Janoff v. Sheepshead Towers, Inc.

no consideration ” and because the lease was merely “ an accommodation ” to an interlocking corporation, the defendant Sheepshead Cabana Club, Inc. In our opinion, the benefit to the interlocking corporation was adequate consideration to the lessor (Seaver v. Ransom, 224 N. Y. 233 ). In addition, the agreement of the lessee, defendant Miramar Yacht Club, Inc., to forego its right to insist upon the interlocking corporation’s performance of its obligation under a previous instrument was adequate consideration. It was not essential that such agreement of the lessee be of any direct benefit to the lessor (Osborne v. Curtis, 209 App. Div. 100 , affd. 239 N. Y. 616 ). The learned Special Term also held that the unrecorded lease was invalid as against the plaintiff because the lessee’s possession was not of a nature sufficient to constitute constructive notice of its rights. However, the issue of constructive notice, in our opinion, is immaterial, for it is not disputed that plaintiff received actual notice of the lease and that plaintiff rejected title and refused to pay the balance of the purchase money by reason of the existence of the lease. Under these circumstances, the plaintiff received the same notice as it would have received had the lease been a matter of record. Since plaintiff had actual knowledge of the lease prior to the payment of the full purchase price and prior to acceptance of the- legal title, he was not a bona fide purchaser and is not entitled to ownership free of the lessee’s rights (Pollack v. Viele, 273 App. Div. 871 , mot. for rearg. and lv. to app. den. 273 App. Div. 910 , affd. 298 N. Y. 670 ; Genet v. Davenport, 66 Barb. 412 , affd. 56 N. Y. 676 ; Macauley v. Smith, 132 N. Y. 524 ; Wright-Blodgett Co. v. United States, 236 U. S. 397 ). In our opinion, the lease was not affected by the provisions of section 20 of the Stock Corporation Law [now Business Corporation Law, § 909] (Keating v. Coleman, 214 App. Div. 668 ; Eisen v. Post, 3 N Y 2d 518 ). In any event, no such issue was directly raised or litigated at Special Term. Had it been there raised, the issue could have been resolved by proper proof of authorization or ratification. Finally, we are of the opinion that the subject lease was not a mere license, terminable at will. By its terms, the lessee, for a valuable consideration, was granted and was entitled to exclusive occupancy rights in the subject property, and such occupancy could be extended over a period of many years. The lease, therefore, was not a mere license (Meers v. Munsch-Protzmann Co., 217 App. Div. 541 ; Miller v. City of N. Y., 20 A D 2d 720 ; Williams v. Hylan, 223 App. Div. 48 , affd. sub nom. Williams v. City of N. Y., 248, N. Y. 616; cf. Lordi v. County of Nassau, 20 A D 2d 658 , affd. 14 N Y 2d 699 ). However, the plaintiff is entitled to recover his actual damages from the vendor, the defendant Sheepshead Towers, Inc., despite the clause in the contract which purports to limit the vendor’s liability. We are in accord with the learned Special Term which held that, by its terms and by established precedent such a limitation-of-liability clause is unavailing for the purpose of limiting the damages flowing from willful or inexcusable default (Cockcroft v. New York & Harlem R. R. Co., 69 N. Y. 201 ; Mokar Props. Corp. v. Hall, 6 A D 2d 536 ). It is our opinion that the plaintiff has no right to recover damages against the defendant Berfond personally. The learned Special Term has properly determined that Berfond committed no fraud. Berfond was a corporate agent and may noti be held responsible, either for the corporation’s breach of contract, or for inducing such breach (Greyhound Corp. v. Commercial Cas. Ins. Co., 259 App. Div. 317 ; Potter v. Minskoff, 2 A D 2d 513 , affd. 4 N Y 2d 695 ). We are remitting this action to the Special Term for the reconsideration of remedies and damages as between plaintiff and the remaining defendant, Sheepshead Towers, Inc. We are doing so because the plaintiff, in view of this decision, may -find it advantageous to select the remedy of damages rather than the remedy of specific performance. Such selection should be the prerogative of the plaintiff. Should the plaintiff, however, still desire specific

performance, that remedy should be granted him upon new terms not inconsistent herewith. Kleinfeld, Brennan, Rabin and Hopkins, J J., concur; Beldock, P. J., dissents and votes to affirm the judgment, with the following memorandum: In my opinion, the defendant Berfond had- no authority to execute the 63-year lease on behalf of the lessor, the defendant Sheepshead Towers, Inc., without the approval of its stockholders, since the lease was entered into by it solely for the benefit of and as an accommodation to the defendant, Sheepshead Cabana Club, Inc. Such a transaction was not part of the regular course of business of the lessor corporation.