Courchevel 1850 LLC v. Wisdom Equities LLC

Opinion

20-815 Courchevel 1850 LLC v. Wisdom Equities LLC

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

1 At a stated term of the United States Court of Appeals for the Second Circuit, 2 held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the 3 City of New York, on the 16th day of February, two thousand twenty-one. 4 5 PRESENT: 6 DENNIS JACOBS, 7 RICHARD J. SULLIVAN, 8 JOSEPH F. BIANCO, 9 Circuit Judges. 10 _____________________________________ 11 12 COURCHEVEL 1850 LLC, 13 14 Plaintiff-Counter- 15 Defendant-Counter- 16 Claimant-Appellant, 17 18 v. No. 20-815 19 20 WISDOM EQUITIES LLC, 4 LAFAYETTE 21 REALTY LLC, 22 23 Intervenors-Counter- 24 Claimants-Counter-

1 Defendants-Appellees. * 2 _____________________________________ 3 For Appellant: Danielle P. Light, Hasbani & Light, P.C., New York, NY.

For Appellee 4 Lafayette Realty JASON LOWE, Law Offices of Jason LLC: Lowe, New York, NY.

4 5 Appeal from the United States District Court for the Southern District of 6 New York (Vincent L. Briccetti, Judge). 7 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, 8 ADJUDGED, AND DECREED that the judgment of the district court is 9 AFFIRMED. 10 Appellant Courchevel 1850 LLC appeals the March 3, 2020 decision of the 11 district court (Briccetti, J.) granting summary judgment in favor of Appellees 12 Wisdom Equities and 4 Lafayette Realty LLC on their counterclaims for rescission, 13 unjust enrichment, and breach of contract, and awarding Appellees a money 14 judgment in the amount of $366,869.04. Courchevel argues that there was a lack 15 of admissible evidence supporting the district court’s decision to grant Appellees’

* The Clerk of Court is respectfully directed to amend the caption as set forth above.

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1 summary judgment motion on rescission, and relatedly, that summary judgment 2 on Appellees’ unjust enrichment counterclaim was not warranted. Courchevel 3 also contends that the district court erred by awarding Appellees “both summary 4 judgment on their claim for rescission (equitable remedy) and for breach of 5 contract (remedy at law),” Courchevel Br. at 14, because rescission results in the 6 absence of a contract, which in turn precludes a legal remedy, and that triable 7 issues of fact remain with respect to the breach of contract claim. We assume the 8 parties’ familiarity with the underlying facts, procedural history, and issues on 9 appeal. 10 The district court properly granted summary judgment on Appellees’ 11 counterclaim for rescission for failure of consideration, which also defeated the 12 purpose and substance of the contract. In New York, “[a] contract may be 13 rescinded for failure of consideration, . . . for inability to perform it after it is made, 14 for repudiation of the contract or an essential part thereof and for such a breach as 15 substantially defeats its purpose,” including breaches that were “so substantial 16 and fundamental as to strongly tend to defeat the object of the parties in making 17 the contract.” Callanan v. Keeseville, Ausable Chasm & Lake Champlain R.R. Co., 199 18 N.Y. 268, 269 (1910). “Failure to perform in every respect is not essential, but a

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1 failure which leaves the subject of the contract substantially different from what 2 was contracted for is sufficient.” Id. “Where the consideration appears to be 3 valuable and sufficient, but turns out to be wholly false, or a mere nullity . . . the 4 consideration wholly fails . . . and the party paying or depositing money upon it 5 can recover it back.” Chapman v. City of Brooklyn, 40 N.Y. 372, 379–80 (1869) 6 (internal quotation marks omitted).

7 Here, the parties contracted for the assignment of a winning bid at a 8 foreclosure sale; that foreclosure sale was unwound, making the bid “a mere 9 nullity.” Id. at 379. As the district court determined, “[s]ince [4 Lafayette] cannot 10 receive that which [it] bargained for” – a bid for the property – “there is a failure 11 of consideration,” which “gives the disappointed party the right to rescind the 12 contract.” Fugelsang v. Fugelsang, 517 N.Y.S.2d 176, 177 (2d Dep’t 1987); see 13 Flandrow v. Hammond, 148 N.Y. 129, 132–33 (1895) (finding a failure of 14 consideration where a purportedly attached judgment “sold by the defendant to 15 the plaintiff was never in fact levied upon . . . and, hence, . . . void”).

16 Contrary to Courchevel’s view, whether the mortgage was in fact 17 previously paid by defendants (who are not parties to this appeal) is irrelevant to

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1 whether the consideration for the contract failed. Accordingly, so too are its 2 arguments that the district court improperly relied on hearsay evidence or a void 3 satisfaction to find that the default judgment should be vacated – particularly as 4 the vacatur itself is not being appealed here. In vacating its entry of default 5 judgment, the district court undid the foreclosure sale, nullifying the deed based 6 on the winning bid that was the subject of the assignment between Courchevel 7 and 4 Lafayette. That nullification, which Courchevel does not contest, alone 8 caused the failure of consideration.

9 Just as the district court did not err in granting summary judgment for 10 Appellees on their counterclaim for rescission, it relatedly did not err in finding 11 that Appellees were entitled to recover on their claim for unjust enrichment. “To 12 prevail on a claim for unjust enrichment in New York, a plaintiff must establish 13 (1) that the defendant benefitted; (2) at the plaintiff's expense; and (3) that equity 14 and good conscience require restitution.” Beth Israel Med. Ctr. v. Horizon Blue 15 Cross & Blue Shield of N.J., Inc., 448 F.3d 573, 586 (2d Cir. 2006) (internal quotation 16 marks omitted). As a “quasi-contract claim,” unjust enrichment “is an obligation 17 the law creates in the absence of any agreement.” Id. (emphasis and internal 18 quotation marks omitted). “[W]here rescission of a contract is warranted, a party

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1 may timely rescind and seek recovery on the theory of quasi contract.” Id. at 587 2 (internal quotation marks omitted). As discussed, rescission is warranted, 3 enabling Appellees to seek equitable recovery. Courchevel admits that it 4 received from 4 Lafayette the purchase price, less credits for taxes, and that 4 5 Lafayette’s acquisition of the property was unwound by the nullification of the 6 deed. We therefore have no difficulty affirming the district court’s judgment on 7 unjust enrichment: Courchevel benefited at 4 Lafayette’s expense, and equity 8 and good conscience require restitution.

9 Courchevel is correct, however, that the district court could not award 10 summary judgment on the counterclaim for breach of contract in addition to those 11 for rescission and unjust enrichment. Because the district court granted 12 rescission, there was no longer a valid contract on which it could find breach and 13 legal damages. See Krigsfeld v. Feldman, 982 N.Y.S.2d 487, 489 (2d Dep’t 2014) 14 (explaining that “plaintiffs could not recover damages under their cause of action 15 alleging the quasi-contract claim of unjust enrichment if the jury found that the 16 parties entered into an oral contract which covered the same subject matter”). 17 Since 4 Lafayette only moved for summary judgment on the breach of contract 18 claim in the alternative to rescission, and the district court ruled on the breach of

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1 contract claim by “assuming the parties have an enforceable agreement,” Sp. 2 App’x at 12, the disposition granting judgment on both rescission and breach of 3 contract was facially inconsistent, though ultimately of no consequence. 2

4 We have considered Courchevel’s remaining arguments and find them to 5 be meritless. Accordingly, we AFFIRM the judgment of the district court.

6 FOR THE COURT: 7 Catherine O’Hagan Wolfe, Clerk of Court

2 The district court awarded legal damages in the amount of $32,000 for the breach of contract claim. The court also found that Appellees were entitled to judgment on the unjust enrichment and rescission counterclaims in light of the fact that Courchevel had “accepted $320,000 from 4 Lafayette but it did not and cannot perform its end of the bargain.” Sp. App’x at 11. While not explicit in the judgment, the $32,000 in legal damages appears to have been subsumed into the final judgment’s principal award of $320,000, and otherwise not separately awarded. Thus, the judgment on the contract claim does not affect the final judgment award.