R.I. Island House, LLC v. North Town Phase II Houses, Inc.

• Decision Date: 20 May 2008
• Docket Number: 2006-10489.
• Citation: 2008 NY Slip Op 04672,858 N.Y.S.2d 372,51 A.D.3d 890
• Parties: R.I. ISLAND HOUSE, LLC, et al., Appellants, v. NORTH TOWN PHASE II HOUSES, INC., et al., Respondents, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

51 A.D.3d 890

858 N.Y.S.2d 372

2008 NY Slip Op 04672

R.I. ISLAND HOUSE, LLC, et al., Appellants, v. NORTH TOWN PHASE II HOUSES, INC., et al., Respondents, et al., Defendants.

2006-10489.

Appellate Division of the Supreme Court of the State of New York, Second Department.

Decided May 20, 2008.

In an action, inter alia, for a judgment declaring that the purported terminations of two contracts for the sale of certain real properties dated November 26, 2003, and February 9, 2004, respectively, are invalid and ineffective, and to recover damages for breach of contract, the plaintiffs appeal from an order of the Supreme Court, Nassau County (Warshawsky, J.), entered October 4, 2006, which granted the motion of the defendants North Town Phase II Houses, Inc., North Town Phase II Associates, L.P., and Island House, Inc., in which the defendants North Town Phase III Houses, Inc., North Town Phase III Associates, L.P., and Westview Houses, Inc., joined, to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211 (a) (1) and (7), granted the motion of the defendants North Town Phase III Houses, Inc., North Town Phase III Associates, L.P., and Westview Houses, Inc., in which the defendants North Town Phase II Houses, Inc., North Town Phase II Associates, L.P., and Island House, Inc., joined, to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211 (a) (1) and (7), and granted the separate motion of the defendants Peter Kimmelman, AD North Town Houses, LLC, and estate of Irene Diamond to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211 (a) (7).

Ordered that the order is modified, on the law, (a) by deleting the provisions thereof granting those branches of the motion of the defendants North Town Phase II Houses, Inc., North Town Phase II Associates, L.P., and Island House, Inc., in which the defendants North Town Phase III Houses, Inc., North Town Phase III Associates, L.P., and Westview Houses, Inc., joined, which were pursuant to CPLR 3211 (a) (1) and (7) to dismiss the first and third causes of action and substituting therefor provisions denying those branches of the motion, (b) by deleting the provisions thereof granting those branches of the motion of the defendants North Town Phase III Houses, Inc., North Town Phase III Associates, L.P., and Westview Houses, Inc., in which the defendants North Town Phase II Houses, Inc., North Town Phase II Associates, L.P., and Island House, Inc., joined, which were pursuant to CPLR 3211 (a) (1) and (7) to dismiss the second, fourth, and seventh causes of action and substituting therefor provisions denying those branches of the motion, and (c) by deleting the provisions thereof granting those branches of the separate motion of the defendants Peter Kimmelman, AD North Town Houses, LCC, and estate of Irene Diamond which were pursuant to CPLR 3211 (a) (7) to dismiss the sixth and eighth causes of action and substituting therefor provisions denying those branches of the separate motion; as so modified, the order is affirmed, with one bill of costs payable by the respondents.

The complaint alleges that the plaintiffs and each of two sets of defendants entered into two respective contracts, pursuant to which those defendants agreed to sell to the plaintiffs, and the plaintiffs agreed to purchase from those defendants, certain real properties located on Roosevelt Island for a total sum of $93,500,000. The two contracts provided for closing dates of March 31, 2004, and May 30, 2004, respectively, but allowed for several extensions at the purchasers' request and upon the purchasers' payment of additional sums toward the purchase price.

After several such extensions, the parties agreed, in letter agreements dated October 11, 2005, that by paying an additional sum of $500,000 per contract on or before October 31, 2005 the plaintiffs could cure their default under the prior contracts and extend the closing dates referable to both contracts until November 30, 2005. The letter agreements further provided that if the closings did not take place on that date, "then the Sellers shall have the right to immediately terminate the Agreements, as modified hereby, without prior Notice of Default and Default Cure Period ... and retain all funds theretofore received from the Purchasers pursuant to the Agreements, as modified hereby, as liquidated damages and as the Sellers' sole remedy."

The plaintiffs allegedly made the payments necessary to extend the closing date to November 30, 2005 bringing the total sum they had paid toward the purchase price to $8,000,000 and increasing the purchase price to the sum of $97,500,000. The closings, however, did not take place as scheduled. Instead, on December 5, 2005 the parties entered into further agreements, which they dated "as of" November 30, 2005, pursuant to which the contracts would be extended until December 16, 2005, upon the purchasers' payment of an additional $1,000,000 on or before 3:00 P.M. on December 5, 2005. The purchasers never paid that sum and the two sets of defendants purportedly terminated the respective contracts on the following day. The plaintiffs nevertheless sought to close the transaction by tendering the balance of the purchase price on February 1, 2006, but both sets of defendants refused to close.

When the two sets of defendants subsequently refused to return the sums that the plaintiffs had paid toward the purchase price, the plaintiffs commenced this action seeking, among other things, a declaration that the purported terminations of the contracts were invalid and ineffective, as well as specific performance of the contracts, and damages for their breach. After the action was voluntarily discontinued against the defendants Melgerhel, Inc., and Melba D. Whatley, the Supreme Court granted the motion of the defendants North Town Phase II Houses, Inc., North Town Phase II Associates, L.P., Island House, Inc., North Town Phase III Houses, Inc., North Town Phase III Associates, L.P., and Westview Houses, Inc. (hereinafter the Island/Westview defendants), to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211 (a) (1) on the basis of documentary evidence and pursuant to CPLR 3211 (a) (7) for failure to state a cause of action, and the separate motion of the defendants Peter Kimmelman, AD North Town Houses, LLC, and estate of Irene Diamond (hereinafter the Kimmelman defendants) to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211 (a) (7). The plaintiffs appeal. We modify the order of the Supreme Court and deny those branches of the separate motions which were to dismiss the plaintiffs' first eight causes of action alleging that the moving defendants (hereinafter together the respondents) breached the respective contracts.

In order to prevail on that branch of their motion which was to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211 (a) (1), the Island/Westview defendants were required to demonstrate that "the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]). Insofar as their motion and the separate motion of the Kimmelman defendants are predicated upon CPLR 3211 (a) (7), the court is required to "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Leon v Martinez, 84 NY2d 83, 87-88 [1994]). "Whether the plaintiff can ultimately establish the allegations `is not part of the calculus'" (Aberbach v Biomedical Tissue Servs., Ltd., 48 AD3d 716, 717-718 [2008], quoting EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]).

The complaint states a valid cause of action for breach of contract by alleging the parties' agreements and the respondents' failure to perform when the plaintiffs tendered the purchase price. The complaint also sufficiently alleges that if the respondents defaulted, the plaintiffs are entitled to specific performance. Contrary to the arguments of the Island/Westview defendants, the documentary evidence failed to establish a default by the plaintiffs.

Initially, the plaintiffs' argument that the further agreements reached on December 5, 2005 are invalid by virtue of the violation of the prohibition against communication by one lawyer with the client of another(see Code of Professional Responsibility DR 7-104 [a] [1] [22 NYCRR 1200.35 (a) (1)]) is without merit. That proscription applies to a lawyer only "[d]uring the course of the representation of a client" (id.). Here, the person who made the allegedly offending communication, although a lawyer, was identified throughout the documents as the president of two of the contracting entities, not as their attorney. The documentary evidence established, therefore, that this disciplinary rule is not implicated.

Nevertheless, the December 5, 2005 agreements do not constitute documentary evidence sufficient to dismiss the complaint insofar as asserted against the Island/Westview defendan...