| Highbridge Dev. BR, LLC v Diamond Dev., LLC |
| 2009 NY Slip Op 07917 [67 AD3d 1112] |
| November 5, 2009 |
| Appellate Division, Third Department |
| Highbridge Development BR, LLC,Respondent, v Diamond Development, LLC, et al.,Appellants. |
—[*1] Frank M. Putorti, Jr., Schenectady, for respondent.
Cardona, P.J. Appeal from an order of the Supreme Court (Kramer, J.), entered January 21,2009 in Schenectady County, which, among other things, granted plaintiff's motion for summaryjudgment.
In 2005, plaintiff entered into a real estate contract to sell approximately 12 acres of landlocated in the Town of Niskayuna, Schenectady County to defendant Diamond Development,LLC for $7.5 million. The contract provided that the closing was to take place within 60 daysafter certain conditions had been met, including, as relevant here, the granting of governmentalapprovals related to the development of both the parcel at issue and another parcel.
As to the terms of payment, the contract required that, upon execution, Diamond wouldplace a $75,000 deposit into an escrow account, which was done. The contract further requiredDiamond to make an additional $475,000 deposit within five business days of plaintiff providingnotice to Diamond that all government approvals required by the contract had been obtained.The parties agree that the approvals were obtained on July 1, 2008.[FN1]On that date, plaintiff sent [*2]Diamond a letter to that effect,which also notified Diamond that (1) it had five business days to make the additional $475,000deposit, (2) the closing must take place within 60 days thereafter, (3) time was of the essence asto those dates, and (4) failure to comply would constitute breach of contract. Due to the holidayweekend, the five-day deadline expired on July 9, 2008.
On July 2, 2008, Diamond assigned its interest in the contract to defendant HDB Ventures,LLC. On July 9, 2008, HDB Ventures informed plaintiff of the assignment and demandeddocumentary evidence indicating that the approvals were no longer subject to challenge, whichplaintiff provided that same day. The next day, July 10, 2008, upon receiving no proof that the$475,000 deposit was made, plaintiff informed defendants that it considered the contract to havebeen breached and that it would entertain offers on the property from other parties. One monthlater, plaintiff commenced this action seeking a judgment declaring the contract null and void or,alternatively, specific performance or damages in the amount of the contract price. Defendantsanswered, asserting various affirmative defenses and counterclaims. Plaintiff moved forsummary judgment on its complaint, and also to dismiss defendants' affirmative defenses andcounterclaims pursuant to CPLR 3211. Defendants cross-moved for summary judgmentdismissing the complaint.
Finding defendants to be in material breach of the contract, Supreme Court granted summaryjudgment in plaintiff's favor. The court also dismissed defendants' affirmative defenses andcounterclaims, declared the contract null and void, and awarded plaintiff the $75,000 deposit asdamages. Defendants now appeal.
Defendants argue that the July 1, 2008 letter that purported to make time of the essence waspremature and ineffective. Thus, they contend, they were entitled to a reasonable time after July9, 2008 within which to tender the $475,000 payment. We agree. Where, as here, a contract forthe sale of real property does not, by its terms, make time of the essence as to payment, the buyerhas a reasonable time in which to tender performance after the specified date (see ADC Orange, Inc. v Coyote Acres,Inc., 7 NY3d 484, 489 [2006]; Malley v Malley, 52 AD3d 988, 989 [2008]). Although the sellermay unilaterally convert the contract into one making time of the essence by giving the buyer"clear, unequivocal notice" and a reasonable time to perform (ADC Orange, Inc. v CoyoteAcres, Inc., 7 NY3d at 490 [internal quotation marks and citation omitted]; see Malley vMalley, 52 AD3d at 989), such notice is premature and ineffective if delivered before thecontractual performance date (see Bardel v Tsoukas, 303 AD2d 344, 345 [2003];Baltic v Rossi, 289 AD2d 430, 430-431 [2001]; 3M Holding Corp. v Wagner,166 AD2d 580, 581 [1990]). Here, the $475,000 payment was due on July 9, 2008. Thus,plaintiff's attempt to declare time of the essence in its July 1, 2008 letter waspremature,[FN2]and plaintiff was not entitled [*3]to summary judgment on thatbasis.
Defendants also contend that Supreme Court should not have dismissed certain of theiraffirmative defenses and counterclaims. To the extent those affirmative defenses andcounterclaims sound in anticipatory repudiation and breach of the covenant of good faith and fairdealing, we agree that they should be reinstated. "To support the claim of anticipatoryrepudiation, there must be 'an unqualified and clear refusal to perform with respect to the entirecontract' " (O'Connor v Sleasman,37 AD3d 954, 956 [2007], lv denied 9 NY3d 806 [2007], quoting DeLorenzo vBac Agency, 256 AD2d 906, 908 [1998]), which may take the form of an unequivocalstatement or act (see Norcon Power Partners v Niagara Mohawk Power Corp., 92 NY2d458, 463 [1998]. Here, defendants allege that plaintiff declared the contract to be void and statedits intention to begin entertaining offers from other buyers. Accepting these assertions as true, aswe must in the context of a motion to dismiss, and affording defendants the benefit of everyfavorable inference (see 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d144, 151-152 [2002]), we find that defendants have stated a cause of action for anticipatoryrepudiation (see O'Connor v Sleasman, 37 AD3d at 956; Rachmani Corp. v 9 E. 96thSt. Apt. Corp., 211 AD2d 262, 267 [1995]). Defendants' further allegations—thatplaintiff marketed the property to prospective tenants, including tenants to whom defendantswere attempting to market the property, and also informed those prospective tenants thatdefendants had no interest in the property—adequately support a cause of action forbreach of the covenant of good faith and fair dealing, which is implied in all contracts in NewYork (see 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d at 153).
Defendants' remaining contentions have been considered and found to be unpersuasive.
Peters, Lahtinen, Malone Jr. and Stein, JJ., concur. Ordered that the order is modified, on thelaw, without costs, by reversing so much thereof as granted plaintiff's motion for summaryjudgment on its complaint and as granted plaintiff's motion to dismiss defendants' affirmativedefenses and counterclaims in their entirety; motion for summary judgment denied and motion todismiss denied with respect to defendants' affirmative defenses and counterclaims sounding inanticipatory repudiation and breach of the covenant of good faith and fair dealing; and, as somodified, affirmed.
Footnote 1: The last of the requiredapprovals related to a parcel of land not directly at issue here (see Matter of Friends of Stanford Home vTown of Niskayuna, 50 AD3d 1289 [2008], lv denied 10 NY3d 716 [2008]).
Footnote 2: Although defendants did notraise before Supreme Court the argument that the time of the essence letter was premature, wefind that the issue is reviewable on appeal because it presents "an issue of law which appearedupon the face of the record and could not have been avoided by [plaintiff] if brought to [its]attention at the proper time" (Matter ofVanderminden v Tarantino, 60 AD3d 55, 58 n 3 [2009] [internal quotation marks andcitation omitted], lv denied 12 NY3d 708 [2009]; see Larson v Albany Med.Ctr., 252 AD2d 936, 939 [1998]).