Nuevo El Barrio Rehabilitacion de Vivienda Y Economia, Inc. v Moreight Realty Corp.

[*1] Nuevo El Barrio Rehabilitacion de Vivienda Y Economia, Inc. v Moreight Realty Corp. 2009 NY Slip Op 52748(U) [26 Misc 3d 1225(A)] Decided on November 16, 2009 Supreme Court, New York County Kornreich, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 16, 2009
Supreme Court, New York County

Nuevo El Barrio Rehabilitacion de Vivienda Y Economia, Inc., Plaintiff,

against

Moreight Realty Corp., Los Tres Unidos Associates, and JOHN and/or JANE DOES A through Z, who are the current GENERAL and/or LIMITED PARTNERS of LOS TRES UNIDOS ASSOCIATES, Defendants.



602698/2006



Attorney for Plaintiff:

Balber Pickard Maldonado & Van

1370 Avenue of Americas

New York, New York 10019

Attorney for Defendant:

Herrick & Feinstein

2 Park Avenue

New York, New York 10016

Shirley Werner Kornreich, J.

Kornreich, Shirley Werner, J.:

Defendants Moreight Realty Corp. (Moreight) and Los Tres Unidos Associates (Los Tres) move for summary judgment against plaintiff, Nuevo El Barrio Rehabilitacion de Vivienda Y Economia (NERVE), seeking dismissal of the Complaint. The Complaint asks for declaratory relief and damages for breach of contract arising from: (1) NERVE's 1981 agreement conveying its interest in a low income housing project in exchange for a general partnership interest in Los Tres and other compensation; (2) the 1985 conversion of NERVE's general partnership interest in Los Tres to a limited partnership interest; (3) Moreight's alleged sale of its general partnership interest in Los Tres in 2004 without affording NERVE its right of first refusal; and additional grounds. NERVE has brought a cross-motion for partial summary judgment on its first cause of action for declaratory relief. The declaratory relief claim seeks a declaration that pursuant to Not-For-Profit Corporation Law (N-PCL) 510(a)(3) and 511, its 1981 agreement transferring NERVE's interests in the housing project, is void.

I. Background

The facts are undisputed in most key respects. NERVE is a type C, not-for-profit corporation (see N-PCL 402) formed in 1975 to develop habitable housing for low income [*2]people in the El Barrio section of East Harlem. NERVE is the non-profit arm of the East Harlem Community Corporation (EHCC). Moreight is the managing general partner of Los Tres, a limited partnership and redevelopment company formed pursuant to Private Housing Finance Law, Article V.

In 1981, Los Tres, in cooperation with NERVE and nonparty United States Department of Housing and Urban Development (HUD), developed a housing project in East Harlem (the Project). The Project consists of a seven-story apartment building which has 135 residential units for exclusive rental to low income families. To effectuate this development, Moreight and NERVE executed two separate agreements: (a) a June 18, 1981 agreement, and (b) the Amended and Restated Limited Partnership Agreement of Los Tres (the partnership agreement). NERVE asserts that its interest in the Project prior to the 1981 Agreement constituted its "primary" asset, a fact disputed by defendants.

NERVE is described inthe June 18, 1981 agreement as a co-sponsor and processor of the Project along with the Harlem Urban Development Corp. (HUDC), and as a co-developer of the Project with Gotham Construction and Louis Rossally. Pursuant to that agreement, HUDC and NERVE conveyed to Moreight all of their

...right, title and interest in and to the Project and in all development rights relating to the Project, including, without limitation, all commitments issued by HUD, GNMA, HFA, and/or Merrill, Lynch, Huntoon Paige, Inc., and all Section 8 subsidy commitments or allocations issued by HUD.

In an Affidavit supporting the cross-motion, Roberto Anazagasti, NERVE's General Manager, attests that NERVE was the "developer and owner" of the Project. Paragraph 9 of the 1981 Agreement, titled "Transfer and Compensation," describes NERVE's rights and interest in the Project as "including, without limitation, all commitments issued by HUD, GNMA, HFA, and/or Merrill, Lynch, Huntoon Paige, Inc., and all Section 8 subsidy commitments or allocations issued by HUD." NERVE also claims it had an interest in the Project derived from its advancement of development costs. The 1981 Agreement refers to "development cost advances" provided by the various parties as set forth in an annexed Exhibit C, which attributes $34,332 in costs to NERVE and $76,641.50 in costs to HUDC. These advances were to be reimbursed out of mortgage proceeds at the Initial Endorsement.

NERVE was given a .01 general partnership interest in Los Tres. In addition, Rossally received a .01 % general partnership interest, Gotham a .01 limited partnership interest, and Moreight a 99.97 % interest as the managing general partner. The Agreement included a provision according NERVE a right of first refusal to purchase the project under certain circumstances. The Agreement further provided that NERVE's GP interest "shall be converted to a .01% limited partnership interest at Final Endorsement of the Project Mortgage Note by HUD." ¶3(c), 6/18/81 Agreement. Thus, by a Second Amendment of the Certificate of Limited Partnership of Los Tres, dated January 21, 1985 (2d Amend PA), NERVE's .01% general partnership interest was converted to a .01% limited partnership interest. Ex. C, Motion. NERVE claims that Moreight executed the 2d Amend PA on its behalf pursuant to § 3(c) of the 1981 Partnership Agreement, which provides, in pertinent part, [T]he Partnership acting solely through the Managing General Partner [Moreight] [*3]shall be empowered ... (iii) To enter into, perform and carry out contracts and agreements of every kind necessary or incidental to the accomplishments of its purposes, including, without limitation, contracts and agreements with the General Partners or any of the Limited Partners....

NERVE general manager Anazagasti asserts that Moreight "agreed to pay, or to cause Los Tres to pay NERVE $231,905 in [further] consideration for its interest in the Property." The Agreement does refer to this money as "compensation," but not for NERVE's rights or interest in the Project or the property. Rather, the money was compensation for NERVE's "services as co-sponsor and processor of the Project," with $50,000 to be paid at initial endorsement and the remainder paid in four installments. The remainder was described as a fee that would be subordinated to development cost overruns and conditioned on there being no default under the mortgage, regulatory or Section 8 agreements. NERVE general manager Anazagasti claims that NERVE was never paid the $231,905.

The 1981 Agreement further delineated the services to be provided by NERVE as consulting with Resources Property Management Corp. (RPMC) and cooperating with the Los Tres partnership "with respect to the ongoing management and community relations aspects of the Project." Agreement ¶11. NERVE retained certain control over Project management, including input as to potential management agents, the right to be advised by Moreight "with respect to management policies and decisions," the right to have quarterly meetings arranged, and the right to advise Moreight. NERVE was correspondingly obligated to cooperate with Moreight "to facilitate suitable and economic management of the Project and amicable tenant relations." ¶8. Finally, under the Agreement NERVE had a right of first refusal to purchase the Project "whenever the Partnership receives a bona fide offer to purchase the Project acceptable to the Partnership."

Through a Land Disposition Agreement (LDA) regarding the property on which the Project was constructed, executed by the City of New York and Los Tres in August, 1981, the City conveyed to Los Tres, as the Housing Company responsible for the project, the underlying property to be redeveloped. The purchase price was $67,500. The redevelopment area was referred to as Milbank Frawley Urban Renewal Area.. LDA, §§101-112, Ex. K. LDA § 402 provided that a transfer of a significant ownership interest in Los Tres, for practical purposes, would constitute a "transfer of the Disposition Area then owned by the Housing Company [Los Tres]." NERVE was described in the LDA as a sponsor/developer of the Project, and as a General Partner of the Housing Company (Los Tres). Schedule A-2, II(1) (General Sponsorship Plan). NERVE's other accomplishments were described as "presently managing 4 (four) buildings with 92 units in East Harlem." In 1981, NERVE acquired two more properties, and three properties were acquired between 1983 and 1985. Exs. D, E, Cross-Motion. In its annual report for the period beginning 7/1/84 and ending 6/30/85, NERVE reported assets of $155,487.69. Exh. E.

Anazagasti attests that the Project was completed in 1983, that it was well-managed and well-maintained and that NERVE participated in meetings with the Los Tres project manager until the managing agent was changed in 1986, after which NERVE was "never again invited to participate." Anazagasti Affid. ¶31. According to Anazagasti, at some point the Project fell into [*4]disrepair and became poorly maintained. NERVE responded to tenant complaints and intervened on their behalf with the Project management. In his deposition, Anazagasti testified that NERVE ceased participating in tenant meetings eight years ago, and had no contact with Moreight since. Ex. F, pp. 86-92.

In 2004, the stock of Moreight was purchased by Dunwell Los Tres, Inc., a New York Corporation, and other entities owned and controlled by Collins & Nikas and Silverstreak. The sale is confirmed in an August 5, 2004 letter to HUD from counsel for the buyers, who stated also that the Section 8 contract would remain in place. Thereafter, in December, 2005, Scott Jaffee and others purchased the ownership shares of Moreight from Dunwell, et al. for $17.5 Million. In the Memorandum of Understanding, Scott Jaffee, who controlled the entities purchasing the Project, agreed that his companies were acquiring their interests subject to NERVE's right of first refusal and NERVE's right to be paid a percentage share of fees payable for supervisory management and consulting. An entity named Sama Holdings LLC, controlled by Jaffee and his partners, purchased the limited partnership interests of Los Tres (except for the .01 % interest of NERVE). The transactions were approved by HUD.

Anazagasti asserts that Moreight had not informed NERVE of the 2004 sale. However, in the Spring of 2005, Moreight informed NERVE that it had decided to sell the Project for $4 Million. NERVE then engaged in negotiations to exercise its right of first refusal to purchase the Project, but Moreight failed to provide NERVE with the requested necessary documentation to finalize the acquisition. These assertions are corroborated by correspondence and e-mail. Moreight then informed NERVE it had received an offer of $16 Million from another source, which it found acceptable. Anazagasti asserts that NERVE had not been afforded its right of refusal as to either sale.

In an Affidavit, Scott Jaffee, the president and 50% owner of Moreight, affirms as follows. From the time Jaffee and his partners assumed control of Moreight, nobody from NERVE ever asked to meet with Moreight or corresponded with Moreight regarding Project management. The files Jaffee and his partners acquired from the previous owners did not include any records of a written offer to purchase the fee to the Project. Nor have they received any such offers.

NERVE has attached a December 23, 2004 letter from Los Tres and Moreight to the Project tenants notifying them that "we do not intend to renew the current Section 8 contract for periods after December 26, 2005," but that tenants would be able to apply for Section 8 vouchers from the local public housing authorities. Ex. G. NERVE then issued a press release calling for a rally in front of Los Tres and declaring that "they have been unjustifiably left out of the process." Ex. H. NERVE, on the tenants' behalf, sought the intervention of then Senator Hillary Clinton "in maintaining our project, low income." Ex. I.

By Decision and Order dated October 18, 2007, Justice Herman Cahn (retired) denied defendants' motion to dismiss the complaint. Key to this court's decision is Justice Cahn's ruling that if NERVE succeeds in proving that the transfer of its interest in the Project amounted to a transfer of all or substantially all of its assets, the "contracts may well be held to have been void from their inception and, therefore, not enforceable." Justice Cahn denied NERVE's pre-answer, cross-motion for summary judgment, as premature.

II. Legal Discussion and Rulings [*5]

To obtain summary judgment, a movant must establish its cause of action or defense sufficiently to warrant the court, as a matter of law, in directing judgment in its favor. CPLR 3212(b). It must do so by tender of evidentiary proof in admissible form. Zuckerman v New York, 49 NY2d 557, 562-563 (1980). Once a movant has met the initial burden, the burden shifts to the party opposing the motion to establish, through admissible evidence, that judgment requires a trial of disputed material issues of fact. CPLR 3212 (b); id. at 560. See also GTF Marketing Inc. v Colonial Aluminum Sales, Inc., 66 NY2d 965 (1985) (complaint properly dismissed on summary judgment where affidavit of opposing counsel was insufficient to rebut moving papers showing case has no merit). The adequacy or sufficiency of the opposing party's proof is not an issue until the moving party sustains its burden. Bray v Rosas, 29 AD3d 422 (1st Dept 2006). Moreover, the parties' competing contentions must be viewed "in a light most favorable to the party opposing the motion." Lakeside Constr. v Depew & Schetter Agency, 154 AD2d 513, 515-515 (2d Dept. 1989).

A. Declaratory Relief

N-PCL § 510

NERVE contends that it is a Type C not-for-profit corporation and did not seek, or obtain, leave of court for the transfer of its interests in Los Tres and the Project. It further contends that these transfers constituted all, or substantially all, of its assets. On this basis, it seeks to void the 1981 and 1983 agreements with Los Tres and unwind 28 years of transactions involving the Project for failure to obtain leave of court.

An N-PCL § 201, Type C corporation is required by law to obtain leave of court for the "sale, lease, exchange, or other disposition of all, or substantially all, of [its] assets" N-PCL § 510 (a)(3); see N-PCL § 511 (a) (procedure for obtaining court approval). The purpose of the requirement is "to protect the beneficiaries of a charitable organization from 'loss through unwise bargains and from perversion of the use of the property."' Rose Ocko Found.. Inc. v Lebovits, 259 AD2d 685, 688 (2d Dept 1999), appeal dismissed, lv denied 93 NY2d 997 (1999), quoting Church of God of Prospect Plaza v Fourth Church of Christ, Scientist, of Brooklyn, 76 AD2d 712, 716 (2d Dept 1980), aff'd 54 NY2d 742 (1981); see N-PCL §§ 510, 511. Failure to first apply for, and obtain, leave of court to sell all or substantially all of the assets of a not-for-profit corporation renders such sale invalid. St. Andrey Bulgarian E. Orthodox Cathedral Church. Inc. v Bosakov, 272 AD2d 55, 56 (1st Dept 2000) (1978 sale of church property held void ab initio for, inter alia, failure to comply with statutory requirement of notice to attorney general), citing Religious Corporations Law § 12, N-PCL § 511; Century 2000 Custom Home Builders & Developers, LLC v United Muslim Org. of NY, Inc., 1 Misc 3d 890, 891 (Sup Ct, Queens County, 2003); cf. Wilson v Ebenezer Baptist Church. Inc., 17 Misc 2d 607, 609 (Sup Ct, Kings County, 1959), citing Religious Corporations Law § 12 [9]). The court notes, however, that wherethe not-for-profit corporation seeks to repudiate a contract, it must return the moneys expended by the other side in reliance on the contract. See Wilson v Ebenezer Baptist Church, Inc., supra, 17 Misc 2d at 610.

The Not-For-Profit Corporation Law does not define what constitutes "all or substantially all" of the assets of a corporation. According to the New York Attorney General, who is entitled to statutory notification, "[t]he assets may be real and/or personal property, including intangible property such as bonds, stocks or certificates of deposit." A Guide to Sales and Other Disposition [*6]of Assets Pursuant to Not-For-Profit Corporation Law §§ 510-511 and Religious Corporations Law § 12, www.oag.state.ny.us/charities/charities.html. There is no fixed numerical or arithmetic measure of "all or substantially all." Court approval is required where the asset to be sold represents a large proportion of the corporation's total assets or where the sale of the asset may affect the ability of the corporation to carry out its purposes regardless of the percentage of the corporation's total assets represented by the sale.

Id. Cases reviewed by the court, where parties have sought judicial approval or in which courts have found transactions void for lack of judicial approval, have involved, mostly, the sale of realty. See, e.g., Rose Ocko Foundation, Inc., supra, 259 AD2d 685 (2d Dept 1999); St. Andrey Bulgarian E. Orthodox Cathedral Church. Inc., supra, 272 AD2d 55, 56 (1st Dept 2000); In re Standup Harlem, Inc., 1 Misc 3d 904A (Sup Ct, New York County 2003) (court refused petition to sell building, non-profit's last remaining asset).

NERVE has failed to establish, as a matter of law, that it sold, exchanged or disposed of all or substantially all of its assets when it entered into the 1981 agreement. The only "interests" that NERVE relinquished were "development rights relating to the Project, including, without limitation, all commitments issued by HUD, GNMA, HFA, and/or Merrill, Lynch, Huntoon Paige, Inc., and all Section 8 subsidy commitments or allocations issued by HUD." Moreover, NERVE shared its status as an initial developer of the Project with HUDC. Although NERVE has not delineated to what extent the various "development rights" were shared with HUDC, the court can infer from the development cost arrangement that NERVE's interest was substantially less than that of HUDC; HUDC laid out $76,641.50 and NERVE laid out $34,332. .

In any event, the court is disinclined to even characterize these interests as quantifiable "assets," unlike what NERVE received in return—a general partnership interest in Los Tres and consultancy fee commitments. NERVE did not have any ownership interest in the underlying realty of the Project in June, 1981, and only acquired an interest (through its .01 % GP interest) when the City sold the property to Los Tres in August, 1981. If anything, NERVE received back far more than it gave by entering the initial agreement.

NERVE then claims that the conversion of its .01 % GP interest to a .01% LP interest in 1983 required judicial approval. The GP interest was an asset, but it was of limited duration. Under the original 1981 agreement, NERVE's interest was that of a .01 % GP only until "Final Endorsement of the Project Mortgage Note by HUD." ¶3(c), 6/18/81 Agreement. At that point, the parties agreed the interest would be converted to that of a .01 % LP, which is exactly what happened. This was not a sale or disposition of the GP interest, but a contractually mandated and agreed-upon conversion. Even if the conversion were characterized as a sale or disposition of an asset, it would not have been all or substantially all of NERVE's assets NERVE was managing four buildings with 92 units in East Harlem when it entered the June, 1981 agreement. Later in 1981, it acquired two more properties (one for $2,750 and a second for $6,500) and obtained ownership of three other properties between 1983 and 1985 (each for less than $7,000). In sum, transfer of NERVE's development rights and conversion of its GP interest to a LP interest did not hamper its ability to carry out its avowed civic purposes. The first cause of action seeking declaratory relief voiding the 1981 agreement is dismissed.

Right of First Refusal [*7]

In the second through sixth causes of action for declaratory relief, NERVE seeks a judgment "(a) declaring that NERVE as of 2003 [and at other times] had the right to purchase the Project; (b) enjoining Moreight, Tres Unidos and the Other Partners from taking any actions contrary to the interests of NERVE; and (c) requiring Moreight, Tres Unidos and the Other Partners to take the actions necessary to convey to NERVE all their remaining interests in the Project...." Defendants argue that no bona fide, written third-party offers to buy the Project from them have been made, so the right of first refusal has not yet been triggered. NERVE counters that under the LDA, a transfer of the ownership interest in Los Tres (which did occur when the ownership of Moreight changed) is equated with a transfer of the Project. Defendants argue that NERVE is not a party to the LDA, which was an agreement between the City and Los Tres/Moreight, and the parties intended the transfer provision to be broad to ensure that any new general partners of Los Tres would meet its standards for operating the Project as affordable housing.

Judge Cahn, in his decision denying the motion to dismiss, made the following findings: NERVE's right of first refusal is expressly contingent upon Tres Unidos' "determination to sell" and receipt of an "acceptable" "bona fide offer to purchase." However, these terms are not defined in either the June 18 agreement or the 1981 amended partnership agreement.... Given the ambiguous nature of the provision's language, it would be premature and inappropriate at this juncture to render any determination regarding the contracting parties' intended meanings of these terms and whether the right has been triggered by any of the events upon which NERVE bases its claims

10/18/07 Decision and Order, pg.8. The prior finding of ambiguity is binding on the court under the law of the case doctrine. See, e.g., People v Evans, 94 NY2d 499, 504-505 (2000) (reiterating that court should not ordinarily reconsider, disturb or overrule an order in the same action of another court of co-ordinate jurisdiction). The court will now consider the parties' extrinsic evidence on this issue. See Greenfield v Philles Records, 98 NY2d 562, 569 (2002) (finding extrinsic evidence admissible to interpret meaning of ambiguous contract terms).

In August, 1981, through a Land Disposition Agreement (LDA), the City conveyed the property to be redeveloped to Los Tres. LDA § 402 provided that a transfer of a significant ownership interest in Los Tres, for practical purposes, would constitute a "transfer of the Disposition Area then owned by the Housing Company [Los Tres]." Moreight signed the LDA as the Managing General Partner of Los Tres at the time. The Los Tres Amended and Restated Limited Partnership Agreement, dated October 27, 1981, defines "Project" as "the Property and improvements, collectively," and "Property" as "certain real estate located in New York County, New York, which is owned by the [Los Tres] Partnership and which is more specifically described in Exhibit B...." Under the June, 1981 Agreement, NERVE had a right of first refusal to purchase the Project "whenever the Partnership receives a bona fide offer to purchase the Project acceptable to the Partnership."

Moreight's subsequent communications with NERVE show, to the Court's satisfaction, that Moreight understood the term Project to encompass a controlling interest in Los Tres, and not just the underlying real estate. NERVE's General Manager Roberto Anazagasti affirms that in [*8]the Spring of 2005, Moreight informed NERVE that it intended to sell the Project and that it would sell it to NERVE for $4 Million. Anazagasti affirms also that Moreight said it intended to "sell its interests in Los Tres" to NERVE. Anazagasti Affid. pg.10. A series of 2005 e-mails between NERVE's counsel and Los Tres principals corroborate Anazagasti and show that the parties engaged in negotiations over the potential sale. One such e-mail from NERVE's counsel Jay Fox, sent September 22, 2005, refers specifically to a July conference call in which Moreight principal Roger Gendron had mentioned a letter of intent from a third-party offeror. Fox complains that, As you know, N.E.R.V.E., Inc., whom we represent, desires to work out the contract of sale with Silver Street Development for Los Tres Unidos, and to implement that desire we have asked your firm several times for data to assist us. But as of this date, we have not received any data, and we have not received a copy of the letter of intent from the third party offeror which was mentioned in our July conference call. If Silver Street's inaction is intended to show that it has changed its position about selling, please extend us the courtesy of letting us know; if Silver Street wants to do the deal, please promptly respond to our previous requests ....

Exh. M. Anazagasti sent another letter separately to Gendron on the same date regarding "our deal to purchase Los Tres Unidos." At the end of that letter Anazagasti states, "Mr. Gendron we remind you that you acknowledged our offer to buy and accepted our 1st right to purchase the property and you have recently gotten an offer to buy for 16 Millions from a "bonafide" buyer ...." Exh. N. Anazagasti also attests to this scenario in his Affidavit.

This evidence shows, without dispute, that Moreight and NERVE both understood the latter's right of first refusal to be triggered by a bona fide offer to purchase Moreight's controlling interest in Los Tres. Moreight engaged in discussions with NERVE to sell it a controlling interest after receiving an offer to purchase same. Moreight broke off those discussions without explanation.

NERVE's submissions establish that the ownership interests in Moreight and Los Tres have changed hands at least twice since the June, 1981 Agreement. A letter to HUD dated August 5, 2004, describes a purchase and sale of the controlling interest in Los Tres by Dunwell Los Tres, Inc. through its acquisition of Moreight's stock for an unspecified price. Exh. J. In December, 2005 Scott Jaffee and companies he controls acquired ownership interests in Los Tres and Moreight for $17.5 Million from Dunwell and other entities. Jaffee was deposed and excerpts of his deposition transcript have been submitted. Affirm. of Juan Maldonado, Esq. Jaffee testified that in or about September, 2005, he might have conveyed a verbal offer to purchase Los Tres and Moreight for approximately $16 Million. He conveyed the offer because he understood that the entities controlling Moreight and Los Tres had determined that they wished to sell.[FN1] [*9]

NERVE's right of first refusal was triggered, but the exact point at which it was triggered, and the price at which it should have been permitted to purchase the Project, remain in dispute. NERVE should have an opportunity to prove its claim for Declaratory Relief and to enforce its right of first refusal under the June, 1981 Agreement.

B.Breach of Contract

Plaintiffs have alleged in the seventh cause of action that Moreight has breached the contract by, among other things, failing to keep NERVE advised of management decisions, failing to meet and consult with NERVE, selling the Project to a party other than NERVE, and notifying the tenants that it intended to terminate their program-based Section 8 subsidies. Defendants argue that NERVE has waived its right to be consulted on management decisions by its years of inaction. The extent to which NERVE participated, attempted to participate and was prevented from participating in management, as well as the timetable and content of offers of sale, raise a number of disputed material factual issues. Further, waiver of a right should not be lightly presumed and is inherently factual. See Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d 966, 968 (1988); Jefpaul Garage Corp. v Presbyterian Hosp., 61 NY2d 442 (1984). In any event, even if NERVE had waived its contractual right to be consulted on management decisions, there is no claim that it waived its right of first refusal or its right to reimbursement of its development costs and consultant's fees.

C.Further Briefing

The court is troubled by the failure to join, as necessary parties pursuant to CPLR 1001, the various entities and individuals who owned, or currently own, Moreight's stock. CPLR 1001(a) provides that necessary parties include those "who ought to be parties if complete relief is to be accorded between the persons who are parties to the action or who might be inequitably affected by a judgment in the action". As to the latter requirement, "[t]he possibility that a judgment rendered without [the omitted party] could have an adverse practical effect [on that party] is enough to indicate joinder" Siegel, NY Prac § 132, at 199 (2d ed). In particular, where rescission is sought, all parties to the agreement must be joined. Tudor v Riposanu, 93 AD2d 718 (1st Dept 1983).

NERVE is seeking a declaration that its right of first refusal was triggered, and violated, each time that Moreight changed ownership. As a result, NERVE argues, it should be afforded the right to purchase Moreight at the price the first buyer allegedly paid, or $4 Million. To afford NERVE this relief, both contracts of sale would arguably have to be rescinded, and specific performance awarded against the original sellers, or owners of Moreight's stock. Additional causes of action alternatively seek the same right to purchase Moreight, but at escalating amounts for the purchase price. Regardless of the point in time, property interests of the owners of this closely held corporation would be significantly affected. NERVE's breach of contract claim also raises joinder concerns. NERVE alleges breaches of contractual rights that derive from the original 1981 Agreement, but that bind Moreight's purchasers, which Moreight's current owners have acknowledged. Further briefing will be necessary to determine whether additional [*10]necessary parties should be joined. Accordingly, it is hereby

ORDERED that the motion for summary judgment by defendants Moreight and Los Tres is granted in part as to the first cause of action, which is dismissed; and it is further

ORDERED that plaintiff NERVE's cross-motion for summary judgment is denied; and it is further

ORDERED that the parties shall submit supplemental memoranda no later than December 14, 2009, in accordance with this decision as to defendants' motion for summary judgment on the second through seventh causes of action.ENTER:

Date: November, 2009_______________________________

New York, NYJ.S.C Footnotes

Footnote 1:In a Memorandum of Understanding entered into approximately September, 2005, Jaffee agreed that his companies were acquiring their interests in Los Tres subject to NERVE's right of first refusal. Exh. B, Maldonado Affirm. Jaffee was not a principal of Moreight when it executed the June, 1981 Agreement, so his understanding of when NERVE's right of first refusal was intended to be triggered is immaterial.