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Garson v. Garson

United States District Court, S.D. New York

June 26, 2017

JAMES GARSON, Plaintiff,
v.
ROBIN GARSON, individually and as voluntary administrator of the Estate of Gerald P. Garson, and the ESTATE of GERALD P. GARSON, Defendants.

          OPINION AND ORDER

          KATHERINE POLK FAILLA UNITED STATES DISTRICT JUDGE [1]

         The events underlying this unfortunate intrafamilial dispute occurred many years ago; the crux of the instant motion is whether they occurred too many years ago to support timely claims under New York law. Plaintiff James Garson extended a $210, 000 loan in 2007 to his stepmother, Defendant Robin Garson, and his father, the now-deceased Gerald P. Garson. Initially by oral agreement, Plaintiff offered to provide the loan to help the Garsons pay legal, medical, and personal expenses while they were under criminal investigation for judicial misconduct. In return, the Garsons agreed to repay Plaintiff from the proceeds from either (i) one or more of their life insurance policies (collectively, the “Insurance Policies”); or (ii) the sale or refinancing of the Garsons' cooperative apartment on East 74th Street in Manhattan (the “Apartment, ” and together with the Insurance Policies, the “Assets”). The parties memorialized the terms of their oral agreement in two documents. Robin Garson first signed a handwritten letter on behalf of the Garsons, confirming the oral agreement and pledging to repay Plaintiff using either category of Assets. Thereafter, she signed a Promissory Note on behalf of Gerald Garson alone that allowed Plaintiff to seek repayment no earlier than nine months after the Note's date of execution from any “collateral pledged.” Plaintiff sought repayment of the loan using the proceeds of Gerald Garson's life insurance policy, which became payable in February 2016. Robin Garson received the proceeds in her capacity as administrator of Gerald Garson's estate (the “Estate”), but refused to provide them at Plaintiff's request. Additionally, Robin Garson neither sold nor refinanced the Apartment. In consequence, Plaintiff brought this action on August 3, 2016, against Robin Garson, individually and as voluntary administrator of the Estate (collectively, “Defendants”).

         Plaintiff alleges three causes of action in his Second Amended Complaint (or “SAC”). He claims first that Defendants breached their oral agreement, memorialized by Robin Garson's handwritten letter, to repay Plaintiff with the Assets. Alternatively, Plaintiff claims that Defendants were unjustly enriched at Plaintiff's expense because they received a $210, 000 loan that they continue to refuse to repay. Finally, and relatedly, Plaintiff seeks to establish a constructive trust over the Assets, the proceeds of which Defendants ostensibly pledged as security for the loan.

         Defendants have moved to dismiss the SAC under Federal Rule of Civil Procedure 12(b)(6), arguing that Plaintiff's allegations are untimely and meritless. Because this Court disagrees with both arguments, at least at this stage of the litigation, it denies the motion.

         BACKGROUND[2]

A. Factual Background

         1. The Loan and Initial Oral Agreement

         Plaintiff is the stepson of Robin Garson and the son of the late Gerald P. Garson. At the time Plaintiff filed his initial complaint on August 3, 2016, he was a citizen and resident of New Jersey. (SAC ¶¶ 6, 10). Robin Garson is a citizen and resident of New York, where she also administers the Estate. (Id. at ¶¶ 7, 9-12).

         Robin Garson and Gerald Garson were under criminal investigation in 2007 for judicial misconduct. (SAC ¶¶ 1, 14). At the same time, Gerald Garson was battling a serious illness. (Id.). Plaintiff extended a $210, 000 loan that same year to Robin and Gerald to assist them with the financial demands of the criminal investigations, Gerald's medical needs, and various personal expenses. (Id. at ¶ 14).

         At the time Plaintiff extended the loan, Robin and Gerald Garson orally agreed to repay Plaintiff using proceeds from either (i) one or more of their Insurance Policies; or (ii) the sale or refinancing of the Apartment. (SAC ¶¶ 2, 16). The triggering events for the repayment of Plaintiff's loan from the Assets were keyed to the nature of each Asset: The proceeds from the Insurance Policies were to be paid either upon the death of Robin or Gerald Garson, or upon termination of the policies before maturity. (Id. at ¶ 16). The proceeds from the Apartment were to be issued to Plaintiff after the sale of its shares or a refinancing of the mortgage. (Id. at ¶¶ 2, 16, 18).

         2. The Subsequent Written Agreements

         Two written agreements followed the parties' initial oral agreement. (SAC ¶¶ 2, 18-20). On June 4, 2007, Robin Garson handwrote a letter (the “June 4 Letter”) confirming the oral agreement. (Id. at ¶¶ 2, 18; see also id., Ex. A at 1). According to the SAC, Robin signed the letter in her own name and on behalf of Gerald Garson, who was by that time incarcerated. (Id.; but cf. Def. Br. 4 n.2 (noting that Gerald Garson's term of incarceration began on June 28, 2007)).[3] The June 4 Letter reads, in relevant part:

That money extended to me or to Gerald Garson as a loan is hereby secured by either of the following:
1. The profits from the sale of the shares representing the corresponding interest in our apartment's cooperative corporation or the proceeds of the refinance of the co-op mtg. and/or
2. The proceeds of any life insurance policy either upon the death of either Robin or Gerald Garson, or the surrender value of that/those policies.
The above to be formalized by written contract or any combination of the above.

(SAC, Ex. A at 1 (emphasis in original)).

         In September 2007, Plaintiff's counsel drafted three loan documents - a Promissory Note, a Cooperative Loan Security Agreement, and an Authorization to File Financial Statement - as contemplated by the June 4 Letter. (SAC ¶ 19; see also id., Ex. B, C, D). Robin Garson signed the Promissory Note on October 23, 2007. (Id. at ¶ 20; id., Ex. E at 1). But she refused to sign the Promissory Note in her personal capacity. (Id. at ¶ 21). Instead, Robin Garson signed it only as “attorney in fact” for her husband. (Id.).

         Robin Garson made two potentially significant handwritten changes to the Promissory Note prior to signing it. (SAC ¶ 22). First, she changed the date after which Plaintiff could request repayment of the loan. (Id.). The Promissory Note's original language provided that Plaintiff's loan would be “payable on demand … in no event sooner than eight (8) months from the date hereof[.]” (Id.; id., Ex. B, E (emphasis added)). Prior to signing, Robin crossed out “eight (8)” and substituted “nine (9)” in its place. (Id.). Second, the Promissory Note originally provided that Plaintiff “shall not be required to look to any collateral pledged or held by it for the payment of this Note, but may proceed against the Maker in such manner as it deems desirable.” (Id. at ¶ 22; id., Ex. B, E (emphasis added)). Robin crossed out the word “not” prior to signing, though this emendation arguably rendered the second half of the sentence moot. (Id.).

         3. The Demand Letter

         Gerald Garson died in February 2016. (SAC ¶¶ 4, 23). Robin Garson, as administrator of the Estate, thereafter received the proceeds of an insurance policy in Gerald's name (the “Insurance Policy”). (Id.). Plaintiff demanded the proceeds of the Insurance Policy from Robin as repayment ...


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