June 20, 2013
Douglas PARK and Gnosh, Inc., Plaintiffs,
SOHO ROOM GROUP, LLC, Bill Gans, an individual, and Progressive Business Brokers, Defendants. No. 652561.
This decision has been referenced in a table in the New York Supplement.
Stuart S. Perry, Esq., Stuart S. Perry, PC, for plaintiffs.
Thomas Torto, Esq., for Defendant Soho Room Group, LLC.
S. Edmund Resciniti, Esq. Garden City, for Defendants Gans and Progressive.
BARBARA JAFFE, J.
By notice of motion dated May 14, 2012, defendant Soho Room Group, LLC (Soho) moves pursuant to CPLR 3212 for an order granting it summary judgment on its counterclaim to retain, as liquidated damages, plaintiffs' contract down payment for the purchase of a restaurant/bar, and dismissing plaintiffs' complaint as to it. Plaintiffs oppose, and by notice of cross motion dated June 8, 2012, move pursuant to CPLR 3212 for an order granting them summary judgment on their claim for the return of the down payment, and sanctions against Soho. Soho opposes.
By notice of motion dated May 22, 2012, defendants Gans and Progressive Business Brokers (Progressive) move pursuant to CPLR 3212 for an order granting them summary judgment dismissing the complaint and all cross-claims against them and sanctions against plaintiffs and/or their attorneys. The motions are consolidated for disposition.
I. UNDISPUTED FACTS
Soho owns and operates Soho Room, a restaurant/bar located on the ground floor of a residential cooperative building at 203 Spring Street in Manhattan. By lease dated July 20, 2005, Soho leases the premises from 124 Commercial, LP. (Affirmation of Thomas Torto, Esq., dated May 14, 2012; Affidavit of Joseph Desena, dated May 10, 2012 [Desena Affid.]; NYSCEF Doc. 19).
On March 4, 2011, Joseph Desena, Soho's principal, agreed to sell Soho Room to plaintiff Park, a computer programmer, on behalf of Gnosh, Inc. (Gnosh) for $550,000. Upon execution of the agreement, Park paid Soho's lawyer Martin Mehler $55,000 for the contract down payment, now held in escrow. ( Id. ). Defendant Progressive, through its chief executive officer Gans, was the broker for the transaction.
Pursuant to paragraph 13 of the agreement, the closing of the sale was conditioned on the State Liquor Authority's (SLA) approval of Park's application for an on-premises liquor license, and an assignment to Park by Soho's landlord of the existing lease and an extension for an additional five years after expiration of the existing lease at similar terms and conditions. And, " if the on-premises liquor license is not obtained, through no willful default or misrepresentation of [plaintiffs], or the assignment of the lease is not obtained, all payments made hereunder shall be returned." ( Id. ).
Pursuant to paragraph 14, the parties agreed that in the event plaintiffs' application for a liquor license was disapproved, so long as plaintiffs were not in default of the agreement, they would have the right to cancel the agreement within 10 days of the date of SLA's denial, by written notice to Soho. And upon such cancellation, Soho would promptly return all monies paid under the agreement, with no further liability resulting to either party " unless of a willful default or misrepresentation by [plaintiffs] in which event the contract down payment shall be retained by [Soho] as and for its liquidated damages." ( Id. ).
In May 2011, defendants Gans, Park, Park's attorney, and Desena met to discuss the assignment and extension of the lease. At the meeting, Park and his lawyer were told that the landlord wanted to meet with the individual who would be responsible for running the restaurant/bar on a daily basis. By email dated May 19, 2011, Desena stated that it was expected that Park would bring his financial records, an experienced restaurant worker, and a menu to the landlord, and by email dated May 24, 2011, Park agreed to do so. By email dated May 20, 2011, Park's lawyer agreed that Park and one Logan McHenry, an experienced restaurant worker, should meet the landlord. ( Id. ).
At a Community Board Two (CB2) meeting held in June 2011, Desena learned that Soho Room's liquor license required that the sale of liquor on the premises stop at two a.m., and not at four a.m. He and Mehler explained to Park and his attorney that there would be no problem amending the license to extend the hour of sales to four a.m.
At the meeting held on June 23, 2011, all were present but McHenry. Among other issues discussed, the landlord reiterated to Park her desire to meet McHenry, articulating her concerns that the restaurant/bar succeed so that rent would be regularly paid. ( Id., Affidavit of Liz Herzog, dated March 20, 2012).
In an email to the co-op board dated July 7, 2011, the landlord forwarded Soho's notice that it intends " to assign their lease with 124 Commercial to a new party who intends to operate the Soho Room as a restaurant." ( Id. ).
By email dated July 5, 2012, Mehler advised Park and his attorney that the liquor license application process was " moving along" and that he needed Park's federal identification number for the application. He also inquired as to whether Park had been fingerprinted for the license. By email dated July 7, Mehler again inquired as to the fingerprinting and advised them that the SLA would be meeting on July 14. ( Id. ).
By email dated July 11, Park's attorney advised Mehler that Park was not available to attend the SLA meeting, and he expressed his " doubts" that the deal would go through as there were " [t]oo many issues" with the landlord[, as Park] will not be able to do the food service [landlord] wants." He also advised Mehler to cancel the SLA meeting " or go and get your license straightened out as to the hours." In email responses of the same day, Mehler stated that there was no problem with the liquor license, and advised that according to Desena " there are no issues with the landlord and that he is close to getting the approval of the hours that were presented to [the SLA]."
By letter dated July 11, 2011, plaintiffs' attorney advised Mehler that as there were " too many issues with the liquor license and lease," plaintiffs could not go forward with the transaction. Opining that the landlord " wants more of a restaurant' and less of a bar,' " he asked for the return of the $55,000 deposit, as plaintiffs believed that the food service they would offer would not " rise to the level of the Landlord's expectations [and that] there is not enough profit in food and compared to liquor." ( Id. ).
Mehler attended the CB2 meeting on July 14. Park did not. By letter dated July 27, Park's attorney advised Mehler that if the deposit was not returned to Park, he would file an order to show cause and also serve it on the SLA and co-op, adding, " You are well aware that your client is operating illegally as his Liquor License does not allow for the hours of operation that he is currently working. I do not wish to draw attention to this fact nor cause other problems for the current owner, However, if the Deposit is not returned, I shall have no choice but bring all of these issues before the Court...." ( Id. ).
On August 2, 2012, the SLA approved Soho Room's application to extend its hours of operation to 4 a.m. ( Id. ).
II. PERTINENT PROCEDURAL BACKGROUND
In their summons and complaint, plaintiffs advance causes for action against Soho for breach of contract, fraud, conversion, unjust enrichment, and breach of implied covenant of good faith and fair dealing, and against Gans and Progressive, tortious interference with contract. They claim, essentially, that they were warranted in terminating the agreement when it became " very apparent" that the transaction, through no willful fault of plaintiffs, could not be consummated due to landlord's failure to grant a lease extension if the premises continued to be operated as a bar. And, although Park agreed to amend the agreement as requested by Soho, the modified agreement was never returned to him signed by Soho and thus, according to plaintiffs, it has no effect.
In support of their causes of action for fraud and breach of implied covenant of good faith and fair dealing, plaintiffs maintain that defendants misrepresented the hours of operation for the liquor license. Plaintiffs thus seek damages in the amount of $55,000 representing the return of their down payment.
In its answer, Soho alleges a failure to state a cause of action, laches, acquiescence, waiver, estoppel, bad faith, and breach of contract, lack of standing and/or capacity, a cross-claim against co-defendants for contribution and/or indemnification, and a counterclaim to retain the down payment as liquidated damages. It claims that having failed to comply with the landlord's reasonable request to meet with Park's daily restaurant manager, finalize the lease extension, and complete the application for a liquor license, plaintiffs breached the amended agreement, thereby warranting its retention of the $55,000 down payment.
In its answer to Soho's cross-claim and counterclaim, plaintiffs set forth Soho's failure to state a claim upon which relief can be granted, waiver, estoppel, and bad faith.
In their answer, Gans and Progressive also set forth a failure to state a cause of action, laches, acquiescence, waiver, estoppel, bad faith, breach of contract, lack of standing and/or capacity to sue, and wrongful amendment of the complaint, a cross-claim against co-defendant for contribution and/or indemnification, and a counterclaim for breach of contract in the form of lost brokerage commissions in the amount of $25,000 and expenses in the amount of $1,000.
II. DEFENDANT SOHO'S MOTION FOR SUMMARY JUDGMENT
In support of its motion, Soho offers an agreement which Desena alleges was entered into by him and Park in April 2011. The agreement modifies the purchase agreement in that plaintiffs waived " any contingency of the Agreement other than the Landlord signing an assignment of the lease," and the sale price was reduced to $500,000. Additionally, plaintiffs agreed to comply with " all reasonable requests of the Landlord in processing the request for a lease assignment." ( Id., Exh. D). Park admits having signed the agreement.
Desena alleges that a second meeting was scheduled for July 26, 2011, at which Park would introduce McHenry to the landlord and they would then finalize the lease extension. Neither Park nor McHenry appeared at the July 26 meeting.
Relying on the modification agreement, Soho maintains that plaintiffs breached the modification agreement by failing to bring McHenry to meet with the landlord, which they claim constituted a reasonable request in furtherance of obtaining a lease assignment and extension. Soho thus asserts that it is warranted in retaining the down payment.
In opposition, plaintiffs argue that there exist triable issues of fact precluding summary judgment, namely, the absence of any evidence that Soho signed and returned the modification to them which, they allege, proves that the SLA's approval of plaintiffs' application for an on-premises liquor licence was never eliminated as a condition for proceeding with the sale. They also deny having received a " lease extension or amendment," and Park denies that he ever agreed to the July 26 meeting. Rather, he claims that at an SLA meeting sometime in May or June, he learned that Soho had fraudulently represented to him the operating hours for the liquor license which, he argues, induced him to enter into the agreement to begin with. (Affirmation of Stuart Perry, Esq., NYSCEF Doc. 29, Affidavit of Steven Park, dated June 4, 2012).
" The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case." ( Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 ; Zuckerman v. City of New York, 49 N.Y.2d 557, 562  ). If this burden is not met, summary judgment must be denied, regardless of the sufficiency of plaintiff's opposition papers. ( Winegrad, 64 N.Y.2d 851, 853).
When the moving party has demonstrated entitlement to summary judgment, the burden of proof shifts to the opposing party to demonstrate by admissible evidence the existence of a factual issue requiring trial. ( Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 ; Zuckerman, 49 N.Y.2d 557, 562). The opposing party must " lay bare" its evidence ( Silbertstein, Awad & Miklos v. Carson, 304 A.D.2d 817, 818 [1st Dept 2003] ); " unsubstantiated allegations and assertions are insufficient" ( Zuckerman, 49 N.Y.2d 557, 562).
1. Breach of contract
In order to establish a cause of action for breach of contract, a plaintiff must prove that:
1) it entered into an agreement with a defendant to exchange goods or services for valuable consideration; 2) plaintiff performed pursuant to the contract; 3) defendant failed to perform; and 4) plaintiff sustained damages as a result. ( See Furia v. Furia, 116 A.D.2d 694 [2d Dept 1986] ).
As Park admits having signed the modification agreement and does not deny having signed it in April 2011, Soho has demonstrated, prima facie, the validity of the modification agreement and the requirement set forth therein that plaintiffs comply with the reasonable request that Park bring McHenry to meet with the landlord. Even if the modification was not signed by Soho and returned to Park, as the party to be charged, Park is bound by it. ( See Vista Props., LLC v. Rockland Ear, Nose & Throat Assocs., P.C., 60 A.D.3d 846 [2d Dept 2009] [plaintiff sought to enforce lease signed by defendant, and as defendant was party to be charged, fact that lease was not signed by plaintiff was immaterial; " absence of a signature by the party seeking to enforce the agreement is without legal significance" ] ).
The doubts expressed by Park in his July 11 email concerning the landlord's approval of the lease extension and problems with the liquor license are both self-serving and bereft of any support in the record. Rather, Mehler's responses of the same day conclusively contradict the assertions, thereby warranting the reasonable inference that it was Park alone who was seeking to back out of the deal, an inference borne out by plaintiffs' letter of the same day, based as well on nothing but Park's unwarranted and self-serving assumptions. Consequently, Park's denial that a meeting was scheduled for July 26 is immaterial.
Thus, even if the landlord did not grant the lease extension, Park offers no evidence that it was anything other than his failure to comply with her reasonable request to meet with his restaurant manager that resulted in the extension being withheld, if in fact it was. And, even if Park was induced into entering into the purchase agreement by virtue of Soho's misrepresentation of the hours of operation permitted by the liquor license, he offers no evidence that the hours were likely to be denied. Rather, Soho has demonstrated, by admissible evidence, that an amended liquor license was granted.
Soho has thus demonstrated, prima facie, that the modification agreement was in effect, that plaintiffs failed to comply with the landlord's reasonable request to meet with Park's daily restaurant manager, and that Soho did not terminate the agreement. Plaintiffs have not raised an issue of fact requiring a trial. Soho is entitled to judgment dismissing the action against it and judgment on its counterclaim permitting it to retain the down payment.
2. Plaintiffs' other claims
Having found that Soho is entitled to retain the down payment, the conversion claim is not viable. ( See Green Complex, Inc. v. Smith, 2013 WL 3023409, 2013 N.Y. Slip Op 04575 [2d Dept 2013] [conversion claim dismissed as defendant was rightfully in possession of down payment] ).
As plaintiffs have not claimed any damages distinct or different from those claimed in their breach of contract claim, and as the alleged misrepresentations are also pleaded as part of plaintiffs' breach of contract claim, the fraud, unjust enrichment, and breach of the duty of good faith and fair dealing claims are duplicative of the breach of contract claim. ( Id. [unjust enrichment]; Carpenter v. Plattsburgh Wholesale Homes, Inc., 83 A.D.3d 1175 [3d Dept 2011] [while plaintiffs asserted that defendant made false representations to them to induce them to purchase home, fraud claim as pleaded was indistinguishable from allegations made in breach of contract claim]; Manas v. VMS Assocs., LLC, 53 A.D.3d 451 [1st Dept 2008] [plaintiff did not allege that she sustained any damages as result of defendants' fraud that would not be recoverable under breach of contract claim]; Nola Realty LLC v. DM & M Holding LLC, 33 A.D.3d 523 [1st Dept 2006] [fraud]; Engelhard Corp. v. Research Corp., 268 A.D.2d 358 [1st Dept 2000] [breach of duty of good faith and fair dealing] ).
III. DEFENDANTS GANS AND PROGRESSIVE'S MOTION FOR SUMMARY JUDGMENT
Plaintiffs' claim against defendants Gans and Progressive for tortious interference with contract is dismissed, based on the finding, supra, II.B.1., that plaintiffs breached the contract. ( See Cantor Fitzgerald Assocs., L.P. v. Tradition N. Am., Inc., 299 A.D.2d 204 [1st Dept 2002], lv denied 99 N.Y.2d 508  [essential element of tortious interference claim is that breach of contract would not have occurred but for defendant's activities] ).
I decline to award sanctions.
Accordingly, it is hereby
ORDERED, that defendant Soho Room Group LLC's motion for summary judgment is granted to the extent that:
(1) the complaint is dismissed with costs and disbursements to defendant as taxed by the Clerk upon the submission of an appropriate bill of costs; and
(2) judgment is granted on defendant's counterclaim to the extent of permitting it to retain plaintiffs' down payment as liquidated damages; it is further
ORDERED, that defendants Bill Gans and Progressive Business Brokers' motion for summary judgment is granted and the complaint is dismissed with costs and disbursements to defendants as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED, that the Clerk is directed to enter judgment accordingly.