In Clerico v Pollak   2012 NY Slip Op 51178(U)   Decided on June 26, 2012   Supreme Court, Queens County   McDonald, J. we see the complicated aftermath of a flip sale.  As far as we can gather Plaintiffs were offered a deal in which they would sell their real property to A, who would then turn around and sell it to B, at a profit.  The parties were to split the profit.  Why A did not simply arrange for plaintiffs to sell to B, at a pre-arranged fee is unknown.
 

Plaintiffs sued, settled and sued again.  Is this permissible? 

"In this regard based upon the plaintiffs’ verified complaint (see CPLR 105(U); Sanchez v. National R.R. Passenger Corp., 92 AD3d 600 [1st Dept. 2012][a verified pleading is the statutory [*5]equivalent of a responsive affidavit for purposes of a motion for summary judgment]; Vollaro v Bevilacqua, 33 AD3d 910 [2d Dept. 2006]; Matter of Dellagatta v. McGillicuddy, 31 AD3d 549 [2d Dept. 2006]), and the affidavits of the plaintiffs submitted in opposition to the motion, this Court finds that there are several questions of fact raised by the papers including whether the plaintiffs were aware of the second sale prior to entering into the settlement; whether the settlement was only intended to cover the contract action asserted in the prior action or was meant to encompass the second sale as well; and whether the funds disbursed to the plaintiff at the closing were only in settlement of the contract action or were also intended to compensate the plaintiffs for their share of the sales proceeds realized from the sale to Mr. Sullivan.

In addition, the third cause of action in the instant complaint alleges fraud against all defendants and states that "defendants severally and jointly, engaged in fraud designed to deceive the plaintiffs by misappropriating funds duly owed to them by acting as purchasers in transaction 1 and immediately reselling the premises in transaction 2." The complaint states that all of the defendants failed to disclose the existence of the second sale to the plaintiffs. Such failure to disclose, it is alleged, was designed to deceive plaintiffs and to misappropriate funds which were due to them.

In this regard, "although a general release bars recovery on any cause of action arising prior to its execution, this is true only in the absence of fraud, duress, illegality or mistake" (see Lambert v Sklar, 61 AD2d 939 [2d Dept. 2009]). Here, as the instant action is based upon a fraudulent scheme, the doctrine of res judicata would not bar plaintiffs from seeking to recover damages in this action (see Lambert v Sklar, 61 AD3d 939 [2d Dept. 2009]).

Accordingly, for all the above stated reasons it is hereby

ORDERED, that the motion of INES GASSMANN and the cross-motions of MICHAEL O’SULLIVAN, CHARLES PEKNIC, MARTIN A. POLLAK, JACK I. SLEPIAN and POLLAK & SLEPIAN, L.L.P. for summary judgment dismissing the plaintiffs’ complaint are denied. "