Opinion
35936/2006
10-03-2019
Guta SCHAPIRO, individually, and as Administrator of the Estate of Levi Schapiro, Plaintiffs, v. Zalman SCHMUCKLER, Efraim Schmuckler, and Shmaya Krinski a/k/a Shmaya Krinsky, Defendants.
For Plaintiff: Kevin Nash, Esq., Goldberg Weprin Finkel Goldstein, 1501 Broadway, New York, NY 10036-5601, 212-301-6944 For Defendants: Andrew S. Lewner, Esq., Brian P. Walsh, Esq., Westerman Ball Ederer Miller Zucker & Sharfstein LLP, 1201 RXR Plaza, Uniondale, NY 11556, 516-622-9200, ext. 367
For Plaintiff: Kevin Nash, Esq., Goldberg Weprin Finkel Goldstein, 1501 Broadway, New York, NY 10036-5601, 212-301-6944
For Defendants: Andrew S. Lewner, Esq., Brian P. Walsh, Esq., Westerman Ball Ederer Miller Zucker & Sharfstein LLP, 1201 RXR Plaza, Uniondale, NY 11556, 516-622-9200, ext. 367
Richard J. Montelione, J.
The trial in the above matter commenced and concluded on September 26, 2019. The court heard testimony from plaintiff Guta Schapiro and defendant Zalman Schmuckler. The court takes judicial notice of a summary holdover proceeding which is stayed pending a determination in this court.
Guta Schapiro, individually, and as administrator of her husband's estate (hereinafter, "plaintiff") seeks in her amended complaint: 1) the application of a constructive trust upon the property located at 422 Crown Street, Brooklyn, New York reflecting her fifty percent ownership in the premises ("422 Crown Street"); 2) a life estate and injunctive relief; 3) damages; 4) and declaratory relief.
Plaintiff, individually and as Administrator, will be referred to as "plaintiff" in the singular.
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The following documents were admitted into evidence:
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There is no dispute that Levi Yitzchok Shapiro, plaintiff's husband, plaintiff Guta Schapiro, and Cyla Ushpol, defendants Zalman Schmuckler's and Efraim Schmuckler's mother, knew each other for many years before the execution of the memorandum agreement dated November 4, 1985. Plaintiff who was born in 1921 or 1922 is 98 or 99 years old and met Cyla Ushpol sometime around 1953 in Leningrad, Russia, and also attended her wedding.
In 1985, plaintiff and her husband lived on the second floor at 422 Crown Street, Brooklyn, New York, and rented space from the owner, Ms. Rose Diamond. This is a three-family home. There came a point when Mrs. Diamond wanted to sell the premises but plaintiff and her husband could not afford to pay for the home and agreed to assign their right to purchase to Cyla Ushpol. The memorandum agreement, signed by Mr. Shapiro and Ms. Ushpol, reflects the following:
MR. LEVI YITZCHOK SHAPIRO and MRS. CYLA USHPOL agree as follows:
1. Mr. Shapiro will go to contract to purchase 422 Crown Street Brooklyn from Mrs. Diamond as soon as possible. Mrs. Ushpol will furnish the funds for 10% down payment.
2. Immediately after contract, Mr. Shapiro will assign the contract to Mrs. Ushpol.
3. Upon taking title, Mrs. Ushpol will make a 10 year lease with Mr. Shapiro on the following terms:
1 year free
Years 2-5 $600 a month
Years 6-10 Rent to be negotiated based on rents for similar apartments. After 5 years (handwritten)
4. If Mrs. Ushpol will want to sell house, she will offer it to Mr. Shapiro at market value in her opinion or at price offered by other parties. If Mr. Shapiro refuses to purchase, lease may be terminated one year after sale of house.
Dated: Nov. 4, 1985
Within three months of the memorandum, Rose Diamond conveyed her interest to Cyla Ushpol by deed dated January 14, 1986.
On January 19, 2000, Cyla Ushpol conveyed her interest to her sons Zalmen Schmuckler and Efraim Schmuckler, without consideration, but with a restriction that "(t)he Grantor reserves a life estate to possess part of the property and to rent out the rest of the house, and pay all the expenses of the house."
On June 5, 2001, a correction deed was filed where, "(t)he Grantor reserves a life estate to possess part of the property. This is a correction Deed to correct the address of Grantees and to revise the life estate of Grantor."
The plaintiff was unaware of the conveyances to defendants Schmucklers.
On or about August 3, 2006, the Defendant Schmucklers entered into a contract of sale with Shmaya Krinski, a prior defendant who is no longer a party in this action, for $1,600,000.00. The defendants never personally contacted the plaintiff regarding her right of first refusal.
Applicable law
The law regarding a constructive trust is found in Diaz v. Diaz , 130 AD3d 560, 561 [2d Dept 2015] and follows:
The elements of a constructive trust are (1) a fiduciary or confidential relationship; (2) an express or implied promise; (3) a transfer in reliance on the promise; and (4) unjust enrichment (see Sharp v. Kosmalski , 40 NY2d at 121 ; see also Watson v. Pascal , 65 AD3d 1333, 1334, 886 NYS2d 440 [2009] ). A party must establish the elements of a constructive trust by clear and convincing evidence (see Klam v. Klam , 239 AD2d 390, 391, 658 NYS2d 35 [1997] ; Davis v. Caldwell, 1 AD2d 827, 827, 148 NYS2d 512 [1956] ).
Regarding the right of first refusal, in the context of a lease, the court in Coinmach Corp. v. Fordham Hill Owners Corp. , 3 AD3d 312 [1st Dept 2004] ) states:
The right of first refusal is an exception to the general rule that the covenants of a lease are extended into a month-to-month tenancy, and it must be expressly reaffirmed ( Galapo v. Feinberg , 266 AD2d 150, 150-151, 699 N.Y.S.2d 344 [1999] ; White Castle Sys. v. Blohm , 807 F.2d 313, 315 [1986] ).
The court in Cipriano v. Glen Cove Lodge #1458, B.P.O.E. , 1 NY3d 53, 61 [2003] ), stated:
Specific performance may be granted only where the holder of the right of first refusal is shown to be ‘ready, willing, and able to purchase the property, not only when the right ripens, but also when specific performance is ordered’ ( 25 Williston, Contracts § 67:85, at 504 [4th ed] ).
The court in Wei Hong Hu v. Sadiqi , 83 AD3d 820, 821 [2d Dept 2011], regarding an action for breach of contract by not being given a right of first refusal held:
In order to establish that their cross claims were meritorious, the tenants were required to demonstrate that they were ready, willing, and able to purchase the premises pursuant to the right of first refusal (see Cipriano v. Glen Cove Lodge # 1458, B.P.O.E. , 1 NY3d 53, 61, 801 NE2d 388, 769 NYS2d 168 [2003] ).
The standard to satisfy the requirements of the statute of fraud are found under General Obligations Law § 5-703(2) and stated in Nesbitt v. Penalver , 40 AD3d 596, 596 (2d Dept 2007) :
To satisfy the statute of frauds, a memorandum evidencing a contract and subscribed by the party to be charged was required to designate the parties, identify and describe the subject matter, and state all of the essential terms of a complete agreement.
Legal Analysis
The court found the testimony of both witnesses credible. It is inconsequential that the memorandum was signed only by plaintiff's husband inasmuch as plaintiff under the facts of this case was meant to be a third-party beneficiary. (See Matter of White Plains Plaza Realty, LLC v. Cappelli Enters., Inc. , 108 AD3d 634 [2d Dept 2013] ).
The plaintiff did not meet her burden of showing by "clear and convincing evidence" that a fiduciary or confidential relationship existed between either herself or her husband and Cyla Ushpol. These parties were close friends for many years and mutually benefited from their relationship, which also happened to include one of landlord and tenant. Although the plaintiff paid rent, she did not pay real estate taxes, maintenance or any other expenses related to the premises. The defendants were no unjustly enriched because there is no evidence that they received or were entitled to receive any funds in excess of what they were due for rent. (See Wells Fargo Bank, N.A. v. Burke , 155 AD3d 668, 671 [2d Dept 2017], " ‘The elements of unjust enrichment are that the defendants were enriched, at the plaintiff's expense, and that it is against equity and good conscience to permit the defendants to retain what is sought to be recovered’ ( County of Nassau v. Expedia, Inc. , 120 AD3d 1178, 1180, 992 NYS2d 293 [2014] ; see Old Republic Natl. Tit. Ins. Co. v. Luft , 52 AD3d 491, 491-492, 859 NYS2d 261 [2008] ). ‘The essence of unjust enrichment is that one party has received money or a benefit at the expense of another’ [ City of Syracuse v. R.A.C. Holding , 258 AD2d 905, 906, 685 NYS2d 381 [1999] ] )").
There is no evidence whatsoever of any contemplation between or among the parties that plaintiff would ever retain a fifty-percent interest in the premises. (See Diaz v. Diaz , supra.). There being no evidence of a confidential relationship or unjust enrichment, this court will not impress a constructive trust on the premises. (See Diaz v. Diaz , supra.)
Although the statute of fraud is not a complete bar to a claim of a life estate, especially when the court impresses a constructive trust ( Paladino v. Sotille , 15 Misc 3d 60 [App Term 2007] ), the court declines to impress such a trust for reasons already stated and because there was no written evidence or other facts that allow an inference of such a life estate in the premises for Levi Yitzchok or plaintiff Guta Schapiro. (See Small v. Fang , 50 Misc 3d 1201[A], 2015 NY Slip Op 51840[U], [Civ Ct, New York County 2015], "[a] life estate is valid only if it is executed through a written agreement. Halberstam v. Kramer , 39 Misc 3d 126[A], 969 N.Y.S.2d 803, 2013 NY Slip Op 50408[U] [App. Term 2nd Dept. 2013], Karron v. Karron , 41 Misc 3d 1215[A], 981 N.Y.S.2d 636, 2013 NY Slip Op 51698[U] [Dist. Ct. Nassau Co. 2013]).
Plaintiff argues that the court must accept the right of first refusal as "law of the case" because of the determination of the court as a result of a prior motion to dismiss, but this court is not so limited because that determination was based on the sufficiency of the pleading. (See and Cf. Landes v. Provident Realty Partners II, L.P. , 2017 NY Slip Op 30196[U], [Sup Ct, NY County 2017] citing RXR WWP Owner LLC v. WWP Sponsor, LLC , 145 AD3d 494 [1st Dept 2016] ). Nonetheless, the court reaches the same conclusion regarding the existence of a "right of first refusal" after trial but on a different basis after hearing the testimony and considering the evidence. Both witnesses testified that under the Jewish tradition and law, known as Bar Mitzra , there exist a right of first refusal. The general rule under New York law provides that if rent is accepted after the end of a lease term the tenancy converts to a month-to-month tenancy with all other terms and conditions applying. The right of first refusal is an exception to the general rule and the right terminates at the end of a lease term unless there is a specific agreement that states otherwise. (See and Cf. Gulf Oil Corp. v. Buram Realty Co. , 11 NY2d 223 [1962], where lease extensions that do not mention right of option to purchase are not incorporated into extension agreements). Some courts appear to completely terminate the right of first refusal at the end of the lease term. (See Hendel v. Torah , 2017 NYLJ LEXIS 655). Other courts allow the continuation of the right if specific provision is made for the continuation of the right of first refusal or it is implied . (Cf. White Castle Sys., Inc. v. Blohm , 807 F2d 313, 315 [2d Cir 1986] ).
The Jewish tradition of Bar Mitzra is significant in understanding the context of the memorandum, "if Mrs. Ushpol will want to sell house, she will offer it to Mr. Shapiro at market value in her opinion or at price offered by other parties," which in this framework was intended to endure for the time plaintiff resided at the residence on a month-to-month basis notwithstanding the expiration of the ten year term of the memorandum agreement. The fact that both parties applied for relief through a Bais Din , a rabbinical court, the defendants in Los Angeles, California, and the plaintiff in Brooklyn, New York, is significant and the court may infer that the parties understood the right of first refusal would continue. This court is not applying Jewish law but giving life to the intent of the parties in the context of their understandings, long history, and the express and implied agreement of the parties.
Notwithstanding plaintiff's right of first refusal, and the failure of the defendants to contact plaintiff directly to offer to sell the premises on the same terms and conditions as offered to Krinsky (the option to exercise the right of first refusal), there was no proof of the plaintiff being "ready, willing and able" to purchase at the time the right of first refusal ripened and in fact the testimony of plaintiff Schapiro candidly indicates as much. In fact, the reason for the 1985 memo to begin with was the inability of plaintiff to purchase the building which caused plaintiff to reach out to her friend Cyla Ushpol and this court will not speculate as to the resources of plaintiff's children for their mother's use in purchasing the premises. Therefore, the action for declaratory relief or specific performance must be denied. See Wei Hong Hu v. Sadiqi, supra .
The failure of the plaintiff to show she was "ready willing and able" to purchase also goes directly to plaintiff's ability to prove damages. Moreover, even if it was shown that plaintiff could purchase the property, there was no evidence of damages suffered by the plaintiff in the form of any testimony regarding the value of the property at the time the right of first refusal ripened and the value of the property today or any evidence of any other damages suffered by plaintiff. Damages is a necessary element for any breach of contract claim. (See , Wei Hong Hu v. Sadiqi , 83 AD3d 820 [2d Dept 2011] ).
Based on the foregoing, it is,
Ordered, that the clerk enter judgment in favor of the defendants and against the plaintiff and the complaint is dismissed; and it is further
Ordered, that all stays in this court are lifted.
This constitutes the decision and order of the court after trial.