Rachmani Corp. v. 9 East 96th Street Apartment Corp.

• Citation: 211 A.D.2d 262,629 N.Y.S.2d 382
• Parties: The RACHMANI CORPORATION, f/k/a Jay Y. Rachmani Real Estate, Inc., Plaintiff-Appellant, v. 9 EAST 96TH STREET APARTMENT CORP., Defendant-Respondent, and 9 East 96th Street, Inc. a/k/a or previously incorporated as 9 East 96th Street Owners, Inc., 9 East 96th Street Owners, Inc., and Borchard Affiliations, Inc., Defendants.
• Decision Date: 16 May 1995
• Court: New York Supreme Court Appellate Division

Page 382

629 N.Y.S.2d 382

211 A.D.2d 262

The RACHMANI CORPORATION, f/k/a Jay Y. Rachmani Real Estate, Inc., Plaintiff-Appellant, v. 9 EAST 96TH STREET APARTMENT CORP., Defendant-Respondent, and 9 East 96th Street, Inc. a/k/a or previously incorporated as

9 East 96th Street Owners, Inc., 9 East 96th

Street Owners, Inc., and Borchard

Affiliations, Inc., Defendants.

Supreme Court, Appellate Division,

First Department.

May 16, 1995.

Robert Kraus, of counsel (Rosen & Livingston, attorneys), for defendant-respondent.

Gerald M. Levine, of counsel (Calotta Levine Samuel & Schreiber, attorneys), for plaintiff-appellant.

Before RUBIN, J.P., and ROSS, NARDELLI, WILLIAMS and TOM, JJ.

RUBIN, Justice Presiding.

This controversy arises out of the conversion of premises known as 9 East 96th Street to a cooperative housing corporation. The sponsor, Borchard Affiliations, Inc., entered into a contract for sale of the premises to the proposed cooperative corporation, 9 East 96th Street Owners, Inc. ("Owners"), on April 1, 1980. An offering plan was filed with the New York State Attorney General's office on August 11, 1980 by the sponsor. The plan identified The Rachmani Corporation as the exclusive selling agent for units owned by the cooperative housing corporation. Rachmani was engaged pursuant to an exclusive sales agreement dated July 18, 1979 which, for some reason, was never signed. The agreement provides that Rachmani is the sole agent with the exclusive right to sell or offer to sell; that Rachmani's appointment is to continue "until title to the [premises] is transferred to [Owners]" unless terminated earlier pursuant to the terms of the agreement; and that the broker's compensation "shall be due, earned and payable only 'when, as and if' the Total Cash Payment is received by the Apartment Corporation, but in no event sooner than the Closing Date" (emphasis added).

For the next year and a half, Rachmani engaged in intense negotiations with a tenants' committee, eventually obtaining subscription agreements from more than 35% of the eligible tenants. By letter dated February 17, 1982, the sponsor announced that the requisite number of tenants had subscribed to purchase the shares allocated to their apartments and that its offering plan was declared effective. Litigation immediately ensued, transfer of title to the cooperative corporation was enjoined, and the matter remained unresolved into 1983.

At this juncture, the course of events took a somewhat unusual turn. In May or June 1983, the sponsor sold the premises, along with its interest in the offering plan, to a new sponsor known as 9 East 96th Street Associates ("Associates") for $4,675,000.00. It is not disputed that the former sponsor, Borchard Affiliations, Inc., never told Rachmani about this sale. On August 7, 1983, Associates filed an amendment to Borchard's original offering plan, which named Associates as the exclusive selling agent, deleting all references to Rachmani. A new cooperative corporation, designated 9 East 96th St. Apartment Corporation, was substituted in place of Owners to take title to the premises at closing. All of the tenants who had previously executed subscription agreements with Owners, plus two additional tenants, executed new subscription agreements with the new sponsor, Associates. On August 17, 1983, the new offering plan was declared effective by Associates, and title to the premises was ultimately transferred by Associates to the new cooperative corporation, defendant 9 East 96th St. Apartment Corporation, on October 4, 1983.

When Rachmani's attorney appeared at the closing to demand the commissions due under the terms of its exclusive right to sell agreement with the original sponsor, he was summarily ejected. Rachmani never received any commission for the subscription agreements it negotiated with the tenants' committee and, on September 26, 1989, it commenced the instant action, alleging breach of contract, unjust enrichment and fraud. Notably, Rachmani seeks to hold defendant liable for the obligation incurred by Owners under the exclusive right to sell agreement, arguing that the formation of the new sponsor served no legitimate purpose.

In May 1992, Supreme Court dismissed plaintiff's claims for fraud and unjust enrichment. In the orders subject to appeal, entered in October and November 1993, the court granted reargument of defendant's motion to dismiss or, in the alternative, for summary judgment. Upon reargument, the court dismissed the breach of contract claim as untimely (CPLR 213[2], relying on the Court of Appeals' decision in Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 599 N.Y.S.2d 501, 615 N.E.2d 985 (1993). Because that determination is distinguishable from the matter on appeal in several significant respects, we reverse and reinstate the cause of action for breach of contract.

At issue is the timeliness of plaintiff's action and, by implication, the date that the cause of action accrued (CPLR 203[a]. Plaintiff argues, quite logically, that Rachmani's contract with the original sponsor, Owners, was breached on October 4, 1983, the date of closing when, pursuant to the exclusive sales agreement, payment of sales commissions became due. Defendant 9 East 96th St. Apartment Corporation, however, contends that the contract was unequivocally breached when the new sponsor, Associates, amended the offering plan in August 1983 to delete all references to Rachmani as sales agent. It is evident that defendant confuses the concept of breach with the related concept of repudiation, and some elementary review is therefore in order.

It is well settled law that a contract is not breached until the time set for performance has expired. This posed a problem when a plaintiff, who was under contract to begin work on June 1, was informed on May 11 by the party obligated to employ him that his services would not be required or accepted. The would-be employee immediately commenced suit and was met by the defense that the action was premature because the date of commencement of the employment obligation had not yet arrived. In this seminal case, the Court ruled that the party aggrieved may either await the appointed date of performance or sue immediately, at his option, reasoning that one who wrongfully renounces an obligation in contract should not be heard to complain that he has immediately been sued by the injured party (Hochster v. De La Tour, 2 E & B 678, 118 Eng Rep 922 [QB 1853].

The doctrine of anticipatory breach is expressed by one authority as follows: "Where there has been an anticipatory breach of a contract by one party, the other party may treat the entire contract as broken and may sue immediately for the breach" (22 NYJur2d, Contracts, §§ 387-393, at 295). It warrants emphasis that resort to the doctrine is generally at the plaintiff's option (Sven Salen AB v. Pierot, Jr., & Sons, 559 F.Supp. 503, 506, affd. 738 F.2d 419 [2nd Cir], citing 1 Weinstein-Korn-Miller, NYCivPrac p 213.10).

The theory underlying the doctrine of anticipatory breach of contract received extensive discussion by the Court of Appeals in the case of Ga Nun v. Palmer, 202 N.Y. 483, 96 N.E. 99 (1911). The authority cited in that case leaves no doubt that the date from which the breach of a contract is measured is the date performance is required to be tendered according to its terms (supra, at 492-493, 96 N.E. 99). The Court held that, even where unequivocal notice of a party's intent to renounce a contractual obligation is given (supra, at 488, 96 N.E. 99), the injured party may elect to keep the contract in force and await the designated time for performance before bringing suit (supra, at 493, 96 N.E. 99). In the event that the plaintiff's action is predicated on the renunciation of the obligation, the Court noted that he must accept it as an anticipatory breach and " 'consider the contract at an end' " (supra, at 492, 96 N.E. 99, quoting Foss-Schneider Brewing Co. v. Bullock, 59 Fed. 83, 87 [6th Cir 1893]. In this event, the date the statutory period of limitation commences to run is logically the date of the act that constitutes repudiation, viz. the date the contract is terminated (see, Ely-Cruikshank Co. v. Bank of Montreal, supra, at 403, 599 N.Y.S.2d 501, 615 N.E.2d 985).

The principle of anticipatory breach of contract is supported by sound policy considerations. Once a party has indicated an unequivocal intent to forego performance of his obligations under a contract, there is little to be gained by requiring a party who will be injured to await the actual breach before commencing suit, with the attendant risk of faded memories and unavailable witnesses. However, it is clear that there must be a definite and final communication of the intention to forego performance before the anticipated breach may be the subject of legal action (McCloskey & Co. v. Minweld Steel Co., 220 F.2d 101 (3d Cir.1955); Ga Nun v. Palmer, supra, at 488, 96 N.E. 99). Mere expression of difficulty in tendering the required performance, for example, is not tantamount to a renunciation of the contract (id.).

With this background in mind, it is appropriate to examine Ely-Cruikshank Co. v. Bank of Montreal (supra ), upon which defendant relies. In that case, a brokerage agreement provided that it could be terminated by either party, on notice, thereupon limiting any right to commission to pending negotiations for a lease. The defendant bank exercised its unilateral right to terminate the agreement effective November 30, 1983 and later sold the subject premises. The plaintiff broker did not commence suit until January 26, 1990.

From the foregoing discussion, it should be apparent that Ely-Cruikshank's action could not be considered timely: once a contract comes to an end, either by operation of its terms or by declaration of an anticipatory breach as a result of its repudiation, the Statute of Limitations begins to run. Even if it is...