Opinion
109246/07.
Decided June 11, 2008.
Plaintiffs were represented by Wedeen Kavanagh, New York, NY, Timothy Wedeen, Esq.
Defendants Coppersmith Coppersmith and Richard Coopersmith, Esq. were represented by Callan, Koster, Brady Brennan, LLP, New York, NY Marc. R. Wilner, Esq.
Defendant, attorney Richard Coopersmith and his law firm, Coopersmith Coopersmith (collectively, Coopersmith) move to dismiss the complaint, on the grounds that there is a defense based on the documentary evidence and that the Complaint fails to state a cause of action, CPLR 3211 (a) (1) and (a) (7).
As discussed below, the motion to dismiss the Complaint as against Coopersmith is granted.
Defendants Margab Realty, LLC and Ziki Gabrielli (collectively, Margab) have not appeared in the action.
BACKGROUND
This action arises out of a contract, dated January 18, 2005, for the sale of the real property located at 315 West 35th Street, New York, New York, between Margab Realty, LLC as seller and plaintiff Sullo as purchaser, for a purchase price of $11.5 million (the Contract). Coopersmith was counsel for the seller.
During the negotiations, Sullo indicated that he wanted to have the property at issue delivered free of the ground floor tenant, Super Light Video (SLV). To that end, a Rider to the Contract was entered into. Paragraph R-20 of the Rider, entitled "GROUND FLOOR STORE," provides, in pertinent part, that:
Purchaser and Seller acknowledge that negotiations have taken place, as a result of which the ground floor retail store tenant has agreed, in principal, to vacate prior to closing. Seller agrees to enter into a surrender agreement, pursuant to which the ground floor retail store tenant shall vacate the Premises in consideration for the sum of One Hundred Seventy Five Thousand ($175,000) Dollars as a relocation expense. A copy of the form of that agreement is attached hereto. . . . Upon execution of that agreement, Purchaser shall, within five (5) days after receipt of notice of same, deposit with Coopersmith Coopersmith, Esq. (the "Escrow Agent") the sum of One Hundred Seventy Five Thousand ($175,000) Dollars (the "Escrow Deposit"), which represents the payment to the ground floor tenant. This sum shall be in addition to the Purchase Price. In the event that the ground floor tenant refuses to enter into the aforesaid surrender agreement, Purchaser may, at his option, terminate this Contract of Sale. . . . or, in the alternative, ratify and confirm this Contract of Sale and accept the Premises with the ground floor tenant in possession (and receive back the Escrow Deposit), such election to be made within ten (10) business days. . . . In the event that the ground floor tenant vacates prior to the closing, the Escrow Agent is authorized and directed to pay over the Escrow Deposit to it.
The form of agreement attached to the Rider is a standard Termination of Lease and Stipulation of Discontinuance form.
Thus, Coopersmith was designated the "Escrow Agent" under the Contract with respect to the $175,000 sum. Paragraph R-21 of the Rider, entitled "ESCROW AGENT," provides, among other things, that "b. Escrow Agent shall not be liable for any error in judgment or for any act done or steps taken or omitted in good faith, or for any mistake of fact or law, except for Escrow Agent's own gross negligence or willful misconduct."
Coopersmith, by letter, dated April 14, 2005, demanded that Sullo deposit the $175,000 with him pursuant to the terms of the Contract. Sullo thereupon delivered a check to Coopersmith in the sum of $175,000. In the transmittal letter, Sullo's attorney stated that the escrowed sums were for the "buy out of the ground floor tenant" and that the sums should only be released in accordance with the terms of the Contract.
At the closing, Sullo inquired about the status of the $175,000 escrowed funds and was informed that Coopersmith had released them to Margab. Sullo contends that, at no time between the signing of the Contract and the closing date, was he informed that the ground floor store tenant had vacated the premises, and or/that the vacatur was the result of a buyout payment of $175,000 made to said tenant in exchange for his agreement to vacate.
Sullo went forward with the closing, reserving his right to object to defendants' handling and disposition of the escrowed funds. At the closing, Margab and Coopersmith agreed to provide Sullo with an explanation of the circumstances regarding the ground floor tenant's vacatur, of how the $175,000 was paid to such tenant, and of Coopersmith's release of the escrowed funds.
The written explanation provided by Margab stated that the $175,000 was disbursed to SLV by "offsetting same against monies due and owing from such tenant for rent." Margab also provided a statement from SLV, signed by its president, Abeygunaratine, "confirm[ing] that I received from Margab Realty LLC all the money for quitting and surrendering the Premises . . . including the security deposit as per the stipulation of discontinuance signed on March 02, 2005." Additionally, in a letter, dated September 26, 2005, from Margab to Coopersmith, Margab provided a breakdown detailing, on a month-by-month basis, how the $175,000 was "paid" to the ground floor tenant.
Coopersmith asserts that upon receipt of the above documentation indicating that SLV vacated the premises, and that said tenant had received from Margab all of the money for quitting and surrendering the premises, Coopersmith disbursed the escrow funds of $175,000 to Margab. Coopersmith, in his reply affidavit states, that:
2. After the ground floor tenant vacated the premises, the escrow funds of $175,000 were disbursed to Margab to make payment to the ground floor tenant, SLV. Prior to my release of the funds, I received a document signed by Stanley Abeygunaratine, the principal of the ground floor tenant, confirming that SLV received from Margab all of the money for quitting and surrendering the premises. Therefore, as the ground floor tenant had already received the money owed from Margab, I was directed, by both Margab and the ground floor tenant, SLV and Stanley Abeygunaratine, to pay the $175,000 directly to Margab.
3. The annexed bank statement from my IOLA account for the period of April 1, 2005 — April 29, 2005 reflects the deposit of the $175,000 into my escrow account and the disbursement of the $175,000 from my escrow account. No portion of the $175,000 from my escrow account was released to myself and no portion of the $175,000 was given back to me from Margrab.Sullo commenced this action on July 5, 2007, claiming, inter alia, that Coopersmith improperly released the $175,000 from escrow. The Complaint contains five causes of action. In the first, for breach of contract, Sullo alleges that, under the Contract (including paragraph R. 20 of the Rider), the escrowed sum was to be used exclusively to pay the ground floor tenant in a buyout and that, if the sum was not used for that purpose, it was to be returned to Sullo. Sullo asserts that Coopersmith breached his obligations under the Contract by improperly releasing the escrow funds in his trust to Margab. The second cause of action is for unjust enrichment. In the third cause of action, for declaratory Judgment, Sullo seeks a declaration that the defendants (including Coopersmith) violated the terms of the Contract. The fourth cause of action purports to state a claim for fraud. Among other things, in paragraph 29 of the Complaint, Sullo alleges that "[d]efendants participated in a fraud by not informing plaintiff that the city vacated the tenant for illegal activity and that a buyout was not necessary." The fifth cause of action, against Richard Coopersmith only, is for breach of fiduciary duty.
DISCUSSION
The crux of this action concerns the question of whether the terms of the Contract authorized the use of the escrowed sums to reimburse Margab for its forgiveness of SLV's rent, or rather, whether the escrowed sums could only be used to reimburse Margab where there was an actual buyout of said tenant.
This motion does not concern the question of whether the Complaint states a cause of action against Margab. Nor does it concern the merits of Sullo's claims against Margab.
The only issue presented here is whether the Complaint states a cause of action or is barred by the documentary evidence with respect to Coopersmith, the parties' appointed escrow agent under the Contract and Rider.
Coopersmith contends that the documentary evidence establishes that he properly and in good faith released the $175,000 from escrow to Margab, in accordance with the terms of the Contract and Rider, which provisions ensured that SLV would vacate the property at issue prior to the closing date. He maintains that he released the funds in good faith based on the information provided to him by his client and by SLV, after being provided documentation indicating that SLV received the payment in consideration of vacating the space. Based on the foregoing, Coopersmith therefore submits that his release of the escrowed sums to Margab was proper and appropriate under the terms of the Rider to the Contract.
Sullo contends that the disbursement of the escrowed sums by Coopersmith to Margrab, based on Margab's forgiveness of SLV's debt, was in contravention of the terms of the Contract and Rider. He maintains that the Contract only authorized the release of the escrowed sums in payment to SLV for an actual buyout. Sullo maintains that the Contract did not permit the release of the escrowed sums where the tenant received only a forgiveness of rent owed in exchange for his agreement to vacate the subject premises.
None of the five causes of action set forth in the Complaint are viable as against Coopersmith.
With respect to the first cause of action, for breach of contract, although a contractual relationship may exist between Sullo and Coopersmith by virtue of the escrow agreement within the confines of the Rider to the Contract, Coopersmith has demonstrated that, based on the documentary evidence, this cause of action should be dismissed as against Coopersmith.
Pursuant to paragraph R-21 of the Rider, Coopersmith had the right to "rely on the genuineness of any signature believed by [him] in good faith to be genuine." Paragraph R-21 of the Rider also states that the Escrow Agent "shall not be liable for any error in judgment or for any act done or step taken or omitted in good faith, or for any mistake of fact or law, except for Escrow Agent's own gross negligence or willful misconduct."
Coopersmith alleges that he believed that the signature from Abeygunaratine, SLV's principal, acknowledging receipt of payment of the relocation expense from Margab, to be genuine. He also maintains that he accepted as accurate the written statement from Margab which detailed how the $175,000 was received by SLV. Coopersmith alleges that he acted in good faith in releasing the $175,000 to Margab based on representations by both Margab and by SLV's principal.
A review of the Complaint, as well as the papers submitted by Sullo in opposition to the motion, support the conclusion that Sullo has not adequately alleged a breach of the escrow provisions contained in the Rider, by Coopersmith. Alternatively, Coopersmith has shown, based on the documentary evidence, that Coopersmith did not breach the escrow provisions. Coopersmith has established that the breach of contract cause of action against him is barred by the documentary evidence and/or that said claim fails to state a cause of action. The first cause of action is therefore dismissed as against Coopersmith.
The second cause of action, for unjust enrichment, is likewise dismissed as against Coopersmith. Unjust enrichment occurs when a defendant enjoys a benefit bestowed by the plaintiff without adequately compensating the plaintiff ( Sergeants Benev. Assn. Annuity Fund v. Renck , 19 AD3d 107, 111-112 [1st Dept 1998]). Here, there is no claim that Coopersmith received any benefit from the transaction. Moreover, it is well settled that "a valid and enforceable written contract precludes recovery on a theory of unjust enrichment" ( Cornhusker Farms, Inc. v Hunts Point Co-op Market, Inc., 2 AD3d 201, 206 [1st Dept 2003], citing Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 389). Although Coopersmith is not a party to the overall Contract, he is a party to the escrow agreement contained in the Rider to the Contract. Therefore, Sullo cannot rely on an unjust enrichment theory as against Coopersmith.
The third cause of action, for declaratory judgment, cannot be maintained because it parallels the other claims and merely seeks a declaration of the same rights and obligations ( see Apple Records, Inc. v Capitol Records, Inc., 137 AD2d 50 [1st Dept 1988]; see also Spitzer v Schussel , 48 AD3d 233 [1st Dept 2008])
The fourth cause of action, for fraud, fails to state a cause of action and fails to satisfy the rules of specificity set forth in CPLR 3016 (b). It is well settled that, "[i]n an action to recover damages for fraud, the 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" ( Lama Holding Co. v Smith Barney Inc., 88 NY2d 413, 421, citing New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 and Channel Master Corp. v Aluminum Ltd. Sales, 4 NY2d 403). CPLR 3016 (b) requires specificity as to each of these elements ( Kaufman v Cohen, 307 AD2d 113 [1st Dept 2003]).
In the Complaint, Sullo alleges that Coopersmith knew that the buyout was unnecessary but never returned Sullo's funds. He further claims that the defendants made up excuses to explain their imporper retention of Sullo's money and that all demands for the return of said funds were ignored and disregarded by defendants. These allegations are conclusory and fail to allege the required elements of a fraud claim.
The allegations also lack sufficient particularity to satisfy the requirements of CPLR 3016 (b). While a court should not apply CPLR 3016 (b) so strictly where it is impossible to state in detail all the circumstances of the fraud ( id.; Oxford Health Plans (NY), Inc. v BetterCare Health Care Pain Management Rehab PC, 305 AD2d 223 [1st Dept 2003]), here, the fraud cause of action lacks "additional detail concerning the facts constituting the alleged fraud" ( see Abbott v Herzfeld Rubin, P.C., 202 AD2d 351 [1st Dept 1994], quoting Credit Alliance Corp. v Arthur Andersen Co., 65 NY2d 536, order amended 66 NY2d 812). Accordingly, the fourth cause of action is dismissed as against Coopersmith.
The cause of action for breach of fiduciary duty is also defective. Sullo contends that the Contract does not authorize the use of the escrowed funds for the forgiveness of debt and, therefore, that Coopersmith breached his fiduciary duties in releasing same to Margab. These contentions are essentially the same as those asserted with respect to the breach of contract cause of action. As previously stated, Coopersmith released the funds directly to Margab after being provided documentation indicating that SLV received payment from Margab for its surrender of the premises. The provisions of the Rider permit Coopersmith, as Escrow Agent, to rely in good faith on the genuineness of signatures. The provisions further exempt the Escrow Agent from liability for any errors in judgment, with the exception of grossly negligent or willful misconduct. Thus, although Coopersmith, pursuant to the terms of the Rider, owed a limited fiduciary duty to Sullo with respect to the escrowed funds ( see generally Seargeants Benev. Assoc. Annuity Fund, 19 AD3d 107), this cause of action, like the breach of contract cause of action, either fails to state a cause of action and/or is barred by the documentary evidence. Suffice it to say, there is nothing alleged in the Complaint or the papers submitted in opposition to the motion that would support a claim that Coopersmith acted outside the realm of his common law or contractual duties as escrow agent and fiduciary. Nor are there any nonconclusory allegations that Coopersmith's actions were not taken in good faith, were grossly negligent and/or amounted to wilful misconduct. Rather, it appears that Coopersmith did exactly what was required of him as Escrow Agent under the Rider to the Contract. Accordingly, this cause of action is dismissed.
It should be noted, that the complaint and its causes of action have been analyzed as to Coopersmith; the result might or might not be the same as to the other defendants.
CONCLUSION
It is ORDERED that the motion by defendants Coopersmith Coopersmith and Richard Coopersmith for an order dismissing the complaint as against them is granted; and it is further
ORDERED that the complaint is dismissed as against defendants Coopersmith Coopersmith and Richard Coopersmith and the Clerk is directed to enter judgment in favor of said defendants with costs and disbursements as taxed by the Clerk; and it is further
ORDERED that the action is severed and shall continue against the remaining defendants.