Cross Properties, Inc. v. Brook Realty Co., Inc.

• Decision Date: 04 August 1980
• Citation: 430 N.Y.S.2d 820,76 A.D.2d 445
• Parties: CROSS PROPERTIES, INC., et al., Plaintiffs-Respondents-Appellants, v. BROOK REALTY CO., INC., Appellant-Respondent; et al., Defendants; County Dollar Corporation et al., Defendants-Respondents-Appellants. Federal Insurance Company, Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 820

430 N.Y.S.2d 820

76 A.D.2d 445

CROSS PROPERTIES, INC., et al., Plaintiffs-Respondents-Appellants, v. BROOK REALTY CO., INC., Appellant-Respondent; et al., Defendants County Dollar Corporation et al., Defendants-Respondents-Appellants Federal Insurance Company, Respondent-Appellant.

Supreme Court, Appellate Division, Second Department.

Aug. 4, 1980.

Stroock & Stroock & Lavan, New York City (Charles G. Moerdler, Robert D. Steefel, Eva L. Coben, Bruce H. Schneider and Sylvia L. Shapiro, New York City, of counsel), for appellant-respondent.

Reavis & McGrath, New York City (Lawrence W. Boes, Paul D. Baiocchi and Ralph C. Dawson, New York City, of counsel), for plaintiffs-respondents-appellants Cross Properties, Inc., The Myer Emporium (London) Ltd., Swiss Bank Corp. Ltd. (London Office Nominees) and Edythe Atlas and for respondent-appellant Federal Ins. Co.

Greenbaum, Wolff & Ernst, New York City (Roger Bryant Hunting and Leo Kayser, New York City, III, of counsel), and McCarthy, Fingar, Donovan, Glatthaar, Drazen & Smith, White Plains (Arthur D. Brennan and Raymond P. O'Keefe, White Plains, of counsel), for defendants-respondents-appellants County Dollar Corp. and Dollar Land Corp. Limited (U. S.).

Shea, Gould, Climenko & Casey, New York City, for plaintiff-respondent-appellant George Farkas, and Wachtell, Lipton, Rosen & Katz, New York City, for plaintiffs-respondents-appellants Farsowin Ltd., Paul Boggis-Rolfe, L. Arnold deVries, Ernest Percival Kingsford Willett and Francis Blake (one brief).

Before HOPKINS, J. P., and TITONE, GULOTTA and COHALAN, JJ.

TITONE, Justice.

The matter before the court on appeal stems from a stockholder's derivative action brought on September 26, 1968 to enjoin the sale to defendant Brook Realty Co., Inc. (Brook) of three parcels of real property and the improvements thereon, located in Yonkers, New York, Corpus Christi, Texas, and Orlando, Florida. The plaintiffs, owners of approximately 26% of the outstanding shares of the parent realty company which controlled the parcels through its corporate subsidiaries and favored the sale, sought to cancel the proposed sale to Brook. They also demanded damages against the proposed purchasers, the real estate brokers and the directors of the parent and subsidiary realty companies. A preliminary injunction enjoining the sale set to take place on October 4, 1968, was obtained by plaintiffs, pending trial of the action.

After a nonjury trial an interlocutory judgment, entered December 9, 1969 (COYLE, J.), was granted in favor of the purchaser Brook. The contract of sale was adjudged valid, the amended complaint of plaintiffs was dismissed, and provision was made for further proceedings to determine, inter alia, whether and on what terms specific performance should be decreed, and whether and in what amounts money damages should be awarded. This court affirmed the interlocutory judgment of the late Justice COYLE on July 6, 1971 (Cross Props. v. Brook Realty, 37 A.D.2d 193, 322 N.Y.S.2d 773, affd. 31 N.Y.2d 938, 340 N.Y.S.2d 928, 293 N.E.2d 95, mot. for rearg. den. 32 N.Y.2d 833, 345 N.Y.S.2d 1026, 299 N.E.2d 263). In his opinion affirming such judgment, former Justice MUNDER of this court stated (p. 204, 322 N.Y.S.2d p. 783) that the trial court in the ensuing proceeding was to determine "whether specific performance should be decreed, under existing circumstances, whether in the circumstances there should be an abatement in the event specific performance is decreed, and whether damages should be awarded in lieu of specific performance."

After a lengthy trial on the specific performance issue and other matters, Mr. Justice BURCHELL directed, inter alia, that Brook be granted specific performance, denied its claim for damages resulting from increased construction costs of the Cross County Shopping Center incurred during the delay caused by the breach of the contract of sale, awarded Brook damages for loss of net rental income from October 1, 1968 to December 31, 1975, in the sum of $5,575,588, and awarded Brook counsel fees incurred in attempting to vacate the preliminary injunction obtained by plaintiffs on October 4, 1968, to the extent of legal services rendered to prove those items of damages caused by the injunction, etc. However, the trial court denied the claim of Brook to recover other damages sustained by reason of the preliminary injunction, such as counsel fees incurred in seeking specific performance and abatement.

Brook appeals from the denial of its claim for damages representing the increased cost of construction pertaining to redevelopment of the Cross County Shopping Center. Plaintiffs and defendants County Dollar Corporation and Dollar Land Corporation Limited (U.S.), in their cross appeal, challenge the propriety of the trial court's granting of damages to Brook with respect to net rental income. Both sides argue that the award of counsel fees to Brook expended with respect to the preliminary injunction was improper. The purchaser, Brook, urges that the award was inadequate since it was also entitled to counsel fees incurred in all proceedings, trial and appeals, both prior and subsequent to the issuance of the preliminary injunction. Plaintiffs Cross Properties, Inc., et al. assert that any award of counsel fees under the bond filed by them in obtaining the preliminary injunction was improper since there was no determination by the trial court that the preliminary injunction was improvidently granted.

PRIOR HISTORY OF CASE

Plaintiffs, collectively, owned approximately 26% of Dollar Land Holdings Limited (Dollar England), a publicly held English corporation. Dollar England owned about 90% of the outstanding shares of Dollar Land Corporation Limited (Dollar Canada), which in turn was the sole shareholder of County Dollar Corporation (County Dollar), a New York corporation. The latter owned Dollar Land Corporation Limited (U.S.) (Dollar U.S.), also a New York corporation, County Dollar was the owner of record of the Cross County Shopping Center in Yonkers while Dollar U.S. owned the Parkdale Shopping Center in Corpus Christi, Texas, and the Citizens' Bank Building in Orlando, Florida. Dollar U.S. and County Dollar are codefendants and cross-appellants on appeal.

In the 1960's Cross County Shopping Center was sold to the Dollar companies. County Dollar took title. Thereafter the same companies secured ownership of the Texas and Florida properties. However, in 1967 the management of Dollar England decided that all the properties owned by its three subsidiary Dollar companies in this hemisphere should be sold because the investment venture was not successful. In September, 1968, after one prospective transaction had been aborted, the real estate firm of Cushman & Wakefield advised the management of Dollar that Brook, a Delaware corporation, was interested in purchasing the three properties for its principals, Loeb Rhoades & Co., and one Leonard Marx. The parties entered into a contract on September 13, 1968. Prior to the signing of the contract on that day, the board of directors of County Dollar and Dollar U.S. convened and authorized the execution of the contract. On September 24, 1968 Dollar Canada adopted a resolution in which it consented to the sale pursuant to the terms of the September 13 contract. The aggregate purchase price for the three properties was $27,515,033.12. A cash payment of $200,000 was to be made on signing of contract, and the closing was set for October 4, 1968.

However, plaintiffs, owners of approximately 26% of Dollar England, as mentioned earlier, were opposed to the sale, particularly the sale of the Cross County property. They believed the proceeds of the sale of the out-of-state properties should be used to redevelop Cross County and thereby produce profits for the companies involved in the venture. Plaintiffs, on September 26, 1968, brought the within stockholder's derivative action to enjoin the sale of the properties. On October 23, 1968 plaintiffs were elected to the control of the parent company, Dollar England, which action also gave them management control of the other Dollar companies. As also indicated earlier, the late Justice COYLE found the agreement to sell the subject properties to Brook was valid and set down the issue of specific performance for a future proceeding. A fuller statement of background information in this case may be found in the opinion of former Justice MUNDER of this court affirming the determination of the late Justice COYLE (37 A.D.2d 193, 322 N.Y.S.2d 773, supra ).

Although the parties did close title on November 1, 1977, in their cross appeal plaintiffs and defendants County Dollar and Dollar U.S., indicate that they were appealing from the granting of such relief by Justice BURCHELL. However, in their brief on appeal plaintiffs, and defendants County Dollar and Dollar U.S., do not allege as error per se the granting of such relief to Brook. Rather, in the seven points set forth in their brief, plaintiffs and defendants County Dollar and Dollar U.S., alternately support the trial court's denial of Brook's claim for damages for increased costs of redevelopment of the Cross County Shopping Center (the Center) and plaintiffs support the restrictions the trial court placed on Brook's claim for counsel fees for efforts expended by it to vacate the preliminary injunction; and then allege as errors the trial court's awarding Brook the net rental income and granting recovery to Brook of attorney fees on the injunction bond.

INCREASED COST OF CONSTRUCTION FOR REDEVELOPMENT

In an exhaustive opinion, Mr. Justice BURCHELL noted that prior to entering into the contract of sale with Brook, the sellers had come to the conclusion that for competitive reasons it was necessary that the shopping center in Yonkers be redeveloped. A study (the Erdman report) commissioned by the management of the Dollar companies before 1968, in recommending...