Elias v. Serota

• Decision Date: 01 October 1984
• Citation: 480 N.Y.S.2d 344,103 A.D.2d 410
• Parties: Ike ELIAS, Respondent, v. Nathan L. SEROTA, Appellant, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

Page 344

480 N.Y.S.2d 344

103 A.D.2d 410

Ike ELIAS, Respondent, v. Nathan L. SEROTA, Appellant, et al., Defendants.

Supreme Court, Appellate Division Second Department.

Oct. 1, 1984.

Shea & Gould, New York City (Herbert B. Evans, Arthur D. Felsenfeld and Willis H. Stephens, Jr., New York City, of counsel), for appellant.

Maffucci, Kruman & Zito, Malverne (Frank W. Zito, Malverne, and Henry E. Kruman, of counsel), for respondent.

Before LAZER, J.P., and MANGANO, NIEHOFF and BOYERS, JJ.

LAZER, Justice Presiding.

The principal issue in this action for judicial dissolution of two partnerships is the enforceability of an auction sale of partnership properties conducted pursuant to the dissolution provisions of the partnership agreements. The partner who opposes judicial dissolution and seeks dissolution pursuant to the partnership agreements has counterclaimed for specific performance of the auction results but Special Term has dismissed the counterclaims on the ground that the auction results were not supported by sufficient memoranda to comply with the Statute of Frauds. We conclude the dismissal was error.

I

The sole partners of S & E Realty Company and the sole general partners of Elota Realty Company, a limited partnership, are Ike Elias and Nathan Serota, for whom these entities have been the vehicles for real estate dealings so extensive that the auction involved 23 commercial parcels. Each of the partnerships was regulated by a partnership agreement which provided for division of profits and losses, recognition of capital contribution, management power, continuation of the business upon the death of either of the partners and the method of dissolution. The dissolution paragraphs in each agreement permitted either Elias or Serota to terminate the partnership by giving a written notice of dissolution containing notice of the time and place of an auction sale of the partnership properties. The auction provisions directed that the sale be conducted by a member of the accounting firm serving the partnerships, limited the bidding solely to the partners, made the order in which each partner could bid on each parcel dependent on the toss of a coin, and required each successive bid to exceed the prior one by at least $2,500. The agreements also declared that "whoever of Serota or Elias shall have made the highest bid * * * shall be deemed to have purchased such property". Within 45 days after the auction sale, the purchasing partner of each parcel was to make a 20% down payment to the partnership, with the remainder due in 36 equal monthly installments. The agreements bound the partnerships and the partners, their heirs, administrators and assigns to the results of the completed auction sales.

By letters dated July 29, 1982, Elias elected to terminate both partnerships and fixed September 14 and 15, 1982, as the dates for the auctions. By two signed memoranda dated September 14, 1982, the partners set that date for the auction of all the properties, designated February 1, 1983 as the closing date, modified the partnership agreements by raising the minimum successive bid to $5,000, and provided for a separate tally for the successful bids of each partner, with the dollar totals to be set off against each other "so that a balance may be struck and a single check be given to the bidder who is entitled to the balance due". ^* To avoid tax consequences and mortgage acceleration clauses, one of the modification memoranda provided that title to each of the properties would be retained by the partnership entities "as nominee for account and exclusive benefit of the successful bidder". It was anticipated that the partnership would enter into more formal nominee agreements with the successful bidders at a later time.

On the day of the auction, the appropriate accountant assumed the role of auctioneer and conducted the auction in the presence of a stenographer who transcribed the proceedings. The next day, the auctioneer signed and mailed the partners a summary of the auction results showing that Elias had successfully bid a total of $11,360,000 for five parcels while Serota was the successful bidder on thirteen parcels for a total of $36,940,000, and that no bids had been received for five parcels. Although the parties agreed that the partnership lawyers would prepare the requisite closing documents, tax and other complications resulted in the retention of separate counsel by Elias, who then refused to execute the closing documents prepared by Serota's counsel on the ground that the documents constituted a material change from the provisions of the partnership agreements.

Elias subsequently commenced this action for judicial dissolution of both partnerships and the appointment of a receiver. Asserting that judicial dissolution would violate the dissolution procedures established by the partnership agreements Serota counterclaimed for specific performance of the auction results plus damages. Elias responded with a motion to dismiss both counterclaims on the ground that the auction sale was unenforceable under the Statute of Frauds because he had never signed any writing memorializing the auction results. Although Elias had not yet replied to the counterclaims, Serota cross-moved for summary judgment on the counterclaims and to dismiss the portion of the complaint that sought appointment of a receiver. At that point, Elias moved separately for the appointment of a receiver.

Special Term denied the motion for a receiver but dismissed Serota's counterclaims on the ground that the auction results were not enforceable under the Statute of Frauds because Elias had not subscribed any written memorandum that identified the property sold or the price to be paid for each parcel. Serota has appealed from so much of the order as dismissed his counterclaims and denied his cross motion for summary judgment.

II

Serota first contends that the Statute of Frauds has no application to partnership agreements but Elias argues that the statute applies to any transaction where interests in real property are created or a contract for the sale of real property is involved (see General Obligations Law, § 5-703, subds. 1, 2). It is true, of course, that the Statute of Frauds is not applicable to a contract to form a partnership to deal in real estate because the interest of each partner in a partnership is deemed personalty (Mattikow v. Sudarsky, 248 N.Y. 404, 162 N.E. 296; Fairchild v. Fairchild, 64 N.Y. 471; Pace v. Perk, 81 A.D.2d 444, 440 N.Y.S.2d 710). Thus, if a partner who has purchased property for a partnership refuses to convey it, the other partners can obtain specific performance of their oral partnership agreement and compel the purchasing partner to convey to the partnership (Mattikow v. Sudarsky, supra; Pace v. Perk, supra ). The situation differs, however, when a partnership agreement requires the partnership to convey partnership real estate to one of the partners individually, for, in that event, the Statute of Frauds applies because the interest to be conveyed is not considered personalty (Najjar v. National Kinney Corp., 96 A.D.2d 836, 465 N.Y.S.2d 590; Pounds v. Egbert, 117 App.Div. 756, 102 N.Y.S. 1079; Backus Plywood Corp. v. Commercial Decal, 317 F.2d 339; 2 Corbin, Contracts, § 411). There is no merit, therefore, in the contention that all agreements between partners involving the disposition of real property fall outside the ambit of the Statute of Frauds.

Serota argues further, however, that if this court concludes that enforceability of the auction transaction is dependent on compliance with the Statute of Frauds, the statute has been satisfied by existing memoranda and documents. These include the written partnership agreements, the notices of termination, the written modification of the auction procedures, the transcript of the auction proceedings, and the auctioneer's summary letter. Since the auction transcript and the auctioneer's letter were not signed by either partner, Serota proffers the rule that permits signed and unsigned writings to be read together to satisfy the Statute of Frauds (see Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48, 110 N.E.2d 551). Elias retorts that the unsigned writings cannot be considered since they postdate the signed ones.

The unsigned writings issue need not be decided, however, because the validity of the auction procedures does not depend on whether a memorandum setting forth the auction results has been subscribed by the partners. Although Elias has focused on the absence of signed writings...