Opinion
2645/04.
Decided May 10, 2010.
Brian Muldrew, Esq., Katten, Muchin, Rosenman, LLP, New York, NY, and Andrea Snelson from The Vera Institute of Justice, Inc., Brooklyn, NY, Atty for Third-Party Plaintiffs.
Richard J. Soleymanzadeh, Esq., Garden City So., NY., Atty for Third-Party Defendant.
By notice of motion dated March 20, 2009, under motion sequence number twenty two, third-party plaintiffs GSC and Jane Doe move pursuant to CPLR § 3212 for an order granting them 1) summary judgment against third-party defendants Brooklyn Heights Management Inc., New Horizon Equities Corp., and Kobe Manor rescinding the September 15, 2003 agreement (the "BHM Agreement") that purported to transfer the property owned by Ms. Jane Doe located at a specific building on Schermerhorn Street, Brooklyn, New York (the "subject property") as void on the ground of unconscionability and 2) dismissal of third-party defendants' counterclaims.
On September 29, 2008, this court granted third-party plaintiffs' motion for a protective order pursuant to CPLR § 3103, limiting the use and disclosure of Jane Doe's medical psychiatric records, and requiring that all parties sign a confidentiality agreement relating thereto. In accordance with the purpose of the protective order and in an effort to preserve the confidentiality of the natural person the court does not refer to the specific address of the property and refers to the natural person third-party plaintiff as Jane Doe and the corporation which Jane Doe owns as GSC as placeholder for her real name and for the real name of the corporation throughout the decision contained herein as well as in the caption.
By notice of motion filed on September 30, 2009, under motion sequence number twenty one, the third-party defendants sought an order granting, among other things, summary judgment finding that Jane Doe was competent to execute the BHM agreement and ordering specific performance of the agreement.
By order of this court dated November 23, 2009, third-party defendants' motion for summary judgment under motion sequence number twenty one was denied. By the same order this court also denied third-party plaintiffs' instant summary judgment motion under sequence number twenty two.
Upon reconsideration and of its own volition, this court, by order dated December 21, 2009, vacated so much of the order dated November 23, 2009, which denied the third-party plaintiff's motion for summary judgment and reserved decision on that matter while leaving the balance of the order as is. The instant decision and order applies to the reserved portion of motion sequence number twenty two.
BACKGROUND
On or about January 27, 2004, Simar Holding Corp. ("Simar") commenced an action in this Court (the "Simar Action" bearing index No. 2645/04) by serving a summons, complaint and a notice of pendency upon Jane Doe and GSC. By order of this court dated May 5, 2009, the Simar action was discontinued.
On or about November 5, 2004, Jane Doe and GSC served a third-party summons and third-party complaint against third-party defendants Brooklyn Heights Management, Inc., New Horizons Equities Corp., and Kobe Manor. Jane Doe is an individual and the sole shareholder of GSC, a domestic corporation. Brooklyn Heights Management, Inc, and New Horizons Equities Corp are domestic corporations that are affiliated with each other and engaged in the business of real estate investing. Kobe Manor is the president of both corporations. The third-party complaint contains sixty four allegations of fact in support of four causes of action. The first cause of action seek rescission of the BHM agreement due to unconscionability. The second cause of action seek rescission of the BHM agreement due to the incompetence of Jane Doe. The third cause of action sounds in fraud. The forth cause of action is pursuant to Article 15 of the RPAPL seeking to quiet GSC title to the subject property.
Issue was joined by third-party defendants answer and counterclaims, dated January 6, 2005. Third-party plaintiffs answered third-party defendants' counterclaims on or about January 28, 2005, by asserting, among other things, that the contract between third-party plaintiffs and third-party defendants was void for unconscionability and that the counterclaims were barred by the doctrine of unclean hands.
On June 11, 2008, part 76G of this court appointed the Vera Institute of Justice as Guardian of Jane Doe's property pursuant to Article 81 of the Mental Hygiene Law. The appointing court found that Jane Doe could neither manage her property interests nor understand the consequences of this inability. A note of issue was filed January 21, 2009.
THE PLEADINGS
The third-party complaint contains sixty five allegations of fact in support of four causes of action. The first cause of action is to rescind the BHM agreement based on unconscionability. The second cause of action is to rescind the BHM agreement based on incompetency. The third cause of action is for fraud. The fourth cause of action is one to quiet title in the subject premises pursuant to RPAPL Article 15.
Third-party defendants' answer to the third-party complaint contains eighty five allegations of fact in support of twelve affirmative defenses and nine counterclaims. The first affirmative defense is termed "waiver, laches, ratification, and/or estoppel". The second affirmative defense is failure to state a claim upon which relief can be granted. The third is unclean hands. The fourth is a restatement of the second. The fifth is that third-party plaintiffs' fraud claim was not stated with sufficient particularity. The sixth and seventh affirmative defenses assert that third-party plaintiff's lack standing. The eighth is termed "abuse of process". The ninth is that plaintiffs' damages were caused by her own acts or omissions. The tenth is that the plaintiffs failed to perform and honor obligations under the contract in dispute. The eleventh is that third-party plaintiffs have failed to act in good faith. The twelfth and final affirmative defense is that third-party plaintiffs' claims are barred by the parole evidence rule. The first counterclaim is for fraud and seeks punitive damages based on the alleged fraud. The second counterclaim is for equitable liens against the subject property based upon the doctrine of laches. The third counterclaim is for equitable liens against the subject property premised on the doctrine of equitable subrogation. The fourth counterclaim is for equitable liens based upon the doctrine of amelioration. The fifth counterclaim is for equitable liens to avoid unjust enrichment. The sixth counterclaim is for breach of contract. The seventh counterclaim is for breach of the implied contractual covenant of good faith. The eighth counterclaim is for specific performance. The ninth counterclaim is for punitive damages for breaching the contract.
Third-party plaintiffs' reply to third-party defendants' counterclaims contains fifty six allegations of fact in support of six affirmative defenses. The first affirmative defense is that the counterclaims are barred by the doctrine of unclean hands. The second is that any damages allegedly suffered by third-party defendants were caused by their own intentional acts and or culpable conduct and without fault of GSC or Jane Doe. The third affirmative defense is incompetency. The fourth affirmative defense is unconscionability. The fifth affirmative defense is that third-party defendants have failed to perform their duty of good faith and fair dealing in negotiating their terms. The sixth affirmative defense is fraud.
MOTION PAPERS
Third-party plaintiffs' motion papers consist of a notice of motion and attorney's affirmation annexed to which there are twenty three exhibits labeled A through W. Exhibit A is the summons and complaint of the Simar action. Exhibit B is a first amended answer and counterclaim made by GSC in the Simar Action. Exhibit C is the third-party summons and third-party complaint made by third-party plaintiffs. Exhibit D is third-party defendants' third-party answer with affirmative defenses and counterclaims. Exhibit E is third-party plaintiffs' reply to third-party defendants' counterclaims. Exhibit F is an interim decision and order as well as an order and judgment of Part 76G of this court appointing a guardian to protect third-party plaintiff Jane Doe's interests. Exhibit G is an protective order issued by Part 52 of this court limiting the disclosure of third-party plaintiff Jane Doe's medical and psychiatric history. Exhibit H is a note of issue filed by third-party plaintiffs. Exhibit I is the report of Eric Nelson, an Article 81 Court Evaluator. Exhibit J is a report of a psychological evaluation of third-party plaintiff Jane Doe made by Dr. Charles Hayes. Exhibit K is a transcript of a deposition of Mark Scheiner. Exhibit L is a confidential psychological assessment of third-party plaintiff Jane Doe made by Mark T. Sammons, Ph.D. Exhibit M is an affidavit of Dr. Regina M. DiGiovanna in support of the appointment of a guardian ad litem for third-party plaintiff Jane Doe. Exhibit N is a series of records from Long Island College Hospital (LICH) of involuntary hospitalization for psychiatric treatment as well as other hospital records. Exhibit O is a complaint made by NYCTL 1999-1 Trust and the Bank of New York as seeking to foreclose on a tax lien levied upon the subject property. Exhibit P is an appraisal of the subject property solicited by the attorney for third-party plaintiffs and prepared by Neglia Appraisals, Inc. Exhibit Q is a transcript of a deposition of third-party defendant Kobe Manor. Exhibit R is the contract of sale executed by GSC as seller and Brooklyn Heights Management, Inc. as purchaser of the subject property. Exhibit S is an appraisal of the subject property performed by David V. Farrell Company at the request of all parties to the third-party action. Exhibit T is an appraisal of the subject property prepared by Alexander Yampolsky of Feld Appraisals, Inc. for the third-party defendants. Exhibit U is Alexander Yampolsky's deposition transcript. Exhibit V is a report by the New York City Landmarks Preservation Commission, dated November 23, 1965, on the Brooklyn Heights Historic District. Exhibit W is a contract of sale executed by GSC as seller and Simar as purchaser of the subject property.
As this court denied third-party defendants' motion for summary judgment by order dated November 23, 2009, these motion papers, described in the following paragraph, are considered here for the limited purpose of opposing third-party plaintiffs' motion for summary judgment with third-party defendants' counsel having informed the court on the record that they may be so used.
Third-party defendants' motion papers consist of a notice of motion for summary judgment pursuant to CPLR § 3212 and an attorney's affirmation annexed to which there are fifteen exhibits labeled A through O. Exhibit A is the contract of sale executed by GSC as seller of the subject property and Brooklyn Heights Management, Inc. as purchaser. Exhibit B is third-party plaintiff Jane Doe's pro se answer to the Simar complaint. Exhibit C is an order of this court appointing Jeffrey Saltiel to serve as a Guardian ad litem for Jane Doe in the Simar action. Exhibit D is the third-party summons and complaint. Exhibit E is the third-party answer with affirmative defenses and counterclaims. Exhibit F is the order and judgment of Part 76G of this court appointing a guardian to protect third-party plaintiff Jane Doe's interests. Exhibit G is the affirmed psychiatric report of Dr. William B. Head, MD, solicited by third-party defendants' attorney. Exhibit H is the transcript of Jane Doe's deposition. Exhibit I is a confidential psychological assessment of Jane Doe made by the Village Institute for Psychotherapy. Exhibit J is a transcript of the deposition of Nathan Erlich. Exhibit K is a transcript of the deposition of Kobe Manor. Exhibit L is a default judgment with supporting documents in an action by Discover Bank against Jane Doe. Exhibit M is an appraisal of the subject property prepared by Alexander Yampolsky of Feld Appraisals, Inc. Exhibit N is an appraisal of the subject property performed by David V. Farrell Company at the request of parties. Exhibit O is a Court of Appeals decision issued in 1969.
LAW AND APPLICATION
A motion for summary judgment may be granted only when there is no doubt as to the absence of any triable issue of material fact ( Kolivas v. Kirchoff , 14 AD3d 493 [2nd Dept. 2005]). "Issue finding, rather than issue determination is the court's function. If there is any doubt about the existence of a triable issue of fact, or a material issue of fact is arguable, summary judgment should be denied" ( Celardo v. Bell, 222 AD2d 547 [2nd Dept. 1995]). A party moving for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, offering sufficient evidence to demonstrate the absence of any material issues of fact ( Alvarez v. Prospect Hosp., 68 NY2d 320 ; Napolitano v. Suffolk County Dept. Of Public Works , 65 AD3d 676 [2nd Dept 2009]). Once the movant has met this burden, the burden then shifts to the party opposing the motion to demonstrate via admissible evidence the existence of a factual issue requiring a trial of the action ( Alvarez v. Prospect Hosp., supra; Zuckerman v. City of New York 49 NY2d 557, 560 [1980]).
The concept of unconscionability is reserved for the type of agreement that is so one-sided that it shocks the conscience such that no person in his or her right mind would make it on the one hand, and no honest and fair person would accept it on the other ( Kojovic v. Goldman , 35 AD3d 65 [1st Dept. 2006] citing Christian v. Christian, 42 NY2d 63).
The Court of Appeals has adopted the definition of an unconscionable contract as one which "is so grossly unreasonable or unconscionable in the light of the mores and business practices of the time and place as to be unenforceable according to its literal terms" ( See, Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1, citing Mandel v. Liebman, 303 NY 88). The doctrine of unconscionability, which is rooted in equity, is flexible and its concept is "intended to be sensitive to the realities and nuances of the bargaining process" ( See, Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1, citing Matter of State of New York v. Avco Fin. Serv., 50 NY2d 383).
A determination of unconscionability generally requires a showing that the contract was both procedurally and substantively unconscionable when made( Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1). A contract is procedurally unconscionable when one of the parties lacked a meaningful choice in its execution. ( Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1). A contract is substantively unconscionable when the terms of the contract are unreasonably favorable to the other party ( Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1). Substantive elements of unconscionability appear in the content of the contract per se ( Matter of Friedman, 64 AD2d 70 [2nd Dept 1978]). Inflated prices have been deemed substantively unconscionable ( See, Matter of Friedman, 64 AD2d 70 [2nd Dept. 1978]; See also, Industralease Automated Scientific Equipment Corp. v. R.M.E. 58 AD2d 482 [2nd Dept. 1977]). Furthermore, the determination of unconscionability is a matter of law for the court to decide ( Industralease Automated Scientific Equipment Corp. v. R.M.E. 58 AD2d 482 [2nd Dept. 1977]).
While both procedural and substantive unconscionability must be present on some level in a contract for it to be set aside, it is the court's responsibility to evaluate the procedurally unconscionable and substantively unconscionable elements of the contract in question on a sliding scale whereby the more questionable the meaningfulness of choice, the less imbalance in a contract's terms should be tolerated and vice versa ( State v. Wolowitz, 96 AD2d 47 [2nd Dept. 1983]).
In addition, it is important to emphasize and make clear that the concept of unconscionability must be applied in a flexible manner depending upon all the facts and circumstances of a particular case ( Matter of Friedman, 64 AD2d 70 [2nd Dept 1978]). The Appellate Division stated in Matter of Friedman at the conclusion of a list of examples of unconscionable contractual elements, "The foregoing examples of unconscionable elements are by no means exhaustive; nor would we attempt to define a hierarchy of importance for any particular element in all cases. The weight to be given to each factor is as variable as the facts of each individual case."
According to the October 21, 2007 report of Eric Nelson, the court evaluator appointed by the court in third-party plaintiff Jane Doe's proceeding pursuant to Article 81 of the Mental Hygiene Law, third-party plaintiff Jane Doe, as of October 2007, was 62 years old. The parties do not dispute that Jane Doe is the sole owner of GSC, a corporation duly organized under the laws of the State of New York. Mr. Nelson indicates in his report that Jane Doe has resided at the property since 1978 when her father purchased it.
The parties also do not dispute the following facts. The property is a five story brownstone with nine apartments located in the Brooklyn Heights section of Brooklyn. According to Mr. Nelson's report, Jane Doe lives in one of the units while other tenants occupy other units. In the early 1980s, Jane Doe became the sole owner of the property. Mr. Nelson goes on to state that Jane Doe informed him that she is not married and has no children. According to Jane Doe's deposition testimony she is a law school graduate and was admitted to the New York State Bar in 1976. In addition, she has a history of mental illness.
In August 2003, GSC owned the property. In the summer of 2003, as a consequence of delinquent tax liens, foreclosure proceedings were imminent. That same summer, Kolbe Manor, according to his deposition testimony, reached out to Jane Doe through his sister, Miri Batito. Ms. Batito worked with Manor by finding properties for him to purchase for investment purposes. Ms. Batito contacted Jane Doe by appearing in person on multiple occasions at Jane Doe's home located at the subject property.
At some point that summer, prior to Manor's first encounter with Jane Doe, he was approached by his sister, Ms. Batito, who apprised him of the opportunity to purchase the subject property, and that it was about to be auctioned. Upon learning this information, Manor informed Jane Doe that he was interested in purchasing the property. This discussion took place approximately two months prior to the signing of the BHM agreement on September 15, 2003.
Approximately one month prior to the signing of the BHM agreement, and one month after her discussion regarding the subject property with her brother, Kolbe Manor, Ms. Batito drove Jane Doe out to Manor's real estate business office located at 189-10 Hillside Avenue, Queens, New York. Upon the arrival of Ms. Batito and Jane Doe at Manor's office, Jane Doe and Manor met for the first time.
The only people present at their meeting were Ms. Batito, Manor, and Jane Doe. At the meeting, Manor discussed the subject property, informed Jane Doe that the property was in jeopardy, and offered to purchase it. According to Manor's deposition testimony, he asked Jane Doe at their meeting what was the amount of the tax lien against the property; why she is not paying it; and "why she's not doing anything with this." Following this initial encounter between Manor and Jane Doe, Ms. Botito drove Jane Doe back to Brooklyn. Subsequent to this meeting and prior to the signing of the BHM agreement, Ms. Botito communicated with Jane Doe.
On September 15, 2003, Manor and Jane Doe met again at Manor's office in Queens. Once again, Ms. Botito drove Jane Doe there. At this meeting, the BHM agreement was signed. According to Manor's deposition testimony, he contacted an attorney Charles Pringle and arranged for him to represent Jane Doe that day. Mr. Pringle drafted the contract of sale at Manor's office on Manor's computer that same day shortly after Manor had contacted him. Mr. Pringle also prepared the deed. Manor testified that prior to drafting the BHM agreement, Mr. Pringle did not speak with Jane Doe beyond introducing himself. In addition, Mr. Pringle was not with Jane Doe when she was presented with the contract to review. Intead, she was left alone in a room to review the contract. She did not consult with Mr. Pringle during the transaction. That same day, Jane Doe signed the contract of sale as well as the deed which purported to transfer title to third-party defendants.
By their presentation of these facts, offered through the transcript of Manor's deposition testimony which is annexed to their motion papers, third-party plaintiffs have made a prima facie showing that the BHM agreement was procedurally unconscionable.
Third-party plaintiffs must also make a prima facie showing that the BHM agreement was substantively unconscionable. They succeed making this showing through their presentation of the Farrell appraisal, which was solicited by counsels for all parties, which values the property at $1.3 million, while the property was sold for approximately $400,000 ( See, Jones v. Star Credit Corp., 59 Misc 2d.189 [NY Sup.1969]).
The burden now shifts to third-party defendants to raise a triable issue of fact as to whether the BHM agreement was unconscionable.
However, contrary to third-party defendants' understanding of Jane Doe's motion, Jane Doe is not seeking a determination by this court that the contract is void or voidable by claiming she was incompetent to contract due to her mental illness. Consequently, the court need not determine whether Jane Doe was competent to contract at the time of the execution of the agreement under dispute, and the court will make no such determination here. Rather, in order to determine whether the contract in question must be rescinded and title to the property awarded to Jane Doe, the issue court must address is whether the contract was unconscionable, because Jane Doe seeks via the instant motion to have the BHM agreement set aside under the doctrine of unconscionability.
In accordance with third-party defendants' misunderstanding of the instant motion, they attempt to raise a triable issue of fact by attempting to showing that Jane Doe was competent to contract at the time of the BHM agreement. In an effort to demonstrate same, they present the affirmed report of Dr. William B. Head Jr. pertaining to his psychiatrist evaluation of Jane Doe performed on June 4, 2009. Dr. Head's pertinent psychiatric diagnoses were Axis I, Paranoid schizophrenia, by history; and Axis II, Paranoid personality disorder manifested by heightened suspiciousness of others and pronounced evasiveness.
Dr. Head notes in his report that Jane Doe was diagnosed at Long Island College Hospital on October 16, 2002 with bipolar disorder; that she was also diagnosed with psychosis at Long Island College Hospital in 2001, 2002, and 2004 and that she was diagnosed with paranoid schizophrenia in July 2004.
Dr. Head also notes in his report that he had been furnished with a number of medical records which he reviewed in order to prepare his report and which supplemented his clinical observations. He included in his report a section entitled "Summary of Records" in which he lists these records, among which were a note from a psychiatrist which indicated Jane Doe had been seen for psychiatric care, from January 10, 1995 through June 1996; emergency room records from Long Island College Hospital, dated July 5, 2001, which noted that Jane Doe had been delusional and disorganized and indicated an admitting diagnosis of paranoid state; a medical evaluation from July of 2001 in which a psychiatrist stated his impression was paranoid/delusional disorder and recommended psychiatric consultation; a psychiatric evaluation dated July 5, 2001 which noted a long history of mental illness and indicated the evaluating psychiatrists impression of Axis I — Psychosis and Axis V — GAF 25.
The court takes judicial notice that the psychiatric diagnoses of Jane Doe referred to within this decision accord with the commonly used format prescribed for making such diagnoses by the Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition, a text published by the American Psychiatric Association ( See, Perlmutter v. Beth David Hospital, 308 NY 100, for an instance of the Court of Appeals taking judicial notice of information contained in medical texts not in the record; See also, People ex rel. Butler v. McNeill, 30 Misc 2d 722). The format organizes psychiatric diagnoses into five categories, called axes, relating to different aspects of a given individual's psychiatric disorder. Axis I includes clinical syndromes, such as bipolar disorder and schizophrenia; Axis II includes developmental and personality disorders; Axis III includes physical conditions which play a role in the development, continuation, or exacerbation of Axis I and II disorders; Axis IV includes psychosocial stressors, which in layman's terms are events in a given individual's life which might impact Axis I and II disorders; Axis V, the final axis, indicates the clinician's assessment of highest level of functioning of the individual under examination on a scale of 1 to 100 which is termed a Global Assessment of Functioning Scale. The court takes further judicial notice that the Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition indicates that a GAF score between 21 and 30 indicates the assessment of an examining clinician that the individual under examination manifests "Behavior [which] is considerably influenced by delusions or hallucinations OR serious impairment in communication or judgment OR inability to function in almost all areas."
Dr. Head's summary of records also noted his having taken into account a note from a psychiatric mental health database, dated July 6, 2001, in which it was stated that Jane Doe noted taking anti-psychotic medications; a psychiatric hospital discharge resume, dated July 9, 2001, which indicated a principal diagnosis of psychosis, not otherwise specified, delusional disorder, paranoid type; an ambulance call report as well as emergency room records from Long Island College Hospital, all dated October 16, 2002, which stated that Jane Doe reported having an asthma attack. In a handwritten psychiatric consultation it was said that Jane Doe had been chronically noncompliant with psychiatric medications and treatment recommendations. The doctor's impression was Axis I — Psychosis, not otherwise specified; Bipolar disorder, mixed; Axis II — None; Axis III — Asthma; Axis IV Moderate — and Axis V: GAF: 55 — 60.
Dr. Head also noted an ambulance call report, dated July 4, 2004, in which Jane Doe reportedly said, "I think someone is drugging me." Jane Doe was said to have been found sitting on the front porch of her residence, with New York Police, alert, delusional at times, stating that she believed that she had been drugged by an anonymous person. She also reportedly said that her urine smelled like almonds and that the anonymous person was peeking in her window.
Dr. Head also noted that he reviewed a psychiatric evaluation from Long Island College Hospital, dated July 4, 2004, in which Jane Doe was reported to have stated that she was assaulted by an acquaintance in April 2004, and that she suspected that her coffee had been poisoned at a bakery she frequented. It was stated that Jane Doe suspected that someone else was poisoning her, causing her urine to smell like almonds, and that she had called 911, but 911 was unresponsive so she called 311. She was noted to have been marginally cooperative, with an irritable affect and paranoia. Insight and judgment were said to have been poor and impulse control fair. The doctor's impression was Axis I — Psychosis, not otherwise specified; Axis II — Deferred; Axis III — Asthma; Axis IV — Moderate and Axis V; GAF: 40. The doctor recommended Zyprexa.
Dr. Head also noted having reviewed a handwritten 72 hour letter written by Jane Doe, dated July 14, 2004, in which she stated that she wanted to be discharged from the psychiatric ward and all services from Long Island College Hospital, after having spent 11 days against her will. In a handwritten attending note, dated July 15, 2004, it was said that Jane Doe remained very delusional and noncompliant with medications. In a discharge resume, dated July 16, 2004, the principal diagnosis was "psychosis, not otherwise specified vs. schizophrenia, chronic, paranoid type". Medications prescribed for Jane Doe included Zyprexa, Ativan, and Benadryl.
The report of third-party defendants' independent psychiatric examiner does not raise a triable issue of fact which would necessitate a trial on the issue of unconscionability. Rather, Dr. Head's report paints a portrait of an individual tortured by mental illness, which tends only to emphasize the procedurally unconscionable nature of the formation of the contract in question.
The court is particularly taken by the fact that Jane Doe was involuntarily hospitalized for psychiatric treatment and diagnosed with paranoid schizophrenia in July of 2004, a mere 10 months after the execution of the purported contract of sale and deed purporting to transfer the subject property. The court is also keen to note Dr. Head's acknowledgment at the beginning of his report that Jane Doe was diagnosed with psychosis in 2001 and 2002, the two years immediately preceding the execution of the contract Jane Doe now seeks to have set aside as unconscionable, as well as Dr. Head's own Axis II diagnosis of Jane Doe of paranoid personality disorder on the day he examined her.
Third-party defendants point out that as the instant third-party action is one for rescission of a contract, and thus sounds in equity ( See, Rudman v. Cowles Communications Inc., 30 NY2d 1), it is ripe for resolution by way of summary judgment. The court agrees with this assessment. The undisputed facts presented through the deposition testimony of Manor himself and the affirmed report of third-party defendants' psychiatric expert, Dr. Head, there is no doubt as to the absence of any triable issue of material fact ( See, Kolivas v. Kirchoff , 14 AD3d 493 [2nd Dept. 2005]).
The undisputed facts, outlined above, shock the conscience of the court ( See, Christian v. Christian, 42 NY2d 63). A lady with a history of involuntary hospitalization for psychiatric treatment acknowledged by third-party defendants' own independent psychiatric examiner, having been diagnosed serially with psychosis, having been prescribed repeatedly anti-psychotic medications, in years including those immediately preceding and immediately following the execution of the agreement under dispute in this litigation, sold her home for approximately one third of its appraised value, according to the only appraisal solicited by counsels for all parties to the third-party action (the Farrell appraisal), to an individual whose sister/colleague approached her at her home and transported her by car on multiple occasions to the individual's office, where according to the individual's own deposition testimony the transfer eventually occurred without her so much as being in the same room as counsel. Moreover, the individual who now seeks to avoid the rescission of the contract states in his own deposition that he himself solicited — on Jane Doe's behalf — the attorney who he would have the court believe served as counsel to Jane Doe — who, again, was not in the room when Jane Doe signed away her home. This is precisely the sort of agreement that is so one sided that no person in his or her right mind would make it on the one hand, and no honest and fair person would except it on the other ( See, Christian v. Christian, 42 NY2d 63).
Elements of procedural unconscionability permeate the formation of the contract in question. In addition to Jane Doe's well chronicled and undisputed history of diagnoses and treatment for mental illness, including diagnoses and treatment occurring within the calendar years immediately preceding and immediately following the calendar year during which the disputed transaction occurred, it is undisputed that Jane Doe was functioning under the stress of her knowledge that foreclosure upon her home was imminent as a consequence of a delinquent tax lien It is fair to infer that this knowledge constituted what a psychiatrist might call a "psychosocial stressor", which might be listed in Axis IV of a psychiatric diagnosis, exacerbating Jane Doe's diagnosed psychiatric condition.
In fact, third-party defendants argue that the fact that Jane Doe was aware that her home was about to be foreclosed upon indicates that her mind was functioning in a rational manner at the time of the execution of the contract, and that consequently Jane Doe was competent to contract. There is thus no dispute that the imminent foreclosure was weighing on Jane Doe's mind. And again, the court need not and does not make any determination as to whether Jane Doe's mind was functioning in a rational manner when the contract of sale of her home was executed as such a determination is not dispositive on the issue of whether the contract was unconscionable. Rather, the presence of procedural and substantive unconscionability, as determined by the court, is dispositive ( See, Industralease Automated Scientific Equipment Corp. v. R.M.E. 58 AD2d 482 [2nd Dept. 1977]).
The procedural unconscionability which permeated the formation of the contract was further exacerbated by the aggressive sales tactics employed by third-party defendants, as outlined in Manor's own deposition testimony. Again, Manor's sister approached Jane Doe at her home at least twice in the summer of 2003 in order to facilitate the sale of the subject property by Jane Doe to third-party defendants. Manor's sister twice transported Jane Doe from downtown Brooklyn to Manor's real estate business office in Queens for the sake of facilitating the transaction. On the day the transaction was executed, Manor solicited the attorney, Mr. Pringle, who was purportedly invited to represent Jane Doe. On the date the transaction was executed, both contract and deed were signed on the same day by Jane Doe sitting in a room by herself, with no attorney, not even Mr. Pringle, present. Having considered all of these circumstances, it is apparent to the court that Jane Doe lacked a meaningful choice, in an extreme sense, in the execution of the contract ( See, Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1).
As for the substantive element of unconscionability, in Jones v. Star Credit Corp., 59 Misc 2d. 189, the Supreme Court, Nassau County per Justice Wachtler, held that the sale of a freezer unit having a retail value of $300 for $900 was unconscionable as a matter of law.
The instant case involves the sale of a person's home, an item of property which the court may fairly describe as being a great deal more significant than a freezer unit, having an appraised value of $1.3 million(see Farrell Appraisal which was solicited by all parties to the third-party action) for $426,500. (The contract states, "Buyer will purchase premises for a total price of $401,500. If seller vacates the premises on or before Dec. 1, 2004, then buyer will pay an extra $25,000, increasing the purhcase price to $426,500.)
The Jones v. Star Credit Corp. court gave short shrift to whatever procedural unconscionability might have been present in the transaction it saw fit to set aside. It focused, rather, on the substantive unconscionability of the transfer of the freezer for one third of its retail value as being outrageous enough to make the contract unconscionable.
As it is the court's responsibility to evaluate the procedurally unconscionable and substantively unconscionable elements of the contract in question on a sliding scale whereby the more questionable the meaningfulness of choice, the less imbalance in a contract's terms should be tolerated, the extreme nature of procedural unconscionability present here would afford the court leeway in determining the contract to be unconscionable with a less substantial showing of substantive unconscionability ( See, State v. Wolowitz, 96 AD2d 47 [2nd Dept. 1983]). Thus, the Feld Appraisal, which values the subject property at $700,000 according to what third-party defendants term a "market approach" or alternatively at $540,000 according to what third-party defendants term an "income approach", does not raise a triable issue of fact on the issue of unconscionability. In accordance with the determination of the Jones v. Star Credit Corp. court, this court evaluates the transaction, in which Jane Doe's home was transferred for one third of its appraised value according to the only appraisal solicited by counsel for third-party plaintiffs as well as by counsel for third-party defendants, as being substantively unconscionable.
Having taken into consideration the facts of this particular case ( See, Matter of Friedman, 64 AD2d 70 [2nd Dept 1978]), and being sensitive to the realities and nuances of the bargaining process ( See, Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1, citing Matter of State of New York v. Avco Fin. Serv., 50 NY2d 383), the court finds that the contract sought to be rescinded by third-party plaintiffs was unconscionable as it was both procedurally as well as substantively unconscionable.
The undisputed array of facts of this case is such that one might think third-party defendants were operating with a comprehensive checklist of the elements unconscionability, checking off as they went elements satisfied through the sequence of events culminating in the transaction.
Whether to grant the equitable remedy of rescission lies within the sound discretion of the court ( See, Matter of Estate of Bowens, 176 Misc 2d 153 [NY Sur. 1998] citing Calhoun v. Delhi M.R. Co., 121 NY 69). Moreover, the equitable remedy is to be invoked only when there is lacking a complete and adequate remedy at law, and where the status quo may be substantially restored( See, Sokolow, Dunaud, Mercadier Carreras LLP. v. Lacher, 299 AD2d 64 [1st Dept. 2002] citing Rudman v. Cowles Communications Inc., 30 NY2d 1). Given that each parcel of real property is presumed to be unique and that consequently third-party plaintiffs would have no adequate remedy at law ( Alba v. Kaufmann , 27 AD3d 816 [3rd Dept. 2006]), and that the status quo of Jane Doe owning the subject property may be substantially restored, rescission is an appropriate remedy.
The court now addresses the third-party plaintiffs' motion to dismiss all counterclaims of the third party defendants. The third-party plaintiffs' motion papers make no showing in support of dismissal of any counterclaim. However, four out of the nine counterclaims seek in sum and substance remedies due to the third party plaintiffs' breach of the BHM agreement. Inasmuch as the court by this decision has determined to rescind the agreement, all counterclaims premised on third-party plaintiffs' breach of the agreement must now fall. Therefore the sixth counterclaim, seventh, eighth, and ninth which fit this description must be dismissed.
The first, second, third, fourth, and fifth counterclaims, however, are not premised on third-party plaintiffs' alleged breach of the unconscionable contract. Rather, they allege in sum and substance that the third-party plaintiffs participated or are participating in some kind of scheme to defraud third-party defendants as well as that third-party defendants somehow expended a certain some of money and are now entitled to various forms of equitable relief at third-party plaintiffs' expense. These counterclaims survive the motion.
In summary, third-party plaintiffs' motion for summary judgment is granted to the extent that the disputed contract is hereby declared null and void, and is rescinded on the ground that the contract was unconscionable, and third-party defendants' sixth, seventh, eighth and ninth counterclaims are dismissed.
The foregoing constitutes the decision and order of the court.