Ideal Capital Fund Inc. v Felske
Annotate this CaseDecided on December 21, 2006
Supreme Court, Suffolk County
Ideal Capital Fund Inc., Plaintiff,
against
R. Norman Felske, Ocean Front Estates at Montauk Inc. and Stanley Weisz P.C. Retirement Plan, Defendants.
004-10484
Richard J. Soleymanzadeh P.C.
Attorney for Plaintiff
320 Nassau Boulevard
Garden City South, New York 11530
Nicholas A. Pellegrini Esq.
Attorney for Plaintiff
320 Nassau Boulevard
Garden City South, New York 11530,
Anthony T. Conforti Esq.
Conforti & Waller L.L.P.
Attorneys for Defendant WEISZ
140 Fell Court
Hauppauge, New York 11788
William F. Bates Esq.
Attorney for Defendant FELSKE
120 Court Street
Riverhead, New York 11901
Neil H. Ackerman Esq.
Chapter 7 Trustee for FELSKE
Meltzer Lippe Goldstein & Breitstone L.L.P.
190 Willis Avenue
Mineola, New York 11501,
Jeffrey Arlen Spinner, J.
Defendant FELSKE's Supplemental Affidavit in Opposition 66-67 & Exhibits A-C
and further
UPON the evidentiary hearing held in this matter which commenced on November 8, 2006 and continued to its conclusion on November 17, 2006 and upon all of the evidence adduced at said hearing,
it is,
ORDERED, that the application of Defendant STANLEY WEISZ P.C. RETIREMENT PLAN is hereby granted to the extent hereinafter set forth.
The Defendant STANLEY WEISZ P.C. RETIREMENT PLAN ("WEISZ") has applied to this Court for an Order awarding summary judgment dismissing this action as against it pursuant to CPLR 3212, together with the imposition of sanctions against both the Plaintiff and its attorney pursuant to 22 NYCRR § 130-1.1. The application has been vigorously opposed, both by the Plaintiff and by the Defendant R. NORMAN FELSKE ("FELSKE").
The Court did receive and thoroughly digest a decidedly cumbrous fagot of paper submitted herein which, taken together, aggregate in excess of six inches in thickness. In addition, the Court did convene a series of lengthy conferences in a valiant albeit unsuccessful attempt to effect an amicable resolution herein. Failing the same, the matter was set down for a hearing.
[*2]
At the hearing, the Defendant WEISZ, through counsel and without opposition, merely introduced into evidence copies of the Summons and Verified Complaint of the Plaintiff, the Verified Answer of Defendant WEISZ and the Verified Answer of Defendant FELSKE whereupon he rested his case. Later in the proceedings, during cross-examination of R. NORMAN FELSKE, the Chapter 11 Petition of FELSKE was introduced into evidence. The parties also submitted a Stipulation of Facts. The Plaintiff, in support of its opposition, adduced testimony from R. NORMAN FELSKE, STANLEY WEISZ and one JOSEPH ATIAS.
The dispute of the parties, distilled to its essence, concerns a series of contracts for the sale of real property. The property at issue is located on DeForest Road at Montauk in the Town of East Hampton and is comprised of approximately 26 acres of unimproved oceanfront land (the "Property"). The fee owner of record was (and still is) OCEAN FRONT ESTATES AT MONTAUK INC. though evidence has been received indicating that title is actually vested in Rose Low Esq. as Referee in foreclosure and that WEISZ is the equitable owner, having been the successful bidder in or about 1990. Unsubstantiated assertions were made by Plaintiff's counsel to the effect that the Referee's Deed was never recorded, having been deliberately withheld at the direction of Stanley Weisz so as to evade lawful payment of conveyance taxes.
On July 29, 2002, the Defendant FELSKE entered into a Contract of Sale to purchase the Property from Defendant WEISZ for the sum of $ 4,250,000.00 (the "Weisz Contract"). In accordance therewith FELSKE paid the sum of $ 150,000.00 (to be held in escrow although WEISZ admitted that the funds were never escrowed) with the sum of $ 2,100,000.00 to be paid in cash at closing and $ 2,000,000.00 to be in the form of a Note secured by a Mortgage in favor of WEISZ. Closing was to occur on or before July 29, 2003 which was extended by WEISZ, first to August 29, 2003 and then again to September 29, 2003. The closing of title was never consummated, WEISZ retained the down payment and presumed that the Contract of Sale was a nullity. The Court received into evidence copies of letters from WEISZ' counsel to FELSKE extending the time for performance and setting forth the tender date of September 29, 2003, including express language that if FELSKE failed to consummate the transaction, the monies paid on account would be retained as liquidated damages.
Thereafter and on December 29, 2003 (some 91 days subsequent to the lapse and nullification of the Weisz Contract) FELSKE made and executed a Contract of Sale for the Property with the Plaintiff as purchaser for consideration of $ 11,000,000.00 (the "Ideal Contract"). The Ideal Contract was received into evidence at the hearing as Plaintiff's Exhibit 17. In Paragraph 5 of the Rider to the Ideal Contract, FELSKE affirmatively represented that he was not the owner of the Property but instead the contract vendee thereof and further, that the Weisz Contract was, as of December 29, 2003, a valid and subsisting contract of sale. In relevant part, he stated that "Seller does however represent to Purchaser that he has entered a Binding Contract of Sale to purchase the subject Parcels and that such Contract is now in full force and effect and will not expire before the end of the "Due Diligence" Review Period. All notices under said contract shall be forwarded to Purchaser."
When the Ideal Contract was not consummated as scheduled, the Plaintiff, on April 22, 2004, [*3]commenced this action demanding specific performance (though not stating upon which of the two Contracts of Sale this remedy was sought to be invoked), money damages for breach of contract, breach of covenant of good faith, fraud, misrepresentation and unjust enrichment (though not specified as against which Defendant or Defendants these branches of relief were sought) and a demand for punitive damages against the Defendant FELSKE only. The Complaint alleged inter alia that both FELSKE and WEISZ were "partners" under the Ideal Contract, that FELSKE was both the agent and alter ego of WEISZ. Plainitff's entire complaint, verified by Joseph Atias, save for the allegations of Plaintiff's corporate status, is based solely and completely upon information and belief and not upon any actual knowledge whatsoever.
Thereafter and on July 23, 2004, FELSKE, acting pro se, filed a voluntary petition for relief pursuant to Chapter 11, Title 11, United States Code with the United States Bankruptcy Court for the Eastern District of New York. That petition was thereafter converted by Order of the Bankruptcy Court to a proceeding for liquidation pursuant to Chapter 7, Title 11 and Neil H. Ackerman Esq. was duly appointed as Chapter 7 Trustee of the Bankruptcy Estate of R. Norman Felske.
A fair reading of all of the papers submitted would, at first blush, indicate that FELSKE was, at all relevant times herein, acting on behalf of WEISZ, either as a partner, joint venturer or agent. However, the evidence adduced at the hearing leads the Court to inescapably conclude very much to the contrary.
Upon examination by Plaintiff's counsel, FELSKE allowed that he was 82 years of age, a native of West Hartford, Connecticut, trained as a civil engineer at Trinity College and Yale University and, for a short time, a professional baseball player with the Boston Braves until an unfortunate injury cut short his sports career. He stated that he has known Stanley Weisz (the principal of WEISZ) for over thirty years and has, in the past, been involved with Mr. Weisz as a joint venturer (solely in their respective individual capacities) in several land transactions. Clearly, he is a highly educated individual who possesses an above-average level of financial sophistication and business acumen, especially in the realm of real property.
Upon cross-examination, he was asked directly by Mr. Conforti if he had defaulted on the Weisz Contract and he candidly and unreservedly answered "Yes, sure. I told him I was defaulting. I told him I couldn't come up with certain monies." In response to another question on cross-examination, he stated that "At one time I was a contract vendee but I assumed after that, all the work I did, that we were partners." He also conceded that he never tendered nor offered to tender any of the funds necessary to consummate the Weisz Contract.
A certified copy of the bankruptcy petition was received into evidence at the hearing as Defendant's Exhibit D. An examination thereof reveals that case no. 04-84749-CISB was assigned on July 23, 2004 on the debtor's pro se petition. A careful review of the individual schedules is both revealing and instructional. In his voluntary petition, FELSKE affirmatively denied the existence of any executory contracts on Schedule G, did not schedule any claims against WEISZ, declared no exemptions and listed but two creditors, both mortgagees. Moreover, on the Statement of Financial Affairs, he affirmatively denied involvement in or the existence of any partnerships, joint ventures or other business arrangements within the two years [*4]preceding the filing. He annexed a Chapter 11 Plan proposing to sell his residence any pay his two mortgage creditors.
The Court did have a substantial opportunity to observe FELSKE, his demeanor, his comportment and was afforded the occasion to evaluate his testimony. What emerged from his testimony was, in addition to the foregoing was that subsequent to July 29, 2002 and even continuing to the present time, FELSKE took affirmative steps to market the Property, engaged professionals to prosecute an application for a lot line alteration and appeared in local court regarding certain violations on the Property.
Taken together, the Court is led to the inescapable conclusion that FELSKE knew full well that after September 29, 2002, the Weisz Contract was a nullity and further, that he was not, for the purposes of this transaction, a partner, agent or representative of WEISZ. This is borne out both by his testimony as well as his sworn statements in the voluntary bankruptcy petition that he filed on July 23, 2004, almost two years subsequent to the execution of the Weisz Contract.
The Plaintiff also called Stanley Weisz, the principal of WEISZ. Mr. Weisz testified, among other things, that he did not have the contract deposit held in escrow despite the express language of the Contract of Sale, that he had FELSKE draw the down payment to Pro Wyse Corp., an entity unrelated to WEISZ but controlled by the witness, that he never authorized FELSKE to take any action upon the Property, that the Contract of Sale with FELSKE was defaulted and as of September 29, 2003 was of no further force and effect, that the down payment made by FELSKE was retained and not refunded as provided for by the Weisz Contract and that, with respect to the Property, there was neither a partnership, joint venture, agency nor any other arrangement between FELSKE and WEISZ. He allowed, however, that in his individual capacity, he had been a joint venturer with FELSKE at times in the past.
The Plaintiff called, as its last witness, Joseph Atias, the principal of the Plaintiff. He testified that he was a real estate investor and a mechanical engineer by training. He stated that, though not an attorney, he drafted the December 29, 2003 Ideal Contract with FELSKE as Seller for consideration of $ 11,000,000.00. He stated that the only "open" issue was the status of title which, it appears, would be an insurmountable impediment to any purported conveyance. He stated that FELSKE represented himself both as an owner and contract vendee of the Property (though the Ideal Contract expressly describes FELSKE as a contract vendee and nothing more) and stated that FELSKE acted in a manner consistent with that of an equity partner (whatever that may mean). He indicated that he was, at the time of this hearing, ready, willing and able to immediately consummate the Ideal Contract. However, on cross-examination, he conceded, after some rather vigorous prodding, that he was unwilling to now purchase the Property for $ 11,000,000.00 due to "up zoning" by the Town of East Hampton. When pressed further on cross, he allowed that FELSKE would have to convey insurable title and that he was aware that FELSKE could not do so.
As a threshold matter, the Court must address the issue of privity of contract as the same applies between the Plaintiff and the Defendant WEISZ. The Plaintiff asserts that FELSKE is, in effect, [*5]the alter-ego of WEISZ, thereby concluding that the Ideal Contract is enforceable as against WEISZ. However, aside from the allegations as such, no admissible proof has been adduced in support thereof. Absent a showing of privity, the action must fail, Merrill v. Green, 55 NY 270 (1873), Simson v. Brown, 68 NY 355 (1877). It is patently clear from the evidence presented that the Plaintiff is merely a potential incidental beneficiary of the Weisz Contract who has not demonstrated an enforceable right thereunder. Where, as here, the Plaintiff seeks to maintain an action against a third party (here, Defendant WEISZ) grounded in a contract
between that Defendant and a third party (here, Defendant FELSKE), it is incumbent upon the Plaintiff to both plead and prove that the contract was intended for its benefit and it must be clear on the face of the contract, Flemington National Bank & Trust Company [N.A.] v. Domler Leasing Corporation, 65 AD2d 29 (1st Dept. 1978), affirmed, 48 NY2d 678 (1979), Fenton v. Fenton, 253 AD2d 844 (2nd Dept. 1998).
Even assuming arguendo that there was a valid and subsisting contract wherein a decree of specific performance would lie, the Plaintiff would have to prove that it was ready, willing and able to consummate the transaction on its agreed terms upon the granting of the decree. The testimony of Mr. Atias shows that the Plaintiff was no longer ready, willing and able to do so, thereby precluding specific performance, McCabe v. Witteveen, 2006 NY Slip Op 08749 (2nd Dept., November 21, 2006), Internet Homes v. Vitulli, 8 AD3d 438 (2nd Dept. 2004).
To grant summary judgment, it must clearly appear that there are no material issues of fact Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395 (1957 ). 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 eliminate any material issues of fact from the case Zuckerman v. City of New York, 49 NY2d 557 (1980); Sillman v. Twentieth Century-Fox Film Corp., supra.
Once a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issue of fact is shown, the burden shifts to the party opposing the motion to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact requiring a trial of the action, Zuckerman v. City of New York, supra. Here the Plaintiff has failed to put forth anything even remotely efficacious to contravene the summary judgment application by Defendant WEISZ. This is so even with the Court giving to the Plaintiff the benefit of every doubt and construing all pleadings liberally in favor of the Plaintiff. Indeed, it is readily apparent to this Court that the Plaintiff's Complaint, at least as it applies to the Defendant WEISZ, is based upon nothing more than sheer speculation, unsubstantiated supposition, presumptive conjecture and innuendo. It is beyond any reasonable doubt whatsoever that the Plaintiff's Complaint as it stands against the Defendant WEISZ clearly runs afoul of 22 NYCRR § 130-1.1 and therefore is sanctionable. Here, the Plaintiff has failed to adduce so much as a scintilla of admissible proof to demonstrate that it is entitled to any of the relief that it seeks against the Defendant WEISZ in this action.
[*6]
The Court will not sua sponte assess sanctions against the Plaintiff herein inasmuch as the Defendant's counsel has previously withdrawn his request for the same, albeit without prejudice. However, the Court cannot condemn strongly enough the commencement and continuation of an action not grounded in good faith. The Court understands that the attorneys in this action are representing their respective clients and that the statements made in the pleadings are not necessarily those of counsel but of the parties. The Court finds that the Defendant WEISZ is entitled to the recovery of a bill of costs against the Plaintiff as a result of this application.
For all the reasons stated hereinabove, it is,
ORDERED, that the application of Defendant STANLEY WEISZ P.C. RETIREMENT PLAN for an Order awarding summary Judgment against Plaintiff, pursuant to CPLR 3212, together with costs and disbursements of this motion, is hereby granted; and it is further
ORDERED that the Plaintiff's complaint is hereby dismissed on the merits as against the said Defendant STANLEY WEISZ P.C. RETIREMENT PLAN; and it is further
ORDERED that the Plaintiff's action be and is hereby severed and continued as to the remaining Defendants R. NORMAN FELSKE and OCEAN FRONT ESTATES AT MONTAUK INC.; and it is further
ORDERED that all further proceedings herein as to the Defendant R. NORMAN FELSKE shall be on due and proper notice to Neil H. Ackerman Esq., the Chapter 7 Trustee of the Bankruptcy Estate of R. Norman Felske and shall be subject to such other and further Orders of the United States Bankruptcy Court, Eastern District of New York under case no. 04-84749-CISB as may be applicable to this matter; and it is further
ORDERED that the Notice of Pendency heretofore recorded by the Plaintiff, encumbering the real property at Montauk, Town of East Hampton, New York and designated on the Suffolk County Tax Map as District 0300, Section 032.00, Block 06.00, Lots 010.000 & 011.000 shall be and the same is hereby dissolved, cancelled, vacated, discharged and of no further force and effect and the Clerk of Suffolk County, upon payment of the proper fees by Plaintiff, if there be any, shall cause the same to be reflected in the land records; and it is further
ORDERED that the Defendant STANLEY WEISZ P.C. RETIREMENT PLAN having an address of 195 Smithtown Boulevard, Nesconset, New York 11767, recover of the Plaintiff IDEAL CAPITAL FUND INC. having an address of 325 Franklin Avenue, Garden City, New York 11530 a bill of costs and disbursements in the amount of $ 280.00 and that it have execution therefor; and it is further
ORDERED, that Counsel for the moving party herein is hereby directed to serve a copy of this order, with Notice of Entry, upon Counsel for all the remaining parties, and upon the Calendar Clerk of this Court within twenty (20) days of the date of entry of this order.
Plaintiff's counsel is directed to settle judgment on 10 days notice.
Dated:Riverhead, New York
December 21, 2006
____________________________________
HON. JEFFREY ARLEN SPINNER, J.S.C.
TO:
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