EVERETT v. VARILLAS (2026)

DECISION & ORDER

In an action for declaratory relief and to compel the defendants' specific performance under the terms of an option agreement, the plaintiff appeals from an order of the Supreme Court, Nassau County (Sharon M.J. Gianelli, J.), entered October 9, 2024.  The order, insofar as appealed from, denied that branch of the plaintiff's motion which was for summary judgment on the complaint.

ORDERED that the order is affirmed insofar as appealed from, with costs.

In May 2021, the plaintiff commenced this action for a judgment declaring that he had properly exercised an option agreement and to compel the defendants' specific performance under the terms of the option agreement.  The complaint set forth that, in 2019, the defendant Dean Varillas and nonparty David Reid were each 50% shareholders of the defendant Online Reporting, Inc. (hereinafter ORI).  The complaint alleged that, in July 2019, the plaintiff entered into an agreement which granted him a five-year option to purchase 20% of the outstanding shares of ORI—10% from Varillas and 10% from Reid. The complaint alleged that, in April 2021, after Reid assigned his shares to ORI, the plaintiff's request to exercise the option to purchase 20% of the shares of ORI was improperly denied by the defendants.

The defendants interposed an answer and a third-party complaint, in which they asserted counterclaims against the plaintiff and third-party claims against the third-party defendants, My Personal DataSafe, LLC, and Everett Consulting, LLC, two companies owned by the plaintiff.  In the answer and third-party complaint, the defendants alleged that, in March 2021, the plaintiff was terminated from his position as chief executive officer of ORI for fraud and breach of his fiduciary duties.  The defendants asserted various affirmative defenses, including that the complaint was barred by the doctrine of unclean hands and by the faithless servant doctrine.  The defendants further alleged, inter alia, that the option agreement was void because the plaintiff procured the agreement through fraudulent misrepresentations.  In May 2023, the plaintiff moved, among other things, for summary judgment on the complaint.  The defendants opposed the motion.  In an order entered October 9, 2024, the Supreme Court, inter alia, denied that branch of the plaintiff's motion.  The plaintiff appeals.

“An option contract is an agreement to hold an offer open;  it confers upon the optionee, for consideration paid, the right to purchase at a later date” (Pfeifer v. Groisman, 123 A.D.3d 684, 684, 997 N.Y.S.2d 706 [internal quotation marks omitted] ).  “An option contract must be strictly complied with, in the manner and within the time specified” (Kendall v. Kendall, 44 A.D.3d 827, 828, 843 N.Y.S.2d 679 [alteration and internal quotation marks omitted] ).

To establish prima facie entitlement to specific performance of an option contract, a plaintiff must show that he or she was ready, willing, and able to perform the contract that would have been formed under the exercise of the option (see Diamond v. Scudder, 70 A.D.3d 626, 627, 892 N.Y.S.2d 883).  Specific performance is an equitable remedy and is subject to equitable defenses, including the doctrine of unclean hands (see Pecorella v. Greater Buffalo Press, 107 A.D.2d 1064, 1065, 486 N.Y.S.2d 562) and the faithless servant doctrine (see Trimarco v. Data Treasury Corp., 146 A.D.3d 1004, 46 N.Y.S.3d 134).

Here, the Supreme Court properly denied that branch of the plaintiff's motion which was for summary judgment on the complaint, as the plaintiff failed to eliminate triable issues of fact as to whether the option agreement was valid and enforceable against the defendants and whether the plaintiff effectively exercised the option (see Olden Group, LLC v. 2890 Review Equity, LLC, 209 A.D.3d 748, 751, 177 N.Y.S.3d 60;  Pfeifer v. Groisman, 123 A.D.3d at 684, 997 N.Y.S.2d 706) and failed to establish, as a matter of law, that there “[was] no defense to the cause[s] of action” in the complaint (CPLR 3212[b];  see GLND 1945, LLC v. Ballard, 209 A.D.3d 993, 995, 177 N.Y.S.3d 315).

Since the plaintiff failed to establish prima facie entitlement to judgment as a matter of law, that branch of the plaintiff's motion which was for summary judgment on the complaint was properly denied, without regard to the sufficiency of the defendants' opposition papers (see Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853, 487 N.Y.S.2d 316, 476 N.E.2d 642).

The parties' remaining contentions need not be reached in light of our determination.

CONNOLLY, J.P., CHAMBERS, FORD and MCCORMACK, JJ., concur.