NIEVES v. All Mine Orange, Inc., appellant. (2026)

DECISION & ORDER

In an action, inter alia, to recover damages for breach of contract, the defendant All Mine of Orange, Inc., appeals from a judgment of the Supreme Court, Orange County (E. Loren Williams, J.), dated October 3, 2024.  The judgment, insofar as appealed from, after a nonjury trial, and upon a decision of the same court dated June 6, 2023, is in favor of the plaintiffs and against that defendant, directing specific performance of a contract and scheduling a closing sale of the subject property.

ORDERED that the judgment is modified, on the facts and on the law, by deleting the provision thereof directing specific performance of the contract and scheduling a closing sale of the subject property, and substituting therefor a provision awarding the amount of the down payment paid by the plaintiffs, $55,000, plus interest;  as so modified, the judgment is affirmed insofar as appealed from, without costs or disbursements, and the matter is remitted to the Supreme Court, Orange County, for the calculation of interest and the entry of an appropriate amended judgment thereafter.

In 2019, the plaintiffs, Angel Nieves and Lourdes Nieves, entered into a contract with the defendant Highland Operating, Ltd. (hereinafter Highland), the owner of a New Windsor subdivision (hereinafter the subdivision) and residential construction company, for the construction of a single-family home (hereinafter the property) in the subdivision.  When the contract was executed, Highland was owned by Vincent Biagini and his wife, Anna Jane Biagini.  On July 3, 2020, Vincent died.  In October 2020, Highland, by Anna Jane, conveyed the subdivision to the defendant All Mine of Orange, Inc. (hereinafter All Mine), which was owned by Vincent's brother, Edward Biagini.  As part of that transaction, All Mine assumed and then satisfied mortgages on the subdivision in the amount of $700,000.

In a letter dated April 30, 2021, All Mine informed the plaintiffs, among other things, that it would not be selling the property at the price set forth in the plaintiffs' contract with Highland.

On May 17, 2021, the plaintiffs commenced the instant action alleging breach of contract against Highland and All Mine, seeking, inter alia, specific performance.  After a nonjury trial, in a decision dated June 6, 2023, the Supreme Court determined that the plaintiffs were entitled to specific performance of the contract either based on a de facto merger of Highland and All Mine or, in effect, the doctrine of equitable estoppel.  In a judgment dated October 3, 2024, the court, among other things, directed All Mine to schedule a closing of sale of the property to the plaintiffs within 90 days.  All Mine appeals.

“In reviewing a determination made after a nonjury trial, the power of this Court is as broad as that of the trial court and ․ it may render the judgment it finds warranted by the facts, taking into account that in a close case, the trial judge had the advantage of seeing the witnesses” (Thuro Metal Prods., Inc. v. Farber Indus., LLC, 242 A.D.3d 1138, 1139–1140, 245 N.Y.S.3d 154 [internal quotation marks omitted] ).

“In general, a corporation that acquires the assets of another is not liable for its predecessor's breaches of contract” (Oorah, Inc. v. Covista Communications, Inc., 139 A.D.3d 444, 445, 30 N.Y.S.3d 626;  see Schumacher v. Richards Shear Co., 59 N.Y.2d 239, 244, 464 N.Y.S.2d 437, 451 N.E.2d 195;  Matter of AT & S Transp., LLC v. Odyssey Logistics & Tech. Corp., 22 A.D.3d 750, 752, 803 N.Y.S.2d 118).  “ ‘However, such liability may arise if the successor corporation expressly or impliedly assumed the predecessor's ․ liability, there was a consolidation or merger of seller and purchaser, the purchaser corporation was a mere continuation of the seller corporation, or the transaction was entered into fraudulently to escape such obligations’ ” (Bonanni v. Horizons Invs. Corp., 179 A.D.3d 995, 998, 118 N.Y.S.3d 137, quoting Shea v. Salvation Army, 169 A.D.3d 1081, 1082, 95 N.Y.S.3d 232;  see Schumacher v. Richards Shear Co., 59 N.Y.2d at 244, 464 N.Y.S.2d 437, 451 N.E.2d 195;  Matter of AT & S Transp., LLC v. Odyssey Logistics & Tech. Corp., 22 A.D.3d at 752, 803 N.Y.S.2d 118).  “Accordingly, ‘[a] transaction structured as a purchase of assets may be deemed to fall within this exception as a de facto merger’ ” (Bonanni v. Horizons Invs. Corp., 179 A.D.3d at 998, 118 N.Y.S.3d 137, quoting Matter of AT & S Transp., LLC v. Odyssey Logistics & Tech. Corp., 22 A.D.3d at 752, 803 N.Y.S.2d 118).

“ ‘The hallmarks of a de facto merger are the continuity of ownership;  cessation of ordinary business and dissolution of the [predecessor] as soon as possible;  assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the acquired corporation;  and, continuity of management, personnel, physical location, assets, and general business operation’ ” (id. [internal quotations marks omitted], quoting Matter of AT & S Transp., LLC v. Odyssey Logistics & Tech. Corp., 22 A.D.3d at 752, 803 N.Y.S.2d 118;  see Energy Coop. of Am., Inc. v. Luigi's Family Bakery, Inc., 170 A.D.3d 1629, 1630, 97 N.Y.S.3d 372).  “The first criterion, continuity of ownership, exists where the shareholders of the predecessor corporation become direct or indirect shareholders of the successor corporation as the result of the successor's purchase of the predecessor's assets, as occurs in a stock-for-assets transaction.  Stated otherwise, continuity of ownership describes a situation where the parties to the transaction ‘become owners together of what formerly belonged to each’ ” (Matter of New York City Asbestos Litig., 15 A.D.3d 254, 256, 789 N.Y.S.2d 484, quoting Cargo Partner AG v. Albatrans, Inc., 352 F.3d 41, 47 [2d Cir] ).  “It has been held that, because continuity of ownership is ‘the essence of a merger,’ it is a necessary element of any de facto merger finding, although not sufficient to warrant such a finding by itself” (id., quoting Cargo Partner AG v. Albatrans, Inc., 352 F.3d at 46–47;  see R & D Elecs., Inc. v. NYP Mgt., Co., Inc., 162 A.D.3d 1513, 1516, 78 N.Y.S.3d 834;  Washington Mut. Bank, F.A. v. SIB Mtge. Corp., 21 A.D.3d 953, 954, 801 N.Y.S.2d 821).

Here, the Supreme Court's determination that All Mine's acquisition of the subdivision amounted to a de facto merger with Highland was not warranted by the facts.  In particular, the evidence did not show that continuity of ownership existed between Highland and All Mine. Notably, Vincent died prior to All Mine's acquisition of the subdivision, and Anna Jane, who was the sole owner of Highland upon Vincent's death, obtained no ownership or equity interest in All Mine. Rather, the evidence showed that the only consideration exchanged as part of the acquisition was in the form of All Mine assuming and satisfying Highland's debts on the subdivision in a cash transaction with Northeast Community Bank. Under the circumstances, All Mine's acquisition of the subdivision did not amount to a de facto merger with Highland (see Oorah, Inc. v. Covista Communications, Inc., 139 A.D.3d at 445, 30 N.Y.S.3d 626;  Matter of TBA Global, LLC v. Fidus Partners, LLC, 132 A.D.3d 195, 210, 15 N.Y.S.3d 769;  Matter of New York City Asbestos Litig., 15 A.D.3d at 257, 789 N.Y.S.2d 484).

Nonetheless, the Supreme Court's determination, in effect, that the plaintiffs established that All Mine should be equitably estopped from disclaiming liability under the contract was warranted by the facts and in light of the court's credibility determinations at trial (see Wilds v. Heckstall, 93 A.D.3d 661, 664, 939 N.Y.S.2d 543;  First Union Natl. Bank v. Tecklenburg, 2 A.D.3d 575, 577, 769 N.Y.S.2d 573;  cf.  Schwartz v. Miltz, 77 A.D.3d 723, 725, 909 N.Y.S.2d 729).

However, the Supreme Court's determination that the plaintiffs were entitled to specific performance of the contract was not warranted by the facts.  As here, “[a] clear contractual provision limiting damages is enforceable absent a special relationship between the parties, a statutory prohibition, or an overriding public policy” (Ryan v. IM Kapco, Inc., 88 A.D.3d 682, 683, 930 N.Y.S.2d 627 [internal quotation marks omitted];  see SJSJ Southold Realty, LLC v. Fraser, 150 A.D.3d 920, 921, 54 N.Y.S.3d 118).  Moreover, the plaintiffs did not demonstrate that they were ready, willing, and able to purchase the property where, among other things, they allowed their mortgage commitment to lapse even before All Mine repudiated the contract (see Guzman v. Ramos, 239 A.D.3d 953, 954, 236 N.Y.S.3d 716).

DUFFY, J.P., WOOTEN, TAYLOR and HOM, JJ., concur.