Midland Container Corp. v. Sophia Realty Corp.

• Decision Date: 20 November 1978
• Parties: MIDLAND CONTAINER CORPORATION, Respondent, v. SOPHIA REALTY CORPORATION et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 638

410 N.Y.S.2d 638

65 A.D.2d 784

MIDLAND CONTAINER CORPORATION, Respondent, v. SOPHIA REALTY CORPORATION et al., Appellants.

Supreme Court, Appellate Division, Second Department.

Nov. 20, 1978.

Guggenheimer & Untermyer, New York City (Bruce J. Berman, New York City, of counsel), for appellants.

Nemeroff, Jelline, Danzig, Graff, Mandel & Bloch, New York City (Howard Graff, New York City, of counsel), for respondent.

Before HOPKINS, J. P., and DAMIANI, RABIN and SHAPIRO, JJ.

MEMORANDUM BY THE COURT.

In an action Inter alia for specific performance of an option to purchase real property, the defendants appeal from an order of the Supreme Court, Queens County, dated August 16, 1978, which denied their motion, Inter alia, to dismiss the complaint based upon documentary evidence (see CPLR 3211, subd. (a), par. 1).

Order reversed, on the law, with $50 costs and disbursements, and defendants' motion to dismiss complaint granted.

On December 13, 1972 the plaintiff entered into a 12-year commercial lease with defendant Sophia Realty Corporation. The lease provided, Inter alia, that after January 1, 1975, rent on the premises would be $48,000 per year until the end of the lease term, December 31, 1984. Furthermore, paragraph "Thirty-Eighth" of the lease (denominated the plaintiff's right of " first refusal") provided that "(i)f the Lessor shall have the opportunity to sell the demised premises * * * Lessor shall give Lessee Fifteen (15) days notice in writing of such proposed sale and the * * * Lessee shall have the first option to purchase the demised premises * * * at the same price and on the same terms". The defendant corporation consisted of only two shareholders, each owning 50% Of the shares of outstanding stock. On January 2, 1975 the shareholders resolved, at a meeting of the Board of Directors, to dissolve the corporation, liquidate the corporate assets and, after payment of liabilities, distribute those assets equally amongst themselves. They agreed to acquire title to those assets not in their individual names, but rather in the form of a partnership. This partnership, defendant Sophia Realty Associates, had been formed the day before for the sole purpose of taking title to the assets of the soon-to-be dissolved corporation and administering them. On January 10, 1975 a deed transferring the leased premises from the defendant corporation to the defendant partnership was recorded in the Queens County Register's Office. Accompanying the deed, the defendants filed a New York City real property transfer tax return indicating that the "consideration" paid to the corporation was the partnership's assumptions of corporate liabilities to the extent of $138,809. New York State transfer taxes were also paid.

It is undisputed that the fair market value of the leased premises is assessed at $355,000. Notice of the change in record title from the corporation to the partnership was also given to the plaintiff at this time. In March, 1978 the plaintiff commenced the instant action for, Inter alia, specific performance of the option clause of the lease, i. e., paragraph "Thirty-Eighth". Plaintiff's theory is essentially that the conveyance of the leased premises from the corporation to the partnership constituted a "sale" within the meaning of the right of "first refusal" clause sufficient to trigger the option. Since the corporation allegedly "sold" the leased premises to the partnership for the consideration stated in the...