[*1]
| Murray v Murray |
| 2011 NY Slip Op 51578(U) [32 Misc 3d 1234(A)] |
| Decided on July 22, 2011 |
| Supreme Court, Rockland County |
| Weiner, J. |
| Published by New York State Law Reporting Bureau
pursuant to Judiciary Law § 431. |
| This opinion is uncorrected and will not be
published in the printed Official Reports. |
Supreme Court, Rockland County
Timothy Murray and J
& T STAPREM, INC., Plaintiffs,
against
Michael Murray, EILEEN COYLE, MURRAY'S DELI OF NYACK,
INC d/b/a MURRAY'S DELICATESSEN, Defendants.
|
11431/08
Joseph H. Adams, Esq. P.C.
Attorney for Plaintiffs
Condon & Associates, PLLC
Attorneys for Defendants
Alfred J. Weiner, J.
This action arises from a series of transactions between the parties regarding a
[*2]delicatessen situated at 80 South Broadway in Nyack, New
York [FN1] ("the premises").
Plaintiffs commenced this action, alleging causes of actions sounding in, inter alia,
breach of contract, fraud, and breach of an alleged partnership agreement. Plaintiffs seek a money
judgment, a declaratory judgment and equitable relief, including setting aside a lease of the
premises, judicial dissolution of the alleged partnership and an accounting. Defendants assert
various counterclaims, including breach of the covenant of quiet enjoyment and conversion. A
trial was held before the Court on all issues.
Plaintiffs contend, in substance, that Timothy Murray, Michael Murray and Eileen
Coyle (collectively "the individual parties"), all siblings, discussed moving the delicatessen from
its previous location at 76 South Broadway to the premises on various occasions. Timothy claims
that the individual parties ultimately entered into a partnership agreement concerning the
ownership and operation of Murray's Deli of Nyack, Inc. d/b/a/ Murray's Delicatessen.[FN2] They also agreed to keep the
name Murray's Delicatessen because it possessed a license from the New York State Liquor
Authority as well as family name recognition. Beginning in late 2006 and continuing through
February 2007, Timothy renovated the building located on the premises for use as a delicatessen
at a cost of approximately $225,000. From early 2007 through the Fall of 2008, the individual
parties worked at Murray's Delicatessen. In 2008, Timothy asked Michael and Eileen to begin
making monthly payments towards their capital contribution of $225,000 each pursuant to the
partnership agreement. Michael and Eileen refused to do so and denied the existence of a
partnership, prompting the instant litigation.
Defendants contend, in substance, that the individual parties never entered into a
partnership agreement regarding the ownership and operation of Murray's Delicatessen. That
Michael has always been the owner of Murray's Delicatessen and Eileen and Timothy worked
there as employees. Defendants also allege that Murray's Delicatessen leased the premises from J
& T Staprem pursuant to a commercial lease dated May 1, 2007. Michael Murray did not testify
at trial.
Partnership Between Timothy Murray, Michael Murray and Eileen
Coyle Under Written Partnership Agreement
Plaintiffs claim that the individual parties established a partnership by signing a
written partnership agreement regarding Murray's Delicatessen in January or February of 2007. In
support of this assertion, Plaintiffs introduced three identical partnership agreements drafted by
Eileen dated January 28, 2007 ("the initial agreement') that set forth the terms of the partnership.
The partnership agreement provided, inter alia, that the individual parties
would not receive [*3]salaries from the business but would be
paid an hourly wage and share the profits and losses of Murray's Delicatessen based upon the
number of hours they worked at the deli. The initial agreement states that each of the individual
parties made an initial capital contribution of $100,000 and that Michael and Eileen would pay
Timothy $150,000 each in future capital contributions over the course of ten years by making
monthly payments of $1,250 beginning on September 1, 2007 with no interest. According to
Timothy, Michael and Eileen agreed to make capital contributions to him as consideration for his
renovation expenditures and forbearance in renting the premises to a third party.
Timothy claims that he did not agree with the initial capital contribution term and
requested that Eileen draft a revised partnership agreement. The revised agreement was identical
to the initial agreement except for the capital contribution term, which was revised to read that
Michael and Eileen would pay Timothy $225,000 each over 10 years plus interest at
7.75%.[FN3] Timothy
testified that the individual parties signed the revised partnership agreement containing this
$225,000 provision and he retained a copy at his gas station. Timothy also testified that this copy
of the fully signed revised partnership agreement "disappeared" around the time the instant
controversy arose.
Defendants allege that no partnership exists between the individual parties because
Michael refused to sign any partnership agreement. In support of this position, Eileen claims that
although she drafted and signed three copies of the inital partnership agreement, she did not see
Michael sign any partnership agreement. She does not believe Michael signed them because of
his refusal to enter into any partnership. As such, Eileen claims that she worked and was
compensated by Murray's Delicatessen as an employee rather than a partner beginning in early
2007.
A writing that in good faith expresses the full understanding of the obligations of the
parties is sufficient to establish a partnership. Martin v. Peyton, 246 NY 213 [1927].
"Partnership results from contract, express or implied." Martin v. Peyton, 246 NY
213, 217 [1927]; Alleva v. Alleva Dairy, 129 AD2d 663 [2d Dept 1987]. Partnership
agreements are subject to all the rules of construction and interpretation applicable to any
contract, including the Statute of Frauds. See Elias v. Serota, 103 AD2d 410 [2d Dept
1984][applying contract law and statute of frauds principles to a partnership agreement]; 4B
N.Y.Prac., Com. Litig. in New York State Courts § 78:6 [3d ed.]["As a contract, the
partnership agreement is subject to all the rules of construction that apply to any contract"].
"The statute of frauds, as incorporated in section 5-701(a)(1) of the General
Obligations Law, provides that an agreement is void if it is not in writing and subscribed by the
party to be charged therewith' when the agreement [b]y its terms is not to be performed within
one year from the making thereof.'" Sheehy v. Clifford Chance Rogers & Wells LLP,
3 NY3d 554 [2004].
[*4]
Any agreement by Michael and Eileen to pay
Timothy over a period of years would be subject to the statute of frauds based upon the length of
the repayment period. The three copies of the initial agreement introduced at trial bear only
Eileen's signature and are not signed by the other putative partners, to wit, Michael or Timothy.
Although Timothy alleges that the initial agreement was subsequent revised to contain the
$225,000 provision and was executed by all of the individual parties, he could not produce any
version of that agreement or satisfactorily prove that the agreement existed and was executed.
Accordingly, Plaintiffs have not established a partnership between the individual parties via a
signed writing and Timothy's claims based upon Michael and Eileen's alleged agreement to pay
him $225,000 each are barred by the statute of frauds.
Oral Partnership Between Timothy Murray, Michael
Murray and Eileen Coyle
Plaintiffs state that even if the Court were to find
that no partnership exists by means of a written agreement, an oral partnership was established
between the individual parties regarding the ownership and operation of Murray's Delicatessen.
Plaintiffs highlight the individual parties' conduct regarding the start-up, daily management and
operation of Murray's Delicatessen from early 2007 to the fall of 2008 as indicia of such a
partnership.
In response, Defendants claim that the individual parties' actions do not support the
finding of an oral partnership. Specifically, Defendants state that Timothy Murray chose to
renovate the premises and currently owns the now-improved fixtures contained thereon. Michael
Murray owned and operated his own deli business since 2000 and therefore had no incentive to
enter into a partnership arrangement with his siblings in 2007. Given this, Defendants allege that
Michael was the sole owner of Murray's Delicatessen and both Timothy and Eileen worked and
were compensated as employees at an hourly rate between $12.00 and $15.00 per hour rather
than as partners in the business.
If the existence of a partnership is denied, "...it may be proved by the production of
some written instrument; by testimony as to some conversation; by circumstantial evidence."
Martin v. Peyton, 246 NY 213, 217 [1927]. "When there is no written partnership
agreement between the parties, the court must determine whether a partnership in fact existed
from the conduct, intention, and relationship between the parties. Factors to be considered in
determining the existence of a partnership include (1) sharing of profits, (2) sharing of losses, (3)
ownership of partnership assets, (4) joint management and control, (5) joint liability to creditors,
(6) intention of the parties, (7) compensation, (8) contribution of capital, and (9) loans to the
organization." Czernicki v.
Lawniczak, 74 AD3d 1121, 1124 [2d Dept 2010][internal citations omitted];
Brodsky v. Stadlen, 138 AD2d 662 [2d Dept 1988].
The Court finds the individual parties shared equally in the profits realized by
Murray's Delicatessen. From early 2007 to the Fall of 2008, the individual parties operated the
deli business in a profitable manner and each received $1,000.00 per week from the profits of the
deli as well as an hourly wage for hours worked at the deli, initially at the rate of $12.00 per hour
and subsequently at $15.00 per hour.
[*5]
The Court further finds that the individual parties
exercised joint management and control of Murray's Delicatessen in coordinating their schedules
so that they would not overlap and ensuring that one of them would be present at all times. They
all agreed to commit an equal amount of time of approximately 60 hours each per week towards
operating the deli. Timothy purchased the initial deli inventory, continuously ordered and
maintained this inventory, and wrote the majority of checks on behalf of Murray's Delicatessen.
Michael operated and managed the deli on the premises and Eileen assisted him in running the
day-to-day operation of the business and performed bookkeeping functions. The individual
parties all conducted business and negotiated with vendors and other individuals on behalf of
Murray's Delicatessen. The parties also held themselves out as partners to individuals when
describing their involvement with Murray's Delicatessen.
Michael and Timothy identified themselves as President and Vice President,
respectively, of Murray's Delicatessen on bank documents establishing a corporate bank account
and both were authorized to sign checks drawn against this account. Furthermore, the individual
parties' efforts to facilitate the transfer of the liquor license from Murray's Delicatessen's former
location to its new location on the premises is indicative of their collaborative intent.
Based upon the evidence and testimony introduced, the Court finds that an oral
partnership at will existed between the individual parties based upon their conduct and intention
regarding the ownership and operation of Murray's Delicatessen.
Commercial Leases Regarding the Premises
Three commercial leases regarding the premises were admitted into evidence.
Plaintiffs requests that this Court rescind or set aside all three leases on various grounds.
Defendants claim that the May 1, 2007 is the only lease that is valid and remains in full
effect.
January 28 ,2007 Lease
The earliest of the three leases is an unsigned commercial lease agreement dated
January 28, 2007 between J & T Staprem, Inc. and the individual parties ("the partnership
lease"). The partnership lease is for a term of 60 years at a rental rate of $6,000.00 per month and
the lessees are responsible for all real estate taxes assessed regarding the premises.
Timothy testified that he signed the partnership lease in early 2007 simultaneously
with the written partnership agreement. Eileen's undisputed testimony was that she drafted the
partnership lease, arbitrarily selected 60 years as the lease term and did not confer or negotiate
this terms with either Timothy or Michael. Eileen testified further that she did not see Michael
sign the partnership lease.
"A contract for the leasing for a longer period than one year, or for the sale, of any
real property, or an interest therein, is void unless the contract or some note or memorandum
thereof, expressing the consideration, is in writing, subscribed by the party to be
charged..."General Obligations Law § 5-701(1); see Geraci v. Jenrette, 41 NY2d
660 [*6][1977].
Although Timothy and Eileen claim to have singed the partnership lease, it has not
been satisfactorily proven that Michael signed the document. The partnership lease does not
contain a signature page and is not otherwise subscribed to by any of the individual parties.
Accordingly, the partnership lease is void based its failure to satisfy the statute of frauds.
February 28, 2007 and May 1, 2007 Leases
The commercial lease dated February 28, 2007 is signed by Timothy and Michael in
their individual capacities("the second lease"). It is for a term of 70 years at a rental rate of
$6,300 per month, including parking privileges. Under the second lease, Michael is responsible
for all real estate taxes assessed regarding the premises.
The commercial lease dated May 1, 2007 is signed by Timothy and Michael on
behalf of J & T Staprem, Inc. and Murray's Delicatessen, respectively ("the third lease"). The
third lease is for a term of 92 years at a rental rate of $6,000.00 per month. Under the third lease,
Murray's Delicatessen is responsible for all real estate taxes assessed regarding the premises.
Plaintiffs contend that the second and third leases do not constitute binding contracts
between the signatories based upon various grounds, including fraud and mistake. In support of
this assertion, Plaintiffs note that Murray's Delicatessen possessed a license from the New York
State Liquor Authority to serve alcohol at its previous location at 76 South Broadway. In order to
transfer this license to its new location on the premises, Murray's Delicatessen needed a valid
lease regarding the premises. Given this requirement, Plaintiffs claim that the second and third
leases were executed solely as a vehicle by which the individual parties could transfer the liquor
license. Timothy testified that he signed the second and third leases with this intention and,
therefore, did not read or expect to be bound by any of the substantive terms contained therein.
Timothy states that $6,000.00 in monthly rent for 92 years is grossly inadequate as consideration
in light of regular rent escalations that are commonplace in commercial leases for much shorter
time periods.
Defendants argue that the third lease was validly executed.
Eileen testified that she drafted the third lease solely for the transfer of the liquor
license, inserted the 92 year term without input or negotiation with her siblings, and did not read
the lease. She contends that she did not want to be on the lease, as it was only for the liquor
authority. Notwithstanding this testimony, Defendants assert that the third lease is valid and was
intended to have legal effect upon the parties' rights in and to the premises. On April 11, 2011,
Eileen executed an assignment that purports to assign the third lease from Murray's Deli to
Murray's 7, Inc., a corporation in which Eileen is the sole shareholder [*7]of.[FN4]
"The fundamental rule in the construction of all agreements is to ascertain the
substantial intent of the parties. The purpose to be accomplished and the object to be advanced
may be considered and may, if necessary, be shown by parol evidence as bearing on the
consideration for the written instrument. If it is claimed by [a party] that a construction should be
placed on the contract other than has been indicated, or any doubt arises from the writing itself,
the court must look into the intention of the parties to be derived not alone from the words used
but it must be read, so far as they may be ambiguous, in the light of the surrounding facts and
circumstances in which event parol evidence may be introduced as to those facts and
circumstances without violating the parol evidence rule." M. O'Neil Supply Co. v. Petroleum
Heat & Power Co., 280 NY 50, 55-56 [1939].
The Court finds that the facts and the circumstances surrounding the execution of the
second and third leases as well as the confidential relationship between the individual parties as
siblings explains their willingness to execute two long term leases within months of each other
and revise them in order to conform with the mandates of the State Liquor Authority. That the
second and third leases were executed with the sole purpose of transferring the liquor license
from Murray's Deli's previous location to the premises and not as a legally operative document
giving rise to a bona fide landlord-tenant relationship. Accordingly, the second and third leases
are deemed void based upon lack of intent to be bound on the part of the individual parties.
Dissolution of the Partnership and Accounting
In Plaintiffs' Verified Complaint, Timothy Murray seeks the judicial dissolution of
the partnership between himself, Michael Murray and Eileen Coyle and an accounting regarding
the partnership.
A partnership dissolution may be caused by, inter alia, "the express will of
any partner when no definite term or particular undertaking is specified." Partnership Law
§62. The oral partnership between the individual parties for an indefinite period of time
creates a partnership at will. See Green v. Le Beau, 281 AD 836[2d Dept 1953]. Such a
partnership may be dissolved at any time when any of the partners expresses an intent not to
continue longer. See Forbes v. Six-S Country Club,12 AD3d 1049, 1051 [4th Dept
2004]; Green, 281 AD at 836. "Since a partnership between the parties has been
judicially established, the plaintiffs are entitled to an accounting." DeMartino v.
Pensavalle, 56 AD2d 589 [2d Dept 1977].
"The dissolution of a partnership at will may be implied from circumstances; but,
when not the result of mutual agreement there must be notice by the party desiring a dissolution,
to his co-partner, of his election to terminate the partnership, or his election must be [*8]manifested by unequivocal acts or circumstances brought to the
knowledge of the other party, which signify the exercise of the will of the former that the
partnership be dissolved" Spears v. Willis, 151 NY 443, 449 [1897].
The verified complaint in this action includes a request for the dissolution of the
partnership and an accounting, thereby putting Michael and Eileen on notice of Timothy's
intentions. In addition, Timothy's unequivocal act of bringing the instant action and commencing
a summary proceeding seeking to evict Murray's Delicatessen from the premises is consistent
with this intention. Eileen and Michael's actions of seeking and securing an order preventing
Timothy from entering onto the premises are equally illustrative. Currently, only Eileen is
involved in the daily operation of Murray's Delicatessen, as Timothy has not participated in the
business since the signing of the order preventing him from entering the premises and Michael
left the premises in January of 2011.
Given the Court's determination that a partnership exists between the individual
parties for an indefinite period of time and the unequivocal acts demonstrating such acrimony
between the individual parties, the partnership between the individual parties is hereby dissolved
and an accounting is hereby ordered. This matter is hereby referred to Jack Schloss, Esq., 420
Route 59, Airmont, NY 10952, 845-425-420 to conduct an accounting regarding the
individual parties' interests in the partnership by Order of Reference signed simultaneously
herewith.
Dated:New City, New York
July 22, 2011
E n t e r
:
________________________
HON. ALFRED J. WEINER JSC
Footnotes
Footnote 1: It is undisputed that the
premises are owned by J & T Staprem, Inc., a corporation in which Timothy is the owner and
sole shareholder.
Footnote 2: Michael Murray is the owner
and sole shareholder of Murray's Deli of Nyack, Inc.
Footnote 3: Timothy states that the 7.75%
interest rate matched the rate of the note and mortgage against his personal residence he used to
finance the renovation of the premises.
Footnote 4: Eileen acquired 50% of the
corporate shares in Murray's Deli via a May 10, 2010 Shareholders Agreement executed by
herself and Michael.