MINT HILL/KERR/NASHVILLE, LLC. v. SPC ACQUISITION COMPANY LLC et al
Filing
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OPINION fld. Signed by Judge William H. Walls on 12/22/14. (sr, )
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UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
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MINT HILL/KERR/NASHVILLE, LLC,
Plaintiff,
v.
SPC ACQUISITION COMPANY LLC,
DONALD HANSON, STUART ALPERT,
and PETER HANSON,
Defendants.
OPINION
Civ. No. 14-4401 (WHW)(CLW)
Walls, Senior District Judge
This is a dispute about a contract for the sale of real property in North Carolina. The
buyer allegedly breached the purchase agreement by not timely meeting its payment obligations,
and the seller seeks to recover damages.
According to the Plaintiff, Defendant SPC Acquisition Company LLC (“SPC,” or
“Buyer”), of which Donald Hanson, Stuart Alpert and Peter Hanson (“the individual
defendants”) are alleged members/managers, agreed to purchase property from Plaintiff Mint
Hill/Kerr/Nashville, LLC (“Mint Hill,” or “Seller”). After signing the purchase agreement but
before closing, SPC deposited the required earnest money with escrow agent First American
Title Insurance Company, Inc. (“First American,” or “Title Company”). The parties then signed
an amendment to the purchase agreement, allowing SPC to delay the closing date, in exchange
for additional payments to Plaintiff. SPC did not make these payments, triggering a breach of the
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purchase agreement. The agreement limits damages in event of a breach to the earnest money
and litigation expenses.
Plaintiff moves under Fed. R. Civ. P. 12(c) for judgment on the pleadings, ECF No. 14,
and Defendants cross-move for the same relief. ECF No. 16. The uncontested allegations of the
pleadings are sufficient to decide the case on the merits, which the Court does without oral
argument under Fed. R. Civ. P. 78. SPC breached the purchase agreement. But, as SPC has
already paid the required earnest money, the agreement limits Plaintiff’s additional damages to
its litigation expenses. The complaint states no other valid cause of action apart from breach of
contract. The complaint is dismissed as to the individual defendants, who are not parties to the
agreement.
BACKGROUND
The Agreement
The following facts are not in dispute. On March 18, 2014, Mint Hill signed an
agreement (“the Agreement,” attached to the complaint as Exhibit 1) with SPC to sell SPC real
property in Nashville, North Carolina. Compl. ¶ 7, ECF No. 1-1; see also Answer ¶ 6, ECF No.
11 (admitting Compl. ¶¶ 7-17). Mint Hill has its principal place of business in Pittsburgh,
Pennsylvania; SPC is headquartered in Hackensack, New Jersey. Compl. ¶¶ 1, 6. The parties
chose First American as their escrow agent and title company, and First American also signed
the Agreement. Id. ¶ 9; Agreement at 23. The purchase price was $3,968,790, with the balance
due to the title company at closing. Compl. ¶ 8; Agreement at 10, § 11(a). The Agreement
required SPC to deposit $100,000 with First American as earnest money within three days of the
signing of the agreement, and another $100,000 of earnest money within twenty-three days of
signing. Compl. ¶ 10; Agreement at 2, §§ 4, 6. SPC missed both these deadlines, but was given
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the opportunity to cure by Mint Hill each time. By April 28, 2014, SPC had deposited the
required $200,000 of earnest money with First American. Compl. ¶¶ 11-15. On April 30, 2014,
SPC invoked its right, under § 10 of the Agreement, to extend the closing date from May 7, 2014
to June 6, 2014. Id. ¶ 16. Section 10 required payment of an additional $100,000 in earnest
money in order to extend the deadline, but SPC did not deposit the funds. Id.
The Amendment
On June 20, 2014, SPC, Mint Hill and First American signed an amendment to the
Purchase Agreement (“the Amendment,” attached to the complaint as Exhibit 5, ECF No. 1-1).
Id. ¶ 17. The essence of the Amendment is summarized in § 4: “In consideration for the Purchase
Price Increase (as defined below), and Buyer’s payment of the Additional Earnest Money
Deposit, the parties hereby agree to extend the Outside Closing Date from June 6, 2014 to July
14, 2014.” Amendment at 2. The Additional Earnest Money Deposit would be $100,000. Id. at 1.
The Purchase Price Increase constituted an additional payment of $20,000, which would not be
credited against the remaining balance. Id. § 5. By signing the Amendment, SPC acknowledged
that Mint Hill had “(a) completely and satisfactorily performed all obligations . . . under the
Purchase Agreement and (b) [had] completely satisfied all conditions to Closing . . .” Id. § 3.
The parties equated a breach of the Amendment with a breach of the Agreement: “[I]f
either or both of the Purchase Price Payment or Additional Earnest Money Deposit are not timely
received as set forth in the preceding sentence, then Buyer shall automatically and immediately
be in material breach and default of the Purchase Agreement (a ‘Payment Default’), without
opportunity for Buyer to cure the Payment Default.” Id. § 7. The parties set forth the remedies
for breach in § 16(b) of the Agreement: “Except for any indemnification obligation of the Buyer
in this Agreement and except as set forth in Section 16(e) herein, the Seller’s sole and exclusive
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remedy in the event of a Default by the Buyer is recovery of damages in the amount of the
Earnest Money.” Agreement at 15. Section 16(e) awards “litigation expenses” to a prevailing
party in any litigation arising out of the agreement. Id. at 16.
Section 7 of the Amendment contains the following language: “Seller’s receipt of the
Earnest Money, in the event of a Payment Default or any other breach or default by Buyer under
the Purchase Agreement, shall not be deemed a waiver of Seller’s right and entitlement to the
Purchase Price Payment or Additional Earnest Money Deposit or any other rights and remedies
of Seller under the Purchase Agreement.” Amendment at 2. The Amendment is otherwise silent
as to damages. It specifically ratifies all of the Agreement’s provisions. Id. § 8.
SPC failed to make the additional payments required by the Amendment. Compl. ¶ 28;
Answer ¶ 10. In its Answer, SPC claimed that “plaintiff did not prove it was ready and able to
close as agreed.” Answer ¶ 10.
On July 11, 2014, Mint Hill filed the present complaint in this Court. The complaint
pleads causes of action against SPC for breach of contract, breach of the implied covenant of
good faith and fair dealing, and tortious interference with contract. It seeks damages in the
amount of $120,000—the $100,000 Additional Earnest Money Deposit, plus the $20,000
Purchase Price Payment—along with attorney’s fees and pre-judgment interest. First American
settled with Mint Hill, paying Plaintiff the $200,000 of earnest money it held in escrow. Pl.’s
Reply 4; see also Answer ¶ 14; Stipulation of Dismissal as to First American, ECF No. 10. SPC
then filed its Answer. ECF No. 11. Plaintiff now moves for judgment on the pleadings against
SPC. ECF No. 14.
In response to the motion, SPC argues that material facts are in dispute, because it alleged
that Mint Hill was not ready and able to close as agreed. ECF No. 16. It asks for dismissal of
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Plaintiff’s causes of action for breach of the implied covenant of good faith and fair dealing and
tortious interference with contract, which it contends are moot or inadequately pled. SPC further
requests dismissal as to the individual defendants, who are not parties to the Agreement and who
are not alleged to have acted independently of SPC.
In response to SPC’s claim that Mint Hill was not ready and able to close as agreed, Mint
Hill argues that this allegation is irrelevant: SPC had, in the Amendment, expressly agreed that
Mint Hill had satisfactorily performed its obligations under the Agreement. Pl.’s Br. 7-8;
Amendment § 3. Plaintiff acknowledges that the Court need not consider its other causes of
action. Pl.’s Reply 4, ECF No. 17.
STANDARD FOR JUDGMENT ON THE PLEADINGS
A party moving for judgment on the pleadings under Rule 12(c) must demonstrate that
there are no disputed material facts and that judgment should be entered in its favor as a matter
of law. See Jablonski v. Pan Amer. World Airways, Inc., 863 F.2d 289, 290 (3d Cir.1988). When
reviewing a motion for judgment on the pleadings, the court must “view the facts presented in
the pleadings and the inferences to be drawn therefrom in the light most favorable to the
nonmoving party.” Id.
ANALYSIS
SPC Is Liable to Mint Hill for Damages under the Amended Agreement
The contract provides that it shall be governed and construed under the laws of the state
where the property is located, North Carolina. Agreement § 21. According to North Carolina
law, “[i]t must be presumed the parties intended what the language used clearly expresses, and
the contract must be construed to mean what on its face it purports to mean.” Self-Help Ventures
Fund v. Custom Finish, LLC, 682 S.E.2d 746, 749 (N.C. 2009) (citations omitted). “When the
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language of the contract is clear and unambiguous, construction of the agreement is a matter of
law for the court, and the court cannot look beyond the terms of the contract to determine the
intentions of the parties.” Piedmont Bank & Trust Co. v. Stevenson, 339 S.E.2d 49, 52 (N.C.
App. 1986) (citations omitted), aff’d per curiam, 344 S.E.2d 788 (N.C. 1986). “Whether or not
the language of a contract is ambiguous or unambiguous is a question for the court to
determine.” Id.
The Court finds that the terms of the Amendment and Agreement are unambiguous, and
that the undisputed facts make clear that SPC breached the contract. SPC admits that there was
an enforceable contract among SPC, Mint Hill and First American; that Exhibit 1 is that contract;
that it paid earnest money in the amount of $200,000 in partial satisfaction of the contract’s
terms; that the parties amended the contract and that the Amendment is attached to the complaint
as Exhibit 5. Answer ¶ 6. The Amendment required SPC to pay a sum certain on a particular
date, else it would be in material breach and default of the Agreement. Amendment § 7. SPC
admits that it failed to make that payment. Answer ¶ 10.
SPC’s statement in its Answer that the contract is “subject to interpretation and
authentication” does not undo its admission that the attached Exhibit 1 was a valid contract
between Plaintiff and SPC. Under the unambiguous terms restated above, which SPC admitted
were in force (and authenticated by admitting their veracity), SPC breached the Agreement by
failing to pay on time. Similarly, SPC’s vague allegation that Mint Hill was not “ready and able”
to close as agreed is ineffectual given SPC’s admission of the validity of the Agreement and its
Amendment. In the Amendment, SPC expressly agreed that Mint Hill had satisfactorily
performed its obligations under the Agreement. Amendment § 3. It follows that SPC is liable to
Mint Hill for whatever damages are allowed under the Agreement as amended.
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Mint Hill’s Damages are Limited to its Litigation Expenses
The Agreement is also unambiguous as to damages: Seller’s remedy in event of Buyer’s
breach is the Earnest Money, along with its litigation expenses. Agreement §§ 16(b), 16(e). SPC
has already paid $200,000 to First American, which First American paid to Mint Hill. Pl.’s Reply
4; see also Answer ¶ 14; Stipulation of Dismissal as to First American, ECF No. 10. Plaintiff
may now recover its litigation expenses under § 16(e). The contract precludes additional
damages.
The language in § 7 of the Amendment falls short of entitling Mint Hill to recover the
$100,000 Additional Earnest Money Deposit and the $20,000 Purchase Price Payment from
SPC. The clause does not waive the right to these payments, but it does not establish the right
either. When stating the consequence of Buyer’s failure to timely make those payments, the
Amendment merely relates to the Agreement:
“Buyer shall deliver the Purchase Price Payment and Additional Earnest Money Deposit
by Federal Reserve System wire transfers no later than 5:00 pm EDST on June 23, 2014
(the ‘Payment Deadline’), time being of the essence. Notwithstanding anything to the
contrary in this Amendment or the Purchase Agreement, Buyer and Seller acknowledge
and agree that if either or both of the Purchase Price Payment or Additional Earnest
Money Deposit are not timely received . . . then Buyer shall automatically and
immediately be in material breach and default of the Purchase Agreement (a ‘Payment
Default’), without opportunity to cure the Payment Default. Buyer and Seller further
acknowledge and agree that upon Seller’s written notice to the Title Company and Seller
of a Payment Default, the Title Company shall promptly deliver all Earnest Money to
Seller . . .”
Amendment § 7. Section 7 of the Amendment refers to three particular deposits: the “Purchase
Price Payment,” the “Additional Earnest Money Deposit”—both of which are subject to an
earlier delivery date than the payments due at closing—and the “Earnest Money.” Id. §§ 4, 7. It
is only the “Earnest Money” that the title company must deliver to Seller in the event of a
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breach. Id. § 7. The “Earnest Money” described in the Agreement does not include the
“Additional Earnest Money Deposit” described in the Amendment. Section 7 of the Amendment
specifically differentiates between the two terms: the title company is instructed to deliver the
Earnest Money to the Seller in event of Buyer’s default, a default which occurs if Buyer does not
deliver the Additional Earnest Money and Purchase Price Payment. Id. § 7. Given the clear
limitation of § 7 of the Agreement, Seller’s entitlement to the Additional Earnest Money Deposit
and the Purchase Price Payment in event of a breach might originate from a contract term more
clear and direct. The Amendment contains no such provision. The Court cannot read this
additional term into the contract.
Plaintiff’s Other Causes of Action Must Be Dismissed
Plaintiff concedes that the Court need not consider its additional causes of action.
Plaintiff resolved its claim against First American, and Plaintiff informed the Court in its Reply
that, “because First American has released the escrow funds which the SPC Defendants had
wrongfully instructed First American to withhold, Count Three (alleging tortious interference) is
moot.” Pl.’s Reply 4; see also Answer ¶ 14; Stipulation of Dismissal as to First American, ECF
No. 10. This cause of action must be dismissed.
Plaintiff also allows that, “[b]ecause Defendants admit liability for breach of contract
entitling Mint Hill to judgment on the pleadings, Mint Hill need not (for purposes of this motion)
rely on its alternative theory of liability for breach of the implied covenant of good faith and fair
dealing (Count Two).” Id. Plaintiff is correct. “Because the covenant of good faith and fair
dealing is implied in a contract . . . a claim for breach of that covenant typically is ‘part and
parcel’ of a claim for breach of contract.” See Ada Liss Group v. Sara Lee Corp., No. 1:06–CV–
610, 2010 WL 3910433 (M.D.N.C. 2010). Absent some “special relationship” between the
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parties, “a breach of the covenant of good faith and fair dealing is simply another way of stating
a claim for breach of contract.” Id. (citations omitted). Examples of such special relationships
include “cases involving contracts for funeral services and insurance. Outside such
circumstances, actions for breach of good faith fail.” See Mechanical Indus., Inc. v.
O’Brien/Atkins Assocs., 1998 U.S. Dist. LEXIS 5389, *10 (M.D.N.C.1998) (citing cases). Here,
Plaintiff’s cause of action for breach of implied covenant must be dismissed, as it is duplicative
of its cause of action for breach of contract.
The Individual Defendants Must Be Dismissed from the Case
Defendants argue that claims against the individual defendants must be dismissed, as the
contract at issue was between two LLCs, and the individuals are only alleged to have acted as
agents for SPC. Def.’s Br. 12-13. North Carolina law, which governs the contract, plainly states,
“[a] person who is an interest owner, manager, or other company official is not liable for the
obligations of the LLC solely by reason of being an interest owner, manager, or other company
official.” N.C.G.S. 57D-3-30. Plaintiff does not allege that the individual defendants acted
independently of their roles with SPC. The claims against the individual defendants must be
dismissed.1
CONCLUSION
Judgment is entered against SPC in favor of Plaintiff, in the amount of Plaintiff’s
litigation expenses, which Plaintiff shall demonstrate through additional filings. Defendants'
cross-motion for judgment on the pleadings is also granted, inasmuch as it requests dismissal of
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Plaintiff raises New Jersey law in support of its position. North Carolina law is the law of the
case.
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the claims against the individual defendants, and dismissal of Counts Two and Three of the
complaint.
DATE:
12/22/2014
___________________________
Senior United States District Judge
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