Matrix Realty Group v. Food Management Group

10-4227-bk
Matrix Realty Group v. Food Management Group
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
AMENDED SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT.
CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS
PERMITTED AND IS GOVERNED BY THIS COURT’S LOCAL RULE 32.1.1 AND
FEDERAL RULE OF APPELLATE PROCEDURE 32.1. WHEN CITING A SUMMARY
ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER
THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated Term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York,
on the 26th day of August, two thousand eleven,
Present: ROSEMARY S. POOLER,
RICHARD C. WESLEY,
Circuit Judges.
JOHN G. KOELTL,*
District Judge.
_____________________________________________________
In re: FOOD MANAGEMENT GROUP, LLC, KMA I, INC.,
KMA II, INC., KMA III, INC. and BRONX DONUT BAKERY, INC.,
Debtors.
_________________________________________________
MATRIX REALTY GROUP, INC.,
Appellant,
-v- 10-4227-bk
FOOD MANAGEMENT GROUP, LLC, KMA I, INC., KMA II, INC.,
KMA III, INC. and BRONX DONUT BAKERY, INC.,
Appellees.
*
The Honorable John G. Koeltl, United States District Court for the Southern District of
New York, sitting by designation.
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Appearing for Appellant: David Lazer, Lazer Aptheker, Rosella & Yedid, P.C. (Zachary
Murdock, on the brief), Melville, N.Y.
Appearing for Appellees: Warren T. Pratt, Drinker Biddle & Reath, LLP,Wilmington, De.
(Janice B. Grubin, Todtman Nachamie Spizz & Johns, P.C., New
York, N.Y., on the brief).
Appearing for Amicus Curiae
QuestTech Financial, LLC: Richard Levy Jr., Pryor Cashman LLP, New York, N.Y., on the
brief.
Appeal from the United States District Court for the Southern District of New York
(Batts, J.).
ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of said District Court be and it hereby is AFFIRMED.
Matrix Realty Group, Inc. appeals from the September 21, 2010, memorandum and order
of the Southern District of New York (Batts, J.) affirming the May 28, 2008 order of the
Bankruptcy Court for the Southern District of New York (Hardin, J.), issued after a bench trial,
finding Matrix liable to Food Management Group, LLC, KMA I, Inc., KMA II, Inc., KMA III,
Inc., and Bronx Donut Bakery, Inc. (collectively, “Debtors”) for breach of contract and awarding
damages in the amount of $9,196,114.11. Matrix raises numerous issues for review, with
particular emphasis on arguing the courts below erred in finding it anticipatorily repudiated an
agreement between the parties for Matrix to purchase the bulk of the assets contained in the
Debtors’ estate. The assets at issue were primarily Dunkin’ Donuts franchises and franchise
agreements. We assume the parties’ familiarity with the underlying facts, procedural history,
and specification of issues for review.
The courts below properly determined that Matrix anticipatorily breached the agreement
between the parties. “Under the doctrine of anticipatory breach, a wrongful repudiation of the
contract by one party before the time of performance entitles the non-repudiating party to
immediately claim damages for total breach, and will relieve the non-repudiating party of its
obligations of future performance.” Aetna Cas. and Sur. Co. v. Aniero Concrete Co., 404 F.3d
566, 587 (2d Cir. 2005)(internal quotation omitted). “Repudiation occurs when a party manifests
an intent not to perform, either by words or by deeds.” Id. Here, the courts below properly found
that Matrix anticipatorily breached the contract by (1) informing the Debtors in a letter dated
June 10, 2005 that it would not perform under the agreement, and seeking a return of its bidding
deposit; and (2) stating, on the record, to the bankruptcy court on June 29, 2005 that it would not
perform under the agreement. Under New York law, repudiation occurs when “the repudiating
party has indicated an unqualified and clear refusal to perform.” De Lorenzo v. Bac Agency,
Inc., 256 A.D.2d 906, 908 (3d Dept. 1998). “Generally, the issue of repudiation or abandonment
is an issue of fact.” DiFolco v. MSNBC Cable LLC, 622 F.3d 104, 112 (2d Cir. 2010) (internal
quotations omitted). On this record, it cannot be said that the bankruptcy court erred in finding
that Matrix repudiated.
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Nor did the courts below err in finding that the agreement was divisible, and the Debtors
were ready, willing and able to substantially perform the bulk of the agreement at the time of
repudiation. Generally, “the severability of a contract is a question of the parties’ intent, to be
determined from the language employed by the parties, viewed in the light of the circumstances
surrounding them at the time they contracted.” In re Balfour MacLaine Int’l Ltd., 85 F.3d 68, 81
(2d Cir. 1996) (internal quotation omitted). “As a general rule, the contract is considered
severable and divisible when by its terms, nature, and purpose, it is susceptible of division and
apportionment.” Id. Here, there were separate pieces of property, each able to be separately
valued, rendering the agreement between the parties divisible. In analyzing whether a party is
ready, willing and able to perform, we have held that the “proof needed to show ability varies
with the nature of the contract and all the surrounding circumstances.” Scholle v. Cuban-
Venezeulan Oil Voting Trust, 285 F.2d 318, 322 (2d Cir. 1960). This was a complex transaction,
involving sophisticated parties, multiple assets in multiple locations, and a bankruptcy estate
where the Debtors were tainted with allegations of fraud and misconduct. The agreement
between the parties expressly states that both the “tangible and intangible assets” were to be
delivered “as is where is,” without any representations or warranties expressly made elsewhere
in the contract. The courts below properly determined the Debtors were ready, willing and able
to substantially perform.
We have considered the remainder of Matrix’s claims and find them to be without merit.
Accordingly, the judgment of the district court hereby is AFFIRMED.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
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