Opinion
Index No. 51043/2020
04-01-2024
Susan Keane and THOMAS F. KEANE, Plaintiffs, v. Russo & Toner, LLP, ALAN S. RUSSO, and STEPHEN B. TONER, Defendants.
Thomas Keane and Susan Keane pro se pltfs Gyimesi and Wedinger. - counsel for Defts
Unpublished Opinion
Thomas Keane and Susan Keane pro se pltfs
Gyimesi and Wedinger. - counsel for Defts
Robert S. Ondrovic, J.
In a breach of contract action, defendants move for an Order pursuant to CPLR 3212(b) and 3211(a)(7): (1) dismissing the complaint based on expiration of the statute of limitations; (2) dismissing the complaint against individual defendants Alan S. Russo and Stephen B. Toner based on a failure to state a cause of action against them; and (3) dismissing the action against individual defendant Toner based on an indemnification agreement (Motion Seq. 6).
Papers Considered NYSCEF Doc. Nos. 147-169, 176-178, 180, 181
1. Notice of Motion/Affirmation of Richard W. Wedinger, Esq./Exhibits A-S/Statement of Material Facts/Memorandum of Law
2. Affirmation of Thomas F. Keane, Esq. in Opposition/Exhibit A/Response to Statement of Material Facts and Counter-Statement of Material Facts
3. Reply Affirmation of Richard W. Wedinger, Esq./Response to Counter-Statement of Material Facts
Discussion
By way of background, plaintiffs commenced this breach of contract action by filing the summons and complaint on January 21, 2020. Plaintiffs allege that in December 2001 when plaintiff Thomas F. Keane was a member of Russo, Keane & Toner, LLP (predecessor law firm to defendant law firm Russo & Toner, LLP) he loaned $200,000.00 to the firm. Plaintiffs allege that $105,000.00 remains outstanding on the loan and that defendants revived the loan by acknowledging it in a 2017 email. The subject email was part of a string of emails between Thomas and Russo regarding winding up Thomas' stake in the firm upon his departure from it. The subject email contains the following sentence:
The complaint initially alleged a loan date in December 2002, but plaintiffs amended the complaint on July 24, 2020 to allege, inter alia, a loan date in December 2001.
Susan Keane, Thomas' spouse, is a co-plaintiff because it is alleged that the $200,000.00 loan originated from mutual funds of Thomas and Susan.
The net result of all of this is that the amount owed by RKT on the loan is 95K of which you owed 1/3 (defendants' exhibits R at 1 [NYSCEF Doc. 166]).
Previously, defendants twice moved to dismiss the complaint pursuant to CPLR 3211. The first application (Motion Seq. 1) was premised on expiration of the statute of limitations on plaintiffs' contract claim. That application was denied with the Court (Lefkowitz, J.) finding "a triable issue of fact whether defendants acknowledged the debt so as to revive the debt after the running of the statute of limitations" (Decision and Order dated July 14, 2020 [NYSCEF Doc. 30]).
After defendants interposed their answer, individual defendants made a second application (Motion Seq. 2), this time limited to dismissal of the complaint as to them, premised, in part, on NY Partnership Law § 26(6) shielding them as limited liability partners from liabilities of the firm. The application was denied by the Court (Lefkowitz, J.) as an impermissible consecutive application under CPLR 3211 pursuant to CPLR 3211(e) (Decision and Order dated October 7, 2020 [NYSCEF Doc. 59]).
After discovery, a Trial Readiness Order was entered on August 8, 2023, and plaintiff filed the Note of Issue on October 3, 2023.
Defendants now move for an Order pursuant to CPLR 3212(b) and 3211(a)(7): (1) dismissing the complaint based on expiration of the statute of limitations; (2) dismissing the complaint against individual defendants Alan S. Russo and Stephen B. Toner based on a failure to state a cause of action against them; and (3) dismissing the action against individual defendant Toner based on an indemnification agreement.
In sum, defendants contend that the complaint is untimely, and the loan was not revived by Russo's statement in the December 2017 email. Defendants further contend that Russo and Toner were not parties to the subject loan and NY Partnership Law § 26(6) otherwise shields Russo and Toner from liability, and that the complaint against Toner should also be dismissed because Russo is indemnifying Toner.
In opposition, plaintiffs contend that the doctrine of "Law of the Case" precludes defendants' application as to their statute of limitations defense because the Court previously found an issue of fact as to whether defendants revived the 2001 loan. Plaintiffs further contend that NY Partnership Law § 26(6) does not shield individual defendants from obligations under firm-related agreements between partners, and that indemnity between individual defendants has nothing to do with plaintiffs' claim against Toner.
As an initial matter, defendants' application is DENIED to the extent it seeks relief under CPLR 3211 as an impermissible consecutive application (see CPLR 3211[e]). The Court will now address defendants' application under CPLR 3212.
Summary Judgment
The proponent of a motion for summary judgment 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 (see Winegrad v NY Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985]; Zuckerman v City of New York, 49 N.Y.2d 557, 562 [1980]). Failure to make such showing requires denial of the motion, regardless of the sufficiency of the opposing papers (see Winegrad, 64 N.Y.2d at 853).
Once the prima facie showing has been made, "the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (see Alvarez v Prospect Hosp., 68 N.Y.2d 320, 324 [1986]; see Zuckerman, 49 N.Y.2d at 562). Mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient to defeat a prima facie showing of entitlement to summary judgment (see Zuckerman, 49 N.Y.2d at 562).
First Branch of Defendants' Application - Timeliness
As to plaintiffs' single cause of action, the statute of limitations for a breach of contract action is six years (CPLR 213[2]) and begins to run "when all of the facts necessary to the cause of action have occurred so that the party would be entitled to obtain relief in court" (County of Suffolk v Suburban Hous. Dev. & Research, Inc., 160 A.D.3d 607, 609 [2d Dept 2018] [internal citation and quotation marks omitted]). Pursuant to GOL 17-101, "the statute of limitations will be tolled by a signed written acknowledgment of an existing debt which contains nothing inconsistent with an intention on the part of the debtor to pay it" (Erdheim v Gelfman, 303 A.D.2d 714, 715 [2d Dept 2003]).
Here, the timeliness of plaintiffs' breach of contract claim turns on whether Russo's December 2017 email acknowledged the December 2001 loan sufficiently to revive it after expiration of the statute of limitations (i.e., in December 2007).
As an initial matter on this score, the parties previously submitted that December 2017 email along with an email chain containing it in conjunction with defendants' first application to dismiss the complaint, and the Court (Lefkowitz, J.) determined that a triable issue of fact exists as to whether defendants revived the subject debt. That determination was not appealed, renewed, or re-argued, and pertains to the same issue on which defendants seek summary judgment now.
The doctrine of law of the case forecloses a court of coordinate jurisdiction from reconsidering an issue decided on the merits (see Fishon v Richmond Univ. Med. Ctr., 171 A.D.3d 873, 874 [2d Dept 2019] ["The doctrine [of 'law of the case'] forecloses reexamination of an issue previously determined by a court of coordinate jurisdiction 'absent a showing of newly discovered evidence or a change in the law' "]; see also HSBC Bank USA, NA v Blair-Walker, 202 A.D.3d 1065 [2d Dept 2022] [affirming lower court's determination that issues as to standing and the affidavit of merit were precluded because those issues were decided on the merits in an earlier order]). That said, defendants make this application after discovery and present new evidence in the form of party deposition testimony. As such, the Court will determine the issue on the merits.
First, it is not seriously disputed that had defendants not purportedly revived the 2001 debt, plaintiffs' instant claim would be beyond the statute of limitations. Thus, but for the December 2017 email, defendants have demonstrated prima facie that plaintiffs' claim is beyond the statute of limitations.
Second, it is not disputed that plaintiffs rely on the December 2017 email to assert that defendants acknowledged and revived the 2001 debt.
Third, the Court finds one fair reading of the December 2017 email to be one that acknowledges a debt of $95,000.00 of which one third is owed by Thomas:
The net result of all of this is that the amount owed by RKT on the loan is 95K of which you owed 1/3 (defendants' exhibits R at 1 [NYSCEF Doc. 166]).
The inquiry now becomes whether defendants have demonstrated prima facie, based on the instant application and new evidence, that that reading is not reasonable or that there is no triable issue of fact that the December 2017 email did not acknowledge and revive the 2001 debt.
The newly proffered evidence includes Russo's deposition testimony, wherein he testified that the subject statement in the December 2017 email was part of a greater discussion between him and Thomas on the wind-up of Thomas' stake in the predecessor law firm (see defendants' exhibit Q, Russo 2023 dep. trans. at 132:20-133:5 [NYSCEF Doc. 165]). Russo also testified that the December 2017 email was not the last email between them on "who was owed what" (see id. at 136:22-137:4). However, what the new evidence does not include is a subsequent communication between the parties contradicting the December 2017 email. As such, defendants failed to demonstrate prima facie that the December 2017 email did not acknowledge and revive the 2001 debt.
Defendants' cases are distinguishable. In Matter of Hollis, the debtor sent an email stating that he "had been 'informed' by his sister" that he owed about $140,000.00, and that he had "every intention of paying this debt" but went on to state that there were "some mitigating circumstances" (180 A.D.3d 680, 682 [2d Dept 2020]). The debtor also sent an email the next day stating, "I just want the process to be fair and not arbitrary" (id.). Here, defendants provide no subsequent communication contradicting Russo's acknowledgment of a loan from Thomas to the law firm with an outstanding balance of $95,000.00 with Thomas responsible for one third of that amount. Further, the accompanying email chain includes admissions of certain payments toward the loan, Russo's offer to settle the matter for $11,000.00, and acknowledgment of a check for $65,000.00 toward the loan, which Thomas never cashed and the amount for which was reversed on the firm's books (see defendants' exhibits O at 3, 7 [NYSCEF Doc. 163]). To be clear, the email exchange about the subject loan culminated with Russo's acknowledgment of the $95,000.00 balance (of which Russo claims Thomas is responsible for one third).
In Bank of NY Mellon v Muriqi, a stipulation in that case did not constitute an unqualified acknowledgement of the debt (205 A.D.3d 667, 668-669 [2d Dept 2022]). Muriqi was an action to foreclose a mortgage and the subject stipulation did not state the total amount of the mortgage debt but instead directed monthly payments toward arrears in the sum of about $15,000.00 (id. at 667). Thus, Muriqi did not involve an acknowledgment of the mortgage debt, which was the subject of the foreclosure action. Whereas here Russo acknowledged the loan which is the subject of this action.
As such, defendants failed to demonstrate prima facie that the December 2017 email did not revive the subject loan. To state it another way, plaintiffs raised a triable issue of fact as to whether the December 2017 email revived the subject loan.
Accordingly, the branch of the application for summary judgment dismissing the complaint based on expiration of the statute of limitations is DENIED.
Second Branch of Defendants' Application - Individual Defendants
As to the second branch of the application, New York Partnership Law 26(b) provides:
Except as provided by subdivisions (c) and (d) of this section, no partner of a partnership which is a registered limited liability partnership is liable or accountable, directly or indirectly (including by way of indemnification, contribution or otherwise), for any debts, obligations or liabilities of, or chargeable to, the registered limited liability partnership or each other, whether arising in tort, contract or otherwise, which are incurred, created or assumed by such partnership while such partnership is a registered limited liability partnership, solely by reason of being such a partner or acting (or omitting to act) in such capacity or rendering professional services or otherwise participating (as an employee, consultant, contractor or otherwise) in the conduct of the other business or activities of the registered limited liability partnership.
Although NY Partnership Law 26(b) protects general partners of a limited liability partnership from the partnership's obligations to third parties (Ederer v Gurksy, 9 N.Y.3d 514, 521-522 [2007]), it does not shield a general partner "from personal liability for breaches of the partnership's or partners' obligations to each other (id. at 516; Kuslansky v Kuslansky, Robbins, Stechel & Cunningham, LLP, 50 A.D.3d 1100, 1101 [2d Dept 2008]).
Here, to the extent defendants established prima facie that NY Partnership Law 26(b) protects the individual defendants from liability on Thomas' loan to the partnership, plaintiffs raised a triable issue of fact as to the nature of the loan as a partnership or partner obligation to each other (see Ederer, 9 N.Y.3d at 516; Kuslansky, 50 A.D.3d at 1101).
Accordingly, the branch of the application seeking to dismiss the complaint against individual defendants is DENIED as to Thomas' claims against them. However, the branch of defendants' application seeking to dismiss Susan's claims against the individual defendants is GRANTED because Susan was not a partner of the limited liability partnership and NY Partnership Law 26(b) shields the individual defendants from the partnership's liability to Susan, a third party (see Ederer, 9 N.Y.3d at 521-522).
Third Branch of Defendants' Application - Indemnification
As to the third branch of the application, "indemnification flows from a contractual relationship" (Westchester Fire Ins. Co. v Utica First Ins. Co., 40 A.D.3d 978, 979 [2d Dept 2007]). Defendants allege that Russo agreed to indemnify Toner for any losses that may result from this lawsuit, but defendants fail to explain how Russo's purported indemnification of Toner somehow extinguishes plaintiffs' claims against Toner. Indeed, one has nothing to do with the other (see Beltrone v General Schuyler & Co., 229 A.D.3d 857, 858 [3d Dept 1996] ["The release upon which he relies does not affect the rights and liabilities of plaintiff and Krolick as between themselves"]).
Accordingly, the branch of the application seeking to dismiss the complaint against Toner based on Russo's purported indemnification of him is DENIED.
All other remaining contentions have been considered and are either without merit or rendered moot by the above determination.
Based on the foregoing, it is hereby
ORDERED that defendants' application is GRANTED only to the extent that Susan Toner's causes of action against individual defendants Alan S. Russo and Stephen B. Toner are DISMISSED and the remainder of the application is DENIED in all other respects; and it is further
ORDERED that the parties are directed to appear at a conference to be noticed to discuss pretrial settlement.