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Eddie FREEMAN, Sugar Hill Restaurant, Inc., Plaintiff(s), v. The CITY OF NEW YORK, Defendant.
Recitation, as required by CPLR 2219(a), of the papers considered in the review of this motion:
Order to Show Cause with Accompanying Affidavits and Exhibits 1
Notice of Motion to Dismiss with Accompanying Affidavits and Exhibits 2
Affirmation in Opposition to Cross Motion with Accompanying Affidavits and Exhibits 3
Reply Affirmation in Further Support of Cross Motion for Preliminary Injunction with Accompanying Exhibits 4
Defendant's Memorandum of Law 5
This case addresses whether an alleged option to purchase real property is enforceable under General Obligations Law (“GOL”) § 5-703 (the “Statute of Frauds”).
Plaintiffs Eddie Freeman (“Freeman”) and Sugar Hill Restaurant, Inc. (“Restaurant”) (“plaintiffs”) claim that the City of New York (“defendant” or “City”), through the Department of Housing Preservation and Development (“HPD”) entered into an implied contract with them for the future sale of City-owned properties located at 635, 637, and 639 Dekalb Avenue, in Brooklyn (“subject properties”) for the price of $70,000. Plaintiffs claim that an implied contract arose from a letter dated August 21, 1996, from Lilliam Barrios-Paoli, then Commissioner of HPD, to James Chin, Chair of the Board of Standards and Appeals (“BSA”), which authorized plaintiff to file an application for a zoning variance to permit the sites to be used as accessory parking,1 and expressed support for the proposed use of the sites. The letter specifically stated: “If the variance is approved, HPD intends to convey the sites to Eddie Freeman, the owner of Sugar Hill, so that they may be used for accessory parking as part of the owner's plan to build a catering hall.” In addition, following plaintiff's application for a zoning variance, HPD wrote to BSA on January 1, 1999, expressing support for the proposed use of the sites as commercial accessory parking and stated that it would “additionally take the necessary steps to amend the Bedford Stuyvesant I Urban Renewal Plan to accommodate the use and to initiate the disposition of the City-owned lots,” conditioned on “Public Review and hearings under ULURP.” In February 1999, the BSA adopted a resolution approving the zoning variance for accessory parking.
Following BSA's approval of the zoning variance, the City, through the HPD, leased the subject properties to plaintiffs for 18 years for use as a parking lot for the Restaurant. The lease provided that 1) it could be terminated at any time without cause; 2) the tenant was precluded from claiming any interest other than the month-to month tenancy; 3) the property was designated for redevelopment and could be disposed of for that purpose at any time; and 4) the tenant had no right or priority to purchase, lease, or obtain title to the property.
In a letter dated November 16, 2007, HPD notified Freeman that it would offer the subject properties to prospective developers through a Request for Proposals (“RFP”) for the development of affordable muti-family housing, and encouraged him to submit a proposal. Plaintiff did not submit an RPD nor challenge HPD's determination to issue the RFP at that time, or try to prevent the award of the contract. A contract was ultimately awarded to St. Nick's Alliance and Bed-Stuy Restoration for the development of 44 units of low income housing.
Plaintiffs do not claim that either the City or HPD took any action in furtherance of the alleged implied contract between February 1999 through the end of 2015. Freeman claims that in 2016 he spoke with several of HPD's staff who advised him to “move the project along,” in furtherance of the implied contract, and that in reliance upon HPD's support, he paid $120,000 for the construction of a 10 foot wall surrounding the subject properties, and expended additional funds to retain an appraiser and conduct soil tests. Plaintiff did not submit any receipts evidencing his expenditures.
In 2017, the City terminated the month-to-month lease and commenced a holdover proceeding in Civil Court, County of Kings (City of New York v. Sugar Hill Restaurant Inc., Eddie Freeman, Index No. 10849/2017), which resulted in a so-ordered stipulation of settlement awarding final judgment of possession to the City. Execution of warrant was to be stayed until August 31, 2017, on the condition that Freeman and the Restaurant grant access to the City to conduct environmental testing necessary to develop the subject properties for affordable housing, and that they keep the lot free of excess debris. The stipulation of settlement further provided : “Respondent is aware that the lot is slated for development as affordable housing. Petitioner is aware of respondent's claim that at one time HPD offered to allow respondent to purchase the property, after the ULURP process was completed. Nothing herein waives respondent's claims with respect to his having an option to purchase or right to buy the subject premises from the City nor HPD of right to claim reimbursement for any improvements thereon from the petitioner. This Agreement specifically contemplates respondent's right to commence an appropriate Supreme Court action to enforce whatever rights he may legally have including that of seeking a stay from Supreme Court of this action under Index no. 10849/2017.”
Plaintiff seeks an order compelling the City to convey to him the properties for $70,000 and to take all the steps attendant to this conveyance, including ULURP review, staying execution of the warrant from Civil Court, and enjoining the City from conveying, encumbering or developing the subject properties. By Order to Show Cause dated August 29, 2017, plaintiff was granted a temporary restraining order (“TRO”), which it now seeks to convert to a preliminary injunction. The City cross-moves for dismissal pursuant to CPLR § 3211(a)(7) for failure to state a cause of action, and because the action is time barred pursuant to CPLR § 3211(a)(5).
General Obligations Law (“GOL”) § 5-703 (“Statute of Frauds”) provides: “An estate or interest in real property, other than a lease for a term not exceeding one year ․ cannot be created, granted․ unless by act or operation of law, or by a deed or conveyance in writing․” Since an option to purchase real property is a contract for its future conveyance, it must conform to the Statute of Frauds requirement that it be embodied in a writing. Kaplan v. Lippman, 75 NY2d 320, 325 (1990). The option, in order to be enforceable, must also contain the essential terms of a valid contract, without leaving any material term for future negotiation. Willmott v. Giarraputo, 5 NY2d 250, 253 (1959); Teutul v. Teutul, 79 AD3d 851, 852 (2d Dept. 2010); 410 BPR Corp. v. Chmelecki Asset Mgt., Inc., 51 AD3d 715, 716 (2d Dept. 2008). LaCarrubba v. Outdoors Clothing Corp., 57 Misc 3d 69, 72 (App. Term 2d Dept. 2017); Thus, an option which provides for further negotiations by the parties with respect to the price term is unenforceable. Teutul, supra, 79 AD3d at 852; Gibraltar Estates, Inc. v. U.S. Bank N.A., 5 AD3d 728, 729 (2d Dept. 2004). An option which is ambiguous as to the intent of the party purportedly bound thereunder is not sufficient under the Statute of Frauds; it must contain “some direct and explicit evidence of actual intent.” Savoy Record Co. v. Cardinal Export Corp., 15 NY2d 1, 5-6 (1964); Vincent Crisafulli Testamentary Trust v. AAI Acquisition, LLC, 2018 NY Slip Op. 51219(U), 2018 NY Misc. LEXIS 3542, *13 (Sup. Ct. Alb. Co. 2018).
In order to be enforceable, the option must also be supported by valid consideration. See, Jarecki v. Shung Moo Louie, 95 NY2d 665, 668 (2001) (“An option contract is an agreement to hold an offer open; it confers upon the optionee for consideration paid, the right to purchase at a later date”); Kaplan v. Lippman, 75 NY2d 320, 324 (1990) (same); East End Cement & Stone, Inc. v. Carnevale, 73 AD3d 974, 975 (2d Dept. 2010) (same). See also, Umscheid v. Simnacher, 106 AD2d 380, 381 (2d Dept. 1984) (for a promise to be enforceable as a contract, it must be supported by valid consideration). Valid consideration consists of either a benefit to the promisor or a detriment to the promisee. Holt v. Feigenbaum, 52 NY2d 291, 299 (1981); Vista Food Exch., Inc. v. BenefitMall, 138 AD3d 535, 536 (1st Dept. 2016); Nassau County v. New York State Urban Dev. Corp., 48 Misc 3d 248, 255 (Sup. Ct. Nass. Co. 2015).
This Court finds that the letter from HPD to the BSA, dated August 21, 1996, (“August 21 letter”) does not constitute an enforceable option contract under the Statute of Frauds. HPD's expression to BSA of its intention “to convey the sites to Eddie Freeman ․so that they may be used for accessory parking” contingent upon plaintiff's obtaining a zoning variance, does not constitute an enforceable option because it does not contain the essential elements of an option contract. First, the letter fails to evince HPD's unequivocal intent to transfer ownership of the property to plaintiffs; it merely memorializes a future intent to allow plaintiffs to use the subject properties as a parking lot, contingent upon plaintiffs' obtaining a zoning variance. The letter also did not provide for a price term or for any type of consideration. Plaintiff does not claim that the City, as the alleged promisor, received a direct benefit, monetary or otherwise, in exchange for granting the alleged option, and plaintiff does not claim to have suffered any legal detriment, monetary or otherwise, in exchange for the alleged option. Finally, since the August 21 letter was not addressed to Freeman and did not present any offer to him, it could not create an option contract with him to purchase the subject properties. See, Express Indus. & Terminal Corp. v. New York State DOT, 93 NY2d 584, 589-590 (1999) (to create binding contract there must be manifestation of mutual assent; to begin with, there must be a “sufficiently definite offer such that its unequivocal acceptance will give rise to an enforceable contract”); EDP Medical Computer Systems, Inc. v. Sears, Roebuck & Co., 149 AD2d 563, 565 (2d Dept. 1989) (“without mutual assent there is no contract as a matter of law”). Similarly, since the January 1, 1999 letter from HPD to BSA, stating that it would “take the necessary steps to amend the Bedford Stuyvesant I Urban Renewal Plan to accommodate the use and to initiate the disposition of the City-owned lots” was not addressed to plaintiff, it could not create an agreement with him.
This Court further finds that there is no evidence that the City or HPD committed to a price of $70,000. Plaintiffs claim that “the [zoning variance] application upon which the resolution was granted lists the $70,000 price.” However, this Court finds that this price term neither appears in plaintiffs' application nor the BSA's resolution approving the zoning variance. This number appears only in an unsigned application for a zoning variance on property located at 633 Dekalb Avenue (not among the subject properties), purportedly written by an unknown individual named “Johnny E. Brown,” who is not a party to this action. Furthermore, petitioners do not even claim that the $70,000 price term was created by a representative of the City, or a representative with authority to bind the City.
This Court further finds that Freeman's alleged conversations with HPD staff members in 2016, in which they allegedly advised him to “move the project along,” also do not constitute an implied contract. Pursuant to the Statute of Frauds, an oral agreement to convey an interest in real property, other than a lease for a term not exceeding one year, is “nugatory and unenforceable.” Messner Vetere Berger McNamee, Schmetterer Euro Rscg v. Aegis Group PLC, 93 NY2d 229, 235 (1999); London Paint & Wallpaper Co., Inc. v. Kesselman, 2016 NY Slip Op. 31220(U), 2016 NY Misc. LEXIS 2396, *17 (Sup. Ct. NY Co. 2016). However, part performance removes oral agreements from the scope of the statute of frauds if the actions of the party seeking to enforce the alleged oral agreement can be characterized as “unequivocally referable” to the alleged agreement.” Messner Vetere Berger, supra, 93 NY2d at 235. “Unequivocally referable” conduct is that which is “inconsistent with any other explanation.” Kurlandski v. Kim, 111 AD3d 676, 677 (2d Dept. 2013); Barretti v. Detore, 95 AD3d 803, 806 (2d Dept. 2012). Where the party seeking to enforce an alleged oral agreement fails to show that the parties ever reached a complete oral agreement as to the material terms, the doctrine of partial performance does not take the alleged agreement outside the scope of the Statute of Frauds. 410 BPR Corp. v. Chmelecki Asset Mgt., Inc., 51 AD3d 715, 717 (2d Dept. 2008).
Plaintiff argues, in effect, that his actions in spending $120,000 for the construction of a 10 foot wall surrounding the subject properties, and expending additional funds to retain an appraiser and conduct soil tests, constitute “part performance,” thereby removing the oral agreement to “move the project along” from the ambit of the Statute of Frauds. However, since plaintiff does not even claim that the parties ever reached a complete oral agreement as to the material terms of the option, the doctrine of partial performance does not take the alleged oral agreement to sell the subject properties to plaintiff outside the scope of the Statute of Frauds.
In order to obtain a preliminary injunction pursuant to CPLR § 6301, petitioners must clearly demonstrate the following three prongs: (1) a likelihood of success of on the merits, (2) irreparable injury absent granting of the preliminary injunction, and (3) a balancing of the equities in the movant's favor. Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 NY3d 839 (2005). When a party seeking a preliminary injunction cannot demonstrate a likelihood of success on the merits, a preliminary injunction may not be issued, whether or not the other criteria are satisfied. Doe v. Axelrod, 73 NY2d 748, 750-751 (1988). See also, Sutherland Glob. Svcs., Inc. v. Stuewe, 73 AD3d 1473 (4th Dept. 2010) (Supreme Court abused its discretion in granting preliminary injunction because plaintiff failed to demonstrate likelihood of success on the merits). Since plaintiff has not demonstrated a likelihood of success on the merits, his motion for a preliminary injunction 1) enjoining the City from conveying, encumbering, developing, constructing upon, or changing the subject properties, 2) staying the Civil Court proceedings and the issuance of any warrants in connection thereto, and 3) for specific performance of the alleged option is denied.
In determining a motion for dismissal under CPLR § 3211(a)(7), the evidence must be viewed in the light most favorable to the party opposing the motion, and all reasonable inferences must be drawn in favor of the opponent. Santelises v. Town of Huntington, 124 AD3d 863, 865 (2d Dept. 2015). Dismissal is warranted when the evidence conclusively establishes that the plaintiff has no claim or cause of action. Lawrence v. Miller, 11 NY3d 588, 595 (2008); Hendrickson v. Philbor Motors, Inc., 102 AD3d 251, 258 (2d Dept. 2012). Viewing the evidence in the light most favorable toward plaintiff, this Court finds that plaintiff has no claim or cause of action since there was neither an actual nor implied contract between the City or HPD and plaintiff for the option to purchase of the subject properties for $70,000.
This constitutes the Decision and Order of the Court.
1. Plaintiff had to apply for a zoning variance since the subject properties were residential and could not be used for the commercial purpose of constructing an open accessory parking lot to accommodate their eating and drinking establishment without a zoning variance.
Katherine A. Levine, J.
Response sent, thank you
Docket No: 516731/2017
Decided: October 31, 2018
Court: Supreme Court, Kings County, New York.
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