Opinion
3532/2016
04-24-2018
Francia V. Holgado DE VERA and Fausto De Vera, Plaintiffs, v. 243 SUYDAM, LLC, Treff & Lowy, PLLC, Rachel S. Farntrog d/b/a Blackrock Title Agency, BlackRock Abstract LLC d/b/a BlackRock Title Agency, First American Title Insurance Company and Felix Q. Vinluan, Esq., Defendants.
Firm Name: David J. Hernandez, Esq, Address: 26 Court Street, Suite 2707, Brooklyn, New York 11242, Phone: 718-522-0009, Attorney for plaintiffs. Firm Name: Paneth & O'Mahony, PLLC, Address: 2329 Nostrand Avenue, Suite M-300, Brooklyn, New Yok 11210, Phone: 718-274-8888, Attorney for defendants Rachel S. Farntrog, DBA Blackrock Title Agency and BlackRock Abstract, DBA Blackrock Title Agency. Firm Name: the Silber Law Firm, LLC, Address: 11 Broadway, Suite 715, New York, New Yok 10004, Phone: 212-765-4567, Attorney for defendant Treff & Lowry, PLLC. Firm Name: Howard B. Weber, Esq., Address: 61 Broadway, Suite 2780, New York, New Yok 10006, Phone: 212-509-0999, Attorney for Defendant 243 Suydam LLC. Felix Q. Vinluan, Esq., 69-10 Roosevelt Avenue, 2nd Floor, Woodside, New York 11377, Pro-se defendant.
Firm Name: David J. Hernandez, Esq, Address: 26 Court Street, Suite 2707, Brooklyn, New York 11242, Phone: 718-522-0009, Attorney for plaintiffs.
Firm Name: Paneth & O'Mahony, PLLC, Address: 2329 Nostrand Avenue, Suite M-300, Brooklyn, New Yok 11210, Phone: 718-274-8888, Attorney for defendants Rachel S. Farntrog, DBA Blackrock Title Agency and BlackRock Abstract, DBA Blackrock Title Agency.
Firm Name: the Silber Law Firm, LLC, Address: 11 Broadway, Suite 715, New York, New Yok 10004, Phone: 212-765-4567, Attorney for defendant Treff & Lowry, PLLC.
Firm Name: Howard B. Weber, Esq., Address: 61 Broadway, Suite 2780, New York, New Yok 10006, Phone: 212-509-0999, Attorney for Defendant 243 Suydam LLC.
Felix Q. Vinluan, Esq., 69-10 Roosevelt Avenue, 2nd Floor, Woodside, New York 11377, Pro-se defendant.
Paul Wooten, J.
PAPERS NUMBERED
Notice of Motion/ Order to Show Cause — Affidavits — Exhibits 1, 2, 3
Answering Affidavits — Exhibits (Memo) 4
Replying Affidavits (Reply Memo) 5, 6
This is an action for a breach of contract commenced by plaintiffs, Francia V. Holgado De Vera and Fausto De Vera (De Veras) against co-defendant Treff & Lowy PLLC (T & L), by filing a Summons and Verified Complaint on March 10, 2016 to recover the amount of escrow deposit in sum of $40,000 with costs, disbursements, and legal fees. Before the Court is a cross motion by co-defendant T & L for an Order, granting summary judgment, pursuant to CPLR 3212, in its favor and for an award of costs and attorneys' fees, pursuant to the Escrow Agreement entered into by De Veras, co-defendant 243 Suydam LLC (Suydam), and T & L, as escrow agent, on February 5, 2015 (Escrow Agreement). The Escrow Agreement concerned the purchase and sale (Transaction) of a two-story residential building located at 243 Suydam Street in Brooklyn, New York (Property). Plaintiffs are in opposition and T & L submits a reply.
BACKGROUND
On August 29, 2014, plaintiffs entered into a contract to sell the Property to Suydam. Plaintiff was represented by co-defendant Felix Q. Vinluan, Esq. (Vinluan) and Suydam was represented by T & L. The parties closed on the Transaction on February 5, 2015.
At the time of the closing, plaintiffs and Suydam were aware that the second-floor apartment of the residential building was still occupied by Raquel Martell and Catalino Martinez (the Tenants) who were unwilling to surrender the apartment voluntarily before the closing of the Transaction. During negotiations at closing, plaintiffs represented to Suydam and T & L that the Tenants refused to move out and plaintiffs were unsure whether they could evict the Tenants post-closing. Suydam, through T & L as its counsel, insisted that plaintiffs should evict the Tenants. Plaintiffs agreed. As a result of their negotiations during the closing, plaintiffs, Suydam, and T & L, entered into a hand-written Escrow Agreement pursuant to which T & L was to act as an escrow agent and hold $40,000 of the sale proceeds in an escrow account (Deposit). The Agreement also specified that T & L would disburse the Deposit to plaintiffs if they successfully compelled the Tenants to completely vacate the second-floor apartment by May 5, 2015, or by June 5, 2015--if plaintiffs would begin and conclude an eviction proceeding against the Tenants before June 5, 2015. The parties consummated the Transaction and plaintiffs deposited $40,000 with T & L.
Thereafter, plaintiffs were unable to convince the Tenants to move out voluntarily and Vinluan instituted an eviction proceeding of the Tenants in the NYC Civil Court, Landlord/Tenant Part, promptly after closing, designating plaintiffs as landlords. Plaintiffs then brought a motion joined by Suydam to substitute plaintiffs by Suydam as the petitioner-landlord. The Tenants appeared before the Housing Court and argued that plaintiffs lacked capacity and standing to maintain the proceeding because they no longer owned the Property, and, therefore, they were no longer their landlords. The Housing Court adjourned the case for trial or settlement. The Tenants opposed the substitution and sought dismissal of the action but then also vacated their apartment and the Property by the end of August 2015. T & L released the deposit to Suydam in July 2015.
STANDARD FOR SUMMARY JUDGMENT
Summary judgment is a drastic remedy that should be granted only if no triable issues of fact exist and the movant is entitled to judgment as a matter of law (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986] ; Andre v Pomeroy , 35 NY2d 361, 364 [1974] ; Winegrad v NY Univ. Medical Cntr. , 64 NY2d 851, 853 [1985] ). The party moving for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence in admissible form demonstrating the absence of material issues of fact (see Alvarez , 68 NY2d at 324 ; CPLR 3212[b] ). A failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers (see Smalls v AJI Indus., Inc. , 10 NY3d 733, 735 [2008] ; Qlisanr, LLC v Hollis Park Manor Nursing Home, Inc. , 51 AD3d 651, 652 [2d Dept 2008] ; Greenberg v Manlon Realty , 43 AD2d 968, 969 [2d Dept 1974] ). Once a prima facie showing has been made, however, "the burden shifts to the nonmoving party to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact that require a trial for resolution" ( Giuffrida v Citibank Corp. , 100 NY2d 72, 81 [2003] ; Zuckerman v City of NY , 49 NY2d 557, 562 [1980] ).
When deciding a summary judgment motion, the Court's role is solely to determine if any material and triable issues of fact exist, not to determine the merits of any such issues (see Sillman v Twentieth Century-Fox Film Corp. , 3 NY2d 395, 404 [1957] ). "This drastic remedy should not be granted where there is any doubt as to the existence of such issues, or where the issue is ‘arguable’; issue-finding, rather than issue-determination, is the key to the procedure" (id. [internal citations omitted] ). The Court views the evidence in the light most favorable to the nonmoving party, and gives the nonmoving party the benefit of all reasonable inferences that can be drawn from the evidence (see Negri v Stop & Shop, Inc. , 65 NY2d 625, 626 [1985] ; Boyd v Rome Realty Leasing Ltd. Partnership , 21 AD3d 920, 921 [2d Dept 2005] ; Marine Midland Bank, N.A. v Dino & Artie's Automatic Transmission Co. , 168 AD2d 610 [2d Dept 1990] ). If there is any doubt as to the existence of a triable fact, the motion for summary judgment must be denied ( Rotuba Extruders v Ceppos , 46 NY2d 223, 231 [1978] ; CPLR 3212[b] ).
DISCUSSION
A. Rescission or Reformation of the Escrow Agreement based on Mistake
In their cross motion for summary judgment, T & L avers that plaintiffs' are not entitled to the remedy of rescission of the Escrow Agreement based on (1) mutual mistake because plaintiff's mistake was unilateral as plaintiffs' counsel merely misapprehended the well-settled law as to which party had standing in the action for eviction of the Tenants, (2) plaintiffs' unilateral mistake of law could have been discovered if plaintiffs performed due diligence, and (3) plaintiffs' unilateral mistake of law cannot be imputed to T & L because T & L did not provide legal opinion or guidance regarding the eviction of the Tenants (see T & L Memorandum of Law, at 7). In opposition, plaintiffs contend, inter alia , that the Escrow Agreement should be rescinded or reformed because both parties, including their respective attorneys, entered into the Agreement on the erroneous, material assumption that plaintiffs had the legal right to institute the eviction proceeding of the Tenants after plaintiffs sold the Property to Suydam (see Plaintiffs' Aff in Opp at 7).
Here, the Court finds that defendant T & L has made a prima facie showing that plaintiffs are not entitled to rescission of the Escrow Agreement based on mistake. "Whether [a] mistake be of one or both parties, the law is that rescission is proper only when the mistake is so material that [ ] it goes to the foundation of the agreement" ( Da Silva v Musso , 53 NY2d 543, 552 [1981] ). Furthermore, CPLR 3005 provides that "[w]hen relief against a mistake is sought ..., relief shall not be denied merely because the mistake is one of law rather than one of fact." However, CPLR 3005 "does not equate all mistakes of law with mistakes of fact" and it certainly does not "permit a mere misreading of the law by any party to cancel an agreement" ( Symphony Space, Inc. v Pergola Properties, Inc. , 88 NY2d 466, 485 [1996] ; see also Gould v Board of Educ. Of Sewanhaka Cent. High School Dist. , 81 NY2d 446, 453 [1993] ). Moreover, conscious ignorance of a party who knows that he has only limited knowledge of a problem to which a mistake relates, but nevertheless goes forward with the transactions and "undertakes to perform in face of such awareness, [bars the relief of rescission of contract as such party] bears the risk of the mistake" (see Restatement [Second] of Contracts § 154 [c]; see also generally P.K. Dev., Inc. v Elvem Dev. Corp. , 226 AD2d 200, 202 [1st Dept 1996] ).
Here, in opposition to T & L's cross-motion for summary judgment, plaintiffs submit joint affidavit in which they admit that they "were not sure that [they] could get the tenant evicted after the closing since [they] were selling the property" (Plaintiffs' Aff in Opp ¶ 8). Plaintiffs were represented by an independent counsel and after negotiations they decided to entered into the Escrow Agreement having full awareness that they had limited knowledge as to whether they would be able to evict the Tenants after selling the Property. Therefore, in choosing to act on this limited knowledge, plaintiffs assumed the risk of their mistake (see P.K. Dev., Inc. , 226 AD2d at 202 ; Da Silva v Musso , 53 NY2d 543, 551-52 [1981] ).
Additionally, Courts have recognized that "one who signs a document is, absent fraud or other wrongful act of the other contracting party bound by its contents" ( Da Silva , 53 NY2d at 550 ). As a preliminary matter, here, despite being represented by an independent counsel during the negotiations and closing of the Transaction, plaintiffs allege that they entered into the Escrow Agreement based on the fact that "both the buyer and his attorney assured [them] that ... [they] could still go to court after the closing and get the tenant evicted" (Plaintiffs' Aff in Opp ¶ 8). In support of their cross-motion, T & L submits an affidavit of its principal, Abraham Lowy, who stated that he did not "offer plaintiffs any advice on dealing with their tenants" (see T & L Reply Aff in Further Supp, exhibit Reply Lowy Aff ¶ 5). Thus, the Court finds that plaintiff's hearsay allegations are insufficient to establish that plaintiffs were induced to enter into the Escrow Agreement by fraud, and the record before the Court is devoid of evidence sufficient to support this allegation (see Barclay Arms, Inc. v Barclay Arms Assocs. , 74 NY2d 644, 646 [1989] ["the essential elements of a fraud claim are misrepresentation of a material fact, falsity, scienter and deception," which must "meet the specificity and particularity requirements of CPLR 3013 and 3016(b)"]; see generally RBE N. Funding, Inc. v Stone Mountain Holdings, LLC , 78 AD3d 807, 809 [2d Dept 2010] ).
Furthermore, here, plaintiffs negotiated at arms-length and signed a contract that clearly and expressly allocates the risk of failure to evict the Tenants by specified dates to plaintiffs, therefore, the parties intended that plaintiffs were to assume the risk that they would be unable to evict the Tenants by these deadlines and lose their right to the Deposit (see generally Restatement [Second] of Contracts § 154 [a] ["A party bears the risk of a mistake when the risk is allocated to him by agreement of the parties"]. The Escrow Agreement provides, in the relevant part, that the Deposit was to be disbursed post-closing, without a notice from any party, as follows:
"(1) To Seller upon Raquel Martell and Catalino Martinez ("Occupants"), the occupants of the 2nd floor at the Property vacating the Property and verification by Buyer that the entire Property in vacant, all prior to May 5, 2015, TIME OF ESSENCE. Seller shall also provide a surrender agreement from Occupants prior to being entitled to the escrow funds.
(2) To Buyer on May 5, 2015 if the Property is not completely vacant and free of all tenants, occupants, leases and licensees, on such date.
...
If Seller commences an eviction proceeding and it appears that same will be concluded prior to June 5, 2015, Seller will be granted an extension until June 5, 2015" [emphasis added]
(Notice of Cross Motion, exhibit C).
Notably, the basis of T & L's and plaintiffs' arguments for a mistake is the fact that plaintiffs' mistake concerned the issue of plaintiffs' lack of standing to commence and maintain the eviction proceeding against the Tenants, which is a condition precedent for the one-month extension of time to evict the Tenants (see id. ).
"A condition precedent is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises" ( Oppenheimer & Co v Oppenheim, Appel, Dixon & Co. , 86 NY2d 685, 690 [1995] [internal citations and quotation marks omitted] ). "The use of terms such as ‘if,’ ‘unless’ and ‘until’ constitutes unmistakable language of condition" ( id. at 691 [internal citations and quotation marks omitted] ). Here, the language of the Escrow Agreement that "[i]f Seller commences an eviction proceeding and it appears that same will be concluded prior to June 5, 2015, Seller will be granted an extension until June 5, 2015" clearly establishes an express condition precedent to plaintiffs' right to the extension of time, "as the parties employed the unmistakable language of condition (‘if ...’)" (see Notice of Cross Motion, exhibit C; Oppenheimer & Co , 86 NY2d at 685 ). The condition precedent for extension of time, however, must not be confused with a condition precedent to the formation or existence of the Escrow Agreement (see id. at 737). Thus, the Court finds that the alleged mistake as to plaintiffs's standing in the post-closing eviction proceeding is material insofar as it goes to the foundation of the condition precedent for one-month extension of time to evict them, rather than to the foundation of the entire Escrow Agreement. Therefore, the motion by T & L for summary judgment that plaintiffs are not entitled to rescission of the Escrow Agreement due to mistake is granted.
Plaintiffs are also not entitled to reformation of the Escrow Agreement, as the parties signed a writing that expressed their agreement, albeit they were mistaken as to the application of law with regard to the eviction matter (see generally Chimart Assocs. v Paul , 66 NY2d 570, 573 [1986] ["In a case of mutual mistake, the parties have reached an oral agreement and, unknown to either, the signed writing does not express that agreement." Thus, "the thrust of a reformation claim is that a writing does not set forth the actual agreement of the parties."]; George Backer Mgmt. Corp. v Acme Quilting Co. , 46 NY2d 211, 219 [1978] ["Reformation is not granted for the purpose of alleviating a hard or oppressive bargain, but rather to restate the intended terms of an agreement when the writing that memorializes that agreement is at variance with the intent of both parties."]; Gunther v Vilceus , 142 AD3d 639, 640 [2d Dept 2016] ), lv to appeal denied 28 NY3d 910 [2016] ).
B. Rescission or Reformation of the Escrow Agreement Based on Impossibility of Performance
In its cross motion for summary judgment, T & L argues that plaintiffs' attempt to argue impossibility of performance under the Escrow Agreement is wrong as plaintiffs cannot show that the eviction of the Tenants was impossible (see T & L Memorandum of Law, at 10). In opposition, plaintiffs contend that T & L's position that despite the fact it was impossible for plaintiffs to commence the Tenant's eviction proceeding, and despite knowing that the Tenants refused to move out, T & L unreasonably maintains that it was possible for plaintiffs to compel the Tenants to move out (see Plaintiffs' Aff in Opp at 6). In addition, plaintiffs aver that their substitution for Suydam was not legally possible because plaintiffs commenced the proceeding after the closing (see Plaintiffs' Aff in Opp at 6).
Here, the Court finds that defendant T & L made a prima facie showing that plaintiffs are not entitled to rescission of the Escrow Agreement based on impossibility of performance under the Escrow Agreement. While the Court also finds that plaintiffs' correctly raise the excuse of impossibility of performance as to its ability to commence and maintain the eviction proceeding against the Tenants, as discussed supra , such impossibility concerns only the condition precedent for extension of time to evict the Tenants (see Boyd v Sametz , 17 Misc 728 [NYCo. 2d Dist 1896] ). Plaintiffs concede that they were unable to successfully commence or maintain the proceeding after they sold the Property as they no longer had any interest in the Property after the closing (see Complaint ¶ 44). For example, as in Boyd , here, plaintiffs conveyed title to the Property before commencing the summary proceeding to evict the Tenants, therefore, plaintiffs lacked standing to obtain a judgment of possession (see id. at 730-731 ; see also Terner v Brighton Foods, Inc. , 27 Misc 3d 1225(A), 910 NYS2d 409 [Civ Ct 2010] ).
Hence, notwithstanding the fact that Suydam was willing to cooperate with plaintiffs, they would be unable to maintain and conclude the proceeding as a non-interested party litigant who had no interest in the Property. Therefore, the Court finds that plaintiffs' duty to conclude the summary eviction proceeding prior to June 5, 2015, in order to be entitled to the one-month extension of time, was excused as their ability to comply with the requirement concerning the eviction proceeding was nullified by law. As a result, plaintiffs were entitled to the extension of time until June 5, 2015, regardless of whether the eviction proceeding could be commenced and concluded by June 5, 2015. Therefore, the Court finds that motion by T & L for summary judgment that plaintiffs are not entitled to rescission of the Escrow Agreement due to impossibility of performance under the Escrow Agreement is granted.
C. Breach of the Escrow Agreement
In its cross motion for summary judgment, T & L argues that it did not deviate from the clear terms of the Escrow Agreement because the Tenants vacated the Property in August—two months after the extended deadline provided for in the Agreement (see T & L Memorandum of Law, at 5-6). In support of this contention, T & L submits an affidavit of Joel Lefkowitz, principal of Suydam, authenticating text messages from one of the Tenants, Raquel Martell, showing that the Tenants would vacate the second floor apartment at the end of August 2015 (see T & L Notice of Cross Motion, exhibit C, Leffkowitz Aff ¶¶ 6-10). In opposition, plaintiffs submitted a joint self-serving affidavit claiming that plaintiffs' attorney informed them that the Tenants vacated the Property in June 2015 and plaintiffs instructed their attorney to notify T & L that T & L should not release the Deposit to Suydam (see De Veras' Aff ¶ 14). Furthermore, plaintiffs argue in their affidavit that the text messages from the tenant Raquel Martell are inadmissible as that they lack credibility (see id. ¶ 15).
As a preliminary matter, the Court finds that the text messages from Raquel Martell to Joel Lefkowitz on July 8, 2015 and August 15, 2015 are admissible into evidence in the case at bar (see People v Agudelo , 96 AD3d 611 [1st Dept 2012], lv denied, 30 NY3d 1106 [2018] ); People v Javier , 154 AD3d 445, 445 [1st Dept 2017] ). In People v Agudelo , the Court admitted into evidence text messages that the victim received on her phone and compiled into a single document ( id. at 612 ). The Agudelo Court stated that the victim who received the messages on her phone "had first-hand knowledge of their contents and was an appropriate witness to authenticate the compilation" (see id. ). In People v Javier , the Court affirmed the decision of the lower court to admit into evidence an email that was created by the undercover officer who copied the text message conversation between the officer and the defendant into an email (see Javier , 154 AD3d at 445 ). The Javier Court found that the undercover officer's testimony that he copied and pasted the text message conversation properly authenticated the email (see id. ).
Similarly to Agudelo and Javier , here, Joel Lefkowitz proffers his email to his attorney containing snapshots of the text messages with the Tenant Raquel Martell, showing the date and time of the messages, and also showing the Tenant identifying herself as such (see T & L Notice of Cross Motion, exhibits C-D). Thus, the Court finds that Joel Lefkowitz, by his affidavit, sufficiently authenticated his text message conversation with the Tenant Raquel Martell.
The Court further finds that T & L sustained its burden of prima facie showing that it did not breach the Escrow Agreement by releasing the Deposit to Suydam as plaintiffs failed to evict the Tenants by the extended deadline of June 5, 2015. An escrow agent, as "trustee of anyone with a beneficial interest in the trust," has "a contractual duty to follow the escrow agreement" (see Baquerizo v Monastero , 90 AD3d 587, 587 [2d Dept 2011], quoting Takayama v Schaefer , 240 AD2d 21, 25 [1998] ). Thus, "the escrow agent has a duty not to deliver the property held in escrow to anyone except upon strict compliance with the conditions imposed in the escrow agreement" and thus "can be held liable for breach of the escrow agreement and breach of fiduciary duty as escrowee" (id. [internal citations and quotation marks omitted] ). However, "in the event of dispute, the escrow funds may not be released until the conditions of the escrow agreement are fully performed and it is clear that no factual issues or viable claims under the closely scrutinized terms of the escrow agreement" ( Takayama , 240 AD2d at 25 ).
Here, T & L released the Deposit to Suydam in July 2015 because the Property was not completely vacant on June 5, 2015—the deadline under the extension of time provision of the Escrow Agreement, as the Tenants moved out completely at the end of August 2015 (see T & L Notice of Cross Motion, exhibit C, Leffkowitz Aff ¶ 10). Since plaintiffs failed to evict the Tenants by June 5, 2015, even with cooperation from Suydam, the Escrow Agreement dictated that T & L was to deliver the Deposit to Suydam. Although plaintiffs stated in their affidavit that (1) their attorney informed them that the Tenants moved out "on or about June 2015," and (2) they instructed their attorney to inform T & L that T & L should not release the Deposit to Suydam, plaintiffs offered no evidence to support these contentions (see Plaintiffs' Aff in Opp ¶ 14).
However, the Court finds that the above statements in plaintiffs' affidavit are inadmissible as they constitute inexcusable hearsay and the affidavit is otherwise devoid of evidentiary facts (see e.g. Kramer v Oil Services, Inc. , 56 AD3d 730 [2d Dept 2008] [plaintiff's affidavit stating that the defendant's employee told her that he caused a rupture in the pipe was a mere hearsay evidence]; Wilbur v Wilbur , 266 AD2d 535 [2nd Dept 1999] [hearsay evidence alone is insufficient to defeat a motion for summary judgment]; Zuckerman , 49 NY2d at 562 ["mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" to defeat a motion for summary judgment] ). Additionally, there is no evidence in the record before the Court that T & L had knowledge, or should have known, of the alleged instruction not to release the Deposit. Therefore, the motion by T & L for summary judgment dismissing plaintiffs' Complaint as asserted against T & L for breach of the Escrow Agreement is granted.
D. Indemnification for Attorneys' Fees and Costs
In their motion for summary judgment, T & L argues that it is entitled to its attorneys' fees and costs T & L incurred in litigating this action as the Escrow Agreement clearly provides for indemnification of T & L for claims arising out of the Agreement (see T & L Memorandum of Law, at 10). In opposition, plaintiffs aver that the Escrow Agreement only mentions indemnification for T & L's claims but attorneys' fees, costs, and expenses are not covered by the indemnification provision of the Agreement (see Plaintiffs' Aff in Opp at 8). Moreover, plaintiffs argue that in order for the escrow agent to recover legal fees in an action for breach of contract, the Agreement must expressly provide for indemnification of costs, expenses, and attorneys' fees that arise from the escrow agent's duties (see id. ).
"The longstanding "American rule" precludes the prevailing party from recouping legal fees from the losing party "except where authorized by statute, agreement or court rule" ( Gotham Partners, L.P. v High River Ltd. P'ship , 76 AD3d 203, 204 [1st Dept 2010] ). "New York, however, has been distinctly inhospitable to such claims; in fact, in the leading case of Hooper Assoc. v AGS Computers , 74 NY2d 487, 492[1989], the Court of Appeals rejected a claim for attorneys' fees under an indemnification clause because the language of the clause did not make it "unmistakably clear" that the winning side should be awarded such fees (see id. ). Hooper stands for the proposition that the intent of the contracting parties must be "unmistakenly clear" that they were authorizing the award of attorneys' fees; mere rational interpretation of the indemnification provision that it allows for an award of legal fees to the prevailing party is not enough (see e.g. Robert F. Regan, Revisiting the American Rule Limitations on the Recovery of Attorney Fees Pursuant to Contractual Indemnification Provisions , NY St. B. J., at 29-30 (Feb. 2016). However, under the rule of Gotham Partners , if the indemnification provision covers not only claims between the parties to the agreement but also third party claims, the recovery of legal fees is not permitted (see id. ; Gotham Partners, L.P. , 76 AD3d at 207 ). Here, the Escrow Agreement provides, in the relevant part:
"The Parties agree to indemnify and hold harmless Treff & Lowy PLLC from all claims in connection with this agreement except for claims in connection with gross negligence and bad faith acts of Treff & Lowy PLLC"
(Notice of Cross Motion, exhibit C).
In Breed, Abbott , Hulko sued the escrowee for breach of contract of sale of the property alleging that Hulko wrongfully released the escrow downpayment to sellers (see Breed, Abbott & Morgan v Hulko , 139 AD2d 71, 73 [1st Dept 1988], affd 74 NY2d 686 [1989] ). The broad indemnification clause in Breed, Abbot stated, "[t]he escrowee shall not be liable to either of the parties for any act or omission except for bad faith or gross negligence, and the parties hereby indemnify the escrowee and hold the escrowee harmless from any claims, damages, losses or expenses arising in connection herewith" ( id. at 73 ). The Breed, Abbott Court found the intent of the parties to be "manifest" that the indemnity agreement between the parties was to cover attorneys' fees and expenses incurred by the parties because the indemnification provision covered claims only between the contracting parties, such as the claim of Hulko against the escrow agent (see id. ). Here, similar to Breed, Abbott , the intent of the parties to the Escrow Agreement was to indemnify T & L exclusively against claims of plaintiffs' or Suydam's alleging misconduct of T & L as their escrow agent because it would be "difficult, if not impossible, to ascertain for what it was that the parties had agreed to indemnify [T & L]" (see id. ). Therefore, the motion by T & L for attorneys' fees and costs incurred in defending the within action is granted.
CONCLUSION
For these reasons and upon the foregoing papers, it is,
ORDERED that T & L's cross motion for summary judgment seeking to dismiss plaintiff's Complaint insofar as asserted against it is granted, and the Complaint is hereby dismissed; and it is further,
ORDERED that T & L is awarded attorneys' fees and costs and this matter is hereby referred to JHO/Special Referee who shall determine the amount of such fees; and it is further,
ORDERED that counsel for T & L shall serve a copy of this Order, with Notice of Entry, upon all parties and the Clerk of the Court who is directed to enter judgment accordingly.
This constitutes the Decision and Order of the Court.