Maksim Grill, Inc. v Edmund's Mineola, Inc.

[*1] Maksim Grill, Inc. v Edmund's Mineola, Inc. 2005 NY Slip Op 51325(U) Decided on August 5, 2005 Supreme Court, Nassau County Austin, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 5, 2005
Supreme Court, Nassau County

MAKSIM GRILL, INC., Plaintiff,

against

EDMUND'S MINEOLA, INC., a/k/a EDMUND'S MINEOLA, INC. and BARBARA KLETT, Defendants.



3762-04



COUNSEL FOR PLAINTIFF

Palmieri & Castiglione, LLP

250 Mineola Boulevard

Mineola, New York 11501

COUNSEL FOR DEFENDANT

Rosenberg, Calica & Birney, LLP

100 Garden City Plaza

Garden City, New York 11530

Leonard B. Austin, J.

BACKGROUND

Plaintiff and Defendant, Edmund's Mineola, Inc. a/k/a Edmond's Mineola Inc. ("Edmund's"), entered into an Agreement dated March 31, 2003, wherein Edmund's agreed to purchase Plaintiff's restaurant business at 205 Hempstead Turnpike, West Hempstead, New York. The business included the chattels, fixtures and equipment at the premises and Plaintiff's interest in the lease at the premises. The purchase price of $90,000 was payable $10,000 upon execution of the Agreement, and $80,000 at closing pursuant to a "purchase money note" to be executed at closing. According to the Agreement, the closing was to take place on or about May 15, 2003.

On March 31, 2003, Plaintiff also executed an assignment of lease to Edmund's, whereby Plaintiff assigned its interest in the lease for the premises to Edmund's. Plaintiff's landlord consented to the assignment. On or about March 31, 2003, Edmund's took possession of the premises and began to use the chattels, fixtures and equipment owned by Plaintiff. However the closing never took place; despite adjournments to January 7, 2004 and February 4, 2004.

Plaintiff commenced this action in March, 2004 against Edmund's and its president, Defendant Barbara Klett ("Klett"). Plaintiff alleges six causes of action; to wit: specific performance of the Agreement; specific performance of personal guarantees that were to have been executed at the closing by Klett; breach of contract; conversion; fraudulent inducement; and judgment voiding the assignment of Plaintiff's interest in the lease.

Defendants have denied Plaintiff's claims. In their answer, Defendants allege a counterclaim for rescission of the Agreement and return of the downpayment based upon fraud. Defendants claim that Plaintiff misrepresented the condition of the property included in the sale and the profitability of the business. In her affidavit in support of Defendants' motion for summary judgment, Klett states that Edmund's "went out of business and vacated the Subject Premises".

Defendants' main argument in support of their request for summary judgment dismissing the complaint is their interpretation of Section 18 of the Agreement entitled ESCROW RECEIPT. Section 18 provides, in pertinent part:

The down payment paid hereunder, shall be held in escrow by Palmieri & Castiglione, LLP, the attorneys for Seller, until the Closing, ("Escrow Fund"). [*2]

In the event, the Closing does not take place as provided for herein, for any reason whatsoever, except the willful default of Seller, the escrow agent is authorized and directed to pay the Escrow Fund to the Seller.

In the event, the Closing does not take place, as a result of the willful default of the Seller, the escrow agent is authorized and directed to return the Escrow Fund to the Purchaser. In such event, the Seller shall have no further liability hereunder.

Defendants argue that this is a liquidated damages provision, and that Edmund's maximum liability in this action is the $10,000 down payment.

DISCUSSION

Whether a writing is ambiguous is a question of law for the court W.W.W. Assocs. v. Giacontieri, 77 NY2d 157, 162 (1990). If the language employed is free from ambiguity, its meaning may be determined on the basis of the writing alone. Hindes v. Weisz, 303 AD2d 459, 460-61 (2nd Dept. 2003). Courts should construe the words used according to their plain meaning (Greenfield v Philles Records, 98 NY2d 562, 569 [2002]; and Russack v Weinstein, 291 AD2d 439, 441 [2nd Dept. 2002]), and may not insert terms or rewrite the contract under the guise of interpretation. See, Vermont Teddy Bear Co., v. 538 Madison Realty Co., 1 NY3d 470, 475 (2004); and Piano 230 North Corp. v. 230 North Realty, LLC, 304 AD2d 544, 545 (2nd Dept. 2003).

Here, the plain meaning of the language employed by the parties in Section 18 of their Agreement does not limit Plaintiff's recourse for Edmund's failure to close to the downpayment. Indeed, the fact that the seller's liability in the event of a "willful default of the Seller" is expressly limited, and the buyer's liability in the event of any other default is not expressly limited, fully supports this conclusion. Defendants' legal arguments to the contrary are not persuasive because Edmund's took possession of the business and the premises.

At this juncture, it is noted that Edmund's has alleged an affirmative defense and counterclaim for fraud with respect to the chattels, equipment and fixtures at the premises and the profitability of the premises. However, Edmund's did not substantiate this defense and counterclaim with any testimony, documents or other evidentiary proof. Summary judgment is the procedural equivalent of a trial (Capelin Assoc. v. Globe Mfg. Corp., 34 NY2d 338, 341 [1974]), and it will not be defeated by mere conclusions or

unsubstantiated allegations. Zuckerman v. City of New York, 49 NY2d 557, 562 (1980).

On this record Edmund's has failed to raise a triable issue of fact as to its affirmative defense of fraud. Consequently, the affirmative defense must be dismissed.

However, Maksim's did not request summary judgment dismissing Edmund's fraud counterclaim.

A motion for summary judgment permits the court to search the record and award summary judgment where appropriate. Schleich v. Gruber, 133 AD2d 224 (2nd Dept. 1987); and Fertico Belgium, S.A. v. Phosphates Chemical Export Assoc., Inc., 100 AD2d 165 (1st Dept. 1984). Summary judgment may be granted even if the party did not demand such relief. Albany Miron Lumber Corp. v. Barr, 115 AD2d 213 (3rd Dept. 1985); Flaks, Zaslow & Co., Inc. v. Bank Computer Network Corp., 66 AD2d 363 [*3](1st Dept. 1979); and Simoni v. Civil Service Employees Assoc, Inc., Local 1000, AFSCME, AFL-CIO, 133 Misc 2d 1 (Sup.Ct., Albany Co. 1986). Since Edmund's counterclaim is premised upon the same allegations as was its affirmative defense, the counterclaim must also be dismissed for lack of evidentiary support.

Under these circumstances, where Edmund's legal argument lacks merit, its factual defense has not been substantiated since it admittedly failed to close on numerous occasions, Plaintiff is entitled to summary judgment against Edmund's on the issue of liability on the third cause of action for breach of the subject Agreement.

Plaintiff requests that this action be set down for an inquest on damages. That is not necessary. Where contract damages are concerned, "the law attempts to secure to the injured party the benefit of his bargain. See, Freund v. Washington Sq. Press, 34 NY2d 379, 382 (1974). It is a fundamental principle of contract law that an award of damages should place the Plaintiff in the same position it would have been in if the contract had not been breached. Wai Ming Ng v. Tow, 260 AD2d 574, 575 (2nd Dept. 1999).

Here, Plaintiff's request for damages of $90,000 in the third cause of action is the benefit of Plaintiff's bargain, comprised of the $10,000 downpayment, together with the $80,000 that Edmund's contracted to pay him at closing. As Edmund's took possession of the premises and the business, the full contract price is the measure of damages that puts Plaintiff in the same position as it would have been in if the contract had not been breached. Under all of the circumstances of this case, the Court finds that an inquest on damages is unnecessary. Plaintiff is entitled to (a) retain the $10,000.00 downpayment, and (b) a judgment against Edmund's for the $80,000.00 balance due at closing, together with interest from the date of breach. CPLR 5001(b). Viewing the evidence in the light most favorable to Edmund's, and giving it the benefit of every

favorable inference, the Court finds that the date of breach is February 4, 2004, the last date on which Plaintiff made "time of the essence."

The remainder of the relief sought by Plaintiff must be denied. Specific performance of the Agreement is not available where, as here, there is an adequate remedy at law for money damages. T. F. Demilo Corp. v. E.K. Const. Co. Inc., 207 AD2d 480, 481 (2nd Dept. 1994). Accordingly, Edmund's is entitled to summary judgment dismissing the first cause of action.

Plaintiff has no valid cause of action against Klett, individually, for specific performance of any personal guarantees described in the Agreement. The Agreement was with Edmund's. Klett executed the Agreement solely in her corporate capacity as President of Edmund's. Maranga v. McDonald & T. Corp., 8 AD3d 351, 352 (2nd Dept. 2004). In addition, Klett's obligation to execute the personal guarantee did not arise until the closing which never took place. The triggering event to cause Klett's execution of the guarantee never occurred. Therefore, Klett is entitled to summary judgment dismissing the second cause of action.

As Edmund's initial possession of the restaurant business was lawful, no conversion could occur absent Plaintiff's demand for the return of the business and Edmund's refusal. Hoffman v. Unterberg, 9 AD3d 386, 388 (2nd Dept. 2004). The fourth cause of action contains no such allegation. Consequently, Plaintiff has failed to state [*4]a cause of action for conversion against Edmund's.

A breach of contract will not be considered a tort unless a legal duty independent of the contract itself has been violated. Clark-Fitzpatrick Inc. v. Long Island Railroad Co., 70 NY2d 382, 389 (1987). Plaintiff's fifth cause of action for fraudulent inducement must be dismissed because Edmund's duty to close arises solely from the Agreement. It is not independently viable. Breco Environmental Contractors, Inc. v Town of Smithtown, 307 AD2d 330 (2nd Dept. 2003); and Coppola v. Applied Electric Corp., 288 AD2d 41(1st Dept. 2001).

The sixth cause of action seeking judgment voiding the assignment of Plaintiff's interest in the lease to Edmund's must be dismissed as moot, in view of the unrefuted allegation that Edmund's has vacated the premises and is out of business.

Accordingly, it is,

ORDERED, that Plaintiff's motion for summary judgment on the issue of liability is granted as against Defendant Edmund's on the third cause of action for breach of contract, and denied as to the remainder of the claims against Edmund's and the second cause of action against Defendant Klett individually, and it is further,

ORDERED, that Plaintiff's request for an inquest on damages is denied and, in the alternative, Plaintiff is awarded its contract damages against Edmund's, consisting of the $10,000.00 downpayment and a judgment for $80,000.00, together with interest from February 4, 2004, and it is further,

ORDERED, that Plaintiff's request for judgment voiding the assignment of the lease is denied as moot, and it is further,

ORDERED, that Defendants' cross-motion for summary judgment dismissing the complaint is granted with respect to the first, second, fourth, fifth, and sixth causes of action and denied with respect to the third cause of action; and it is further,

ORDERED, that Defendants' counterclaim for fraud is hereby dismissed.

This constitutes the decision and Order of the Court.

Settle Clerk's judgment on ten (10) days notice.

______________________________

HON. LEONARD B. AUSTIN, J.S.C.

Dated: Mineola, NY

August 5, 2005