Presten v. Sailer

• Decision Date: 26 April 1988
• Citation: 225 N.J.Super. 178,542 A.2d 7
• Parties: Kary D. PRESTEN, Plaintiff-Respondent, v. Kenneth SAILER, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 178

225 N.J.Super. 178

542 A.2d 7

Kary D. PRESTEN, Plaintiff-Respondent, v. Kenneth SAILER, Defendant-Appellant.

Superior Court of New Jersey,

Appellate Division.

Submitted Feb. 16, 1988.

Decided April 26, 1988.

Anthony J. Riposta, North Arlington, for defendant-appellant (Anthony J. Riposta, on the brief).

Goldman, Carlet, Garrison, Bertoni & Klein, Clifton, for plaintiff-respondent (Michael J. Zaretsky, on the brief).

Before Judges PETRELLA, DREIER and BAIME.

The opinion of the court was delivered by

PETRELLA, P.J.A.D.

The issues presented in this case include the existence and enforceability of an oral agreement between two individuals to jointly purchase an ownership interest in a cooperative apartment. Implicated therein is the status of ownership of shares of a cooperative apartment as realty or personalty. The Chancery Division judge found that Kenneth Sailer and Kary D. Presten had entered into a partnership or joint venture for the purchase of the apartment in which the two men had been living and that this agreement did not fall within the statute of frauds. Sailer now appeals.

Prior to the conversion of the building to a cooperative, the lease to the apartment in which the parties lived was solely in Sailer's name. Sailer had entered into the written lease for apartment 3F in Bridgeview Towers, Fort Lee in June 1982. He advertised in a newspaper to share the two-bedroom apartment. In December 1982 Presten orally subleased a share of the apartment for $250. At that time Sailer's monthly rental was $442. Each party occupied a separate bedroom and bath for over a period of three years and shared the use of the rest of the apartment, splitting utility costs.

The apartment complex was purchased by the Fort Lee Conversion Corporation in September 1984. Shortly thereafter Sailer and Presten became aware that the apartment building was converting to cooperative status and that shares in the cooperative would be offered to the tenants in the apartments.

In late 1984 Sailer told Presten that he was considering purchasing the shares entitling him to lease his apartment from the cooperative. Sailer received a prospectus from the Bridgeview Towers Cooperative in December 1985 or January 1986. He was offered the right of first refusal to purchase the cooperative shares and obtain the lease for his apartment at an insider's price of $55,800, which was projected to be about 60% to 70% lower than the market price. In order to exercise his right to purchase, Sailer had to pay a $1,000 subscription fee by March 1, 1986.

Without telling Presten, Sailer placed an advertisement on February 13, 1986 in The New York Times advising that his apartment was for sale for $115,000. Presten claimed that on February 19, 1986 Sailer sought an equal partnership with him to purchase the cooperative shares because Sailer could not obtain financing himself. According to Presten, Sailer asked "Do you want to be partners?" Presten then gave Sailer the $1,000 check, the proceeds of which were used by Sailer for the subscription fee, i.e., the deposit to purchase the cooperative shares and the proprietary lease at the insider's price. According to Presten this money was a deposit on their purchase of the shares as partners and they both agreed to share all expenses of the purchase, including financing.

On the other hand, Sailer claimed that he merely agreed to "think about a possible partnership" and that no agreement to form a partnership was reached. Sailer testified that he did not need the $1,000, and that he had only told Presten he had inadequate liquid mutual funds to pay the subscription fee, claiming that the funds could have been liquidated within seven days. Sailer also testified that Presten gave him $1,000 so he would not accept an offer by any of the prospective buyers who responded to the newspaper advertisement.

After Presten gave Sailer the $1,000 he asked for a copy of the prospectus to show his attorney. He realized that Sailer had placed the February 13, 1986 newspaper advertisement when prospective buyers started to telephone or visit the apartment. According to Presten, he believed that Sailer had placed these advertisements only to determine the market value of the apartment.

Sailer told Presten shortly before March 1, 1986 that he had received a firm offer of $125,000 and had decided to take it. According to Sailer, Presten did not react to this announcement. Presten testified that about seven to ten days later Sailer said that he had reconsidered and wanted to stay and buy the apartment with him. Presten said he responded "okay." Presten testified that Sailer wanted to retain more than a 50% interest because his name was on the lease, although no offer of a percentage was made. Sailer denied any arrangement being made. Sailer said that while Presten wanted a written agreement, he did not because he was not ready to enter such an agreement.

In late March 1986 Sailer told Presten "we have no partnership" and increased Presten's rent from its then $279 amount to $450 as of April 1, 1986. He also asked for a security deposit. However, he did not return the $1,000 advanced by Presten. Presten said he would think about the increase while he was away on a business trip. When he returned he contacted his attorney and thereafter confronted Sailer about the partnership agreement. Although Sailer attempted at that time to return the $1,000, Presten did not accept the money, but told Sailer to "think about it and get back to me." Sailer testified that he attempted to return the $1,000 when a prospective buyer approached him during early March. He also wanted to return the money because it showed (according to his deposition testimony) possible evidence of a partnership and because his attorney had instructed him to do so.

Presten then instituted suit. Sailer responded by giving Presten a "Notice to Quit" and a check for $1,013.33 which represented the return of the $1,000 and interest. Presten made utility and monthly rental payments which Sailer accepted up until the time of trial. Presten then vacated the apartment.

Sailer bought the cooperative shares in July 1986 and obtained a proprietary lease for the apartment in his name and that of his brother. Sailer conceded that his brother had an unofficial 20% interest in the stock. According to Sailer, he did not need his brother to co-sign on the mortgage, since at the time his approximate salary was $18,000 per year and his mortgage payment, taxes and maintenance amounted to only $877 a month. In October 1986 Sailer married, and his wife moved into the apartment with him and now shares expenses.

The Chancery judge found that although the lease had remained in Sailer's name, it had in effect been a co-tenancy prior to the conversion. He found a specific agreement between the parties to have Sailer exercise the cooperative conversion rights for the benefit of both of them, sharing in any profits and expenses. He also found that Sailer "attempted to use" Presten when he entered the agreement thus establishing misrepresentation. The judge found that although there had been discussion about defendant's interest being slightly more than plaintiff's, these discussions had not resulted in any definite agreement. Hence he applied the presumption that the parties had an equal interest in the cooperative shares.

On this appeal Sailer contends that the cooperative form of ownership is an interest in real estate and that the alleged oral agreement between himself and Presten to purchase the cooperative shares as partners is unenforceable because it violates the statute of frauds. He also argues that even if it is assumed that the formation of a partnership made the statute of frauds inapplicable, there was no partnership in the first instance. Alternatively, Sailer argues that if the transfer of an interest in a cooperative apartment is more akin to the sale of securities, goods or personal property valued at more than $5,000 than to the sale of an interest in real estate, then the various Uniform Commercial Code (UCC) statute of frauds provisions apply. Finally, Sailer argues that if an equitable lien is to be imposed, it should be limited to the amount contributed by Presten toward the purchase price.

I

Although condominium ownership has been generally regulated by statute (see N.J.S.A. 46:8A-1 et seq.), the cooperative form of ownership has heretofore not been so regulated. ¹ However, N.J.S.A. 46:8D-1 et seq. will apply to "all cooperatives created within this State after the effective date of this act [L.1987, c. 381]." ² Legal title to the real and personal property of a cooperative complex or project is vested in a cooperative corporation, and individuals purchase shares of stock ³ enabling them to occupy a dwelling within the cooperative project under a proprietary lease. See Plaza Road Co-op, Inc. v. Finn, 201 N.J.Super. 174, 180, 492 A.2d 1072 (App.Div.1985); AMR Realty Co. v. State, 149 N.J.Super. 329, 334-335, 373 A.2d 1002 (App.Div.1977), app. dism. 153 N.J.Super. 84, 379 A.2d 59 (App.Div.1977).

We thus consider whether the ownership of shares in a cooperative constitutes holding an "interest in" or "concerning" real estate so as to bring it within the ambit of the statute of frauds relating to realty in N.J.S.A. 25:1-5d. Whether the interest of the stockholder-tenant in a cooperative corporation is personal or real property has been the subject of much debate. Although other states have grappled with and resolved the issue in various contexts and for various purposes, New Jersey has not yet finalized the distinction between whether cooperative ownership entails personalty or realty. In Plaza Road Co-op., Inc. v. Finn, supra (201 N.J.Super. at 180, 492 A.2d 1072), we quoted the Law Division to the effect that:

... a cooperative apartment association is a unique form of property ownership which does not fit into common law classifications....