Unjust Enrichment and the “Battle of the Breaches”

• Posted on: Aug 5 2020

The elements of a cause of action for breach of contract are: (1) the existence of a contract between plaintiff and defendant; (2) performance by one party; (3) the other party’s failure to perform; and (4) damages resulting from such failure to perform. JP Morgan Chase v. J.H. Elec. of New York. Inc., 69 A.D.3d 802, 803 (2d Dept. 2010). When a party breaches a contract, that breach may excuse the non-breaching party from further performance if the breach is so substantial that it defeats the parties’ objective in making the contract. Robert Cohn Assocs. Inc. v. Kosich, 63 A.D.3d 1388, 1389 (3d Dept. 2009). In such a case, the non-breaching party is discharged from performing any further obligations under the contract and may elect to terminate the contract and sue for damages. Casita. LP v. Maplewood Equity Partners (Offshore) Ltd., 17 Misc. 3d 1137(A) (Sup. Ct., N.Y. County 2007).

Sometimes, each party claims that the other breached the agreement first. Courts characterize this situation as the “battle of the breaches”. Boston Concessions Grp. v. Criterion Ctr. Corp., 200 A.D.2d 543, 545 (1st Dept. 1994). 

The battle of the breaches is typically inappropriate for summary determination because each party to the contract submits “conflicting affidavits and documentary evidence which cast the other party in the role of the primary contract offender.” Boston Concessions Grp., 200 A.D.2d at 545. A material question of fact is, therefore, presented regarding the nature and extent of the breaches alleged, which cannot be determined in advance of trial. 

In 20 St. Marks, LLC v. St. Marks NY LLC, 2020 N.Y Slip Op. 32512(U) (Sup. Ct., N.Y. County July 28, 2020) (here), the Court denied a motion for summary judgment because the record was laden with contested issues of fact that were better left for resolution at trial.  

Marks involved a commercial lease dispute. 

Plaintiff, a bar owner, entered into a commercial lease with defendants on December 26, 2017. Upon signing the lease, plaintiff tendered $154,000.00 to defendants, representing the first month’s rent (at $22,000 per month), and six months’ rent as security deposit (totaling $132,000 in security). Structural defects prevented the premises from opening to the public as planned by plaintiff. On February 20, 2019, plaintiff terminated the lease.

Plaintiff contended that defendants breached the lease by failing to deliver possession of the premises by May 1, 2018, as required under the lease. Pursuant to the lease, plaintiff could, at its “sole option, elect to terminate th[e] Lease” “if for any reason, Landlord [was] unable to give possession to Tenant by May 1, 2018.” Slip Op. at *3. Upon termination, defendants were required to “promptly refund any pre-paid rent together with [plaintiff]’s Security Deposit.” Id.

According to plaintiff, in an affidavit executed by one of its members, 14 months after signing the lease, defendants had yet to deliver possession of the premises.

Defendants contended, through the affidavit of the premises’ property manager, that they gave plaintiff the keys to the premises immediately after signing the lease. According to defendants, plaintiff changed the locks, and in March 2018, had its engineer perform exploratory probing into the flooring. Id. at *5 (citing Pacific Coast Silks, LLC v. 247 Realty, LLC, 76 A.D.3d 167, 175 (1st Dept. 2010) (holding that the commercial tenant had been given possession of the premises when the keys had been delivered and accepted, and the tenant “actively cooperated in the process of readying the place for contemplated future business operations”)).

In addition, and relevant to today’s article, defendants interposed a counterclaim, alleging that plaintiff breached the lease by failing to pay rent and abandoning the premises.

Plaintiff responded by arguing that the keys were provided so that it could monitor “[d]efendants’ progress and so that [p]laintiff could access the space with its own contractors and professionals so that [p]laintiff could begin its construction immediately after [d]efendants’ work was completed.” Id. (citation to the record omitted). Plaintiff maintained that it did not take possession of the premises by taking the keys; instead it was “a mere accommodation.…” Id.

The Court found that based upon the record before it, “either party could be the primary contract offender.” Slip Op. at *6. As such, said the Court, “questions as to which party breached first … preclude summary disposition.” Id. (citation omitted). “Therefore,” concluded the Court, “plaintiff’s motion for summary judgment on its [breach of contract] claims, and for dismissal of defendants’ counterclaim, sounding in breach of contract, must be denied.” Id.

Plaintiff also asserted a claim for unjust enrichment. The Court held that the claim was barred because there was “a valid contract governing the subject matter” of the action and, therefore, “preclude[d] recovery in quasi contract for event[s] arising out of the same subject matter” as the contract. Id. at *6-*7 (citing Adelaide Prods., Inc. v. BKN Intl. AG, 38 A.D.3d 221, 225-226 (1st Dept. 2007) (internal quotation marks and citations omitted). “As such,” the Court denied “plaintiff’s motion for summary judgment on the [unjust enrichment] cause of action, [and] dismissed the cause of action pursuant to CPLR 3212(b). Id. at *7 (citing Abramovitz v. Paragon Sporting Goods Co., Inc., 202 A.D.2d 206, 208 (1st Dept. 1994)).

Takeaway

Each party in Marks cast the other in the role of the offender. Thus, a material question of fact existed as to which party breached first. Since the Court’s role on summary judgment is not to determine the credibility of the affiants, summary judgment was denied.