Whitestone-Triangle, L.P. v Triangle Plaza II Mgr. Inc.
Annotate this CaseDecided on October 28, 2005
Supreme Court, New York County
Whitestone-Triangle, L.P., by Whitestone-Triangle /GP, INC., General Partner, Plaintiff, Plaza II Manager Inc. and TRIANGLE EQUITIES, LLC, Defendants.
TRIANGLE PLAZA MANAGER, INC., Plaintiff,
against
WHITESTONE-Triangle, L.P., Defendant.
601659/05
Bernard J. Fried, J.
This is a case where the Buyer of an interest in a shopping center seeks specific performance of the contract for the sale of that interest. However, the Seller claims the contract cannot be performed because there is a condition precedent that has not been satisfied. In the alternative, Seller seeks reformation of the contract with respect to an alleged mistake with regards to the purchase price.
The parties to this action are: Seller, Whitestone-Triangle ("Whitestone"), and Buyer, Triangle Plaza Manager Inc. ("Triangle"). Whitestone's parent company is ARC Corporate Realty Trust Inc. ("ACRT"). Previously, Triangle and Whitestone had formed a limited liability company to own and manage the shopping center. According to the amended operating agreement of the limited liability company, if one partner wants to sell its interest in the property, it must obtain approval from its partners and offer to sell its interest to the other partners, i.e., a non-selling partner must be offered a "right of first refusal." The contract of sale at dispute in this action arises from Triangle's exercise of its right of first refusal as provided in the operating agreement.
There are two separate actions: (1) by Triangle for specific performance (Index No. 601659/2005); and (2) by Whitestone seeking reformation of the contract to the re-appraised price or for a declaration that Whitestone has no obligation to transfer its interest to Triangle [*2]without satisfaction of a condition precedent (Index No. 601708/2005). Both actions have been consolidated.[FN1]
On January 2, 1998, Triangle, Triangle Equities, Inc. and Whitestone entered into an Amended and Restated Operating Agreement ("Operating Agreement") of Triangle Plaza II, LLC. ("LLC"). The LLC owns, operates, and develops Triangle Plaza II, a shopping center in Whitestone, Queens.
The Operating Agreement, in Section 3.02 states, "Any Member may Dispose of its Membership Interest to a Person provided such Member provides the other Members with a written request seeking the prior written consent of the Majority, . . . written consent may be withheld by such Majority of the Members, at their sole and absolute discretion." (Reichman Affirmation, Exhibit A, at 14).
Section 3.09 of the Operating Agreement states,
The non-transferor Member shall have thirty (30) Business Days to determine whether to exercise its right of first refusal, which shall be for the same terms and conditions as set forth in the Written Request. If the non-transferor Member delivers, in writing, its election to exercise its right of first refusal on or before the expiration of such 30 business Day period, the transferor Member shall Dispose of the subject Membership Interest in accordance with the terms and conditions of the Written Request.
(Reichman Affir., Ex. A, at 17).
On January 3, 2005, Whitestone, by way of a Written Request, notified Triangle and Triangle Equities of its intention to sell to a third-party its 40% minority interest in the property. The Written Request stated "[Whitestone] has agreed to sell its interest in the Company [the LLP] to HPI/NL Investors LLC or its nominee for a purchase price of $5,469,540 as such amount may be adjusted in accordance with the Purchase Agreemen." ("Purchase Price") (Reichman Affir., Ex. B, at ¶ 2)(emphasis added). The Purchase Agreement referred to in Whitestone's Written Request is a contract governing the sale of many of Whitestone's properties to a third party. One of the many properties in the agreement is the interest in the shopping center that forms the basis for this dispute.
Pursuant to the Operating Agreement, Whitestone's Written Request stated that Triangle "ha[d] a period of 30 business days from the date of its receipt of this notice to notify [Whitestone] in writing of [Triangle's] election to exercise its right of first refusal and its acceptance of such terms and conditions of sale." (Id. at ¶ 3).
On February 8, 2005, Triangle in its response letter stated, "[Triangle] hereby elects to exercise its right of first refusal with respect to your proposed sale and will purchase Whitestone-Triangle, L.P.'s interest in the Company pursuant to and in accordance with the terms and conditions set forth in the [ ] "Purchase Agreement" referenced in your notice." (Reichman Affir., Ex. C, at ¶ 1)(emphasis added). Triangle, in the same letter requested Whitestone to "please forward a copy of the Purchase Agreement to [Triangle]." Lester Petracca of Triangle, in his Affidavit, acknowledges that his counsel "subsequently" obtained a copy of the Purchase Agreement. (Petracca Affidavit, at ¶ 3). [*3]
On March 21, 2005, Triangle received a letter from ACRT which claimed that "the Board [has] subsequently learned that ACRT's third party valuation advisor had made a substantial error in its calculation of the value of the interest. [ ] The advisor allocated net value in proportion to membership interests, rather than first providing for return of capital as required by the [Operating] Agreement. [ ] The value should have been slightly less than $7,406,286." (Reichman Affir., Ex. D, at ¶ 3). Whitestone also asserted, in this letter, that the mistake does not affect the "aggregate value" of the underlying property being sold under the Purchase Agreement, rather the mistake affects only the price Triangle would need to pay to exercise its right of first refusal. Because of this error, the sale was not approved by ACRT's stockholders and "[Whitestone] could not carry out the sale of the Interest to [Triangle] on the proposed terms under the Purchase Agreement." (Id. at ¶ 4). "[Whitestone's] obligation to convey the Interest to [Triangle] under the [Operating] Agreement is subject to the terms and conditions of the Purchase Agreement." (Id. at ¶ 4). The letter continued, stating Whitestone would now be willing to sell its interest to Triangle for the adjusted price of $7,406,286 ($1,936,746 higher than the original contracted price), but "[Triangle's] failure to accept this offer . . . will constitute its rejection of the offer." (Id. at ¶ 6). Triangle refused to pay the higher price.
Triangle moves for summary judgment on the grounds that there are no disputed facts. It seeks specific performance, claiming that its acceptance of the Written Request created a binding contract. Triangle states that "once an offer has been accepted, a binding contract is created, and the offer can no longer be withdrawn. Williston, Contracts Section 28 [3 ed.]." (Triangle Memo of Law, pg 6). Triangle also seeks, in its motion for summary judgment, dismissal of Whitestone's complaint, including the claim for reformation of the purchase price.
Whitestone opposes Triangle's motion for summary judgment and cross-moves for summary judgment in its favor, asking the court to "reform the contractual obligation to require [Triangle] to buy the Interest for $7,406,286 or declar[e] that [Whitestone] has no obligation to transfer the Interest to [Triangle] in the absence of Shareholder Approval." (Lynch Affidavit, at ¶ 5). Whitestone claims that shareholder approval was a condition precedent to the contract between it and Triangle because Whitestone's Written Request referred to the Purchase Agreement and the Purchase Agreement contains a provision requiring shareholder approval.
In opposition to the cross-motion, Triangle asserts several arguments: (1) that stockholder approval was not a condition precedent because the Written Request only referred to the provision of the Purchase Agreement addressing the adjustment of the "purchase price" and that provision does not allow for adjustment of the purchase price of the interest in the shopping center; (2) that there is no clear language establishing a condition precedent in the Written Request; (3) that if there is a condition precedent, Whitestone caused its own non-performance and therefore the condition precedent is void; and, (4) that the contract cannot be reformed as requested by Whitestone because it has not shown that the mistake was fraudulently induced by the defendant. Triangle also argues that Whitestone's motion for summary judgment must be denied because no discovery has been taken.
Summary judgment can only be granted on a claim or defense when there is no genuine issue of material fact upon which the party is entitled to judgment as a matter of law. "In deciding a motion for Summary Judgment, the court's role is solely to determine if any triable issues [of fact] exist." (F. Garofalo Elec. Co., Inc. v. New York University), 300 AD2d 186 [1st Dep't 2002])(citing Stillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395).
A condition precedent is a term in a contract that requires one or both of the parties to [*4]either do or not do something, if the condition precedent is not performed, there is no duty to perform the contract by the other party. "An act or event, other than a lapse of time, which, unless excused, must occur before a duty to perform a promise in the agreement arises." (E.g., Oppenheimer & Co., Inc. v. Oppenheimer, Appel, Dixon & Co., 86 NY2d 685, 688 [1995]). In this case, the condition precedent, which Whitestone contends exists, requires approval by the shareholders of Whitestone's parent company. Resolution of whether in the contract between the parties there is a condition precedent rests on an examination of the language in the documents that comprise the contract.
In the Written Request from Whitestone, the only reference to the Purchase Agreement addresses the Purchase Price, i.e., "as such amount may be adjusted in accordance with the Purchase Agreement (the "Purchase Price")." (Reichman Affir., Exh. B at ¶ 2) This refers to a provision in the Purchase Agreement that provides adjustments to the price of specific properties sold under the agreement. That provision does not allow for adjustment of the price of the shopping center. (Reichman Aff., Ex A, at 6)
Triangle's written acceptance of the Written Request on February 8, 2005 stated that Triangle "hereby elects to exercise its right of first refusal with respect to your proposed sale and will purchase [Whitestone's] interest in the Company pursuant and in accordance with the terms and conditions set forth in the [Purchase Agreement], dated December 20, 2004 referenced in your notice. . . . Please forward a copy of the Purchase Agreement to [Triangle] and its counsel." [emphasis added] (Reichman Affir., Ex. C, at ¶ ¶ 1, 2).
The only rational reading of these documents is that Triangle's acceptance of the offer stated in the Written Request includes only the section of the Purchase Agreement mentioned by Whitestone in the Written Request. Whitestone argues that its offer to Triangle includes the provision of the Purchase Agreement requiring Board approval, but its Written Request to Triangle does not reference that provision. Since Triangle was not provided with a copy of the Purchase Agreement, it could not accept other terms of the Purchase Agreement that were not included in the offer. Furthermore, many of the provisions of the Purchase Agreement could not possibly apply to Triangle because the agreement governs the sale of many of Whitestone's other properties in addition to the shopping center in which Triangle had a right of first refusal. Triangle has no rights with respect to the other properties in the Purchase Agreement.
Because the section of the Purchase Agreement specified in the Written Request does not provide for adjustments of the shopping center, it does not affect the contract created between Triangle and Whitestone.
Triangle's motion for summary judgment is based on the claim that its acceptance of the Written Request from Whitestone created a binding contract. Having concluded that there was no valid condition precedent for the sale, a binding contract exists. It is clear that Whitestone offered the right of first refusal and in that offer referred to one section of the Purchase Agreement. When Triangle accepted the Written Request, it only accepted what was offered, to be bound by the Purchase Agreement only as far as it was included in the Written Request. The attempt by Whitestone to read additional terms into the acceptance beyond those specified is incorrect.
Specific performance is warranted here, if I conclude, as I do, that there was no condition precedent in the contract for the sale of the interest in the shopping center. This issue is not disputed. Indeed, it is a well established that in contracts relating to land "partly because a specific piece of land is in its nature different from every other piece [ ] a contract to convey land [*5]is specifically enforceable by the purchaser." (Williston, Contracts Section 67:61). Therefore, the contract should be specifically performed.
With respect to Whitestone's claim for reformation of the purchase price, Triangle moves for summary judgment seeking to dismiss Whitestone's complaint, disputes the re-appraisal of the purchase price, and correctly contends that Whitestone offered no admissible evidence of the mistake of its "third party valuation advisor", other than the hearsay statements in the Ambrosi affidavit.
Whitestone has not addressed Triangle's motion for summary judgment to dismiss the reformation cause of action, but rather cross-moves for summary judgment. Whitestone argues that it relied on its "third party valuation advisor" when it stated the value of the interest in the shopping center, that the value stated was a mistake, and that Triangle, as a sophisticated entity, should have known of the mistake. However, Whitestone has not submitted any admissible evidence to support this argument.
Summary judgment must be granted in favor of Triangle because Whitestone has failed to state a valid claim for reformation. Even if Triangle had not moved for summary judgment to dismiss Whitestone's claims, I would be required to evaluate the validity of Whitestone's claim for reformation because, on a motion for summary judgment against a responsive pleading, New York courts are required to "search the record" and evaluate the sufficiency of the claim that forms the basis for the motion for summary judgment. (CPLR § 3212[b])(See A.C. Transportation, Inc. v. The Board of Education of the City of New York, 253 AD2d 330, 338 [1st Dep't 1999]).
Whitestone fails to state a valid cause of action for reformation, since it does not allege either mutual mistake or fraud. (See Chimart Assoc. v. Paul, 66 NY2d 570, 573-74 [1986]; Seebold v. Halmar Constr. Corp., 146 AD2d 886, 887 [3rd Dep't 1989]; Briand Parenteau Associates Inc. v. HMC Associates, 225 AD2d 874, 876 [3rd Dep't 1996]). In any event, Whitestone failed to oppose Triangle's motion seeking dismissal of the reformation claim, except to seek summary judgment which motion for summary judgment I am denying. Therefore, Triangle's motion for summary judgment is granted and Whitestone's cross-motion is denied.
Triangle's claim for damages and attorneys fees is denied because the contract for the sale of the interest in the shopping center does not provide for attorneys fees.
Accordingly, it is hereby
ORDERED that Whitestone's motion for summary judgment is denied; and it is further
ORDERED that Triangle's motion for summary judgment is granted as to Triangle's request for specific performance of the contract but it is denied as to damages and attorneys fees, and it is further
ORDERED that the clerk is directed to enter judgment accordingly, with costs.
.
Date: October 28, 2005ENTER:
_________________
J.S.C.
Footnotes
Footnote 1: Without objection, the actions were consolidated at oral argument.
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