Opinion
No. 2141/2014.
08-07-2014
833 MANAGEMENT, LLC, Plaintiffs, v. GREAT EMPIRE 65 REALTY, LLC and Henry Chen, Defendants.
Paul Felicione, Esq., Desena & Sweeney, LLP, Bohemia, NY, Attorneys for Plaintiff. Simcha Schonfeld, Esq., Ross & Schonfeld, LLP, New York, NY, Attorney for Defendants.
Paul Felicione, Esq., Desena & Sweeney, LLP, Bohemia, NY, Attorneys for Plaintiff.
Simcha Schonfeld, Esq., Ross & Schonfeld, LLP, New York, NY, Attorney for Defendants.
Opinion
CAROLYN E. DEMAREST, J.
Defendants Great Empire 65 Realty, LLC (“Great Empire”) and Henry Chen (“Chen”) move pursuant to CPLR 3211(a)(1) and 3211(a)(7) to dismiss the complaint of plaintiff 833 Management LLC (“833 Management”). Plaintiff cross-moves for leave to serve an amended complaint, which was granted on the record on May 14, 2014, and was deemed served on consent. Defendants' motion to dismiss will be addressed to the amended complaint. Defendants also seek sanctions pursuant to NYCRR § 130–1.1 on the ground that the instant action is frivolous.
BACKGROUND
EEM Realty Corporation (“EEM Realty”) was the owner of a premises located at 833–853 65th Street, Brooklyn, New York (the “Premises”), where 833 Management was a tenant pursuant to a written lease. EEM Realty intended to sell the Premises to Great Empire. Prior to the instant action, 833 Management commenced an action in the Supreme Court, Kings County against EEM Realty claiming a first option to purchase the Premises pursuant to the lease (the “Prior Action”). In a decision and order dated March 1, 2012, Justice Schmidt found that 833 Management had not properly exercised its first option right and granted summary judgment dismissing the complaint to EEM Realty. 833 Management then filed an appeal of the decision in the Prior Action in the Appellate Division, Second Department.
Prior to resolution of the appeal, negotiations between EEM Realty, Great Empire, and 833 Management resulted in a contract of purchase and sale dated June 3, 2013 (“Contract of Purchase and Sale”). Pursuant to the Contract of Purchase and Sale, EEM Realty agreed to sell and Great Empire agreed to buy the Premises, subject to certain closing obligations of the purchaser. Section 12 of the Contract of Purchase and Sale provides, in pertinent part:
At Closing, Purchaser shall:
§ 12.05. Provide a duly executed Stipulation discontinuing with prejudice the pending Landlord/Tenant litigation Index No. 85180/2012 and withdrawing the Appeal pending in the Appellate Division, Second Department Supreme Court, Index No. 9682–2010 currently between Seller and existing Tenant.
§ 12.06. Pay to Tenant 833 Management LLC the sum of $230,000 and Provide a duly executed Termination or Surrender of the existing lease between Seller and 833 Management LLC and Waiver of any Right of First Refusal contained therein. Simultaneous with the execution of this Contract Purchaser shall deposit the sum of $230,000 in escrow with the Tenant's attorney Leonard Lorin, Esq. The fund shall be deposited in Leonard Lorin's escrow account at Chase Bank on Montage Street, Brooklyn, New York.
§ 12.07. Provide a General Release from 833 Management LLC (“Tenant”) to Seller. Upon receipt of same Seller shall provide a General Release to 833 Management LLC.
EEM Realty, Great Empire, and 833 Management were all signatories to the Contract of Purchase and Sale.
It is undisputed that Great Empire deposited $230,000 in the escrow account of 833 Management's attorney, Leonard Lorin, by check dated June 3, 2013, and that this amount was paid to 833 Management at closing. Subsequent to the closing of the sale on August 29, 2013, 833 Management executed an agreement to surrender the lease and the Premises (the “Surrender of Lease”) in favor of Great Empire on September 11, 2013. 833 Management also executed a general release in favor of EEM Realty and its “successors and assigns”, which was dated September 23, 2013 (the “General Release”).
According to the affidavit of Andy W. To (“Andy To”), agent for 833 Management, when the parties met on June 3, 2013 to execute the Contract of Purchase and Sale, Andy To, on behalf of 833 Management, “would not agree to surrender the lease to the premises, waive its first option and discontinue the pending lawsuits for the amount stated in the contract” (Andy To Aff. ¶ 7). Andy To states that Chen, the managing member of Great Empire, offered to pay an additional $500,000 to 833 Management if 833 Management would agree to the above terms. Andy To further claims that, during the meeting, Chen prepared a handwritten agreement, signed by both Andy To and Chen, which stated that Chen agrees to pay $500,000 to 833 Management “upon closing of 833–853 65th Street property.” The closing subsequently took place and when plaintiff demanded payment of the $500,000, defendants refused to pay.
DISCUSSION
Plaintiff advances a single cause of action for breach of contract based on the handwritten document and defendants move to dismiss for failure to state a cause of action. On a motion to dismiss, the facts pleaded in the complaint are presumed to be true and are accorded every favorable inference (see Caniglia v. Chicago Tribune, 204 A.D.2d 233 [1st Dept 1994] ). Defendants argue that the complaint fails to plead the existence of consideration for the purported contract. “To establish the existence of an enforceable agreement' there must be an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound' “ (Civil Serv. Empls. Assn. v. Baldwin Union Free School Dist., 84 AD3d 1232, 1233–34 [2d Dept 2011], quoting Kowalchuk v. Stroup, 61 AD3d 118, 121 [1st Dept 2009] ). Plaintiff's position is that the Contract of Purchase and Sale is not the full and complete agreement between the parties and that the parties intended for the handwritten page to be included as part of the Contract of Purchase and Sale. Plaintiff amended its complaint to plead that consideration for the additional $500,000 consisted of the waiver of the first option to purchase the Premises, the surrender of the lease, and the discontinuance of the Prior Action. Defendants argue that the purported consideration for the additional $500,000 is the same consideration for which plaintiff had already agreed to receive $230,000 pursuant to the Contract of Purchase and Sale.
“Agreements executed at substantially the same time and related to the same subject matter are regarded as contemporaneous writings and must be read together as one” (Petra CRE CDO v. Morgans Group LLC, 84 AD3d 614, 615 [1st Dept 2011] ; see also Nau v. Vulcan Rail & Constr. Co., 286 N.Y. 188, 197 [1941]. Plaintiff asserts that the handwritten document was signed by Andy To and Chen at the same time as the parties signed the Contract of Purchase and Sale, and both documents are dated June 3, 2013. Defendants essentially do not dispute that this handwritten document was signed by Chen on June 3, 2013 and Chen's affidavit provides no information regarding the circumstances under which it was signed. The two writings are also related to the same subject matter, specifically the closing of the sale of the Premises, and therefore must be read together as one agreement. The Court notes that while the signatories to the Contract of Purchase and Sale include EEM Realty, Henry Chen as a member of Great Empire, and Andy To as agent for 833 Management, the handwritten agreement is executed by Andy To as agent for 833 Management and individually by Chen. Although the signatories are not identical, both agreements appear to be part of the same transaction, and therefore must be read together (see Manufacturers and Traders Trust Co. v. Erie County Industrial Development Agency, 269 A.D.2d 871 [4th Dept 2000] ). Taking plaintiff's contentions as true, plaintiff has stated a cause of action for breach of contract by pleading that the handwritten agreement was additional consideration for 833 Management's entering into the Contract of Purchase and Sale (see Infinity Corp. v. Champion Parking Corp., 255 A.D.2d 217 [1st Dept 1998] (holding that contemporaneous written agreements were to be read together where defendant entered into two separate agreements granting parking privileges to owner of property and sub-lessee as additional consideration for the sublease and owner's consent to the sublease)). Accordingly, plaintiff's claim cannot be dismissed on this ground.Defendants further argue that the General Release signed by 833 Management in favor of EEM Realty and its “successors and assigns” also releases the defendants in their capacity as successors to the prior owner of the Premises. CPLR 3211(a)(1) enables a party to move to dismiss a cause of action based upon documentary evidence. The court may dismiss a cause of action under CPLR 3211(a)(1) “only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law” (Leon v. Martinez, 84 N.Y.2d 83, 88 [1994] ). “In construing a general release it is appropriate to look to the controversy being settled and the purpose for which the release was executed [,] ... [and] a release may not be read to cover matter which the parties did not desire or intend to dispose of” (Bugel v. WPS Niagra Properties, Inc., 19 AD3d 1081, 1082 [4th Dept 2005] ; see also Wechsler v. Diamond Sugar Co., 29 AD3d 681, 682 [2d Dept 2006] ). Plaintiff argues that Great Empire is not EEM Realty's successor in interest and that the General Release was signed by Andy To solely for the benefit of EEM Realty. Defendants assert that the Surrender of Lease executed by Andy To expressly designates Great Empire as EEM Realty's successor in interest, and that plaintiff would not have executed the Surrender of Lease and the General Release almost a month after closing of the sale if defendants still owed $500,000 to the plaintiff.
As indicated in the Surrender of Lease, Great Empire is the successor to EEM Realty's interest in the Premises. A successor in interest to real property takes the premises subject to the conditions of any tenancy as long as the successor has notice of the existence of the leasehold (see Tehan v. Thos C. Peters Printing Co., Inc., 71 A.D.2d 101, 104 [4th Dept 1979] ). Because 833 Management had a ten-year lease of the Premises that commenced on July 1, 2005, and Great Empire was aware of it, Great Empire's purchase of the Premises would have been subject to 833 Management's lease. However, 833 Management surrendered its lease in favor of Great Empire, acknowledging that Great Empire was the successor in interest to the Premises. 833 Management also executed a General Release, the purpose of which was to settle the controversy related to the sale of the Premises from EEM Realty to Great Empire and 833 Management's surrender of its rights pursuant to the lease.
In construing the meaning and coverage of a general release, the court must consider the controversy being settled and the purpose for which the release was actually given (see Cahill v. Regan, 5 N.Y.2d 292, 299 [1959] ). The General Release provides that 833 Management “releases and discharges [Great Empire], [Great Empire's] shareholders, executors, administrators, heirs, successor and assigns ... from all causes of actions, actions, debts, sums of money, accounts, bonds, bills, covenants, contracts, controversies, promises, agreements, trespasses, variances, judgments, damages, executions, claims, demands whatsoever, in law, equity and/or admiralty”. Plaintiff's claim against Great Empire is barred by the General Release because its scope encompasses claims relating to the purchase and sale of the Premises and 833 Management's surrender of rights as a tenant. It is clear from the documents that the intention of the parties was to satisfy 833 Management's claim of leasehold rights, especially its claim of a first option to purchase the Premises that was pending in the Appellate Division, in order to allow the sale of the Premises to close. Accordingly, the General Release protects Great Empire because plaintiff's claim relates to the same controversy that was meant to be settled by the General Release. However, plaintiff may maintain its claim against Chen individually because the General Release does not protect him in his individual capacity, and, as noted earlier, it is undisputed that the handwritten document was signed individually by Chen.
Defendants also move for sanctions pursuant to 22 NYCRR § 130–1.1 on the ground that the instant action is frivolous. Conduct is frivolous if it is “completely without merit in law or fact and cannot be supported by a reasonable argument for the extension, modification, or reversal of existing law” or if “it is undertaken primarily to delay or prolong the resolution of litigation, or to harass or maliciously injure another, or it asserts material factual statements that are false” (Mascia v. Maresco, 39 AD3d 504, 505 [2d Dept 2007] ). The authority to impose sanctions is left to the court's discretion (see Landes v. Landes, 248 A.D.2d 268, 269 [1st Dept 1998] ). While the Court has determined that Great Empire is entitled to dismissal of the plaintiff's claim, dismissal has been denied as to Chen. Clearly, commencement of this action was therefore not frivolous within the meaning of 22 NYCRR § 130–1.1.
CONCLUSION
Defendants' motion to dismiss is granted pursuant to CPLR 3211(a)(1) as against Great Empire and denied as against Chen. Defendants' motion for sanctions is denied.
This constitutes the decisions and order of the Court.