A fair construction of the terms, subject matter and
circumstances surrounding the July 14 Agreement show that the
agreement was not severable.
A consideration of the circumstances at the time and the
subject matter of the agreement supports the conclusion that the
July 14 Settlement Agreement was an entire contract. First,
there was no severability clause, which militates against a
finding of severability. See F & K Supply, Inc. v. Willowbrook
Development Co., 288 A.D.2d 713, 732 N.Y.S.2d 734, 738 (3d
Dep't 2001). The July 14 Agreement was a settlement agreement,
and the parties, in their negotiations, made various
interdependent concessions in order to come to a final
resolution of their differences. MCAP made concessions to the
Page defendants. For instance, MCAP deferred payment on the
Stockton Bonds and agreed to forbear from foreclosing on Elden
Terrace, another property covered in the July 14 Agreement, for
no discernible benefit within those respective provisions. The
Page defendants also made various concessions. The Page
defendants agreed to create Put Agreements for the Sampson and
Susanville bonds, when there were none previously. It is logical
that each party would "impair its rights with regard to some
bond issues in exchange for promises related to other bond
issues." [Pl. Reply Mem., at p. 9.] The terms of the contract
are interdependent on each other, and only when taken together
comprise an entire contract.
(2) There was a material breach of the July 14 Agreement
Defendants argue that even if the July 14 Agreement was an
entire contract, and not a divisible one, the Page defendants'
alleged breach with respect to nonpayment of the Stockton Bonds
was immaterial. [Def. Mem. In Opp. at 16.] Defendants contend
that "[e]ven if the Page parties' performance with respect to
the Stockton Bonds were delayed, MCAP would still be able to
receive substantially what it had bargained for under the July
14 Agreement," and that therefore "MCAP . . . had no right to
terminate the whole agreement." Id. Furthermore, defendants
allege that MCAP's wrongful repudiation of the entire contract
constituted a material breach of the July 14 Agreement, and
"thus the Page parties should be discharged from further
performance under the [agreement]." Id. at 17.
Defendants' failure to pay the over five million dollars owed
for the Stockton Bonds on August 1, 2000 did constitute a
material breach of the July 14 Agreement. See Jafari v. Wally
Findlay Galleries, 741 F. Supp. 64, 67 (S.D.N.Y. 1990) ("We find
that the [buyers] failed to pay the sellers any money . . .
indeed it is difficult to imagine anything more material,"
quoting Schneider v. Dumbarton Developers, Inc.,
767 F.2d 1007, 1014 (D.C.Cir. 1985)). See also Truglia v. KFC Corp.,
692 F. Supp. 271, 276 (S.D.N.Y. 1988), aff'd without op.,
875 F.2d 308 (2d Cir. 1989). In light of this material breach of a
non-severable contract, MCAP had the right to treat defendants'
failure to pay as a total breach, to terminate the entire
contract and to sue for damages. See, e.g., ARP Films, Inc. v.
Marvel Entertainment Group, Inc., 952 F.2d 643, 649 (2d Cir.
1991). "The injured party's claim for damages for total breach
takes the place of its remaining substantive rights under the
contract. Damages are calculated on the assumption that neither
party will render any further performance." 2 Farnsworth on
Contracts, Second Edition, § 8.15 at 490 (1998).
MCAP terminated the July 14 Agreement on August 25, 2000, and
damages must be calculated as of that date. See id. The July
14 Agreement established two different put prices depending on
the date of payment: 105% of the principal amount then
outstanding if paid before October 1, 2000, and 110% of the
principal amount then outstanding if paid on or after October 1,
2000. MCAP chose to terminate the contract before October 1,
2000, thereby preventing the Page defendants from making its
contractual payments before October 1, 2000 at the 105% rate.
Damages due by the Page defendants, as of August 25, 2000,
equals 105% of the principal amounts then outstanding on the
Susanville and Sampson Bonds.
MCAP's motion for summary judgment is granted insofar as the
Page defendants must pay 105% of the principal of the Susanville
Bonds, plus accrued interest and a 4% penalty, and a 5% premium
on the 100% principal of the Sampson Bonds already paid by the
Page defendants. MCAP's motion for summary judgment for the 10%
premium on the Stockton Terrace and Stockton Garden Bonds is
This constitutes the order and decision of the Court.