LEE v. ZEITLIN (2026)

Judgment, Supreme Court, New York County (Robert R. Reed, J.), entered August 23, 2024, in favor of plaintiffs and against defendants in the amount of $1,165,058.93 plus interest, and bringing up for review an order, same court and Justice, entered June 11, 2024, which granted plaintiffs' motion for summary judgment on their causes of action for breach of contract and account stated but denied the motion to the extent it sought summary dismissal of defendants' counterclaim for breach of the implied covenant of good faith and fair dealing, and severed the counterclaim, unanimously affirmed, with costs.  Appeals from aforementioned order, unanimously dismissed, without costs, as subsumed in the appeals from the judgment.

Summary judgment is appropriate with respect to plaintiffs' claim for breach of the Loan Restructuring and Settlement Agreement.  It is clear as a matter of law that defendants failed to fulfill their contractual obligation to turn over to plaintiffs the $413,731.53 recovery they obtained with respect to the Engelbert deposit.  There is no basis, contractual or otherwise, for defendants to offset such payment by the amount of legal fees incurred to secure this recovery.  It is also clear as a matter of law that defendants failed to fulfill their contractual obligation to list the Dutchess County property for sale within a reasonable time of the triggering event – i.e., the nonpayment of the remaining principal balance by June 30, 2017.  Even if plaintiff's February 2018 email extended what was reasonable, defendants should have been on notice by late July 2020, at the latest (upon receipt of plaintiffs' counsel's letter threatening foreclosure), that the time had come to take action.

Even if considered, defendants' failure to mitigate damages defense is not a proper basis to deny summary judgment.  Plaintiffs were not required to accept defendant's February 2018 proposal, as “the duty to mitigate does not require that the party expose itself to unreasonable risk or expense” (see Fourth Ave. Owners Corp. v. Douglas Elliman Prop. Mgt., 234 AD3d 590, 591 [1st Dept 2025] ) or that it take a chance on a new agreement with the breaching party (see Canadian Indus.  Alcohol Co. v Dunbar Molasses Co., 258 N.Y.194, 200–201 [1932];  Rollins v. Bowman Cycle Co., 96 AD 365, 369 [1st Dept 1904] ).

Defendants have not articulated any basis to vacate the award of summary judgment on the account stated claim.  Defendants' arguments with respect to this claim (other than those addressed above) are not properly considered because they were first raised at oral argument or on appeal and are not purely legal in nature.

The motion court properly denied summary judgment dismissing defendants' breach of the implied covenant of good faith and fair dealing counterclaim as premature (see CPLR 3212[f];  DaSilva v Haks Engrs., Architects & Land Surveyors, P.C., 125 AD3d 480, 482 [1st Dept 2015];  Voluto Ventures, LLC v Jenkens & Gilchrist Parker Chapin LLP, 44 AD3d 557, 557 [1st Dept 2007] ).  Proof sufficient to rebut plaintiff's attestations that she did not manipulate the price of the relevant stock is exclusively in plaintiffs' control or the control of other third parties;  defendants actively sought, thus far, unsuccessfully, to obtain such proof;  and defendants' evidence of unusual fluctuations in the relevant stock prices was sufficient to create an evidentiary basis suggesting that further discovery might lead to relevant evidence.

This counterclaim was not so inextricably intertwined with plaintiffs' breach of contract claim as to render the grant of summary judgment with respect to plaintiffs' claim inappropriate (see Fleet Bank v. Pine Knoll Corp., 290 A.D.2d 792, 794 [3d Dept 2002];  Marine Midland Bank v. Cafferty, 174 A.D.2d 932, 934–935 [3d Dept 1991] ).