Preview
FILED: ROCKLAND COUNTY CLERK 12/29/2023 04:42 PM INDEX NO. 030709/2023
NYSCEF DOC. NO. 75 RECEIVED NYSCEF: 12/29/2023
EXHIBIT J
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF ROCKLAND
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KPL GREEN LLC, Index No. 030709/2023
Plaintiff,
-against-
GREENPORT/HUDSON ASSOCIATES LLC,
MORGENSTERN DeVOESICK, PLLC, as Escrow
Agent, and CRAZY BEER WORLD, INC.,
Defendants.
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MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS’ JOINT MOTION TO
DISMISS THE PLAINTIFF’S VERIFIED COMPLAINT
Respectfully submitted,
Brian K. Condon, Esq.
CONDON PAXOS PLLC
55 Old Turnpike Road, Suite 502
Nanuet, New York 10954
(845) 627-8500
Brian@CondonPaxos.com
Attorney for Plaintiff, KPL Green LLC
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PRELIMINARY STATEMENT
The Plaintiff’s predecessor corporation, Maraki Realty Corp., through extensive
negotiations with Defendant, Greenport/Hudson Associates, LLC (“GHA”) negotiated the
purchase of a single-story commercial shopping plaza with fifteen (15) commercial tenants
located at 300 Fairview Avenue, Hudson, New York (the “Premises”). The agreed upon purchase
price for the Premises was Five Million Nine Hundred Thousand ($5,900,000.00) Dollars (the
“Purchase Price”).
On or about June 7, 2022, a Contract of Sale was executed between Maraki Realty Corp.
(or a corporation to be formed), the Plaintiff’s predecessor, and GHA1 (the “Contract of Sale”).
According to Paragraph 3 of the Contract of Sale, the Purchaser was required to deposit two (2)
payments of Two Hundred Fifty Thousand ($250,000.00) Dollars totaling $500,000.00 dollars,
into Defendant, Morgenstern DeVoesick PLLC’s (“MDP”) escrow account, as Escrow Agent.
According to Paragraph 2 of the Contract of Sale, at the closing of the Premises
$578,910.00 of the Purchase Price was required to be escrowed by Seller’s attorney from the sale
proceeds until the lease with a prospective commercial tenant Crazy Beer World, Inc. (the “Beer
Lease”) was fully executed (“Escrow Fund”). Emphasis Added. The Beer Lease contained a
liquor license contingency which granted Crazy Beer World one hundred and twenty (120) days
to transfer their liquor license or terminate the Contract of Sale. The Purchase Price was
calculated on the premise that Beer World would take tenancy at the Premises, with the
understanding that the contingency period could go beyond the closing date. As such, the parties
1
Maraki Realty Corp. created the Plaintiff entity and transferred its purchase rights under
the Contract of Sale to KPL Green LLC. As such, the Contract of Sale was later amended to
reflect Plaintiff, KPL Green LLC, as purchaser in lieu of Maraki Realty Corp.
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aggressively negotiations, and thereafter, explicitly included in Paragraph 2 of the Contract of
Sale, (1) the value that was attributed to the Purchase Price as a result of the Beer Lease tenancy
and (2) the respective obligations of Seller and MDP, as Escrow Agent, to the Escrow Fund.
After the execution of the Contract of Sale, on June 7, 2022, MDP, as Escrow Agent, sent
Plaintiff’s attorney their escrow account information and wiring instructions. On that same day,
Plaintiff’s attorney, in accordance with the Contract of Sale, wired an initial $250,000.00 dollars
into MDP’s escrow account for GHA’s benefit. Thereafter, on September 9, 2022, Plaintiff’s
attorney wired an additional $250,000.00 dollars into MDP’s escrow account for GHA’s benefit.
Pursuant to Paragraph 2 of the Contract of Sale, at the closing, which took place on
November 8, 2022, MDP, as Escrow Agent, was to maintain an Escrow Fund until the Beer
lease was fully executed and all contingencies were satisfied. Emphasis Added.
At the November 8, 2022 closing, the remaining proceeds to be wired to MDP’s escrow
account totaled $92,273.91, but in accordance with the Contract of Sale and on agreement
between the parties, $15,000 was delayed pending Seller’s production of tenant’s estoppel
certificates. As such, on November 14, 2022, Plaintiff’s attorney wired the remaining
$77,273.91 into MDP’s escrow account for GHA’s benefit.
The Beer Lease contingency was extended, by GHA, past the Closing Date up to and
through the end of December 2022. As of January 18, 2023, the Beer Lease contingencies were
not satisfied. As such, Plaintiff, through counsel, asked MDP for proof that the required Escrow
Fund was still being maintained by MDP. MDP refused to provide proof that MDP still
possessed the Escrow Fund, and therefore, it is believed that the escrowed funds in MDP’s
escrow account were improperly released from escrow by MDP to GHA.
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MDP after admittedly providing the account number for their escrow account, accepting
the escrowed funds into its escrow account, and holding the escrow funds MDP is now
advancing a flawed argument 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, coincidentally,
after releasing the escrow funds without proper authorization from Plaintiff to do so and after
shirking its own fiduciary duties and obligations. Emphasis Added.
Where a defendant has submitted evidentiary material in support of a motion to dismiss a
complaint pursuant to CPLR 3211 (a) (7) and the motion has not been converted to one for
summary judgment, pursuant to CPLR 3211 [c], the criterion is whether the [plaintiff] has a
cause of action, not whether he [or she] has stated one, and, unless it has been shown that a
material fact as claimed by the [plaintiff] to be one is not a fact at all and unless it can be said
that no significant dispute exists regarding it . . . dismissal should not eventuate. Defendant’s
Memorandum of Law does not convert the instant motion to summary judgment therefore the
question before this Honorable Court is whether a cause of action has been established within the
four corners of the complaint and the documentary evidence as recognized by New York Courts.
The answer to the question is unequivocally “yes.” Even, assuming arguendo, that this Honorable
Court were to recognize that this motion was converted into a motion for summary judgment the
question before this Honorable Court would be whether a significant and material dispute exists
regarding the complaint - where the answer is also “yes.” In such a case, the law established and
cited by the Defendants in their own motion papers supports that a dismissal should not
eventuate.
For the foregoing reasons, those set forth in the Verified Complaint, those espoused
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below, and those contained in the accompanying Affidavit of Lena Paxos, Esq., the Defendants’
Joint Motion to Dismiss the Verified Complaint should be denied in its entirety.
COUNTER STATEMENT OF FACTS
I refer this Honorable Court to the Counter-Statement of Facts as set forth in the
accompanying Affidavit of Lena E. Paxos, Esq.
LEGAL STANDARD
A pre-answer motion for dismissal based upon documentary evidence should only be
granted when “the documentary evidence utterly refutes plaintiff’s factual allegations,
conclusively establishing a defense as a matter of law.” Goshen v. Mutual Life Ins. Co. of N.Y.,
98 N.Y.2d. 314, 746 N.Y.S.2d 858 (2002). When a party fails to utterly refute the allegations in
the Plaintiff’s complaint, the pre-answer motion to dismiss must be denied. Greenapple v.
Capital One, N.A., 92 A.D.3d 548, 939 N.Y.S.2d 351 (1st Dept. 2012).
In order for evidence submitted in support of a CPLR 3211(a)(1) motion to qualify as
“documentary evidence,” it must be “unambiguous, authentic, and undeniable.” Attias v.
Costiera, 120 A.D.3d 1281 [2nd Dept. 2014]. At the same time, “[n]either affidavits, deposition
testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211
(a)(1).” Id.
ARGUMENT
A. Defendants have failed to provide unambiguous, authentic, and undeniable
documentary evidence warranting dismissal pursuant to CPLR 3211(a)(1)
Defendants in their own Memorandum of Law cite to Woss, LLC v. 218 Eckford, LLC,
102 A.D.3d 860 [2nd Dept. 2013] where the Second Department established that , “where a
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defendant has submitted evidentiary material in support of a motion to dismiss a complaint
pursuant to CPLR 3211 (a) (7) and the motion has not been converted to one for summary
judgment (CPLR 3211), ‘the criterion is whether the [plaintiff] has a cause of action.’” Id. As
discussed, in Attias, in order for evidence submitted to this Honorable Court to be considered
documentary evidence under CPLR 3211(a)(1) it must be unambiguous, authentic and
undeniable such as, “[J]udicial records, as well as documents reflecting out-of-court transactions
such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially
undeniable, would qualify as documentary evidence in the proper case.” Attias v. Costiera, 120
A.D.3d 1281 [2nd Dept. 2014]. The Second Department, at the same time, found that “[n]either
affidavits, deposition testimony, nor letters are considered documentary evidence within the
intendment of CPLR 3211 (a)(1).” Id.
As such, in Attias, “the affidavits submitted by the defendants, their attorney's
affirmation, and the correspondence that was submitted in support of the defendants' motion did
not constitute documentary evidence within the meaning of CPLR 3211(a)(1)” and further found
that it “should not have been relied upon by the Supreme Court in directing the dismissal of the
complaint pursuant to CPLR 3211(a)(1).” Id. The Court went on to find that “the only
documentary evidence submitted in support of the defendants’ motion was the contract of sale
and rider to the contract of sale.” Id. Emphasis Added. As established in Attias, the affidavits
submitted by defendants here, along with their their attorney’s affirmation and the remaining
correspondence do not constitute documentary evidence and should not be relied upon by this
Honorable Court when considering Defendants’ herein application. The only remaining evidence
which possibly constitute documentary evidence is the Contract of Sale and amendments thereto.
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Those documetns do “not ‘utterly refute’ the plaintiff's allegations or ‘conclusively establish a
defense as a matter of law.’” Id.
B. Plaintiff’s Breach of Fiduciary Duty Claim Against
Morgenstern DeVoesick PLLC is Valid
In its motion papers, the Defendant, MDP, feebly shirks its fiduciary responsibilities as
escrow agent by disingenuously asserting that: (1) there was no escrow agreement; (2) there was
no escrow fund established and (3) no deposit of escrowed funds. In essence, Defendant MDP
wants this Honorable Court to pretend (1) there was no contract of sale, that (2) there were no
funds exchanged and, therefore (3) that there was no transaction. These arguments are not only
specious, but they are belied by the facts and actions of MDP.
Defendant MDP, as the drafter of the Contract of Sale, included therein no less than
three (3) detailed paragraphs appointing and identifying themselves as “Escrow Agent”,
naming and identifying the “Escrow Funds” and detailing, with great specificity, the roles and
fiduciary obligations of MDP as Escrow Agent.
For example, Paragraph 3 of the Contract of Sale states as follows:
3. DEPOSIT. Upon execution of this Contract by both parties, Purchaser shall
deposit with Morgenstern DeVoesick PLLC, as escrow agent the sum of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)(“Initial Deposit”).
Upon expiration of the Due Diligence Period, the Purchaser shall deposit an
additional Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00)(“Additional Deposit”)(the Initial Deposit and the Additional
Deposit collectively the “Deposit”). The Deposit shall be returned to Purchaser in
the event this Contract is terminated in accordance with the provision of this
Contract. (Emphasis added).
Further, Paragraph 2 of the Contract of Sale states as follows:
2. PURCHASE PRICE. The purchase price shall be Five Million Nine Hundred
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Thousand Dollars ($5,900,000)(“Purchase Price”) payable by Purchaser in cash or
certified funds at Closing.
At Closing, $578,910.00 of the Purchase Price shall be escrowed (the “Escrow
Fund”) with Seller’s attorneys as Escrow Agent (Escrow Fund”) with Seller’s
attorneys as Escrow Agent pending Seller’s execution of the proposed lease
(“Beer Lease”) with Crazy Beer World, Inc. d/b/a Beer Universe (“Beer
Universe”). Purchaser reserves its right to seek an adjustment of the Escrow
Fund amount prior to the expiration of the Due Diligence Period in order to
conduct an independent evaluation of the net operating income (“NOI”) both with
and without the Beer Lease (Emphasis Added).
Seller represents that the NOI of $536,290, set forth below, is based upon the final
execution and removal of contingencies of the Beer Lease regarding the 17,000
+/- square feet space which the current tenant, ALDI, is currently occupying but is
expected to vacate prior to the delivery date set forth in the Beer Lease.
Seller further represents that if the Beer Lease is not fully executed without
contingencies, the loss of revenue will cause a reduction in the Premises’ NOI by
$52,621, as is set forth below.
With Tenant Without Tenant DELTA
NOI $536,290 $483,669 $52,621
Cap Rate 9.08966% 9.08966% 0%
Price $5,900,000 $5,321,090 $578,910
The respective parties have agreed that as the end date of several
contingencies set forth in the Beer Lease (including, but not limited to, the
liquor license contingencies) may exceed the anticipated Closing Date, the
Escrow Agent for the Premises shall continue to hold the Escrow Fund until
such date as the Beer Lease is executed and all contingencies are cleared,
satisfied, waived or removed or the Beer Lease is canceled (Emphasis
Added).
Within three (3) days of the Beer Lease not being executed, Seller shall
provide Purchaser’s counsel with written notice of the same and, upon
Purchaser’s receipt of said notice, the full amount of the Escrow Fund shall
be remitted to Purchaser’s counsel. If the Escrow Fund is dispersed to
Purchaser as a result of Beer Universe’s failure to execute the Beer Lease, or
satisfy the contingencies set forth therein, the Purchaser and/or its affiliates
covenant and agree that they shall have no right to seek any further
indemnification or compensation from Seller in excess of the Escrow Fund
(Emphasis Added)
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If the contingencies are satisfied, cleared, waived, and /or removed and the
Beer Lease is executed, then the full amount of the Escrow Fund shall be
transferred to the Seller, upon three (3) days written notice to Purchaser’s
counsel, less the monthly rent payments, as set forth in the Beer Lease, which
shall be released to Purchaser in amounts equal to the monthly rent and the
four (4) month construction period (the “Foregiveness Period”). However,
should the Beer Lease not be fully executed on or before the Closing Date,
Seller shall also authorize the release of said monthly rent payments from the
Closing Date up to and through the Foregiveness Period. It being understood
and agreed between Seller and Purchaser that once rent payments are made
pursuant to the Beer Lease, no further monthly payments from the Escrow
Fund shall be tendered to Purchaser and the remaining Escrow Fund shall
be released to Seller upon three (3) days written notice to Purchaser
(Emphasis Added).
And, finally, Paragraph 11(M) of the Contract of Sale states as follows:
11. REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller
represents and warrants as follows:
* * *
M. Seller covenants and warrants that if the Beer Lease with Beer Universe is not
fully executed with all contingencies for liquor licensing either satisfied, cleared,
waived, or removed at the time of Closing then all furniture, fixtures and
equipment shall be removed and said vacant unit shall be delivered in a broom
cleaned condition; provided however, if Beer Universe has time remaining to
satisfy liquor licensing contingencies and is still pursuing the satisfaction of such
contingencies, Seller shall deposit Thirty Thousand Dollars ($30,000) with the
Escrow Agent to pay for the removal of such furniture, fixtures and
equipment in the event that unit is not leased to Beer Universe or any other tenant
and such other tenant does not take possession of the vacant unit with the
furniture, fixtures and equipment. The foregoing $30,000 escrow shall be
released to Seller upon the earlier of the following: (a) possession of the
leased premises by Beer Universe; (b) a new tenant executing a lease for the
Premises with the furniture, fixtures and equipment remaining; or (c) such
premises being delivered to Buyer in a broom clean condition with all
furniture, fixtures and equipment removed (Emphasis Added).
All of the representations and warranties of the Seller herein contained shall be
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true and correct as of the date of this Contract, and as of the Closing as if
expressly made on and as of the Closing Date.
As discussed, supra, MDP drafted the Contract of Sale, defined the Escrow Fund and
identified itself as the Escrow Agent for this Purchase. MDP further set forth, in great detail, its
fiduciary obligations as Escrow Agent with respect to the Escrowed Funds should the Beer Lease
terminate or fail to satisfy its contingencies.
Thereafter, on June 7, 2022, MDP made the affirmative act, as Escrow Agent, to provide
Plaintiff with its escrow wiring instructions. On that same day, Plaintiff wired to MDP, as
Escrow Agent, and MDP accepted the initial, contractually obligated, $250,000.00 dollar
payment into its escrow account. Again, on September 9, 2022, Plaintiff wired to MDP, as
Escrow Agent, and MDP accepted the additional, contractually obligated, $250,000.00 dollar
payment into its escrow account. On November 14, 2022, Plaintiff wired to MDP, as Escrow
Agent, and MDP accepted an additional $77,273.91 payment into its escrow account. Paragraphs
2 and 11(M) of the Contract of Sale, respectively, unequivocally detail MDP’s fiduciary
responsibilities with respect to the monies escrowed by MDP.
It shocks the conscience that MDP, as the drafter of the Contract of Sale, who named
themselves as Escrow Agent, defined their own responsibilities therein, provided their escrow
wiring instructions to Plaintiff and accepted monies into their escrow account are now, after
violating the provisions of the document they drafted, arguing that there was no “valid escrow
agreement.”
In support of this incredulous allegation, MDP cites to George A. Fuller Co. v. Alexander
& Reed, Esqs., 760 F.Supp. 381 (S.D.N.Y. 1991), a federal case which was heard before the
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Southern District of New York. In George A. Fuller Co., the Court states that, “Under New York
law, for an instrument to act as a valid escrow agreement it must contain: (a) an agreement as to
the subject matter and delivery of the instrument; (b) a third party depositary; (c) delivery of the
instrument to a third party conditioned upon the performance of some act on the happening of
some event; and (d) relinquishment by the grantor”.
First, we agree and, as is set forth above, that the Contract of Sale which identifies the
Escrow Agent and its obligations satisfies “an agreement as to the subject matter and delivery of
the instrument.” Id. MDP contends that Plaintiff cannot unilaterally impose the obligations of an
escrow agent as it relates to the Plaintiff, yet to the extent the Court were to accept that such
obligation was unilaterally imposed, such imposition lies at the feet of MDP as the drafter of the
Contract of Sale who identified itself as the Escrow Agent. Equally as incredulous is the
argument that MDP’s lack of signature as Escrow Agent on the Contract of Sale in some way
absolves MDP of its fiduciary obligations particularly because MDP drafted the Contract of Sale,
identified itself as the Escrow Agent, self-imposed the escrow obligations on itself, reviewed the
same with its client GHA, and under its counsel had GHA sign the very terms identifying the
same, and then affirmatively accepted provided escrow information and, thereafter, accepted the
escrowed monies, as Escrow Agent, into its escrow account.
Next, MDP’s escrow account where the monies were deposited satisfies the third party
depositary prong articulated in George A. Fuller Co. Further, the fact that the Contract of Sale
was delivered to MDP and affirmatively, plainly and directly conditions the Escrow Fund on the
Liquor License Contingency being satisfied and the Beer Lease being executed satisfies the
delivery of the instrument to a third party conditioned upon the performance of some act on the
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happening of some event prong as articulate in George A. Fuller Co. And, finally, the
requirement that Defendant provide written notice to Plaintiff before releasing any escrowed
funds to the Defendant satisfies the relinquishment by the grantor prong as articulated in George
A. Fuller Co.
MDP makes another thinly veiled attempt to distance itself as Escrow Agent by claiming
that “an escrow agent has no fiduciary duty to a depositor prior to receiving a depositor’s
money.” Yet, the facts clearly demonstrate that Plaintiff deposited, and MDP accepted, into
MDP’s escrow account over $575,000.00 in escrow funds. Escrow funds which undeniably,
pursuant to the Contract of Sale drafted by MDP, requires MDP to maintain in the Escrow Fund
as Escrow Agent. These monies were, in fact, the Escrow monies created and established by the
parties pursuant to the Contract of Sale. And, MDP, as the escrow agent, owed the parties to the
transaction a fiduciary duty. Talansky v. Schulman, 2 A.D.3d 355, 770 N.Y.S.2d 48 (1st Dept.
2003). Therefore, as the agent, and as a fiduciary, MDP had “a strict obligation to protect the
rights of [the] parties” for whom he or she acts as escrowee.” Grinblat v. Taubenblat, 107 A.D.2d
735, 484 N.Y.S. 2d 96 (2nd Dept. 1985). The law is clear, as Escrow Agent, under to the terms of
the contract, it was MDP’s fiduciary obligation to both the Seller and Purchaser to maintain those
funds as per the explicit terms set forth in the Contract. Emphasis Added.
An escrow agent not only has a contractual duty to follow the escrow agreement, but
additionally becomes a trustee of anyone with a beneficial interest in the trust. Farago v. Burke,
262 N.Y. 229, 186 N.E. 683 (1933); Oppenheim v. Simon, 57 A.D.2d. 1006, 394 N.Y.S.2d 500
(3rd Dept. 1977). Additionally, comes the “duty not to deliver the escrow to anyone except upon
strict compliance with the conditions imposed” (Farago v. Burke, supra at 233). Thus, an escrow
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agent, like MDP here, can be held liable for breach of the escrow agreement and breach of
fiduciary duty as escrowee (see, Grinblat v. Taubenblat, 107 A.D.2d 735, 484 N.Y.S.2d 96
(1933).
It is well settled that, in the event of a dispute, like here, the escrow funds may not be
released until the conditions of the escrow agreement are fully performed and it is “clear that no
factual issues or viable claims exist under the closely scrutinized terms of the escrow agreement”
(E.S.P. Adj. Servs. V. ASTA Group, 125 A.D.2d 849, 509 N.Y.S.2d 955 (3rd Dept. 1986); see,
Matter of Kaplan v. Shaffer, 112 A.D.2d 369, 491 N.Y.S.2d 821 (2nd Dept. 1985).
Pursuant to the Contract of Sale, a legally recognized piece of documentary evidence,
MDP was not allowed to release the escrow funds if the Beer Lease was not executed and all the
contingencies satisfied. Plaintiff’s Verified Complaint clearly sets forth a Declaratory Judgment
cause of action against Defendant, Crazy Beer World, Inc. for failing to execute the lease and
satisfy its contingencies, which, pursuant to the Contract of Sale between the Plaintiff and GHA,
must have been satisfied before ever triggering the release of the Escrow Fund to either
Defendant. Furthermore, pursuant to Paragraph 11(M), the Escrow Agent was to provide written
notice to Plaintiff before releasing any escrowed funds to the Defendant GHA. As per the
Affidavit of Lena E. Paxos, Esq., no such written notice was ever provided by MDP, as Escrow
Agent, to Plaintiff nor its counsel prior to its release of the Escrow Fund to GHA.
Upon MDP’s realization of its unfortunate error placing themselves, by their own actions,
in an untenable position, it was forced the advance its herein frivolous, weak and meritless
argument that Plaintiff’s breach of fiduciary duty cause of action is not pled with specificity. The
same was further apparent by MDP’s total failure to acknowledge Plaintiff’s request for proof of
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the Escrow Fund.
Simply put, MDP had a fiduciary obligation not to release the monies it accepted into its
Escrow Fund, as Escrow Agent, to the Defendant GHA until the Beer Lease was fully executed,
all contingencies were satisfied and proper written notice was given to Plaintiff.
C. Plaintiff’s Breach of Contract Claim Against
Greenport/Hudson Associates, LLC is Valid
Equally without merit is Defendant GHA’s claim that there is no sustainable breach of
contract claim against GHA. In support of its argument, GHA advances that “there must have
been an Escrow Fund established by Purchaser at the Closing as required by the Contract.” See
Defendants’ Memorandum of Law, Page 6. Notably, Defendants do not cite to any language in
the Contract of Sale in support of its contention because no such language, burden nor
responsibility was created nor written into the Contract of Sale. It does not state that it was the
Purchaser’s responsibility to “establish the Escrow Fund.” Conversely, it clearly states that “[a]t
Closing, $578,910 of the Purchase Price shall be escrowed (the “Escrow Fund”) with Seller’s
attorney as Escrow Agent pending Seller’s execution of the proposed lease (“Beer Lease”) with
Crazy Beer World, Inc. d/b/a Beer Universe (“Beer Universe”).”
Prior to the closing, Plaintiff had already deposited $500,000.00 dollars of its own monies
into the escrow account of MDP, as Escrow Agent. At the closing, held on November 8, 2022,
an additional $77,273.91 of Plaintiff’s monies were deposited into the escrow account of MDP.
Once the monies were deposited into MDP’s escrow account, which made up part of the
Purchase Price, both the Defendant GHA and Defendant MDP, as Escrow Agent, were
contractually obligated to see that those contractual terms were met. The Plaintiff performed its
obligations under the Contract of Sale by remitting the $5.9 million dollar purchase price to the
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Defendant GHA on the good faith belief that Defendants would, in turn, honor and uphold their
contractual obligations. To date, neither Defendant has provided any proof nor documentary
evidence to support its establishment of an Escrow Fund. As such, upon information and belief,
none of the monies remitted by Plaintiff were maintained in the Escrow Fund and definitely not
until the conditions of the Beer Lease were satisfied and/or terminated.
It is Plaintiff’s contention, as set forth in the Verified Complaint, that since Crazy Beer
World did not properly and/or timely execute the lease and satisfy all of its contingencies, the
Plaintiff was entitled to “disbursement of the Escrow Fund in the Contact of Sale.” See
Plaintiff’s Verified Complaint at Paragraph 52. There is no amendment, modification nor any
written document signed by the parties modifying the terms of the Escrow Fund or agreeing to
release of the Escrow Fund to GHA. Simply put, without an amendment, modification, court
order or judgment declaring Defendant GHA’s rights to the Escrow Fund, GHA had a contractual
obligation to the Plaintiff to maintain the Escrow Fund and reduce the purchase price, by way of
the Escrow Fund, if certain contingencies were not met. Plaintiff maintains that those
contingencies were not met, that Plaintiff is entitled to the Escrow amount and, further, that GHA
never maintained the Escrow Fund in order to pay the Plaintiff the reduction in Purchase Price in
direction violation of the Contract of Sale.
GHA further argues that the Escrow Fund, which was to be established at the Closing, did
not survive the transfer of title to the Property as all representations and warranties shall not
survive the closing when the Contract of Sale, drafted by Defendant, states, in relevant part, “The
respective parties have agreed that as the end date of several contingencies set forth in the Beer
Lease (including, but not limited to, the liquor license contingencies) may exceed the anticipated
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Closing Date, the Escrow Agent for the Premises shall continue to hold the Escrow Fund until
such date as the Beer Lease is executed and all contingencies are cleared, satisfied, waived or
removed or the Beer Lease is canceled.” Emphasis Added. Further, it is well settled New York
Law, that, “any ambiguity which might exist” in a written agreement “must be construed against”
the “drafter of the agreement.” Bernstein v. Sosnowitz, 198 A.D.2d 204.
GHA’s reference to Plaintiff’s credit of $74,865.38, in accordance with the
Contract of Sale and Amendments thereto, are without merit. The credit was in accordance with
the Contract of Sale, on agreement of the parties and in tandem with the establishment of the
Escrow Fund. More specifically outlined in Paragraph 2 of the Contract of Sale, “However,
should the Beer Lease not be fully executed on or before the Closing Date, Seller shall also
authorize the release of said monthly rent payments from the Closing Date up to and through the
Forgiveness Period.” See the Contract of Sale, Paragraph 2. Defendants assertion that Plaintiff in
some way elected a remedy is unsupported by, and in fact directly contradicts, the plain language
found in the Contract of Sale and is, therefore, wholly without merit.
As per the Contract of Sale, the prevailing party in any dispute shall be entitled to recover
the cost of having to make and/or defend said dispute. The paucity of Defendants’ arguments
coupled with Defendants’ frivolous and unsupportable allegations, warrants this Honorable
Court’s awarding Plaintiff the costs incurred in having to defend this frivolous instant Joint
Motion to Dismiss.
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CONCLUSION
For the reasons set forth above, the Affidavit of Lena E. Paxos, Esq. and the exhibits set
forth therein, Defendants’ Joint Motion to Dismiss the Plaintiff’s Verified Complaint should be
denied in its entirety together with such other and further relief as to this Court seems just and
proper.
Dated: Nanuet, New York
June 23, 2023 CONDON PAXOS PLLC
By:_____________________
Brian K. Condon
Attorneys for Plaintiff
55 Old Turnpike Road, Suite 502
Nanuet, New York 10954
Tel.: (845) 627-8500
E-Mail: Brian@CondonPaxos.com
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Word Count Certification
The total number of words in the foregoing brief, memorandum, affirmation or affidavit
exclusive of point headings and footnotes and exclusive of the caption, table of contents, table of
authorities, proof of service, certificate of compliance, or any authorized addendum containing
statutes, rules, regulations, etc. is 4,647.
The document complies with the applicable word count limit and is based on the word
count of the word-processing system used to prepare the document.
Dated: June 23, 2023 CONDON PAXOS PLLC
Preview
FILED: ROCKLAND COUNTY CLERK 12/29/2023 04:42 PM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 RECEIVED NYSCEF: 12/29/2023 EXHIBIT J FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF ROCKLAND --------------------------------------------------------------------X KPL GREEN LLC, Index No. 030709/2023 Plaintiff, -against- GREENPORT/HUDSON ASSOCIATES LLC, MORGENSTERN DeVOESICK, PLLC, as Escrow Agent, and CRAZY BEER WORLD, INC., Defendants. --------------------------------------------------------------------X MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS’ JOINT MOTION TO DISMISS THE PLAINTIFF’S VERIFIED COMPLAINT Respectfully submitted, Brian K. Condon, Esq. CONDON PAXOS PLLC 55 Old Turnpike Road, Suite 502 Nanuet, New York 10954 (845) 627-8500 Brian@CondonPaxos.com Attorney for Plaintiff, KPL Green LLC 1 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 PRELIMINARY STATEMENT The Plaintiff’s predecessor corporation, Maraki Realty Corp., through extensive negotiations with Defendant, Greenport/Hudson Associates, LLC (“GHA”) negotiated the purchase of a single-story commercial shopping plaza with fifteen (15) commercial tenants located at 300 Fairview Avenue, Hudson, New York (the “Premises”). The agreed upon purchase price for the Premises was Five Million Nine Hundred Thousand ($5,900,000.00) Dollars (the “Purchase Price”). On or about June 7, 2022, a Contract of Sale was executed between Maraki Realty Corp. (or a corporation to be formed), the Plaintiff’s predecessor, and GHA1 (the “Contract of Sale”). According to Paragraph 3 of the Contract of Sale, the Purchaser was required to deposit two (2) payments of Two Hundred Fifty Thousand ($250,000.00) Dollars totaling $500,000.00 dollars, into Defendant, Morgenstern DeVoesick PLLC’s (“MDP”) escrow account, as Escrow Agent. According to Paragraph 2 of the Contract of Sale, at the closing of the Premises $578,910.00 of the Purchase Price was required to be escrowed by Seller’s attorney from the sale proceeds until the lease with a prospective commercial tenant Crazy Beer World, Inc. (the “Beer Lease”) was fully executed (“Escrow Fund”). Emphasis Added. The Beer Lease contained a liquor license contingency which granted Crazy Beer World one hundred and twenty (120) days to transfer their liquor license or terminate the Contract of Sale. The Purchase Price was calculated on the premise that Beer World would take tenancy at the Premises, with the understanding that the contingency period could go beyond the closing date. As such, the parties 1 Maraki Realty Corp. created the Plaintiff entity and transferred its purchase rights under the Contract of Sale to KPL Green LLC. As such, the Contract of Sale was later amended to reflect Plaintiff, KPL Green LLC, as purchaser in lieu of Maraki Realty Corp. -1- 2 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 aggressively negotiations, and thereafter, explicitly included in Paragraph 2 of the Contract of Sale, (1) the value that was attributed to the Purchase Price as a result of the Beer Lease tenancy and (2) the respective obligations of Seller and MDP, as Escrow Agent, to the Escrow Fund. After the execution of the Contract of Sale, on June 7, 2022, MDP, as Escrow Agent, sent Plaintiff’s attorney their escrow account information and wiring instructions. On that same day, Plaintiff’s attorney, in accordance with the Contract of Sale, wired an initial $250,000.00 dollars into MDP’s escrow account for GHA’s benefit. Thereafter, on September 9, 2022, Plaintiff’s attorney wired an additional $250,000.00 dollars into MDP’s escrow account for GHA’s benefit. Pursuant to Paragraph 2 of the Contract of Sale, at the closing, which took place on November 8, 2022, MDP, as Escrow Agent, was to maintain an Escrow Fund until the Beer lease was fully executed and all contingencies were satisfied. Emphasis Added. At the November 8, 2022 closing, the remaining proceeds to be wired to MDP’s escrow account totaled $92,273.91, but in accordance with the Contract of Sale and on agreement between the parties, $15,000 was delayed pending Seller’s production of tenant’s estoppel certificates. As such, on November 14, 2022, Plaintiff’s attorney wired the remaining $77,273.91 into MDP’s escrow account for GHA’s benefit. The Beer Lease contingency was extended, by GHA, past the Closing Date up to and through the end of December 2022. As of January 18, 2023, the Beer Lease contingencies were not satisfied. As such, Plaintiff, through counsel, asked MDP for proof that the required Escrow Fund was still being maintained by MDP. MDP refused to provide proof that MDP still possessed the Escrow Fund, and therefore, it is believed that the escrowed funds in MDP’s escrow account were improperly released from escrow by MDP to GHA. -2- 3 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 MDP after admittedly providing the account number for their escrow account, accepting the escrowed funds into its escrow account, and holding the escrow funds MDP is now advancing a flawed argument 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, coincidentally, after releasing the escrow funds without proper authorization from Plaintiff to do so and after shirking its own fiduciary duties and obligations. Emphasis Added. Where a defendant has submitted evidentiary material in support of a motion to dismiss a complaint pursuant to CPLR 3211 (a) (7) and the motion has not been converted to one for summary judgment, pursuant to CPLR 3211 [c], the criterion is whether the [plaintiff] has a cause of action, not whether he [or she] has stated one, and, unless it has been shown that a material fact as claimed by the [plaintiff] to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it . . . dismissal should not eventuate. Defendant’s Memorandum of Law does not convert the instant motion to summary judgment therefore the question before this Honorable Court is whether a cause of action has been established within the four corners of the complaint and the documentary evidence as recognized by New York Courts. The answer to the question is unequivocally “yes.” Even, assuming arguendo, that this Honorable Court were to recognize that this motion was converted into a motion for summary judgment the question before this Honorable Court would be whether a significant and material dispute exists regarding the complaint - where the answer is also “yes.” In such a case, the law established and cited by the Defendants in their own motion papers supports that a dismissal should not eventuate. For the foregoing reasons, those set forth in the Verified Complaint, those espoused -3- 4 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 below, and those contained in the accompanying Affidavit of Lena Paxos, Esq., the Defendants’ Joint Motion to Dismiss the Verified Complaint should be denied in its entirety. COUNTER STATEMENT OF FACTS I refer this Honorable Court to the Counter-Statement of Facts as set forth in the accompanying Affidavit of Lena E. Paxos, Esq. LEGAL STANDARD A pre-answer motion for dismissal based upon documentary evidence should only be granted when “the documentary evidence utterly refutes plaintiff’s factual allegations, conclusively establishing a defense as a matter of law.” Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d. 314, 746 N.Y.S.2d 858 (2002). When a party fails to utterly refute the allegations in the Plaintiff’s complaint, the pre-answer motion to dismiss must be denied. Greenapple v. Capital One, N.A., 92 A.D.3d 548, 939 N.Y.S.2d 351 (1st Dept. 2012). In order for evidence submitted in support of a CPLR 3211(a)(1) motion to qualify as “documentary evidence,” it must be “unambiguous, authentic, and undeniable.” Attias v. Costiera, 120 A.D.3d 1281 [2nd Dept. 2014]. At the same time, “[n]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211 (a)(1).” Id. ARGUMENT A. Defendants have failed to provide unambiguous, authentic, and undeniable documentary evidence warranting dismissal pursuant to CPLR 3211(a)(1) Defendants in their own Memorandum of Law cite to Woss, LLC v. 218 Eckford, LLC, 102 A.D.3d 860 [2nd Dept. 2013] where the Second Department established that , “where a -4- 5 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 defendant has submitted evidentiary material in support of a motion to dismiss a complaint pursuant to CPLR 3211 (a) (7) and the motion has not been converted to one for summary judgment (CPLR 3211), ‘the criterion is whether the [plaintiff] has a cause of action.’” Id. As discussed, in Attias, in order for evidence submitted to this Honorable Court to be considered documentary evidence under CPLR 3211(a)(1) it must be unambiguous, authentic and undeniable such as, “[J]udicial records, as well as documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable, would qualify as documentary evidence in the proper case.” Attias v. Costiera, 120 A.D.3d 1281 [2nd Dept. 2014]. The Second Department, at the same time, found that “[n]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211 (a)(1).” Id. As such, in Attias, “the affidavits submitted by the defendants, their attorney's affirmation, and the correspondence that was submitted in support of the defendants' motion did not constitute documentary evidence within the meaning of CPLR 3211(a)(1)” and further found that it “should not have been relied upon by the Supreme Court in directing the dismissal of the complaint pursuant to CPLR 3211(a)(1).” Id. The Court went on to find that “the only documentary evidence submitted in support of the defendants’ motion was the contract of sale and rider to the contract of sale.” Id. Emphasis Added. As established in Attias, the affidavits submitted by defendants here, along with their their attorney’s affirmation and the remaining correspondence do not constitute documentary evidence and should not be relied upon by this Honorable Court when considering Defendants’ herein application. The only remaining evidence which possibly constitute documentary evidence is the Contract of Sale and amendments thereto. -5- 6 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 Those documetns do “not ‘utterly refute’ the plaintiff's allegations or ‘conclusively establish a defense as a matter of law.’” Id. B. Plaintiff’s Breach of Fiduciary Duty Claim Against Morgenstern DeVoesick PLLC is Valid In its motion papers, the Defendant, MDP, feebly shirks its fiduciary responsibilities as escrow agent by disingenuously asserting that: (1) there was no escrow agreement; (2) there was no escrow fund established and (3) no deposit of escrowed funds. In essence, Defendant MDP wants this Honorable Court to pretend (1) there was no contract of sale, that (2) there were no funds exchanged and, therefore (3) that there was no transaction. These arguments are not only specious, but they are belied by the facts and actions of MDP. Defendant MDP, as the drafter of the Contract of Sale, included therein no less than three (3) detailed paragraphs appointing and identifying themselves as “Escrow Agent”, naming and identifying the “Escrow Funds” and detailing, with great specificity, the roles and fiduciary obligations of MDP as Escrow Agent. For example, Paragraph 3 of the Contract of Sale states as follows: 3. DEPOSIT. Upon execution of this Contract by both parties, Purchaser shall deposit with Morgenstern DeVoesick PLLC, as escrow agent the sum of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)(“Initial Deposit”). Upon expiration of the Due Diligence Period, the Purchaser shall deposit an additional Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)(“Additional Deposit”)(the Initial Deposit and the Additional Deposit collectively the “Deposit”). The Deposit shall be returned to Purchaser in the event this Contract is terminated in accordance with the provision of this Contract. (Emphasis added). Further, Paragraph 2 of the Contract of Sale states as follows: 2. PURCHASE PRICE. The purchase price shall be Five Million Nine Hundred -6- 7 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 Thousand Dollars ($5,900,000)(“Purchase Price”) payable by Purchaser in cash or certified funds at Closing. At Closing, $578,910.00 of the Purchase Price shall be escrowed (the “Escrow Fund”) with Seller’s attorneys as Escrow Agent (Escrow Fund”) with Seller’s attorneys as Escrow Agent pending Seller’s execution of the proposed lease (“Beer Lease”) with Crazy Beer World, Inc. d/b/a Beer Universe (“Beer Universe”). Purchaser reserves its right to seek an adjustment of the Escrow Fund amount prior to the expiration of the Due Diligence Period in order to conduct an independent evaluation of the net operating income (“NOI”) both with and without the Beer Lease (Emphasis Added). Seller represents that the NOI of $536,290, set forth below, is based upon the final execution and removal of contingencies of the Beer Lease regarding the 17,000 +/- square feet space which the current tenant, ALDI, is currently occupying but is expected to vacate prior to the delivery date set forth in the Beer Lease. Seller further represents that if the Beer Lease is not fully executed without contingencies, the loss of revenue will cause a reduction in the Premises’ NOI by $52,621, as is set forth below. With Tenant Without Tenant DELTA NOI $536,290 $483,669 $52,621 Cap Rate 9.08966% 9.08966% 0% Price $5,900,000 $5,321,090 $578,910 The respective parties have agreed that as the end date of several contingencies set forth in the Beer Lease (including, but not limited to, the liquor license contingencies) may exceed the anticipated Closing Date, the Escrow Agent for the Premises shall continue to hold the Escrow Fund until such date as the Beer Lease is executed and all contingencies are cleared, satisfied, waived or removed or the Beer Lease is canceled (Emphasis Added). Within three (3) days of the Beer Lease not being executed, Seller shall provide Purchaser’s counsel with written notice of the same and, upon Purchaser’s receipt of said notice, the full amount of the Escrow Fund shall be remitted to Purchaser’s counsel. If the Escrow Fund is dispersed to Purchaser as a result of Beer Universe’s failure to execute the Beer Lease, or satisfy the contingencies set forth therein, the Purchaser and/or its affiliates covenant and agree that they shall have no right to seek any further indemnification or compensation from Seller in excess of the Escrow Fund (Emphasis Added) -7- 8 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 If the contingencies are satisfied, cleared, waived, and /or removed and the Beer Lease is executed, then the full amount of the Escrow Fund shall be transferred to the Seller, upon three (3) days written notice to Purchaser’s counsel, less the monthly rent payments, as set forth in the Beer Lease, which shall be released to Purchaser in amounts equal to the monthly rent and the four (4) month construction period (the “Foregiveness Period”). However, should the Beer Lease not be fully executed on or before the Closing Date, Seller shall also authorize the release of said monthly rent payments from the Closing Date up to and through the Foregiveness Period. It being understood and agreed between Seller and Purchaser that once rent payments are made pursuant to the Beer Lease, no further monthly payments from the Escrow Fund shall be tendered to Purchaser and the remaining Escrow Fund shall be released to Seller upon three (3) days written notice to Purchaser (Emphasis Added). And, finally, Paragraph 11(M) of the Contract of Sale states as follows: 11. REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller represents and warrants as follows: * * * M. Seller covenants and warrants that if the Beer Lease with Beer Universe is not fully executed with all contingencies for liquor licensing either satisfied, cleared, waived, or removed at the time of Closing then all furniture, fixtures and equipment shall be removed and said vacant unit shall be delivered in a broom cleaned condition; provided however, if Beer Universe has time remaining to satisfy liquor licensing contingencies and is still pursuing the satisfaction of such contingencies, Seller shall deposit Thirty Thousand Dollars ($30,000) with the Escrow Agent to pay for the removal of such furniture, fixtures and equipment in the event that unit is not leased to Beer Universe or any other tenant and such other tenant does not take possession of the vacant unit with the furniture, fixtures and equipment. The foregoing $30,000 escrow shall be released to Seller upon the earlier of the following: (a) possession of the leased premises by Beer Universe; (b) a new tenant executing a lease for the Premises with the furniture, fixtures and equipment remaining; or (c) such premises being delivered to Buyer in a broom clean condition with all furniture, fixtures and equipment removed (Emphasis Added). All of the representations and warranties of the Seller herein contained shall be -8- 9 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 true and correct as of the date of this Contract, and as of the Closing as if expressly made on and as of the Closing Date. As discussed, supra, MDP drafted the Contract of Sale, defined the Escrow Fund and identified itself as the Escrow Agent for this Purchase. MDP further set forth, in great detail, its fiduciary obligations as Escrow Agent with respect to the Escrowed Funds should the Beer Lease terminate or fail to satisfy its contingencies. Thereafter, on June 7, 2022, MDP made the affirmative act, as Escrow Agent, to provide Plaintiff with its escrow wiring instructions. On that same day, Plaintiff wired to MDP, as Escrow Agent, and MDP accepted the initial, contractually obligated, $250,000.00 dollar payment into its escrow account. Again, on September 9, 2022, Plaintiff wired to MDP, as Escrow Agent, and MDP accepted the additional, contractually obligated, $250,000.00 dollar payment into its escrow account. On November 14, 2022, Plaintiff wired to MDP, as Escrow Agent, and MDP accepted an additional $77,273.91 payment into its escrow account. Paragraphs 2 and 11(M) of the Contract of Sale, respectively, unequivocally detail MDP’s fiduciary responsibilities with respect to the monies escrowed by MDP. It shocks the conscience that MDP, as the drafter of the Contract of Sale, who named themselves as Escrow Agent, defined their own responsibilities therein, provided their escrow wiring instructions to Plaintiff and accepted monies into their escrow account are now, after violating the provisions of the document they drafted, arguing that there was no “valid escrow agreement.” In support of this incredulous allegation, MDP cites to George A. Fuller Co. v. Alexander & Reed, Esqs., 760 F.Supp. 381 (S.D.N.Y. 1991), a federal case which was heard before the -9- 10 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 Southern District of New York. In George A. Fuller Co., the Court states that, “Under New York law, for an instrument to act as a valid escrow agreement it must contain: (a) an agreement as to the subject matter and delivery of the instrument; (b) a third party depositary; (c) delivery of the instrument to a third party conditioned upon the performance of some act on the happening of some event; and (d) relinquishment by the grantor”. First, we agree and, as is set forth above, that the Contract of Sale which identifies the Escrow Agent and its obligations satisfies “an agreement as to the subject matter and delivery of the instrument.” Id. MDP contends that Plaintiff cannot unilaterally impose the obligations of an escrow agent as it relates to the Plaintiff, yet to the extent the Court were to accept that such obligation was unilaterally imposed, such imposition lies at the feet of MDP as the drafter of the Contract of Sale who identified itself as the Escrow Agent. Equally as incredulous is the argument that MDP’s lack of signature as Escrow Agent on the Contract of Sale in some way absolves MDP of its fiduciary obligations particularly because MDP drafted the Contract of Sale, identified itself as the Escrow Agent, self-imposed the escrow obligations on itself, reviewed the same with its client GHA, and under its counsel had GHA sign the very terms identifying the same, and then affirmatively accepted provided escrow information and, thereafter, accepted the escrowed monies, as Escrow Agent, into its escrow account. Next, MDP’s escrow account where the monies were deposited satisfies the third party depositary prong articulated in George A. Fuller Co. Further, the fact that the Contract of Sale was delivered to MDP and affirmatively, plainly and directly conditions the Escrow Fund on the Liquor License Contingency being satisfied and the Beer Lease being executed satisfies the delivery of the instrument to a third party conditioned upon the performance of some act on the -10- 11 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 happening of some event prong as articulate in George A. Fuller Co. And, finally, the requirement that Defendant provide written notice to Plaintiff before releasing any escrowed funds to the Defendant satisfies the relinquishment by the grantor prong as articulated in George A. Fuller Co. MDP makes another thinly veiled attempt to distance itself as Escrow Agent by claiming that “an escrow agent has no fiduciary duty to a depositor prior to receiving a depositor’s money.” Yet, the facts clearly demonstrate that Plaintiff deposited, and MDP accepted, into MDP’s escrow account over $575,000.00 in escrow funds. Escrow funds which undeniably, pursuant to the Contract of Sale drafted by MDP, requires MDP to maintain in the Escrow Fund as Escrow Agent. These monies were, in fact, the Escrow monies created and established by the parties pursuant to the Contract of Sale. And, MDP, as the escrow agent, owed the parties to the transaction a fiduciary duty. Talansky v. Schulman, 2 A.D.3d 355, 770 N.Y.S.2d 48 (1st Dept. 2003). Therefore, as the agent, and as a fiduciary, MDP had “a strict obligation to protect the rights of [the] parties” for whom he or she acts as escrowee.” Grinblat v. Taubenblat, 107 A.D.2d 735, 484 N.Y.S. 2d 96 (2nd Dept. 1985). The law is clear, as Escrow Agent, under to the terms of the contract, it was MDP’s fiduciary obligation to both the Seller and Purchaser to maintain those funds as per the explicit terms set forth in the Contract. Emphasis Added. An escrow agent not only has a contractual duty to follow the escrow agreement, but additionally becomes a trustee of anyone with a beneficial interest in the trust. Farago v. Burke, 262 N.Y. 229, 186 N.E. 683 (1933); Oppenheim v. Simon, 57 A.D.2d. 1006, 394 N.Y.S.2d 500 (3rd Dept. 1977). Additionally, comes the “duty not to deliver the escrow to anyone except upon strict compliance with the conditions imposed” (Farago v. Burke, supra at 233). Thus, an escrow -11- 12 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 agent, like MDP here, can be held liable for breach of the escrow agreement and breach of fiduciary duty as escrowee (see, Grinblat v. Taubenblat, 107 A.D.2d 735, 484 N.Y.S.2d 96 (1933). It is well settled that, in the event of a dispute, like here, the escrow funds may not be released until the conditions of the escrow agreement are fully performed and it is “clear that no factual issues or viable claims exist under the closely scrutinized terms of the escrow agreement” (E.S.P. Adj. Servs. V. ASTA Group, 125 A.D.2d 849, 509 N.Y.S.2d 955 (3rd Dept. 1986); see, Matter of Kaplan v. Shaffer, 112 A.D.2d 369, 491 N.Y.S.2d 821 (2nd Dept. 1985). Pursuant to the Contract of Sale, a legally recognized piece of documentary evidence, MDP was not allowed to release the escrow funds if the Beer Lease was not executed and all the contingencies satisfied. Plaintiff’s Verified Complaint clearly sets forth a Declaratory Judgment cause of action against Defendant, Crazy Beer World, Inc. for failing to execute the lease and satisfy its contingencies, which, pursuant to the Contract of Sale between the Plaintiff and GHA, must have been satisfied before ever triggering the release of the Escrow Fund to either Defendant. Furthermore, pursuant to Paragraph 11(M), the Escrow Agent was to provide written notice to Plaintiff before releasing any escrowed funds to the Defendant GHA. As per the Affidavit of Lena E. Paxos, Esq., no such written notice was ever provided by MDP, as Escrow Agent, to Plaintiff nor its counsel prior to its release of the Escrow Fund to GHA. Upon MDP’s realization of its unfortunate error placing themselves, by their own actions, in an untenable position, it was forced the advance its herein frivolous, weak and meritless argument that Plaintiff’s breach of fiduciary duty cause of action is not pled with specificity. The same was further apparent by MDP’s total failure to acknowledge Plaintiff’s request for proof of -12- 13 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 the Escrow Fund. Simply put, MDP had a fiduciary obligation not to release the monies it accepted into its Escrow Fund, as Escrow Agent, to the Defendant GHA until the Beer Lease was fully executed, all contingencies were satisfied and proper written notice was given to Plaintiff. C. Plaintiff’s Breach of Contract Claim Against Greenport/Hudson Associates, LLC is Valid Equally without merit is Defendant GHA’s claim that there is no sustainable breach of contract claim against GHA. In support of its argument, GHA advances that “there must have been an Escrow Fund established by Purchaser at the Closing as required by the Contract.” See Defendants’ Memorandum of Law, Page 6. Notably, Defendants do not cite to any language in the Contract of Sale in support of its contention because no such language, burden nor responsibility was created nor written into the Contract of Sale. It does not state that it was the Purchaser’s responsibility to “establish the Escrow Fund.” Conversely, it clearly states that “[a]t Closing, $578,910 of the Purchase Price shall be escrowed (the “Escrow Fund”) with Seller’s attorney as Escrow Agent pending Seller’s execution of the proposed lease (“Beer Lease”) with Crazy Beer World, Inc. d/b/a Beer Universe (“Beer Universe”).” Prior to the closing, Plaintiff had already deposited $500,000.00 dollars of its own monies into the escrow account of MDP, as Escrow Agent. At the closing, held on November 8, 2022, an additional $77,273.91 of Plaintiff’s monies were deposited into the escrow account of MDP. Once the monies were deposited into MDP’s escrow account, which made up part of the Purchase Price, both the Defendant GHA and Defendant MDP, as Escrow Agent, were contractually obligated to see that those contractual terms were met. The Plaintiff performed its obligations under the Contract of Sale by remitting the $5.9 million dollar purchase price to the -13- 14 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 Defendant GHA on the good faith belief that Defendants would, in turn, honor and uphold their contractual obligations. To date, neither Defendant has provided any proof nor documentary evidence to support its establishment of an Escrow Fund. As such, upon information and belief, none of the monies remitted by Plaintiff were maintained in the Escrow Fund and definitely not until the conditions of the Beer Lease were satisfied and/or terminated. It is Plaintiff’s contention, as set forth in the Verified Complaint, that since Crazy Beer World did not properly and/or timely execute the lease and satisfy all of its contingencies, the Plaintiff was entitled to “disbursement of the Escrow Fund in the Contact of Sale.” See Plaintiff’s Verified Complaint at Paragraph 52. There is no amendment, modification nor any written document signed by the parties modifying the terms of the Escrow Fund or agreeing to release of the Escrow Fund to GHA. Simply put, without an amendment, modification, court order or judgment declaring Defendant GHA’s rights to the Escrow Fund, GHA had a contractual obligation to the Plaintiff to maintain the Escrow Fund and reduce the purchase price, by way of the Escrow Fund, if certain contingencies were not met. Plaintiff maintains that those contingencies were not met, that Plaintiff is entitled to the Escrow amount and, further, that GHA never maintained the Escrow Fund in order to pay the Plaintiff the reduction in Purchase Price in direction violation of the Contract of Sale. GHA further argues that the Escrow Fund, which was to be established at the Closing, did not survive the transfer of title to the Property as all representations and warranties shall not survive the closing when the Contract of Sale, drafted by Defendant, states, in relevant part, “The respective parties have agreed that as the end date of several contingencies set forth in the Beer Lease (including, but not limited to, the liquor license contingencies) may exceed the anticipated -14- 15 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 Closing Date, the Escrow Agent for the Premises shall continue to hold the Escrow Fund until such date as the Beer Lease is executed and all contingencies are cleared, satisfied, waived or removed or the Beer Lease is canceled.” Emphasis Added. Further, it is well settled New York Law, that, “any ambiguity which might exist” in a written agreement “must be construed against” the “drafter of the agreement.” Bernstein v. Sosnowitz, 198 A.D.2d 204. GHA’s reference to Plaintiff’s credit of $74,865.38, in accordance with the Contract of Sale and Amendments thereto, are without merit. The credit was in accordance with the Contract of Sale, on agreement of the parties and in tandem with the establishment of the Escrow Fund. More specifically outlined in Paragraph 2 of the Contract of Sale, “However, should the Beer Lease not be fully executed on or before the Closing Date, Seller shall also authorize the release of said monthly rent payments from the Closing Date up to and through the Forgiveness Period.” See the Contract of Sale, Paragraph 2. Defendants assertion that Plaintiff in some way elected a remedy is unsupported by, and in fact directly contradicts, the plain language found in the Contract of Sale and is, therefore, wholly without merit. As per the Contract of Sale, the prevailing party in any dispute shall be entitled to recover the cost of having to make and/or defend said dispute. The paucity of Defendants’ arguments coupled with Defendants’ frivolous and unsupportable allegations, warrants this Honorable Court’s awarding Plaintiff the costs incurred in having to defend this frivolous instant Joint Motion to Dismiss. -15- 16 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 CONCLUSION For the reasons set forth above, the Affidavit of Lena E. Paxos, Esq. and the exhibits set forth therein, Defendants’ Joint Motion to Dismiss the Plaintiff’s Verified Complaint should be denied in its entirety together with such other and further relief as to this Court seems just and proper. Dated: Nanuet, New York June 23, 2023 CONDON PAXOS PLLC By:_____________________ Brian K. Condon Attorneys for Plaintiff 55 Old Turnpike Road, Suite 502 Nanuet, New York 10954 Tel.: (845) 627-8500 E-Mail: Brian@CondonPaxos.com -16- 17 of 18 FILED: ROCKLAND COUNTY CLERK 12/29/2023 06/24/2023 04:42 12:12 PM AM INDEX NO. 030709/2023 NYSCEF DOC. NO. 75 36 RECEIVED NYSCEF: 12/29/2023 06/24/2023 Word Count Certification The total number of words in the foregoing brief, memorandum, affirmation or affidavit exclusive of point headings and footnotes and exclusive of the caption, table of contents, table of authorities, proof of service, certificate of compliance, or any authorized addendum containing statutes, rules, regulations, etc. is 4,647. The document complies with the applicable word count limit and is based on the word count of the word-processing system used to prepare the document. Dated: June 23, 2023 CONDON PAXOS PLLC