New York Coll. of Health Professions v Sohn
Annotate this CaseDecided on May 25, 2006
Supreme Court, Nassau County
New York College of Health Professions, Formerly Known as New York College for Wholistic Health Education & Research, Plaintiff,
against
Tina Sohn, Defendant.
6620-05
Counsel for Plaintiff
Steven Bennett Blau, P.C.
7 Penn Plaza - Suite 1803
New York, New York 10001
Counsel for Defendant
Rosenberg, Calica & Birney, LLP
100 Garden City Plaza - Suite 408
Garden City, New York 11530
Leonard B. Austin, J.
Plaintiff New York College of Health Professions ("College") moves for reargument and renewal from this Court's order of December 27, 2005 which denied College's motion for summary judgment in lieu of complaint and which granted Defendant's cross-motion to dismiss and set the matter down for a hearing on the issue of whether sanctions should be imposed upon College or its attorney. Upon reconsideration, College seeks to have the Court deny Defendant's motion to dismiss.
BACKGROUND
College is a private, not-for profit institution of higher learning chartered by the New York State Department of Education. College is a Type-B Not for Profit Corporation.
In 1992, Defendant Tina Sohn ("Sohn") executed a mortgage note ("Note") payable to The Independent Church of the Realization of the Word of God, Inc., as mortgagee The Note was assigned to College in April 1994. Sohn made payment on the note through the payment due in May 1999. Thereafter, substantial disputes arose between College and Sohn.
In October 2000, Sohn and College entered into a written comprehensive settlement agreement ("Agreement"). One of the provisions of the Agreement provided that the Note would be cancelled.
The Agreement was executed on behalf of College by Steven Schenkman, who was then the President of College. Mr. Schenkman also signed the agreement individually with regard to Section 2(d). Schenkman's compliance with Section 2(d) of the Agreement is not in issue in this litigation.
Sohn was represented by Barry Shapiro, Esq., then of Rivkin, Radler and Kremer, LLP. College was represented primarily by Murray Schwartz, Esq of Meyer, Suozzi, English & Klein, P.C. Mr. Schwartz is no longer associated with Meyer Suozzi, English and Klein, P.C.
At some point thereafter, Barry Shapiro became a member of Meyer, Suozzi, English & Klein, P.C. As a result of this apparent conflict, Mr. Shapiro withdrew from representing Sohn. Sohn was thereafter represented by the firm of Rosenberg, Calica & Birney, LLP.
In 2003, College commenced an accounting malpractice action against its auditors, Deloitte and Touche, LLP. One of the primary bases for this action was a statement contained in the College's 1999 financial statement which indicated that the Board of Trustees of College had determined that the remaining amount due on the Note was not likely to be collected and was written off.
In 2003, College commenced an action against its current and former directors for having approved the Agreement. That action was discontinued by order of the Hon. Robert Roberto, Jr., [*2]Justice of this Court, dated May 25, 2004. The order of Justice Roberto indicated that the action was being discontinued because the party responsible for the pecuniary loss was the College's accountants, Deloitte & Touche, LLP.[FN1]
College commenced this action by serving a summons with a motion for summary judgment in lieu of complaint in accordance with CPLR 3213. Defendant cross-moved to dismiss this action pursuant to CPLR 3211(a)(1) and (5). Sohn asserted College had released her from any liability on the Note by the October 2000 Agreement.
By order dated December 27, 2005, this Court denied College's motion for summary judgment and granted Sohn's motion to dismiss and set the matter down for hearing to determine if sanctions should be imposed upon College or its counsel as provided for by 22 NYCRR 130-1.1. College seeks to reargue and renew from that order.
DISCUSSION
A. Reargument
A motion to reargue must be so designated. It must be based upon an assertion that the court overlooked or misapprehended matters of law or fact when it decided the prior motion and must be made within thirty (30) days of service of the order with notice of entry from which reargument is sought. CPLR 2221 (d).
A motion to reargue is addressed to the discretion of the court and may granted upon a showing that the court overlooked relevant facts or misapplied or misapprehended the applicable law or for some other reason improperly decided the prior motion. Carrillo v. PM Realty Group, 16 AD3d 611 (2nd Dept. 2005); Hoey-Kennedy v. Kennedy, 294 AD2d 573 (2nd Dept. 2003); and Foley v. Roche, 68 AD2d 558 (1st Dept. 1979).
A motion to reargue is based solely upon the papers submitted in connection with the prior motion. New facts may not be submitted or considered by the court. James v. Nestor, 120 AD2d 442 (1st Dept. 1986); and Philips v. Village of Oriskany, 57 AD2d 110 (4th Dept. 1997).
The Court has reviewed the exhibits annexed to College's motion. Exhibits 11, 14 and 15 are excerpts of the depositions of Barry Shapiro, Steven Schenckman and Arthur Gurwitz [FN2], respectively. These deposition excerpts were not part of the record on the prior motion. Since a motion to reargue is based upon the record on the prior motion these deposition excerpts will not be considered by the Court in deciding College's motion for reargument.
1.Absence of Court Approval
College asserts the Court misapprehended the law and the facts in finding that it could enter into the Agreement without obtaining court approval as required by Not-for-Profit Corporation Law § 510(a)(3).
Not-for-Profit Corporation Law § 510(a)(3) requires a Type B Not-for-Profit Corporation such as College to obtain judicial approval for the sale, lease, exchange or other disposition for all or substantially all of its assets. The Not-for-Profit Corporation Law does not define what [*3]constitutes "all or substantially all" of the assets of a corporation.
The purpose of the statue is to protect the assets of a not-for-profit corporation from loss through unfair or unwise transactions. Rose Ocko Foundation, Inc. v. Schwartz, 259 AD2d 685 (2nd Dept. 1999). Obtaining court approval for such transactions assures that the assets of a not-for profit corporation are preserved to serve the public purposes. 64th Assocs., L.L.C. v. Manhattan Eye, Ear and Throat Hospital, 2 NY3d 585 (2004).
The Agreement did not involve all of the property or assets of College. The issue is whether the release of Sohn from liability on the Note was a disposition of substantially all of College's assets.
Words in a statute "...are to be given their ordinary and usual meaning." McKinney's Statutes § 232. The ordinary and usual meaning of substantial is "being of moment: IMPORTANT, ESSENTIAL" (Webster's Third New International Dictionary at p. 2280) or "considerable in quantity: significantly large" (Webster's Ninth New Collegiate Dictionary at p. 1176).
The Note was self-liquidating in the principal amount of $925,000. The Note bore interest at the rate of 8.25% per annum and was payable over a period of thirty (30) years in monthly payments of principal and interest in the sum of $6,949.22. The first payment on the Note was due on December 1, 1992. The final payment was due on October 16, 2022. The College was receiving payments of $83,990.64 on the note annually.
College's income increased in 1999 even though it did not receive payment on the Note.
A review of College's balance sheet indicates that the Note constituted approximately 17.86% of College's assets as of December 31, 1998. College's assets were approximately 15.8% less as of December 31, 1999 than they were as of December 31, 1998. These percentages do not amount to substantially all of the College's assets.
Thus, by definition, the Agreement did not constitute an unfair or unwise decision. The Agreement represents a negotiated settlement of a dispute between Sohn and College in which both sides were represented at arm's length by competent counsel. The Agreement was the result of prolonged negotiations between the attorneys for the parties. The College's operations continued unabated before and after the Agreement was executed. Therefore, College was not obligated to obtain Court approval of the settlement as provided for by Not-for-Profit Corporation Law §510(a)(3).
2.Absence of Approval by College's Board of Directors
College further asserts that the Court misconstrued the facts and law in concluding the Agreement was enforceable in the absence of proof that the College's Board of Directors had approved the settlement and authorized Schenkman to sign on behalf of College.
The affairs of a Not-for-Profit Corporation are managed by its Board of Directors. Not-for-Profit Corporation Law §701. College asserts its Board of Directors never passed a resolution approving the settlement and authorizing Schenckman to execute the Agreement or the ancillary documents related to the Settlement on behalf of College. Thus, it claims, the Agreement is unenforceable.
The Agreement was executed by Schenckman on behalf of College while he was president of College.
The president of a corporation has the apparent authority to make contracts on behalf of the corporation that are within the usual scope of the corporation's business. Odell v. 704 [*4]Broadway Condominium, 284 AD2d 52 (1st Dept. 2001); and Spitzer v. Born, Inc., 194 App.Div. 739 (1st Dept. 1921). A corporate president has apparent authority even though the president did not have actual authority to perform such acts. Odell v. 704 Broadway Condominium, supra; and Wishnow v. Kingsway Estates, Inc., 26 AD2d 61 (1st Dept. 1966). A contract entered into by the corporate president while acting within the scope of his or her apparent authority is binding upon the corporation unless the other party was aware of or had actual knowledge of the limitation on the president's authority. Odell v. 704 Broadway Condominium, supra; and Traitel Marble Co. v. Brown Brothers, Inc., 159 App. Div. 485 (1st Dept. 1913).
The apparent authority of the corporate president does not, however, extend to acts which are beyond the statutory limitations on his authority. Bouton v. Rhomas Bros. Sales Corp., 179 AD2d 612 (2nd Dept. 1992); and Vig v. Deka Realty Corp., 143 AD2d 185 (2nd Dept. 1988). The test is whether the president's actions are in the furtherance of the corporation's business. Hastings v. Brooklyn Life Ins. Co., 138 NY 473 (1893); and Odell v. 704 Broadway Condominium, supra. The corporate president's authority extends to those acts that could be ratified by the directors. Hastings v. Brooklyn Life Ins. Co., supra; Odell v. 704 Broadway Condominium, supra; and Best-Site Assocs., Inc. v. Ventrice, 245 App.Div. 758 (2nd Dept. 1935).
The Agreement is a contract between College and Sohn. Not-for-Profit Corporation Law §202(9) grants not-for-profit corporations the authority to make contracts. Not-for-Profit Corporation Law §202(a)(16) grants not-for-profit corporations the authority to exercise all powers necessary to effect the purposes for which the corporation was formed.
The settlement of claims against a corporation is clearly within it's power to make contracts and is part of the powers necessary to effectuate the purpose for which the corporation was formed. Schenckman, as president of College, had apparent authority to make such a contract. The Agreement most certainly could have been ratified by College's Directors. College cannot simply choose to ignore the Agreement which is valid on its face.
3.Alleged Conflict of Interest
Any claim by College of conflict on the part of Barry Shapiro, Esq. is also without merit. Mr. Shapiro represented Sohn and not College. The Agreement waived any claim of conflict or potential conflict. In making this argument, College is simply ignoring the plain language of the Agreement.
A motion to reargue is not a means by which the unsuccessful party can obtain a second opportunity to argue issues decided in the prior motion or to present new and different arguments relating to the previously decided issues. Gellert & Rodner v. Gem Community Mgt., Inc., 20 AD3d 388 (2nd Dept. 2005); and McGill v. Goldman, 261 AD2d 593 (2nd Dept. 1993).
College has not demonstrated that the court misapprehended either the law or the fact. The motion to reargue must be denied.
B. Renewal
A motion to renew should be designated as such and should be based upon new facts not presented to the court in connection with the prior motion that would change the court's prior determination or demonstrate that there has been a change in the law which would change the prior decision. The renewal motion must provide a reasonable justification or excuse for the failure to present the new facts on the prior motion. CPLR 2221(e). See, Kaufman v. Kunis, 14 [*5]AD3d 542 (2nd Dept. 2005); and Yarde v. New York City Transit Auth., 4 AD3d 352 (2nd Dept. 2004).
The only new evidence not placed before the Court in connection with the prior motion are the excerpts of the depositions of Shapiro, Schenkman and Gurwitz.
The deposition of Schenkman is not new evidence. Schenkman was deposed over three days. College states that the bulk of his testimony was taken on September 12, 2005. The motion which resulted in the order from which renewal is sought was submitted to the Court on September 20, 2005. Thus, Schenkman's testimony was available to College when the prior motion was submitted.
If Schenkman's testimony was essential the Court's proper determination of the prior motion, it could and should have been provided prior to the submission date of this motion. College offers no explanation as to why this testimony was not provided to the Court in connection with the prior motion.
Shapiro was deposed on September 22, 2005 while Gurwitz was deposed on September 29, 2005. Both of these depositions were completed shortly after the prior motion was submitted. If the deposition testimony of Shapiro and Gurwitz was so essential to the Court's determination of the prior motion, College could have made an application for leave to open the record. See, Matter of Ero v. Graystone Materials, Inc., 252 AD2d 812 (3rd Dept. 1998).
Since Shapiro and Gurwitz were not deposed until after the prior motion was submitted, the excerpts of their depositions are new evidence. However, consideration of these depositions does not mandate a different outcome. These depositions establish, at best, that the Board of Directors never passed a formal resolution approving the Agreement and authorizing Schenkman to execute it.
Schenkman's testimony establishes that he thought College's Board of Directors had approved the Agreement and authorized him to sign it. Schenkman further testified that he had been directed by Gurwitz, who was Chairman of the Board, to execute the Agreement.
The fact that College's Board limited Schenkman's authority to execute contracts by resolution passed in December 2000 is of no moment. Schenkman executed the contract on behalf of College before his authority was limited. The minutes of the December 2000 meeting of the Board were in the record of the underlying motion. Thus, the limitations placed on Schenkman's authority is not "new evidence."
Paragraph 3(a) of the Agreement contains specific representations that (1) College has the power and authority to execute the Agreement; (2) the Agreement has been approved by College Board of Directors; and (3) the Agreement is legal, valid and binding upon College. Neither Sohn nor Shapiro had any basis for questioning these representations.
To the extent that the deposition testimony constitutes new evidence which was unavailable at the time the prior motion was made, it does not suggest a different outcome. College entered into a valid and binding agreement discharging Sohn of her liability on the Note. College cannot simply choose to ignore or disregard the terms of the Agreement.
Accordingly, it is,
ORDERED, that Plaintiff's motion for reargument is denied; and it is further,
ORDERED, that Plaintiff's motion to renew is granted and, upon reconsideration, the Court adheres to its prior decision; and it is further,
ORDERED, that counsel shall appear for a conference to schedule the sanctions hearing granted in this Courts' order of December 27, 2005 on June 28, 2006 at 9:30 a.m. [*6]
This constitutes the decision and Order of the Court.
Dated: Mineola, NY _____________________________
May 25, 2006 Hon. LEONARD B. AUSTIN, J.S.C.
Footnotes
Footnote 1:A separate action by College against Deloitte & Touche, LLP is pending before this Court.
Footnote 2:Each of these depositions was taken in September 2005 as part of discovery in the New York College of Health Professions v. Deloitte and Touche, LLP action.
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