Opinion
4712/03.
Decided September 15, 2005.
Aswad Ingraham, By: Richard N. Aswad, Esq., Attorney for the Petitioner, Binghamton, NY.
State of New York, Office of the Attorney General, By: Dewey Lee, Esq., Assistant Attorney General, Poughkeepsie, NY.
Upon the foregoing papers, plaintiff David Safena moves for summary judgment on his cause of action for the release of escrow funds.
On June 15, 2001, sellers Ann Marie Marino, Joseph Marino and Marie Marino Termini (the sellers) entered into a contract for the sale of the premises located at 2234 West Street in Brooklyn, New York with purchasers Jousiph Alkadeh and Moses Safena. The complaint alleges that plaintiff is a third-party beneficiary to and/or assignee of the contract and that defendant prepared the deed therefor by inserting plaintiff's name as grantee thereto, on or about October 23, 2001. The complaint further alleges that by preparing a deed to plaintiff and by closing title to the premises on October 23, 2001, "defendant ratified the assignment of the rights under the agreement by Jouisph [sic] Alkadeh and Moses Safena to plaintiff as assignee and grantee."
Alternatively known as 2334 West Street, but also identified as Section 21, Block 7151 and Lot 69.
The contract contained a provision which obligated the sellers to pay plaintiff use and occupancy at the rate of $100.00 per day if they remained in possession of the premises after October 23, 2001. Specifically, the provision states:
"Sellers agrees [sic] to deliver entire premises, except part occupied by purchasers, broom clean and vacant at the time of closing. In the event a seller is allowed to remain in said premises subsequent to closing, then premises shall be so delivered at the time of possession. Seller may, at his option, remain in possession for a period not to exceed seven (7) days from the date of the closing by depositing with their attorney the sum of $50,000 which deposit shall be deemed in escrow for the purpose of securing delivery of possession of the premises to the Purchasers within said seven (7) day period. If the Seller does not vacate the premises within the seven (7) day period then in that event there shall be a diminution in purchase price of $100 per day for each and every day thereafter, which amount shall be deducted from the escrow fund and be payable to the Purchasers as diminution of purchase price. No landlord/tenant relationship shall exist by virtue of this possession and the Purchasers shall not be required to maintain the premises during said period. In the event it becomes necessary for the Purchasers to institute legal proceedings to remove the Sellers from the premises, the Sellers agrees [sic] to pay reasonable attorney fees for said proceedings and the Sellers hereby waive any and all defenses to such eviction proceedings other than failure of consideration. This provision shall survive delivery of the Deed."
The complaint and moving papers further allege that defendant was the escrow agent for the sum of $50,000.00 pursuant to the contract and rider, and that defendant received proceeds from plaintiff to be held in escrow, "to be disbursed by him accordingly."
According to plaintiff, after the contract was assigned to him, the sellers conveyed title to him and he took possession of the property on October 23, 2001, the day of the closing. Plaintiff alleges, however, that Joseph Marino remained in possession of the premises after the closing from October 23, 2001 to June 4, 2001, for a total of 225 days, and thus incurred use and occupancy expenses in the amount of $22,500.00, along with costs, interest, disbursements, and attorney's fees.
Thereafter, plaintiff made a demand for payment, which was rejected by defendant's attorney, who stated "[t]here was a misunderstanding. My client is staying there [at the subject premises] as a tenant and there is no one hundred ($100.00) dollars a day owed."
Plaintiff's counsel alleges that as a result of Mr. Marino's possession of the premises, defendant is contractually obligated to pay him from the escrow the agreed-upon use and occupancy of $100 per day until such use and occupancy ended; that under the terms of the June 15, 2001 contract and rider, defendant continues to hold the $50,000.00 in escrow and was obligated to preserve it; and that although defendant admitted that Mr. Marino was staying at the premises as a "tenant," Mr. Marino could not qualify as a tenant because plaintiff was not paid rent and because the contract and rider specifically stated that no previous seller would be deemed a tenant. Plaintiff concludes that there is no defense to this action on the merits.
The subject property was sold by plaintiff on June 4, 2002.
In opposition, defendant, in a sworn affidavit, asserts that he represented "Marie Marino Termini[,] individually and as heir to the Estate of Anna Marie Marino[,] and Joseph Louis Moreno [sic] and Ann Marie Moreno [sic][,] as co-executors of the estate of Anselmo Moreno [sic], individually and as heir to the [e]state of Anna Marie Moreno [sic], in a partition action against Joseph Moreno [sic] and the Estate of Anna Marie Moreno [sic] in this court under index number 29191/99." He asserts that on June 23, 2000, the court issued an interlocutory judgment that the subject property was owned in three equal shares by "Marie Moreno [sic] Termini, the Estate of Anselmo Moreno [sic], and the defendant Joseph Moreno [sic] as tenants in common," and that the judgment provides the upon the sale of the property the proceeds were to be divided into three equal parts to those individuals.
Defendant further asserts that on June 15, 2001, the parties entered into a contract to sell the premises for $240,000.00 and that (after the sale of the premises), he collected the proceeds and divided them in accordance with the judgment. Defendant further states that he paid Joseph "Moreno" $40,000.00 on October 23, 2002. Most significantly, defendant contends that plaintiff was never a party to the underlying sale, nor was he a party to the interlocutory judgment providing for the sale and distribution of the assets. In addition, he asserts that there is another action pending in this court entitled "Joseph Moreno [sic] v Marie Moreno [sic] Termini under Index No. 2139/04. Based upon the aforementioned interlocutory judgment, defendant argues that he complied with the direction of the court and that therefore summary judgment should be denied.
Counsel for plaintiff replies that the pending action under Index No. 2139/04 involves different issues and other parties, and claims not connected to the instant case.
In addition, counsel states that the escrow was for security for delivery of possession, that is, if the seller retained possession, liquidated damages would be imposed at the rate of $100.00 per day.
Counsel also asserts that defendant interposes no substantive opposition to plaintiff's motion, yet makes serious admissions of his own unethical conduct. Specifically, counsel contends that defendant's failure to honor the escrow agreement by paying Mr. Marino $40,000.00 gives rise to a strong inference of fraud and violations of 1) Judiciary Law § 487; 2) General Business Law (GBL) § 349; and 3) provisions of the Disciplinary Rules of the Lawyer's Code of Professional Responsibility, namely a) 22 NYCRR 1200.46 (DR9-102[e]), entitled "Preserving of Funds and Property of others, Fiduciary responsibility" and b) 22 NYCRR 1200.3 (DR 1-102[a][4]), entitled "Misconduct."
Counsel further alleges that because of the escrow agreement contained in the underlying real estate contract, defendant should not have given Mr. Marino the opportunity to accept the $40,000.00. In this regard, counsel states that defendant's opposition omits any reference to the attorney escrow account checkbook; that defendant has no written permission from plaintiff or his attorney of record that authorized the release of the escrow; that defendant's failure to provide this documentation in opposition "indicates either that this cash payment did not happen or that it could have not legitimately occurred;" and that defendant has made no effort to explain his release of the $40,000.00 to Mr. Marino.
With respect to the merits of plaintiff's claim, counsel points to the interlocutory judgment which directs the premises to be sold to plaintiff and Eli Safenia [sic], tenants of the premises. Counsel states that the contract was assigned to plaintiff, that the assignment was then ratified by virtue of the closing, and that the sale of the property was then duly made to plaintiff. Based upon the foregoing, counsel asserts that defendant's opposition is frivolous and that defendant should be sanctioned. He also contends that plaintiff has met his burden of proof on his motion, and that defendant has failed to raise any triable issue of fact. Finally, counsel requests reasonable attorney's fees, costs and interest from the date of the breach running from June 4, 2002.
Plaintiff cross-moves to amend the complaint to assert additional causes of action against defendant, namely allegations of fraud and violations of Judiciary Law § 487 and GBL § 349 based upon defendant's "serious admission of a premature and substantial cash payment in the sum of ($40,000.00) out of the proceeds" of the underlying real estate transaction to one of the sellers. If the cross-motion is granted, counsel requests that the complaint be deemed served and that defendant be given 20 days to answer same.
Plaintiff's counsel also asserts that when he attempted to file the cross-motion, he learned that this action was either dismissed or "marked off" for an alleged failure to appear at a CCP conference on January 12, 2005; although he was advised by the motion clerk that plaintiff's pending summary judgment motion had not been affected thereby. In any event, counsel states that assuming that the action was "marked off" the calendar or that the action was dismissed, it was done in error because he and opposing counsel had actually appeared for the conference but was advised that discovery was stayed during the pendency of the summary judgment motion. Thus, counsel states that the action should be restored for all purposes.
Analysis
Plaintiff's motion for summary judgment is denied because plaintiff has failed to join the sellers of the subject property as necessary party defendants. "Under CPLR 1001(a), parties who ought to be joined in a proceeding or action are divided into two categories: (1) those who ought to be joined if complete relief is to be accorded those who are already parties: and (2) those who might in some way be inequitably affected by the judgment" ( Storrs v Holcomb, 245 AD2d 943, 945). Here, inasmuch as the sellers have contributed to the very escrow fund from which plaintiff seeks his judgment, the sellers would be inequitably and adversely impacted if plaintiff were to obtain the relief he seeks without the sellers' participation. However, inasmuch as the court is unable to join the sellers as necessary parties on its own initiative ( see CPLR 1003; New Medico Assocs., Inc. v Empire Blue Cross and Blue Shield, 267 AD2d 757, 758), the motion is denied with leave to renew following a motion by plaintiff to add the sellers as necessary party defendants.
Plaintiff moved for this relief by cross-motion, an improper vehicle for seeking affirmative relief from a nonmoving party ( Volpe v Canfield, 237 AD2d 282, 283-284 [1997]). "Such a technical defect may be disregarded where, as here, there is no prejudice, and defendant had ample opportunity to be heard on the merits of the relief sought (see, CPLR 2001)" ( id.).
That branch of plaintiff's cross-motion to "restore" is granted. While plaintiff's counsel states that the action was improperly "marked off" the trial calendar because of his purported failure to appear at a compliance conference, a note of issue had not been filed at that time and has not yet been filed. The "marking off" of a pre-note of issue case is not permitted ( see Khaolead v Leisure Video, 18 AD3d 829; Burdick v Marcus, 17 AD2d 388). Further, there was no 90-day notice pursuant to CPLR 3126 and there was no order dismissing the complaint pursuant to 22 NYCRR 202.27 ( see 22 NYCRR 202.27; Klevanskaya v Khanimova, AD3d, 2005 App Div LEXIS 8258, *1). Thus, the cross-motion to "restore" is granted.
That branch of plaintiff's cross-motion to amend the complaint is denied without prejudice. "Although leave to amend a complaint should be freely granted ( see CPLR 3025[a]), the movant must make some evidentiary showing that the proposed amendment has merit, and a proposed amendment that is lacking in merit will not be permitted" ( Ripepe v Crown Equipment Corp., 293 AD2d 462, 463). Here, plaintiff's presumption that defendant misused the escrow account is unsupported by any evidentiary showing, but is instead based upon defendant's statement that "[u]pon Joseph Moreno [sic] appearing at my office, I paid him $40,000.00 on October 23, 2002." However, it cannot be determined that defendant paid Mr. Marino $40,000.00 from the escrow account which was maintained for the purpose of "securing delivery of possession of the premises to the buyers based upon this statement." Plaintiff's additional arguments demonstrates the speculative nature of his claim. For example, plaintiff's counsel argues that defendant failed to honor the escrow agreement by making "a substantial cash payment to his client Mr. Marino of $40,000.00, presumably from defendant's escrow account, as the proceeds from the underlying real estate sale (emphasis added)." Similarly, plaintiff's counsel states "we must assume the $40,000.00 which was allegedly released as cash by defendant to Mr. Marino was the proceeds from the underlying real estate transaction; we must further assume it was derived from the $50,000.00 escrow that defendant was obligated to preserve and maintain for the plaintiff's exclusive benefit for the post-closing possession (emphasis added)." Inasmuch as plaintiff is unable to show any merit to his claim that defendant paid Mr. Marino $40,000.00 from the escrow account, this branch of the cross-motion to amend the complaint is denied without prejudice.
Defendant annexed a written statement from Mr. Marino in which Mr. Marino asserts that he received $40,000.00 in cash from defendant "as distribution from my share of the sale of the premises located at 2234 West Street, Brooklyn, New York," but the statement is not notarized.
In sum, plaintiff's motion is denied with leave to renew following a motion by plaintiff to join the sellers as necessary party defendants. The cross-motion is granted only to the extent of restoring this action to active status.
This constitutes the decision and order of the court.