104-106 E. 81st St. LLC v O'Brien
Annotate this CaseDecided on June 16, 2006
Civil Court of the City of New York, New York County
104-106 East 81st Street LLC, Petitioner,
against
Jack O'Brien, Respondent,
80619/05
Gerald Lebovits, J.
Petitioner moves to vacate a two-attorney so-ordered stipulation. Petitioner now claims it erroneously agreed that respondent is entitled to recover reasonable attorney fees to be determined at a hearing. The issue in this case is whether petitioner's alleged mistake, absent fraud, is enough to vacate that stipulation.
Nearly a year ago, petitioner commenced a holdover proceeding based on respondent's alleged nonprimary residence. Respondent moved to dismiss under CPLR 3211 (a) (7) claiming that the nonrenewal notice petitioner sent to respondent lacked sufficient facts. On November 3, 2005, the Honorable Peter M. Wendt dismissed the holdover petition because, he found, the nonrenewal notice was conclusory and therefore failed to satisfy the requirements in Rent Stabilization Code [9 NYCRR] § 2524.2 (b). (See 104-106 E. 81 St. LLC v O'Brien, Hous Part, Civ Ct, NY County, Nov. 3, 2005, Wendt, J., Index No. 80619/05.) As the prevailing party, respondent made a motion, returnable February 23, 2006, to restore the case to the calendar for attorney fees. Petitioner did not submit papers opposing the motion. On February 23, the parties submitted a two-attorney stipulation in which petitioner consented to granting respondent's motion to the extent of agreeing to an attorney-fee hearing at which the only issue would be how much the court would award in reasonable fees. The matter was adjourned for a hearing to [*2]March 13, 2006.
Three consent adjournments followed. On May 17, 2006, petitioner informed the court that it would move to vacate the February 2006 stipulation on the ground that it agreed to the attorney-fee hearing in error. Petitioner then moved to vacate the stipulation for unilateral mistake or, in the alternative, mutual mistake.
Petitioner's counsel states that he made a unilateral mistake when he consented to an attorney-fee hearing in reliance on petitioner's ad damnum clause in its holdover petition seeking attorney fees. (See Petitioner's Attorney Affirmation, May 31, 2006, at ¶ 10.) Petitioner's counsel states that he learned only on March 13, 2006, that petitioner's standard lease agreements exclude awarding attorney's fees to a prevailing party in the event of litigation—that petitioner's practice is to cross out without initials each lease's attorney-fee clause. Petitioner also argues mutual mistake in that respondent has not produced his lease to prove that his lease provides for attorney fees to the prevailing party. (See id. at ¶ 12.)
Respondent argues that the stipulation is binding. He further contends, in an argument he asks the court not to reach—"atmospherics," as he put it—that it is unlikely that a landlord would cross out, without having either side initial the cross outs, its prospective entitlement to attorney fees but then seek those fees in its ad damnum clause. (Respondent's Attorney Affirmation in Opposition, June 6, 2006, at ¶ 19.) Respondent's in-the-alternative argument is that petitioner's supposed mistake is no mistake at all.
Courts favor stipulations. They are not lightly to be set aside (Matter of Galasso, 320 NE2d 618, 618 [1974]; 227 E 178 Realty Co., LLC v Morillo, 2001 NY Slip Op 50119 [U], *3, 2001 WL 1750627, 2001 NY Misc LEXIS 963, at *4 (Hous Part, Civ Ct, Bronx County, 2001]), especially when counsel represented the party seeking to vacate the stipulation. (Town of Clarkstown v M.R.O. Pump & Tank, Inc., 287 AD2d 497, 498 [2d Dept 2001, mem].) The party moving to vacate a stipulation must show "cause sufficient to invalidate a contract, such as fraud, collusion, mistake or accident." (Hallock v State of NY, 64 NY2d 224, 230 [1984], citing Matter of Frutiger, 29 NY2d 143, 149-150 [1971].) The party seeking to vacate a stipulation for mistake must prove the unilateral or mutual mistake by clear and convincing evidence. (Vermilyea v Vermilyea, 224 AD2d 759, 761 [3d Dept 1996].)
Distinctions exist between unilateral mistakes and mutual mistakes. (See e.g. Matter of Mahonski, 195 Misc 2d 580, 585 [Ct Claims 2003]; Mazzola v CNA Ins. Co., 145 Misc 2d 896, 901 [Civ Ct, Queens County 1989].) A stipulation may be voided on a unilateral mistake if (1) enforcement would be unconscionable; (2) the mistake is material and made despite the exercise of ordinary care by the party in error; (3) the innocent party had no knowledge of the error; and (4) it is possible to place the parties in status quo ante. (Mazzola, 145 Misc 2d at 900-901.) A stipulation will not be vacated where inquiry or ordinary care would have elicited the correct information and revealed the mistake (Matter of Jones, 13 Misc 2d 678, 682 [Surr Ct, Nassau County 1958]; Mazzola, 145 Misc 2d at 901), but it may be vacated on a unilateral mistake "if [*3]failing to do so would result in unjust enrichment of the [petitioner]." (Weissman v Bondy & Schloss, 230 AD2d 465, 469 [1st Dept 1997], appeal dismissed 91 NY2d 887 [1998].) Petitioner has not proven unilateral mistake by clear and convincing evidence.
Enforcing the stipulation would not be unconscionable. "Unconscionable" is defined as "contractual overreaching, imposition, oppressiveness, or unfairness." (Mazzola, 145 Misc 2d at 901, citing Hume v United States, 132 US 406 [1889].) Petitioner has not proved that any overreaching, imposition, oppressiveness, or unfairness occurred.
Nor has petitioner proven that it exercised ordinary care. Although petitioner's alleged mistake in consenting to the hearing is material, petitioner did not exercise ordinary care when it signed the stipulation represented by counsel while in an adversarial relationship. Petitioner never opposed respondent's motion or sought time to investigate whether respondent's lease provided for attorney fees to the prevailing party. This is a case in which a management corporation, through counsel, did not advise counsel that its lease agreements excluded attorney fees.
Petitioner has also failed to prove that respondent had no knowledge of its error. It is unclear whether respondent knew about petitioner's alleged mistake. The evidence shows only that respondent learned of petitioner's alleged mistake on March 16, 2006, when petitioner brought to respondent's attention that it allegedly crossed out (without initialing the cross-out) the attorney-fee provision in respondent's lease. Petitioner submits an affidavit from Michelle Weinberg, one of petitioner's employees responsible for preparing residential leases for tenants, stating that she does not recall the lease in question but that her practice is to cross out the attorney-fee provision in petitioner's standard lease agreements before she presents them to tenants for signature. (See Affidavit of Michelle Weinberg, May 31, 2006, at ¶¶ 4-5.) Petitioner also submits copies of standard lease agreements from two other tenants in the building to demonstrate that it crossed out the attorney-fee provisions in other leases. (Petitioner's Notice of Motion, May 18, 2006, Exhibits 9 and 10.) Respondent, but only through counsel, says he lost his lease. (Respondent's Attorney Affirmation in Opposition, June 6, 2006, at ¶ 20.) The court finds it curious that respondent has not submitted to the court an affidavit alleging that he cannot find his lease. But petitioner concedes that neither respondent's counsel nor respondent himself engaged in fraud in seeking attorney fees. The court will not inquire further.
Even though it is possible to place the parties in status quo ante, the court deems it inappropriate to do so here. Given petitioner's lack of ordinary care, this court cannot vacate the stipulation for the alleged mistake. Petitioner's inquiries and investigations occurred long after the parties agreed to conduct an attorney-fee hearing. A timely inquiry would have elicited the correct information and revealed the alleged mistake, and the court would have held a hearing to ascertain whether Weinberg really crossed out the lease's attorney-fee clause.
Respondent will not be unjustly enriched if this court conducts an attorney-fee hearing. Respondent incurred legal fees in defending himself: by moving to dismiss the petition; by [*4]making numerous court appearances; and by opposing this application to vacate the stipulation. Respondent will be compensated, not enriched, after a hearing at which he must prove that his attorney fees are reasonable.
Petitioner argues, in the alternative, mutual mistake because respondent has not produced his lease. (Id. at ¶ 12.) Petitioner has not proved mutual mistake by clear and convincing evidence. A stipulation may be voided on mutual mistake if the mistake existed when the agreement was made and is so substantial that the agreement fails to represent a true meeting of the minds. (Mahonski, 195 Misc 2d at 584.) Petitioner's mistake, if it was a mistake, was substantial, but petitioner has not demonstrated that any alleged mutual mistake existed when the stipulation was signed. Petitioner, moreover, has not demonstrated that the alleged mutual mistake would have prevented a meeting of the minds; petitioner shows simply that no meeting of the minds exists now. The court cannot ignore that a meeting of the minds occurred on February 23, 2006, when the parties, represented by counsel, presented the court with a stipulation agreeing to an attorney-fee hearing, signifying respondent's entitlement to reasonable attorney fees.
Petitioner's motion to vacate the February 2006 stipulation is denied. The matter is adjourned for an attorney-fee hearing to July 10, 2006, at 9:30 a.m.
This opinion is the court's decision and order.
Dated: June 16, 2006
J.H.C.
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