Elyachar v. Gerel Corp., 82 Civ. 5070 (ADS).

• Decision Date: 30 March 1984
• Docket Number: No. 82 Civ. 5070 (ADS).,82 Civ. 5070 (ADS).
• Citation: 583 F. Supp. 907
• Parties: Daniel ELYACHAR and Ralph Elyachar, Plaintiffs, v. GEREL CORPORATION, Huguel Corporation, Ruradan Corporation, Timston Corporation, and Jehiel R. Elyachar, Defendants.
• Court: U.S. District Court — Southern District of New York

583 F. Supp. 907

Daniel ELYACHAR and Ralph Elyachar, Plaintiffs, v. GEREL CORPORATION, Huguel Corporation, Ruradan Corporation, Timston Corporation, and Jehiel R. Elyachar, Defendants.

No. 82 Civ. 5070 (ADS).

United States District Court, S.D. New York.

March 30, 1984.

Esanu, Katsky, Korins & Siger, New York City, for plaintiffs; Mark Walfish, David Katsky, Stephen J. Swiatkiewicz, Bruce Levine, New York City, of counsel.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for defendants; Leslie Gordon Fagen, Earl H. Doppelt, New York City, of counsel.

OPINION AND ORDER

SOFAER, District Judge.

This is an action by two sons, Daniel and Ralph Elyachar, to compel their 85-year old father, Colonel Jehiel R. Elyachar, to deliver to them certain stock certificates. They claim their father long ago gave them the interests represented by the certificates, but now refuses physically to deliver the certificates because he wants to revoke the gifts he made. The father contends he never made the gifts claimed by his sons, and that his failure to deliver the certificates proves his intent. These differences resulted in an eight-day trial to ascertain the father's intentions from his statements and actions. The evidence establishes that Colonel Elyachar intended to create and created irrevocable, intervivos trusts (or remainder interests), whereby he implicitly declared himself trustee of the shares he gave to his children and grandchildren as beneficial owners, with full control over the interests to pass to them only upon the Colonel's death or resignation.

Jehiel Elyachar was born in Jerusalem in 1898. He left what was then Palestine around 1928 to come to this country. He became an engineer, and then a builder and owner of office and apartment buildings in Manhattan. He enlisted in the war against Hitler, joining General Patton's army in its march across Europe into the Nazi homeland, and helping to construct the bridges used by Patton's troops in their advance. His service earned him promotion to the rank of full Colonel, as well as the Bronze Star from the United States Army and the Legion of Honor from the French Government. After the war, Colonel Elyachar returned to his real estate business in New York. Over the years he built and managed several valuable properties. He also built a family — twin sons, the plaintiffs in this case, and a daughter named Ruth, who has interests similar to those of her brothers, but who has refused to join a suit against her father.

I. Jurisdictional Defenses

Defendants contend that diversity of citizenship is absent here, because Daniel and Ralph are domiciliaries of New York, where their father also lives. The evidence establishes, however, that the sons are domiciled in Florida. Daniel has lived in Florida for over ten years, Ralph for over five. They run a real estate business there, as partners in two companies that operate only in Florida. Both have been registered to vote there for several years, and both hold Florida drivers' licenses. The fact that they rent and do not own their homes in Florida has little significance, in that many bona fide domiciliaries rent their homes. Ralph and Dan appear from the record to have economic constraints on their ability to buy homes at this time, given their other Florida land holdings. They left New York in part because their father cannot constructively work with them in running the family real estate. The Colonel himself recognized at trial that his sons "live in Florida." Tr. 867; see Tr. 831, 834.

Defendants argue that Ralph owns a Scarsdale home worth over $250,000, that he has spent substantial time there, see Tr. 585, 587-88, 592-93, that Ralph's wife has retained her New York citizenship, and that Ralph and his wife filed a verified complaint in a personal injury action in October 1981 in New York County Supreme Court reciting that they reside at the Scarsdale home. In fact, Ralph's wife Alice does regard herself as a New York resident, and while she lives with her husband in Florida she apparently does so with the hope that he will someday return to New York. Alice, however, and not Ralph, owns the Scarsdale home, see Tr. 584; and Alice filed the complaint alleging that she and her husband were residents of New York without consulting Ralph or obtaining his authorization for such a statement, see Tr. 589-90. Defendants also refer to statements that indicate that plaintiffs intend to return to New York, particularly if they succeed in this suit and assume control of significant properties. Defendants failed to prove, however, that plaintiffs have formed an intent to return to New York at any specific time. Plaintiffs have made a bona fide change in their domicile, and the fact that they might be inclined to return to New York under circumstances that may or may not ever come about does not nullify their present intent to live in Florida, which is potentially unlimited in time. See generally 1 Moore's Federal Practice ¶ 0.743-4 (2d ed. 1983).

The suggestion that plaintiffs are guilty of laches or should be estopped from bringing this suit is untenable. Plaintiffs have always understood that their father retained control of the business in which they argue he gave them ownership interests. They have also understood and agreed that they had no right to sell or pledge the stock, all in the Colonel's possession and control, in their names. Until recently, the Colonel gave no hint that he intended to revoke what his sons thought were gifts. In 1982, for example, when the Colonel stopped payment on dividend checks from Gerel Corporation his sons demanded the dividends as owners of "20 percent of the Gerel Corporation," and new checks were then issued at the Colonel's direction. See PX 74; see Tr. 458, PX 47. The Colonel has not been prejudiced by the alleged delay, moreover. He has voluntarily continued running the family businesses, and would have done so even if he had known all along that some of his companies were irrevocably owned by his children and grandchildren. The missing documents and faded memories encountered at the trial were partially if not exclusively the product of the Colonel's willful suppression of evidence. Had he produced the missing documents they would have established even more clearly that he intended to convey ownership interests to his children and grandchildren. In addition, he failed to call some available witnesses who have intimate knowledge of his intentions, and the evidence of record provides no reason to believe that the potential witnesses who have died would have supported the Colonel's position.

Defendants also argue that plaintiffs are barred by the applicable statute of limitations, having sought delivery of the certificates for over 10 years and having been denied delivery or use of the stock during that period. The earlier requests that the Colonel deliver the certificates were not demands, however, but only suggestions that he arrange his affairs to avoid estate tax problems. No demand for the certificates was made until the Colonel recently made clear that he wanted to deny his sons the interests he and the family had always treated as theirs. When that repudiation occurred, plaintiffs promptly made the formal demands that led to this litigation.

II. Relevant History and Findings

Plaintiffs claim that their father made them outright gifts of the stock certificates they now seek to have delivered. To establish their claim they must prove the requisites of a valid, intervivos gift of stock. In New York, these are an intention on the part of the donor to make a gift, delivery of the property, and acceptance by the donee. In re Estate of Szabo, 10 N.Y.2d 94, 98, 176 N.E.2d 395, 396, 217 N.Y.S.2d 593, 595 (1961); In re Van Alstyne, 207 N.Y. 298, 306, 100 N.E. 802, 804-05 (1913). Defendants assert that the Colonel never intended to make a present gift of the stock, that the stock has never been delivered to plaintiffs, and that plaintiffs have never accepted the certificates. Plaintiffs alternatively argue that their father made them gifts of ownership interests in the defendant corporations to the extent reflected by the certificates, retaining for himself the power to control the corporations during his lifetime. This claim was raised and advanced well before trial, and defendants have presented their evidence and argument against it. Plaintiffs' motion to deem the complaint amended to conform to the proof supporting this claim is therefore granted. See Fed.R. Civ.P. 15(b).

The Colonel decided early in his career to place each of the buildings he owned in a separate corporation. Huguel Corporation, for example, owns a building on East 56th Street; Timston Corporation owns a building at Second Avenue and 39th Street; Ruradan Corporation owns a building on East 48th Street; and Gerel Corporation owns a building on Madison Avenue. When Ruradan, Huguel, and Timston were formed, in about 1935, 1938, and 1945 respectively, Colonel Elyachar had not yet given his children ownership interests in those entities. In 1948, however, he arranged through his attorney and accountant to transfer all the stock of Ruradan (a name based on the names of Ruth, Ralph and Dan) to the Drell Corporation, which at that time was owned by his three children. PX 58-61. Thereafter, on December 29, 1948, the original stock certificates issued for Ruradan were cancelled, and four new certificates were issued, reflecting 20 shares to J.R. Elyachar and 10 shares each to the three children. Each 10-share block was "in exchange for 10 shares of Drell Corporation." DX 1003, Certificate Nos. 4-7. The Colonel placed or arranged to have placed on each certificate the stock transfer tax stamps required under New York law for such transfers. See N.Y. Tax Law § 270 (McKinney's 1966 & Supp.1983). All three of the children's certificates were countersigned some time after June 1949 by the Colonel's daughter, Ruth...