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Sitar v. Sitar

April 14, 2009

JOHN F. SITAR, ET AL., APPELLANTS,
v.
STEVEN SITAR, ET AL., RESPONDENTS, ET AL., DEFENDANTS.



In an action, inter alia, for rescission and to recover damages for fraud, the plaintiffs appeal (1), as limited by their brief, from so much of an order of the Supreme Court, Westchester County (Nicolai, J.), dated March 21, 2008, as granted that branch of the motion of the defendants Steven Sitar, Kristen Sitar, Corstar Communications, LLC, Netstar Technologies, LLC, B3 Broadband Business, Inc., and Netstar Corporation which was, in effect, for summary judgment dismissing the complaint insofar as asserted against them, and (2), from an order of the same court dated July 3, 2008, which denied their motion for leave to reargue and renew the original motion.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

STEVEN W. FISHER, J.P., HOWARD MILLER, DANIEL D. ANGIOLILLO and RUTH C. BALKIN, JJ.

(Index No. 21538/05)

DECISION & ORDER

ORDERED that the appeal from so much of the order dated July 3, 2008, as denied that branch of the plaintiffs' motion which was for leave to reargue the original motion is dismissed, as no appeal lies from an order denying reargument; and it is further;

ORDERED the order dated March 21, 2008, is affirmed insofar as appealed from; and it is further,

ORDERED that the order dated July 3, 2008, is affirmed insofar as reviewed; and it is further,

ORDERED that one bill of costs is awarded to the respondents.

In 2002, the plaintiff John F. Sitar, the then president and owner of the plaintiff Corstar Business Computing Co., Inc. (hereinafter Corstar Business), agreed to sell the corporation's assets to the defendant Corstar Communications, LLC (hereinafter Corstar Communications), a business entity owned by his son and daughter-in-law, the defendants Steven Sitar and Kristen Sitar. At that time, Steven and Kristen were employees of Corstar Business. According to John, the parties agreed that the purchase price would be dependent upon the profitability of Corstar Business during a period of time ranging from 2002 to early 2004. John alleges that he repeatedly requested the books and records of Corstar Business from Kristen, who was the bookkeeper during that period, but they were never delivered to him. Nevertheless, on January 29, 2004, John (on behalf of the seller Corstar Business) and Steven (on behalf of the buyer Corstar Communications) executed an "Asset and Business Purchase Agreement" (hereinafter the APA). Among other things, the APA stated that the purchase price for Corstar Business's assets was $290,000.

John alleges that after the APA was signed he received financial records of Corstar Business which purportedly revealed that prior to the signing of the APA Steven and Kristen had engaged in allegedly unauthorized business transactions, including substantial unauthorized increases in their salaries, that reduced Corstar Business's profitability in the relevant period, thus reducing the ultimate purchase price for Corstar Business's assets.

Subsequently, in December 2005 John and Corstar Business commenced this action against, inter alia, Steven, Kristen, Corstar Communications, and various other business entities controlled by Steven and Kristen (hereinafter the respondents). As relevant here, the plaintiffs seek rescission of the APA on the ground that John was induced to sign it based upon the respondents' fraudulent representations and/or concealment regarding Corstar Business's profitability. The plaintiffs allege, inter alia, that Steven and Kristen deliberately withheld Corstar Business's financial documents and failed to disclose the company's profitability, which they allegedly had a duty to disclose based upon their status as employees of Corstar Business, and as John's son and daughter-in-law. They further allege that John reasonably relied upon his special relationship with them, which caused him to sell Corstar Business's assets for less than their fair value. The plaintiffs also seek to recover damages on a number of theories, including fraud based upon Steven and Kristen's alleged concealment of Corstar Business's profitability in the relevant period.

In order to prevail in an action based upon fraudulent representations, whether for rescission of a contract or in tort for damages, the plaintiff must establish a misrepresentation of a material fact, which was false and known to be false by the defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party, and injury (see Lama Holding Co. v Smith Barney, 88 NY2d 413, 421; Channel Master Corp. v Aluminum Ltd. Sales, 4 NY2d 403, 406-407). Where it is alleged that the defendant fraudulently concealed a material fact, the plaintiff must establish that the defendant had a duty to disclose the subject information (see E.B. v Liberation Publs., 7 AD3d 566, 567; Swersky v Dreyer & Traub, 219 AD2d 321, 326).

The respondents made a prima facie showing of entitlement to judgment as a matter of law warranting dismissal of the plaintiffs' causes of action for rescission and ...


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