New York Coll. of Health Professions v Sohn

[*1] New York Coll. of Health Professions v Sohn 2005 NY Slip Op 52187(U) [10 Misc 3d 1068(A)] Decided on December 27, 2005 Supreme Court, Nassau County Austin, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 27, 2005
Supreme Court, Nassau County

NEW YORK COLLEGE OF HEALTH PROFESSIONS, Formerly Known as New York College for Wholistic Health Education & Research, Plaintiff,

against

TINA SOHN, Defendant.



6620-05



COUNSEL FOR PLAINTIFF

Steven Bennett Blau, P.C.

7 Penn Plaza - Suite 1803

New York, New York 10001

COUNSEL FOR DEFENDANT

Rosenberg, Calica & Birney, LLP

100 Garden City Plaza - Suite 408

Garden City, New York 11530

Leonard B. Austin, J.

BACKGROUND

This is an action to recover the unpaid principal due under a promissory note.

Plaintiff New York College of Health Professions ("NYCHP" or "College"), formerly known as The New York College for Wholistic Health Education and Research, is a private not-for-profit institution of higher learning chartered by the State of New York Department of Education. NYCHP is classified as a Type B Corporation under the Not-For-Profit Corporation Law ("N-PCL").

On or about October 16, 1992, Defendant Tina Sohn ("Sohn") executed a mortgage note in the principal amount of $925,000 to be paid to The Independent Church of the Realization of the Word of God, Inc. at an interest rate of 8 1/4 % per annum, payable in equal and successive monthly installments. The loan was made to Sohn for the purchase of a condominium in Wiliae Maui, Hawaii.

In April, 1994, the mortgage note was assigned to The New York College for Wholistic Health Education and Research to "assist in its current expansion." Sohn and her late husband Dr. Robert Sohn were the initial founders of NYCHP and members of its Board of Trustees.

Sohn made monthly payments on the note at a fixed interest rate of 3.5% to NYCHP up to and including May, 1999.

In 1999, substantial disputes arose between Sohn and NYCHP. One related controversy involved NYCHP's continuing use of Sohn's registered trademark and logo AMMA Therapy pursuant to a written license agreement dated July 1, 1992.

In November, 2000, the parties executed a comprehensive settlement agreement which provided:

"j) All principal and interest owed by Mrs. Sohn to the College are, on the day hereof, forgiven in full and that certain Note (the Note') dated October 16, 1992, in the principal amount of $539,000 issued by Mrs. Sohn in favor of the College, is hereby canceled and of no further force and effect. On the date hereof, the College has delivered the original Note to Mrs. Sohn marked canceled.'" [*2]

Sohn was represented by Rivkin, Radler and Kremer, LLP and by Barry Shapiro, Esq. The College and its then President, Steven Schenkman were represented by Meyer, Suozzi, English & Klein, P.C. (acting principally through Murray Schwartz, Esq., now with the firm of Pryor, Cashman).

In or about 2003, Mr. Shapiro became a member of Meyer, Suozzi, English & Klein, P.C. The resulting legal conflict required that Mr. Shapiro withdraw from and avoid any representation of Sohn in this matter. Thereafter, Sohn retained the firm of Rosenberg, Calica & Birney LLP.

In 2003, NYCHP commenced an action against its auditors, DeLoitte and Touche, LLP alleging, inter alia, that its auditors committed malpractice in connection with its certification of the financial statements. In 1999, the College's accountants, DeLoitte & Touche, LLP, prepared a financial statement which provided in part that: "At December 31, 1999, Management determined that the remaining outstanding balance of $531,966 was not likely to be collected and was, therefore, written off."

In 2003, the College prepared and filed a complaint in this Court entitled New York College of Health Professionals, etc. v Hans Bosch, et al. In that lawsuit, the current and former members of the College's Board of Directors were specifically sued for having entered into the settlement agreement with Sohn.

In 2005, NYCHP commenced this action seeking summary judgment in lieu of complaint pursuant to CPLR 3213.

In response thereto, Sohn has cross-moved to dismiss this action pursuant to CPLR 3211(a)(1) and (5) on the ground that the promissory note sued upon was specifically released and canceled pursuant to the aforementioned settlement agreement. Sohn also seeks to impose sanctions pursuant to 22 NYCRR 130-1.1 based upon Plaintiff's failure to disclose or to set forth any cognizable basis for avoiding the release contained in the settlement agreement.

DISCUSSION

A. Plaintiff's Motion

On a motion for summary judgment, it is incumbent upon the movant to 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. Alvarez v. Prospect Hosp., 68 NY2d 320, 324 (1986); and Zuckerman v City of New York, 49 NY2d 557, 562 (1980). The failure to make that showing requires the denial of the motion regardless of the sufficiency of the opposing papers. Mastrangelo v Manning, 17 AD3d 326 (2nd Dept. 2005); Roberts v Carl Fenichel Community Servs., Inc., 13 AD3d 511 (2nd Dept. 2004). Issue finding, as opposed to issue determination is the key to summary judgment. See, Kriz v Schum, 75 NY2d 25 (1989). Indeed, "[e]ven the color of a triable issue forecloses the remedy. Rudnitsky v Robbins, 191 AD2d 488, 489 (2nd Dept. 1993). [*3]

To establish a prima facie case to entitlement to judgment as a matter of law, plaintiff must submit proof of the existence of a promissory note and the defendant's failure to make payment in accordance with its terms. CPLR 3213. See, Constructamax, Inc. v. CBA Associates, Inc., 294 AD2d 460 (2nd Dept. 2002); and E.D.S. Security System v. Allyn, 262 AD2d 351 (2nd Dept. 1999).

NYCHP has not established a prima facie case inasmuch as Sohn has demonstrated a viable defense to the note. Hence, the College's motion for summary judgment in lieu of complaint must be denied.

B.Defendant's Cross-Motion - Dismissal

A dismissal motion based upon documentary evidence (CPLR 3211[a][1]) "may be appropriately granted only where the documentary evidence utterly refutes Plaintiff's factual allegations, conclusively establishing a defense as a matter of law." Goshen v. Mutual Life Ins. Co. of New York, 98 NY2d 314, 326 (2002); and Levenherz v Povinelli, 14 AD3d 658 (2nd Dept. 2005).

Defendant has submitted extensive documentation including an affidavit and the deposition testimony of Barry Shapiro, Esq.; two other complaints which contain certain judicial admissions regarding the settlement agreement; various financial statements, and NYCHP Board minutes authorizing the approval of the settlement agreement. Significantly, Mr. Shapiro states, in his affidavit that "[t]o my personal knowledge, th[e] Promissory Note was released and discharged pursuant to a comprehensive Settlement Agreement reached between Mrs. Sohn and New York College. I directly participated in the negotiation, drafting and the execution of the Settlement Agreement."

The comprehensive, lawyer negotiated settlement agreement specifically provides for the forgiveness and cancellation of the promissory note. Furthermore, the settlement agreement was fully executed on behalf of all the necessary parties.

Accordingly, the note was released by the settlement agreement. Ross v United Deerfield Assocs., Inc., 231 AD2d 472 (1st Dept. 1996).

With respect to the College's belated claim of a legal conflict on Mr. Shapiro's part (by reason of his former service as Chairman of the College's Board and as its outside counsel), an express written "Waiver of Conflict" is contained in paragraph 19 of the Settlement Agreement. See, St. Barnabas Hosp. v. New York City Health & Hosp. Corp., 7 AD2d 83 (1st Dept. 2004).

The College's contention that the settlement agreement is void under Section 510(a)(3) of the Not-For-Profit Corporation Law is rejected. N-PCL § 510(a)(3) mandates that not-for-profit corporations, such as NYCHP, receive judicial approval of "contracts to sell and/or dispose of all or substantially all of their assets." The documentation provided by Sohn establishes that the cancellation of the promissory note did not represent "all or substantially all" of NYCHP's assets. Hence, prior court approval of the settlement was not required. [*4]

Thus, the dismissal of the complaint should be granted.

C.Defendant's Cross-Motion - Sanctions

The court may impose sanctions upon a party or an attorney who engages in frivolous conduct. 22 NYCRR 130-1.1(a). The basis of Sohn's claim for sanctions is the failure of NYCHP to mention or address the Settlement Agreement in its motion.

Conduct is frivolous if it makes arguments that are without merit in law and which cannot be supported by a reasonable extension, modification or reversal of existing law, if it designed to harass or maliciously injure another or if it makes material statements of fact which are false. 22 NYCRR 130-1.1(a)(b)(c).

Sohn seeks sanctions characterizing NYCHP's failure to mention the Settlement Agreement and prior litigation as "grossly misleading and inaccurate."

The regulations permitting the imposition of sanctions specify the bases upon which sanctions can be imposed. Conduct which is "grossly misleading and inaccurate" is not a stated basis for the imposition of sanctions.

The determination as to whether sanctions should be imposed is one left to the sound discretion of the court. Wagner v. Goldberg, 293 AD2d 527 (2nd Dept. 2002). Sanctions should be imposed when frivolous litigation or dilatory or malicious litigation tactics unnecessarily waste judicial resources. Levy v. Carroll Mgt. Corp., 260 AD2d 27 (1st Dept. 1999). Sanctions should not be imposed simply because the court ultimately determines that a claim is without merit. See, Hair Say, Ltd. v. Salon Opus, Inc., 6 Misc 3d 1041(A) (Sup.Ct. Nassau Co., 2005).

NYCHP's failure to mention or address the Settlement Agreement is less than forthright which arguably is violative of 22 NYCRR 130-1.1(c)(1) or (3). An award of sanctions can only be had after the party ir attorney against whim sanctions are to be

awarded has an opportunity to be heard. 22 NYCRR 130-1.1(d). Under such circumstances, the imposition of sanctions would be inappropriate without a hearing.

Accordingly, it is,

ORDERED, that Plaintiff's motion for summary judgment in lieu of complaint is denied; and it is further,

ORDERED, that Defendant's cross-motion to dismiss this action is granted; and it is further,

ORDERED, that Defendant's cross-motion for sanctions is granted to the extent that Plaintiff and its counsel are directed to appear before this Court on January 26, 2006 at 9:30 a.m. to show cause why an award of sanctions should not be entered against either or both of them..

This constitutes the decision and Order of the Court.

Dated: Mineola, NY _____________________________

December 27, 2005 Hon. LEONARD B. AUSTIN, J.S.C. [*5]