Written Settlement Agreement Between Families Over Jointly Owned Property

This was originally posted on the SGR Blog.

Was the Agreement Sufficient to Satisfy the Statute of Frauds?

Members of different families often combine forces and funds to purchase real estate together. When differences arise, they sometimes resolve those disputes with a settlement agreement that seems effective at the time—but is later subject to challenge. And, as a recent case illustrates, a “signed and sealed” settlement agreement intended to resolve inter-family disputes may not be enforceable when subject to judicial scrutiny.

Shlomo Ehrenreich and his father allegedly partnered with Joel Israel, Amrom Israel, and Michael Israel in various real estate ventures over a period of several years and a dispute allegedly arose between the parties. As a result, Ehrenreich entered into a written settlement agreement signed by Ehrenreich, Joel, and Amrom providing that Joel and Amrom would sell Ehrenreich certain parcels of real property to settle the dispute.

The Israels allegedly reneged on the contract and Ehrenreich sued them for specific performance, to recover damages for breach of contract, for a judgment declaring that the Israels willfully breached the alleged contract, and for the imposition of a vendee’s lien. And he also filed a notice of pendency against the properties the Israels allegedly contracted to convey. The Israels moved to cancel the notice of pendency and to dismiss the complaint. Supreme Court denied both motions. The Israels appealed.

The appellate court agreed with the Israels that the causes of action in the complaint, all of which were based on the alleged contract, were barred by the statute of frauds.

Pursuant to General Obligations Law § 5-703(2), a contract for the sale of real property “is void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing.”

And a writing satisfies the statute of frauds if it identifies the parties to the transaction, describes the properties to be sold with sufficient particularity, states the purchase price and the down payment required, and is subscribed by the party to be charged. But a memorandum evidencing a contract and subscribed by the party to be charged must designate the parties, identify and describe the subject matter, and state all of the essential terms of the agreement. And, in a real estate transaction, the essential terms of a contract typically include the purchase price, the time and terms of payment, the required financing, the closing date, the quality of title to be conveyed, the risk of loss during the sale period, and adjustments for taxes and utilities.

Here, the alleged contract did not satisfy the statute of frauds– because it did not contain the essential terms typically included in a contract for the sale of real property, including the purchase price, the time and terms of payment, the required financing, the closing date, the risk of loss during the sale period, and adjustments for taxes and utilities. Additionally, the alleged contract was not signed by Michael Israel, and it indicated that several of the properties were co-owned by other individuals who also were not signatories to the document.

Further, the email relied upon by Ehrenreich to demonstrate that the parties reached a complete agreement were between the parties’ attorneys. There was neither an allegation in the complaint nor any evidence in the record, that the attorneys were authorized in writing to bind the parties to a contract of sale. Moreover, the deeds relied upon by Ehrenreich that purported to convey the properties between corporate entities were not identified in the contract. And Ehrenreich admittedly rejected the deeds “pending a further agreement” on the purchase price and quality of title. Therefore, the deeds, when viewed together with the alleged contract, did not evidence a complete agreement between the parties. Furthermore, Ehrenreich’s allegations that he partially performed under the contract were insufficient to remove the agreement from the statute, since the conduct relied on was not unequivocally referable to the alleged agreement.

Supreme Court should have granted the Israels’ motion to dismiss the complaint. And, inasmuch as there was no binding contract for the conveyance of real property between the parties, their motion to cancel the notice of pendency pertaining to the properties also should have been granted.

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