Mr. Karp and Mr. Cangemi made an arrangement to purchase and fund some investment real estate.  Cangemi v Karp  2015 NY Slip Op 51185(U)  Decided on August 6, 2015  Supreme Court, Queens County  McDonald, J.  After a while Mr. Karp grew “weary” of the arrangement and sought to shake things up.  He sued not only his business partner, but the attorney too.  The case went badly for Karp.

“On or about September 2, 2013, defendant entered into an agreement to loan plaintiff the sum of $500,000.00. On September 3, 2013, plaintiff executed a mortgage in connection with the loan agreement. Both parties were represented by attorney Peter Mammis. An Escrow Agreement was executed on September 11, 2013 in which Mr. Mammis created an arrangement where the loan documents were held by him in escrow pending either repayment of the loan in full or a default by plaintiff.

Plaintiff transferred ownership of the subject property located at 31-17 Ditmars Boulevard on September 3, 2013 to Ditmars Properties LLC, a New York Limited Liability Company. Defendant held an 85% share of Ditmars Properties LLC and plaintiff held a 15% share of the Ditmars Properties LLC. Plaintiff collected rent and paid a monthly payment of interest to defendant.

The Escrow Agreement provides, inter alia, the mortgage has not and shall not be recorded; upon receipt of notice from defendant that plaintiff is in default of the Note, Mr. Mammis will release all documents held in escrow to defendant; and upon notice from defendant that plaintiff has satisfied in full his obligation pursuant to the Note, Mr. Mammis will destroy all documents held in escrow. The Note provides, inter alia, plaintiff shall make a monthly interest payment in the sum of $5,833.33 to defendant; the final balloon payment consisting of the principal sum of $500,000.00 shall be paid by plaintiff to defendant on or before October 1, 2015; and if plaintiff fails to make three consecutive installment payments when due or if he fails to make the balloon payment then the shares will be released to defendant and plaintiff will waive any rights or interest in such shares and any ownership interest in the subject premises.

At some point after executing the loan documents, defendant became weary of such arrangement and commenced an action on or about March 18, 2014 in Supreme Court, Queens County under Index Number 701835/2014 against Mr. Mammis and plaintiff for reformation of the loan documents and legal malpractice. Defendant also filed a notice of pendency against the subject property, recorded the mortgage, and paid the mortgage recording tax of $14,000.00 along with the recording fees.”

“The essential elements for pleading a cause of action to recover damages for breach of contract are the existence of a contract, the plaintiff’s performance pursuant to the contract, the defendant’s breach of his or her contractual obligations, and damages resulting from the breach (see Dee v Rakower, 112 AD3d 204 [2d Dept. 2013]; Elisa Dreier Reporting Corp. v Global NAPS Networks, Inc., 84 AD3d 122 [2d Dept. 2011]).

Here, it is undisputed that a contract exists. Plaintiff demonstrated his performance pursuant to the contract by tendering the monthly interest payments and by ultimately tendering the balloon payment. Although defendant alleges that plaintiff breached the contract by failing to make the May 1, 2014 and June 1, 2014 payments, pursuant to the loan documents, three months of nonpayment constituted a breach. As such, plaintiff demonstrated his compliance with the contract and also demonstrated defendant’s breach when defendant commenced the reformation action and filed the mortgage in direct contravention of the terms of the Escrow Agreement. Lastly, plaintiff alleged damages resulting from defendant’s breach including the $14,000.00 mortgage tax and the additional financing plaintiff incurred. As such, plaintiff sufficiently pled a cause of action for breach of contract.”