Wilderhomes, LLC v Zautner

[*1] Wilderhomes, LLC v Zautner 2009 NY Slip Op 50718(U) [23 Misc 3d 1112(A)] Decided on April 2, 2009 Supreme Court, Albany County Teresi, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 2, 2009
Supreme Court, Albany County

Wilderhomes, LLC, Plaintiff,

against

Donald G. Zautner and Robert N. Zautner, Defendants.



Donald G. Zautner and Robert N. Zautner, Third-Party Plaintiffs,

against

Peter Smith and Jennifer L. Smith, Third-Party Defendants.



7158-04



Ginley & Gottmann, PC

Steven H. Gottmann, Esq.

Attorneys for Plaintiff and Third-Party Defendant

96 Ballston Avenue

Saratoga Springs, New York 12866

The Law Office of Livingston T. Coulter, Esq.

Livingston T. Coulter, Esq.

Attorney for the Defendant and Third-Party Plaintiff

25 Gates Avenue Extension PO Box 5

Schuylerville, New York 12871

Joseph C. Teresi, J.

On January 30, 2004, plaintiff and defendants entered into a real estate contract whereby plaintiff agreed to purchase, and defendant agreed to sell, an apartment building located in the Town of Bethlehem, New York. The contract never closed, and this litigation ensued. The Appellate Division - Third Department, by Memorandum and Order entered November 22, 2006 (hereinafter "2006 Order"), reversed the prior Decision and Order, dated May 17, 2005 (Spargo, J.) (hereinafter "2005 Decision") in this action, dismissing plaintiff's complaint. Defendants/third party plaintiffs (hereinafter collectively referred to as "defendants") now move to amend their pleadings to add a cause of action sounding in malicious prosecution; and, move for summary judgment on their tortious interference with a third party contract, abuse of process, prima facia tort, and malicious prosecution causes of action, with the judgment piercing plaintiff's corporate veil. Plaintiff/third party defendants (hereafter referred to collectively as "plaintiff" unless specifically named) oppose the motion and affirmatively move to dismiss defendants' claims and for summary judgment.

Considering first the plaintiff's motions to dismiss, "[o]n a motion to dismiss for failure to state a cause of action, the court must liberally construe the [pleading], accept all of its allegations as true, accord [the non-movant] every favorable inference and decide only whether the alleged facts fit within any recognized legal theory." (Abele v. Dimitriadis, 53 AD3d 969, 970 [3d Dept. 2008]). Moreover, "deficiencies in the complaint may be amplified by supplemental pleadings and other evidence". (AG Capital Funding Partners, L.P. v. State Street Bank and Trust Co., 5 NY3d 582 [2005]).

One of defendants' claims against plaintiff alleges "tortious interference with a third party contract". "[T]o sustain a claim for tortious interference with a contract, it must be established that a valid contract existed which a third party knew about, the third party intentionally and improperly procured the breach of the contract and the breach resulted in damage to the plaintiff". (Clearmont Property, LLC v. Eisner, 58 AD3d 1052 [3d Dept. 2009](emphasis added); NBT Bancorp Inc. v. Fleet/Norstar Financial Group, Inc., 87 NY2d 614 [1996]).

Here, accepting all of defendants' allegations as true, defendants' have not properly set forth a tortious interference with a contract claim. Defendants' pleadings allege that plaintiff duly cancelled the parties' initial contract for the sale of defendants' apartment building. Despite such cancellation, the parties continued negotiating terms. As negotiations were ongoing, a third party offered to purchase defendants' apartment building. This caused plaintiff and the third party to bid against each other. Resulting in the third party's offer being accepted, the plaintiff's offer being rejected, and the formation of a contract between defendants and the third party. From such facts, defendants allege that a contract existed between themselves and a third party that the plaintiff knew about, thereby setting forth the first and second elements of a tortious interference with a contract claim. Defendants have not, however, properly alleged the third element because [*2]they failed to allege that their contract with the third party was breached. Neither the defendants' pleadings, nor any of their supporting documents, allege such breach. Rather, defendants merely allege that their contract with the third party was "delayed." As defendants' have failed to allege a necessary element of their tortious interference with a contract claim, it is dismissed.

While defendants have failed to set forth a "tortious interference with a contract claim", there are other forms of "tortious interference". (NBT Bancorp Inc., supra). Another permutation of "tortious interference" allows a claim premised upon a party's interference "with prospective contract rights... [which requires a showing of] more culpable conduct on the part of the [plaintiff]." (NBT Bancorp Inc., supra at 621). Actionable culpable conduct consists of "physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure". (NBT Bancorp Inc., supra at 621 quoting Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 NY2d 183 [1980]). Moreover, the culpable conduct must be "the proximate cause of the rejection of the... proposed contractual relations". (Pacheco v United Med. Assoc., 305 AD2d 711 [3d Dept. 2003] quoting Jabbour v. Albany Medical Center, 237 AD2d 787 [3d Dept. 1997]).

Considering the defendants' pleadings in a light most favorable, defendants have alleged a cause of action sounding in "tortious interference with prospective contract rights". Defendants allege that plaintiff, by the commencement of this action, interfered with their prospective contracts with potential tenants at the apartment building at issue in this litigation. Defendants' pleadings properly allege "culpable conduct" by claiming that plaintiff's commencement of this action was wrongful. (NBT Bancorp Inc., supra). Defendants further alleged "proximate cause" by claiming that the commencement of this action interfered with defendants' procuring prospective tenants by causing uncertainty for such potential tenants' future leases at the apartment building. As such, on its face, defendants' pleadings set forth a "tortious interference with prospective contract rights" claim, and plaintiff's motion to dismiss that portion of defendants claim is denied.

Next, defendants' abuse of process claim fails to state a cause of action. "The elements of abuse of process are regularly issued process, either civil or criminal, an intent to do harm without excuse or justification, and use of the process in a perverted manner to obtain a collateral objective." (Minasian v. Lubow, 49 AD3d 1033, 1035-36 [3d Dept. 2008] quoting Plataniotis v. TWE Advance/Newhouse Partnership, 270 AD2d 627 [3d Dept. 2000]). However, the "institution of a civil action by summons and complaint is not legally considered process capable of being abused." (Curiano v. Suozzi, 63 NY2d 113 [1984]).

Here, defendants' claim the "process" plaintiff's allegedly abused consisted of instituting this action and in filing a lis pendens. The institution of this action, with its summons and complaint, does not form the basis for an abuse of process claim, as a matter of law. (Curiano, supra). Similarly, "even if it is assumed that the filing of a lis pendens can provide a basis for an abuse of process claim, the critical fact remains that defendants do not assert that the lis pendens was improperly used after its issuance, but only that plaintiff acted maliciously in bringing the action." (Brown v. Bethlehem Terrace Associates, 136 AD2d 222, 225 [3d Dept.1988]). An allegation of maliciousness alone is insufficient to state an abuse of process claim. Accordingly, defendants' abuse of process claim is dismissed.

Defendants also set forth a cause of action sounding in prima facie tort. "To succeed on [*3]the merits of that claim, [defendant] must show (1) the intentional infliction of harm, (2) which results in special damages, (3) without any excuse or justification, (4) by an act or series of acts which would otherwise be lawful." (Morrison v. Woolley, 45 AD3d 953 [3d Dept. 2007] quoting Freihofer v. Hearst Corp., 65 NY2d 135 [1985] internal quotes and citations omitted). However, "a claim of prima facie tort [can] not be used to avoid the requirements... set for traditional torts, such as malicious prosecution". (Engel v. CBS, Inc., 93 NY2d 195, 203 [1999]). "New York courts have consistently refused to allow retaliatory lawsuits based on prima facie tort[,] predicated on the malicious institution of a prior civil action". (Curiano, supra at 118)

Here, defendants' prima facie tort claim is premised upon plaintiff's alleged "baseless filing of [its] civil action" and the "baseless filing of a notice of pendency". Such claims fall squarely within Curiano's prohibition of prima facie tort claims, premised upon allegations of "malicious institution of a prior civil action". Accordingly, plaintiff's motion to dismiss defendants' prima facie tort claim is granted.

Moving next to the parties' respective motions for summary judgment, it is well established that "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 demonstrate the absence of any material issues of fact." (Smalls v. AJI Industries, Inc., 10 NY3d 733 [2008] quoting Alvarez v. Prospect Hospital, 68 NY2d 320 [1986]).

If the movant establishes their right to judgment as a matter of law, the burden then shifts to the opponent of the motion to establish, by admissible proof, the existence of genuine issues of fact. (Zuckerman v. City of New York, 49 NY2d 557 [1980]). With the burden shifted, the opponent of the motion must "assemble, lay bare and reveal his proofs in order to show that the allegations in the complaint are real and capable of being established upon a trial". (Manculich v. Dependable Auto Sales and Service, Inc., 39 AD3d 1070 [3d Dept. 2007]).

Assuming, without deciding, that defendants' motion to amend their pleadings to include a malicious prosecution claim is viable; plaintiff has demonstrated their entitlement to summary judgment dismissing such claim. "To prove malicious prosecution based upon a prior civil action, a plaintiff must show that a prior proceeding terminated in its favor, a patent lack of probable cause for that proceeding, malice and special damages." (Rossi v. Attanasio, 48 AD3d 1025 [3d Dept. 2008]; Perryman v. Village of Saranac Lake, 41 AD3d 1080 [3d Dept. 2007]). Where, a judgment is entered against the party bringing the malicious prosecution claim "in the prior action of which it complains, that circumstance is at least prima facie evidence that the prior action was based on probable cause, and this presumption is not overcome by a subsequent reversal." (I.G. Second Generation Partners, L.P. v. Duane Reade, 17 AD3d 206 [1st Dept. 2005]; see also Crown Wisteria, Inc. v. F.G.F. Enterprises Corp., 168 AD2d 238 [1st Dept. 1990]).

Plaintiff submits the prior 2005 Decision in this action, which denied defendants' motion to dismiss plaintiff's complaint. While clearly not a judgment, such 2005 Decision was entered against defendants, the party bringing this malicious prosecution claim, and constitutes a judicial recognition of the existence of probable cause for the action. Just as the I.G. Second Generation Partners, L.P. court recognized the evidentiary value of a judgment in a prior action, regardless if it was subsequently reversed. Here too, the 2005 Decision constitutes a prima facie demonstration of plaintiff's probable cause to bring this action, even though such decision was [*4]reversed. As such, plaintiff has demonstrated its prima facie entitlement to summary judgment, shifting the burden to defendants, to raise a genuine issue of fact.

On this record, defendants have failed to raise an issue of fact. To rebut the presumption arising from the prior 2005 Decision, defendants must demonstrate "facts from which it might be inferred that the prior decision... was obtained by fraud or misrepresentation". (I.G. Second Generation Partners, L.P., supra). Defendants make no such showing. Moreover, the defendants heavy reliance upon the facts found in the Third Department's 2006 Order, to establish plaintiff's lack of probable cause to commence this action, is misplaced. The 2006 Order did dismiss the plaintiff's complaint for failure to state a breach of contract cause of action. However, its analysis was not so clear cut as to preclude a finding that the plaintiff's complaint was not based upon probable cause.

Accordingly, because plaintiff demonstrated its entitlement to judgment as a matter of law, and defendants have failed to raise a genuine issue of fact, plaintiff's motion for summary judgment dismissing defendants' malicious prosecution claim is granted

The only remaining claim in this action is defendants' tortious interference with prospective contract rights cause of action. Such claim was not specifically pled by defendants. Rather, it was stated only upon a liberal reading of the pleadings. As such, neither party has specifically address their summary judgment motion to defendants' tortious interference with prospective contract rights claim, and no motion for summary judgement relative to such claim is pending. Moreover, defendants' tortious interference with prospective contract rights claim, as set forth in the third party action against plaintiff's only members, is still viable. "Members of limited liability companies... may be held personally liable if they participate in the commission of a tort in furtherance of company business." (Rothstein v. Equity Ventures, LLC, 299 AD2d 472 [2d Dept. 2002]; Haire v. Bonelli, 57 AD3d 1354 [3d Dept. 2008]; W. Joseph Mcphillips Inc. v. Ellis, 278 AD2d 682 [3d Dept. 2000]).Lastly, plaintiff has made no factual showing, with admissible proof, demonstrating its entitlement to dismissal of defendants' claims pursuant to CPLR §3404. Accordingly, that portion of plaintiff's motion is denied.

The parties' remaining contentions have been examined and found to be lacking in merit or moot.

All papers, including this Decision and Order, are being returned to counsel for plaintiff . The signing of this Decision and Order shall not constitute entry or filing under CPLR § 2220. The parties are not relieved from the applicable provisions of that section respecting filing, entry and notice of entry.

So Ordered.

Dated: April 2, 2009

Albany, New York

________________________________

JOSEPH C. TERESI, J.S.C.