Sadwith v. Lantry

• Decision Date: 11 July 1963
• Parties: Ryan SADWITH, Plaintiff, v. Jacob LANTRY, Jennie E. Lantry, Universal Sheet Metal Works, Inc. and Universal Sheet Metal Corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

219 F. Supp. 171

Ryan SADWITH, Plaintiff, v. Jacob LANTRY, Jennie E. Lantry, Universal Sheet Metal Works, Inc. and Universal Sheet Metal Corporation, Defendants.

United States District Court S. D. New York.

July 11, 1963.

COPYRIGHT MATERIAL OMITTED

Samuel L. Chess, New York City, for plaintiff.

Levine & Berman, New York City, for defendants.

EDELSTEIN, District Judge.

The plaintiff was a party to an agreement dated May 21, 1926, whereby he sold his one-half interest in the defendant Universal Sheet Metal Works, Inc. to the defendant, Jacob Lantry, the owner of the remaining one-half interest. Sadwith now seeks to have Lantry and the other defendants "account in equity" for certain transactions concerning real property which was, in part, the subject matter of the agreement. Sadwith's contentions, to be more fully explored infra, are that the legal effect of the May 21, 1926, agreement was to create an express trust over the subject property or a joint venture to share in the proceeds of the property and that consequently, Lantry is liable to him either as a cestui que trust or as a joint venturer. The transactions for which plaintiff claims Lantry to be liable occurred intermittently between 1926 and 1961. Plaintiff seeks to have the court impress a trust or equitable lien to the extent of his interest in the subject property. Jurisdiction of the action is based on diversity of citizenship, 28 U.S. C. § 1332(a) (1) (1952).

Defendants have moved for judgment on the pleadings pursuant to Rule 12 (c), Fed.R.Civ.P. Since affidavits have been submitted both in support of and in opposition to the motion, the motion "shall be treated as one for summary judgment and disposed of as provided in Rule 56 * * *." Rule 12(c), Fed. R.Civ.P. Plaintiff's cross-motion for summary judgment was denied following oral argument.

An examination of the moving papers and the memoranda of the parties demonstrates that the controversy does not concern genuine material factual issues. There is no dispute whatever concerning the validity of the agreement itself and the defendants have not taken issue with any of plaintiff's factual allegations concerning transactions occurring subsequent to the execution of the agreement. Rather, what is at issue is the legal force and effect of the 1926 contract. The question that so sharply divides the parties is the determination of their legal relationship as created by the agreement and the respective rights, duties and liabilities flowing therefrom. Therefore, where, as here, the facts are undisputed, and the issue depends solely upon a legal conclusion to be drawn from a consideration of the parties' relationship, resort to summary judgment is appropriate. See Empire Electronics Co. v. United States, 311 F.2d 175 (2d Cir., 1962); United States v. Birngold Realty Co., 211 F.Supp. 934 (S.D.N.Y. 1962), aff'd per curiam sub nom. United States v. Schildhaus, 316 F.2d 240 (2d Cir., 1963). "The procedure for summary judgment was intended to expedite the settlement of litigation where it affirmatively appears upon the record that in the last analysis there is only a question of law as to whether the party should have judgment in accordance with the motion for summary judgment." Elgin J. & E. Ry. Co. v. Burley, 140 F.2d 488, 490 (7th Cir. 1943), aff'd 325 U.S. 711, 719, 65 S.Ct. 1282, 1287-1288, 89 L.Ed. 1886 (1945), adhered to on rehearing, 327 U.S. 661, 66 S.Ct. 721, 90 L.Ed. 928 (1946); 6 Moore, Federal Practice ¶ 56.151 (2d ed. 1953).

The undisputed material facts are as follows: Prior to 1918 plaintiff and defendant Lantry were doing business as a partnership under the firm name of Universal Sheet Metal Works. On January 4, 1918, they formed the defendant corporation, Universal Sheet Metal Works, Inc., hereafter referred to as "Universal Works," and transferred to it the assets of the partnership. The S. & L. Realty Co., Inc., a jointly owned corporatenominee of plaintiff Sadwith and defendant Lantry was the record owner of the business site located at 4010, 4014 and 4016 Park Avenue in Bronx County, in the City of New York. In 1926 plaintiff sought to terminate his association with Universal Works and on May 21, 1926, the written dissolution agreement that is the subject of this motion was entered into by plaintiff, Lantry, Universal Works, and the S. & L. Realty Co., Inc. Pursuant to this agreement the assets of the two corporations were divided and distributed between plaintiff and defendant Lantry. Sadwith sold and transferred his interest in Universal Works to Lantry in return for approximately $38,000 worth of cash and personalty received from Universal Works and Lantry. Lantry thereby became the owner of all of the capital stock of Universal Works.

The agreement further provided that Universal Works was to acquire the Park Avenue property, subject to a mortgage of $22,000 and pursuant to the agreement the premises were conveyed to Universal Works by the S. & L. Realty Co., Inc. Article First 9(b) of the agreement provided that "Upon a bona fide sale of the premises known as Nos. 4010, 4014, 4016 Park Avenue, New York City, by Universal whenever the same may take place, a minimum sum of Five thousand — dollars ($5000.00) shall be paid to Sadwith, or in the alternative, if Sadwith so desires, one-half (½) of the net profits derived after the sale of said premises. * * *" For the purpose of arriving at the net profits it was agreed that Universal Works' cost basis should be $38,000 plus the additional expenses that it might incur in effecting a sale of the property. Apart from this provision, and provision 9(c) dealing with the sale of the property in the event of total destruction by fire¹ the agreement contained no restrictions as to the use, encumbrance or disposition of the property. Nor did the agreement contain any explicit provision requiring Universal Works to give notice to plaintiff of any action it might take with respect to the property.

In March 1927 Universal Works executed a second mortgage as security for a loan of $15,000 and in May 1929, after this second mortgage became due, a first mortgage of $35,000 was executed by Universal Works to the Dollar Savings Bank. In 1934 the Dollar Savings Bank (Bank) foreclosed the mortgage and purchased the property for $36,000 at a foreclosure sale. The judgment of foreclosure entered on April 16, 1934, in an action in the Supreme Court of Bronx County, stated that Universal Works and all persons claiming under it were "forever barred and foreclosed of all right, claim, lien, title, interest and equity of redemption in said premises and each and every part thereof."

After foreclosure Universal Works remained on the premises as the Bank's tenant. On August 12, 1937, Universal Works and one of its customers, the Raisler Heating Company, entered into an agreement whereby a new corporation, the Universal Sheet Metal Corp. (hereafter referred to as "Universal Metal") was formed. Raisler purchased all of the Class B stock of the new company and Universal Works (Lantry) received all of the Class A stock in consideration of the transfer by Universal Works of all its assets, subject to certain of Universal Metal's listed liabilities. Both classes of stock were equal in rights but each class separately elected two directors of the newly-formed corporation. Jacob Lantry became President and a director of the new corporation, and Jennie E. Lantry, his wife, who is also a defendant, became Vice-president and a director.

Universal Metal continued as the Bank's tenant in the Park Avenue premises until January 1942 when its subsidiary, 4010 Park Avenue Corporation, purchased the premises for $4,000 in cash and a $16,000 purchase money mortgage. In February 1942 the premises were conveyed by the 4010 Park Avenue Corp. to its parent, Universal Metal, for a nominal consideration. In 1951 the premises were totally destroyed by fire and were thereafter rebuilt with all or a substantial part of the insurance money. Subsequently, the property was mortgaged to the Harlem Savings Bank for $80,000 in January 1953. On February 20, 1961, Universal Metal conveyed title to the premises to Jacob Lantry in consideration for the redemption of the Class A stock owned by him. Lantry conveyed an undivided one-half interest in the premises to his wife, Jennie Lantry, on June 2, 1961.

Plaintiff alleges that by virtue of the May 21, 1926, agreement, an express trust was created over the Park Avenue property and that Lantry and the other defendants became trustees for the benefit of plaintiff. In the alternative, Sadwith alleges "that under terms of the agreement the real estate in suit was entrusted by the plaintiff to the defendants pursuant to a joint venture or common enterprise for the purpose of deriving a profit." The plaintiff contends that under either of his legal theories, the defendants are accountable to him. He claims that even though all of the foregoing transactions in the property, including the various mortgages, were effected in the name of the defendants Universal Works and Universal Metal, these corporate defendants were merely nominal owners of the property and that Lantry was the real party in interest since at all times he wholly dominated and controlled the corporations. Sadwith maintains that the defendants, in violation of their fiduciary obligations, entered into transactions pursuant to a scheme or plan designed to deprive plaintiff of his equitable interest in the property. Moreover, it is alleged that plaintiff was not given notice which he claims was required of any of the transactions and that he did not become aware of the various property transactions until 1961. Consequently, plaintiff seeks to have the defendants' account in equity for the rents and profits from the property and to have the court impress a trust or equitable lien to the extent of plaintiff's interest in the property, whatever that may be.

Defendants, on the...