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Petrello v. White

February 2, 2006

ANTHONY PETRELLO, CYNTHIA PETRELLO, PLAINTIFFS,
v.
JOHN C. WHITE, JR., WHITE INVESTMENT REALTY, LP., DEFENDANTS.



The opinion of the court was delivered by: Hurley, District Judge

MEMORANDUM & ORDER

INTRODUCTION

Presently before the Court are the motions by Plaintiffs Anthony Petrello ("Petrello") and Cynthia Petrello (collectively, "Plaintiffs") for summary judgment and Defendants John C. White, Jr. ("White"), and White Investment Limited Partnership*fn1 (collectively, "Defendants") for judgment as a matter of law and leave to amend counterclaims. Originally before the Honorable Leonard D.Wexler, Senior District Judge for the Eastern District of New York, the parties entered into a settlement agreement on May 30, 2003. The settlement agreement was only in effect for nine months. As was his option, Petrello elected not to extend the agreement. The parties returned to court, and, after Judge Wexler recused himself, the case was reassigned here. Neither party seeks enforcement of the settlement agreement, but rather both parties have resumed their initial claims.

For the reasons stated below, the Court GRANTS Plaintiffs' motion for summary judgment, DENIES Defendants' motion for judgment as a matter of law, DENIES Defendants leave to amend as to the sixth counterclaim, and GRANTS Defendants leave to amend as to the seventh and eighth counterclaims.

BACKGROUND

The material facts, drawn from the parties' Local 56.1 Statements and submitted evidence, are undisputed unless otherwise noted. Plaintiffs are residents of Houston, Texas. Petrello was a partner at Baker & McKenzie ("Baker") until 1991 when he took a position as legal counsel for Nabors Industries in Houston. He remained "Of Counsel" at Baker from 1991 to 2000. White is a resident of the Hamlet of Sagaponack, in the Town of Southampton, New York, where he owns a fifty-seven-acre farm. Defendant White Investment Limited Partnership is a limited partnership formed by the White family, including White and his son, Jeff White, to protect the family's financial interests and keep the farm within the family.

I. White's Estate Planning (1980's - July 1995)

White's family has owned the farm for nearly 300 years. Fearing that his children would be unable to pay the estate taxes for the increasingly valuable property, White began dealing with estate planning issues in the 1980's. White decided to subdivide his "Homelot." To do so, he sought the assistance of Richard Halsey ("Halsey"), President of the Peconic Land Trust ("PLT"), Richard Warren, a principal of Inter-Science Research Associates, Inc., an environmental and land-development consulting firm, and Dolliver Associates, a surveying firm, to begin preparing subdivision maps and related materials.

The White family retained the services of the PLT to prepare and implement a conservation plan for estate tax purposes. In 1993, Halsey referred the family to Philip G. Hull, Esq. ("Hull"), of the law firm Winthrop Stimson ("Winthrop"), who concluded that an effective estate plan would involve a charitable donation to the PLT and the sale of some oceanfront property. The end result would be that the family could maintain most of its property while raising enough cash to cover anticipated estate taxes.

II. Petrello and White Negotiate Land Purchase (July 1995 - February 1998)

Michael Burrows ("Burrows") introduced Petrello to White. Burrows was White's longtime friend and a partner at Baker with Petrello. White had a number of cottages on the property that he rented during the summer months. After the introduction, Petrello became a seasonal visitor, renting a summer cottage with his wife from 1992 to 1997.

During one of his visits, Petrello approached White about purchasing a portion of the Homelot. Petrello proposed a deal: if White would sell a portion of his property to Petrello, Petrello would pay all of the land planning and legal work required to subdivide the property and employ Baker attorneys to develop a complete estate plan for the Whites. Petrello offered White two million dollars for 10.59 acres of land. On August 25, 1995, both parties signed the Memorandum of Sale, which included all of these terms. (See Pls.' Summ. J. Mem., Ex. A-17.) Three days later, the parties signed an addendum, wherein Petrello agreed to hire Baker to complete an estate plan for White at no cost to White.

As of late August 1995, Hull was no longer handling the White family's estate planning. After execution of the Memorandum of Sale, Robert Dumont, Esq. ("Dumont"), an estate-planning attorney at Baker, went to White's house for a meeting with the family, Burrows, and Halsey. On November 3, 1995, Dumont provided a letter to White outlining an estate plan. In December, Halsey contacted William Hutton, Esq., to discuss the estate plan and strategy conceived by Dumont.

In August 1997, Dumont drafted living wills and revocable trust documents for the White family. The documents drafted by Dumont replaced similar documents drafted earlier by Hull of Winthrop.

III. Contract of Sale (February 1998 - June 2000)

By February 1998, nearly three years after the signing of the Memorandum of Sale, the parties prepared to sign the Contract of Sale. At the recommendation of the PLT, in or about February 1998, White retained P. Edward Reale, Esq. ("Reale"), of Twomey, Latham, Shea & Kelley ("Twomey"), to draft the Contract of Sale and the rider thereto. Reale was listed as the attorney for seller on the Contract. At about the same time, Jay Quartararo, Esq., also of Twomey, took over the Whites' estate planning. Dumont was no longer involved with the White family's estate planning.

On April 13, 1998, Reale circulated a draft of the Contract of Sale, which he had prepared, to the parties. The terms of the Contract of Sale were different from those of the Memorandum of Sale. According to the terms of the contract, White would sell Lots 4, 5, and 6, totaling 9.56 acres, to Petrello for a purchase price of $2.1 million. That amount was $100,000 more than the purchase price in the Memorandum of Sale for one less acre of land. The Contract of Sale also contained a merger clause that read:

All prior understandings, agreements, representations and warranties, oral or written, between Seller and Purchaser are merged in this contract: it completely expresses their full agreement and has been entered into after full investigation, neither party relying upon any statement made by anyone else that is not set forth in this contract. (Pls.' Summ. J. Mem., Ex. A-1 ¶ 28(a).) The contract further acknowledged that Petrello had paid $355,000 toward the purchase price as of August 1998 and provided that $170,000 was due at closing.

Petrello returned the signed contract to Reale on July 31, 1998. White signed the contract on August 21, 1998, in the presence of Reale. Reale sent the fully-signed contract to Petrello with a cover letter dated September 4, 1998.

IV. White Refuses to Close (June 2000 - May 2001)

In June 2000, White's land was reappraised. Since the beginning of his estate planning, the price of real estate had skyrocketed and he determined that he would need between $8 and $10 million to cover potential estate taxes rather than $2 million, as originally thought. According to the new appraisal, the land at issue was worth between $14.5 and $16 million.

On October 26, 2000, Reale sent Petrello a full set of closing documents. Petrello signed the closing documents and returned them to Reale on November 14, 2000. White refused to sign the documents. Reale sent Petrello a second set on April 10, 2001, which were returned signed by Petrello on April 25, 2001. White again refused to sign.

As a result of White's refusals, Petrello filed the present complaint on May 15, 2001, demanding, inter alia, specific performance of the Contract of Sale and damages for White's delays in closing the sale. (See generally Supplemental & Am. Compl.) White answered on July 9, 2001, asserting eighteen affirmative defenses (see Am. Answer to the Supplemental & Am. Compl. with Affirmative Defenses ("Am. Answer"), ¶47-64)*fn2 , and the following counterclaims:

(1) common law fraud; (2) fraud in the inducement; (3) breach of fiduciary duty; (4) breach of constructive trust; and (5) declaratory judgment that the Contract of Sale is null and void. (See Am. Answer, ¶183-214.) As previously noted, the case was initially assigned to Judge Wexler.

V. Procedural History (May 2003 - February 2004)

On May 30, 2003, after three days of trial, the parties agreed to settle. In the settlement agreement, the parties had nine months to resolve any development issues with the Town of Southhampton. If the settlement agreement was not completed within the nine month time-frame, then Petrello could terminate the agreement at his election.

Each party disputed various actions by the other over the subsequent nine months. For example, Petrello took four months to provide the required documents to White. On September 30, 2003, when Petrello finally delivered the new lot map to White, White objected to the drawing of the access road. Judge Wexler appointed a Special Master to determine issues regarding the settlement agreement, e.g. the location of the access road. With regard to the access road, the Special Master decided on January 6, 2004, that the decision should be left to the town.

By the time Petrello finally submitted the project documents to the Town of Southampton, it was the beginning of February. As a result, the town did not approve the plans by the end of the nine-month time frame. Petrello elected not to extend the term of the settlement agreement.

The suit returned to federal court. For reasons not presently relevant, Judge Wexler recused himself. Thereupon, the case was reassigned to this Court. Petrello filed a Motion for Summary Judgment, demanding specific performance of the August 25, 1998 Contract of Sale. (See Pls.' Summ. J. Mem.) White opposed the motion, arguing for either rescission of the Contract of Sale or the imposition of a constructive trust. (See Defs.'Opp'n Mem.) Petrello filed a reply. (See Pls.' Reply Mem.) Not long thereafter, White filed a Motion for Judgment as a Matter of Law ("JMOL"), as to Petrello's request for specific performance, and sought leave to amend the answer to add three new counterclaims.*fn3 (See Defs.' Mem. for JMOL.) Petrello opposed the motions and White filed a reply. (See Pls.' Opp'n Mem.; Defs.' Reply Mem.)

STANDARDS

The standards for JMOL and summary judgment are the same. See Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000) ("[T]he standard for granting summary judgment 'mirrors' the standard for judgment as a matter of law, such that 'the inquiry under each is the same.'") (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51 (1986)); Kerman v. City of New York, 374 F.3d 93, 118 (2d Cir. 2004) ("The standard for judgment as a matter of law is the same as the standard for summary judgment."); Piesco v. Koch, 12 F.3d 332, 341 (2d Cir. 1993) (holding that "whether there are fact issues that should be decided only by the jury, the same standard that applies to a pretrial motion for summary judgment pursuant to Fed. R. Civ. P. 56 also applies to motions for judgment as a matter of law during or after trial pursuant to Rule 50"). Summary judgment is generally appropriate where the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Viola v. Philips Med. Sys. of N. Am., 42 F.3d 712, 716 (2d Cir. 1994) (quoting Fed. R. Civ. P. 56(c)). The party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion," and identifying those materials "it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

Once the moving party has offered some evidence that no genuine issue of material fact remains to be tried, the burden shifts to the non-moving party to provide similar evidence indicating that a genuine, triable issue remains. Anderson, 477 U.S. at 250; Fed. R. Civ. P. 56(e). Affidavits submitted in opposition to summary judgment must be based on personal knowledge, must "set forth such facts as would be admissible in evidence," and must show that the affiant is "competent to testify to the matters stated therein." Patterson v. County of Oneida, N.Y., 375 F.3d 206, 219 (2d Cir. 2004) (citing Fed. R. Civ. P. 56(e)). When determining whether a genuinely disputed factual issue exists, "a trial judge must bear in mind the actual quantum and quality of proof necessary to support liability," or "the substantive evidentiary standards that apply to the case." Anderson, 477 U.S. at 254-55.

In deciding a summary judgment motion, a court must resolve all factual ambiguities and draw all reasonable inferences in favor of the non-moving party. Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir. 1987). Nevertheless, it is well-established that a non-movant cannot defeat summary judgment with nothing more than "unsupported assertions," Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995), or the allegations in its pleadings. Cifarelli v. Vill. of Babylon, 93 F.3d 47, 51 (2d Cir. 1996); Fed. R. Civ. P. 56(e). More particularly, although "summary judgment should be used sparingly" in cases where the material fact at issue is the defendant's intent or motivation, the plaintiff must nevertheless offer some "concrete evidence" in his favor, and is "not entitled to a trial simply because the determinative issue focuses upon the defendant's state of mind." Dister v. Cont'l Group, Inc., 859 F.2d 1108, ...


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