NEEDEL v. FLAUM (1998)

Supreme Court properly granted that part of defendants' motion for summary judgment dismissing the first, third, fourth and fifth causes of action.   In April 1993 the Galleries of Syracuse (Galleries), a building with multiple tenants, was acquired by Onondaga Galleries Corporation (Onondaga), a corporation formed by defendant David M. Flaum (Flaum), a developer.   Plaintiff alleges that for two years he helped Flaum lay the groundwork for the acquisition and that Flaum then reneged on a promise to make him a 10% partner in the enterprise.   The complaint states causes of action for breach of contract, unjust enrichment, breach of fiduciary duty, deceptive business practices and fraud.

 Whether the alleged agreement was to make plaintiff an owner of the Galleries, as plaintiff initially believed, or a shareholder in Onondaga, pursuant to a subsequent offer by Flaum, the Statute of Frauds applies.  General Obligations Law § 5-703(3) provides that “[a] contract to devise real property, * * * or any interest therein or right with reference thereto, is void unless the contract or some note or memorandum thereof is in writing and subscribed by the party to be charged therewith, or by his lawfully authorized agent.”   Similarly, UCC 8-319 bars enforcement of an oral contract involving the exchange of services for an equity interest in a corporation (see, Fallon v. McKeon, 230 A.D.2d 629, 646 N.Y.S.2d 109;  Hart v. Windjammer Barefoot Cruises, 220 A.D.2d 252, 632 N.Y.S.2d 100).   Plaintiff characterizes his oral agreement with Flaum as a partnership agreement or a joint venture and thus contends that the Statute of Frauds does not apply (see, Prince v. O'Brien, 234 A.D.2d 12, 650 N.Y.S.2d 157;  Unicorn Enters. v. Stonewall Contr. Corp., 232 A.D.2d 404, 405, 648 N.Y.S.2d 153).   However, the essence of a partnership or joint venture is a community of interest that manifests itself in mutual control and an agreement to share the burden of losses (see, Kyle v. Brenton, 184 A.D.2d 1036, 584 N.Y.S.2d 698;  Natuzzi v. Rabady, 177 A.D.2d 620, 622, 576 N.Y.S.2d 326).   Defendants established that there was neither a sharing of control nor provision for the apportionment of losses, and plaintiff failed to raise an issue of fact in response.

In any event, there is no proof of a contract, oral or otherwise, to make plaintiff an equity partner.   At best, there are unenforceable agreements to agree (see, Liberty Moving & Stor. Co. v. Bay Shore Moving & Stor., 152 A.D.2d 682, 684, 543 N.Y.S.2d 745, lv. denied 75 N.Y.2d 701, 551 N.Y.S.2d 905, 551 N.E.2d 106).   By his own admission, plaintiff rejected an initial agreement when it was reduced to writing, and it is clear that the parties never intended to be bound without a signed written agreement (see, Rogers v. Mattucci, 230 A.D.2d 725, 645 N.Y.S.2d 875, lv. denied 89 N.Y.2d 816, 659 N.Y.S.2d 857, 681 N.E.2d 1304).

 Without an enforceable contract, plaintiff has no cause of action for breach of contract or breach of fiduciary trust (see, Fallon v. McKeon, supra).   The cause of action for fraud was properly dismissed because there is no proof of a breach of duty distinct from that arising from the alleged oral agreement (see, Fallon v. McKeon, supra), nor proof that Flaum did not intend from the outset to fulfill his alleged promise (see, Hart v. Windjammer Barefoot Cruises, supra, at 253, 632 N.Y.S.2d 100;  Harrington v. Murray, 169 A.D.2d 580, 582, 564 N.Y.S.2d 738).   Plaintiff has not addressed on appeal the dismissal of the fourth cause of action alleging deceptive business practices and thus is deemed to have abandoned that issue (see, Ciesinski v. Town of Aurora, 202 A.D.2d 984, 609 N.Y.S.2d 745).

We reject the argument of defendants on their cross appeal that the court erred in failing to dismiss the second cause of action for unjust enrichment (see, Farash v. Sykes Datatronics, 59 N.Y.2d 500, 506, 465 N.Y.S.2d 917, 452 N.E.2d 1245;  Bradkin v. Leverton, 26 N.Y.2d 192, 199, 309 N.Y.S.2d 192, 257 N.E.2d 643).   Furthermore, the incorporation of Onondaga did not cut off any claim plaintiff had against Flaum and defendant Flaum Management Company, Inc. (cf., Judelson v. Weintraub, 55 A.D.2d 906, 390 N.Y.S.2d 455).

Order unanimously affirmed without costs.

MEMORANDUM: