Court Opinion

ID: 3194054
Source: CourtListenerOpinion
Date Created: 2016-04-14 14:06:23.020949+00
Date Added: 2024-06-11T14:36:17.940743
License: Public Domain

State of New York
                   Supreme Court, Appellate Division
                      Third Judicial Department
Decided and Entered: April 14, 2016                    521567
________________________________

LAKSHMI GROCERY & GAS, INC.,
                    Respondent,
      v

GRJH, INC.,
                    Defendant and           MEMORANDUM AND ORDER
                    Third-Party
                    Plaintiff-
                    Appellant;

RAVINDER SHARMA et al.,
                    Third-Party
                    Defendants-
                    Respondents.
________________________________

Calendar Date:   February 18, 2016

Before:   Peters, P.J., Garry, Rose and Devine, JJ.

                             __________

      E. Stewart Jones Hacker Murphy, Troy (John F. Harwick of
counsel), for defendant and third-party plaintiff-appellant.

      Hug Law PLLC, Troy (Matthew C. Hug of counsel), for
respondent and third-party defendants-respondents.

                             __________

Garry, J.

      Appeal from a judgment of the Supreme Court (Muller, J.),
entered January 8, 2015 in Warren County, upon a decision of the
court in favor of plaintiff.

      Plaintiff is a corporation owned by third-party defendants,
Ravinder Sharma and Yosho Lakshmi. In the summer of 2010, Sharma
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contacted James Metz, an officer of defendant with whom Sharma
had previously had successful business dealings, to inquire about
commercial opportunities in New York. Metz responded that a gas
station and convenience store owned by defendant was available
for lease. After discussions with Metz and defendant's
president, Alicia Metz, plaintiff agreed to take over the store
and made certain payments to defendant. Third-party defendants
signed a combined lease and contractor agreement but, almost
immediately after taking control of the store, discovered records
indicating that the store's sales were lower than plaintiff had
been led to believe. After attempting unsuccessfully to modify
the contract terms, third-party defendants vacated the store and
requested a refund of their initial payments, which defendant
refused to pay.

      Plaintiff brought the instant action for rescission of the
contract based upon fraudulent inducement. Defendant joined
issue and commenced a third-party breach of contract action
against third-party defendants. During the subsequent bench
trial, plaintiff moved to conform the pleadings to the proof and
pursue rescission based upon an additional theory of mutual
mistake. Supreme Court granted the motion, found that a mutual
mistake had occurred, awarded damages to plaintiff, rescinded the
contract and dismissed the third-party action. Defendant
appeals.

      Supreme Court did not err in granting plaintiff's motion to
conform the pleadings to the proof. Such a motion may be made at
any time and should be liberally granted "unless doing so results
in prejudice to the nonmoving party" (Matter of Mogil v Building
Essentials, Inc., 129 AD3d 1378, 1380 [2015]; see CPLR 3025 [c];
Murray v City of New York, 43 NY2d 400, 405 [1977]; Lewis &
Clarkson v October Mtn. Broadcasting Co., 131 AD2d 15, 17
[1987]). Plaintiff's complaint alleged that defendant acted
intentionally in misrepresenting the store's sales as being
greater than they actually were. At trial, Sharma testified that
before he signed the contractor agreement, he repeatedly asked
for the store's inside sales figures – that is, sales of such
items as groceries, coffee and cigarettes, which he testified are
a critical factor in a convenience store's profitability. Early
in September 2010, Alicia Metz responded with an email stating
                              -3-                521567

that the store's sales for August 2010 totaled approximately
$22,000. Several days after taking over the store, however,
Sharma discovered sales records revealing that the true figure
for August 2010 was approximately $15,500, an amount that he
testified was too low to permit the successful operation of the
store. He stated that he would not have signed the contract if
he had known the correct sales figures. Alicia Metz testified
that the figures she provided to Sharma actually represented the
store's inside sales for August 2009 and were provided as
"representative sales" because the complete figures for August
2010 were not yet available. She stated that she "mismarked" the
figures as representing August 2010 sales, acting in error and
good faith.

      The burden was upon defendant, as the party opposing
plaintiff's motion, to establish that it was "hindered in the
preparation of [its] case or . . . prevented from taking some
measure in support of [its] position" (Loomis v Civetta Corinno
Constr. Corp., 54 NY2d 18, 23 [1981]; accord Kimso Apts., LLC v
Gandhi, 24 NY3d 403, 411 [2014]). That burden cannot be met when
the difference between the original pleading and the evidence
results from "proof admitted at the instance or with the
acquiescence of [the opposing] party" (Murray v City of New York,
43 NY2d at 405). Here, the proof upon which plaintiff's motion
was based was the testimony of defendant's president that she
acted mistakenly in providing the wrong sales figures to Sharma.
Given this testimony, defendant cannot have been surprised or
unduly prejudiced by plaintiff's assertion of the theory of
mutual mistake; thus, leave to conform the pleadings to the proof
was properly granted (see Kimso Apts., LLC v Gandhi, 24 NY3d at
414; Murray v City of New York, 43 NY2d at 406; Bay Plaza Estates
v New York Univ., 257 AD2d 472, 473 [1999]; Weisberg v My Mill
Holding Corp., 205 AD2d 756, 757 [1994]).

       Supreme Court did not err in rescinding the contract on
the basis of mutual mistake. A contract may be rescinded when it
is shown by clear and convincing proof that a mutual mistake
existed when the contract was executed that was so substantial
that there was no "true meeting of the parties' minds" (Carney v
Carozza, 16 AD3d 867, 868-869 [2005]; see Matter of Gould v Board
of Educ. of Sewanhaka Cent. High School Dist., 81 NY2d 446, 453
                              -4-                521567

[1993]; Adalian v Stuyvesant Plaza, 288 AD2d 789, 791 [2001]).
Here, the testimony that defendant's president acted erroneously
in sending incorrect sales figures to Sharma, as well as Sharma's
testimony that the true figures were not discovered until after
the contract was signed and were too low to permit successful
operation of the business, constituted clear and convincing proof
that a substantial mutual mistake occurred such that there was no
meeting of the minds as to the basis for the store's
profitability (see Matter of Gould v Board of Educ. of Sewanhaka
Cent. High School Dist., 81 NY2d at 453).

      As for defendant's claim that plaintiff was negligent in
failing to obtain more complete sales records before signing the
contract, negligence may bar rescission when a party fails to
take advantage of "easily accessible" means of ascertaining the
truth (Da Silva v Musso, 53 NY2d 543, 551 [1981] [internal
quotation marks and citation omitted]; accord Gitelson v Quinn,
118 AD3d 403, 404 [2014]). Here, in addition to Sharma's
testimony that he asked repeatedly for the August 2010 sales
records before receiving what proved to be erroneous information,
he also testified that he asked to inspect the store's books but
was not permitted to do so. Sharma stated that he was told that
he could visit the store while posing as a customer, but could
not speak to employees or inspect sales records. Alicia Metz and
James Metz both denied that Sharma had asked to inspect the
store's records, but Alicia Metz admitted that defendant had a
policy of prohibiting prospective contractors from speaking with
employees to avoid warning them of the potential transfer.
Sharma testified that he trusted James Metz based upon their
longstanding business relationship and relied upon his assurances
that the store was profitable. Supreme Court credited Sharma's
testimony that a level of trust existed between them and found
that plaintiff's exercise of due diligence, although minimal, was
reasonable. Upon this Court's independent assessment of the
weight of the evidence supporting the judgment in a nonjury
trial, we "giv[e] due deference to the trial court's
determinations of witness credibility unless such findings are
contrary to a fair interpretation of the evidence" (Mazza v Fleet
Bank, 16 AD3d 761, 762 [2005]). Given plaintiff's lack of ready
access to the store records and the longstanding trusting
relationship between Sharma and James Metz, we find no negligence
                              -5-                  521567

sufficient to bar rescission (compare Da Silva v Musso, 53 NY2d
at 550-551). Accordingly, Supreme Court properly dismissed
defendant's third-party action.

     Peters, P.J., Rose and Devine, JJ., concur.

     ORDERED that the judgment is affirmed, without costs.

                             ENTER:

                             Robert D. Mayberger
                             Clerk of the Court