Opinion
No. 11028 2009.
2012-11-29
Stavros VLACHOS et al., Plaintiffs, v. C. Fred WEIL, et ano., Defendants.
CHARLES J. MARKEY, J.
The following papers numbered 1 to 51 read on this motion by defendant C. Fred Weil pursuant to CPLR 3212 for summary judgment dismissing the complaint, dismissing the cross claims of the co-defendant Azarow for contribution and/or indemnification, and for a conditional order of summary judgment in favor of the defendant/third-party plaintiff Weil against the third-party defendant Freidman; on the motion by third-party defendant Evgeny Freidman s/h/a Evgeny Friedman pursuant to CPLR 3212 and 3211 dismissing the third-party complaint together with any and all cross-claims and/or counter claims; on the motion by defendant Arnold Azarow pursuant to CPLR 3212 for summary judgment dismissing the complaint, for summary judgment on his cross-claims against the defendant Weil and for an order granting the defendant Azarow summary judgment on his cross claims against Freidman; and on the cross motion by the plaintiff for summary judgment and awarding judgment to each plaintiff in the amount of $104,481.60 and impressing a constructive trust in favor of the plaintiffs on any judgment the defendants may secure from the third-party defendant, awarding the plaintiffs legal fees in an amount to be determined by the Court.
+----------------------------------------------------+ ¦Papers ¦Numbered ¦ +-----------------------------------------+----------¦ ¦Notices of Motion–Affidavits–Exhibits ¦1–16 ¦ +-----------------------------------------+----------¦ ¦Notice of Cross Motion–Affidavits–Exhibit¦17–21 ¦ +-----------------------------------------+----------¦ ¦Answering Affidavits–Exhibits ¦22–42 ¦ +-----------------------------------------+----------¦ ¦Reply Affidavits ¦43–51 ¦ +----------------------------------------------------+
Upon the foregoing papers it is ordered that the motion and cross motion are determined as follows:
This action arises out of the stock sale in the following corporations: Bull Consulting, Inc.; Gess Corporation; and Millennium Taximeter Corporation. Some of the corporations ran a business consisting of a gas and repair station and convenience store, and some owned the property. The plaintiffs were equal shareholders in the three corporations. The defendants Azarow and Weil were hired and retained jointly by the plaintiffs to represent them in the sale of stock in the corporations to third-party defendant Evgeny Freidman. The plaintiffs allege that due to the negligence of the defendants they did not receive the correct amount of money that they were owed when they transferred their shares of stock at the closing. They allege that as a result of this malpractice there was a total short fall of $417,926.40 and that each shareholder lost $104,481.60.
The plaintiff originally retained Azarow to represent them in this transaction. Azarow informed them that he was semi-retired and would only agree to represent them if an additional attorney was hired to handle part of the transaction. The plaintiffs agreed and retained Weil. The attorneys for plaintiffs and the attorney for the purchaser negotiated and drafted a Stock Sale Agreement (the Agreement). The Agreement was signed in or about July 2007 and required the purchaser to pay $5,700,000 for the stock in the three Corporations. A deposit of $570,000 was placed in Weil's escrow account. The balance of $5,130,000 was to be paid by the purchaser at the closing.
Prior to the closing the attorneys Weil and Azarow, and the plaintiffs divided their responsibilities at closing. It was agreed that at the closing Weil would be in charge of the financial dealings and that Azarow would not be responsible for the financial aspects of the closing. At the closing the sellers tendered their stock to the purchaser. In exchange for the stock purchaser paid approximately $417,000 less than the purchase price in the Agreement. During the closing the plaintiffs questioned Weil as to whether they were receiving enough money as they felt that they might be getting less then the agreed upon price. Weil stated that there was sufficient funds in his escrow account and that the purchaser was paying the correct amount. Subsequent to the closing, Weil determined that the purchaser underpaid the sellers at the closing. Weil wrote an email to Azarow explaining the shortfall:
As we have previously discussed, this will confirm that the shortfall of $417,926.43, in proceeds due to our clients, was my error as I was in charge, at the closing, of making the appropriate adjustments and ensuring that the correct amount due our clients was delivered to them. As you also know, I made this clear to our clients.
After realizing the shortfall, Weil attempted to contact the attorney for the purchaser to resolve the dispute, but the attorney advised that he was no longer representing the purchaser. Weil then contacted the purchaser and sought to correct the underpayment, but the purchaser has refused to meet or pay the sellers any more money.
The plaintiff sellers did not sue the purchasers, but instead commenced this action against their attorneys alleging legal malpractice.
First, the cross motion by the plaintiffs, though untimely, will be considered as it was made on nearly identical grounds as the timely motions made by the moving defendants Azarow and Weil ( see Ellman v. Village of Rhinebeck, 41 AD3d 635 [2007];Grande v. Peteroy, 39 AD3d 590 [2007] ).
A party moving for summary judgment must show by admissible evidence that there are no material issues of fact in controversy and that they are entitled to judgment as a matter of law ( see Alvarez v. Prospect Hosp., 68 N.Y.2d 320 [1986];Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985] ). The elements a plaintiff must prove to maintain a cause of action for legal malpractice are that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the breach of duty proximately caused actual and ascertainable damages (Reisner v. Litman & Litman, P.C., 95 AD3d 858 [2012] ). Here, the plaintiffs established that but for the negligence of the attorney Weil they would have received the full amount of the purchase price at the closing. The evidence submitted established that Weil was in charge of the finances at the closing of the deal and his negligence in his reconciliation and legal accounting caused them to receive a shortage in funds at the closing.
The opponent of a summary judgment motion must present admissible evidence that is sufficient to raise an issue of fact ( see Zuckerman v. City of New York, 49 N.Y.2d 557 [1980] ). In opposition, the defendant Weil failed to raise a triable issue of fact. The argument that the acts of the plaintiff's chief financial officer was an intervening act that cut off the but for causation is without merit. While Stravros Vlachos assisted the defendant Weil by supplying adjustments as to the inventory, the responsibility to do the calculations was ultimately on the defendant Weil. In fact, a discrepancy was brought up by Stavros Vlachos, but was dismissed by the defendant Weil. Additionally, the argument that the acts of the purchaser was an intervening act that cuts off proximate cause is also without merit. Though the purchaser paid an amount less than the correct price, he paid what he was told by the attorneys at the closing to pay. He thus paid what he was asked to pay and but for the negligence by the attorney Weil in his calculation the sellers would have been paid the correct amount. The action of the purchaser in refusing to correct this mistake was not an intervening act and does not relieve the defendant Weil of the consequences of his negligence ( see Ableco Fin. LLC v. Hilson, 81 AD3d 416 [2011];Winters v. Dowdall, 63 AD3d 650 [2009];Garten v. Shearman & Sterling LLP, 52 AD3d 207 [2008] ).
The complaint, however, must be dismissed against the defendant Azarow. The evidence established that the defendant Azarow did not handle the financial aspects of the closing. While the defendant Azarow may have had a supervisory role in the beginning of the transaction, by the time of the closing he was not supervising Weil's work and they each had separate duties. The argument put forth by plaintiffs in their cross motion, though not contained in the complaint, that the defendant Azarow was negligent because he did not have a survival clause in the contract for the sale of the stock is without merit. Here, the merger doctrine does not apply and survival language was not necessary. The provisions of a contract for the sale of land are merged in the deed at the time of closing and as a result claims arising from the contract of sale are extinguished upon the closing of title except where there is a clear intent that a particular provision will survive delivery of the deed ( see Novelty Crystal Corp. v. PSA Institutional Partners, L.P., 49 AD3d 113 [2008];Dourountoudakis v. Alesi, 271 A.D.2d 640 [2000];Goldsmith v. Knapp, 223 A.D.2d 671 [1996] ). The plaintiffs and the third-party defendant Friedman argue that the merger doctrine applies. Here, however, no deed was transferred. While property was part of the sale, as the corporations that were sold owned properties, there was no deed transferred and thus the merger doctrine does not apply. The fact that property transfer tax was paid still does not change the fact that no deed was transferred and there was no merger. Therefore, the plaintiffs were not harmed by the lack of the survival language as they did have recourse from the purchaser after the closing.
The court next turns to the third-party complaint. The third-party complaint must be dismissed. The defendant Weil does not have a cause of action against the purchaser Freidman. Inasmuch as the defendant Weil is being sued for his own negligence he cannot maintain a cause of action for indemnification ( see Nesterczuk v. Goldin Mgt., Inc., 77 AD3d 800 [2010];Barry v. Hildreth, 9 AD3d 341 [2004] ). The cause of action for contribution must also be dismissed. CPLR 1401 does not permit contribution for economic loss resulting from breach of contract ( see Board of Educ. of Hudson City School Dist. v. Sargent, Webster, Crenshaw & Folley, 71 N.Y.2d 21 [1987] ). Here, the underlying wrong committed by the third-party defendant was that he did not pay the agreed upon purchase price. This amounts to a breach of contract which caused economic loss to the plaintiffs. Therefore, no cause of action for contribution is allowed.
Accordingly, the branches of the motion by defendant Arnold Azarow dismissing the complaint and all cross claims are granted and the complaint and all cross claims are dismissed. The branches of the motion by defendant Arnold Azarow for summary judgment on his cross claims against the defendant Weil and third-party defendant Freidman are denied as moot.
The motion for summary judgment by the third-party defendant Evgeny Freidman is granted and the third-party complaint is dismissed.
The motion by the defendant C. Fred Weil for summary judgment dismissing the complaint and for a conditional order of summary judgment in his favor against the third-party defendant is denied.
The branch of the cross motion for summary judgment by the plaintiff for summary judgment against the defendant Azarow is denied. The branch of the cross motion for summary judgment by the plaintiff for summary judgment against the defendant Weil is granted. The branch of the cross motion by the plaintiff for a constructive trust is denied.