S. Nicolia & Sons Realty Corp. v AJA Concrete Ready Mix, Inc.

[*1] S. Nicolia & Sons Realty Corp. v AJA Concrete Ready Mix, Inc. 2011 NY Slip Op 50153(U) [30 Misc 3d 1221(A)] Decided on January 25, 2011 Supreme Court, Nassau County Warshawsky, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 25, 2011
Supreme Court, Nassau County

S. Nicolia & Sons Realty Corp., Plaintiff,

against

AJA Concrete Ready Mix, Inc. a/k/a AJA Concrete, Inc. and David Soleimani, Defendants.



001794/08

Ira B. Warshawsky, J.

PRELIMINARY STATEMENT

The Court held a bench trial on this matter on numerous days between September and October 2010.

BACKGROUND

Plaintiff, S. Nicolia & Sons Realty Corp.("S. Nicolia Realty"), the owner of a concrete ready mix plant("Concrete Plant") located at 3896 Long Beach Road, in Island Park, NY, entered a lease agreement("Property Lease") with defendant A.J.A. Concrete Ready Mix, Inc.("AJA Concrete"). The Property Lease agreement, which was signed on December 27, 2005, was a two year lease commencing on January 1, 2006 and ending on December 31, 2007.(see Evidence Exhibit 2). On the same day, these parties signed a two year equipment lease("Equipment Lease"), commencing and ending on the same dates as the Property Lease.(see Evidence Exhibit 3) A personal guarantee by defendant David Soleimani("Soleimani"), the president of AJA concrete, and an itemized schedule of equipment covered by the lease, were attached to the Equipment Lease.Id. These agreements provided AJA Concrete a ready mix plant and related equipment with which AJA Concrete could operate its concrete business.

Between January 1, 2006 and July 19, 2007, the parties, and their attorneys, began having [*2]discussions of a possible sale of the plaintiff's Concrete Plant to defendant AJA Concrete. The significance of a June 14, 2007 letter from defendant's attorney to plaintiff's attorney is heavily contested by the parties.(see Evidence Exhibit 18). The underlying text of the letter memorialized plaintiff's attorney's understanding that the parties had agreed to a sale of the property based on terms that were substantially to terms in an earlier potential agreement.Id. The letter also provided several terms that would be part of the agreement, including a down payment of $240,000.00 and a term that would make the contract conditional on defendant's ability to obtain a mortgage within 60 days of the date of the contract.Id. In addition to the significance of the underlying text of this document, this document is important because it was used, in part, as a receipt of a $240,000.00 down payment from defendants to plaintiff.(Id.; see also Plaintiff's Reply memo, pg. 3, line 11). The upper right quadrant of the document contains the handwritten signatures of Roberto Nicolia, Soleimani, and Helene Falgia, which collectively appear below handwritten language which the Court concludes, in light of poor legibility, states "Deposit Rec'd $240,000.00 Two Hundred and Forty Thousand".(Evidence Exhibit 18). The parties do not dispute that $240,000.00 was paid as a down payment for the purchase of the Concrete Plant. However, plaintiff views this document as merely a receipt of the down payment, while the defendants view this document as a letter agreement which also provided terms that were to be included in the contemplated property purchase agreement.

The underlying text of the June 14, 2007 letter included the following language:

"I have been advised by my client that he has met directly with

your clients concerning the [Concrete Plant] property and that

the parties have agreed that the sale of the property shall go

forward in substantially the same form as set forth in the

agreement previously provided to this office with following

exceptions."

"My client will be posting a down payment of $240,000.00 and the

purchase shall be subject to my client obtaining a mortgage in the

amount of $2,080,000.00. Mortgage must be obtained within sixty

(60) days from the date of contract."

"In the event that my client is not able to obtain the

above-referenced mortgage in the allotted time, the down payment

paid on the contract will be refunded to my client, less all lease and

rent arrears owed to the landlord/seller. Please confirm the above

with your client and contact the undersigned or forward a contract

consistent with the above so that we might move this matter forward

as expeditiously as possible."(Evidence Exhibit 18).

On June 15, 2007, plaintiff's attorney responded to the June 14, 2007 letter with by faxing a letter to defendant's attorney with an attached redlined version of a Contract of Sale.(Evidence Exhibit 19). The letter states that if the "enclosed is acceptable, we will forward execution copies to you."Id. The enclosed "red-lined" contract did not reflect all changes identified in the June 14, 2007 letter.

Over one month later, on July 19, 2007 the parties signed an agreement for the sale of the Concrete Plant property to defendant AJA Concrete.(See Evidence Exhibits 13, 15). This [*3]agreement("Purchase Agreement") was signed by Roberto Nicolia on behalf of seller S. Nicolia Realty and Soleimani on behalf of purchaser AJA Concrete. This purchase agreement did not contain all the exclusions listed in the June 14, 2007 letter and was different in many respects from the redline version attached to the June 15, 2007 letter.

Section 21 of the Purchase Agreement provides the "Purchaser's Cancellation Rights." Section 21(B.) of the Purchase Agreement provides, in large part, the following language:

"Purchaser may cancel this Agreement if, after making good faith

application for financing with the an[sic] institutional lender for

mortgage financing in a sum not to exceed ... [$2,080,000.00]

dollars (the "Loan"), for a period of no less than ten (10) years, ...

in the manner to be set forth below, it is unable to obtain financing

and comply with all conditions of any commitment which is issued

on or before July 16, 2007. Purchaser's right to cancel hereunder

is conditioned on purchaser's ... diligent compliance with all of the

following:

(a) Purchaser must apply in good faith for the Loan from a

commercial bank, savings bank, ... [etc.] within five (5)

business days after a fully executed counterpart of this

Agreement is delivered to Purchaser(with time being of

the essence);

...

(d) Purchaser must comply with all reasonable and

customary requirements of the Prospective Lender;

(e) In the event Purchaser does not obtain a commitment letter

or is unable to satisfy the condition therein, and wishes to

elect to terminate this Agreement, Purchaser must provide

Seller with notice ... no later than 5:00 p.m. on July 16,

2007, accompanied by a loan refusal letter issued by the

Prospective Lender. Failure to comply with the provisions

of this subparagraph shall be deemed a waiver of any

contingency and this Agreement shall be deemed an

"all cash" transaction in common parlance;"

(See Exhibit 15, pgs. 10,11)

The foregoing mortgage contingency provision uses July 16, 2007 as a key date, but the Purchase Agreement was Signed on July 19, 2007.

Section 21C. of the Purchase Agreement further provides that if the purchaser elects to cancel the agreement for "any reason permitted ..., Seller's sole liability shall be to refund the balance of the Down Payment after payment of any accrued and unpaid rent and charges due under the Equipment Lease."(Id. at pg. 11).

Section 28 of the Purchase Agreement provides, in part, that:

"This instrument constitutes the entire agreement between the

parties ... and there are no other covenants, promises or agreement,

written or oral, and no agent of either party has the authority to [*4]

make representations or other agreements, verbal or written which

modify or vary the terms or conditions of this agreement. This

agreement supersedes and cancels any and all negotiations,

arrangements, agreement and understandings, if any, between the

parties hereto. This agreement shall be deemed to have been jointly

drafted by the attorneys for both parties and shall be construed neither

for or against the Seller or the Purchaser."

Section 11 of the Purchase Agreement provides, in part that the

"deed shall be delivered upon the receipt of the balance of the

Purchase Price("the "Closing") due at Closing ... at 10:00 A.M. on

August 20, 2007 (the "Closing Date"). TIME SHALL BE OF

THE ESSENCE WITH RESPECT TO PURCHASER'S

OBLIGATIONS TO PAY THE BALANCE ON THE CLOSING

DATE." (See Evidence, Exhibit 15, pg. 6)

A letter dated September 19, 2007, from plaintiff's attorney to defendants' attorney and the defendants, explained that based on AJA Concrete's failure to close on the closing date of August 20, 2007 the plaintiff deemed the Purchase Agreement terminated. (Evidence Exhibit 9). The letter further stated that the plaintiff would retain the down payment "as and for liquidated damages."(Id. at pg. 2)

Soleimani received an October 1, 2007 letter from Unity Bank. The letter was not a commitment to lend, as the letter clearly states that "[t]his letter is not a commitment to lend, and Lender is not obligated to provide financing hereby."(Evidence Exhibit 8, pg. 1). The letter did provide a comprehensive "proposal for financing through Unity Bank(the lender) and the SBA 504 Loan Program("SBA")" with numerous contemplated terms of a possible eventual loan commitment.

A closing was never held and the sale of the Concrete Plant property was never completed.

On January 31, 2008, plaintiff moved, ex parte, by Order to Show Cause, to recover equipment from defendants pursuant to the Equipment Lease, and to enjoin the defendants from continuing to occupy the premises of the Concrete Plant. The Order, stated, inter alia:

"[AJA Concrete and Soleimani, and their employees] ... are

hereby enjoined, prohibited and restrained, from (a) removing the

equipment set forth in the annexed Schedule from the

[Concrete Plant] or such other place as such equipment may now

or hereafter be found, ... and (c) occupying, remaining in possession,

or controlling the Premises without permission of the owner"

(See Order to Show Cause, pg 2)

The plaintiff took possession of the Concrete Plant on or about February 2, 2008. Prior to the January 31, 2008 Order, the defendants were in possession of the Concrete Plant and continued to occupy the premises.

Plaintiffs' complaint set forth the following causes of action:

1) Breach of equipment lease(AJA)

2) Breach of equipment lease(Soleimani) [*5]

3) Unjust Enrichment(AJA)

4) Unjust Enrichment(Soleimani)

5) Declaratory Judgment 6) Permanently Injunction enjoining defendants from occupying the Concrete Plant

7) Writ of execution

8) Replevin of Equipment

Plaintiff withdrew the fifth and seventh causes of action.(See plaintiff's post trial submission, pg 6, para. 3)

Defendant's Answer set forth the following counterclaims:

1) Specific Performance(purchase of Concrete Plant)

2) Declaratory Judgment(renewal of real property lease for 5 years)

3) Wrongful Eviction

DISCUSSION

"As a general rule, where a mistake in contracting is both mutual and substantial, there is an absence of the requisite meeting of the minds' to the contract and relief will be provided in the form of rescission" (County of Orange v. Grier, 30 AD3d 556 [2d Dept 2006]) "The mutual mistake must exist at the time the contract is entered into and must be substantial" Id at 557. The effect of rescission "is to declare the contract void from its inception and to put or restore the parties to status quo"Id.

Here, the parties entered the Purchase Agreement for the sale of the Concrete Plant on July 19, 2007. Section 28 of the Purchase Agreement provided, in part, that "[t]his agreement supersedes and cancels any and all negotiations, arrangements, agreement and understandings, if any, between the parties hereto." Therefore the June 14, 2007 letter should not be used to interpret the Purchase Agreement. Section 21 of the Purchase Agreement provides cancellation rights to the purchaser. Section 21B, contains a mortgage contingency clause. This mortgage contingency clause was a crucial part of the contract because if the purchaser could not obtain financing, according to the terms of this clause, plaintiff would have the right to cancel the contract. The fact that this clause was in the contract implies the parties intended for the contract to have a mortgage contingency provision. However, on July 19, 2007, the date the Purchase Agreement was signed, per the express terms of this clause, the purchaser's time to cancel the contract had already expired. Section 21B(e), states:

"In the event Purchaser does not obtain a commitment letter or is

unable to satisfy the condition therein, and wishes to elect to

terminate this Agreement, Purchaser must provide Seller with

notice ... no later than 5:00 p.m. on July 16, 2007, accompanied

by a loan refusal letter issued by the Prospective Lender. Failure

to comply with the provisions of this subparagraph shall be

deemed a waiver of any contingency". (See Exhibit 15, pgs. 10,11)

Therefore, on July 19, 2007, the prospective purchaser effectively had no right to cancel the contract under the mortgage contingency provision, if the purchaser could not obtain financing. The Court concludes, based on the contract, and based on the evidence from trial, that both parties intended for the contract to have a mortgage contingency provision and that said [*6]provision was defective on the date the contract was signed due to the mutual mistake of both parties to the contract. The Court further concludes that the mortgage contingency provision was a key element of the contract and that said mutual mistake was substantial in nature. Based on the parties' mutual mistake the Court determines that the Purchase Agreement was void from inception and the proper form of relief is rescission. Accordingly, the defendants are entitled to the return of the $240,000.00 down payment, less any amounts that would have been properly due pursuant to the underlying real property lease agreement and amounts properly owed based on tenants failure to vacate the premises at the December 31, 2007 termination of said lease agreement.(see Evidence Exhibit 2). The referee is directed to the determine the amount plaintiff owes defendants.

Based on the foregoing, defendants first cause of action on its counterclaim seeking specific performance of the Purchase Agreement is hereby dismissed.

Defendants' second cause of action seeks a declaratory judgment that renews the underlying real property lease agreement for five years. This is based on paragraph 23 of the rider to said real property lease, and the understanding of the parties. Based on the facts adduced at trial, and paragraph 23 of the rider, the Court finds insufficient evidence to support this cause of action. Defendants' second cause of action is dismissed.

Plaintiff's seventh cause of action seeks a permanent injunction under CPLR 6301 permanently enjoining defendants from occupying the Concrete Plant. This cause of action is now moot because, the Court has determined that the lease expired without being renewed, the purchase agreement was void, and plaintiff has retaken possession of the Concrete Plant. In sum, defendants have no right to possession of the Concrete Plant. Plaintiff's seventh cause of action is dismissed.

Plaintiff's eighth cause of action seeks replevin of the equipment pursuant to the equipment lease. The Court determines that plaintiff has the right to replevin of it's equipment pursuant to the equipment lease, however no further action is required because plaintiff has already obtained possession of said equipment.

RPAPL 853 provides:

"If a person is disseized, ejected, or put out of real property in a

forcible or unlawful manner, or, after he has been put out, is held

and kept out by force or by putting him in fear of personal

violence or by unlawful means, he is entitled to recover treble

damages in an action therefor against the wrongdoer."

This Court's January 31, 2008 Order, upon the plaintiff's ex parte Order to Show Cause, inter alia, directed the Sheriff to seize equipment on the premises, and enjoined the defendants from "occupying, remaining in possession, or controlling the premises without permission of the owner." The section of the Order that directed the Sheriff to break open and search for equipment, was limited in scope to the schedule of equipment from the Equipment Lease. The aspect of the Order that enjoined the defendants from occupying or remaining in possession was based in large part on the affidavit of Roberto Nicolia which stated the defendants were using the property as a transfer station, without a requisite permit and therefore defendants' continued use of the property was subjecting plaintiff Nicolia "to enormous fines from the Town of Hempstead, and the State of New York for violating the Environmental Conservation Law".(Order to Show [*7]Cause, R. Nicolia Affidavit, para 4). The Court now concludes, based on the evidence produced at trial, that the evidence does not support the plaintiff's contention that the defendants were using the property as a transfer station. In sum, plaintiffs moved ex parte, and plaintiff's claim of immediate and irreparable harm was based, in large part, on information that was not true. As a result of the Order, which enjoined the defendants from occupying the premises, plaintiff seized possession of the premises. The plaintiff then proceeded to dispose of personal property of the defendants. Because the plaintiffs obtained possession of the premises by Court Order based on false information supplied by the plaintiffs, the Court determines that the plaintiffs seized the real property in an "unlawful manner" within the meaning of RPAPL 853.

A tenant who is unlawfully removed from possession of real property within the meaning of RPAPL 853, can recover the value of items of personal property lost during the unlawful eviction.(See North Main Street Bagel Corp. v. Duncan, 37 AD3d 785, [2d Dept 2007]). There must be sufficient evidence to establish the value of the property, at the time of loss.Id. "The measure of compensatory damages for wrongful eviction ... [includes] actual damages flowing directly from the wrongful eviction ... which include lost profits ascertainable with a reasonable degree of certainty, and loss of personal property." (North Main Street Bagel Corp. v. Duncan, 37 AD3d 785, [2d Dept 2007]). "[T]he awarding of treble damages pursuant to RPAPL 853 is discretionary".(Moran v. Orth, 36 AD3d 771, [2d Dept 2007]).

There were two types of personal property of the defendants' which were lost during the course of the unlawful removal from the premises. The first were trucks which were removed from the premises. The second type of property was "fill" material that was removed.

After defendants' unlawful eviction from the premises, the defendants were effectively locked out, and the plaintiffs had control of the property. The defendants' trucks were towed off the premises by Al's Towing, or at the direction of Al's Towing. But for plaintiff's wrongful eviction of defendants, defendants' trucks never would have been removed from the property. In addition, regardless of whether Al's Towing did or did not obtain Soleimani's consent to remove the trucks, Al's Towing appeared at the premises because plaintiff S. Nicolia sought the assistance of Al's Towing in removing defendants' trucks from the premises. Plaintiff did not have the right to facilitate the removal of any of defendants' property at the time of the wrongful eviction. At the time of removal, plaintiff had the responsibility to preserve defendants' personal property on the premises, and the trucks could not have been removed absent consent of the plaintiff, who requested Al's Towing come to the premises. On the basis of the foregoing the Court determines that the defendants' have provided sufficient proof to support liability of plaintiff for improper removal of the trucks. However, with respect to damages, the defendants put forth insufficient evidence to prove damages caused by the removal of said trucks. Evidence was not provided as to the what trucks of similar characteristics could be resold for, nor how trucks of similar characteristics would have depreciated. In sum, the Court concludes, there is insufficient proof adduced at trial from which a fact finder could ascertain the value of the trucks on the day they were removed from the property.

Defendants seek to recover lost "gross profits" of $600,000.00 based on the wrongful eviction and a large contract signed in January 2008, to deliver concrete. When said contract was signed, defendants were holdover tenants. More importantly, however, defendants contend they lost $600,000.00 in "gross profits", but because they would have received $600,000.00 if the [*8]contract was fully performed. The money that would have been received is more accurately described as revenue. Defendants failed to submit evidence into the record from which a fact finder could discern what expenses defendants would have had related to said contract. Without such expenses, the court cannot ascertain lost profits with a reasonable degree of certainty. In sum, defendants relied on lost revenue and did not provide sufficient additional evidence for a fact finder to ascertain lost profits with a reasonable degree of certainty. Defendants claim for lost profits is dismissed.

The Court concludes the "fill" removed from the premises was personal property of the defendants, and was improperly removed from the premises. The Court further concludes said fill had value and defendants are entitled to recover the value of the fill that was removed. The referee is directed to determine damages attributed to the value of the fill removed. The Court, in its discretion, determines the defendants are to receive treble damages for the value of the fill removed from the premises by plaintiffs.

Plaintiff's first and second causes of action seek damages for breach of the equipment lease by defendants. Plaintiff has since recovered possession of the equipment included in said equipment lease. Schedule A of the equipment lease agreement listed the equipment included in the equipment lease. At trial plaintiff argued, and presented evidence that, certain equipment was not adequately maintained, and that some of the equipment had missing parts. Defendants denied these claims. The Court finds insufficient evidence was adduced at trial to support a finding that defendants' failed to properly maintain the equipment or removed parts from the equipment in breach of the equipment lease. In sum, plaintiff failed to produce proof sufficient for the Court to conclude that there were damages under the equipment lease agreement. Plaintiff's first and second causes of action are dismissed.

"To prevail on a claim of unjust enrichment, a plaintiff must establish that the defendant benefitted at the plaintiff's expense and that equity and good conscience require restitution."(Whitman Realty Group, Inc. v. Galano, 41 AD3d 590, 592 [2d Dept 2007]). However, a valid and enforceable contract bars recovery for unjust enrichment.Id. Plaintiff's first two causes of action sound in breach of contract of the equipment lease. The proof adduced at trial established that said equipment lease is a valid and enforceable contract. Accordingly, plaintiff's third and fourth causes of action for unjust enrichment, due to the breach of the equipment lease, are hereby dismissed.

To summarize, the Court determined that the Purchase Agreement was void. Defendants are entitled to $240,000.00, less amounts due pursuant to the underlying real property lease agreement and amounts owed based on tenants failure to vacate the premises at the December 31, 2007 termination of said property lease agreement. The Court also determined that defendants' were wrongfully evicted and that defendants are entitled to recover the value of fill removed from the premises. The referee is directed to the determine the net amount plaintiff owes defendants. All other causes of action were either granted, and require no further action, or dismissed.

The parties are directed to appear for a hearing before Referee Frank Schellace on Wednesday, February 16, 2011 at 9:30am to determine damages owed to defendants. [*9]

This constitutes the Decision and Order of the Court.

Submit Judgment.

Dated: January 25, 2011______________________________

J.S.C.