Zafarani v Gluck

[*1] Zafarani v Gluck 2006 NY Slip Op 50056(U) [10 Misc 3d 1073(A)] Decided on January 19, 2006 Supreme Court, Kings County Rivera, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 19, 2006
Supreme Court, Kings County

JOSEPH ZAFARANI, Plaintiff,

against

KENNETH GLUCK, BEARRO, INC. and HELENE K. TOBIN, Defendant



17943/04

Francois A. Rivera, J.

Plaintiff moves by order to show cause for an order staying defendant Helene K. Tobin (hereinafter Tobin) from conveying any interest in 3480 Nostrand Avenue, Brooklyn, New York (hereinafter, "the property") except to defendant Bearro, Inc. (hereinafter Bearro) in conformity with its lease of July 1, 1997, as modified on April 10, 2002. Plaintiff also moves for an order staying defendants Bearro and/or Kenneth Gluck (hereinafter Gluck) from conveying any interest in the property to any person or entity other than plaintiff; for an order staying defendants Bearro and Gluck from acting in anyway which interferes with plaintiff's contractual right to purchase the property; for an order compelling defendants to produce any and all contractual agreements between and among them regarding the conveyance of the property; for an order directing defendants to produce any tangible records of title examination and insurance ordered from Metropolitan Abstract Corporation and/or any other abstract or title company relating to the prospective purchase of the property; for an order directing the production of a true and complete copy of any lease between defendants Tobin and Bearro or Gluck, including any modifications thereto; and any and all tangible record of correspondence between and among the named defendants relating to the lease and/or sale by Tobin of the property to Bearro or Gluck.

By summons and complaint, dated June 7, 2004, plaintiff asserts six causes of action. The first and second causes of action seek an order directing Gluck and Bearro to specifically perform a purchase option agreement granting defendants Gluck and Bearro the right to purchase the property from Tobin; and for specific performance of plaintiff's contract with Gluck and Bearro executed on March 22, 2004, for the purchase of the property for ($1,575,000.00) one million five hundred and seventy five thousand dollars. The third cause of action seeks an order directing Tobin to specifically perform the contract with Bearro and/or Gluck. The fourth and fifth causes of action claim that Bearro and Gluck, committed fraudulent misrepresentations causing plaintiff monetary damages. The sixth cause of action claims that plaintiff has suffered [*2]monetary damages for a breach of contract by Tobin.

Plaintiff brought the instant order to show cause for injunctive relief pending the disposition of the action and filed a lis pendens against the property. Defendant Tobin cross-moves for an order dismissing plaintiff's third and sixth causes of action and the cross-claim of defendants Bearro and Gluck pursuant to CPLR §§3211(a)(1) and 3211(a)(7). Tobin also seeks an order canceling the notice of pendency filed by plaintiff affecting the property. CPLR §3211 provides the procedural vehicle for moving for an accelerated judgment with subsection (a)(1) dealing with defenses based on documentary evidence and (a)(7) concerning pleadings which fail to state a cause of action.

Defendants Bearro and Gluck cross-move jointly against the plaintiff, Joseph Zafarani, for an order dismissing the complaint in its entirety and vacating the lis pendens. They also cross move against co-defendant Tobin for an order finding her in default on her cross-claim and compelling her to produce a contract of sale for the premises in question; together with the costs, disbursements, and attorney's fees necessitated by this action. Plaintiff opposes both

cross-motions. Bearro and Gluck oppose Tobin's cross-motion to dismiss their cross-claims.

Defendant Tobin is the owner and landlord of the property. Defendant Gluck is an officer of Bearro, a dry-cleaning plant located at the ground floor of the property. On July 1, 1997, Bearro entered into a lease with Tobin to lease the premises. Pursuant to Article II Section 2.6. of the lease as amendment on April 10, 2002, Bearro held an option to purchase the property for ($1,000,000.00) one million dollars.

Article II Section 2.6 provides as follows: Purchase Option, provided the tenant is not in default of the terms of the Lease, "Tenant is hereby granted an option to purchase the demised premises for a net purchase price to landlord of one million dollars. This option shall terminate on February 28, 2005 and shall be exercised by Tenant not later than August 28th, 2004 by giving notice to landlord in accordance with the notice provisions of the lease. Failure of tenant to properly exercise this option on or before August 28, 2004 shall render said option null and void."

By letter dated February 23, 2004, Bearro notified Tobin's husband that it was exercising the option to purchase the property. Bearro also requested an extension to the end of 2004 to obtain financing and for a right of first refusal in the event it could not obtain financing. By letter dated May 13, 2004, sent by Tobin's counsel to Bearro's counsel, Tobin acknowledged receipt of Bearro's notice of intention to exercise the option. Tobin's letter of May 13, 2004, stated the following:

"Dear Mr. Finkelstein My client requires an escrow deposit of $100,000.00 to be paid to my Trust Account on account of the purchase price. It is my understanding that your client had asked my client for a one (1) year extension of the option to purchase.My client is willing to extend said option until February 18, 2006 to be exercised not later than August 28, 2005 for a net purchase price of One Million One Hundred Thousand 00/100 ($1,100,000.00) Dollars with a deposit in escrow of [*3]$110,000.00 at time of exercising the option to be held in my Trust Account.

My client has also the intention to do a §1031 like-kind exchange.

Very truly yours,

Pedro F. Martell"

Thus, Tobin made an unequivocal demand for a deposit of ($100,000.00) one hundred thousand dollars. Tobin also made a counter offer to extend the option for an additional year if Bearro agreed to an increase in the purchase price to ($1,100,00.00) one million one hundred thousand dollars and sent a down payment of ($110,000.00) one hundred and ten thousand dollars. Bearro did not tender any monies to Tobin and did not accept Tobin's counter offer. Article XIV Section 14 of the lease agreement also prohibited Bearro's assignment of the lease without Tobin's written consent and set forth a detailed protocol of the manner required for notifying her of the desire to assign the lease. In March 2004, the plaintiff Zafarani and defendant Bearro entered into an agreement which assigned Bearro's option to buy the property to plaintiff. Plaintiff gave defendant Bearro a ($50,000.00) fifty thousand dollars deposit. In June 2004, Bearro attempted to return the deposit to plaintiff.

The court's analysis will address the defendants' cross motions first. Defendant Tobin seeks to dismiss the third cause of action which alleges that Tobin has violated her contractual obligation to convey the property to defendant Gluck/Bearro. In this cause of action, plaintiff contends that they are a third party beneficiary of such a contract between Tobin and Gluck/Bearro. A third party beneficiary may sue for breach of contract only if he is an intended, and not a mere incidental, beneficiary; and even then, the parties' intent to benefit the third party must be apparent from the face of the contract (Zelber v Lewoc, 6 AD3d 1043 [3rd Dept. 2004]). The test to determine whether a contract creates a third party beneficiary relationship is whether the parties to the contract intended to create a direct obligation from one party to the contract to the third party (Zelber v Lewoc, supra). It is well settled that to prevail on a claim as a third party party beneficiary under a contract, Zafarani must plead facts that show the existence of a valid contract between other parties, that the contract was intended for Zafarani's benefit, and that the benefit to Zafarani was sufficiently immediate, rather than incidental, to indicate assumption by the contracting parties of a duty to compensate Zafarani if the benefit is lost (Burns Jackson Miller Summit & Spitzer v. Linder, 59 NY2d 314 [1983]; see also Alicea v. City of New York, 145 AD2d 315 [1st Dept 1988]). Although a third party need not be specifically mentioned in the contract before third-party beneficiary status is found, New York law requires that the parties' intent to benefit a third party must be shown on the face of the agreement (Port Chester Electric Construction Co v. Atlas, 40 NY2d 652,656 [1976]; see also Greenwood v. Daily News, L.P., 8 Misc 3d 1002(A) [NY Sup 2005]). Zafarani was never an intended third party beneficiary of the option agreement between Tobin and Gluck/Bearro and thus the court grants Tobin's motion for summary judgment dismissing the third cause of action.

Plaintiff's sixth cause of action seeks monetary damages as a third party beneficiary for the breach of contract between Tobin and Bearro. For the aforementioned reasons, this action is not viable either. The lease clearly prohibited an assignment without the written consent of Tobin. Therefore, plaintiff failed to show an intent within the lease that the option may be [*4]assigned (Majestic Farms Supply , Ltd. v. Surowiec, 160 AD2d 777 [2nd Dept 1990], see also Gilbert v Van Kleeck, 284 AD 611 [3rd Dept 1954]). Thus, plaintiff cannot replace Gluck/Bearro as the assignee of Gluck/Bearro's option. Defendant Tobin's motion to dismiss the sixth cause of action is also granted.

Gluck's cross-motion and underlying cross-claim against Tobin seeks an order directing

specific performance by Tobin of the original option terms. Defendant's cross motion also seeks

to hold defendant Tobin in default for not answering its cross-claim. Pursuant to CPLR § 3011 as amended in 1977, a cross-claim requires an answer only if the pleadings containing the cross-claim demands one. Prior to the 1977 amendment, all cross claims required answers. In the absence of a demand, the allegations of the cross-claim are deemed denied (see Siegal's New York Practice §277, Fourth Edition). A review of Gluck's cross-claim pleadings reveals the absence of a demand for an answer by Tobin. Gluck/Bearro's motion to hold defendant Tobin in default is therefore denied.

Upon Bearro's notice to Tobin that it wished to exercise the option, Tobin sent a letter dated May 13, 2004, which called for the payment of a deposit of ($100,000.00) one hundred thousand dollars. Upon receiving proper notice of the exercise of the option, Tobin's obligation was to offer a contract of sale of the property for ($1,000,000.00) one million dollars. Tobin request for a down payment of ten percent was not a repudiation of the agreement but rather a reasonable request to go forward on a contract of sale on the original option. Once that request was made, it was Bearro's duty to tender the ($100,000.00) one hundred thousand dollars down payment to purchase the property. Tobin was not required under the terms of the option to extend Bearro's time to exercise it. Tobin, however, made a counter offer in which he would agree to extend Bearro's time to exercise the option if Bearro agreed to a purchase price of ($1,100,000.00) one million one hundred thousand dollars. Bearro's acceptance of this counter offer was to be demonstrated by providing a down payment of ($110,000.00) one hundred and ten thousand dollars.

It is undisputed that Bearro did not provide or tender a deposit to Tobin under the original option or counter offer. Also undisputed is that Bearro took no steps to show an intention to accept Tobin's counter offer. It was incumbent upon Gluck/Bearro to submit a down payment of ($100,000.00) one hundred thousand dollars to go forward on the first option which never occurred (Ludlam Stead, Ltd v Rezza, 118 AD2d 628 [2nd Dept 1986]). The option to purchase was a unilateral contract which called for acceptance in the form of a promise to create a second, bilateral contract (see Siders v Odak, 126 AD2d 292 [3rd Dept. 1987]; Cochran v Taylor, 273 NY 172 [1937]). As the original option to purchase the property for ($1,000,000.00) one million dollars expired on February 28, 2005, it cannot now be exercised. Defendant Gluck/Bearro had the duty to tender at least ($100,000.00) one hundred thousand dollars within a reasonable time, or by the agreed date of February 28, 2005 (see Ludlam Stead v Ltd. v Rezza, 147 AD2d 457 [2nd Dept. 1989]). By failing to do so, the option has expired. Therefore, the court dismisses the cross claim made by Gluck/Bearro against Tobin.

Pursuant to CPLR §6514 any aggrieved party may move for a court order to vacate a notice of pendency. CPLR §6514(a) sets forth the basis for mandatory cancellation and [*5]subsection (b) sets forth the discretionary grounds for cancellation. Pursuant to CPLR§6514 (a) the court must cancel the notice of pendency, if service of a summons has not been completed within the time limited by section 6512; or if the action has been settled, discontinued or abated; or if the time to appeal from a final judgment against the plaintiff has expired; or if enforcement of a final judgment against the plaintiff has not been stayed pursuant to section 5519. Although the court has dismissed both plaintiff's causes of action against Tobin and Gluck/Bearro's cross claim against Tobin, the notice of pendency cannot be cancelled pursuant to CPLR §6514[a], if time to appeal has not expired (Freedom Enterprises Inc v Hager Realty Corp, 52 Misc 2d 1043 [New York County, 1967]; CPLR §6514[a]). Furthermore, no other basis for mandatory cancellation of the notice of pendency is applicable in this case. Pursuant to CPLR §6514 (b), the court may cancel a notice of pendency, if the plaintiff has not commenced or prosecuted the action in good faith. Since there is no evidence that plaintiff has not prosecuted the action in good faith, the court will not exercise its discretion to cancel the notice of pendency pursuant to CPLR §6514 (b).

The following is the court's analysis of the defendant Gluck/Bearro's motion for summary judgment against plaintiff Zafarani. Since the procurement of a contract of sale between Tobin and Gluck/Bearro was a condition precedent clearly contemplated by the terms of the March 22, 2004 letter between plaintiff and Gluck/Bearro, the agreement was merely an agreement to agree (see Sabetfard v Smith, 306 AD2d 265 [2003]; Checkla v Stone Meadow Homes, 280 AD2d 510 [2nd Dept. 2001]). To satisfy the statute of frauds, a "writing must set forth the entire contract with reasonable certainty so that the substance thereof appears from the writing alone. If the contract is incomplete and it is necessary to resort to parol evidence to ascertain what was agreed to, the remedy of specific performance is not available (Sabertfard v Smith, supra.).

Gluck/Bearro took no action on the first option to purchase and therefore, Tobin had no obligation to procure a contract of sale for the property. As to the second option to purchase for ($1,100,000.00) one million one hundred thousand dollars, the court has not been presented with evidence that it was exercised by August 28, 2005. Regardless, plaintiff's agreement with Gluck/Bearro violated the Statute of Frauds (General Obligations Law §5-703 [2]). The agreement between plaintiff and Gluck/Bearro contemplated the execution of a formal mutually binding contract between Gluck/Bearro and Tobin, and the record clearly demonstrates that those parties never had a meeting of the minds with respect to material and essential terms of the agreement (see Behar v Mawardi, 268 AD2d 400 [2nd Dept. 2000]). The court, therefore, grants Gluck/Bearro's cross motion for summary judgment dismissing the plaintiff's complaint as to the first and second causes of action.

However, Gluck/Bearro's cross- motion for summary judgment as it pertains to the fourth and fifth causes of action is denied. When considering the competing contentions on a motion for summary judgment, the opponent is entitled to the benefit of every favorable inference that may be drawn from the pleadings, affidavits, and competing contentions of the parties (see Ingle v Glamore Motor Sales, 73 NY2d 183, 194 [1989]); Summary judgment is inappropriate where questions of fact or credibility are raised that require a trial (see Zuckerman v City of New York, 49 NY2d 557 [1980]). Competing affidavits on the allegations of fraud from Gluck and Zafarani demonstrate that there are issues of fact to be resolved.

Tobin seeks to recover attorney's fees associated with their defense. It is well settled in [*6]New York that a prevailing party may not recover attorney's fees from a losing party except where authorized by statute, agreement, or court rule (U.S. Underwriters Ins Co v City Club Hotel, LLC, 3 NY3d 592 at 597 [2004]). Tobin does not claim a right to attorney's fees based on a statutory right, court rule, or by agreement. Tobin's request for attorney's fees is denied. Tobin also seeks costs for defending the action. Pursuant to CPLR §8106, the court has discretion to award costs upon a motion by any party. In its exercise of discretion, the court does not award costs to Tobin. Finally, Tobin also seeks to recover disbursements. Pursuant to CPLR §8103 [c], "the court may allow taxation of disbursements by a party not awarded costs in an action..., and shall allow taxation of disbursements by a party not awarded costs in an action for a sum of money only where he recovers fifty dollars or more." Here, there was no monetary recovery. Tobin's motion for disbursements is, therefore, denied.

Based on the court's foregoing decision, plaintiff's order to show cause for injunctive relief is denied. To be entitled to a preliminary injunction, plaintiff was required to show the probability of success on the merits, irreparable injury in absence of an injunction, and the balance of equities in their favor (Aetna Insurance Co v Capasso, 75 NY2d 860 [1990]). The plaintiff has failed to meet their burden.

The foregoing constitutes the decision and order of this court.

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