| Fulton v Hankin & Mazel, PLLC |
| 2015 NY Slip Op 07619 [132 AD3d 806] |
| October 21, 2015 |
| Appellate Division, Second Department |
[*1]
| Timothy Fulton, Respondent, v Hankin &Mazel, PLLC, Appellant. (And a Third-Party Action.) |
Traub Lieberman Straus & Shrewsberry, LLP, Hawthorne, N.Y. (J. PatrickCarley II and Daniel G. Ecker of counsel), for appellant.
Michael F. Mongelli II, P.C., Flushing, N.Y. (Martin C. Chow of counsel), forrespondent.
In an action, inter alia, to recover damages for fraud and conversion, the defendantappeals from an order of the Supreme Court, Queens County (Lane, J.), dated December2, 2013 which denied its motion for summary judgment dismissing the first throughfourth causes of action.
Ordered that the order is reversed, on the law, with costs, and the defendant's motionfor summary judgment dismissing the first through fourth causes of action isgranted.
This action arises out of a transaction regarding the sale of shares of stock in acorporation known as Emjay Environmental Recycling, Ltd. (hereinafter Emjay). In orabout June 2003, nonparties John Kelly and Michael Cholowsky became the soleshareholders of Emjay. Pursuant to an agreement of sale dated February 3, 2010, Kellyagreed to sell all of his shares of common stock in Emjay to Cholowsky in exchange foran amount equal to $1,300,000 and the assumption of the outstanding balance of certaindebt. Kelly was the sole seller and Cholowsky was the sole buyer, or "purchaser,"identified in the agreement of sale. The plaintiff, Timothy Fulton, signed the agreementas a guarantor of certain payment and performance promised by the buyer. The soledefendant in this case, Hankin & Mazel, PLLC (hereinafter the law firm), is the lawfirm which represented the seller in this sale. In addition to drafting the agreement andattending to its execution, the law firm also signed the agreement as the escrowagent.
The plaintiff maintains that, when he signed the agreement of sale as a guarantor, hehad an oral agreement with the buyer that the plaintiff would fund the majority of thepurchase price and the plaintiff would later acquire a 45% ownership interest in Emjay.One day after the agreement of sale was executed, the plaintiff wired $200,000 to the lawfirm, as escrow agent, as part of the down payment. Subsequently, the plaintiff paid anadditional $900,000 towards the purchase price by delivering the money to the lawfirm.
Notwithstanding the payments that he made pursuant to his alleged oral agreementwith the buyer, the plaintiff did not acquire the 45% ownership interest in Emjay. InAugust 2010, he commenced an action seeking to recover the monies he paid, allegingbreach of contract and unjust enrichment. In that prior action, the plaintiff named onlythe buyer and the seller as [*2]defendants; he did notname the law firm as a defendant (see Fulton v Kelly, 2011 NY Slip Op33284[U], *2 [Sup Ct, Queens County 2011]).
The plaintiff commenced this action against the law firm in April 2011. As pertinentto the instant appeal, the first through fourth causes of action alleged fraud, aiding andabetting fraud, conversion, and unjust enrichment. The plaintiff alleged that the law firmmisrepresented that he would acquire an ownership interest in Emjay, colluded with theseller to induce him to transfer more than $1,000,000 to the law firm as the escrow agent,and transferred those funds to the seller despite the fact that no ownership interest inEmjay was ever transferred to the plaintiff.
The law firm moved for summary judgment dismissing the first through fourthcauses of action. The Supreme Court denied the motion, concluding that there weretriable issues of fact as to whether the law firm "unlawfully retained or distributed" theplaintiff's funds. The law firm appeals, and we reverse.
The Supreme Court should have granted that branch of the law firm's motion whichwas for summary judgment dismissing the cause of action alleging fraud. A cause ofaction alleging fraud must be pleaded with specificity (see CPLR 3016 [b]; Dumas v Fiorito, 13 AD3d332, 333 [2004]). To establish a cause of action to recover damages for fraud, theplaintiff must demonstrate that "(1) the defendant made a false representation of fact, (2)the defendant had knowledge of the falsity, (3) the misrepresentation was made in orderto induce the plaintiff's reliance, (4) there was justifiable reliance on the part of theplaintiff, and (5) the plaintiff was injured by the reliance" (Pace v Raisman & Assoc.,Esqs., LLP, 95 AD3d 1185, 1188-1189 [2012]; see Eurycleia Partners, LP vSeward & Kissel, LLP, 12 NY3d 553, 559 [2009]).
Here, the plaintiff essentially alleged that the law firm committed fraud by falselyrepresenting that, if he made payments toward the purchase price, he would "be aninvestor/purchaser of a portion" of the seller's shares in Emjay, and the law firm wouldwork together with the buyer and seller to "get the transaction completed." However, theplaintiff failed to set forth allegations with the particularity required by CPLR 3016 (b),let alone establish, with admissible evidence, what specifically the law firm representedas to how or when the plaintiff would acquire any of the seller's shares in Emjay (see generally Scott v Fields, 92AD3d 666, 668 [2012]). Accordingly, the Supreme Court should have granted thatbranch of the defendant's motion which was for summary judgment dismissing the causeof action alleging fraud (seeBrualdi v IBERIA, Lineas Aereas de España, S.A., 79 AD3d 959, 961[2010]; Moormann v Perini& Hoerger, 65 AD3d 1106, 1108 [2009]; Dumas v Fiorito, 13AD3d at 333).
Moreover, even if the cause of action alleging fraud had satisfied the pleadingrequirements of CPLR 3016 (b), the law firm established, prima facie, that it wasretained by the seller to sell his shares in Emjay solely to the buyer. Although the lawfirm's submissions demonstrate that the plaintiff spoke with the buyer and believed thathe and the buyer would co-own Emjay, there is no dispute that the plaintiff signed theagreement of sale as a guarantor rather than as a buyer or purchaser. "A party is under anobligation to read a document before he or she signs it, and a party cannot generallyavoid the effect of a [document] on the ground that he or she did not read it or know itscontents" (Martino v Kaschak, 208 AD2d 698, 698 [1994]; see Cash v Titan Fin. Servs.,Inc., 58 AD3d 785, 788 [2009]). Under these circumstances, the law firmdemonstrated that the plaintiff could not have justifiably relied on any alleged falserepresentation that it made regarding the unambiguous terms of the agreement (see Grand Pac. Fin. Corp. v 97-111Hale, LLC, 123 AD3d 764, 768 [2014]; cf. Churchill Fin. Cayman, Ltd. v BNP Paribas, 95 AD3d614, 614 [2012]). To the extent that the plaintiff alleged that the law firm falselyrepresented that he would become an owner of Emjay by virtue of some event separateand apart from the agreement of sale, such representation related to the buyer's futureintent, and did not constitute a misrepresentation of existing fact made to induce theplaintiff to take action (see Satler v Merlis, 252 AD2d 551, 552 [1998];Roney v Janis, 77 AD2d 555, 556 [1980], affd 53 NY2d 1025 [1981]). Insum, the defendant law firm's submissions demonstrated that, if anyone intentionallymade a false representation of fact to the plaintiff regarding the sale of Emjay, it was notthe law firm. In opposition, the plaintiff failed to raise a triable issue offact.
[*3] With respect to the cause ofaction to recover damages for aiding and abetting fraud, the law firm established, primafacie, that even if some underlying fraud was perpetrated by an actor other than the lawfirm, the law firm did not render any substantial assistance in connection with the allegedfraud (see generallyNabatkhorian v Nabatkhorian, 127 AD3d 1043, 1043 [2015]; CRT Invs., Ltd. v BDO Seidman,LLP, 85 AD3d 470, 472 [2011]; cf. Weinberg v Mendelow, 113 AD3d 485, 487-488[2014]; Agostini v Sobol, 304 AD2d 395, 396 [2003]). In opposition, theplaintiff failed to raise a triable issue of fact.
Further, contrary to the Supreme Court's determination, the law firm demonstrated itsprima facie entitlement to judgment as a matter of law dismissing the cause of action torecover damages for conversion. The evidence submitted by the law firm established,prima facie, that it transferred the monies to the seller pursuant to the agreement of saleand the plaintiff did not have a "possessory right or interest in" the allegedly convertedfunds (Colavito v New YorkOrgan Donor Network, Inc., 8 NY3d 43, 50 [2006]; see R.U.M.C. Realty Corp. v JCFAssoc., LLC, 51 AD3d 993, 995 [2008]). In opposition, the plaintiff failed toraise a triable issue of fact.
Finally, the law firm established its prima facie entitlement to judgment as a matter oflaw dismissing the cause of action to recover damages for unjust enrichment. In supportof its motion, the law firm submitted evidence demonstrating that it did not retain theplaintiff's money and that, instead, the money was transferred to the seller pursuant to theescrow provisions in the agreement of sale (see Comprehensive Mental Assessment & Med. Care, P.C. vGusrae Kaplan Nusbaum, PLLC, 130 AD3d 670 [2015]; Clifford R. Gray, Inc. v LeChaseConstr. Servs., LLC, 31 AD3d 983 [2006]; Citibank, N.A. v Walker, 12 AD3d 480, 481 [2004]). Inopposition, the plaintiff failed to raise a triable issue of fact.
Accordingly, the Supreme Court should have granted the law firm's motion forsummary judgment dismissing the first through fourth causes of action. Dillon, J.P.,Miller, Maltese and LaSalle, JJ., concur.