Lakshmi Grocery & Gas, Inc. v. GRJH, Inc.

• Court: New York Supreme Court — Appellate Division
• Writing for the Court: GARRY, J.
• Citation: Lakshmi Grocery & Gas, Inc. v. GRJH, Inc., 138 A.D.3d 1290, 30 N.Y.S.3d 743, 2016 N.Y. Slip Op. 2891 (N.Y. App. Div. 2016)
• Decision Date: 14 April 2016
• Docket Number: 521567.
• Parties: LAKSHMI GROCERY & GAS, INC., Respondent, v. GRJH, INC., Defendant and Third–Party Plaintiff–Appellant; Ravinder Sharma et al., Third–Party Defendants–Respondents.

138 A.D.3d 1290

30 N.Y.S.3d 743

2016 N.Y. Slip Op. 02891

LAKSHMI GROCERY & GAS, INC., Respondent,

v.GRJH, INC., Defendant and Third–Party Plaintiff–Appellant;

Ravinder Sharma et al., Third–Party Defendants–Respondents.

521567.

Supreme Court, Appellate Division, Third Department, New York.

April 14, 2016.

E. Stewart Jones Hacker Murphy, Troy (John F. Harwick of counsel), for defendant and third-party plaintiff-appellant.

Hug Law PLLC, Troy (Matthew C. Hug of counsel), for respondent and third-party defendants-respondents.

Before: PETERS, P.J., GARRY, ROSE and DEVINE, JJ.

GARRY, J.

Appeal from a judgment of the Supreme Court (Muller, J.), entered January 8, 2015 in Warren County, upon a decision of the court in favor of plaintiff.

Plaintiff is a corporation owned by third-party defendants, Ravinder Sharma and Yosho Lakshmi. In the summer of 2010, Sharma contacted James Metz, an officer of defendant with whom Sharma had previously had successful business dealings, to inquire about commercial opportunities in New York.

Metz responded that a gas station and convenience store owned by defendant was available for lease. After discussions with Metz and defendant's president, Alicia Metz, plaintiff agreed to take over the store and made certain payments to defendant. Third–party defendants signed a combined lease and contractor agreement but, almost immediately after taking control of the store, discovered records indicating that the store's sales were lower than plaintiff had been led to believe. After attempting unsuccessfully to modify the contract terms, third-party defendants vacated the store and requested a refund of their initial payments, which defendant refused to pay.

Plaintiff brought the instant action for rescission of the contract based upon fraudulent inducement. Defendant joined issue and commenced a third-party breach of contract action against third-party defendants. During the subsequent bench trial, plaintiff moved to conform the pleadings to the proof and pursue rescission based upon an additional theory of mutual mistake. Supreme Court granted the motion, found that a mutual mistake had occurred, awarded damages to plaintiff, rescinded the contract and dismissed the third-party action. Defendant appeals.

Supreme Court did not err in granting plaintiff's motion to conform the pleadings to the proof. Such a motion may be made at any time and should be liberally granted “unless doing so results in prejudice to the nonmoving party” (Matter of Mogil v. Building Essentials, Inc.,

129 A.D.3d 1378, 1380, 12 N.Y.S.3d 346 [2015] ; see CPLR 3025[c] ; Murray v. City of New York, 43 N.Y.2d 400, 405, 401 N.Y.S.2d 773, 372 N.E.2d 560 [1977] ; Lewis & Clarkson v. October Mtn. Broadcasting Co., 131 A.D.2d 15, 17, 520 N.Y.S.2d 258 [1987] ). Plaintiff's complaint alleged that defendant acted intentionally in misrepresenting the store's sales as being greater than they actually were. At trial, Sharma testified that before he signed the contractor agreement, he repeatedly asked for the store's inside sales figures—that is, sales of such items as groceries, coffee and cigarettes, which he testified are a critical factor in a convenience store's profitability. Early in September 2010, Alicia Metz responded with an email stating that the store's sales for August 2010 totaled approximately $22,000. Several days after taking over the store, however, Sharma discovered sales records revealing that the true figure for August 2010 was approximately $15,500, an amount that he testified was too low to permit the successful operation of the store. He stated that he would not have signed the contract if he had known the correct sales figures. Alicia Metz testified that the figures she provided to Sharma actually represented the store's inside sales for August 2009 and were provided as “ representative sales” because the complete figures for August 2010 were not yet available. She stated that she “mismarked” the figures as representing August 2010 sales, acting in error and good faith.

The burden was upon defendant, as the party opposing plaintiff's motion, to establish that it was “hindered in the preparation of [its] case or ... prevented from taking some measure in support of [its] position” (Loomis v. Civetta Corinno Constr. Corp., 54 N.Y.2d 18, 23, 444 N.Y.S.2d 571, 429 N.E.2d 90 [1981] ; accord Kimso Apts., LLC v. Gandhi, 24 N.Y.3d 403, 411, 998 N.Y.S.2d 740, 23 N.E.3d 1008 [2014] ). That burden cannot be met when the difference between the original pleading and the evidence results from “proof admitted at the instance or with the acquiescence of [the opposing] party” (Murray v. City of New York, 43 N.Y.2d at 405, 401 N.Y.S.2d 773, 372 N.E.2d 560 ). Here, the proof upon which plaintiff's motion was based was the testimony of defendant's president that she acted mistakenly in providing the wrong sales figures to Sharma. Given this testimony, defendant cannot have been surprised or unduly prejudiced by plaintiff's assertion of the theory of mutual mistake; thus, leave to conform the pleadings to the proof was properly granted (see Kimso Apts., LLC v. Gandhi, 24 N.Y.3d at 414, 998 N.Y.S.2d 740, 23 N.E.3d 1008 ; Murray v. City of New York, 43 N.Y.2d at 406, 401 N.Y.S.2d 773, 372 N.E.2d 560 ; Bay Plaza Estates v. New York Univ., 257 A.D.2d 472, 473, 683 N.Y.S.2d 538 [1999] ; Weisberg v. My Mill Holding Corp., 205 A.D.2d 756, 757, 613 N.Y.S.2d 680 [1994] ).

Supreme Court did not err in rescinding the contract on the basis of mutual mistake. A contract may be rescinded when it is shown by clear and convincing proof that a mutual mistake existed when the contract was executed that was so substantial that there was no “true meeting of the parties' minds” (Carney v. Carozza, 16 A.D.3d 867, 868–869, 792 N.Y.S.2d 642 [2005] ; see Matter of Gould v. Board of Educ. of...