Pace v. Perk

• Decision Date: 06 July 1981
• Citation: 81 A.D.2d 444,440 N.Y.S.2d 710
• Parties: Lester PACE et al., Respondents, v. Percy PERK et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 710

440 N.Y.S.2d 710

81 A.D.2d 444

Lester PACE et al., Respondents, v. Percy PERK et al., Appellants.

Supreme Court, Appellate Division,

Second Department.

July 6, 1981.

Frederick M. Douglass, Brooklyn, for appellants

Robin & Alexander, Brooklyn (Harry Alexander, Brooklyn, of counsel), for respondents.

Before DAMIANI, J. P., and GULOTTA, COHALAN and O'CONNOR, JJ.

DAMIANI, Justice Presiding.

The issues in this case are whether plaintiffs' complaint states a cause of action against any or all of the defendants and, if so, whether relief is barred to plaintiffs against any or all of those defendants by reason of the applicability of the affirmative defenses of the Statute of Frauds, res judicata, or collateral estoppel.

In substance, the complaint alleges that in August, 1973 plaintiffs Lester and Isabel Pace and defendant Percy Perk agreed to purchase improved real property known as the ICU Hotel located on Fulton Street in Kings County. The purchase price was $50,000, payable $10,000 in cash at the closing and the remainder by giving a purchase money mortgage for $40,000 bearing 8 1/2% interest per annum for a term of 5 years. An additional $15,000 was required to put the premises in good repair. The parties agreed to form a partnership for the purpose of purchasing the premises and operating it as a hotel. Defendant Perk was to contribute $15,000 and plaintiffs agreed to contribute $10,000, to provide labor in making repairs, and to manage the hotel when it opened. Plaintiffs and Perk agreed to treat their respective investments as equal and to share equally in the profits or losses.

Before the closing, defendant Perk advised plaintiffs that he wished to take title in the name of plaintiffs and his nominee Vurlia Wilkins. Wilkins paid no consideration and was not a member of the partnership. On September 24, 1973 plaintiffs and Wilkins took title to the premises.

On or about January 15, 1974 defendant Perk requested that plaintiffs and Wilkins execute a $15,000 second mortgage to secure his investment. Perk requested that the named mortgagee be Edward Hall. Hall paid no consideration for execution of the bond and mortgage. The plaintiffs Pace and defendant Wilkins executed the mortgage in favor of Hall for $15,000 for 5 years at 8 1/2% interest payable $307.95 per month. In contradiction of its terms, plaintiffs orally agreed with defendant Perk After the closing, the plaintiffs improved the premises and operated it as a hotel. They distributed the income equally between themselves and defendant Perk.

that because they were partners, no payments need be made on the mortgage.

On or about January 1, 1975 defendant Perk demanded that plaintiffs buy out his interest for a substantial sum and threatened that unless they did so he would take over complete title to the premises. Apparently plaintiffs refused. On or about January 23, 1975 defendant Perk had Hall, the mortgagee, institute a foreclosure action.

It appears from the record that on August 8, 1975 the court in the foreclosure action granted Hall summary judgment striking the answer of the Paces and Wilkins. A sale was held on September 9, 1975 and the property was purchased by Hall who assigned his bid to Hall & Wilkins, Inc., a domestic corporation. On September 10, 1975 the referee executed a deed in favor of that corporation. On or about March 19, 1976 the Paces moved to set aside the judgment of foreclosure and sale. The motion to vacate the judgment of foreclosure was denied on April 12, 1976. Plaintiffs Pace did not appeal, but instead commenced this action.

The "WHEREFORE" clause in plaintiffs' complaint in this action demands, inter alia, that any conveyances made by defendants to any fictitious corporation formed by them be annulled, that defendants be directed to provide an accounting of the partnership affairs, that a trust be declared in favor of plaintiffs to the extent of their interest in the property and that they be granted a money judgment for the amount found to be due them on the partnership account.

Issue was joined against defendant Perk on May 7, 1977. His answer denies the material allegations of the complaint and sets forth the Statute of Frauds as an affirmative defense. Issue was joined with defendant Wilkins on July 1, 1977. His answer denies the material allegations of the complaint and sets forth as an affirmative defense the alleged failure of the complaint to state a cause of action. Issue was joined with defendant Hall on August 10, 1976. His answer also denies the material allegations of the complaint and sets forth as affirmative defenses the claims that plaintiffs lacked personal jurisdiction over Hall and that the complaint failed to state a cause of action.

Plaintiffs moved to strike the answers of the defendants for failure to appear for an examination before trial. Defendants cross-moved to dismiss the complaint (1) for failure to state a cause of action, (2) on the ground of res judicata, and (3) on the ground of abandonment. The motion in chief was granted to the extent of directing defendants to appear for examination on a date certain and plaintiffs have not appealed. With respect to the cross motion, Mr. Justice HIRSCH found that the complaint sounded in fraud and deceit and therefore stated a cause of action. He rejected the res judicata claim because (a) defendant Perk was not a party to the foreclosure action and (b) the instant action for fraud is different in nature and object from one in contract, citing Lipkind v. Ward, 256 App.Div. 74, 8 N.Y.S.2d 832. Finally he found no intent on the part of the plaintiffs to abandon the action. Accordingly, the defendants' cross motion to dismiss was denied. The defendants have appealed.

FAILURE TO STATE A CAUSE OF ACTION

At the outset we note that the procedure adopted by defendants was somewhat confusing since their notice of cross motion and supporting papers, submitted after joinder of issue, requested dismissal of plaintiffs' complaint but did not specify the section of the CPLR under which the motion was made. Motions to dismiss a complaint are governed by CPLR 3211 and generally must be made before service of a responsive pleading is required. However, a motion to dismiss upon the ground that one or more causes of action asserted in the complaint fail to state a cause of action is an exception to the general rule and may be made at any time (CPLR 3211, subd. Siegel A reading of defendants' moving papers indicates that by the branch of their cross motion addressed to the alleged failure of the complaint to state a cause of action, they did not seek anything more than to test its legal sufficiency. Upon such a motion to dismiss a complaint for legal insufficiency, the court must assume that its allegations are true (Denihan Enterprises v. O'Dwyer, 302 N.Y. 451, 458, 99 N.E.2d 235), and must deem the complaint to allege whatever can be imputed from its statements by fair and reasonable intendment, however imperfectly, informally or illogically facts may be stated therein (Condon v. Associated Hosp. Service of New York, 287 N.Y. 411, 40 N.E.2d 230). In making its analysis, the court is not bound by the constructions and theories of the parties (see Siegel, Practice Commentaries, McKinney's Cons. Laws of N.Y., Book 7B, CPLR 3211:24). The test of the sufficiency of a complaint is whether it gives sufficient notice of the transactions, occurrences, or series of transactions or occurrences intended to be proved and whether the requisite elements of any cause of action known to our law can be discerned from its averments (CPLR 3013; Foley v. D'Agostino, 21 A.D.2d 60, 62-65, 248 N.Y.S.2d 121; Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 274-275, 401 N.Y.S.2d 182, 372 N.E.2d 17). Where the motion to dismiss for failure to state a cause of action is made under CPLR 3211, the plaintiff may rest upon the matter asserted within the four corners of the complaint and need not make an evidentiary showing by submitting affidavits in support of his complaint (Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 635, 389 N.Y.S.2d 314, 357 N.E.2d 970).

Practice Commentaries, McKinney's Cons. Laws of N.Y., Book 7B, CPLR 3211:28).

Since that branch of defendants' cross motion which was addressed to plaintiffs' complaint was confined only to the issue of legal sufficiency we deem it to have been made under CPLR 3211 (subd. par. 7). It does not appear that Special Term chose to consider that branch of the motion as one for summary judgment under CPLR 3211 (subd. and/or CPLR 3212 and hence we have confined ourselves to the allegations of the plaintiffs' complaint itself and would have considered the affidavits submitted on the cross motion and plaintiffs' verified bill of particulars, only if necessary, for the limited purpose of remedying any defects in the complaint (see Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 636, 389 N.Y.S.2d 314, 357 N.E.2d 970, supra).

The complaint alleges in paragraph 7 that plaintiffs and defendant Perk formed a partnership for the purchase and operation of the hotel. Because Perk did not want his name connected with the transaction he used Vurlia Wilkins as his dummy to take title and Edward Hall as his dummy to take a mortgage on the premises from plaintiffs and Wilkins. Neither Wilkins nor Hall paid any consideration for their interests in the premises. Plaintiffs are alleged to have agreed with defendant Perk that, despite its terms, no payments were to be made under the mortgage since they were partners. After the hotel had been repaired and the profits had been equally divided for some time, defendant Perk came to plaintiffs and demanded that they purchase his interest for a substantial sum and threatened that if they refused he would take over the place and give them nothing. When they refused Perk had Hall foreclose on the mortgage. Hall bought at the sale and assigned his bid to a corporation named Hall & Wilkins, Inc. which...