Yesterday, we started a discussion of Randazzo v Nelson 2015 NY Slip Op 04299 Decided on May 20, 2015 Appellate Division, Second Department which arose from the sale of a deli in Staten Island. Deli’s make retail sales, and buyer’s attorney must know that there can be an audit by the NYS Tax Department of the sales taxes which are due. There will almost always be some sales taxes due (from the current quarter), and the savvy buyer’s attorney will either follow the rules set forth by the Tax department, or hold a large enough escrow to survive any problems.
Unfortunately for buyer, this was not done, and a legal malpractice case ensued.
“The plaintiffs retained the defendant attorney to represent them in the purchase of a delicatessen known as Gentile’s, Inc. (hereinafter Gentile’s), in Staten Island. The transaction was consummated through a stock purchase agreement dated December 10, 2009. Prior to the February 25, 2010, closing, Gentile’s was dissolved by proclamation. The defendant drafted an indemnification and escrow agreement, which was executed at the closing, in which the seller agreed to indemnify the plaintiffs for claims relating to the period prior to closing. Funds were to be held in escrow by the seller’s attorney for seven days for the payment of liens. After receipt of a March 2, 2010, statement of tax liabilities from the Department of Taxation and Finance (hereinafter the Department), the seller paid the known outstanding tax liabilities, and the defendant authorized the release to the seller of the funds held in escrow. Almost two months later, the plaintiffs received notice from the Department that Gentile’s had outstanding sales tax liabilities, which had attached to their successor delicatessen pursuant to Tax Law § 1141(c).
The plaintiffs commenced this action against the defendant alleging, inter alia, legal malpractice. The defendant moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7). The Supreme Court granted the motion, and the plaintiffs appeal.
On a motion to dismiss pursuant to CPLR 3211(a)(7), the complaint is to be afforded a liberal construction, the facts alleged are presumed to be true, the plaintiff is afforded the benefit [*2]of every favorable inference, and the court is to determine only whether the facts as alleged fit within any cognizable legal theory (see CPLR 3026; Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326; Leon v Martinez, 84 NY2d 83, 87; Thompson Bros. Pile Corp. v Rosenblum, 121 AD3d 672, 673). Where a party offers evidentiary proof on a motion pursuant to CPLR 3211(a)(7), “the criterion is whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one” (Guggenheimer v Ginzburg, 43 NY2d 268, 275;see Bua v Purcell & Ingrao, P.C., 99 AD3d 843, 845; Peter F. Gaito Architecture, LLC v Simone Dev. Corp., 46 AD3d 530). ” [A] court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint'” (McGuire v Sterling Doubleday Enters., L.P.,19 AD3d 660, 661, quoting Leon v Martinez, 84 NY2d at 88; see Rovello v Orofino Realty Co.,40 NY2d 633, 635; Berman v Christ Apostolic Church Intl. Miracle Ctr., Inc., 87 AD3d 1094, 1096-1097).”