Ivory Dev., LLC v. Roe

• Decision Date: 21 January 2016
• Citation: 135 A.D.3d 1216,25 N.Y.S.3d 686
• Parties: IVORY DEVELOPMENT, LLC, et al., Appellants, v. Duane B. ROE Jr. et al., Respondents.
• Court: New York Supreme Court — Appellate Division

135 A.D.3d 1216

25 N.Y.S.3d 686

IVORY DEVELOPMENT, LLC, et al., Appellants,

v.Duane B. ROE Jr. et al., Respondents.

Supreme Court, Appellate Division, Third Department, New York.

Jan. 21, 2016.

Joseph J. Haspel, Goshen, for appellants.

Stoloff & Silver, LLP, Monticello (Richard A. Stoloff of counsel), for respondents.

Before: PETERS, P.J., LAHTINEN, GARRY, ROSE and CLARK, JJ.

GARRY, J.

Appeal from an order of the Supreme Court (McGuire, J.), entered October 30, 2014 in Sullivan County, which, among other things, partially granted defendants' motion for partial summary judgment dismissing the complaint.

In May 2006, defendant Duane B. Roe Jr. and plaintiff Sullivan Farms II, Inc. (hereinafter SFII)—a company then owned by Roe—entered into a retention agreement with plaintiff Raymond Farms Plus, LLC by which Raymond retained Roe and SFII to purchase and develop certain parcels of real property. The agreement provided, among other things, that Roe would be compensated by certain payments scheduled to be made upon signing, then at the closing of each real estate purchase, and finally upon the completion of Roe's contractual obligations. Thereafter, as pertinent here, SFII purchased two properties, referred to by the parties as the Truex and Kaufman parcels. Additionally, defendant Sullivan Farms, Inc. (hereinafter SF)—another company owned by Roe—entered into a contract to purchase another parcel of property, and, in June 2007, assigned that real estate contract to plaintiff Seven Peaks, LLC. The assignment agreement required Seven Peaks to convey part of the property back to SF upon closing and imposed certain contractual obligations on SF. SF assigned its rights under this agreement to Freeman Properties, Inc. Part of the property was conveyed to Freeman and part to Seven Peaks; SF's contractual obligations were allegedly not fulfilled.

In February 2008, the parties signed an amended retention agreement that, among other things, acknowledged that Roe had received certain payments and reduced the amount of the final payment due to him upon completion of his contractual obligations. Roe did not complete all of these obligations before the agreement's scheduled termination date, and the agreement was not renewed.

In March 2010, plaintiffs, which are business entities under common management, commenced this action against defendants and Freeman alleging, among other things, breach of contract.¹ Plaintiffs thereafter filed an amended complaint that did not include Freeman as a named defendant. Following joinder of issue and partial discovery, defendants moved pursuant to CPLR 3211 and 3212 for dismissal of the amended complaint's first and second causes of action, which sought recovery of certain sums paid to Roe, as well as the 12th through 15th causes of action, which sought injunctive relief and damages related to the Seven Peaks transaction. Plaintiffs opposed the motion and cross-moved for leave to amend the caption to add Freeman as a defendant. Supreme Court denied the cross motion and partially granted defendants' motion, by dismissing the first cause of action on CPLR 3211 grounds and granting summary judgment dismissing the second cause of action. The court further dismissed the 12th through 15th causes of action against defendants for failure to state a cause of action, and against Freeman, without prejudice, on the ground that Freeman was not a party. Plaintiffs appeal.

Turning first to the claims related to payments to Roe, the first cause of action alleged, as pertinent here, that certain sums paid to Roe upon the closings of the Truex and Kaufman purchases were not due to him at that time, but instead were interim advances against future earnings—that is, against the final payment that was not to become due until after completion of all of Roe's contractual obligations. Plaintiffs alleged that as Roe never completed these obligations, the Truex and Kaufman payments were unearned and should be returned to them. In dismissing this cause of action, Supreme Court found that the amended complaint failed to allege that plaintiffs had made the payments. The court concluded that plaintiffs lacked standing to recover funds that they had not paid and, further, that there was no cause of action for recovery of such payments.

We find that plaintiffs' first cause of action should not have been dismissed on this ground. A plaintiff may submit affidavits in opposition to a CPLR 3211 motion to rectify defects in an inartfully pleaded complaint, and such affidavits must be "given their most favorable intendment" (Cron v. Hargro Fabrics, 91 N.Y.2d 362, 366, 670 N.Y.S.2d 973, 694 N.E.2d 56 [1998] [internal quotation marks and citation omitted] ). Here, one of plaintiffs' principals submitted an opposing affidavit alleging that the payments to Roe were made by a nonparty operating entity used by plaintiffs to manage their real estate holdings, known as Black Creek Construction, LLC, and that Black Creek had made the payments at plaintiffs' direction, using plaintiffs' funds and acting in accord with the retention agreement. Although a corporation does not generally have standing to exercise the legal rights of another corporation, even when the entities are affiliated through their ownership or management (see Lyman Rice, Inc. v. Albion Mobile Homes, Inc., 89 A.D.3d 1488, 1489, 933 N.Y.S.2d 471 [2011] ; Alexander & Alexander of N.Y. v. Fritzen, 114 A.D.2d 814, 815, 495 N.Y.S.2d 386 [1985], affd. 68 N.Y.2d 968, 510 N.Y.S.2d 546, 503 N.E.2d 102 [1985] ), a principal may sue on claims arising from actions taken by its agent (see First Natl. Bank of Md. v. Fancy, 244 A.D.2d 179, 179, 663 N.Y.S.2d 851 [1997], lv. denied 92 N.Y.2d 803, 677 N.Y.S.2d 73, 699 N.E.2d 433 [1998] ; see generally 24 N.Y. Jur. 2d, Agency and Independent Contractors § 323 ). Plaintiffs' affidavit, in effect, alleged that Black Creek acted as plaintiffs' agent in making the payments to Roe. Thus, plaintiffs' first cause of action should not have been dismissed on CPLR 3211 grounds.

Nonetheless, we find upon review that defendants proved their right to relief as a matter of law pursuant to CPLR 3212, by revealing that plaintiffs have no contractual right to recover the Truex and Kaufman payments. Initially, defendants demonstrated that the Kaufman transaction was not covered by the retention agreement, as shown by a schedule enumerating the real estate transactions to be governed thereby. The retention agreement provided that additional properties could be added to the list by agreement, but also required any contractual modifications to be made in writing. The parties modified the retention agreement by executing the amended agreement after the Kaufman transaction had occurred. The amended agreement not only failed to add the Kaufman transaction to the schedule of covered properties, but further provided that no modifications other than those enumerated had been made.² Additionally, defendants submitted an interrogatory response submitted by plaintiffs several years after executing the amended agreement in which they provided a list of "the only [parcels] acquired" pursuant to the retention agreement; this list did not include the Kaufman property. Plaintiffs failed to submit admissible evidence to rebut this proof and reveal factual issues. Plaintiffs argued that the Kaufman transaction was omitted from the list of covered properties in error, but provided no proof of mutual mistake. A unilateral mistake provides grounds for reformation of a contract only when coupled with fraud (see Timber Rattlesnake, LLC v. Devine, 117 A.D.3d 1291, 1292, 986 N.Y.S.2d 278 [2014], lv. denied 24 N.Y.3d 904, 2014 WL 4548528 [2014] ), and here plaintiffs made no such allegations.

In the second cause of action, plaintiffs alleged that a $250,000 payment made to Roe when the retention agreement was signed was an unearned advance against the final payment. Supreme Court granted summary judgment dismissing the second cause of action on the ground that nothing in the parties' submissions could be construed to support plaintiffs' theory that the parties intended to require Roe to return this payment if he failed to earn the final payment. We agree with this conclusion. Even when an employment agreement provides that interim payments will be made as advances against sums that have not yet been earned, no recovery is available for the excess of such payments over amounts ultimately earned "in the absence of an agreement, express or implied, by the agent or employee to repay such excess" (Regent Fin. Group, LLC v. Bedian, 97 A.D.3d 1116, 1117, 949 N.Y.S.2d 315 [2012] [internal quotation marks and citations omitted]; see Centerbank Mtge. Co. v. Shapiro, 237 A.D.2d 477, 477, 655 N.Y.S.2d 596 [1997] ). Here, nothing in the retention agreement provides for interim payments against the final obligation, nor can anything in that agreement or the amended agreement be construed to create an obligation on Roe's part to return such payments. None of the listed payments to Roe are described as loans or unearned advances. The amended agreement provides that the $250,000 payment was made "in partial satisfaction" of plaintiffs' obligations to Roe and includes no language suggesting that the payment had not yet been earned. This analysis applies with equal force to the claim asserted in the first cause of action for return of the Truex payment. Had the parties intended to identify either the Truex or the $250,000 payments as a loan or to condition Roe's retention of these payments on his ultimate completion of all of his obligations, they could have included language revealing this intent. They did not do so, and "courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing" (Reiss v. Financial Performance Corp., 97 N.Y.2d 195, 199, 738 N.Y.S.2d 658, 764 N.E.2d 958 [2001] [internal...