Opinion
10 Civ. 4638 (DAB)
02-16-2011
CP III RINCON TOWERS, INC, Plaintiff, v. RICHARD D. COHEN, Defendant.
MEMORANDUM AND ORDER
This matter is now before the Court on a Motion filed by Defendant on August 11, 2010, contending (1) that the Complaint should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6) because no "Triggering Event" has been alleged under the unambiguous terms of the Guaranty, the occurrence of one of which is a condition precedent to Defendant's obligation to pay; and (2) that the Court should decline to exercise jurisdiction, since there is a prior-filed state court action involving some of the same parties and issues.
The Parties have submitted matters outside the pleadings in the form of Declarations by Counsel. Because the Court declines to convert Defendant's Rule 12(b)(6) Motion into a motion for summary judgment and has not invited or allowed Parties to make summary judgment submissions, the Declarations docketed at ## 7 and 9 in this matter are excluded from consideration for purposes of the motion to dismiss, and will be considered only as is necessary for determination of the motion to abstain from exercising jurisdiction. See Fed. R. Civ. P. 12(d).
For reasons detailed herein, Defendant's Motion is DENIED in its entirety. I. BACKGROUND
Plaintiff filed the Complaint docketed at #1 in this matter (the "Complaint" or "Cplt.") on June 14, 2010. The factual allegations of the Complaint are assumed to be true for purposes of the Motion to Dismiss now before the Court, and will be recounted herein only as necessary. II. DISCUSSION
A. Dismissal Pursuant to Fed. R. Civ. P. 12(b)(6)
For a complaint to survive a motion brought under Rule 12(b)(6), the plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility," the Supreme Court has explained,
when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The
plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of 'entitlement to relief.'Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-57). "[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (internal quotation marks omitted). "In keeping with these principles," the Supreme Court has stated,
a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.Iqbal, 129 S.Ct. at 1950.
In considering a Motion under Rule 12(b)(6), the Court must accept as true all factual allegations set forth in the complaint and draw all reasonable inferences in favor of the plaintiff. See Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 n. 1 (2002); Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004). However, this principle is "inapplicable to legal conclusions," Iqbal, 129 S. Ct. at 1949, which, like the complaint's "labels and conclusions," Twombly, 550 U.S. at 555, are disregarded. Nor should a court "accept [as] true a legal conclusion couched as a factual allegation." Id. at 555. Accordingly, "where the interpretation of a contract is at issue, in considering the contract's terms to determine whether the plaintiff can prove any set of facts which would entitle it to relief, a court is 'not constrained to accept the allegations of the complaint in respect of the construction of [the contract].'" Compania Financiera Ecuatoriana de Dearollo, S.A. v The Chase Manhattan Bank, No. 97 Civ. 5724 (JGK), 1998 WL 74299, at *1 (S.D.N.Y. Feb. 19, 1998), aff'd 165 F.3d 13 (2d Cir. 1998), cert. den. 526 U.S. 1065 (1999) (quoting International Audiotext Network, Inc. v. American Tel. and Tel. Co., 62 F.3d 69, 72 (2d. Cir. 1995).
In ruling on a 12(b)(6) motion, a court may consider the complaint as well as "any written instrument attached to the complaint as an exhibit or any statements or documents incorporated in it by reference." Zdenek Marek v. Old Navy (Apparel) Inc., 348 F.Supp.2d 275, 279 (S.D.N.Y. 2004) (citing Yak v. Bank Brussels Lambert, 252 F.3d 127, 130 (2d Cir. 2001) (internal quotations omitted)). However, though such evidence may be considered when attached to or incorporated into the Complaint, the Court's function is "not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Id. (citing Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985)).
To assert a breach of contract claim under New York law, a plaintiff must plead: (1) the existence of a contract; (2) the plaintiff's adequate performance of the contract; (3) the defendant's breach of the contract; and (4) damages. Five Star Development Resort Communities, LLC v. iStar RC Paradise Valley LLC, No. 09 Civ. 2085 (LTS), 2010 WL 1005169 (S.D.N.Y., March 18, 2010) (citing Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir. 1996)). If the conditions precedent to a defendant's duty to perform have not been met, breach is not possible. See, e.g., Aetna Cas. and Sur. Co. v. Aniero Concrete Co., Inc., 404 F.3d 566, 597 (2d Cir. 2005) ("A condition precedent is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises.").
The Guaranty provides that New York law applies, see Guaranty ¶ 5.3, and New York law shall therefore be applied. See LaSalle Bank, 424 F.3d at 205 n. 7 ("'New York law gives full effect to parties' choice-of-law provisions.'") (quoting Krock v. Lipsay, 97 F.3d 640, 645 (2d Cir. 1996)).
According to the factual allegations of the Complaint, at least four mechanic's liens have been recorded against the Property without Lender's written consent. One of those liens has advanced to judgment and is now being foreclosed against the Property.
The Guaranty makes Defendant liable "if Borrower fails to obtain Lender's prior written consent to any Transfer." Guaranty ¶ 1.2(b)(v). The Loan Agreement provides that a transfer will be deemed to have taken place should Borrower "sell, convey, mortgage, grant, bargain, encumber, pledge, assign, grant options with respect to, or otherwise transfer or dispose of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) the Property or any part thereof or any legal or beneficial interest therein . . ." Loan Agmt. § 5.2.10(b).
The outstanding judgment against the Property, which was the result of a perfected mechanic's lien, clearly encumbers the Property. Accordingly, the Court finds that Plaintiff has pled sufficient facts to allege plausibly that a "transfer" has occurred, satisfying a condition precedent to Defendant's liability under the Guarantee.
The Court need not reach, and does not reach, the sufficiency of Plaintiff's allegations concerning the other conditions precedent pled in the Complaint.
B. Abstention
Defendant moves this Court to abstain from exercising its jurisdiction over this action, in light of related proceedings now underway in state court in California.
The Complaint states claims for breach of contract and seeks damages for a breach which is alleged to have already occurred. Defendant's attempt to cast this action as an action for a declaratory judgment in order to avoid the rigorous abstention analysis otherwise applicable is therefore unconvincing. See Village of Westfield v. Welch's, 170 F.3d 116 (2d Cir. 1999) (applying Colorado River analysis rather than less stringent Wilton analysis to action which sought both damages and a declaration, rather than purely declaratory relief). Accordingly, a Colorado River analysis is appropriate.
Abstention pursuant to Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), is premised on the existence of parallel state court proceedings. Dittmer v. County of Suffolk, 146 F.3d 113, 117-18 (2d Cir. 1998) ("[A] finding that the concurrent proceedings are 'parallel' is a necessary prerequisite to abstention under Colorado River."); see, e.g., Gregory v. Daly, 243 F.3d 687, 701-02 (2d Cir. 2001) (explaining that the mere fact that parallel proceedings are pending in state court is insufficient to justify abdicating the virtually unflagging obligation to exercise federal jurisdiction) (citing Colorado River at 817). "Suits are parallel when substantially the same parties are contemporaneously litigating substantially the same issue in another forum." Dittmer, 146 F.3d at 118.
Here, Borrower has filed a complaint against instant Plaintiff's predecessor in interest in California state court, seeking to prevent foreclosure against the Property under the Loan and to clear title to the Property. See Millstein Decl. Ex. 2. Defendant is not a party to that action, and neither claim in the California court is brought pursuant to the Guaranty or appears likely to resolve issues concerning the Guaranty. Accordingly, the California action involves neither substantially the same parties nor substantially the same issues. Abstention is therefore unwarranted, and Defendant's Motion to Abstain is DENIED. III. CONCLUSION
The Court finds that the Complaint states a facially plausible claim for breach of contract and further finds that this action is not parallel to the state court action in California. Accordingly, the Motion docketed at # 5 in this matter is DENIED in its entirety.
Defendant is directed to serve and file an Answer to the Complaint in this matter within thirty (30) days of the date of this Order. There shall be no extensions. Failure to answer timely may, on proper motion, lead to the entry of a default judgment.
SO ORDERED.
Dated: New York, New York
February 16, 2011
/s/_________
Deborah A. Batts
United States District Judge