Opinion
2014-0464
05-09-2016
Jimmy J. Bagley, KARL B. CROPPER, CHARLES WILSON d/b/a TRIPLE PLAY PROMOTIONS, Plaintiffs, v. Molly McKee, LLC, MOLLY MCKEE REALTY CORP., FIRST NIAGARA FUNDING, INC., THEODORE SANNELLA, and JESSE BAILEY, Defendants.
COUNSEL FOR PLAINTIFFS D/B/A TRIPLE PLAY PROMOTIONS: JIMMY J. BAGLEY, PRO SE 502 WILLIAM REUBEN DRIVE ENDICOTT, NY 13760 KARL B. CROPPER, PRO SE 6 CHAPEL PLACE BINGHAMTON, NY 13902 CHARLES WILSON, PRO SE 100 ROBERT STREET BINGHAMTON, NY 13902 COUNSEL FOR DEFENDANTS: WOODS OVIATT GILMAN, LLP BY:WARREN B. ROSENBAUM, ESQ., OF COUNSEL 700 CROSSROADS BUILDING 2 STATE STREET ROCHESTER, NY 14614
COUNSEL FOR PLAINTIFFS D/B/A TRIPLE PLAY PROMOTIONS: JIMMY J. BAGLEY, PRO SE 502 WILLIAM REUBEN DRIVE ENDICOTT, NY 13760 KARL B. CROPPER, PRO SE 6 CHAPEL PLACE BINGHAMTON, NY 13902 CHARLES WILSON, PRO SE 100 ROBERT STREET BINGHAMTON, NY 13902 COUNSEL FOR DEFENDANTS: WOODS OVIATT GILMAN, LLP BY:WARREN B. ROSENBAUM, ESQ., OF COUNSEL 700 CROSSROADS BUILDING 2 STATE STREET ROCHESTER, NY 14614 Ferris D. Lebous, J.
Defendants Molly McKee, LLC, Molly McKee Realty Corp., Theodore Sannella and Jesse Bailey (hereinafter "defendants McKee") move for summary judgment dismissing the complaint.
Plaintiffs Jimmy J. Bagley, Karl B. Cropper, Charles Wilson d/b/a Triple Play Promotions (hereinafter collectively "plaintiffs") oppose the motion.
The court heard oral argument on April 8, 2016.
BACKGROUND
This action arises from negotiations between these parties for a commercial lease by which plaintiffs agreed to rent commercial space from defendants McKee to operate a banquet hall at 1 Delaware Avenue in the Village of Endicott, New York.
Defendants McKee purchased the subject property at a foreclosure sale on May 26, 2010 consisting of 76 residential apartment units and a two story commercial area. On March 26, 2011, defendants McKee obtained a $950,000 mortgage loan from First Niagara Funding, Inc. The loan application from defendants McKee contained a Certificate of Rent Roll to First Niagara which does not contain any reference to the commercial area at issue here.
In the summer of 2011, the parties began negotiations for the lease of the commercial space. It is undisputed that the proposed lease was drafted by Molly McKee LLC as landlord and forwarded to plaintiffs to sign on behalf of Triple Play Promotions as tenant and is dated August 1, 2011 (hereinafter "Proposed Lease"). It is further undisputed that the Proposed Lease is signed by each of the plaintiffs, but was never signed by the landlord, Molly McKee LLC.
The Proposed Lease expressly states that the "Tenant may use the Premises as a Banquet Hall. No other uses shall be allowed (Proposed Lease, § 8.1). The Proposed Lease further states that the "Tenant, at Tenant's sole expense, shall obtain all licenses or permits which may be required for the conduct of Tenant's business...." (Proposed Lease, § 8.2). Thus, in August 2011, the parties sought a permit from the Town of Union Planning Department for a permit to operate a banquet hall. According to defendant member Jesse Bailey, a shareholder and managing member of Molly McKee, LLC, the parties did not anticipate any problem in obtaining the permit, but soon learned that neighbors had complained regarding the prior commercial tenant. Mr. Bailey avers that plaintiffs, not Molly McKee, LLC, were the applicants for the permit, although Mr. Bailey avers he was present for the meeting between plaintiffs and Town officials (Bailey Affidavit, ¶ 8). Mr. Bailey further avers that "Molly McKee, LLC, engaged its attorneys to assist Plaintiffs, but were unsuccessful" (Bailey Affidavit, ¶ 9).
To the surprise of the parties, on June 20, 2012, the Town Planning Department determined that a banquet hall was not a permitted use under the zoning law. More specifically, the Town stated that "[i]n the opinion of the Planning Board the definition of indoor recreation does not include the proposed banquet and dance hall facility as permitted uses, and therefore the applicant, Molly McKee LLC, would need to request a Use Variance for their proposal" (Bailey Aff, Exhibit E). It appears that neither party pursued a use variance.
At some unidentified point, defendants McKee gave possession of the premises to plaintiffs. The complaint alleges the plaintiffs began making various repairs and improvements at a cost of $40-50,000 (Complaint, ¶¶ 24 & 30). Additionally, plaintiffs aver that they paid a $2,500 deposit , paid $600 for liability insurance, and $3,000 for business consultants (Complaint, ¶¶ 19, 20 & 21). According to plaintiffs they performed the following repairs and improvements at the premises "paint interior, decorate interior to needs of business operation, kitchen operational up and running. Install new lighting" (Exhibit D to Proposed Lease).
The complaint states that in August 2012, defendants McKee refunded the sum of $1,600 to plaintiffs.
Despite their possession of the premises, defendants McKee aver that plaintiffs never paid any rent (Bailey Aff, ¶ 10).
It is unclear what, if anything, transpired between the parties from the date of the Planning Board's denial on June 20, 2012 until the commencement of this action on February 25, 2014. Plaintiffs commenced this action with the filing of a Summons & Complaint alleging five causes of action, four of which are against the defendants McKee alleging breach of contract, fraud, unjust enrichment, and constructive trust. On March 28, 2014, defendants McKee interposed a Verified Answer with affirmative defenses. DISCUSSION
The fourth cause of action was against First Niagara Funding, Inc. which was dismissed by Amended Order dated June 16, 2014. The causes of action against defendants McKee are numbered 1, 2, 3, and 5.
A party moving for summary judgment must make a prima facie case by presenting evidentiary facts showing entitlement to judgment as a matter of law, offering sufficient evidence to demonstrate the absence of any material issue of fact (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). Once the burden shifts, the opposing party must present evidentiary proof in admissible form sufficient to establish the existence of a factual issue (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). The court must accept the non-moving party's evidence as true and grant him/her every favorable inference (Hourigan v McGarry, 106 AD2d 845 [3d Dept 1984], lv dismissed 65 NY2d 637 [1985]). Moreover, it is well settled that the court has the authority to search the record to determine whether any cognizable legal theory applies (Perkins v Kapsokefalos, 57 AD3d 1189 [3d Dept 2008], lv denied 12 NY3d 705 [2009]).
Defendants McKee's motion
In support of their motion, defendants McKee have submitted, among other things, an Affidavit of Jesse Bailey, a shareholder and managing member of Molly McKee, LLC, together with various exhibits relating to the loan from First Niagara including the Certificate of Rent Roll, the Mortgage and Security Agreement, and the Assignment of Leases and Rents. After oral argument, defendants' counsel submitted a letter brief dated April 11, 2016. Plaintiffs' opposition
Before proceeding to a discussion of the legal argument for each cause of action alleged, it will be more efficient for the court to review plaintiffs' opposing papers.
Each of the plaintiffs have submitted their own affidavit swearing that there are questions of fact on all issues, together with exhibits consisting of four affidavits from various witnesses dated from mid-2014 that plaintiffs claim help establish questions of fact. The court finds that each of plaintiffs' affidavits contain only speculative and conclusory allegations (Apache-Beals Corp. v International Adjusters, Ltd., 59 AD2d 1032 [4th Dept 1977], affd 46 NY2d 888 [1979]). Plaintiffs have not made any legal arguments in opposition to defendants McKee's motion.
The court will address the merits of these witness affidavits setting aside that they are all somewhat outdated as having been sworn to in mid-2014.
With respect to the witness affidavits, the first affidavit is from Rodney Parker, the former property manager for defendants McKee. Mr. Parker avers that on behalf of defendants McKee he assisted in leasing property to plaintiffs. Mr. Parker's affidavit is based upon "the best of [his] recollection" and "upon information and belief" regarding the terms of the Proposed Lease and promises allegedly made by defendants McKee therein such as conducting repairs and obtaining governmental approvals. In the first instance, the court finds that Mr. Parker has no first hand knowledge of the Proposed Lease that is before the court. Moreover, the language in the Proposed Lease contradicts Mr. Parker's recollections with respect to both the obligation for repairs and the timing of the McKee-Niagara loan. The court finds that Mr. Parker's affidavit has no probative value.
The second witness affidavit is from Mathew Ronnie, a carpenter who avers that he was employed by K & C Contracting from October 2010 through March 2011 and performed various work on the subject property. Mr. Ronnie does not have any first hand knowledge of the Proposed Lease but states his recollections about what plaintiffs told him while he was working on the premises. The court finds that Mr. Ronnie's affidavit has no probative value.
The third witness affidavit is from Steven Engler, the owner and operator of Engler and Company, a business consulting firm. Mr. Engler avers that he was hired by plaintiffs to organize and license the banquet hall on the subject property including applying for a liquor license, etc. Mr. Engler states that he observed plaintiffs commence repairs on the premises. Mr. Engler also repeats various recollections about what plaintiffs told him about the terms of the Proposed Lease. The court finds that Mr. Engler's affidavit has no probative value.
The fourth witness affidavit is from Jamar Johnson, the owner and operator of Jrama Entertainment, a special events marketing company hired by plaintiffs. Mr. Johnson avers that he would have booked special events for the proposed banquet hall that would have generated $100,000+ annually for plaintiffs. Mr. Johnson also repeats various recollections about what plaintiffs told him about the terms of the Proposed Lease. The court finds that Mr. Johnson's affidavit has no probative value.
The court finds that the Parker, Ronnie, Engler and Johnson affidavits contain only speculative and conclusory allegations and have no probative value (Apache-Beals, 59 AD2d 1032). 1. Breach of Contract
Defendants McKee argue that the first cause of action for breach of contract is barred by the statute of frauds, by the integration clause in the Proposed Lease, and because plaintiffs' intended use of the premises was deemed illegal.
The statute of frauds is contained in General Obligations Law § 5-703(2) and states, in pertinent part, as follows:
[a] contract for the leasing for a longer period than one year, or for the sale, of any real property, or an interest therein, is void unless the contract or some note or memorandum thereof expressing the consideration, is in writing, subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing.
In sum, this statutory provision mandates that any lease for longer than one year must be in writing. Here, the Proposed Lease was for a term of three years, renewable thereafter. The court finds that defendants McKee have satisfied their burden of establishing that this Proposed Lease is barred by the statute of frauds.
In opposition, plaintiffs have not submitted any proof establishing their entitlement to any exception to the statute of frauds. That said, the court will search the record to determine whether there are any viable arguments warranting an exception to the statute of frauds. Two exceptions exist to the statute of frauds, namely partial performance or promissory estoppel. Partial performance is inapplicable here because plaintiffs seek a money judgment, not specific performance (Stainless Broadcasting Co. v Clear Channel Broadcasting Licenses, L.P., 58 AD3d 1010, 1012-1013 [3d Dept 2009]).
With respect to promissory estoppel, the doctrine may prevent a party from asserting the statute of frauds as a defense "[t]o prevent the infliction of unconscionable injury and loss upon one who has relied on the promise of another [citations omitted]" (American Bartenders School v 105 Madison Co., 59 NY2d 716, 718 [1983]). That said, however, when the alleged injury represents nothing more than that which flowed naturally from the nonperformance of a business deal, the application of the exception is not proper (American Bartenders School, 91 AD2d 901 [1st Dept 1983], affd 59 NY2d 716; Country-Wide Leasing Corp. v Subaru of Am. Inc., 133 AD2d 735 [2d Dept 1987], lv denied 70 NY2d 615 [1988] [mere failure to obtain uncertain prospective benefit does not rise to unconscionable injury]; Chrysler Credit Corp. v Kosal, 132 AD2d 686 [2d Dept 1987] [commercial transaction by business people in commercial setting]). Stated another way, the court finds that the monetary damages alleged by plaintiffs, even if true, "[d]o not rise to a level of unconscionability warranting application of equitable estoppel [citation omitted]" ( American Bartenders School, 59 NY2d at 718]).
In any event, even if one of the exceptions to the statute of frauds were to have applied and allowed the breach of contact claim to proceed, the breach of contract cause of action would still be subject to dismissal because it is based upon an illegal contract (Vittoria v Silver, 284 AD 979 [2d Dept 1954]). It is undisputed that the Town deemed the use of the premises as illegal, meaning that the application of the doctrine of promissory estoppel is not proper and the breach of contract claim would fail.
In view of the foregoing, the court finds that the complaint fails to state cause of action for breach of contract. 2. Fraud
Defendants McKee argue that the second cause of action for fraud is not valid because it is based on an alleged breach of contract.
In an action to recover damages for fraud, "[t]he plaintiff must prove a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury [citations omitted]" (Lama Holding Co. v Smith Barney, 88 NY2d 413 [1996]). However, it is well-settled that New York generally does not recognize a cause of action for fraud based upon breach of contract (Shlang v Bear's Estates Dev. of Smallwood, NY, 194 AD2d 914 [3d Dept 1993]).
To the extent that plaintiffs' fraud cause of action is based upon a breach of contract it must fail.
As to plaintiffs' allegations that the defendants McKee fraudulently promised it would obtain approval by the Town for the use of the premises as a banquet hall, the court finds these arguments to be without merit (Complaint, ¶ 42). The Proposed Lease states that obtaining permits is the tenant's responsibility, not the landlord's (Proposed Lease § 8.2).
"Tenant, at Tenant's sole expense, shall obtain all licenses or permits which may be required for the conduct of Tenant's business within the terms of this Lease (including but not limited to a ____license), or for the making of repairs, alterations, improvements, or additions to be performed by or at the request of Tenant" (Proposed Lease, § 8.2).
The court finds that the complaint fails to state a cause of action for fraud. 3. UNJUST ENRICHMENT/CONSTRUCTIVE TRUST
Defendants McKee argue that the third and fifth causes of action must fail because they are based upon the mistaken allegation that defendants McKee used the Proposed Lease to obtain a mortgage loan from First Niagara. There is significant overlap in the allegations regarding these causes of action so the court will address them jointly as have the parties.
The complaint alleges that defendants McKee were unjustly enriched by using the Proposed Lease to obtain a $950,000 loan from First Niagara (Complaint, ¶ 56). The complaint also alleges that a constructive trust should be imposed due to the foregoing upon any remaining proceeds of the mortgage loan (Complaint, ¶¶ 74-77).
The elements for unjust enrichment are: (1) the other party was enriched; (2) at plaintiff s expense; and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered (PJI 4:2; Baron v Pfizer, Inc., 42 AD3d 627 [3d Dept 2007]).
The elements to establish a constructive trust are: (1) a confidential or fiduciary relation; (2) a promise; (3) a transfer in reliance thereon; and (4) unjust enrichment (Sharp v Komalski, 40 NY2d 119 [1976]).
With respect to the mortgage loan, defendants McKee have come forward with documentary proof establishing that defendants McKee obtained a $950,000 loan from First Niagara on March 16, 2011, which is five months before plaintiffs signed the Proposed Lease. The proof further establishes that the commercial space which is the subject of the Proposed Lease was not even listed on the Certificate of Rent Roll submitted by the defendants McKee to First Niagara. In view of the foregoing, defendants McKee have satisfied their burden of establishing entitlement to judgment as a matter of law, shifting the burden to plaintiffs. In opposition, plaintiffs have submitted no evidentiary proof to dispute this documentary evidence. Thus, plaintiffs' unjust enrichment and constructive trust causes of action are dismissed to the extent they argue that the Proposed Lease was a scam for defendants to obtain the mortgage loan from First Niagara.
Separate and apart from the arguments involving the mortgage loan, the complaint also alleged the existence of a unjust enrichment cause of action in terms of various expenses incurred by plaintiffs which they argue will unjustly enrich defendants McKee.
More specifically, the complaint alleges that plaintiffs incurred $40-50,000 in repairs, $3,000 in consultant fees, and start up expenses (Complaint ¶ 57), as well as causing plaintiffs to incur business and loss of income (Complaint, ¶ 58). Only the issue of repairs and improvements could conceivably form the basis for a claim of unjust enrichment.
With respect to various repairs and improvements, defendant McKee's moving papers did not address these causes of action in that regard. During oral argument the court raised the issue of unjust enrichment in relation to repairs and/or improvements that plaintiffs may have made to the premises. During oral argument, plaintiff Charles Wilson stated that he may have some receipts regarding various repairs but that much of the work was plaintiffs' sweat equity.
During oral argument, although somewhat unclear, Mr. Wilson stated that he and Mr. Bailey may have made some oral agreement for repairs to be conducted to save them both money. --------
After oral argument, defendants McKee submitted a letter on this issue highlighting a provision in the Proposed Lease, § 9.1, which states that any improvement that Tenant may make during the term became Landlord's property upon the expiration or other termination of the Lease. Plaintiffs submitted their own post-argument letter arguing that said provision is inapplicable because the Proposed Lease never expired or otherwise terminated.
The Proposed Lease contains several relevant provisions, namely sections 9.2 and 9.3 and Exhibit B. Exhibit B of the Proposed Lease states as follows:
EXHIBIT B
Tenant's Work
Paint interior, decorate interior to needs of business operation, kitchen operational up and running. Install new lighting.
Landlord's work
Correct main entry window that is cracked, install exterior (2) side window lights, Back rooms behind stage will be repaired with drywall and finished with paint. Sub floor in middle room, cooler, kitchen area to be replaced. This work will be started on when executed lease, insurance certificate and security deposit is completed by no later than Monday July 18, 2011. (Proposed Lease, Exhibit B).
In section 9.2, it states "upon taking possession, the Tenant contemplates performing the work described on Exhibit B annexed hereto (the "Tenant's Work"). The Proposed Lease goes on to detail the information the plaintiffs should submit regarding any "Tenant's Work" together with a procedure for approval by defendants McKee. Notably, there is no contractual provision indicating the value of the Tenant's Work or for defendants McKee's liability to plaintiffs for any such work performed if the Proposed Lease were not valid.
Further, even assuming that plaintiffs' occupancy of the premises was month-to-month tenancy, there is simply no evidence of any promise on the part of defendants McKee or any facts to establish liability on defendants McKee for repairs and/or improvements performed (Mulford v Borg-Warner Acceptance Corp., 115 AD2d 163 [3d Dept 1985]).
The court finds that the complaint fails to state cause of action for unjust enrichment and constructive trust.
Any remaining arguments not addressed herein are found to be without merit.
CONCLUSION
In view of the foregoing, the court finds that defendants McKee's motion for summary judgment should be granted and the complaint is dismissed in its entirety.
This constitutes the order of the court. Dated:May 9, 2016 Binghamton, New York
s/ Ferris D. Lebous
Hon. Ferris D. Lebous
Justice, Supreme Court
The court considered the following papers which are on file in the Broome County Clerk's Office:
1.Notice of Motion for Summary Judgment dated December 2, 2015;
2.Affidavit of Jesse Bailey dated sworn to November 24, 2015 with exhibits; 3.Attorney Affirmation of Warren B. Rosenbaum, Esq. dated December 1, 2015 with exhibits; 4.Defendants McKee's Memorandum of Law dated December 1, 2015; 5.Defendants McKee's Reply Memorandum of Law dated March 9, 2016; 6.Letter dated April 11, 2016 Warren B. Rosenbaum, Esq.; 7.Affidavit in Opposition to Motion for Summary Judgment of Jimmy J. Bagley sworn to February 19, 2016, with exhibits consisting of Affidavit of Rodney Parker sworn to May 30, 2014; Affidavit of Mathew Ronnie sworn to July 30, 2014; Affidavit of Steven Engler sworn to July 30, 2014; and Affidavit of Jamar Johnson sworn to July 28, 2014; 8.Affidavit in Opposition to Motion for Summary Judgment of Karl B. Cropper sworn to February 19, 2016 with exhibits noted above; 9.Affidavit in Opposition to Motion for Summary Judgment of Charles Wilson sworn to February 19, 2016 with exhibits noted above; and 10.Letter dated April 19, 2016 from plaintiffs with exhibits.