My monthly submissions usually relate to complicated factual scenarios, tortuous procedural conundrums or irreconcilable conflicts among the courts on challenging commercial issues arising in the judicial process.
Two recent decisions in the Supreme Court, Wayne County, published on consecutive days, brought home the fact that many cases involve “one off” disputes that would seem banal except for the fact that the matters involve real people and down–to–earth problems that have a material (and possibly adverse) impact on the business and personal lives of the litigants.
Baghaei-Rad v. Jones, 2014 NY Slip. Op. 30237 (U), Supreme Court, Wayne County, January 27, 2014, Dennis M. Kehoe, J.
The Court described the proceedings:
The Plaintiff Mohammad Baghael-Rad has commenced this action seeking a permanent injunction against the Defendants, together with specific performance of an alleged contract between the Plaintiff and the Defendants for the sale and purchase of cows and cow embryos. In conjunction with this action, the Plaintiff has filed and served an Order to Show Cause, seeking a Preliminary Injunction, prohibiting the Defendants Sherman and Donna Jones, and Gala Rose Farms from selling, transferring or removing the subject cows and embryos, pending the determination of this action. A Temporary Restraining Order was granted by the Court as part of the Order to Show Cause. Id. at 1-2.
The Plaintiff’s claim arises from an auction which was held in Lyons, New York, on November 3, 2013, for the purpose of the dispersal of the Gala Rose Farm herd. At the auction, an individual named Tom Packard placed winning bids on behalf of the Plaintiff, which resulted in the purchase of five Black Angus cows and eleven lots of embryos. The total combined purchase price was $19,750.00. Id. at 1-2.
The Plaintiff owns Hidden Acres Angus, a farm in Amsterdam, New York, where he operates a business engaged in the breeding of Black Angus cows, and the selling of Black Angus cow embryos. In his Affidavit, the Plaintiff alleges that “the cows and the embryos (purchased at the auction) are of a unique quality and character”, due to their “pedigree and lineage”, making it impossible to purchase replacements elsewhere. Id.
A Bill of Sale was tendered by the auctioneer to Mr. Parkard on the Plaintiff’s behalf at the close of auction. The auction sheet contains a paragraph stating that the “suggested Terms and Conditions of the American Angus Association” will control the auction procedures. That paragraph also contains the following language in bold face type:
ALL PURCHASES MUST BE PAID FOR IN FULL PRIOR TO LOAD OUT – NO EXCEPTIONS, CATTLE NOT PICKED UP WITHIN 30 DAYS WILL BECOME THE SOLE PROPERTY OF GALA ROSE FARMS. (emphasis added).
The suggested terms and conditions also state that all sales are for cash unless credit arrangements are made prior to sale. Id. at 2-3.
The factual contentions:
According to the Affidavit of the Defendant Sherman Jones, Mr. Packard advised Mr. Jones that he did not have the necessary cash at the time of auction, but that he would pay for the cattle the next day and load them out. Mr. Jones then received a telephone call from Mr. Packard the next day, indicating he still did not have the money, but that he would come the following Wednesday. Mr. Packard finally appeared at the Defendant’s farm on November 25, 2013. At that time the cattle were loaded, and Mr. Jones then proceeded to open a sealed envelope given to him by Mr. Packard on behalf of the Plaintiff. There was, indeed, a check in the envelope from the Plaintiff in the amount of the full bid price; however, the check had a handwritten notation indicating it should not be deposited “on or before December 10”. At that point, Mr. Jones called Mr. Packard and told him to return the cows. The Plaintiff then called Mr. Jones and asked him to hold the check as he did not presently have the funds. Mr. Jones refused and Mr. Packard returned the cows, at which point Mr. Jones gave Mr. Packard the Plaintiff’s check. Mr. Jones informed Mr. Packard at that time that he considered the sale cancelled, for breach of contract. Id. at 3-4.
On November 27, 2013, Mr. Jones received a telephone call from Paul L. Wollman, Esq. on behalf of the Plaintiff. Mr. Wollman informed Mr. Jones that the Plaintiff had provided him with a cashier’s check in the amount of $19,750.00. He advised Mr. Jones that the Plaintiff would deliver the check and pick up the cattle on November 29, 2013. Mr. Jones indicated he would not accept the check. Later in the day, Mr. Wollman called Mr. Jones a second time, indicating that Plaintiff had provided him with the bid price in the form of cash. Mr. Jones stated that he would not accept payment and that he would not deliver the cows. Id. at 4.
On December 2, 2013, the Plaintiff’s attorney Roy Z. Rotenberg, Esq., emailed and faxed letters to the Defendants, stating that the Plaintiff was prepared to tender cash to the Defendants, pick up the cows and obtain a release for the embryos on December 3, 2013 at 1:00 P.M. The letters also stated that, if the Defendants did not confirm the terms with him by 10:00 A.M. on December 3, 2013, legal action would be taken against them. Mr. Rotenberg received no confirmation from the Defendants. Id.
Based upon the above sequence of events, the Defendants maintain that any contract arising from the auction is now cancelled. However, the Plaintiff contends that it is uncontroverted that he made several tenders of the purchase price, and that he advised the Defendants that he was prepared to load out the cattle prior to the expiration of the 30 day period as set forth in the auction sheet. Id. at 4-5.
And the relief sought and granted:
The Plaintiff now seeks a Preliminary injunction, restraining the Defendants from transferring the cows and embryos to a third party, pending the outcome of this action. In order to obtain a preliminary injunction, a party must establish: 1) a likelihood of success on the merits; 2) irreparable injury absent a preliminary injunction; and 3) a balancing of the equities in the movant’s favor (See, e.g. Destiny USA Holdings, LLC v Citigroup Global Marks Realty Corp., 69 AD3d 212 (4th Dept. 2009)). While a hearing is often necessary to determine issues of fact prior to issuing a preliminary injunction, (See, CPLR §6312(c)), in this matter, the Court concludes that the Plaintiff has made a sufficient showing by the affidavits and documentary evidence submitted with the Order to Show Cause to demonstrate a likelihood of success in the underlying action. The evidence includes affidavits by the Plaintiff, counsel for the Plaintiff, attorney Paul L. Wollman, Esq., and the auctioneer Tom Burke, as well as documentary evidence which include the Terms and Conditions of sale, the auction sheet and the Bill of Sale. While the Defendants have raised issues based upon the restrictions on the original check, the alleged improprieties in the conduct of the auction, and the interpretation of the language of the auction documents, these allegations are insufficient to defeat the Plaintiff’s application for a preliminary injunction. Id. at 5-6.
The Plaintiff has also demonstrated the possibility of irreparable harm by his unrefuted statements as to the “unique quality and character” of the cows. Finally, in balancing the equities of the matter between the parties, the Court agrees with the Plaintiff’s contention that the issuance of a preliminary injunction will preserve the status quo without significant harm to the Defendants. If the Defendants maintain that they are entitled to money damages, that issue may be determined at the time of trial. Id. at 6.
Carter v. Rouse, 2014 NY Slip. Op. 3026 (U), Supreme Court, Wayne County, January 28, 2014, John B. Nesbitt, J.
The Court described the “back story”:
This litigation resulted in a two day non-jury trial over the ownership of certain personal property acquired by the parties, either jointly or separately, during their five year relationship and cohabitation. Resolution of this case brings with it the typical difficulties that present when untangling the mingled financial affairs of an unmarried couple, where dealings are not conducted or documented with the exactitude of arms-length business transactions. The reason, of course, is that the parties never anticipate that their contractual or property rights vis-à-vis each other will ever become an issue. Divorce law deals with this problem through statutory concepts such as marital and separate property and equitable distribution that are tested and refined through decisional law. While case law has addressed some of the issues involving the separation of unmarried couples in various contexts (i.e., partition and constructive trust actions, for example), there is no overall, conceptually clear body of law providing genuine practical guidance to courts facing these issues. In the main, the courts are left to divine the intent of the parties regarding their separate rights, when, in fact, there probably was no such intent. This case presents similar issues, with the addition of an apparent property settlement agreement the validity of which is disputed. Id. at 1.
The “contested facts”:
At the time of the first day of trial on May 15, 2012, the plaintiff, Gary Carter, was sixty-five years old and a long-term resident of the Town of Sodus, Wayne County, currently residing at 5316 Route 14 (TT 05/15/2013 p. 5). Carter was living at 5608 North Geneva Road, Sodus, in 2006 when he met defendant Mary Rouse, who moved in with him at that address the same year. They lived at the Geneva Road address for about a year until moving together to 5316 Route 14. At the time Carter met Rouse, she was working at Parker Hannifin in Lyons, and he was an over-the-road truck driver, owning and operating his own truck, and primarily engaged in multi-state deliveries of windmills (TT 05/15/2013 p. 6). Id. at 2.
The parties’ move to 5316 Route 14 was precipitated by a couple of factors. Most immediately, the Geneva Road residence had been the site of a farming operation that Carter ran as a sideline to his trucking business. Corn and beans were the crops planted and harvested by Carter; however, the operation was not able to sustain the debt obligation to the Farmer’s Home Administration, which foreclosed, eventuating the farm being sold as well as the equipment secured with it (TT 05/15/2013 p. 31). Foreclosure had been forestalled temporarily by Rouse’s payment of almost $5000 to FHA (Id.). Loss of the Geneva Road property did not impede Carter’s second sideline business of baling hay, which was done off site, although he apparently began to phase this out around this time (TT 05/15/2013 p. 33). Id.
The second factor behind the move to 5316 Route 14 was its fit with Carter and Rouse’s interest in developing a horse business. 5316 Route 14 was used as Carter and Rouse’s residence and was acquired from, and financed by, a purchase money mortgage with Bonnie Miller as mortgagee (TT 05/15/2013 p. 12). Across the road was 5319 Route 14, which was a house and extensive outbuildings, which was acquired from, and financed, by a lease/installment sale agreement with William Halling as contract vendor. (TT 06/10/2013 at 19). Carter and Rouse owned separately or collectively two or three horses, which they had been boarding at Alasa Farms at the intersection of Shaker and Red Mill Roads north of the hamlet of Alton in the Town of Sodus. They decided to do their own boarding, so they acquired the Halling property, and started boarding other horses for pay as well as their own (TT 05/15/2013 p. 17-18). Id. at 2-3.
As Carter and Rouse took up residency at 5316 Route 14 and began horse boarding operations across the road at 5319 Route 14, they began to acquire various types of equipment useful to the enjoyment and maintenance of the two properties and the horse boarding business. From the record, it appears that there was no real financial plan and that it was basically a hand-to-mouth operation. In fact, it is telling that during Carter and Rouse’s joint occupation of these properties, Mr. Carter did not file any income tax returns or pay any income taxes, notwithstanding that he was apparently doing well as an over-the-road truck driver. Mr. Carter testified at trial that he presently owes approximately $90,000 in back taxes relating to the period he was living with Ms. Rouse. (TT 05/15/2013 p. 47). Ms. Rouse testified at an EBT that she pumped $42,000 of her own separate earnings into the partnership with Carter towards bills and acquisitions (Plaintiff’s Ex. 12 [3/4/3013] at p. 26). Id. at 2-3.
The Carter Rouse relationship ended in 2009, three years after it started. Mr. Carter ended up with the residence at 5316 Route 14 and Ms. Rouse with the horse farm at 5319 Route 14. The termination of their relationship led to an attempt to resolve their interests and expectancies in the various equipment and sundry personal property acquired during their partnership. Ms. Rouse prepared a document that she and Mr. Carter signed and dated September 18, 2009. Ms. Rouse proffered a writing at trial purporting to be this document, which was received as Plaintiff’s Exhibit 7. This exhibit is typewritten and reads as follows:
I Gary Carter agree that Mary Rouse is now the owner of the following:
1456 International Tractor w/Loader and attachments
265 Massey Fergusson Tractor w/Loader and attachments
4 Basket Hay Wagons
Yamaha Grizzley 600 4-wheeler
2 carts for 4-wheeler (one came with the farm)
box trailer (came with farm)
New Idea Cutditioner
Bush Hog Mower
It is understood that equipment will continue to be shared.
Equipment will not be loaned to a third party without permission.
In the event of death or incapacitation of either person the above becomes the property of the survivor.
It is also agreed that Mary can continue to use the shop/tools if necessary.
Mary can use the Dodge pickup to pull the horse trailer and for snowplowing.
Also, in the event of an extended power outage, the generator can be used to power the horse barn at least long enough to obtain a water supply. If the generator is to be sold, Gary needs to inform Mary so that she is aware that it is no longer available.
If equipment is to be traded or sold for any reason such as for replacement both people need to reach an agreement on the how’s and why’s and what it is to be replaced with. Gary can use the horse trailer, hay baler, and manure spreader. Also if there are other things that Mary owns more than likely an agreement on usage can be agreed on. If more items/issues may come up, we agree to discuss them like civilized adults.
/s/ Gary Carter Date: 9-18-09
/s/ Mary Rouse Date: 9-18-09
Id. at 3-4.
The conflicting testimony at trial:
Ms. Rouse testified that both she and Mr. Carter signed the agreement with the content quoted above. Mr. Carter testified that the agreement as set out in Plaintiff’s Exhibit 7 is altered from that which he signed. He testified that the language reciting his agreement that Rouse was “now the owner” of the enumerated items was not there when he signed the agreement. So too, he claims that the language reciting Rouse’s right to use the Dodge pickup and his shop tools was not there in the original as well (TT 05/15/2013 p.11). Id. at 4.
The issue before the Court:
The legitimacy and validity of this alleged agreement became the subject of this litigation when Mr. Carter commenced action for declaratory relief (determining ownership), replevin (directing return of property), and compensatory damages (denial of possessory right). In his Amended Complaint, Mr. Carter not only disputes the validity of the agreement with regard to ownership of the listed items – which he claims are his – but argues alternatively that (1) the agreement fails for want of consideration and (2) that, in any event, Ms. Rouse repudiated the same by selling and allowing others to use certain of the listed property. Id.
The controlling legal principles:
Assessing the respective claims of the parties regarding the September 18, 2009, agreement requires application of basic principles of contract law. At root, “‘[a] contract is a promise or a set of promises for the breach of which the law give a remedy, or the performance of which the law in some way recognizes as duty’” (Ledain v Town of Ontario, 192 Misc.2d 247, 249-250 [Sup. Ct., Wayne Co. 2002], aff’d. for the reasons stated 305 AD2d 1094 [4th Dep’t 2003][quoting Restatement (Second) of Contracts §1). The elements of a legally enforceable contract are “(1) at least two parties with legal capacity to contract, (2) mutual assent to the terms of the contract, and (3) consideration.” (2B NY PJI3d 4:1, at 3 ). Id. at 5.
The findings based thereon:
The Court finds, based upon a preponderance of the credible testimony, that the parties did sign the agreement set forth as Plaintiff’s Exhibit 7 indicating mutual assent and that the mutual rights and obligations contained therein constitute adequate consideration.
The Court does also find, however, that Ms. Rouse, by her own testimony, repudiated the agreement by disposing of and loaning certain of the items subject thereto in violation of its terms.
The law in this area is clear.
“In general, rescission of a contract is permitted for the repudiation of the contract or any essential part of it.
Where one party to a contract repudiates its obligations thereunder, the other party may elect to treat the contract as terminated.
The theory is that where one party renounces a contract without cause before the time for performing it has elapsed, the party authorizes the other party to treat it as terminated” (22A NY Jur., Contracts §513 ).
Plaintiff’s exhibit 12 is a transcript of a portion of an Examination Before Trial where Ms. Rouse admits that she loaned out hay wagons to others without Mr. Carter’s assent and that she sold the conveyor. In doing so, she testified that she “had considered that our contract was null and void as far as selling the equipment, sharing the equipment with anyone else” (Plaintiff’s Exhibit 12 p. 27). At trial, Ms. Rouse reaffirmed that she “thought the restriction on sale was null and void” and stated the reason as:
“I had moved out of the house I was no longer living there, [and] there was an agreement on there [the contract] that he remain civilized to me which he had not, there’s also agreements that he would continue to share the shop and his Dodge pickup with me which he had ceased to do that long, long before. I felt he had broken the terms of the sharing agreement and that there was no more sharing, and I actually owned the equipment.” (TT 06/10.2013. p. 53).
If Ms. Rouse took the position that Mr. Carter was the first party to breach or repudiate the contract, her remedy was to seek its enforcement. It did not give her the license to also repudiate her obligations under the contract, but retain the benefits thereof, i.e. ownership of the enumerated equipment. By repudiating her obligation to share the equipment subject to each party’s right of ownership if he or she survived the other, she relinquished here claim of ownership of the equipment, but, of course, only so far as it may be based upon the contract. The effect – so far as this litigation is concerned – is to eliminate the September 18, 2009, agreement as dispositive instrument so far as ownership of the disputed property is concerned. Id. at 5-6.
And the conclusion of the Court:
Based upon the record, the Court concludes that Mr. Carter has established his individual title and ownership of the Vermeer Tedder, the Bush Hog Mower, the Massey Tractor, two hay wagons and the Cutditioner. Declaratory relief to that effect is granted, together with direction that those items be returned to Mr. Carter. Regarding the remaining items, the burden of proof was on Mr. Carter to establish his claim of ownership. The Court does not find that he did so by a preponderance of evidence. This, of course, does not mean that Ms. Rouse is the sole owner, but indicates to the Court that the parties are joint or co-owners of the remaining disputed property. Id. at 6.
Not every case in our Court system is reflected by the decisions regularly reported in the legal press – addressing, for example, disputes involving CDOs, cross-border conflicts, massive toxic torts and class actions of all flavors. The Courts also exist to adjudicate, and routinely determine, claims by ordinary people in the regular course of their lives that are of profound importance to the litigants.