Opinion
No. 4480–13.
05-14-2014
SCHENECTADY STATE STREET ASSOCIATES, LLC, Plaintiff, v. HORN CAPITAL REALTY, INC., Defendant.
O'connell and Aronowitz Neil H. Rivchin, of counsel, Albany, for Plaintiff. Goldman Attorneys PLLC Paul J. Goldman and Erika C. Browne, of counsel, Albany, for Defendant.
O'connell and Aronowitz Neil H. Rivchin, of counsel, Albany, for Plaintiff.
Goldman Attorneys PLLC Paul J. Goldman and Erika C. Browne, of counsel, Albany, for Defendant.
Opinion
RICHARD M. PLATKIN, J.
Defendant Horn Capital Realty, Inc. (“Horn Capital”) moves pursuant to CPLR 3212 for summary judgment on its counterclaim and dismissal of plaintiff's complaint. Plaintiff Schenectady State Street Associates, LLC (“SSSA”) cross-moves for summary judgment on its complaint and dismissal of defendant's affirmative defenses and counterclaim. Additionally, each party seeks an award of attorney's fees and costs.
BACKGROUND
On April 26, 2013, the parties entered into a Purchase Agreement (“Agreement”) whereby Horn Capital agreed to purchase from SSSA certain real property located at 2037 State Street, Schenectady, New York (“the Property”) for the sum of $2.6 million. The Property is improved with a commercial structure and leased to a tenant that operates a CVS pharmacy.
Pursuant to the Agreement, Horn Capital made an “Initial Deposit” of $10,000 in earnest money, which was placed in escrow upon execution of the Agreement. The Agreement further required Horn Capital to make an “Additional Deposit” of $190,000 into escrow following expiration of a 45–day “Contingency Period” established in Paragraph 7.1 of the Agreement. The Agreement refers collectively to the “Initial Deposit” and the “Additional Deposit” as the “Deposit”.
Horn Capital made the Initial Deposit as required. However, by letter dated May 28, 2014, it purportedly terminated the Agreement pursuant to Paragraph 7.1 and requested the return of the Deposit. SSSA asserts, without contradiction, that defendant terminated the Agreement after learning that Wal–Mart may be opening a store with a pharmacy near the Property.
SSSA commenced this action in August 2013, seeking to recover the entire Deposit as liquidated damages, together with the reasonable attorney's fees and court costs authorized to a “prevailing party” under the Agreement. It is SSSA's contention that Horn Capital did not validly terminate the Agreement pursuant to any of the contingencies outlined in Paragraph 7.1 and that Horn Capital's breach of the Agreement requires it to forfeit both the Initial Deposit, which had been placed in escrow, and the Additional Deposit, which did not become due until after the purported termination.
In its answer, Horn Capital raises a host of affirmative defenses and alleges a counterclaim. Defendant's principal contention is that SSSA's claim is barred by Paragraph 18.2 of the Agreement, which provides that in the event of a breach by purchaser, SSSA's “sole remedy at law or in equity” is “to retain the Deposit in accordance with Subparagraph 5.1(ii) as [SSSA's] agreed and total liquidated damages.” In the same paragraph, SSSA waives “any right to seek any equitable or legal remedies against [Horn Capital].” On the basis of these contractual provisions and the fact that the purported termination occurred before the Additional Deposit was due, Horn Capital maintains that SSSA may not obtain recovery of the Additional Deposit.
Prior to the taking of any discovery, Horn Capital initiated the instant motion practice. This Decision and Order follows.
ANALYSIS
Summary judgment is a drastic remedy and should only be granted if there are no material issues of disputed fact (Sillman v. Twentieth–Century Fox Film Corp., 3 N.Y.2d 395 [1957] ). In evaluating a motion for summary judgment, a court should simply determine whether material issues of disputed fact preclude the grant of judgment as a matter of law (S.J. Capelin Assoc. v. Globe Mfg. Corp., 34 N.Y.2d 338 [1974] ). The party moving for summary judgment has the initial burden of coming forward with admissible evidence to support the motion, so as to warrant the Court directing judgment in movant's favor; the burden then shifts to the opposing party to demonstrate, by admissible evidence, the existence of any factual issue requiring a trial of the action (see Zuckerman v. City of New York, 49 N.Y.2d 557 [1980] ).
This action calls for interpretation of the Agreement. In so doing, the Court must be “guided by basic principles of contract interpretation which instruct that a contract should be construed to give effect to the parties' intent as gleaned from the four corners of the document itself, provided that its terms are clear and unambiguous (Elmira Teachers' Assn. v. Elmira City School Dist., 53 AD3d 757 [3d Dept 2008] ), “[A] contract should be interpreted according to its plain and ordinary meaning and in such a manner as to give effect to all of its provisions” (id.; see TAG 380, LLC v.. ComMet 380, Inc., 10 NY3d 507 [2008] ). In so doing, it is “important to read the document as a whole to ensure that excessive emphasis is not placed upon particular words or phrases” (South Rd. Assoc., LLC v. International Bus. Machs. Corp., 4 NY3d 272, 277 [2005] ). Whether an agreement is ambiguous is a question of law to be determined by the Court (see Van Wagner Adv. Corp. v. S & M Enters., 67 N.Y.2d 186, 191 [1986] ). The test of ambiguity is whether the language in question is “susceptible of two reasonable interpretations” (Essex Ins. Co. v. Pingley, 41 AD3d 774, 776 [2d Dept 2007] ).
As stated above, Horn Capital's motion for summary judgment and its opposition to SSSA's cross-motion rely principally upon Paragraph 18.2 and Subparagraph 5.1(ii) of the Agreement. Paragraph 18.2 limits SSSA's remedy for Horn Capital's breach of the Agreement to retention of “the Deposit in accordance with Subparagraph 5.1(ii)”. The cited subparagraph provides that “if Buyer defaults or breaches with respect to this Agreement ... the Deposit shall be paid to Seller ... as Seller's agreed and total liquidated damages and its sole and exclusive remedy”. Based on these provisions and the fact that the purported termination of the Agreement occurred during the Contingency Period and prior to the time in which Horn Capital was obliged to make to make the Additional Deposit, defendant argues that SSSA's sole remedy is retention of the Initial Deposit. Relatedly, Horn Capital argues that it is the prevailing party in this litigation and, therefore, entitled to an award of attorney's fees under Paragraph 31.1.
In its cross-motion, SSSA recognizes that it is limited under the Agreement to retention of the Deposit as the “agreed and total liquidated damages and its sole and exclusive remedy”. However, SSSA argues that it is entitled to recovery of the entire Deposit-the $10,000 Initial Deposit together with the $190,000 Additional Deposit-regardless of the fact that the purported termination occurred during the Contingency Period and before the Additional Deposit was due to be made. SSSA emphasizes that Horn Capital's purported termination was not authorized under any of the five “Termination Conditions” established in Subparagraph 7.1(c).
It is apparent that Horn Capital's interpretation of the Agreement and relevant events is flawed in at least three important respects. First, nothing in the Agreement gave Horn Capital an unfettered right to terminate the Agreement, even during the Contingency Period. Rather, Paragraph 7.1 establishes a limited period in which Horn Capital was given the right to cancel the Agreement and obtain the return of its Deposit upon the happening of one of five specified Termination Conditions. While Horn Capital's termination letter of May 28, 2014 referenced this paragraph, it did not invoke any of the Termination Conditions prescribed therein. Further, SSSA has tendered proof that Horn Capital's purported termination was not based upon any of the Termination Conditions, and Horn Capital has not come forward with any proof to the contrary. As Horn Capital did not validly invoke the cancellation provisions of Paragraph 7.1 and has identified no other provision of the Agreement conferring a unilateral right of cancellation, the purported May 29, 2013 termination of the Agreement was a ity, and SSSA permissibly declared Horn Capital to be in breach.
Second, Horn Capital's obligation to make the Additional Deposit was not extinguished by its purported termination of the Agreement. Upon Horn Capital's breach, SSSA became entitled to recovery of the “Deposit” as its agreed and total liquidated damages. The term “Deposit” is defined in Section 4 as the “Initial Deposit” together with the “Additional Deposit”. Thus, the clear and unambiguous language of the Agreement entitles SSSA to retain a total “Deposit” of $200,000. Moreover, the fact that Horn Capital breached its obligation to make the Additional Deposit cannot defeat SSSA's recovery. “Although the plaintiff did not actually possess the [$190,000] and thus could not literally retain' that deposit, this does not preclude [plaintiff] from recovering the amount to which [it] is entitled pursuant to the agreement” (Elias v. Wal–Mart Stores, 224 A.D.2d 479, 481 [2d Dept 1996] ). Relatedly, Paragraph 31.1 clearly authorizes SSSA to maintain this action to enforce the foregoing terms of the Agreement.
Finally, Horn Capital cannot rely upon parol evidence concerning how the parties may have arrived at the amount of liquidated damages to limit or alter the clear and unambiguous terms of the Agreement. While Horn Capital asserts that it was advised during negotiations that the Additional Deposit was intended “to cover [SSSA's] costs of defeasance of [its] mortgage loan”, the plain text of the Agreement fixes the “agreed and total liquidated damages” at the sum of $200,000, representing the Initial Deposit of $10,000 and the Additional Deposit of $190,000.
Moreover, Section 2 of the Agreement includes a broad merger clause, by which any prior written or verbal agreements between the parties concerning the transaction embodied in the Agreement were superseded.
Interestingly, defense counsel seems to agree that “in light of the merger clause, any negotiations which occurred prior to the signing of the Purchase Agreement are not relevant to this proceeding” (Browne Aff. ¶ 9).
Finally, Horn Capital's reliance on the canon that “any ambiguities in a contract must be construed against the drafter (Jacobson v. Sassower, 66 N.Y.2d 991, 993 [1985] ) is without merit. Horn Capital has failed to establish any ambiguity in the Agreement. The pertinent provisions are susceptible to only one reasonable interpretation: in the absence of a valid cancellation pursuant to Paragraph 7.1, Horn Capital is liable to SSA for the entire “Deposit”, which consists of the Initial Deposit and the Additional Deposit. In any event, the present record shows that both parties were involved in the drafting of the Agreement, rendering the cited canon of construction inapplicable.
Based on the foregoing, the Court concludes that SSSA has demonstrated a prima facie entitlement to judgment as a matter of law on its cross-motion for summary judgment on its complaint and for dismissal of Horn Capital's counterclaim, which, in essence, seeks a determination of non-liability. Accordingly, the Court must consider the thirteen affirmative defenses raised by Horn Capital.
Insofar as Horn Capital argues that it should be permitted to take discovery on its various affirmative defenses, the request is denied. Under CPLR 3212(f), summary judgment may be denied as premature where the party opposing the motion demonstrates that further discovery may reveal evidence within the exclusive knowledge of the movant that would warrant denial of the motion (Green v. Covington, 299 A.D.2d 636, 637 [3d Dept 2002] ; Landes v. Sullivan, 235 A.D.2d 657 [3d Dept 1997] ; Halsey v. County of Madison, 215 A.D.2d 824, 824–825 [3d Dept 1995] ). Here, Horn Capital initiated the instant motion practice without taking discovery, and it has failed to articulate—much less establish through the submission of proof in admissible form—how further discovery would provide an evidentiary basis for the denial of the cross-motion.
Horn Capital's first, second, third, fifth, sixth, tenth, eleventh, twelfth and thirteenth affirmative defenses all challenge the legal merit of SSSA's claim for relief and are rejected for the reasons stated above. The fourth, seventh and eighth affirmative defenses, which allege “unclean hands”, “estoppel” and “lack of good faith” respectively, are unsupported by competent proof in admissible form. Accordingly, these affirmative defenses also are dismissed. Finally, Horn Capital's invocation of the statute of frauds, which is alleged at the ninth affirmative defense, has no relevance to this action.
Finally, as SSSA is the prevailing party, it is entitled to an award of attorney's fees and costs pursuant to Paragraph 31.1 of the Agreement.
Accordingly, it is ORDERED that defendant's motion for summary judgment is denied; and it is further
The Court has considered the parties' remaining arguments and contentions, but finds them unavailing or unnecessary to reach given the disposition ordered herein.
ORDERED that plaintiff's cross-motion for summary judgment is granted; and it is further
ORDERED that within twenty days from the date of this Decision & Order, plaintiff shall submit to the Court on notice to defendant a proposed judgment in accordance with the foregoing, accompanied by competent proof of attorney's fees and court costs for which recovery is sought under Paragraph 31.1 of the Agreement, and defendant shall have ten days from service of such submission in which to be heard on the form of the judgment and as to the amount and reasonableness of the requested court costs and attorney's fees.
This constitutes the Decision and Order of the Court. The original Decision and Order is being transmitted to counsel for the plaintiff; all other papers are being transmitted to the Albany County Clerk. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220, and counsel is not relieved from the applicable provisions of that Rule.
Papers Considered:
Notice of Motion, dated January 29, 2014;
Affidavit of Jonathan S. Horn, sworn to January 28, 2014, with attached exhibits 1–6;
Affidavit of Paul J. Goldman, Esq,. sworn to January 29, 2014;
Notice of Cross–Motion, dated February 27, 2014;
Affidavit of David Ray, sworn to February 24, 2014, with attached exhibits A–E;
Affirmation of Neil H. Rivchin, Esq., dated February 27, 2014;
Affidavit of Jonathan S. Horn, sworn to March 19, 2014;
Affidavit of Erika C. Browne, Esq., dated March 20, 2014.