Philip D. Fonda et al., Respondents, v First Pioneer Farm Credit, ACA, Appellant.
Supreme Court, Appellate Division, Third Department, New York
927 NYS2d 417
Garry, J.
Defendant is a mortgagee for plaintiffs’ dairy farm in the Town of Lisbon, St. Lawrence County. As required by the mortgage, plaintiffs carried fire insurance that named defendant as the insured. In August 2004, a fire on the property killed livestock and damaged or destroyed several farm buildings. The insurer issued payment jointly to defendant and plaintiff Philip D. Fonda for insurance proceeds of $223,000. Plaintiffs requested that defendant release the funds to be used for repairs and equipment purchases, but the parties disagreed as to how the funds should be used, and defendant refused to release them.
In November 2004, plaintiffs commenced this action claiming, as pertinent here, breach of contract and violation of
Defendant first asserts that it did not violate
We agree, however, with Supreme Court‘s refusal to dismiss plaintiffs’ breach of contract claim, finding triable issues of fact as to whether defendant committed anticipatory repudiation and breached the implied covenant of good faith and fair dealing.1 Anticipatory repudiation occurs when a party “attempt[s] to avoid its obligations by advancing an untenable interpretation of the contract, or . . . communicate[s] its intent to perform
Plaintiffs contend that defendant‘s representative improperly sought to require them to apply approximately $80,000 from the insurance proceeds to pay down principal on the mortgage debt and to “scale down” their reconstruction plans accordingly. Defendant asserts that it imposed no such requirement, but merely offered to release part of the insurance proceeds before repairs were completed if plaintiffs agreed to apply the remainder to reduce the principal. However, in support of their claim, plaintiffs submitted the deposition transcript of their former counsel, who represented them at the time of the negotiations in question. He testified that during the negotiations, defendant‘s representative advised him that, if plaintiffs did not agree to reduce the mortgage debt, defendant would neither release any proceeds in advance nor reimburse plaintiffs for completed repairs, and that the purpose of imposing this requirement was to enable defendant to maintain leverage and control over plaintiffs’ activities.2 Plaintiffs thereby established the existence of triable issues of fact barring summary judgment as to whether defendant unequivocally communicated its intent to require plaintiffs to comply with an extracontractual condition before it would reimburse them for repairs (see O‘Connor v Sleasman, 14 AD3d at 987-988; see also Highbridge Dev. BR, LLC v Diamond Dev., LLC, 67 AD3d 1112, 1115 [2009]). Issues of fact arising out of the same alleged conduct also support plaintiffs’ claim that defendants breached the implied covenant of good faith and fair dealing (see SPI Com-munications v WTZA-TV Assoc. Ltd. Partnership, 229 AD2d at 645).
We reject defendant‘s contention that, even if its conduct constituted a breach of contract, dismissal is proper because its conduct did not proximately cause plaintiffs’ damages. Plaintiffs’ submissions establish the existence of issues of fact as to whether defendant‘s imposition of the debt-reduction requirement caused delays in repairs to the farm buildings that exposed their livestock and facilities to damage during the harsh winter that followed the fire. Accordingly, Supreme Court properly refused to grant summary judgment dismissing plaintiffs’ breach of contract claim.
Mercure, J.P., Rose, Lahtinen and Kavanagh, JJ., concur. Ordered that the order is modified, on the law, without costs, by reversing so much thereof as denied defendant‘s motion for summary judgment dismissing the cause of action alleging violation of