Great Lakes Motor Corp. v. Johnson

• Decision Date: 22 December 2017
• Docket Number: 1244,CA 17–00764
• Citation: Great Lakes Motor Corp. v. Johnson, 156 A.D.3d 1369, 68 N.Y.S.3d 614 (N.Y. App. Div. 2017)
• Parties: GREAT LAKES MOTOR CORP., doing business as Mercedes–Benz of Buffalo, Plaintiff–Appellant, v. Patrick J. JOHNSON, Defendant–Respondent.
• Court: New York Supreme Court — Appellate Division

156 A.D.3d 1369

68 N.Y.S.3d 614

GREAT LAKES MOTOR CORP., doing business as Mercedes–Benz of Buffalo, Plaintiff–Appellant,

v.Patrick J. JOHNSON, Defendant–Respondent.

1244

CA 17–00764

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

Entered: December 22, 2017

BOND SCHOENECK & KING, PLLC, BUFFALO (SHARON M. PORCELLIO OF COUNSEL), FOR PLAINTIFF–APPELLANT.

WOODS OVIATT GILMAN LLP, BUFFALO (WARREN B. ROSENBAUM OF COUNSEL), FOR DEFENDANT–RESPONDENT.

PRESENT: CENTRA, J.P., PERADOTTO, LINDLEY, NEMOYER, AND TROUTMAN, JJ.

MEMORANDUM AND ORDERMemorandum:

Defendant purchased a vehicle from plaintiff and, at the time of the purchase, executed a Nonexport Agreement in which he agreed that he would not personally export the vehicle or transfer the vehicle "to any party for export outside North America." In addition, the Nonexport Agreement provided that "[t]he parties agree that it would be impractical or difficult to fix the actual damages" if the vehicle were exported in violation of the agreement and, therefore, if the vehicle were so exported, defendant would be obligated to pay plaintiff liquidated damages in the amount of $20,000. Some time after defendant purchased the vehicle, he transferred ownership of the vehicle to Superior Auto Sales, Inc. (Superior) and, less than one month after the vehicle was sold to defendant, it was exported to China. Plaintiff thereafter commenced this action seeking damages related to defendant's alleged breach of the Nonexport Agreement.

Following joinder of issue but prior to discovery, defendant moved for summary judgment dismissing the complaint, contending, inter alia, that the liquidated damages clause was unenforceable. On a prior appeal, we affirmed Supreme Court's order denying that motion, concluding that "defendant failed to meet his initial burden of establishing as a matter of law that the amount of liquidated damages does not bear a reasonable relation to plaintiff's actual damages" ( Great Lakes Motor Corp. v. Johnson , 132 A.D.3d 1390, 1391, 18 N.Y.S.3d 256 [4th Dept. 2015] ).

During the ensuing discovery, plaintiff was provided with a copy of an agreement between defendant and Superior (Nominee Agreement), pursuant to which defendant agreed to buy vehicles for Superior, which was unable to do so itself as a result of "certain restrictive trade practices engaged in by the manufacturers and distributors of motor vehicles." Defendant agreed to be "a bare Nominee" with no actual interest in the vehicles purchased, and further agreed to transfer those vehicles immediately to Superior. Defendant was thus a " ‘straw buyer’ " of the vehicle ( United States v. Any and All Funds on Deposit in Account No. 0139874788, at Regions Bank, Held in the Name of Efans Trading Corp. , 2015 WL 247391, *1 [S.D.N.Y.2015] ). The Nominee Agreement further provided that Superior agreed to indemnify and hold harmless defendant "against any and all liability with respect to the purchase of the [vehicles] purchased by Superior in the name of [defendant]." In addition, defendant appointed Superior "to act as his ... lawful attorney ... in connection with the purchase of the motor vehicles." It is thus undisputed that Superior is representing defendant's interests.

Plaintiff thereafter moved for, inter alia, leave to amend its complaint to add Superior as a defendant and to assert causes of action for breach of contract and tortious interference with a contract against Superior as well as a cause of action for civil conspiracy against both defendant and Superior. We agree with plaintiff that the court erred in denying that part of plaintiff's motion.

"Leave to amend a pleading should be freely granted in the absence of prejudice to the nonmoving party where the amendment is not patently lacking in merit" ( McFarland v. Michel , 2 A.D.3d 1297, 1300, 770 N.Y.S.2d 544 [4th Dept. 2003] [internal quotation marks omitted]; see CPLR 3025 [b] ; Holst v. Liberatore , 105 A.D.3d 1374, 1374, 964 N.Y.S.2d 333 [4th Dept. 2013] ). Although defendant contends that plaintiff was required to " ‘make an evidentiary showing that the claim[s] [could] be supported’ " ( Farrell v. K.J.D.E. Corp. , 244 A.D.2d 905, 905, 665 N.Y.S.2d 201 [4th Dept. 1997] ; see Di Matteo v. Grey , 280 A.D.2d 929, 930, 721 N.Y.S.2d 182 [4th Dept. 2001] ; Mathews v. Visual Thermoforming , 187 A.D.2d 964, 964–965, 592 N.Y.S.2d 287 [4th Dept. 1992] ), or to submit an affidavit of merit (see Weller v. Colleges of the Senecas , 261 A.D.2d 852, 852–853, 689 N.Y.S.2d 588 [4th Dept. 1999], lv denied 93 N.Y.2d 817, 697 N.Y.S.2d 564, 719 N.E.2d 925 [1999] ), plaintiff correctly relies on the more recent cases from this Court, which provide that "[a] court should not examine the merits or legal sufficiency of the proposed amendment unless the proposed pleading is clearly and patently insufficient on its face" ( Landers v. CSX Transp., Inc. , 70 A.D.3d 1326, 1327, 893 N.Y.S.2d 774 [4th Dept. 2010] [emphasis added and internal quotation marks omitted]; see Holst , 105 A.D.3d at 1374–1375, 964 N.Y.S.2d 333 ; see generally Lucido v. Mancuso , 49 A.D.3d 220, 224–230, 851 N.Y.S.2d 238 [2d Dept. 2008] ).

Here, defendant has failed to demonstrate that the proposed amendments were "palpably insufficient or patently devoid of merit" ( Holst , 105 A.D.3d at 1374, 964 N.Y.S.2d 333 ). In any event, the original complaint, exhibits and documents attached to the motion "provided the necessary evidentiary support for the motion" ( id. at 1375, 964 N.Y.S.2d 333 ).

Defendant contends that all of the proposed amendments are "without merit" because plaintiff "did not and cannot prove it suffered any damages." We reject that contention. "In [the] proposed amended complaint, plaintiff alleges that, as a result of [the conduct of defendant and Superior], [plaintiff] was damaged. On this record, we cannot conclude that plaintiff's allegation of damages is patently lacking in merit" ( Duszynski v. Allstate Ins. Co. , 107 A.D.3d 1448, 1450, 967 N.Y.S.2d 796 [4th Dept. 2013] ). Moreover, although plaintiff did not suffer any "chargeback[s]" from Mercedes–Benz, USA (MBUSA), deposition testimony of "the export sales compliance specialist" for MBUSA established that there were many other items of "financial loss" suffered by dealers as a result of the violation of Nonexport Agreements (see Holloway Auto. Group v. Giacalone , 169 N.H. 623, 625–626, 154 A.3d 1246, 1248 [2017] ). In denying that part of the motion seeking leave to amend the complaint, the court concluded that plaintiff could not demonstrate any actual damages as a result of the breach of the Nonexport Agreement. We agree with plaintiff that the court improperly decided the merits of a disputed issue of fact in the context of a motion seeking leave to amend the complaint (see Caruso, Caruso & Branda, P.C. v. Hirsch , 41 A.D.3d 407, 409, 837 N.Y.S.2d 734 [2d Dept. 2007] ; Curiale v. Weicholz & Co. , 192 A.D.2d 339, 339, 596 N.Y.S.2d 19 [1st Dept. 1993] ; see generally Lucido , 49 A.D.3d at 224–230, 851 N.Y.S.2d 238 ).

Contrary to defendant's further contention, the proposed...