Sutton v. East River Savings Bank, 55 N.Y.2d 550 (1982)
When a contract does not specify a time for performance, the law implies a reasonable time, the determination of which depends on the specific facts and circumstances of the case.
Summary
Sutton, as limited partners, agreed to a partnership where their interest would terminate on a specific date, with a clause allowing termination upon property disposal if written notice was given. After the property was transferred to a corporation and converted to cooperative apartments, the limited partners accepted profits for 22 months before attempting to terminate the partnership. The New York Court of Appeals held that the 22-month delay in providing notice was unreasonable, barring the limited partners from relief even if the property transfer triggered the termination clause. This case highlights the importance of timely action when a contract lacks specific deadlines.
Facts
Plaintiffs’ predecessors sold property with apartment buildings to defendant general partnership, receiving a mortgage in return. When the partnership struggled with payments, the plaintiffs became limited partners with a 20% profit share in exchange for consenting to mortgage refinancing. The partnership agreement stated that if the property was sold or disposed of before January 31, 1985, the partnership could terminate upon written notice by any partner. The agreement did not specify a time frame for providing this notice. In November 1982, the general partnership formed a corporation, transferred the apartment complex to it, and converted the property to cooperative apartments. The general partners then paid off the original mortgage. Approximately 20% of the cooperative shares were sold to individual apartment owners.
Procedural History
The plaintiffs, as limited partners, initially did not provide notice to terminate the partnership after the property transfer and cooperative conversion. They accepted their 20% share of profits, including proceeds from the apartment sales, for 22 months. Subsequently, they attempted to give notice of termination, which the general partners rejected. The lower courts ruled in favor of the general partnership, finding the delay in providing notice unreasonable. The case then reached the New York Court of Appeals.
Issue(s)
Whether a 22-month delay in providing notice to terminate a partnership, after a triggering event as defined in the partnership agreement, constitutes an unreasonable delay, thereby precluding the right to terminate.
Holding
Yes, because the 22-month delay was deemed unreasonable given the circumstances, even if the cooperative conversion triggered the right to terminate under the partnership agreement.
Court’s Reasoning
The Court of Appeals affirmed the Appellate Division’s order. The court stated that when a contract doesn’t specify a time for performance, a reasonable time is implied. The court cited Webster’s Red Seal Publs. v Gilberton World-Wide Publs., noting the principle that a reasonable time depends on the facts and circumstances of each case. They also cited Ben Zev v Merman. The court emphasized that the plaintiffs accepted profits for nearly two years after the property transfer before attempting to terminate the partnership. The court agreed with the Appellate Division’s conclusion that the 22-month delay was unreasonable. The court reasoned that, even if the cooperative conversion triggered the right to terminate, the plaintiffs’ unreasonable delay barred them from any relief. The Court’s decision turned on the practical implications of allowing a party to delay exercising a contractual right, especially when that delay prejudices the other party or allows the delaying party to benefit from the status quo before attempting to change it. As the court implied, a party cannot wait an unreasonable amount of time to see how things play out before attempting to enforce a contractual right. The court did not discuss any dissenting or concurring opinions.