| Parr v Ronkonkoma Realty Venture I, LLC |
| 2009 NY Slip Op 06669 [65 AD3d 1199] |
| September 22, 2009 |
| Appellate Division, Second Department |
| Ronald Parr, Respondent, v Ronkonkoma Realty VentureI, LLC, et al., Appellants. |
—[*1] Rosenberg & Fortuna & Laitman, LLP, Garden City, N.Y. (David I. Rosenberg of counsel),for respondent.
In an action to impose constructive trusts on certain real property, to recover damages forbreach of contract, and for specific performance of an agreement to acquire certain shares ofcommon stock, the defendants appeal, as limited by their brief, from so much of a judgment ofthe Supreme Court, Suffolk County (Spinner, J.), entered April 18, 2008, as, upon a decision ofthe same court dated March 12, 2008, made after a nonjury trial, imposed a constructive trust oncertain real property and is in favor of the plaintiff and against them in the principal sum of$6,428,204.50.
Ordered that the judgment is modified, on the law, by deleting the third decretal paragraphthereof which is in favor of the plaintiff and against the defendants in the principal sum of$6,428,204.50; as so modified, the judgment is affirmed insofar as appealed from, without costsor disbursements, and the matter is remitted to the Supreme Court, Suffolk County, for arecalculation of damages in accordance herewith, and the entry of an appropriate amendedjudgment.
The plaintiff brought this action to impose constructive trusts on four parcels of realproperty, to obtain specific performance of a certain agreement dated April 30, 1999 between theplaintiff and the defendant Pitcairn-Properties, Inc. (hereinafter PPI), and to recover damages forbreach of the agreement. Two of the real estate parcels (hereinafter the Islip properties) areowned by the defendant Ronkonkoma Realty Venture I, LLC (hereinafter Ronkonkoma I), andtwo parcels (hereinafter the Brookhaven properties) are owned by the defendant RonkonkomaRealty Venture II, LLC (hereinafter Ronkonkoma II).
These parcels originally were owned by the plaintiff individually, and encumbered withmortgages which were in arrears. The plaintiff had given deeds to the properties to the mortgagecreditor North Fork Bank (hereinafter North Fork) and North Fork had recorded those deeds,allegedly in violation of an agreement between them.
The plaintiff sued North Fork, claiming it improperly recorded those deeds. By agreementdated April 8, 1999, the plaintiff and North Fork entered into a settlement, which permitted theplaintiff to redeem the properties for $3 million, and provided for the discontinuance [*2]of the action against North Fork.
To secure the funds to redeem the property, the plaintiff entered into an agreement datedApril 30, 1999 with PPI, whereby PPI agreed to satisfy the plaintiff's outstanding mortgages onthe properties, and the plaintiff agreed to direct the mortgage creditor North Fork to convey theproperties to Ronkonkoma I and Ronkonkoma II. At the trial of this action, the plaintiff testifiedthat it was his understanding that upon satisfaction of the North Fork mortgages, title to theproperties would be vested in Pitcairn-Parr, LLC, a limited liability company formed by hiscorporation Parr Financial, Inc., and PPI in 1998.
According to the plaintiff, since the agreement dated April 30, 1999, did not provide thattitle to the properties would be vested in Pitcairn-Parr, LLC, the plaintiff entered into ahandwritten agreement at the closing. Pursuant to that handwritten agreement, PPI agreed to paythe plaintiff 50% of the value of the properties at the closing, less the amount paid for theproperty and related closing costs, in common stock of PPI. The handwritten agreement furtherprovided that the "cash invested to acquire the property or amounts paid for related costs shall behandled as set for in the Pitcairn-Parr LLC agreement."
PPI paid $5,653,590.93, inter alia, to satisfy the outstanding mortgages. It is undisputed thatthe plaintiff never received any stock.
The plaintiff claimed that, as president of Pitcairn-Parr, LLC, he was to have control overdevelopment of the properties. Instead, PPI used the Brookhaven properties to secure a$4,000,000 mortgage loan which it used for its own purposes.
The plaintiff commenced the instant action, alleging that Ronkonkoma I and Ronkonkoma IIfailed to transfer the four parcels to Pitcairn-Parr, LLC. The first eight causes of action soughtimposition of constructive trusts against each of the Ronkonkoma defendants. The ninth andtenth causes of action sought damages, or in the alternative, specific performance of thehandwritten agreement directing PPI to deliver stock to the plaintiff.
In 2002 a settlement was reached with respect to the Islip properties, and the parties releasedeach other from liability with respect to those properties. The plaintiff assigned all rights to theIslip properties, including rights to manage and rights to profits, to Ronkonkoma I. The actioncontinued with respect to the Brookhaven properties. As further evidence that this settlementrelated to all of the plaintiff's claims with respect to the Islip properties, the plaintiff, in hisaffidavit in opposition to the defendants' motion for summary judgment, stated that thesettlement settled "all claims alleged by me with respect to the Islip Property." At issue on thisappeal is the determination of the trial court, rendered after a nonjury trial, that the defendantswere liable to the plaintiff on his theory of a constructive trust pursuant to the doctrine ofequitable estoppel.
In reviewing a determination made after a nonjury trial, the power of this Court is as broadas that of the trial court, and the Appellate Division may render the judgment it finds warrantedby the facts, bearing in mind that in a close case, the trial judge had the advantage of seeing thewitnesses (see Northern Westchester Professional Park Assoc. v Town of Bedford, 60NY2d 492, 499 [1983]; Totonelly vEnos, 49 AD3d 710, 711 [2008]).
The defendants note that equitable estoppel was not alleged in the complaint as a cause ofaction. However, the plaintiff acknowledges that equitable estoppel is not a cause of action foraffirmative relief, but rather is a defense to preclude the defendants' claim that they did notintend to make the plaintiff a partner in a joint venture.
The plaintiff's status as a partner in a joint venture gives rise to a fiduciary relationshipwhich allows imposition of a constructive trust (see Mendelson v Feinman, 143 AD2d76 [1988]; A.G. Homes, LLC vGerstein, 52 AD3d 546 [2008]). Elements of a constructive trust are (1) fiduciaryrelationship, (2) a promise, (3) a transfer in reliance thereon, and (4) unjust enrichment (see A.G. Homes, LLC v Gerstein, 52AD3d 546 [2008]). Here the plaintiff established a fiduciary relationship, a [*3]promise, a transfer of his title to the properties as beneficial ownerof those properties (see Parr vRonkonkoma Realty Venture I, LP, 32 AD3d 384 [2006]), and unjust enrichment whenPPI encumbered the property with a mortgage for its own benefit.
With respect to damages, the trial court subtracted the cost of acquiring all four parcels($5,653,590) from the total of the plaintiff's appraiser's values for all four parcels ($18,510,000),to arrive at a net value of $12,856,409. The plaintiff was awarded 50% of that sum, or$6,428,204.50.
The plaintiff's appraiser testified at the trial that one Brookhaven parcel was worth$5,300,000, and the other Brookhaven parcel was worth $7,150,000, for a total of $12,450,000,and the Islip parcels had a combined value of $6,060,000. The defendants challenge thisvaluation as excessive. However, PPI's business plan from June 1999 listed the fair market valueof the Brookhaven property as $13,712,000 and the value of the Islip parcels as $6,700,000,indicating that valuation by the plaintiff's appraiser was substantially accurate.
However, the Supreme Court erred in awarding the plaintiff monetary damages with respectto the Islip properties, as the parties' July 2002 agreement settled all claims with respect to thoseparcels. In awarding damages for the Brookhaven properties, only the value of the Brookhavenproperties as of April 30, 1999, or $12,450,000, should be considered. The portion of the$5,653,590 attributable to the Brookhaven properties should be deducted from that sum, and theplaintiff should be awarded 50% of the difference.
The defendants' remaining contentions are without merit. Dillon, J.P., Miller, Leventhal andChambers, JJ., concur. [See 18 Misc 3d 1138(A), 2008 NY Slip Op 50360(U).]