The opinion of the court was delivered by: POLLACK
This is a motion for summary judgment in an action on a promissory note executed by defendants' testator.
Plaintiff is a Florida corporation with principal place of business in Florida. The defendants are the executors of the estate of former United States Representative Joseph Y. Resnick. The decedent was and all the defendants are citizens of New York. Jurisdiction is based upon diversity of citizenship and the requisite amount in controversy. 28 U.S.C. § 1332.
In their amended answer the defendants raise the single affirmative defense of a settlement made with plaintiff subsequent to the commencement of this action. Accordingly, defendants believe they are entitled to summary judgment in their favor based on the terms of the settlement.
Plaintiff contends that the settlement is void under the applicable New York law because either the settlement was not in writing or else required written authority was not given to plaintiff's counsel to enter into the settlement. See N.Y. General Obligations Law § 15-501(2). In addition, plaintiff claims that any otherwise enforceable agreement is voidable for defendants' failure to perform terms of the settlement within a reasonable time. See N.Y. General Obligations Law § 15-501(3).
The evidence presented to the Court shows the following:
On June 13, 1969 plaintiff agreed to sell property in Jamaica to the decedent for $815,000, of which the sum of $733,500 was represented by a note, secured by a mortgage on the property. The land was conveyed to Twin Reef Acres Limited, a Jamaica corporation wholly owned by the decedent. Twin Reef Acres was described in the documents as the mortgagor and the decedent was joined therein as "surety" and also described in the documents as the "principal debtor".
Interest on the unpaid principal at the annual rate of 8% was payable quarterly with an acceleration clause applying to both principal and interest. The first interest payment was due on October 31, 1969.
Representative Resnick died on October 6, 1969 and the estate failed to pay the interest due at the end of that month. In January, 1970 plaintiff commenced this action demanding the full amount of principal and accrued interest from the defendants pursuant to the acceleration clause; there was no attempt to foreclose on the land in question.
Soon after issue was joined, a settlement was proposed and accepted in principle. In essence, plaintiff's president agreed to accept all the shares in Twin Reef Acres, whose sole asset apparently is the land in question, and in return, plaintiff was to release the Resnick estate of all liability on the note and discontinue the instant action. Each side was to pay one-half of the cost of transfer stamps and title registration with respect to the mortgaged property. After long delays in implementing the agreement reached, lasting about a year, the plaintiff decided to back out of the settlement and made the present motion for summary judgment on the note.
Lack of Writing Executed by Plaintiff
Since the jurisdiction of the Court is based on diversity, the substantive law of New York must be applied. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938). In New York an executory accord must be in writing:
An executory accord shall not be denied effect as a defense or as the basis of an action or counterclaim by reason of the fact that the satisfaction or discharge of the claim * * * which is the subject of the accord was to occur at a time after the making of the accord, provided the promise of the party against whom it is sought to enforce the accord is in writing and signed by such party or his agent. N.Y. General Obligations Law § 15-501(2) (emphasis added).
This provision has been construed by New York courts to mean that an oral settlement cannot be enforced. E.g., Chemical Bank New York Trust Co. v. Staten Island Board of Jewish Education, Inc., 23 A.D. 2d 833, 259 N.Y.S. 2d 501 (1965); Goldbard v. Empire State Mutual Life Insurance Co., 5 A.D. 2d 230, 235, 171 N.Y.S. 2d 194 (1958). The parties are in sharp dispute whether a ...