| R.I. Is. House, LLC v North Town Phase II Houses, Inc. |
| 2008 NY Slip Op 04672 [51 AD3d 890] |
| May 20, 2008 |
| Appellate Division, Second Department |
| R.I. Island House, LLC, et al., Appellants, v North TownPhase II Houses, Inc., et al., Respondents, et al., Defendants. |
—[*1] Davidoff Malito & Hutcher LLP, New York, N.Y. (Larry Hutcher and Stuart Perlmutter ofcounsel) and Akin Gump Strauss Hauer & Feld LLP, New York, N.Y. (Richard B. Zabel, Sean E.O'Donnell, Hyong Soon Kim, and Robert J. Boller of counsel), for respondents North TownPhase II Houses, Inc., North Town Phase II Associates, L.P., and Island House, Inc., DavidoffMalito & Hutcher LLP, New York, N.Y. (Larry Hutcher and Stuart Perlmutter of counsel), forrespondents North Town Phase III Houses, Inc., North Town Phase III Associates, L.P., andWestview Houses, Inc., and Schulte Roth & Zabel LLP, New York, N.Y. (Robert Abrahams ofcounsel), for respondents Peter Kimmelman, AD North Town Houses, LLC, and Estate of IreneDiamond (one brief filed).
In an action, inter alia, for a judgment declaring that the purported terminations of twocontracts for the sale of certain real properties dated November 26, 2003, and February 9, 2004,respectively, are invalid and ineffective, and to recover damages for breach of contract, theplaintiffs appeal from an order of the Supreme Court, Nassau County (Warshawsky, J.), enteredOctober 4, 2006, which granted the motion of the defendants North Town Phase II Houses, Inc.,North Town Phase II Associates, L.P., and Island House, Inc., in which the defendants NorthTown Phase III Houses, Inc., North Town Phase III Associates, L.P., and Westview Houses, Inc.,joined, to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211 (a) (1)and (7), granted the motion of the defendants North Town Phase III Houses, Inc., North TownPhase III Associates, L.P., and Westview Houses, Inc., in which the defendants North TownPhase II Houses, Inc., North Town [*2]Phase II Associates, L.P.,and Island House, Inc., joined, to dismiss the complaint insofar as asserted against them pursuantto CPLR 3211 (a) (1) and (7), and granted the separate motion of the defendants PeterKimmelman, AD North Town Houses, LLC, and estate of Irene Diamond to dismiss thecomplaint insofar as asserted against them pursuant to CPLR 3211 (a) (7).
Ordered that the order is modified, on the law, (a) by deleting the provisions thereof grantingthose branches of the motion of the defendants North Town Phase II Houses, Inc., North TownPhase II Associates, L.P., and Island House, Inc., in which the defendants North Town Phase IIIHouses, Inc., North Town Phase III Associates, L.P., and Westview Houses, Inc., joined, whichwere pursuant to CPLR 3211 (a) (1) and (7) to dismiss the first and third causes of action andsubstituting therefor provisions denying those branches of the motion, (b) by deleting theprovisions thereof granting those branches of the motion of the defendants North Town Phase IIIHouses, Inc., North Town Phase III Associates, L.P., and Westview Houses, Inc., in which thedefendants North Town Phase II Houses, Inc., North Town Phase II Associates, L.P., and IslandHouse, Inc., joined, which were pursuant to CPLR 3211 (a) (1) and (7) to dismiss the second,fourth, and seventh causes of action and substituting therefor provisions denying those branchesof the motion, and (c) by deleting the provisions thereof granting those branches of the separatemotion of the defendants Peter Kimmelman, AD North Town Houses, LCC, and estate of IreneDiamond which were pursuant to CPLR 3211 (a) (7) to dismiss the sixth and eighth causes ofaction and substituting therefor provisions denying those branches of the separate motion; as somodified, the order is affirmed, with one bill of costs payable by the respondents.
The complaint alleges that the plaintiffs and each of two sets of defendants entered into tworespective contracts, pursuant to which those defendants agreed to sell to the plaintiffs, and theplaintiffs agreed to purchase from those defendants, certain real properties located on RooseveltIsland for a total sum of $93,500,000. The two contracts provided for closing dates of March 31,2004, and May 30, 2004, respectively, but allowed for several extensions at the purchasers'request and upon the purchasers' payment of additional sums toward the purchase price.
After several such extensions, the parties agreed, in letter agreements dated October 11,2005, that by paying an additional sum of $500,000 per contract on or before October 31, 2005the plaintiffs could cure their default under the prior contracts and extend the closing datesreferable to both contracts until November 30, 2005. The letter agreements further provided thatif the closings did not take place on that date, "then the Sellers shall have the right toimmediately terminate the Agreements, as modified hereby, without prior Notice of Default andDefault Cure Period . . . and retain all funds theretofore received from thePurchasers pursuant to the Agreements, as modified hereby, as liquidated damages and as theSellers' sole remedy."
The plaintiffs allegedly made the payments necessary to extend the closing date to November30, 2005 bringing the total sum they had paid toward the purchase price to $8,000,000 andincreasing the purchase price to the sum of $97,500,000. The closings, however, did not takeplace as scheduled. Instead, on December 5, 2005 the parties entered into further agreements,which they dated "as of" November 30, 2005, pursuant to which the contracts would be extendeduntil December 16, 2005, upon the purchasers' payment of an additional $1,000,000 on or before3:00 p.m. on December 5, 2005. The purchasers never paid that sum and the two sets ofdefendants purportedly terminated the respective contracts on the following day. The plaintiffsnevertheless sought to close the transaction by tendering the balance of the purchase price onFebruary 1, 2006, but both sets of defendants refused to close.
When the two sets of defendants subsequently refused to return the sums that the plaintiffshad paid toward the purchase price, the plaintiffs commenced this action seeking, among otherthings, a declaration that the purported terminations of the contracts were invalid and ineffective,as well as specific performance of the contracts, and damages for their breach. After the actionwas voluntarily discontinued against the defendants Melgerhel, Inc., and Melba D. Whatley, theSupreme Court granted the motion of the defendants North Town Phase II Houses, Inc., NorthTown Phase II Associates, L.P., Island House, Inc., North Town Phase III Houses, Inc., NorthTown Phase III Associates, L.P., and Westview Houses, Inc. (hereinafter the Island/Westviewdefendants), to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211 (a)(1) on the basis of documentary evidence and pursuant to CPLR 3211 (a) (7) for failure to state acause of action, and the separate motion of the defendants Peter Kimmelman, AD North TownHouses, LLC, and estate of Irene Diamond (hereinafter the Kimmelman defendants) to dismissthe complaint insofar as asserted against them pursuant to CPLR 3211 (a) (7). The plaintiffsappeal. We modify the order of the Supreme Court and deny those branches of the separatemotions which were to dismiss the plaintiffs' first eight causes of action alleging that the movingdefendants (hereinafter together the respondents) breached the respective contracts.
In order to prevail on that branch of their motion which was to dismiss the complaint insofaras asserted against them pursuant to CPLR 3211 (a) (1), the Island/Westview defendants wererequired to demonstrate that "the documentary evidence utterly refutes plaintiff's factualallegations, conclusively establishing a defense as a matter of law" (Goshen v Mutual LifeIns. Co. of N.Y., 98 NY2d 314, 326 [2002]). Insofar as their motion and the separate motionof the Kimmelman defendants are predicated upon CPLR 3211 (a) (7), the court is required to"accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possiblefavorable inference, and determine only whether the facts as alleged fit within any cognizablelegal theory" (Leon v Martinez, 84 NY2d 83, 87-88 [1994]). "Whether the plaintiff canultimately establish the allegations 'is not part of the calculus' " (Aberbach v Biomedical Tissue Servs., Ltd.,48 AD3d 716, 717-718 [2008], quoting EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]).
The complaint states a valid cause of action for breach of contract by alleging the parties'agreements and the respondents' failure to perform when the plaintiffs tendered the purchaseprice. The complaint also sufficiently alleges that if the respondents defaulted, the plaintiffs areentitled to specific performance. Contrary to the arguments of the Island/Westview defendants,the documentary evidence failed to establish a default by the plaintiffs.
Initially, the plaintiffs' argument that the further agreements reached on December 5, 2005are invalid by virtue of the violation of the prohibition against communication by one lawyerwith the client of another(see Code of Professional Responsibility DR 7-104 [a] [1] [22NYCRR 1200.35 (a) (1)]) is without merit. That proscription applies to a lawyer only "[d]uringthe course of the representation of a client" (id.). Here, the person who made theallegedly offending communication, although a lawyer, was identified throughout the documentsas the president of two of the contracting entities, not as their attorney. The documentaryevidence established, therefore, that this disciplinary rule is not implicated.
Nevertheless, the December 5, 2005 agreements do not constitute documentary evidencesufficient to dismiss the complaint insofar as asserted against the Island/Westview defendants.The relevant language of each of those agreements provides that "the Purchaser shall extend theClosing Date . . . by paying to the Partnership $500,000 by wire transfer. . . no later than [*3]3:00 p.m. on December 5, 2005and by 5:00 p.m. on the same date providing evidence satisfactory to the Sellers in theirreasonable business judgment that by December 16, 2005 Purchasers will have sufficient capitalavailable from one or more lenders to be able to fulfil [sic] its financial obligations underthe Agreements at Closing." There is no dispute that the plaintiffs neither paid the additional sumnor produced the required evidence. Even if the plaintiffs had paid, however, the agreementsdated December 5, 2005 were not unequivocally effective to extend the closing date.
In the first instance, the agreements dated December 5, 2005 provide that the "purchaser"could extend the closing date by performing certain acts, not that the parties had agreed to extendthe closing date. As a result, the requirement of payment by the "purchaser" is susceptible ofbeing read as a condition precedent to the effectiveness of the December 5, 2005 agreements, asthe respondents' transactional counsel in fact understood it at the time, rather than, as therespondents would have it now, an obligation that was breached by the plaintiffs' failure to pay. Ifthe former, the agreements reached on December 5, 2005 never became effective and,consequently, cannot have been breached by the plaintiffs' failure to close on December 16, 2005as the respondents assert. Since a dismissal pursuant to CPLR 3211 (a) (1) cannot rest on anambiguous document (see Mendelovitzv Cohen, 37 AD3d 670, 671 [2007]), the Island/Westview defendants' argument in thisregard must be rejected at this stage of the litigation.
The respondents also failed to establish, at least at this stage of the litigation, that theplaintiffs defaulted by failing to close on November 30, 2005. Contrary to the argument of theIsland/Westview defendants, the documentary evidence does not establish that the contracts inissue are option contracts requiring strict compliance and for which time is inherently of theessence (see Richmond v Miele, 30AD3d 575 [2006]; LaPonte v Dunn,17 AD3d 539 [2005]; Mohring Enters. v HSBC Bank USA, 291 AD2d 385[2002]). Whether an agreement is an option contract or a bilateral contract is determined byreference to its various terms (see T.I.P. Holding No. 2 Corp. v Wicks, 63 AD2d 263,269-271 [1978]). Unlike the situation presented in Ittleson v Barnett (304 AD2d 526[2003]), the language of the contracts between the parties here does not resolve that issue. As aresult, the documentary evidence is not sufficient to establish that the contracts are optioncontracts.
Without concluding that the contracts are option contracts, the documentary evidence doesnot establish that the plaintiff defaulted by failing to close on November 30, 2005 (cf.Fucarino v Tide Way Homes, 306 AD2d 375 [2003]). Even if time had been properly madeof the essence by the October 11, 2005 agreement, as the Island/Westview defendants argue, thedocumentary evidence does not establish the respondents' readiness and ability to close onNovember 30, 2005, as it must in order for them to prevail on their contention that the plaintiffswere in default at that time (see Lawrence v Miller, 86 NY 131 [1881]; Nowak v Rametta, 43 AD3d 1120,1122 [2007]; Gargano v Rubin, 200 AD2d 554 [1994]). The plaintiffs' request for anadjournment of the closing was not, at least on this record, the unequivocal repudiation of thecontracts necessary to constitute anticipatory repudiation (see Norcon Power Partners vNiagara Mohawk Power Corp., 92 NY2d 458, 463 [1998]; Tenavision, Inc. v Neuman,45 NY2d 145, 150 [1978]; Engelhardt v McGinnis, 2 AD3d 572, 573 [2003]; RachmaniCorp. v 9 E. 96th St. Apt. Corp., 211 AD2d 262, 266 [1995]) that would absolve therespondents of the obligation to tender (see Cooper v Bosse, 85 AD2d 616, 618 [1981];Spero v Kobler, 245 App Div 643, 645 [1935]).
The plaintiffs' remaining causes of action, however, were properly dismissed. The causes ofaction alleging tortious interference with contract "are devoid of a factual basis and are vague andconclusory" (Black Car & Livery Ins.,Inc. v H&W Brokerage, Inc., 28 AD3d 595, [*4]595[2006], quoting Schuckman Realty v Marine Midland Bank, 244 AD2d 400, 401 [1997])and the documentary evidence conclusively established that no third party to the contractsintentionally procured any of the respondents to breach them (see generally Lama HoldingCo. v Smith Barney, 88 NY2d 413, 424 [1996]; Fusco v Fusco, 36 AD3d 589 [2007]). The causes of action allegingbreach of the covenant of good faith and fair dealing, implied in every contract, were duplicativeof the breach of contract causes of action (see Pludeman v Northern Leasing Sys., Inc., 40 AD3d 366 [2007];Pier 59 Studios L.P. v Chelsea PiersL.P., 27 AD3d 217, 218 [2006]). The valid and express agreement between the partieswith respect to the same subject matter precludes the causes of action alleging unjust enrichmentand seeking recovery in quantum meruit (see Goldman v Metropolitan Life Ins. Co., 5 NY3d 561 [2005];Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382 [1987]; Hawthorne Group v RRE Ventures, 7AD3d 320, 324 [2004]; Commercial Tenant Servs. v First Union Natl. Bank, 305AD2d 210, 211 [2003]; Kohn v Hartstein & Hartstein, 294 AD2d 543 [2002]). This isnot a case where some of the proceeds demanded were allegedly earned outside of the scope ofthe parties' written agreements (see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2dat 389) or there was a bona fide dispute as to the existence of an express contract (see Hochman v LaRea, 14 AD3d653, 654-655 [2005]). Finally, the plaintiffs' causes of action alleging prima facie tort wereproperly dismissed because the complaint failed to allege special damages with the requiredspecificity (see Freihofer v Hearst Corp., 65 NY2d 135, 142-143 [1985]; DiSanto vForsyth, 258 AD2d 497, 498 [1999]) and the plaintiffs did not allege that disinterestedmalevolence was the sole motivation for the conduct of which they complain (see EECP Ctrs.of Am. v Vasomedical, Inc., 265 AD2d 372 [1999]; see generally Burns Jackson MillerSummit & Spitzer v Lindner, 59 NY2d 314, 333 [1983]).
The plaintiffs' remaining contentions are without merit. Spolzino, J.P., Miller, Dillon andMcCarthy, JJ., concur.