Decided June 11, 2007.
DAVID O. WRIGHT, ESQ., Attorney for Plaintiff, Yorktown Heights, New York.
McCUSKER, ANSELMI, ROSEN, CARVELLI WALSH, P.A., By: Paul F. Carvelli, Esq., Attorneys for Defendant ExxonMobil Corporation, New York, New York.
PAUL, HASTINGS, JANOFSKY WALKER LLP, By: Paul R. Dehmel, Esq., Attorneys for Defendants Trammell Crow Corporate Services, Inc., Eric Lefcourt and Jack Walsdorf, New York, New York.
This is a most unusual case and comes before this Court with an atypical litigation history. Plaintiff claims that Defendants induced it into contracting to sell some of its land. Plaintiff charges that Defendants had no intention of honoring the contract but, instead, used the contract to induce Plaintiff to sell an even larger amount of land at what Plaintiff asserts was then a below-market price. Plaintiff suggests that the value of the land has decreased since it was sold by Plaintiff in December 2000. Plaintiff goes so far as to state that the property "is no longer worth" what Plaintiff received for it. Yet Plaintiff, rather than being pleased that the deal turned out better than it perhaps it originally appeared, seeks to rescind it, notwithstanding its acknowledgment that "it would be difficult to unscramble the eggs'", and to collect money damages. Defendants seem to agree that the property is no longer worth what was paid for it and allege that they are willing to give it back but say that Plaintiff does not have the financial ability to pay the money back. Plaintiff acknowledges that it presently does not have the money but asserts that it could raise it, perhaps by borrowing against the property. It seems illogical that Plaintiff could borrow more against the property than it is worth but that is no more illogical than an effort to rescind a transaction which, no matter how intended, seems to have ended up working out favorably to Plaintiff.
Plaintiff received at least $3.6 million for the property but claims that, if it could be developed, it would be worth $10 million. But, as Plaintiff argues, the local municipality has refused to issue the necessary zoning and other approvals, which is the subject of another litigation. Additionally, Plaintiff also points out other, competing projects have been developed and are now in place in the neighboring area which, according to Plaintiff, greatly depreciates the attractiveness of the property in issue.
This action was commenced in the New York State Supreme Court, Westchester County in late 2001, seeking money damages for duress, undue influence, fraud, breach of lease and breach of contract. Defendants removed the action to the United States District Court for the Southern District of New York, invoking federal jurisdiction on the basis of diversity of citizenship. Plaintiff did not contest the propriety of the removal. Once in federal court, Defendants moved, pre-answer, to dismiss the action. On April 26, 2002, United States District Judge Colleen McMahon ruled that Defendants' motion to dismiss should be granted as to all but one claim. Judge McMahon denied Plaintiff's request to amend its complaint so as to assert a claim for rescission.
Plaintiff, apparently recognizing that its sole remaining claim was doomed to failure, moved to dismiss it, apparently for the purpose of accelerating appellate review by the United States Court of Appeals for the Second Circuit of Judge McMahon's dismissal of the other claims. While it may be unusual for a party to seek to dismiss one of its claims, the case took an even stranger turn. In its appellate brief, Plaintiff disclosed that two of its limited partners and one of the Defendants were, at time the action was filed, residents of the same state — a fact fatal to federal diversity jurisdiction over the case. The Second Circuit, on November 3, 2003, while chastising all parties for failing to alert Judge McMahon to the absence of subject matter jurisdiction before she expended considerable judicial time on the case, nevertheless remanded the action to the District Court for a determination of the jurisdictional issue. See Adrian Family Partners I, LP v. Exxon Mobil Corp., 79 Fed. Appx 489 (2d Cir. 2003)(unreported). The District Court apparently concluded that subject matter jurisdiction was indeed lacking, as the case was returned to state court. Plaintiff's appeal was thus successful, though not in the usual sense. Plaintiff did not succeed in obtaining an appellate determination that Judge McMahon's dismissal was incorrect; instead, Plaintiff obtained an appellate determination that effectively freed it to litigate its claims anew in another forum. In essence, Plaintiff scored a legal mulligan, enabling it to replay the game on a different course.
While Defendants, naturally, blame Plaintiff for failing to point this out earlier, Plaintiff rejoins that Defendants were aware of this state of affairs.
Upon return to state court in 2004, Plaintiff amended the complaint — asserting the rescission claim that Judge McMahon refused to allow two years earlier on the ground that Plaintiff had already had enough time to assert such a claim. The parties then engaged in discovery. Prior to January 2007, this action was assigned to the Commercial Division and was supervised by Hon. Kenneth W. Rudolph, J.S.C., then the only Justice assigned to the Division. On December 6, 2006, Justice Rudolph held that discovery was complete and that the case was ready for trial. These motions for summary judgment by Defendants followed.
Although Plaintiff complains that there were still open discovery requests from both sides at the time that Justice Rudolph ruled discovery over, Plaintiff does not allege that summary judgment should be denied on that ground, i.e. Plaintiff does not contend that there are facts that Defendants have which would warrant denial of the motions but Plaintiff has not had a chance to discover them.
Plaintiff asserts that Defendants obstructed and delayed disclosure and failed to disclose. Plaintiff claims that, by reason of Defendants' disclosure conduct, the Court should draw negative inferences against Defendants for purposes of this motion. According to the schedule submitted by Plaintiff (Ex. 30), it was seeking documents and a deposition from a title company and two depositions of employees of Defendant Trammell Crow Corporate Services, Inc. Plaintiff also indicates that it was seeking documents regarding a 1031 exchange and miscellaneous documents requested in certain letters (with no specification as to what these documents might be). Most significantly, subject to two exceptions to be discussed infra, Plaintiff never explains how any of these matters relate to the pending motions or how non-disclosure of these items prejudiced its ability to oppose these motions. Plaintiff, subject to one exception discussed infra, does not specify what inferences it would have the Court draw nor why those inferences would be justified based upon refusal to disclose.
This Court was assigned to the Commercial Division effective January 2, 2007. With the advent of a second Justice in the Commercial Division, a number of cases were reassigned, this case being one of them. Thereafter, the motions for summary judgment were fully submitted and the Court now proceeds to decide them.
Specifically, Plaintiff Adrian Family Partners I, L.P., ("Plaintiff" or "Adrian") has brought an action targeting both the entity that acquired its property, Defendant ExxonMobil Corporation ("Exxon Mobil"), and the real estate agents involved, Defendants Trammell Crow Corporate Services, Inc., ("Trammell Crow"), Eric Lefcourt ("Lefcourt") and Jack Walsdorf ("Walsdorf") (collectively the "Trammell Crow Defendants"). The Trammell Crow Defendants move (Motion Sequence Number 6) for an order pursuant to CPLR 3212 granting them summary judgment, and dismissing all counts asserted against them in Plaintiff's Amended Complaint. Exxon Mobil separately moves (Motion Sequence Number 7) pursuant to CPLR 3212 for summary judgment and to dismiss the Amended Complaint. Adrian opposes both motions and the Court consolidates them for purposes of determination.
Some of the events at issue took place prior to the merger of Exxon and Mobil and Plaintiff was then dealing with Mobil Oil Corporation ("Mobil"). For purposes of this Decision and Order, the Court refers to the merged entity, unless otherwise indicated, as it is undisputed that ExxonMobil is the successor to the rights and liabilities of Mobil.
This action arises from the sale by Adrian in December 2000 of 11.07 acres of commercial real property located in Yorktown, New York for a price of $3,900,000. One year after the sale was completed, Plaintiff commenced the present action. Plaintiff's Amended Complaint asserts nine causes of action, all of which are asserted against Exxon Mobil and five of which include the Trammell Crow Defendants. As against Exxon Mobil, Adrian asserts claims of breach of contract, rescission and restitution, money damages for fraud, damages for unjust enrichment, declaratory relief and breach of lease. Adrian includes the Trammell Crow Defendants in its action for rescission of the transaction based on assertions of duress, fraud and misrepresentation. In the alternative, Adrian seeks damages based on assertions of fraud and unjust enrichment.
Adrian asserts that the price was actually $3.6 million. The contract specifies that the purchase price is $3.9 million but that Seller agreed to put $300,000 aside to pay for road improvements necessary to develop the property.
The Amended Complaint asserts, in its introductory allegations, that Trammell Crow acted for Exxon Mobil in connection with the transaction; on the other hand, it also alleges later on that Trammell Crow had a duel role. Plaintiff's memorandum asserts that Trammell Crow owed Plaintiff a fiduciary duty, citing authority to the effect that a broker representing dual interests owes a fiduciary duty of disclosure. However, Plaintiff has put forward no facts that, if believed, would support a finding that Trammell Crow represented any one other than Exxon Mobil. Defendant Walsdorf asserts in his affidavit that Trammell Crow had an account with Mobil and then with Exxon Mobil. Nothing in Mr. Adrian's affidavit indicates that he regarded Trammell Crow as working for Adrian, much less any facts that would support such a view. The contract in question identifies Walsdorf of Trammell Crow as Purchaser's representative and states that Adrian did not work with any real estate agent in connection with the transaction. Accordingly, given the admission in Plaintiff's pleading, the language of the contract, and the absence of anything to the contrary, the Court finds that there is no basis for viewing Trammell Crow as anything other than Exxon Mobil's agent and rejects any suggestion by Adrian that Trammell Crow was a dual agent.
THE PRIOR DECISION OF THE FEDERAL DISTRICT COURT
While Defendants have provided the Court with the transcript of Judge McMahon's orally delivered decision granting their motion to dismiss, they have not articulated what consideration this Court should give it. Plaintiff asserts that Judge McMahon's decision is "completely irrelevant". It would also have this Court believe that Judge McMahon was focused merely upon "pleading deficiencies" and explains that the original complaint "prepared by prior counsel was poorly drafted". Putting aside the draftsmanship of Plaintiff's prior counsel, it is evident from a review of Judge McMahon's decision that Judge McMahon determined that, as to all but one of Plaintiff's claims, Plaintiff, under applicable New York law, did not have cognizable claims; her ruling was not limited to whether Plaintiff had failed to properly articulate them in the pleading.
As Chief Judge Charles D. Breitel wrote some thirty years ago, it is "an encyclopedia commonplace" that where a court is without jurisdiction, its acts and proceedings are of no force and validity and a mere nullity and void. Nuernberger v. State, 41 NY2d 111, 115 (1976). But, as he also trenchantly acknowledged, this principle is glib and capable of creating confusion given the elastic and versatile definition and use of the term "jurisdiction". See 41 NY2d at 116-118. It cannot be denied that Judge McMahon had at least some power to adjudicate at the time the case was before her and that the jurisdictional flaw amounted to no more than a latent defect exposed on appeal. All parties, and Judge McMahon, perceived that her court had jurisdiction to adjudicate the controversy at the time the matter was before her court. While her decision is no longer binding on the parties in the sense that it no longer provides a conclusive determination of the controversy, that does not mean that the pages upon which her decision is set forth are to be viewed as if composed in disappearing ink which faded from view upon the realization, more than a year and a half later, that complete diversity was absent. The law should not insist upon such a slavish devotion to strict formalism as to demand that this Court to pretend that Judge McMahon's apt analysis of the law applicable to this case simply did not exist. It would be otiose to require this Court to blind its eyes to Judge McMahon's well reasoned decision and to trod the same ground as if there were no footprints to mark the path.
That said, the case comes before this Court in a quite different context than it had before Judge McMahon. After the remand to the state court, Adrian filed an Amended Complaint adding several new causes of action including causes of action for rescission and restitution based upon the grounds of duress, fraud and misrepresentation. Substantial discovery was undertaken, including the depositions of the key parties, portions of which are provided in the papers before this Court. Thus, this Court has before it a different pleading and evidentiary material not extant when the case was before Judge McMahon. Most significant too is that Judge McMahon ruled upon a pre-answer motion to dismiss, while this Court must decide motions for summary judgment. Even if the federal standard under F.R. Civ. P. Rule 12(b) was exactly the same as the New York standard under CPLR 3211(a)(7), the standard to be applied on summary judgment is quite different. Thus, the consideration of the issues tendered on these motions must necessarily reflect the variation in the relevant legal context.
THE SUMMARY JUDGMENT STANDARD
The proponent of a motion for summary judgment carries the initial burden of production of evidence as well as the burden of persuasion. Alvarez v. Prospect Hospital, 68 NY2d 320 (1986). The moving party must tender sufficient evidence to demonstrate as a matter of law the absence of a material issue of fact. Once that initial burden has been satisfied, the burden of production shifts to the opponent, who must now go forward and produce sufficient evidence in admissible form to establish the existence of a triable issue of fact or demonstrate an acceptable excuse for failing to do so. Zuckerman v. City of New York, 49 NY2d 557, 562 (1980); Tillem v. Cablevision Systems Corp. ,38 AD3d 878 (2d Dept. 2007).
There is no requirement that proof be submitted in the form of an affidavit, as opposed to other acceptable forms, such as deposition testimony. Muniz v. Bacchus, 282 AD2d 387 (1st Dept. 2001).
The court's function on a motion for summary judgment is issue finding rather than issue determination. Sillman v. Twentieth Century Fox Film Corp., 3 NY2d 395 (1957). Since summary judgment is a drastic remedy, it should not be granted where there is any doubt as to the existence of a triable issue. Rotuba Extruders v. Ceppos, 46 NY2d 223 (1978). Thus, when the existence of an issue of fact is even arguable or debatable, summary judgment should be denied. Stone v. Goodson, 8 NY2d 8 (1960); Sillman v. Twentieth Century Fox Film Corp., supra.
In evaluating Defendants' motions in accordance with these standards, the Court will consider Judge McMahon's analysis of the applicable law. Though not strictly binding, it is nevertheless an excellent resource which provides a useful road map for the resolution of the matters at hand.
THE RELEVANT FACTS
The gravamen of Adrian's Amended Complaint is the claim that Exxon Mobil and the Trammell Crow Defendants took advantage of Adrian's stressed financial condition in order to negotiate the purchase of more property for less than fair market value. Adrian asserts that Exxon Mobil and the Trammell Crow Defendants began negotiations for the purchase of a small parcel of land that Exxon Mobil had previously leased from Adrian with the intention of one day causing Adrian to sell nearly all of its land at an unconscionably low price. Adrian asserts that it had no choice but to sell its land on the terms and conditions imposed by Exxon Mobil due to Defendants' alleged deceitful tactics and Adrian's poor economic condition. However, the sale took place after extensive negotiations, during which time Adrian was free to walk away and either retain possession of its land or seek an alternate purchaser.
Many of the essential facts are undisputed. In December 2000, Adrian and Exxon Mobil executed a Real Estate Contract of Sale pursuant to which Adrian sold to Exxon Mobil an 11.07 acre parcel of commercial real estate in Yorktown, New York (the "Purchase Parcel") for a price of $3.9 million. The instant action concerns the circumstances of that transaction and seeks, essentially, to undo it.
A. The Lease
Exxon Mobil's acquisition of the Purchase Parcel was the result of intensive negotiation and was caused, in large part, by Adrian's inability to secure from the Town of Yorktown the necessary approvals to develop a Stop Shop supermarket that it had sought for a portion of the property.
It is clear that Adrian perceives that the value of its property would have been significantly greater had it been able to develop the property as it saw fit. However, Adrian's development concepts were inconveniently impeded by various municipal requirements and regulations, some of which preexisted the facts in question here, some of which occurred as matters proceeded with Exxon Mobil, and some of which occurred later on. Adrian, alleging that the Town of Yorktown and its policy-making officials sought to deny it the right to develop its property and to punish it for exercising its constitutional rights, has prosecuted a federal civil rights action against the Town and town officials, entitled Joseph Adrian, et al. v. Town of Yorktown, Civil Action No. 03 CV 6604 (the "Yorktown Lawsuit"). See Adrian v. Town of Yorktown, 2007 WL 1467417 (S.D.NY) (Fox, M.J.).
Exxon Mobil has put before this Court an affidavit that Mr. Adrian submitted in the Yorktown Lawsuit, arguing that his assertions there belie his assertions here. In any event, the Court may take judicial notice of decisions rendered in the Yorktown Lawsuit as it involves the same plaintiff and the same property and some of the same events. See Lefkowitz v. Lurie, 253 AD2d 855 (2d Dept. 1998).
The present saga begins in early 1999 when Mobil entered into a Lease with Adrian concerning a small portion of the Purchase Parcel, a 28,000 square-foot (or .838 acre) parcel, for use as a gasoline service station (the "Pad Site").
The Pad Site had been the subject of substantial negotiation by and between at least two prospective occupants. In early 1996 Adrian, through its managing partner Joseph Adrian ("Mr. Adrian"), contacted a representative of Texaco to ascertain Texaco's interest in leasing the Pad Site. Thereafter, Mr. Adrian also began conducting negotiations with Mobil concerning the same site. Mr. Adrian, who testified at his deposition that he did not share with Texaco or Mobil his ongoing negotiations with the other, preferred Mobil as a tenant, as he ". . . felt that Texaco . . . was not as strong a tenant as Mobil." (Cavelli Aff., Ex. D., Adrian Dep. I at 42:22-24). Throughout Mobil's negotiations with Adrian, Trammell Crow served as Mobil's real estate acquisition and leasing agent, and Trammell Crow employee Walsdorf, who was assigned to the territory in which the Adrian property was situated, negotiated on Exxon Mobil's behalf with Mr. Adrian.
Ultimately, Adrian entered into the Lease with Mobil. Adrian executed the Lease on January 25, 1999 and Mobil executed the lease on March 16, 1999. Under the Lease, Adrian received $25,000 and a $100,000 loan; the loan having to be repaid to Mobil, with interest, upon termination of the Lease. The Lease required Mobil to seek all licenses and other authorizations needed for the construction, maintenance and operation of a retail service station on the Pad Site. "During the Preliminary Term, Tenant shall apply for all licenses, permits and other authorizations needed to construct, maintain and operate its retail station facility on the Premises and to construct and maintain all driveways in and out of the Premises that tenant desires." (Lease, § 3.1 [B]).
The Lease further provided that: (a) Mobil was supposed to use "reasonable efforts" to secure all permits (Lease, § 3.1 [B]); and (b) that the filing for such permits was to occur within a reasonable time after the commencement of the Preliminary Term. (Lease, § 3.1 [B]). The Preliminary Term commenced upon the end of the expiration of the "Interim Term" (Lease, § 3.1[A]), defined in Lease Section 2.6, as the earlier of: (a) nine months from execution [December 16, 1999]; or (b) the final, unappealable denial of a site plan submission of another entity, Yorktown Properties, LLC ("Yorktown Properties"), which was seeking to build a supermarket for Stop Shop on a separate portion of the Purchase Parcel, consisting of approximately 8.1 acres.
The Lease Agreement stipulated that Mobil was not required to pay rent (other than nominal rent of $1 per month) to Adrian until the Town of Yorktown approved its Site Plan Application. (Lease, §§ 3.2, 4.1, 4.2). In addition, and in the event that Mobil could not obtain approval within 2 years of entering into the Lease Agreement, the lease automatically would terminate. (Lease, § 3.1). The two year period would be up on the second anniversary of the Lease Date, i.e., the date Mobil signed the Lease (Lease, § 2.1). Since Mobil signed the Lease on March 16, 1999, the two year period would end on March 16, 2001. The Lease specifically prohibited Mobil from submitting its Site Plan Application throughout the "Interim Term". (Lease, § 2.6). Mr. Adrian gave deposition testimony that the parties agreed to the Interim Term because "the town planning board and planning department did not want a second application to come in during the first application." (Cavelli Aff. Ex., F., Adrian Dep. II at 363:15-18). B. Extension of Interim Period
According to Exxon Mobil, in late 1999, Mr. Adrian sought from it a four-month extension of the Interim Term, as the approvals for the Yorktown Properties' Stop Shop supermarket site were still pending. As a result, the earliest that Exxon Mobil could submit its Site Plan Application was April 15, 2000. According to Walsdorf, and consistent with the terms of the Lease, Mr. Adrian specifically requested that Exxon Mobil "do nothing that might jeopardize the Stop Shop application". (Cavelli Aff., Ex. E, Walsdorf Dep. at 50:5-7; 159:21-25; Lease § 2.6). On the other hand, Mr. Adrian asserts that the four-month extension was requested by Walsdorf. But, no matter who asked for it, it is undisputed that Adrian and Exxon Mobil executed a document, dated December 13, 1999 which extended the Interim Term for four months to April 15, 2000, due to the absence of a final, unappealable decision with respect to the Stop Shop plan.
Under the schedule set forth in the Lease, Exxon Mobil had a period of two years from the lease date in which to secure the "licenses, permits and other authorizations" constituting approval of its Site Plan Application. ([Lease § 3.1 [A]; Cavelli Aff. Ex. D, Adrian Dep. I at 85:2-87:8). Nevertheless, Mr. Adrian insists in this action that Exxon Mobil had an obligation to take action prior to the December 16, 1999 end of the Interim Term, and that its failure to do so constituted a breach of the Lease Agreement. (Cavelli Aff., Ex. D., Adrian Dep. at 65:9-16.). To that end, at his deposition, he testified:
Q:When were you first made aware that Exxon Mobil had breached the Lease Agreement?
A:I was made aware in December 99, when I found out that nothing had been submitted to the State for review or even discussions with the state to give a curb cut to this site, and no plans had been prepared . . .
* * *
Q:And what I'm asking you to do, I just want to make sure we're clear I want you to identify in the lease agreement that you signed on behalf of Adrian Family Partners, where you see that obligation on behalf of Mobil?
A:I've been trying to find it but I know that it doesn't exist within the four corners of this.
[Cavelli Aff., Ex. D, Adrian Dep I at 190:25-191:8; 65:17-25].
In opposing this motion, Mr. Adrian acknowledges that Exxon Mobil could not file anything until the Preliminary Term commenced, i.e., April 15, 2000, but asserts that, because preparing the filings would take some time, Exxon Mobil was "not permitted to do nothing until the magic date" arrived.
Exxon Mobil asserts it made substantial efforts beginning in March 2000 to obtain the requisite permits and approvals for the Site Plan Application, to wit: it obtained the services of a site plan engineer, Richard Calkins of Northeast Consulting, LLC. There is further evidence that discussions were held between Exxon Mobil and Mr. Adrian regarding the proposed curb placement for the site. Indeed, in opposing this motion, Mr. Adrian avers that the State Department of Transportation approved the Mobil "curb cut" in March 2000.
While Mr. Adrian submits evidence indicating that Calkins was not formally retained until at least April 15, 2000 (Adrian Aff., Ex. 6), he also submits deposition testimony from Calkins which indicates that Calkins wrote to the State Department of Transportation, seeking an indication as to whether DOT would give approval to the proposal, on March 24, 2000. (Adrian Aff., Ex. 3 at 28-29). Indeed, on December 6, 2000, Calkins wrote a memo to Defendant Lefcourt, copy to Walsdorf, in which Calkins referenced a tour of the site with Walsdorf in or about March 15, 2000.
C. The Discussions for a Pad Site Purchase
It is undisputed that in the Spring of 2000, Exxon Mobil and Mr. Adrian began discussions regarding a purchase by Exxon Mobil of the Pad Site, rather than continue with the Lease.
Calkins recounted visiting the Adrian property site in or about March 15, 2000 with Walsdorf and reported that the lease arrangement was being converted into a purchase. "At that time, it was mentioned that the purchase of the entire site in Yorktown would be worth investigating." (Adrian Aff. Ex. 8). Adrian views this statement by Calkins as reflecting a recommendation by Walsdorf that Exxon Mobil buy the Purchase Parcel — a recommendation kept secret from him.
In any event, the impetus for a change in direction appears to have been the difficulties that Adrian was having with Stop Shop. On May 1, 2000, Mr. Adrian wrote to the President of Stop Shop seeking a decision as to its intentions, stating that "[w]hile we would prefer to have Stop Shop, we will not continue to sterilize Mobil, Wendy's, our car wash, or other potential tenants from obtaining site plan approval, awaiting Stop Shop's decision. . . ." (Walsdorf Aff. Ex. A). A copy of this letter was faxed to Walsdorf on May 2, 2000.
According to Mr. Adrian, in May, 2000, Walsdorf communicated to him an offer from Exxon Mobil to buy the Pad Site for $840,000. He claims that, while he agreed to consider this offer, he continued to insist that Mobil come up with a final layout. However, the only support for this assertion is a reference to a June 8, 2000 fax to Walsdorf, consisting of a copy of a letter sent to Stop Shop requesting a decision from it and a handwritten cover sheet to Walsdorf saying that this was the end of the "fruitless attempts" with Stop Shop and stating: "As soon as Mobil has the final layout, we can proceed with the rest of land."
Notwithstanding Mr. Adrian's continuing missives to Stop Shop as late as June 1, 2000, Mr. Adrian claims in his affidavit that he actually terminated the Stop Shop transaction on March 20, 2000.
In any event, whether Adrian's deal with Stop Shop terminated in June, 2000 or earlier or later, there is nothing to indicate that Adrian took any action to try to urge Exxon Mobil to proceed with any approval applications. As noted, the only evidence submitted by Adrian is his June 8, 2000 letter which is, to the say the least, ambiguous as to what land was being referred to and, in any event, hardly carries a note of insistence. While Adrian also states that he never agreed orally or in writing that Exxon Mobil did not have to continue with permitting efforts, the fact remains that the parties were in regular communication and, at the very least, Adrian did not document any efforts to press Exxon Mobil to file any municipal applications. Instead, it entered into negotiations for a sale.
Walsdorf states that he thought that Adrian's efforts to negotiate with Stop Shop continued until August, 2000.
Adrian claims that Walsdorf stalled it for many months but that on September 25, 2000, Clark Maier of Trammell Crow sent him a draft purchase agreement, with a purchase price of $770,000 and with Adrian having to pay Trammell Crow's $45,000 commission. While Mr. Adrian asserts that this was a "reduced" price (from his claimed $840,000 offer), the Court notes that the terms are the same as those that Walsdorf reported having offered Adrian (and Adrian having accepted) on August 30, 2000 in a fax memo to Maier. (Walsdorf Aff., Ex. D).
Mr. Adrian states that there was an understanding that, at worst, the commission would be split "since Walsdorf was representing both sides to the deal." However, as previously noted, Adrian has offered no evidence to support this assertion. Mr. Adrian's reference to joint representation does not qualify since he offers nothing to support this conclusory assertion. Indeed, Mr. Adrian offers nothing to support this supposed understanding. Indeed, he refers to "[w]e" having an understanding and "we" splitting the commission, without explaining who exactly "we" are and the circumstances under which this understanding was reached.
Whether the terms were reduced or not, it is not disputed that on September 29, 2000, Adrian sent back to Maier, with a copy to Walsdorf, a copy of the proposed contract for the Pad Site, marked to show Adrian's proposed changes. Of some interest, the marked-up contract has, in its printed portion, a purchase price of $770,000 but requires Adrian to put $250,000 in escrow for use by Adrian for construction-related expenses that were Adrian's obligation. The marked-up contract makes no provision for Adrian to pay Trammell Crow's commission and refers to Walsdorf of Trammell Crow as Exxon Mobil's representative. Moreover, the Court also observes that, while Section 1(j) refers to a legal description of the property being sold as attached as Exhibit "A", the document before the Court does not contain any Exhibit "A".
Mr. Adrian states that substantially all of his changes were accepted and that he was sent an execution copy on October 3, 2000. He claims that Trammell Crow "simply attached our signature page to the prior draft". The Court notes that the marked-up draft (Dehmel Aff., Ex. G) does not have any signatures (p. 14); the "by" lines are blank. The version identified by Mr. Adrian as the execution copy (Dehmel Aff., Ex. H) has signatures on those lines, purporting to be the signatures of Elaine M. Adrian and Joseph M. Adrian, general partners of Adrian, though both bear a date of September 26, 2000. Moreover, the purported execution copy, while referring to a legal description of the property being sold as attached as Exhibit "A", the Exhibit A included within the document states "( SELLER TO ATTACH)".
The same document is also annexed as Exhibit N to the affidavit of David J. Fisher, Exxon Mobil's Real Estate Specialist.
According to David J. Fisher, employed by Exxon Mobil as a Real Estate Specialist, though Exxon Mobil received a proposed contract marked up and executed by Adrian and dated September 26, 2000, Exxon Mobil never signed it. He states that it was his responsibility to sign it and he did not do so. Fisher avers that Exxon Mobil instructed Trammell Crow to contact Adrian and explore a transaction for the purchase of the Purchase Parcel.
The Court observes that it was Mr. Fisher who signed the Lease as Attorney-in-Fact for Mobil.
Mr. Adrian states in his affidavit that he believes he saw a fully-executed copy of the contract for the purchase of the Pad Site. However, he never states the reason for this belief. He admits he cannot explain why he did not retain a copy, a statement which is mystifying in and of itself, as it implies that he definitely did see a fully-executed contract (as opposed to his more tentative assertion that he believes he saw one) and that he was in a position to "retain" it. It defies comprehension that a sophisticated real estate investor, developer and appraiser would not have retained a copy of an executed land contract, if one, in fact, existed.
Nonetheless, Adrian asserts that a fully-signed contract exists and that Defendants have failed to produce it. Defendants maintain that Exxon Mobil never signed the contract and that they cannot produce what does not exist. Since Adrian has not given any reason for his professed belief that he saw a fully signed contract, and since he has offered no admissible evidence that would support a finding that any fully signed contract exists, the Court cannot conclude that any fully signed contract exists or ever existed. Likewise, the Court cannot fault Defendants for not producing a document which there is no evidence ever existed.
Mr. Adrian asks why "they" would make his changes, attach a copy of his signature page, and send it back to him, if "they didn't mean for us to understand it was agreed?" Even assuming the postulates to Mr. Adrian's question, the answer seems apparent — Defendants wanted Adrian to have a typed copy of what they supposed he had signed. Mr. Adrian's question more aptly gives rise to another question: Why would Adrian believe that the Pad Site deal was agreed to if Exxon Mobil hadn't yet signed the document, bearing in mind that there had been an approximately one and one-half month delay between the time that Adrian signed the Lease and the time that Fisher had signed it for Mobil?
In an attempt to answer the question as to why Adrian would think that the Pad Site deal was done, Mr. Adrian alleges he had a new survey done and that at the end of October, 2000, a title commitment was issued for $800,000, effective September 25, 2000. (Adrian Aff., Ex. 13). Because Defendants have not produced the order placed for this title policy, or any of their communications with the title company, Mr. Adrian asks that the Court infer that Defendants sent the title company a copy of the Pad Site agreement and asked Stewart Title to issue a title policy. The Court agrees that, from the fact that the title company sent Trammell Crow a title commitment, which appears referable to the Pad Site (given the date and the amount of insurance), it seems reasonable to infer that Trammell Crow sent the title company a proposed Pad Site contract and asked it to issue a title commitment for title insurance. However, the Court cannot infer that Exxon Mobil (rather than Trammell Crow) sent the proposed contract or asked for title insurance. While the Court does view Trammell Crow as Exxon Mobil's agent, the Court cannot infer that Trammell Crow sent the title company a fully executed contract. There is no evidence that a fully executed contract ever existed or that Trammell Crow had it, and there is no evidence that the title company would issue a title commitment only if presented with a fully executed contract.
Mr. Adrian alleges that in October, 2000, he was asked by Walsdorf to obtain tax maps, surveys and other information relating to the Pad Site and provide that documentation to Mark Reenstierna, Exxon Mobil's appraiser. Mr. Adrian avers that he provided the documentation to Reenstierna and, on October 27, 2000, toured the Pad Site with Reenstierna. Adrian states that Reenstierna told him that Reenstierna was aware that there was a price for the Pad Site and he, Reenstierna, was "just creating documentation for the file". Mr. Adrian asserts that he is a local appraiser and that he did research on comparable sites and provided information to Reenstierna (see Adrian Aff. Ex. 22), supplementing this submission as late as November 4, 2000.
Mr. Adrian states that in early November, 2000, Maier of Trammell Crow asked him for a metes and bounds description of the Pad Site. Adrian sent a legal description of the Pad Site to Lefcourt, copy to Walsdorf, on November 13, 2000. (Adrian Aff., Ex. 23).
Mr. Adrian annexes deposition testimony from Fisher indicating that Trammell Crowe would have ordered a survey in preparation for closing.
D. The Purchase Parcel Purchase
Adrian alleges that all of these preliminaries were a front designed to conceal Exxon Mobil's real agenda, which was to buy the entire 11.07 acre parcel at a price below market. Of some interest, Adrian annexes deposition testimony to the effect that Fisher did not remember participating in by which Trammell Crow and Exxon Mobil decided to seek to acquire more property from Adrian. The Court notes that Fisher's affidavit states that he did not sign the Pad Site contract and that "Exxon Mobil authorized Trammell Crow to contact Adrian and explore a transaction for the purchase of the Purchase Parcel. . . ." Fisher does not state that it was he, rather than someone else at Exxon Mobil, who made this determination.
In any event, Mr. Adrian alleges that on or about November 17, 2000, Walsdorf called to set up a meeting. He states that Walsdorf and Lefcourt met with Mr. Adrian that afternoon and announced "good and bad news." The bad news was that they were refusing to purchase the Pad Site, but the good news was that they would buy all of the property for $2.8 million. Adrian states that he ordered them off his property.
In any event, Lefcourt sent Adrian a fax at 8:40 p.m. on November 17, 2000, a proposed contract for the Purchase Parcel, proposing to have Exxon Mobil buy it for $3.9 million. Then, according to Fisher, Exxon Mobil sent a draft contract to Adrian on or about December 4, 2000, a copy of which is attached as Exhibit P to Fisher's affidavit. Fisher states that Mr. Adrian made handwritten changes to the draft and returned it. According to Fisher, Mr. Adrian's changes were incorporated in the final version of the document. Mr. Adrian states that Exhibit P is a draft that he received by fax from Lefcourt on November 30 and claims that Exxon Mobil did not accept any of his changes "except matters of form".
Mr. Adrian asserts that the timing of this fax is "highly unlikely" because the fax was sent from Fairfax, Virginia and the meeting had occurred just that afternoon. The fax is addressed to "Brian" at 914-245-8351 (Fisher Aff., Ex. O) which is the same fax number that appears on Adrian's fax cover sheet (see Fisher Aff., Ex. N). In any event, Mr. Adrian does not deny receipt of the fax.
Mr. Adrian alleges that, during this sequence of events, he was told the closing had to occur by December 5, a demand attributable to Exxon Mobil's desire to invoke Section 1031 of the Internal Revenue Code. Mr. Adrian claims that the time pressure imposed by Exxon Mobil "prevented [him] from taking any meaningful action". Mr. Adrian claims that the closing date was changed to December 8 but on that date he learned that the 1031 deadline was December 12, 2000.
According to Mr. Adrian, on December 4, 2000, Lefcourt sent him a new demand: an option to Exxon Mobil to purchase an auto body shop (the sole property remaining to Adrian after the Purchase Parcel). Mr. Adrian asserts that the proposed price was half the value of the body shop. Mr. Adrian avers that, on December 8, 2000, Lefcourt faxed a new version of the Option to Purchase demanding that Adrian pay off all indebtedness on the body shop (a $375,000 mortgage) and that Adrian could not lease the property or any portion thereof. A closing was set for December 12, 2000.
It appears that two separate contracts were signed relative to the acquisition by Exxon Mobil of the Purchase Parcel. A Real Estate Contract was signed by Adrian (through Joseph and Elaine Adrian) on December 9, 2000 (the "Real Estate Contract"). (Fisher Aff., Ex. A). Exxon Mobil signed the document on December 12, 2000.
This contract, too, lacked a legal description on Exhibit A.
Mr. Adrian avers on that December 11, 2000, the night before the closing, he was told that Exxon Mobil was going to renege on its promise not to put a car wash on the Purchase Property for 20 years.
On December 12, 2000, Adrian and Exxon Mobil signed a "host of documents" and the sale of the Purchase Parcel closed. The closing was attended by Mr. Adrian, his wife (Elaine Adrian), their attorney, David Steinmetz, Esq., Michael Corbit (of the title company) and Lefcourt. No Exxon Mobil employee attended.
Pursuant to the Real Estate Contract, the purchase price for the Purchase Parcel was $3.9 million, of which $300,000 was placed in escrow on account of offsite road improvements. According to the Escrow Agreement (Fisher Aff., Ex. Q), the property did not have the offsite improvements required for development for a retail commercial use. It was agreed that Adrian's maximum liability for the required improvements was $300,000. (Fisher Aff., Ex. Q).
The parties agreed to terminate the Lease and, as part of the Lease Termination Agreement, the $100,000 loan was forgiven. (Fisher Aff., Ex. R).
The Real Estate Contract reflects that a provision under which Exxon Mobil would agree not to build a car wash on the Purchase Parcel was deleted.
The parties also signed an Option to Purchase the auto body shop for $600,000. (Fisher Aff., Ex. S). A provision in the Real Estate Contract states that Mr. and Mrs. Adrian agreed to subject the land on which their auto body business is situated to certain protective covenants and competitive use restrictions.
At his deposition, Mr. Adrian acknowledged he did not ask to speak with any Exxon Mobil employee at the Closing, although he was present at the Closing "for probably at least three hours or more." (Cavelli Aff., Ex. D, Adrian Dep. I at 212:12-16; 156:16-23). He also testified that his attorney, David Steinmetz, Esq., was present "to make sure we didn't sign our entire lives away" and that Mr. Steinmetz did not comment on the transaction. ( Id. at 145:24-25).
Adrian points out that Reenstierna valued the Pad Site at $800,000 and the Purchase Parcel at $4.8 million, both as of October 27, 2000.
E. Adrian's Yorktown Lawsuit
Although in the current action Adrian essentially lays blame for its financial difficulties at the feet of Defendants, it is noteworthy that Adrian has another suit pending — the Yorktown Lawsuit — in which it asserts the Town of Yorktown is to blame for the same financial difficulties at issue here.
Mr. Adrian's December 7, 2005 affidavit in that lawsuit (Ex. C to Carvelli Aff.) asserts, among other things, that the Town of Yorktown's "decision, by map issued October 5, 2000 [before the sale of the Purchase Parcel to Exxon Mobil] not to include our property in the Hunterbrook Sewer District" had the "effect" to "sterilize the property," essentially rendering it unable for development. The affidavit further indicates that the Town's determination "was fatal, and finally caused [Adrian] to lose most of [Adrian's] property in December 2000." (Cavelli Aff., Ex. C, [Adrian Aff. ¶¶ 4.C, 22]. The federal affidavit alleges that, as a result of this determination Mr. Adrian indicated he ". . . was not able to obtain financing that could have saved the property, and [Adrian] lost it shortly thereafter, in December 2000." ( Id. at fn. 2).
In the federal affidavit, Mr. Adrian concedes that Exxon Mobil extended to Adrian the only proverbial olive branch that saved it from financial ruin: to wit:
We sold the property to Exxon Mobil in a distress sale, for $3.6 million. This was essentially a loss, on a property, which should have been worth $10 million for a reasonable development. The sales price reflects the fact that we had been denied any economic use." ( Id. at 15 n. 10).
Mr. Adrian thus admits Adrian's property had little to no economic use at the time it was sold to Exxon Mobil and that Adrian's financial predicament at the time, whatever it was, was caused by the Town of Yorktown's failure to approve the use of the Adrian property in the manner that Adrian desired. CPLR 3212(b) specifically permits consideration, on motions for summary judgment, of "written admissions". Statements made by parties or their counsel in affidavits or briefs may constitute informal judicial admissions which may be held against them in other cases. See, e.g., Matter of Liquidation of Union Indemnity Insurance Co., 89 NY2d 94, 103-104 (1996); Morgenthow Latham v. Bank of New York Co., 305 AD2d 74 (1st Dept. 2003); see also Festinger v. Edrich, 32 AD2d 412 (2d Dept. 2006).
The Amended Complaint asserts nine causes of action. The First and Second Cause of Action seek money damages for breach by Exxon Mobil of an alleged agreement to purchase the Pad Site only. The Third, Fourth, and Fifth Causes of Action seek rescission and restitution by reason of duress, fraud, and misrepresentation, respectively. The Sixth Cause of Action seeks money damages for fraud. The Seventh Cause of Action asserts a claim for unjust enrichment. The Eighth Cause of Action demands a declaratory judgment that the Purchase Option for the auto body shop and the Non-Exclusivity Clause with respect to the car wash are void and unenforceable. The Ninth Cause of Action asserts a claim for breach of the Lease.
The Court will approach the Third through Eighth Causes of Action first, since the disposition of those claims will provide greater clarity for analysis of the First and Second Causes of Action. In particular, the First, Second and Ninth Causes of Action make sense only if the Purchase Parcel transaction is unwound. Further, as previously noted, the Court will take into account, as relevant, the previous decision by Judge McMahon as set forth in her carefully considered decision from the Bench.
A. The Third, Fourth and Fifth Causes of Action (Rescission and Restitution)
Adrian's Third, Fourth and Fifth Causes of Action are asserted against all Defendants and rescission of the Real Estate Contract for the Purchase Parcel for reasons of duress (Third), fraud (Fourth) and misrepresentation (Fifth). Each fails as a matter of fact and law.
Rescission is an extreme action that seeks to return parties to the status quo by placing them into the same or equivalent position they were in prior to entering into a voidable contract. See, Marshall v. Alaliewie, 304 AD2d 1026, 1027 (2d Dept. 2003) (stating that rescission "is to be invoked only when there is lacking complete and adequate remedy at law and where the status quo may be substantially restored") (citations omitted).
When a party has been induced to enter into a contract on the basis of fraud, misrepresentation or other wrongful conduct, that party has three options: (1) immediately rescind the contract; (2) bring an action in equity to rescind the contract based on the alleged wrongful conduct; or (3) retain the benefits of the contract and seek damages. See, Fitzgerald v. Title Guarantee and Trust Co., 290 NY 376, 378-79 (1943); John Berg Inc. v. Associated Spinners Inc., 201 Misc. 627, 629-30 (City Ct. of the City of NY, 1951).
Here, Adrian's initial complaint asserted in 2001 did not seek rescission of the Real Estate Contract. Instead, Adrain did not interpose it until 2004, more than three years later. While it could be said that some of the delay is not Adrian's doing (in that Judge McMahon refused to allow it to interpose this claim and ultimately its action was entirely dismissed and not effectively reinstated until after it was determined that federal subject matter jurisdiction was lacking), Adrian cannot avoid the consequences of delay. First, Judge McMahon refused on April 26, 2002 to permit such an amendment. Second, the delay due to the lack of subject matter jurisdiction is as much Adrian's fault as Defendants' since it appears to this Court that, at a minimum, all parties were aware, or should have been aware, of the relevant circumstances.
Moreover, as Judge McMahon observed in 2002, there is no evidence (including in the Amended Complaint) that Adrain ever offered to return the funds it received from Exxon Mobil. Specifically, there is no dispute that Adrain distributed approximately $1,900,000 of the funds it received to its general and limited partners within months of the transaction. (Carvelli Aff., Ex. F, Adrian Dep II at pp. 275-284). Likewise, there is no dispute that Adrian used the remaining funds to purchase real property in Yorktown for $1,285,000 ( Id. at 286-287). Moreover, Mr. Adrian has testified under oath that, absent a mortgage, Plaintiff lacks the ability to return the money it received from Exxon Mobil. [See Dehmel Aff. Ex. C at 177).
In opposing summary judgment, Mr. Adrian, as previously noted, has expressed the view that the property is no longer worth what Exxon Mobil paid for it. Accordingly, his argument that Adrian could obtain the funds needed for a repayment from a mortgage on the property makes no sense. It is illogical that Adrian could obtain a mortgage for greater than the current value (even assuming that Exxon Mobil was willing to allow Adrian to mortgage the property for purposes of a buy-back).
Moreover, Mr. Adrian avers, in a different context, that the Town of Yorktown's refusal to include the property in the sewer district precluded Adrain from obtaining financing in 2000. Since there is no indication that the Town has changed its position since that time, there is no reason to believe that financing is available now.
Mr. Adrian also suggests that the funds could be raised by capital contributions from partners. But Mr. Adrian does not identify who these people might be, what their financial status is, and their willingness to provide any money. Mr. Adrian's argument that Adrian could raise the money is belied by his argument that, in 2000, Adrian was in such bad fiscal shape that it had no choice but to capitulate to Exxon Mobil's demands. Assuming those statements to be true, Mr. Adrian offers no explanation as to how the finances of those involved in Adrian's affairs have improved since then. If Adrian could not call upon its partners in 2000 to stave off Exxon Mobil, there is no reason to believe that Adrian could do so today.
Adrian argues that CPLR 3004 provides that restitution may not be denied "because of a failure to tender before judgment restoration of" the benefits of the deal to the other party to the transaction. CPLR 3004 stipulates that the court may make tender of restoration of benefits a condition of its judgment.
The Court agrees that Adrian was not required to tender restoration of benefits prior to suit or even to allege in its pleading that it was willing to do so. See Allen v. Westpoint-Pepperell, Inc., 945 F.2d 40, 47 (2d Cir. 1991). However, it seems pointless to condemn the parties, and the Court, to a protracted trial on the issue of rescission where the complaining party has not even made a prima facie showing of financial ability to restore the purchase price to Exxon Mobil. This is not now a motion to dismiss; this is a motion for summary judgment. CPLR 3004 does not require the Court to await the final judgment before assessing the complaining party's ability to restore benefits. See Gregory v. Garrett Corp., 589 F.Supp. 296 (S.D.NY 1984).
On this motion, Defendants have made out a prima facie case that Plaintiff does not have the financial ability to make restoration, pointing out that Adrian had distributed or used all of the money received from Exxon Mobil in 2000 and that its only known bank account had just $79.23 in it as of December 31, 2005. In response to this showing, Adrian was required to come up with evidence that would show that it has the ability to make restoration. It wholly failed to do so. Its conclusory assertion that it "stands ready" to do so is simply not good enough, on a motion for summary judgment. For this reason, Adrian's rescission claims must fail. Yet, there are other, further reasons why each of Adrian's rescission claims — whether grounded in duress, fraud, or misrepresentation — are insufficient.
The Third Cause of Action asserts that Plaintiff was compelled to enter into the Real Estate Contract for the Purchase Parcel because of duress. Plaintiff claims that Defendants' conduct put Plaintiff in a position in December 2000 where Exxon Mobil was "able to force" Plaintiff into accepting Exxon Mobil's unilaterally proposed changes to the alleged deal, in September 2000, to the sale of the Pad Site. Mr. Adrian concedes in his affidavit that he did not have a gun to his head. He relies upon the "economic equivalent".
Under New York law, "[a] party seeking to avoid a contract on grounds of economic duress shoulders a heavy burden." International Halliwell Mines, Ltd. v. Continental Copper Steel Indus., Inc., 554 F.2d 105, 108 (2d Cir. 1976). Adrian has fallen well short of showing facts that would create a triable issue on the claim of economic duress.
Adrian proceeds on the premise that Defendants created economic duress when Exxon Mobil refused to proceed with the purchase of the Pad Site.
Under New York law, a contract is voidable on the ground of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his free will. Austin Instrument Corp. v. Loral Corp., 29 NY2d 124, 130 (1971). Existence of economic duress is demonstrated by proof that one party to a contract has threatened to breach the agreement by withholding performance unless the other party agrees to some further demand. 805 Third Avenue Co v. M.W. Realty Associates, 58 NY2d 447, 451 (1983). However, a mere threat by one party to breach the contract by not performing does not itself constitute economic duress. It must also be shown that the threatened party could not obtain equivalent performance from another party and that the ordinary remedy for breach of contract would not be adequate. Austin Instrument Corp. v. Loral Corp. supra, 29 NY2d. at 130-131.
To the extent that Adrian posits its economic duress claim on the theory that Exxon Mobil had already breached, or was threatening to breach the Lease signed in 1999 with Mobil, its claim is entirely without merit. Nothing in the Lease required that Mobil submit its applications by a date certain; it provided only that the Lease would terminate in two years' time if the approvals were not obtained. As Judge McMahon stated, a covenant to reasonably seek the required approvals could be fairly implied in the Lease and Plaintiff could have sued for specific performance or for money damages. Moreover, any dispute over whether Exxon Mobil was, or was not, timely seeking approvals, played out over several months and Plaintiff had ample time to exercise its free will or seek relief in court. C.B.S. Rubbish Removal Co. v. Winters Waste Services of New York, Inc. , 18 AD3d 790 (2d Dept. 2005).
Likewise, to the extent Adrian asserts that Exxon Mobil engaged in economic duress by having Walsdorf tell Mr. Adrian in November, 2000 that Exxon Mobil would not proceed with the contract for the Pad Site only, its claim falls far short of what is required. There are two principal reasons for this. First, it is well settled that "a party cannot be guilty of economic duress for refusing to do that which it is not legally required to do." Edison Stone Corp. v. 42nd Street Development Corp., 145 AD2d 249, 252 (1st Dept. 1989). Exxon Mobil did not sign the Pad Site contract and, as discussed, infra, without a contract signed by Exxon Mobil, Exxon Mobil was not required to buy the Pad Site. Exxon Mobil was not legally required to proceed with the purchase of the Pad Site in light of the fact that no enforceable contract existed for that transaction. Further, even if it is assumed that Adrian genuinely believed that there was a basis for enforcing such a contract (such as because of part performance or because of estoppel or "confluence of documents"), it is apparent that Exxon Mobil genuinely disagreed. The existence of a legitimate dispute regarding whether the contract itself even existed precludes a finding of wrongful conduct on Defendants' part. Stewart M. Muller Construction Co. v. New York Telephone Co., 50 AD2d 580 (2d Dept. 1975), affirmed, 40 NY2d 995 (1976).
Moreover, even assuming that a Pad Site contract existed and that Exxon Mobil breached it by refusing to perform, "[a] mere breach of contract does not alone constitute duress." Colonie Constr. Corp. v. DeLollo, 25 AD2d 464, 465 (3d Dept. 1966). As noted above, there must be a further showing that the aggrieved party could not make an equivalent contract elsewhere and that the ordinary contract remedies were inadequate. Austin Instrument, Inc. v. Loral Corp., supra, 29 NY2d at 130.
Mr. Adrian states that he had no choice because he was destitute. He says that he had no funds because Exxon Mobil "tied up our property", paying nothing. However, this refers only to the Pad Site, not to the entire Purchase Parcel, which was not "tied up" until Adrian signed the Real Estate Contract. Recognizing this, Mr. Adrian points to the fact that in October, 2000, he found out that the Town had not included the property in the sewer district, which would have precluded bank financing. While acknowledging he could have contacted other oil companies (Texaco, Hess) or other major companies (Wendy's) who had expressed strong interest in the property, he states that it would have taken a long time to make a new deal and he had $20,000 per month in obligations and $275,000 to Glar Holding coming due. He also argues that he did not have the resources to litigate with the largest company in the world.
Adrian made the very same argument to Judge McMahon and this Court completely agrees with her rejection of it:
To the extent that plaintiff wants me to assume that its pre-existing economic problems were so great that it literally did not have time to pursue legal redress for breach of contract, I am constrained to note that this does not create an inadequate remedy at law. Plaintiff's economic problems were not of defendants' making, and are not alleged to be so. Thus, no duress.
It is well settled that "the existence of financial pressure and unequal bargaining position are insufficient to constitute economic duress," [ Edison Stone Corp. v. 42nd Street Development Corp., supra, 145 AD2d at 256] because "[a] defense of duress cannot be sustained by a contracting party who has simply been bested in contract negotiations by the hard bargaining' of another contracting party . . . even when the hard bargainer knowingly takes advantage of his counterpart's difficult financial circumstances." Regent Partners, Inc. v. Parr Dev. Co., Inc., 960 F. Supp. 607, 612 (E.D.NY), affirmed, 131 F.3d 131 (2d Cir. 1997).
Financial pressures, even when coupled with inequality in bargaining position, do not, without more, constitute duress. Gubitz v. Security Mutual Life Insurance Co. of New York, 262 AD2d 451, 452 (2d Dept. 1999).
The federal court in David Associates, Inc. v. Health Management Services, Inc., 168 F. Supp. 2d 109, 116 (S.D.NY 2001), rejected the complaint of a contracting party who sought to void an agreement on the grounds of economic duress indicating:
A sophisticated party is not deprived' of its free will' simply because it finds itself in a legal cul-de-sac, withdrawal from which will inevitably cost it money, where the party had constructive (and some actual) notice of the problems looming on the horizon. 168 F.Supp.2d at 117.
As Judge McMahon aptly stated:
That these final negotiations took place against the backdrop of plaintiff's financial difficulties is of no moment. Neither is the fact that plaintiff thinks it could have obtained more for the property had defendants not taken advantage of its weakened financial condition. As a matter of law, since the defendants did not cause plaintiff's financial distress, they were privileged to drive a hard bargain and to take what advantage they could of the circumstances in which they found the Plaintiff. Onix Credit Alliance v. Bell Realty, 1995 WL 410074, and Kenneth D. Laub v. Domansky, [ 17 AD2d 289 (1st Dept. 1991)]
It is also clear that Adrian waived its opportunity to raise the defense of duress in this matter. "One who would disaffirm a contract made under duress must act promptly to repudiate it or be deemed to have elected to affirm." Sosnoff v. Carter, 165 AD2d 486, 491-492 (1st Dept. 1991) (citations omitted); accord, 110 Sand Co. v. Nassau Land Improvement Co. , 7 AD3d 497 (2d Dept. 2004). Here, Adrian waived the defense of duress when it took no remedial action over the twelve month period following the closing and when it cashed Exxon Mobil's $3.9 million check at closing more than six years ago.
The cases relied upon by Adrian in support of its claim that its delay was reasonable do not assist its position. For example, in Austin Instrument Corp. v. Loral Corp., supra, the complaining party made its demand three days after the last delivery on the second subcontract. 29 NY2d at 133. In Sosnoff v. Carter, 165 AD2d 486 (1st Dept. 1991), there was a showing of continued economic distress as well as a showing that the offended party made repeated complaints which were inconsistent with a finding of ratification. Here, Adrian has not shown any evidence that would support a finding that its economic distress continued after Exxon Mobil paid it $3.6 million. Nor has Adrian shown that, after the Purchase Parcel transaction closed, it made any protest to Exxon Mobil. Instead, it just kept the money.
2.Fraud and Mispresentation
Adrian's Fourth and Sixth Causes of Action each allege fraud, and seek remedies in the alternative — the Fourth Count seeks rescission and restitution and the Sixth Count seeks monetary damages. Adrian's Fifth Cause of Action seeks rescission and restitution based upon misrepresentation, the purpose of the Fifth Cause of Action being an attempt to avoid the scienter (intent to defraud) element of its fraud claim.
Whatever remedy Adrian seeks, however, its fraud claim fails to satisfy the threshold requirement under CPLR 3016(b) requiring that allegations of misrepresentation or fraud shall state in detail the circumstances constituting the wrong. Further, it is clear that self-serving, clouded, and conclusory allegations cannot defeat a motion for summary judgment. Zuckerman v. City of New York, 49 NY2d 557, 562 (1980).
Adrian has failed to show the existence of triable issues of fact on the requisite element of its fraud claim. The essential elements of a fraud cause of action are: (1) the making of a material representation by the defendant; (2) that the representation was false; (3) that the defendant knew it was false and made it with the intention of deceiving the plaintiff; (4) that the plaintiff believed the representation to be true and justifiably acted in reliance on it, and was deceived; and (5) that the plaintiff was damaged thereby. Small v. Lorillard Tobacco Co., Inc., 94 NY2d 43 (1999); 60A NY Jur. 2d Fraud and Deceit Sec. 232. Where the alleged misrepresentation relates to facts which would not appear to be exclusively within the defendant's knowledge, the complaint may be regarded as insufficient for failing to show why the plaintiff could not have ascertained such facts through the exercise of ordinary diligence. 320 Realty Management Co. v. 320 West 76 Corp., 221 AD2d 174 (1st Dept. 1995). In addition, each of the foregoing elements must be supported by factual allegations containing the details constituting the wrong sufficient to satisfy CPLR 3016(b). Cohen v. Houseconnect Realty Corp., 289 AD2d 277, 278 (2d Dept. 2001). Further, the heightened standard of proof of "clear and convincing evidence" applies to fraud claims. Mix v. Neff, 99 AD2d 180, 183 (3d Dept. 1984), citing Adams v. Gillig, 199 NY 314, 323 (1910); see ICD Holdings S.A. v. Frankel, 976 F.Supp. 234 (S.D.NY 199 0.
Here, the Amended Complaint contains only a single alleged "misstatement of fact" as the basis of Adrian's fraud and misrepresentation claims, to wit:
Exxon Mobil made misstatements of material fact. Centrally, Exxon Mobil misstated its intention to perform the September 2000 Agreement". (Amended Complaint, ¶ 39).
Accordingly, the only alleged "misstatement" attributed to Exxon Mobil is that it falsely claimed an intention to purchase the Pad Site. The Amended Complaint does not allege that the Trammell Crow Defendants made any representations to Plaintiff, much less ones that were false. The absence of any alleged false representations attributable to the Trammell Crow Defendants is fatal to Plaintiff's fraud counts against them.
There is no evidence to support the conclusion that Exxon Mobil's efforts to purchase the Pad Site were part of a scheme to defraud Adrian. To the contrary, when Adrian's deal with Stop Shop fell through, the Purchase Parcel became available and Exxon Mobil offered to purchase it — an offer which Adrian was free to decline. Adrian instead chose to negotiate and accept Exxon Mobil's offer and accepted the benefit of the bargain for the past six years.
Again, this Court entirely agrees with the prior analysis of Judge McMahon:
Here, the complaint alleges that the defendants misrepresented to plaintiff that Exxon Mobil was interested in purchasing the smaller Mobil lease parcel. The alleged reliance was that plaintiff did not explore other avenues and was thus forced to sell the entire 11.07-acre parcel at a grossly unfair price. But the complaint does not allege that defendants had a duty to tell plaintiff of Exxon Mobil's true intentions, and Exxon Mobil had no such duty, as a matter of law. Also, it was free to modify its offer, even after acceptance, but before final contracting. This sort of thing happens all the time in commercial negotiations. And while there was no binding contract, plaintiff was at all times free to speak with others, not just for the Stop Shop parcel, but even for the Mobil lease parcel, as well. Exxon Mobil could not stop plaintiff from selling the lease parcel, unless and until it signed a contract to purchase that parcel, which it never did.
So since ExxonMobil did not indicate any interest in buying the larger parcel until November 20th, 2000, plaintiff had no reason, based on the allegedly misrepresented interest in the smaller purchase, to keep the larger acreage off the market, except for its own preferences, which are irrelevant here.
In short, even if Exxon Mobil harbored secret desires to purchase all 11 acres, its tender of a contract to buy 3 of 11 acres could not, as a matter of law or logic, have induced plaintiff to refrain from exploring other avenues for the remaining 8 acres. Plaintiff's failure to explore other opportunities, which is alleged to be the source of its reliance, and hence its damage, cannot be laid at defendants' feet.
Finally, it is settled law that even intentionally false statements indicating an intent to perform under a contract are not sufficient to support a claim of fraud. Defendant must have made a misrepresentation that is collateral to the contract. Bridgestone/ Firestone v. Recovery Credit Services, 98 F.3d 13, 19 (2d Cir. 1996).
So any statement by the defendants indicating that Exxon Mobil only intended to purchase the smaller parcel is not actionable in fraud, as a matter of law. It is settled law in New York that a breach of contract is not also a fraud, and that an action for breach of contract cannot be converted into one for fraud merely by alleging that the defendant did not intend to fulfill the contract. Rochelle Associates v. Fleet Bank of New York, 238 AD2d 605 (1st Dept. 1986).
Plaintiff has attempted to detour around part of Judge McMahon's reasoning by alleging that Walsdorf, "[a]cting as broker for both parties", owed a duty to Plaintiff which was breached by participation in Exxon Mobil's scheme to mask its true intentions. (Amended Complaint, ¶ 43). However, Plaintiff, as previously stated, has failed to adduce any evidence that would support a theory of dual agency.
Any statements by Exxon Mobil to Adrian declaring its intent to perform on the Pad Site proposed contract would not give rise to claims of fraud or misrepresentation under New York law. Such statements would not be construed as misrepresentations of presently existing facts, but, instead, as expressions of future intent, which are not actionable. Brown v. Lockwood, 76 AD2d 721, 731 (2d Dept. 1980). ("It is the general rule that fraud cannot be predicated upon statements which are promissory in nature at the time they are made and which relate to future actions or conduct . . . Mere unfulfilled promissory statements as to what will be done in the future are not actionable as fraud."); Sabo v. Delman, 3 NY2d 155, 160 (1957); Deerfield Communications Corp. v. Chesebrough-Ponds, Inc., 68 NY2d 954, 956 (1986). Adrian's failure to identify a single misstatement of a presently existing fact proves fatal to its fraud and misrepresentation claims.
Finally, it is well settled that where a plaintiff alleges fraud predicated on a statement of intention as to performance of a contract, a plaintiff must demonstrate "a fraudulent misrepresentation collateral or extraneous to the contract." Deerfield Communications Corp., supra; Coppola v. Applied Electric Corp., 288 AD2d 41, 42 (1st Dept. 2001). Here, the basis of Adrian's claim for fraud (i.e., that Exxon Mobil did not consummate the purchase of the Pad Site, and allegedly concealed its intent not to do so in favor of the larger transaction for the Purchase Parcel) is nothing more than a breach of contract claim. Indeed, Adrian has provided no evidence of any representations made by Exxon Mobil, which exist separately from its claims for breach of contract. Accordingly, the fraud claim must fail as a matter of law.
B. The Unjust Enrichment Claim (Seventh Cause of Action)
Adrian's Seventh Cause of Action seeks damages for unjust enrichment. Where a plaintiff claims unjust enrichment, restitution is the remedy. New York City Economic Development Corp. v. T.C. Foods Import and Export Co., Inc., 11 Misc 3d 1087 (A) (Sup.Ct. Queens County 2006). Where a party seeks to recover based upon a theory of unjust enrichment it must "allege and prove that (1) defendant was enriched, (2) such enrichment was at the plaintiff's expense, and (3) in equity and good conscience the defendant should be required to return the money or property to the plaintiff." Id.
Here, Mr. Adrian's own affidavit shows that Exxon Mobil was not enriched in that the value of the Purchase Parcel is now less than it paid Adrian for it. Likewise, those statements show that Adrian was not injured by the sale to Exxon Mobil. Rather, to the extent that there has been a loss in value, as Mr. Adrian sets forth both in his affidavit to this Court and in his affidavit in the federal Yorktown Lawsuit, that loss resulted from the actions of the Town of Yorktown, including the Town's denial of Adrian's application to become part of the Hunterbrook Sewer District. (Ex. C. to Carvelli Aff., Adrian Affid., at 3, fn. 2). This belies any claim here of unjust enrichment.
C. The Claim for Declaratory Judgment (Eighth Cause of Action)
In a one sentence cause of action, Plaintiff's Eighth Cause of Action asserts Plaintiff is "entitled to a declaratory judgment declaring that the Purchase Option and Non-Exclusivity Clause are void and unenforceable" (Amended Complaint, ¶ 53).
CPLR 3001 states that "[t]he supreme court may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed. . . ." A declaratory judgment action "requires an actual controversy between genuine disputants with a stake in the outcome . . ." Watson v. Aetna Casualty Surety Company, 246 AD2d 57, 62 (2d Dept. 1998), citing Siegel, Practice Commentaries, McKinney's Cons. Laws of NY, Book 7B, CPLR C3001:3, at 433. Here, except to the extent that Plaintiff seeks to have all of the documents relating to the December 12, 2000 transaction set aside on the ground of duress, fraud or misrepresentation, there does not appear to be any controversy between the parties as to the Purchase Option for the auto body shop or the Non-Exclusivity Clause regarding the car wash. There is no indication that Exxon Mobil has attempted to enforce any rights under the Purchase Option or Non-Exclusivity Clause. Since the Non-Exclusivity Clause is contained in the Real Estate Contract for the Purchase Parcel, Plaintiff's challenge to the Clause falls with the failure of Plaintiff's challenge to the Real Estate Contract. If it was Plaintiff's intention to seek to void the Purchase Option for the same reasons as underlie its challenge to the Real Estate Contract, that, too, fails. On the other hand, if there are other reasons for voiding or assailing the Purchase Option, they are not apparent to the Court and there seems to be no actual, live controversy regarding the Purchase Option. Thus, this cause of action must also be dismissed.
D. The Claims for Breach of Contract (First and Second Cause of Action)
The First and Second Causes of Action of Adrian's Amended Complaint allege that Exxon Mobil breached the Proposed Real Estate Contract for the Pad Site — the contract that Exxon Mobil drafted and sent to Adrian but never signed and ultimately rejected in favor of the larger transaction for the Purchase Parcel (which included the Pad Site). These claims are factually and legally deficient and should be dismissed.
These two causes of action make sense only in the light of Plaintiff's hope that it would prevail on its attempt to disavow the Real Estate Contract for the Purchase Parcel. That claim has failed and the two causes of action based on the purported agreement for the Pad Site must now fail.
Whether the parties did or did not make a binding agreement for the sale of the Pad Site, they subsequently made a binding agreement for the sale of the Pad Site and more. The subsequent agreement for the Purchase Parcel operates as a novation, effectively extinguishing any obligation under the alleged Pad Site agreement, even if one existed. See Beatie and Osborn, LLP v. Bank of New York, 15 AD2d 168 (1st Dept. 2005). The elements of a novation are: a previous valid obligation, an agreement by all parties to a new obligation, extinguishment of the old contract, and a valid new contract. Wasserstrom v. Interstate Litho Corp., 114 AD2d 952 (2d Dept. 1985). Assuming that there was a Pad Site contract the other elements are all clearly present. Indeed, Mr. Adrian concedes that Exxon Mobil refused to go through with the Pad Site deal, leading to a new agreement to sell the Pad Site and more. Obviously, once the Pad Site was sold as part of the Purchase Parcel, it could not be sold again by Adrian to Exxon Mobil, since Exxon Mobil had already acquired it.
Of course, if there was no Pad Site contract, these causes of action would fail for that reason.
Additionally, the First Cause of Action proceeds on the assumption that Exxon Mobil signed the Pad Site contract. However, the evidence demonstrates that Exxon Mobil did not execute the proposed contract for the Pad Site. Exxon Mobil prepared a draft of the Proposed Contract, had it sent to Adrian and received a return copy signed by Mr. and Mrs. Adrian, but never ultimately agreed to the transaction and never signed the draft contract. Instead, Exxon Mobil negotiated with Adrian to purchase the entire Purchase Parcel. Accordingly, there was no contract for the Pad Site to breach. Adrian cannot possibly establish the elements of breach and resultant damages.
Simply stated, one cannot breach a contract that never legally existed. The First Cause of Action runs afoul of the Statute of Frauds. Under New York law, "a contract for the sale of any real property is void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing." G.G.F. Properties, LLC v. Yu Mi Hong, 284 AD2d 427, 428 (2d Dept. 2001); see also, General Obligations Law § 5-703(2). No such signed writing exists that establishes an enforceable contract.
The Second Cause of Action, anticipating the Statute of Frauds problem, pleads the application of exceptions to the necessity for a signed writing: confluence of documents, part performance and estoppel. These defenses, however, are unavailing.
As to the "confluence of documents" argument, Plaintiff asserts that the Statute of Frauds may be satisfied by a combination of signed and unsigned writings referring to the same transaction. Horn Hardart Co. v. Pillsbury Co., 888 F.2d 8, 11 (2d Cir. 1989); Crabtree v. Elizabeth Arden Sales Corp., 305 NY 48 (1953). Plaintiff asserts, without legal authority, however, that the contract which never was signed by Exxon Mobil, together with "the extensive documents otherwise generated by Exxon Mobil concerning the transaction, would satisfy this test." The Court disagrees. As stated, Plaintiff has cited the no legal authority for the proposition that the exercise of drafting a proposed contract equates to an enforceable contract; neither has Plaintiff identified which of the "extensive documents otherwise generated" by Exxon Mobil, together with the unsigned draft contract, would suffice to satisfy the Statute of Frauds.
As to the "part performance" argument, Plaintiff submits that if Exxon Mobil prepared the September 2000 contract, and then ordered a title report and appraisals, and went about other steps "unequivocally referable" to the contract, Exxon Mobil could be barred by the related doctrines of Part Performance and Equitable Estoppel from denying the existence of the contract. Rose v. Spa Realty Associates, 42 NY2d 338, 344 (1977). The Court disagrees. As to Plaintiff's "part performance" argument, it appears Plaintiff is suggesting that the mere request for a title report and appraisal creates an enforceable contract for the subject property. Plaintiff has failed to meet the standard of showing that its part performance of the proposed contract was "unequivocally referable" to the contract. "In order to do so, [Plaintiff] needed to demonstrate that the conduct was "unintelligible or at least extraordinary', explainable only with reference to the oral agreement". Lowinger v. Lowinger, 287 AD2d 39, 45 (1st Dept. 2001) (citations omitted). Ordering a title report and appraisal in anticipation of a contract is not conduct toward the performance of the contract.
Plaintiff's claim that Defendants should be estopped from denying the existence of the unsigned contract also is without merit. Although Plaintiff asserts it has met the standard for promissory or equitable estoppel because there allegedly existed (1) a clear and unambiguous promise; (2) a reasonable and foreseeable reliance by the promisee, and (3) an unconscionable injury sustained as a result of that reliance ( Rogers v. Town of Islip, 230 AD2d 727 (2d Dept. 1996)), no such showing has been made by Plaintiff. This argument must fail, because Plaintiff cannot be said to have reasonably relied on a proposed, unsigned contract for the purchase of the Pad Site. Even if such reliance could be found to be reasonable, however, Plaintiff waived its estoppel argument when it entered into the contract for the Purchase Parcel transaction and consummated the deal. Accordingly, Plaintiff has no defense to the application of the Statute of Frauds in connection with the unsigned contract for the Pad Site.
E. The Claim for Breach of Lease (Ninth Cause of Action)
Adrian's Ninth Cause of Action seeks damages based upon Exxon Mobil's alleged breach of the Lease with Mobil. The Amended Complaint alleges only that "[b]eginning in December 1999, Exxon Mobil breached the Lease Agreement by failing to commence site plan applications required under that agreement." (Amended Complaint, ¶ 10].
Most fundamental, the Lease was terminated pursuant to written agreement. It is undisputed that the parties executed an Agreement to Terminate Lease. (Fisher Aff., Ex. R). In that document, Adrian released Exxon Mobil from any claim for breach of the Lease Agreement and Exxon Mobil forgave the $100,000 loan. Adrian has no basis for suing for breach of a terminated lease.
Further, Adrian has failed to identify any provision in the Lease Agreement that Exxon Mobil allegedly breached. When asked at his deposition to identify the source of Exxon Mobil's alleged obligation to commence site plan applications as of December 1999, Mr. Adrian conceded: "I know that it doesn't exist within the four corners of [the Lease] . . ." [Carvelli Aff., Ex. D, Adrian Dep. I at 65:17-25). .
It is also undisputed that the parties agreed, in writing, to extend the Interim Term of the Lease Agreement to April 15, 2000 (Fisher Aff., Ex. C), thus defeating any obligation that otherwise may have existed on Exxon Mobil's part in December of 1999 to commence site plan applications. Moreover, the Lease expressly provided that Exxon Mobil had two years from the lease date in which to secure the "licenses, permits and other authorizations" constituting approval of its Site Plan Application. [Lease at § 3.1A; Carvelli Aff., Ex. D, Adrian Dep. I at 85:2-87:8]. There is no evidence that reflects that Exxon Mobil would not have submitted an application in time for the Town of Yorktown to make a determination by March, 2001. Indeed, there is evidence from both Exxon Mobil and Mr. Adrian that Exxon Mobil made at least some effort beginning in March 2000 towards preparing its application and seeking approvals.
ORDERED that the motion by Defendant Exxon Mobil Corporation pursuant to CPLR 3212 for summary judgment dismissing the Amended Complaint of Adrian Family Partners I, L.P. is granted; and it is further
ORDERED that the motion by Defendants Trammell Crow Corporate Services, Inc., Eric Lefcourt, and Jack Walsdorf pursuant to CPLR 3212 for summary judgment dismissing all counts asserted against them in Plaintiff's Amended Complaint is granted; and it is further
ORDERED that counsel shall appear at a conference before the Court to be held on June 29, 2007 at 9:30 a.m. for the purpose of scheduling further proceedings, including proceedings with respect to Exxon Mobil's counter claim.
The foregoing constitutes the Decision and Order of this Court.