Opinion
15358/06
12-10-2009
SPENCER BOULEVARD, LLC, Plaintiff, v. PATRICK EUSTACHE ET AL., Defendants.
Martin Kurlander, Esq., Brooklyn, NY, Attorney for Plaintiff. Victoria Sprague, Esq., Port Washington, NY, Attorney for Defendants.
Defendants Patrick Eustache (hereinafter referred to as "Eustache Sr."), Patrick Eustache, Jr. (hereinafter referred to as "Eustache Jr."), and Robert Eustache move to dismiss the complaint of plaintiff Spencer Boulevard, LLC (Spencer) pursuant to CPLR 3211(a)(3), (5) and (7). For the reasons set forth below the motion is denied without prejudice to renew.
On March 15, 2004, Eustache Jr., as seller, signed a written contract for the sale of a multiple family dwelling located at 21-23 Spencer Place, Brooklyn, NY for $825,000 (the "subject premises" or "property"). Rabbi Herman Silberman, the alleged president, operating officer and trustee of the Congregation of Bais Chana (Cong Bais Chana), a small synagogue in Williamsburg, Brooklyn, signed on behalf of the congregation as purchaser. Cong Bais Chana did not provide the down payment for the property. Instead, the Eisners, the individuals who first brought the property to Rabbi Silberman's attention, arranged for a third-party, Gerald Silver, to provide the down payment. Subsequent to the execution of the agreement, Rabbi Silberman became apprehensive about managing the property and decided to assign the contract of sale to Spencer.
Moshe Eisner, a managing member of plaintiff Spencer, formed the plaintiff entity Spencer Boulevard, LLC, for the purpose of receiving the assignment. A written assignment dated April 23, 2004 was executed by Rabbi Silberman listing him and Cong Bais Chana as assignor of the property to Spencer as assignee. The handwritten assignment is signed by Rabbi Silberman and states, in pertinent part:
For value received, the undersigned the Herman Silberman and Cong Bais Chana ("Assignor"), hereby assigns, transfers and sets over unto Spencer Blvd LLC ("Assignees"), all of its rights, of the contract of sale and title and interest of assignor, in and to any leases, landlord/tenant proceeding and rent arrears due assignor from tenants regarding 21-23 Spencer Pl, Brooklyn, NY. Block 2000 Lot 3. The original contract of Patrick R. Eustache/Patrick Eustache Jr. was to Cong Bais Chana 620 Bedford Ave, Brooklyn, NY 11211.
(Hull Affidavit in Support, Exhibit E).
Sometime after the assignment, Moshe Eisner sent a letter to defendants' attorney notifying him that Spencer was the assignee of the contract. Eisner demanded closing on August 31, 2005. However, defendants did not close on that date and, thus, on March 18, 2006, Spencer commenced the instant action for breach and specific performance of the contract of sale. Defendants raised plaintiff's alleged lack of standing as an affirmative defense in their Answer.
Discussion
CPLR 1003 provides that "[n]onjoinder of a party who should be joined under section 1001 is a ground for dismissal of an action without prejudice." Under CPLR 1001(a) a party should be joined if it "might be inequitably affected by a judgment in the action." Furthermore, CPLR 1001(b) provides that if a party that should have been joined under subdivision (a) has not been joined, the Court must consider "the prejudice which may accrue from the nonjoinder to the defendant or the person not joined" when determining whether to allow the action to continue. (CPLR 1001[b][2]). Defendants argue that plaintiff lacks standing because the assignment of the contract of sale from Cong Bais Chana was invalid. Although no party raised the issue of whether Cong Bais Chana is a necessary party, the court may, on its own initiative, consider the issue of nonjoinder of a necessary party (Matter of Lezette v Board of Ed., Hudson City School Dist., 35 NY2d 272, 282 [1974]). Thus, the Court must consider whether Cong Bais Chana is a necessary party to this action and whether the action can continue without it being joined as a party.
Defendants argue that Rabbi Silberman did not have the authority to sign the contract of sale or assignment on behalf of Cong Bais Chana. As defendants correctly point out, the board of a religious corporation must take action collectively; neither the trustees nor the officers of a religious corporation have individual authority to bind the corporation contractually (Congregation Anshe Kesser v. Jewish Community Center of Corona, 5 AD2d 1011, 1012 [2d Dept 1958]; see generally Religious Corporations Law § 5; see also §§ 6 and 7). A religious corporation like Cong Bais Chana may not enter into a contract for the sale of real property without authorization of its board (see Not-For-Profit Corporation Law § 509 ["No purchase of real property shall be made by a corporation . . . unless authorized by the vote of two-thirds of the entire board."]; see also Religious Corporations Law § 2-b [detailing the applicability of the not-for-profit corporations law to religious corporations]; see also Bais Yaakov of Brooklyn v Temple Emanu-el of Boro Park, 202 AD2d 534 [2d Dept 1994]). Thus, as a matter of law, the contract of sale at issue would be void if there was no resolution by the board of trustees authorizing Rabbi Silberman to execute it. Furthermore, plaintiff, as assignee, would be divested of any rights to sue on the void contract since an assignee can only acquire whatever rights the assignor possessed at the time of assignment (In Re Stralem, 303 AD2d 120, 123 [2d Dept 2002][internal quotation marks and citations omitted]). Thus, plaintiff's ability to prosecute its claims turns on whether any rights were assigned through the underlying contract of sale.
A determination of whether Spencer has acquired any rights by virtue of the assignment of the contract of sale requires an investigation into the Cong Bais Chana's actions at the time of both transactions. Were this Court to void the contract of sale, for failure to comply with the requirements of Religious Corporations Law § 5, and grant defendants' motion, Cong Bais Chana would be stripped of all of its purported rights under the contract without allowing it an opportunity to proffer evidence of its validity (see Red Hook/ Gowanus Chamber of Commerce v New York City Bd. of Standards and Appeals, 5 NY3d 452, 459 [2005]). Therefore, the Court finds that Cong Bais Chana is a necessary party and the action cannot continue without it being joined as a party. (CPLR 1001; CPLR 1003; cf. Cardtronics, LP v St. Nicholas Beverage Discount Center, Inc., 8 AD3d 419, 420 [2d Dept 2004][finding that the assignor of a claim was not a necessary party because the validity of the assignment was not contested]). Accordingly, plaintiff is directed to serve and file an amended complaint including Cong Bais Chana as a defendant within thirty (30) days.
The motion to dismiss is denied without prejudice to renewal as a motion for summary judgment pursuant to CPLR 3212 following joinder of Cong Bais Chana. The parties are at an advanced stage of discovery. A preliminary conference order setting forth the initial discovery deadlines was signed in August 2007. Since then, there have been numerous discovery disputes between the parties and numerous conferences, all resulting in orders amending the initial discovery deadlines and instructing the parties to complete discovery. All of those deadlines have long passed. No note of issue has been filed, however, this case is ripe for summary judgment.
The foregoing constitutes the decision and order of the Court.
Defendants had previously submitted a motion to dismiss which was denied on the record on June 22, 2009 because one of defendants' exhibits was not attached to the motion papers. Defendants moved to renew the motion to dismiss citing a clerical error in the failure to attach the exhibit. This Court granted renewal of the motion on July 29, 2009 and heard oral argument on the merits of the motion to dismiss on September 30, 2009.