Four sisters. One house. Who owns it?
Today's case delves into a thorny situation many closely-held family businesses struggle with—proving ownership.
It's no secret that many closely-held family business do not comply with corporate formalities. In the absence of such formalities, it can be difficult to demonstrate ownership without stock certificates in hand, or other definitive evidence of ownership. But, over the years, we've highlighted numerous cases in which plaintiffs/petitioners have endeavored to do exactly that, to mixed results (see here [equity did not rescue shareholders attempting to issue shares beyond those authorized by the certificate of incorporation], here [doctrine of tax estoppel and its impact on proof of ownership], and here [divergent and inconsistent documents and testimony in fight over 50% ownership required remand to trial court]).
A recent decision out of the Second Department in Franco v Farr, 2025 NY Slip Op 04880 (2d Dept Sept 10, 2025) resolved one such dispute between feuding siblings arising out of contested ownership of a single-asset real estate holding company, though, not with as much clarity as the parties might have wished for.
JLTD Inc. Formed as a Single-Asset Real Estate Holding Company
This dispute concerns a single-asset real estate holding company, JLTD Inc., named after the sisters in the Galasso family—Jonna, Lana, Tori-Ann, and Dana—daughters to family matriarch Henrietta Galasso.
Over the years, Mom formed several entities to invest in real estate. Mom ran the show when it came to the family businesses, with the sisters occasionally participating as Mom directed.
In November 1989, daughter Tori-Ann executed a contract of sale to purchase 11 Cypress Lane for a purchase price of $207,000, as directed by Mom.
About a month later, on December 27, 1989, Mom formed JLTD, Inc.
The deed for 11 Cypress Lane was recorded a few weeks after that, in January 1990, reflecting JLTD as the purchaser of the property.
Tori-Ann moved into 11 Cypress Lane with her son, and has lived there continuously ever since.
The Dispute Over 11 Cypress Lane
JLTD did not exercise any corporate formalities. And I mean, none.
The corporate kit contained blank stock certificates. The off-the-shelf shareholders agreement was left blank and was never executed. There were never any shareholders meetings. No distributions were ever made.
In fact, JLTD was so lax in its corporate governance, it was dissolved by proclamation in 1993, just over 3 short years after its formation, by the New York State Secretary of State—a fact that apparently none of the family members knew about until it was uncovered during certain probate proceedings concerning Mom's estate decades later.
As for the purchase and maintenance of JLTD's sole asset, 11 Cypress Lane: Mom paid the down payment of $20,700, and also advanced the remaining funds to close on the purchase.
During the course of said probate proceedings, it came to light that in August 1999, JLTD (unaware that the entity had been dissolved by proclamation) transferred title to 11 Cypress Lane to sisters Tori-Ann and Jonna, as joint tenants with right of survivorship, which transfer Mom's attorney facilitated. Some 10 years after that, title was transferred to Tori-Ann, solely, "for estate planning purposes."
Sisters Lana and Dana contend they had no idea these transfers had taken place, and only found out during the course of the probate proceeding.
Soon thereafter, Lana and Dana commenced a plenary action against Tori-Ann and Jonna for a variety of fraud-based claims stemming from the transfer of 11 Cypress Lane out of JLTD to Tori-Ann individually.
Cross-Motions for Summary Judgment Featuring Sharply Contrasting Views on Ownership of JLTD
The parties filed cross-motions for summary judgment.
Tori-Ann (individually and as personal representative for Jonna, who passed away during the course of the litigation) sought summary dismissal of the action, arguing that Lana and Dana have no ownership interest in JLTD.
Tori-Ann took the position that 11 Cypress Lane was always intended to be her personal residence. It was uncontested that JLTD never exercised corporate formalities. It was also undisputed that none of the sisters contributed cash to the entity in consideration for their interest. Lana and Dana rarely ever visited the property, never paid any real estate taxes on the property, and never contributed funds toward the maintenance or renovations on the property. They never asked to review the books and records of JLTD, nor did they ever demand the return of any alleged investment in the entity.
Lana and Dana cross-moved for summary judgment, contending that they each made an investment of $50,000 in 1989 (i.e. around the time of the purchase of 11 Cypress Lane), which investment was administered by Mom by means of an inheritance from their grandparents. Instead of distributing the inheritance directly to the sisters, Mom directed those funds into JLTD on behalf of Lana and Dana. This, the sisters contend, entitled them to a respective 25% ownership interest in the corporation.
But the coup-de-grace Lana and Dana relied on was Tori-Ann's deposition testimony in which she acknowledged that the four sisters owned JLTD on an equal 25% ownership basis:
Q: Who are the owners of JLTD?
A: It was four girls.
Q: What were the shares of ownership by the four girls, in percentages, if you can?
A: Twenty-five percent each.
Tori-Ann later submitted an errata sheet, correcting her answers to instead read, "I assume it was the four girls" and "I assume it was twenty-five percent each" explaining that the reason for the change was because she had not seen any documentation to that effect.
Lana and Dana, thus, requested that the Court strike the errata sheet, and grant summary judgment in their favor based on Tori-Ann's admissions.
Supreme Court Grants Summary Dismissal in Favor of Defendants, Finding Plaintiffs Did Not Prove Ownership
Rockland County Supreme Court Justice Sherri L. Eisenpress granted Tori-Ann's motion for summary judgment dismissing the complaint, and denied Lana and Dana's cross-motion for summary judgment.
The court found that "Defendants made a prima facie showing of their entitlement to judgment as a matter of law dismissing the complaint by submitting evidence that Plaintiffs have no ownership interest in JLTD." Relying heavily on the analysis found in Matter of Pappas v Corfian Enters. Ltd., 22 Misc 3d 1113 [A] (Sup Ct, Kings County 2009) aff'd 76 AD679 (2010), to search for indicia of ownership in the absence of corporate formalities, Justice Eisenpress found:
Defendants' submissions demonstrate that Plaintiffs paid no consideration for an ownership interest in JLTD: they did not make any capital contributions toward JLTD or the purchase of 11 Cypress Lane; never contributed funds toward maintenance or renovations of 11 Cypress Lane; and did not perform any services for JLTD. Furthermore, Defendants' evidence shows that Plaintiffs did not engage in any conduct reflecting their alleged status as shareholders; rather, Plaintiffs admittedly were not involved in the operation of JLTD and never demanded any proceeds from JLTD to be distributed to them or set aside for them.
The Court further disagreed with Lana and Dana that Tori-Ann's errata sheet constituted a material alteration of her testimony, nor did the testimony raise a triable issue of fact.
The Court also found that Lana and Dana's contention that they each invested $50,000 in JLTD and therefore have a 25% ownership interest in JLTD was conclusory and therefore insufficient to raise a triable issue of fact.
After an unsuccessful motion to reargue, Lana and Dana appealed from the dismissal (see the appellate briefs here, here, and here).
Second Department Affirms, But on Entirely Different Grounds
Aside from noting that the Supreme Court granted summary dismissal on the grounds that "defendants demonstrated, as a matter of law, that the plaintiffs did not have any ownership interest in JLTD," the appellate court uttered not a word about evidence of ownership or the challenged testimony.
Instead, the Second Department affirmed dismissal based solely on statute of limitations—an issue that was briefed, but not discussed by the court below. As the contested transfer took place in August of 1999, the 2020 commencement of the action was outside of the applicable statute of limitations period. The two year discovery rule did not save Lana and Dana's claims because, as the Appellate Court pointed out, they attested that, "defendants defrauded, schemed, and misused property for many years," and therefore had knowledge of facts that should have caused them to inquire and discover the alleged fraud with reasonable diligence.
Final Thoughts
But, where does all this leave the parties as to the ownership of JLTD? I'm not sure. And it may not matter. Statute of limitations being what they are, Lana and Dana are foreclosed from challenging the transfer of the property out of JLTD to Tori-Ann.
It's clear is that the Appellate Court felt that the action should be dismissed instead of sent to trial. But by affirming on different grounds (not alternative, or additional grounds), it seems that the court may not have been entirely convinced that the Supreme Court got it right on the ownership issue.
It's certainly a close call. The analysis the Supreme Court undertook to reach its determination evidencing a lack of ownership interest—i.e. no capital contributions, did not perform services for JLTD, did not contribute funds toward maintenance or renovations, never asked for corporate books and records, never demanded distributions—could just as easily describe any number of passive shareholders. Folks who, in situations like with a family business, are content to allow other family members handle the family business until it comes time to sell.
While the indicia outlined in Matter of Pappas (a case we covered extensively, see here and here) may evidence shareholder status absent corporate formalities, the inverse is not necessarily true. More significantly, Pappas was decided after a framed issue hearing with live testimony from 14 witnesses and the submission of 48 exhibits into evidence, whereas JLTD's ownership was decided by the trial court on summary judgment.
Furthermore, and this may just be one litigator's opinion, the change in Tori-Ann's deposition testimony from, "The four girls" are owners of JLTD to "I assume it was the four girls" is a material change to my eyes. Now, should it have been it enough for summary judgment in favor of the plaintiffs? Probably not. But, was the change was material enough to, at a minimum, create triable issues of fact requiring a fact finder to weigh witness credibility. Yes, I think it was.
All that said, we won't have the chance to see how this might have played out at trial.
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