Kain Development, LLC v. Krause Properties, LLCKain Development, LLC v. Krause Properties, LLC
Kain Development, LLC, Respondent-Appellant, v Krause Properties, LLC, et al., Appellants-Respondents, et al., Defendants. [14 NYS3d 520]—
McCarthy, J.P. Cross appeals from an order of the Supreme Court (Crowell, J.), entered March 10, 2014 in Saratoga County, which, among other things, partially granted a motion by defendants Krause Properties, LLC and Gail Krause for summary judgment dismissing the amended complaint against them.
In July 2013, plaintiff commenced the instant action seeking to, among other things, foreclose the mortgage on the property and recoup those monies previously advanced to Krause Properties and to the president of Krause Properties, defendant Gail Krause (hereinafter collectively referred to as the Krause defendants). Eventually, plaintiff filed an amended verified complaint setting forth causes of action seeking foreclosure pursuant to
Next, the Krause defendants argue that this Court should dismiss this action due to a prior pending action with the same parties based upon the same causes of action (see generally
In addition, we reject plaintiff‘s argument that the Krause defendants’ motion for summary judgment should be denied in its entirety to allow plaintiff to conduct further discovery. As to this issue, plaintiff failed to establish through proof that any of the Krause defendants had exclusive knowledge and possession of material facts necessary to oppose the motion (see Millington v Kenny & Dittrich Amherst, LLC, 124 AD3d 1108, 1109 [2015]; 2 N. St. Corp. v Getty Saugerties Corp., 68 AD3d 1392, 1395-1396 [2009], lv denied 14 NY3d 706 [2010]).
Turning to the merits of the Krause defendants’ motion, they established as a matter of law that plaintiff repudiated the contract, warranting dismissal of plaintiff‘s breach of contract cause of action. “Anticipatory repudiation occurs when a party attempt[s] to avoid its obligations by advancing an untenable interpretation of the contract” (Fonda v First Pioneer Farm Credit, ACA, 86 AD3d 693, 694 [2011] [internal quotation marks and citations omitted]). Upon a showing of such anticipatory repudiation, the nonrepudiating party is entitled to forgo further performance and to claim damages for total breach (see id. at 694-695; O‘Connor v Sleasman, 14 AD3d 986, 987-988 [2005]).
The plain terms of the contract allowed plaintiff to terminate the contract upon certain conditions. In order to effectuate such termination, the contract required plaintiff to provide written notice within three days of the expiration of the “Inspect Period (the Due Diligence Deadline)” as to certain contingencies and written notice by either the last day of the “Approvals Contingency Period” or “Financing Contingency Period” in regard to the remaining and respective contingencies allowing for such termination. Per the terms of the contract, both the “Approvals Contingency Period” and the “Financing Contingency Period” commenced upon the “Due Diligence Deadline” and ended 36 months thereafter. Therefore, according to the plain terms of the contract, plaintiff‘s entitlement to terminate the contract upon any described contingency expired no later than 36 months after the due diligence period expired.
Turning to the expirations of the aforementioned deadlines, the contract further explicitly provided that the legal counsel to the parties to the contract were authorized to execute by letter any agreement to “extend or adjourn” deadlines described in the agreement. The Krause defendants submitted an April 2006 letter from plaintiff‘s counsel asserting that it served as the “Due Diligence Termination Notice” unless the Krause defendants chose to grant an additional 90-day extension to the due diligence deadline. Although there is an issue of fact as to whether the Krause defendants granted that 90-day extension, a September 2006 letter from plaintiff‘s counsel renders such issue immaterial. The September letter acknowledges that plaintiff “w[ould] continue to proceed” under the contract “rather than . . . cancelling the contract under the Due Diligence contingency.”
Therefore, the unrebutted evidence established that plain-tiff‘s
Accordingly, regardless of whether plaintiff was entitled, at some point, to terminate the contract pursuant to the terms of the agreement, the unambiguous terms of the contract and any related agreements as to extensions established that the various periods allowing for such termination all had expired no later than 2009. Further, contrary to plaintiff‘s contention that it provided termination notice in its April 2006 letter,2 its own representation in the September 2006 letter was that it had not terminated the agreement and that it wished to proceed pursuant to the contract and other negotiated agreements, the latter of which were unrelated to any of the aforementioned extension periods. Given plaintiff‘s and the Krause defendants’ agreement that plaintiff unequivocally stated its intention to stop performing pursuant to the contract in June 2012, and given that the Krause defendants established as a matter of law that plaintiff repudiated, rather than terminated, the contract at that point in time, plaintiff‘s breach of contract cause of action must be dismissed.
The Krause defendants also established their entitlement to judgment as a matter of law dismissing the cause of action for an equitable lien upon the Canal Properties that Krause purchased in her own name and with plaintiff‘s funds. A cause of action for an equitable lien “is dependent upon some agreement express or implied that there shall be a lien upon specific property” (James v Alderton Dock Yards, 256 NY 298, 303 [1931]; see Miller v Marchuska, 31 AD3d 949, 951 [2006]). An October 2007 email from plaintiff‘s principal, Brad Desai, to Krause asserted Desai‘s desire to “secure [plaintiff‘s] funds” provided to her for the purchase of the Canal Properties by
The Krause defendants were also entitled to summary judgment dismissing the cause of action for a constructive trust. A constructive trust is warranted “when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest” (Sharp v Kosmalski, 40 NY2d 119, 121 [1976] [internal quotation marks, brackets and citation omitted]). A plaintiff establishes entitlement to such a trust upon proving “‘a confidential or fiduciary relationship, a promise, a transfer in reliance thereon and unjust enrichment‘” (Rafferty Sand & Gravel, LLC v Kalvaitis, 116 AD3d 1290, 1291 [2014], quoting Enzien v Enzien, 96 AD3d 1136, 1137 [2012]).
Even viewing the evidence in the light most favorable to plaintiff, the interactions between plaintiff and the Krause defendants lead to the single reasonable conclusion that their agreements were the result of arm‘s length business transactions and that the Krause defendants were never plaintiff‘s fiduciary. As a single example showing the unambiguous nature of this business relationship, in the same email that Krause wrote agreeing to purchase the Canal Properties, she communicated to Desai that any further correspondence between them should take place between respective legal counsel. Accordingly, plaintiff did not have any special relationship with either of the Krause defendants so as to warrant a constructive trust in relationship to any advances that plaintiff made to them (see Hydro Invs. v Trafalgar Power, 6 AD3d 882, 886 [2004]; compare Mei Yun Chen v Mei Wan Kao, 97 AD3d 730, 730 [2012]).
Nonetheless, by stating its constructive trust cause of action,
Further, to the extent that certain of the aforementioned monetary advances were provided pursuant to the contract that the Krause Properties—but not Krause—was bound by, the Krause defendants failed to establish as a matter of law that plaintiff could not pierce the corporate veil in order to recoup any portion of such advances from Krause upon a theory of unjust enrichment. Absent fraud, the corporate veil may be pierced in order to achieve equity when a corporation has been so dominated by individuals or other entities that it primarily transacts the dominators’ business instead of its own (see Fernbach, LLC v Calleo, 92 AD3d 831, 832-833 [2012]; Campone v Pisciotta Servs., Inc., 87 AD3d 1104, 1105 [2011]; Matter of Island Seafood Co. v Golub Corp., 303 AD2d 892, 893 [2003]; Austin Powder Co. v McCullough, 216 AD2d 825, 827 [1995]). This inquiry includes consideration of factors such as the overlap in ownership, officers, directors and personnel, the capitalization of the corporation, any commingling of assets and the presence, or absence, of the formalities that attend the corporate form (see Matter of Island Seafood Co. v Golub Corp., 303 AD2d at 893-894; Austin Powder Co. v McCullough, 216 AD2d at 827).
In her affidavit provided in support of the Krause defendants’ motion for summary judgment, Krause explained that the funds provided, pursuant to the agreement, by plaintiff to her were intended to provide her family a living stipend, despite the fact that Krause was not a party to such agreement. When
Finally, the Krause defendants failed to establish as a matter of law that plaintiff could not foreclose on a mortgage on certain real property. The Krause defendants argue that under the terms of the mortgage, plaintiff was not entitled to accelerate the note and mortgage and that, therefore, Krause Properties did not default. Under the terms of the mortgage, plaintiff was entitled to accelerate the note and mortgage in the event that Krause Properties failed to satisfy certain obligations set forth in the mortgage. One such obligation was that Krause Properties pay the relevant property taxes for the real property secured. In her affidavit in support of the Krause defendants’ motion for summary judgment, Krause concedes that such property taxes were not paid. Accordingly, the Krause defendants failed to establish that they were entitled to summary judgment dismissing plaintiff‘s foreclosure cause of action (see generally NY Professional Drywall of OC, Inc. v Rivergate Dev., LLC, 100 AD3d 216, 221 [2012]).
The remaining arguments raised by the parties are either premature, academic and/or without merit.
Egan Jr., Devine and Clark, JJ., concur. Ordered that the order is modified, on the law, without costs, by reversing so much thereof as (1) granted the motion by defendants Krause Properties, LLC and Gail Krause for summary judgment dismissing the unjust enrichment cause of action against Gail Krause, and (2) denied said defendants’ motion for summary judgment dismissing the causes of action for breach of contract, equitable lien and constructive trust; motion denied and granted to said extent and the causes of action for breach of contract, equitable lien and constructive trust dismissed against said defendants; and, as so modified, affirmed.