Actions for specific performance of contracts for the purchase and sale of real property abound. The plaintiffs allege that they are ready, willing and able to perform. And the defendants either refuse to close or assert that their performance is excused by the failure of a condition precedent. Several recent examples follow.
Chun Peter Dong v. First Korean Church of N.Y., 2017 NY Slip Op 05063 (App. Div. 2nd Dept. June 21, 2017)
Supreme Court granted defendant’s motion for summary judgment dismissing the complaint for specific performance of a contract to sell real property and declared that the contract was not binding and enforceable.
The Appellate Division summarized the facts:
On July 15, 2013, the plaintiff and the defendant, First Korean Church of New York…entered into a contract whereby the Church agreed to sell to the plaintiff real property located in Queens County for the purchase price of $18,700,000. A rider to the contract acknowledged that, since one of the parties to the agreement was a church, “this sale . . . is therefore subject to approval by the New York State Attorney General and the Supreme Court.” The contract was executed on behalf of the Church by its President, Sei Oung Yoon.
After the contract was executed, the Church obtained an appraisal valuing the property at $19,500,000. At a special meeting of the Church’s board of trustees held on December 8, 2013, the trustees unanimously adopted a resolution “recommending the sale of the property, but unanimously voting not to proceed with the current contract of sale at a price below [the] appraised value of [$]19,500,000.” A special meeting of the Church’s congregation was scheduled and noticed for December 22, 2013, at which the members of the Church raised questions regarding the advisability of the sale, and postponed a vote to approve the sale. Thereafter, in an effort to determine its obligations under the contract, the Church submitted a proposed petition pursuant to Not-For-Profit Corporation Law § 511 to the Office of the New York State Attorney General, seeking a judicial determination as to whether the Church “should complete the sale of the Property . . . to [the plaintiff] for the sum of $18,700,000.” In a letter dated May 15, 2014, the Attorney General advised that the requirements of Not-For-Profit Corporation Law § 511(a)(7) and (8) had not been met and, therefore, the Attorney General would object to the granting of an order approving the proposed sale. Based upon the Attorney General’s letter, the Church chose not to file the proposed petition in the Supreme Court, and instead repudiated the contract and returned the plaintiff’s down payment.
And the Second Department, as follows, summarily affirmed:
The Church met its prima facie burden on its motion for summary judgment…”A religious corporation shall not sell . . . any of its real property without applying for and obtaining leave of the court or the attorney general therefor…A petition seeking such approval must set forth, inter alia, “[t]hat such sale…has been recommended or authorized by vote of the directors in accordance with law” and that, “[w]here the consent of members of the corporation is required by law, such consent has been given”…Here, notwithstanding the execution of the contract by the Church’s president, the contract was not binding against the Church, since it was not approved by the Church’s board of trustees or members[.]
1107 Putnam, LLC v. Beulah Church of God in Christ Jesus of the Apostolic Faith, Inc., 2017 NY Slip Op 05411 (App. Div. 2nd Dept. July 5, 2017)
Supreme Court denied defendant’s motion for summary judgment dismissing the complaint for specific performance of a contract for the sale of real property.
The Appellate Division summarized the facts:
The defendant church entered into a contract to sell real property located on Macon Street in Brooklyn…to the plaintiff. The contract provided for a purchase price of $256,000, and specified that after approval of the sale by the Supreme Court and the Attorney General of the State of New York, the closing was to be held “on or before a date determined or allowed” by the Supreme Court “or July 27, 2012, whichever is later.” Following the execution of the contract, a title report was ordered, and it revealed several judgments against the premises. Nonetheless, after seeking and obtaining approval of the Attorney General, the parties obtained an order of the Supreme Court dated September 24, 2014, approving the sale.
After the defendant allegedly was unable or unwilling to remove the encumbrances, it delivered a letter dated November 26, 2014, claiming that it was unable to deliver marketable title, and that it was cancelling the contract and returning the down payment.
The prior proceedings:
On December 18, 2014, the plaintiff commenced this action seeking specific performance of the contract. After issue was joined, the defendant moved for summary judgment dismissing the complaint. The Supreme Court denied the motion[.]
And the Second Department, as follows, summarily affirmed:
To prevail on a cause of action for specific performance of a contract for the sale of real property, a plaintiff purchaser must establish that it substantially performed its contractual obligations and was ready, willing, and able to perform its remaining obligations, that the vendor was able to convey the property, and that there was no adequate remedy at law…Here, on its motion for summary judgment dismissing the complaint, the defendant vendor failed to meet its prima facie burden of establishing that the plaintiff was unable to prove one or more of the elements of its cause of action. The defendant failed to demonstrate the absence of triable issues of fact as to whether the plaintiff purchaser was ready, willing, and able to close…The defendant also failed to eliminate triable issues of fact with respect to whether it was able to deliver marketable title pursuant to the terms of the parties’ contract, and whether the plaintiff defaulted by refusing to close without the removal of title defects[.]
Heights Props. 1388, LLC v. Make Realty Corp., 2017 NY Slip Op 04822 (App. Div. 2nd Dept. June 14, 2017)
Plaintiffs appealed from an order of Supreme Court that denied their motion for summary judgment and, upon searching the record, awarded summary judgment to Make Realty Corp.
Second Department summarized the facts:
The defendant Make Realty Corp.…was incorporated in New York in 1981. Its certificate of incorporation states that it was formed for the purpose of, inter alia, buying, selling, leasing, mortgaging, exchanging, managing, operating, and dealing in lands or interest in lands, houses, buildings, or other works. Make Realty was subsequently dissolved by proclamation/annulment of authority on September 28, 1994.
The plaintiff alleges that on September 24, 2013, it entered into a contract to purchase from Make Realty a property located on St. Johns Place in Brooklyn…and that pursuant to a rider to the contract of sale, the parties also agreed to execute a right of first refusal agreement pertaining to two adjacent properties, also owned by Make Realty. The contract of sale and right of first refusal agreement were both executed by the defendant Irvine J. Thomas, the corporate secretary of Make Realty.
The prior proceedings:
After Make Realty refused to close, the plaintiff commenced this action against Make Realty and Thomas. In its amended complaint, the plaintiff alleged that Make Realty breached the contract of sale by refusing to convey the subject property. The plaintiff also filed a notice of pendency against the subject property, as well as the two adjacent properties that are the subject of the right of first refusal.
Prior to discovery, the plaintiff moved for summary judgment on the first, fifth, and sixth causes of action in the amended complaint insofar as asserted against Make Realty. In opposing the motion, Make Realty asked the court to search the record and award summary judgment in its favor, arguing that the contract of sale and right of first refusal agreement were unenforceable because Thomas lacked the authority to represent Make Realty.
* * *
The Supreme Court, inter alia, denied the plaintiff’s motion, searched the record, awarded summary judgment to Make Realty dismissing the first, second, fifth, and sixth causes of action in the amended complaint insofar as asserted against it, and cancelled the plaintiff’s notice of pendency[.]
At the outset, the Supreme Court erred in concluding that the contract of sale and right of first refusal were unenforceable by reason of Make Realty’s failure to comply with the shareholder voting requirements set forth in Business Corporation Law § 909(a). Business Corporation Law § 1005—not § 909—governs corporate procedure where, as here, the company has been dissolved by proclamation…Moreover, a dissolved corporation, in winding up its affairs, has the power, inter alia, to “sell its assets for cash at public or private sale”…This can be done by the corporation’s board of directors, without seeking the authorization of the shareholders…As it is undisputed that the subject transaction was entirely for cash, it follows that no shareholder authorization was required.
Thus, the central question, in relation to the allegations contained in the amended complaint, hinges on the apparent or actual authority of Thomas, who was Make Realty’s corporate secretary, to represent the corporation in connection with the execution of the contract of sale and right of first refusal.
“[A]pparent authority is dependent on verbal or other acts by a principal which reasonably give an appearance of authority to conduct the transaction”…”While in the normal course the implied authority vested in an actively functioning president will not devolve upon a secretary or treasurer, such officer will be deemed to have authority to act and speak on behalf of the corporation where he has been the one actually managing its business”[.]
There is insufficient evidence, on this pre-discovery record, to determine, as a matter of law, whether Thomas had actual or apparent authority to represent Make Realty. While the Supreme Court properly denied the plaintiff’s motion for summary judgment on the first, fifth, and sixth causes of action, it erred in searching the record and awarding summary judgment to Make Realty dismissing the first, second, fifth, and sixth causes of action insofar as asserted against it, and canceling the notice of pendency.
Saul v. Vidokle, 2017 NY Slip Op 04485 (App. Div. 2nd Dept. June 7, 2017)
Supreme Court denied defendant’s motion to dismiss the complaint and to cancel the notice of pendency in an action for specific performance of an alleged agreement for the sale of real property.
The Second Department summarized the facts:
The parties in this case allegedly agreed in email discussions that the defendant would sell his Brooklyn apartment to the plaintiff. The defendant emailed his attorney with information regarding the sale, including the parties’ names, the purchase price of $1.3 million in cash, and an agreement that no brokers would be involved in the sale and that the defendant would lease the property back from the plaintiff for $3,000 per month during the period of time it took for the completion of his new home. Within days, however, the defendant was informed by a real estate broker that the property could be sold for a significantly higher amount; accordingly, the defendant asked the plaintiff to “wait” on moving forward with the execution of a formal contract. The plaintiff insisted that the parties were already bound by their emails, commenced this action for specific performance of the alleged agreement, and filed a notice of pendency on the property.
The prior proceedings:
The defendant moved (1) to dismiss the complaint pursuant to CPLR 3211(a)(1), (5), and (7), on the ground that the emails failed to satisfy the statute of frauds, (2) to cancel the notice of pendency pursuant to CPLR 6514(a), (3) for an award of costs and expenses pursuant to CPLR 6514(c), and (4) for an award of sanctions and attorney’s fees pursuant to 22 NYCRR 130-1.1. The Supreme Court denied that branch of the defendant’s motion which was to dismiss the complaint, and, in effect, denied the remainder of the relief sought[.]
The applicable law:
The emails relied upon by the plaintiff to establish the alleged agreement among the parties for the purchase of the defendant’s apartment were insufficient to satisfy the statute of frauds, as they left for future negotiations essential terms of the contemplated contract, such as a down payment, the closing date, the quality of title to be conveyed, the risk of loss during the sale period, and adjustments for taxes and utilities, and were subject to the execution of a more formal contract of sale…Contrary to the plaintiff’s contention, in the emails exchanged by and between the parties and the defendant’s attorney, the parties expressly anticipated the execution of a formal contract…Accordingly, the Supreme Court should have granted the defendant’s motion to dismiss the complaint[.]
Moreover, because there was no binding real estate contract between the parties, the plaintiff’s notice of pendency pertaining to the property should have been cancelled, and the defendant awarded costs and expenses occasioned by the cancellation…The defendant is not, however, entitled to recover “any costs of the action” pursuant to CPLR 6514(c), as he did not provide any documentation to establish the costs he incurred in defending the action. Moreover, because the action cannot be deemed to be completely without merit…the Supreme Court properly, in effect, denied that branch of the defendant’s motion which was for an award of sanctions and attorney’s fees pursuant to 22 NYCRR 130-1.1.
Tomhannock, LLC v. Roustabout Resources, LLC, 2017 NY Slip Op 02712 (App. Div. 3rd Dept. April 6, 2017)
Supreme Court granted plaintiff’s cross-motion for partial summary judgment seeking specific performance of the sale of real property.
The Court summarized the facts:
[I]n April 2002, plaintiff sold a 15.94-acre parcel of vacant land located in the Town of Pittstown, Rensselaer County. In conjunction therewith, plaintiff and the buyers entered into an option agreement, whereby the buyers agreed to reconvey a 3.5-acre portion of the parcel upon plaintiff’s request — provided such request was made within the 10-year option period. As partial consideration for the underlying conveyance, plaintiff reduced the purchase price for the 15.94-acre parcel (purportedly by $55,000) and, pursuant to the terms of the option agreement, agreed to pay 22% of the school and property taxes assessed upon the entire parcel — apparently representing its proportional share of taxes for the 3.5-acre parcel. The agreement, which was binding upon the parties’ heirs and assigns, was duly recorded in the Rensselaer County Clerk’s office.
In October 2005, the buyers conveyed the entire 15.94-acre parcel to defendants Ronald F. LaPorte and Linda J. LaPorte — “[s]ubject to enforceable easements, covenants, conditions and restrictions of record” — and, in January 2011 (within the 10-year option period), plaintiff advised the LaPortes that it was exercising its option with respect to the 3.5-acre parcel. Instead of reconveying the 3.5-acre parcel to plaintiff, however, the LaPortes conveyed the entire 15.94-acre parcel to defendant Roustabout Resources, LLC…Upon learning of the transfer in July 2011, plaintiff again exercised its option (within the option period) and demanded that defendant reconvey the 3.5-acre parcel. Defendant refused, prompting plaintiff to commence this action for specific performance[.]
The prior proceedings:
[Defendant] moved for summary judgment dismissing the complaint, and plaintiff cross-moved for partial summary as to its cause of action seeking specific performance of the option agreement. Supreme Court, among other things, granted plaintiff’s cross motion to the extent of directing defendant to sign the reconveyance deed within 30 days. In so doing, Supreme Court expressly found “that the obligation to record the deed [was] not a condition precedent to defendant’s obligation to reconvey title” of the 3.5-acre parcel under “the clear and unambiguous language of the [option] agreement,” and that defendant’s arguments to the contrary “confuse[d] plaintiff’s obligation to record the deed with…plaintiff’s right to title of the property[.]”
The applicable law:
In order to be entitled to specific performance, plaintiff “had the burden of establishing, as a matter of law, that [it] was ready, willing and able to perform under the [terms of the option agreement] . . . and that [defendant] was unwilling to convey the property”…Defendant contends that plaintiff has not — and indeed cannot — discharge this burden because plaintiff is unable to record the desired deed due to the admitted absence of “such other instruments necessary for recording,” i.e., the Combined Real Estate Transfer Tax form (TP-584) and the Real Property Transfer Report (TP-5217)[.]
Pursuant to the terms of the option agreement, “upon written demand made by [plaintiff] on or before the tenth (10th) anniversary of the recording of the [relevant deed in the Rensselaer County Clerk’s office],” defendant was required to “execute a bargain and sale deed with covenant against grantor’s acts, conveying the [r]econveyance [p]arcel to [plaintiff].” As Supreme Court aptly observed, the option agreement does not set forth any condition precedents to defendant’s performance thereunder. Rather, as the option agreement makes clear, if plaintiff made a written demand seeking reconveyance of the 3.5-acre parcel within the 10-year option period, defendant was required to execute a bargain and sale deed reconveying said parcel to plaintiff. As plaintiff made a timely written demand here, we agree with Supreme Court that defendant is obligated to tender the required deed.
To be sure, paragraph No. 3 of the option agreement places responsibility for preparing and filing the reconveyance deed, “together with such other instruments necessary for recording” such deed, upon plaintiff and, further, obligates plaintiff to assume the expenses associated therewith. Defendant interprets this language as imposing an additional requirement upon plaintiff — namely, that plaintiff actually record or, at the very least, be able to successfully record, the reconveyance deed in order to exercise its rights under the option agreement. As argued by defendant, plaintiff’s ability to produce a deed capable of being recorded is dependent upon plaintiff’s execution of a valid Real Property Transfer Report, which, in turn, implicates the need for subdivision approval. As plaintiff has not obtained subdivision approval, the argument continues, plaintiff can neither execute the “instruments necessary for recording” nor file, i.e., record, the reconveyance deed for the subject parcel; hence, plaintiff cannot exercise its rights under the option agreement[.]
And concluding that:
As this Court previously has held, “nothing within the four corners of the option agreement requires plaintiff to obtain subdivision approval prior to exercising its option with respect to the 3.5-acre parcel, nor does the option agreement provide that the failure to obtain such approval renders the underlying agreement null and void”… Further, as Supreme Court correctly noted, Real Property Law § 291 does not compel plaintiff to actually record the reconveyance deed for the subject parcel, as “recording is not required in order to transfer title to real property”…and the fact that the deed may not be recorded until a later date — or at all — does not affect the validity of the conveyance…While it is true that, generally speaking, prudence would suggest that a grantee record his or her deed, there is no requirement that he or she do so. More to the point, we do not interpret the option agreement before us as requiring plaintiff to record the deed obtained subsequent to exercising its rights relative to the 3.5-acre parcel — only a provision that, if it elects to do so, it be at its expense.
To be sure, plaintiff’s inability and/or failure to record the reconveyance deed may present practical difficulties for the parties. Such difficulties, however, neither undermine nor stand as an impediment to plaintiff’s exercise of the reconveyance rights that it possesses under the clear and unambiguous terms of the option agreement[.]
SJSJ Southold Realty, LLC v. Fraser, 2017 NY Slip Op 03791 (App. Div. 2nd Dept. May 10, 2017)
Supreme Court denied plaintiff’s motion for summary judgment on the amended complaint and granted defendant’s cross-motion for summary judgment dismissing the amended complaint in this action relating to a contract to purchase a parcel of real property.
The Appellate Division summarized the facts:
In March 2004, the plaintiff entered into a contract to purchase a parcel of real property from the estate of Mary Adamowicz, deceased, and Michael Adamowicz…as tenants in common. The contract permitted the seller to return the plaintiff’s down payment and cancel the contract in the event “the reasonably estimated aggregate cost to remove or comply with any violations or liens which Seller is required to remove or comply with . . . shall exceed the Maximum Amount specified in Schedule D [$23,500].” The estate’s 50% ownership interest in the parcel was subject to a lien imposed by the Internal Revenue Service…for estate taxes in the initial amount of approximately $6,000,000. The title company listed the lien as an exception to coverage, which the plaintiff demanded the seller remove. After the estate failed to obtain a release of the lien, on August 12, 2004, the seller advised the plaintiff that it could not deliver insurable title and, therefore, it was canceling the contract and returning the plaintiff’s down payment.
And prior proceedings:
In November 2004, the plaintiff commenced this action against Elizabeth Fraser, as Executor of the Estate of Mary Adamowicz, and Michael Adamowicz, inter alia, for specific performance of the contract. The caption was subsequently amended to substitute Deborah Adamowicz, as Preliminary Executor of the Estate of Michael Adamowicz, as a defendant. In the order appealed from, the Supreme Court denied the plaintiff’s motion for summary judgment on the amended complaint, and granted the defendants’ cross motion for summary judgment dismissing the amended complaint. Thereafter, the court entered a judgment in favor of the defendants and against the plaintiff, in effect, dismissing the complaint.
Where, as here, a contract for the sale of real property provides that in the event the seller is unable to convey title in accordance with the terms of the contract, the seller may refund the buyer’s down payment and cancel the contract without incurring further liability, that “limitation contemplates the existence of a situation beyond the parties’ control and implicitly requires the seller to act in good faith”…Here, in support of their cross motion, the defendants established their prima facie entitlement to judgment as a matter of law by demonstrating that they validly cancelled the contract pursuant to its terms after making good faith efforts to resolve the lien…Thus, the defendants demonstrated, prima facie, that the plaintiff was not entitled to specific performance[.]
SDK Prop. One, LLC v. QPI-XXXII, LLC, 2016 NY Slip Op 06696 (App. Div. 2nd Dept. October 12, 2016)
Supreme Court granted defendant’s motion for summary judgment dismissing the complaint and denied plaintiff’s cross-motion for summary judgment in an action for specific performance of a contract for the sale of real property.
The Court summarized the facts:
The parties entered into a purchase and sale agreement…dated May 4, 2010, in which the plaintiff agreed to purchase and the defendant agreed to sell certain real property located in Queens. The agreement required the defendant to “cure and eliminate all Title Objections which were caused by, resulted from or arose out of (1) a… mortgage.” The subject property was encumbered by a blanket mortgage that covered a number of properties, and in order for the defendant to eliminate all title objections to the property, it would have been required to obtain the release of the property from the mortgage.
The relevant contractual provisions:
Section 13 (a) of the agreement provided that, in the event of a default by the defendant, the plaintiff would be entitled to either: “(i) terminate this Agreement and receive the Deposit, and the interest earned thereon, from the Escrow Agent … or (ii) enforce specific performance of this Agreement (but no other action, or damages or otherwise, shall be permitted).”
The agreement further provided that the plaintiff “shall be deemed to have elected to terminate this Agreement…if [the plaintiff] fails to commence an action for specific performance within one hundred twenty (120) days after the Scheduled Closing Date.”
The subsequent developments:
The defendant encountered difficulty in obtaining the release of the subject property from the mortgage. As a result, the parties executed four written amendments to the agreement, each of which adjourned the closing date to a specified date. The final written amendment adjourned the closing date until May 1, 2011, and stated that time was of the essence for the defendant to close. The agreement contained a provision requiring all amendments to be in writing. Ultimately, the defendant was unable to obtain the release of the subject property from the mortgage, thereby defaulting under the terms of the agreement.
The prior proceedings:
The plaintiff commenced this action on April 30, 2012, alleging causes of action seeking specific performance, specific performance with an abatement, and consequential damages for breach of contract. The defendant subsequently moved for, among other things, summary judgment dismissing the complaint, contending that the action was barred because the plaintiff failed to commence an action for specific performance within 120 days after May 1, 2011, the closing date agreed to by the parties in their final written amendment to the agreement. The plaintiff opposed the motion and cross-moved for summary judgment on the complaint, asserting that the parties had agreed to adjourn the closing date indefinitely. The Supreme Court granted that branch of the defendant’s motion which was for summary judgment dismissing the complaint, and denied the plaintiff’s cross motion[.]
The defendant made a prima facie showing of its entitlement to judgment as a matter of law dismissing the complaint by demonstrating that the plaintiff failed to commence an action for specific performance within 120 days after the closing date of the agreement[.]
It is undisputed that the defendant defaulted under the agreement. As a result, section 13 (a) of the agreement required the plaintiff, if it desired to seek specific performance of the agreement, to commence an action for specific performance within 120 days after May 1, 2011, the scheduled closing date pursuant to the final written amendment of the agreement. Therefore, the plaintiff was required to commence its action for specific performance by August 29, 2011. As the plaintiff failed to commence this action until April 30, 2012, approximately eight months after the 120-day period ended, its action was untimely, and it was entitled only to terminate the agreement and receive its deposit back, plus interest[.]
Vanderbilt Brookland, LLC v. Vanderbilt Myrtle, Inc., 2017 NY Slip Op 01402 (App. Div. 2nd Dept. February 22, 2017)
In an action for a declaratory judgment and injunctive relief, Supreme Court granted plaintiff’s motion to enjoin and restrain the transfer of the property to any person or entity other than the plaintiff.
The Appellate Division summarized the facts:
The defendant Vanderbilt Myrtle, Inc.…was the tenant of certain property…under a lease agreement with Gulf Oil Limited Partnership, on behalf of Cumberland Farms, Inc.…Cumberland sought to sell the property, and Myrtle had a right of first refusal to purchase the property. In an agreement dated December 4, 2013…Cumberland agreed to sell, and Myrtle agreed to purchase, the property for the sum of $10,000,000. The purchase and sale agreement required Myrtle to make a deposit in the sum of $1,000,000, and provided that the closing would occur no later than July 30, 2014.
Prior to execution of the purchase and sale agreement, the plaintiff, Vanderbilt Brookland, LLC (hereinafter Brookland), and Myrtle entered into an agreement…whereby Brookland agreed to purchase, and Myrtle agreed to sell, five percent of the issued and outstanding shares of Myrtle’s common stock for the sum of $500,000. In the stock sale agreement, Brookland and Myrtle also agreed that Brookland would acquire Myrtle’s right to purchase the property, and Brookland agreed to be bound by the terms and conditions set forth in the purchase and sale agreement, including the requirement to tender the deposit in the sum of $1,000,000.
In January 2014, Brookland commenced this action for declaratory and injunctive relief against Myrtle, alleging, inter alia, that Myrtle had repudiated the stock sale agreement. It alleged that it had made the $1,000,000 deposit required by the purchase and sale agreement, but that Myrtle had then attempted to cancel the stock sale agreement. It moved, among other things, for a preliminary injunction prohibiting Myrtle from transferring any of its rights under the purchase and sale agreement to any entity other than Brookland, or transferring the property, or any interest in the property, to any entity other than Brookland. In an order dated April 4, 2014, the Supreme Court, upon, inter alia, determining that Brookland had tendered the $1,000,000 deposit, granted those branches of the motion[.]
The subsequent developments:
Thereafter, Brookland learned that on December 23, 2013, Myrtle had assigned its rights under the purchase and sale agreement to All Year Management, LLC…Brookland then amended its complaint to add Cumberland and All Year as defendants in the action, and moved for a preliminary injunction, inter alia, enjoining and restraining Cumberland and All Year from transferring or purporting to transfer the property to any person or entity other than Brookland, and pursuing or taking any action in furtherance of any rights claimed by All Year with respect to the property. The Supreme Court denied the motion in an order dated October 6, 2014. Brookland then moved, inter alia, for leave to reargue its motion, and Cumberland and All Year moved to cancel a notice of pendency filed by Brookland. In the order on appeal, the court granted that branch of Brookland’s motion which was for leave to reargue and, upon reargument, in effect, vacated its order dated October 6, 2014, and granted those branches of Brookland’s prior motion which were for a preliminary injunction against Cumberland and All Year. The court also denied the motion of Cumberland and All Year to cancel the notice of pendency filed by Brookland. Myrtle[.]
The applicable law as to injunctive relief:
“The party seeking a preliminary injunction must demonstrate a probability of success on the merits, danger of irreparable injury in the absence of an injunction and a balance of equities in its favor”…”The purpose of a preliminary injunction is to maintain the status quo and prevent the dissipation of property that could render a judgment ineffectual’”…The decision whether to grant or deny a preliminary injunction rests in the sound discretion of the court[.]
“The New York Recording Act…inter alia, protects a good faith purchaser for value from an unrecorded interest in a property, provided such a purchaser’s interest is first to be duly recorded”…”The status of good faith purchaser for value cannot be maintained by a purchaser with either notice or knowledge of a prior interest or equity in the property, or one with knowledge of facts that would lead a reasonably prudent purchaser to make inquiries concerning such”…While a good faith purchaser for value must contract in good faith for the purchase of the property, good faith is not a requirement at the time the contract is recorded[.]
Here, All Year established that it was a good faith purchaser for value at the time the purchase and sale agreement was assigned to it. However, All Year did not record the purchase and sale agreement and the assignment. Rather, in April of 2014, it recorded a memorandum of the purchase and sale agreement…While we disagree with the Supreme Court’s determination that the memorandum, in effect, constituted a modification of the purchase and sale agreement, resulting in a new contract which was not entered into in good faith, we find that the court correctly determined that the recording of the memorandum did not serve to give All Year’s claim to the property a priority over Brookland’s claim.
Real Property Law § 294(2) provides, inter alia, “[i]n lieu of the recording of an executory contract, there may be recorded a memorandum thereof, executed by the parties.” Here, in lieu of recording the purchase and sale agreement and assignment thereof, All Year and Cumberland executed and recorded a memorandum referencing the purchase and sale agreement and the assignment. However, Myrtle, which was a party to both the purchase and sale agreement and the assignment, did not execute the memorandum. As Myrtle did not execute the memorandum, it was improperly recorded in lieu of the purchase and sale agreement and assignment, and its recording did not serve to give All Year’s claim to the property priority over Brookland’s claim.
Thus, the Supreme Court did not err in determining that Brookland established a likelihood of success on the merits. Moreover, based on that finding, and additional facts, the court did not err in determining that Brookland also established irreparable injury and a balancing of the equities in its favor. Accordingly, the court providently granted the preliminary injunction.
Pursuant to CPLR 6501, with limited exceptions, a notice of pendency may be filed in any action in which “the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property.” Pursuant to CPLR 6514(b), the court may direct that a notice of pendency be canceled “if the plaintiff has not commenced or prosecuted the action in good faith.” A notice of pendency may be filed “before or after service of summons and at any time prior to judgment”[.]
Here, since the action is one in which Brookland seeks specific performance of a contract granting it the right to purchase real property, the Supreme Court correctly determined that the action was one in which the judgment demanded would affect the title to, or the possession, use, or enjoyment of, real property…Moreover, the court providently declined to cancel the notice of pendency on the ground that Brookland did not commence or prosecute the action in good faith[.]
Marler v. A & S Lake Shore Leasing, Inc., 2017 NY Slip Op 50972(u) (Sup. Ct. Warren Co. June 7, 2017)
Supreme Court summarized the facts:
On August 18, 2015, defendant A & S Lakeshore Leasing, Inc.…the seller, and plaintiff Henry Marler, the buyer, entered into a contract for the sale of certain commercial property located at 28-30 Elm Street in the City of Glens Falls, Warren County. Defendant Fred Alexy is the principal officer of A & S and signed the contract on its behalf. Pursuant to the terms of the contract, Marler had to complete all inspections by August 31, 2015 and obtain a mortgage loan commitment by October 19, 2015. The closing was to take place on December 28, 2015.
A structural inspection of the property was done on August 12, 2015, prior to execution of the contract. Marler then obtained a mortgage loan commitment from NBT Bank by letter dated September 28, 2015…The parties agreed that the property would be conveyed to plaintiff Marler Family Properties, LLC and, as such, the commitment letter listed Marler Family Properties as the borrower and Marler himself as guarantor. The commitment letter stated, in pertinent part:
ENVIRONMENTAL MATTERS: As a precondition to loan closing, NBT [Bank], at a minimum, will require an EA Quick Loan Check Report be completed. Further requirements may be necessary as determined by NBT Bank.
In accordance with this precondition, NBT Bank arranged for an environmental site inspection to be performed by LCS, Inc. on October 15, 2015. LCS then issued its report that same day, stating as follows: “One suspect fill port was noted on the southeast exterior of the subject structure. No petroleum odors were detected when the cap was removed. The nature of such is unknown and may be associated with an [underground storage tank].” LCS concluded that it could not “assess whether the subject property [was] acceptable as collateral until additional information [was] obtained regarding the nature of the pipe. . . .” Upon receipt of the report, NBT Bank advised Marler that it would require soil testing on the property as a condition of financing. Marler’s real estate agent, David Strainer, then relayed this information to A & S’ real estate broker, Mark Levack.
Levack met with Alexy “a week or less” after learning of the fill port. Alexy, who operates a business out of the subject premises and is in the building “every day,” was not previously aware of the fill port because it was “covered up by a dumpster.” Indeed, Marler’s structural inspection also failed to find the fill port. Upon learning of the fill port, Alexy conducted some additional investigation and discovered that it was attached to an underground storage tank and, further, that the tank had fuel oil in it. As a result, he had one of his employees look into emptying the tank.
On October 22, 2015, Strainer forwarded an email to Levack from Timothy E. Robinson, Vice President & Commercial Relationship Manager of NBT Bank, indicating that “[o]nce [defendant] determine[s it] will close the tank…the Bank would…want to see clean soil samples as close to the tank as possible.” Levack was then advised by Alexy on November 3, 2015 that the tank had been emptied and he passed this information along to Strainer that same day. Levack began gathering estimates for the taking of soil samples in mid-November. Soon thereafter, however, Alexy decided not to go forward with the contract and, on December 5, 2015, counsel for A & S and Alexy…sent a letter to counsel for Marler and Marler Family Properties…advising that the contract was null and void. Counsel for defendants relied upon paragraph 10 of the contract, stating as follows:
Under the terms of the contract, once the buyer has notified the seller of the existence of a problem discovered during the investigation, the contract is deemed canceled, null and void. In the alternative, the buyer may opt to forestall termination of the contract for a period of 10 days allowing the parties to enter into a written agreement concerning resolution of the defect found. [My] client is not willing to enter into any agreement relative to this storage tank. Therefore, [my] client considers the contract to be canceled, null and void.
The applicable law:
To be entitled to specific performance, plaintiffs have “the burden of establishing, as a matter of law, that [they are] ready, willing and able to perform under the parties’ [contract] and that [defendants are] unwilling to convey the property”[.]
The Court finds that plaintiffs have succeeded in establishing their entitlement to specific performance as a matter of law. Paragraph 6 of the contract provides, in pertinent part:
Buyer and Seller agree that this contract is binding on Buyer only if Buyer is able to obtain a…commercial mortgage loan in the sum of $297,000.00…Buyer agrees to apply for the mortgage loan within six (6) business days after Seller has accepted this contract. Buyer agrees to apply for such a mortgage loan and to put forth all best efforts to obtain the mortgage loan. If Buyer does not obtain a mortgage loan commitment and provide a copy thereof to Seller in accordance with [p]aragraph 24 of this contract by October 19, 2015 (the Commitment Date), then at any time after the Commitment Date and prior to Buyer providing a copy of Buyer’s mortgage loan commitment to Seller, either Buyer or Seller may terminate this contract by written notice to the other in accordance with [p]aragraph 24 of this contract.
Paragraph 10 of the contract then provides as follows:
This Agreement is contingent upon [a] determination, by a New York State licensed home inspector…, registered architect or licensed engineer,…that the premises is free from any substantial structural, mechanical, plumbing,…, roof covering, mold (mildew is not classified as a mold), water or sewer defects[.]
Buyer may have a qualified individual test the ground and buildings on the property for mold (mildew is not classified as mold), the presence of underground fuel tanks, and contamination from any hazardous materials whose presence or discharge on the property is in violation of any applicable laws or regulations.
All tests and/or inspections contemplated pursuant to this [p]aragraph 10 shall be completed on or before August 31, 2015 and at Buyer’s expense, and shall be deemed waived unless Buyer provides written notice of the failure of any of these tests and/or inspections, which notice is to be sent in accordance with [p]aragraph 24 of this Agreement, no later than August 31, 2015. If Buyer so notifies and further supplies written confirmation by a copy of the test results and/or inspection report(s), or letter(s) from the inspector, then this entire Agreement shall be deemed canceled, null and void and all deposits made hereunder shall be returned to Buyer[.]
Plaintiffs have demonstrated that a mortgage loan commitment was obtained by October 19, 2015, as required under paragraph 6 of the contract. They have further demonstrated that a structural inspection of the property was done by August 31, 2015, as required under paragraph 10. While the environmental inspection was not done until October 15, 2015, it is undisputed that neither of the parties ever declared that time was of the essence and, as such, this brief delay is inconsequential. Indeed, unless there is a declaration that time is of the essence, “the law will allow the vendor and vendee a reasonable time to perform their respective obligations, regardless of whether they specify a particular date for the [obligation to be fulfilled]”…Finally, plaintiffs have demonstrated that they are prepared to proceed with the soil testing so as to secure their financing in accordance with the terms of the commitment letter. Significantly, defendants were provided with a copy of this commitment letter in accordance with paragraph 6 of the contract and never objected to its terms.
The Court further finds that defendants have failed to raise a triable issue of fact relative to plaintiffs’ specific performance cause of action. Defendants contend that the contract is null and void based upon the notification it received from plaintiffs — under the terms of paragraph 10 of the contract — that the property had failed the environmental inspection. This contention, however, is without merit. Paragraph 10 expressly provides that written notice of the failure of any tests and/or inspections must be sent in accordance with paragraph 24 of the contract, which paragraph provides as follows:
All notices contemplated by this Agreement shall be in writing, delivered by (a) first class mail postage prepaid postmarked no later than the required date; (b) by electronic transmission by 11:59 p.m. on such required date; or (c) by personal delivery by 11:59 p.m. on such required date. Such notice shall be effective on the date it is sent. Any notices shall be sent to the other party’s attorney if known, if not then to the other party by serving the first named Buyer or Seller, as the case may be, at the address set forth for such party. A courtesy copy of all correspondence shall be sent to both brokers.
There is nothing in the record to suggest that written notice was ever sent by plaintiffs to counsel for defendants — or anyone else at his law firm — advising of the failure of the environmental inspection. Indeed, plaintiffs never adopted the position that the environmental inspection failed. Rather, they adopted the position that further investigation was necessary, which position is amply supported by the several email exchanges between Levack and Strainer trying to arrange for the necessary soil testing. Without the requisite written notice, defendants simply cannot invoke the provisions of paragraph 10 to declare the contract null and void[.]
Defendants further contend that they do not wish to proceed with the contract because of “the potential liability on the seller with no assurance or guaranty of the buyer moving forward regardless of the outcome of the further investigation.” This contention is also unavailing. It was expressly agreed in paragraph 10 of the contract that Marler could have a qualified individual test the ground on the property for any contamination and the soil testing clearly falls within the purview of this paragraph. Moreover, even if the contract was deemed null and void, it is unlikely that any other potential purchaser could obtain financing without similar testing being performed.
Finally, inasmuch as defendants contend that they do not wish to proceed with the contract because the soil testing is too expensive, this contention is without merit. Paragraph 10 expressly provides that “[a]ll tests and/or inspections [are] at Buyer’s expense” and, as such, defendants are not responsible for payment.
First Am. Props. Group, Inc. v. NLO Holding Corp, 2017 NY Slip Op 31169(U) (Sup. Ct. N.Y. Co. May 12, 2017)
The Court addressed various motions in plaintiff’s suit for specific performance of a contract of sale in which NLO Holding Corp. agreed to sell to First American Properties the property previously owned by Anna L. Boone.
As a threshold matter, the Court held that:
Plaintiff’s first claim against each defendant, for specific performance, requires plaintiff to show its own substantial performance under the contract and willingness to perform any remaining obligations; defendants’ ability to perform their obligations, here to convey specified real property; and the absence of an adequate remedy at law…As plaintiff conceded at oral argument, the specific performance claim against Boone is not viable because she never executed a contract with plaintiff. Although NLO Holdings did execute a contract with plaintiff, plaintiff nowhere alleges that NLO Holdings owns the property. NLO Holding, moreover, points to proposed intervenor Manhattan Homes & Estates’ current ownership, based on an undisputed recorded deed. These combined facts demonstrate NLO Holdings’ inability to convey the property and thus to perform its contractual obligation, defeating plaintiff’s specific performance claim against NLO Holding[.]
Absent plaintiff’s showing of a contract between Boone and plaintiff, its second claim against Boone, for breach of contract, also fails…Despite NLO Holding’s inability to convey the premises, however, the alleged breach of its contract with plaintiff permits recovery of damages from NLO Holdings…While NLO Holding contends it cancelled the contract and returned plaintiff’s downpayment, it fails present an authenticated, admissible contract, which plaintiff does not incorporate in the complaint…NLO Holding does not identify any contractual provision allowing such a cancellation.
And, as to the facts, concluded that:
NLO Holding nonetheless relies on correspondence dated July 11, 2014, from NLO Holding’s attorney to plaintiff’s attorney and a check dated June 30, 2014, for the amount of the downpayment plaintiff previously paid. Even if this correspondence and check are considered admissible and the type of documentary evidence contemplated by C.P.L.R. § 3211(a)(1), they do not establish that plaintiff accepted NLO Holding’s return of the downpayment or that the check was cashed…Holding thus fails to demonstrate a conclusive defense to plaintiff’s breach of contract claim[.]
Prime Homes LLC v. O’Reilly, 2017 NY Slip Op 30969(U) (Sup. Ct. N.Y. Co. May 8, 2017)
Supreme Court addressed motions in an action seeking specific performance of a $700,000 “short sale” contract of sale.
The Court summarized the facts and prior proceedings:
Plaintiff Prime commenced this action on February 17, 2016 seeking (i) specific performance of a contract between Defendant O’Reilly and Prime; (ii) quiet title and wipe the Memorandum of Contract from the land records; and (iii) a claim for tortious interference against LHU. This action arose in 2012 when Mr. O’Reilly contracted with Prime to sell his property located at 227 Edgecombe Avenue, New York, New York…to Prime in a short sale for $700,000. The closing was scheduled to take place within thirty (30) days from approval of the short sale by Mr. O’Reilly’s mortgagee, which was approved June 26, 2012, but O’Reilly did not convey the Property to Prime as he was only a 2% owner of the Property at the time of the closing. In September of 2016, Mr. O’Reilly deeded the Property to New My Management LLC who mortgaged it to S&S Funding, LLC.
Mr. O’Reilly contends he is entitled to summary judgment as the contract between Prime and him was void ab initio and invalid because (i) Mr. O’Reilly and his mother were both owners of the Property as tenants in common, and therefore, he had no right to enter into the contract without his mother’s approval, and (ii) Prime did not deposit the down payment required upon signing the contract rendering it unenforceable without consideration.
The applicable law and facts:
When a party commences a specific performance action, courts look at the marketable title held by the seller at the time the action is commenced…At the time of the closing on August 20, 2012 Mr. O’Reilly owned 2% of the Property, with his mother owning the remainder. However, on October 21, 2014, Mr. O’Reilly obtained 100% of the Property and gained marketable title…This action was commenced on February 17, 2016…Mr. O’Reilly later deeded the Property to New My Management LLC on September 29, 2016 after the commencement of this action…Mr. O’Reilly had marketable title at the time this action commenced.
Prime annexed a copy of the negotiated down payment check dated April 16, 2012 for the agreed upon total of two-thousand ($2,000) dollars…Mr. O’Reilly contends the down payment check was only the first indication that a down payment was paid and denies the down payment was tendered. He highlights the failure of the escrow agent to sign the escrowee provision of the Rider to the Contract. Mr. O’Reilly’s summary judgment motion must fail as there remains an issue of fact as to whether Prime tendered the down payment as consideration.
Yerushalmi Holdings, LLC v. Olumo Real Estate Corp., 2017 NY Slip Op 30855(U) (Sup. Ct. K. Co. April 24, 2017)
The Court addressed plaintiff’s motion for summary judgment on its claim for specific performance of a $1.7 million real estate contract of sale.
The Court summarized the facts:
On or around August 1, 2013, the parties herein entered into a contract of sale whereby Plaintiff was to purchase real property known as 63 New York Avenue in Brooklyn, New York…from Defendant OLUMO REAL ESTATE CORP.… the owner of the Property, for the purchase price of $1,700,000.00. Plaintiff tendered $170,000.00 as a down payment for the Property. Defendant OLUFEMI FALADE…is the sole owner of Olumo.
With respect to the transaction, both parties were represented by counsel — Eial Girtz, Esq.… represented Plaintiff and Ingrid Wyllie, Esq.…represented Defendants. The contract reflected a closing date of “on or about September 20, 2013,” but did not contain a “time of the essence” clause. On or around May 6, 2014, Girtz sent a letter to Wyllie demanding a time of the essence closing on June 9, 2014. However, according to Plaintiff, Defendants did not appear for the closing and refused to schedule a closing date any time thereafter. Plaintiff commenced this action on July 25, 2014 seeking specific performance of the contract.
Plaintiff submits that, under the contract, it was required to pay the down payment and order title insurance for the Property, which it did, as evidenced by Wyllie’s deposition testimony confirming same. Also, that the final version of the contract contained handwritten changes requiring Defendants to pay all monetary obligations on the Property such as penalties, judgments, fines, liens and outstanding bills, regardless of the amount. It is undisputed that some of the monetary obligations on the Property include approximately $613,000.00 in outstanding real estate taxes and about $45,000.00 in transfer taxes. Plaintiff contends that the only “title issues” that Defendants were “working to clear up were negotiating down the monetary obligations so that Defendants could maximize his proceeds from the sale.”
Plaintiff further submits that despite Defendants’ claim that the contract terminated in November 2013, Wyllie sent Plaintiff multiple emails between February 2014 and June 2014 stating that Defendants were working on title issues in preparation for the closing. Further, that Wyllie testified, at her deposition, that her understanding at the time of those emails was that the contract had not been terminated. In addition, Plaintiff proffers an affidavit from Yanni Simantov, the broker for the sales transaction, stating he was never advised that Defendants intended to terminate the contract. Plaintiff also states that email correspondence shows that Mr. Simantov was working with Defendants as late as May 2014 to clear up title issues for the purpose of selling the Property to Plaintiff.
[D]efendants contend that the contract signed by Falade did not contain the handwritten changes or other typed changes made by Plaintiff to the contract and rider. Defendants contend that the contract signed by Falade capped the amount he would pay for violations and other charges at half of 1% of the purchase price. Falade contends that he never agreed to the handwritten paragraphs and never saw the changes until November 30, 2013, at which point he notified Wyllie to cancel the contract.
Defendants also argue that the contract is invalid because Plaintiff’s attorney signed the contract without a power of attorney, instead of the two partners comprising Plaintiff.
The governing law:
“Before specific performance of a contract for the sale of real property may be granted, a buyer must demonstrate that it was ready, willing, and able to perform”…Said demonstration must relate to the original law day or, if time was not of the essence, on a subsequent date fixed by the parties…If a contract does not contain a time of the essence clause, a party may convert a non-time-of-the-essence contract into one making time of the essence by giving the other side clear, unequivocal notice and a reasonable time to perform[.]
Here, Plaintiff converted a non-time-of-the-essence contract into one making time of the essence by way of its May 6, 2014 letter setting a closing date of June 9, 2014. Further, there is no dispute that Plaintiff possessed the financial wherewithal to perform under the contract. In addition, aside from Defendants’ conclusory denials, the record evidence indicates that Plaintiff performed as required under the contract by tendering the down payment and ordering title insurance. Plaintiff also established that the contract the parties agreed to contained the handwritten changes requiring Defendants to pay down all monetary obligations on the Property. Defendants’ contention to the contrary is not supported by any evidence.
Finally, the only other issue raised by Defendants’ opposition, that the contract is invalid because it was only signed by Plaintiff’s counsel is without merit. “An agent’s power to bind his principal is coextensive with the principal’s grant of authority”…Here, there is no dispute that Girtz signed the contract on behalf of Plaintiff Yerushalmi Holdings LLC and that Girtz was granted such authority by Plaintiff.
Silvershore Props., LLC v. Dunning, 2017 NY Slip Op 30620(U) (Sup. Ct. K. Co. April 3, 2017)
Supreme Court addressed a motion for partial summary judgment on a claim for specific performance and other relief arising out of a $5.5 million real estate contract of sale in respect of which plaintiffs made a $200,000 deposit.
Supreme Court summarized the facts:
The underlying action arises out of a contractual dispute between the parties. On May 22, 2014, Plaintiff and Individual Defendant Eugene Dunning, contracted for Plaintiff to buy and for Mr. Dunning to sell a piece of real property in Brooklyn, New York for $5,500,000. The contract called for a down payment of $200,000. Plaintiff paid the down payment to Mr. Dunning’s then transactional attorney, Individual Defendant Fred D. Way III.
The contract also called for a closing date of June 24, 2014. As a condition to closing, Mr. Dunning was required to obtain and produce tenant estoppel certificates from commercial tenants then occupying the property. Plaintiff claims the parties failed to close on June 24, 2014 because Mr. Dunning was unable to obtain the required estoppel certificates. Defendants counter that the parties did not attempt to close on June 24, 2014 and that Plaintiff was aware that Mr. Dunning was taking steps to obtain the estoppel certificates. On July, 28, 2014, Mr. Way, acting on behalf of Mr. Dunning, sent Plaintiff a letter designating August 11, 2014 as the new closing date. Mr. Way’s letter also indicated that “time was of the essence”.
According to Mr. Way, the parties met on August 2014 in an apparent effort to effectuate closing. However, Mr. Way claims that Plaintiff refused to close unless Mr. Dunning agreed to reduce the contract price from $5,500,000 to $4,800,000. Plaintiff then commenced this action to obtain specific performance, to reduce the contract price and to nullify Mr. Way’s July 28, 2014 letter[.]
The specific performance claim:
With regards to its specific performance claim, Plaintiff argues that it is entitled to summary judgment because it substantially performed under the contract by tendering the $200,000 down payment. Further, Plaintiff maintains that it was ready, willing and able to close on the June 24, 2014 closing date. Plaintiff submits a loan commitment from a bank and an affidavit from its mortgage broker in support of its readiness to close.
Concerning Mr. Way’s July 28, 2014 letter, Plaintiff argues that the letter is unenforceable because Mr. Dunning breached the parties’ agreement prior to the letter’s issuance. According to Plaintiff, in addition to not providing the tenant estoppel certificates, Mr. Dunning made several misrepresentations about tenants’ status on the property. Plaintiff claims to have learned that one of the tenants had not paid rent in years. And that another tenant’s lease did not expire until 2019, despite Mr. Dunning’s representations to the contrary. Plaintiff argues that $5,500,000 contract price should be reduced because the price was improperly inflated by Mr. Dunning’s misrepresentations.
[D]efendants argue, among other things, that issues of fact exist as to whether Plaintiff was ready, willing and able to close. Defendants maintain that the parties did not attempt to close on June 24, 2014. According to Defendants, at the August 2014 meeting between the parties, Plaintiff indicated that it would close only if Mr. Dunning agreed to reduce the contract price from $5,500,000 to $4,800,000. Defendants dispute that Mr. Dunning made misrepresentations to Plaintiff regarding the tenants’ status. Defendants maintain that Plaintiff was aware of the issues concerning the tenants. Further, Defendants maintain that Plaintiff’s request of an abatement of the purchase price goes against what the parties agreed to in the contract.
According to Defendants, the contract provides Plaintiff two options if Mr. Dunning is unable to deliver title or if Plaintiff refuses to consummate the purchase. The first option allows Plaintiff to cancel the purchase and receive back its $200,000 down payment. The second option allows Plaintiff to proceed with the purchase and receive a maximum abatement of $50,000. Defendants argues that, if the Court decides to grant Plaintiff’s request for specific performance, Plaintiff should not receive an abatement greater than $50,000. In response, Plaintiff argues, among other things, that the $50,000 maximum abatement applies only to title defects, not the allegations at issue.
The applicable law:
A party seeking specific performance of a real-estate contract must establish that it was ready, willing, and able to perform its obligations under the contract “on the original law day or, if time is not of the essence, on a subsequent date fixed by the parties or within a reasonable time thereafter”[.]
Here, Plaintiff contends that it was ready, willing and able to perform based on the loan commitment from a bank and Plaintiff’s mortgage broker’s affidavit. However, Defendants’ allegation that Plaintiff refused to close in August 2014 unless Mr. Dunning agreed to reduce the contract price from $5,500,000 to $4,800,000 raises a triable issue of fact as to whether Plaintiff was indeed ready to proceed. Therefore, Plaintiff’s motion for summary judgment as to its specific performance claim is DENIED.
Moving on to Mr. Way’s July 28, 2014 letter. “It is fundamental that time is never of the essence of a contract for the sale of real property unless the contract specifically so provides or special circumstances surrounding its execution so require”…However, “it is possible for the seller to convert a non-time-of-the-essence contract into one making time of the essence by giving the buyer ‘clear, unequivocal notice’ and a reasonable time to perform”[.]
Here, Plaintiff argues that Mr. Way’s letter should be voided because Mr. Dunning breached the parties’ agreement in failing to obtain estoppel certificates and in making various misrepresentations about the status of the property’s tenants. However, an issue of fact exists as to whether Mr. Dunning failed to obtain the estoppel certificates prior to closing. Further, Defendants deny that Mr. Dunning made misrepresentations to Plaintiff regarding the status of the tenants. As such, Plaintiff’s motion, with regard to that part of its complaint is also DENIED.
Plaintiff’s attempt at reducing the contract price is based upon the allegation that Mr. Dunning misrepresented the status of tenants at the property. However, Defendants deny that Mr. Dunning represented that status of the tenants to Plaintiff. Further, the parties dispute whether the contract allows Plaintiff to enjoy an abatement greater than $50,000. Therefore, Plaintiff’s motion, as it relates to its effort at reducing the contract price is similarly DENIED.
Horrigan Dev. LLC v. Drozd, 2017 NY Slip Op 30270(U) (Sup. Ct. K. Co. February 3, 2017)
Supreme Court addressed a motion for summary judgment seeking specific performance of a contract to sell an interest in real property.
The Court summarized the facts:
On or about December 7, 2010, the parties entered into a contract of sale whereby Drozd agreed to sell the property known as 91 Jewel Street in Brooklyn, New York…to Horrigan for the purchase price of $1,650,000.00. Horrigan paid the initial deposit of $82,500.00 and the remaining balance of $1,567,500.00 was to be paid at closing. The closing date was scheduled for February 25, 2011.
At the time that the parties entered into the contract, Drozd owned 71.34% of the Property. Drozd had acquired 50% of title to the Property from his mother, Maria Drozd, via two separate deeds dated October 31, 1998 and December 17, 2002. When the mother died on December 27, 2008, her 50% share was devised as follows: 24.66% to her son, Kaziamiez Drozd; 32.66% to her son, Tadeusz Drozd; and 42.68% to Drozd. As a result, Drozd obtained an additional 21.34% in title, leaving him with 71.34% total with Kaziamiez and Tadeusz holding the remainder.
Regal Title Agency…the title insurer hired by Horrigan, issued a title report dated January 2, 2011, confirming the foregoing. To clear title, Regal Title required Drozd to probate his father’s will in order to properly place the mother in the chain of title, the father having owned the Property prior to the mother. In addition, Regal Title required Drozd’s brothers, Kaziamiez and Tadeusz, to execute the deed as grantors.
According to Drozd, he filed a petition to probate his father’s will. A guardian ad litem was appointed to protect the interests of Drozd’s two incapacitated brothers, Stanley and Edward. The parties anticipated a closing date sometime in April 2012, however the guardian ad litem’s report was not finalized until June 4, 2012.
On February 25, 2012, Tadeusz passed away in Poland. According to Tadeusz’s will, he left all of his property to his common-law wife in Poland, Anna Mitchna. As a result, to clear title, Regal Title required Tadeusz’s estate to be probated in Poland and for Drozd to commence an ancillary proceeding in New York to obtain court approval of the Property’s sale. Drozd states that he was advised by his estate law attorney, Steven Bracco, Esq., by letter dated June 14, 2013, that it would cost more than $35,000.00 in legal fees to commence the ancillary proceeding and obtain a court order authorizing the sale of the Property.
Drozd states that he informed Horrigan of the costs, both orally and in writing via a letter dated June 27, 2013…stating:
With regard to the above matter, enclosed please find a letter from the Estate Attorney, Steven Bracco, indicating that the cost to have the sale of the premises approved by the Surrogate’s Court will cost approximately $35,000.00.
As per the terms of the Contract of Sale, specifically Schedule D, Item #15, and paragraph 13.02 of the Contract, the Seller shall not be required to bring any action or proceed[ing] or to incur any expense in excess of the Maximum Expense specified in Schedule D.
Also enclosed please find a copy of the appraisal indicating a value of $2,100,000.00. The Surrogate’s Court will have to approve the sale, and the requirement of the Court is that the purchase price needs to be equal or close to a current appraised value.
Please advise if your client is willing to increase their offer to the current appraised value.
Soon after receiving the 2013 Letter, Horrigan commenced the instant action for specific performance and breach of contract. Horrigan filed its note of issue on November 12, 2015.
The pending motion:
With the instant motion, Horrigan moves for summary judgment on its claim for specific performance seeking a transfer of Drozd’s undisputed 71.34% interest in the Property and a proportional abatement in the purchase price. Horrigan argues that it has been ready, willing and able to close for five years, having obtained a mortgage commitment from Ridgewood Savings Bank. Horrigan further argues that Drozd breached the contract by demanding an increase of the purchase price to the appraised value and misleading it about the family’s estate problems, specifically, his ability to clear ownership to the Property. Based on the foregoing, Horrigan contends that it is entitled to partial summary judgment compelling Drozd to execute a deed conveying his 71.34% interest to Horrigan.
Opposition to the motion:
Drozd opposes Horrigan’s motion and cross-moves for summary judgment dismissing the complaint and deeming the down payment forfeited. Drozd argues that Horrigan is not entitled to specific performance because it failed to schedule a law date closing. Drozd submits that there was no provision in the contract that time would be of the essence and the closing date fixed in the contract was waived by mutual consent of the parties to afford Drozd time to cure the title defects. Drozd further argues that, pursuant to paragraph 13.02 of the contract, his maximum expenditure to cure title defects was capped at $5,000.00. Thus, under the circumstances, Horrigan had two options—to cancel the contract and obtain a refund of the down payment or to take title as is. Drozd further argues that his 2013 Letter gave Horrigan written notice that it would cost more than $35,000.00 to cure title defects, and, at that point, it was incumbent upon Horrigan to make the required election and that Horrigan’s failure to do so constituted a breach of contract.
[H]orrigan argues that the 2013 Letter was a repudiation of the contract and as such, it was under no obligation to set a law closing date or tender performance. Further, that Drozd misrepresented his authority to transfer 100% of the Property to Horrigan and his inability to convey 100% of the Property was self-created due to his failure to obtain his brother’s signature.
And Drozd’s reply:
[D]rozd argues that the 2013 Letter does not indicate a refusal to close. Further, that the evidence establishes that Drozd intended to close on the sale and that, as a layman, he did not know that his mother, father, and subsequently, his brother’s estate would all need to be cleared for title and the complexity of such a process. Further, that his brothers were in agreement, in any case, to sell the Property to Horrigan at the agreed upon price.
“[W]hen parties set down their agreements in a clear, complete document, their writing should…be enforced according to its terms”…This rule is especially important “in the context of real property transactions, where commercial certainty is a paramount concern, and where . . . the instrument was negotiated between sophisticated, counseled business people negotiating at arm’s length”[.]
In addition, “[w]hen a contract for the sale of real property contains a clause specifically setting forth the remedies available to the buyer if the seller is unable to satisfy a stated condition, fundamental rules of contract construction and enforcement require that we limit the buyer to the remedies for which it provided in the sale contract”[.]
Upon consideration of the foregoing principles and the undisputed evidence, the Court finds Drozd is entitled to summary judgment dismissing the complaint. Paragraph 13.02, which contemplates the precise situation herein, where the seller is unable to convey title in accordance with the contract, expressly limits Horrigan’s remedies to two options: (1) cancel the sale and receive a refund of its down payment and title costs or (2) take the property subject to the title defects, with a maximum credit of the Maximum Expense amount, which in this case was $5,000.00. Drozd clearly indicated to Horrigan, via the 2013 Letter, that the cost to clear title would surpass $5,000.00 seven times over and, accordingly, that he was under no obligation to pursue the requisite legal proceedings to clear title. Nothing in the 2013 Letter indicates Drozd’s refusal to close.
To the extent Horrigan argues that he was deliberately mislead by Drozd, the Court finds that all of the evidence demonstrates the contrary. Based on the title report, Horrigan knew soon after entering the subject contract that Drozd owned only 71.34% of the Property. The evidence indicates that Drozd intended to convey full title to the Property with his brothers’ consent and made good-faith efforts to clear title, such as commencing legal action to probate his father’s will. Unfortunately, the untimely death of Tadeusz in Poland was an unexpected event that significantly complicated the process of conveying full title of the Property to Horrigan. Although Horrigan was not without recourse pursuant to the contract, instead of electing a remedy, Horrigan commenced the instant action. Thus, in the circumstances herein, it is Horrigan who breached the contract by failing to cancel the contract or take the property subject to the title defects[.]
Barraclough v. Jarrett, 2017 NY Slip Op 30056(U) (Sup. Ct. N.Y. Co. January 12, 2017)
Supreme Court addressed defendant’s motion to dismiss an action for breach of contract and specific performance of a real estate contract.
The Court summarized the facts:
On February 26, 2014, Defendant agreed to sell Plaintiff the property located at 193 Edgecombe Avenue, New York, NY 10030, for the purchase price of $1,200,000 pursuant to a Residential Contract of Sale…The property was to be sold pursuant to a short sale, which required Defendant’s lender, Specialized Loan Servicing, LLC…to approve the sale as follows:
[t]hen the entire transaction is subject to and contingent upon the approval by Seller’s existing mortgage Lender(s) since the proceeds of the sale are currently insufficient to satisfy all liens against the subject property. If the Lender(s) does not approve of the transaction and does not agree to accept the proceeds of this transaction (after all costs, commissions, fees and taxes have been paid) which is an amount that is less than currently owed by the Seller, the Purchaser will have the option to increase the purchase price to such an amount as is sufficient to satisfy the Lender(s) and modify the terms of the contract accordingly, or may elect to terminate this Contract and receive back the Contract Deposit. All parties are aware that there may be delays in receiving Lender(s) approval and seller shall endeavor to obtain such approval as expeditiously as possible. However, if said approval is not received within 4 MONTHS from the date of fully executed contracts, then either party may cancel this contract of sale and the seller’s only obligation to the purchaser is to return purchaser’s real estate deposit[.]
More than a year and a half later, on September 15, 2015, Plaintiff’s attorney e-mailed Defendant’s attorney requesting an update on the process of the short sale, to which Defendant’s attorney replied on the same day, indicating that, “we have investor approval as of a few days ago”[.]
Two months later, by letter dated November 9, 2015, SLS denied approval of the short sale. The reason for denial was simply “[t]erms [c]hanged”[.]
The following month, on December 14, 2015, Defendant’s attorney provided Plaintiff’s attorney with SLS’s denial, and gave “notice of [defendant’s] cancelation of the contract of sale on the ground that more than four months have passed since the execution of the contracts of sale without short sale approval[.]”
The pending action:
[P]laintiff filed the instant action, alleging that Defendant acted in bad faith in his dealing with Plaintiff…She alleges that as early as June 6, 2014, Defendant was aware of the two liens on the title report that would affect the title to the property: first, a lis pendens filed by the New York City Department of Housing Preservation and Development, and second, a family court judgment…in the amount of $146,456.24, docketed in Downsview, Canada…Plaintiff also alleges that Defendant lead her to believe that he was working to resolve both liens in order move forward with the short sale, but as of October 19, 2015, both remained on the title…Plaintiff also alleges that Defendant delayed the short sale by “[f]ailing to communicate with the lender and his representatives, and failing to provide necessary documentation in a timely fashion causing the file to have to be resubmitted on multiple occasions”…Further, in early December 2015, Defendant, while in contract with Plaintiff, sought to reactivate the listing to sell the property to another buyer at a higher price[.]
The argument in support of dismissal:
[D]efendant argues that the allegations that he failed to act in good faith are “patently false” and conclusory. Citing to SLS’s November 9, 2015 Denial Letter, Defendant argues that if SLS denied Defendant’s request because of Defendant’s failure to communicate or provide documentation as alleged, SLS would have so indicated or checked the corresponding box relating to the non-receipt of documentation. However, because SLS’s letter did not attribute its denial to missing documents or Defendant’s actions, the denial was not the result of Defendant’s actions.
Defendant further argues that documentary evidence, i.e., Defendant’s attorney’s December 14, 2015 Cancellation Letter, contradicts Plaintiff’s assertion that Defendant canceled the contract for sale because of the Judgment against the property. Such letter states that the contract was being canceled pursuant to paragraph 9 of the Rider, not because of the Judgment.
Also, Defendant did not cancel the contract based on the Judgment, but waited until the SLS sent notice of the disapproval. If it were his intent to cancel the sale due to the Judgment, he would have done so sooner. Therefore, plaintiff does not have a cause of action for bad faith.
Finally, Defendant acted pursuant to the Contract. The sale was contingent on SLS’s approval, and could not go through. Although Defendant could have cancelled the Contract in June 2014 when the sale had not yet been approved, Defendant only chose to cancel the Contract after learning that SLS would not approve the sale.
[P]laintiff argues that Defendant’s reliance on the SLS’s Denial Letter to demonstrate that he did not act in bad faith is misplaced, as the letter simply states that the short sale was denied because “terms changed,” with no further explanation. Further, Defendant’s reliance on the Rider to claim a right to cancel the Contract is also misplaced, since SLS approved the short sale in September 2015 before Defendant canceled the Contract. Defendant should not receive the benefit of paragraph 9 if he caused the reversal of approval. And, if SLS reversed its approval because the purchase price was deemed insufficient, Defendant was required to notify Plaintiff to permit Plaintiff to increase the purchase price to satisfy SLS. Plaintiff notes that Defendant re-listed the property close in time to his cancellation of the Contract.
Accepting the facts as alleged in the Complaint as true, and according “plaintiffs the benefit of every possible favorable inference,” as required…the Court finds that Plaintiff sufficiently states a claim for failure to act in good faith.
“Implicit in every contract is a promise of good faith and fair dealing that is breached when a party acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party from receiving the benefits under their agreement”…”The implied covenant of good faith and fair dealing between parties to a contract embraces a pledge that “neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract”[.]
Defendant failed to demonstrate that the allegations pleaded in the Complaint are false… Notably, SLS’s Denial Letter does not defeat Plaintiff’s allegations that Defendant delayed the short sale by failing to communicate with the lender and failing to timely provide required documentation. Nor does Plaintiff’s Cancellation Letter defeat Plaintiff’s claim that Defendant lead her to believe that he was attempting to resolve both liens; the Letter is silent as to such Liens. Therefore, as Defendant failed to show that the documentation on which he relies absolves Defendant of culpability for the denial of the short sale, or that the allegations alleged in the Complaint are conclusory, it cannot be said that Plaintiff does not have a claim based on Defendant’s alleged bad faith.
Gray v. Koock Jung, 2017 NY Slip Op 50047(U) (Sup. Ct. Warren Co. January 12, 2017)
Supreme Court addressed a motion for specific performance of a $960,000 real estate contract of sale.
The Court summarized the facts:
In June 2016, plaintiff and defendants entered into a contract whereby defendants agreed to sell to plaintiff for $960,000 certain real property located on Lockhart Mountain Road in the Town of Queensbury, Warren County. Thereafter, defendants refused to close on the sale of the property. Plaintiff then commenced this action in August 2016 seeking specific performance of the real estate contract. In September 2016, and prior to any disclosure, plaintiff made this motion for summary judgment.
The burden of proof:
“[T]o obtain specific performance, plaintiff [was] required to demonstrate that [he] substantially performed [his] contractual obligations and [was] ready, willing and able to fulfill [his] remaining obligations, that defendant[s] was able but unwilling to convey the property and that there is no adequate remedy at law’”[.]
Plaintiff submitted proof establishing that the property had been listed by defendants with a real estate agent. He met with defendants on more than one occasion, discussed various aspects of the property with them, and negotiated an agreed upon price and conditions of the sale. Both parties consulted with legal counsel. Plaintiff states in his affidavit (and submitted evidence establishing) that he satisfied all his contingencies under the contract and was (and continues to be) ready, willing and able to purchase the property. Plaintiff has met his threshold burden in this motion for summary judgment seeking specific performance.
In opposition, defendants contend that defendant Koock Jung (formerly a practicing psychiatrist) was not competent to enter into the contract. “In this regard, the case law makes clear that `a person is presumed to be competent at the time of the performance of the challenged action and the burden of proving incompetence rests with the party asserting incapacity’”…”Thus, to prevail, [defendants] ha[ve] to demonstrate that [Koock Jung’s] mind was `so affected as to render him wholly and absolutely incompetent to comprehend and understand the nature of the transaction’ and, further, that such incompetency/incapacity existed when he executed the [contract]”…”[N]either hindsight nor regret establishes incompetency”[.]
Defendants have submitted a considerable amount of medical records and evidence regarding Koock Jung’s medical problems. In addition, one of his sons, who is a medical doctor, detailed his father’s condition and opined regarding his father’s illness that:
[The condition] made it difficult, perhaps impossible, for him to read and comprehend the real estate contract he signed this summer. He has memory loss, issues with balance and what is referred to as `brain fog.’ The brain fog sometimes would be so severe that there was an instance where he did not even recognize a patient he had known and treated for thirty years[.]
More significantly, defendants submitted an affidavit and attached report from one of Koock Jung’s treating physicians, Joseph G. Jemsek, who is board certified in internal medicine and infectious disease. Jemsek sets forth details about Koock Jung’s condition, including that his diagnosis included, “Borreliosis Complex with neuroborreliosis” and further that “he is especially impacted with regards to short-term memory, concentration, and overall mentation (‘brain fog’); he also reported auditory hallucinations.” Based on the detailed information in his report, Jemsek states: “It is my best medical opinion to a reasonable degree of medical certainty, that [Koock] Jung’s condition was severe enough to preclude him from fully understanding or entering into a contract for the sale of his home.”
To be sure, plaintiff submitted strong proof (if credited) indicating that Koock Jung was competent at the time he signed the contract and that, with hindsight, defendants ostensibly regretted their decision to sell. At this procedural junction, however, the facts must be viewed in the light most favorable to defendants. Although defendants face a difficult task in proving that Koock Jung lacked competency at the time he executed the contract, nonetheless, the facts viewed most favorably to defendants reveal triable issues.
Lessons learned: Plaintiffs in an action for specific performance must be prepared to prove that they were ready, willing and able to perform. And, in opposition, defendants must be able to establish that their failure or refusal to close is excused by an event specifically contemplated by the contract of sale.