| Treeline 990 Stewart Partners, LLC v RAIT Atria,LLC |
| 2013 NY Slip Op 04328 [107 AD3d 788] |
| June 12, 2013 |
| Appellate Division, Second Department |
| Treeline 990 Stewart Partners, LLC,Appellant, v RAIT Atria, LLC, et al., Respondents, et al.,Defendant. |
—[*1] Duane Morris LLP, New York, N.Y. (Dana B. Klinges and Brian J. Markowitz ofcounsel), for respondents.
In an action, inter alia, to recover damages for breach of contract, the plaintiffappeals, as limited by its brief, from so much of an order of the Supreme Court, NassauCounty (Bucaria, J.), entered November 15, 2011, as granted those branches of themotion of the defendants RAIT Atria, LLC, RAIT Partnership, L.P., and RAIT General,Inc., which were pursuant to CPLR 3211 (a) to dismiss the complaint insofar as assertedagainst them.
Ordered that the order is modified, on the law, by deleting the provision thereofgranting that branch of the motion of the defendants RAIT Atria, LLC, RAITPartnership, L.P., and RAIT General, Inc., which was pursuant to CPLR 3211 (a) todismiss the cause of action to recover damages for breach of contract insofar as assertedagainst RAIT Atria, LLC, and substituting therefor a provision denying that branch ofthe motion; as so modified, the order is affirmed insofar as appealed from, with costs tothe plaintiff.
In 2006, Treeline 990 Stewart Partners, LLC (hereinafter Treeline), and RAIT Atria,LLC (hereinafter RAIT Atria), executed an operating agreement, which set forth theirrights and interests as the only members of 990 Stewart Avenue Investors, LLC(hereinafter 990 SAI), a limited liability company formed for the purpose of purchasingand operating an office building in Garden City. Pursuant to the operating agreement,both Treeline, as the "common capital member" and "managing member" of 990 SAI,and RAIT Atria, as the "preferred capital member" of 990 SAI, were entitled to, amongother things, certain monthly distributions from the rent and income generated throughthe ownership and management of the office building. The operating agreement specifiedthat any modification thereto had to be made in writing.
According to the complaint, after the operating agreement was executed, economicconditions changed, and the office building began losing tenants. With the officebuilding struggling financially, Treeline and RAIT Atria began discussing potentialtransactions to either restructure the terms of the operating agreement or, alternatively, tosell RAIT Atria's interest in 990 SAI to Treeline at a discount. Also according to thecomplaint, after months of negotiations, the parties eventually agreed that Treeline wouldbuy RAIT Atria's interest in 990 SAI at a discounted price. [*2]Although Treeline allegedly took steps to obtain thenecessary financing and invested funds in the office building in reliance on this allegedbuyout agreement, the alleged buyout agreement was never reduced to writing, and RAITAtria ultimately refused to close on the alleged buyout agreement.
Treeline commenced the instant action against, among others, RAIT Atria, RAITGeneral, Inc., and RAIT Partnership, L.P. (hereinafter collectively the RAIT defendants).The complaint alleged that, by failing to close on the buyout agreement, RAIT Atriabreached a contract, committed fraud, and engaged in negligent misrepresentation. TheSupreme Court granted the motion of the RAIT defendants, inter alia, pursuant to CPLR3211 (a) to dismiss the complaint insofar as asserted against them.
A motion to dismiss a complaint pursuant to CPLR 3211 (a) (1) may be appropriatelygranted "only where the documentary evidence utterly refutes plaintiff's factualallegations, conclusively establishing a defense as a matter of law" (Goshen v MutualLife Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]; see Green v Gross & Levin, LLP, 101 AD3d 1079,1080-1081 [2012]; Bodden vKean, 86 AD3d 524, 526 [2011]). Contrary to the RAIT defendants'contentions, the documentary evidence that they submitted did not conclusively establish,as a matter of law, a defense to the breach of contract cause of action insofar as assertedagainst RAIT Atria. The RAIT defendants contend that, since the operating agreementcontained a provision prohibiting oral modifications, enforcement of the alleged oralagreement to buy out RAIT Atria's interest in 990 SAI is barred by General ObligationsLaw § 15-301. However, the alleged oral agreement described by Treeline did nothave the effect of modifying the terms and conditions of the operating agreement. Theoperating agreement defined the interests owned by RAIT Atria and Treeline andincluded, among other things, provisions for monthly income distribution and financialreporting. The operating agreement did not prohibit the sale of RAIT Atria's interest in990 SAI, and did not set forth any terms that such a sale was required to include. Assuch, the alleged oral agreement was a separate additional agreement addressing asituation not covered by the terms of the operating agreement (see Gerard v Cahill, 66 AD3d957, 959 [2009]). Accordingly, enforcement of the alleged oral agreement is notbarred by General Obligations Law § 15-301 (see id.; Heydt Contr.Corp. v Tishman Constr. Corp. of N.Y., 163 AD2d 196, 197 [1990]).
Moreover, the Supreme Court should not have granted that branch of the RAITdefendants' motion which was pursuant to CPLR 3211 (a) (7) to dismiss the cause ofaction alleging breach of contract insofar as asserted against RAIT Atria for failure tostate a cause of action. On a motion to dismiss a complaint pursuant to CPLR 3211 (a)(7), the court must "accept the facts as alleged in the complaint as true, accord plaintiffsthe benefit of every possible favorable inference, and determine only whether the facts asalleged fit within any cognizable legal theory" (Leon v Martinez, 84 NY2d 83,87-88 [1994]; see Green v Gross & Levin, LLP, 101 AD3d at 1080-1081; Granada Condominium III Assn. vPalomino, 78 AD3d 996 [2010]). The test to be applied is "whether thecomplaint gives sufficient notice of the transactions, occurrences, or series oftransactions or occurrences intended to be proved and whether the requisite elements ofany cause of action known to our law can be discerned from its averments" (JP Morgan Chase v J.H. Elec. ofN.Y., Inc., 69 AD3d 802, 803 [2010] [internal quotation marks omitted]).Applying these principles to the instant matter, the complaint adequately alleges all of theessential elements of a cause of action to recover damages for breach of contract againstRAIT Atria (see id.). Contrary to the contention of the RAIT defendants, thecomplaint sufficiently alleges that the parties orally agreed on all of the material terms ofsale of RAIT Atria's interest in 990 SAI (see Matter of Municipal Consultants &Publs. v Town of Ramapo, 47 NY2d 144, 148-149 [1979]).
However, the Supreme Court properly granted those branches of the RAITdefendants' motion which were pursuant to CPLR 3211 (a) (7) to dismiss the causes ofaction alleging fraud and negligent misrepresentation insofar as asserted against them. Acause of action to recover damages for fraud does not lie where the only fraud claimedrelates to an alleged breach of contract (see McGee v J. Dunn Constr. Corp., 54 AD3d 1010[2008]). Moreover, a general allegation that a party entered into a contract while lackingthe intent to perform is insufficient to state a cause of action to recover damages for fraud(see id.; Mendelovitz vCohen, 37 AD3d 670, 671 [2007]). Similarly, as Treeline failed to allege anymisrepresentation which was collateral or extraneous to the alleged contract between theparties, the Supreme Court properly granted that branch of the RAIT [*3]defendants' motion which was pursuant to CPLR 3211 (a)(7) to dismiss the cause of action alleging negligent misrepresentation insofar as assertedagainst them (see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382,389-390 [1987]; Lunal Realty,LLC v DiSanto Realty, LLC, 88 AD3d 661, 663 [2011]; Heffez v L & G Gen. Constr.,Inc., 56 AD3d 526 [2008]; Jorbel v Kopko, 31 AD3d 611, 612 [2006]). Dillon, J.P.,Lott, Austin and Hinds-Radix, JJ., concur. [Prior Case History: 33 Misc 3d 1226(A),2011 NY Slip Op 52115(U).]