Princes Point LLC v. Muss Development L.L.C.

This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 92
Princes Point LLC, &c.,
Appellant,
v.
Muss Development L.L.C., et al.,
Respondents,
et al.,
Defendant.
John S. Ciulla, for appellant.
Scott E. Mollen, for respondents.
FAHEY, J.:
This appeal presents the question whether the mere
commencement of an action seeking “rescission and/or reformation”
of a contract constitutes an anticipatory breach of such
agreement. Under the circumstances of this case, we conclude
that it does not. We reverse the Appellate Division order and
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answer the certified question in the negative.
Facts
By way of background, plaintiff agreed to purchase the
property in question (a developable waterfront parcel on Staten
Island) from defendants Allied Princes Bay Co. and Allied Princes
Bay Co. #2, LP (collectively, APB).1 To that end, a purchase
agreement was executed in 2004. In relevant part, the agreement
provided that, as a condition precedent to closing, APB was
required to deliver certain government approvals necessary to
develop the property. The agreement prescribed a closing date of
30 days after plaintiff received notice that the approvals had
been obtained, but in no event later than the “Outside Closing
Date,” which the agreement defined as 18 months after the
execution and delivery of that compact.
The agreement also provided that if the approvals could
not be obtained by the Outside Closing Date, then either party
could terminate the agreement upon 30 days’ notice. In the event
of such termination, plaintiff would receive a refund of its
deposit and the parties would be released from the majority of
their contractual obligations. In lieu of termination, plaintiff
retained an option to waive the approvals and proceed to closing.
1
Defendant Joshua L. Muss is a general partner in APB,
whereas defendant Muss Development L.L.C. is a membership company
that oversees certain administrative functions of the various
entities and developmental projects in which the Muss family
directly or indirectly has an interest.
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Following the landfall of Hurricane Katrina in
Louisiana -– and the catastrophe that ensued –- the New York
State Department of Environmental Conservation (DEC) noted
certain flaws in a retaining wall along the waterfront of the
property, and it required APB to remedy those defects. Thus, APB
was unable to obtain the requisite development approvals by the
closing date set in the purchase agreement. In light of the
additional time and cost required, APB advised plaintiff that it
intended to exercise the right to terminate the agreement unless
plaintiff agreed to amend it.
To that end, in March 2006, APB and plaintiff amended
the purchase contract to increase the purchase price and down
payment to be made with respect to the property, to require the
parties to share in the costs of remediation, and to extend the
“outside closing date” for the sale to July 22, 2007. That
outside closing date later was extended -- on approximately 11
occasions -- to July 22, 2008, based on the ongoing nature of the
remedial work required to close the sale. The amendments to the
contract also contain what is referred to as a forbearance
clause, which essentially provided that, “as a material
inducement to [APB’s] agreement to the New Outside Closing Date,”
plaintiff would “not commence any legal action against [APB] in
the event that any of the Development Approvals had not been
issued or the [remedial work] had not been completed by the New
Outside Closing Date.”
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Approximately one month before the final new outside
closing date, plaintiff commenced this action alleging, among
other things, fraud in the inducement of the amendments to the
contract. Plaintiff also sought to eliminate the increase in
purchase price and the requirement that plaintiff share in the
cost of repairs to the property, as embodied in the amendments.
Said simply, plaintiff sought specific performance of the
contract absent the amendments on the ground that the amendments
were executed based on defendants’ alleged misrepresentation of
their ability to complete the remedial work necessary to close
the sale.
In response, defendants (save for defendant AKRF
Engineering, P.C., which did not join this motion practice2)
asserted various counterclaims, two of which are relevant here.
In their first counterclaim, defendants sought judgment declaring
that, based on what by then was the expiration of the final new
outside closing date, either the contract had terminated or
plaintiff must immediately proceed to closing without any
abatement in the purchase price. Then, in their third
counterclaim, defendants alleged that, by failing to close the
transaction in accordance with the contract, plaintiff defaulted
on that agreement, thereby entitling APB to retain “the entire
2
Inasmuch as defendant AKRF Engineering, P.C. did not
participate in this motion practice, all references to defendants
herein refer collectively to APB, Joshua L. Muss, and Muss
Development L.L.C.
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down payment,” as well as the payments plaintiff made in
furtherance of its obligation to share in the cost of the
remediation of the property.
All of plaintiff’s causes of action subsequently were
dismissed. The matter eventually proceeded to defendants’ motion
for partial summary judgment, which considered only the first and
third counterclaims. Through that application, defendants sought
judgment declaring that the contract is terminated, and that
plaintiff materially breached the contract. Supreme Court
granted the motion, adjudging that the contract had “expired by
its terms” and that plaintiff “materially breached” that compact,
entitling defendants to, among other things, retain the down
payment and the remedial payments made pursuant to the amendments
to that agreement.
On appeal, the Appellate Division affirmed the judgment
insofar as appealed from3 and determined “that, because a
rescission action unequivocally evinces the plaintiff’s intent to
disavow its contractual obligations, the commencement of such an
action before the date of performance constitutes an anticipatory
breach” (Princes Point LLC v Muss Dev. L.L.C., 138 AD3d 112, 114
3
Plaintiff did not pursue an appeal from the part of the
judgment declaring the contract expired (see Princes Point LLC v
Muss Dev. L.L.C., 138 AD3d 112, 118 [1st Dept 2016]). To that
end, we do not address herein the part of the motion seeking
summary judgment with respect to the first counterclaim, through
which defendants sought, among other things, a declaration that
the contract had terminated.
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[1st Dept 2016]). The Appellate Division also concluded “that
the seller [(here, APB,)] was not required to show that it was
ready, willing, and able to complete the sale [as a condition of
receiving damages] because the buyer’s anticipatory breach
relieved [the seller] of further contractual obligations” (id.).
The Appellate Division subsequently granted plaintiff
leave to appeal to this Court. In doing so, the Appellate
Division certified for our review the question whether “the order
of the Supreme Court, as affirmed by [the Appellate Division,
was] properly made?”
Analysis
“An anticipatory breach of a contract by a promisor is
a repudiation of [a] contractual duty before the time fixed in
the contract for . . . performance has arrived” (10-54 Corbin on
Contracts § 54.1 [2017]; see 13 Williston on Contracts § 39:37
[4th ed]). An anticipatory breach of a contract -- also known as
an anticipatory repudiation -- “can be either a statement by the
obligor to the obligee indicating that the obligor will commit a
breach that would of itself give the obligee a claim for damages
for total breach or a voluntary affirmative act which renders the
obligor unable or apparently unable to perform without such a
breach” (Norcon Power Partners v Niagara Mohawk Power Corp., 92
NY2d 458, 463 [1998] [internal quotation marks omitted]; see 2B
NY PJI2d 4:1 at 35-36 [2017]).
For an anticipatory repudiation to be deemed to have
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occurred, the expression of intent not to perform by the
repudiator must be “positive and unequivocal” (Tenavision, Inc. v
Neuman, 45 NY2d 145, 150 [1978]; see Ga Nun v Palmer, 202 NY 483,
489 [1911]). We have taught that the party harmed by the
repudiation must make a choice either to pursue damages for the
breach or to proceed as if the contract is valid (see
Strasbourger v Leerburger, 233 NY 55, 59 [1922]; see also
American List Corp. v U.S. News & World Report, 75 NY2d 38, 44
[1989]). We have also clarified that “a wrongful repudiation of
the contract by one party before the time for performance
entitles the nonrepudiating party to immediately claim damages
for a total breach” (id.).
On this record -- and particularly in view of the
repeated movement of the new outside closing date -- we cannot
conclude that the commencement of this action reflects a
repudiation of the contract. At the core of this appeal is the
unsettled question whether “the commencement of an action,
particularly one seeking rescission, is an anticipatory breach”
(Princes Point, 138 AD3d at 117, citing Auten v Auten, 308 NY
155, 159 [1954] [addressing whether an action for separation
constituted a repudiation of a prior separation agreement, but
declining to answer that question given that English law
controlled that matter]). The Appellate Division correctly
observes that the commencement of a declaratory judgment action
“does not constitute an anticipatory breach . . . because a
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declaratory judgment action merely seeks to define the rights and
obligations of the parties” (Princes Point, 138 AD3d at 117).
We do not, however, agree with the Appellate Division’s
conclusion that, in this context, “[a]n action seeking rescission
of a contract is markedly different” from a declaratory judgment
action (id.). To be sure, this action (one for “rescission
and/or reformation” of the purchase agreement based on
defendants’ purported misrepresentation with respect to the
condition of the property) and a declaratory judgment action
necessarily would produce different results. This action is one
based on the terms under which the amendments to the contract
were entered, and essentially seeks to nullify those terms. A
declaratory judgment action would produce a ruling as to the
rights of the parties under the terms of the contract, and
essentially would determine the meaning of those terms (see CPLR
3001 [considering declaratory judgment actions]). Nevertheless,
in this context -- specifically, where the amended complaint
seeks, among other things, reformation of the amendments to the
contract and specific performance of the original agreement --
there was no “positive and unequivocal” repudiation (Tenavision,
45 NY2d at 150). There is no material difference between this
action and a declaratory judgment action. At bottom, both
actions seek a judicial determination as to the terms of a
contract, and the mere act of asking for judicial approval to
avoid a performance obligation is not the same as establishing
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that one will not perform that obligation absent such approval
(see Restatement [Second] of Contracts § 250, Illustration 3).4
Finally, with respect to plaintiff’s request for
“reverse” summary judgment, we note that, “[w]hile Supreme Court
and the Appellate Division may search the record and grant
summary judgment to a nonmoving party (see CPLR 3212[b]),” this
Court may not (see JMD Holding Corp. v Congress Fin. Corp., 4
NY3d 373, 385 [2005], citing Merritt Hill Vineyards v Windy Hgts.
Vineyard, 61 NY2d 106, 110–111 [1984]). To that end, in
reversing the Appellate Division order we only deny defendants’
motion for partial summary judgment.
Accordingly, the Appellate Division order should be
reversed, with costs, the motion of defendants for partial
summary judgment on the third counterclaim denied, and the
certified question answered in the negative.
4
In so holding we have no occasion to reach plaintiff’s
alternative contention that, even if its commencement of this
action constituted an anticipatory breach of the contract,
defendants were required to show -– and failed to show -– that
they were ready, willing, and able to perform their contractual
obligations and close the subject sale at the time of the
purported repudiation in order to retain the down payment and
compaction payments made pursuant to the contract (see generally
Coleman v Daines, 19 NY3d 1087, 1090 [2012]).
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* * * * * * * * * * * * * * * * *
Order reversed, with costs, motion by defendants Allied Princes
Bay Co., Allied Princes Bay Co. #2, L.P., Muss Development L.L.C.
and Joshua L. Muss for partial summary judgment on the third
counterclaim denied, and certified question answered in the
negative. Opinion by Judge Fahey. Chief Judge DiFiore and
Judges Rivera, Stein, Garcia and Wilson concur. Judge Feinman
took no part.
Decided October 19, 2017
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