Raoul v. Olde Village Hall, Inc.

• Decision Date: 07 July 1980
• Parties: Serge RAOUL et al., Appellants, v. The OLDE VILLAGE HALL, INC., et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 214

430 N.Y.S.2d 214

76 A.D.2d 319

Serge RAOUL et al., Appellants, v. The OLDE VILLAGE HALL, INC., et al., Respondents.

Supreme Court, Appellate Decision, Second Department.

July 7, 1980.

James V. DeMarco, New York City, for appellants.

Blauman & McCabe, P. C., c/o Siff & Newman, P.C., New York City (Benjamin Vinar, Louis G. Adolfsen and Terrence M. McCabe, New York City, of counsel), for respondents Abby Towers, Ltd. and Jarg Luncheonette, Inc. and for respondents The Olde Village Hall, Inc. and Sal Sutera (separate briefs filed).

Before DAMIANI, J. P., and GULOTTA, MARGETT and WEINSTEIN, JJ.

DAMIANI, Justice Presiding.

The issue presented is whether the Statute of Frauds may be interposed for the first time on appeal where the allegations of the complaint reveal upon their face that the action is based upon an oral contract within the purview of the statute. Despite some old cases to the contrary, it is our view that under the present practice statute the defendants' failure to affirmatively raise the defense of the Statute of Frauds by motion to dismiss or by answer resulted in a waiver.

In this case the owner of certain improved real property, The Olde Village Hall, Inc. (hereinafter Village Hall), negotiated with the plaintiffs, Serge and Guy Raoul, for the sale of the property. In February, 1979 the lawyer for Village Hall sent the Raouls an unsigned contract of sale covering the premises for a purchase price of $60,000. A down payment of $6,000 was due upon the signing of the contract and was to be held in escrow by the attorney for the seller until the closing. The balance of $54,000 was due upon delivery of the deed. The plaintiffs signed this contract and returned it to the lawyer for Village Hall with their check for $6,000. He deposited the check in his special account.

Village Hall had leased a portion of the premises to defendant Jarg Luncheonette, Inc. (hereinafter Jarg). The lease to Jarg contained an option to purchase the property upon the same terms as any bona fide offer. The contract of sale was signed and returned by the Raouls. Before it was executed by Sal Sutera, the president of Village Hall, the contract was amended by adding the words: "This contract is subject to the present tenants' option to purchase the premises, which said option expires on April 1, 1979." Sutera signed the amended contract and returned it to the Raouls.

Jarg exercised its option and Village Hall then entered into a contract for the sale of the property to it upon the same terms as had been offered to the Raouls. Thereafter, Village Hall returned the Raouls' deposit.

In April, 1979 the Raouls commenced this action against Village Hall and Sal Sutera by service of a summons and complaint seeking specific performance and damages for breach of contract and annexing thereto the contract as it had been amended and signed by those defendants. Basically this complaint alleged that Jarg's option to purchase had not been validly exercised and that accordingly those defendants had wrongfully failed to perform. The answer of the defendants Village Hall and Sutera denied the material allegations of this first complaint and asserted as a defense that Sutera acted solely as an officer of Village Hall and had no interest in the property.

On May 3, 1979 Jarg assigned its rights under the contract of sale it had negotiated with Village Hall to a corporation known as Abby Towers, Ltd. The assignee was subsequently added as a party. Its answer also denied the material allegations of the first complaint and asserted as defenses that its assignor, Jarg, had validly exercised its purchase option and that oral testimony concerning both plaintiffs' and defendant Jarg's contracts of sale and the lease between Village Hall and Jarg was inadmissible to vary the intent of the parties as expressed in those documents. Abby Towers' answer also included a cross claim against Village Hall for specific performance of the contract of sale made by the latter with its assignor.

On or about July 18, 1979 plaintiffs served an amended complaint upon Village Hall, Sutera, Abby Towers and Jarg. Abby Towers initially rejected service of this amended complaint but on August 13, 1979, in open court, plaintiffs were granted leave to serve and file the amended complaint nunc pro tunc as of the date it was initially served. This amended complaint was substantially different than its predecessor. Unlike the prior complaint, it did not rely upon the plaintiffs' contract as amended and signed by Sutera on behalf of Village Hall. Rather, the amended complaint and exhibits annexed thereto appear to claim that the parties entered into negotiations as a result of which the attorney for the vendor sent a covering letter to plaintiffs' attorney stating that he had assured his client that "the sale is firm" and enclosing copies of a written contract embodying the terms orally agreed upon in the negotiations. Plaintiffs signed the written contract and returned it to the attorney for Village Hall with their check for the down payment which the attorney deposited in his special account. Thus construed, the amended complaint was founded upon either an oral contract reached in negotiations or upon written memoranda signed by Village Hall's attorney as its agent. The plaintiffs' first cause of action sought specific performance from Village Hall and Sutera. The second cause of action sought damages against those defendants for their refusal to perform. The third cause of action alleged that Jarg had affirmatively declared that it wished neither to renew its lease nor to purchase the property. However, after negotiating the contract with plaintiffs, Village Hall and Jarg conspired with others unknown to plaintiffs to defeat the plaintiffs' rights. This was allegedly accomplished when Jarg exercised its purchase option, entered into a contract of sale with Village Hall and then assigned that contract to Abby Towers. The fourth cause of action alleged that Abby Towers and Jarg wrongfully induced Village Hall and Sutera to breach the contract with plaintiffs. Finally, the fifth cause of action alleged that the named defendants and others unknown to plaintiffs conspired to wrongfully deny plaintiffs their rights under the initial contract of sale.

Village Hall and Sutera did not answer the amended complaint. The amended answer of Abby Towers and Jarg denied the material allegations of plaintiffs' second complaint and asserted essentially the same two defenses and cross claim as raised in the answer which Abby Towers had served to plaintiffs' initial complaint.

Defendants Abby Towers and Jarg did not move to dismiss the amended complaint pursuant to CPLR 3211 and their amended answer did not assert the defense of the Statute of Frauds with respect to the contract upon which plaintiffs relied in their amended complaint. Those defendants did, however, move for summary judgment in their favor and Special Term granted that motion by awarding specific performance on the cross claim and dismissing plaintiffs' complaint, stating in relevant part:

"A review of the documentary evidence submitted clearly indicates that JARG Luncheonette had a valid and binding option to purchase the premises and that that option was exercised in accordance with the terms contained in JARG's lease with Olde Village. The valid exercise of that option preempted any rights of plaintiffs to purchase the building. The Court can discern no legal impediment to the assignment of purchase rights by JARG to Abby Towers, regardless of motive, and none of the events recited in the pleadings and submissions support a cause of action for conspiracy. None of the claims of the moving defendant are refuted on behalf of plaintiffs by a person with knowledge of the facts, nor could they be given the documentary evidence submitted."

It is apparent from the foregoing that Special Term's dismissal of plaintiffs' first two causes of action seeking either specific performance or damages for breach of a contract to sell the property was predicated upon the notion that such contract was subject to Jarg's option to purchase, which option was validly exercised. This was error. The version of the contract upon which the amended complaint was based contained no clause making it subject to Jarg's option to purchase and, accordingly, the plaintiffs' right of recovery under those two causes of action, if any, cannot be affected by the existence and exercise of Jarg's option.

On this appeal the defendants Jarg and Abby Towers contend for the first time that recovery upon the contract on which the amended complaint is predicated is barred by the Statute of Frauds. There is no question that the initial contract sent by the attorney for Village Hall to plaintiffs was not signed on the former's behalf. Similarly, there is no showing that the attorney was authorized in writing to act as the agent for Village Hall in consummating the sale of the real property. Under these circumstances, the Statute of Frauds could have been successfully asserted by Village Hall as a defense to plaintiffs' action (see General Obligations Law, § 5-703, subd. 2). As the assignee of a subsequent contract vendee of the property, Abby Towers succeeded to the interest of Village Hall and Jarg therein and it had the right to interpose the Statute of Frauds as a defense to plaintiffs' suit on the prior contract of sale (see Brought v. Howard, 30 Ariz. 522, 532-533, 249 P. 76; Collins v. Lackey, 31 Okl. 776, 781-782, 123 P. 1118; Gibson v. Stalnaker, 87 W.Va. 710, 716-717, 106 S.E. 243; 73 Am.Jur.2d, Statute of Frauds, § 577; 37 C.J.S. Frauds, Statute of § 220, subd. d).

The CPLR provides that at any time before the service of a responsive pleading is required, a party may move for judgment dismissing one or more causes of action asserted against him on the ground that the cause of action may not be maintained because of the Statute of Frauds...