O'Neill v O'Neill

[*1] O'Neill v O'Neill 2010 NY Slip Op 51685(U) [29 Misc 3d 1204(A)] Decided on September 30, 2010 Supreme Court, Suffolk County Pines, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 September 30, 2010
Supreme Court, Suffolk County

Michael O'Neill, Plaintiff,

against

Kathleen O'Neill and Kathleen MacArthur, Defendants.



14312-2008



Attorney for Plaintiff

Christopher Hansen, Esq.

O'Rourke & Hansen, PC

235 Brooksite Drive, Suite 300

Hauppauge, New York 11788

Attorney for Defendant

Peter B. Gierer, Esq.

400 Town Line Road, Suite 100

PO Box 5296

Hauppauge, New York 11788

Emily Pines, J.

ORDERED, that the motion (motion sequence number 001) by defendants, to vacate their default in appearing and to dismiss the Complaint against Kathleen O'Neill, pursuant to CPLR §3211(a)(1) and (5) is granted to the extent that the default is vacated upon consent of plaintiff and the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth and Tenth causes of action are dismissed as to Kathleen O'Neill only.

Plaintiff commenced this action against defendants by the filing of a Summons and Verified Complaint on or about January 31, 2008 and although defendants defaulted in appearing, plaintiff has agreed to vacate the default pursuant to a Stipulation dated April 21, 2010. The submissions [*2]reflect that plaintiff and defendant Kathleen O'Neill ("Kathleen") were married and during the course of the marriage, defendant was the owner and president of Michael O'Neill Photography, Inc. ("MOP"). Kathleen was the secretary and treasurer of the corporation and defendant Kathleen Macarthur was an employee of MOP. In or about 2006, plaintiff commenced an action for divorce against Kathleen, which was ultimately resolved by a Stipulation of Settlement (the "Stipulation") executed by both parties on August 19, 2007. As relevant to the motion sub judice, the Stipulation contained the following provisions:

ARTICLE 4

MUTUAL RELEASE AND DISCHARGE OF GENERAL CLAIMS

Subject to the provisions of this Agreement, each party hereby remises, releases and forever discharges the other from all cause or causes of action, claims, rights or demands whatsoever, in law or in equity, which either of the parties hereto ever had, or now has, against the other, except any or all cause or causes of action for divorce, annulment or separation action now pending or hereafter brought by the other.

ARTICLE 16

MICHAEL O'NEILL PHOTOGRAPHY, INC./MICHAEL O'NEILL FINE ARTS

A. ... The Husband and Wife herein agree to work together to complete any and all outstanding obligations of Michael O'Neill Photography, Inc. More particularly, the parties herein agree to immediately deliver all documents and materials required by the party performing work for the various contract obligation that is necessary to complete said obligation.

D.The parties hereby agree to dissolve Michael O'Neill Photography, Inc. within sixty (60) days of the execution of this Stipulation.

i.The parties acknowledge that all corporate tax returns must be filed prior to dissolving Michael O'Neill Photography, Inc. As a result thereof, the parties consent and agree to tender to the corporation's accountant any and all documents in their possession or control necessary to complete said returns and tax obligations.

E.Within THIRTY (30) days of the execution of this contract the parties consent and agree to remove the Defendant as an officer, director, shareholder, agent and/or employee of Michael O'Neill Photography, Inc.

Plaintiff commenced this action in January of 2008 against Kathleen and MacArthur. The gravamen of this action is breach of contract, tortious interference with contract, breach of fiduciary duty, conversion, misappropriation and conspiracy to defraud, in conjunction with the operation of MOP. Specifically, plaintiff alleges that during the course of the matrimonial action, Kathleen and MacArthur formed a competing business called Candid Like Life Photography ("Candid"), and actively solicited MOP's customers. Thus, the Complaint asserts causes of action against both defendants for tortious interference (first cause of action); breach of fiduciary duty (second cause of action); conversion (sixth cause of action); unfair competition (seventh cause of action); prima facie tort (eighth cause of action); and permanent injunction [*3](ninth cause of action). The Complaint also asserts causes of action against Kathleen only for breach of contract (third and tenth causes of action); mismanagement of corporate assets (fourth cause of action); accounting (fifth cause of action). Finally, the Complaint asserts a cause of action against MacArthur only for breach of contract (eleventh cause of action).

Defendants now move to dismiss the Complaint as against Kathleen pursuant to CPLR §3211(a)(5) based upon the release contained the Stipulation of Settlement of the matrimonial action and pursuant to CPLR §3211(a)(1) based upon documentary evidence, to wit, the Stipulation of Settlement.[FN1] Defendants assert that the release contained within Article 4 of the Stipulation operates as a complete bar to this action against Kathleen. Kathleen argues, in her affidavit in support of the motion to dismiss, that the actions complained of in the Complaint in the first through ninth causes of action, occurred prior to the entry of the Stipulation and thus, must be dismissed. Moreover, Kathleen notes that pursuant to the terms of the Stipulation, plaintiff was required to dissolve MOP, but has failed to do so. Thus, defendants urge the Court to dismiss the Complaint in its entirety.

Plaintiff opposes the motion and initially, admits that MOP has not been dissolved yet due to Kathleen's actions in failing to withhold the proper sales tax and failing to report same. Notably, plaintiff states in his affidavit in opposition that "During the course of the matrimonial action, it came to my attention that O'Neill and MACARTHUR, while both still associated with MOP, began operating a competing studio called Candid Like Life Photography...". Plaintiff's Affidavit at ¶16. He further states that he confronted O'Neill but she denied any wrongdoing yet admitted certain customers preferred to work with her and became customers of Candid. Plaintiff signed the Stipulation of Settlement, notwithstanding this admission by Kathleen. Plaintiff's Affidavit at ¶18-19. Plaintiff claims that subsequent to the execution of the Stipulation he learned that Kathleen did not disclose all of the customers who went to Candid. Plaintiff claims that as a result of the fraud by Kathleen, the release does not apply. Rather, since Kathleen did not fully disclose her actions, she cannot use the release provision to shield her from liability. Further, he argues that since he discovered the conduct after the execution of the Stipulation, this action should not be dismissed.

Additionally, plaintiff argues that Kathleen has failed to report numerous withholding and sales tax liabilities which resulted in him paying unnecessary interest, penalties and accounting fees and also have prevented the dissolution of MOP.[FN2] Based on the foregoing, plaintiff asks the [*4]Court to deny the motion to dismiss in its entirety.[FN3]

Defendants submit a reply and reiterate that the release contained within the Stipulation mandates dismissal of this action against Kathleen. Defendants note that plaintiff commenced the within action only mere months after executing the Stipulation and has not challenged the validity of the Stipulation. Defendants argue that plaintiff should not have commenced this action, sanctions should be imposed against plaintiff for frivolous conduct pursuant to 22 N.Y.C.R.R. §130-1.1 and the action dismissed against Kathleen in its entirety.

CPLR Rule 3211(a)(1) provides for dismissal of an action based upon documentary evidence. CPLR Rule 3211(a)(5) provides for dismissal of an action based upon a release. To succeed on a motion to dismiss a complaint based pursuant to CPLR Rule 3211(a)(1) based upon documentary evidence, the documentary evidence must "resolve all factual issues as a matter of law and conclusively dispose of the plaintiffs' claim." DiGiacomo v. Levine, __A.D.3d __, 2010, __N.Y.S.2d __, WL 3583424 (2d Dept. 2010). Judicial records, mortgages, deeds, contracts and "any other papers the contents of which are essentially undeniable,' would qualify as documentary evidence.'" Fontanetta v. Doe, 73 AD3d 78, 898 NYS2d 569 (2d Dept. 2010). See also, Springer v. Amontaser, 75 AD3d 539, 904 NYS2d 765 (2d Dept. 2010). A "valid release constitutes a complete bar to an action on a claim which is the subject of the release." Littman v. Magee, 54 AD3d 14, 860 NYS2d 24 (1st Dept. 2008)(internal quotations omitted). Where the language of the release clearly and unambiguously covers the subject matter of the latter action, the action must be dismissed. Luxury Travel Coach v. 4020 Assoc., Inc., 241 AD2d 443, 663 NYS2d 977 (2d Dept. 1997). The Courts have recognized that a " release will be set aside by a court only for duress, illegality, fraud or mutual mistake.'" Seff v. Meltzer, Lippe, Goldstein & Schlissel, 55 AD3d 592, 865 NYS2d 323 (2d Dept. 2008); quoting, Shklovskly v. Khan, 273 AD2d 371, 709 NYS2d 208. See also, Haynes v. Garez, 304 AD2d 714, 758 NYS2d 391 (2d Dept. 2003).

In this case, a review of the Complaint demonstrates that the allegations of all of the causes of action, except the Tenth Cause of Action, arise out of alleged actions by Kathleen which occurred prior to the execution of the Stipulation of Settlement of the matrimonial action. In fact, plaintiff alleges in his Complaint that the actions of the defendants occurred "during the course of the matrimonial action" and over "the course of at least a two (2) year period". Complaint at ¶'s 24 and 25, 65 and 66, respectively. The broad language of the general release contained within Article 4 of the Stipulation of Settlement thus covers the actions that allegedly occurred during the period prior to the execution of the document. Plaintiff admits that he was aware of defendants' conduct with regard to soliciting clients, albeit not the extent to which he claims it occurred. Yet he executed the Stipulation notwithstanding such knowledge and while [*5]represented by able and competent counsel. A release is a contract [FN4] and to avoid a release on the ground of fraud, a party must allege every material element of that cause of action. Matter of O'Hara, 85 AD2d 669, 445 NYS2d 201 (2d Dept. 1981). Here, plaintiff has failed to sustain that burden by the conclusory allegations of the Complaint. However, to the extent the tenth cause of action alleges breach of contract arising from Kathleen's failure to comply with the terms of the Stipulation of Settlement, that cause of action is not barred by the release and is continued against Kathleen.

Based on the foregoing, defendants' default in appearing is vacated upon consent of the plaintiff and the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth and Eleventh causes of action are dismissed as to Kathleen O'Neill only. The action is continued against MacArthur and the Tenth Cause of Action is continued against Kathleen O'Neill.

Counsel are reminded that a status conference is scheduled for October 5, 2010 at 9:30 a.m. before the undersigned.

This constitutes the DECISION and ORDER of the Court.

Dated: September 30, 2010

Riverhead, New York

EMILY PINES J. S. C. Footnotes

Footnote 1:Although defendants also move to vacate their default in answering the Complaint, the parties have stipulated to vacate the default and a copy of the Stipulation is annexed to the motion papers.

Footnote 2:Plaintiff also asks the Court to consider Kathleen's alleged violation of an agreement to deposit the proceeds of the sale of the marital residence into his attorney's escrow account. However, such is not part of the Complaint in this action and plaintiff has not sought affirmative relief by way of a cross-motion seeking leave to amend the Complaint. Therefore, such will not be considered by the Court at this time.

Footnote 3:The Court notes that plaintiff refers to actions by MacArthur in his affidavit in opposition. However, defendants have only moved to dismiss the action against Kathleen so no further discussion is warranted regarding MacArthur.

Footnote 4:Lee v. Boro Realty, LLC, 39 AD3d 715, 832 NYS2d 453 (2d Dept. 2007).