as academic; and it is further
ORDERED that the branch of plaintiff's cross-motion seeking an award of attorney fees is denied; and it is further
ORDERED that plaintiff serve a copy of this order with notice of its entry on all parties.