Opinion
601977/07.
October 11, 2007.
Plaintiffs Peter and Evelyn Kowalchuk bring this action against defendant Matthew Stroup to enforce an agreement settling an arbitration proceeding. Stroup moves to dismiss the complaint under CPLR 3211(a)(1), (2) and (5) and for summary judgment under CPLR 3212 on the ground that no enforceable settlement agreement exists. Defendant cross-moves for summary judgment.
PROCEDURAL ISSUES
A motion or cross motion for summary judgment may be made only after issue has been joined. Pursuant to CPLR 3212(b), the moving papers must contain a copy of the pleadings.
Here, the pleadings have not been supplied by either party, and the County Clerk's file contains no answer to the complaint. Counsel have confirmed that no answer to the complaint has been served. While I may exercise discretion to overlook the failure to supply copies of the pleadings, see e.g. Welch v Hauck, 18 AD3d 1096 (3d Dept), lv. denied 5 NY3d 708 (2005), a motion or cross motion under CPLR 3212 may not be granted prior to joinder of issue.
Nevertheless, since the motion is made also under CPLR 3211 (a), I have the discretion to convert the motion to one for summary judgment pursuant to CPLR 3211(c), which provides, in pertinent part:
c) Evidence permitted; immediate trial; motion treated as one for summary judgment. Upon the hearing of a motion made under subdivision (a) or (b), either party may submit any evidence that could properly be considered on a motion for summary judgment. Whether or not issue has been joined, the court, after adequate notice to the parties, may treat the motion as a motion for summary judgment.
Where, as here, the action involves no issues of fact, but only "issues of law fully appreciated and argued by both sides," and/or where, as here, "both sides make it unequivocally clear that they are laying bare their proof and deliberately charting a summary judgment course," notice of conversion is not required, Four Seasons Hotels Ltd. v Vinnik, 127 AD2d 310 (1st Dept 1987). Since the material facts are undisputed and since resolution of the motion calls for applying the law to those facts, since both defendant and plaintiffs affirmatively seek summary judgment, and since both sides have briefed the motion and cross motion as seeking summary judgment, notice of conversion is not required, and the motion under CPLR 3211 is hereby converted to a motion for summary judgment.
FACTS
The Kowalchuks and Stroup were parties to an arbitration proceeding before the National Association of Securities Dealers, Inc. ("NASD"). Stroup was one of several respondents in the arbitration. The Kowalchuks' claims against the other respondents in that arbitration were settled and are not at issue in this action.
The proceedings before the Arbitrators were concluded on February 2, 2007.
Settlement discussions were held between Liam O'Brien, Esq., who represented the Kowalchuks, and Norman Arnoff, Esq., who represented Stroup. Those negotiations bore fruit in the form of a General Release and Settlement Agreement (the "Settlement Agreement").
By email to O'Brien dated February 14, 2007, Arnoff stated, in pertinent part:
My client has executed the settlement agreement, which I will forward to you tomorrow for your clients to execute. If you are agreeable I would like to advise the NASD tomorrow we have a settlement and/or an agreement in principle that will be documented and formalized shortly.
By email to Arnoff dated February 16, 2007, O'Brien stated, in pertinent part, "[p]lease fax your client's executed agreements to me at 212-504-9574 and notify the NASD. I will forward my client's executed copies as soon as they are received."
By fax and mail, Arnoff sent to O'Brien a letter dated February 16, 2007 stating, in pertinent part:
Attached is the signed and approved settlement agreement. I will be forwarding to the NASD and copying to you the confirmation of settlement. Please send to me your signed counterpart as well as the confession of judgment you wish executed.
As thus sent, the settlement agreement, which contains four pages plus signature pages, bears Stroup's signature. It recites, at section 6, in pertinent part, "[t]he Agreement is complete and binding upon its execution by all signatories."
By fax and mail dated February 16, 2007, addressed to the Case Administrator of NASD Dispute Resolution, Inc., Northeast Region, Arnoff advised:
Please be advised the above captioned arbitration has been settled and accordingly please advise the arbitrators so that no award is entered and published [emphasis added].
That letter was copied to both O'Brien and Stroup.
The Settlement Agreement, bearing the Kowalchuks' signatures notarized on February 20, 2007, was sent by overnight courier to Arnoff on February 22, 2007.
The Arbitrators had issued an award dated February 15, 2007. That award was sent to Arnoff by letter dated February 15, 2007, one day prior to the above-described emails, letters and faxes between counsel. The Arbitrators' award, while in the Kowalchuks' favor, was less favorable to the Kowalchuks than was the negotiated settlement.
By fax and mail dated February 20, 2007, addressed to the NASD Case Administrators, copied to O'Brien and Stroup, Arnoff stated, in pertinent part:
Please be advised my client has instructed me to withdraw the offer of settlement in this matter as we did not receive the settlement and release documents executed by the claimants accepting the settlement. An award was rendered February 15, 2006, which Respondent Stroup intends to honor.
DISCUSSION
Contrary to Stroup's contention on this motion, his offer was not withdrawn before it was accepted. On the plain face of the documentary evidence and of the affidavits supplied, the parties came to an agreement settling the dispute, and all that remained was the execution by the Kowalchuks of the agreement that had already been signed by Stroup, and was already binding on all parties.
"[A]n unsigned contract may be enforceable, provided there is objective evidence establishing that the parties intended to be bound," Flores v Lower East Side Service Center, Inc. 4 NY3d 363, rearg denied 5 NY3d 746 (2005). "In determining whether the parties entered into a contractual agreement and what were its terms, it is necessary to look, rather, to the objective manifestations of the intent of the parties as gathered by their expressed words and deeds," Brown Bros. Elec. Contractors v Beam Constr. Corp. 41 NY2d 397 (1977).
Even where (unlike here) the agreement has not yet been reduced to writing, "[t]he intention to commit an agreement to writing will not prevent contract formation prior to execution," Richbell Information Services. Inc. v Jupiter Partners, L.P., 309 AD2d 288 (1st Dept 2003). Among the issues relevant to whether reducing a contract to writing is a prerequisite to its binding effect are "'(1) whether there [had] been an express reservation of the right not to be bound in the absence of a writing; (2) whether there [had] been partial performance of the contact; (3) whether all of the terms of the alleged contract [had] been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to writing'," Elizabeth Street Inc. v 217 Elizabeth Street Corp. 276 AD2d 295 (1st Dept 2000) [internal citation omitted].
Here, not only had all the terms been agreed upon, they had been fully reduced to writing.
There was no express reservation of the right not to be bound in the absence of a fully executed writing, and no time limit by which the Kowalchuks were required to supply an executed copy. To the contrary,both sides expressed their understanding that the binding effect of the settlement agreement was not contingent upon its execution by the Kowalchuks. This was unmistakably expressed in O'Brien's email requesting that Arnoff "notify the NASD," followed by his promise to "forward my client's executed copies as soon as they are received," and Arnoff's letter to the Case Administrator advising that the "arbitration has been settled and accordingly please advise the arbitrators so that no award is entered and published." This letter cannot be reconciled with the contention that Stroup's intent was that the existence of a settlement agreement, which Stroup had already signed, was contingent on its execution by the Kowalchuks.
As noted above, in a prior email to O'Brien dated February 14, 2007, Arnoff had stated:
My client has executed the settlement agreement, which I will forward to you tomorrow for your clients to execute. If you are agreeable I would like to advise the NASD tomorrow we have a settlement and/or an agreement in principle that will be documented and formalized shortly [emphasis added].
A comparison of this letter with Arnoffs February 16, 2007 letter to the Case Administrators ("the above captioned arbitration has been settled [emphasis added]") establishes that Arnoff's understanding and intent on February 16, 2007 was that the dispute was settled.
Thus, contrary to Stroup's claim after learning of the arbitration award, there was no pending "offer" by him that could be withdrawn. Offer and acceptance had already taken place. The execution of the documentation was a ministerial formality.
Stroup's attempted invocation of the doctrine of mutual mistake is unavailing. "While mutual mistake will justify rescission where the mistake exists at the time the contract is entered into and the mistake is substantial, it may not be invoked by a party to avoid the consequences of its own negligence," P.K. Development. Inc. v Elvem Development Corp., 226 AD2d 200 (1st Dept 1996). In that case, the parties had contracted for the sale of a cooperative apartment, and were of the belief that the apartment was occupied by a tenant protected by Rent Stabilization provisions. After learning that the tenant had died prior to the execution of the contract, defendant declined to comply, invoking the doctrine of mutual mistake. Reversing the lower court, the First Department held that mutual mistake was not available because
defendant's negligence, or "[c]onscious ignorance," regarding the actual occupancy of the unit bars rescission; as owner of the unit in question, defendant, in the exercise of ordinary care, should have known or could easily have ascertained whether the unit was occupied. Such confirmation would hardly have been onerous: a simple phone call or inspection would have sufficed. Even where a party must go beyond its own efforts in order to ascertain relevant facts (such as obtaining experts' reports), courts have held that the party must bear the risk of mistake if it chooses to act on its otherwise limited knowledge.
Here, Stroup, or Arnoff, could have called the Case Administrator on February 16, 2007, before executing the Agreement, and before writing to the Case Administrator to advise that the dispute had been settled. The doctrine of unilateral mistake is likewise unavailing, for this and other reasons.
Contrary to Stroup's contention, the issuance of the award did not destroy the subject of the Settlement Agreement. An arbitration award is subject to challenge under prescribed circumstances. The Settlement Agreement precluded any such challenge.
Also contrary to Stroup's contention, the provision in the Settlement Agreement that "[t]he Agreement is complete and binding upon its execution by all signatories," does not affect plaintiffs' entitlement to relief. The clause does not state that the agreement is not binding until it has been executed by all signatories. In any event, even if it could be so construed, that would at best create an ambiguity. The parties' conduct establishes that both sides understood and intended that the dispute had been settled.
PREJUDGMENT INTEREST
The Settlement Agreement provides for payments to be made commencing 30 days after the execution of the Settlement Agreement, and provides notice and an opportunity to cure, and thereafter for entry of confession of judgment Under the circumstances, prejudgment interest is awarded at the rate of 9% per annum from March 23, 2007.
ATTORNEYS FEES
Section 9 of the Settlement Agreement provides, in pertinent part:
In the event that any party is required to bring any action against any other party to enforce the terms of this Agreement, the prevailing party in such action shall be entitled to recover from the other party all reasonable and necessary attorney's fees, costs and expenses.
As the prevailing parties, plaintiffs are entitled to contractual attorneys' fees. Plaintiffs' claims for attorneys' fees are severed and referred to a Special Referee to hear and report, or, upon stipulation, to hear and determine.
Accordingly, it is hereby
ORDERED that defendant's motion for summary judgment is denied as procedurally improper; and it is further
ORDERED that plaintiffs' cross motion for summary judgment is denied as procedurally improper; and it is further
ORDERED that defendant's motion under CPLR 3211 (a) is converted pursuant to CPLR 3211(c) to a motion for summary judgment; and it is further
ORDERED that, as thus converted, defendant's motion is denied; and it is further
ORDERED that, searching the record on the motion as thus converted, summary judgment is granted to plaintiffs for breach of the Settlement Agreement in the sum of $285,000, with prejudgment interest at the rate of 9% per annum from March 23, 2007; and it is further
ORDERED that upon presentation of the requisite papers, the Clerk is directed to enter judgment accordingly; and it is further
ORDERED that, searching the record on the motion as thus converted, summary judgment is granted to plaintiffs as to liability under the Settlement Agreement for attorneys' fees; and it is further
ORDERED that the issue of the amount of attorneys' fees to which plaintiffs are entitled is severed and is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further
ORDERED that counsel for plaintiffs shall, within 30 days from the date of service of this order with notice of entry, serve a copy of this order with notice of entry, together with a completed Information Sheet, upon the Special Referee Clerk in the Motion Support Office in Rm. 119 at 60 Centre Street, who is directed to place this matter on the calendar of the Special Referee's Part (Part 50 R) for the earliest convenient date.
Copies are available in Rm. 119 at 60 Centre Street, and on the Court's website.