Cinema North Corp. v. Plaza at Latham Associates

• Decision Date: 01 February 1989
• Docket Number: 148 and 224,Nos. 73,D,s. 73
• Parties: CINEMA NORTH CORPORATION, Plaintiff-Appellant, Cross-Appellee, v. PLAZA AT LATHAM ASSOCIATES and Hoyt's Cinema Corporation, Defendants-Appellees, Cross-Appellants. ockets 88-7389, 7421 and 7423.
• Court: U.S. Court of Appeals — Second Circuit

Page 135

867 F.2d 135

CINEMA NORTH CORPORATION, Plaintiff-Appellant, Cross-Appellee, v. PLAZA AT LATHAM ASSOCIATES and Hoyt's Cinema Corporation Defendants-Appellees, Cross-Appellants.

Nos. 73, 148 and 224, Dockets 88-7389, 7421 and 7423.

United States Court of Appeals Second Circuit.

Argued Aug. 30, 1988.

Decided Feb. 1, 1989.

Paul F. Feigenbaum, Albany, N.Y. (White, Brenner & Feigenbaum, of counsel), for plaintiff-appellant.

Daniel J. Tyson, Albany, N.Y. (Zubres, D'Augostino & Hoblock, of counsel), for defendants-appellees, Plaza at Latham Associates.

David S. Weiss, Boston, Mass. (Goulston & Storrs, of counsel), for defendants-appellees, Hoyt's Cinema Corp.

Before FEINBERG, Chief Judge, CARDAMONE and PRATT, Circuit Judges.

GEORGE C. PRATT, Circuit Judge:

On this appeal we are asked to determine whether, under New York State's statute of frauds, a partnership may avoid the obligations of an agreement signed by a person who identifies himself as the partnership's "Vice President", but who is not specifically authorized in writing to enter into such an agreement.

Cinema North Corporation ("Cinema North") appeals from the granting of defendant Plaza at Latham Associates' motion for summary judgment and the dismissal of Cinema North's claim against defendant Hoyt's Cinema Corporation ("Hoyt's"). In the district court Cinema North claimed that Plaza at Latham Associates ("Plaza") had breached its agreement to lease theater space to Cinema North and that Hoyt's had tortiously interfered with this contract between Plaza and Cinema North.

Plaza argued that it could not be bound to the agreement because the agent who signed the agreement had not been authorized in writing to do so, as required by the New York State statute of frauds. N.Y.Gen.Oblig.Law Sec. 5-703(2) (McKinney 1978). Accepting Plaza's argument, the district court concluded that, although there were some unresolved questions of fact, none of them was material because, regardless of how they might be resolved, Plaza was not bound by the agreement. The district court also dismissed Cinema North's claim against Hoyt's: since Cinema North could not establish a valid contract to which Plaza was bound, a fortiori it could not maintain its claim against Hoyt's for tortious interference with that contract.

New York law provides an exception from its statute of frauds' requirement for written authority when the signing agent is a corporate officer; we must consider here whether that exception applies to a partner or to an officer of a corporate partner of a partnership.

We hold that under New York law a partnership may not avoid the obligations of an agreement signed by such an officer simply because he had not been authorized in writing to enter into the agreement. We do not decide whether Plaza's self-described "Vice President", Gary A. Carstens, was such an officer of Plaza or whether this exception to the statute of frauds applies to the facts of this case; we determine only that the absence of a written authorization for Carstens' signature was insufficient to permit summary judgment for Plaza and that material questions of fact, including those surrounding Carstens' relationship to Plaza, and Plaza's relationship with Eugene Weiss, I.K.S., Inc. and E.W. Development Co., require further proceedings in the district court.

I. BACKGROUND

In 1987 Plaza, a New York partnership that owns and operates Latham Circle Mall ("the mall"), near Albany, New York, planned an expansion of the mall that was to include the construction of an eight-movie-theater cinema complex. Through two of its employees, Carstens and Michael Glenn, Plaza commenced discussions with representatives of Cinema North about leasing and operating the cinema complex.

After about one month of negotiations, Cinema North and Plaza on July 8, 1987, executed a written "proposal" for lease of the theaters. This proposal was typed on Plaza stationery and was signed by Cinema North's president, Gerald Couture, and Cinema North's vice-president, Kevin Mullin, as officers of "Latham Circle Mall Cinemas (corporation to be formed)", and by Carstens as "Latham Circle Mall Representative". Underneath Carstens' signature he is identified as "Vice President". Carstens was not a partner of Plaza, its only general partners being Eugene Weiss and I.K.S., Inc., a Florida corporation. Eugene Weiss, the only individual who is a partner in Plaza, is also the sole shareholder in I.K.S., Inc., as well as a principal of E.W. Development Company. The facts are disputed concerning the relationships among E.W. Development Company, Weiss, Plaza, and Carstens.

On July 21, 1987, a second, corrected "proposal" was prepared on Plaza stationery and was later executed by the same parties. Following Carstens' signature is a handwritten "V.P." and underneath, just as on the July 8, 1987 proposal, he is identified as "Vice President". Both proposals provided that Latham Circle Mall Cinemas as tenant, with Cinema North as guarantor, would lease at specified rents approximately 20,000 square feet of theater space from Plaza for fifteen years commencing October 1, 1988.

Between July and November 1987 several conferences between Cinema North and Plaza were held to negotiate the details of a more formal "Shopping Center Lease" and, Cinema North alleges, the parties reached agreement on these terms in November. The formal lease, however, was never signed. Cinema North also alleges that, during the same period, it made purchases totaling over $15,000 for use in the theaters and made other financial arrangements in reliance on its agreement with Plaza.

On February 16, 1988, Plaza advised Cinema North that it was entering into a lease agreement with Hoyt's and that therefore it was not in a position to conduct further negotiations with Cinema North.

Cinema North commenced this diversity action in federal district court seeking specific performance of the contract by Plaza and claiming tortious interference with the contract by Hoyt's. Finding that Carstens lacked written authority to enter into the lease, the district court granted summary judgment in favor of Plaza and dismissed Cinema North's claims against Hoyt's. This appeal followed.

II. DISCUSSION

Under Fed.R.Civ.P. 56(c) summary judgment shall be granted when, viewing the record in the light most favorable to the nonmoving party, see United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam), the evidence offered demonstrates that there is no genuine issue of fact and that the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). To defeat a motion for summary judgment a plaintiff must offer "concrete evidence from which a reasonable juror could return a verdict in his favor," Dister v. Continental Group, Inc., 859 F.2d 1108 (2d Cir.1988).

Plaza asserts that the district court's grant of summary judgment in Plaza's favor may be affirmed on any of three grounds: (1) Cinema North lacks standing to sue for enforcement of the contract; (2) the "proposal" was insufficient to satisfy the statute of frauds as a matter of law; and (3) Carstens was not authorized in writing to sign a binding lease agreement on behalf of Plaza at Latham Associates, as required by the statute of frauds. We disagree and remand for further proceedings.

1. Standing of Cinema North.

Because Cinema North is merely the guarantor of the proposed lease agreement, and not the tenant which was a corporation to be organized, Plaza argues that Cinema North does not have standing to sue for enforcement of the lease agreement. In essence, Plaza challenges Cinema North's status as a real party in interest under Fed.R.Civ.P. 17(a).

"[A]n agent who has an ownership interest in the subject of the suit * * *, which is a question to be answered under the applicable substantive law, is a real party in interest" (footnote omitted). 6 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1553, at 698 (1971 & Supp.1988). The question, then, is whether, under New York law, Cinema North has an ownership interest in the lease and acted as an agent for Latham Circle Mall Cinemas, the tenant named in the proposed lease.

Cinema North, through its officers, negotiated and signed the proposal, and thus acted as the agent for Latham Circle Mall Cinemas. This, together with the identity of officers between Cinema North and Latham Circle Mall Cinemas, and the fact that Cinema North would have a controlling ownership interest in Latham Circle Mall Cinemas when formed, makes Cinema North a real party in interest with respect to the agreement. See Hanna Mining Co. v. Minnesota Power & Light Co., 573 F.Supp. 1395, 1398 (D.Minn.1983), aff'd, 739 F.2d 1368 (8th Cir.1984).

However, the fact that Cinema North's principal was a "corporation to be formed" has some consequences under New York law that we must consider. Ordinarily a party that executes an agreement on behalf of a "corporation to be formed" is not bound to the agreement personally, and therefore cannot compel the other party specifically to perform the agreement. Adamo v. Flow, 44 Misc.2d 628, 254 N.Y.S.2d 668 (Sup.Ct. Monroe Cty.1964) (plaintiff who executed offer to purchase real estate in his own name followed by the words "in behalf of a corporation to be formed", not intending to be personally bound, may not obtain specific performance). Here, however, officers of Cinema North executed the agreement on behalf of a corporation to be formed and agreed that Cinema North would act as the guarantor for the first five years of the lease. Thus, even though Plaza could not sue Latham Circle Mall Cinemas for enforcement of the lease, Plaza could sue Cinema North on its guaranty. The guaranty agreement supplies the mutuality of obligation that was missing in Adamo v. Flow, 44 Misc.2d at 628, 254 N.Y.S.2d at 669.

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