Choice Valet, Inc. v Sang Doo Lee

[*1] Choice Valet, Inc. v Sang Doo Lee 2008 NY Slip Op 52549(U) [21 Misc 3d 1148(A)] Decided on December 4, 2008 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 4, 2008
Supreme Court, Nassau County

Choice Valet, Inc., Plaintiff,

against

Sang Doo Lee, J & C TOWER CORP. and H. TOP CLEANERS, INC., Defendants.



9055-08



COUNSEL FOR PLAINTIFF

Chadda Kim & Rha, LLP

40-45 Utopia Parkway

Flushing, New York 11358

COUNSEL FOR DEFENDANT

Stephen Latzman, Esq.

276 Fifth Avenue, Suite 306

New York, New York 10001

Leonard B. Austin, J.

Plaintiff moves for judgment on its amended complaint setting aside the stipulation of settlement entered into in a prior action entitled Choice Valet Inc. v. Sang Doo Lee, J & C Tower Corp. and H. Top Cleaners, Inc. (Sup Ct., Nassau Co. 2004), Index No. 6800/04 ("2004 action"). [*2]

Defendants, Sang Doo Lee ("Lee") and J & C Tower Corp. ("J & C"), cross-move for an order dismissing the amended complaint pursuant to CPLR 3211(a)(1) and (a)(7), for failure to state a cause of action and upon documentary evidence.

BACKGROUND

In 2003, Plaintiff, Choice Valet, Inc. ("Choice Valet"), purchased J & C's shirt laundry business in Syosset. The Bill of Sale for this transaction included a restrictive convenant precluding J & C from engaging in any business similar to the one sold, within a 10-mile radius, for a term of 5 years.

Plaintiff commenced the 2004 action, claiming that Lee breached the restrictive covenant by engaging in a similar business under the name of H. Top Cleaners, Inc. ("H. Top") in Carle Place. The 2004 action was settled pursuant to a stipulation of settlement that was "So Ordered" by this Court on June 23, 2004.

In 2006, Lee commenced an action seeking summary judgment in lieu of complaint in the amount of $109,240.13 against Choice Valet and Plaintiff's principal, Seok Young Choi ("Choi"), based on the alleged failure to pay the promissory notes executed by Choice Valet in the 2003 sale of the shirt laundry business (the "2006 action"). Summary judgment was denied as the issue of violation of the stipulation of settlement was raised by Choice Valet and Choi as a defense. In their answer in the 2006 action, Choice Valet and Choi interposed a counterclaim for damages for violation of the stipulation of settlement in the 2004 action. The 2006 action is now ready for trial.

During discovery in the 2006 action, Lee was deposed. He testified that he loaned $70,000 to his nephew in connection with his nephew's purchase of H. Top. On the basis of this evidence, Choice Valet commenced this action seeking to set aside the stipulation of settlement in the 2004 action on the grounds of fraud. Specifically, Choice Valet relies upon an affidavit submitted in the 2004 action wherein Lee's nephew, the sole shareholder and director of H. Top, averred that Lee had "no interest in H. Top." Plaintiff argues that Lee's testimony in the 2006 action directly contradicts Lee's nephew's affidavit in the 2004 action, and that the only reasonable inference to be drawn is that Lee's nephew's statements were intentional perversions of the truth. Choi claims that he relied on Lee's nephew's testimony in executing the stipulation of settlement and that because that testimony was untrue, Choice Valet should now be granted judgment setting aside the stipulation of settlement in the 2004 action.

This action and Plaintiff's motion, are both based upon the assumption that Lee is liable for his nephew's sworn statements, because the statements were offered to induce Choice Valet to agree to the stipulation of settlement in the 2004 action.

Lee and J & C cross-move for dismissal of the complaint on the grounds that the amended complaint does not set forth a cause of action for fraud because, as a matter of law, Choice Valet cannot show justifiable reliance.

DISCUSSION

Although on a motion addressed to the sufficiency of a complaint pursuant to CPLR 3211(a)(7), the facts pleaded are presumed to be true and accorded every favorable inference (Arnav Indus. Inc. Retirement Trust v. Brown Raysman, Millstein, Felder & Steiner, LLP, 96 NY2d 300, 303 [2001]), allegations consisting of bare legal conclusions as well as factual claims contradicted by the documentary evidence are not entitled to such consideration. Smith v. [*3]Meridian Technologies Inc., 52 AD3d 685 (2nd Dept. 2008); and Peter F. Gaito Architecture, LLC v. Simone Development Corp., 46 AD3d 530 (2nd Dept. 2007). If documentary evidence disproves an essential allegation of the complaint, dismissal pursuant to CPLR 3211(a)(1) is warranted even if the allegations, standing alone, could withstand a motion to dismiss for failure to state a cause of action. Id.; and McGuire v. Sterling Doubleday Enterprises., LP, 19 AD3d 660 (2nd Dept. 2005), lv. app. den., 7 NY3d 701 (2006).

Stipulations of settlement are judicially favored and will not be lightly set aside (Hallock v. State of New York, 64 NY2d 224, 230[1984]; Kelley v. Chavez, 33 AD3d 590[2nd Dept. 2006]; and Cooper v. Hempstead General Hospital, 2 AD3d 566 [2nd Dept. 2003], lv. app. dsmd., 2 NY3d 823 [2004]), especially here where the party seeking to vacate the stipulation was represented by counsel. Trakansook v. Kerry, 45 AD3d 673 (2nd Dept. 2007); Kelley v. Chavez, supra; and Town of Clarkstown v. MRO Pump & Tank, Inc., 287 AD2d 497 (2nd Dept. 2001). Unless public policy is affronted, parties to a civil dispute are free to chart their own course. Mitchell v. New York Hosp., 61 NY2d 208, 214 (1984); and J & A Vending, Inc. v. JAM Vending, Inc., 303 AD2d 370, 371 (2nd Dept. 2003). No countervailing public policy issue is presented here.

A party seeking to set aside a stipulation of settlement will be granted such relief only upon a showing of good cause sufficient to invalidate a contract, such as fraud, duress or mistake. Hallock v. State of New York, supra; Trakansook v. Kerry, supra; and Kelley v. Chavez, supra. Accordingly, the Court turns to Choice Valet's allegations of fraud.

The essential elements of a cause of action for fraud are a misrepresentation or a material omission of fact which was false and known to be false, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury. Lama Holding Co. v. Smith Barney Inc., 88 NY2d 413, 421 (1996). See, Shovac v. Long Island Commercial Bank, 50 AD3d 1118 (2nd Dept. 2008), lv. app. dsmd. in part and den. in part, 11 NY3d 762 (2008); and Orlando v Kukielka, 40 AD3d 829 (2nd Dept. 2007).

Assuming arguendo for the purposes of this motion that Lee does have an interest in H. Top contrary to his nephew's statements, New York law imposes an affirmative duty on sophisticated investors to protect themselves from misrepresentations made during business acquisitions by investigating the details of the transactions and the business they are acquiring. Global Minerals and Metals Corp. v. Holme, 35 AD3d 93 (1st Dept. 2006), lv. app. den. 8 NY3d 804 (2007); and Abrahami v. UPC Construction Co., Inc., 224 AD2d 231 (1st Dept. 1996). Where a party has means available to him for discovering, "by the exercise of ordinary intelligence," the true nature of a transaction he is about to enter into, "he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentations." Id. at 234, quoting Schumaker v. Mather, 133 NY 590, 596 (1892). See also, Stuart Silver Assoc. Inc. v. Baco Development Corp, 245 AD2d 96, 98-99 (1st Dept. 1997); and Rudnick v. Glendale Systems Inc., 222 AD2d 572 (2nd Dept. 1995). See gen'lly, Stuart Lipsky, PC v. Price, 215 AD2d 102 (1st Dept. 1995). Where there is any hint of falsity, a heightened degree of diligence is required. Global Minerals and Metals Corp v. Holme, supra at 100.

Choice Valet, as Plaintiff here, submits the affidavit of Chong Hyi, the seller of the wholesale shirt dry cleaning business in Carle Place, sworn to on May 7, 2004, and the affidavit [*4]of Min Su Park, a former deliveryman for H. Top, sworn to on May 20, 2004. Both documents are dated more than a month before the stipulation of settlement of the 2004 action. As these two documents raise issues of Lee's interest and role in H. Top, Choice Valet clearly had an opportunity to further investigate these issues prior to agreeing to the stipulation of settlement of the 2004 action. At the very least, in the face of such evidence, Choice Valet could have sought to condition the stipulation of settlement on the truth of the sworn representations made by Lee's nephew (Global Minerals and Metals Corp. v. Holme, supra at 101), but it did not do so. Under these circumstances, any alleged reliance by Plaintiff on the representations of Lee's nephew cannot be found to be reasonable. Consequently, Choice Valet has no cause of action for fraud against Defendants. Stuart Lipsky, PC v. Price, supra.

Accordingly, it is,

ORDERED, that the cross-motion by Defendants, Sang Doo Lee and J & C Tower Corp., for judgment dismissing the amended complaint for failure to state a cause of action for fraud is granted, and it is further,

ORDERED, that, on the Courts' own motion, the amended complaint as to Defendant H. Top Cleaners, Inc., is hereby dismissed; and it is further,

ORDERED, that Plaintiff's motion for judgment setting aside the stipulation of settlement in the 2004 action is denied.

This constitutes the decision and Order of the Court.

______________________________

Hon. Leonard B. Austin, J.S.C.

Dated: Mineola, NY

December 4, 2008

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