Beck v. Motler

54 A.D.2d 61, 387 N.Y.S.2d 169, 1976 N.Y. App. Div. LEXIS 13608

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: September 30, 1976
• Status: Published

Opinions

Mahoney, J.

The resolution of the issue of whether Leonard J. Beck (hereinafter referred to as Beck, Jr.) is entitled to 50% of Gem Cadillac-Oldsmobile, Inc. (hereinafter referred to as Gem) stock turns solely on a construction of the intention of Leonard S. Beck (hereinafter Beck, Sr.) and Martin Gottlieb in causing Gem to come into being as a new corporate entity to be operated by their respective donees, Beck, Jr. and Jay Motler.

In 1970 Beck, Sr. owned a two-thirds interest in the predecessor corporation of Gem and being desirous of attracting additional capital to create a successor corporation he entered into negotiations with Martin Gottlieb, a friend experienced in operating an automobile franchise. That such negotiations concluded in an agreement is certain. That the agreement was intended by both parties to inure to the benefit of Beck, Jr. and Motler by installing them as officers and operators of the new corporation is equally certain. That the new corporation (Gem) was created and commenced operations under the joint tutelage of Beck, Jr. and Motler is probatively established. However, that the ownership of Gem was to be joint and the stock was intended to be evenly divided between the beneficiaries of the agreement has been rejected by the trial court on the ground that the oral testimony of the witnesses for the respective parties is contradictory to a degree requiring mutual cancellation and, further, that in the absence of meaningful oral proof the issue raised by the pleadings must be resolved against plaintiff Beck, Jr. because the documentary evidence preponderates in defendant’s favor. We disagree.

Beck, Sr. testified that when he invited Gottlieb’s participation he owned 66%% of Gem’s predecessor corporation. Gottlieb does not deny that all he acquired from De Witt for his expenditure of $75,000 was the remaining Vs interest in the old corporation. Consequently, to affirm the decision below requires a finding that Beck, Sr. agreed that Gottlieb should acquire an additional 17%% rather than 16%% of the stock in the predecessor corporation from Beck and that this revised ownership of the old be reflected in the new corporation by Beck’s son owning 49% of Gem’s stock and Gottlieb’s son-in-law 51%. In our view the facts do not support this conclusion.

Since the trial court found the oral testimony unpersuasive, it relied solely on three pieces of documentary evidence each of which reflected a 49-51% stock relationship between Beck, Jr. and Motler. Each of the three was an application to Cadillac and Oldsmobile for a franchise. Beck, Sr. testified that the 49-51% relationship on each of the applications was not a reflection of the true ownership of Gem’s stock but, rather, was a deliberate distortion to comport with Gottlieb’s insistence that Cadillac and Oldsmobile would deal only with a majority owner. At trial Gottlieb denied not only that Cadillac and Oldsmobile required a principal owner but also that he told the Becks that there was such a requirement. Yet, in a classic example of impeachment by a prior inconsistent statement, Gottlieb was confronted on cross-examination with his own notarized affidavit wherein he swore that Cadillac franchises are not granted unless the applying corporation is controlled by a principal owner. Impeachment on a central and critical issue should not have been so lightly regarded below nor should it have been ignored in assessing the probative value of the three documents relied upon for complaint dismissal. While the assent by the Becks to falsify the true stock relationship of Beck, Jr. and Motler on the applications cannot be condoned, it is understandable, given the assurance of Gottlieb, a more experienced car franchisee, that principal ownership was a requisite if Gem was to be franchised. The testimony of Gottlieb is suspect not only because it was impeached on a critical issue, but for the further reason that he and Motler had much to gain by causing to be created documentary evidence that apparently reflected an agreement on the part of Beck, Jr. to be a minority stockholder.

In this connection more attention should also have been given to the testimony of Jesse Safir, an experienced attorney who had represented the Rice estate when that entity settled its differences with De Witt prior to the latter’s sale of his stock to Gottlieb. Mr. Safir, who had no interest in the outcome of this litigation, testified that the Becks in the course of consulting with him concerning the present dispute, advised him that Gottlieb had promised the Becks that he would issue a signed letter attesting to equal ownership of the stock of Gem after the falsified applications had been delivered to Cadillac. Whereupon, Safir testified, he called Gottlieb on the phone and Gottlieb affirmed that he had made such a promise but would forward the letter only after the Becks had paid one half of the costs he had sustained in causing Cadillac to place the franchise in both Beck, Jr’s, and Motler’s names. The Becks assented and left a check in the sum of $11,000 with Mr. Safir, said sum being one half of the costs as fixed by Gottlieb. Mr. Safir affirmed this in a letter to Gottlieb. Gottlieb’s testimonial response to all this was "But that’s a Jesse Safir production. Excuse me, Judge.” Why Mr. Safir, a respected attorney, should stage a "production” favorable to the Becks remains unexplained in the record.

In sum, we conclude that the trial court erred in concluding that the oral testimony adduced by the parties was so conflicting as to render all such evidence probatively valueless and, further, to resolve the issue solely on the declarations of ownership on the three franchise applications. These documents, as proof, were severely damaged as the result of Gottlieb’s impeached testimony. The only other piece of documentary evidence in the case, reflecting a 50-50% relationship between Beck, Jr. and Motler, was a sworn statement to the Internal Revenue Service, an agency capable of inflicting penalties much more severe than Cadillac for intentionally inaccurate averments.

The order should be modified, on the law and the facts, by striking the first decretal paragraph thereof and by inserting in its place a new paragraph granting judgment to the plaintiff with costs against Martin Gottlieb, to be taxed by the Clerk; by amending the second paragraph to direct that the capital stock of Gem Cadillac-Oldsmobile, Inc. be issued equally to Leonard J. Beck and Jay M. Motler; and by striking the third paragraph which stayed the execution of the order and judgment, and, as so modified, affirmed; judgment reversed, on the law and the facts, and matter remitted for the entry of a judgment for costs in favor of plaintiff, with costs upon this appeal against Martin Gottlieb.