Chiampou Travis Besaw & Kershner, LLP v Pullano

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Chiampou Travis Besaw & Kershner, LLP v Pullano 2019 NY Slip Op 34060(U) November 19, 2019 Supreme Court, Erie County Docket Number: 805848-2017 Judge: Deborah Chimes Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: 1] ERIE COUNTY CLERK 01/03/2020 03:10 PM , IFIL$C. NYSCEF DOC. ERIE NO. 112C~TY CLERK 11720/2019 09:42 NYSCEF DOC. NO. 101 INDEX NO. 805848/2017 INDEX NO. 805848/2017 RECEIVED NYSCEF: 01/03/2020 RECEIVED NYSCEF: 11/20/2019 STATE OF NEW YORK SUPREME COlJRT: COUNTY OF ERIE CHIAMPOU TRAVIS BESAW & KERSHNER, LLP and 45 BRYANT WOODS, LLC, . Petitioners, -vs- DECISION Index No. 805848-2017 GERALD F. PULLANO, Respondent. BACKGROUND £etitioners, Chiampou, Travis, Besaw and Kershner, LLP and 45 Bryant Woods, LLC, .(collectively, C1BK), commenced an action seeking a declaratory judgement 1.hat the methodology they used to calculate payments made to respondent, Gerald Pullano, under a promissory note and pursuant to a partnership agreement was correct; and a declaration relative :to the transfer of interest in real property known as 45 Bryant Woods. Respondent interposed an Answer with counter-claims seeking a determination that petitioners erred in calculating the full -- - --~-~-~- - -- - value of respondent's partnership iiltereSt; a determillation that petitioners were in default on payment of the note; that respondent is entitled to enforce the acceleration clause in the note; and a determination that respondent is not obligated to relinquish his.interest in 45 Bryant Woods. All issues were resolved by prior proceedings, with the exception of whether respondent was precluded from enforcing the acceleration clause because such action would be unconscionable, 1 of 5 3 of 7 [*IFILED: 2] ERIE COUNTY CLERK 01/03/2020 03:10 PM I •!FILED: NYSCEF DOC. ERIE NO. 112COUNTY CLERK 11/20/2019 09.: 42 NYSCEF DOC. NO. 101 AMI INDEX NO. 805848/2017 INDEX NO. 805848/2017 RECEIVED NYSCEF: 01/03/2020 RECEIVED NYSCEF: .11/20/2019 A bench trial was conducted on September 11, 2019. The parties submitted pos_t- trial memorandums on October 16, 2019. FINDINGS OF FACT CTBK is an-accounting firm. This controversy arose out of respondent's withdrawal and departure .as a partner·from CTBK. Respondent withdrew as partner of CIBK on June 22, 2015, effective December 31, 201 S. The parties entered into a separation agreement wherein CT~K agreed to buy out regpondent' s interest in the business and signed a 10-year promissory note. Pursuantto the note, the first quarterly payment was due-on February 28, 2016. On February 25, 2016, CTBKsentrespondent the first quarterly check in the amount of$32,999.69, along with an executed promissory note dated December 31, 2015 and an amortization schedule showing equal payments over the 10-year payment period. In a letter dated April 8, 2016, respondent informed petitioners that the promissory note did not have the acceleration clause required under the partnership agreement and that the note did not accurately :eflect the calculation ofpayments as specified under the partnership agreement. The payment, respondent wrote, should have been "equal installments ofprincipal, together with unpaid interest," but instead reflected "equal . . combined installments of principal and interest." In that same letter a request was niade for . immediate payment of the outstanding balance· ofthe initial insfalinient anifarevlSed ~ ~ amortization schedule. In a letter dated April 11, 2016, CTBK advised respondent's attomey that it disagreed with the respondent's .interpretation of the amortization of the promissory note. It appears from an exchang~ of e-mails dated in September 2016, that the parties discussed possible resolution to the disagreement over the amortization. of the promissory n,ote. On February 4, 2017, respondent sent CTBK a "Notice .of Default and Acceleration" seeking immediate 2 2 of 5 4 of 7 [*1FILED: 3] ERIE COUNTY CLERK 01/03/2020 03:10 PM , IF:IIl)!P:' . ER:IE eO'f:'.JNTY eilERK 11I2eI2e19 e 9 . 42 NYSCEF DOC. NO. 112 ,J NYSCEF DOC. NO. 101 ' INDEX NO. 805848/2017 INDEX NO. 805848/2017 RECEIVED NYSCEF: 01/03/2020 RECEIVED NYSCEF: 11/20/2019 payment of the enth'e principal balance plus interest. On February 18, 2017, CTBK noted its disagreement over being in default. The parties remain¢ in disagreement and CTBK filed a petition on May 8, 2017. Throughout the litigation, petitioners continued to make payments under the amortization schedule in the amount they believed to be correct. The issue of the manner in which amortization was to be calculated was the subject of a prior motion, wherein on November 26, 2018, thls Court decided in favor of respondent's calculation and found petitioners to be in default. Said decision was made part of an order dated January 17, 2019. On November 28, 2018, petitioners made payment in the amount of the shortage. DECISION It is clear from the correspondence exchanged, that the parties had a bona fide dispute over the way ih which interest was to be paid on the note. Though the parties attempted to convince the other of thefr interpretation, they could not agree and the petitiop.ers sought the Court's intervention regarding the issue. Additionally, respondent by way of a cross-claim, challenged the petitioners' evaluation of the "full value" of his interest in the business and claimed it was "erroneously calculated" and in "bad faith." Respondent sought the Court's interpretation on this issue as well. · - - - - This Court; fil a-prior decision, found tlle petitioners' calrn1lation of full. value ~orrect and thoughrespondenfs interpretation was foiind erroneous, the Court did aud does not impute bad faith against the respondent for defending his p9sition on the issue. Similarly, in a prior decision, this Court found petitioners' amortization of interest to be erroneous and likewise did and does not impute bad faith against the petitioners for defending their position on that issue. Petitioners, within three days of the Court's ruling, forwarded a check for the "calculated 3 3·of 5 5 of 7 [*FILED: 4] ERIE COUNTY CLERK 01/03/2020 03:10 PM ""IEILED: NYSCEF DOC. ERIE NO. 112COON'l'Y CLERK 1172072019 09: 42 AA NYSCEF DOC. NO. 101 INDEX NO. 805848/2017 INDEX NO. 805848/2017 RECEIVED NYSCEF: 01/03/2020 RECEIVED NYSCEF: 11/20/2019 shortage." It is also noted that throughout the litigation, petitioners continued to make payment under their interpretation of the promissory note. Notwithstanding the continued payment and the payment to cure, the respondent seeks enforcement of the acceleration clause. It is the r~e case that denies enforcement of an agreement providing for the acceleration ofthe entire debt upon the default of the obligor. "Absent some element of fraud, exploitive overreaching or unconscionable conduct.•. there is no warrant either in law or equity for a court to refuse enforcement of the agreement of the parties." Fifty States Management Corooration. 46 NY 2d 573, 577 (1979). However, "equity may relieve against the effect of a good faith mistake, promptly cured by the party in default with no prejudice to the creditor to prevent unconscionable overreaching." (internal citations omitted). Id. at 577. The circumstances of this case make it one of those rare cases where the acceleration clause should not be enforced. Here petitioners, while exercising their right to litigate the interpretation of a contractual clause, continued to make payments under itl! interpretation until the Court found the p~itioners method of calculation erroneous. Upon learning of the error, petitioners promptly paid respondent the shortage with interest. Further, with the immediate payment of the shortage and the continuation of payments, respondent was not prejudiced. To enforce the acceleration clause under these facts would be unconscionable. ·- - - - Respondent also seeks payment of attorney fees, costs and expenses pursilanffo se-ction 5(a) of the promissory note. Costs and expenses, including attorney fees, are awarded to respondent. , 4 4 of 5 6 of 7 [*FILED: 5] ERIE COUNTY CLERK 01/03/2020 03:10 PM '~WE'f). ERIE COUNTY NYSCEF DOC. NO. 112 CLERK 11/26/2619 69.42 NYSCEF DOC. NO. 101 ~ INDEX NO. 805848/2017 INDEX NO. 805848/2017 RECEIVED NYSCEF: 01/03/2020 RECEIVED NYSCEF: 11/20/2019 CONCLUSION The Court finds petitioners acted in good faith when seeking the Court's interpretation of the promissory note and to enforce the acceleration clause would be unconscionable under the circumstances of this case. Costs and expenses, including attorney fees incurred in the collection under the Promissory Note, are granted to respondent. Counsel for petitioners is to prepare and submit an Order, attaching the Court's decision. DATED: Buffalo, New York A/c;.rPn1hP1i i9 ...Jt)J9 5 5 of 5 7 of 7

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