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Conditional Acceptance, Conflicting Testimony and An Alleged Oral Agreement

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  • Posted on: Jun 29 2020

In prior posts, we examined the rules of contract formation. In our most recent post on the subject (here), we considered a case in which one of the issues before the court was whether there was an exchange of consideration sufficient to support the formation of a contract. Today, we examine Galarneau v. D’Andrea, 2020 N.Y. Slip Op. 03584 (3d Dept. June 25, 2020) (here), a case in which the Appellate Division, Third Department was asked to consider whether plaintiff demonstrated (at trial) that the defendant accepted of an offer to purchase real property located in Saratoga Springs, New York. As discussed below, the Court affirmed the dismissal of plaintiff’s claim for specific performance because he could not demonstrate the formation of a contract (i.e., the acceptance of an offer). See Isabella v. Jackling, 155 A.D.3d 1650, 1651 (4th Dept. 2017) (internal quotation marks, brackets and citation omitted) (“[i]t is fundamental that specific performance may be awarded only where there is a valid existing contract for which to compel performance”).

As noted in our prior post, “[t]o establish the existence of an enforceable agreement, a plaintiff must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound.” Kasowitz, Benson, Torres & Friedman, LLP v. Duane Reade, 98 A.D.3d 403, 404 (1st Dept. 2012) (internal quotation marks and citations omitted), aff’d, 20 N.Y.3d 1082 (2013).

“An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” Restatement (Second) of Contracts § 24. Acceptance of an offer is effective if it clearly, unambiguously and unequivocally complies with the terms of the offer. King v. King, 208 A.D.2d 1143, 1143-1144 (3d Dept. 1994) (citing 21 N.Y. Jur. 2d, Contracts § 53 at 470 (1982), and 2 Williston on Contracts § 6:10 at 68 (4th ed. 1990)). Where an offer is met with qualified conditions, “it is equivalent to a rejection and counteroffer.” Lamanna v. Wing Yuen Realty, 283 A.D.2d 165, 166 (1st Dept. 2001) (internal quotation marks and citation omitted), lv. denied, 96 N.Y.2d 719 (2001); accord Solartech Renewables, LLC v. Vitti, 156 A.D.3d 995, 997 (3d Dept. 2017). “Rejection by counteroffer extinguishes the offer and renders any subsequent acceptance thereof inoperative.” Jericho Group, Ltd. v. Midtown Dev., L.P., 32 A.D.3d 294, 299 (1st Dept. 2006) (citation omitted).

As noted, Galarneau involved the alleged sale of real property (the “subject property”). Plaintiff met with defendants Robert D’Andrea and Joseph D’Andrea in 2013 to discuss the transaction. Defendants were seeking $4 million for the subject property, which, under applicable zoning amendments, permitted the development of 50 lots. Plaintiff testified that he believed the price to be too high for 50 lots, but indicated that “it would be interesting if we could get enough lots on the [subject] property.” 

Following this meeting and “probably two” subsequent phone conversations, plaintiff began researching the subject property and discovered that, approximately 10 years prior, the City of Saratoga Springs adopted a comprehensive plan that dramatically decreased the number of homes permitted to be developed on the subject property from 300 or 400 lots to 50 lots. Plaintiff testified that he met with Robert D’Andrea and Joseph D’Andrea and informed them of this discovery. Plaintiff also testified that he wanted to seek the necessary approvals to increase the number of lots by making a presentation to the Comprehensive Review Plan committee regarding the unfairness of the decrease in the number of developable lots that previously occurred. Robert D’Andrea and Joseph D’Andrea were allegedly supportive of the plan.

Plaintiff testified that, after this meeting, he sent Robert D’Andrea and Joseph D’Andrea a letter, dated October 31, 2013, which recited what he believed to be the parties’ understanding of the terms of his purchase of the subject property. Among the terms was a purchase price of $4 million and a 1% interest rate, “to begin upon final approval.” Plaintiff testified that, although he never received any response regarding the letter, he started working on the project and invested significant time and resources, totaling $200,000, into an application to change the zoning and increase the number of permissible lots per acre. Ultimately, the application was denied. Robert D’Andrea testified that, after the zoning change was denied, he had a meeting with plaintiff wherein they discussed denial of the application and plaintiff’s belief that the subject property was worth only $3 million. Robert D’Andrea testified that “at that point I told [plaintiff] we’re through, we would turn to another developer who had been sitting at the sidelines for a long time waiting.”

Plaintiff commenced the action seeking specific performance or, alternatively, money damages under theories of breach of contract and equitable estoppel. Plaintiff also alleged a cause of action for unjust enrichment and sought a vendee’s lien on the subject property. Following defendants’ joinder of issue, the Supreme Court granted their motion to dismiss the complaint with the sole exception of plaintiff’s cause of action for breach of contract seeking specific performance by application of the doctrine of part performance. See 60 Misc. 3d 1205[A], 2017 N.Y. Slip Op. 52007[U], *1-*5 (Sup. Ct., Saratoga County 2017) (here), aff’d, 162 A.D.3d 1169 (3d Dept. 2018). 

[Ed. Note: It is important to note that Galarneau involved an alleged oral agreement to buy and sell real property. Under General Obligations Law § 5-703 (3), an agreement to buy and sell real property “will be barred by the statute of frauds ‘unless the contract or some note or memorandum thereof is in writing and subscribed by the party to be charged therewith, or by his [or her] lawfully authorized agent.’” Sivos v. Eppich, 78 A.D.3d 1360, 1361 (3d Dept. 2010), quoting General Obligations Law § 5-703 (3). “Partial performance of an alleged oral contract will be deemed sufficient to take such contract out of the statute of frauds only if it can be demonstrated that the acts constituting partial performance are unequivocally referable to said contract.” Bowers v. Hurley, 134 A.D.3d 1191, 1193 (3d Dept. 2015) (citations and quotation marks omitted). In Galarneau, the Supreme Court held that plaintiff’s alleged partial performance – i.e., that he pursued site development and re-zoning, and expended considerable funds in doing so – presented “sufficient evidence from which a trier of fact might conclude that plaintiff’s conduct [was] explainable only by a reference to the oral contract.” (Citations omitted.)]

In December 2018, the parties proceeded to a nonjury trial on plaintiff’s remaining cause of action. The Supreme Court, in a written decision, found that the evidence presented at trial did not support plaintiff’s claim that the parties entered into a contract and dismissed plaintiff’s remaining cause of action for specific performance. Plaintiff appealed.

The Third Department affirmed the dismissal.

The Court held that plaintiff failed to satisfy his burden of proving the existence of an oral agreement. Slip Op. at *1. The reason, said the Court, was because plaintiff failed to prove acceptance of the offer for the subject property. Id. The Court explained that “[a]lthough Robert D’Andrea and Joseph D’Andrea acknowledged that they offered plaintiff the opportunity to purchase the subject property for $4 million, plaintiff failed to accept the offer insofar as he testified that he conditioned his acceptance on obtaining zoning approval for additional lots on the property.” Id. By conditioning his offer, plaintiff effectively rejected the offer. Id. (citing Lamanna, 283 A.D.2d at 166 and Solartech Renewables, 156 A.D.3d at 997).

“Moreover,” said the Court, “even if plaintiff’s condition was part of the original alleged agreement … plaintiff still failed to show acceptance of the offer,” because of “conflicting testimony as to whether the terms included in the October 31, 2013 letter complied with the terms of the offer.” Slip Op. at *1.  The Court explained that if the terms of the letter contradicted the offer “then the letter operated as a rejection and counteroffer because it effectively presented newly suggested terms.” Id. (citing Solartech Renewables, 156 A.D.3d at 997). The Court further explained that “although plaintiff … believed Joseph D’Andrea eventually agreed to the 1% interest rate, Joseph D’Andrea and Robert D’Andrea testified to the contrary, both stating that, during the meetings that predated the October 31, 2013 letter, Joseph D’Andrea clearly rejected this term.” Id. “Despite the rejection of this term,” observed the Court, “plaintiff’s October 31, 2013 letter include[d] reference to it.” Id. 

“Additionally,” noted the Court, “the letter indicate[d] that ‘[p]ayment [was] to be made proportionately as each lot closes.’” Id. The Court found this term to be “problematic” because “there was no evidence presented that defendants would [have] accept[ed] installment payments of any kind, which [was] directly at odds with the letter.” Id. The Court further found the term to be “problematic” because “there [was] no clear agreement as to how many lots would be developed on the subject property; therefore, there [was] no clear agreement as to how many payments would be made to equal the $4 million offer.” 

Accordingly, the Court declined to disturb the Supreme Court’s dismissal of the claim.

Takeaway

Galarneau teaches the importance of satisfying every element of a contract. Galarneau also demonstrates the consequence of responding to an offer with conditions – the courts will consider it to be the “equivalent to a rejection and counteroffer.” Lamanna, 283 A.D.2d at 166.

Finally, Galarneau shows the impact conflicting testimony can have on the outcome of a trial and an appellate court’s deference to the credibility determinations of a trial court. AMCAT Global, Inc. v. Greater Binghamton Dev., LLC, 140 A.D.3d 1370, 1372 (3d Dept.), lv. denied, 28 N.Y.3d 904 (2016).

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