Duty To Perform Actions Not Required by Contract Will Not Be Imputed To Save Contract Claim From Dismissal

Posted: April 11, 2025 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Breach of Contract, Motion to Dismiss

Duty To Perform Actions Not Required by Contract Will Not Be Imputed To Save Contract Claim From Dismissal

On January 30, 2025, Justice Meilssa A. Crane granted defendants’ motion to dismiss a contract claim that alleged breach through defendants’ failure to prepare a revised preliminary valuation that the contract did not require. The case is Gurney-Goldman v. Solil Management, LLC et al., Index No. 655549/2023.

Section 8.06(g) of the parties’ contract, known as the SGI Operating

Agreement, required defendants to retain an appraiser to prepare a preliminary valuation/appraisal if members desire to exercise their put rights. Defendants did so, but plaintiffs disagreed with the valuation and brought suit for breach of contract when defendants refused to revise the valuation.

Justice Crane dismissed because:

. . . the SGI Operating Agreement does not contemplate a procedure for resolving a dispute arising out of the put right valuation process. There is absolutely no mention of a “revised preliminary valuation,” nor anything of the sort.

Under Section 8.06(g), if any members express a preliminary interest in exercising their put rights, “the Managers will promptly retain an Appraiser to prepare a preliminary valuation (in accordance with Section 8.06(b), under an agreement directing the Appraiser to (and under which the Appraiser agrees to) complete such preliminary valuation not less than ninety (90) days prior to the applicable Put Right Exercise Date and to complete a final valuation (in accordance with Section 8.06(b)) not later than sixty (60) days after the applicable Put Right Exercise Date” (SGI Operating Agreement at pg. 49).

Plaintiffs argue that, because the preliminary valuation did not comport with the standards set forth in 8.06(g), defendants are contractually obligated to commence a revised preliminary valuation. The agreement does not say this. While plaintiffs could have potentially asserted a claim for defendants’ alleged breach of Section 8.06(b), they did not. Rather, plaintiffs chose to sue for the breach of a contractual obligation that does not exist. (see Apogee Handcraft, Inc. v. Verragio, Ltd., 155 AD3d 494, 495 (1st Dep’t 2017); 34-06 73, LLC v. Seneca Ins. Co., 39 NY3d 44, 52 (2022)).

Slip op., p. 8

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning contractual claims or motions to dismiss.