Ridge Seneca Plaza, LLC v. BP Products North America, Inc. et al
Filing
188
DECISION AND ORDER granting 104 Motion for Summary Judgment. The following causes of action plead against it are dismissed: AS AND FOR A SECOND CAUSE OF ACTION FOR MISTAKE AGAINST FIRST ALLIED.AS AND FOR AN TWELFTH CAUSE OF ACTION FOR NEGLIGENCE AG AINST GLAZER AND FIRST ALLIED.AS AND FOR A FOURTEENTH CAUSE OF ACTION FOR EQUITABLE OR IMPLIED INDEMNIFICATION AGAINST DEFENDANTS GLAZER AND FIRST ALLIED.AS AND FOR A FIFTEENTH CAUSE OF ACTION FOR RESTITUTION AGAINST DEFENDANTS GLAZER AND FIRST ALLIED.Signed by Hon. Charles J. Siragusa on 5/2/11. (KAP)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
RIDGE SENECA PLAZA, LLC,
Plaintiff,
-vsBP PRODUCTS NORTH AMERICA, EAST
RIDGE ENTERPRISES, INC., FIRST ALLIED
SHOPPING CENTER, L.P. and FISHER
ASSOCIATES, P.E., L.S., P.C.,
Defendants.
FISHER ASSOCIATES, P.E., L.S., P.C.,
DECISION AND ORDER
06-CV-6333 CJS
Cross-Claimant,
-vsBP PRODUCTS NORTH AMERICA, INC., EAST
RIDGE ENTERPRISES, INC., FIRST ALLIED
SHOPPING CENTER, L.P. and FISHER
ASSOCIATES, P.E., L.S., P.C.,
Cross-Defendants.
APPEARANCES
For Plaintiff:
Alan J. Knauf, Esq.
Knauf Shaw LLP
1125 Crossroads Building
Two State Street
Rochester, NY 14614
(585) 546-8430
For defendant First Allied Shopping
Center, LLP:
Beryl Nusbaum, Esq.
Woods Oviatt Gilman LLP
Two State Street Suite 700
Rochester, NY 14614
(585) 987-2817
INTRODUCTION
Siragusa, J. This case, brought by Ridge Seneca Plaza, LLC (“Ridge Seneca”) is
before the Court on a motion for summary judgment (Docket No. 104) filed by First Allied
Shopping Center, L.P. (“First Allied”).1 For the reasons stated below, the Court grants the
application.
FACTUAL BACKGROUND
Pursuant to Western District of New York Local Rule, both parties submitted
statements of fact. W.D.N.Y. Loc. R. Civ. P. 56 (2011). The source of the following
background is from the parties’ statements and not in dispute, except where indicated
below. Ridge Seneca Plaza (referred to as the “Premises” in the Purchase Agreement), the
property that is the subject matter of this lawsuit, is located at the intersection of the
northwest corner of Seneca Avenue and the south side of Ridge Road East in Rochester,
New York, and is owned by Plaintiff Ridge Seneca Plaza, LLC (“Ridge Seneca”). Ridge
Seneca Plaza, LLC (“Ridge Seneca”) purchased this property from First Allied in February
of 2001 under the terms of a contract dated September 14, 2000, as amended on January
11, 200I. The purchase contract was originally entered into by First Allied with Sylvan
Enterprise Corp. (“Sylvan”) and Sylvan assigned the contract to Ridge Seneca on the day
of closing, February 27, 2001. Sylvan and Ridge Seneca were both represented by Harter
Secrest & Emery LLP, and First Allied was represented by Woods Oviatt Gilman LLP.
1
The motion for summary judgment (Docket No. 102) filed by Fisher Associates, P.E., L.S.,
P.C., was heard by U.S. Magistrate Judge Jonathan W. Feldman on consent of the parties. (See
Docket No. 125, Consent and Reference of a Dispositive Motion to a Magistrate Judge.) Judge
Feldman granted Fisher’s motion for summary judgment in a decision and order filed on March 28,
2011 (Docket No. 180).
Page 2 of 16
Sylvan and Ridge Seneca were both managed and controlled by Rabbi Shlomo
Noble (“Noble”), who executed the assignment of the Contract on the part of both Sylvan
and Ridge Seneca. The Purchase Agreement provided in Paragraph 6, as follows:
6.
Condition of Premises.
6.1
Buyer specifically acknowledges and agrees that Seller shall sell and
Buyer shall purchase the Premises “as is, where is and with all faults” and
Buyer is not relying on any representations or warranties of any kind
whatsoever, whether oral or written, express or implied, statutory or
otherwise, from Seller, nor any partner, officer, employee, attorney, agent or
broker of Seller, as to any matter, concerning the Premises, or set forth,
contained or addressed in any materials provided by Seller to Buyer with
respect to the Premises (including without limitation, the completeness
thereof). Without limiting the generality of the foregoing, Buyer expressly
acknowledges and agrees that Buyer is not relying on any representation or
warranty of Seller, nor any partner, officer, employee, attorney, agent or
broker of Seller, whether implied, presumed or expressly provided at law or
otherwise, arising by virtue of any statute, common law or other legally
binding right or remedy in favor of Buyer. Buyer further acknowledges and
agrees that Seller is under no duty to make any inquiry regarding any matter
that may or may not be known to Seller or any partner, officer, employee,
attorney, agent or broker of Seller. This Section shall survive the Closing, or,
if the Closing does not occur, beyond the termination of this Agreement.
6.3
Buyer, for itself and any successors and assigns of Buyer, waives its
right to recover from, and forever releases and discharges, and covenants
not to sue, Seller, Seller’s property and asset managers, any lender to Seller,
the partners, trustees, shareholders, controlling persons, directors, officers,
attorneys, employees and agents of each of them, and their respective heirs,
successors, personal representatives and assigns (each a “Seller Party”, and
collectively, the “Seller Parties”) with respect to any and all claims, whether
direct or indirect, known or unknown, foreseen or unforeseen, that may arise
on account of or in any way be connected with the Premises including,
without limitation, the physical, environmental and structural condition of the
Premises or any law or regulation applicable thereto (including, without
limitation, any claim or matter relating to the use, presence, discharge or
release of hazardous materials on, under, in. above or about the Premises);
provided, however, Buyer does not waive its right under Section 12 hereof
in connection with any default by Seller hereunder. This Section 6.3 shall
survive the Closing. (Exhibit F)
Page 3 of 16
(Purchase Agreement ¶¶ 6–6.3.) The Purchase Agreement further provided pertinent part
as follows:
For the period from the Effective Date to twelve o’clock noon on October 30,
2000 (the “Review Period”). Buyer shall have the right to inspect all aspects
of the Premises including the leases and contracts in effect and all existing
governmental approvals, and, in connection therewith, shall have the right at
all reasonable times to enter onto the Premises in order to inspect the
Premises and to conduct such tests as Buyer deems appropriate (subject to
the terms of Section 3.2 below). If Buyer is dissatisfied with its investigations,
Buyer shall have the right to terminate this Agreement at any time on or
before twelve o’clock noon on the last day of’ the Review Period, by
providing written notice of termination to Seller on or before the expiration of
the Review Period.
(Contract ¶ 3.1.)
During the negotiation of the Purchase Agreement, and prior to the closing, there
were never any discussions between representatives of Sylvan or Ridge Seneca and
representatives of First Allied concerning the environmental condition of the property.
Amendment No. 1 to the contract provided in pertinent part as follows:
1. Buyer and Seller agree that the Contract is hereby reinstated and in full
force and effect as amended by the terms of this Amendment.
2. Section 3.1 shall be deleted in its entirety, it being understood that Buyer
has reviewed its contingency described therein and accepts the Property in
its “as is” “where is” condition. Buyer acknowledges that Buyer has
completed its investigations pursuant to section 3.2.…
6. Except as amended hereby, all terms and conditions of the Contract shall
remain unmodified and in full force and effect.
(First Amendment to Agreement to Purchase ¶¶1–2, 6.) The Amendment is consistent with
Paragraph 6.1 of the Purchase Agreement, which provided that the property would be
purchased “as is, where is and with all faults” and that there were no representations
Page 4 of 16
whatsoever of any condition of the property on the part of First Allied, as well as the
release provisions of Paragraph 6.3.
Pursuant to Paragraph 6.2 of the Purchase Agreement, Sylvan engaged Fisher
Associates, P.E., L.S., P.C. to conduct a Phase I environmental study of the property. No
Phase II environmental study was conducted prior to the closing.
In 2005, Ridge Seneca sought a new mortgage from Washington Mutual Bank and
at that time petroleum was discovered under the property. There is no source of petroleum
on the property itself and, although Plaintiff’s original complaint included claims under the
Oil Spill Law of the State of New York against First Allied, Ridge Seneca withdrew all
claims made under that law against First Allied when it filed its amended complaint. In its
amended complaint, Ridge Seneca included a claim against First Allied under the
Comprehensive Environmental Response, Compensation, and Liability Act, Section 107,
but Plaintiff has since withdrawn that claim as well.
Ridge Seneca has four remaining causes of action against First Allied, which are
the following:
AS AND FOR A SECOND CAUSE OF ACTION FOR MISTAKE AGAINST
FIRST ALLIED, PLAINTIFF ALLEGES AS FOLLOWS:
97. Plaintiff repeats and realleges paragraphs “1" through “96" of this
Amended Complaint, as if set forth in this paragraph at length.
98. Plaintiff, Sylvan and First Allied mistakenly believed that the Property was
free of Contamination and did not require remediation, and based upon this
mistaken fact, entered into or accepted the Purchase Agreement and/or held
the Closing and recorded the Deed.
99. Plaintiff’s mistaken belief regarding the Contamination and the lack of
need for remediation was made despite its exercise of ordinary care in
entering into the Purchase Agreement and investigating the Property.
Page 5 of 16
100. This mistake was material in that the lack of Contamination on the
Property was a fundamental assumption of the Purchase Agreement, and a
fact which vitally affected the basis on which the Purchase Agreement was
made, and the Closing was held.
101. First Allied was not a party to the Assignment, and plaintiff never agreed
to the Purchase Agreement.
102. Accordingly, plaintiff is not bound by any “as is,” waiver or release
contained in the Purchase Agreement.
103. Further, enforcement of the “as is” and waivers or release contained in
the Purchase Agreement that First Allied may claim survived the Closing
would not only result in the unjust enrichment of First Allied at the expense
of plaintiff, but would be unconscionable.
104. Accordingly, this Court should not enforce the Purchase Agreement
against plaintiff, or should, in equity, reform the Purchase Agreement and the
resulting Closing, so as to rescind any portions of the Purchase Agreement
that survived the Closing, make an adjustment in the purchase price so that
First Alliance is directed to reimburse plaintiff for the costs of investigation
and remediation of the Contamination, and/or grant rescission or other
appropriate equitable relief.
* * *
AS AND FOR AN TWELFTH CAUSE OF ACTION FOR NEGLIGENCE
AGAINST GLAZER AND FIRST ALLIED, PLAINTIFF ALLEGES AS
FOLLOWS:
141. Plaintiff repeats and realleges the allegations of paragraphs “1" through
“140" of this Amended Complaint, as if set forth in this paragraph at length.
142. Defendants (including their officers, agents, servants, and/or
employees) owed a duty of care to plaintiff and others with regard to their
use, ownership and operation of the Property and investigation and
disclosure of activities on or information related to the Property, including
disclosure of the EMG Phase I (in the case of First Allied), and/or otherwise
in connection with the Property.
143. Defendants (including their officers, agents, servants, and/or
employees) acted unreasonably and negligently in: (a) failing to detect the
Discharges, Releases, and/or Contamination; (b) First Allied failing to
disclose to plaintiff the EMG Phase I; and (c) Glazer failing to take
reasonable precautions necessary to prevent the Releases and/or the PCE
Page 6 of 16
Contamination; and those acts or omissions were a direct and proximate
cause of the damages to plaintiff.
144. Defendants, by reason of their negligence, are liable for all of the
damages to plaintiff proximately caused by the Contamination, and
investigation, cleanup and removal of the Contamination.
* * *
AS AND FOR A FOURTEENTH CAUSE OF ACTION FOR EQUITABLE OR
IMPLIED INDEMNIFICATION AGAINST DEFENDANTS GLAZER AND
FIRST ALLIED, PLAINTIFF ALLEGES AS FOLLOWS:
149. Plaintiff repeats and realleges the allegations of paragraphs “1" through
“148" of this Amended Complaint, as if set forth in this paragraph at length.
150. Defendant Glazer, including his agents, servants, and/or employees,
had a non-delegable duty to plaintiff to clean up or ensure against the PCE
Contamination of the Property.
151. As a result of the breach of this duty by defendant Glazer, including his
agents, servants, and/or employees, he is responsible for plaintiff’s past and
future expenses and damages in investigation, remediation, cleanup, and
removal of, and response to, the PCE Contamination, and as a result,
defendant Glazer should, in equity, indemnify plaintiff for some or all of its
expenses, costs, and damages.
AS AND FOR A FIFTEENTH CAUSE OF ACTION FOR RESTITUTION
AGAINST DEFENDANTS GLAZER AND FIRST ALLIED, PLAINTIFF
ALLEGES AS FOLLOWS:
152. Plaintiff repeats and realleges the allegations of paragraphs “1" through
“151" of this Amended Complaint, as if set forth in this paragraph at length.
153. It would be against equity and good conscience to permit defendants
Glazer and First Allied to pass the burden of cleaning up the Contamination
to plaintiff, and for defendant First Allied to have had the benefit of
enjoyment of the use of the Property, free of any responsibility for
investigation, remediation, cleanup, and removal of, and response to, the
Contamination.
154. Therefore, defendants Glazer and First Allied should make restitution
to plaintiff for some or all of its expenses, costs, and damages.
(Amend. Compl. ¶¶ 97–104, 141–54.)
Page 7 of 16
The source of the petroleum contamination on the property is evidently from the
former East Ridge Enterprise, Inc., gasoline station on the northeast corner of Seneca
Avenue and Ridge Road East. First Allied contends, and Ridge Seneca disputes, that there
is no documentation identifying when petroleum contamination first entered the property,
and that there is no documentation as to whether petroleum contamination affected the
property prior to February 27, 2001.
STANDARD OF LAW
The standard for granting summary judgment is well established. Summary
judgment may not be granted unless “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment
as a matter of law.” Fed. R. Civ. P. 56(c). A party seeking summary judgment bears the
burden of establishing that no genuine issue of material fact exists. See Adickes v. S.H.
Kress & Co., 398 U.S. 144, 157 (1970). “[T]he movant must make a prima facie showing
that the standard for obtaining summary judgment has been satisfied.” 11 MOORE’S
FEDERAL PRACTICE, § 56.11[1][a] (Matthew Bender 3d ed.). That is, the burden is on the
moving party to demonstrate that the evidence creates no genuine issue of material fact.
See Amaker v. Foley, 274 F.3d 677 (2d Cir. 2001); Chipollini v. Spencer Gifts, Inc., 814
F.2d 893 (3d Cir.1987) (en banc). Where the non-moving party will bear the burden of
proof at trial, the party moving for summary judgment may meet its burden by showing the
evidentiary materials of record, if reduced to admissible evidence, would be insufficient to
carry the non-movant’s burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317,
322–23 (1986).
Page 8 of 16
Once that burden has been met, the burden then shifts to the non–moving party to
demonstrate that, as to a material fact, a genuine issue exists. Fed. R. Civ. P. 56(e);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). A fact is “material” only if the
fact has some affect on the outcome of the suit. Catanzaro v. Weiden, 140 F.3d 91, 93 (2d
Cir. 1998). A dispute regarding a material fact is genuine “if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248.
In determining whether a genuine issue exists as to a material fact, the court must view
underlying facts contained in affidavits, attached exhibits, and depositions in the light most
favorable to the non-moving party. U.S. v. Diebold, Inc., 369 U.S. 654, 655 (1962).
Moreover, the court must draw all reasonable inferences and resolve all ambiguities in
favor of the non-moving party. Leon v. Murphy, 988 F.2d 303, 308 (2d Cir.1993);
Anderson, 477 U.S. at 248-49; Doe v. Dep’t of Pub. Safety ex rel. Lee, 271 F.3d 38, 47 (2d
Cir. 2001), rev’d on other grounds Connecticut Dept. of Public Safety v. Doe, 538 U.S. 1,
123 S.Ct. 1160 (2003); International Raw Materials, Ltd. v. Stauffer Chemical Co., 898 F.2d
946 (3d Cir. 1990). However, a summary judgment motion will not be defeated on the basis
of conjecture or surmise or merely upon a “metaphysical doubt” concerning the facts.
Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir. 1991) (citing Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)); Knight v. United States Fire Ins. Co.,
804 F.2d 9 (2d Cir. 1986). Rather, evidentiary proof in admissible form is required. Fed. R.
Civ. P. 56(e). Furthermore, the party opposing summary judgment “may not create an
issue of fact by submitting an affidavit in opposition to a summary judgment motion that,
by omission or addition, contradicts the affiant’s previous deposition testimony.” Hayes v.
Page 9 of 16
New York City, Department of Corrections, 84 F.3d 614, 619 (2d Cir. 1996).
ANALYSIS
First Allied’s Alleged Negligence in Failing to Disclose the EMG Phase I Report to
Ridge Seneca
Ridge Seneca argues that First Allied had a duty to disclose “all material information
regarding the environmental condition of the Property prior to Closing….” (Ridge Seneca
Mem. of Law at 2–3.) In particular, Ridge Seneca refers to the EMG Phase I completed on
March 14, 1997, (Amend. Compl. ¶ 143(b)), which discussed a 1994 tank failure at the
gasoline station adjacent to the Property, and pointed out that a dry cleaner had operated2
prior to regulations on the disposal of hazardous dry cleaning waste. Ridge Seneca relies
on Stambovsky v. Ackley, 169 A.D.2d 254 (N.Y. App. Div. 1st Dept. 1991) and Young v.
Keith, 112 A.D.2d 625 (N.Y. App. Div. 3d Dept. 1985), to support its contention that First
Allied had a duty to disclose even in the absence of a specific inquiry from Ridge Seneca.
(Ridge Seneca Mem. of Law at 4.) First Allied counters:
New York adheres to the doctrine of caveat emptor and imposes no duty on
the seller to disclose any information concerning the premises when the
parties deal at arm’s length, unless there is some conduct on the part of the
seller that constitutes active concealment (see, Platzman v Morris, 283
A.D.2d 561, 562 (2d Dep’t 2001); Howard Iron Works v. Buffalo Elevating
Co., 113 A.D. 562, 570 (4th Dep’t 1901)3).
(First Allied Mem. of Law at 5.) Howard Iron Works dealt with the sale of personal property,
so is not relevant here, but in Platzman, cited in Howard, the appellate court, in a case
2
The papers submitted in support of, and in opposition to, the motion, do not indicate
whether the dry cleaner operated on the premises sold, or on an adjacent premises.
3
The Howard case was actually decided on May 9, 1906, not 1901, and was affirmed on
May 10, 1907. Howard Iron Works v. Buffalo Elevating Co., 188 N.Y. 619 (1907).
Page 10 of 16
concerning the sale of a house with a condition that violated the local zoning ordinance,
held that the purchaser was not entitled to relief. There, the Second Department wrote:
New York adheres to the doctrine of caveat emptor and imposes no duty on
the seller to disclose any information concerning the premises when the
parties deal at arm’s length, unless there is some conduct on the part of the
seller which constitutes active concealment (see, London v Courduff, 141
AD2d 803; Stambovsky v Ackley, 169 AD2d 254). To maintain a cause of
action to recover damages for active concealment in the context of a
fraudulent nondisclosure, the plaintiffs must show, in effect, that the seller
thwarted the plaintiffs’ effort to fulfill their responsibilities fixed by the doctrine
of caveat emptor (see, London v Courduff, supra).
Platzman v. Morris, 283 A.D.2d 561, 562 (N.Y. App. Div. 2d Dep’t 2001).
The Court agrees with First Allied’s position and finds that the cases relied upon by
Ridge Seneca are distinguishable. In Stambovsky v. Ackley, 169 A.D.2d 254 (N.Y. App.
Div. 1st Dep’t 1991), cited by Ridge Seneca, the First Department allowed the New York
City purchaser of a house in the Village of Nyack to rescind the purchase on the basis that
the seller failed to disclose that the house was reputed to be haunted:
The case law in this jurisdiction dealing with the duty of a vendor of real
property to disclose information to the buyer is distinguishable from the
matter under review. The most salient distinction is that existing cases
invariably deal with the physical condition of the premises (e.g., London v
Courduff, supra [use as a landfill]; Perin v Mardine Realty Co., 5 AD2d 685,
affd 6 NY2d 920 [sewer line crossing adjoining property without owner’s
consent]), defects in title (e.g., Sands v Kissane, 282 App Div 140
[remainderman]), liens against the property (e.g., Noved Realty Corp. v A.
A. P. Co., supra), expenses or income (e.g., Rodas v Manitaras, supra [gross
receipts]) and other factors affecting its operation. No case has been brought
to this court’s attention in which the property value was impaired as the result
of the reputation created by information disseminated to the public by the
seller (or, for that matter, as a result of possession by poltergeists).
Where a condition which has been created by the seller materially impairs
the value of the contract and is peculiarly within the knowledge of the seller
or unlikely to be discovered by a prudent purchaser exercising due care with
respect to the subject transaction, nondisclosure constitutes a basis for
rescission as a matter of equity. Any other outcome places upon the buyer
Page 11 of 16
not merely the obligation to exercise care in his purchase but rather to be
omniscient with respect to any fact which may affect the bargain. No practical
purpose is served by imposing such a burden upon a purchaser. To the
contrary, it encourages predatory business practice and offends the principle
that equity will suffer no wrong to be without a remedy.
Stambovsky, 169 A.D. 2d at 260. Ridge Seneca also cites to Young v. Keith, 112 A.D.2d
625 (N.Y. App. Div. 3d Dept. 1985). In Young, the court wrote:
nondisclosure may constitute a false representation where a party has a duty
to communicate the undisclosed information to the other contracting party
(24 NY Jur, Fraud and Deceit, § 106, at 159). Such a duty can arise when
one party to a contract has superior knowledge which is not available to both
parties (24 NY Jur, Fraud and Deceit, § 108, at 162). As the Court of Appeals
has stated, “Concealment with intent to defraud of facts which one is
duty-bound in honesty to disclose is of the same legal effect and significance
as affirmative misrepresentations of fact” (Nasaba Corp. v Harfred Realty
Corp., 287 NY 290, 295). Considering the allegations that the mobile home
park was sold as an operating business and that the sewer and water
systems’ deficiencies were known by defendants to require very expensive
reconstruction and to pose a threat to the business’ operating license, a duty
to disclose the deficiencies could be found. Plaintiff’s complaint can be
further read to allege that they could not have discovered the deficiencies
through an ordinary inspection and that they would not have purchased the
property had they known of them.
Young, 112 A.D.2d at 626–27.
From these and other cases cited by Ridge Seneca in its memorandum of law, the
Court concludes that in order to maintain a cause of action for failing to disclose the
existence of the EMG Phase I report, Ridge Seneca would have to show that First Allied
actively concealed the report or the conditions on which it reported, or, as in the case of
a haunted house,
a very practical problem arises with respect to the discovery of a paranormal
phenomenon: “Who you gonna’ call?” as a title song to the movie
“Ghostbusters” asks. Applying the strict rule of caveat emptor to a contract
involving a house possessed by poltergeists conjures up visions of a psychic
or medium routinely accompanying the structural engineer and Terminix man
on an inspection of every home subject to a contract of sale. It portends that
Page 12 of 16
the prudent attorney will establish an escrow account lest the subject of the
transaction come back to haunt him and his client—or pray that his
malpractice insurance coverage extends to supernatural disasters. In the
interest of avoiding such untenable consequences, the notion that a haunting
is a condition which can and should be ascertained upon reasonable
inspection of the premises is a hobgoblin which should be exorcised from the
body of legal precedent and laid quietly to rest.
Stambovsky, 169 A.D.2d at 257. No evidentiary proof in the record shows active
concealment, or a situation that could not be ascertained upon reasonable inspection of
the premises, especially considering the commercial entities that were parties to the
transaction.
Purchase Agreement between First Allied and Sylvan Enterprise Corp.
First Allied contends that Ridge Seneca is bound by the terms of the purchase
agreement between First Allied and Sylvan, which assigned the contract to Ridge Seneca.
Ridge Seneca counters that,“while the rights in the Purchase Agreement were assigned
to [it], the associated burdens were not.” (Ridge Seneca Mem. of Law at 7.) In other words,
it apparently is Ridge Seneca’s position that they are therefore not bound by the terms of
the contract between Sylvan and First Allied, whereby Sylvan purchased the property “as
is, where is and with all faults.”
In Langel v. Betz, 250 N.Y. 159, 161 (1928), the New York Court of Appeals
reviewed the question of whether an assignee of a contract is bound by the contract’s
obligations, as well as being entitled to the benefits of the contract. See also Kaufman v.
William Iselin & Co., 272 A.D. 578, 581 (N.Y. App. Div. 1st Dep’t 1947) (“The question
whether an assignee assumes the duties as well as the rights under an assigned contract
was considered at length by the Court of Appeals in Langel v. Betz, 250 N.Y. 159, 163, 164
N.E. 890, 891.”). In Langel, the Court wrote:
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The mere assignment of a bilateral executory contract may not be interpreted
as a promise by the assignee to the assignor to assume the performance of
the assignor’s duties, so as to have the effect of creating a new liability on
the part of the assignee to the other party to the contract assigned. The
assignee of the vendee is under no personal engagement to the vendor
where there is no privity between them.
Langel, 250 N.Y. 161–62. However, the Court of Appeals in Langel then pointed out that
a contrary interpretation may result where circumstances surrounding the assignment itself
indicate a promise on the part of the assignee to assume the assignor’s duties. Id. at 163.
Here, the Assignment of Purchase Agreement signed by Nobel as assignor and as
one of the assignees, reads in pertinent part as follows:
KNOW ALL BY THESE PRESENTS, that Sylvan Enterprises Corp.…
(“Assignor”), for good and valuable consideration…, hereby assigns and
conveys to Ridge Seneca Plaza, LLC, …all right, title, and interest of
Assignor in and to that certain Purchase Agreement by and between
Assignor and First Allied Shopping Center, L.P. (“Seller”), dated September
14, 2000, as amended by that certain First Amendment to Agreement to
Purchase between Assignor and Seller dated January 11, 2001 (collectively,
the “Contract”), relating to certain property located in the City of Rochester,
County of Monroe, and State of New York, known as Ridge Seneca Plaza
and more particularly described in the Contract (the “Premises”).
TO HAVE AND TO HOLD the said Contract unto Assignee, its successors
and assigns, to its and their use and behoof [sic] forever.
(Nussbaum Aff. Ex. J.) What Sylvan assigned to Ridge Seneca was the entire Purchase
Agreement including Paragraphs 6.1, 6.2 and 6.3, quoted above. Paragraph 6.1 specifies
that the Property is being purchased “as is, where is and with all faults.” Paragraph 6.2
makes clear that, “[a]ny reports, repairs or work required by Buyer are the sole
responsibility of Buyer, and Buyer agrees that there is no obligation on the part of Seller
to make any changes, alterations or repairs to the Premises or to cure any violations of law
or to comply with the requirements of any insurer.” (Purchase Agreement ¶ 6.2.) Finally,
Page 14 of 16
Paragraph 6.3, binds not only the buyer to the terms of the contract, but also any
successors and assignees of Buyer. Ridge Seneca’s citations to eight cases in its
memorandum of law do not support a contrary conclusion.
Ridge Seneca’s Mutual Mistake Claim
Ridge Seneca claims that its purchase of the Premises was based on a mutual
mistake of fact. First, it contends that while First Allied should have disclosed the EMG
Phase I report. In the alternative, Ridge Seneca argues that if First Allied did not understand the significance of the report’s findings, then it did not perceive the true condition of
the property and was, therefore, mistaken as to the condition of the property it was selling.
(Ridge Seneca Mem. of Law at 9.)
The general rule in New York is that “a contract is voidable under the equitable
remedy of rescission if the parties entered into the contract under a mutual mistake of fact
which is substantial and existed at the time the contract was entered into.” Rekis v. Lake
Minnewaska Mountain Houses, Inc., 170 A.D.2d 124, 130 (N.Y. App. Div. 3d Dep’t 1991)
(citations omitted). “An objective test is used to determine whether there has been a mutual
mistake….” Ryan v. Boucher, 144 A.D.2d 144, 145 (N.Y. App. Div. 3d Dep’t 1988) (citation
omitted).
The assigned contract contained no representations as to the condition of the
premises that First Allied was selling to Sylvan in the contract assigned to Ridge Seneca.
Instead, the contract specifically left it to the purchaser to determine whether the condition
of the property was such that the purchaser did not want to purchase it. The Court has
twice, above, quoted paragraphs 6.1 and 6.3 of the Purchase Agreement. Those provisions
made it clear that whether First Allied understood the significance of the EMG Phase I
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Report was irrelevant to the sale. First Allied was selling the property “as is, where is and
with all faults” and Ridge Seneca has not shown that First Allied made any representations
as to the property’s condition.
CONCLUSION
First Allied Shopping Center, LP’s motion (Docket No. 104) for summary judgment
is granted. The following causes of action plead against it are dismissed:
AS AND FOR A SECOND CAUSE OF ACTION FOR MISTAKE AGAINST
FIRST ALLIED….
AS AND FOR AN TWELFTH CAUSE OF ACTION FOR NEGLIGENCE
AGAINST GLAZER AND FIRST ALLIED….
AS AND FOR A FOURTEENTH CAUSE OF ACTION FOR EQUITABLE OR
IMPLIED INDEMNIFICATION AGAINST DEFENDANTS GLAZER AND
FIRST ALLIED….
AS AND FOR A FIFTEENTH CAUSE OF ACTION FOR RESTITUTION
AGAINST DEFENDANTS GLAZER AND FIRST ALLIED….
It Is So Ordered.
Dated: May 2, 2011
Rochester, New York
ENTER.
/s/ Charles J. Siragusa
CHARLES J. SIRAGUSA
United States District Judge
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