Menorah Home & Hosp. for the Aged & Infirm v Laufer

[*1] Menorah Home & Hosp. for the Aged & Infirm v Laufer 2008 NY Slip Op 50473(U) [19 Misc 3d 1102(A)] Decided on March 13, 2008 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 March 13, 2008
Supreme Court, Kings County

Menorah Home and Hospital for the Aged and Infirm, Plaintiff,

against

Issac Laufer, Defendant.



23444/06



Attorney for Plaintiff

William J. Garry

Garry & Garry Esqs.

115 Broadway, Third Floor

New York, NY 10006

Attorney for Defendant

Seth Eisenberger

108 Airport Executive Park

Nanuet, NY 10954

Carolyn E. Demarest, J.

In this action for breach of contract, plaintiff Menorah Home and Hospital for the Aged and Infirm (plaintiff) moves for summary judgment in its favor against defendant Isaac Laufer (defendant), awarding it a monetary judgment in the sum of $820,000, together with interest thereon from July 31, 2006, and reasonable attorney's fees, costs, and expenses. Defendant cross-moves for partial summary judgment: (1) dismissing plaintiff's second cause of action for attorney's fees, and (2) in his favor on his first, second, and third counterclaims and his claim for attorney's fees.

Plaintiff is a not-for-profit corporation, licensed by the State of New York Department of Health (the DOH) to operate 206 residential health care beds, which were located at 871 Bushwick Avenue, in Brooklyn, New York (the facility). By Purchase Agreement date July [*2]20, 2005 between plaintiff, as seller, and defendant, as purchaser, plaintiff agreed to sell to defendant its interests in the right to operate 60 of the residential healthcare facility beds operated at the facility (i.e., the right to operate a facility containing this number of patients, which is referred to as "the asset" in the Purchase Agreement). Paragraph 2 of the Purchase Agreement provided that the purchase price for the sale was $1,320,000 for the 60 beds ($22,000 per bed). This purchase price was payable, pursuant to paragraph 2 (a), by a down payment of $198,000 within one day of the execution of the Purchase Agreement and, pursuant to paragraph 2 (b), by an additional down payment of $302,000 within 10 days after receipt by defendant of a letter from the DOH acknowledging that the Purchase Agreement received conceptual prior approval from it (i.e., an acknowledgment of receipt of the agreement and that it had no objection to the agreement). Defendant paid the two down payments, which totaled $500,000 toward the purchase price.

Paragraph 2 (c) of the Purchase Agreement provided:

"The balance of the Purchase Price shall be due and payable at the Closing after such time as the Public Health Council of the State of New York gives final, unconditional approval to a Certificate of Need ( CON') application to be filed by Purchaser to operate the sixty (60) beds to be acquired pursuant to the Agreement, which application shall be filed by Purchaser, or an entity to be designated or to be formed by him, no later than sixty (60) days after the receipt from the [DOH] as specified in Paragraph 2 (b) of this Agreement. The CON application shall be to use the Asset in connection with an addition to an existing nursing facility or a nursing facility to be acquired by Purchaser, either facility being located in the City of New York."

Thus, pursuant to paragraph 2 (c) of the Purchase Agreement, defendant was required to file the CON application for final approval by the Public Health Council of the State of New York (the PHC) to operate the 60 residential health care beds no later than 60 days after receiving notice that the DOH acknowledged receipt of the Purchase Agreement and had no objection to it. By letter dated August 1, 2005, defendant received notification that the DOH had acknowledged receipt of an executed copy of the Purchase Agreement and had no objection to it. Defendant, however, failed to file the CON application by October 27, 2005 (60 days from receipt of the letter) or at any time thereafter. Thus, it is now more than two years from the date on which defendant received notification that the DOH had no objection to the Purchase Agreement dated July 20, 2005 and defendant still has not filed a CON application.

Paragraph 11 (a) of the Purchase Agreement provides:

"11. Remedies.

(a) If (i)the Purchaser, or an entity to be designated or to be formed by him, fails to submit the requisite CON application in a timely manner within sixty (60) days after receipt of the letter from the New York State Department of Health as specified in Paragraph 2 (b) of the Agreement; (ii) the Purchaser, or an entity to be designated or to be formed by him, withdraws such CON application; or (iii) the CON application is not approved for reasons [*3]other than (x) public need solely with respect to the Asset or (y) an official or unofficial moratorium on the processing of CON nursing facility applications imposed by the New York State Department of Health, Seller shall be entitled to the Purchase Price, with a credit for the Down Payment and Additional Down Payment, provided, however, that if Purchaser's failure to submit the CON application or withdrawal of the CON application is a direct result of the intentional acts of Seller, or if the CON application is not approved for reasons of public need solely with respect to the Asset, or due to an official or unofficial moratorium on the processing of CON nursing facility applications imposed by the New York State Department of Health, then Seller shall return the Down Payment and Additional Down Payment to Purchaser immediately by certified or bank check, which amounts shall not be deemed to have accrued any interest payable to Purchaser."

By letter dated February 9, 2006, plaintiff's attorney gave defendant written notice, demanding his payment of the balance of the purchase price in the sum of $820,000 pursuant to paragraph 11 (a) of the Purchase Agreement. Defendant refused to pay this sum.

Consequently, on August 7, 2006, plaintiff filed this action against defendant, alleging that defendant breached the Purchase Agreement by failing to file the CON application as required by paragraph 2 (c) of the Purchase Agreement. Plaintiff's first cause of action alleges that pursuant to paragraph 11 (a) of the Purchase Agreement, it is entitled to recover $820,000, the balance of the purchase price (i.e., the full purchase price minus the $500,000 in down payments already paid by defendant) from defendant. Plaintiff's second cause of action seeks recovery of plaintiff's reasonable attorney's fees in the sum of $50,000, which it alleges defendant is required to pay to it pursuant to an indemnification provision (discussed below) contained in paragraph 13 (b) (iii) of the Purchase Agreement.

Defendant has interposed an answer, which asserts three counterclaims. Defendant's first counterclaim alleges that the Purchase Agreement has contingency clauses in paragraphs 11 (a) and 11 (b), and that the Purchase Agreement does not provide a time limit for the contingency. It seeks a declaration that plaintiff must return the down payment and additional down payment if the PHC fails to approve the transfer of the beds at any time in the future. Defendant's second counterclaim requests a judgment declaring that paragraph 11 (a) of the Purchase Agreement, which requires him to pay the complete purchase price to plaintiff without the receipt of the nursing home beds, is an unenforceable penalty and that plaintiff must return his down payment and additional down payment if the beds are not transferred to him. Defendant's third counterclaim alleges that the parties' intent was for him to receive the nursing home beds upon demand after payment of the full purchase price, irrespective of when such payment was made. It seeks a judgment reforming the Purchase Agreement so as to provide that upon defendant's demand any time after defendant's payment of the full purchase price, plaintiff will be required to take all necessary actions to transfer the nursing home beds to him.

In opposition to plaintiff's instant motion and in support of his cross motion, defendant asserts that his counterclaims are inextricably interwoven with and inseparable from the [*4]issues raised by plaintiff's claim, and should, therefore, preclude summary judgment in plaintiff's favor. Defendant argues that the Purchase Agreement does not reflect the intention of the parties, and that the court should reform the Purchase Agreement to reflect the parties intent. Defendant argues that the Purchase Agreement presupposed that he was going to add the beds to an existing facility. Defendant explains that at the time of the Purchase Agreement, he was engaged in negotiations to purchase another nursing facility and its property in Queens, New York. A minority shareholder, however, interfered with defendant's consummation of the purchase of the nursing home in Queens. The litigation in Queens is presently ongoing. Defendant asserts that as a result of this litigation in Queens, he has been unable to file a CON with the PHC to attach the beds to the Queens nursing home, and that it will be impossible for him to do so until the litigation in Queens is concluded.

Defendant argues that since the means of his performance have been nullified, his performance has been rendered objectively impossible, and that his performance under the Purchase Agreement should be excused. Generally, however, "once a party has made a promise, that party must perform or respond in damages, even when unforeseen circumstances make performance burdensome" (Kel Kim Corp. v Central Mkts., 70 NY2d 900, 902 [1987]; Comprehensive Bldg. Contrs. v Pollard Excavating, 251 AD2d 951, 952 [1998]; Inter-Power of NY v Niagara Mohawk Power Corp., 208 AD3d 1073, 1074 [1994]). A defense of impossibility of performance is "applied narrowly, due in part to judicial recognition that the purpose of contract law is to allow the risks that might affect performance and that performance should be excused only in extreme circumstances" (Kel Kim Corp., 70 NY2d at 902; Comprehensive Bldg. Contrs., 251 AD2d at 952). The defense of impossibility of performance is thus available when "the impossibility . . . [is] produced by an unanticipated event that could not have been foreseen or guarded against in the contract" (Kel Kim Corp.,70 NY2d at 902; see also 407 E. 61st Garage v Savoy Fifth Ave. Corp., 23 NY2d 275, 281-282 [1968]; Estates at Mountainview, Ltd. v Nakazawa, 38 AD3d 828, 829 [2007]; Came Realty, LLC v Canadian Imperial Bank of Commerce,10 AD3d 348, 349 [2004]; Lagarenne v Ingber, 273 AD2d 735, 737 [2000]; Ogdensburg Urban Renewal Agency v Moroney, 42 AD2d 639, 640 [1973]).

Here, defendant's predicament is not within the embrace of the doctrine of impossibility. Defendant's inability to purchase the Queens nursing home could have been foreseen and guarded against, when defendant entered into the Purchase Agreement, by making it contingent on the closing of that sale. Therefore, defendant's obligations thereunder cannot be excused on the basis of impossibility of performance (see Kel Kim Corp., 70 NY2d at 902; Estates at Mountainview, Ltd., 38 AD3d at 829; Came Realty, LLC, 10 AD3d at 349; Ogdensburg Urban Renewal Agency, 42 AD2d at 640).

Defendant further argues that it was the intent of the parties that the acquisition of the Queens facility was a condition precedent to his performance under the Purchase Agreement. There is, however, no such condition contained anywhere in the Purchase Agreement. Defendant argues that parol evidence should be admitted to determine the intent of the [*5]parties. However, " [i]nterpretation of an unambiguous contract provision is a function for the court, and matters extrinsic to the agreement may not be considered when the intent of the parties can be gleaned from the face of the instrument'" (Chimart Assoc. v Paul, 66 NY2d 570, 572-573 [1986], quoting Teitelbaum Holdings v Gold, 48 NY2d 51, 56 [1979]). It is the responsibility of the court to interpret written contracts as a matter of law where the determination of the intent of the parties is discernible from the four corners of an unambiguously worded agreement (see R/S Assoc. v New York Job Dev. Auth., 98 NY2d 29, 32 [2002]; Matter of Wallace v 600 Partners Co., 86 NY2d 543, 548 [1995]; Hartford Acc. & Indem. Co. v Wesolowski, 33 NY2d 169, 171-172 [1973]; Lipton v Rising Sun Dev. Corp., 239 AD2d 564, 565 [1997]; Hay Group Inv. Holdings v Saatchi & Saatchi Co., 223 AD2d 458, 459 [1996]; Reisshold Developers v Walkill Corp., 87 AD2d 815, 815 [1982], affd 57 NY2d 694 [1982]).

Here, the pertinent language of the Purchase Agreement is not ambiguous (see R/S Assoc., 98 NY2d at 32; Matter of Wallace, 86 NY2d at 548; Lipton, 239 AD2d at 565). A review of the four corners of the Purchase Agreement demonstrates that it contains no presupposed condition that the beds were going to be added to an existing facility. Rather, the language of paragraph 2 ( c) is unconditional and unambiguously sets forth that defendant was required to file the CON application within 60 days after receiving the DOH's acknowledgment of receipt of the Purchase Agreement.

Defendant points to the reference in paragraph 2 (c) to a "nursing facility to be acquired by Purchaser" and argues that this is supportive of his argument that it was the intent of the parties that his duties under the agreement were contingent upon his acquisition of the Queens facility to place the beds. This argument is unavailing since paragraph 2 (c) (as quoted above), in fact, merely allowed a defendant, in his CON application, to designate either an existing nursing facility or a nursing facility to be acquired by him as the location of the beds. It does not condition defendant's agreement to purchase the beds upon his obtaining a facility in Queens.

Defendant also relies on a July 20, 2005 Letter Agreement, which, he claims, evidences plaintiff's awareness that he was going to place the asset in a facility which he did not own at the time of the Purchase Agreement. Defendant's reliance on this July 20, 2005 Letter Agreement is misplaced. The language purportedly referenced by defendant's counsel in the July 20, 2005 Letter Agreement only states that if the PHC decided that the asset could not be utilized outside of Brooklyn, defendant would not have to purchase the asset. That is not what occurred in this case since no CON application was ever submitted to the PHC by defendant. The Letter Agreement does not make defendant's obligations under the Purchase Agreement contingent upon the purchase of the Queens nursing facility.

Moreover, paragraph 14 (f) of the Purchase Agreement contains a merger clause, which provides:

"(f) This Agreement and its exhibits . . . constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject [*6]matter hereof. No representation, warranty, promise, inducement or statement of intention has been made by any party which is not embodied in this Agreement . . . and neither Seller nor Purchaser shall be bound by, or be liable for, any alleged representation, warranty, promise, inducement or statement of intention not embodied herein . . ."

Thus, any purported oral understandings or statement of intention not embodied in the Purchase Agreement were expressly merged into it by paragraph 14 (f) and may not be relied upon by defendant as a basis for rescission of the Purchase Agreement. While defendant seeks rescission and reformation of the Purchase Agreement, the fact that defendant is unable to perform because he has not obtained a facility cannot relieve him of his contractual obligations. As noted above, there is no condition precedent in the Purchase Agreement which conditions the purchase of the 60 beds upon the acquisition of a facility by defendant, and defendant does not dispute that the CON application was not timely filed by him in compliance with paragraph 2 (c) of the Purchase Agreement.

"[T]here is a heavy presumption that a deliberately prepared and executed written instrument manifest[s] the true intention of the parties'" (Chimart Assoc., 66 NY2d at 574, quoting George Backer Mgt. Corp. v Acme Quilting Co., 46 NY2d 211, 219 [1978]). "The proponent of reformation must show in no uncertain terms, not only that mistake or fraud exists, but exactly what was really agreed upon the parties'" (Chimart Assoc., 66 NY2d at 574, quoting George Backer Mgt. Corp., 46 NY2d at 219).

Here, defendant, who was sophisticated in the business of the health care industry and was represented by an attorney during the negotiations and execution of the Purchase Agreement, bargained for the terms of the Purchase Agreement and voluntarily undertook this contractual obligation upon himself. There is no evidence of any mutual mistake or fraud, as required to sustain a counterclaim for rescission/reformation, to permit defendant to be relieved of his obligations (see Chimart Assoc., 66 NY2d at 574; Seebold v Halmer Constr. Corp., 146 AD2d 886, 887 [1989]). Rather, defendant cannot dispute that he was aware of what he was contracting for, and plaintiff, in reliance upon defendant's contractual agreement, held this asset for defendant's benefit, causing it to lose its value.

Moreover, it is noted that defendant first entered into the formal written contract to purchase the Queens facility on November 23, 2005, four months after the date of the July 20, 2005 Purchase Agreement, and beyond the 60-day period to file a CON as required by section 2 (c) of the Purchase Agreement. The Queens litigation was not commenced until May 6, 2006, approximately 10 months after the July 20, 2005 Purchase Agreement was executed. Indeed, plaintiff claims that it did not learn of defendant's intent to house the asset in a facility which he did not own until defendant's counsel advised this court, at oral argument on February 7, 2007, of the Queens litigation. Thus, the unambiguous language of paragraph 2 (c) of the Purchase Agreement supports plaintiff's motion for an award of summary judgment on the issue of liability for a breach of this contractual provision.

Defendant, however, seeks a declaration that the contingency of approval by the PHC as triggering the closing is "open-ended." He asserts that the Purchase Agreement has a [*7]contingency clause in paragraph 11 (a) concerning the non-approval of his CON application, which provides for the return of his down payments. He states that this contingency was not limited to any specific time period. Defendant argues that due to this open-ended contingency, plaintiff was required to take all necessary actions to transfer the subject nursing home beds to him at the time of closing following approval by the PHC whenever that occurs.

Defendant's argument must be rejected. The contingency for the return of the down payments in paragraph 11 (a) is only triggered "if the CON application is not approved for reasons of public need solely with respect to the Asset, or due to an official or unofficial moratorium on the processing of CON nursing facility applications imposed by the [DOH]." This contingency has not occurred and is wholly irrelevant to the issue at bar.

While defendant similarly relies upon paragraph 11 (b) as creating an open-ended contingency without a time limitation for the return of his down payments, this paragraph is also inapplicable to the issues raised in this case since the contingency referred to is the event that the PHC refuses to approve defendant's CON application on the same grounds of public need or a moratorium set forth in paragraph 11 (a). It, thus, presupposes defendant's submission of a CON application. Here, the requisite CON application was never submitted by defendant and, thus, it could not have been denied on the grounds specified. In fact, paragraph 11(b) expressly provides that, unless the POH refuses approval for the reasons stated:

"In the event that Purchaser, or an entity to be designated or to be formed by him, fails to obtain Public Health Council approval within eighteen (18) months (with the right of an additional six (6) month extension, subject to Seller's consent, which consent shall not be unreasonably withheld), after the letter specified in Paragraph 2(b) of the Agreement is received, this Agreement shall terminate and Seller will be entitled to the Purchase Price, with a credit for the Down Payment and Additional Down Payment . . ."

Thus it is clear that the parties did not anticipate an open ended agreement for an indefinite period of time as defendant suggests, but expected the entire sale to be concluded within approximately two and a half years from the date of contract. The issue of defendant's liability pursuant to paragraph 2 (c) must be resolved in plaintiff's favor as a matter of law (see CPLR 3212 [b]; Central Irrigation Supply v Putnam Country Club Assoc, LLC, 27 AD3d 684, 685 [2006]).

Under the terms of the Agreement, this court's finding that defendant failed to comply with paragraph 2 (c) of the Purchase Agreement triggers the remedy set forth in paragraph 11(a) consisting of a liquidated damages clause under which defendant would be required to pay the full contract price of $1,320,000 as stipulated damages and receive nothing in return. Defendant argues that this liquidated damages clause constitutes an unlawful penalty and should not be enforced by the court. Plaintiff, on the other hand, argues that the damages sought are not a penalty, but represent the agreed upon contractual damages and [*8]fairly compensate it for the transfer of its right to operate 60 residential health care facility beds.

"While, the parties may agree as to [liquidated] damages in the event of a breach . . . the imposition of penalties or forfeitures for a breach of contract is not permitted in the absence of statutory authority" (Matter of Ann-Par Sanitation, Inc. v Town of Brookhaven, 23 AD3d 380, 382 [2005]; see also Irving Tire Co. v Stage II Apparel Corp., 230 AD2d 772, 774 [1996]; Willner v Willner, 145 AD2d 236, 239-240 [1989]). " The general rule is that liquidated damages provide compensation for loss'" and " [t]here must be some reasonable relation between the stipulated amount and the anticipated injury'"(Matter of Ann-Par Sanitation, Inc., 23 AD3d at 382, quoting M. Viaggio & Sons v City of New York, 114 AD2d 939, 939 [1985]; see also Java St. Realty, Inc. v New York City Economic Dev. Corp., 18 AD3d 437, 439 [2005]).

Thus, "[a] contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable [actual] loss and the amount of actual loss [suffered] is incapable [of estimation] or difficult [to] precise[ly determine]" (Truck Rent-A-Ctr. v Puritan Farms 2nd, 41 NY2d 420, 425 [1977]; see also BDO Seidman v Hirshberg, 93 NY2d 382, 396 [1999]; City of Rye v Public Serv. Mut. Ins. Co., 34 NY2d 470, 473 [1974]; Pyramid Ctrs. & Co. v Kinney Shoe Corp., 244 AD2d 625, 627 [1997]; Irving Tire Co., 230 AD2d at 773; Mid-Atlantic Autec v Keeler Motor Car Co., 199 AD2d 732, 733 [1993]). "If, however, the amount fixed is plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced" (Truck Rent-A-Ctr., 41 NY2d at 425; see also Matter of Ann Par Sanitation, Inc., 23 AD3d at 382; Evangelista v Ward, 308 AD2d 504, 505 [2003]; Pyramid Ctrs. & Co., 244 AD2d at 627; Irving Tire Co., 230 AD2d at 773; Mid-Atlantic Autec,199 AD2d at 733).

Where a provision in a contract provides for stipulated damages that equals the entire price, the primary purpose of such a provision is deemed to constitute a penalty, rather than to provide for compensation, and is unenforceable (see National Telecanvass Assoc. v Smith, 98 AD2d 796, 797-798 [1983]). Furthermore "any reasonable doubt as to whether a provision constitutes an unenforceable penalty or a legitimate liquidated damages clause should be resolved in favor of a construction which holds the provision to be a penalty" (Vernitron Corp. v CF 48 Assoc., 104 AD2d 409, 409-410 [1984]; see also Pyramid Ctrs & Co., 244 AD2d at 627; Willner, 145 AD2d at 240; National Telecanvass Assoc., 98 AD2d at 798).

Plaintiff, in order to support its claim that the liquidated damages sought bear a reasonable proportion to the actual loss sustained by it, has submitted the affidavit of Jane Rosenthal, its Chief Executive Officer, wherein she states that in reliance upon defendant's contractual representations in the Purchase Agreement, plaintiff closed its facility that housed its 60 residential health care beds and sold its building to Metro International Church, Inc., another not-for-profit corporation. She asserts that "plaintiff cannot take back the sixty (60) residential health care facilities beds and sell them to another party." She further asserts that [*9]plaintiff has lost a significant business opportunity, and will suffer severe economic injury if defendant does not pay it the full purchase price as damages.

This affidavit, however, is conclusory and wholly lacking in any specific factual detail or documentary support (see generally Ayotte v Gervasio, 81 NY2d 1062, 1062 [1993]). As such, it is insufficient to sustain plaintiff's prima facie burden of demonstrating that the actual damages sustained by it equal the entire contract price (see generally JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373, 384-385 [2005]; Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; S.J. Capelin Assoc. v Globe Mfg. Corp., 34 NY2d 338, 341 [1974]; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).

In addition, defendant points out that plaintiff did not close all of its operations. According to the July 21, 2005 letter by plaintiff's attorney to the DOH, plaintiff was to close its 206-bed facility in Bushwick in July 2005, and "move 125 of those beds to its Manhattan Beach location after renovation of the existing facility there takes place"; it was to sell defendant 60 of the remaining 81 beds that were not being relocated to its Manhattan Beach site. Defendant asserts that there is no absolute evidence that plaintiff cannot directly or indirectly utilize, resell, or transfer the beds, and requests that it be given an opportunity to conduct discovery as to this issue (see CPLR 3212 [f]). Defendant also points out that since the Purchase Agreement had a contingency, if the contingency had occurred, then plaintiff would have sustained the same damages if the PHC or the DOH did not permit the transfer, and he would have been entitled to a return of his down payments.

Thus, plaintiff has not made a satisfactory demonstration of its entitlement to the liquidated damages amount as actual damages and since the liquidated damages clause provides that the entire contract price would be forfeited upon defendant's default, the court finds that this liquidated damages clause constitutes an onerous and unenforceable penalty as a matter of law (see Evangelista, 308 AD2d at 505; Pyramid Ctrs. & Co., 244 AD2d at 627; Irving Tire Co., 230 AD2d at 773-774; Willner, 145 AD2d at 241; Mid-Atlantic Autec, 199 AD2d at 733; National Telecanvass Assoc., 98 AD2d at 797-798).

Although the court finds this liquidated damages clause to be unenforceable, paragraph 14 (k) provides that "the unenforceability . . . of any provision . . . hereof shall not render unenforceable, or impair, the remainder hereof," and that "[i]f any provision . . .hereof shall be deemed invalid or unenforceable, either in whole or in part . . . this Agreement shall be deemed amended to delete . . . the offending provision." Thus, the Purchase Agreement may otherwise be enforced, and plaintiff may be permitted to prove its actual damages (see Pyramid Ctrs. & Co., 244 AD2d at 627; Irving Tire Co., 230 AD2d at 772-773; Mid-Atlantic Autec, 199 AD2d at 734; National Telecanvass, 98 AD2d at 798).

The court now turns to plaintiff's motion insofar as it seeks summary judgment on its second cause of action for attorney's fees, which, it claims, it is entitled to recover pursuant to paragraph 13 (b) (iii) of the Purchase Agreement. Paragraph 13 (b) (iii) provides:

"13. Indemnification

. . . [*10]

(b) From and after the Closing Date, Purchaser agrees to indemnify Seller . . from any and all . . . expenses (including reasonable attorneys' fees) arising out of, resulting from or in any way connected with . . . (iii) any failure by Purchaser . . . to perform [his] obligations pursuant to this Agreement . . ." (emphasis added).

The Purchase Agreement expressly limits any indemnification and award of attorney's fees to only those attorney's fees arising out of a failure by defendant to perform his obligations pursuant to the Purchase Agreement "[f]rom and after the Closing Date." A review of the entire provision suggests that indemnification was intended to be for costs incurred as a result of non-performance of obligations specifically relating to the operation of the asset following closing. Therefore, the closing of the transfer of the asset was a condition precedent to defendant's liability for attorney's fees. The Closing Date is defined in paragraph 3 (a) as "twenty (20) days after approval by the [PHC]," or another date agreed upon by the parties in writing. Since it is undisputed that this approval never occurred and no closing (pursuant to paragraph 3 of the Purchase Agreement) has taken place, this provision has not become operative.

The necessity for the closing to have taken place prior to this provision for attorney's fees becoming operative is further evidenced by paragraph 11 (c), under the heading "Remedies," which provides:

"(c) In the event of the failure by Seller to transfer the Asset as required under this Agreement, Purchaser shall be entitled to specific performance including, but not limited to, attorney's fees, incurred as a result of obtaining legal relief to require such performance by Seller."

As set forth, paragraph 11 (c) addresses defendant's entitlement to pre-closing attorney's fees in connection with litigation seeking specific performance requiring the transfer of the beds by plaintiff. This is in contrast to paragraph 13, entitled "Indemnification," which grants both plaintiff (in paragraph 13 [b]) and defendant (in paragraph 13 [a]) attorney's fees for certain post-closing claims. The omission of any reference in paragraph 11 to liability on the part of defendant for pre-closing attorney's fees incurred by plaintiff is thus indicative of the parties' intent not to provide for plaintiff's recovery of these fees in the event of a pre-closing breach of contract by defendant.

Indeed, paragraph 13 would render paragraph 11 (c) superfluous if construed to encompass pre-closing attorney's fees. It is well established that "a construction which makes a contract provision meaningless is contrary to basic principles of contract interpretation" (Matter of Columbus Park Corp. v Department of Hous. Preserv. & Dev. of City of NY, 80 NY2d 19, 31 [1992]).

Attorney's fees are incidents of litigation and a prevailing party may not collect them unless an award of such fees is authorized by an agreement between the parties, statute, or court rule (see Chapel v Mitchell, 84 NY2d 345, 348-349 [1994]; Hooper Assoc. v AGS Computers, 74 NY2d 487, 491 [1989]; Matter of A.G. Ship Maintenance Corp. v Lezak, 69 NY2d 1, 5 [1986]; Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 21-22 [1979]). Since the contractual provision for indemnification of post-closing attorneys' fees does not apply, and there is no other basis for an award of attorney's fees, plaintiff's motion for summary judgment in its favor on its second cause [*11]of action for attorney's fees must be denied, and defendant's cross motion insofar as it seeks dismissal of this cause of action must be granted (see CPLR 3212 [b]).

Defendant, in its cross motion, seeks an award of attorney's fees pursuant to paragraph 11 (c) of the Purchase Agreement, which, as noted above, provides for his recovery of attorney's fees in connection with obtaining specific performance. Defendant contends that since plaintiff is unwilling to abide by the intended terms of the Purchase Agreement, he is entitled to recover attorney's fees.

Defendant's contention is devoid of merit. Paragraph 11 (c) is only applicable in the event that plaintiff failed to transfer the beds as required under the terms of the Purchase Agreement. Here, plaintiff has fully performed and complied with all of its obligations under the Purchase Agreement. It is defendant who has not applied for the CON and cannot proceed to closing. Thus, paragraph 11 (c) is inapplicable and defendant may not recover his attorney's fees from plaintiff.

Accordingly, plaintiff's motion for summary judgment in its favor against defendant: (1) is granted on the issue of liability with respect to its first cause of action and (2) is denied insofar as it seeks the award of a monetary judgment in the sum of $829,000, together with interest thereon from July 31, 2006 pursuant to the liquidated damages clause in the Purchase Agreement, and (3) is denied with respect to its second cause of action for reasonable attorney's fees, costs, and expenses. Defendant's cross motion for partial summary judgment: (1) is granted insofar as it seeks dismissal of plaintiff's second cause of action, (2) is granted with respect to defendant's second counterclaim to the extent that the liquidated damages clause in paragraph 11 (a) is declared an unenforceable penalty, and (3) is denied insofar as it seeks judgment in his favor on his first and third counterclaims, and on his claim for attorney's fees.

The parties are directed to appear for conference in Commercial Part I on April 23, 2008.

This constitutes the decision and order of the court.

E N T E R,

J. S.C.