Opinion
No. CV15–0283.
02-09-2016
Susan S. WELLS, Plaintiff, v. Shelby S. HODGKINS, Defendant.
Iseman, Cunningham, Riester & Hyde, LLP, Albany (James P. Lagois of counsel) and Law Office of James M. Brooks, Lake Placid (James M. Brooks of counsel), for plaintiff. McNamee, Lochner, Titus & Williams P.C., Albany (John J. Privitera of counsel), for defendant.
Iseman, Cunningham, Riester & Hyde, LLP, Albany (James P. Lagois of counsel) and Law Office of James M. Brooks, Lake Placid (James M. Brooks of counsel), for plaintiff.
McNamee, Lochner, Titus & Williams P.C., Albany (John J. Privitera of counsel), for defendant.
ROBERT J. MULLER, J.
In 1956, Hamilton H. Salmon III and his wife, Frances S. Salmon, purchased a seasonal home known as “Beach Cove” located on the shore of Lake Placid in the Town of North Elba, Essex County. The home came fully furnished with antiques and heirlooms dating back over 100 years to the original owners. The Salmons then formed Salmon Enterprises, Inc. (hereinafter SEI) in 1986 to hold title to Beach Cove and facilitate transfer of the home to future generations, with the bylaws restricting ownership of shares to the Salmons' blood-line descendants. Plaintiff Susan B. Wells and defendant Shelby S. Hodgkins—two of the Salmons' four daughters—both own shares of SEI. Specifically, plaintiff owns 30 shares and defendant owns 1 share, with the remaining shares owned by other family members. In recent years, the relationship amongst the shareholders—and the parties to this action in particular—has grown increasingly acrimonious. The property taxes and the cost of owning and maintaining Beach Cove have grown considerably, with some shareholders unable “to shoulder their proportionate share” of the expenses [Complaint, attached as Exhibit “B” to Privitera Affirmation, at ¶ 20]. Additionally, the Salmon family is now spread out across the United States and many family members are unable to use Beach Cove to the same extent as prior generations. According to plaintiff, “[t]hese factors, among others, have led to a significant amount of discord ... over the management of SEI and the operation of Beach Cove” [Complaint, at ¶ 21].
In 2014, the Board of Directors of SEI chose to begin renting Beach Cove to the public over plaintiff's objection. Plaintiff's primary concern was the risk of theft, loss and damage to the heirlooms inside the home. With rentals to begin in the summer of 2015, plaintiff met defendant and her other two sisters at Beach Cove the weekend of March 26–29, 2015 to divide the heirlooms. On March 28, 2015, there was apparently a confrontation between the parties which culminated with defendant asking plaintiff: “What would it take, so that I never have to see your face again, and you never come to Camp [Beach Cove] again?” [Complaint, at ¶ 29]. Plaintiff then responded by inviting defendant to purchase her shares of SEI, which defendant allegedly agreed to do for $900,000.00 “on the condition that [p]laintiff personally, promptly, and permanently vacate from Beach Cove, and that [p]laintiff have removed from Beach Cove by Wednesday, April 1, 2015, all of the heirlooms that had been claimed by [her,] together with the rest of [her] personal property ...” [Complaint, at ¶ 31]. According to plaintiff, “[d]efendant promised to pay the purchase price to [p]laintiff by wire transfer as soon as [p]laintiff could provide [d]efendant with wire instructions for the transfer of funds” [Complaint, at ¶ 33]. Upon receipt of the money, plaintiff was then to “retrieve[ ] her stock certificates in SEI from her safe deposit box [and] deliver them to [d]efendant ...” [Complaint, at ¶ 43].
Plaintiff alleges that this Board of Directors was formed in April of 2014 when her “three sisters installed one of each of their children into three essentially dormant director' positions that were created in the old bylaws of SEI” [Plaintiff's Affidavit, at ¶ 5]. According to plaintiff, “at the time of its incorporation in December 1986, SEI was managed by [her] parents and their attorney” [Plaintiff's Affidavit, at ¶ 5].
Plaintiff subsequently removed all of her property from Beach Cove and vacated the premises by April 1. Defendant then refused to wire the $900,000.00, as the result of which plaintiff commenced this action for specific performance. Presently before the Court is (1) defendant's pre-answer motion to dismiss the complaint for failure to state a cause of action (see CPLR 3211[a][7] ), as well as for the imposition of sanctions; and (2) plaintiff's cross motion to, inter alia, strike the notice filed by counsel for defendant pursuant to CPLR 322(b). The motion and cross motion will be addressed in seriatim.
“On a motion to dismiss for failure to state a cause of action, [the Court] must afford the pleadings a liberal construction, accept the facts alleged therein as true, accord the plaintiff the benefit of every possible inference and determine whether the facts alleged fit within any cognizable legal theory” (Nelson v. Capital Cardiology Assoc., P.C., 97 AD3d 1072, 1073 [2012], quoting Matter of Upstate Land & Props., LLC v. Town of Bethel, 74 AD3d 1450, 1452 [2010] ).
Defendant contends that the complaint must be dismissed because the alleged oral agreement is unenforceable as a matter of law under the statute of frauds. To that end, General Obligations § 5–703(1) provides as follows:
“An estate or interest in real property, other than a lease for a term not exceeding one year, or any trust or power, over or concerning real property, or in any manner relating thereto, cannot be created, granted, assigned, surrendered or declared, unless by act or operation of law, or by a deed or conveyance in writing, subscribed by the person creating, granting, assigning, surrendering or declaring the same....”
Where “the transaction which is the subject of [an] alleged oral contract involve[s] the sale of stock in a corporation the sole asset of which [is] an interest in realty, ... the statute of frauds [is] applicable, and any oral agreement to convey such interest[ is] unenforceable as a matter of law” (Yenom Corp. v. 155 Wooster St. Inc., 33 AD3d 67, 70–71 [2006] ; see Bergman v. Krausz, 19 AD3d 186, 186–187 [2005] ; Pritsker v. Kazan, 132 A.D.2d 507 [1987] ). Defendant contends that Beach Cove is the only asset of SEI and, as such, the statute of frauds renders the oral agreement unenforceable.
Plaintiff, on the other hand, contends that the statute of frauds is not applicable because Beach Cove is not the only asset of SEI. Rather, the antiques and heirlooms inside of Beach Cove are also assets of the corporation. In support of this contention, plaintiff attempts to liken this case to that before the Court in Micromat Co., Inc. v. Catskill Mtn. Brewing Co., Inc. (2012 WL 1898846 [ND N.Y. May 23, 2012, No. 1:10–CV–508 (MAD/RFT) ] ) (hereinafter Micromat ), where the statute of frauds was deemed inapplicable. There, the Court stated as follows:
“[T]he alleged oral agreement in the present matter was not for a sale of stock of a corporation whose sole asset' was an interest in realty. Here, the alleged oral contract was for the sale of stock in a corporation that runs a restaurant and brewery, assets that clearly comprise much of the value in the stock” (id. at *3).
The Court finds plaintiff's contention to be without merit. Unlike in Micromat, the sole asset owned by SEI is a seasonal home and its contents—there is no business associated with the home that comprises much of the value in the stock. The statute of frauds is therefore applicable to the alleged oral agreement.
While SEI apparently planned to rent the home for the summer of 2015, there is nothing in the record before the Court to suggest that it was in fact rented or that any significant income was realized as a result of such rentals.
Plaintiff next contends that, even if the statute of frauds is applicable to the oral agreement, defendant is barred from invoking it under the doctrine of part performance. Under this doctrine, “it is the conduct of the [individual] seeking to enforce the oral agreement, and its detrimental reliance on the agreement, that makes proper the invocation of equitable principles” (McCormick v. Bechtol, 68 AD3d 1376, 1379 [2009], lv denied 15 NY3d 701 [2010], cert denied 562 U.S. 1063 [2010], quoting Messner Vetere Berger McNamee Schmetterer Euro RSCG v. Aegis Group, 93 N.Y.2d 229, 236 [1999] ; see Anostario v. Vicinanzo, 59 N.Y.2d 662, 664 [1983] ; Sivos v. Eppich, 78 AD3d 1360, 1361 [2010] ). “The doctrine of part performance may be invoked only if plaintiff's actions can be characterized as unequivocally referable' to the agreement alleged” (Anostario v. Vicinanzo, 59 N.Y.2d at 664 ; accord McCormick v. Bechtol, 68 AD3d at 1379 ).
Here, the complaint alleges that, “[i]n reliance on [d]efendant's promise, and with [d]efendant's awareness, [p]laintiff made expedited arrangements for a moving company to remove all of [her] property from Beach Cove by the April 1, 2015[ ] deadline” [Complaint, at ¶ 34]. The complaint further alleges that, “[i]n reliance on [d]efendant's promise, and with [d]efendant's awareness, [p]laintiff's son transferred to another Salmon family member title to his sailboat that he was using at Beach Cove to ensure that [p]laintiff and her immediate family did not leave any of their personal property at [the home] past the April 1, 2015[ ] deadline” [Complaint, at ¶ 35]. Finally, the complaint alleges that, “[i]n reliance on [d]efendant's promise, and with [d]efendant's awareness, [p]laintiff agreed to and did discontinue her participation and ... sharing in the meeting's division of heirlooms at Beach Cove, despite [p]laintiff's statements and demonstration of her own readiness for continuing toward completion” [Complaint, at ¶ 36]. According to plaintiff, “[t]o comply with her side of the [a]greement, [she] was forced unexpectedly to have to say a rushed and painful goodbye to Beach Cove, which had been a part of her life since she was a small child and was a site of many personal milestones” [Complaint, at ¶ 38].
Affording the pleadings a liberal construction and accepting the facts therein as true, plaintiff's allegations could support a finding that defendant is barred from invoking the statute of frauds under the doctrine of part performance. Indeed, defendant does not dispute that plaintiff removed all of her personal belongings from Beach Cove by April 1, 2015, nor does she offer any other reason why plaintiff might have undertaken these actions. While plaintiff perhaps moved her belongings as a result of personal animosity toward defendant and her other two sisters, there is nothing in the record to suggest this was the case. To the contrary, the record contains several emails from various family members which specifically reference “the sale of shares from [plaintiff] to [defendant]” [Beverly S. Hall Email, attached to Lagois Affirmation, as Exhibit “C”, at p 1]. Under the circumstances, plaintiff's actions could be found to unequivocally refer to the existence of the alleged oral agreement (see Sivos v. Eppich, 78 AD3d at 1362 ; OnBank & Trust Co. v. Burr Enters., 235 A.D.2d 799, 803–804 [1997] ; compare Post Hill, LLC v. E. Tetz & Sons, Inc., 122 AD3d 1126, 1128–1129 [2014] ; Rosenheck v. Calcam Assoc., 233 A.D.2d 553, 554 [1996] ).
Based upon the foregoing, defendant's motion to dismiss the complaint is denied in its entirety, as is her request for the imposition of sanctions. Defendant is hereby directed to serve her answer to the complaint on or before March 11, 2016, and counsel for the parties shall thereafter appear for a preliminary conference on April 8, 2016 at 10:30 A.M. at the Essex County Courthouse.
In lieu of appearing, counsel may confer and submit a Preliminary Conference Stipulation and Order to the Court prior to the conference. This form is available online at http://www.nycourts.gov/courts/4jd/mt-rules/ muller-order.pdf.
Turning now to the cross motion, CPLR 322(b) provides as follows:
“The attorney for a non-resident defendant in an action affecting real property shall file with the clerk written authority for his appearance, executed and acknowledged in the form required to entitle a deed to be recorded, and shall serve either a copy of such authority or notice of such filing on the plaintiff's attorney within twenty days after appearing or making a motion.”
Here, defendant resides in Maine and her attorney—who considers this action to be one affecting real property—filed and served a notice pursuant to CPLR 322(b). Plaintiff seeks to vacate this notice, contending that this action does not affect real property but, rather, pertains only to the transfer of stock in a corporation.
The Court is not persuaded. As discussed above, the sole asset owned by SEI is a seasonal home and its contents. Therefore, the sale of stock in SEI amounts to the sale of real property. The Court thus declines to strike the CPLR 322(b) notice filed and served by counsel for defendant.
The Court similarly declines to correct the Request for Judicial Intervention filed by counsel for defendant which describes the action as “Other Real Property: Breach of Contract/Statute of Frauds.” The Court finds such description to be accurate.
Based upon the foregoing, plaintiff's cross motion is denied in its entirety.
Therefore, having considered the Affirmation of John J. Privitera, Esq. with exhibits attached thereto, dated July 27, 2015, submitted in support of the motion; Memorandum of Law of John J. Privitera, Esq., dated July 24, 2015, submitted in support of the motion; Affirmation of James P. Lagios, Esq. with exhibits attached thereto, undated, submitted in opposition to the motion and in support of the cross motion; Affidavit of Susan S. Wells with exhibits attached thereto, sworn to August 14, 2015, submitted in opposition to the motion and in support of the cross motion; Memorandum of Law of James P. Lagois, Esq., dated August 14, 2015, submitted in opposition to the motion and in support of the cross motion; and Reply Memorandum of Law of John J. Privitera, Esq., dated August 20, 2015, submitted in opposition to the cross motion and in further support of the motion, and oral argument having been heard on February 5, 2016 with James P. Lagois, Esq. appearing on behalf of plaintiff and John J. Privitera, Esq. appearing on behalf of defendant, it is hereby
ORDERED that defendant's motion to dismiss the complaint is denied in its entirety, as is her request for the imposition of sanctions; and it is further
ORDERED that defendant shall serve her answer to the complaint on or before March 11, 2016, and counsel for the parties shall thereafter appear for a preliminary conference on April 8, 2016 at 10:30 A.M. at the Essex County Courthouse; and it is further
ORDERED that plaintiff's cross motion is denied in its entirety.
The original of this Decision and Order has been filed by the Court together with the Notice of Motion dated July 24, 2015, the Notice of Cross Motion dated August 14, 2015 and the submissions enumerated above. Counsel for plaintiff is hereby directed to promptly obtain a filed copy of the Decision and Order for service with notice of entry upon defendant in accordance with CPLR 5513.