Stewart Family LLC v. Stewart

The following e-filed documents, listed by NYSCEF document number (Motion 003) 112, 113, 114, 115, 116, 117, 118, 119, 120, 122, 123, 124, 125, 126, 127 were read on this motion to/for SUMMARY JUDGMENT (AFTER JOINDER). DECISION + ORDER ON MOTION Upon the foregoing documents, plaintiff moves for summary judgment on the first cause of action (replevin) in its complaint and for a judgment declaring it to be the lawful owner of four oil paintings with the sole right to possess them, and directing that the paintings be delivered to plaintiff. Defendant cross-moves for summary judgment dismissing plaintiff’s complaint. BACKGROUND The Four Trusts Plaintiff Stewart Family LLC was formed on December 27, 2001, as a Delaware limited liability company. The sole equal members of plaintiff are four inter vivos trusts created by William Stewart Jr. (“Bill”) in or about 1985, for each of his four children, William Stewart III (“Tres”), Jeffrey Stewart (“Jeffrey”), Lisa Stewart (“Lisa”), and Gregory Stewart (“Gregory”). Bill was the sole Trustee of the four trusts until 2004 when his wife, defendant Barbara Stewart (Barbara), became a Co-Trustee. Bill and Barbara divorced in or about 2014. On December 29, 2001, the four trusts entered into an Operating Agreement (“Original Operating Agreement”) which designated Bill and Barbara as the Managers of the LLC. In or about 2009, Bill petitioned the Surrogate’s Court, New York County to remove Barbara as Co-Trustee of the trusts and on December 6, 2010, the Surrogate’s Court issued a temporary restraining order (“TRO”) which “wholly and summarily suspended” Barbara as Co- Trustee. On December 1, 2011, the Surrogate Court permanently removed Barbara as Co-Trustee. On October 11, 2011, Bill called a meeting acting as sole representative Trustee to remove Barbara as a Manager of the LLC. At the meeting, all four trusts, acting through Bill, as sole representative Trustee, voted unanimously to remove Barbara as a Manager of plaintiff pursuant to the terms of the Operating Agreement. Thereafter, Bill executed an Amended and Restated Operating Agreement (“Amended Operating Agreement”), wherein he was appointed sole Manager of plaintiff LLC. The Four Paintings and the Underlying Action At issue in this case are four oil paintings purchased by each of the four trusts,¹ which were conveyed to the LLC in 2003. Thereafter, in 2018, Bill sought to sell one of the paintings in order to raise funds for the trusts. However, Barbara refused to provide access to or return the paintings which were located at her Manhattan apartment, prompting the LLC to commence the instant action to recover the paintings. The complaint, filed on July 23, 2018, set forth a cause of action for replevin and sought an order of seizure. In relation to the second cause of action for seizure, the parties stipulated that the paintings would be stored at Crozier Fine Arts, Inc. (“Crozier”), pending further order of the court at the LLC’s expense. The Prior Motion and Cross Motion for Summary Judgment In November 2018, Barbara filed an answer and a third-party complaint against Bill for contribution and indemnification. The LLC moved for summary judgment on the complaint and Bill moved to dismiss the third-party complaint. Barbara cross-moved for summary judgment dismissing the complaint. Pursuant to an order of the court dated August 16, 2019 (Marin, J.), the LLC’s motion for summary judgment and Barbara’s cross motion were denied, and Bill’s motion to dismiss the third-party complaint was granted. The court also directed that the paintings be delivered to Barbara’s residence. As relevant here, the court denied the LLC’s motion for summary judgment on the ground that it failed to demonstrate that it was necessary to sell the paintings for the benefit of the trusts. Both parties appealed from the August 2019 order. On appeal, the Appellate Division, First Department modified the order to the extent of granting the LLC’s application to keep the paintings in storage pending resolution of the action and otherwise affirmed (Stewart Family LLC v. Stewart, 184 AD3d 487 [1st Dept 2020]). Significantly, the Appellate Division determined that the LLC made out the elements of a claim for replevin in that the LLC’s “ownership of the paintings is established by the contract by which the paintings were conveyed to it by the trusts” and “Barbara’s refusal to relinquish possession of the paintings is not disputed” (id. at 491). The Court further found that the “Supreme Court erred when it imposed the additional requirement that [the LLC] must demonstrate that the trusts’ financial circumstances required the sale of the paintings” (id.). The Appellate Division nevertheless affirmed the Supreme Court’s denial of the LLC’s motion for summary judgment, finding that Barbara asserted three affirmative defenses to the LLC’s claim for replevin which the court was required to consider on appeal. The Appellate Division rejected the first two affirmative defenses, and in addressing the third affirmative defense, i.e., that Bill was the sole attendee at the October 11, 2011 meeting which was improperly noticed, the Court noted that the parties relied upon the Amended Operating Agreement, adopted after Barbara’s removal as Manager. The Court determined that the Original Operating Agreement, which had not been included in the record, governed Barbara’s removal as a Manager of the LLC, and that issues of fact existed as to whether she was properly removed. Specifically, the Court stated: …among other questions, we do not know whether the prior operating agreement allowed for removal of a manager for cause without notice. Accordingly, there is an issue of fact as to whether Barbara was properly removed as co-manager of Stewart LLC. If she was not properly removed as manager, then there is a question as to whether Stewart LLC is authorized to bring this lawsuit (id. at 492). This Court now addresses plaintiff LLC’s motion for summary judgment to determine, as a matter of law, the lawful ownership of the paintings and directing delivery of the paintings to plaintiff LLC. Additionally, the Court shall also address Barbara’s cross motion for summary judgment dismissing the complaint. DISCUSSION The case law is well-settled that a party moving for summary judgment bears the burden of making a prima facie showing of entitlement to judgment as a matter of law and must tender sufficient evidence in admissible form to demonstrate the absence of any material factual issues (see CPLR 3212 [b]; Alvarez v. Prospect Hosp., 68 NY2d 320 [1986]; Zuckerman v. City of New York, 49 NY2d 557 [1980]). Where the “proponent makes a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact, and the opponent fails to rebut that showing,” summary judgment is proper (Brandy B. v. Eden Cent. School Dist., 15 NY3d 297, 302 [2010] [citation and internal quotation marks omitted]; see also Ferluckaj v. Goldman Sachs & Co., 12 NY3d 316 [2009]; Tillmon v. New York City Hous. Auth., 203 AD2d 19 [1st Dept 1994]; Alvarez v. Prospect Hosp., 68 NY2d 320) Once this showing has been made, however, the burden shifts to the party opposing summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action (see id.). In this regard, to prevail on a claim of replevin, a plaintiff must demonstrate that he or she owns specified property, or is lawfully entitled to possess it, and that the defendant has unlawfully withheld the property from the plaintiff (see CPLR 7101; Khoury v. Khoury, 78 AD3d 903 [2d Dept 2010]; see also Solomon R. Guggenheim Found. v. Lubell, 153 AD2d 143 [1st Dept 1990], affd 77 NY2d 311 [1991]). In the case at bar, the Court finds that plaintiff has established prima facie entitlement to summary judgment as a matter of law on its cause of action of replevin. In Stewart Family LLC v. Stewart, 184 AD3d 487 [1st Dept 2020], the Appellate Division, First Department determined that “Stewart LLC’s ownership of the paintings is established by the contract by which the paintings were conveyed to it by the trusts,” thus, plaintiff LLC’s ownership of the paintings is uncontroverted and is the law of the case. (see Carmona v. Mathisson, 92 AD3d 492 [1st Dept 2012]). As to defendant’s wrongful withholding of property, plaintiff has cited numerous instances throughout the record where defendant refused to return the paintings, and which ultimately resulted in plaintiff’s ex parte application of seizure. In opposition, Barbara’s contention that she did not receive proper notice of the October 11, 2011 meeting, and that Bill did not have the authority to act on behalf of the trusts fail to raise a triable issue of fact, since her arguments, although compelling, lack the probative weight required to rebut plaintiff’s prima facie showing. “[O]ne opposing a motion for summary judgment must produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which he rests his claim…mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient” (Zuckerman v. City of New York, 49 NY2d 557, 562 [1980]). A review of the Operating Agreement annexed to the moving papers establishes that Bill had the authority to act on behalf of the trust since Barbara was properly removed as a Manager of the LLC. The Court notes that the Appellate Division previously determined that the Operating Agreement was the governing document regarding this issue. Firstly, the meeting removing Barbara was properly called pursuant to Sections 6.2. (b) and 6.2. (e), which provides that a Manager may call a meeting for any purpose. Section 6.2. (b), entitled “Special Meetings,” states: [s]pecial meetings of the Members, for any purpose or purposes, unless Otherwise prescribed by statute, may be called by any Manager or by any Member or Members holding at least ten percent (10%) of the Percentage Interests. Section 6.2. (e), entitled “Meeting of All Members,” states: [i]f all of the Members shall meet at any time and place, either within or outside of the State of Delaware, and consent to the holding of a meeting at that time and place², the meeting shall be valid without call or notice, and at the meeting lawful action may be taken (emphasis added). Section 8.7., entitled “Removal”, provides that Members can remove either or both Managers at a meeting of Members. Section 8.7, states: [a]t a meeting called expressly for that purpose, either or both of the Managers may be removed at any time, with or without cause, by the unanimous vote of the Members. The removal of a Manager who is also a Member shall not affect the Manager’s rights as a Member and shall not constitute a withdrawal as a Member (emphasis added). Further, a review of the Operating Agreement indicates that Bill was authorized to vote on Barbara’s removal on behalf of the trust Significantly, the signature page of the Operating Agreement states: “IN WITNESS WHEREOF, the undersigned Initial Members of the [LLC] have executed this Agreement as of the date first written above.³” The name of each trust appears under this statement, and under the name of each trust, a signature line appears stating: “By: _________________ William P. Stewart, Jr., Trustee.” Each signature line contains Bill’s signature. As such, the four trusts are the sole “Members” of the LLC, not Barbara and Bill’s four children. By definition, the trustee holds legal title to the trust corpus for the benefit of the beneficiaries (see EPTL 7-2.1; Gaigal v. Laub, 236 AD2d 362 [2d Dept 1997]), and the trust agreements themselves grant the trustees the powers conferred by law as well as the power “to vote personally” on behalf of the trust (Trust Instruments, Article V, A.6).⁴ Accordingly, the Court finds that the October 11, 2011 meeting provided proper notice, pursuant to Sections 6.2. (b) and 6.2. (e) of the Operating Agreement. Additionally, Bill was the only person authorized to exercise the authority as Trustee on behalf of the trusts since Barbara’s powers to act as Co-Trustee were suspended by the December 1, 2011 TRO, and the vote of the trusts to unanimously remove Barbara as a Manager was consistent with Section 8.7. of the Operating Agreement, which provides for the removal of a manager “at any time, with or without cause.” The Court further notes that at the same meeting, Bill, again acting as sole Trustee, executed the Amended Operating Agreement wherein he was appointed as sole Manager of plaintiff with the authority to bring the instant lawsuit. Based on the foregoing, it is hereby, ORDERED AND ADJUDGED, that plaintiff’s motion for summary judgment is granted on the first cause of action for replevin, and, as such, plaintiff is declared to be the lawful owner of the paintings: “Le Quintette” signed Raoul Dufy, “Street Scene” signed Lucien Genin, “Au bord de la mer” signed Albert Marquet, and “Blumenstilleben (Still Life with Flowers)” signed Alexej Von Jawlensky; and it is further ORDERED that plaintiff is entitled to a judgment of possession as to the four paintings: 1.”Le Quintette” signed Raoul Dufy 2. “Street Scene” signed Lucien Genin 3. “Au bord de la mer” signed Albert Marquet 4. “Blumenstilleben (Still Life with Flowers)” signed Alexej Von Jawlensky; and it is further ORDERED, that plaintiff shall arrange for delivery of the paintings forthwith from Crozier Fine Arts, Inc., 525 West 20th Street, New York, New York 10011 to a location designated by the plaintiff; and it is further ORDERED, that all stays issued in the within action are vacated; and it is further ORDERED that defendant’s cross motion for summary judgment dismissing the complaint is denied; and it is further ORDERED, that the Clerk is directed to enter judgment accordingly. CHECK ONE: CASE DISPOSED X         NON-FINAL DISPOSITION X     GRANTED DENIED GRANTED IN PART OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE Dated: October 28, 2022