Marion Scott Real Estate, Inc. v Rochdale Vil., Inc.
Annotate this CaseDecided on April 28, 2009
Supreme Court, Queens County
Marion Scott Real Estate, Inc.
against
Rochdale Village, Inc.
15138/07
Orin R. Kitzes, J.
In this action for breach of contract, account stated, unjust enrichment, quantum meruit, promissory estoppel, breach of the covenant of good faith and fair dealing, and damage to commercial reputation, defendant Rochdale Village, Inc. moves for an order granting summary dismissing the complaint, pursuant to CPLR 3211 and 3212. Plaintiff Marion Scott Real Estate, Inc. cross-moves in opposition and seeks an order granting summary judgment on the cause of action for breach of contract.
Plaintiff Marion Scott Real Estate, Inc. (MSRE) is the former managing agent of defendant Rochdale Village, Inc., a cooperative housing corporation located in Queens, New York. Rochdale Village is a Mitchell-Lama whose operation is governed by regulations promulgated by the New York State Division of Housing and Community Renewal (DHCR). The DHCR is responsible for overseeing the cooperative's actual operation, and appoints a member to the cooperative's sixteen member Board of Directors.
Plaintiff MSRE entered into a one year management agreement with Rochdale Village, dated June 1993, which was effective from July 1, 1993 to June 30, 1994. The contract states that after June 30, 1994, "it shall continue in full force and effect from month to month unless renewed or terminated as provided in the General Conditions of the Contract for Managing Agents. Notwithstanding the above, the contract shall not be effective or binding unless and until the approval of the DHCR is endorsed hereon".
Article 9 of the General Conditions of the Contract for Managing Agents (General Conditions) provides:
"The contract between the Agent and the Owner may be terminated as follows:
"(a) by mutual consent upon thirty (30) days written notice to DHCR;
"(b) by DHCR, with cause, such termination to be effective immediately upon notice to the [*2]Owner and Agent;
"(c) by DHCR, without cause, upon thirty (30)days written notice to the Owner and Agent;
"(d) by the Owner or DHCR effective immediately upon notice in the event a petition in a bankruptcy is filed by or against either the Owner or Agent, or in the event that either should make an assignation for the benefit of creditors or take advantage of any insolvency act;
"(e) by the Agent effective immediately upon notice if the Owner shall fail or refuse to comply with or abide by any rule, order, determination, ordinance or law of any Federal, State or Municipal Authority, upon giving twenty-four hours written notice mailed to the Owner at its address first hereinabove set forth; or
"(f) by the Owner upon not less than thirty days written notice to the Agent in the event of a
bona fide sale or demolition of property."
This termination provision is required to be included in the parties' contract (9
NYCRR § 1729-1.2[l]). The 1993 contract was approved by the DHCR.
The DHCR's regulations provide that "[s]ubject to the commissioner's approval, the housing company may renew the managing agent agreement for a year" (9 NYCRR § 1729-1.2[m]). The regulations also provide that the DHCR will advise the housing company and the managing agent in writing in those instances where either renewal of the agreement is not approved or an award of a percentage increment is not approved, and upon receipt of such advice the housing company shall either select a new management company, request that the commissioner approve the continuation of the present agreement without a percentage increment, or request that the commissioner reconsider and reevaluate the managing agent's performance (9 NYCRR § 1729-1.2[n]).
The management contract was renewed in either one or two year intervals, and each renewal was approved by the DHCR. The last renewal document states that a contract was entered into in February 1991, with subsequent extensions to "June 30, 199 ___05," that the parties wished to extend the contract, and agreed that:
"1. The Contract is extended for twelve(12) months, from July 1, 2004 to June 30, 2005.
***
"5. Unless thirty(30) days prior to the expiration of this contract, either the owner or the
agent gives thirty (30)days written notice to the other party and DHCR of its intention not to
renew, or DHCR gives such thirty(30)days written notice to both parties, this contract shall be
extended on the same terms and conditions for an additional 12 months ending June 30, 200. The
monthly managing agent fee for the extended year shall be the fee agreed to in Article 5.1 above,
modified by any DHCR authorized increments or by any lesser amount agreed to by the owner
and the agent, or by other adjustments provided for by DHCR."
Said renewal agreement was approved by the DHCR on October 6, 2004.Jane Berri,
the DHCR's [*3]Director of Housing Management Bureau, in a
letter dated September 21, 2004 and addressed to the then president of Rochdale Village, stated
that the DHCR had completed its performance evaluation of MSRE and that it found that the
managing agent had performed satisfactorily during the contract period ending June 30,2004.
Ms. Berri stated that the DHCR would:"approve an extension of your present contract for a 12
month period ending June 30, 2005 and, unless terminated, an additional extension for the 12
month period ending June 30, 2006 on the same terms and conditions, modified by any Division
authorized increments in the Project's Base Rate and Administrative Expense Fee, of by other
adjustments provided for by Division rule, regulation, order or directive, or by contract. The
extension to June 30, 2006 is contingent upon the agent's continued satisfactory performance."
Ms. Berri further stated in this letter that "[t]ermination is defined in Article 9 of the
Owner-Agent agreement. Also, the owner or the agent may elect not to renew as of June 30,
2005 by giving 30 days written notice to the other party and to DHCR."
The parties did not enter into a written extension agreement for the 12-month period ending June 30, 2006, and therefore the DHCR did not approve a written extension for the period ending June 30, 2006.
Rochdale Village's Board of Directors, at a meeting held on September 25, 2006, adopted a resolution which states as follows:
"WHEREAS the Management Contract of Marion Scott Real Estate, Inc., expires on June 30, 2006, and
"WHEREAS the New York State Division of Housing and Community Renewal has not yet issued their management evaluation, we do not envision anything less than a satisfactory evaluation and
"WHEREAS the New York State Division of Housing and Community Renewal authorizes two-year contracts with increases as approved by D.H.C.R..Marian Scott Real Estate, Inc., did not draw down increased fees July 31, 2005 to June 30, 2006.
"NOW THEREFORE LET IT BE RESOLVED that Rochdale Village, Inc., hereby extends
the Management Contract with Marion Scott Real Estate, Inc. for the period July 1, 2006 through
June 30, 2007, with increase in fee and administrative costs at the level authorized by D.H.C.R.
and such increases in the second year, July 1, 2007 to July 31, 2008, as the New York State
Division of Housing and Community Renewal authorizes."
However, Rochdale Village and MSRE did not execute a written extension
agreement for the period of July 1, 2006 through June 30, 2007 and for the period of July 1, 2007
through June 30, 2008, and no such agreement was approved by the DHCR.
On March 26, 2007 Rochdale Village held a regularly scheduled Board of Directors meeting, at which time the Board moved to terminate the services of MSRE and directed that it return all property of Rochdale Village to Rochdale Village Security; to bar MSRE personnel from reentering the Management Office or elsewhere on the property of Rochdale Village, except to retrieve personal items under the supervision of Security within a 24 hour period; and directed that the locks be changed at the management office, that the computer passwords be changed, barred employees and [*4]board members from discussing Rochdale Village's business with MSRE, and directed security to guard the management office until such time as the locks were changed.
Counsel for MSRE in a letter dated March 29, 2007 and addressed to the Board of Directors of Rochdale Village, stated that the Board's action in terminating the services of MSRE was a breach of contract and demanded that it be reinstated. Counsel stated that "[t]ermination is defined in Article 9 of the Owner-Agent agreement and may not be circumvented by the arbitrary action of the Board of Directors," and that legal action would be taken if MSRE was not reinstated.
Counsel for MSRE, in a letter dated April 23, 2007, and addressed to the president of Rochdale Village stated that the summary termination breached MSRE's contract, and demanded payment in full in the sum of $1,108,448.00 for the remainder of the contract.
General Counsel for Rochdale Village, in a letter dated April 25, 2007, in reply to the letter of March 29, 2007, stated that MSRE's contract was not in effect as it had not been approved by the DHCR, and therefore as there was no contract, no breach had occurred. Counsel stated DHCR had informed Mr. Scott and the Board of Directors that MSRE was on a month-to-month basis, which commenced in 2005 and had continued through its termination, and had been paid for the month in which it was terminated. Counsel thus stated that there was no breach of contract and no money due MSRE.
MSRE in a letter dated June 6, 2007 and addressed to the DHCR asserted that its extension agreement with Rochdale Village was signed by the DHCR on October 6, 2004 and ran through June 30, 2006, and that none of the conditions required to cancel the management services contract had been met. MSRE noted that the Board of Directors had voted to extend the contract for two more years through June 30, 2008, that the Board's termination of the contract was improper, and questioned why the DHCR allowed this to happen without notice to MSRE or the agency.
MSRE commenced the within action on June 15, 2007, and asserts claims for breach of contract, account stated, unjust enrichment, quantum meruit, promissory estoppel, breach of the covenant of good faith and fair dealing, and damage to commercial reputation, and seeks to recover the sum of $1,108,448.00, plus costs and attorney's fees on each of the causes of action. Defendant served its answer and interposed nine affirmative defenses.
Following the commencement of this action, Rochdale Village entered into a contract dated August 1, 2007 with Wentworth Property Management to act as its managing agent, which had been executed by the parties on July 25, 2007 and approved by the DHCR on July 27, 2007.
Defendant Rochdale Village now moves for an order granting summary judgment dismissing the complaint in its entirety. Plaintiff cross-moves in opposition and seeks an order granting summary judgment on its first cause of action for breach of contract.
It is well settled that the proponent of a motion for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law by tendering sufficient evidence in admissible form that demonstrates the absence of any material issues of fact (see Ayotte v Gervasio, 81 NY2d 1062, 1063 [1993]; Alvarez v Prospect Hosp., 68 NY2d 320 [1986]; Stahl v Stralberg, 287 AD2d 613 [2001]).
Plaintiff's first cause of action is for breach of contract. In order to sustain such a claim, plaintiff is required to prove (1) the existence of a contract, (2) plaintiff's performance under the contract, (3) defendant's breach and (4) damages (see Furia v Furia, 116 AD2d 694 [1986]). Here, it is undisputed that the parties entered into a contractual agreement in June 1993, with the approval [*5]of the DHCR, whereby MSRE performed as Rochdale Village's managing agent. In order for the management contract and all subsequent renewals to be effective, these annual agreement were required to be in writing and approved by the DHCR (9 NYCCR §§ 1729-1.2[j], [m]). It is noted that although the last renewal agreement states that a contract was entered into in February 1991, and Mr. Scott testified that his corporation first entered into a management agreement with Rochdale Village in February 1991, the only management agreement submitted by the parties is dated June 1993. The provisions of the June 1993 agreement and the last written renewal agreement, therefore, are controlling here.
Rochdale Village's Board of Directors vote on September 25, 2006 to extend MSRE's contract for an additional two years, did not result in a written extension agreement, and no such agreement was ever approved by the DHCR. Therefore, as said extension was without force and effect, plaintiff may not rely upon this vote in order to establish any portion of its cause of action for breach of contract, including damages.
The last written renewal agreement provides for a term of 12 months, from July 1, 2004 to June 30, 2005, and provides for an additional 12 months ending "June 30, 200." This renewal agreement was approved by the DHCR on October 6, 2004. The DHCR in its letter of September 21, 2004, stated that it had approved the renewal for July 1, 2004 to June 30, 2005 and that the extension of the contract for an additional year, to June 30, 2006, was contingent upon MSRE's satisfactory performance of the contract. Although the DHCR conducted a field visit of Rochdale Village on October 4, 2006 and January 19, 2007, there is no evidence that the DHCR issued a statement regarding MSRE's performance of the subject management contract for the period of July 1, 2004 through June 30, 2005.
Ellen Irizarry, an Assistant Director of the DHCR, testified at her deposition that in March 2007 she was a field unit supervisor for the DHCR and that Rochdale Village was under her jurisdiction. She stated that several months prior to the March 26, 2007 Board of Directors meeting, she met with three Board members at their request regarding MSRE's contract. She stated that she informed these Board members that MSRE's contract was month to month, and that in order to replace MSRE they would need the support of the Board, would have to "bid out" the contract, and should have a transition period of 30 days. She stated that she did not review the parties' contract agreements.
In the absence of any evidence that MSRE's performance of the management agreement for the period of July 1, 2004 through June 30, 2005 was found to be satisfactory, the contingent event imposed by the DHCR for approving the extension of the renewal agreement to June 30, 2006, never came to pass. Therefore, contrary to both plaintiff and defendant's assertions, the last written renewal agreement expired on June 30, 2005, and not on June 30, 2006. Thus, as of July 1, 2005, MSRE, pursuant to the terms of the June 1993 agreement, continued to perform management services on a month-to-month basis.
Defendant's claim that the parties' contractual relationship ended and that MSRE became an employee at will, is rejected. It is the well-established rule that, "absent an agreement establishing a fixed duration, an employment relationship is presumed to be a hiring at will, terminable at any time by either party" (Sabetay v Sterling Drug, 69 NY2d 329, 333 [1987]; see e.g. Goldman v White Plains Ctr. for Nursing Care, LLC, 11 NY3d 173 [2008]; Murphy v American Home Prods. Corp., 58 NY2d 293, 300 [1983]). Here, the evidence establishes that MSRE was defendant's managing [*6]agent, rather than its employee. Moreover, the parties' 1993 contract establishes a 12-month duration period, and in the event the contract is not extended, "it shall continue in full force and effect from month to month unless renewed or terminated as provided in the General Conditions." Thus, the duration period became month to month, and the parties' agreement could only be terminated pursuant to the DHCR's termination provisions, which were incorporated into the parties' agreement.
It is noted that although neither the parties' contract nor the regulations permit either party to unilaterally terminate the contract upon notice to the other party and the DHCR, the DHCR in its letter of September 26, 2004 stated that it would have permitted the parties to elect a right not to renew the contract upon such notice.
The Board of Directors' immediate termination of the month-to-month contractual agreement with MSRE in March 2007 failed to comply with the termination provisions set forth in Article 9 of the contract's General Conditions. The DHCR also failed to follow its own regulations in that it did not provide MSRE with written notice that it was terminating the month-to-month contract. However, it is clear that the DHCR tacitly approved MSRE's termination, as it approved Rochdale Village's contract with another managing agent in July 2007. The court therefore finds that Rochdale Village's termination of MSRE's services on March 27, 2007 constituted a breach of contract.
MSRE's compensation under the 2004-2005 renewal agreement was $69,278.00 a month, and it is undisputed that MSRE was paid for the services it performed in the month of March 2007. Since MSRE was a month to month employee, the measure of damages is limited to the months of April through July 2007. MSRE's claim for damages beyond this period is denied, as it was not entitled to employment at Rochdale Village without the DHCR's approval and said approval was withdrawn when the agency approved a contract with another entity in July 2007. Plaintiff's damages, therefore, are limited to $69,278.00 a month for four months, which totals $277,112.00.
To the extent that plaintiff in its first cause of action seeks attorney's fees, this claim is denied. It is well settled in New York that a prevailing party may not recover attorneys' fees from the losing party except where authorized by statute, agreement or court rule (see Chapel v Mitchell, 84 NY2d 345, 349 [1994], quoting Hooper Assoc., Ltd. v AGS Computers, Inc., 74 NY2d 487, 491 [1989]; U.S. Underwriters Ins. Co. v City Club Hotel, LLC, 3 NY3d 592, 597 [2004]; Mighty Midgets, Inc. v Centennial Ins. Co., 47 NY2d 12, 21-22 [1979]). MSRE has not established that its contract with Rochdale Village included the payment of legal fees, and such payments are not authorized by any statute or court rule.
To the extent that plaintiff's first cause of action seeks to recover costs, plaintiff is only entitled to recover statutory costs.
Accordingly, that branch of defendant's motion which seeks to dismiss plaintiff's first cause of action for breach of contract is denied, and plaintiff's cross motion for summary judgment on the first cause of action for breach of contract is granted to the extent stated above.
That branch of defendant's motion which seeks summary judgment dismissing the second cause of action for an account stated in the sum of $1,108,448.00, is granted. "An account stated is an agreement between parties to an account based upon prior transactions between them with respect to the correctness of the account items and balance due" (Jim-Mar Corp. v Aquatic Constr., 195 AD2d 868, 869 [1993], lv denied 82 NY2d 660 [1993]; see Sisters of Charity Hosp. of Buffalo v Riley, 231 AD2d 272, 282 [1997]; Chisholm-Ryder Co. v Sommer & Sommer, 70 AD2d 429, 431 [1979]). An essential element of an account stated is an agreement with respect to the amount of the [*7]balance due (see Interman Indus. Prods. v R.S.M. Electron Power, 37 NY2d 151, 153-154 [1975]; Sisters of Charity Hosp. of Buffalo, supra at 282). "An account stated assumes the existence of some indebtedness between the parties, or an express agreement to treat the statement as an account stated. It cannot be used to create liability where none otherwise exists" (M. Paladino, Inc. v Lucchese & Son Contr. Corp., supra at 516 [1998]; see Gurney, Becker & Bourne v Benderson Dev. Co., 47 NY2d 995, 996 [1979]; Erdman Anthony & Assocs. v Barkstrom, 298 AD2d 981, 981-982 [2002]; Bauman Assoc. v H & M Intl. Transp., 171 AD2d 479, 485 [1991]). Here, the plaintiff's counsel in a letter dated April 23, 2007 asserted a breach of the parties' contract and demanded payment of $1,108,448.00. This letter, however, is not evidence of an agreement between the plaintiff and defendant with respect to an indebtedness between these parties, and does not give rise to a cause of action for an account stated. In addition, defendant's counsel in his letter of April 25, 2007 denied that the contract was in effect and denied that any payment was due. Since plaintiff neither alleges nor can establish that defendant either expressly consented to, or otherwise assumed, an obligation to pay the plaintiff the sum demanded, the second cause of action for an account stated is dismissed (see M. Paladino, Inc. v J. Lucchese & Son Contr. Corp., supra; Sybelle Carpet & Linoleum v East End Collaborative, supra; Perma Pave Contr. Corp. v Paerdegat Boat & Racquet Club, supra.)
Plaintiff's third cause of action for unjust enrichment is dismissed. A cause of action for unjust enrichment (or quasi-contract) requires a showing that (1) the defendant was enriched, (2) at the expense of the plaintiff, and (3) that it would be inequitable to permit the defendant to retain that which is claimed by the plaintiff (Cruz v McAneney, 31 AD3d 54 [2006]; Clifford R. Gray, Inc. v LeChase Construction Services, LLC, 31 AD3d 983 [2006]). The essence of an unjust enrichment cause of action is that one party is in possession of money or property that rightly belongs to another (Clifford R. Gray, Inc. v LeChase Construction Services, LLC, 31 AD3d at 983). Here, all services provided by the plaintiff were paid for through March 2007, and it is undisputed that plaintiff performed no services for the defendant after March 2007. Plaintiff thus cannot establish a claim for unjust enrichment.
Plaintiff's fourth cause is also dismissed, as it is not entitled to recovery in quantum meruit, as the existence of a valid and enforceable agreement governing a "particular subject matter, ordinarily precludes recovery in quasi contract for events arising out of the same subject matter" (Clark-Fitzpatrick, Inc. v Long Is. R. R. Co., 70 NY2d 382, 388 [1987]; Mucci v Munsey Park Assocs., 231 AD2d 501 [1996], appeal denied 89 NY2d 812 [1997]; Metropolitan Elec. Mfg. Co. v Herbert Constr. Co., 183 AD2d 758, 759 [1992]).
Plaintiff's fifth cause of action for promissory estoppel is also dismissed. In order to establish a claim for promissory estoppel a plaintiff must allege and establish (1) an oral promise that is sufficiently clear and unambiguous, (2) reasonable reliance on the promise and (3) an injury caused by the reliance (see Knight Sec. L.P. v Fiduciary Trust Co., 5 AD3d 172 [2004]). Here, any promise made by the Board of Directors to renew the agreement is unenforceable, as plaintiff knew that all contracts and renewal agreements were required to be in writing and further knew that all such agreements were subject to DHCR approval in order to be in effect and enforceable. Plaintiff thus is unable to establish that it reasonably relied upon an oral promise to extend the subject management agreement.
Plaintiff's sixth cause of action for breach of good faith and fair dealing, is dismissed. A [*8]party may be in breach of the implied duty of good faith and fair dealing, which is implicit in every contractual arrangement, when it exercises a contractual right as part of a scheme to realize gains that the contract implicitly denies or to deprive the other party of the fruit of its bargain (Moran v Erk, 11 NY3d 452 [2008]; Dalton v Educational Testing Service, 87 NY2d 384, 389 [1995]; Outback/Empire I, Ltd. Partnership v Kamitis, Inc., 35 AD3d 563, 563 [2006]). Here, plaintiff's sixth cause of action is based upon the improper termination of the parties' agreement and thus is duplicative of the breach of contract claim.
Plaintiff's final cause of action, designated as the "eleventh" cause of action for "damage to commercial reputation" fails to state a cause of action and therefore is dismissed (Bridge St. Enters. v Pastino's Italian Grill, Inc., 43 AD3d 1306 [2007]; State v General Elec. Co., 199 AD2d 595, 596 [2007]).
In view of the foregoing defendant's motion for summary judgment dismissing the complaint is granted as to the second, third, fourth, fifth, sixth and "eleventh" causes of action and is denied as to the first cause of action for breach of contract. Defendant's cross motion for summary judgment on the first cause of action for breach of contract is granted, and damages are limited to the sum of $277,112.00 for the period of April 2007 through July 2007, plus one bill of statutory costs. That branch of the cross motion which seeks to recover attorney's fees is denied.
Settle order.
J.S.C.
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