Court Decides If Claims Were Barred By Stipulated Damages Limitation
In December 2016, National Society of Hebrew Days Schools Inc. entered into a contract for the sale of certain real property located in Brooklyn to Jack Saadia “or an entity to be formed by him.” 1966 Coney Island, LLC was subsequently formed to purchase the property. Jack Saadia is the principal of the LLC. In May 2018, Saadia and Coney Island commenced an action against National Society for specific performance of the contract. That action was settled pursuant to a stipulation of settlement dated July 23, 2019, which altered certain terms of the contract and set a new closing date of October 24, 2019. But the parties failed to close.
In January 2020, Saadia and Coney Island commenced an action, asserting causes of action for specific performance (first cause of action), to recover damages for breach of contract (second cause of action) and unjust enrichment and in quantum meruit (third cause of action). The complaint alleged that Saadia and Coney Island were ready, willing, and able to close on the purchase of the premises, but National Society failed to appear at the scheduled closing date. Additionally, the complaint alleged that Saadai and Coney Island subsequently appeared at the offices of National Society’s counsel in November 2019 in order to close on the purchase of the premises, but National Society refused to pay the transfer taxes as required by the terms of the contract and, therefore, the closing did not take place.
National Society moved to dismiss the complaint and to cancel the notice of pendency, based upon documentary evidence, contending that a limitation of damages provision in the stipulation precluded Saadia and Coney Islands from seeking specific performance of the contract or monetary damages for breach of contract. In an order dated September 1, 2020, Supreme Court granted the motion. Saadai and Coney Island appealed.
To succeed on a motion to dismiss based upon documentary evidence, the proof must utterly refute the plaintiff’s factual allegations, conclusively establishing a defense as a matter of law. To be considered documentary, evidence must be unambiguous and of undisputed authenticity, that is, it must be essentially unassailable Judicial records, as well as documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable, would qualify as documentary evidence in the proper case. But letters, emails, and affidavits are not documentary evidence.
On a motion to dismiss, the court accepts the facts as alleged in the complaint as true, accords the plaintiff the benefit of every possible favorable inference, and determines only whether the facts as alleged fit within any cognizable legal theory. Where evidentiary material is submitted and considered on a motion to dismiss a complaint, the question becomes whether the plaintiff has a cause of action, not whether the plaintiff has stated one and, unless it has been shown that a material fact as claimed by the plaintiff to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it, dismissal should not eventuate.
Supreme Court should have denied those branches of the motion to dismiss so much of the first cause of action as was for specific performance and the second cause of action, alleging breach of contract. The letters, emails, and affirmation of National Society’s principal submitted in support of its motion were not documentary evidence. Although contracts may qualify as documentary evidence, the contract, the stipulation, and other evidence submitted in support of the motion did not utterly refute Saadia’s factual allegations.
And National Society failed to establish, as a matter of law, that the limitation of damages provision in the stipulation precluded Saadia from seeking specific performance of the contract or monetary damages for breach of contract. Where a seller sabotages efforts to close the deal, remedy limitation clauses in the contract of sale do not bar a buyer from obtaining specific performance. Further, a vendor of real property who breaches the contract of sale in bad faith cannot limit the damages recoverable by the injured purchaser by relying on a contractual limitation.
Here, the complaint, as amplified by Saadia’s affidavit, alleged that the parties agreed to reschedule the closing date beyond the deadline set forth in the stipulation and that National Society’s principal appeared on the rescheduled closing date. Additionally, Saadia alleged that National Society failed to appear at the initial scheduled closing date and then refused at the subsequent rescheduled closing date to pay the transfer taxes as required by the terms of the contract. Under the circumstances of this case, the contract, the stipulation, and other documentary evidence submitted in support of National Society’s motion did not utterly refute Saadia’s factual allegations and conclusively establish a defense as a matter of law to so much of the first cause of action as was for specific performance and the second cause of action, alleging breach of contract.
Supreme Court also should have denied those branches of National Society’s motion to dismiss so much of the first cause of action as was for specific performance and the second cause of action, alleging breach of contract. The evidentiary materials submitted by National Society did not demonstrate, as a matter of law, that Saadia did not have viable causes of action for specific performance or to recover damages for breach of contract.
Since so much of the first cause of action as was for specific performance should not have been dismissed, Supreme Court also should have denied that branch of the motion which was to cancel the notice of pendency.
However, Supreme Court properly granted that branch of the National Society’s motion to dismiss the third cause of action, alleging unjust enrichment and to recover in quantum meruit. The existence of a valid contract governing the subject matter generally precludes recovery in quasi contract for events arising out of the same subject matter. Unjust enrichment and quantum meruit theories are precluded, since that cause of action arose out of the same subject matter concerning which the parties had a valid contract.