Parcside Equity, LLC v. Freedman

Full title: PARCSIDE EQUITY, LLC, Plaintiff, v. LEONARD FREEDMAN, Defendant.

Court: SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK : IAS PART 12

Date published: Oct 28, 2013

2013 N.Y. Slip Op. 32757 (N.Y. Sup. Ct. 2013)

Opinion

Index No. 116998/08 Motion seq. no. 012

10-28-2013

PARCSIDE EQUITY, LLC, Plaintiff, v. LEONARD FREEDMAN, Defendant.

For plaintiff: Richard I. Wolff, Esq. Law Office of Richard I. Wolff, P.C. For defendant: Russell Piccoli, Esq. Davidoff Hutcher & Citron LLP

Barbara Jaffe

DECISION & ORDER

BARBARA JAFFE, JSC:

For plaintiff:

Richard I. Wolff, Esq.

Law Office of Richard I. Wolff, P.C.

For defendant:

Russell Piccoli, Esq.

Davidoff Hutcher & Citron LLP

By notice of motion, plaintiff moves for an order granting it an immediate trial for reasonable attorney fees, expenses, costs, and interest. Defendant opposes.

I. PERTINENT BACKGROUND

In 2008, defendant sold two life insurance policies to plaintiff pursuant to a contract of sale. Plaintiff then sold the policies to a third party. That same year, plaintiff commenced the instant action against defendant for declaratory relief and attorney fees based on an alleged breach of the sales contract. (NYSCEF 117). A complete description of the instant action is set forth in a decision and order dated July 7, 2011, rendered by the justice previously assigned to this part.

In 2010, defendant sued the third party and Phillip Lian, plaintiff's principal, in California District Court, seeking damages relating to the sales of the policies. That action, Leonard Freedman v Parcside Equity, LLC, et al. (the Freedman action), was transferred to this court pursuant to a stipulation between the parties (Index no. 116711/10), and dismissed on May 12, 2013. (NYSCEF 77).

As pertinent here, paragraph 10 of the parties' sales contract provides:

In the event either party initiates action to enforce his or her rights hereunder, the substantially prevailing party shall recover from the substantially non-prevailing party its reasonable expenses, court costs and reasonable attorneys' fees, whether suit be brought or not. As used herein, expenses, court costs and attorneys' fees include expenses, court costs and attorneys' fees incurred in any appellate proceeding . . . Expenses incurred in enforcing this paragraph shall be covered by this paragraph.

In the July 2011 decision, the previously assigned justice denied defendant's motion for summary judgment and granted plaintiff's motion for summary judgment to the extent of, as pertinent here, finding that plaintiff was entitled to judgment on its claim for attorney fees and costs as the "substantially prevailing party," and ordered a hearing "to determine the amount of plaintiff's reasonable attorneys fees, expenses and costs incurred in connection with the prosecution of this action and defending against [defendant's] counterclaim." (NYSCEF 117). That decision was affirmed on appeal on June 26, 2012.

The fee hearing was held before a JHO on March 27 and 28, 2012. The parties stipulated that the relevant period for the assessment of fees was December 4, 2008 through November 30, 2011, and plaintiff's attorney submitted an affirmation, whereby plaintiff reserved its right to seek additional attorney fees, costs, disbursements, and interest incurred after November 30, 2011, at the fee hearing, in opposing the appeal, and for "all other matters that may arise in this lawsuit." (NYSCEF 285).

Following the fee hearing, a judgment was granted in plaintiff's favor as follows:

(1) $390,000 representing plaintiff's reasonable attorneys fees for December 4, 2008 through November 30, 2011;
(2) $6,476 representing the stipulated amount of plaintiff's disbursements for December 4, 2008 through November 30, 2011;
(3) pre-judgment statutory interest from the stipulated date of April 7, 2010 to the date of entry of judgment on the attorney fees and disbursements at the annual rate of nine percent; and
(4) pursuant to a stipulation between the parties, the foregoing amount would be offset in the amount of $325,000, representing plaintiff's payment in full of the purchase price to defendant for the insurance policies at issue.

(NYSCEF 253).

II. CONTENTIONS AND ANALYSIS

Plaintiff claims entitlement to the following attorney fees and costs and expenses:

(1) for the period after November 30, 2011 to the conclusion of the instant action for preparing and conducting the hearing before the JHO, and defending and arguing defendant's appeal;
(2) for the period after September 6, 2012, when the judgment was entered, to the conclusion of the instant action for the amount of monies expended or to be expended for the enforcement proceedings instituted in California against defendant seeking to enforce the judgment awarded here; and
(3) for the period after June 16, 2010 to the conclusion of the instant action for monies expended or to be expended (in excess of $120,000) pursuant to New York Limited Liability Company Law § 420 in connection with Lian's defense in the Freedman action and the California action.

(NYSCEF 275, 276, 294).

Defendant opposes plaintiff's fee requests. First, he denies that plaintiff substantially prevailed at the fee hearing. I find, however, that the issue is not whether plaintiff prevailed at the fee hearing, but whether it prevailed in the action, an issue already determined in plaintiff's favor by the previously assigned justice when he granted plaintiff's motion for summary judgment on its claim for attorney fees and costs as the "substantially prevailing party."

Defendant next argues that the fees relating to the appeal, fee hearing, and enforcement of the judgment are excessive, unnecessary, and unreasonable. The reasonableness of the fees, however, is immaterial to plaintiff's entitlement to them, and the same holds true for the fees relating to the enforcement of the judgment. The decision granting summary judgment to plaintiff, moreover, was not affirmed on appeal until after the completion of the fee hearing. Consequently, plaintiff was not entitled to attorney fees for the appeal until then.

Based on the attorney fees provision in the sales contract, plaintiff argues that it is entitled to recover monies it paid or advanced to Lian for his defense in the California action, as that action arose from defendant's attempt to enforce his rights under the sales contract, and that given the discontinuance of that action and the dismissal of the Freedman action, plaintiff is the substantially prevailing party. (NYSCEF 294). Defendant maintains that the fees relating to Lian's defense should have been sought in California or at the fee hearing, and that plaintiff may not recover them absent an agreement with Lian.

It is "generally impermissible to seek litigation fees related to the prosecution of an action in a separate action . . ." (Board of Managers of the Amherst Condominium v CC Ming [USA] Ltd. Partnership, 308 AD2d 380 [1^st Dept 2003]; see 930 Fifth Corporation v King, 42 NY2d 886, 887 [1977]). However, a determination as to a party's entitlement to attorney fees in an earlier proceeding may be postponed where further litigation on the same issue is ongoing, as an attorney fee award should be based on the ultimate outcome of the controversy between the parties. (Elkins v Cinera Realty, Inc., 61 AD2d 828 [2d Dept 1978]; compare 283 East 5^th St. Housing Corp. v Tasman, NYLJ, Oct. 13, 1999, at 33, col 2 [Sup Ct, Kings County] [motion to dismiss attorney fee claim denied and cross-motion for summary judgment granted to landlord where underlying issues of controversy between parties had been resolved and landlord was prevailing party in earlier and instant litigation]).

Here, the parties stipulated to discontinue the Freedman action in California in order to pursue it in New York. Thus, there was no final adjudication of that action or a determination as to the identity of the substantially prevailing party, until the action was dismissed here. Plaintiff thus had no opportunity or ground for seeking fees incurred in that action until now.

However, plaintiff may not recover fees from Lian absent an agreement between them or by statute or court rule. (Hooper Assocs., Ltd. v AGS Computers, Inc., 74 NY2d 487 [1989]). And plaintiff offers no authority for the proposition that the advancement of funds to Lian pursuant to the Limited Liability Company Law constitutes a legal basis for reimbursement.

III. CONCLUSION

Accordingly, it is hereby

ORDERED, that plaintiff's motion for an order granting it additional fees is granted except as to any fees sought for Lian's defense in the California action; and it is further

ORDERED, the issue of the amount of the award is referred to a special referee to hear and determine, and counsel for plaintiff shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet,¹ upon the Special Referee Clerk in the Motion Support Office in Room 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; and it is further

1 Copies are available in Rm. 119 at 60 Centre Street, and on the Court's website.

ORDERED, that upon completion of the hearing, the Clerk of the Court shall enter judgment in favor of plaintiff and against defendant for the amount determined.

ENTER:

_______

Barbara Jaffe, JSC
DATED: October 28, 2013

New York, New York