Treeline 990 Stewart Partners, LLC v. Rait Atria, LLC

• Decision Date: 12 June 2013
• Citation: 2013 N.Y. Slip Op. 04328,107 A.D.3d 788,967 N.Y.S.2d 119
• Parties: TREELINE 990 STEWART PARTNERS, LLC, appellant, v. RAIT ATRIA, LLC, et al., respondents, et al., defendant.
• Court: New York Supreme Court — Appellate Division

107 A.D.3d 788

967 N.Y.S.2d 119

2013 N.Y. Slip Op. 04328

TREELINE 990 STEWART PARTNERS, LLC, appellant,

v.RAIT ATRIA, LLC, et al., respondents, et al., defendant.

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

June 12, 2013.

Cohen Law Group, P.C., New York, N.Y. (Brian S. Cohen of counsel), for appellant.

Duane Morris LLP, New York, N.Y. (Dana B. Klinges and Brian J. Markowitz of counsel), for respondents.

MARK C. DILLON, J.P., PLUMMER E. LOTT, LEONARD B. AUSTIN, and SYLVIA HINDS–RADIX, JJ.

In an action, inter alia, to recover damages for breach of contract, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (Bucaria, J.), entered November 15, 2011, as granted those branches of the motion of the defendants RAIT Atria, LLC, RAIT Partnership, L.P., and RAIT General, Inc., which were pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against them.

ORDERED that the order is modified, on the law, by deleting the provision thereof granting that branch of the motion of the defendants RAIT Atria, LLC, RAIT Partnership, L.P., and RAIT General, Inc., which was pursuant to CPLR 3211(a) to dismiss the cause of action to recover damages for breach of contract insofar as asserted against RAIT Atria, LLC, and substituting therefor a provision denying that branch of the motion; as so modified, the order is affirmed insofar as appealed from, with costs to the plaintiff.

In 2006, Treeline 990 Stewart Partners, LLC (hereinafter Treeline), and RAIT Atria, LLC (hereinafter RAIT Atria), executed an operating agreement, which set forth their rights and interests as the only members of 990 Stewart Avenue Investors, LLC (hereinafter 990 SAI), a limited liability company formed for the purpose of purchasing and operating an office building in Garden City. Pursuant to the operating agreement, both Treeline, as the “common capital member” and “managing member” of 990 SAI, and RAIT Atria, as the “preferred capital member” of 990 SAI, were entitled to, among other things, certain monthly distributions from the rent and income generated through the ownership and management of the office building. The operating agreement specified that any modification thereto had to be made in writing.

According to the complaint, after the operating agreement was executed, economic conditions changed, and the office building began losing tenants. With the office building struggling financially, Treeline and RAIT Atria began discussing potential transactions to either restructure the terms of the operating agreement or, alternatively, to sell RAIT Atria's interest in 990 SAI to Treeline at a discount. Also according to the complaint, after months of negotiations, the parties eventually agreed that Treeline would buy RAIT Atria's interest in 990 SAI at a discounted price. Although Treeline allegedly took steps to obtain the necessary financing and invested funds in the office building in reliance on this alleged buyout agreement, the alleged buyout agreement was never reduced to writing, and RAIT Atria ultimately refused to close on the alleged buyout agreement.

Treeline commenced the instant action against, among others, RAIT Atria, RAIT General, Inc., and RAIT Partnership, L.P. (hereinafter collectively the RAIT defendants). The complaint alleged that, by failing to close on the buyout agreement, RAIT Atria breached a contract, committed fraud, and engaged in negligent misrepresentation. The Supreme Court granted the motion of the RAIT defendants, inter alia, pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against them.

A motion to dismiss a complaint pursuant to CPLR 3211(a)(1) may be appropriately granted “only where 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 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190;see Green v. Gross & Levin, LLP, 101 A.D.3d 1079, 1080–1081, 958 N.Y.S.2d 399;Bodden v. Kean, 86 A.D.3d 524, 526, 927 N.Y.S.2d 137). Contrary to the RAIT defendants' contentions, the documentary evidence that they submitted did not conclusively establish, as a matter of law, a defense to the breach of contract cause of action insofar as asserted against RAIT Atria. The RAIT defendants contend that, since the operating agreement contained a provision prohibiting oral modifications, enforcement of the alleged oral agreement to buy out RAIT Atria's interest in 990 SAI is barred by General Obligations Law § 15–301. However, the alleged oral agreement described by Treeline did not have the effect of modifying the terms and conditions of the operating agreement. The operating agreement defined the interests owned by RAIT Atria and Treeline and included, among other things, provisions for monthly income distribution and financial reporting. The operating agreement did not prohibit the sale of RAIT Atria's interest in 990 SAI, and did not set forth any terms that such a sale was required to include. As such, the alleged oral agreement was a separate additional agreement addressing a situation not covered by the terms of the operating agreement ( see Gerard v. Cahill, 66 A.D.3d 957, 959, 888 N.Y.S.2d 104). Accordingly, enforcement of the alleged oral agreement is not barred by General...