| Gersten-Hillman Agency, Inc. v Heyman |
| 2009 NY Slip Op 09111 [68 AD3d 1284] |
| December 10, 2009 |
| Appellate Division, Third Department |
| Gersten-Hillman Agency, Inc., Respondent, v Russ Heyman,Appellant. |
—[*1] Baum Law Offices, L.L.P., Monticello (Morton I. Baum of counsel), forrespondent.
Peters, J.P. Appeal from an order of the Supreme Court (Meddaugh, J.), entered May 8, 2008in Sullivan County, which, among other things, denied defendant's cross motion for summaryjudgment dismissing the complaint.
In 1995, plaintiff entered into an oral agreement with defendant, an insurance broker,whereby defendant agreed to operate as an independent contractor in the sale of insuranceproducts. Plaintiff's complaint alleges that, under the terms of the agreement, defendant was toretain 60% of all commissions earned on accounts and policies he produced in the fields of life,accidental and health insurance, as well as variable life/variable annuities, with the remaining40% of these commissions to be remitted to plaintiff. Commissions earned on accounts andpolicies produced by defendant for property, casualty, personal lines and baggage insurance wereto be shared 35% to defendant and 65% to plaintiff. According to plaintiff, the commissionsearned on renewals of those accounts and policies produced by defendant were to be shared inthe same manner. The complaint also alleges that the agreement called for defendant to provideplaintiff with a monthly accounting of each policy he produced and the commission earnedthereon. The parties operated in accordance with this arrangement for approximately 11 years,until plaintiff was sold to Marshall & Sterling, Inc. in May 2006. On June 30, 2006, defendantterminated his relationship with plaintiff and sent a final payment to plaintiff representingcommissions earned during that month. Plaintiff responded by requesting the accounting for thesix-month period ending in June 2006 and a continuing payment of 40% of the commissions dueon any account and policy renewals. Defendant did not comply with the request.[*2]
Plaintiff thereafter commenced this action againstdefendant seeking (1) an accounting of all accounts, policies produced, accounts renewed andcommissions due to each party pursuant to the oral agreement between the parties, (2) adeclaration that such agreement was fully performed by both parties, with the exception ofaccurate accountings and the remitting of all commissions due, and (3) an order directingdefendant to pay commissions on all policy renewals occurring subsequent to June 30, 2006.After defendant failed to respond to plaintiff's discovery demands and ultimately SupremeCourt's scheduling order, plaintiff moved to strike defendant's answer. In response, defendantcross-moved for summary judgment dismissing the complaint and, in the alternative, leave toamend his answer to include additional affirmative defenses and counterclaims. Supreme Courtconditionally granted plaintiff's motion to strike defendant's answer unless defendant respondedto plaintiff's discovery demands by a specified date. The court then denied defendant's summaryjudgment motion pursuant to CPLR 3212 (f), finding that the information demanded by plaintiffwas in defendant's exclusive knowledge and control and could reveal the existence of materialissues of fact, and also denied his motion for leave to file an amended answer. Defendant nowappeals.
Supreme Court erred in failing to grant defendant summary judgment dismissing plaintiff'scause of action for an accounting. It is well settled that an equitable action for an accounting willnot lie in the absence of a fiduciary relationship between the parties (see Bradkin vLeverton, 26 NY2d 192, 199 n 4 [1970]; Hydro Invs. v Trafalgar Power, 6 AD3d 882, 886 [2004];Village of Hoosick Falls v Allard, 249 AD2d 876, 879 [1998], lv denied 92NY2d 807 [1998]; Reichert v MacFarland Bldrs., 85 AD2d 767, 768 [1981];Brigham v McCabe, 27 AD2d 100, 105 [1966], affd 20 NY2d 525 [1967]). Here,plaintiff's complaint does not allege—nor do any of the facts pleaded reveal—theexistence of a fiduciary or confidential relationship between the parties. Rather, the complaintexpressly alleges that defendant was hired as an independent contractor for the sale of insurancepolicies, and that the parties were to share in the commissions from all policies sold in aspecified manner. What defendant received was the proceeds from the sales of insurance policieshe made, a part of which proceeds, when ascertained, he would owe to plaintiff. "The mere factthat the defendant[ ] collected the proceeds and the plaintiff may be unaware of the exact amountto which it is entitled does not make the defendant [a] fiduciar[y]" (National Comm. onObservance of Mother's Day v Kirby, Block & Co., 17 AD2d 390, 391 [1962] [citationomitted]; see Waldman v Englishtown Sportswear, 92 AD2d 833, 835-836 [1983];Sinkwich v Drew & Co., 2 AD2d 788, 789 [1956]; Freeman v Miller, 157 AppDiv 715, 719 [1913]). Rather, "[t]he sum owed is a mere debt as contrasted with a trust fund," forwhich an equitable action for an accounting cannot be maintained (National Comm. onObservance of Mother's Day v Kirby, Block & Co., 17 AD2d at 392; see Model Bldg. &Loan Assn. of Mott Haven v Reeves, 236 NY 331, 339 [1923]; Marvin v Brooks, 94NY 71, 80-81 [1883]). Thus, plaintiff is relegated to an action at law for damages for the allegedbreach of the agreement by defendant (see Schantz v Oakman, 163 NY 148, 157-158[1900]), and can determine the amount it is owed, if any, through an examination before trial anddiscovery (see Sinkwich v Drew & Co., 2 AD2d at 789; Hermes v Compton, 260App Div 507, 509-510 [1940]; Pelkey v Pelkey, 236 App Div 55, 57 [1932];Hutchinson v Birdsong, 211 App Div 316, 320 [1925]; see also 1 NY Jur 2d,Accounts and Accounting § 34).
We also find that Supreme Court erred in denying defendant's summary judgment motion tothe extent that it sought to dismiss plaintiff's claim for future commissions on policy renewals.General Obligations Law § 5-701 (a) (1) requires an agreement to be in writing andsubscribed by the party to be charged if such agreement "[b]y its terms is not to be performedwithin one year of the making thereof." "To that end, it has long been the rule that '[a] service[*3]contract of indefinite duration, in which one party agrees toprocure customers or accounts or orders on behalf of a second party, is not by its termsperformable within a year—and hence must be in writing . . . —sinceperformance is dependent, not upon the will of the parties to the contract, but upon that of a thirdparty' " (Currier v Prudential Ins. Co. of Am., 266 AD2d 596, 597 [1999], quotingZupan v Blumberg, 2 NY2d 547, 550 [1957] [citations omitted]). As such, "an oralpromise to pay renewal commissions following the termination of an at-will employmentrelationship is unenforceable under the [s]tatute of [f]rauds" (Whitehorn Assoc. v One TenBrokerage, 264 AD2d 516, 517 [1999]; see Strauss v Fleet Mtge. Corp., 282 AD2d736, 736 [2001]; Caruso v Malang, 250 AD2d 800, 801 [1998]; Gold v Benefit PlanAdm'rs, 233 AD2d 421 [1996]; Apostolos v R.D.T. Brokerage Corp., 159 AD2d 62,64-65 [1990]).
In opposition to defendant's motion, plaintiff argued that summary judgment was prematurebecause the facts necessary to oppose the motion may be in the exclusive possession ofdefendant. More specifically, plaintiff claimed that defendant's responses to its discoveryrequests may, collectively, produce the necessary writing to satisfy the statute of frauds withrespect to this alleged agreement to pay future commissions. While it is true that "[a] motion forsummary judgment may be opposed with the claim that facts essential to justify opposition mayexist but that such material facts are within the exclusive knowledge and possession of themoving party" (Pank v Village of Canajoharie, 275 AD2d 508, 509 [2000]; seeCPLR 3212 [f]; Rochester Linoleum &Carpet Ctr., Inc. v Cassin, 61 AD3d 1201, 1202 [2009]), a party's mere hope orspeculation that evidence sufficient to defeat the motion may be uncovered during the discoveryprocess is insufficient to postpone determination on the motion (see Clochessy vGagnon, 58 AD3d 1008, 1010 [2009]; Svoboda v Our Lady of Lourdes Mem. Hosp., Inc., 20 AD3d 805,806 [2005]; Scofield v Trustees of Union Coll. in Town of Schenectady, 267 AD2d 651,652 [1999]). Here, not only is it evident that plaintiff's argument is based on pure conjecture andspeculation, but it is also clear that any claimed documents are not in defendant's exclusivepossession, since plaintiff necessarily possesses any documentation or correspondence betweenthe parties that would reveal an agreement to pay future commissions. Plaintiff's additionalassertion that the parties' partial or full performance would take the contract outside of the statuteis plainly without merit, since performance of an agreement to pay commissions on futurerenewals has obviously not yet taken place.
Next, we are unpersuaded by defendant's assertion that the complaint should have beendismissed because plaintiff lacked standing to sue. While the record reveals that shares ofplaintiff were sold to Marshall & Sterling, documents also indicate that plaintiff was a divisionof Marshall & Sterling following the sale and no evidence has been proffered that plaintiffceases to exist as a corporate entity (compare Westside Fed. Sav. & Loan Assn. of N.Y. Cityv Fitzgerald, 136 AD2d 699 [1988]). Nor do we find that Marshall & Sterling is a necessaryparty to this action. Plaintiff is seeking to hold defendant accountable for his failure to properlyaccount for commissions due to it during the parties' 11-year relationship and the payment offuture commissions on all renewals of policies that were generated during that period. With noshowing by defendant that Marshall & Sterling may be inequitably affected by such a dispositionor that complete relief cannot be afforded in its absence (see CPLR 1001 [a]), we findthat Marshall & Sterling is not a necessary party to this action.
Finally, we address Supreme Court's denial of defendant's motion for leave to serve anamended answer. While leave to amend pleadings is generally freely given (see CPLR3025 [b]), "such determination necessarily rests within the sound discretion of the trial court and,absent a clear abuse of that discretion, will not be lightly cast aside" (Pagan v Quinn, 51 AD3d 1299,[*4]1300 [2008]; see Thomas v Laustrup, 34 AD3d 1115, 1116 [2006]). Althoughdelay alone is insufficient to bar amendment, "denial of a motion to amend is appropriate whenthere is prejudice to the opposing party and no showing of a satisfactory excuse for the delay"(Ciarelli v Lynch, 46 AD3d1039, 1040 [2007]; see Pagan v Quinn, 51 AD3d at 1300-1301) or where themoving party fails to make an evidentiary showing that the proposed amendment has some merit(see Trupia v Lake George Cent. SchoolDist., 62 AD3d 67, 68 [2009]; D'Orazio v Mainetti, 39 AD3d 981, 982 [2007]; Jackson v DowChem. Co., 295 AD2d 855, 856 [2002]).
Here, defendant sought to amend his answer by adding additional affirmative defenses andtwo counterclaims. With regard to the affirmative defenses, one of which was based upon theDead Man's Statute (see CPLR 4519), defendant provided no basis for the defenses, nordid he proffer any explanation as to why these defenses were unknown at the time issue wasjoined. Turning to his proposed counterclaims, the first alleges that, at the time the partiesentered into the 1995 oral brokerage agreement, plaintiff agreed not to compete with him in thesale of insurance policies in certain fields and that plaintiff breached the noncompete agreementwhen it was sold to Marshall & Sterling. Such an oral restrictive covenant, however, is barred bythe statute of frauds since it is not capable of performance within one year (see GeneralObligations Law § 5-701 [a] [1]; Queens Group v Martin Packaging Corp., 245AD2d 183, 183 [1997]), and defendant neither addresses nor makes any assertion of anyexception that would take this alleged promise outside of the statute. As for his secondcounterclaim, which seeks a constructive and/or equitable trust, defendant has failed todemonstrate how, as an independent contractor, he would be entitled to any share in the sale ofplaintiff. Under these circumstances, and in light of Supreme Court's explicit finding thatdefendant has deliberately and willfully delayed the litigation, we find no abuse of the court'sdiscretion in denying the proposed amendments (see D'Orazio v Mainetti, 39 AD3d at982).
Defendant's remaining contentions, to the extent not addressed herein, have been found to beunavailing.
Spain, Lahtinen, Kane and Malone Jr., JJ., concur. Ordered that the order is modified, on thelaw, without costs, by reversing so much thereof as denied defendant's motion for summaryjudgment dismissing the claim for an equitable accounting and the claim for commissions forpolicy and account renewals after the termination of the alleged oral agreement between theparties; motion granted to said extent and said claims dismissed; and, as so modified, affirmed.