Justice Slams Justice

In a scathing decision denouncing the testimony of a retired East Hampton Town justice as “either self-serving or intentionally vague and disingenuous,” a State Supreme Court judge has ordered her to repay $1.045 million plus interest to a former partner of her late husband.

Catherine Cahill, who left the bench at the end of last year after two decades, “repeatedly purported not to understand the questions that were posed to her, or to have the knowledge or understanding or expertise to answer substantive questions about her husband’s business dealings or the administration of his estate of which she is the executrix,” wrote Justice Paul J. Baisley. “Mindful of Cahill’s professional stature and standing as an officer of the court not only as an attorney but as a sitting judge as well, the court finds that Cahill’s professed ignorance as to matters fully within the comprehension of any lawyer or judge is not credible.”

 The long-running case began in November 2005, when Nelson Gerard, a partner with Marvin Hyman in a real estate venture called Buckskill Farm, sued Mr. Hyman, claiming he had wrongly transferred $1.895 million from their corporate account and deposited it in an account shared with his wife, Ms. Cahill. Mr. Hyman died of prostate cancer about a month after the lawsuit commenced. Two years later Mr. Gerard sued Ms. Cahill, claiming fraud and breach of an alleged “oral agreement.”

 State Supreme Court found for Justice Cahill, saying there had been no fraud. As for the putative oral agreement between the partners, the court said that even had it existed it was unenforceable.

Mr. Gerard appealed, and the Appellate Division reversed the decision, sending the case back to the lower court, although it agreed that fraud was not at issue. What was, it said, was whether Mr. Gerard and Mr. Hyman had indeed made an oral agreement — “a separate, additional agreement addressing a scenario that was not anticipated and not covered by the terms of the operating agreement.” If so, the appellate judges said, Mr. Hyman had breached it. The question was left to Justice Baisley to determine.

 Buckskill Farm, a limited liability corporation, was created in June 2003 to subdivide a 9.6-acre parcel in East Hampton. Mr. Gerard put in $2 million; Mr. Hyman, an attorney experienced in land use and development, $350,000, including his services in shepherding the proposal through the East Hampton Town Planning Board. Depending on the number of lots ultimately permitted, their operating agreement envisioned various scenarios.

For example, if the subdivision yielded eight lots plus a required reserve, Mr. Gerard would get five lots and a half-interest in the reserve; Mr. Hyman would get the rest. If the map yielded only four or five lots plus a reserve, then Mr. Gerard would own all the lots and Mr. Hyman would receive only the reserve. “Significantly,” wrote Justice Baisley, the agreement stipulated that “all decisions . . . be made jointly.”

What the partners had not foreseen was that the town would soon enact a moratorium on subdivisions with less than 10 acres. In February 2004, Mr. Hyman notified Mr. Gerard that not only was the freeze about to happen, but also that the town wanted to buy four of their potential eight lots together with the now 6.8-acre reserve, which would be used for farming.

East Hampton eventually offered $1.9 million to purchase the four lots and the reserve. Mr. Hyman signed the contract with the town in October 2004, though without obtaining the consent of his partner as required by the operating agreement. He deposited the money into Buckskill Farm’s account, then withdrew almost all of it and put it, without Mr. Gerard’s knowledge (these facts were undisputed), into his and Ms. Cahill’s joint account.

According to Mr. Gerard, who testified at a preliminary hearing in 2005 that he had been given to believe the town was not buying the reserve outright but only its development rights, he and his partner then agreed that the corporation would buy out Mr. Hyman’s interest for $950,000. But Mr. Hyman never signed a formal document setting out the agreement. He “didn’t like it,” he testified at the same hearing, held shortly before he died. “I felt they were being economic bullies and beating me up.”

After understanding that the town was buying the reserve area outright, Mr. Gerard said at the hearing, he deemed the $950,000 no longer equitable. Instead, he offered to buy Mr. Hyman out of the partnership for either $850,000 or one buildable lot. If Mr. Hyman chose the lot, he would pay back the $1.845 million; if he took the money, he would pay back $1.045 million.

Mr. Hyman, however, denied ever having agreed to that offer — the “alleged oral agreement” that eventually became the heart of the current case.

Justice Cahill was questioned closely about her knowledge of the alleged agreement in 2007, at a deposition. “Did you ever discuss with [Mr. Hyman] . . . whether he had promised to receive $850,000 or a lot out of this transaction?” she was asked. She refused to answer, citing spousal privilege, the right of a wife not to testify against her husband. Asked again, however, on the stand before Justice Baisley, she stated “for the first time,” he wrote, “that her husband ‘indicated to me that he did not agree to anything.’ ”

That statement clearly infuriated the court. “It is improper for a party to obstruct discovery by the assertion of a privilege at deposition only to waive it and subject the opponent to surprise testimony at trial,” said Justice Baisley in his decision, citing a 1995 case in Island Park as precedent. Agreeing with the plaintiff, he then drew a “negative inference” against Ms. Cahill, finding that she was “bound by the answers she gave during her sworn deposition.”

“Indeed, the court finds Cahill’s testimony as a whole to be not credible,” the justice wrote. He concluded that “on the basis of Cahill’s deposition answers and her demeanor and credibility on the witness stand . . . that Hyman did agree to accept either the sum of $850,000 or the distribution of one lot in exchange for his L.L.C., interest.” Mr. Gerard, he found, “would never have agreed to ratify the contract with the town and approve the subdivision map if he did not have an agreement with Hyman as to the buyout of Hyman’s interest.”

“It goes without saying,” Justice Baisley added before directing Ms. Cahill to repay Mr. Gerard $1.045 million plus interest, “that Gerard never would have agreed to the purchase and sale if he’d known that Hyman intended to take all of the sale proceeds for himself.”

      Stephen R. Angel, representing Ms. Cahill, said the decision would be appealed.