Kain Dev., LLC v. Krause Props., LLC

• Decision Date: 09 July 2015
• Docket Number: 520256
• Citation: 130 A.D.3d 1229,2015 N.Y. Slip Op. 06002,14 N.Y.S.3d 520
• Parties: KAIN DEVELOPMENT, LLC, Respondent–Appellant, v. KRAUSE PROPERTIES, LLC, et al., Appellants–Respondents, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

130 A.D.3d 1229

14 N.Y.S.3d 520

2015 N.Y. Slip Op. 06002

KAIN DEVELOPMENT, LLC, Respondent–Appellant

v.KRAUSE PROPERTIES, LLC, et al., Appellants–Respondents, et al., Defendants.

520256

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

July 9, 2015.

Anderson Byrne, LLC, Saratoga Springs (Elizabeth Byrne–Chartrand of counsel), for appellants-respondents.

Stockli Slevin & Peters, LLP, Albany (Scott D. Lukowski of counsel), for respondent-appellant.

Before: McCARTHY, J.P., EGAN JR., DEVINE and CLARK, JJ.

Opinion

McCARTHY, J.P.

Cross appeals from an order of the Supreme Court (Crowell, J.), entered March 10, 2014 in Saratoga County, which, among other things, partially granted a motion by defendants Krause Properties, LLC and Gail Krause for summary judgment dismissing the amended complaint against them.

In October 2005, plaintiff entered into a contract for the purchase and sale of certain real property with defendant Krause Properties, LLC whereby plaintiff was to purchase approximately 17 acres of waterfront property, located along the Mohawk River in the Town of Halfmoon, Saratoga County, for the purpose of constructing, among other things, a residential condominium project. The purchase price to Krause Properties was to be the sum total equal to $19,642.88 per condominium unit for which the project ultimately obtained approvals, up to a maximum sale price of $6.3 million. In addition, plaintiff executed a $760,000 promissory note in favor of Krause Properties, secured by a mortgage on certain real property. In the event that the contract was terminated pursuant to its terms, Krause Properties agreed to repay certain funds advanced by plaintiff.

In July 2013, plaintiff commenced the instant action seeking to, among other things, foreclose the mortgage on the property and recoup those monies previously advanced to Krause Properties and to the president of Krause Properties, defendant Gail Krause (hereinafter collectively referred to as the Krause defendants). Eventually, plaintiff filed an amended verified complaint setting forth causes of action seeking foreclosure pursuant to RPAPL article 13, damages for breach of contract, return of converted funds, foreclosure of an equitable lien and imposition of a constructive trust. The Krause defendants answered and asserted a counterclaim for breach of contract. Subsequently, the Krause defendants moved for, among other things, summary judgment dismissing the amended complaint and discharge of the subject mortgage. Plaintiff responded and cross-moved for the disqualification of the Krause defendants' counsel based on a purported conflict of interest. Thereafter, Supreme Court, among other things, denied plaintiff's motion to disqualify the Krause defendants' counsel and partially granted the Krause defendants' summary judgment motion by dismissing (1) plaintiff's amended complaint as against Krause, individually, and (2) plaintiff's third cause of action for conversion. The Krause defendants now appeal and plaintiff cross-appeals.

Initially, Supreme Court properly found that disqualification of the Krause defendants' counsel, Michele Anderson, was not warranted. As is relevant here, “[a] lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing” (Rules of Professional Conduct [22 NYCRR 1200.0 ] rule 1.9 [a]; see former Code of Professional Responsibility DR 5–108[A][1] [22 NYCRR 1200.27(a)(1) ]; Campbell v. McKeon, 75 A.D.3d 479, 480–481, 905 N.Y.S.2d 589 [2010] ).¹ Plaintiff's proof that it had provided payment to Anderson was not inconsistent with Anderson's sworn statement that such payments were made on behalf of Krause for legal services that Anderson provided to her. In the absence of any other proof indicating that Anderson had an attorney-client relationship with plaintiff—not to be confused with the proof merely indicating that Anderson worked with plaintiff as a result of her representation of the Krause defendants and regarding projects for which the relevant parties' interests were aligned—plaintiff failed to meet its burden of establishing a conflict of interest for which disqualification would be justified or appropriate (see Abselet v. Satra Realty, LLC, 85 A.D.3d 1406, 1407, 926 N.Y.S.2d 178 [2011] ; Cunningham v. Anderson, 66 A.D.3d 1207, 1209, 887 N.Y.S.2d 712 [2009], lv. denied 14 N.Y.3d 710, 2010 WL 1854333 [2010] ).

Next, the Krause defendants argue that this Court should dismiss this action due to a prior pending action with the same parties based upon the same causes of action (see generally CPLR 3211[a][4] ). Although the Krause defendants at various times recited facts related to the allegedly prior pending action, it never requested that Supreme Court dismiss the instant action on that basis. Accordingly, this argument is not preserved for our review (see Hush v. Taylor, 84 A.D.3d 1532, 1533, 923 N.Y.S.2d 284 [2011] ).

In addition, we reject plaintiff's argument that the Krause defendants' motion for summary judgment should be denied in its entirety to allow plaintiff to conduct further discovery. As to this issue, plaintiff failed to establish through proof that any of the Krause defendants had exclusive knowledge and possession of material facts necessary to oppose the motion (see Millington v. Kenny & Dittrich Amherst, LLC, 124 A.D.3d 1108, 1109, 2 N.Y.S.3d 273 [2015] ; 2 N. St. Corp. v. Getty Saugerties Corp., 68 A.D.3d 1392, 1395–1396, 892 N.Y.S.2d 217 [2009], lv. denied 14 N.Y.3d 706, 2010 WL 1235671 [2010] ).

Turning to the merits of the Krause defendants' motion, they established as a matter of law that plaintiff repudiated the contract, warranting dismissal of plaintiff's breach of contract cause of action. “Anticipatory repudiation occurs when a party attempt[s] to avoid its obligations by advancing an untenable interpretation of the contract” (Fonda v. First Pioneer Farm Credit, ACA, 86 A.D.3d 693, 694, 927 N.Y.S.2d 417 [2011] [internal quotation marks and citations omitted] ). Upon a showing of such anticipatory repudiation, the nonrepudiating party is entitled to forgo further performance and to claim damages for total breach (see id. at 694–695, 927 N.Y.S.2d 417 ; O'Connor v. Sleasman, 14 A.D.3d 986, 987–988, 788 N.Y.S.2d 518 [2005] ).

The plain terms of the contract allowed plaintiff to terminate the contract upon certain conditions. In order to effectuate such termination, the contract required plaintiff to provide written notice within three days of the expiration of the “Inspect Period (the Due Dilligence Deadline )” as to certain contingencies and written notice by either the last day of the “Approvals Contingency Period” or “Financing Contingency Period” in regard to the remaining and respective contingencies allowing for such termination. Per the terms of the contract, both the “Approvals Contingency Period” and the “Financing Contingency Period” commenced upon the “Due Diligence Deadline” and ended 36 months thereafter. Therefore, according to the plain terms of the contract, plaintiff's entitlement to terminate the contract upon any described contingency expired no later than 36 months after the due diligence period expired.

Turning to the expirations of the aforementioned deadlines, the contract further explicitly provided that the legal counsel to the parties to the contract were authorized to execute by letter any agreement to “extend or adjourn” deadlines described in the agreement. The Krause defendants submitted an April 2006 letter from plaintiff's counsel asserting that it served as the “Due Diligence Termination Notice” unless the Krause defendants chose to grant an additional 90–day extension to the due diligence deadline. Although there is an issue of fact as to whether the Krause defendants granted that 90–day extension, a September 2006 letter from plaintiff's counsel renders such issue immaterial. The September letter acknowledges that plaintiff “w[ould] continue to proceed” under the contract “rather than ... cancelling the contract under the Due Diligence contingency.”

Therefore, the unrebutted evidence established that plaintiff's objective manifestations did not terminate the contract pursuant to any relevant contingency during the due diligence period and that such period expired in 2006, triggering the commencement of both the “Approvals Contingency Period” and the “Financing Contingency Period” (see generally Brown Bros. Elec. Contrs. v. Beam Constr. Corp., 41 N.Y.2d 397, 399, 393 N.Y.S.2d 350, 361 N.E.2d 999 [1977] ; Sokoloff v. National City Bank of N.Y., 239 N.Y. 158, 170, 145 N.E. 917 [1924] ). Both the aforementioned periods expired, according to the terms of the contract, 36 months thereafter, or in 2009. The Krause defendants and plaintiff submitted consistent evidence that plaintiff thereafter contacted Krause in June 2012 and attempted to terminate the contract pursuant to a contingency related to governmental approvals.

Accordingly, regardless of whether plaintiff was entitled, at some point, to terminate the contract pursuant to the terms of the agreement, the unambiguous terms of the contract and any related agreements as to extensions established that the various periods allowing for such termination all had expired no later than 2009. Further, contrary to plaintiff's contention that it provided termination notice in its April 2006 letter,² its own representation in the September 2006 letter was that it had not terminated the agreement and that it wished to proceed pursuant to the contract and other negotiated agreements, the latter of which were unrelated to any of the aforementioned extension periods. Given plaintiff's and the Krause defendants' agreement that plaintiff unequivocally stated its intention to stop performing pursuant to...