Minichiello v. Royal Business Funds Corp.

• Decision Date: 30 December 1966
• Citation: 18 N.Y.2d 521,277 N.Y.S.2d 268,223 N.E.2d 793
• Parties: , 223 N.E.2d 793, 24 A.L.R.3d 1154 Angelo MINICHIELLO et al., Respondents, v. ROYAL BUSINESS FUNDS CORPORATION, Appellant et al., Defendants.
• Court: New York Court of Appeals Court of Appeals

Page 268

277 N.Y.S.2d 268

18 N.Y.2d 521, 223 N.E.2d 793, 24

A.L.R.3d 1154

Angelo MINICHIELLO et al., Respondents, v. ROYAL BUSINESS FUNDS CORPORATION, Appellant et al., Defendants.

Court of Appeals of New York.

Dec. 30, 1966.

Bruce Bromley, Morton L. Ginsberg, John R. Hupper, Thomas D. Barr and Jay E. Gerber, New York City, for appellant.

Edward F. Butler and Reginald Leo Duff, New York City, for Angelo Minichiello, respondent.

KEATING, Judge.

Angelo Minichiello alleges in his complaint that, between September, 1963 and March, 1964, he performed certain services for appellant Royal Business Funds Corporation (Royal) and defendant Small Business Investment Company of New York (SBIC).

As alleged in Mr. Minichiello's complaint, Royal and SBIC had become the owners of 'a substantial amount of the convertible debentures issued by Colorama Features, Inc.' After a default by Colorama in September, 1963, plaintiff alleges that, at the request of defendants Royal and SBIC, he found a purchaser (the defendant Jayark Films Corporation), who bought from them the convertible debentures of Colorama as well as certain Colorama Stock.

Plaintiff claims from Royal $25,000 for these services as well as $5,000 for finding defendant Jayark as a source of investment for defendant Royal. Plaintiff has no written memorandum of his alleged contract with defendants.

Royal moved to dismiss Minichiello's complaint on the ground that his action is barred by the Statute of Frauds (General Obligations Law, Consol.Laws, c. 24--A, § 5--701). The Appellate Division affirmed Special Term's denial of this motion, Justice STEUER dissenting (25 A.D.2d 502, 266 N.Y.S.2d 570).

The issue thus presented on this appeal is whether the order of Special Term denying appellant's motion to dismiss on the ground that this action is barred by the Statute of Frauds was properly made.

As enacted in 1949, subdivision 10 of section 31 of the Personal Property Law, Consol.Laws, c. 41, now contained as amended in the General Obligations Law (§ 5--701, subd. 10), applied the Statute of Frauds to any agreement which: 'Is a contract to pay compensation for services rendered in negotiating a loan, or in negotiating the purchase, sale, exchange, renting or leasing of any real estate or interest therein, or of a business opportunity, business, its good will, inventory, fixtures or an interest therein, including a majority of the voting stock interest in a corporation and including the creating of a partnership interest'.

This section was subsequently construed by lower courts to permit recovery, despite the absence of a writing, in Quantum meruit. (See Gibson v. Archer Prods., 281 App.Div. 661, 117 N.Y.S.2d 438 (1st Dept., 1952); Wells v. Dent, 4 A.D.2d 307, 164 N.Y.S.2d 646 (4th Dept., 1957).) The section has also been construed to be inapplicable to business 'finders' as opposed to brokers. (See Wells v. Dent, supra; Kuffler v. List, 144 F.Supp. 776 (S.D.N.Y., 1956).) Our court has never passed on either question.

In 1964, the Legislature amended subdivision 10 to clearly apply the section to finders and to preclude any recovery in Quantum meruit. The amended section thus provides "Negotiating' includes procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction. This provision shall apply to a contract implied in fact or in law'.

Since plaintiff's cause of action accrued before the effective date of the amendment it is necessary for us to construe the meaning of subdivision 10 of section 31 of the Personal Property Law as it was enacted in 1949, and before the passage of the 1964 amendment.

In recommending the amendment to subdivision 10 of section 5--701, the Law Revision Commission characterized it as a clarification of the Original intent of the 1949 Legislature, stating with respect to the amendment: 'Its purpose is to make clear that the contracts required to be evidenced by writing include a contract or agreement for the compensation of a business broker for acting as a 'finder', 'originator' or 'introducer,' or for assisting in the negotiation or consummation of the transaction, and that the requirement cannot be avoided by an action for compensation in quantum meruit.' (N.Y.Legis.Doc., 1964, No. 65(F).)

Although, undoubtedly, the 1964 Law Revision Commission cannot conclusively determine the intent of the 1949 Legislature, the above statement of the commission constitutes a declaration of its own intent in proposing the statute, which has some bearing on the legislative intent in enacting the proposed section.

The briefs for each side have considered at some length various sources of legislative history surrounding the enactment of subdivision 10 of section 31.

The Law Revision Commission's recommendation to the 1949 Legislature failed to consider, explicitly, the two issues: (1) whether recovery could be had in Quantum meruit and (2) whether the statute was to apply to finders.

Accordingly, appellant has stressed the study prepared at the direction of the commission by Professor Braucher of Harvard, which did consider these issues, and respondent has correspondingly urged that the study should be accorded no weight.

Although a study like this is entitled to some weight in determining the legislative intent particularly where it accompanies the commission's report to the Legislature, the intention of the Legislature in this case can be far better perceived by examining the purpose of the statute.

In its brief recommendation to the Legislature, the Law Revision Commission stated its reason for proposing subdivision 10 of section 31: 'In recent years there have been a substantial number of reported cases of claims for commissions for services rendered in the sale of a going business or a business opportunity. Under existing law there...