Gorton v Marmon

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Gorton v Marmon 2012 NY Slip Op 31073(U) April 16, 2012 Supreme Court, New York County Docket Number: 108094/11 Judge: Joan M. Kenney Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] t I 8 I I' \ 1 F I LtED APR 2 3 2012 , 'NEW YOAK I " I , n 0 4 N l - Y CLERKS OFFICE [* 2] - - DECISION AND ORDER Index Number: 108094111 Motion Seq. No.: 001 +gainst- Recitation, as required by CPLR 2219(a), of the papers considered in revicw ofthis motion to dismiss. Papers Notice of Motion, Affirmation and Exhibits, and Memo of Law Opposition Affirmation and Exhibits, and Memo of Law Reply Papers, and Memo of Law Numbered 1-6 7-17 18-19 In this matter sounding in contribution and/or indemnification, defendant, James L. Maman, Esq. (Mr. Marmon), moves for an Order, pursuant to CPLR 32 I 1(a)(5) and CP FILED 32 1 1(a)(7), dismissing the complaint. APR 2 3 2012 This action arises out of a niulti-million dollar real estate transaction in which EW YORK CLERKS OFFICE and Stephcn Marcus (the sellers), acting as the purported sole shareholders of Reymar Really Corp. (Reymar) and represented by defendant, Mr. Marmon, BS sellers' legal counsel, transferred ownership of real properly located at 108 W. 76Ih St., New York, N Y 10023 (the property) to plaintiffs. The purchase contract, drafted and negotiatcd by Mr. Marmon, was executed by the sellers and plaintif% on May 13, 2005 (the contract). Paragraph 24.7 of thc contract provides, in pertinent part, that: "Seller hm the full power and authority to execute and deliver this agreement and all documents now or hereafter to be executed and delivered by it pursuant to this agreement [* 3] and to perforin all obligations arising tinder this agreement arid under seller’s documents. This agreement constitutes, and the seller’s documents will each constitute, the legal, valid binding obligation of seller, enforceable in accordance with their respective terms, cov c n an ts, and conditions,” Prior to the transfer of the property, which took place on or around lune 30,2005, it is alleged that defendant expressly represented to plaintirs that Shannon Marcus was the holder of48 of 100 shares of Reymar, that Stephen Marcus was the holder of 52 of 100 shares of Reymar, and that the sellers jointly had the authority to convey the property to plaintiffs. In support of the sellers’ supposed authority to sell the property, defcndant gave plaintiffs what purported to be minutes From a special meeting of Reyrnar shareholders, resolving to sell the property to the plaintiffs. Based on these representations, plaintiffs agreed to, and did, purchase the property from Reyninr for $4,800,000.00. Rachel Hirsch and Richard Marcus (non-parties) are the children of Stephen Marcus (the Marcus children), and they allege that the sellers did not have the authority to convey the property. In fact, on June 26, 2009, approximately four years after the sale of the property, the Marcus children coninienced an action in the United States District Court for the Southern District of New York, against plaintiffs and Reymar (the Federal Court Action), alleging that: (1) at the time o f the sale, the Marcus children collectively held 42% of the shares of Reymar, and that Stephen Marcus held the remaining 58%; (2) that Sharman Marcus w s not a shareholder of Reymar; and (3) that a Reymar had innrc than IO0 shares of stock. The Marcus children further allege that their consent, required to legally cffcciuaic the sale of the property, was never obtained. Therefore, in the Federal Court Action, the Marcus children are seeking to rescind the sale of the property to plaintiffs. It is undisputed that soiiie documents produced by the sellers in the Federal Court Action reveal that defendant, Mr. Marmon, had in his possession, or had access to, certain documents 2 [* 4] which included stock certificates demonstrating that the Marcus children collectively own 42% of Reymar, with Stephen Marcus owning the remaining 53% and Sharinon Marcus having no shares in Reymar. Despitc having access to these documents, Mr. Marmon still counseled sellers to go forward with the transaction and allegedly facilitated a fraudulent sale of the property, according to pi ai n t i ffs herein . Plaintiffs were t?rst made aware of the alleged fraudulent nature of the transaction wheii they were served with the Federal Court Action complaint in September 2009. During discoveiy in the Federal Court Action, the Marcus children wcre made aware of a document purported to be n November 1988 Resolution (1988 Resolution) of Reymar, unilaterally transferring all of the shares from the Marcus children back to Stephen Marcus. The legality ofthis 1988 Resolution is disputed. Mr. Marmon, however, asserts that he was aware of the 1988 Resnlution, and therefore did not parlicipate in any purported fraudulent conveyance as this document did give Reyrnar authority to sell the property in question. Armmen@ Defendant contends that: ( I ) plaintiff’s’ cause of action for negligence is really one for legal malpractice and should therefore be dismissed because it is barred by the statute of limitations and plaintitys lack of privity; (2) plaintiffs’ fraud claim should be dismissed as improperly plead and barred by the statute of limitations; (3) plaintiffs’ claim for contribution and indemnity should be dismissed because those claims arc premature and for plaintiffs failure to state a claim for common law indemnification; and (‘4) plaintiffs’ claim for a declaratory judgment must be dismissed, as it is premature. Plaintif-Tsargue that this action cannot be dismissed because: (1) they have timely alleged n prima facie case f’or negligence; (2) the fraud claim i s timely and properly plead; (3) their claims 5 [* 5] for contribution and indeinnificution are ripe and sufficiently pled; and (4)the declaratory judgment claim is ripe for adjudication. Discussion When deciding whether or not a coinplaint should be dismissed pursuant to CPLR 32 1 1 (a)(7), the complairit must be construed in the light most favorable to the plaintiff, and all factual allcgatioiis must bc accepted as tnie, limiting The inquiry to whether or not the complaint states. in some recognizable form, any cause of action known to our law (see, World W d ie A1Jjzi.sfmenl Burecru ef d , EdvurdS. Gordon Company, Inc.,et al., 1 1 1 AD2d 98 [ 1st Dept, v 19851). In assessing the sufficiency o f the complaint, this Court must also consider the allegations made in both the complaint and the accompanying affidavit, subinitled in opposition to the motion, as true and resolve all infereiiccs which reasonably flow therefrom, in favor of the plaintiff (Joel v. Weber, 166 Ad2d 130, [ I st Dept, 19911). The suficiency of a pleading to state a cause of action generally depends upon whethcr or not there is substantial compliance with CPLR 3013, which requires that statements in a pleading be sufficiently particular tn give the court and parties notice of the transactions or occurrences intended to be proved and the material elennents of each cause of action. The burden is placed upon one who attacks a pleading for deficiencies in its allegalions to show that he is prejudiced. The test of prejudice is to be given primary cmphasis. ' r h ~ c b y the , court disregards pleadilig irregularities, defects, or omissions that are not such as to rcnsonably mislead one as to the identity of the transactions or occurrences sought to bc litigated, or as to the nature and elements of the alleged cause or defense. The existence of a legal duty is, of course, an essential element of any negligence claim. (Pulku v. Edelmun, 40 N.Y.2d 781, 782, 390 N.Y.S.2d 393, 358 N.E.2d 1019). It is aplaintiffs obligation to establish a breach of that duty and that the injuries claimed were proximately caused 4 [* 6] by thc breach. (;Y17ur?/s). b y Adu D.i J , Uifyof New York, 190 A.D.2d 356, 361, 598 N.Y.S.2d 475, L 478 [ I ” Dept. 19931 aff’d, 83 N.Y.2d 948, 638 N.E.2d 962 [ Ist Dept. 19941). The statutc of limitations for a negligence claim is 3 years from the accrual of the cause of action. (CPLR 214). “The elenients of a cause of action for fraud are a representation concerning a material fact, falsity of that representation, scienter, reliance and damages. Plaintiff must show not only that he acttially relied on the misrepresentations, but also that such reliance was reasonable. Wherc a party has the means to discover thc true nature of the transaction by the exercise of ordinary intelligence, and fails to innke use of thosc meatis, he cannot claim justifiable reliance on defendant’s misrepresentations.” (Stuarf,Silver .4ssociates, Inc. v. Baco Development Corp., 245 A.D.2d 96, 665 N.Y.S.2d 41 5 [ 1’‘ Dept. 19971). CPLR 213(8), an action based upon fraud, states, in pertinent part: “,..the time within which the action must be commenced shall be the greater of six years from the date the cause of action accrued or two years from the time the plaintiff or the person under whom the plaintiff claim discovered the fraud, or could with reasonable diligence have discovered it.” “Contribution is generally available as a remedy ‘when two or more tort-feasors share in responsibility for an injury, in violation of duties they respectively owe to the injured person.’ (Garref1v. HoIiduy Inns, 58 N.Y.2d 253, 258,460 N.Y.S.2d 774,447 N.E.2d 71 7, quoting Srnifh v. Supienm, 52 N.Y.2d 82, 87, 436 N.Y.S.2d 236,417 N.E.2d 530). ‘A contribution claim can be made even when the contributor has nQ duty to the injured plaintiff ,’(Xayuet v. Bruun, 90 N.Y.2d at 182, 659 N.Y.S.2d 237, 68 I N.E.2d 404). In such situations, a claim of contribution may be asserted if there has been a brench of duty that runs from the contributor to the defendnnt who h a s been held liable. The ‘critical requirement’ for Rpportiunrnent by contribution under CPLR Article 14 is that ‘the breach of duty by the contributing party must have had a part in causing or 5 [* 7] augmenting the injury for wliich contribution is saught.’(Trumi-, Viff.Srclion 3, Inc. 17. New York Sfate NOZIS. &my, 307 A.D.2d 891, 896, 764 N.Y.S.2d 17, 22-23 [ l “ Dept. 20031). CPLR Fin. I40 I stales that “two or more persons who arc subject to liability for dainagcs for the same personal injury, injury to property or wronglul death, may claim contribution among them whether or not an action has been brought or a judgment has been rendered against the person fkom whom contribution is sought.” A right to indemnity, as distinguished from contribution, is not dependent upon legislative will, but springs from contract, express or implied, and full, not partial reimbursement is sought. (McDermnfl v. C i y qf’Netv Ywk, 50 N.Y.2d 21 1, 406 N.E.2d 460 [1980]). Indemnification claims generally do not accrue for purpose of statute of limitations until paity seeking iiidemiiification has made payment to in-jured person and principle does not vary according to breach of duty for which indemnification is sought. (Id.).”The right to indemnification ...includes the right to recover attorneys’ fees, costs and disbursements for defending against plaintiff’s action.” (Lowe v. Dollar Tree Stores, Inc., 40 A.D.3d 264, 835 N.Y.S.2d 161 [ l ” Dept. 20071). CPLR 3017(b) defines a demands for relief, and defines declaratory judgment as: i‘ln an action for a declaratoryjudgment, the demand for relief in the complaint shall specify the rights and other legal relations on which a declaration is requested and statc whsther further or consequential relief is or could be claimed and the nature and extent of any such reliefwhich is claimed.” A declaratory judgment “is usually unnecessary where a full and adequate remedy is already provided by another well-known fonn of action ..... Where there is no necessity for resorting to the declaratory judgrncnt it should not be employed.” (Automafed Ticket Sy.stems, L t d v. Quinn, 90 A.D.2d 738,455 N.Y.S.2d 799 [ I ” Dept. 19821). In reference to plaintiffs’ negligence cause of action, moving defendant fails to refute 6 [* 8] plaintiffs’ claim on negligence, and instead argues that the negligence claim is really one for legal malpractice. I-iaving failed to address the negligence claim at all, defendant is not entitled to its dismissal. Moreovcr, plaintiffs deny that they are alleging any legal malpractice clnini against defendant and admit that he was not thcir attorney at the closing of the sale of this property in question. PlaintifTs specified tlie elements of a claim of fraud in the pleadings and therefore the claim cannot be disniisscd pursuant to CPLR 32 1 I (a)(7). Specifically, plaintiffs allege that Mr. Mnrmon rnisreprcsented the fact that the sellers had the legal right to transfer the property; he knowingly did so, due to his access to all of the Reyrnar records; plaintiffs relied on this representation, made the purchase and are now claiming damages as a resulf of Mr. Marmon’s purportcd fraud. The fraud claim is also not barred by the statute of limitations. While the interposition date of July 14, 201 1 is beyond 6 years from the June 30, 2005 sale of the property, plaintiffs assert that they did not discover the lkaud until September 2009 when they were served with the pleadings in the Federal Court action and therefore the 2-years-from-discovery rule is applicable, arid the claim of fraud, timely. Plaintiffs’ contribution claim is not premature. Plaintiffs have a possibility of losing the property in tlie Fedcral Court Action, having the sale of the property rescinded and losing thc $4.8 inillion apartment. As per*the “critical requirement” of CPLR Article 14, such a claim may be made before the potential jiidgment in the Federal Coufl Action. Moreover, plaintiff‘s have stated a cause oraction for indemnification and at this juncture it is premature to dismiss this cause of action altogether. Plaintiffs seck that the court declare that defendant be held liable for any damages awarded in the Federal Court Action. As the declaratory relief is an equitable remedy, and the remedy of 7 [* 9] damages is more readily available, this cause of action must be dismissed. (E-2’ Eating d l Corp. v. H E . Newporl L.L.C., 84 A.D.3d 401, 922 N.Y.S.2d 329 [ I s t Dept. 201 I]). Accordingly, it i s ORDERED, that defendant’s suminmy judgment motion to dismiss the action, is denied in part, and granted, in part; and it is further ORDERED, that plaintiffs’ 4“’ cause of action seeking declaratory relief, is hereby dismisscd; and it is further ORDERED, that defendant serve and file an answer to the complaint within 20 days from service o f a copy of this order with notice of entry; and it is further ORDERED that defendant shall serve a copy of this order with notice of entiy on Ihe County Clerk (Room 141B) and upon the Trial Support Office (Room 158) forthwith; and it is further ORDERED that couiisel are dirccted to appear for preliminary conference in Room 304, 7 1 Thomas St., NYC, 10013 011 June 7,2012, at 9:30 AM. ENTER: FILED APR 2 3 2012 NEW YORK Joan M. Kenney, J.S.C. 8 COUNTY CLERK‘S OFFICE