Opinion
Index Number 21150/ 2008 Motion Seq. No. 3
02-07-2013
AURELIO C. LUNA, as Administrator of the Estate of JOVENCIO C. LUNA, Plaintiff, v. MARIA-MARCIAL AYROSO, Defendant.
Short Form Order Present: HONORABLE
Justice
The following papers numbered 1 to 11 read on this motion by defendant pursuant to CPLR 3212 for summary judgment dismissing the complaint.
+-----------------------------------------------------+ ¦ ¦Papers ¦ ¦ ¦ ¦ ¦ ¦Numbered ¦ +------------------------------------------+----------¦ ¦Notice of Motion - Affidavits - Exhibits ¦1-4 ¦ +------------------------------------------+----------¦ ¦Answering Affidavits - Exhibits ¦5-7 ¦ +------------------------------------------+----------¦ ¦Reply Affirmation ¦8-9 ¦ +------------------------------------------+----------¦ ¦Letter dated September 25, 2012 and ¦ ¦ ¦ ¦10-11 ¦ ¦Replacement Affidavit of Dr. David J. Chun¦ ¦ +-----------------------------------------------------+
Upon the foregoing papers it is ordered that the motion is determined as follows:
In this action for rescission, unjust enrichment, and fraudulent inducement, plaintiff seeks to rescind the sale and conveyance of the real property known as 164-11 Crocheron Avenue, Flushing, New York, from Jovencio Luna, plaintiff's decedent and Severina Ramos, decedent's wife (now deceased), to defendant and to obtain an award of monetary damages and an accounting. Plaintiff alleges that Jovencio Luna and Severina Ramos, his brother and sister-in-law (the Lunas), became physically and mentally incapacitated, and lacked the requisite mental capacity to manage their property, or enter into the sale and conveyance of it to defendant. It is alleged that the Lunas were both suffering from dementia as of August 23, 2002, the date of their execution of the original contract of sale (original contract), and were incompetent to comprehend and understand the nature of the transaction, and to consent to the terms of sale. According to plaintiff, the Lunas were defrauded by defendant who took advantage of their mental incapacity in connection with her purchase of their property, and the collection of rent from tenants at the property. Plaintiff alleges that defendant, aware of the Lunas' infirmities, fraudulently induced them to sell the building, which had dental office space, and two residential units, to her for inadequate consideration. Plaintiff also alleges that defendant took advantage of the Lunas' infirmities by having them execute side letters dated August 23, 2002, advising tenants at the property that the ownership of the building had be en transferred to defendant, effectively immediately, notwithstanding the transfer of title did not take place until August 5, 2003. Plaintiff further alleges that defendant received rent from the tenants prior to the transfer of the deed, and failed to account to the Lunas for the monies. It is alleged that following the execution of the original contract of sale, Jovencio Luna gave plaintiff a durable, general power of attorney dated October 9, 2002, and that Severina Ramos died on August 2, 2005. Plaintiff was allegedly appointed by order of the District Court of Clark County, Nevada, co-guardian of the person and estate of Jovencio Luna and on December 7, 2007, was issued letters of general co-guardianship on December 7, 2007. Following Jovencio Luna's death on May 1, 2009, plaintiff was issued letters of administration for the Estate of Jovencio C. Luna on June 4, 2009 by the Register of Wills, Monroe County, Pennsylvania.
Divina Luna allegedly was appointed general co-guardian of the person and estate of Jovencio Luna and was issued letters of general co-guardianship following a hearing on February 27, 2008.
Defendant served an answer denying the material allegations of the complaint, and interposing various affirmative defenses.
Defendant moves for summary judgment dismissing the complaint asserted against her. She asserts that plaintiff has failed to show the Lunas lacked the requisite mental capacity to sell and convey the property to her or to issue the side letters. Defendant also asserts that plaintiff has failed to allege any fraudulent misrepresentation made by her, or the existence of any fiduciary relationship between her and the Lunas. She additionally asserts that plaintiff authorized the sale of the property, on the terms set forth in the final version of the contract of sale dated February 3, 2003, as modified by a rider (final contract), when he sent a letter dated December 31, 2002 to her transactional attorney.
Plaintiff opposes the motion asserting that when the relevant documents were signed and the transactions were entered into by the Lunas, they were suffering from dementia, which deprived them of their capacity to understand the substance of the documents they signed, as well as the consequences emanating therefrom. Plaintiff denies he authorized the final contract or waived any right to challenge the transaction. Although plaintiff admits he sent the December 31, 2002 letter to defendant's transactional attorney, he claims he did so without the advice of counsel and to avoid incurring legal fees in defense of a threatened suit by defendant for tortious interference with contract.
It is well established that the proponent of a summary judgment motion "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Zuckerman v City of New York, 49 NY2d 557 [1980]).
The competence of a contracting party "is presumed and the party asserting incapacity bears the burden of proving incompetence" (Feiden v Feiden, 151 AD2d 889, 890 [3d Dept 1989]). Furthermore, the mere fact that a contracting party is suffering from a neurological disease, impairment, or disorder such as Alzheimer's disease, dementia, or organic brain syndrome is insufficient to prove that the party lacked the capacity to enter into the contract. Instead, it must be demonstrated that, because of the affliction, the individual was incompetent at time of the challenged transaction (see Matter of Lee, 294 AD2d 366, 367 [2d Dept 2002]; Gala v Magarinos, 245 AD2d 336 [2d Dept 1997]; see also Matter of Mildred M.J., 43 AD3d 1391 [4th Dept 2007]). Moreover, an individual is only deemed to be incompetent to authorize a transaction if his or her mind was so affected as to render him or her wholly and absolutely incompetent to comprehend and understand the nature of the transaction (see Whitehead v Town House Equities, Ltd., 8 AD3d 367, 369 [2d Dept 2004]; Gala v Magarinos, 245 AD2d at 336; Matter of Mildred M.J., 43 AD3d at 1391; Feiden v Feiden, 151 AD2d at 890).
In support of her motion, defendant offers a copy of the pleadings, the transcripts of the deposition testimony of herself and plaintiff, and various documents. These submissions show defendant met Severina Ramos, a dentist, through her ex-husband, also a dentist, who worked in the dental practice of Severina Ramos at the property. After defendant obtained her dental license, she also worked in the same dental practice. In June 1997, defendant and her ex-husband entered into a lease of the dental office at the property with the Lunas, which included a right of first refusal to purchase the property. The submissions show that it was anticipated by the Lunas and defendant, that defendant would purchase the property when the Lunas retired. Defendant testified that after Severina Ramos had a stroke, Severina told her that she intended to retire and inquired if defendant was interested in purchasing the property. Defendant testified that she was unaware of any impairment by Severina Ramos at the time and she told Severina Ramos she was interested. The submissions further show that the Lunas subsequently retired, sold their home and moved to Las Vegas, Nevada but before doing so, discussed the sale of the property with defendant, who proposed to buy the property for $350,000.00 to $400,000.00. Defendant retained an attorney to draft a proposed contract for the sale of the property, which was executed by the Lunas in Las Vegas, Nevada on August 23, 2002 (the original contract). The original contract bears an acknowledgment of a notary public of the State of Nevada, indicating the Lunas and defendant executed it in Nevada.
The submissions additionally show that plaintiff apprised defendant by letter dated November 4, 2002 that he objected to the sale because Jovencio Luna did not "know what [Jovencio was] doing," and he had a power of attorney from Jovencio Luna dated October 9, 2002, appointing him as Jovencio's attorney in fact. Defendant testified that she went to Nevada to speak to Jovencio Luna in person, and that Jovencio Luna became upset when he learned plaintiff had objected to the sale, and indicated he, Jovencio, wanted to proceed with the sale. Plaintiff admitted during his deposition that Jovencio Luna continued to maintain a driver's license, drive and play poker after the sale, and argued with him about the contract, and did not want to take his advice. The submissions further show that defendant offered, by counsel's letter dated November 21, 2002 to rescind the original contract, upon various conditions including that her down payment be returned, with interest thereon, and she be reimbursed for expenses she incurred in connection with the property less rent she collected from other tenants since September 2002. When plaintiff failed to respond, defendant's transactional counsel contacted plaintiff's newly retained attorney by letter dated December 16, 2002, reiterating defendant's offer to rescind the contract and setting forth a breakdown of expenses she incurred to that date. Defendant's transactional attorney then contacted plaintiff, who by this time was no longer represented by counsel, by letter dated December 27, 2002, requesting an answer as to whether plaintiff intended to rescind the sale and return defendant's deposit and expenses or whether he would allow the sale to proceed. Counsel indicated that if he did not hear from plaintiff by January 2, 2003, defendant would be compelled to seek judicial intervention to protect her interests and if necessary, he would be named as an individual defendant based on a cause of action for tortious interference of contract. It was in response to this letter that plaintiff, by letter dated December 31, 2002, relayed Jovencio Luna's willingness to proceed with the matter upon condition that the purchase price be paid "up front," and advised that the transaction could go forward without plaintiff's intervention. Thereafter, the Lunas, who were represented by counsel, entered into the final contract which called for the payment of a $410,000.00 purchase price, with $31,000.00 as a down payment and the balance of the purchase price in the amount of $379,000.00 at closing. Plaintiff testified at his examination before trial that he did not ever have any discussion with Jovencio Luna about the selling price and has never obtained an appraisal of the property, and did not speak to the notary who witnessed the Lunas' signatures on the original contract.
By these submissions, defendant has established a prima facie case that the Lunas understood the nature of the transaction and the consequences of their signing of contract of sale (see Brown v Graziano, 51 AD3d 962, 963 [2d Dept 2008]; Crawn v Sayah, 31 AD3d 367, 368 [2d Dept 2006]). The burden shifts to plaintiff to produce evidentiary proof in admissible form sufficient to establish a material issue of fact which requires a trial of the claim of rescission (see Zuckerman, 49 NY2d 557; Alvarez, 68 NY2d 320).
Plaintiff asserts the terms of the original contract were unconscionable, and the Lunas' agreement to such terms, along with their provision of the side letters to defendant, are prima facie proof the Lunas were incompetent by August 23, 2002. Plaintiff contends that the sales price of $410,000.00 (which was reflected in both the original and final versions of the contract) was well below the property's fair market value. He also contends that the terms in the original contract permitted defendant, in effect, to purchase the property with an unsecured, interest-free loan from the Lunas payable over 4 years in monthly installments, and contained a mathematical discrepancy insofar as the total monthly installment payments did not result in full payment of the purchase price. He further contends that the side letters enabled defendant to collect rent from the tenants at the premises prior to her being the actual owner thereof. Plaintiff also offers an affidavit of Dr. David J. Chun, M.D., a physician, to demonstrate the Lunas were without the competency to make informed decisions in relation to the sale of the property.
The affidavit of Dr. Chun is insufficient to raise a triable issue of fact as to the competency of the Lunas at the time of the subject transactions (see Feiden v Feiden, 151 AD2d at 890). Neither the original nor the replacement affidavit of Dr. Chun, which were notarized outside the state, has the requisite certificate of conformity (see CPLR 2309). In addition, the affidavits fail to specifically set forth that the Lunas were lacking in mental capacity sufficient to enter into the transactions at the time they executed the original and final contracts, and the side letters. Rather, they merely indicate that at some unspecified point in time, the Lunas could not make "informed decisions." The affidavits fail to tie the Lunas' decision-making ability to any time frame. Nor do they set forth the basis for Dr. Chun's opinion. They do not recite the manner in which Dr. Chun treated the Lunas, or whether he conducted any studies or tests as to their mental capacity, or give the dates of his treatment in relation to the dates the original and final contracts were signed. Plaintiff has failed to present any other medical evidence regarding the Lunas' mental capacities.
Plaintiff admittedly is the sole person who shall benefit from this lawsuit in the event the sale and conveyance are set aside, and damages are awarded to the Estate of Jovencio C. Luna. By plaintiff's sending the letter dated December 31, 2002, relaying Jovencio Luna's consent and desire to proceed with the sale, and advising defendant that she could go forward with the transaction without any further intervention on his part, he consented to, or ratified, the sale of the property on the terms contained in the final contract, regardless of whether the Lunas were incompetent to contract to sell their property at such time. Plaintiff, furthermore, has failed to establish duress in connection with his giving his consent or ratification. He has not shown that he was compelled to agree to the sale of the property, or to refrain from taking steps to protect the Lunas from defendant, because of a wrongful threat by defendant which precluded the exercise of his free will (see 805 Third Ave. Co. v M.W. Realty Assoc., 58 NY2d 447, 451 [1983]). There was no actionable economic duress here, since the threat by defendant was to exercise a legal right, i.e. to seek relief in court as to the validity of the original contract of sale (see Precision Mech. v Dormitory Auth. of State of N.Y., 5 AD3d 653, 654 [2d Dept 2004]; see also Gerstein v 532 Broad Hollow Rd. Co., 75 AD2d 292 [1st Dept 1980]). In addition, the final contract removed the term to which plaintiff objected, i.e. payment of the balance of the purchase price over months following the closing of title. Plaintiff furthermore has failed to demonstrate that the purchase price was unconscionably low. The computer printouts attached as an exhibit to plaintiff's opposition papers do not constitute admissible evidence on the issue of the fair market value of the property, and plaintiff has failed to offer any other evidence thereof. To the extent the transaction is not to be rescinded, plaintiff's claim for unjust enrichment, which arises out of the enforceable contract between the Lunas and defendant, also falls (see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]; Accurate Copy Service of America, Inc. v. Fisk Bldg. Associates L.L.C., 72 AD3d 456 [1st Dept 2010]; Aviv Constr. Inc. v Antiquarium, Ltd., 259 AD2d 445 [1st Dept 1999]).
Under such circumstances, plaintiff is estopped from seeking rescission of the contract of sale and deed, and making a claim based upon unjust enrichment due to the alleged lack of competency of the Lunas. Defendant, therefore, is entitled to summary judgment dismissing the causes of action based upon rescission and unjust.
The elements of a cause of action alleging fraud in the inducement are representation of a material existing fact, falsity, scienter, reliance and injury (see Channel Master Corp. v Aluminium Ltd. Sales, 4 NY2d 403, 407 [1958]; Urstadt Biddle Props., Inc. v Excelsior Realty Corp., 65 AD3d 1135 [2d Dept 2009]; Urquhart v Philbor Motors, Inc., 9 AD3d 458, 458-459 [2d Dept 2004]). Moreover, CPLR 3016(b) requires that the circumstances underlying a cause of action based on fraud be stated "in detail" (CPLR 3016[b]; see Scott v Fields, 92 AD3d 666, 668 [2d Dept 2012]). Plaintiff alleges that defendant was able to convince the Lunas that the fair market value of the property was at least $600,000.00 less than the amount than the purchase price. Plaintiff, however, has failed to allege or prove any representation made by defendant to the Lunas regarding the value of the property. Plaintiff testified at his examination before trial that he was not present during any of the conversations between defendant and the Lunas concerning the sale, and never had any discussion with Jovencio Luna about the selling price. Defendant testified at her deposition that she received an estimated value for the property from one of her patients, which she used when making her offer to the Lunas to purchase the property. Plaintiff testified that he has never obtained any appraisal of the property. Thus, plaintiff has failed to state or prove a cause of action based upon fraud in the inducement, and defendant is entitled to summary judgment dismissing the cause of action based upon such claim (CPLR 3211[a][7]; CPLR 3212).
With respect to the cause of action for accounting regarding the monies collected by defendant from tenants at the premises prior to the deed transfer, "[t]he right to an accounting is premised upon the existence of a confidential or fiduciary relationship and a breach of the duty imposed by that relationship respecting property in which the party seeking the accounting has an interest" (Palazzo v Palazzo, 121 AD2d 261, 265 [2d Dept 1986]). Plaintiff has failed to allege or demonstrate a fiduciary relationship existed between the Lunas and defendant. The evidence presented indicates that defendant's relationship with the Lunas was a business relationship, first as an employee of Severina Ramos, then as a tenant and lastly as a purchaser. Nor has plaintiff made a "showing of 'special circumstances' " that could have transformed their business relationship to a fiduciary one (L. Magarian & Co. v Timberland Co., 245 AD2d 69, 70 [1st Dept 1997]). Defendant is entitled to summary judgment dismissing the cause of action for an accounting.
Accordingly, the motion for summary judgment dismissing the complaint is granted. Dated: February 7, 2013
D:48LD
_________________________________
J.S.C.