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Second Department Dismisses Action for Specific Performance Because Contractual Conditions Were Not Satisfied

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  • Posted on: Dec 1 2023

By Jonathan H. Freiberger

Many times, remedies for the breach of a contract other than monetary damages are necessary to make a plaintiff whole.  One such remedy is specific performance [a topic previously addressed by this BLOG, inter alia,  [here], [here], [here] [here] and [here]].  The remedy of specific performance “will not be ordered where money damages would be adequate to protect the expectation interests of the injured party.”  Sokoloff v. Harriman Estates Development Corp., 96 N.Y.2d 409, 415 (2001) (citations and internal quotation marks omitted).  Specific performance is an equitable remedy that, instead of awarding money damages to the prevailing party, requires the breaching party to perform under the contract.  “Specific performance is appropriate … when ‘the subject matter of the particular contract is unique and has no established market value.’”  BT Triple Crown Merger Co., Inc. v. Citigroup Global Markets Inc., 19 Misc. 3d 1129, *8 (NOR) (Sup. Ct. N.Y. Co. 2008) (quoting Van Wagner Advert. Corp. v. S&M Enters., 67 N.Y.2d 186, 193 (1986)).  “The point at which breach of a contract will be redressable by specific performance thus must lie not in any inherent physical uniqueness of the property but instead the uncertainty of valuing it….”  Van Wagner, 67 N.Y.2d at 193.  The Sokoloff Court also stated that:

The decision whether or not to award specific performance is one that rests in the sound discretion of the trial court. In determining whether money damages would be an adequate remedy, a trial court must consider, among other factors, the difficulty of proving damages with reasonable certainty and of procuring a suitable substitute performance with a damages award (see, Restatement [Second] of Contracts § 360). Specific performance is an appropriate remedy for a breach of contract concerning goods that “are unique in kind, quality or personal association” where suitable substitutes are unobtainable or unreasonably difficult or inconvenient to procure (see, id., comment c).

Sokoloff, 96 N.Y.2d at 415.  It is generally accepted that “the equitable remedy of specific performance is routinely awarded in contract actions involving real property, on the premise that each parcel of real property is unique.”  Alba v. Kaufman, 27 A.D.3d 816, 818 (3rd Dep’t 2006) (citations and internal quotation marks omitted); EMF General Contracting Corp. v. Bisbee, 6 A.D.3d 45, 52 (1st Dep’t 2004) (same).

On November 29, 2023, the Appellate Division, Second Department, in First Korean Church of New York v. 35 Ave & Parsons, LLC, affirmed the motion court’s order dismissing an action for, inter alia, specific performance of a real estate contract because the seller failed to obtain required approvals for the sale in the timeframes set forth in the contract.  [Eds. Note: some of the facts (which are simplified herein for editorial purposes) were obtained from the underlying court record available on the court’s NYSCEF system.]

The plaintiff/seller in First Korean is a religious corporation that owned a valuable piece of real property in Queens, New York (the “Property”).  In order for a religious corporation to sell real property and/or a significant portion or all of its assets it must comply with various provisions of New York’s Religious Corporations Law (“RCL”) and Not-For-Profit Corporation Law (“NPC”).  See, e.g., NPC §§ 509, 510 and 511; RCL § 12.  Under various provisions of the NPC and RCL, inter alia: a majority of a not-for-profit’s board must approve the sale of the corporation’s real property (see NPC § 509(b)); the “sale … of all, or substantially all, the assets of a corporation may be made” pursuant to certain terms and conditions of the statute (see NPC § 510); permission to sell or transfer substantially all a corporations assets may be obtained from a court (see NPC § 511); and, a religious corporation “shall not sell … any of its real property without applying for and obtaining leave of court or the attorney general… (see RCL § 12).  

Plaintiff entered into a contract with defendant/purchaser pursuant to which plaintiff was to sell the Property to defendant for over $40,000,000.  The contract provided that if plaintiff failed to obtain the requisite approvals from its board, the court and/or the Attorney General within ninety (90) days, either party could terminate the contract.  Approvals were not obtained within the agreed upon 90-day period and defendant sent a termination notice per the contract.  Plaintiff responded to defendant’s termination letter by sending its own letter arguing that due to the COVID-19 pandemic it could not hold the necessary Board meeting to obtain necessary approvals.  In addition, plaintiff filed a petition with the court for approval of the sale and said petition was denied by the court and the proceeding was dismissed.  Under the parties’ contract, the failure of the court to grant plaintiff’s petition resulted in the automatic termination of the contract.

In light of defendant’s decision to terminate the contract, plaintiff commenced an action in which it sought, inter alia, specific performance of the contract and damages for breach of contract.  Defendant moved to dismiss the complaint pursuant to, inter alia, CPLR 3211(a)(1) based on documentary evidence.  As previously noted in this BLOG, under CPLR § 3211(a), a party may make a motion to dismiss on the “ground that . . . a defense is founded upon documentary evidence.” The CPLR does not, however, define the phrase “documentary evidence.”  To qualify as “documentary,” the content of the document must be “essentially undeniable and …, assuming the verity of [the paper] and the validity of its execution, will itself support the ground on which the motion is based.” Amsterdam Hospitality Grp., LLC v. Marshall-Alan Assocs., Inc., 120 A.D.3d 431, 432 (1st Dep’t 2014), quoting David D. Siegel, Practice Commentaries, McKinney’s Cons. Laws of N.Y., Book 7B, C.P.L.R. C3211:10 at 22. Materials that clearly qualify as “documentary evidence” include judicial records, such as judgments and orders, as well as documents reflecting out of-court transactions, such as contracts, deeds, wills, and mortgages. Fontanetta v. Doe, 73 A.D.3d 78, 84 – 85 (2nd Dep’t 2010) (citation omitted); see also Davis v. Henry, 212 A.D.3d 597 (2nd Dep’t 2023).  Thus, in order for evidence to qualify as “documentary,” it must be unambiguous, authentic and undeniable.” Granada Condominium III Ass’n v. Palomino, 78 A.D.3d 996, 996-97 (2nd Dep’t 2010).  

In affirming the motion court, the Second Department stated:

When deciding a motion to dismiss for failure to state a cause of action, “the court must ‘accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every cognizable legal theory”‘ (Rudovic v Law Off. of Timothy A. Green, 200 AD3d 814, 815, quoting Leon v Martinez, 84 NY2d 83, 87-88). A motion to dismiss based on documentary evidence pursuant to CPLR 3211 (a)(l) may be granted “only where the documentary evidence utterly refutes the plaintiffs factual allegations” (Bedford-Carp Constr., Inc. v Brooklyn Union Gas Co., 215 AD3d 907, 908 [internal quotation marks omitted]; see Mawere v Landau, 130 AD3d 986, 987). 

Here, in support of its motion, the defendant submitted, inter alia, the agreement, which provided, in relevant part, that, if the plaintiff did not obtain all the required approvals for the purchase and sale of the property for any reason within a 90-day time period from the date the parties entered into an amendment to the agreement, either party was permitted to terminate the agreement by written notice. The defendant also submitted documentary evidence that, more than 90 days after the parties executed the amendment to the agreement, the plaintiff had not obtained the required approvals for the purchase and sale of the property and that the defendant served the plaintiff with written notice exercising its option to terminate the agreement. Thus, the defendant’s documentary evidence utterly refuted the plaintiffs allegations in the complaint and resolved all factual issues (see Bedford-Carp Constr., Inc. v Brooklyn Union Gas Co., 215 AD3d at 909). 

Contrary to the plaintiffs contention, Executive Order (A. Cuomo) No. 202.8 (9 NYCRR 8.202.8), and the subsequent orders extending it, did not toll the 90-day period set forth in the agreement (see Prestige Deli & Grill Corp. v PLG Bedford Holdings, LLC, 213 AD3d 962, 963).  [Hyperlinks added.]

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

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