Opinion
505638/18
01-02-2019
FIRST AMERICAN TITLE INSURANCE COMPANY, Plaintiff, v. CUMBERLAND FARMS, INC., Vanderbilt Myrtle Inc., and Vanderbilt Brookland LLC., Defendants.
Attorney for Plaintiff, Helmut Borchert, Esq., 19-02 Whitestone Expressway, Suite 302, Whitestone, NY 11357, (718) 767-3333 Attorney for Defendant Cumberland Farms, Inc., Barclay Damon Tower, 125 Jefferson Street, Syracuse, NY 13202 Attorney for Defendant Vanderbuilt Myrtle Inc., Law Office of Wendy Tso, P.C., 291 Broadway, Suite 803, New York, NY 10007-1926 Attorney for Defendant Vanderbilt Brookland LLC, Robinson Brog Leinwand Greene, Genovese & Gluck, P.C., 875 Third Avenue, 9th Floor, New York, NY 10022
Attorney for Plaintiff, Helmut Borchert, Esq., 19-02 Whitestone Expressway, Suite 302, Whitestone, NY 11357, (718) 767-3333
Attorney for Defendant Cumberland Farms, Inc., Barclay Damon Tower, 125 Jefferson Street, Syracuse, NY 13202
Attorney for Defendant Vanderbuilt Myrtle Inc., Law Office of Wendy Tso, P.C., 291 Broadway, Suite 803, New York, NY 10007-1926
Attorney for Defendant Vanderbilt Brookland LLC, Robinson Brog Leinwand Greene, Genovese & Gluck, P.C., 875 Third Avenue, 9th Floor, New York, NY 10022
Francois A. Rivera, J.
Recitation in accordance with CPLR 2219 (a) of the papers considered on the notice of motion of First American Title Insurance Company, (hereinafter plaintiff or First American), filed on July 2, 2018, under motion sequence one, for an order: (1) pursuant to CPLR 3212 and 1006 (f) permitting it to deposit certain funds with the Court and be discharged from further liability; and (2) awarding it costs, disbursements and reasonable attorney's fees.
Notice of Motion
Affirmation
Affidavit of Antonio Vozza, Esq.
Exhibit A to I
Affirmation of Jon. P. Devendorf in opposition
Exhibit A to E
Affirmation of Allen M. Eisenberg in opposition
Exhibit A
Affirmation of Wendy Tso in opposition
Affirmation in reply
The motion is opposed by all defendants.
MOTION PAPERS
First American's motion papers consist of an affirmation of its counsel, an affidavit of Antonio Vozza, Esq., its Vice President, and nine annexed exhibits labeled A through I. Exhibit A is a copy of the First American's instant summons and verified complaint. Exhibit B is a copy of the answer of defendant Cumberland Farms, Inc. (hereinafter Cumberland) filed on April 18, 2018. Exhibit C is a copy of the answer of defendant Vanderbilt Myrtle Inc (hereinafter Myrtle) filed on May 15, 2018. Exhibit D is a copy of the answer of defendant Vanderbilt Brookland LLC (hereinafter Brookland) filed on June 12, 2018. Exhibit E is a copy of the amended complaint in the Matter of Vanderbilt Brookland v. Vanderbilt Myrtle, et. al. , filed with the Kings County Clerk's office (hereinafter KCCO) on May 7, 2014 under Index Number 500522/2014 (hereinafter the related action). Exhibit F is a copy of the affidavit of James Thanasules, First American's Vice President, bearing Index Number 500522/2014 and dated February 3, 2014. Exhibit G is copy of the purchase and sale agreement between Cumberland and Myrtle dated December 4, 2013. Exhibit H is a duplicate of Exhibit E. Exhibit I is a letter dated February 11, 2014, from Todd Harris Hesekiel, Brookland's counsel, addressed to First American.
Cumberland's opposition papers consist of an affirmation of its counsel and five annexed exhibits labeled A through E. Exhibit A is a duplicate of plaintiff's Exhibit E and H. Exhibit B is described as Cumberland's answer in the related action. Exhibit C is First American's verified complaint in the instant matter. Exhibit D is Cumberland's verified answer in the instant matter. Exhibit E is a copy of a non-party subpoena issued to First American in connection with the related action.
Brookland's opposition papers consist of an affirmation of counsel and one annexed exhibit labeled A. Exhibit A is the Decision and Order of Justice Knipel dated April 10, 2015 issued in the related action.
BACKGROUND
On March 21, 2018, First American commenced the instant interpleader action by filing a summons and verified complaint with the KCCO. On April 18, 2018, Cumberland filed its verified answer. On May 18, 2018, Myrtle filed its verified answer. On June 12, 2018, Brookland filed its verified answer.
First American's verified complaint alleges the following salient facts. On December 4, 2013, Cumberland, as seller, and Myrtle, as purchaser, entered into a agreement (hereinafter the purchase agreement) for the sale of real property. The purchase agreement required that Myrtle deposit $1,000,000.00 with First American, as the escrow agent. The deposit was to be credited at closing toward the $10,000,000.00 purchase price. On December 10, 2013, First American received a wire transfer from Gilad Enterprises, LLC on behalf of Brookland in the amount of $1,000,000.00 (hereinafter the subject funds). First American alleges that this transfer was in accordance with the purchase agreement. First American deposited the subject funds into an account which it continues to hold.
By letter dated February 11, 2014, Brookland informed plaintiff that it was restrained from releasing the subject funds due to Brookland's commencement of the related action against Cumberland, Myrtle, and All Years Management LLC. The related action was brought and is currently pending in the Kings County Supreme Court under Index Number 500522/14. The related action is for, among other things, a declaratory judgment and injunctive relief premised on the parties breach of the purchase agreement.
By the instant motion First American seeks, among other things, an accelerated judgment permitting it as a stakeholder to deposit the subject funds into the court pursuant to CPLR 3212 and 1006.
LAW AND APPLICATION
It is well established that summary judgment may be granted only when it is clear that no triable issue of fact exists ( Alvarez v. Prospect Hospital , 68 NY2d 320 [1986] ). The burden is upon the moving party to make a prima facie showing that he or she is entitled to summary judgment as a matter of law by presenting evidence in admissible form demonstrating the absence of material facts ( Guiffirda v. Citibank , 100 NY2d 72 [2003] ).
A failure to make that showing requires the denial of the summary judgment motion, regardless of the adequacy of the opposing papers ( Ayotte v. Gervasio , 81 NY2d 1062 [1993] ). If a prima facie showing has been made, the burden shifts to the opposing party to produce evidentiary proof sufficient to establish the existence of material issues of fact ( Alvarez , 68 NY2d at 324 ).
"Pursuant to CPLR 3212 (b) a court will grant a motion for summary judgment upon a determination that the movant's papers justify holding, as a matter of law, "that there is no defense to the cause of action or that the cause of action or defense has no merit." Further, all of the evidence must be viewed in the light most favorable to the opponent of the motion ( Marine Midland Bank v. Dino & Artie's Automatic Transmission Co. , 168 AD2d 610 [2nd Dept 1990] )" ( People ex rel. Spitzer v. Grasso , 50 AD3d 535, 544 [1st Dept 2008] ).
CPLR 1006 Interpleader Relief
Generally, an interpleader action allows a person who may be exposed to multiple liability as the result of adverse claims to join these adverse claimants in one action for a determination of all the parties' rights and obligations (see CPLR 1006 [a]; Vincent C. Alexander, Practice Commentaries McKinney's Cons Law of NY, CPLR C1006:1). The person against whom adverse claims are asserted is defined as a stakeholder (see Id. ).
To qualify for discharge, a person or entity must establish first that it is a stakeholder (see e.g. Maggiolo Corp. v. S.J.M. Gen. Contractors, Inc. , 19 AD2d 535 [2nd Dept 1963] ).
It is well established that an escrow agent may qualify as a stakeholder for the purposes of an interpleader action (see e.g. Manufacturer's & Traders Trust Co. v. Reliance Ins. Co. , 8 NY3d 583 [2007] ). "An escrow agent not only has a contractual duty to follow the escrow agreement, but additionally becomes a trustee of anyone with a beneficial interest in the trust with the duty not to deliver the escrow to anyone except upon strict compliance with the conditions imposed" ( Takayama v. Schaefer , 240 AD2d 21, 25 [2nd Dept 1998] citing Farago v. Burke , 262 NY 229 [1933] ). An escrow agent may be held liable for breach of an escrow agreement and its fiduciary duty as escrowee (see Takayama , 240 AD2d at 25 ).
It is undisputed that First American is the escrow agent for the purchase agreement at issue in the related action involving Brookland, Cumberland, and Myrtle, among other. First American's complaint alleges that it is currently in possession of $1,000,000.00 intended to be a deposit in accordance with the purchase agreement. Furthermore, the affidavit of Vozza, establishes that First America received notice of the related action wherein the defendants may have adverse claims in relation to the subject funds. Here, First American's status as the escrow agent in a purchase agreement qualifies it as a stakeholder within the meaning of CPLR 1006.
CPLR 1006 (f), entitled Discharge of Stakeholders, provides in pertinent part that:
"After the time for all parties to plead has expired, the stakeholder may move for an order discharging him from liability in whole or in part to any party. The stakeholder shall submit proof by affidavit or otherwise of the allegations in his pleading. The court may grant the motion and require payment into court, delivery to a person designated by the court or retention to the credit of the action, of the subject matter of the action to be disposed of in accordance with further order or the judgment."
To prevail on a summary judgment motion seeking interpleader relief, a plaintiff must make a prima facie showing that it is a neutral stakeholder with no interest in the funds or property in question (see Fid. and Deposit Co. of Maryland v. Barroga-Hayes , 129 AD3d 773, 774 [2nd Dept 2015] ). "If the stakeholder is not indifferent, either because the stakeholder denies liability to any of the claimants or asserts its own interest in the relevant property, then a discharge should not be granted" (Vincent C. Alexander, Practice Commentaries McKinney's Cons Law of NY, CPLR C1006:4).
First American's supporting papers establish that it does not claim an interest in the subject funds and that it is not a party to the related action brought by Brookland. Therefore, First American has demonstrated prima facie entitlement to judgment in its favor pursuant to CPLR 1006 (f).
Nevertheless, a triable issue may be found "where the issue of a stakeholder's independent liability to a claimant is raised either in the pleading or by motion" ( CPLR 1006 [e] ). In such case, "the court may dismiss the claim of the appropriate claimant, order severance or separate trials, or require the issue to be tried in the action" (Id. ) A stakeholder may be denied discharge where an adverse claimant raises an issue as to the independent liability of stakeholder seeking summary judgment (see Sun Life Ins. and Annuity Co. of New York v. Braslow , 38 AD3d 529, 530 [2nd Dept 2007] citing Inovlotska v. Greenpoint Bank , 8 AD3d 623 [2nd Dept 2004] ; see also CPLR 1006 [e] ).
In opposition, the defendants make the following arguments. Cumberland disputes plaintiff's allegation that the subject funds were "the contract deposit" referenced in the purchase agreement. Cumberland further contends that plaintiff should not be granted leave to deposit the funds with the court because the issue is pending in the Brookland action. Similarly, Myrtle argues that the instant motion should be denied due to pending discovery in the Brookland action. Furthermore, Brookland contends First American is obligated to continue as escrow agent by the terms of the purchase agreement and not entitled to discharge this duty.
Not one of the defendants' arguments raises a triable issue of fact regarding First American's status as a neutral stakeholder or of its freedom from independent liability with regards to the subject funds ( Sun Life Ins. and Annuity Co. of New York v. Braslow , 38 AD3d 529 [2nd Dept 2007] ). Accordingly, that branch of First American's motion seeking leave to deposit the subject funds to the Court pursuant to CPLR 1006 is granted.
Costs, Disbursements and Attorney's Fees
First American also seeks attorney's fees, cost, expenses and disbursements associated with bringing the instant interpleader action. CPLR 1006 (f) provides in pertinent part that the stakeholder may move for discharge and "[t]he court shall impose such terms relating to payment of expenses, costs and disbursements as may be just and which may be charged against the subject matter of the action."
First American may tax to the clerk of the court its costs and disbursements in this action. However, any other expenses, pursuant to CPLR 1006 (f), including attorney's fees which are recoverable pursuant thereto, will have to be approved by the Court. The Court in its discretion may award reasonable attorney's fees where a stakeholder is "forced" to participate in disputes in which it has no interest (see Sun Life Ins. and Annuity Co. of New York , 38 AD3d at 530 ). First American was not named as a party in the related action, and therefore cannot claim that it was being forced to participate in the dispute between those litigants. However, the Appellate Division has recognized that while an escrow agent has no obligation to commence an interpleader action, interpleader remains an appropriate and safe course of action (see Takayama , 240 AD2d at 25 ).
Accordingly, First American is directed to serve on or before January 31, 2019, an affidavit or affirmation setting forth the attorney fees incurred in litigating the instant action upon defendants' respective counsel. Defendants' counsels may serve opposition on First American's counsel on or before February 15, 2019. The parties must then appear on February 26, 2019 for further proceedings.
The Court will then determine whether to order a hearing on the reasonableness of the attorney's fees incurred by First American in connection with the instant interpleader action, and to determine how the fees shall be apportioned ( CPLR 1006 (f) ; Lincoln Life & Annuity Co. v. Caswell , 31 AD3d 1 [1st Dept 2006] ; Fischbein, Badillo, Wagner v. Tova Realty Co. , 193 AD2d 442 [1st Dept 1993] ).
CONCLUSION
First American's motion for an order pursuant to CPLR 1006 permitting it to deposit the subject funds with the Court and be discharged from further liability is granted.
First American shall deposit the entire $1,000,000.00 with the Court within thirty (30) days of service of the instant decision and Order with notice of entry. Upon compliance with the instant order First American will be discharged from any further liability.
First American's motion for an order awarding it costs, disbursements and attorney's fees is reserved pending further proceedings in accordance with this decision and order.
The foregoing constitutes the decision and order of this Court.