| Gendot Assoc., Inc. v Kaufold |
| 2008 NY Slip Op 08451 [56 AD3d 421] |
| November 5, 2008 |
| Appellate Division, Second Department |
| Gendot Associates, Inc., Appellant, v Edmund L. Kaufoldet al., Respondents. |
—[*1] Kushnick & Associates, P.C., Melville, N.Y. (Lawrence A. Kushnick and Craig H. Handlerof counsel), for respondents.
In an action, inter alia, for specific performance of a contract for the sale of real property, theplaintiff appeals from a judgment of the Supreme Court, Suffolk County (Spinner, J.), dated May10, 2007, which, upon an order of the same court dated April 3, 2007, inter alia, granting thosebranches of the defendants' motion which were for summary judgment dismissing the complaintand on the fourth counterclaim declaring that the contract of sale dated February 28, 2002, is nulland void, among other things, dismissed the complaint and declared that the contract of sale isnull and void.
Ordered that the judgment is reversed, on the law, with costs, those branches of thedefendants' motion which were for summary judgment dismissing the complaint and on thefourth counterclaim declaring that the contract of sale is null and void are denied, the complaintis reinstated, and the matter is remitted to the Supreme Court, Suffolk County, for furtherproceedings consistent herewith.
Since 1967 the defendants Edmund L. Kaufold and Florence E. Kaufold (hereinafter theKaufolds) have been the owners of a 27-acre parcel of farmland located in the Town ofRiverhead. On February 28, 2002 the Kaufolds entered into a contract for the sale of the property(hereinafter the contract) with the plaintiff Gendot Associates, Inc. (hereinafter Gendot) for thesum of $1.8 million. Gendot's president and sole shareholder Gerald Simone executed thecontract on behalf of Gendot. Gendot sought to develop the vacant land into a subdivision of atleast 24 single-family [*2]lots, and agreed to pay the Kaufolds theadditional sum of $55,000 for each additional lot greater than 24 that was approved by the Town.
The Town imposed a long-term moratorium on development, which was applicable to theKaufolds' property. Three years after the execution of the contract, Gendot, relying upon a riderto the contract, sought to close title on an "as is" basis despite its failure to obtain subdivisionapproval from the Town. The Kaufolds, believing that Gendot could not unilaterally close titlewithout subdivision approval, refused to close and failed to appear at the scheduled closing. TheKaufolds contended that the purchase price of the property was dependent upon the number ofunits that Gendot could build on the property, and that, without the Town's subdivision approval,the price term of the contract was indefinite.
In 2005 Gendot commenced the instant action for specific performance of the contract and torecover damages for the Kaufolds' alleged breach of contract. The Kaufolds interposed severalcounterclaims against Gendot alleging, inter alia, that the contract was null, void, andunenforceable because there were mutual mistakes as to the meaning of contract terms, there wasno meeting of the minds as to the sale price, and the contract was unfair and unconscionablebecause their attorney Peter Danowski, who represented them during the contract negotiation andexecution, had breached his fiduciary duty to them by failing to disclose his prior dealings andrepresentations of Gendot and Simone in unrelated subdivision matters. It is undisputed thatDanowski had informed the Kaufolds that he had represented Gendot in the past; however, theparties disagree as to the completeness of that disclosure, since there were ongoing matters inwhich Danowski represented Gendot.
The Supreme Court, while finding "a plethora of issues of fact to be decided after trial,"nonetheless granted those branches of the Kaufolds' motion which were for summary judgmentdismissing the complaint and on the fourth counterclaim declaring that the contract is null andvoid. It entered a judgment which, inter alia, declared that the contract is null and void, anddismissed the complaint "on the grounds of the existence of an undisclosed and impermissibleconflict of interest" between Gendot and Danowski. We reverse.
The Supreme Court erred in granting that branch of the Kaufolds' motion which was forsummary judgment dismissing the complaint based on its conclusion that an impermissibleconflict of interest existed that rendered the entire transaction unconscionable and void per se (cf. Hall Dickler Kent Goldstein & Wood,LLP v McCormick, 36 AD3d 757, 758 [2007]; Dominguez v Community HealthPlan of Suffolk, 284 AD2d 294 [2001]). "A determination of unconscionability generallyrequires a showing that the contract was both procedurally and substantively unconscionablewhen made" (Gillman v Chase Manhattan Bank, 73 NY2d 1, 10 [1988]). It requires"some showing of 'an absence of meaningful choice on the part of one of the parties together withcontract terms which are unreasonably favorable to the other party' " (id., quotingWilliams v Walker-Thomas Furniture Co., 350 F2d 445, 449 [1965]). If a contract isunconscionable, it is voidable, but it can nonetheless be ratified (see King v Fox, 7 NY3d 181, 191[2006]; McMahon v Eke-Nweke, 503 F Supp 2d 598, 603 [2007]).
"Where there is doubt, as in the case at bar, as to whether a contract is fraught with elementsof unconscionability, there must be a hearing where the parties have an opportunity to presentevidence with regard to the circumstances of the signing of the contract, and the disputed terms'setting, purpose and effect" (Davidovits v De Jesus Realty Corp., 100 AD2d 924, 925[1984], citing State of New York v Wolowitz, 96 AD2d 47, 68-69 [1983]). Since thereare unresolved, triable issues of fact as to, inter alia, contract interpretation and whether anyconflict of interest on Danowski's part resulted [*3]in theexecution of a contract unconscionable to the Kaufolds, the Supreme Court erred in grantingthose branches of their motion which was for summary judgment dismissing the complaint andon the fourth counterclaim declaring that the contract is null and void (see Lawrence v Graubard Miller, 48AD3d 1, 8 [2007]; cf. Davidovits v De Jesus Realty Corp., 100 AD2d at 925).Lifson, J.P., Santucci, Balkin and Belen, JJ., concur.