Manus v Family M. Found. Ltd.

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[*1] Manus v Family M. Found. Ltd. 2017 NY Slip Op 50326(U) Decided on March 17, 2017 Supreme Court, New York County Reed, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 March 17, 2017
Supreme Court, New York County

Ninotchka Jannetje Manus, Plaintiff,

against

Family M. Foundation Ltd. and Elizabeth Manus a/k/a Libby Manus, Defendants.



602326/2004



For Plaintiffs:

Robert Fierman, Esq.

1 Rockefeller Plaza Suite 1428

New York, NY 10020

By: Robert Fierman, Esq.

For Defendants:

Hiller, PC

600 Madison Avenue

New York, NY 10022

By: Michael S. Hiller, Esq.
Robert R. Reed, J.

For over a decade, the parties to this action (or their predecessors in interest), in one forum or another, have engaged in a pitched legal battle for ownership and/or control of a Cayman Islands company known as Family M. Foundation Ltd. ("Family M."). Family M. was established by Allen Manus ("Allen") in or about 1992 under the laws of the Cayman Islands. Near Family M.'s beginning, one-third (1/3) beneficial interests in its ownership were created for Allen's third wife, Elizabeth Manus ("Libby"); Allen's daughter from his first marriage, Jane von Richthofen ("Jane"); and Allen's niece, Ellen Sue Goldberg ("Ellen Sue"). Allen died in 2003 (see Manus v Family M. Foundation Ltd., et ano, 2014 NY Misc LEXIS 1658, 2014 NY Slip Op 30921(U) [Friedman, J.], at *1-2 [citing prior decision by Fried, J.]). In this action, plaintiff, Allen's second wife, Ninotchka Jannetje Manus ("Ninotchka"), and defendants, Libby and Family M. (of which Libby is "president and sole director") (see Family M. Foundation Ltd. v Manus, 71 AD3d 598), dispute the current ownership of the shares of Family M. (see Manus v Family M. Foundation Ltd., et ano, 2014 NY Misc LEXIS 1658, 2014 NY Slip Op 30921(U), at *2).



BACKGROUND

The complaint in this action, initiated by Jane, alleges that Ellen Sue sold her shares in Family M. to Jane and that, as a result, Jane owned two-thirds of the shares of Family M. and Libby owned one-third. During the pendency of this action Jane assigned her right, title, and interest in Family M. to Ninotchka (id.; Von Richthofen v Family M. Foundation Ltd., 44 AD3d 573, 574-575). Thereafter, Ninotchka was substituted for Jane as plaintiff herein (see Von Richthofen v Family M. Foundation Ltd., 44 AD3d at 575) and, thus, Ninotchka (instead of Jane) now seeks a declaratory judgment declaring that she is the rightful owner of "a two-thirds (2/3) ownership interest in Family M.," and directing that defendants deliver to her "stock certificates representing two-thirds (2/3) of the issued and outstanding shares of stock of Family M." (Complaint, para. 16). In addition, Ninotchka seeks a permanent injunction restraining defendants from selling or assigning any shares of stock or property of Family M. without taking into consideration Ninotchka's status as two-thirds (2/3) owner of the Family M. shares (id. at 19).

Defendants counterclaim herein for a declaratory judgment that "Libby Manus is the sole 100% shareholder, officer and director of Family M." (Answer and Amended Counterclaims, para. 43) (see Manus v Family M. Foundation Ltd., et ano, 2014 NY Misc LEXIS 1658, 2014 NY Slip Op 30921(U), at *2-3). It is defendants' contention that "at some point in 2000 or 2001, Jane and Ellen Sue surrendered their shares back to Family M., leaving Libby the sole owner of the company" (see Von Richthofen v Family M. Foundation Ltd., 44 AD3d at 574). Plaintiff, on the other hand, contends that "[b]y irrevocable assignment dated July 8, 2004, Ellen Sue transferred her right, title and interest in the foundation and any and all shares in the corporation to Jane" and that "[b]y assignment dated February 23, 2005, Jane assigned all of her right, title and interest in Family M. to Ninotchka (id.).

In Von Richthofen v Family M. Foundation Ltd., 44 AD3d 573, the First Department unanimously reversed, on the law, a June 19, 2006 order in this action (per Fried, J.) which had granted Libby's cross-motion for summary judgment dismissing the complaint herein and denied Ninotchka's motion to be substituted as party plaintiff. "The evidence offered by Jane in opposition raised an issue of fact regarding ownership of the relevant shares of stock in the Family M. foundation," the appellate court wrote (id. at 574). "Whether the shares were ever actually transferred in 2000 or 2001,"as defendants had contended in support of their cross-motion, " cannot be determined on this record," the court explained (id. at 575). Given, among other things, "the dispute over whether any transfer occurred[,] the evidence submitted raised material issues of fact, precluding summary judgment in Libby's favor" (id.). The appellate court seems to have accepted as beyond genuine dispute, for purposes of assessing the summary judgment motion, that "Ninotchka is the assignee of Jane's right, title and interest (if any) in the foundation via irrevocable assignment" (id.). The court observed, however, that "[i]t may well be that Ninotchka has no stake in the foundation because Jane transferred her stake in or about 2000" (id.). "But those," the appellate court concluded, "are issues that await trial" (id.).

In Manus v Family M. Foundation Ltd., et ano, 2014 NY Misc LEXIS 1658, 2014 NY Slip Op 30921(U), in an April 4, 2014 order in this action determining plaintiff's motions to disqualify defendants' counsel and to dismiss defendants' first counterclaim, as well as defendants' motion to strike plaintiff's jury demand, Justice Friedman identified "the ownership of the shares of Family M." as "the critical issue in this action" (id. at *7) — and thus framed the issue for trial as follows. "In order to prevail here," Justice Friedman wrote, "Ninotchka must demonstrate that Jane owned the shares before assigning them" (id.). Justice Friedman's order, in [*2]addition, granted plaintiff's motion to disqualify defendants' counsel, denied plaintiff's motion to dismiss defendants' first counterclaim, and granted defendants' motion to strike plaintiff's jury demand, and, allowing time for substitution of defense counsel, scheduled a pre-trial conference.

When this matter ultimately came on for a bench trial before the undersigned justice, plaintiff's counsel, when directed to proceed with the presentation of his client's evidence in support of her case, declared on the record that plaintiff had "no prima facie case" in support of her two causes of action (Tr. 73), and then rested without calling a single witness or introducing any item of evidence (Tr. 74, 80). After inquiry to confirm that plaintiff's counsel's declaration was intentional, and not the result of some inadvertent utterance, the court stated on the record that "plaintiff has rested without introducing any evidence before the court" (Tr. 84-85). The court then granted defendants' application for a "directed verdict" and dismissed plaintiff's two causes of action with prejudice (Tr. 86) (the court stating "Accordingly, it is hereby ordered that the defendant is entitled to a directed verdict and it is ordered that the first and second causes of action of the complaint are hereby dismissed."). Considering the extreme length of the litigation, the lack of any assertion of unreadiness by plaintiff on the duly scheduled trial date, and the court's effort to confirm counsel's intentions with respect to the failure of plaintiff to put on a prima facie case, the court expressly ordered that the dismissal be "with prejudice" (Tr. 86, 92).

Before being directed to present his client's prima facie case, plaintiff's counsel had argued that plaintiff was entitled to rely upon the Appellate Division's holding, as set forth in Von Richthofen v Family M. Foundation Ltd., supra, to establish plaintiff's necessary proofs at trial. The court, however, advised plaintiff's counsel on the record that such a strategy was ill-founded, pointing out that the denial of summary judgment establishes nothing other than that a final determination on the merits is not warranted based on the record at that time (Tr. 61), that the denial of summary judgment "offers no determination on the merits" (Tr. 74), and that, as a consequence, the Appellate Division's decision denying summary judgment herein would not constitute evidence before the court for purposes of trial or establish any set of facts (Tr. 72). Plaintiff's counsel was unmoved by the court's advice, and stubbornly adhered to his view that his client's case could be established by directing the court to particular language in the Appellate Division's decision herein.



DISCUSSION

The First Department's decision in Cushman & Wakefield, Inc. v. 214 E. 49th St. Corp., 218 AD2d 464, is instructive. There, as the Appellate Division observed, "[the] case was tried upon the supposition that the pretrial decision denying both parties' respective motions for summary judgment had narrowed the issues at trial," and that a particular element of plaintiff's case "was not in controversy before the trial court" (Cushman & Wakefield, Inc. v. 214 E. 49th St. Corp., 218 AD2d at 468) (emphasis added). Nevertheless, that appellate court stated as follows: "[W]e are unable to conclude that the outcome of the parties' motion practice was to relieve plaintiff of its obligation to establish a prima facie case, or its obligation, if it were ultimately to prevail, to prove its case by a preponderance of the credible evidence" (id.) "What is 'determined' on a motion for summary judgment," the Cushman & Wakefield court explained, "is the entitlement of a party to a pretrial judgment upon the affidavits and proofs before the court at that time, not the issues defined by the living testimony and proofs at trial" (id.) (emphasis in original). Indeed, "[b]y way of further example," the Cushman & Wakefield court added, "proof offered to defeat a motion for summary judgment does not meet the standard of proof required to resolve an issue of fact at trial" (id.).

Similarly, the First Department wrote in Metropolitan Steel Indus., Inc. v. Perini Corp., 36 AD3d 568, that "It is well settled that the denial of a motion for summary judgment is not an adjudication on the merits" (id. at 570). Describing as "meritless" the argument that an earlier order by the trial denying summary judgment constituted the "law of the case" on a particular contractual defense at trial, the Appellate Division in Metropolitan Steel Indus. concluded that, "[s]ince no evidence was presented at trial on this issue, the trial court properly found that [the defendant] had failed to demonstrate the applicability of [such contractual defense]" (id.). Further, the late Professor Siegal in his comments notes that the denial of a motion for summary judgment "establishes nothing except that summary judgment is not warranted at this time" (Siegel, NY Prac § 287, at 470 [4th ed]).

Of course, it is true that, in denying a motion for summary judgment, a court may, pursuant to CPLR 3212 (g), determine "what facts are not in dispute or are incontrovertible . . . [and] make an order specifying such facts [which] shall be deemed established for all purposes in the action." The Appellate Division's decision set forth in Von Richthofen v Family M. Foundation Ltd., supra, however, certainly makes no such specification (even as it assumes certain facts as being without controversy for purposes of the summary judgment motion). In any event, as has already been observed, what the language of the Appellate Division's decision in the matter at bar does make explicit is this: that the issue of whether Ninotchka had any current stake in Family M. was required to be demonstrated at trial (id. at 575) (see the following two consecutive sentences: "It may well be that Ninotchka has no stake in the foundation because Jane transferred her stake in or about 2000 " and "But those are issues that await trial"). Neither could there have been any reasonable confusion about "the critical issue" to be resolved at trial, as Justice Friedman's language in her April 4, 2014 order was also explicit: "In order to prevail here, Ninotchka must demonstrate that Jane owned the shares before assigning them" (id.).

Plaintiff's counsel, thus, in failing (indeed, refusing, essentially) to put on a prima facie case, completely ignored plaintiff's burden. Plaintiff could not, simply by sitting on her hands, in effect, shift the burden to defendants to disprove the allegations of the complaint. CPLR 4401 authorizes any party to "move for judgment with respect to a cause of action or issue upon the ground that the moving party is entitled to judgment as a matter of law, after the close of the evidence presented by an opposing party with respect to such cause of action or issue, or at any time on the basis of admissions." Here, plaintiff's admission, as articulated by her counsel, was colossal: plaintiff had "no prima facie case" in support of her two causes of action (Tr. 73). Moreover, with respect to the two causes of action set forth in the complaint, there was nothing for defendants to oppose. And with plaintiff resting without calling a single witness or introducing any item of evidence (Tr. 74, 80), there was, indeed, no allegation on the record for defendants to disprove. Under such circumstances, defendants were manifestly entitled to judgment as a matter of law, dismissing the complaint, pursuant to CPLR 4401.



All that remained for decision at trial, then, after the dismissal of the complaint, was defendants' counterclaim for a declaratory judgment that "Libby Manus is the sole 100% shareholder, officer and director of Family M." (Answer and Amended Counterclaims, 43). After some colloquy and argument over what the court interpreted as a request by defendants for affirmative relief upon their counterclaim, which the court rejected (Tr. 86-87), the court proceeded to hear testimony and receive exhibits in support of and in opposition to the counterclaim — and, upon conclusion of the record proceedings, to request and ultimately to receive the parties' findings of fact and [*3]conclusions of law. In retrospect, however, once the court ruled that the complaint should be dismissed, it was not necessary for the court to take testimony or to receive exhibits with respect to defendants' counterclaim. As this court stated on the record near the end of this matter's proceedings, once plaintiff's two causes of action seeking affirmative relief on her behalf had been dismissed, "there was no reason to go forward with this case, because there [was] nothing about this [case] that needed to be heard" (Tr. 409). By failing to put forward at trial a prima facie case on her claim to an ownership interest in Family M., plaintiff abandoned her previously expressed assertion of a substantial legal interest in a determination of Family M.'s ownership. That decision by plaintiff — expressed with certainty by her counsel on the record — rendered defendants' counterclaim non-justiciable (CPLR 3001) ("The supreme court may render a declaratory judgment as to the rights and other legal relations of the parties to a justiciable controversy.").

A justiciable controversy is a real dispute between adverse parties, involving substantial legal interests, for which a declaration of rights will have some practical effect (see Downe v Rothman, 215 AD2d 716; De Veau v Braisted, 5 AD2d 603, affd 5 NY2d 236; Playtogs Factory Outlet v County of Orange, 51 AD2d 772). Simply put, the question of whether Libby is "the sole 100% shareholder, officer and director of Family M." became irrelevant vis-à-vis Ninotchka once Ninotchka's causes of action were dismissed with prejudice. As plaintiff then had no viable legal basis for asserting a two-thirds (2/3) ownership in Family M., her legal interests were no longer substantively adverse to defendants. In failing and refusing to put on a prima facie case at trial, plaintiff had rendered her role in any dispute over the ownership of Family M. a nullity. Consequently, there was no practical effect to this court's determination of the counterclaim as against the interests of Ninotchka, given the lack of any viable legal dispute between this set of parties warranting adjudication (see id.).

Therefore, it is hereby

ORDERED that the complaint is DISMISSED in its entirety, with prejudice, and the Clerk is directed to enter judgment accordingly, and it is further

ORDERED that the counterclaim is DISMISSED.



Dated: March 17, 2017

Hon. Robert R. Reed

J.S.C.

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