New York State Court of Claims

New York State Court of Claims

GRJH v. THE STATE OF NEW YORK, #2009-041-001, Claim No. 114999, Motion Nos. M-75577, CM-75760


Synopsis


Claimant’s motion for summary judgment is denied in claim alleging that Division of the Lottery wrongfully converted claimant’s funds where triable issue of fact exists as to whether claimant’s alleged oral promise to pay the debt of another is rendered unenforceable under the Statute of Frauds; defendant’s cross-motion to disqualify claimant’s attorneys is granted where said attorneys’ testimony is necessary at trial and may be prejudicial to claimant.

Case Information

UID:
2009-041-001
Claimant(s):
GRJH, INC.
Claimant short name:
GRJH
Footnote (claimant name) :

Defendant(s):
THE STATE OF NEW YORK
Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
114999
Motion number(s):
M-75577
Cross-motion number(s):
CM-75760
Judge:
FRANK P. MILANO
Claimant’s attorney:
SGAMBETTERA & ASSOCIATES, P.C.By: Matthew J. Sgambettera, Esq.
Defendant’s attorney:
HON. ANDREW M. CUOMO
New York State Attorney GeneralBy: Joan Matalavage, Esq., Assistant Attorney General
Third-party defendant’s attorney:

Signature date:
January 22, 2009
City:
Albany
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision


Claimant moves for summary judgment on its claim that defendant, through the Division of the Lottery (Lottery), wrongfully converted funds belonging to claimant in the amount of $28,000.00 to satisfy a debt owed to the Lottery by an unrelated entity. Defendant opposes the motion and cross-moves to disqualify all members of the law firm representing claimant in this action because the attorneys “were actively involved in negotiating” the transactions underlying the claim and will be called as witnesses by defendant. The claim alleges that in July 2007, claimant, as landlord, took possession of a convenience store located at 200 Main Street, Altamont, New York, from its former tenant (Altamont Convenience) after Altamont Convenience defaulted in its payment obligations to claimant. The claimant then began operating the convenience store formerly operated by Altamont Convenience. The claim further alleges that despite claimant having obtained its own license from the Lottery, defendant wrongfully withdrew approximately $28,000.00 from claimant’s bank account to pay an obligation owed by Altamont Convenience to the Lottery.

Claimant moves for summary judgment, asserting that it did not agree in writing to pay the debt of Altamont Convenience and that any claim by defendant that claimant orally agreed to be responsible for the debt of Altamont Convenience is barred by the Statute of Frauds (General Obligations Law § 5-701), which provides as follows:
Ҥ 5-701. Agreements required to be in writing

a. Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking:

2. Is a special promise to answer for the debt, default or miscarriage of another person . . .”
“A motion for summary judgment should be entertained only after the moving party has established, by competent admissible evidence, that it is entitled to judgment as a matter of law. . . If the movant meets this initial burden, the opposing party is required to submit evidence which raises a material issue of fact to preclude an award of summary judgment” (Ware v Baxter Health Care Corp., 25 AD3d 863, 864 [3d Dept 2006]).

Once the moving party has satisfied this obligation, the burden shifts and the party opposing the motion must demonstrate by admissible evidence the existence of a factual issue (Svoboda v Our Lady of Lourdes Memorial Hospital, Inc., 31 AD3d 877 [3d Dept 2006]).

Summary judgment is “a drastic remedy” (Lebanon Valley Landscaping, Inc. v Town of Moriah, 258 AD2d 732, 733 [3d Dept 1999]). It “is the procedural equivalent of a trial . . . and should be granted only when it has been established that there is no triable issue of material fact” (Harris v State of New York, 187 Misc 2d 512, 517 [Ct Cl 2001]; see Paulin v Needham, 28 AD3d 531 [2d Dept 2006]).

“The proof presented is viewed in the light most favorable to the nonmovant” (Encarnacion v State of New York, 49 AD3d 1038, 1039, [3d Dept 2008]), and the Court should give the “party opposing the motion . . . the benefit of every reasonable inference” (Boyce v Vazquez, 249 AD2d 724, 726 [3d Dept 1998]; see Boston v Dunham, 274 AD2d 708, 709 [3d Dept 2000]).

The court’s role on a motion for summary judgment is issue finding, not issue determination (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]; Matter of Hannah UU., 300 AD2d 942, 943 [3d Dept 2002]; Schaufler v Mengel, Metzger, Barr & Company, LLP, 296 AD2d 742, 743 [3d Dept 2002]) and where a genuine issue of fact exists, the motion must be denied (Fleet Bank v Tiger Racquet Fitness and Exercise Center, Inc., 255 AD2d 793, 794 [3d Dept 1998]).

Claimant has met its initial burden on the motion by showing that the debt for which the Lottery withdrew approximately $28,000.00 from claimant’s account was incurred by Altamont Convenience rather than claimant and that claimant did not agree in writing to pay the debt of Altamont Convenience.

The burden thus shifts to defendant to show the existence of a triable issue of fact. Defendant contends that claimant orally promised to be primarily responsible for the debt of Altamont Convenience in consideration of the issuance of a lottery sales license at the Altamont location in its own name, and further, to have the license issued in an expedited manner, and that claimant’s attorney authorized the withdrawal of the $28,000.00 from claimant’s account.

In considering whether defendant has shown the existence of a triable issue of fact with respect to whether the Statute of Frauds bars proof of the alleged oral agreement, the following principles, set forth in Martin Roofing, Inc. v Goldstein (60 NY2d 262, 265 [1983]), should be kept in mind:
“The purpose of the rule [requirement of a signed writing] is evidentiary, to avoid perjury, and incidentally to serve as a cautionary measure to avoid ill-considered actions (3 Williston, Contracts [3d ed], § 452; Farnsworth, Contracts, § 6.3; Restatement, Contracts 2d, § 112). In most oral contracts, a writing is not required because the promisor has received something and the circumstances show probable liability. When a party promises to answer for the debt of another, however, the benefit to the promisor is not apparent and so the promise, if it is to be enforceable under the statute, must either be evidenced by writing or plaintiff must prove it is supported by a new consideration moving to the promisor and beneficial to him and that the promisor has become in the intention of the parties a principal debtor primarily liable.”
The affidavit of Lottery Game Director Patrick Frament (Frament) states that:
“[O]n August 2, 2007, Judy Drislane, the Eastern Regional Director for the Lottery made the decision that she would not approve a new license at the Altamont location until either the outstanding balance was paid in full or a payment plan was signed. A copy of her e-mail of August 2, 2007 is annexed hereto as Exhibit “C”. In it she advised that all parties be so notified.”
The affidavit of Lottery Assistant Regional Director John Dudley (Dudley) states that he received a telephone call from claimant’s attorney Gregory Sanda in August 2007 and that Sanda advised Dudley that “he represented [claimant]” and that claimant:
“[W]ould be willing to pay the outstanding $28,000.00 debt of Altamont Convenience so that his client could be approved to license and sell lottery.”
Dudley memorialized his conversation with Sanda in an e-mail to Frament on August 9, 2007.

The affidavit of Frament states that he thereafter spoke to Sanda by telephone and advised Sanda that Lottery would not re-license the subject location “until the [Altamont Convenience] debt was cleared up.” Frament states that “Mr. Sanda then informed me his client had the money and would pay the debt.”

Frament’s affidavit asserts that claimant would not be issued a lottery sales license for the Altamont location until the debt was resolved. Claimant has not provided an affidavit from Sanda disputing the sworn statements of Dudley and Frament as to the alleged oral promise made by Sanda (claimant’s attorney) to pay the Altamont Convenience debt and the reasons for paying such debt nor has claimant disputed the authority of Sanda to make such a promise.

In addition to alleging an oral promise to pay, defendant is required to raise an issue of fact as to whether claimant received new consideration beneficial to it and that claimant became, in the intention of the parties, a principal debtor primarily liable for the Altamont Convenience debt.

Beneficial new consideration has been shown where an owner-developer of a shopping mall has received continued shipments of construction materials from a supplier on the basis of its alleged promise to pay the debt of a contractor who failed to pay the supplier (Pyramid Champlain Co. v R.P. Brosseau & Co., 267 AD2d 539 [3d Dept 1999], lv denied 94 NY2d 760 [2000]).

An oral agreement between a subcontractor and property owner, made following the general contractor’s removal from the job, that the owner would pay the subcontractor directly for completed past work and for all future work, if the subcontractor completed the unfinished work, constituted sufficient consideration to support an oral promise by the owner to pay the general contractor’s debt to the subcontractor (Concordia General Contracting v Peltz, 11 AD3d 502 [2d Dept 2004]).

It has also been held that “forbearance of legal action” could constitute beneficial new consideration for an oral promise to pay the debt of another (Kramer v Harrington Wells & Rhodes, Ltd., 275 AD2d 302, 303 [2d Dept 2000]; Talansky v Schulman, 2 AD3d 355, 361 [1st Dept 2003]).

In Perini v Sabatelli (52 AD3d 588, 589 [2d Dept 2008]), the Appellate Division reversed an order of the Supreme Court which had granted the defendant summary judgment dismissing a complaint based upon an oral promise to pay the debt of another:
“In this case, in response to the defendant’s prima facie showing of entitlement to judgment as a matter of law on the ground that enforcement of the alleged agreement was barred by the statute of frauds, the plaintiff established that there were triable issues of fact as to whether the alleged oral agreement was supported by new consideration flowing to the defendant and beneficial to her personally, and, if so, whether the defendant, in making the agreement, intended to become primarily liable for the debt.”
The affidavits of Dudley and Frament raise a triable issue of fact as to whether claimant requested, and received, beneficial consideration in the form of not only the issuance of a lottery sales license at the Altamont location, but also its issuance in an expedited manner, in exchange for its promise to pay the Altamont Convenience debt.

The previously attributed statements in the affidavits of Dudley and Frament also raise a triable issue of fact as to whether the parties intended that claimant be a principal debtor primarily liable for the debt.

The Court finds that defendant has raised triable issues of fact as to whether claimant orally agreed to pay the Altamont Convenience debt in consideration of, in the first instance, the issuance of a lottery sales license at the Altamont location in its own name, and additionally, the issuance of the license in an expedited manner, and further, whether claimant became, in the intention of the parties, a principal debtor primarily liable for the Altamont Convenience debt.

Accordingly, the claimant’s motion for summary judgment is denied.

Defendant cross-moves to disqualify the law firm representing claimant on the basis of 22 NYCRR 1200.21 (b), which provides:
“Neither a lawyer nor the lawyer’s firm shall accept employment in contemplated or pending litigation if the lawyer knows or it is obvious that the lawyer or another lawyer in the lawyer's firm may be called as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony would or might be prejudicial to the client.”
Case law reveals that where a party’s attorney is “intimately involved” in the transaction underlying the lawsuit, has dealt directly with the other party during the transaction and has conversed directly with the other party concerning a material matter in the litigation, the attorney becomes “a witness with information about relevant and material facts and . . . should [be] disqualified” (Kattas v Sherman, 32 AD3d 496, 497 [2d Dept 2006]).

It is also evident that where a partner of the law firm representing a party will be called to testify regarding the negotiations underlying a litigated transaction and “it is apparent that the testimony provided by the attorney may be prejudicial” to the party, the law firm representing the party should be disqualified (Wensley and Partners, L.L.C. v Polimeni, 262 AD2d 311, 312 [2d Dept 1999]).

As set forth above, the affidavit of Dudley states that claimant’s attorney Gregory Sanda advised Dudley that “he represented [claimant]” and that claimant:
“[W]ould be willing to pay the outstanding $28,000.00 debt of Altamont Convenience so that his client could be approved to license and sell lottery.”
Similarly, the affidavit of Frament states that he advised Sanda that Lottery would not re-license the subject location “until the [Altamont Convenience] debt was cleared up” and that “Mr. Sanda then informed me his client had the money and would pay the debt.”

Defendant’s attorney affirms that both members of the firm representing claimant will be called as witnesses at the trial of the claim.

Claimant provides no affidavit or facts disputing the sworn statements of Dudley and Frament as to the potentially prejudicial representations allegedly made by Sanda, instead offering only the conclusory, one-sentence opposition of Sanda’s law partner, Matthew Sgambettera, that the disqualification motion is “completely inappropriate and the Defendant’s Cross-Motion must be denied.”

Since defendant has made a prima facie showing that the law firm representing claimant should be disqualified pursuant to 22 NYCRR 1200.21 because Sanda will be called “as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony would or might be prejudicial to the client” and claimant has offered no factual opposition to that showing, the defendant’s cross-motion is granted.

Claimant shall file and serve a substitution of attorney within 60 days of the filing of this decision and order. The action is stayed until such filing and service.

The claimant’s motion for summary judgment is denied. Defendant’s cross-motion to disqualify claimant’s attorneys is granted.


January 22, 2009
Albany, New York

HON. FRANK P. MILANO
Judge of the Court of Claims


Papers Considered:

  1. Claimant’s Notice of Motion, filed September 25, 2008;
  2. Affidavit of Matthew J. Sgambettera, sworn to September 25, 2008, and annexed exhibits;
  3. Defendant’s Cross Notice of Motion, filed October 28, 2008;
  4. Affidavit of Joan Matalavage, sworn to October 28, 2008, and annexed exhibits;
  5. Affidavit of Patrick Frament, sworn to October 20, 2008;
  6. Affidavit of John Dudley, sworn to October 21, 2008;
  7. Affidavit of Matthew J. Sgambettera, sworn to November 26, 2008, and annexed exhibits;
  8. Affidavit of Lauren Simons, sworn to November 26, 2008.