Yu Han Young v Chiu

[*1] Yu Han Young v Chiu 2006 NY Slip Op 52084(U) [13 Misc 3d 1232(A)] Decided on October 16, 2006 Supreme Court, Queens County Gavrin, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through November 3, 2006; it will not be published in the printed Official Reports.

Decided on October 16, 2006
Supreme Court, Queens County

YU HAN YOUNG, Individually and as 50 % Shareholder of YNC Ltd and CNY Ltd., Plaintiff,

against

Cathy Chiu and YNC Ltd. and CNY Ltd., Defendants Yu Han Young, Individually and as 50% Shareholder of YNC Ltd. And CNY Ltd., Plaintiff,

against

Cathy Chiu and AUSTIN REALTY HOLDINGS, LLC, Defendants

12499/04

Darrell L. Gavrin, J.

Action No. 1 and Action No. 2 were joined for trial by an order dated

November 30, 2005.

In Action No.1, plaintiff, Yu Han Young, seeks specific performance of written agreements for the division of real property, and defendant, Cathy Chiu, counterclaims for recision of these agreements.

In Action No. 2, plaintiff, Yu Han Young, seeks to compel the transfer to her of certain property owned by defendant, Austin Realty Holding, LLC. [*2]

A non-jury trial was held on June 7, 8, 13 and 14, 2006. The following witnesses testified at the trial: plaintiff, Yu Han Young a/k/a Linda Young; defendant, Kathy Chiu sued herein as Cathy Chiu; James Lin, an officer of Amerasia Bank; Veronica Wong, the property manager at Bethel Management, and Henry Chiu, husband of Kathy Chiu.

Based on the evidence adduced at trial, the court made the following findings of fact and conclusions of law.

FINDINGS OF FACT

Linda Young and Kathy Chiu are equal shareholders and officers in two corporations, YNC Ltd. and CNY Ltd.CNY Ltd. was formed in 1995, when it purchased premises 70-11, 70-13, 70-15 and 70-21 Austin Street in Forest Hills. YNC Ltd. was formed in 1998, when it purchased premises 70-17 and 70-19 Austin Street in Forest Hills. These premises are part of a complex of three buildings. The building containing premises 70-11 and 70-13 is called Condo 1, although the proposal to convert it to a condominium was not approved. The building housing premises 70-15 and 70-17 is Condo 2, and the building with premises 70-19, 70-21 and 70-23 is Condo 3. Each building is composed of commercial rental units of two stores and two offices. The owner of premises 70-23 Austin Street was Howard Lee. In late 2003, Kathy Chiu and her husband, Henry Chiu, contracted with him to purchase this property. Title to the 70-23 unit was transferred by a deed dated February 26, 2004 to Austin Realty Holdings, LLC, a corporation in which Kathy and Henry Chiu are the sole shareholders.

Plaintiff Young and defendant Chiu had known each other since 1988. Both had emigrated to the United States from China and both are married to dentists. They had a great deal in common, socialized and were good friends when they formed the corporations and purchased the Austin Street properties. Henry Chiu had even helped Linda Young's husband adapt to the practice of dentistry in the United States. They also had prior experience with commercial real estate investments, having entered into such investments together, as well as alone and with other persons, before purchasing the Austin Street properties.

Linda Young, Kathy Chiu, and their respective husbands met regularly to discuss their investment in the Austin Street properties. Sometime in 2000, they decided that structural changes should be made in order to replace the three shared elevators, located in front of 70-11, 70-15 and 70-21, with a single elevator. The evidence revealed that it was thought this would be more efficient and economical and would enhance the appearance of the buildings. Further, there was a flooding [*3]problem in the elevators in front of 70-11 and 70-15 which would be greatly alleviated if the elevator was placed closer to premises 70-23, since the ground sloped down from 70-23 to 70-11. The parties hired an architect, recommended by Henry Chiu, who prepared plans which called for the existing three elevators to be removed and a single elevator installed to service all seven units in the three buildings. Implementation of the architect's plan required easement agreements for a walkway joining the seven units to the new elevator. The plans were approved by the City of New York and defendant, Kathy Chiu, signed easement agreements on behalf of the corporations. However, Howard Lee, who owned 70-23 Austin Street, refused to sign an easement agreement. As result, the construction work never commenced.

At first, Linda Young and Kathy Chiu alternated managing the properties and collecting the rents but in August 2003, Bethel Management was retained to handle these duties. By 2004, the friendly relationship between plaintiff Young and defendant Chiu had deteriorated and they decided to divide their interests in the Austin Street properties. On February 19, 2004, the parties, together with their husbands, met at Amerasia Bank located at 41-06 Main Street, Flushing. This bank holds a first mortgage on the 70-11 to 70-21 Austin Street properties. Shortly before the meeting, Linda Young learned that Kathy Chiu and her husband were in contract to purchase premises 70-23 Austin Street. In late 2003, while Linda Young was away on a trip to China, Kathy and Henry Chiu had negotiated with Howard Lee to purchase this property. When Linda Young returned from China, Kathy Chiu had casually inquired, as she accompanied her to a bus stop after a meeting at the Bethel Management office, whether the plaintiff was interested in purchasing the 70-23 premises. However, Kathy Chiu did not tell the plaintiff that Chiu and her husband had negotiated for the purchase of the property and were entering into a contract of sale with Howard Lee.

The meeting at Amerasia Bank was held in the presence of James Lin, executive vice president and chief lending officer of the bank, who had known the parties for many years. They discussed and drafted an agreement to divide the Austin Street properties. The handwritten agreement, which was prepared by Henry Chiu, the husband of Kathy Chiu, is dated February 19, 2004. It was signed by plaintiff Young, defendant Chiu, and their husbands, and notarized by Cheng-Tsang Tsai, an officer of the bank. This agreement provided as follows:

February 19, 2004 Agreement is reached today between Ms. Linda Young (a/k/a Yu Han Young) and Ms. Kathy Chiu of CYY, Ltd. And YNC, Ltd. regarding the [*4]property at 70-11 70-13, 70-15 70-21 (CNY, Ltd.) 70-17, 70-19 (YNC, Ltd.) of Austin Street Forest Hills, NY 11375.

1. That 70-11, 70-13, 70-19 and 70-15 70-17 70-21 will bedivided into two parcels. The assignment will be decided by drawing lots. Difference in appraised value will be paid by the respective parties to equalize the value.

2. The lending bank (Amerasia Bank) will coordinate the financing of the reconstruction project (remove two elevators ramps & walkways as previously planned). The project shall proceed simultaneously with 1.

3. The lending bank will handle the appraisal, reappraisal and

refinancing process, etc. as per Mr. Lin G.M. of Amerasia Bank.

4. Ms. Linda Young and Ms. Kathy Chiu will contact the contractor and project manager to get the reconstruction project started immediately. Signed By Yu Han Young, Henry Chiu, Katy Chiu, Jang Rong Young and

Notarized by Cheng-Tsang Tsai.

On February 26, 2004, only a week after this meeting, Kathy and Henry Chiu closed title on the 70-23 Austin Street property and received a deed transferring the property to defendant, Austin Realty Holdings, LLC. As required by the agreement of February 19, 2004, Mr. Lin ordered a new appraisal of the Austin Street properties jointly owned by Linda Young and Kathy Chiu.He gave the appraiser specific instructions to provide the market value for each unit and to base the value upon the reconfiguration of the elevator, in accordance with the architect's plans which he submitted to the appraiser. On April 22, 2004, after receiving the appraisal, the parties again met at the bank. They had prepared an agreement in which values had been assigned to the units based on the bank's appraisal, except for the 70-21 property. This unit had been appraised at $1,116,000. However, the parties reduced its value to $850, 000 because it would be partially blocked by the new single elevator to be installed in the renovation construction. The agreement divided the units, as equally as possible, into two parcels, "A" and "B", and provided as follows:

April 22, 2004 It is hereby mutually agreed by the undersigned partners of CNY, Ltd. & YNC Ltd. That the value of the subject properties are 70-11 Austin Street$1,313,000 70-13$1,313,000 70-15$1,465,000 70-17$1,465,000 70-19$1,313,000 70-21$ 850,000 A. 70-11, 70-13, 70-19 as one package totaling $3,939,000 B. 70-15, 70-17, 70-21 as one package totaling $3,780,000
It is hereby mutually agreed by the undersigned that Condo 1 (70-11, 70-13 Austin Street) Condo 2 (70-15, 70-17 Austin Street) Condo 3 (70-19, 70-21 70-23 Austin Street) Are three separate and equal entities. All reconstruction cost and future maintenance of the common elements shall be born (sic) equally by the three condos. Expenses for condo 3 will be divided according to the shares percentage recorded in the condo book. It is hereby mutually agreed that all expenses related to the 1. Formation of condo 1 (70-11, 70-13 Austin Street, Forest Hills) 2. transformation of CNY, Ltd & YNC, Ltd. To two separateentities 3. between Linda Young and Ms. Kathy Chiu will be born equally by the undersigned parties.

Signed By Yu Han Young Henry Chiu, Katy Chiu, Jang Rong Young and Notarized by Cheng-Tsang Tsai.

Plaintiff Young, defendant Chiu, and their husbands signed this agreement at the bank on April 22, 2004 and it was notarized by the bank officer, Cheng-Tsang Tsai. After this agreement was signed, the parties conducted a drawing. Six slips of papers, three with Parcel "A" and three with Parcel "B" written on them, were placed in a bowl. The first person to pick two slips with the same parcel, was to receive that parcel. As a result of the drawing, Linda Young received parcel "A" and Kathy Chiu received parcel "B" (Trial transcript at 59-62, 103-106). The parties then prepared another agreement, handwritten by Henry Chiu, which they all signed before the notary. This agreement provided as follows:

April 24, 2004 At the office of Mr. Lin GM of Amerasia Bank, by mutual agreement between Kathy Chiu and Ms. Linda Young with Mr. Lin as witness.[*5]

70-11, 70-13 70-19 has been assigned to Ms. Linda Young. 70-15 70-17 70-21 has been assigned to Ms. Kathy Chiu.Linda Young shall pay to Ms. Kathy Chiu Seventy Nine Thousand Five Hundred ($79,500) Dollars at the time of closing to equalize the values of the two packages per the agreement of February 19, 2004.Signed By Yu Han Young, Henry Chiu, Katy Chiu, Jang Rong Young and Notarized by Cheng-Tsang Tsai.

Kathy Chiu was dissatisfied with the results of the drawing held at Amerasia Bank on April 22, 2004. She sent plaintiff Young a letter, dated April 27, 2004, stating that there had been mistakes made in the valuation of the buildings which nullified the agreements dividing the properties, and offering to pay $400,000 to swap the parcels. Defendant Chiu also has refused to sign the proposed contract to renovate the buildings, although the contractor, The Atlantic Group, was recommended by her husband. She and her husband now insist that the elevator should be situated at premises 70-11 Austin Street instead of 70-21 Austin Street, as previously planned.

CONCLUSIONS OF LAW

It is hornbook law that "extrinsic and parol evidence is not admissible to create an ambiguity in a written agreement which is complete and clear and unambiguous upon its face." (Intercontinental Planning,Ltd. v. Daystrom, Inc., 24 NY2d 372; 374; accord WWW Assoc. Inc. v. Giancontieri, 77 NY2d 157, 163). "Mere assertion by one that contract language means something to him, where it is otherwise clear, unequivocal and understandable when read in connection with the whole contract, is not in and of itself enough to raise a triable issue of fact." Bethlelem Steel Co. v. Turner Constr. Co., 2 NY2d 456, 460; accord Federal Deposit Ins. Corp. v. Herald Square Fabrics Corp., 81 AD2d 168; 180; see also Christian, Podelska v. Goldman Sachs & Co., 203 AD2d 9, appeal dismissed 85 NY2d 830). The agreements for the division of the Austin Street properties are complete, clear and unambiguous. Therefore, these agreements speak for themselves and parol evidence is not admissible to vary their terms. (See SAA-A, Inc. v. Morgan Stanley, 281 AD2d 201, 203; Unisys Corp. v. Hercules, Inc., 224 AD2d 365, 368 - 369, appeal withdrawn 89 NY2d 1031; Moloney v. Weingarten, 118 AD2d 836, 837, 1v denied 69 NY2d 608).

In order to rescind the agreements for the division of the Austin Street properties, based upon fraud and mistake, Kathy Chiu must prove, by clear [*6]and convincing evidence, that Linda Young misrepresented or intentionally concealed a material fact upon which Kathy Chiu relied to her detriment, or she must prove either mutual mistake or the necessary elements involving unilateral mistake which would require recision of the agreements. (Amalp Holdings, Inc. v. Bank Leumi Trust Co., 196 AD2d 518 lv denied 83 NY2d 754; see also Chimart Assocs. v. Paul, 66 NY2d 570). A party seeking to rescind an agreement based on unilateral mistake must show, inter alia, that despite the exercise of reasonable care, she had no knowledge of the mistake. (Desiderato v. N & A Taxi Inc., 190 AD2d 250, 253, see also DaSilva v. Musso, 53 NY2d 543).

Linda Young and Kathy Chui, were both experienced and knowledgeable in the area of commercial real estate. They had engaged in commercial real estate investments before purchasing the Austin Street properties and owned commercial real estate in various areas of Queens County, as well as elsewhere. In Chimart Assocs. v. Paul (supra at 572), the Court of Appeals held that: "Where a written agreement between sophisticated, counseled businessmen is unambiguous on its face, one party cannot defeat summary judgment by a conclusory assertion that, owing to mutual mistake or fraud, the writing did not express his own understanding of the oral agreement reached during negotiations." Similarly, the unsupported claim of Kathy Chiu that she relied upon misrepresentations by Linda Young as to the value of the units in the Austin Street properties, and that the parties, or at least defendant Chiu, were mistaken as to the nature of the values stated in the bank appraisal, cannot avoid enforcement of the written agreements for the division of the Austin Street properties. Linda Young and Kathy Chiu were well versed in market value, as contrasted with the value employed by a bank when financing property. Mr. Lin, the chief executive officer of Amerasia Bank, testified that he had business dealings, involving bank loans on real estate, with Chiu since 1995 or 1996 and with Young since 1999. For Kathy Chiu to claim she misunderstood the nature of a bank appraisal or that she was misled by representations of value made by Linda Young, is disingenuous. When these parties decided to use the bank appraisal values in dividing the Austin Street properties, they knew exactly what they were doing. The fact that they adjusted the value of the 70-21 unit, demonstrates exactly how knowledgeable they were as to the respective value of the units. Kathy Chiu did not suggest that a new appraisal was necessary before the drawing was held. The bank appraisals were utilized only to effect a division of the units and not to determine their actual market value. Moreover, when the [*7]Austin Street properties were divided into two parcels, "A" and "B", neither party knew which parcel she would own. It was only after the drawing was held that Chiu decided she had drawn the less valuable parcel. If this is in fact the case, she must live with it. Kathy Chiu has failed to prove any facts which warrant the recision of the agreements for the division of the Austin Street properties and her counterclaim must be dismissed. As Henry Chiu observed after the drawing was held, "what is done is done" (Trial transcript at 344).

When Kathy and Henry Chiu purchased the 70-23 Austin Street property, YNC Ltd. and CNY Ltd. owned all the units in the three building complex, known as Condo 1, 2, and 3, except for 70-23 Austin Street. The 70-23 unit was part of Condo 3 and the last unit in the building complex. Ownership of the entire complex would have simplified management of the property and enhanced its value. Also, plans to renovate the elevators in the buildings had been thwarted for years by the refusal of the owner of the 70-23 unit to sign an easement agreement. Clearly, ownership of premises 70-23 Austin Street was important for YNC Ltd. and CNY Ltd. , the corporations formed to purchase the Austin Street properties. In New York, officers and directors of a corporation "may not assume and

engage in the promotion of personal interests which are incompatible with the superior interests of their corporation."(Foley v. D'Agostino, 21 AD2d 60, 66). Kathy Chiu, a shareholder and officer of the closely held corporations, YNC Ltd. and CNY Ltd., was under a duty to deal fairly, in good faith, and with loyalty to the corporations and the other shareholder, not to profit at their expense or place her private interests in conflict with theirs. (American Federal Group, Ltd., v. Rothenberg, 136 F2d 897, 905). As concerns the Austin Street properties, Linda Young and Kathy Chiu were co-adventurers who owed one another the duty of the finest loyalty. "Many forms of conduct permissible in a workaday world for the those acting at arm's length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate." (Meinhard v. Salmon, 249 NY 458, 464; see also Richbell Info. Servs. v. Jupiter Partners, L.P., 309 AD2d 288, 299-300; Blank v. Blank, 222 AD2d 851).

Premises 70-23 Austin Street was not just another commercial property in Forest Hills. It was the final unit of seven units in the building complex owned [*8]by the corporations formed by plaintiff Young and defendant Chiu. These corporations clearly had an interest or a "tangible expectancy" in this property when it was acquired by defendant, Austin Realty Holdings, LLC. Therefore, the purchase of 70-23 Austin Street was a "corporate opportunity" which Kathy Chiu had a duty to acquire for the corporations. (See Burg v. Horn, 380 F 2d 897, 899; Blaustein v. Pan American Petroleum, 293 NY 281, 300; Blake v. Buffalo Creek C.R. Co., 56 NY 485; Alexander & Alexander, Inc, v. Fritzen, 147 AD2d 241, 247-248, affd 68 NY2d 968) . Kathy Chiu violated her fiduciary duty when she appropriated the property for herself and her husband, without informing plaintiff Young. Her casual inquiry as to whether Young was interested in purchasing the property, made as she accompanied her to a bus stop, was not the disclosure required of a corporate fiduciary. Defendant Chiu did not act in good faith and is now employing her ownership of 70-23 Austin Street to compel placement of the new elevator at a location that is beneficial only to her interests. Under New York Law, the corporations of which Kathy Chiu was a fifty percent shareholder and officer, CNY Ltd. and YNC Ltd., are entitled to impress a constructive trust on the 70-23 Austin Street property. Linda Young, as a fifty percent shareholder in these corporations is entitled to a one half interest in the 70-23 unit, when the Austin Street properties are divided between plaintiff Young and defendant Chiu.

Accordingly, in Action No. 1, plaintiff Young is awarded specific performance of the agreements dividing the property involved in this action between plaintiff, Yu Han Young a/k/a Linda Young, and defendant, Kathy Chiu, sued herein as Cathy Chui. Within thirty days of service of the judgment to be entered hereon, with notice of entry, Kathy Chiu is to execute all documents required to effectuate this division of the property, including the proposed contract for the renovation work to be performed by The Atlantic Group. The counterclaim of defendant Chiu is dismissed.

In Action No. 2, plaintiff Young, as a fifty percent shareholder in YNC Ltd. and CNY Ltd., is awarded a one half interest in the real property known as 70-23 Austin Street, on condition that within 45 days of service of the judgment to be entered hereon, with notice of entry, Yu Han Young a/k/a Linda Young pays defendant, Austin Realty Holdings, LLC., one half the purchase price and closing costs paid for this property

Settle judgment accordingly.



Dated: October 16, 2006[*9]______________________________

DARRELL L. GAVRIN, A.J.S.C.