Tuesday, June 8, 2021
Rabbi Vilmos Meisels, living in Britain, acquired five Brooklyn rental properties worth over $100 million as of 2017. In January 2017, Vilmos entered into a contract, styled a "Sale, Deed, and Agreement" (the Agreement) which purported to transfer the properties to his sons, Henry and Jacob, in exchange for $15 million. Henry, and Henry's son, Joel, managed the property, and they shared the proceeds of the business with Vilmos and Jacob, until Vilmos passed in 2019. At that point, Henry ceased making payments, sought a declaration that the properties were his and that no further payments were necessary.
Enter (at 3:20 in the video below), Vilmos's widow, Frumme Sarah.
I wish. No, his widow's name is Minia, but she claimed that the properties were not Vilmos's to sell. That issue was too complicated for the court to resolve at a preliminary stage in the litigation. However, the court could address the question of whether or not the Agreement entailed an illusory promise and thus was unenforceable for lack of consideration.
In Meisels ex rel. Stamford Equities, LLC v. Meisels, the District Court for the Eastern District of New York sided with Minia. The Agreement provided that payment was to be made within thirty days of handwritten notice from Vilmos or after Vilmos's death. Bizarrely, however, the Agreement also provided that "delaying payment can in no way retract from the validity of this sale." Minia correctly deduced that the Agreement as written did not require that Henry pay anything at all. In addition, the Agreement provided that it could only be enforced by Vilmos, which became very hard for him to do once he died.
Along the way, the court cleared away some jurisdictional issues. Jacob, although a party to the Agreement and possible beneficiary thereof, sided with his mother and attempted to join the suit, spoiling the court's diversity jurisdiction. But the court swept aside procedural niceties and dismissed Jacob from the suit so that it could address the sweet little contracts issue. The court likewise made short work of Henry's clever argument that Minia had no standing to challenge the validity of a contract to which she was not a party. Henry's view, if accepted, would enable parties to sell non-parties' property without their consent and then deny them standing to challenge the conversion. Not saying that's what you were up to, Henry.
Technically, although Minia brought a 12(c) motion for judgment on the pleadings, the court treated it as a 12(f) motion to strike Henry and Joel's affirmative defenses. Those defenses rested on the validity of the Agreement. They attempted to characterize the language that rendered their promises illusory as merely limiting Minia's remedies to a suit for damages. The court sagely noted that, without the ability to challenge the transfer of the property, a suit for damages would be quite useless. In any case, any attempt by the court to construe payment terms would violate the Statute of Frauds as interpreted under New York law. Minia's motion was granted, and I suspect that decides the case, but we shall see.
H/T to the New York Contracts Decisions Twitter Feed and to my new R.A.s, Sydney Scott and Alyssa Cross, for their assistance.