Papagiannis v Commerce Bank

[*1] Papagiannis v Commerce Bank 2009 NY Slip Op 51926(U) [24 Misc 3d 1249(A)] Decided on September 10, 2009 Supreme Court, Suffolk County Mayer, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 September 10, 2009
Supreme Court, Suffolk County

Nick Papagiannis, Plaintiff(s),

against

Commerce Bank, MAPLE PROPERTIES, INC., and THE ESTATE OF PENELOPE PATAPIS, Defendant(s).



22847-2007



Christopher Modelewski, Esq.

Attorney for Plaintiff

44 Elm Street

Huntington, New York 11743

Weber Law Group, LLP

Attorneys for Defts Commerce Bank and Maple Properties

201 North Service Road

Melville, New York 11747

Peter H. Mayer, J.

Upon the reading and filing of the following papers in this matter: (1) Notice of Motion by the defendants, dated September 6, 2007, and supporting papers, including Memorandum of Law; (2) Affirmation in Opposition by the plaintiff, dated December 6, 2007, and supporting papers, including Memorandum of Law; (3) Reply Memorandum of Law by the defendants, dated January 11, 2008; and now [*2]

UPON DUE DELIBERATION AND CONSIDERATION BY THE COURT of the foregoing papers, the motion is decided as follows: it is

ORDERED that the motion by the defendants, Commerce Bank and Maple Properties, Inc., which seeks an order dismissing the plaintiff's complaint pursuant to CPLR § 3211(a)(1),(5) and (7), is hereby denied; and it is further

ORDERED that the defendants are directed to serve, upon counsel for the plaintiff, an answer to the plaintiff's complaint by first class mail on or before October 9, 2009; and it is further

ORDERED that the parties are directed to appear for a Preliminary Conference in the courtroom of the undersigned on October 21, 2009, 9:30 a.m.; and it is further

ORDERED that the movant shall promptly serve a copy of this Order upon all appearing parties by first class mail and shall thereafter promptly file the affidavit(s) of such service with the County Clerk.

Plaintiff, Nick Papagiannis ("Papagiannis"), is the leaseholder of real property located at 647 Main Street, in the Village of Northport, County of Suffolk, State of New York (hereinafter referred to as "the Property" or "the Premises"). Papagiannis owned and operated a restaurant and catering business called the Cow Harbor Inn at the Premises from 1978 to 2003. He leased the Premises from the owner, Penelope Patapis. Defendant Commerce Bank ("Commerce") sought to open a new branch at this location, and in 2001 the defendant, Maple Properties Inc. ("Maple"), a Commerce affiliate, approached Papagiannis and Ms. Patapis, now deceased, seeking to purchase both the Papagiannis business and the Property (defendant, Estate of Penelope Patapis, is hereinafter referred to as "Patapis"). Thereafter, Maple and Papagiannis executed an agreement (hereinafter referred to as the "Agreement") for the sale of Papagiannis' business in the amount of $500,000.00. Maple also entered into a contract with Patapis for the sale of the Property.

Maple drafted the Agreement and Papagiannis signed it without the assistance of counsel. The Agreement was conditioned upon 1) the buyers simultaneously closing on the purchase of the Property; and 2) the buyers obtaining all approvals for construction of a commercial bank with a minimum of four drive-through lanes. The Agreement states that the buyers' deposit shall be returned to the buyers if these conditions were not met. Also relevant is the provision that the "[s]ellers must stay current with all lease payments." After execution of the Agreement on December 12, 2001, Commerce made attempts to seek the necessary municipal approvals to construct its bank branch; however, local residents of Northport Village began a series of Article 78 proceedings to prevent Commerce from erecting the branch at this location. Commerce then amended its application by changing the design of the building, including the number of drive-thru lanes in order to comport with the needs of the Village.

Papagiannis ceased paying rent for the Premises in or about September 2002; however, he continued to maintain insurance in order to preserve and protect the Premises, he continued [*3]cooperating with the buyers, and he continued to publically proselytize the benefits of having a bank branch at that location. Papagiannis ceased operating the restaurant business in 2003, allegedly due to a diminution of business because of the publicity regarding the bank applications and rumors of the potential placement of a fire house sub-station at the location.

In his verified complaint, the plaintiff alleges that, notwithstanding the delays occasioned by Commerce Bank and the plan for re-development of the site, both Commerce and Maple, through their representatives, remained in contact with plaintiff, assuring him of the continued interest in the purchase of the business and leasehold. Plaintiff further alleges that Maple and Commerce reaffirmed the intention to close the deal with plaintiff as soon as possible, notwithstanding their departure from certain conditions in the Agreement. Plaintiff made an agreement with Patapis to allocate approximately $140,000.00 of the sales price at closing to settle the accumulated rent arrears. This agreement was memorialized in a letter from Patapis' attorney at the time, Jordan Fields, Esq., to the plaintiff's attorney, Christopher Modelewski, Esq. Following this alleged agreement to use proceeds of the sale to pay rent arrears, defendants Commerce and Maple refused to close, notwithstanding their alleged continued promise to do so.

In September of 2005, Patapis commenced a summary proceeding against Papagiannis, who then commenced a prior action in Supreme Court, seeking a declaratory judgment and consolidation of the Supreme Court case with the summary proceeding. The summary proceeding against Papagiannis alleged that he had made no rent payments since September 2002 and that he owed arrears in the amount of $227,000.00. In that matter, Papagiannis essentially alleged that the parties had previously agreed that arrears would be paid from the sale, which could not take place until the approval process was complete. Papagiannis also sought a preliminary injunction to preclude his eviction until after the closing.

In this action, the plaintiff's complaint alleges that he was asked to forebear from pursuing his lawsuit at the request of a representative from defendants Commerce and Patapis. There is no dispute that both the Supreme Court action and the summary proceeding were subsequently withdrawn or abandoned. Plaintiff alleges the consideration for this mutual forbearance was a renewal of the previous commitment to close by defendant Maple/Commerce Bank and to pay plaintiff approximately $360,000 of the original purchase price with approximately $140,00 to be paid to defendant Patapis as a compromise, to cover the rental arrears. While the above was occurring, the approval process was continuing.

It is undisputed that a written Agreement, which is the subject of this litigation, existed between plaintiff and defendant Maple Properties. Moreover, the application for the approvals from the Village, the successful granting of which are a contingency of the Agreement, was made in the name of Commerce Bank. On April 25, 2007, the Zoning Board of Appeals of Northport Village granted, in part, and denied, in part, the necessary approvals, which were the subject of the application. Notably, the approval granted the issuance of a special use permit for Commerce, which would include the maintenance of three drive-through lanes instead of four. Title has now passed from Patapis to defendant Maple Properties and/or Commerce Bank. [*4]

The plaintiff alleges four causes of action in his verified complaint. The first alleges breach of contract; the second alleges breach of the "accord reached in 2004;" the third alleges breach of an "executory accord reached in September 2005;" and the fourth alleges that Commerce and Maple "tortiously interfered with plaintiff's property with intent to cause financial harm through the withholding of payment owed for the purchase of plaintiff's business and leasehold and tortiously interfered with plaintiff's "contractual relations." Defendants seeks dismissal of plaintiff's complaint pursuant to CPLR § 3211(a)(1), (a)(5) and (a)(7), alleging that since Commerce is not a party to the Agreement, it is not a proper defendant. In opposition, the plaintiff argues that Maple was acting as agent for Commerce when executing the Agreement, thus binding defendant Commerce and rendering Commerce a proper defendant. The defendants also seek dismissal on the grounds that the Agreement concerns an interest in real property, and that the Statute of Frauds prevents oral modifications to the written Agreement pursuant to General Obligations Law (GOL) § 15-301.

On the question of whether the complaint states a cause of action sufficient to withstand a motion to dismiss pursuant to CPLR §3211(a)(7), the Court is to liberally construe the pleadings, accept as true the facts alleged in the complaint, and determine only whether the facts as alleged fit within any cognizable legal theory (Leon v Martinez, 84 NY2d 83, 614 NYS2d 972 [1994]). In an action in which a moving party offers matters extrinsic to the pleadings, such as supporting affidavits, the court on a motion to dismiss need not assume the truthfulness of the pleaded allegations, in that the criteria is whether the proponent of the pleading actually has a cause of action, not whether he has properly stated one; for a defendant to be successful on a motion to dismiss, the evidence defendant offers must establish conclusively that plaintiff has no cause of action (Kaufman v International Business Machines Corp., 97 AD2d 925, 470 NYS2d 720 [3rd Dept 1983], aff'd 61 NY2d 930, 474 NYS2d 721 [1984]).

Defendants contend that plaintiff cannot maintain this action because certain contingencies were not met, including: 1) the inability to obtain the approvals referred to in paragraphs 7 and 8 of the Agreement, in that the approvals obtained allowed for three drive-thru lanes instead of four; and 2) plaintiff's failure to stay current with the rent. Plaintiff alleges that the defendants waived the requirement that these contingencies be met by the accord in 2004. In support, the plaintiff cites a September 20, 2004 letter tendered by Jordan Fields, Esq., attorney for Patapis. In pertinent part, the letter states that Mr. Fields spoke with Brian Weber, who represented Commerce, confirming with the plaintiff that they were ready to close "this week." The letter also confirms that plaintiff owed Patapis $141,800.00 as the agreed-upon amount to be paid at closing for rent arrears. Although the letter is not given under oath, no dispute is raised as to its authenticity, or as to Mr. Fields' capacity to speak on behalf of Patapis.

Mr. Fields, as attorney for Patapis in the land transaction, was her agent. Therefore, his statements were binding on Patapis and, as such, constitute an admission by Patapis (see, Prince, Richardson on Evidence § 8-231(4) [Farrell 11th ed]). Moreover, from September 2002 until the September 20, 2004 letter, defendants had not commenced a summary proceeding to evict plaintiff. Thus, plaintiff continued to maintain his leasehold, even though out he was of business. Further, the approvals in question were still being sought in September 2004 and there is no dispute that the [*5]intention of the parties was to facilitate an agreement to allow the defendants Maple and Commerce to acquire the property and construct a building for a Commerce Bank branch.

Waiver is essentially a matter of intention. The evidence must have probative force sufficient to prove that there was in fact an intention to waive the right or benefit, a voluntary choice not to claim it. In essence, waiver is the voluntarily relinquishment of a known right (Schapfel v Taylor, ___ AD3d ___, 2009 Slip Op 6242 [2d Dept 2009]; Gresser v Princi, 128 AD2d 752, 513 NYS2d 462 [2d Dept 1987]; GM Acceptance Corp. v Clifton Fine Central School District, 85 NY2d 232, 623 NYS2d 821 [1995]; Bank Lewmi Trust Co. v Block 3102 Corp., 180 AD2d 588, 580 NYS2d 299 [1st Dept 1992]). Inextricably interwoven with the waiver issue is the claim by the defendants that the action must be dismissed under CPLR §3211(a)(5) based on the Statute of Frauds, as the Agreement to sell a business with a leasehold extending greater than one year violates the Statute (American Bartenders School v 105 Madison, 59 NY2d 716, 457 NYS2d 523 [1983]; GOL § 5-703).

Parties to a written agreement who include a proscription against oral modification are protected under GOL §15-301(1). Notably, the subject Agreement in this matter contains no such proscription against oral modification; however, any contract containing such a clause cannot be changed by agreement unless such is in writing and signed by the party against whom enforcement is sought (DFI Communications v Greenburg, 41 NY2d 602, 394 NYS2d 586 [1977]). Under these circumstances GOL §15-301 nullifies only "executory" oral agreements. Partial performance, unequivocally referable to the oral modification, will obviate the requirement of a writing (Rose v Spa Realty Assocs., 42 NY2d 338, 397 NYS2d 922 [1977]; Healy v Williams, 30 AD3d 466, 818 NYS2d 121 [2d Dept 2006]; Donald v Barbato, 27 AD3d 414, 810 NYS2d 665 [2d Dept 2006]; Kayser v Kayser, 18 AD3d 441, 795 NYS2d 250 [2d Dept 2005]; Sparer v Sparer, 227 AD2d 613, 643 NYS2d 617 [2d Dept 1996]).

When an oral agreement has been acted upon to completion, the same need to protect the integrity of the written agreement against false claims of modification does not arise. In such a case, not only may past oral discussions be relied upon to test the modification, but the actions taken may demonstrate, objectively, the nature and extent of the modification. Where there is partial performance of an oral modification sought to be enforced, the likelihood that false claims would go undetected is similarly diminished. Here, too, the Court may consider not only past oral exchanges, but also the conduct of the parties (Rose v Spa Realty, supra ; Schapfel v Taylor, supra ; J & R Landscaping v Damianos, 1 AD3d 563, 769 NYS2d 52 [2d Dept 2003]). Analogous but distinct from the doctrine of partial performance is the principle of equitable estoppel. Once a party to a written agreement has induced another's significant and substantial reliance upon an oral modification, the first party may be estopped from invoking the statute to bar proof of the oral modification (Riverside Research Institute & Warwick Investors v KMGA, Inc., 108 AD2d 365, 489 NYS2d 220 [1st Dept 1985]; Stony Brook Realty v Cremktco, 176 Misc 2d 589, 675 NYS2d 749 [App Term, 2d Dept. 1998]).

Here, the parties entered into the Agreement in December 2001. Likewise, the defendant Maple entered the contract to purchase the fee simple in December 2001. Closings were to take [*6]place simultaneously. Inordinate delays were then caused by the Article 78 proceedings. There is evidence that a "Mr. Hill," on behalf of Maple/Commerce, spoke directly with Christopher Modelewski, Esq., counsel for plaintiff, on or about August 5, 2004, regarding his desire to close "next week," and that Mr. Modelewski conveyed this information in writing to Mr. Libert, who represented the Maple/Commerce defendants at the time. This communication took place almost two years after the plaintiff stopped paying rent and during which no summary proceeding had been commenced. There is no evidence in the defendants' pleadings or affidavits regarding their alleged insistence that they would not close because of plaintiff's failure to stay current with rent payments.

In addition, although Paragraph 10 of the Agreement states that the seller must stay current with lease payments, this condition is not expressly declared to be a contingency for closing. Paragraph 11 states that the seller must pay all back rent to the property owner at the time of settlement. Taken together, these clauses create an ambiguity in the Agreement. One clause seemingly mandates that plaintiff keep current on the rent, while the other clause contemplates the potential for arrears. As is well established in our law, ambiguities must be resolved against the party drafting the instrument which, in this case, is the defendant Maple (Westview Assocs. v Guar. Nat'l Ins. Co., 95 NY2d 334, 717 NYS2d 75 [2000]; Nationwide Mut. Ins. Co. v CNA Ins. Co., 286 AD2d 485, 729 NYS2d 760 [2d Dept 2001]). If the rights and obligations of the parties cannot be discerned from the four corners of the agreement, parol evidence is admissible (Tierney v Drago, 38 AD3d 755, 833 NYS2d 127 [2d Dept 2007]).

Notwithstanding the lack of rental payments, the plaintiff continued to maintain the leasehold during and subsequent to the closing of his business by paying insurance premiums and by inspecting and maintaining the Premises. He continued to publicly support the project and cooperate with the buyers in seeking their approvals pursuant to the requirements of paragraph 16 of the Agreement. The defendants themselves continued on their expected path of seeking and ultimately obtaining an approval with a revised plan containing three drive-through lanes. This approval was obtained in April 2007. There is no evidence demonstrating that the defendants were insisting on strict compliance with the conditions in the Agreement during this, or any other period.

It is undisputed that the defendants refused to close in late 2004, despite their alleged continuous promises to do so. A summary proceeding was brought by Patapis against the plaintiff in September of 2005, immediately followed by the prior Supreme Court action by plaintiff against the defendants. At the time, the defendants were still in the approval process. Both suits were withdrawn or abandoned and plaintiff, in his verified complaint, alleges that this forbearance was predicated on the representations by defendants that they intended to close. Therefore, both the plaintiff and Patapis altered their legal position. There is no explanation in the pleadings for this altered position, other than that which is offered by plaintiff, to wit, the forbearance was induced by the defendants through their conduct and words, that they fully intended to close.

The court concludes that there exist multiple factual disputes as to whether there was a waiver, or oral modification to the contract and/or whether the defendant should be estopped from denying any oral modification based on the words and conduct of the parties (see, J & R [*7]Landscaping, Inc. v Damianos, supra ; Gresser v Princi, supra ; Stony Brook Realty LLC v Cremictco Inc., supra ; Schapfel v Taylor, supra ).

Maple contracted with the plaintiff in order to buy out his leasehold to facilitate the construction of a Commerce Bank at the subject location. After the agreements were reached between the plaintiff and the landholder, applications for approvals were made to Northport Village in the name of Commerce. These approvals were contingencies set forth in the Agreement. Commerce Bank is a corporation authorized to do business in New York. Corporations in New York have the power to appoint agents other than corporate officers (see, BCL §202 [a] [10]). Agency is a fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act (Restatement [Second] of Agency § 1).

The agent holds the power to alter the legal relationship between his principal and third parties in matters within the scope of the agency (C. Smirlock Realty Corp. v Title Guarantee Corp., 70 AD2d 455, 421 NYS2d 232 [1979]). The authority to act may be established circumstantially or by the course of conduct of the principal's business. Again, the criteria to be used in this analysis is whether the proponent actually has a cause of action not whether he has stated one (Kaufman v IBM Corp., 97 AD2d 925, 470 NYS2d 720 [3d Dept 1983], aff'd 61 NY2d 930, 474 NYS2d 721 [1984]). Based upon these principles, the Court finds that the Department of State exhibit, which names Maple Properties Inc. as an independent corporate entity, is not sufficient, in the context of this case, to conclusively establish the defense on behalf of Commerce at this time, as factual questions exist as to whether defendant Maple was acting as an agent for Commerce when the Agreement with plaintiff was executed.

With regard to a cause of action for tortious interference with contract, the elements necessary to be pled are: 1) the existence of a contract between the plaintiff and a third party; 2) defendants' knowledge of the contract; 3) defendants' intentional inducement of the third party to breach or otherwise render performance impossible; and 4) damages to plaintiff (Bernberg v Health Mgmt Systems, Inc., 303 AD2d 348, 756 NYS2d 96 [2003]). Here, plaintiff alleges that he had a contractual relationship with defendant landowner whereby the landowner would allow plaintiff to stay in possession of the premises until closing with the defendants. The plaintiff further alleges that the defendants, Maple and Commerce, notwithstanding their continuing promise to close, delayed the proceedings and induced Patapis to bring a summary proceeding to evict the plaintiff, thus precluding Maple/Commerce's obligation to honor the Agreement with the plaintiff. In accepting as true, the facts contained in the complaint and according the plaintiff the benefit of every favorable inference, the Court concludes that the defendants' motion to dismiss this cause of action pursuant to CPLR 3211(a)(7) must be denied (see, Leon v Martinez, supra ).

This constitutes the Decision of the Court.

Dated: September 10, 2009

Peter H. Mayer, J.S.C.