288 ST. NICK v. KISEKI REALTY

• Decision Date: 09 August 2000
• Citation: 712 N.Y.S.2d 849,185 Misc.2d 359
• Court: New York Supreme Court
• Parties: 288 ST. NICK L. L. C., Plaintiff,<BR>v.<BR>288 KISEKI REALTY, INC., Defendant.

185 Misc.2d 359

712 N.Y.S.2d 849

288 ST. NICK L. L. C., Plaintiff,

v.288 KISEKI REALTY, INC., Defendant.

August 9, 2000.

Fulbright & Jaworski, New York City, for defendant.

Rimberg & Associates, P. C., New York City, for plaintiff.

OPINION OF THE COURT

EDWARD H. LEHNER, J.

The novel legal issue presented on this motion by defendant 288 Kiseki Realty, Inc. (Kiseki) to dismiss the complaint is whether a power of attorney given by the sole shareholder, director and officer of Kiseki to his mother grants her authority, under the provision of General Obligations Law § 5-1502E, to execute a contract for the sale of real property owned by the corporation.

Facts

Shi Hwan Kim was the sole shareholder, director and officer of Kiseki, which owned the property located at 288 St. Nicholas Avenue (the Property). On April 5, 1999 he executed a general power of attorney in favor of his mother, Kil Soon Cha. In the instrument he initialed each of the powers listed in General Obligations Law § 5-1501.

In the late summer of 1999, Kim retained an attorney, Seyun Bach, to prepare a contract for a proposed sale of the Property. At his initial meeting with Bach, Kim was accompanied by his mother, who apparently was experienced in dealing with real estate. However, the contemplated transaction was not consummated. Kim then left for Asia. Thereafter, Cha requested Bach to prepare a contract for the sale of the Property to the plaintiff herein for the sum of $3,300,000. The contract was executed at a closing held on November 5, 1999, at which Cha signed on behalf of Kiseki, as attorney-in-fact for Kim. Both Bach and plaintiff's attorney apparently believed that the aforesaid power of attorney authorized Cha to bind Kiseki. Paragraph 20 of the rider to the contract provided: "Seller represents that Kil Soon Cha has the authority to execute this Contract of Sale on behalf of 288 Kiseki Realty, Inc. and that the Board of Directors of 288 Kiseki Realty, Inc. has approved the sale."

While Fred Harari has submitted an affidavit on behalf of plaintiff asserting that in his presence Cha called Kim to communicate some of the terms of the contract and get his approval therefor, Kim denies he knew anything of the contract execution until mid-November. In his affidavit, Bach states that upon learning of the transaction, Kim "became angry and told me (a) that he [that is Kiseki] had not approved that transaction, objected to the sale, and did not want to sell the Property, and (b) to rectify the situation." Further, Harari^[1] asserted that Cha told him that her son did not want the responsibility of evicting one of the tenants. Consequently a side agreement was executed (again Cha signing on behalf of Kiseki as attorney-in-fact for her son) in which the plaintiff agreed to remove the specified tenant.^[2]

Notwithstanding Bach's asserted mid-November conversation with Kim, no attempt was made in any way to terminate the contract until January 19, 2000 when Bach wrote to plaintiff's attorney stating that Kiseki elected to cancel the agreement because it was conditioned upon plaintiff obtaining a mortgage commitment by January 15, 2000 in the sum of $2,200,000, and no proof of such commitment had been sent. Such basis for termination was rejected by plaintiff's counsel, who pointed out that the contractual provision for termination was at the option of the plaintiff buyer and that a provision allowing the defendant seller to cancel if a mortgage commitment was not timely obtained was stricken from the agreement. Plaintiff's attorney subsequently sought to arrange for a closing date. However, by letter dated February 25, 2000 from new counsel, who are now representing defendant in this action, defendant for the first time asserted that the contract is unenforceable under the Statute of Frauds because the power of attorney did not authorize Cha to act on behalf of Kiseki.

Thereafter, this action was commenced in which plaintiff seeks specific performance. Before me are defendant's motion to dismiss pursuant to CPLR 3211 (a) (1), (5) and (7), and a cross motion by plaintiff for summary judgment.

Discussion

General Obligations Law § 5-703 (2) provides that a contract for the sale of real property is void unless it "is in writing, subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing." Thus, if the contract were for the sale of property owned by Kim personally, the power of attorney to Cha which authorizes her to act in "real estate transactions" would clearly be sufficient authority for her to execute a contract binding upon Kim. (See, General Obligations Law § 5-1502A.)

However, normally a power of attorney executed by an individual would not in itself authorize the agent to act on behalf of the principal in the principal's corporate capacity. But where, as here, the principal initials the power granting the agent authority in "business operating transactions," subdivision (3) of General Obligations Law § 5-1502E provides that this gives the agent broad powers "[w]ith respect to any business enterprise which is owned solely by the principal."

Although the General Obligations Law does not define the term "business enterprise," other statutory provisions where such term is used define it to include a corporation (e.g., Economic Development Law §§ 141, 210; General Municipal Law § 957 [g]). In light of (i) the definition of the term when employed in such other statutes, (ii) the fact that under common usage a corporation would be considered a business enterprise, and (iii) the wording of the statute from which there is nothing to evidence a legislative intent to exclude a corporation from the meaning thereof, I find that the term includes corporations.

Said subdivision (3) of General Obligations Law § 5-1502E provides that the power granted to an agent with respect to "business operating transactions" authorizes the agent with "respect to any business enterprise solely owned by the principal":

"a. to continue, to modify, to renegotiate, to extend and to terminate any contractual arrangements made with any person, firm, association or corporation whatsoever by or on behalf of the principal with respect thereto prior to the creation of the agency;

"b. to determine the policy of such enterprise as to the location of the site or sites to be utilized for its operation, as to the nature and extent of the business to be undertaken by it, as to methods of manufacturing, selling, merchandising, financing, accounting and advertising to be employed in its operation, as to the amount and types of insurance to be carried, as to the...