Carey & Associates v. Ernst

• Decision Date: 09 March 2006
• Docket Number: 6296.
• Citation: 810 N.Y.S.2d 475,2006 NY Slip Op 01715,27 A.D.3d 261
• Parties: CAREY & ASSOCIATES, Appellant, v. RUDI ERNST, JR., Respondent, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

27 A.D.3d 261

810 N.Y.S.2d 475

2006 NY Slip Op 01715

CAREY & ASSOCIATES, Appellant, v.RUDI ERNST, JR., Respondent, et al., Defendants.

6296.

Appellate Division of the Supreme Court of the State of New York, First Department.

March 9, 2006.

Order, Supreme Court, New York County (Leland DeGrasse, J.), entered on or about March 26, 2004, which, to the extent appealed from as limited by the briefs, granted defendants' cross motion to the extent of dismissing the fourth cause of action against defendant Rudi Ernst, Jr., unanimously affirmed, without costs.

In December 1997, plaintiff law firm was retained by defendants Rudolf and Angelika Ernst(the Ernsts) to represent Rudolf in an extradition proceeding brought by the Swiss government.The matter was litigated in United States District Court for the Southern District of New York.The retainer agreement was signed by the Ernsts, obligating both of them to pay plaintiff's fees.The agreement also was signed by the Ernsts' son, Rudi, Jr., as "Depositor," to reflect Rudi, Jr.'s deposit of $50,000 into an advance account on his parents' behalf.The retainer agreement authorized the firm to draw on that advance account to cover any unpaid legal bills, and further authorized it to seek to withdraw as counsel if its bills were not paid.

In June 1998, the Ernsts stopped paying the firm's bills.The firm contacted Rudi, Jr., who earned a substantial salary as an ABC Television executive, and asked for payment.According to the firm's principal, Michael Carey, Esq., Rudi, Jr. was told that if payment on the outstanding bills was not forthcoming, the firm would move to withdraw as counsel for Rudolf.Carey states that Rudi, Jr. responded that he wanted the firm to continue as counsel until after Rudolf's extradition hearing and that he would obtain the necessary funds by mortgaging a property he owned in Virginia.Rudi, Jr. admits that the firm asked him to pay the bills, but denies that he promised to pay them.

The firm represented Rudolf for approximately two more months, until either the extradition occurred or the firm's motion to withdraw was granted.At that time, the Ernsts had paid the firm $154,765.64 of the $227,039.78 billed under the agreement.Angelika testified at deposition that she and her husband failed to pay the balance owing because they"ran out of money."

The firm commenced the instant action for breach of the retainer agreement, seeking the unpaid balance plus collection costs.The first three causes of action sought recovery from the Ernsts on theories of breach of contract, quantum meruit and account stated.The fourth cause of action alleged that Rudi, Jr. breached his oral promise to Carey to pay the sums due under the retainer agreement.Defendants submitted a single answer denying any liability under the agreement and counterclaimed for breach of fiduciary duty and fraud with respect to the quality of the firm's representation.

The firm moved for summary judgment and dismissal of the defenses and counterclaims and defendants opposed and cross-moved to dismiss the quantum meruit (second) and oral promise (fourth) causes of action.Supreme Court granted the firm summary judgment on its first and third causes of action, but granted defendants' cross motion to the extent of dismissing the fourth cause of action against Rudi, Jr., finding his oral promise to pay his parents' debt unenforceable under the statute of frauds.

On appeal, the firm argues that because Rudi, Jr. made an independent promise to pay his parents' debt with the intent that he become primarily liable, the oral promise is enforceable under a recognized exception to the statute of frauds.We disagree.An oral promise to guarantee the debt of another is unenforceable pursuant to General Obligations Law § 5-701 (a)(2).However, under a long-standing exception to the statute, the promise need not be in writing if it is (1) supported by new consideration moving to the promisor and beneficial to him, and (2) the promisor has become in the intention of the parties a principal debtor primarily liable (Martin Roofing v Goldstein,60 NY2d 262, 265-267[1983], cert...