Gelman v. Buehler , 936 N.Y.2d 154 ( 2012 )

Defendant could not unilaterally dissolve the partnership since the partnership had the specific undertaking of acquiring a business and expanding it until the investors would receive a return on their capital investments. Moreover, the partnership also had a definite term, namely, to achieve the liquidity event. “ ‘[W]here a partnership has for its object the completion of a specified piece of work, or the effecting of a specified result, it will be presumed that the parties intended the relation to continue until the object has been accomplished’ ” (Hooker Chems. & Plastics Corp. v International Mins. & Chem. Corp., 90 AD2d 991, 991 [1982], quoting Hardin v Robinson, 178 App Div 724, 729 [1916], affd 233 NY 651 [1918]). Here, a sale or other liquidity event was the ultimate goal of the partnership, and until that time a partner could not unilaterally terminate the partnership.

Thus, it does not matter that the partnership was to operate between four to seven years to achieve the liquidity event, and it was error for the lower court to dismiss the breach of contract claim this early in the action. As the Court of Appeals has held, “In the absence of an express term fixing the duration of a contract, the courts may inquire into the intent of the parties and supply the missing term if a duration may be fairly and reasonably fixed by the surrounding circumstances and the parties’ intent” (Haines v City of New York, 41 NY2d 769, 772 [1977]; see also Scholastic, Inc. v Harris, 259 F3d 73, 85 [2001] [“Whether a partnership is terminable at will is a question of fact, and the jury should determine what the parties intended if the agreement does not fix an express duration”]).

Here, neither party expressly held out that the partnership was to be one terminable at will. Nor was the venture to be perpetual in nature. That is, the partnership did not seek to achieve an indefinite number of “liquidity events,” but rather to achieve the one discernable event to give a return to a limited number of investors (see Better Living Now, Inc. v Image Too, Inc., 67 AD3d 940, 941 [2009] [“Unless a contract expressly provides for perpetual performance, the Taw will not imply that a contract calling for continuing performance is perpetual in duration’ ”], quoting Haines at 772). In such a situation, and at this early juncture in the action, plaintiffs breach of contract claim should not have been dismissed.

Nor is the oral agreement between plaintiff and defendant barred by the statute of frauds. General Obligations Law § 5-701 (a) (1) provides that “a. Every agreement... is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, ... if such agreement, . . . 1. By its terms is not to be performed within one year from the making thereof.” In deciding if an oral agreement falls within the statute of frauds, it matters not that it was unlikely or improbable that the contract could be performed within a year; rather, “[t]he critical test ... is whether ‘by its terms’ the agreement is not to be performed within a year” (Freedman v Chemical Constr. Corp., 43 NY2d 260, 265 [1977]; see also Foster v Kovner, 44 AD3d 23, 26 [2007] [stating that the statute of frauds “encompasses only those agreements which, by their terms, have absolutely no possibility in fact and law of full performance within one year” and that “(i)t matters not that completion of performance within one year may be unlikely or improbable” (internal quotation marks omitted)]). Here, although the estimated time to achieve a liquidity event was to be four to seven years, it cannot be said that there was absolutely no possibility that performance could not be completed within one year, and since “neither party has contended that the alleged agreement contained any provision which directly or indirectly regulated the time for performance, the agreement is not within the bar of [the statute of frauds]” (Freedman, 43 NY2d at 265).

In any event, where, as here, there is partial performance of the partnership agreement, the statute of frauds is inapplicable (see H.P.P. Ice Rink v New York Islanders, 251 AD2d 249 [1998]). The partial performance here included naming the LLC after the respective school colors of plaintiff and defendant, plaintiff and defendant moving in together and listing their residential address as their business address, creating joint business cards, creating marketing material, and sending numerous e-mails to and attending meetings with potential investors. Concur — Saxe, Moskowitz and Acosta, JJ.