Oppenheim v Ultimate Servs. for You, Inc.

[*1] Oppenheim v Ultimate Servs. for You, Inc. 2011 NY Slip Op 50004(U) [30 Misc 3d 1206(A)] Decided on January 4, 2011 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 4, 2011
Supreme Court, Kings County

Kira Oppenheim, Petitioner,

against

Ultimate Services for You, Inc., LYUDMILA BERLINKOVA and LEONID BERLINKOV, Respondents.



22671/08



Attorney for Petitioner:

Mirra Khavulya, Esq.

Mallow, Konstam & Nisonoff, P.C.

321 Broadway

New York, NY 10007

Attorney for Respondents:

Victor Worms, Esq.

65 Broadway, Suite 750

New York, NY 10006

Carolyn E. Demarest, J.

Petitioner Kira Oppenheim moves, pursuant to CPLR 2104, to enforce a stipulation of settlement, agreed to on the record in open court on May 18, 2010 (the "May 18 settlement"), seeking payment from the respondents for the interest incurred due to the delayed closing in the amount of $16,947 and attorneys' fees associated with the enforcement of the May 18 settlement in the amount of $12,393,90.

Background

Petitioner commenced the instant action for corporate dissolution under BCL § 1104 on August 5, 2008, alleging that she was the 50% owner of respondent Ultimate Services For You, Inc. ("Ultimate"). Respondents Ultimate, Lyudmila Berlinkova and Leonid Berlinkov opposed the petition. After conducting a hearing on October 31 and November 3, 2008, this court granted [*2]respondents' motion to dismiss the dissolution claim, finding that petitioner had not met her burden to prove that she had become a 50% owner of respondent corporation. The court granted leave for petitioner to file an amended complaint, determining that petitioner owned a one-third interest in respondent Ultimate and that the individual respondents owned the remaining two-thirds of the interest. The petitioner sought to appeal the court's determination and the individual respondents sought to exercise their right of election to buy out petitioner's interest. In the interim, on April 13, 2009, this court directed the parties to mediation, but they were unable to resolve their dispute. On July 1, 2009, this court referred the matter to accountant Joan Lipton of Lazar Lipton Valuations Services to appraise the value of petitioner's share of Ultimate. On May 18, 2010, this court held a final settlement conference with the parties in which the parties agreed to settle all outstanding issues. In open court, Abe Konstam, Esq., petitioner's counsel stated:

Your Honor, I am pleased to let the Court know that we have reached a settlement. I just want to put the basic terms of the settlement on the record, and we'll be putting this in formal writing to be signed and to close at a certain date.

The settlement is, the defendants will pay the plaintiff $790,000 in full satisfaction of her interests in the business Ultimate.

The statutory interest will begin to run no later than 45 days hereafter. That's when it will start to run. We expect to close within 45 days.

At which point when we do the closing, they will pay us $400,000 at the closing, and we'll waive our right to appeal the balance after they pay us the $400,000 which will be paid with the statutory interest of nine percent until the full balance is paid; but it must be paid in one year. That's listed as additional security.

My client will sign . . . the shares of stock, and it will be held in escrow by me that when the final payment is made, we will turn it over to the defendant[s]. Likewise, the defendants in full payment of the balance of the settlement amount, they will sign over their shares in black to be held by Mr. Worms [respondents' counsel], so that if there's a default, that we have recourse as additional security against their shares.

Mirra Khavulya, Esq., also counsel for petitioner, explained that, "[t]hey're going to owe us approximately 790. They give us 400,000. . . .Now they have a right to pay the 390 with statutory interest up to a year. . . Then if they default and they don't pay it by the year, [Mr. Konstam is] going to hold as decisional [sic] security their shares of stock that I can go after that stock or attach it or do whatever I have to do in order to get the balance."

Petitioner's counsel also stated that petitioner would withdraw from participating in the business of Ultimate. This court asked, "[t]hat's effective immediately upon closing within 45 days?" to which Mr. Worms responded, "yes."According to Ms. Khavulya, all parties also agreed to refrain from "disparag[ing] each other and do[ing] anything inimical to the business of Ultimate" or, according to respondents' counsel, Victor Worms, Esq., "tak[ing] any action that [*3]could cause the license of the business to be revoked." All parties were present and agreed to the terms of the settlement.

Although a written agreement was contemplated, counsel for both parties represented that the terms set forth on the record constituted the material terms of the settlement, which would not be changed by a written agreement. Mr. Worms stated that the agreement "will all be reduced to a written agreement to be signed by the parties." This court then inquired, "[i]f you make a settlement on the record in open court, then you're bound to the terms of that settlement, and I want to be clear what your intention is. Are you settling this today now upon the terms stated, and your written agreement is superfluous in some manner?" Ms. Khavulya responded, "It's settled on the terms that we have stayed [sic], your Honor, but as far as the written agreement, you know, we just want to have any writing set out, but these are the terms." Mr. Worms subsequently stated, "[the] material terms won't change, but there might be additional sort of housekeeping terms that we may need after the agreement." This court also directly asked the parties, "do you understand that if you acknowledge the terms of this agreement, this is a final enforceable agreement at law?" and explained that the May 18 settlement "supersedes any other issues. There will not be further litigation in this case except based upon the terms of your settlement."

On June 15, 2010, Ms Khavulya sent an email to Mr. Worms attaching a draft stipulation of settlement and requesting that Mr. Worms review the draft and, if acceptable, arrange for its execution. On June 16, 2010, Ms. Khavulya reiterated her June 15, 2010 email, via fax, and attached the same draft stipulation of settlement. On June 22, 2010, Ms. Khavulya sent another letter to Mr. Worms informing him that she had not received any response to her draft stipulation of settlement and reminding him that this court directed that the $400,000 payment be made within 45 days of the May 18 settlement. Between June 29, 2010 and July 1, 2010, Ms. Khavulya and Mr. Worms exchanged a series of emails regarding the draft stipulation of settlement. Ms. Khavulya again called for a response to her prior correspondence. In an email sent by Ms. Khavulya to Mr. Worms on June 29, 2010 at 4:38 P.M., Ms. Khavulya states, "this is my third attempt to call your attention to the Settlement Agreement drafted pursuant to the Order of Hon. Justice Demarest. Up to date, I have not received any response to either my letter, email or telephone message. Your clients' check in the sum of $400,000 is due on or before July 1, 2010. Please take care of the Settlement Agreement and check immediately to avoid further unnecessary Court intervention." At 5:03 P.M., Mr. Worms responded, "I have had a busy court schedule the last week. It took almost a month for you to draft the settlement agreement and I did not call to rush you. I think I am entitled to the same courtesy. I will attempt to respond to the agreement before the end of the week." In an email sent later that day, Mr. Worms stated that no payment would be made prior to the execution of the written stipulation of settlement.

On July 20, 2010, Ms. Khavulya sent a letter to Mr. Worms reminding him that, pursuant to the terms of the May 18 settlement, respondents were to deliver $400,000 to petitioner no later than July 2, 2010. The letter stated that, as no payment was made within the 45-day closing period, interest began to accrue at the statutory rate of 9% and the respondents' total debt was $793,501.36. The letter demanded that respondents deliver to petitioner a certified or bank check in the amount of $403,501.36 as soon as possible. The letter also informed respondents that should petitioner be required to enter and enforce the judgement, she would seek compensation [*4]from the respondents for any legal fees incurred that are associated with the enforcement of the settlement. Petitioner subsequently filed the instant motion for money judgment.[FN1]

On July 26, 2010, Mr. Worms responded to Ms. Khavulya's July 20, 2010 letter, claiming that the $400,000 payment would be due and interest would begin to accrue on the unpaid balance only after 45 days had passed from the execution of the written stipulation of settlement. Attached to an e-mail dated July 27, 2010, Mr. Worms transmitted his proposed changes to the written stipulation modifying the dates and terms of the settlement. Petitioner's counsel subsequently moved, pursuant to CPLR 2104, to enforce the May 18 settlement.

On August 11, 2010, this court heard the argument on the instant motion. In open court, a closing date of September 28, 2010 was set, at which time $400,000 would be paid. At that time, the court also rejected Mr. Worms' contention that a written stipulation of settlement was a condition precedent to closing, finding the proposed writing to be "superfluous" to the settlement reached on the record, scheduled additional oral arguments relating to when the payment should have taken place, and directed the parties to submit additional briefing. A written stipulation of settlement was executed on September 28, 2010, at which time petitioner was paid $400,000. According to the terms of the written stipulation, the remaining balance of $390,000 was to be paid in 12 equal monthly installments of $34,106.00, commencing on October 15, 2010, and was to be fully paid by September 15, 2011. The written stipulation left open the possibility that this court could direct, at a later date, the payment of statutory interest from July 2, 2010 to September 28, 2010 on the $790,000 petitioner claimed was outstanding as of July 2, 2010. The written stipulation provided: "If the court determines that statutory interest is due from the Respondents to the Petitioner on the $790,000.00 from July 2, 2010 to September 28, 2010, the Respondents shall pay such statutory interest as directed by the court (Art. I, 1)." On October 6, 2010, this court heard counsels' oral arguments relating to past interest due. The court rejected, on the record, Mr. Worm's interpretation that the $400,000 was to be paid 45 days after closing but reserved decision on whether past interest should be due in light of the delayed closing. It directed the parties to submit supplemental papers addressing why the closing was delayed.

Analysis

At issue is the date by which the individual respondents were required to have a closing and make the initial $400,000 payment and by which the statutory interest on the remaining balance began to accrue. Petitioner claims that, in accordance with the May 18 settlement, the [*5]parties were required have a closing within 45 days of the date of the settlement, or on or before July 2, 2010, at which time the individual respondents were to make the initial $400,000 payment and interest would begin to accrue at the statutory amount on the remaining balance. Because the closing did not take place on or before July 2, 2010, petitioner claims that interest began to accrue upon the entire outstanding $790,000 until September 28, 2010, when the closing ultimately did take place. Respondents claim that because the closing date was not specified in the May 18, 2010 settlement, it could only take place after a written settlement agreement was executed. Petitioner moves to enforce the stipulation pursuant to CPLR 2104, which provides that"[a]n agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered."The statute makes clear that an oral stipulation of settlement is enforceable if entered into in open court. It is well-settled law that courts have a strong policy interest in enforcing stipulations because they provide predictability and assurance that courts will honor the parties' prior agreements (see McCoy v Feinman, 99 NY2d 295, 303 [2002]; Kaplan v Kaplan, 82 NY2d 300, 307 [1993]), and promote judicial economy (id; Hallock v State of New York, 64 NY2d 224, 230, [1984]). Thus, "a stipulation is generally binding on parties that have legal capacity to negotiate, do in fact freely negotiate their agreement and either reduce their stipulation to a properly subscribed writing or enter the stipulation orally on the record in open court" (McCoy at 303, 99 NY2d 295; see also CPLR 2104; Siegel, NY Prac 2004, at 323; see also Hallock at 230, 64 NY2d 224).

When a stipulation is binding and enforceable, as it is here, its interpretation is subject to "settled principles of contractual interpretation" (McCoy at 303, 99 NY2d 295; see also Keith v Keith, 241 AD2d 820, 822 [3d Dept 1997]. Accordingly, as with a binding and enforceable contract, a stipulation should not be disturbed "absent a showing of good cause such as fraud, collusion, mistake or duress; or unless the agreement is unconscionable or contrary to public policy; or unless it suggests an ambiguity indicating that the words did not fully and accurately represent the parties' agreement (McCoy at 303, 99 NY2d 295 (internal quotation marks and citations omitted). The court's role is to interpret the terms of the stipulation based on an examination of the record (Lacorazza v Lacorazza, 47 AD3d 897 [2d Dept 2008]).

In the instant action, this court finds that a settlement was unequivocally reached in open court on May 18, 2010, to which all parties agreed. It is also clear, based upon the questions asked by this court and by the responses given from both counsel and from the parties themselves, that the settlement reached in open court was intended to stand on its own, independent of any written agreement contemplated, and that all parties understood the settlement to be "a final enforceable agreement at law," as stated by this court on the record. Although the parties contemplated that the oral settlement would be reduced to a writing, the parties all agreed that all the material terms of the settlement would remain the same and that the writing was merely intended to include "housekeeping terms." Thus, the stipulation agreed to in open court must be enforced according to its plain meaning.

The oral settlement clearly provided that the closing was to take place within 45 days of the date of May 18, 2010, on or before July 2, 2010. Thus, the defendants were to pay petitioner [*6]$400,000 on or before July 2, 2010, at which time interest would begin to accrue on the outstanding balance. The oral settlement further provided that the parties would reduce the agreement to a written settlement agreement, which would provide for the closing to take place on a date certain within the allotted 45 days. Neither side made any statements which suggest that the absence of a written settlement agreement would modify or nullify the oral settlement. Moreover, petitioner's counsel established that, mindful of the requirement to close on or before July 2, 2010, they had attempted to prepare a written stipulation of settlement, sending a draft on June 15 and June 16, 2010 and a follow-up letter on June 22, 2010, which was not timely executed due to the unresponsiveness of respondents' counsel. The series of emails exchanged by Ms. Khavulya and Mr. Worms between June 29, 2010 and July 1, 2010 reveal that Mr. Worms took issue with the length of time it took Ms. Khavulya to send the initial draft. Although Mr. Worms is correct that Ms. Khavulya did not supply a draft of the written stipulation of settlement until nearly a month after the oral stipulation of settlement, he does not dispute that he failed to respond to Ms. Khavulya's correspondence until June 29, 2010, nor does he provide any adequate reason for not reviewing the draft within the two weeks between June 15, 2010 and the anticipated date of closing. The written stipulation of settlement executed on September 28, 2010 does not differ markedly from the initial draft, and does not differ in any material way from the May 18 settlement. Indeed, Mr. Worms's correspondence reveals his unwillingness to comply with the clear terms set forth in the May 18 settlement. As stated on the record in open court, it was agreed that "[t]he statutory interest will begin to run no later than 45 days hereafter" (emphasis added). Thus, respondents's failure to close and/or make payment within 45 days of the May 18 settlement entitles petitioner to accrued interest on the agreed sum of $790,000. Respondents are responsible for paying petitioner the accrued interest at nine percent, the statutory rate, in the amount of $16,947 on the outstanding balance of $790,000 from July 2, 2010, the date by which the closing should have taken place, until September 28, 2010, the date of the actual closing, and continuing on any remaining balance until fully paid.

Petitioner's request for attorneys' fees must be denied. Petitioner is seeking to enforce the May 18 settlement, which contained no provision for the payment of petitioner's legal fees, and has provided no other basis for the award of attorneys' fees. "Where a stipulation of settlement provides the basis for an award of an attorney's fee, the terms of the agreement control"(Arato v Arato, 15 AD3d 511 [2d Dept 2005]; see also Towne Partners, LLC v RJZM, LLC, 2010 WL 4977561 [1st Dept 2010]; Hooper Associates, Ltd. v AGS Computers, Inc., 74 NY2d 487, 491 [1989]). It is noted that the written stipulation of settlement, executed on September 28, 2010,does contain a provision requiring respondents to pay petitioner's legal fees. Thus, respondents will be required to compensate petitioner for legal fees incurred by the institution of any subsequent legal proceedings related to the enforcement of the written stipulation, but will not be required to compensate petitioner for legal fees associated with the enforcement of the May 18 settlement

This constitutes the decision, order, and judgment of the court.

ENTER,

_______________________ [*7]

Carolyn E. Demarest

J. S. C. Footnotes

Footnote 1: Respondents assert, unsupported by case law, that the petitioner's motion to enforce the settlement agreement must be denied as a matter of law because the underlying action is an equitable proceeding to dissolve the respondent corporation, and the court cannot grant a monetary judgment in an equitable proceeding. Respondents' contention is without merit. Petitioner's initial complaint reveals that petitioner sought both equitable relief and monetary damages. Moreover, petitioner is not seeking an order granting monetary judgment in lieu of equitable relief. Rather, petitioner is seeking an order, pursuant to CPLR 2104, to enforce a settlement agreed to in open court, which may be done by motion in the instant action, without bringing a new action. "The mechanism for enforcing a stipulation of settlement (or seeking its vacatur) will depend on the terms of the settlement and the procedural status of the relevant litigation....A motion in the action to which the settlement relates. . . would be a simpler and more economical expedient, and such remedy is available unless the parties have unequivocally terminated' the lawsuit" (Alexander, Practice Commentaries (McKinney's Cons Law of NY, Book 7B, CPLR C2104:3)).