Pleasant Hill Developers, Inc. v Foxwood Enters., LLC

[*1] Pleasant Hill Developers, Inc. v Foxwood Enters., LLC 2008 NY Slip Op 51339(U) [20 Misc 3d 1113(A)] [20 Misc 3d 1113(A)] Decided on July 3, 2008 Supreme Court, Orange County Giacomo, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 3, 2008
Supreme Court, Orange County

Pleasant Hill Developers, Inc., Plaintiff,

against

Foxwood Enterprises, LLC and Chris Scibelli, Defendants.



9285/2006



Gardiner S. Barone, Esq.

Blustein, Shapiro, Rich & Barone, LLP

Attorneys for Plaintiff

90 Crystal Run Road- Suite 409

Middletown, New York 10941

Neal D. Frishberg, Esq.

Fabricant Lipman & Frishberg, PLLC

Attorney for Defendants One Harriman Square

P.O. Box 60

Goshen, New York 10924

William J. Giacomo, J.

Foxwood Enterprises, LLC (hereinafter "Foxwood") was the owner of certain vacant land designated as Section 30, Block 1, Lot 1.7 on the tax maps of Town of Cornwall (the "Property"). By contract of sale dated July 26, 2003 Foxwood agreed to sell the Property to Joel Kahan and Jacob Kahan (hereinafter the "Kahans") for a purchase price of $600,000 (the "Contract")[FN1]. The Contract contained two (2) riders, a "Seller's Rider" and a "Purchaser's Rider".

The Contract contained a provision for Foxwood to secure approval of a six (6) lot subdivision of the Property [FN2]. Both the Purchaser's Rider and the Seller's Rider made the obligation of either party to close on the Property contingent upon the Planning Board granting final approval of the subdivision of the Property into six (6) residential lots. (See Purchaser's Rider at ¶16 and Seller's Rider at ¶15.) The Contract also provided that for each lot Foxwood could not obtain final approval for, there would be a $100,000 reduction in the purchase price of [*2]the Property. The Contract also contained a merger clause.

In or about November 2004, Foxwood obtained preliminary approval of the six (6) lot subdivision and it must have seemed to the parties as if the only remaining issues was the extension of water service to the Property. Nonetheless, final planning board approval for the six (6) lot subdivision was not yet granted.

Nonetheless the parties proceeded to closing on December 27, 2004. To facilitate the closing, and because Foxwood had not yet received final approval for a six (6) lot subdivision, the parties entered into a post-closing agreement (the "Agreement") that was to survive the closing.

The Agreement provided that Foxwood would "diligently pursue" securing "completion of a water main extension to the subject premises which completion is all that remains for final subdivision approval". If not completed by June 1, 2005, the Agreement provided that "the sum of $15,000 shall be held in escrow to secure the completion of the items hereinafter set forth and which are at this time incomplete." (Agreement at ¶5.) More specifically, the Agreement provided that the $15,000 escrow was being held to insure completion of the water main extension to the Property.

The Agreement also provided that Foxwood "agrees to provide to the purchaser, mylars and subdivision maps duly executed by the Chairman of the Town of Cornwall Planning Board necessary to present the final subdivision map to the Orange County Clerk's office for filing, for a 6 lot subdivision." (Agreement at ¶5.) The Agreement further provided that the "parties acknowledge and agree that this agreement embodies the entire understanding between the parties with respect to its subject matter and has been entered into only after independent investigation and without reliance upon any representation or promise not contained herein." (Agreement at ¶7.) Foxwood's performance of the Agreement was personally guaranteed by defendant Chris Scibelli, a member of Foxwood.

After the closing on the Property, and before final approval was obtained for a six (6) lot subdivision of the Property, the local zoning laws were amended. As a result, the parties were advised that the preliminary approval for a six (6) lot subdivision was no longer valid. Eventually, Pleasant Hill obtained final approval from the Planning Board for a four (4) lot subdivision.

Plaintiff commenced this action by complaint alleging three (3) causes of action: specific performance of the post-closing Agreement; breach of the Agreement; and to enforce the personal guaranty of Chris Scibelli. Defendants answered and interposed twelve (12) affirmative defenses.

Plaintiff now moves to dismiss the affirmative defenses and for an order granting it summary judgment as to liability. Plaintiff argues that the Agreement obligated defendants to provide "mylars and subdivision maps duly executed by the Chairman of the Town of Cornwall Planning Board necessary to present the final subdivision map to the Orange County Clerk's office for filing, for a 6 lot subdivision", which they claim obligated them to obtain the six (6) lot subdivision approval, and the water main extension.

Defendants oppose the motion and cross-move for summary judgment, seeking an order dismissing the complaint, or limiting defendants' liability to $15,000. [*3]Defendants' argue that by closing the transaction on December 27, 2004, prior to Foxwood obtaining final approval for the six (6) lot subdivision [FN3], Pleasant Hill waived the six (6) lot subdivision contingency and any other obligations of Foxwood under the Contract by operation of the doctrine of merger. Defendants state that, in return for the waiver, Foxwood agreed to a limited continuing obligation concerning the procurement of a final approval of the six (6) lot subdivision and a limit of its liability to $15,000.

Discussion

It is not disputed that at the time of closing, Foxwood was not in position to convey the Property with approval for a six (6) lot subdivision. Nonetheless, plaintiff proceeded to closing even though Foxwood was not in compliance with the terms of the Contract and tendered the full purchase price at closing.

"The rule of law applicable to such disputes has frequently been stated. Generally, the obligations and provisions of a contract for the sale of land are merged in the deed and, as a result, are extinguished upon the closing of title [citation omitted]. However, this rule does not apply where there is a clear intent evidenced by the parties that a particular provision [of the contract of sale] shall survive the delivery of the deed, or where there exists a collateral undertaking' ". Novelty Crystal Corp. v. PSA Institutional Partners, L.P., 850 NYS2d 497, 500 (2nd Dept., 2008), quoting, Davis v. Weg, 104 AD2d 617, 619, 479 NYS2d 553 (2nd Dept., 1984).

As a threshold matter, this Court holds that Foxwood's obligation to obtain a six (6) lot subdivision of the Property was not a collateral undertaking that is excepted from the doctrine of merger. " [A] contract provision cannot be a collateral undertaking if it is "an integral part of the principal purpose of the contract, namely a conveyance of title to real property" ' ". Id., quoting, Alexy v. Salvador, 217 AD2d 877, 878, 630 NYS2d 133, 135 (3rd Dept., 1995), quoting, Yaksich v. Relocation Realty Serv. Corp., 89 Misc 2d 410, 411, 391 NYS2d 822 (Eric Cty, 1977). As held in Yaksich v. Relocation Realty Serv. Corp., "the payment of the purchase price is not collateral". Id.

In the instant matter, not only was plaintiff's obligation to close specifically conditioned upon the adoption of a resolution for the six (6) lot subdivision [FN4], but the [*4]purchase price delineated in the Contract was subject to reduction in the event that Foxwood could not obtain a six (6) lot subdivision. This is not a collateral undertaking. See generally, 527 Smith Street Brooklyn Corp. v. Bayside Fuel Oil Depot Corp., 262 AD2d 278, 278, 691 NYS2d 560, 561 (2nd Dept., 1999)[A real estate contract that does not provide that the clause regarding the purchase price survive delivery of the deed and does not contain a provision for any post-closing adjustment does not fall within the exception to the merger doctrine and since the "purchase price is an integral part of the real estate transaction, and not a collateral undertaking."]

The plaintiff closed on the Property fully aware that final approval of the six (6) subdivision had not been granted. Therefore, in order to sustain its cause of action plaintiff must show a clear intent that Foxwood's obligation to obtain approval of the six (6) lot subdivision of the Property survived the delivery of the deed [FN5]. Id. Plaintiff argues that such intent is evidenced by the Agreement.

When interpreting a contract such as the Agreement at bar, "the document must be read as a whole to determine the parties' purpose and intent, giving a practical interpretation to the language employed so that the parties' reasonable expectations are realized". Snug Harbor Square Venture v. Never Home Laundry, 252 AD2d 520, 521, 675 NYS2d 365 (2nd Dept., 1998). Whether or not a writing is ambiguous is a question of law to be resolved by the courts. W.W.W. Associates, Inc., v. Giancontieri, 77 NY2d 157, 162, 566 NE2d 639 (1990). "The test for determining whether contract language is ambiguous is whether the agreement on its face is reasonably susceptible of more than one interpretation' ". McCabe v. Witteveen, 34 AD3d 652, 654, 825 NYS2d 499, 501 (2nd Dept., 2006), quoting, Chimart Assoc. v. Paul, 66 NY2d 570, 573, 498 NYS2d 344, 489 NE2d 231(1986).

While the interpretation of an unambiguous contract may be made by this Court, it is axiomatic that it "should not, under the guise of contract interpretation, imply a term which the parties themselves failed to insert' or otherwise rewrite the contract". Lui v. Park Ridge at Terryville Assn., 196 AD2d 579, 581, 601 NYS2d 496 (2nd Dept., 1993), quoting, Mitchell v. Mitchell, 82 AD2d 849, 440 NYS2d 54(2nd Dept., 1981).

The purpose of the Agreement at bar is set forth in its "whereas" clause which [*5]reads as follows:

"Whereas, pursuant to an agreement between the parties dated March 26, 2003, Seller agreed to sell property located at Orrs Mill Road & Pleasant Hill Road, Cornwall, New York to the Purchaser; title is to be closed on the 27th day of December 2004, and the parties have agreed that the sum of $15,000.00 shall be held in escrow to secure the completion of the items hereinafter set forth and which are at this time incomplete." (Agreement at p.1, emphasis supplied.)

The clear and unequivocal language of the Agreement further states that the $15,000 escrow being held was

"to insure completion of a water main extension to the subject premises which condition is all that remains for final subdivision approval. Seller agrees to diligently pursue completion of the aforesaid items and to notify the Purchase (sic) when the work is completed. In the event the Seller shall be unable or unwilling to complete the water main extension on or before the 1st day of June, 2005, Seller agrees that the Purchaser shall complete those items and present invoices for the same up to $15,000.00, to the Escrowee who will reimburse Purchaser therefor. Seller agrees to provide to the Purchaser, mylars and subdivision maps duly executed by the Chairman of the Town of Cornwall Planning Board necessary to present the final subdivision map to the Orange County Clerk's office for filing, for a 6 lot subdivision." (Agreement at ¶6.)

The Agreement also contains a standard disclaimer that the written Agreement embodied the entire understanding of the parties. (See Agreement at ¶7.)

It is quite clear from the submissions, and the language of the Agreement, that both parties presumed that approval by the Town Board of the six (6) lot subdivision of the Property was a foregone conclusion. While the plaintiff argues that the intent of the Agreement was to reflect a continuation of the defendants' obligations under the Contract to obtain and provide final site plan approval of a six (6) lot subdivision [FN6], the language of the Agreement, as reflected above, does not clearly indicate that this was the case.

Notably absent from the Agreement is a specific covenant by Foxwood to continue to pursue the six (6) lot subdivision application through final approval. The covenant contained in the Agreement obligates Foxwood to only complete the water main extension which was the only remaining condition of the preliminary site plan approval in order to gain final approval of the Town Board. There is a difference between the two. Furthermore, plaintiff's attempt to equate Foxwood's agreement to provide "mylars and subdivision maps duly executed by the Chairman of the Town of Cornwall Planning Board necessary to present the final subdivision map to the Orange County Clerk's office for filing, for a 6 lot subdivision" with a continuing obligation to pursue the six (6) lot subdivision application through final approval is rejected. The terms of the Agreement require Foxwood only to provide the subdivision maps and mylars duly executed by the Chairman of the Town Planning Board as is necessary to [*6]present the final subdivision map to the Orange County Clerk's office for filing.

Notably absent from the Agreement is any reference to the rights of the plaintiff in the event final site approval for the six (6) lot subdivision is not obtained. Also absent from the Agreement is a provision for a price adjustment, as there was in the Contract, in the event final subdivision approval for all six (6) lots was not received as contemplated. Here, the parties are bound by the terms of the Agreement not the terms of the Contract of Sale which merged with the Deed at closing.

There is no indication in the Agreement that the parties intended to obligate Foxwood to a new obligation or render Foxwood liable when this unforseen contingency occurred. The Agreement related only to the water line. It further stated that

The parties acknowledge and agree that this agreement embodies the entire understanding between the parties with respect its (sic) subject matter and has been entered into only after independent investigation and without reliance upon any representation or promise not contained herein. The parties specifically disclaim the making of any representations not embodied herein and specifically disclaim reliance thereon. (Agreement at ¶7.)

Foxwood's failure to obtain the water line obligates them to a $15,000 penalty pursuant to the terms of the Agreement. There is no breach of the Agreement if Foxwood pays the $15,000 penalty delineated in the Agreement. The record does not indicate that the $15,000 was demanded and not paid. Absent such proof, there is no breach of the Agreement.

On account of the foregoing, plaintiff's motion seeking summary judgment on the issue of liability is DENIED. Defendants' cross-motion seeking summary judgment dismissing the complaint is DENIED. Defendants' cross-motion seeking to limit defendants' liability to the sum of $15,000 is GRANTED.

All parties shall appear for conference with the Court on July 21, 2008 at 9:30 a.m. in Courtroom 6.

The foregoing shall constitute the decision and order of the Court.

Dated: Goshen, New York

July 3, 2008

/s/

Hon. William J. Giacomo, J.S.C.

cc:

Gardiner S. Barone, Esq.

Blustein, Shapiro, Rich & Barone, LLP

Attorneys for Plaintiff

90 Crystal Run Road- Suite 409

Middletown, New York 10941 [*7]

Neal D. Frishberg, Esq.

Fabricant Lipman & Frishberg, PLLC

Attorney for Defendants

One Harriman Square

P.O. Box 60

Goshen, New York 10924 Footnotes

Footnote 1:Shortly after executing the Contract, the Kahans assigned and transferred their rights to their corporation, plaintiff Pleasant Hill Developers, Inc. (hereinafter "Pleasant Hill")

Footnote 2:It is undisputed that Foxwood had been seeking and had already submitted its application for approval of the six (6) lot subdivision to the Town of Cornwall Planning Board (the "Planning Board") prior to the execution of the Contract.

Footnote 3:Defendants state that in December 2004, the real estate market was rapidly appreciating and that the Property at the time of closing was worth considerably more than the $600,000 sale price. This increase in value, defendants' argue, was plaintiff's impetus for closing without final subdivision approval, it being obvious that both sides were risking adverse consequences.

Footnote 4:Where, as here, an obligation to convey a parcel of property is subject to obtaining approval for a proposed subdivision, the condition can be waived. See, Lieberman Properties, Inc. v. Braunstein, 134 AD2d 55, 60, 522 NYS2d 874, 877 (N.Y.A.D. 2nd Dept.,1987); BPL Dev. Corp. v. Cappel, 86 AD2d 591, 446 NYS2d 134 (2nd Dept., 1982), lv. denied, 56 NY2d 506, 453 NYS2d 1025, 438 NE2d 880 {56 NY2d 506} ).

Footnote 5:In the matter at bar, the Contract also provides for same in that it expressly provides that

"notwithstanding any contrary provision contained in this contract, or in any other rider hereto, none of the terms or provisions of this agreement, nor any promise, representation, warranty, agreement or obligation on the part of the Seller, it agents, employees or representatives, whether express or implied, shall survive the delivery and acceptance of the deed hereunder, unless such term or provision hereof or such promise, representation, warranty, agreement or obligation, is fully set forth in writing and signed by the Seller and unless such writing expressly states that the same shall survive the delivery and acceptance of such deed." (Contract, Seller's Rider at ¶6.)

Footnote 6:A position that defendant opposes as set forth above.