Petrello v. Jeffery G. White, White, Jr., Thomas D. White, White, Jr., & White Inv. Ltd.
| Decision Date | 08 March 2018 |
| Docket Number | 01-CV-3082 (DRH) (AKT) |
| Parties | ANTHONY G. PETRELLO and CYNTHIA A. PETRELLO, Plaintiffs, v. JEFFERY G. WHITE, as Co-Executor of the Estate of John C. White, Jr., THOMAS D. WHITE, as Co-Executor of the Estate of John C. White, Jr., and WHITE INVESTMENT LIMITED PARTNERSHIP, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
For Plaintiffs:
NICA B. STRUNK, PLLC
P.O. Box 5087
Southampton, NY 11969
By: Nica B. Strunk, Esq.
BERG & ANDROPHY
120 West 45th Street
New York, New York 10036
By: David H. Berg, Esq.
For Defendants:
McDERMOTT WILL & EMERY LLP
340 Madison Avenue
New York, New York 10173
By: Banks Brown, Esq.
Monica Asher, Esq.
KRAMER LEVIN NAFTALIS & FRANKEL LLP
1177 Avenue of the Americas
New York, New York 10036
By: John P. Coffey, Esq.
Leah Friedman, Esq.
This long-running controversy centers around an August 25, 1998 contract of sale (the "Contract") for 9.56 acres of waterfront property located in Sagaponeck, New York (referred to as lots 4, 5, and 6). That Contract also gave Plaintiffs a written right of first refusal over certain other parcels. Presently before the Court for resolution are cross motions for summary judgments on the issue of whether the November 28, 2000 transfer of title to the parcel known as Lot 1 triggered the right of first refusal granted to Plaintiffs. For the reasons set forth below, Plaintiffs' motion is granted and Defendants' motion is denied.
The background of this litigation is contained in the various decisions issued by this Court, as well as the Second Circuit.1 Set forth below are the facts relevant to the instant motions. Unless otherwise noted, the facts are undisputed. Other asserted disputed facts will be discussed as appropriate.
Plaintiffs Anthony G. Petrello and Cynthia A. Petrello ("Plaintiffs" or "Petrellos"), as purchasers, and defendant John C. White, Jr. ( "Defendant" or "White"), as seller, entered into a contract for the sale of Lots 4, 5, and 6 on the then-proposed Subdivision Map of John C. White Farm (the "Contract"). The fully signed Contract, dated "April 1998," was delivered to Plaintiffs on September 4, 1998. (Defs.' Resp. to Pl.'s 56.1 Statement at ¶ 1.)
The Contract contains the following provision in paragraph 33(4) of the Rider:
If Seller proposes to sell or otherwise transfer all or any portion of the Farm Property (the remaining property on the attached Map of White's Subdivision) to any third-party, then, prior to entering into such a transaction (or each such transaction in the event of periodic sales), Seller shall provide to Buyer a written copy of the proposed transaction and offer Buyer the opportunity within a thirty day period to match the transaction on the same terms and conditions. If Buyer declines, Seller shall be free to sell. If Seller proposes to sell or otherwise transfer all or any portion of the Farm Property to a related party, then this right of refusal shall not apply to such transfer, but the transferee shall be bound by the terms of this right of first refusal. Nothing herein shall preclude Seller from granting a conservation easement or transferring development rights associated with the Farm property without being subject to the right of first refusal.
(Defs.' Resp. to Pl.'s 56.1 Statement at ¶ 2.) Paragraph 33(6) of the Contract Rider defines the terms "related party" and "third party" thusly:
For purposes of paragraph 4 and 5 above, a third-party shall be any person or entity other than a "related party." A "related party" shall in the case of Seller refer to any of the following: (i) any person or group of persons who are descendants of John C. White, Jr. and Elizabeth J. White; (ii) any trust, at least ninety (90) percent of the value of which provides for beneficiaries who are the persons listed in (i); (iii) any general or limited partnership at least ninety (90) percent of the equity of which is owned by partners who are persons listed in (i); and (iv) any corporation or other limited liability entity at least ninety (90) percent of the shares are [sic] are owned by shareholder or owners who are listed in (i).
(Defs.' Resp. to Pl.'s 56.1 Statement at ¶ 3.)
On November 28, 2000, White transferred to an entity entitled White Investment Realty, LP ("WIRLP") Lot 1 on the subdivision Map of the John C. White Farm ("Lot 1"). The "Recording Page" in the Suffolk County Clerk's Office indicates that zero consideration was paid by WIRLP for the transfer. Prior to that conveyance, White obtained an appraisal of Lot 1 which stated that the market value was $1,375,000.00 as of April 2000.The parties agree that, infact, WIRLP does not exist and the intended grantee was White Investment Limited Partnership ("WILP"). Accordingly, on July 8, 2010 a Correction Deed was executed stating that the intended grantee of the November 28, 2000 deed was WILP. (Defs.' Resp. to Pl.'s 56.1 Statement at ¶¶ 4-7.)
WILP was formed in the State of Delaware by certificate executed on September 3, 1998, and filed in the Office of the Secretary of State of the State of Delaware on September 17, 1998. The General Partners listed in the Certificate of Limited Partnership were: White, Elizabeth J. White (Defendant's wife), Jeffrey G. White (Defendant's son), Barbara J. White (Defendant's daughter) and Thomas D. White (Defendant's son). (Defs.' Resp. to Pl.'s 56.1 Statement at ¶ 8.)
On December 23, 1999 the partners of WILP executed a document entitled "The White Investment Limited Partnership Agreement." Schedule A attached thereto lists the general and limited partners and their interest in the partnership as follows:
General Partners: Percentage Interest John C. White
.485% Elizabeth J. White
.485% Jeffrey J. White
.01% Barbara J. White
.01% Thomas D. White
.01% Limited Partners: Percentage Interest John C. White
33.265% Elizabeth J. White
33.265% Jeffrey J. White
1.91% Barbara J. White
1.91% Thomas D. White
1.91% The John N. White Irrevocable Trust 1.91% The White Family Trust 24.83%
(Defs.' Resp. to Pl.'s 56.1 Statement at ¶ 9.)
On January 1, 2000, the partners of WILP executed an "Amendment and Restatement of Limited Partnership Agreement" wherein Defendant and Elizabeth J. White gratuitously transferred and assigned a portion of their interest in the partnership, resulting in the following partners and percentage interests:
General Partners: Percentage Interest John C. White
.485% Elizabeth J. White
.485% Jeffrey J. White
.01% Barbara J. White
.01% Thomas D. White
.01% Limited Partners: Percentage Interest John C. White
17.03% Elizabeth J. White
17.03% Jeffrey J. White
3.82% Barbara J. White
3.82% Thomas D. White
3.82% The John N. White Irrevocable Trust 3.82% The White Family Trust 49.66%
(Defs.' Resp. to Pl.'s 56.1 Statement at ¶ 10.)
Under paragraph 36 (6)(iii) of the Rider to the Contract, the WILP would only qualify as a "related party" if it is a limited partnership "at least ninety percent of the equity of which is owned by partners who are persons listed in (i)", i.e. "descendants of [Defendant] and Elizabeth J. White." On November 28, 2000, the date of the transfer by Defendant of Lot 1 to WILP, (1) in excess of 17% of the equity of WILP was owned by Elizabeth J. White and (2) 49.66% of the equity of WILP owned by the White Family Trust ("WFT"). Defendants do not dispute that on the foregoing date Elizabeth J. White was not a person listed in paragraph 33(6)(i) of the Rider to the Contract because she was not a descendant of herself and Defendant. They contend,however, that this was a mistake which requires reformation2 of the contract. Additionally, they object to consideration of whether Elizabeth White is a "related party" as this was not raised in the applicable pleading. With respect to the ownership interest of the White Family Trust, Defendants assert that "the White Family Trust held a 25.06% interest after the transfer." Specifically, "following" the transfer the ownership interest in WILP were as follows:
(Defs.' Resp. to Pl.'s 56.1 Statement at ¶ 11-14 & Counterstatement 3.)
The White Family Trust Agreement was signed on September 29, 1999, by Defendant, as Grantor, and Jeffery G. White, Michael Burrows and Robert C. Brewer, as Trustees. The beneficiaries of the Trust are divided into two classes: (i) the "Issue Class," which consists of "the Grantor's issue and any trust established for the benefit of the Grantor's issue"; and (ii) the "Family and Close Family Friends Class," which consists of: "Kathleen Mary Sullivan White, William Ord Brewer, Adrianne Allgeier Brewer, Alexander Allgeier Brewer, Katrina Lee Brewer, Caroline Crimmins Daley, Michael Burrows, Alice Lee Arnold Brewer, Robert C. Brewer, Matthew D. Burrows, Gwendolyn Brewer Rhawn, Catherine Brewer Daley and Judy Miller Burrows." None of the foregoing members of the "Family and Close Friends Class" are descendants of Defendant and Elizabeth J. White. (Defs.' Resp. to Pl.'s 56.1 Statement at ¶ 16-17.)
White did not provide Plaintiffs a written copy of the proposed transaction with WIRLP and offer them the opportunity within a thirty day period to match the transaction on the same terms and conditions; Defendants assert no such notice was required. Plaintiffs maintain they were and are ready, willing, and able to purchase Lot 1 on the Subdivision Map for the sum of $1,375,000.00 or such other value as the Court may determine was the fair market value as of November 28, 2000. Plaintiffs are ready, willing and able to pay such purchase price in cash, and to close title within 30 days. (Defs.' Resp. to Pl.'s 56.1 Statement at ¶ 20, 22.)
Lot 1 is currently wholly-owned by WILP; there has been no transfer of Lot 1 since the 2000 transfer. However, WFT's interest in WILP was...
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