| Sitar v Sitar |
| 2009 NY Slip Op 02984 [61 AD3d 739] |
| April 14, 2009 |
| Appellate Division, Second Department |
| John F. Sitar et al., Appellants, v Steven Sitar et al.,Respondents, et al., Defendants. |
—[*1] Meiselman, Denlea, Packman, Carton & Eberz, P.C., White Plains, N.Y. (Peter N. Freibergof counsel), for respondents.
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, WestchesterCounty (Nicolai, J.), dated March 21, 2008, as granted that branch of the motion of thedefendants Steven Sitar, Kristen Sitar, Corstar Communications, LLC, Netstar Technologies,LLC, B3 Broadband Business, Inc., and Netstar Corporation which was, in effect, for summaryjudgment dismissing the complaint insofar as asserted against them, and (2), from an order of thesame court dated July 3, 2008, which denied their motion for leave to reargue and renew theoriginal motion.
Ordered that the appeal from so much of the order dated July 3, 2008 as denied that branchof the plaintiffs' motion which was for leave to reargue the original motion is dismissed, as noappeal 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 isfurther,
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.[*2]
In 2002 the plaintiff John F. Sitar, the then president andowner 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 employeesof Corstar Business. According to John, the parties agreed that the purchase price would bedependent upon the profitability of Corstar Business during a period of time ranging from 2002to early 2004. John alleges that he repeatedly requested the books and records of CorstarBusiness from Kristen, who was the bookkeeper during that period, but they were neverdelivered to him. Nevertheless, on January 29, 2004, John (on behalf of the seller CorstarBusiness) and Steven (on behalf of the buyer Corstar Communications) executed an "Asset andBusiness Purchase Agreement" (hereinafter the APA). Among other things, the APA stated thatthe purchase price for Corstar Business's assets was $290,000.
John alleges that after the APA was signed he received financial records of Corstar Businesswhich purportedly revealed that prior to the signing of the APA Steven and Kristen had engagedin allegedly unauthorized business transactions, including substantial unauthorized increases intheir salaries, that reduced Corstar Business's profitability in the relevant period, thus reducingthe 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 entitiescontrolled by Steven and Kristen (hereinafter the respondents). As relevant here, the plaintiffsseek rescission of the APA on the ground that John was induced to sign it based upon therespondents' fraudulent representations and/or concealment regarding Corstar Business'sprofitability. The plaintiffs allege, inter alia, that Steven and Kristen deliberately withheldCorstar Business's financial documents and failed to disclose the company's profitability, whichthey 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 hisspecial relationship with them, which caused him to sell Corstar Business's assets for less thantheir fair value. The plaintiffs also seek to recover damages on a number of theories, includingfraud based upon Steven and Kristen's alleged concealment of Corstar Business's profitability inthe relevant period.
In order to prevail in an action based upon fraudulent representations, whether for rescissionof a contract or in tort for damages, the plaintiff must establish a misrepresentation of a materialfact, which was false and known to be false by the defendant, made for the purpose of inducingthe other party to rely upon it, justifiable reliance of the other party, and injury (see LamaHolding Co. v Smith Barney, 88 NY2d 413, 421 [1996]; Channel Master Corp. vAluminium Ltd. Sales, 4 NY2d 403, 406-407 [1958]). Where it is alleged that the defendantfraudulently concealed a material fact, the plaintiff must establish that the defendant had a dutyto disclose the subject information (seeE.B. v Liberation Publs., 7 AD3d 566, 567 [2004]; Swersky v Dreyer & Traub,219 AD2d 321, 326 [1996]).
The respondents made a prima facie showing of entitlement to judgment as a matter of lawwarranting dismissal of the plaintiffs' causes of action for rescission and for damages based uponfraudulent concealment.
In particular, the deposition testimony and documentary evidence the respondents submitteddemonstrates, prima facie, that when John agreed to sell Corstar Business he agreed to apurchase price of $500,000, to be reduced at the time of the closing by the total amount of salary[*3]John was paid (at the rate of $10,000 per month) between thetime of the agreement and the date of the closing. The respondents further demonstrated, primafacie, that by the time of the closing, the balance due on the purchase price was $290,000, andthe APA was drafted, and executed, in recognition of that fact. In sum, the evidence therespondents produced demonstrated, prima facie, that John agreed to sell Corstar Business for aflat price regardless of the company's profitability in the relevant period, and that the respondentshonored that agreement.
Furthermore, even assuming that Steven and Kristen, as John's close family members, had aduty to disclose Corstar Business's financial records and their failure to do so was a materialomission, the respondents established, prima facie, that John's reliance was unreasonable andthat he failed to fulfill his duty to investigate in light of the clear, documented written provisionin the APA stating that the purchase price was $290,000. A plaintiff is expected to exerciseordinary diligence and may not claim to have reasonably relied on a defendant's representationswhere he has "means available to him of knowing, by the exercise of ordinary intelligence, thetruth or the real quality of the subject of the representation" (Curran, Cooney, Penney vYoung & Koomans, 183 AD2d 742, 743 [1992] [internal quotation marks and citationsomitted]; see Orlando v Kukielka,40 AD3d 829, 831 [2007]).
The respondents also demonstrated, prima facie, that the plaintiffs could not repudiate theAPA due to John's acceptance of the benefits of the transaction and his failure to act promptly(see Barrier Sys. v A.F.C. Enters., 264 AD2d 432, 433 [1999]; Capstone Enters. ofPort Chester v County of Westchester, 262 AD2d 343, 344 [1999]). John received monthlypayments under the APA and did not commence this action until roughly two years after theclosing. Consequently, he ratified the APA.
In opposition to the respondents' prima facie showing, the plaintiffs failed to raise a triableissue of fact (see generally Alvarez v Prospect Hosp., 68 NY2d 320 [1986]). John'scontention that he signed the APA under duress is without merit. "A contract may be voided onthe ground of economic duress where the complaining party was compelled to agree to its termsby means of a wrongful threat which precluded the exercise of its free will" (Stewart M.Muller Constr. Co. v New York Tel. Co., 40 NY2d 955, 956 [1976]). Here, John'sdeposition testimony demonstrated that there was no duress as he admitted that he could havewalked away from the transaction. Moreover, the plaintiffs offered no evidence to justify John'sexecution of an agreement which, through the exercise of ordinary intelligence, he could havedetermined was contrary to his claimed understanding that the purchase price was based uponCorstar Business's profitability.
In addition, the respondents made a prima facie showing of entitlement to judgment as amatter of law with respect to the remaining causes of action asserted against them. In response,the plaintiffs failed to raise a triable issue of fact. Accordingly, the Supreme Court properlygranted the respondents' motion for summary judgment dismissing the complaint insofar asasserted against them.
Moreover, the Supreme Court properly denied that branch of the plaintiffs' motion whichwas for leave to renew (see Lawlor vHoffman, 59 AD3d 499 [2009]).
The plaintiffs' remaining contentions are without merit. Fisher, J.P., Miller, Angiolillo andBalkin, JJ., concur.