Opinion
No. 127.
Argued June 5, 2008.
decided July 1, 2008.
APPEAL, by permission of the Appellate Division of the Supreme Court in the Second Judicial Department, from an order of that Court, entered July 10, 2007. The Appellate Division (1) affirmed an order of the Supreme Court, Nassau County (Zelda Jonas, J.), which had granted defendant's motion for leave to renew and reargue and, upon reargument, denied that branch of plaintiff's prior motion for summary judgment dismissing defendant's first and second affirmative defenses and granted that branch of defendant's prior cross motion for leave to amend his answer by interposing three affirmative defenses and two counterclaims, (2) dismissed an appeal from an order of that court which had, sua sponte, adjourned defendant's motion for summary judgment, and (3) modified, on the law, an order of that court (op 2005 NY Slip Op 30102[U]), which had granted defendant's motion for summary judgment dismissing the complaint. The modification consisted of denying defendant's motion for summary judgment. The Appellate Division affirmed the order as modified. The following question was certified by the Appellate Division: "Was the opinion and order of this Court dated July 10, 2007, properly made?"
G.K. Alan Assoc., Inc. v Lazzari, 44 AD3d 95, affirmed.
Law Office of Vincent D. McNamara, East Norwich ( Vincent D. McNamara, Anthony Marino, George R. Gridelli and Donald N. Mackenzie of counsel), for appellant.
Moss Kalish, PLLC, New York City ( Mark L. Kalish and David B. Gelfarb of counsel), for respondent.
Before: Chief Judge KAYE and Judges CIPARICK, GRAFFEO, READ, SMITH, PIGOTT and JONES concur in memorandum.
OPINION OF THE COURT
The order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative.
Harvey and Pearl Katzenberg are sole shareholders of plaintiff G.K. Alan Assoc., Inc. (Alan), a corporation that brokered insurance for a number of companies in the commercial kitchen equipment sale and repair business (the Acme Group). On March 21, 2001, Harvey Katzenberg, then also an officer and shareholder of various Acme Group companies, sold his interest in the companies to defendant, Derval Lazzari, for $1.9 million, payable over 15 years, and the assumption of a $175,000 loan obligation. That same day, Lazzari entered into an agreement with Alan whereby it (concededly, Harvey Katzenberg) would provide consulting services to the purchased companies for 15 years and Lazzari would pay Alan $25,000 per month, for a total of $4.5 million. The consulting agreement contained an acceleration clause in the event of Lazzari's sale of his interest and "required" that Katzenberg work no more than 12 days a month; Lazzari, however, waived any defenses to payment based on nonperformance.
Lazzari claims that he subsequently discovered that Alan had been submitting incorrect information about the Acme Group's payroll classifications and vehicle and equipment storage in order to lower insurance premiums, that Alan overbilled the Acme Group for insurance, and that it kept a third of the savings on premiums for itself. Relying on this alleged fraud and embezzlement, Lazzari repudiated the consulting agreement, and Alan sued for breach. Although the trial court dismissed plaintiff's claims, sustaining only defendant's counterclaims for rescission, the Appellate Division determined that triable issues of fact precluded summary judgment for either party.
We agree. Two core questions — whether the consulting agreement was, as plaintiff contends, actually intended as an additional compensation stream for the stock purchase, effectuated through a services agreement to avoid taxation, and to what extent defendant (who had worked for the Acme Group for more than a decade before purchasing the interest in issue) had knowledge of the ongoing insurance fraud or embezzlement — involve factual issues for proper resolution at trial.
Order affirmed, etc.