Opinion
No. 2215/10.
2012-02-1
BLINDS AND CARPET GALLERY, INC., et ano., Plaintiffs, v. EEM REALTY, INC., Defendant.
The Wilson law Firm, New York, NY, for Plaintiff. Simcha Shonfeld, New York, NY, for Defendant's.
The Wilson law Firm, New York, NY, for Plaintiff. Simcha Shonfeld, New York, NY, for Defendant's.
DAVID SCHMIDT, J.
The following papers numbered 1 to 7 read herein:
+----------------------------------------------------+ ¦Papers ¦Numbered ¦ +-------------------+--------------------------------¦ ¦Notice of Motion ¦/Order to Show Cause/ ¦ +-------------------+--------------------------------¦ ¦Petition ¦/Cross Motion and ¦ +-------------------+--------------------------------¦ ¦Affidavits ¦(Affirmations) Annexed– 34–5 ¦ +-------------------+--------------------------------¦ ¦Opposing Affidavits¦(Affirmations) 6 ¦ +-------------------+--------------------------------¦ ¦Reply Affidavits ¦(Affirmations) 67 ¦ +-------------------+--------------------------------¦ ¦Affidavit ¦(Affirmation) ¦ +----------------------------------------------------+
Other Papers
Upon the foregoing papers, plaintiffs Blinds and Carpet Gallery, Inc. (BCG) and Indoor Outdoor Flooring Supplies, Inc. (IOFS)
move for an order, pursuant to CPLR 3025, granting leave to amend their complaint. Defendant EEM Realty, Inc. cross-moves for an order, pursuant to CPLR 3212, granting defendant summary judgment dismissing plaintiffs' claims.
Ying Sum Lau, the president of BCG, is also president of IOFS.
Plaintiffs brought this action seeking a judgment that defendant must provide a tenyear lease extension or, alternatively, damages for sums expended by plaintiffs toward the renovation of the subject commercial property. On December 20, 2000, BCG entered into a ten-year commercial lease with defendant to operate a store on the ground floor of the subject premises. The term of the lease commenced on January 1, 2001 and expired on December 31, 2010. Plaintiffs allege that throughout the course of the leasehold they inquired about the possibility of extending the lease for an additional ten-year term as they were seeking to renovate the premises. In a handwritten letter addressed to BCG, dated August 3, 2009, defendant's vice president, Irwin Dayan, stated the following:
I, being the Landlord hereby declare that a new 10 years (sic) lease is to be granted to [BCG] upon expiration of old lease. Lease would start from Jan. 1, 2011.
All conditions of old lease are in effect including same rent rate escalation.
Plaintiffs thereafter drafted a lease renewal agreement and transmitted the document to defendant via facsimile on November 3, 2009. The proposed lease extension/renewal prepared by plaintiffs identifies the tenant as “BLINDS AND CARPET GALLERY INC. as further assigned to INSPIRE DESIGN SUPPLY LLC” and states that the “rental of the extended term beginning January 1, 2011 shall be $130,838.15 per annum, payable in equal monthly installments, in advance, of $10,903.18.” Plaintiffs subsequently mailed a letter, dated December 17, 2009, informing defendant that plaintiffs were set to renovate the store and requesting that a renewal lease be signed and returned. By letter dated December 23, 2009, defendant's counsel rejected plaintiffs' request for a lease extension. Among the reasons given for the rejection was that according to the August 3, 2009 offer a renewal lease would be granted upon the expiration of the current lease, which had not yet occurred, that BCG did not obtain defendant's consent to assign the lease to a different entity as required by the terms of the lease, that BCG failed to pay taxes on the property and that the proposed lease renewal agreement differed materially from the terms of the offer by failing to take into account the “rent rate escalation” when it stated a first rent in the amount of $10,903.18 (the same amount due for the final month of the expiring lease). Meanwhile, on November 18, 2009, defendant entered into a contract to sell the subject premises. Plaintiffs allege that on January 5, 2010, Ying Sum Lau sent Mr. Dayan a copy of the August 3, 2009 offer which was signed by Ying Sum Lau on behalf of BCG and which noted that the offer was accepted.
Following the commencement of this action, plaintiffs moved to amend their complaint and further moved for a preliminary injunction enjoining defendants from transferring title to the property. By order dated April 9, 2010, this court denied plaintiff's motion to amend the compliant as a copy of the proposed amended complaint was not submitted with the motion. The court further denied plaintiffs' motion for a preliminary injunction on grounds that plaintiffs failed to demonstrate a likelihood of success on the merits and failed to demonstrate irreparable injury. In its decision, the court stated the following:
The August 3, 2009 offer clearly contemplated a renewal lease to BCG on the same terms of the current lease including the “rent rate escalation.” The proposed renewal agreement, however, stated a different entity as tenant and stated a first rental amount which did not include the escalation. Whenever a purported acceptance is even slightly at variance with the terms of an offer, the qualified response operates as a rejection and termination of-and substitution for-the initially offered terms (Homayouni v. Paribas, 241 A.D.2d 375 [1997] ). While the failure to include the rent escalation increase in the proposed renewal agreement may have been inadvertent, it is clear that plaintiffs desired that the new lease be provided not to BCG or IOFS but rather to a new entity named “Inspire Design Supply LLC,” which was formed upon the purchase by three individuals of 60% of Mr. Lau's shares in IOFS. By submitting a proposed renewal agreement which contained a material alteration of the terms of the August 3, 2009 offer, plaintiffs essentially made a counteroffer which rejected and terminated the offer, and plaintiffs could not thereafter “accept” the original offer by their January 5, 2010 communication ( see Keryakos Textiles, Inc. v.. CRA Dev., Inc., 167 A.D.2d 738 [1990] ).
Plaintiffs thereafter appealed that part of this court's order denying the preliminary injunction. By order dated March 1, 2011, the Appellate Division, Second Department affirmed this court's order insofar as appealed from (Blinds & Carpet Gallery, Inc. v. E .E.M. Realty, Inc., 82 AD3d 691 [2011] ).
On August 25, 2011, plaintiffs brought a second motion to amend their complaint, correcting the previous deficiency by attaching a copy of the proposed new pleading. In its proposed amended complaint, plaintiffs basically restate the facts contained in the original complaint but now seek to clarify their claims by separating them into distinct causes of action. In the proposed pleading, plaintiffs set forth causes of action for breach of contract, fraud, misrepresentation, fraudulent inducement, promissory estoppel and unjust enrichment. Plaintiffs further assert a new allegation that “[u]pon information and belief, another tenant has the contractual right of first refusal. Plaintiffs had a discussion with the Defendant that Plaintiffs should be given the right of first refusal if the current owner of the right of first refusal fails to secure purchase.” Plaintiffs also now seek an award of punitive damages in addition to actual damages. Defendant cross-moves for an order granting it summary judgment “as to plaintiffs' claims.”
“Generally, in the absence of prejudice or surprise to the opposing party, leave to amend a pleading should be freely granted unless the proposed amendment is palpably insufficient or patently devoid of merit” (Sampson v. Contillo, 55 AD3d 591, 592 [2008][internal quotation marks and citations omitted] ). In determining a motion to amend a pleading, “the legal sufficiency or merits of a pleading will not be examined unless the insufficiency or lack of merit is clear and free from doubt” ( see Lucido v. Mancuso, 49 AD3d 220, 227 [2008] ).
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law tendering sufficient evidence to demonstrate the absence of any material issues of fact (Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 [1986] ). Failure to make such prima facie showing requires a denial of the motion regardless of the sufficiency of the opposing papers ( id.). The proof submitted to the court should be scrutinized carefully in the light most favorable to the party opposing the motion ( see Sillman v. Twentieth Century–Fox Film Corp., 3 N.Y.2d 395, 404 [1957] ). Once a prima facie showing is made, the burden shifts to the party opposing the motion to lay bare its proof and present evidentiary facts sufficient to raise a genuine triable issue of fact ( see Zuckerman v. City of New York, 49 N.Y.2d 557 [1980];Friends of Animals v. Associated Fur Mfrs., 46 N.Y.2d 1065 [1979] ).
Because defendant's cross motion for summary judgment is directed at the proposed amendments, this court will examine both the facial sufficiency of the amendments and whether any issues of fact exist with respect to plaintiffs' claims.
Breach of Contract
On the prior motion for a preliminary injunction, this court examined the merits of plaintiffs' claim that there was a valid acceptance of defendant's August 3, 2009 offer for an extension of the lease, thus forming a binding contract. As noted above, it was determined that plaintiffs could not demonstrate a likelihood of success on the merits of their claim that a contract was formed since the purported acceptance by plaintiffs, in the form of the proposed November 2009 lease extension, constituted a “counteroffer” rather than an acceptance. Upon a renewed analysis in light of the instant motions to amend and for summary judgment, the court finds as a matter of law that no contract was created by the November 2009 lease proposal. It is a fundamental principle of contract law that a valid acceptance must comply with the terms of the offer ( see Gram v. Mutual Life Ins. Co. of NY, 300 N.Y. 375, 382 [1950];Roer v. Cross County Med. Ctr. Corp., 83 A.D.2d 861 [1981] ). As this court noted in the prior order, “whenever a purported acceptance is even slightly at variance with the terms of an offer, the qualified response operates as a rejection and termination of—and substitution for—the initially offered terms” (Homayouni v. Banque Paribas, 241 A.D.2d 375, 376 [1997] ). The November 2009 lease proposal differed from the terms set forth in the offer in at least one crucial respectthe identity of the tenant. The offer contemplated that a lease extension would be offered to BCG. The November 2009 lease proposal made clear that plaintiffs desired that lease be given to a different entity-“Inspire Design Supply LLC.” This counteroffer was expressly rejected by defendant by way of the December 23, 2009 letter from its counsel. Once the counteroffer was rejected, plaintiffs could not revive the original offer by thereafter sending an acceptance agreeing to the original terms ( see Credit Suisse First Boston Corp. v. Cooke, 284 A.D.2d 365 [2001] ).
As a result, plaintiffs' cause of action for breach of contract is dismissed.
Fraud, Misrepresentation and Fraudulent Inducement
The gravamen of plaintiffs' claim of fraud is that defendant failed to keep a promise to provide an extension upon the expiration of plaintiffs' lease. The failure to fulfill promises to perform acts in the future is merely a breach of contract and not a fraud ( see Pepper v. Hezghia, 307 A.D.2d 959 [2003];Nathanson & Co. v.. Marinello, 192 A.D.2d 575 [1993];Spellman v. Columbia Manicure Mfg. Co., Inc., 111 A.D.2d 320, 322 [1988] ). A present intent to deceive must be alleged and a mere misrepresentation of an intention to perform under a contract is insufficient to allege fraud ( see WIT Holding Corp. v. Klein, 282 A.D.2d 527, 528 [2001];Ross v. DeLorenzo, 28 AD3d 631 [2006] ). “Mere promissory statements as to what will be done in the future are not actionable” (Adams v. Clark, 239 N.Y. 403, 410 [1925] ). The proposed amended complaint fails to allege that defendant harbored a present intent to deceive plaintiffs but, rather, alleges only that defendant misrepresented its intention to perform in the future. Such allegations are facially insufficient to sustain causes of action for fraud, misrepresentation and fraudulent inducement ( see J.M. Builders & Assocs., Inc. v. Lindner, 67 AD3d 738 [2009] ).
Accordingly, the proposed causes of action for fraud, misrepresentation and fraudulent inducement are patently without merit.
Promissory Estoppel
“To apply the doctrine of promissory estoppel, a plaintiff must demonstrate: (1) a clear and unambiguous promise; (2) reasonable and foreseeable reliance by the party to whom the promise is made; and (3) an injury sustained in reliance on the promise” (NGR v. General Elec. Co., 24 AD3d 425, 425 [2005],see Fleet Bank Pine Knoll, 290 A.D.2d 792, 797 [1992];Gurreri v. Associates Ins. Co., 248 A.D.2d 356, 357 [1998] ). Recovery under the doctrine of promissory estoppel is limited to cases where the promisee suffered unconscionable injury ( see Halliwell v. Gordon, 61 AD3d 932 [2009];Dunn v. B & H Assoc., 295 A.D.2d 396, 397 [2002];Gary Powell, Inc. v. Mendel/Borg Group, 237 A.D.2d 407, 408 [1997];D & N Boening v. Kirsch Beverages, 99 A.D.2d 522, 523–524 [1984],affd63 N.Y.2d 449 [1984] ). In other words, an oral promise will not be enforced on promissory estoppel grounds unless it would be unconscionable to deny it ( see Steele v. Delverde S.R.L., 242 A.D.2d 414, 415 [1997] ). The fact that plaintiffs ordered and/or purchased materials to be used in the planned renovation, without more, is insufficient to demonstrate that plaintiffs suffered an “unconscionable injury,” particularly since the expenditures were made in reliance upon only an offer by defendant, not a completed agreement ( see Spier v. Southgate Owners Corp., 39 AD3d 277 [2007];cf. Fleet Bank v. Pine Knoll Corp., 290 A.D.2d 792 [2002] ). While plaintiffs may have had a good faith belief that a lease extension would be forthcoming, the court nonetheless finds that in the absence of a written and signed lease extension agreement, plaintiffs' reliance upon Mr. Dayan's letter is unreasonable.
Therefore, plaintiffs' proposed cause of action for promissory estoppel is without merit.
Unjust Enrichment
To prevail on a claim for unjust enrichment, which is at issue here, a party must show that (1) the other party was enriched, (2) at that party's expense, and (3) it is against equity and good conscience to permit the other party to retain what is sought to be recovered ( see Corsello v. Verizon NY, Inc., 77 AD3d 344, 370 [2010];Spector v. Wendy, 63 AD3d 820, 822 [2009];Anesthesia Assoc. of Mount Kisco, LLP v. Northern Westchester Hosp. Ctr., 59 AD3d 473, 481 [2009] ). “The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered” (Paramount Film Distrib. Corp. v. State of New York, 30 N.Y.2d 415, 421[1972] ). Unjust enrichment does not require a showing that the party enriched committed a wrongful act, as innocent parties may frequently be unjustly enriched ( see Cruz v. McAneney, 31 AD3d 54, 59 [2006] ).
In their amended complaint, plaintiffs allege that they invested more than $700,000.00 toward the renovation of the property and that “the premises are now newly renovated to the ultimate benefit of the owner and/or successor owner and to the complete detriment of the Plaintiffs.” The court finds that these allegations are sufficient to state a viable cause of action for unjust enrichment.
As a result, that part of plaintiffs' motion to amend their complaint to assert a cause of action for unjust enrichment is granted.
As defendant has not established as a matter of law that no renovations were performed to the premises or that the property was not improved at plaintiffs' sole expense, that part of defendant's cross motion for summary judgment, to the extent it seeks to dismiss the claim for unjust enrichment, is denied.
In all other respects, plaintiffs' motion to amend the complaint is denied and defendants' cross motion for summary judgment is granted.
The foregoing constitutes the decision and order of the court.