Gargiulo v. Oppenheim

• Decision Date: 11 October 1983
• Citation: 95 A.D.2d 484,467 N.Y.S.2d 276
• Parties: Vincent GARGIULO, et al., Respondents, v. Murray L. OPPENHEIM, et al., Defendants, Harry Licht, Appellant (and a third-party title).
• Court: New York Supreme Court — Appellate Division

Page 276

467 N.Y.S.2d 276

95 A.D.2d 484

Vincent GARGIULO, et al., Respondents, v. Murray L. OPPENHEIM, et al., Defendants Harry Licht, Appellant (and a third-party title).

Supreme Court, Appellate Division Second Department.

Oct. 11, 1983.

Shaw, Goldman, Licitra, Levine & Weinberg, P.C., Garden City (Richard Eisenberg, Garden City, of counsel), for appellant.

Irving L. Schuh, Great Neck (Marshall D. Sweetbaum, Plainview, of counsel), for respondents.

Before THOMPSON, J.P., and BRACKEN, RUBIN and BOYERS, JJ.

PER CURIAM.

We are asked upon this appeal to determine whether the plaintiffs' claim against defendant Licht for the return of the sum of $112,000, predicated upon a claim of unjust enrichment, is barred by reason of the application of the doctrine of claim preclusion (res judicata ), and, if it is not so barred, whether plaintiffs are entitled to recover upon such claim.

Hendway Associates, Inc. (hereinafter Hendway) and Waverly-M Associates Inc. (hereinafter Waverly) are New York corporations, the shares of which were initially held as follows: one third by Sam Getz and Gary Joseph, one third by Jeffrey Podell and Bella Weiner and one third by Vincent Gargiulo and Peter Argento, the plaintiffs herein. Hendway and Waverly were organized for the corporate purpose of constructing day-care centers in the City of New York and held the fee titles to the land on which the centers were to be built.

Getz and Joseph also owned and operated a construction contracting concern known as Getz Contractors, Inc., which was employed by Waverly and Hendway to construct two day-care centers, one in Brooklyn and one in Staten Island, which facilities, it was planned, were to be leased to the Department of Social Services of the City of New York. Some time prior to June 20, 1973, the contractor encountered financial difficulty and abandoned construction of the day-care centers. As a result, Waverly and Hendway were faced with building loan mortgage foreclosures. Messrs. Gargiulo and Argento were also affected in that they had contributed their personal funds and had, inter alia, pledged their own personal credit for the building loan mortgages and other obligations in connection with the construction of the day-care centers. Additionally, commitments obtained by Waverly and Hendway for permanent mortgage loans, to be made upon completion of the day-care centers, were in jeopardy of being lost by cancellation thereof.

In an attempt to find a way out of their predicament, Getz and Joseph decided to offer Podell and Weiner $50,000 for their shares of stock in the two corporations, Hendway and Waverly, and they told defendant Licht that he could purchase these shares for $112,000 and earn 17% interest upon his investment. There is no evidence that Licht, who paid the $112,000 to Getz and Joseph, had any knowledge of what arrangements Getz and Joseph made to obtain the shares of stock in question. In fact, they paid $85,000 to Podell and Weiner for their one-third of the issued and outstanding corporate shares of Waverly and Hendway, and the remaining $27,000 was used to reduce the indebtedness of Getz Contractors to its creditors. Sam Getz died during the pendency of the litigation which resulted from these and other transactions.

In an apparent effort to save the day-care centers from foreclosure and to salvage their investments, Gargiulo and Argento entered into a written agreement dated June 20, 1973 with Gary Joseph, Waverly and Hendway. The agreement, which acknowledged that Joseph had owned two-thirds of the stock of the two executing corporations, and that he had previously sold one-third to Licht, required that Joseph return his remaining one-third to the corporations and "cause" the shares owned by Licht to also be returned, "with the intent and purpose that Peter [Argento] shall be the sole stockholder in Waverly and Hendway". In return for the Licht stock, the corporations were to pay Licht a total purchase price of $112,000 upon the closing of certain permanent mortgages and the sale of the day-care centers. The payment was guaranteed by Gargiulo and Argento, with certain contingency exceptions which would have permitted them and the corporations to return Licht's stock and pay him nothing. In addition, Joseph was to resign as an officer and director of the corporations. As security for their guarantee of payment to Licht, Gargiulo and Argento pledged certain authorized and issued shares of stock they held in an unrelated corporation called Jamsut Associates, Inc. (hereinafter Jamsut), which were given to Licht's then attorney, Murray Oppenheim, to hold in escrow on condition that the escrowed shares be returned upon payment to Licht of $112,000.

By letters dated January 29, 1974, attorney-in-fact Oppenheim, on behalf of Licht, advised Gargiulo and Argento that the sum of $112,000 not having been paid, the Jamsut stock would be sold on February 8, 1974 in accordance with the terms of the June 20 agreement. As a result, on or about February 7, 1974, by service of a summons and amended complaint, Gargiulo and Argento commenced the instant action against Licht, Oppenheim and Gary Joseph in Supreme Court, Queens County, by which they originally sought to enjoin the disposition of the Jamsut stock and to have the June 20 agreement rescinded and declared null and void, asserting in support causes of action based upon claims of violation of public policy, lack of consideration, fraud and duress (on the part of Gary Joseph), violation of the Business Corporation Law and violation of certain restrictions against the transfer of the stock of Hendway and Waverly.

Thereafter, in about May, 1974, Licht commenced his own action in the United States District Court for the Eastern District of New York against Gargiulo, Argento, Jamsut Associates and others. Asserting that the event precedent to payment of the $112,000 had occurred on about December 31, 1973, Licht pressed three causes of action; two in a fiduciary capacity on behalf of Jamsut to set aside a conveyance of real property by that corporation and recover $350,000, the alleged value of such property, and a third against Gargiulo and Argento for the payment of $112,000, pursuant to the June 20 agreement. He also sought interest on the debt and counsel fees. By their answer, Gargiulo and Argento alleged affirmative defenses including "failure" of consideration, lack of mutuality of obligation, illegality as a contravention of public policy, fraud and duress. Gargiulo and Argento also interposed the additional affirmative defense of the pendency of a State action and demanded judgment dismissing the complaint.

Meanwhile, in the State action, Gargiulo and Argento moved for a temporary injunction restraining attorney Oppenheim from selling the Jamsut stock to satisfy their obligation pursuant to the June 20 agreement. Special Term's denial of this application was affirmed by this court in November, 1974 (Gargiulo v. Oppenheim, 46 A.D.2d 847).

Shortly after the denial of this application, counsel for Licht, Gargiulo and Argento, and attorney Oppenheim, pro se, entered into a stipulation dated December 10, 1974. The stipulation provided in part that Gargiulo and Argento were to pay $112,000 to Licht, in return for which, Licht, through Oppenheim, would return the Jamsut stock to Gargiulo and Argento. Also included was a provision that the exchange of money for stock between Licht and Gargiulo and Argento would not "operate to settle, discontinue, abate or otherwise affect" the viability of the two then pending actions. The terms of the stipulation were carried out. On January 9, 1975, Gargiulo and Argento paid Licht the sum of $112,134.48, comprising the $112,000 purchase price of Licht's share of Waverly and Hendway, and Licht's costs and disbursements on the appeal to this court.

The action in the United States District Court came to trial first before Judge BRUCHHAUSEN in December, 1975 and March, 1976. Licht's two derivative causes of action on behalf of Jamsut were dismissed for reasons not herein relevant, and the issues before the court were restricted by order dated November 13, 1975 to Licht's third claim for relief (interest upon the $112,000 and an application for counsel fees incurred in his derivative claims).

By memorandum and order dated April 19, 1976, Judge BRUCHHAUSEN denied Licht's application for counsel fees, and with respect to his claim for interest, found that the $112,000 was paid and accepted by Licht on the date required by the stipulation and that as that document did not call for the payment of interest, Licht had no right thereto. Accordingly, the judgment entered thereon on April 21, 1976, stated simply that "plaintiff [Licht shall] take nothing of the defendants" and dismissed the complaint.

By amended opinion dated April 28, 1976, Judge BRUCHHAUSEN sustained defendants' second and fourth through ninth affirmative defenses. Thereafter, in late May, 1976, he filed supplemental findings of fact and conclusions of law, in which the facts were found to be substantially as set forth, supra. Additionally, it was found that, while at the time the June 20 agreement was made Gargiulo and Argento possessed only one-third of the voting stock in the two corporations, consent of two-thirds of the voting stock was required by the lending institutions for the closing of the permanent mortgage loans. To induce Gargiulo and Argento to proceed with the project, and as a necessary concomitant thereof, to sign the June 20 agreement, Judge BRUCHHAUSEN found that Joseph had given them false information as to the cost of completing the centers, indicating that it would be substantially less than it actually was, and that just prior to the execution and delivery of the agreement, Joseph threatened Gargiulo and Argento that if they and the corporation did not sign, he would walk out without furnishing the needed consents to close the...