CITY OF NEW YORK v. SHELLBANK RESTAURANT CORPORATION (2019)

The motion court correctly found that the parties' unambiguous agreement was terminable at will and therefore did not create a property interest protected by the due process clause or the takings clause of the U.S. Constitution (see White Plains Towing Corp. v. Patterson, 991 F.2d 1049, 1062 [2d Cir.1993], cert denied 510 U.S. 865, 114 S.Ct. 185, 126 L.Ed.2d 144 [1993];  Brooklyn Historic Ry. Assn. v. City of New York, 126 A.D.3d 837, 840, 7 N.Y.S.3d 152 [2nd Dept. 2015] ).

The breach of contract counterclaim is barred by defendant's failure to serve a notice of claim (see Administrative Code of City of N.Y. § 7–201).  The claim also fails because the agreement was terminable at will, giving plaintiff the unfettered right to terminate it (see Red Apple Child Dev. Ctr. v. Community School Dists. Two, 303 A.D.2d 156, 157–158, 756 N.Y.S.2d 527 [1st Dept. 2003], lv denied 1 N.Y.3d 503, 775 N.Y.S.2d 240, 807 N.E.2d 290 [2003] ).  In any event, defendant expressly waived damages of any kind arising from the exercise of the right of termination.

The counterclaim for conversion is barred by defendant's failure to comply with General Municipal Law §§ 50–i and 50–e (see Matter of White v. City of Mount Vernon, 221 A.D.2d 345, 633 N.Y.S.2d 369 [2d Dept. 1995] ).  The reference to damages for cancelled events in the parties' stipulation staying the TRO that barred defendant from the premises is insufficiently informative to substitute for a notice of claim (cf. Montana v. Incorporated Vil. of Lynbrook, 23 A.D.2d 585, 256 N.Y.S.2d 651 [2d Dept. 1965] [formal or technical requirements of notice of claim waived where defendant is fully cognizant of claim] ).  Moreover, the property allegedly converted, whether characterized as access to the premises or loss of business opportunities, cannot form the basis for a conversion claim (Sun Gold, Corp. v. Stillman, 95 A.D.3d 668, 669–670, 946 N.Y.S.2d 24 [1st Dept. 2012] ).  The counterclaim also is duplicative of the breach of contract counterclaim, as there were no facts pleaded beyond those that support the contract claim or that would support the existence of a duty separate from the parties' agreement (see Fesseha v. TD Waterhouse Inv. Servs., 305 A.D.2d 268, 269, 761 N.Y.S.2d 22 [1st Dept. 2003] ).

The counterclaim for breach of the covenant of good faith and fair dealing fails because it is predicated on plaintiff's exercise of its unambiguous contractual right to terminate at its discretion (see Rowe v. Great Atl. & Pac. Tea Co., 46 N.Y.2d 62, 69–70, 412 N.Y.S.2d 827, 385 N.E.2d 566 [1978] ).

The actions taken by plaintiff that defendant contends breached the agreement, precluding enforcement, were not breaches;  the agreement granted plaintiff the right to take those actions.  In any event, these alleged breaches were not material (see Greenspan v. Amsterdam, 145 A.D.2d 535, 536 N.Y.S.2d 90 [2d Dept. 1988] ).

The fact that it was terminable at will does not make the agreement illusory (see McCall Co. v. Wright, 133 App.Div. 62, 68, 117 N.Y.S. 775 [1st Dept. 1909], affd 198 N.Y. 143, 91 N.E. 516 [1910] ).  Moreover, it is clear from the face of the agreement that each side received something of value (see Apfel v. Prudential–Bache Sec., 81 N.Y.2d 470, 476, 600 N.Y.S.2d 433, 616 N.E.2d 1095 [1993] ).