Lippman v. Kaplan, 504 N.E.2d 702 (N.Y. 1986)
The Statute of Frauds applies to the creation of an option contract for the sale of real property, not to the subsequent exercise of that option, provided the original option contract is in writing and signed by the party to be charged.
Summary
Lippman and Wengraf, sublessors of a cooperative apartment, appealed a decision that Kaplan, the sublessee, validly exercised an option to purchase the apartment. The sublessors argued that the exercise of the option violated the Statute of Frauds because the sublessee’s attorney lacked written authority to act on the sublessee’s behalf. The court held that the Statute of Frauds was satisfied by the written sublease agreement containing the option, and the sublessees had actual notice of the intent to exercise the option. The court affirmed the order compelling the sublessors to convey their interest.
Facts
Lippman and Wengraf sublet a cooperative apartment to a medical corporation (Kaplan). The sublease agreement contained a clause (paragraph 18) granting the sublessee the option to purchase the sublessors’ shares in the cooperative for $30,000. The option required written notice to the lessors at least six months before the option’s termination. The sublessee’s attorney sent a letter to the sublessors’ former attorney notifying them of the intent to exercise the option. Three additional letters were sent to the same attorney without response. Later, another attorney for the sublessee wrote directly to Lippman referring to the prior letters.
Procedural History
The sublessee sought to enforce the option. The sublessors argued the exercise of the option was invalid under the Statute of Frauds. The Appellate Division ruled in favor of the sublessee. The sublessors appealed to the New York Court of Appeals.
Issue(s)
Whether the exercise of an option to purchase real property is invalid under the Statute of Frauds if the attorney exercising the option on behalf of the client lacks separate written authorization, given that the original option agreement was in writing and signed by the party to be charged.
Holding
No, because the Statute of Frauds applies to the creation of the option contract itself, not to the act of exercising the option, provided the original option agreement is in writing and signed by the party to be charged, and because the sublessors had actual notice of the subtenant’s intention to exercise the purchase option.
Court’s Reasoning
The court reasoned that an option contract is an agreement to hold an offer open, giving the optionee the right to purchase at a later date. The Statute of Frauds requires that contracts for the sale or long-term lease of property be signed by the party to be charged. In this case, the option agreement was contained in a written sublease agreement signed by the sublessors (the party to be charged). The court stated, “It is the execution of the option agreement, and not the exercise of the option, that is controlling with respect to the application of the Statute of Frauds.” Once the optionee gives notice of intent to exercise the option according to the agreement, the unilateral option agreement becomes a fully enforceable bilateral contract. The court emphasized that the sublessors had actual notice within the specified time period that the subtenant intended to exercise the purchase option. The court distinguished *Ochoa v. Estate of Sarria*, 97 A.D.2d 538, and agreed with the holding in *Stark v. Fry*, 129 A.D.2d 237. The court noted the sublessors’ misunderstanding of the Statute of Frauds, stating, “The Statute of Frauds requires that a contract for the sale or long-term lease of property be signed by the party to be charged, i.e., the party against whom enforcement of the contract is sought. The absence of a signature by the party seeking to enforce the agreement is without legal significance.”