Pirraglia v. Jofsen, Inc.

• Decision Date: 11 April 2019
• Docket Number: 8727,Index 23247/15E,8726,8728N
• Parties: John PIRRAGLIA, Plaintiff-Respondent, v. JOFSEN, INC., et al., Defendants-Appellants.
• Court: New York Supreme Court — Appellate Division

171 A.D.3d 521

98 N.Y.S.3d 156

John PIRRAGLIA, Plaintiff-Respondent,

v.JOFSEN, INC., et al., Defendants-Appellants.

8726

8727

8728N

Index 23247/15E

Supreme Court, Appellate Division, First Department, New York.

ENTERED: APRIL 11, 2019

Herrick, Feinstein LLP, New York (Raymond N. Hannigan and Janice I. Goldberg of counsel), for appellants.

Maldonado & Cruz, PLLC, Bronx (Angel Cruz of counsel), for respondent.

Richter, J.P., Gische, Kern, Moulton, JJ.

Order, Supreme Court, Bronx County (Doris M. Gonzalez, J.), entered on or about November 27, 2017, which found, after a framed-issue hearing directed by this Court ( 148 A.D.3d 648, 49 N.Y.S.3d 296 [1st Dept. 2017] ), that Jofsen did not have a valid agreement to arbitrate, and denied its motion to compel arbitration, unanimously affirmed, without costs. Order, same court and Justice, entered on or about March 8, 2018, which granted plaintiff's motion to strike Jofsen's answer, counterclaims, and affirmative defenses, and denied defendants' cross motion to compel discovery and for a default judgment on the counterclaims of defendants Jofsen and Carl D. Madsen, unanimously modified, on the law, to deny plaintiff's motion, and otherwise affirmed, without costs. Order, same court and Justice, entered on or about June 18, 2018, insofar as it denied Madsen's motion to renew, unanimously affirmed, without costs. Appeal from so much of the June 18, 2018 order as (1) denied Jofsen's motion to renew and (2) denied defendants' motion to reargue, unanimously dismissed, without costs, as (1) academic in light of our disposition of the March 2018 order, and (2) as taken from a nonappealable paper, respectively.

Jofsen contends that paragraph 21 of the 2001 lease between itself and plaintiff, which says, "Any disputes will be settled in a court of law," does not supersede the 1986 agreement between itself and plaintiff's parents, which provides for arbitration. Jofsen does not dispute that by agreeing to paragraph 21 it intended to supercede the arbitration provision in the 1986 agreement and to litigate all issues involving the properties (as opposed to narrower issues involving the 2001 lease). Instead, Jofsen argues that defendant John P. Jorgenson was not authorized by Jofsen in writing to execute the lease on Jofsen's behalf and therefore, the 2001 lease was void. This argument is unavailing. The statutes on which Jofsen relies— General Obligations Law §§ 5–703, 5–1103, and 5–1111 —are inapplicable because the 2001 lease does not exceed a term of one year.

Moreover, Jofsen ratified the 2001 lease because it failed to repudiate it for more than 16 years (see Matter of Silicone Breast Implant Litig., 306 A.D.2d 82, 85, 761 N.Y.S.2d 640 [1st Dept. 2003] ; Matter of Cologne Life Reins. Co. v. Zurich Reins. [N. Am.], 286 A.D.2d 118, 126, 730 N.Y.S.2d 61 [1st Dept. 2001] ). Accordingly, the 2001 lease is not unenforceable under General Obligations Law §§ 5–703, 5–1103 and 5–1111 because Jofsen's ratification of the lease was sufficient to take the lease out of the statute of frauds (see e.g. Richter v. Zabinsky, 257 A.D.2d 397, 398, 683 N.Y.S.2d 65 [1st Dept. 1999] ; Garfunkel v. Malcolmson, 217 A.D. 632, 634, 217 N.Y.S. 32 [1st Dept. 1926] ; Barnum v. Frickey, 115 A.D.2d 977, 497 N.Y.S.2d 543 [4th Dept. 1985] ).

Although the court properly denied Jofsen's motion to compel arbitration, it erred by granting plaintiff's motion to strike Jofsen's answer, affirmative defenses, and counterclaims. First, plaintiff's motion was untimely (see CPLR 3012[a] and 3211[e] ). Second, a corporation—like Jofsen—that continues to carry on its affairs after it is dissolved for nonpayment of taxes is "a de facto corporation" ( A.A. Sutain, Ltd. v. Montgomery Ward & Co., 22 A.D.2d 607, 610, 257 N.Y.S.2d 724 [1st Dept 1965], affd 17 N.Y.2d 776, 270 N.Y.S.2d 626, 217 N.E.2d 674 [1966] ; see also Garzo v. Maid of Mist Steamboat Co., 303 N.Y. 516, 524, 104 N.E.2d 882 [1952] ). "[A] dissolved corporation may sue or be sued on its obligations, including contractual obligations" ( MMI Trading, Inc. v. Nathan H. Kelman, Inc., 120 A.D.3d 478, 479, 989 N.Y.S.2d 911 [2d Dept. 2014] [internal quotation marks omitted] ). The statutes on which plaintiff relies—Business Corporations Law §§ 1509 and 1510 and Surrogate's Court Procedure Act § 2108 —are inapplicable. Third, "the ultimate penalty" of striking Jofsen's answer was unwarranted because it did not engage in "[e]xtreme conduct" ( Dauria v....