Kabro PM LLC v WGB Main St. LLC

[*1] Kabro PM LLC v WGB Main St. LLC 2007 NY Slip Op 51415(U) [16 Misc 3d 1114(A)] Decided on June 6, 2007 Supreme Court, Nassau County Winslow, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 6, 2007
Supreme Court, Nassau County

Kabro PM LLC, Plaintiff,

against

WGB Main Street LLC, Plainview Hospital f/k/a North Shore University Hospital at Plainview, Defendants.



2310/05

F. Dana Winslow, J.

This is an action for specific performance of a contract for the purchase and sale of real property. KABRO PM LLC ("Kabro") makes a motion pursuant to CPLR §3212 for specific performance of a commercial real estate contract of sale and for attorneys' fees, costs and expenses. PLAINVIEW HOSPITAL f/k/a NORTH SHORE UNIVERSITY HOSPITAL at PLAINVIEW (the "Hospital") cross moves for summary judgment pursuant to CPLR §3212 dismissing Kabro's complaint, or in the alternative to disqualify Kabro's attorneys and for leave to amend its answer to assert certain cross claims against WGB MAIN STREET LLC ("WGB"). WGB cross moves for summary judgment pursuant to CPLR §3212 dismissing Kabro's complaint and for attorneys' fees, costs and disbursements. On February 1, 2007, on the record and without objection, the Court, with the court clerk and reporter and counsel for the parties, held an onsite inspection and noted, among other things, that the property in question was filled with parked vehicles and would be perceived as an entrance area to the Hospital.

At issue in this case is a contract, dated July 18, 2003, entered into between, Kabro, as purchaser and WGB as seller, to purchase real property located at 896 Old Country Road, Plainview (the "Property") for a purchase price of $800,000 (the "Kabro Contract"). WGB owned the Property and leased it to a Mobil gas station. WGB asserts that it terminated the Kabro Contract pursuant to its terms, and, as a result, on September 30, 2004, entered into a contract with the Hospital to purchase the Property for a purchase [*2]price of $950,000 and closed title on February 3, 2005.

Kabro claims that the Kabro Contract is valid and binding and remains in full force and effect and that WGB entered into a second contract to sell the Property during the time WGB was under contract to sell the Property to Kabro. Specifically, Kabro claims that WGB never terminated the Kabro Contract in accordance with its terms, that even if WGB is deemed to have terminated the contract, Kabro, by letter dated December 19, 2003, effectively exercised its right to override and vitiate the termination. In addition, Kabro claims that it did not breach the Kabro Contract, that it was ready, willing and able to perform its obligations under the Kabro Contract but was awaiting completion of an environmental clean-up by WGB as required by the contract. Kabro asserts further that the deed between WGB and the Hospital must be set aside as the Hospital had knowledge of the Kabro Contract was therefore not a good faith purchaser for value.

WGB contends that it sent a termination notice to Kabro, dated December 19, 2003, in which WGB stated that Kabro's environmental due diligence period had expired, and as such, WGB was exercising its right to terminate the Kabro Contract upon five days notice. WGB stated it was terminating the Kabro Contract due to Kabro's failure to satisfy or waive its closing conditions and proceed to closing on January 6, 2004. By letter, dated December 19, 2003, Kabro elected to override and vitiate WGB's termination notice and stated that "in accordance with Section 3.2(d), the [Kabro] Contract shall remain in full force and effect as if [WGB's] termination notice was never sent." By letter, dated December 23, 2003, WGB informed Kabro that the closing of the Kabro Contract shall occur on January 6, 2004, time being of the essence, and that if Kabro fails to close on that date, WGB will exercise its rights and remedies under the Kabro Contract, including retaining Kabro's down payment. Said letter also informed Kabro that upon closing, Kabro would receive an assignment of the environmental indemnity obligations of Mobil Oil Corporation ("Mobil").

WGB contends that section 1.2 of the Kabro Contract obligated WGB to clean and repair any damage or contamination on the Property caused by the removal of the fuel tanks and that the Kabro Contract did not contain a global environmental clean-up provision requiring WGB to repair, prior to closing, any and all damage or contamination to the entire Property. WGB argues that this interpretation of the Kabro Contract is consistent with other provisions in the contract. WGB also contends that by overriding WGB's termination notice pursuant to Section 3.2(d) of the Kabro Contract, Kabro waived the right to test the environmental state of the Property as failure to comply with the environmental due diligence period was the basis for WGB's termination. WGB contends that section 6 of the Kabro Contract provides that Kabro agrees to purchase the Property "as is" and "where is" subject to Kabro's environmental testing of the Property pursuant to section 3.2(a) of the Kabro Contract and to WGB's obligation to remove the [*3]excluded assets, which include the fuel tanks.

WGB further claims that after Kabro refused to close by January 6, 2004, it continually refused to close despite WGB giving notice that time was of the essence. By letter, dated January 29, 2004, WGB informed Kabro that Mobil had committed to remediation of the Property and that Mobil's monitoring would not interfere with use of the Property "but will likely continue for several months or even several years." WGB also informed Kabro that Kabro should promptly close the transaction, or alternatively should terminate the contract prior to April 6, 2004. By letter, dated April 7, 2004, from WGB to Kabro, WGB states that "despite the termination of the [Kabro] Contract, my client would be willing to close with your client, but such closing would have to occur no later than Friday, April 16, 2004." By letter, dated February 2, 2005, WGB's counsel returned the contract deposit, plus interest, to counsel for Kabro which was thereafter rejected as improperly paid to Kabro's attorneys. By letter, dated February 17, 2005, WGB resent a check to Kabro for the contract deposit made out to Kabro directly.

The Hospital asserts that it learned in or about December 2003, that the Premises was on the market and expressed an interest in purchasing the Property for a purchase price of $900,000 but that negotiations between the parties ceased due to the dispute between Kabro and WGB. The Hospital asserts that negotiations recommenced on June 25, 2004, at which time the Hospital was informed that Kabro had abandoned any attempt to close on the Kabro Contract. The contract of sale between the Hospital and WGB (the Hospital Contract") was executed on September 30, 2004, and closed on February 3, 2005. Pursuant to Section 3.3(a) of the Hospital Contract, the Hospital acknowledged the existence of the Kabro Contract,"notwithstanding the fact that [WGB] has delivered a notice of termination to the buyer under the [Kabro Contract] on or after April 6, 2004."

Summary judgment is an appropriate remedy only when the record presents no issues of material fact. Stillman v. Twentieth Century Fox Film Corp., 3 NY2d 395. Quoting Friends of Animals v. Associated Fur Mfrs.,46 NY2d 1065, 1067-1068, the Court in Zuckerman v. City of New York, 49 NY2d 557, 562held that"to obtain summary judgment it is necessary that the movant establish his cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment' in his favor (CPLR 3212, subd [b]), and must do so by tender of evidentiary proof in admissible form."

The Court finds that plaintiff has not made the prima facie showing of entitlement to summary judgment as a matter of law. Kabro has not met its burden in proving that there was a valid and binding contract in effect which WGB breached. Rather, by interpreting the Kabro Contract as mandating a global cleanup, Kabro was in effect repudiating the contract, or at the very least indicating its unwillingness to go forward. If [*4]the vitiation by Kabro of the termination of the Kabro Contract by WGB did indeed reinstate the contract, Kabro has failed to prove that section 1.2 of the contract obligated WGB to repair and clean all damage or contamination to the Property rather than repair and clean only damage related solely to the removal of the fuel tanks.

The determination to grant specific performance lies within the discretion of the Court. See Marinoff v. Natty Realty Corp., 34 AD3d 765; McGinnis v. Cowhey, 24 AD3d 629. To obtain specific performance of a contract, a buyer must demonstrate that it is ready, willing and able to perform on the date set for closing, or, if time was not of the essence, on a subsequent date fixed by the parties or within a reasonable time thereafter. Fridman v. Kucher, 34 AD3d 726; Fallati v. Mackey, 31 AD3d 879; Paglia v. Pisanello, 15 AD3d 373; Island Estates Management, Inc. v. MBA Manorhaven, LLC, 12 Misc 3d 1194(A). If a contract does not contain a time of the essence' provision, in order for time to be made of the essence, "there must be a clear, distinct, and unequivocal notice to that effect giving the other party a reasonable time in which to act." Zev v. Merman, 134 AD2d 555, 557, aff'd 73 NY2d 781. See Guippone v. Gaias, 13 AD3d 339; Moray v. DBAG, Inc., 305 AD2d 472; Savitsky v. Sukenik, 240 AD2d 557. When the requisite notice that time is of the essence is not given by either party, the contract must be performed within a reasonable time. See Ramnarain v. Ramnarain, 30 AD3d 394; Stansky v. Mallon, 133 AD2d 392.

The Court finds that Kabro was not ready, willing and able to perform under the Kabro Contract executed in 2003. Although the Kabro Contract did not contain a time of the essence' clause, subsequent correspondence by WGB gave sufficient notice to Kabro that time was of the essence and that failure to close would result in WGB's exercise of its rights under the contract, including retention of the down payment as damages. The original time of the essence closing was established by WGB to be January 6, 2004 and thereafter extended to April 6, 2004. WGB once again allowed Kabro to close ten days later, namely April 16, 2004, which in effect became the final closing date even though April 6, 2004 was the established time of the essence date. Kabro was put on notice that it had to make a determination as to whether to pursue closing of the Kabro Contract based on information supplied by WGB in letters dated December 23, 2003 and January 29, 2004, that remediation by Mobil may continue for several months or even several years. Instead, Kabro chose to wait and see. There was no evidence of any communication between Kabro and WGB until February 2, 2005 when WGB attempted to return the contract deposit to Kabro. The Court can only surmise that Kabro's determination to wait may have included the consideration that there would be a diminution in value of the Property. Though the essence notices are sufficient, additionally, Kabro did not tender performance within a reasonable time. See Ramnarain v. Ramnarain, supra; Stansky v. Mallon, supra. Furthermore, granting specific performance would result in the dismantling of a parking lot serving the Hospital [*5]community thereby causing unreasonable hardship. See Marinoff v. Natty Realty Corp., supra; McGinnis v. Cowhey, supra.

We have examined parties' remaining contentions and find them to be without merit.

On the basis of the foregoing, it is

ORDERED, plaintiff KABRO PM LLC's motion for summary judgment awarding plaintiff specific performance of a contract of sale, dated July 18, 2003 is denied; and it is further

ORDERED, defendant PLAINVIEW HOSPITAL f/k/a NORTH SHORE UNIVERSITY HOSPITAL AT PLAINVIEW's cross motion for summary judgment dismissing the complaint is granted; and it is further

ORDERED, defendant PLAINVIEW HOSPITAL f/k/a NORTH SHORE UNIVERSITY HOSPITAL AT PLAINVIEW's cross motion to disqualify the law firm of Rosenberg, Calica & Birney, LLP from representing plaintiff Kabro PM LLC in this action is denied as moot; and it is further

ORDERED, defendant PLAINVIEW HOSPITAL f/k/a NORTH SHORE UNIVERSITY HOSPITAL AT PLAINVIEW's cross motion for leave to amend its answer to assert cross claims against defendant WGB MAIN STREET, LLC is denied as moot; and it is further

ORDERED, defendant WGB MAIN STREET, LLC's cross motion for summary judgment is granted.

Plaintiff shall serve defendants with a copy of this Order, within 15 days after entry of this Order in the records of the Nassau County Clerk.

This constitutes the Order of the Court.

Dated:, 2007ENTER:

___________________________

J.S.C.