Ballston Ave. Dev., LLC v Wolf

[*1] Ballston Ave. Dev., LLC v Wolf 2006 NY Slip Op 52645(U) [21 Misc 3d 1116(A)] Decided on June 13, 2006 Supreme Court, Saratoga County Nolan, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 13, 2006
Supreme Court, Saratoga County

Ballston Avenue Development, LLC, Plaintiff,

against

Karl Wolf, SUSAN WOLF, WOLF HI-ROC LANES, INC. and FRANK J. PARILLO, Defendants.



2005-2280



APPEARANCES:

KING, ADANG & ARPEY

Attorneys for Plaintiff

P.O. Box 4580

Saratoga Springs, New York 12866

ROBERT J. KRZYS

Attorney for Defendants Karl Wolf, Susan Wolf and

Wolf Hi-Roc Lanes, Inc.

107 Division Street

Amsterdam, New York 12010

WHITEMAN OSTERMAN & HANNA LLP

Attorneys for Defendant Parillo

One Commerce Plaza

Albany, New York 12260

Thomas D. Nolan, J.

Defendants Karl Wolf, Susan Wolf and their corporation, Wolf Hi-Roc Lanes, Inc. (collectively Wolf) entered into two agreements with Joseph Bonavita. The first agreement entitled, "Option to Purchase Real Property" (Option), granted Bonavita for $10,000.00 an option to purchase for $3,240,000.00 a 2.83 acre parcel of property in Saratoga Springs, New York for "twelve (12) months from date" (this "date" was not precisely defined in the option or elsewhere). Bonavita had the right to extend the option "to a date twenty-four (24) months from [*2]date" provided Bonavita (1) was proceeding "with due and timely diligence" to obtain municipal approvals for a commercial and residential project and (2) gave written notice to extend to Wolf "no later than 30 days prior to the expiration of the option period" and (3) paid an additional $10,000.00. If Bonavita were to exercise the option, rather than extend it, the agreement required that he give written notice to exercise to Wolf "no later than 21 days prior to the expiration of the option period". The option further called for the personal delivery of "any notices required to be given pursuant to the [agreement]". The option was signed by Wolf on July 9, 2004, and by Bonavita on June 11, 2004 and was initialed by Bonavita on July 20, 2004.[FN1]

The second agreement entitled, "Agreement as to Sale and Purchase of Real Property" (buy-sell agreement) denominated as "part of an Option Agreement", set the purchase price at $3,250,000.00, and afforded a credit against the purchase price for option payment(s) made. Wolf signed this agreement on July 9, 2004 and Bonavita signed on July 20, 2004.

Thereafter, Bonavita assigned all rights under both the option and buy-sell agreements to plaintiff, Ballston Avenue Development, LLC (Ballston), a business entity comprised of Bonavita and others, including two principals of the listing real estate broker, Capital North Real Estate, Inc.,[FN2] (Capital North) which, on June 15, 2005, secured a special use permit from the Planning Board of the City of Saratoga Springs for a mixed use development of business offices, professional offices, 150 residential condominiums, and amenities. The special use permit covered, not only, the 2.83 acre parcel, but also, two adjacent properties on which plaintiff holds purchase options. On July 19, 2005, Wolf's attorney, in correspondence to the realtor, Capital North, issued notice that Ballston's option had expired and that Wolf considered that the option agreement and buy/sell agreement had terminated. On July 20, 2005, in an attempt to extend the option, Ballston had delivered directly to Wolf a $10,000.00 check which Wolf did not accept. On September 2, 2005, Wolf contracted with defendant Frank J. Parillo (Parillo) to sell him the 2.83 acre parcel for $3,250,000.00.

In this action for specific performance, Ballston urges that the option was duly extended and that the buy/sell agreement remains viable and enforceable, and alternatively, seeks money damages based upon breach of contract, unjust enrichment, and fraud against Wolf. In a counterclaim, defendant Wolf alleges frivolous conduct by Ballston for having commenced a non-meritorious action and seeks sanctions and costs for the legal fees and other expenses [*3]incurred as a result of the filing of this action and a notice of pendency against the property.

Now, defendant Wolf moves for summary judgment dismissing Ballston's complaint and for judgment on his counterclaim, and Ballston cross-moves for summary judgment directing specific performance of the agreements and dismissing the counterclaim. In addition to the pleadings, Wolf submits its reply to Ballston's combined discovery demands, Ballston's answers to Wolf's interrogatories, and the affidavits of Karl Wolf and Susan Wolf along with an attorney's affirmation.

In brief, Wolf asserts, even giving Ballston the benefit of a construction that the agreements did not come into existence until July 20, 2004, the date Bonavita signed the buy-sell agreement and initialed the option, that Ballston was required, no later than June 20, 2005, to have notified Wolf personally and in writing that it was extending the option and to have paid an additional $10,000.00. Next, Wolf contends, once again giving Ballston the benefit that such agreements did not become effective until July 20, 2004, that Ballston was required under the option agreement to have given written notice no later than June 29, 2005 that it intended to exercise the option and then to close within 30 days after the option expired, namely August 19, 2005.

In opposition to Wolf's dismissal motion and in support of its motion for specific performance, Ballston relies upon affidavits from counsel, from Bonavita and from Stefan Sias (Sias), and Scott Duffy (Duffy) and Loren Sitzer (Sitzer), realtors with Capital North who were involved in negotiating the transaction and who had worked to secure the special use permit.

In brief, Ballston asserts that on June 17, 2005, two days after the issuance of the special use permit, and before both the June 20, 2005 or June 29, 2005 notice dates, Duffy and Sias met with defendant Karl Wolf and made it clear to him that the project was now viable, that Ballston intended to go forward with the purchase, and explained what still had to be accomplished, including additional municipal approvalsbefore construction could begin. According to Duffy and Sias, Wolf expressed at that time no hesitation about consummating the sale and did not warn them that Ballston's rights to extend or exercise the option would soon lapse [FN3] and to the contrary and notably, specifically said that an extension of the option was "not a problem". In sum, Ballston contends that it thus timely informed Wolf that it intended to exercise its right to extend the option for the second year and that Wolf thus misled it and "lulled" it into believing that the deal was still solid and would be consummated.

In reply, Wolf denies having mislead Ballston and denies stating in effect "that everything was fine" or there was "no problem" or indicating in any manner that strict compliance with the option and buy-sell agreements would not be required. Wolf adds that Ballston never confirmed to him that it possessed the financial wherewithal to close the transaction.[FN4]

The court's role in adjudicating a motion for summary judgment is issue identification, not issue resolution. Speller v Sears, Roebuck & Co., 100 NY2d 38, 44 (2003). The movant must make a prima facie showing that it should prevail as a matter of law by tendering sufficient, [*4]competent evidence eliminating material issues of fact. Welch v Hauck, 18 AD3d 1096 (3rd Dept 2005). In making an assessment whether a material issue of fact exists, the court must view the evidence in the light most favorable to the party opposing the motion. Czarnecki v Welch, 13 AD3d 952 (3rd Dept 2004). So here, in determining Wolf's motion, the court must accept, unless preposterous, Ballston's version of the transaction, and in determining Ballston's cross motion, must accept, unless preposterous, Wolf's version. Deciding which version is credible is for the trier of fact. Rockefeller v Albany Welding Supply Co., 3 AD3d 753 (3rd Dept 2004).

In contract cases, "[A] clear and complete agreement will be enforced according to the terms set forth therein by the parties". CV Holdings, LLC v Artisan Advisors, LLC, 9 AD3d 654 (3rd Dept 2004). The court must first decide, as a point of law, if the contract is ambiguous, that is, subject to more than one interpretation, and if it is, parol evidence may be considered to discern the parties' intent; but if there is no such ambiguity, the court ought not stray beyond "the four corners of the agreement". Kass v Kass, 91 NY2d 554, 566 (1998); Hudock v Village of Endicott,AD3d, 814 NYS2d 286 (3rd Dept 2006); Comprehensive Health Solutions v Trustco Bank, N.A., 277 AD2d 861, 863 (3rd Dept 2000). A contract is unambiguous if its language has a "definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion". Greenfield v Philles Records, 98 NY2d 562, 569 (2002); quoting Breed v Insurance Co. of N. Am., 46 NY2d 351, 355 (1978).

When the terms of an option define the manner of its exercise or, in this case, the steps necessary to extend it, the optionee must act within the time and in the manner specified in the agreement to extend the option. Kaplan v Lippman, 75 NY2d 320, 325 (1990); LaManna v Wing Yuen Realty, Inc., 283 AD2d 165 (1st Dept 2001), lv denied 96 NY2d 719 (2001). Strict compliance is the articulated standard. Ittleson v Barnett, 304 AD2d 526 (2nd Dept 2003); Boghosian v SCS Properties, Inc., 299 AD2d 693 (3rd Dept 2002). For example, in Boghosian, supra , a 10 day delay in tendering a non-refundable deposit payment toextendan option beyond the initial 180 days period was deemed fatal with the court ruling that the late payment warranted summary judgment declaring the option had terminated.

Yet, this seemingly rigid principle has been relaxed in other cases in which equity afforded some protection to an optionee which failed to follow the exact letter of the contract, if the optionor timely acquired, i.e., before the option period had ended, actual knowledge that the optionee intended to exercise its right to extend and if the optionor was not prejudiced by the lack of strict compliance with the contract's procedure for extending the option. The mollifying principle is that "[I]n equitable actions a court is permitted to look beyond the technical formalities in contracts and ascertain whether the substance was met". Christy v Premo, 194 AD2d 910, 911, lv dismissed, 82 NY2d 803 (1993).

Some other cases illustrate this principle of equity. In Kaplan v Lippman, supra , while the option agreement required written notice of exercise to the optionor, the optionee gave written notice, not to the optionor, but to its attorney. Following the optionor's refusal to close, the optionee successfully sued for specific performance. The court concluded that "...under the facts of this case, where the [sellers] had actual notice within the specified time period that the [buyer] intended to exercise the purchase option...[the sellers] will be held to their agreement". see also 2M Realty Corp. v Boehm, 204 AD2d 620 (2nd Dept 1994) [De minimis defaults in [*5]complying with notice provisions of option agreement overlooked since the seller was not prejudiced and buyer had expended funds for improvements in anticipation of exercise of the option]; Christy v Premo, supra [Buyer's notice cancelling the contract, sent by facsimile transmission and regular mail, rather than by certified mail or registered mail as specified in the contract was sufficient notice and the seller was not entitled to judgment of specific performance because substance of the contract was met by buyer and court in equity could overlook noncompliance with technical formalities]; Weissman v Adler, 187 AD2d 647 (2nd Dept 1992) [Buyer's attorney, not buyer, sent letter and down payment in time to exercise the option but did not send it by certified mail, return receipt requested, or include signed contract of sale; such failure to follow the contract was found de minimis and excusable deviations, and specific performance would be granted if buyer proves lack of prejudice to seller and shows that improvements were made to the property in expectation of purchase]; Rodriguez v Baker, 182 AD2d 751 (2nd Dept 1992), lv dismissed 84 NY2d 847 (1994) [Option enforceable despite fact that attorney for buyer, not buyer, served notice of exercise of option not in the name of the buyer, but rather in the name of the buyer's corporation]. In a recently decided case Ballston cites, RR Chester LLC v Arlington Building Corp., 22 AD3d 652 (2nd Dept 2005), the failure of the buyer to strictly comply with a contractual requirement that a $5,000.00 down payment on a $8,000,000.00 purchase price be deposited in an escrow account rather than be held uncollected by an attorney did not justify either summary judgment declaring the contract null and void or dismissing the buyer's specific performance claims; rather,"considering all of the circumstances of this case including the disproportionately small amount of the down payment and the conduct of the parties" the court found that there was an issue of fact whether the such noncompliance was a material breach of the contract. , supra , at 654.

First, there is no issue of fact that Ballston exercised the initial option, since it did not give to Wolf written notice, or for that matter, any notice, that it intended to purchase the property at least 21 days before the option year expired, and it has not sought to close.

Here, the option agreement is clear and precise and not ambiguous in requiring Ballston to take three steps to extend the option for a second year: 1) give written notice to Wolf no later than 30 days prior to expiration of the initial option; 2) give that notice to Wolf by personal delivery; and 3) pay to Wolf an additional $10,000.00. Even if Ballston had until June 20, 2005 to take these steps, there is no issue of fact that Ballston completely satisfied or strictly complied with these three contractual requirements.

The court, on these motions or any other, cannot determine credibility. Accepting, as it must, evidence in the light most favorable to the party opposing a summary determination, the court cannot reconcile these conflicting versions and decide as a matter of fact and law whether the option has lapsed or was extended and thus still enforceable. Summary judgment does not lie in favor of either Ballston or Wolf.

Ballston's version of the facts, accepted as true, as it must be, at this juncture, concerning the June 17, 2005 meeting between two of its representatives, Sias and Duffy, and Karl Wolf demonstrates the existence of material issues of fact (1) whether Wolf acquired actual and timely notice that Ballston intended to extend the option for one year and (2) whether, by his words and conduct during that meeting, Wolf waived the right to insist that Ballston strictly comply with the contractual requirements to extend the option. [*6]

Also, there is evidence which demonstrates the existence of an issue of fact whether Wolf will suffer prejudice if those technical contractual requirements were relaxed. Although Wolf states (para 39, affidavit) that its subsequent contract with Parillo is "eminently more favorable [to it]",[FN5] Wolf does not produce evidence sufficient to justify a ruling, now, under all circumstances, as a matter of law, that Wolf will suffer prejudice of a magnitude that would justify a holding that Ballston's option has lapsed. On the one hand, the Wolf/Parillo contract does not condition the closing on further municipal approvals and thus Wolf would receive the sales price sooner, if the closing date were abided by and transaction closed. On the other hand, Wolf agreed to sell to Parillo for the same price that Ballston agreed to pay. Second, Ballston, Parillo, or any other purchaser will still have to satisfy additional municipal requirements before the contemplated or any modified project could be built, and from the terms of the contract, it is obvious that Parillo does not intend to take over the operation of the existing bowling alley located on Wolf's parcel. Third, the record shows that the existing special use permit covers, not only, Wolf's property, but also, two additional properties which Wolf and Parillo do not control but on which Ballston still holds purchase options which do not expire until December 1, 2006 and May 31, 2007. Presumably, without these two other parcels under his control, Parillo would have to seek an amendment or modification of the existing special permit to reduce its boundaries to just Wolf's 2.83 acre parcel and thus potentially reopen, with all its attendant vagaries and vicissitudes, the earlier approval of the existing special use permit. Lastly, although not relevant to Wolf's prejudice, but relevant to the court's power to do equity,aside from the price for the option, Ballston stands to lose its investment of approximately $182,000.00 incurred in the lengthy process to satisfy the most important pre-condition to purchase, namely securing a special use permit, which will run with the three combined parcels of land, St. Onge v Donovan, 71 NY2d 507 (1988), and will inure to the benefit of Wolf or Parillo neither of whom made any investment to secure that permit.

Once again, Karl Wolf, in his recollection of events, denies that anything more than a cursory meeting occurred and that he gave Sias and Duffy no indication that anything less than strict compliance with the contract would be acceptable or that otherwise would have fairly lead Ballston to believe that the deal was intact. His version of events, accepted as true at this juncture, is sufficient to demonstrate an issue of fact sufficient to defeat plaintiff's motion for summary judgment on its specific performance cause of action.

One issue, however, can be determined now. Even if the court were to hold Ballston's actions frivolous, which it does not, Wolf would not be entitled to recover its costs and reasonable attorney's fees, since CPLR 8303-a, the statutory predicate for such awards, applies to actions to recover damages for personal injury, injury to property or wrongful death and not to contract actions. Browning Ave. Realty Corp. v Rubin, 207 AD2d 263 (1st Dept 1994), lv denied 85 NY2d 804 (1995). Wolf's reliance on 22 NYCRR § 130.1.1 is misplaced. That court rule affords authority to punish a party for conduct that is frivolous in prosecuting or defending an [*7]action, as contrasted with initiating a non-meritorious case.

Defendant's Wolf's motion is denied, without costs.

Plaintiff's Ballston's cross motion is granted to the extent that defendant's Wolf's counterclaim is dismissed and otherwise denied, without costs.

This memorandum shall constitute both the decision and the order of the court. All papers, including this decision and order, are being returned to plaintiff's Ballston's counsel. The signing of this decision and order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable provisions of that section relating to filing, entry and notice of entry.

So Ordered.

DATED: June 13, 2006

Ballston Spa, New York

HON. THOMAS D. NOLAN, JR.

Supreme Court Justice Footnotes

Footnote 1:Bonavita, in his opposing affidavit, explains that after he had initially signed, changes were made at Wolf's direction before Wolf signed, and that then he initialed each page of the agreement on July 20th agreeing to those changes. Wolf contends that Bonavita signed the option a second time in Rhode Island on July 20, 2004 relying upon an acknowledgment indicating that fact. Bonavita admits initialing the option agreement that day but does not address the assertion that he signed it a second time. This discrepancy is inconsequential.

Footnote 2:Disclosure was made in the buy-sell agreement by Capital North that two of its principals and one of its licensed sales agents were members of the limited partnership and that the Seller's interests thus were "to be compromised due to a conflict of interest during the negotiating process, as well as in the event of second party interest in purchasing the Property". (Buy-Sell Agreement, para 12).

Footnote 3:Both Sias and Duffy mistakenly believed the option was for two years.

Footnote 4:In late August 2005, during negotiations to resurrect the deal, a then, but now former, member of Ballston, disclosed his financial records showing sufficient funds to finalize the purchase.

Footnote 5:A copy of the Wolf/Parillo contract is included in Wolf's reply to Ballston's combined discovery demands. It permits Wolf to remove and retain all of its bowling alley equipment and fixtures, and allow Wolf to rent the premises for $16,650.00 per month through May 15, 2006, and is not conditioned on the issuance of any municipal permits or approvals.