556 B.R. 68
Bankr. E.D.N.Y.2016Background
- Debtor Brooklyn Renaissance, LLC (Defendant) and JJCC Real Estate LLC (Plaintiff) signed a PSA for 555 and 557 Union Street, Brooklyn; Plaintiff paid a $380,000 deposit.
- PSA conditioned Plaintiff’s obligation to close on delivery of a 2006 ALTA Owner’s Title Policy by “its title company.” Plaintiff selected First American; First American declined to issue the policy.
- Defendant sought other carriers (Stewart); Plaintiff objected to Stewart and refused to close on the scheduled February 24, 2016 closing.
- Defendant declared Plaintiff in default, retained the Deposit as liquidated damages, and Plaintiff sued in adversary proceeding seeking return of the Deposit.
- Defendant moved to dismiss: arguing (a) “its title company” means any insurer willing to issue the policy and thus no breach; (b) Plaintiff failed to give required notice; (c) unjust enrichment is barred by the PSA; and (d) fraud claim fails Rule 9(b) and duplicates contract claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of “its title company” in PSA §3.3 (first & third causes) | Means the title company chosen by Purchaser (Plaintiff); failure of First American to issue policy prevented closing | Means any title company willing to issue the Title Policy satisfies condition; word “its” does not limit to Purchaser’s chosen insurer | Denied dismissal — language ambiguous; on pleadings must accept Plaintiff’s reasonable interpretation that it refers to Purchaser’s title company |
| Notice requirement to terminate for failure to close within 180 days (§§5.2.2, 8.3 vs §1.1(h)) | Plaintiff relied on §1.1(h) right to terminate after 180 days; no extra notice required | Defendant asserted notice under default sections was not given | Denied dismissal — §1.1(h) gives a separate termination right without the §5.2.2/8.3 notice; §8.3 exempts failures to close from those default notice rules |
| Unjust enrichment (second cause) | Plaintiff seeks restitution of Deposit based on Defendant’s retention despite breach | Defendant: contract governs subject matter; unjust enrichment barred where valid contract covers dispute | Granted dismissal — unjust enrichment precluded because a valid, enforceable contract governs the dispute and seeks identical relief |
| Fraud (fourth cause) — Rule 9(b) and duplicative tort theory | Plaintiff alleges Defendant misrepresented title and intended to deceive, seeking Deposit return | Defendant: allegations are conclusory, lack particularity and fraudulent intent; claim duplicates contract remedy | Granted dismissal — fraud not pled with required particularity and is duplicative of breach claims; no independent tort pleaded |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for complaints)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim)
- Eternity Global Master Fund Ltd. v. Morgan Guaranty Trust Co. of N.Y., 375 F.3d 168 (2d Cir. 2004) (ambiguous contract terms defeat dismissal on pleadings)
- Beth Israel Medical Center v. Horizon Blue Cross & Blue Shield of New Jersey, 448 F.3d 573 (2d Cir. 2006) (enforce clear contract language)
- Harsco Corp. v. Segui, 91 F.3d 337 (2d Cir. 1996) (elements of breach of contract under NY law)
- Mills v. Polar Molecular Corp., 12 F.3d 1170 (2d Cir. 1993) (Rule 9(b) particularity for fraud)
- Clark-Fitzpatrick, Inc. v. Long Island R. R. Co., 70 N.Y.2d 382 (1987) (no tort for mere breach absent duty independent of the contract)