Preview
INDEX NO. 030709/2023
FILED: ROCKLAND COUNTY CLERK 0471472023 01:50 PM
NYSCEF DOC. NO. 21 RECEIVED NYSCEF 04/14/2023
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF ROCKLAND
wanna n nen enn ene nen eee eee ee eee
KPL GREEN LLC,
Plaintiff, Index No: 030709/2023
-against- Motion Seq. No. 001
GREENPORT/HUDSON ASSOCIATES, LLC,
MORGENSTERN DEVOESICK, PLLC,
as Escrow Agent, and CRAZY BEER WORLD, INC.,
Defendants.
ween nee nee eee ene eee een eee nee
DEFENDANTS GREENPORT/HUDSON ASSOCIATES, LLC AND
MORGENSTERN DEVOESICK, PLLC’s MEMORANDUM OF LAW IN SUPPORT OF
THEIR JOINT MOTION TO DISMISS TO THE VERIFIED COMPLAINT
LEWIS BRISBOIS BISGAARD & SMITH LLP
Jeffrey Y. Spiegel, Esq., Esq.
Stephen G. Rickershauser, Esq.
Attorneys for Defendant
Morgenstern DeVoesick, PLLC
77 Water Street, Suite 2100
New York, New York 10005
(212) 232-1300
WOODS OVIATT GILMAN LLP
F. Michael Ostrander, Esq.
Attorneys for Defendant
Greenport Hudson Associates, LLC
1900 Bausch and Lomb Place
Rochester, New York 14604
(585) 987-2800
1 of 16
INDEX NO. 030709/2023
FILED: ROCKLAND COUNTY CLERK 0471472023 01:50 PM
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
TABLE OF CONTENTS
PRELIMINARY STATEMENT
STATEMENT OF FACTS
LEGAL STANDARD
ARGUMENT
I THE BREACH OF CONTRACT CLAIM AGAINST GHA MUST BE
DISMISSED
Il THE BREACH OF FIDUCIARY DUTY CLAIM AGAINST MDP
MUST BE DISMISSED
CONCLUSION 10
2 of 16
INDEX NO. 030709/2023
FILED: ROCKLAND COUNTY CLERK 0471472023 01:50 PM
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
TABLE OF AUTHORITIES
Page(s)
Cases
Angeli v. Barket,
211 A.D.3d 896 (2d. Dept. 2022) .
Armentano v. Paraco Gas Corp.,
90 A.D.3d 683 (2d Dept. 2011)
Baron vy. Galasso,
83 A.D.3d 626 (2d Dept. 2011) 10
Baumann v. Hanover Community Bank,
100 A.D.3d 814 (2d Dept. 2012) 10
Black Car & Livery Ins., Inc. v. H&W Brokerage, Inc.,
28 A.D.3d 595 (2d Dept. 2006)
Blank vy. Noumair,
658 N.Y.S.2d 88 (2d Dept. 1997)
Chiu v. Man Choi Chiu,
71 A.D.3d 621 (2d Dept. 2010) 6, 11
Community Bd. 7 of Borough of Manhattan v. Schaffer,
84 N.Y.2d 148 (1994)
Dir. Door Corp. v. Marchese & Sallah,
127 A.D.2d 735 (2d Dept. 1987) ..
Fredriksen v. Fredriksen,
30 A.D.3d 370 (2d Dept. 2006) 11
George A. Fuller Co. v. Alexander & Reed, Esqs.,
760 F. Supp. 381 (S.D.N.Y. 1991)
Goshen v. Mutual Life Ins. Co. of N.Y.,
98 N.Y.2d 314 (2002) 11
Hohwald v. Farm Family Cas. Ins. Co.,
155 A.D.3d 1009 (2d Dept. 2017)...
Kim v. Hfz 11 Beach St., LLC,
Index No. 657153/2020, 2021 N.Y.Misc. LEXIS 18040 (Sup. Ct. October 11,
2021). 10
Leon v. Martinez,
84 N.Y.2d 83 (1994) 11
i
3 of 16
INDEX NO. 030709/2023
FILED: ROCKLAND COUNTY CLERK 0471472023 01:50 PM
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
Muscara v. Lamberti,
133 A.D.2d 362 (2d Dept. 1987) .. 9, 10
Palmetto Partners, L.P. v. AJW Qualified Partners, LLC,
83 A.D.3d 804 (2d Dept. 2011) 6, 11
Parola, Gross & Marino, P.C. v. Susskind,
43 A.D.3d 1020 (2d Dept. 2007)
Pierce Coach Line, Inc. v. Port Wash. Union Free Sch. Dist.
213 A.D.3d 959 (2d Dept. 2023)
Reiss v. Financial Performance Corp.,
97 N.Y.2d 195 (2001).
Rosenberg v. Rosenberg,
180 A.D.2d 607 (1st Dept. 1992) 10
Stein v. Rand Constr. Co.,
400 F.Supp 944 (S.D.N.Y. 1975) 10
Sunset Café, Inc. v. Mett’s Surf & Sports Corp.
103 A.D.3d 707 (2d Dept. 2013)
Thomson v. Watchtower Bible & Tract Socy. of N.Y., Inc.,
198 A.D.3d 996 (2d Dept. 2021) ..
Tsinias Enters. Ltd. v. Taza Grocery, Inc.,
172 A.D.3d 1271 (2d Dept. 2019)
Vermont Teddy Bear Co. v. 538 Madison Realty Co.,
1 N.Y.3d 470 (2004)
Woss, LLC v. 218 Eckford, LLC,
102 A.D.3d 860 (2d Dept. 2013) 10
Other Authorities
CPLR § 3016(b) 5, 6, 10
CPLR § 3211
CPLR § 3211 (a)(1)
CPLR § 3211(a)(7)
55 N.Y. Jur.2d, Escrows, §8 10
iii
4 of 16
INDEX NO. 030709/2023
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
Defendants Greenport/Hudson Associates, LLC (“GHA”) and Morgenstern DeVoesick,
PLLC (“MDP”) (GHA and MDP shall be collectively referred to as the “Defendants”), by their
undersigned attorneys, submit this Memorandum of Law in support of their motion pursuant to
CPLR §§ 3211 and 3016(b) for an order dismissing Plaintiff
KPL Green LLC’s claims against them.
PRELIMINARY STATEMENT
Plaintiff brings the instant complaint (the “Complaint” or “Compl.”)! against the Defendants
seeking damages stemming from the purchase and sale of real property located at 300 Fairview
Avenue, Hudson, NY (the “Property”). The pleading asserts a breach of contract claim against GHA,
the seller of the Property, and a breach of fiduciary duty claim against MDP, GHA’s counsel for the
transaction. For the reasons set forth below, the Complaint should be dismissed.
First, Plaintiff cannot state a claim for breach of contract because, among other things, it fails
to adequately allege its own performance under the contract or that GHA breached any of its
contractual obligations. Moreover, the plain language of the agreement dooms this claim, as the
contract bars Plaintiff from bringing this action.
Second, Plaintiff cannot state a claim for breach of fiduciary duty against MDP for the simple
reason that a fiduciary relationship never existed. It is black letter law that an escrow agent has no
fiduciary duty to a depositor prior to (1) the execution of an escrow agreement or (2) the receipt of
escrowed funds. Here, Plaintiff admits that neither of these conditions occurred; the Escrow Fund
was never established — a salient fact that is both undisputed and corroborated by documentary
evidence. Moreover, there are no allegations setting forth how MDP caused any harm, and Plaintiff
' While the Complaint is submitted as a “Verified” Complaint, Plaintiff failed to attach an
executed verification page to its pleading.
93426323.1
5 of 16
INDEX NO. 030709/2023
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
offers no allegation of what its damages actually are beyond mere conclusory and speculative claims,
which are entirely insufficient. The Complaint also fails to meet the heightened pleading
requirements for a breach of fiduciary duty claim.
For these reasons, and those developed below, the Court should dismiss the claims against
the Defendants.”
STATEMENT OF FACTS?
On or about June 7, 2022, GHA, as “Seller,” entered into a certain Contract for the Purchase
and Sale of Real Property (the ““Contract”’) with Marakai Realty Corp., as “Purchaser,” with regard to
the purchase and sale of the Property. (Compl. 96, Ex. A.)* At the time the Contract was executed,
GHA had entered into a lease with a potential new tenant, Crazy Beer World, Inc. (“Beer World”),
which contained a liquor licensing contingency (“Liquor Contingency’). (/d. 98, Ex. B.) Plaintiff
alleges that the Contract established that the purchase price for the Property was calculated to
include Beer World’s final execution and removal of the Liquor Contingency. (Compl. 410.) The
Contract also allegedly provided that if Beer World’s Liquor Contingency was not satisfied, cleared,
removed, or waived at the time of closing, it would cause a loss of revenues to Plaintiff and a
reduction in the Property’s Net Operating Income. (/d. §11.) As such, the Plaintiff
and GHA agreed
? Submitted herewith is the Affirmation of Jeffrey Y. Spiegel, Esq., dated April 14, 2023
(“Spiegel Aff.”), the Affirmation ofF. Michael Ostrander, Esq., dated April 14, 2023
(“Ostrander Aff.”), the Affidavit of Susan Gordon, sworn to on April 11, 2023 (“Gordon Aff.’”),
and the Affidavit of Jeffrey DeVoesick, Esq., sworn to on April 13, 2023 (“DeVoesick Aff.”) all
with annexed exhibits.
3 Defendants do not concede that the allegations in the Complaint are accurate, but they
are assumed to be true for the purpose of this motion.
4+ The Contract was thereafter amended by Addendum to Contract on three different
occasions. (Gordon Aff. Ex. A) Pursuant to the first addendum the parties agreed that the Purchaser
would take title under the entity name KPL Green LLC. (/d.)
93426323.1
6 of 16
INDEX NO. 030709/2023
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
that “the end date of several contingencies set forth in the Beer Lease (including, but not limited to,
the Liquor Contingency) may exceed the anticipated Closing Date.” (/d. 413.)
Pursuant to the Contract, the “Purchase Price” was “payable by Purchaser in cash or certified
funds at Closing.” (Compl. Ex. A at §2.) The Contract further provided that “at Closing, $578,910.00
of the Purchase Price shall be escrowed (the “Escrow Fund”) with Seller’s attorneys as Escrow
Agent pending Seller’s execution of the proposed [Beer Lease].” (Compl. 413.) Plaintiffalleges that
the Escrow Fund was to be held by MDP until the Beer Lease was executed and all contingencies
were satisfied, cleared, removed or waived, or the Beer Lease was cancelled. (/d. 414.) On October
5, 2022, GHA and Beer World agreed to extend the time for Beer World to clear the Liquor
Contingency up to and including December 31, 2022. (dd. 415, Ex. C.)
Contract paragraph 12 expressly states that: “All representations, warranties and agreements
made by either party shall not survive Closing and transfer of title.’ (Compl. Ex. A at §12.) In
pertinent part, Contract paragraph 14 provides that, in the event of a breach by the Seller, “the
Purchaser shall be entitled to: A. Close the transaction contemplated by this Contract, thereby
waiving such breach... or B. Sue Seller for performance of this Contract; or....” (Ud. at 414,
emphasis added.)
On or about November 8, 2022, the purchase and sale transaction contemplated by the
Contract was closed, and title to the Property was accepted by Plaintiff. (Compl. 416.) In connection
with that closing, Plaintiff and GHA executed a Real Estate Closing Statement (“Closing
Statement”). (Gordon Aff., Ex. B.) Pursuant to the Closing Statement, GHA and Plaintiff agreed to
credit Plaintiff $74,865.38 for the Beer Lease. (/d., Ex. B.) However, the Closing Statement made no
provision for the $578,910.00 Escrow Fund. (Gordon Aff. §8, Ex. B.)
93426323.1
7 of 16
INDEX NO. 030709/2023
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
At Closing, title for the Property was transferred without Plaintiff ever having funded,
created or arranged for the Escrow Fund. (Gordon Aff. 410, Ex. B; Compl. §30.) Accordingly, the
$578,910 Escrow Fund was not created at the Closing, but Plaintiff accepted title to the Property and
caused the sale proceeds to be disbursed in accordance with the Closing Statement. (Gordon Aff.
410.) The Closing Statement corroborates that the Escrow Fund was never funded nor created. (/d.,
Ex. B.)
On December 30, 2022, counsel for Beer World, Albert Hrdlicka, emailed MDP requesting a
further extension of the Liquor Contingency, stating that the liquor authority had not yet processed
Beer World’s application. (Compl., Ex. F.) Hrdlicka further stated that “just in case the landlord
doesn’t agree to the extension the tenant reserves their right to cancel the lease since they have not
received the liquor license yet.” (/d.) Plaintiff claims that on January 3, 2023, three days after
expiration of Beer World’s Liquor Contingency, Hrdlicka contacted counsel for Plaintiffrequesting
the extension. (Compl. §23.) On January 18, counsel for Plaintiff emailed MDP requesting
immediate proof of the Escrow Fund “in light of the recent developments with Beer World”.
(Compl., Ex. E.) On January 24, 2023, Plaintiff allegedly sent notices to GHA, MDP and Beer
World, acknowledging and accepting Beer World’s supposed termination of the Beer Lease.*
(Compl. 424.) Plaintiff then sent notices to GHA and MDP that same day demanding disbursement
of the Escrow Fund pursuant to the Contract. (/d. 428.) Plaintiff alleges that to date MDP, has failed
to provide proofor disbursement of the Escrow Fund. (/d. 29.)
The Complaint’s First Cause of Action purports to allege breach of contract against GHA and
the Second Cause of Action purports to allege breach of fiduciary duty against MDP, both for failing
5 By way of its Verified Answer with Counterclaims (Doc. No. 19.) Beer World has
specifically denied terminating the lease and seeks judgment declaring that the lease is in full force
and effect. (Verified Answer with Counterclaims [Doc. No. 19] at {| 30-45.)
93426323.1
8 of 16
INDEX NO. 030709/2023
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
to hold $578,910 in escrow until the Liquor Contingency was either satisfied, cleared, waived or
removed or the Beer Lease was terminated.
Defendants now seek an Order dismissing the breach of contract and breach of fiduciary duty
causes of action pursuant to CPLR § 3211(a)(1), based upon documentary evidence, and pursuant to
CPLR § 3211(a)(7), for failure to state a valid cause of action. Defendants also seek dismissal of the
breach of fiduciary duty cause of action pursuant to CPLR § 3016(b) for failure to plead such claim
with particularity.
LEGAL STANDARD
Under CPLR §3211(a)(1), a court may grant a motion to dismiss where “the documentary
evidence utterly refutes [a] plaintiff's factual allegations, conclusively establishing a defense as a
matter of law[.]” Sunset Café, Inc. v. Mett’s Surf & Sports Corp., 103 A.D.3d 707, 709 (2d Dept.
2013). “Contracts are among the documents that qualify as documentary evidence.” Hohwald v.
Farm Family Cas. Ins. Co., 155 A.D.3d 1009, 1010 (2d Dept. 2017).
On a motion pursuant to CPLR 3211§(a)(7) to dismiss for failure to state a cause of action,
the court will accept the facts as alleged in the complaint as true, afford plaintiffs the benefit of every
possible favorable inference, and determine only whether the facts as alleged fit within any
cognizable legal theory. Tsinias Enters. Ltd. v. Taza Grocery, Inc., 172 A.D.3d 1271, 1272 (2d Dept.
2019) (internal quotation marks omitted). “However, bare legal conclusions and factual claims
which are flatly contradicted by the record are not presumed to be true.” Parola, Gross & Marino,
P.C. v. Susskind, 43 A.D.3d 1020, 1021-1022 (2d Dept. 2007).
A cause of action to recover damages for breach of fiduciary duty must be pleaded with the
particularity required under CPLR §3016(b). Palmetto Partners, L.P. v. AJW Qualified Partners,
93426323.1
9 of 16
INDEX NO. 030709/2023
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
LLC, 83 A.D.3d 804, 808 (2d Dept. 2011); Chiu v. Man Choi Chiu, 71 A.D.3d 621, 623 (2d Dept.
2010).
ARGUMENT
I THE BREACH OF CONTRACT CLAIM AGAINST GHA MUST BE DISMISSED
To properly plead a breach of contract claim, a plaintiff must allege the existence of a
contract, the plaintiff's performance pursuant to the contract, the defendant’s breach of his or her
contractual obligations, and damages resulting from the breach. See Pierce Coach Line, Inc. v. Port
Wash. Union Free Sch. Dist., 213 A.D.3d 959 (2d Dept. 2023) (reversing denial of motion to
dismiss); Angeli v. Barket, 211 A.D.3d 896 (2d. Dept. 2022) (affirming dismissal of breach of
contract action).
Here, the basis of Plaintiff's breach of contract claim stems from GHA’s purported breach for
failing to hold $578,910 in escrow until the Liquor Contingency was either satisfied, cleared, waived
or removed, or the Beer Lease was terminated. (Compl. 936, Ex. A.) For Plaintiffto bring a claim
alleging that GHA failed to hold money in escrow, there must have been an Escrow Fund established
by Purchaser at the Closing as required by the Contract. However, there was never any such Escrow
Fund established, as Plaintiff failed to deliver the Escrow Fund to MDP or otherwise make
arrangements for its creation or funding. (DeVoesick Aff. {§ 11-12; Gordon Aff. 410.) This is made
clear in the Closing Statement, and further admitted by Plaintiff in its pleading. (Compl. §30; Gordon
Aff., Ex. B.) Without the establishment of an Escrow Fund, Plaintiff cannot legitimately allege that
GHA breached its contractual obligations for failing to hold such funds and for this reason, this
claim must be dismissed.
93426323.1 6
10 of 16
INDEX NO. 030709/2023
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
The plain wording of the Contract warrants dismissal of Plaintiffs First Cause of Action. As
held by the New York State Court of Appeals, “when parties set down their agreement in a clear,
complete document, their writing should be enforced according to its terms,” and this rule is applied
with special force “in the context of real property transactions, where commercial certainty is a
paramount concern, and where the instrument was negotiated between sophisticated, counseled
business people negotiating at arm’s length.” Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1
N.Y.3d 470, 475 (2004) (internal quotation marks, ellipses and citations omitted). Courts may not
“by construction add or excise terms, nor distort the meaning of those used and thereby make a new
contract for the parties under the guise of interpreting the writing” Reiss v. Financial Performance
Corp., 97 N.Y.2d 195, 199 (2001) (internal quotation marks and citation omitted).
Here, the unequivocal language of the Contract demonstrates that any purported obligation
that GHA may have had to Plaintiffto hold funds in escrow did not survive transfer of title to the
Property. Specifically, Section 12 of the Contract provides that: “All representations, warranties and
agreements made by either party shall not survive Closing and transfer of title.” (Compl., Ex. A at
§12.) The Closing for the Property occurred on or about November 8, 2022, at which time “there
was a transfer of ownership of the Property from GHA to [Plaintiff].” (/d. 16.) As the Closing took
place, title to the Property had transferred and ownership rights were delivered, any claims Plaintiff
might have had arising from the Contract were extinguished pursuant to Section 12.
Similarly, Contract Section 14 provides, in pertinent part, that, in the event ofa breach by the
Seller, “the Purchaser shall be entitled to: A. Close the transaction contemplated by this Contract,
thereby waiving such breach... or B. Sue Seller for performance of this Contract; or...” (Compl.
Ex. A at §14, emphasis added.) Pursuant to the plain language of the Contract, the Purchaser was
not permitted to both close the transaction in the face of an alleged breach and sue GHA for that
7
93426323.1
11 of 16
INDEX NO. 030709/2023
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023
alleged breach. It is undisputed that the transaction contemplated by the Contract closed without the
Escrow Fund having been created at Closing. (Compl. at 416, 30.) It cannot be legitimately
disputed that Plaintiff received a $74,865.38 credit for the “Beer Lease” at Closing, but no Escrow
Fund was created. (Gordon Aff. Ex. B.) The Purchaser having elected its remedy, accepted the
$74,865.38 credit for the “Beer Lease” and closed the transaction, any purported breach by GHA
relating to the Escrow Fund was waived by the express terms of the Contract and Plaintiff cannot
maintain its claim under the plain and unambiguous terms ofthe Contract.
Il. THE BREACH OF FIDUCIARY DUTY CLAIM AGAINST MDP MUST BE
DISMISSED
“
Preview
INDEX NO. 030709/2023 FILED: ROCKLAND COUNTY CLERK 0471472023 01:50 PM NYSCEF DOC. NO. 21 RECEIVED NYSCEF 04/14/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF ROCKLAND wanna n nen enn ene nen eee eee ee eee KPL GREEN LLC, Plaintiff, Index No: 030709/2023 -against- Motion Seq. No. 001 GREENPORT/HUDSON ASSOCIATES, LLC, MORGENSTERN DEVOESICK, PLLC, as Escrow Agent, and CRAZY BEER WORLD, INC., Defendants. ween nee nee eee ene eee een eee nee DEFENDANTS GREENPORT/HUDSON ASSOCIATES, LLC AND MORGENSTERN DEVOESICK, PLLC’s MEMORANDUM OF LAW IN SUPPORT OF THEIR JOINT MOTION TO DISMISS TO THE VERIFIED COMPLAINT LEWIS BRISBOIS BISGAARD & SMITH LLP Jeffrey Y. Spiegel, Esq., Esq. Stephen G. Rickershauser, Esq. Attorneys for Defendant Morgenstern DeVoesick, PLLC 77 Water Street, Suite 2100 New York, New York 10005 (212) 232-1300 WOODS OVIATT GILMAN LLP F. Michael Ostrander, Esq. Attorneys for Defendant Greenport Hudson Associates, LLC 1900 Bausch and Lomb Place Rochester, New York 14604 (585) 987-2800 1 of 16 INDEX NO. 030709/2023 FILED: ROCKLAND COUNTY CLERK 0471472023 01:50 PM NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 TABLE OF CONTENTS PRELIMINARY STATEMENT STATEMENT OF FACTS LEGAL STANDARD ARGUMENT I THE BREACH OF CONTRACT CLAIM AGAINST GHA MUST BE DISMISSED Il THE BREACH OF FIDUCIARY DUTY CLAIM AGAINST MDP MUST BE DISMISSED CONCLUSION 10 2 of 16 INDEX NO. 030709/2023 FILED: ROCKLAND COUNTY CLERK 0471472023 01:50 PM NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 TABLE OF AUTHORITIES Page(s) Cases Angeli v. Barket, 211 A.D.3d 896 (2d. Dept. 2022) . Armentano v. Paraco Gas Corp., 90 A.D.3d 683 (2d Dept. 2011) Baron vy. Galasso, 83 A.D.3d 626 (2d Dept. 2011) 10 Baumann v. Hanover Community Bank, 100 A.D.3d 814 (2d Dept. 2012) 10 Black Car & Livery Ins., Inc. v. H&W Brokerage, Inc., 28 A.D.3d 595 (2d Dept. 2006) Blank vy. Noumair, 658 N.Y.S.2d 88 (2d Dept. 1997) Chiu v. Man Choi Chiu, 71 A.D.3d 621 (2d Dept. 2010) 6, 11 Community Bd. 7 of Borough of Manhattan v. Schaffer, 84 N.Y.2d 148 (1994) Dir. Door Corp. v. Marchese & Sallah, 127 A.D.2d 735 (2d Dept. 1987) .. Fredriksen v. Fredriksen, 30 A.D.3d 370 (2d Dept. 2006) 11 George A. Fuller Co. v. Alexander & Reed, Esqs., 760 F. Supp. 381 (S.D.N.Y. 1991) Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314 (2002) 11 Hohwald v. Farm Family Cas. Ins. Co., 155 A.D.3d 1009 (2d Dept. 2017)... Kim v. Hfz 11 Beach St., LLC, Index No. 657153/2020, 2021 N.Y.Misc. LEXIS 18040 (Sup. Ct. October 11, 2021). 10 Leon v. Martinez, 84 N.Y.2d 83 (1994) 11 i 3 of 16 INDEX NO. 030709/2023 FILED: ROCKLAND COUNTY CLERK 0471472023 01:50 PM NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 Muscara v. Lamberti, 133 A.D.2d 362 (2d Dept. 1987) .. 9, 10 Palmetto Partners, L.P. v. AJW Qualified Partners, LLC, 83 A.D.3d 804 (2d Dept. 2011) 6, 11 Parola, Gross & Marino, P.C. v. Susskind, 43 A.D.3d 1020 (2d Dept. 2007) Pierce Coach Line, Inc. v. Port Wash. Union Free Sch. Dist. 213 A.D.3d 959 (2d Dept. 2023) Reiss v. Financial Performance Corp., 97 N.Y.2d 195 (2001). Rosenberg v. Rosenberg, 180 A.D.2d 607 (1st Dept. 1992) 10 Stein v. Rand Constr. Co., 400 F.Supp 944 (S.D.N.Y. 1975) 10 Sunset Café, Inc. v. Mett’s Surf & Sports Corp. 103 A.D.3d 707 (2d Dept. 2013) Thomson v. Watchtower Bible & Tract Socy. of N.Y., Inc., 198 A.D.3d 996 (2d Dept. 2021) .. Tsinias Enters. Ltd. v. Taza Grocery, Inc., 172 A.D.3d 1271 (2d Dept. 2019) Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470 (2004) Woss, LLC v. 218 Eckford, LLC, 102 A.D.3d 860 (2d Dept. 2013) 10 Other Authorities CPLR § 3016(b) 5, 6, 10 CPLR § 3211 CPLR § 3211 (a)(1) CPLR § 3211(a)(7) 55 N.Y. Jur.2d, Escrows, §8 10 iii 4 of 16 INDEX NO. 030709/2023 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 Defendants Greenport/Hudson Associates, LLC (“GHA”) and Morgenstern DeVoesick, PLLC (“MDP”) (GHA and MDP shall be collectively referred to as the “Defendants”), by their undersigned attorneys, submit this Memorandum of Law in support of their motion pursuant to CPLR §§ 3211 and 3016(b) for an order dismissing Plaintiff KPL Green LLC’s claims against them. PRELIMINARY STATEMENT Plaintiff brings the instant complaint (the “Complaint” or “Compl.”)! against the Defendants seeking damages stemming from the purchase and sale of real property located at 300 Fairview Avenue, Hudson, NY (the “Property”). The pleading asserts a breach of contract claim against GHA, the seller of the Property, and a breach of fiduciary duty claim against MDP, GHA’s counsel for the transaction. For the reasons set forth below, the Complaint should be dismissed. First, Plaintiff cannot state a claim for breach of contract because, among other things, it fails to adequately allege its own performance under the contract or that GHA breached any of its contractual obligations. Moreover, the plain language of the agreement dooms this claim, as the contract bars Plaintiff from bringing this action. Second, Plaintiff cannot state a claim for breach of fiduciary duty against MDP for the simple reason that a fiduciary relationship never existed. It is black letter law that an escrow agent has no fiduciary duty to a depositor prior to (1) the execution of an escrow agreement or (2) the receipt of escrowed funds. Here, Plaintiff admits that neither of these conditions occurred; the Escrow Fund was never established — a salient fact that is both undisputed and corroborated by documentary evidence. Moreover, there are no allegations setting forth how MDP caused any harm, and Plaintiff ' While the Complaint is submitted as a “Verified” Complaint, Plaintiff failed to attach an executed verification page to its pleading. 93426323.1 5 of 16 INDEX NO. 030709/2023 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 offers no allegation of what its damages actually are beyond mere conclusory and speculative claims, which are entirely insufficient. The Complaint also fails to meet the heightened pleading requirements for a breach of fiduciary duty claim. For these reasons, and those developed below, the Court should dismiss the claims against the Defendants.” STATEMENT OF FACTS? On or about June 7, 2022, GHA, as “Seller,” entered into a certain Contract for the Purchase and Sale of Real Property (the ““Contract”’) with Marakai Realty Corp., as “Purchaser,” with regard to the purchase and sale of the Property. (Compl. 96, Ex. A.)* At the time the Contract was executed, GHA had entered into a lease with a potential new tenant, Crazy Beer World, Inc. (“Beer World”), which contained a liquor licensing contingency (“Liquor Contingency’). (/d. 98, Ex. B.) Plaintiff alleges that the Contract established that the purchase price for the Property was calculated to include Beer World’s final execution and removal of the Liquor Contingency. (Compl. 410.) The Contract also allegedly provided that if Beer World’s Liquor Contingency was not satisfied, cleared, removed, or waived at the time of closing, it would cause a loss of revenues to Plaintiff and a reduction in the Property’s Net Operating Income. (/d. §11.) As such, the Plaintiff and GHA agreed ? Submitted herewith is the Affirmation of Jeffrey Y. Spiegel, Esq., dated April 14, 2023 (“Spiegel Aff.”), the Affirmation ofF. Michael Ostrander, Esq., dated April 14, 2023 (“Ostrander Aff.”), the Affidavit of Susan Gordon, sworn to on April 11, 2023 (“Gordon Aff.’”), and the Affidavit of Jeffrey DeVoesick, Esq., sworn to on April 13, 2023 (“DeVoesick Aff.”) all with annexed exhibits. 3 Defendants do not concede that the allegations in the Complaint are accurate, but they are assumed to be true for the purpose of this motion. 4+ The Contract was thereafter amended by Addendum to Contract on three different occasions. (Gordon Aff. Ex. A) Pursuant to the first addendum the parties agreed that the Purchaser would take title under the entity name KPL Green LLC. (/d.) 93426323.1 6 of 16 INDEX NO. 030709/2023 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 that “the end date of several contingencies set forth in the Beer Lease (including, but not limited to, the Liquor Contingency) may exceed the anticipated Closing Date.” (/d. 413.) Pursuant to the Contract, the “Purchase Price” was “payable by Purchaser in cash or certified funds at Closing.” (Compl. Ex. A at §2.) The Contract further provided that “at Closing, $578,910.00 of the Purchase Price shall be escrowed (the “Escrow Fund”) with Seller’s attorneys as Escrow Agent pending Seller’s execution of the proposed [Beer Lease].” (Compl. 413.) Plaintiffalleges that the Escrow Fund was to be held by MDP until the Beer Lease was executed and all contingencies were satisfied, cleared, removed or waived, or the Beer Lease was cancelled. (/d. 414.) On October 5, 2022, GHA and Beer World agreed to extend the time for Beer World to clear the Liquor Contingency up to and including December 31, 2022. (dd. 415, Ex. C.) Contract paragraph 12 expressly states that: “All representations, warranties and agreements made by either party shall not survive Closing and transfer of title.’ (Compl. Ex. A at §12.) In pertinent part, Contract paragraph 14 provides that, in the event of a breach by the Seller, “the Purchaser shall be entitled to: A. Close the transaction contemplated by this Contract, thereby waiving such breach... or B. Sue Seller for performance of this Contract; or....” (Ud. at 414, emphasis added.) On or about November 8, 2022, the purchase and sale transaction contemplated by the Contract was closed, and title to the Property was accepted by Plaintiff. (Compl. 416.) In connection with that closing, Plaintiff and GHA executed a Real Estate Closing Statement (“Closing Statement”). (Gordon Aff., Ex. B.) Pursuant to the Closing Statement, GHA and Plaintiff agreed to credit Plaintiff $74,865.38 for the Beer Lease. (/d., Ex. B.) However, the Closing Statement made no provision for the $578,910.00 Escrow Fund. (Gordon Aff. §8, Ex. B.) 93426323.1 7 of 16 INDEX NO. 030709/2023 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 At Closing, title for the Property was transferred without Plaintiff ever having funded, created or arranged for the Escrow Fund. (Gordon Aff. 410, Ex. B; Compl. §30.) Accordingly, the $578,910 Escrow Fund was not created at the Closing, but Plaintiff accepted title to the Property and caused the sale proceeds to be disbursed in accordance with the Closing Statement. (Gordon Aff. 410.) The Closing Statement corroborates that the Escrow Fund was never funded nor created. (/d., Ex. B.) On December 30, 2022, counsel for Beer World, Albert Hrdlicka, emailed MDP requesting a further extension of the Liquor Contingency, stating that the liquor authority had not yet processed Beer World’s application. (Compl., Ex. F.) Hrdlicka further stated that “just in case the landlord doesn’t agree to the extension the tenant reserves their right to cancel the lease since they have not received the liquor license yet.” (/d.) Plaintiff claims that on January 3, 2023, three days after expiration of Beer World’s Liquor Contingency, Hrdlicka contacted counsel for Plaintiffrequesting the extension. (Compl. §23.) On January 18, counsel for Plaintiff emailed MDP requesting immediate proof of the Escrow Fund “in light of the recent developments with Beer World”. (Compl., Ex. E.) On January 24, 2023, Plaintiff allegedly sent notices to GHA, MDP and Beer World, acknowledging and accepting Beer World’s supposed termination of the Beer Lease.* (Compl. 424.) Plaintiff then sent notices to GHA and MDP that same day demanding disbursement of the Escrow Fund pursuant to the Contract. (/d. 428.) Plaintiff alleges that to date MDP, has failed to provide proofor disbursement of the Escrow Fund. (/d. 29.) The Complaint’s First Cause of Action purports to allege breach of contract against GHA and the Second Cause of Action purports to allege breach of fiduciary duty against MDP, both for failing 5 By way of its Verified Answer with Counterclaims (Doc. No. 19.) Beer World has specifically denied terminating the lease and seeks judgment declaring that the lease is in full force and effect. (Verified Answer with Counterclaims [Doc. No. 19] at {| 30-45.) 93426323.1 8 of 16 INDEX NO. 030709/2023 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 to hold $578,910 in escrow until the Liquor Contingency was either satisfied, cleared, waived or removed or the Beer Lease was terminated. Defendants now seek an Order dismissing the breach of contract and breach of fiduciary duty causes of action pursuant to CPLR § 3211(a)(1), based upon documentary evidence, and pursuant to CPLR § 3211(a)(7), for failure to state a valid cause of action. Defendants also seek dismissal of the breach of fiduciary duty cause of action pursuant to CPLR § 3016(b) for failure to plead such claim with particularity. LEGAL STANDARD Under CPLR §3211(a)(1), a court may grant a motion to dismiss where “the documentary evidence utterly refutes [a] plaintiff's factual allegations, conclusively establishing a defense as a matter of law[.]” Sunset Café, Inc. v. Mett’s Surf & Sports Corp., 103 A.D.3d 707, 709 (2d Dept. 2013). “Contracts are among the documents that qualify as documentary evidence.” Hohwald v. Farm Family Cas. Ins. Co., 155 A.D.3d 1009, 1010 (2d Dept. 2017). On a motion pursuant to CPLR 3211§(a)(7) to dismiss for failure to state a cause of action, the court will accept the facts as alleged in the complaint as true, afford plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory. Tsinias Enters. Ltd. v. Taza Grocery, Inc., 172 A.D.3d 1271, 1272 (2d Dept. 2019) (internal quotation marks omitted). “However, bare legal conclusions and factual claims which are flatly contradicted by the record are not presumed to be true.” Parola, Gross & Marino, P.C. v. Susskind, 43 A.D.3d 1020, 1021-1022 (2d Dept. 2007). A cause of action to recover damages for breach of fiduciary duty must be pleaded with the particularity required under CPLR §3016(b). Palmetto Partners, L.P. v. AJW Qualified Partners, 93426323.1 9 of 16 INDEX NO. 030709/2023 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 LLC, 83 A.D.3d 804, 808 (2d Dept. 2011); Chiu v. Man Choi Chiu, 71 A.D.3d 621, 623 (2d Dept. 2010). ARGUMENT I THE BREACH OF CONTRACT CLAIM AGAINST GHA MUST BE DISMISSED To properly plead a breach of contract claim, a plaintiff must allege the existence of a contract, the plaintiff's performance pursuant to the contract, the defendant’s breach of his or her contractual obligations, and damages resulting from the breach. See Pierce Coach Line, Inc. v. Port Wash. Union Free Sch. Dist., 213 A.D.3d 959 (2d Dept. 2023) (reversing denial of motion to dismiss); Angeli v. Barket, 211 A.D.3d 896 (2d. Dept. 2022) (affirming dismissal of breach of contract action). Here, the basis of Plaintiff's breach of contract claim stems from GHA’s purported breach for failing to hold $578,910 in escrow until the Liquor Contingency was either satisfied, cleared, waived or removed, or the Beer Lease was terminated. (Compl. 936, Ex. A.) For Plaintiffto bring a claim alleging that GHA failed to hold money in escrow, there must have been an Escrow Fund established by Purchaser at the Closing as required by the Contract. However, there was never any such Escrow Fund established, as Plaintiff failed to deliver the Escrow Fund to MDP or otherwise make arrangements for its creation or funding. (DeVoesick Aff. {§ 11-12; Gordon Aff. 410.) This is made clear in the Closing Statement, and further admitted by Plaintiff in its pleading. (Compl. §30; Gordon Aff., Ex. B.) Without the establishment of an Escrow Fund, Plaintiff cannot legitimately allege that GHA breached its contractual obligations for failing to hold such funds and for this reason, this claim must be dismissed. 93426323.1 6 10 of 16 INDEX NO. 030709/2023 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 The plain wording of the Contract warrants dismissal of Plaintiffs First Cause of Action. As held by the New York State Court of Appeals, “when parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms,” and this rule is applied with special force “in the context of real property transactions, where commercial certainty is a paramount concern, and where the instrument was negotiated between sophisticated, counseled business people negotiating at arm’s length.” Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475 (2004) (internal quotation marks, ellipses and citations omitted). Courts may not “by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing” Reiss v. Financial Performance Corp., 97 N.Y.2d 195, 199 (2001) (internal quotation marks and citation omitted). Here, the unequivocal language of the Contract demonstrates that any purported obligation that GHA may have had to Plaintiffto hold funds in escrow did not survive transfer of title to the Property. Specifically, Section 12 of the Contract provides that: “All representations, warranties and agreements made by either party shall not survive Closing and transfer of title.” (Compl., Ex. A at §12.) The Closing for the Property occurred on or about November 8, 2022, at which time “there was a transfer of ownership of the Property from GHA to [Plaintiff].” (/d. 16.) As the Closing took place, title to the Property had transferred and ownership rights were delivered, any claims Plaintiff might have had arising from the Contract were extinguished pursuant to Section 12. Similarly, Contract Section 14 provides, in pertinent part, that, in the event ofa breach by the Seller, “the Purchaser shall be entitled to: A. Close the transaction contemplated by this Contract, thereby waiving such breach... or B. Sue Seller for performance of this Contract; or...” (Compl. Ex. A at §14, emphasis added.) Pursuant to the plain language of the Contract, the Purchaser was not permitted to both close the transaction in the face of an alleged breach and sue GHA for that 7 93426323.1 11 of 16 INDEX NO. 030709/2023 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 04/14/2023 alleged breach. It is undisputed that the transaction contemplated by the Contract closed without the Escrow Fund having been created at Closing. (Compl. at 416, 30.) It cannot be legitimately disputed that Plaintiff received a $74,865.38 credit for the “Beer Lease” at Closing, but no Escrow Fund was created. (Gordon Aff. Ex. B.) The Purchaser having elected its remedy, accepted the $74,865.38 credit for the “Beer Lease” and closed the transaction, any purported breach by GHA relating to the Escrow Fund was waived by the express terms of the Contract and Plaintiff cannot maintain its claim under the plain and unambiguous terms ofthe Contract. Il. THE BREACH OF FIDUCIARY DUTY CLAIM AGAINST MDP MUST BE DISMISSED “