Notice of Motion/ Order to Show Cause — Affidavits — Exhibits ...�

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Answering Affidavits — Exhibits (Memo)__________________________�

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Reply Affidavits — Exhibits (Memo)_____________________________ _�

Cross-Motion:YesNo

In this action concerning the granting of an encumbrance on real property, defendants Thomas D. Gammino (Gammino), Joseph C. Jannetty (Jannetty) and Lynch Mob Associates (LMA) move, pursuant to CPLR 3212, for an order dismissing the verified complaint of plaintiff 221 Second Avenue, LLC (221 LLC) and the cross claims of defendants Fidelity National Financial, Inc. and Fidelity National Title Insurance Company (together, Fidelity) against them. Gammino, Jannetty and LMA also seek an order, pursuant to CPLR 3126, striking the answer of defendant James Gomez (Gomez) or precluding him from offering at trial any evidence with respect to liability, due to his failure to comply with their deposition notice.

It is undisputed that Gaminno, Jannetty and Gomez formed their general New York [*2]partnership, LMA on January 6, 1997, the same day that it (LMA) acquired title by deed, from nonparty Brause and Brause, to real property known by the street address of 221 Second Avenue, New York, New York (the Property). It is also undisputed that LMA purchased the Property, with the assistance of a purchase money mortgage, from Brause and Brause in the amount of $450,000, as amended pursuant to an Amendment to Note, dated September 17, 1997 (Exhibit 5).

Approximately a year later, on February 1, 1998, LMA sold the Property to 221 LLC for the sum of $1,400,000. In anticipation of the sale, 221 LLC purchased a policy of title insurance from Fidelity for the express purposes of insuring its interest, and protecting it against challenges to its rightful ownership of the Property. As part of the transaction, LMA delivered to 221 LLC and Fidelity both a Title Affidavit and a Warranty/Bargain and Sale Deed (Warranty Deed).

The Title Affidavit, which is signed by Gammino but not dated, provides, at paragraph 2:

With the exception of a first mortgage in favor of Brause and Brause in the approximate amount of $450,000 and a mechanic's lien in favor of Metropolitan Lumber in the approximate amount of $6,400, I am unaware of any monetary liens or encumbrances against the Premises.

The Warranty Deed, which was executed by Gaminno, Jannetty and Gomez as general partners of LMA, and dated February 1, 1998, provides, in relevant part:

[LMA] covenants that [LMA] has not done or suffered anything whereby the said premises have been encumbered in any way whatever, except as aforesaid.

It is undisputed that the LMA partnership was dissolved upon its completion of the February 1, 1998 sale to 221 LLC, and that the New York County Office of the City Registrar (City Registrar) recorded the Warranty Deed almost five months later, on June 29, 1998.

Approximately 10 years later, in or about December 2008, an architect engaged by plaintiff for the purpose of planning an expansion of the building, conducted a title search of the Property. The architect discovered that the Property was encumbered by a Light and Air Easement (Easement) which had been granted in 1997 by LMA in favor of a neighboring property located at 223 Second Avenue, which was owned by 14th Street HK Realty Corp. (HK Realty) and 242 East 14th Street Associates, L.P. (242 East). The Easement, which was dated March 12, 1997, was not executed by LMA, HK Realty and 242 East until September 3, 1997, and not recorded by the City Registrar until June 26, 1998, just three days prior to the date the City Registrar recorded the Warranty Deed. The Easement provides as follows:

Easement Agreement, made this 12th day of March, 1997, between Lynch Mob Associates, hereinafter referred to as the "grantor," . . . and 14th Street HK Realty Corp. and 242 East 14th Street Associates, L.P., hereinafter referred to as the "Grantee".. .

WHEREAS, "Grantor," is the record owner in fee of premises known as 221 Second Avenue . . . hereinafter referred to as Parcel A . . .

WHEREAS, the "Grantee" is the record owner in fee of premises known as 242 East 14th Street a/k/a 223 Second Avenue . . . hereinafter referred to as Parcel B . . .

WHEREAS, there is a 7-story building erected on Parcel B;

WHEREAS, Grantee desires to obtain approval of an Alteration Application . . . From the New York City Department of Buildings . . . to alter floors 2 to 7 for residential use on Parcel B; and

WHEREAS, the Department of Building shall approve said Alteration Application only upon the condition, inter alia, that Grantor create an easement . . . for light and air for the benefit of [*3]the present and future owners of parcel B . . .

NOW, THEREFORE, in consideration of ten dollars and other good and valuable consideration paid by the Grantee to the Grantor . . . 1. Grantor here by grants and conveys to Grantee . . . and to any future owner of Parcel B, the right to unrestricted light and air over Parcel A as described herein, such that any construction on Parcel A shall never infringe upon the light and air provided to Parcel B.

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3. This covenant shall run with the land and be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns . . . (Notice of Motion, Exhibit G).

The bottom of page two of the Easement reads "Grantor: Lynch Mob Associates, By: James Gomez" (signature). Directly beneath Gomez's signature is the notary stamp, and what appears to be the signature of Gammino.

On or about April 27, 2009, 221 LLC commenced the instant action sounding in breach of contract, breach of warranty, unjust enrichment, and fraud, and demanding relief in both law (damages) and equity (an injunction and rescission of the Easement). The gravamen of the complaint is that LMA sold 221 LLC a Property which was supposed to have certain appurtenant rights. These rights included the right to unrestricted light and air over the building. However, at the time of the sale, defendants failed to disclose the fact that LMA had previously granted the light and air easement to HK Realty and 212 East, purposefully timing the recording of the Easement so that it was not likely to be discovered either prior to, or at or about the time of the closing. In this manner, defendants diminished the value of the Property to 221 LLC by impeding its ability to enhance the building through the development of additional floors. Both plaintiff and Fidelity charge LMA, Jannetty and Gammino with actual and constructive knowledge of the partnership's actions.

More specifically, 221 LLC claims that the timing of the recording of the Easement ^[FN1] coupled with the lack of notice to plaintiff or to plaintiff's attorneys and/or agents, and the misstatements contained in the contract of sale, Title Affidavit and Warranty Deed as to the existence of encumbrances on the Property, evidences LMA, Gammino, Jannetty, Gomez, HK Realty and 242 East's clear intent to keep the Easement a secret from plaintiff and its title insurance company. Plaintiff is also suing Fidelity for breach of the title insurance policy it issued with respect to the Property.

LMA, Jannetty, Gammino, HK Realty and 242 East responded by moving, under motion sequence numbers 001 and 002, for a pre-answer dismissal of the complaint. Fidelity answered the complaint and cross-claimed against LMA and its partners Gammino, Jannetty and Gomez, for fraud, indemnification and contribution.

By decision and order of the Hon. Michael Stallman, dated December 22, 2009, before whom this matter was then pending, the motions were granted in part and denied in part. The complaint was severed and dismissed as against HK Realty and 242 East, and the only causes of action to survive the motions were the claim for fraud (fifth cause of action) against LMA, Gammino, Jannetty and Gomez, and the claim for breach of the Fidelity Policy terms and [*4]conditions (first cause of action) against Fidelity. Following a period of discovery, in which Gomez did not fully participate,^[FN2] plaintiff filed a note of issue on May 24, 2011,^[FN3] triggering service of this motion. LMA, Jannetty and Gammino now seek a summary judgment dismissal of the claim for fraud and Fidelity's cross claims for indemnification and contribution, on the ground that neither Jannetty nor Gammino participated in, or had any knowledge of, the Easement which, they contend, Gomez solely and clandestinely granted to HK Realty and 242 East.

As the proponents of the summary judgment motion, the burden is on LMA, Jannetty and Gammino to "make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. Failure to make such showing requires denial of the motion" (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985] [internal citations omitted]).

To this end, they contend that 221 LLC has failed to put forth any evidence tending to show that LMA, Jannetty or Gammino committed any fraudulent acts. In addition to offering Jannetty's and Gammino's sworn, categorical denials of any knowledge of, or participation in, the granting of the Easement, and Gammino's personal repudiation of, what purports to be, his signature on page two of the Easement, movants assert that if there was fraudulent conduct, the conduct was that of Gomez, acting independently of his partners. Citing Barnhard v Barnhard (179 AD2d 716 [2d Dept 1992]) and its progeny, Jannetty and Gammino also assert that, despite their interest in the partnership, knowledge of Gomez's actions cannot be imputed to them because Gomez was acting outside the scope of the ordinary course of LMA business when he: surreptitiously granted the Easement; failed to inform his partners about the Easement; somehow arranged for Gammino's signature to appear on page two of the Easement without Gammino's knowledge or participation; and falsely stated that there were no encumbrances on the Property.

Movants support their arguments with copies of the transaction documents, as well as party and nonparty deposition transcripts, including their own and that of Larry Gluck and Paula Katz, the principals of HK Realty and 242 East, and of David Kriss, the attorney who handled the closing. The transcripts of Gluck and Katz are offered as evidence that neither Jannetty nor Gammino played any role in the granting of the Easement, and the transcript of Kriss is offered to show, among other things, that he had no knowledge of the Easement at the time he handled the February 1, 1998 transaction, although it remains unclear whether Kriss represented the buyer, the seller or both. Defendants offer a copy of the Easement document, essentially, for the court to take note of certain deficiencies in Gammino's purported notarization.

For the following reasons, summary judgment is denied.

As acknowledged by Jannetty and Gammino at their respective depositions, the LMA partnership existed for the specific purpose of owning and managing the Property. LMA was formed on the day it purchased the Property from Brause and Brause, and dissolved on the day it sold the Property to 221 LLC. While the defendants do not meaningfully dispute that the partnership did not disclose the fact that the Property was encumbered by a light and air [*5]easement, they claim entitlement to judgment on the basis that, as a matter of law, they did not have actual or constructive knowledge of the prior encumbrance, and therefore, cannot be held liable for any losses sustained by plaintiff. Both Jannetty and Gammino assert that Gomez handled most of the day- to-day management of the Property, and insist, that while they were not always comfortable with his management style, they did not have cause to investigate whether LMA, through Gomez, had encumbered the Property prior to the sale to 221 LLC. They argue that they too, are victims of Gomez's wrongdoing, as they and LMA were defrauded by his secret granting of the Easement.

Their assertions fall short of the evidentiary proof in admissible form necessary for the court to direct judgment in their favor (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). Jannetty and Gammino's explanation that they were justified in believing that the Property had no encumbrances (other than the specified $450,000 first mortgage and the $6,400 mechanic's lien) when they attested to the accuracy of the Warranty Deed and Title Affidavit containing statements to that effect, constitutes unsubstantiated protestations of ignorance, rather than evidentiary proof, which are inadequate for the purpose of summary judgment (id.).

It is well settled that:

general partners are jointly and severally liable to nonpartner creditors for all wrongful acts and breaches of trust committed by their partners in carrying out the partnership's business, and jointly liable for all other debts to third parties. This proposition follows naturally from the very nature of a partnership, which is based on the law of principal and agent. Just as a principal is liable for the acts of its agents, each partner is personally responsible for the acts of other partners in the ordinary course of the partnership's business (see Ederer v Gursky, 9 NY3d 514, 521-522 [2007]; see also Partnership Law § 26).

Moreover, not only are the actions of one general partner acting in the course of partnership business binding upon the partnership and each general partner, but it is also well settled that knowledge of that activity is imputed and chargeable to the remaining general partners regardless of their personal participation in the offending transaction (see McIntyre v Kavanaugh, 242 US 138, 139 [1916]; Guild v Herrick, 51 NYS2d 326, 331 [Sup Ct, NY County 1944]).

In line with Partnership Law § 26, Partnership Law § 24 dictates:

Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership, or with the authority of his copartners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act.

Accordingly, and contrary to movants' assertions, knowledge of LMA partnership activity can be imputed to Jannetty and Gammino as they, along with Gomez, were general partners throughout LMA's existence. Actual knowledge of the encumbrance is neither material nor a prerequisite to a finding of liability (see also Partnership Law § 23; Bank of Commerce v De Santis, 114 Misc 2d 491, 495 [Civ Ct, Kings County 1982]).

With respect to movants' contention that they should not be held liable to plaintiff because the illicit manner in which the Easement was granted does not fall within the category of ordinary partnership business, their argument is unavailing. LMA was formed for the express purpose of owning and managing the Property, and managing the appurtenant light and air rights was a part of that responsibility. Even if Jannetty and Gammino were, as they contend, unaware that Gomez had granted the Easement, that unforeseen event would not convert an [*6]otherwise ordinary business decision by a property owner into an unacceptable act, falling outside the scope of ordinary partnership business (see Guild v Herrick, 51 NYS2d at 331 - 332; Sawchuk v 335 Realty 58 Assoc., 44 AD3d 532 [1st Dept 2007]).

There is also considerable controversy over whether Gammino notarized the Easement document. Gammino adamantly denies that the signature appearing in conjunction with his notary stamp, directly beneath the signature of the grantor, LMA, by Gomez, is his. He also references a supposed defect in the jurat portion of the notarization which, he argues, constitutes conclusive evidence that he did not notarize the document, and suggests that Gomez forged the notarization based upon his access to the notary stamp.

His denial of authenticity notwithstanding, Gammino has failed to rebut the presumption of due execution. A certificate of acknowledgment, or jurat, "should not be overthrown upon evidence of a doubtful character, such as the unsupported testimony of interested witnesses, nor upon a bare preponderance of evidence, but only on proof so clear and convincing so as to amount to a moral certainty" (John Deere Ins. Co. v GBE/Alasia Corp., 57 AD3d 620, 622 [2d Dept 2008] [internal quotation marks and citations omitted]). Accordingly, it is best left to the trier of fact to resolve the issues surrounding the authenticity of Gammino's notarization.

With respect to the Fidelity cross claims, movants make no arguments independent of those attendant to their demand for a dismissal of 221 LLC's fraud claim. Nevertheless, a review of the record requires a denial of the motion to dismiss the cross claims. Fidelity has raised significant questions concerning the apparent failure of both the Warranty Deed and Title Affidavit to disclose the existence of the previously executed and acknowledged, but not (prior to closing) recorded Easement.

Finally, the movants seek an order striking the answer of Gomez or precluding him from offering evidence at trial with respect to liability based upon his failure to appear for a deposition in this matter. Plaintiff opposes the motion on the ground that LMA, Jannetty and Gammino do not have standing to seek a dismissal of that aspect of Gomez's answer which pertains to the complaint, and not to the cross claims. Plaintiff also asserts that the motion is inappropriate because there is a currently pending motion for a preclusion order against Gomez, pursuant to CPLR 3126. In light of this Court's decision and order in motion sequence 004, dated September 9, 2011, wherein this.0 Court granted the plaintiff's motion for a preclusion order against Gomez, the portion of the motion seeking to strike Gomez's answer is denied as moot.

Accordingly, for the reasons set forth above, it is

ORDERED that the motion by defendants Thomas D. Gammino, Joseph C. Jannetty

and Lynch Mob Associates for summary judgment is denied; and it is further,

ORDERED that the branch of the motion which seeks relief pursuant to CPLR 3126, is

denied as moot.

This constitutes the Decision and Order of the Court.



Dated:September 23, 2011

PAUL WOOTENJ.S.C. [*7]