ADAGO v. SY (2022)

Order, Supreme Court, New York County (Laurence Love, J.), entered on or about November 8, 2021, which, to the extent appealed from as limited by the briefs, denied as moot plaintiff's motion to amend the pleadings, and denied plaintiff's cross motion to vacate the previously ordered stay of the action pending arbitration and for, inter alia, summary judgment on his claims against defendants and for a restraining order against defendant Abdou Rahmane Sy, unanimously modified, on the law, to grant the cross motion to the extent of vacating the stay as to plaintiff's fraud, conversion, and breach of contract claims against Sy individually, and remanding for a hearing on the issue of whether the parties' memorandum of understanding (MOU) was permeated with fraud, and for determination of plaintiff's motion for leave to amend the complaint to add a claim for constructive trust and the branch of plaintiff's cross motion seeking an order prohibiting Sy from transferring or encumbering his assets, and otherwise affirmed, without costs.

Plaintiff cannot be compelled to arbitrate his individual claims against Sy for fraud, conversion, and breach of a 2021 settlement agreement, as he established that neither he nor Sy were individual signatories to the MOU, which was the instrument that contained the arbitration clause (see JMT Bros. Realty, LLC v. First Realty Builders, Inc., 51 A.D.3d 453, 455, 856 N.Y.S.2d 616 [1st Dept. 2008]).  Further, no other evidence in the record affirmatively establishes an agreement for the individual parties to arbitrate, and a party will not be compelled to proceed to arbitration without an express agreement to do so (id.;  see Matter of Metamorphosis Constr. Corp. v. Glekel, 247 A.D.2d 231, 231, 668 N.Y.S.2d 594 [1st Dept. 1998]).

As for plaintiff's claim that the transaction was fraudulent, the complaint, as supplemented by plaintiff's submissions on renewal, pleads that the MOU was part of a scheme by Sy to defraud plaintiff.  Thus, plaintiff has raised a substantial question whether the MOU was induced by fraud or whether it was so “permeated with fraud” that the entire agreement, including the arbitration provision, is void (see Matter of Silverman [Benmor Coats, Inc.], 61 N.Y.2d 299, 307–308, 473 N.Y.S.2d 774, 461 N.E.2d 1261 [1984];  Matter of Kennelly v. Mobius Realty Holdings LLC, 33 A.D.3d 380, 382–383, 822 N.Y.S.2d 264 [1st Dept. 2006]).  Accordingly, we remand for a hearing to determine that issue, and for a determination of plaintiff's motion for leave to amend and the branch of his cross motion that seeks an order prohibiting Sy from transferring or encumbering his assets (see CPLR 7503[a];  Matter of Kennelly, 11 A.D.3d at 383, 822 N.Y.S.2d 264).

To the extent plaintiff's cross motion sought summary judgment on his claims, relief cannot be granted, even in the absence of a stay, because the cross motion was brought before joinder of issue by defendants (CPLR 3212[a];  see Leff v. Leff, 182 A.D.2d 401, 402, 581 N.Y.S.2d 348 [1st Dept. 1992]).