Weinstock v. Handler

• Court: New York Supreme Court — Appellate Division
• Writing for the Court: Before SULLIVAN; All concur except RUBIN; RUBIN
• Citation: Weinstock v. Handler, 679 N.Y.S.2d 48, 254 A.D.2d 165 (N.Y. App. Div. 1998)
• Decision Date: 22 October 1998
• Parties: 1998 N.Y. Slip Op. 9035 Israel WEINSTOCK, Plaintiff-Appellant, v. Emmerich HANDLER, et al., Defendants-Respondents.

Page 48

679 N.Y.S.2d 48

1998 N.Y. Slip Op. 9035

Israel WEINSTOCK, Plaintiff-Appellant, v. Emmerich HANDLER, et al., Defendants-Respondents.

Supreme Court, Appellate Division First Department.

Oct. 22, 1998.

James Klatsky, for Plaintiff-Appellant.

Edward Rubin, for Defendants-Respondents.

Before SULLIVAN, J.P., ROSENBERGER, NARDELLI, RUBIN and SAXE, JJ.

MEMORANDUM DECISION.

Order, Supreme Court, New York County (Ira Gammerman, J.), entered June 12, 1996, which denied plaintiff's motion for partial summary judgment pursuant to CPLR 3212(e) and which granted the cross-motion of defendants Emmerich and Rita Handler for summary judgment, reversed, on the law, without costs or disbursements, and plaintiff's motion for partial summary judgment granted.

Plaintiff owns an 8% interest in a limited partnership that owned a building located in Brooklyn. Plaintiff asserted that defendant Emmerich Handler represented to him that the building could be sold for $11,750,000. Based upon this representation, plaintiff and defendant arrived at a purchase price of $425,000 and, in February 1984, plaintiff and defendant entered into a letter agreement in which defendant agreed to purchase plaintiff's interest in the partnership for such sum. The agreement provided that $25,000 was to be paid upon execution of the contract, with the balance due at the closing, scheduled to take place on January 2, 1985.

In January 1985, prior to closing, plaintiff allegedly learned that defendant had in fact listed the building for a sum greatly in excess of that represented to plaintiff. Defendant allegedly had received offers between $18 million and $20 million for the building, and plaintiff alleged he would never have agreed to sell his interest in the partnership for merely $425,000 had he known of these facts. As a result, plaintiff demanded that defendant rescind the sale.

Thereafter, in January 1985, the parties entered into a second letter agreement in which defendant noted that there was no need for him to make a tender of $400,000 of the purchase price since plaintiff claimed the right to rescission. However, defendant also acknowledged that should it later be determined that plaintiff did not have the right to rescission or if plaintiff waived that claim, defendant would pay plaintiff $400,000 plus interest at 12% per annum from January 1, 1985 upon not less than 30 days written notice.

While the agreements are related, the complaint seeks to rescind the 1984 agreement, which is a contract for the sale of interest in a limited partnership. On the other hand, plaintiff's motion for summary judgment seeks to enforce the 1985 agreement that required defendant to pay plaintiff $400,000 if plaintiff did not have a right to rescission or if plaintiff waived that claim.

While the general rule is that a party may not obtain summary judgment on an unpleaded cause of action (Cohen v. City Co. of New York, 283 N.Y. 112, 27 N.E.2d 803), it is also true that summary judgment may be awarded on an unpleaded cause of action if the proof supports such cause and if the opposing party has not been misled to its prejudice (Torrioni v. Unisul, Inc., 214 A.D.2d 314, 315, 624 N.Y.S.2d 433). As with a trial, the court may deem the pleadings amended to conform to the proof (Deborah International Beauty, Ltd. v. Quality King Distributors, Inc., 175 A.D.2d 791, 793, 573 N.Y.S.2d 189).

In this case, the documentary evidence submitted on the motion for summary judgment supports plaintiff's claim as to the 1985 agreement. Plaintiff described and annexed the 1985 agreement and asserted that he waived his rescission claim. As plaintiff contends, since defendant drafted the 1985 agreement, and solicited plaintiff's agreement to its terms, it cannot be said that defendant has been misled to his prejudice (Torrioni v. Unisul, Inc., supra, at 315, 624 N.Y.S.2d 433). By its own terms, the January 1985 agreement expressly contemplated its enforcement at any time after execution merely upon plaintiff's waiver of his rescission claim. Thus, plaintiff established his entitlement to payment pursuant to the 1985 agreement and, in opposition, defendant did not dispute the merits of said motion and does not do so on appeal.

All concur except RUBIN, J., who dissents in a memorandum as follows:

RUBIN, Justice (dissenting).

It is an elementary principle that equity is a shield, not a sword (Canron Corp. v. City of New York, 214 A.D.2d 115, 120, 631 N.Y.S.2d 642, affd. 89 N.Y.2d 147, 652 N.Y.S.2d 211, 674 N.E.2d 1117). If for no other reason, plaintiff should not be permitted to transform an equitable action, which seeks to rescind a contract, into an action at law that demands performance of the very same transaction that plaintiff has repudiated. Moreover, for a variety of legal and equitable reasons, the summary disposition sought by plaintiff is unavailable.

In a letter agreement dated February 23, 1984, plaintiff Israel Weinstock contracted to sell his interest in a real estate limited partnership holding title to the premises located at 26 Court Street in Kings County to defendant Emmerich Handler for the sum of $425,000. Thereafter, a dispute arose concerning the fair value of the premises, culminating in plaintiff's refusal to convey his interest in the limited partnership pursuant to the contract. On January 25, 1985, the parties entered into a second letter agreement stipulating to forgo the formality of a closing (see, 1776 Associates Corp. v. Broadway W. 57th St. Assocs., 181 A.D.2d 601, 585 N.Y.S.2d 316, appeal dismissed 80 N.Y.2d 824, 587 N.Y.S.2d 896, 600 N.E.2d 623) and to have their respective rights construed as if a closing had been held and plaintiff had refused to convey his interest in the limited partnership for the tendered purchase price. The stipulation concludes, "Should it later be determined that you do not have the right to rescission, or should you waive any such claim, I shall pay you $400,000, plus interest at 12% per annum, upon not less than 30 days' written notice to me."

Subsequently, by way of a complaint dated March 12, 1985, plaintiff brought a prayer in equity seeking rescission of the contract. The grounds asserted for relief are that plaintiff was fraudulently induced to enter into the agreement by defendants' false representation that the property was worth far less than its alleged value of 18 to 20 million dollars. The complaint indicates that the valuation of plaintiff's interest was predicated on a sales price for the subject premises of approximately $12 million and charges that "statements and representations regarding the value of the Premises made by Handler were false and known by him to be so at the time the statements were made and were intentionally made to defraud plaintiff."

It is uncontroverted that the subject premises were never conveyed. It is also undisputed that, in 1993, a bankruptcy petition was filed by the partnership's creditors, resulting in the sale of the premises, and that, with the conclusion of the bankruptcy proceedings in 1994, plaintiff's equity interest in the limited partnership was rendered worthless. The record indicates that this matter languished for a decade without any attempt by plaintiff to enlist judicial assistance in obtaining the relief demanded in the complaint.

In December 1995, plaintiff undertook to file the summons and complaint that he had served on defendants over ten years earlier in March of 1985. By way of the subject motion dated February 8, 1996, plaintiff purports to seek recovery within the context of this equitable action pursuant to the stipulation dated January 25, 1985, based on the provision that defendant Emmerich Handler will pay $400,000 to plaintiff Weinstock should plaintiff waive his claim for rescission of the contract. It is plaintiff's contention that the January 1985 instrument is enforceable either as a separate agreement between the parties or as a stipulation settling the dispute.

The collateral agreement cannot be regarded as a settlement of this action because the stipulation was drafted prior to service of the complaint. Furthermore, its language clearly contemplates the commencement of an action for rescission. In any event, the interpretation and effect of the stipulation are governed by the rules of contract (Rebell v. Trask, 220 A.D.2d 594, 596-597, 632 N.Y.S.2d 624; Childs v. Levitt, 151 A.D.2d 318, 543 N.Y.S.2d 51, lv. denied 74 N.Y.2d 613, 547 N.Y.S.2d 847, 547 N.E.2d 102), including defenses to its enforcement (Hallock v. State, Power Authority, 64 N.Y.2d 224, 230, 485 N.Y.S.2d 510, 474 N.E.2d 1178 ["cause sufficient to invalidate a contract"]; see also, Matter of Galasso, 35 N.Y.2d 319, 321, 361 N.Y.S.2d 871, 320 N.E.2d 618 [agreement to agree] ). In view of the significant change in circumstances occasioned by the ensuing bankruptcy of the limited partnership and by the abrupt change in the theory of the case reflected in the motion for summary judgment, plaintiff has neither a credible equitable ground nor a valid legal basis to demand enforcement of the stipulation.

The complaint in this action seeks to vitiate the contract, signed in February 1984, by which plaintiff undertook to sell his interest in the limited partnership. It recites that plaintiff has "no adequate remedy at law" and "demands judgment declaring that the agreement be cancelled [sic] and rescinded, and plaintiff be relieved of all liability under that instrument". No mention is made of the stipulation dated January 25, 1985, which is the subject of the motion for summary judgment brought some 11 years later and pursuant to which plaintiff seeks to enforce the contract of sale. Thus, without ever obtaining leave to amend the complaint (CPLR 3025[b] ), plaintiff seeks summary judgment on an unpleaded cause of action that is the very antithesis of the relief originally demanded, predicated on an 11-year-old contract never raised in the pleadings.

As def...