| Pugliese v Mondello |
| 2008 NY Slip Op 09769 [57 AD3d 637] |
| December 9, 2008 |
| Appellate Division, Second Department |
| mSaverio C. Pugliese, Appellant, v Ben Mondello, Also Knownas Ben R. Mondello, Jr., Respondent. |
—[*1] McBreen & Kopko, Jericho, N.Y. (Evan Gewirtz and Richard A. Auerbach of counsel), forrespondent.
In an action, inter alia, to recover damages for breach of an oral partnership agreement, the plaintiffappeals, as limited by his brief, from so much of an order of the Supreme Court, Nassau County(Murphy, J.), dated March 31, 2008, as denied those branches of his motion which were pursuant toCPLR 3211 (a) (7) to dismiss the defendant's counterclaim, pursuant to CPLR 3211 (b) to dismiss thedefendant's second affirmative defense of the statute of frauds, and for summary judgment dismissingthe defendant's counterclaim and in his favor on the first, second, and fifth causes of action, and deniedthat branch of his separate motion which was for a protective order with respect to his 2004 and 2005income tax returns.
Ordered that the order is modified, on the law, (1) by deleting the provision thereof denying thatbranch of the plaintiff's motion which was for a protective order with respect to his 2004 and 2005income tax returns and substituting therefor a provision granting that branch of the motion and strikingso much of the defendant's demand dated October 22, 2007, as demanded discovery of the plaintiff's2004 and 2005 income tax returns, (2) by deleting the provisions thereof denying those branches of theplaintiff's motion which were pursuant to CPLR 3211 (b) to dismiss the defendant's second affirmativedefense, and for summary judgment dismissing the defendant's counterclaim, and substituting thereforprovisions granting those branches of the motion; as so modified, the order is affirmed insofar asappealed from, with costs to the plaintiff.[*2]
The plaintiff and the defendant allegedly were involved inseveral oral partnership agreements and/or joint ventures to buy, train, race, and sell race horses. Theplaintiff alleges that pursuant to one oral partnership agreement, he paid the defendant $50,000 as hiscapital contribution to the partnership, and the defendant converted the money to his own use.
The defendant acknowledges that he received the $50,000 and placed it in his own account. Heclaims that the $50,000 was paid as compensation to him for a bad business decision made by theplaintiff with respect to a prior partnership and/or joint venture regarding a horse named Marco's Tale.
The defendant's counterclaim, bill of particulars, and supporting affidavits allege that the plaintiff, thedefendant, and named horse trainers entered into a partnership or joint venture agreement to purchase,train, and race the horse named Marco's Tale, that the plaintiff caused Marco's Tale to be entered in aclaiming race where the horse could be claimed and sold for $50,000, that Marco's Tale was claimedand sold for $50,000, and that Marco's Tale was in fact worth $250,000, causing the defendant, whohad a one-fourth interest in the agreement, to sustain a loss of $62,500.
Although the defendant's counterclaim did not state the legal theory upon which it was based, in hisbrief to this Court the defendant characterized the counterclaim as sounding in breach of fiduciary duty.In support of his motion for summary judgment, the plaintiff submitted the defendant's depositiontestimony, wherein the defendant acknowledged that Marco's Tale was entered in the claiming race bya representative of the horse's trainer, and that it is always the trainer of a horse who enters that horse ina claiming race. The defendant also testified at the deposition that the plaintiff directed the trainer to putMarco's Tale in the claiming race with the knowledge of the defendant, who spoke to the plaintiff"every day." According to the defendant, the plaintiff had the authority to do what he did, and thedefendant had no authority to overrule that decision.
The defendant further testified that Marco's Tale had sustained a cracked sesamoid early in 2004and had to be withdrawn from a "select sale" for approximately $500,000. Accepting the defendant'saccount as true, there were legitimate business considerations for the plaintiff's alleged decision to placeMarco's Tale in a $50,000 claiming race.
Pursuant to the business judgment rule, absent evidence of bad faith, fraud, self- dealing, or othermisconduct, the courts must respect business judgments (see Auerbach v Bennett, 47 NY2d619, 630 [1979]). A business decision is not subject to review under the business judgment rule if it isauthorized, made in good faith, and in furtherance of the business's legitimate interests (see Aguilera del Puerto v Port Royal Owner'sCorp., 54 AD3d 977 [2008]; Walden Woods Homeowners' Assn. v Friedman, 36 AD3d 691[2007]). In the instant case, the defendant acknowledged that the plaintiff had the authority to make thedecision to place Marco's Tale in the claiming race, and that decision was apparently made in goodfaith, in furtherance of a legitimate business interest. There was no evidence of fraud, self-dealing, orother misconduct. Accordingly, the plaintiff was entitled to summary judgment dismissing thecounterclaim.
Nevertheless, the plaintiff was not entitled to summary judgment in his favor for the return of the$50,000 demanded in the complaint. The defendant claimed at his deposition that the plaintiff made thepayment as compensation to the defendant for what turned out to be a bad business decision. Althoughthe plaintiff disputes this, there is no documentary evidence to support his [*3]assertions. Indeed, even the memo line of the plaintiff's $50,000 checkpayable to the defendant is blank. Accordingly, the plaintiff failed to establish his entitlement tojudgment as a matter of law for return of the $50,000.
The plaintiff sustained his burden of demonstrating that the defendant's second affirmative defense,based upon the statute of frauds, was without merit by establishing that the alleged partnershipagreement did not come within the statute of frauds (see General Obligations Law §5-701). Indeed, the statute of frauds is generally inapplicable to an agreement to create a joint venture(see Foster v Kovner, 44 AD3d 23,27 [2007]; F.S. Intertrade Off. Prods. v Babina, 199 AD2d 95, 96 [1993]) or partnership(see Prince v O'Brien, 234 AD2d 12 [1996]; Rella v McMahon, 169 AD2d 555[1991]). Accordingly, the Supreme Court erred in denying that branch of the plaintiff's motion whichwas pursuant to CPLR 3211 (b) to dismiss the second affirmative defense.
In addition, the Supreme Court erred in denying that branch of the plaintiff's motion which was fora protective order with respect to his 2004 and 2005 income tax returns. "[T]ax returns are generallynot discoverable in the absence of a strong showing that the information is indispensable to the claimand cannot be obtained from other sources" (Latture v Smith, 304 AD2d 534, 536 [2003]; see Benfeld v Fleming Props., LLC, 44AD3d 599 [2007]; Altidor v State-WideIns. Co., 22 AD3d 435 [2005]). The defendant failed to meet this burden.
The plaintiff's remaining contentions are without merit or need not be addressed in light of ourdetermination. Mastro, J.P., Florio, Eng and Chambers, JJ., concur. [See 2008 NY Slip Op31061(U).]