United States: Arugula, Radicchio & Romaine/Attorneys At Law Lettuce Get Your Deposit Back

Now that I have your attention:  Litigation abounds over the right to keep/return the deposit when a real estate transaction fails.  Several recent examples follow:

Ward Capital Mgt. LLC v. New Pelham Parkway N. LLC, 2018 NY Slip Op 06797, App. Div. 1st Dept. (October 11, 2018)

Supreme Court granted defendants' motion for summary judgment dismissing the complaint; granted their counterclaims to retain plaintiff's $1 million downpayment; and denied plaintiff's cross-motion for summary judgment.

The Appellate Division, as follows, summarily affirmed:

Defendants made a prima facie showing of their entitlement to judgment as a matter of law. They submitted evidence that the contract of sale between the parties for the sale of four real estate properties clearly stated that "time is of the essence" as to the closing date and that, through an amendment to that contract, the parties scheduled the closing for October 18, 2013. Defendants also provided evidence that all parties appeared at the proposed closing on that date, defendants were ready, willing and able to close, and plaintiff did not have the liquid cash to pay the purchase price...Since the real estate contract provided that the time of closing is of the essence, performance on the specified date was a material element and plaintiff's failure to perform on that date constituted material breach[.]

In opposition, plaintiff failed to raise a triable issue of fact. Plaintiff asserted that it had lawful excuses for its failure to close, since defendants provided a false representation in the sale contract regarding threatened litigation related to two of the properties, there was cloudy title due to a pending foreclosure action, and a third party failed to provide final documentation regarding a $10 million loan to plaintiff to cover part of the purchase price.

First, the sale contract explicitly stated that if a representation was false and had a materially adverse effect on the market value of the property, defendants could monetarily solve the problem and plaintiff would still be required to close. Second, while there was a pending foreclosure action concerning two of the four properties that were the subject of the sale, the plaintiff bank in that action was well aware that the outstanding mortgage amounts, related costs, and attorneys' fees would be paid off in connection with the closing and the bank provided pay-off statements to effectuate the payments. Moreover, the title insurance company agreed to provide insurance without any exceptions. Third, plaintiff warranted in the sale contract that it did not need outside financing to fund the purchase price, plaintiff's obligations thereunder were not contingent on any loan from any third party, and defendants were relying on this representation as a material inducement to enter into the sale contract. In light of this language, the lack of final documentation regarding a $10 million loan to plaintiff was not a lawful excuse.

Funk v. Seligson, Rothman & Rothman, Esqs., 2018 NY Slip Op 06614, App. Div. 1st Dept. (October 4, 2018)

Supreme Court granted summary judgment for return of a downpayment in the amount of $55,180.60.

The Appellate Division summarized the applicable provisions of the contract of sale:

Paragraph 25(d) of the agreement between plaintiffs and Petit states, "If no [mortgage] Commitment is issued by the Institutional Lender on or before the Commitment Date, . . . [plaintiffs] may cancel this contract . . ., provided that . . . [they] ha[ve] complied with all [their] obligations under this paragraph 25." In turn, plaintiffs' obligations under paragraph 25 included making a prompt application to one or more Institutional Lenders, pursuing such application with diligence, and cooperating in good faith with the lender(s).

The notice cancelling the contract:

Plaintiffs' June 9, 2016 notice cancelling the contract merely stated that they had "complied with all their obligations under Paragraph 25." The following day, [defendant's] counsel asked plaintiffs' transactional counsel to provide documentation of their good-faith pursuit of financing.

Found paragraph 25(d) to be ambiguous:

Paragraph 25(d) is ambiguous...On the one hand, it could mean, as plaintiffs contend, that they only have to say they are in compliance. On the other hand, it could also mean, as defendants contend, that plaintiffs have to show they were in compliance; defendants did not have to accept plaintiffs' mere say-so.

And finding issues of fact:

Even if plaintiffs' June 9, 2016 notice were sufficient, there is an issue of fact as to whether plaintiffs withdrew it and agreed to proceed with the transaction if Petit agreed to extend the Commitment Date and closing, which it did. After defendants submitted Diamond's affirmation, detailing her dealings with Mero, plaintiffs failed to submit either an affirmation or an affidavit from him; hence, they are deemed to have admitted the facts in Diamond's affirmation...Moreover, although the contract required plaintiffs' cancellation notice to be in writing, it did not require a withdrawal of the notice to be in writing.

Nevertheless, defendants are not entitled to summary judgment because their own submissions (i.e., some of their exhibits) showed that plaintiffs may have insisted on a new written contract. In other words, it is unclear whether plaintiffs agreed to proceed (a) if Petit postponed the Commitment Date and closing or (b) only if there were a new written agreement. "When parties do not intend to be bound until their agreement is reduced to writing and signed, there is no contract in the interim even if the parties have orally agreed upon all the terms of the proposed contract"...The doctrines of promissory estoppel, equitable estoppel, and part performance do not entitle defendants to summary judgment, either.

An additional issue of fact arises from paragraph 25(a), which states, "[A] commitment conditioned on the Institutional Lender's approval of an appraisal shall not be deemed a Commitment' hereunder until an appraisal is approved (and if that does not occur before the Commitment Date, [plaintiffs] may cancel under paragraph 25 . . . (d) unless the Commitment Date is extended)" (emphasis added). It is undisputed that Petit extended the Commitment Date; however, it did not do so in writing, and the contract requires all modifications to be in writing signed by the party to be charged. However, "a contractual prohibition against oral modification may itself be waived"...and waiver is usually a question of fact[.]

Second Ave. 1355 Realty LLC v. 1355 Second Owner LLC, 2018 NY Slip Op 06191, App. Div. 1st Dept. (September 28, 2018)

Supreme Court granted defendant's motion to dismiss various causes of action.

The First Department, as follows, summarily affirmed:

Plaintiff alleges that defendant 1355 Second Owner LLC...breached the agreement pursuant to which it would purchase from plaintiff a multi-use building in Manhattan. Plaintiff concedes that it failed to meet the condition precedent that it deliver the building "vacant, free of all residential tenancies and occupancies," which would relieve the buyer of its duty to close on the purchase...but argues that the buyer waived the condition precedent.

The documentary evidence conclusively establishes that there was no waiver of the condition precedent...The agreement required that any waiver be express and in writing. The January 6, 2016 letter and January 7, 2016 email written by buyer's counsel on which plaintiff relies do not mention either waiver or the vacancy condition precedent. Indeed, they do not appear to address these issues at all. They focus on a dispute over a different but related provision of the agreement, which obligated plaintiff to use its best efforts to bring about the fulfillment of the condition precedent.

Rodrigues NBA, LLC v. Allied XV, LLC, 2018 NY Slip Op 06129, App. Div. 2nd Dept. (September 19, 2018)

Supreme Court denied plaintiff's motion for summary judgment in an action to recover damages for breach of a contract for the sale of real estate in which the seller sought to retain the $375,000 downpayment.

The Appellate Division summarized the facts:

Although the contract of sale specified a date for the closing, the parties agreed to adjourn the closing to a later date. Eventually, the seller sent the buyer a "time of the essence" letter. The letter, which was dated June 21, 2016, set June 30, 2016, as the closing date. The buyer rejected that closing date, alleging that certain ongoing administrative proceedings involving the subject property violated the terms of the contract of sale. The buyer did not appear at the closing.

The pleadings and prior proceedings:

The seller commenced this action, inter alia, to recover damages for breach of the contract of sale. The seller sought to retain the down payment as liquidated damages as specified in the contract of sale. The buyer interposed an answer with related counterclaims. The buyer sought the return of the down payment, alleging that the seller breached the contract of sale.

The seller moved, among other relief, for summary judgment on the complaint and dismissing the buyer's counterclaims. The buyer opposed the motion. In the order appealed from, the Supreme Court denied those branches of the seller's motion which were for summary judgment on the complaint and dismissing the buyer's counterclaims. The court concluded that the time of the essence letter was a nullity because it did not provide the buyer with a reasonable amount of time in which to act and, in any event, that the seller failed to demonstrate that it was ready, willing, and able to perform on the scheduled date. The seller appeals.

The applicable law:

"When, as here, a contract for the sale of real property does not make time of the essence, the law permits a reasonable time in which to tender performance, regardless of whether the contract designates a specific date for performance"...Where there is an indefinite adjournment of the closing date specified in the contract of sale, "some affirmative act has to be taken by one party before [it] can claim the other party is in default; that is, one party has to fix a time by which the other must perform, and [it] must inform the other that if [it] does not perform by that date, [it] will be considered in default"[.]

In order to make time of the essence, "there must be a clear, distinct, and unequivocal notice to that effect giving the other party a reasonable time in which to act"..."What constitutes a reasonable time for performance depends upon the facts and circumstances of the particular case"..."Included within a court's determination of reasonableness are the nature and object of the contract, the previous conduct of the parties, the presence or absence of good faith, the experience of the parties and the possibility of prejudice or hardship to either one, as well as the specific number of days provided for performance"..."The determination of reasonableness must by its very nature be determined on a case-by-case basis"..."[T]he question of what constitutes a reasonable time is usually a question of fact"[.]

Concluding that:

[T]he seller failed to establish, prima facie, that the time of the essence letter provided the buyer with a reasonable time within which to close...Furthermore, the seller's submissions failed to eliminate triable issues of fact as to whether the property was the subject of ongoing administrative proceedings, in violation of the contract of sale, which could be completely resolved at the scheduled closing or within a reasonable time thereafter...Under these circumstances, the seller failed to sustain its burden of demonstrating that it was ready, willing, and able to convey title in accordance with the contract of sale[.]

Chahalis v. Roberta Ebert Irrevocable Trust, 2018 NY Slip Op 05135, App. Div. 2nd Dept. (July 11, 2018)

Supreme Court granted plaintiff's motion for summary judgment for the return of his downpayment.

The Second Department summarized the facts:

On May 21, 2015, the plaintiff entered into a contract of sale with the defendants to purchase a condominium located in Rockland County and tendered a down payment. The contract contained a mortgage contingency clause providing, inter alia, that the plaintiff's obligations under the contract were conditional upon him obtaining a mortgage commitment within a certain time period. The clause further provided that if the plaintiff did not receive such a commitment within the contingency period, he was entitled to cancel the contract and to the return of his down payment. The plaintiff received a mortgage commitment, and that information was transmitted to the defendants on June 22, 2015.

On July 21, 2015, however, the plaintiff was notified by his employer that due to restructuring, he was being terminated from his employment effective July 31, 2015. After the contingency period had expired, the lender revoked the mortgage commitment. The plaintiff promptly notified the defendants, who refused the plaintiff's request for a return of his down payment, and indicated their intention to retain the down payment under the terms of the contract.

The pleadings and prior proceedings:

Thereafter, the plaintiff commenced this action against the defendants to recover damages for breach of contract and for the return of his down payment. The defendants moved...to dismiss the complaint and the Supreme Court...converted the motion to one for summary judgment dismissing the complaint. In response, the plaintiff opposed the defendants' motion and moved for summary judgment for the return of his down payment. The Supreme Court granted the plaintiff's motion and, in effect, denied the defendants' converted motion.

Concluding that:

"A mortgage contingency clause is construed to create a condition precedent to the contract of sale'"..."The purchaser is entitled to return of the down payment where the mortgage contingency clause unequivocally provides for its return upon the purchaser's inability to obtain a mortgage commitment within the contingency period"..."However, when the lender revokes the mortgage commitment after the contingency period has elapsed, the contractual provision relating to failure to obtain an initial commitment is inoperable, and the question becomes whether the lender's revocation was attributable to any bad faith on the part of the purchaser"[.]

Here, the plaintiff established his prima facie entitlement to judgment as a matter of law for the return of his down payment. He submitted evidence that he acted in good faith in obtaining a mortgage commitment, that the commitment was subject to re-verification of employment, and that the subsequent revocation of the commitment was not attributable to any bad faith on his part...In opposition, the defendants failed to raise a triable issue of fact[.]

313 43rd St. Realty, LLC v. TMS Enters., LP, 2018 NY Slip Op 05013, App. Div. 2nd Dept. (July 5, 2018)

Supreme Court granted buyer's motion for return of downpayments in the sum of $680,000.

The Appellate Division described the pleadings and prior proceedings:

The plaintiff...commenced this action to recover two down payments that were made pursuant to two contracts for the sale of two parcels of real property. The defendants TMS Enterprises, LP, and 313 43rd Street Realty Associates, Ltd....interposed an amended answer that included three counterclaims. The first two counterclaims alleged that the buyer breached the contracts of sale and that the sellers were therefore entitled to retain the down payments. The third counterclaim alleged fraud.

The sellers moved, among other things...to dismiss the complaint for failure to state a cause of action. The buyer cross-moved for summary judgment on the complaint and directing the defendants to return the down payments, and, in effect, dismissing the sellers' first and second counterclaims. The buyer separately moved...to dismiss the sellers' third counterclaim for failure to state a cause of action.

[S]upreme Court denied that branch of the sellers' motion...to dismiss the complaint, granted the buyer's cross motion, and granted the buyer's separate motion...to dismiss the third counterclaim. The court subsequently entered a judgment in favor of the buyer and against the sellers dismissing the sellers' counterclaims, and in favor of the buyer and against the defendants on the complaint and directing them to return to the buyer its down payments in the total principal sum of $680,000[.]

The legal template:

As a general rule, to prevail on a cause of action for the return of a down payment on a contract for the sale of real property, the evidence must demonstrate that the seller was not ready, willing, and able to perform on the law day[.]

Concluding as to the motion to dismiss the complaint:

Contrary to the sellers' contention, the complaint contained sufficient factual allegations to state a cause of action to recover the disputed down payments. On a motion to dismiss...the complaint is to be afforded a liberal construction, the facts alleged are presumed to be true, the plaintiff is afforded the benefit of every favorable inference, and the court is to determine only whether the facts as alleged fit within any cognizable legal theory"...Although the facts pleaded are presumed to be true and are to be accorded every favorable inference, bare legal conclusions as well as factual claims flatly contradicted by the record are not entitled to any such consideration"[.]

Here, the allegations in the complaint that the sellers unilaterally set an unreasonable closing date were inadequate to constitute a "positive and unequivocal" repudiation of the contracts of sale so as to form the basis for a cause of action premised on anticipatory breach of contract...Nevertheless, the complaint adequately alleged that the sellers were "not ready, willing and able to close under [the] [c]ontracts [of sale]." Construed liberally, the complaint states a cause of action for the return of down payments on contracts for the sale of real property...Accordingly, we agree with the Supreme Court's determination to deny that branch of the sellers' motion...to dismiss the complaint for failure to state a cause of action.

And as to the buyer's cross-motion for summary judtgment:

[S]upreme Court should not have granted the buyer's cross motion for summary judgment. On a motion for summary judgment, the movant must "make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact"...Only if the movant succeeds in meeting its burden will the burden shift to the opponent to demonstrate through legally sufficient evidence that there exists a triable issue of fact[.]

Here, the buyer failed to sustain its prima facie burden. The buyer's submissions failed to establish that the sellers were not ready, willing, and able to close, or that they otherwise breached the contracts of sale[.]

Hu v. Leff, 2018 NY Slip Op 00617, App. Div. 1st Dept. (February 1, 2018)

Supreme Court granted plaintiff's motion for summary judgment on the claims for breach of contract and for a declaration that they were entitled to keep defendant's downpayment.

The Appellate Division summarized the facts:

After the parties entered into a contract for sale of a condominium apartment, but before the closing, building-wide structural defects were discovered that required remediation work to the ceiling of the apartment. As a result, there were two foot by two foot holes in the ceiling at the time of the scheduled closing. The building's engineers estimated that work to repair the ceiling would cost $30,000 to $50,000 and would take approximately three weeks to complete. The sellers advised the buyers of this and provided them with documentation the day after they learned of it, and the buyers performed a walk-through a few days later, but raised no objection until the day of the closing, when, even after the sellers offered to give the buyers a $50,000 credit, the buyers refused to tender the balance of the purchase price.

Affirming and concluding that:

As the motion court ruled, the structural defects in the ceiling, which existed at the time the contract was executed, are covered under the "as is" clauses in the contract and rider, even if they were unknown to the parties at that time...The "risk of loss" provision of the sale contract does not apply, since it covers damage caused by "fire or other casualty" that would have been covered by the sellers's insurance...Even if we accept the argument that the seller is in default, the purchaser must show the seller is unable to correct the default in reasonable time or has refused to do so upon the purchaser's demand...The purchaser failed to do so.

Clements v. 201 Water St. LLC, 2018 NY Slip Op 00471, App. Div. 1st Dept. (January 25, 2018)

Supreme Court declared a real estate contract enforceable and denied plaintiff's claim for return of the downpayment.

The Appellate division, as follows, summarily affirmed:

Contrary to plaintiffs' conclusory allegations, the purchase agreement does not place sole and absolute discretion in defendant sponsor to set a closing date on plaintiffs' condominium unit. Rather, the agreement requires defendant to set a closing date either concurrently with or after the attainment of appropriate certificates of occupancy for the building or plaintiffs' unit, which was under construction when the parties entered into the agreement. Defendant is also obligated under the agreement to use best efforts to procure the certificates within two years of the issuance of the building's or any unit's first temporary certificate of occupancy. At the time plaintiffs commenced the instant action, the requisite certificates of occupancy were not yet obtained, and the complaint makes no allegation of unreasonable delays on defendant's part in the progress of the condominium's construction. While the agreement does not specify a closing date, the law provides for a reasonable time to close[.]

Chen v. Majewski, 2017 NY Slip Op 32243, Sup Ct. NY Co. (October 19, 2017)

Plaintiff moved for summary judgment on the complaint seeking the return of her downpayment with respect to a failed real estate transaction.

Supreme Court briefly summarized the facts:

On October 30, 2013, plaintiff and the Sellers [Majewski and Tamanaha] executed a contract of sale...for the Apartment for the price of $560,000. Plaintiff paid a security deposit of $56,000 into escrow.

The contract of sale:

The Contract provides that the sale is subject to the unconditional consent of the cooperative corporation...However, should the Corporation refuse consent due to the purchaser's bad faith, the purchaser shall be in default:

6.1 This sale is subject to the unconditional consent of the Corporation.

6.2 Purchaser shall in good faith:

6.2.1 submit to the Corporation or the Managing Agent an application with respect to this sale on the form required by the Corporation, containing such data and together with such documents as the Corporation requires...

6.2.2 attend...one or more personal interviews...

6.3 Either party, after learning of the Corporation's decision, shall promptly advise the other Party thereof...If such consent is refused at any time, either Party may cancel this Contract by Notice. In the event of cancellation pursuant to this ¶ 6.3, the Escrowee shall refund the Contract Deposit to Purchase.

6.4. If such consent is refused, or not given, due to Purchaser's bad faith conduct, Purchaser shall be in default and ¶ 13.1 shall govern[.]

With respect to default remedies, section 13.1 of the Contract indicates that, "[i]n the event of a default or misrepresentation by Purchaser, Seller's sole and exclusive remedies shall be to cancel this Contract, [and] retain the Contract Deposit as liquidated damages..."

Regarding maintenance charges, the Seller was to notify the Purchaser promptly about any changes in maintenance; however, this was a courtesy only. The Contract provides that failure to notify is not a breach of the Contract by the Seller[.]

The subsequent developments:

Pursuant to the terms of the Contract, plaintiff met with the Corporation's board of directors. After the Corporation did not approve plaintiff's purchase of the Apartment, plaintiff gave notice to the Sellers and demanded the return of her security deposit. When the Sellers would not return plaintiff's security deposit, plaintiff commenced this action.

The complaint:

Plaintiff's first cause of action alleges that the Sellers breached the Contract when, after the Corporation did not consent to the sale, the Sellers did not return the $56,000 deposit. Plaintiff's second cause of action is for attorneys' fees incurred as a result of this litigation. Pursuant to the terms of the Contract, "[i]n connection with any litigation arising out of this Contract, the prevailing party shall be entitled to recover all costs thereof, including, without limitation, reasonable attorneys' fees and disbursements for services rendered in connection with such litigation[.]"

The answer and counterclaims:

The Sellers answered and set forth three counterclaims. The first counterclaim alleges that plaintiff breached the contract by "intentionally and in bad faith submitt[ing] false and/or misleading financial statements to Seller and the Corporation in violation of the terms and conditions of the Contract."...In addition, the Sellers contend that plaintiff intentionally and in bad faith sabotaged her interview with the Corporation, in violation of the Contract. The Sellers maintain that, as a result of plaintiff's breach of the Contract, they are entitled to retain the contract deposit, as they incurred additional costs associated with re-listing the apartment and paying for a rental.

The second counterclaim, for fraudulent misrepresentation, alleges that plaintiff misrepresented to the Sellers that she had no outstanding loans or debts, and that she had cash reserves equal to 100 maintenance and mortgage payments. They state that they relied on those financial statements when they entered into the Contract.

In the third counterclaim, pursuant to the terms of the Contract, the Sellers are seeking the costs and attorneys' fees they incurred as a result of litigation arising out plaintiff's alleged breach of the Contract.

The additional facts developed upon the motion for summary judgment:

In September 2013, the Sellers listed the apartment for sale for the price of $575,000. Plaintiff submitted an initial offer of $535,000, with a down payment of $250,000. Plaintiff's offer letter stated that she had no loans/debt outstanding, a stable job, over $600,000 in total assets in bank and investment accounts and "post-closing liquidity: $276,000 (100+ months of mortgage and maintenance)."...Plaintiff further indicated that she had a mortgage pre-approval letter from the bank for $470,000.00.

On October 6, 2013, plaintiff accepted the Sellers' counter offer of $565,000. After the Sellers sent a proposed contract of sale to plaintiff's attorney and took the apartment off the market, plaintiff emailed the Sellers to request a reduction in the sale price. Plaintiff claimed that, after researching the financials and reviewing the board meeting notes, she had "some concerns around the financials of the building, and that a maintenance increase as well as an assessment will take place in the near future."...Plaintiff indicated that she was "revising" her offer price to $555,000, which would be "more in line with my original expectation"[.]

Majewski responded that he had spoken to real estate agents who sold apartments in the building, and that plaintiff's "typical due diligence findings do not merit a price reduction, and there is nothing out of the ordinary for the building."...Majewski noted that the average maintenance for 24-hour doorman buildings is $1,680, and "the lowest is $1,176 which is higher than our current maintenance."...Majewski continued that he did not "understand the logic for your reduced offer price. Assessments that we have experienced during 10 years in the building have been less than $1000 every 2 years . . . [and] these were mostly offset by the STAR rebate."[.]

Nevertheless, Majewski agreed, "[a]gainst my better judgment, in order to close the deal we are willing to meet you half way and reduce the price to $560,000."[.]

Evidently, after the Sellers reduced the initial accepted price, plaintiff emailed Jennifer Liu..."[s]o they went down to $560,000. Just as I expected. So we take it?"[.]

Liu, plaintiff's friend, would be living in plaintiff's apartment with her after the closing. Liu and plaintiff have known each other since high school and had previously started a business together. Plaintiff testified that she introduced Liu to the Sellers as her sister, not as a friend, and that she did not inform them that Liu is listed as a dependent on her tax forms.

In any event, despite plaintiff's professed concerns, on October 30, 2013, she and the Sellers executed the Contract for $560,000 and plaintiff provided the security deposit. Plaintiff then secured her mortgage loan commitment.

The record indicates that, on November 20, 2013, Majewski emailed plaintiff to check the status of her loan application and board approval package. He states, "[w]e are in the process of applying for our future home and would like to present that our home sale is close to closing."[.]

After a couple of email exchanges, in December 2013, plaintiff emailed the Sellers again, asking for a reduction in the purchase price of the apartment. She stated, "[i]f we can come to an agreement in the next day or so, I will have the board package submitted before week's end."...Plaintiff claimed that she was concerned, because the apartment was appraised at 40 percent less than the selling price.

The Sellers did not agree to a reduction, stating that their attorney and real-estate broker friends advised them that lower appraisal values are "common in this competitive market, but not an accurate expression of value. The market determines value."...Majewski reminded plaintiff that the apartment had undergone extensive renovations and that they "already made significant reductions, even reducing the price after we had reached an agreement...When we accepted your offer and signed the contract, there were multiple interested parties. It is not fair to expect further reductions after the competition has been removed."[.]

Plaintiff then emailed Liu, "They are unwilling to budge even one bit. What should I do?"[.]

After further communication from plaintiff regarding the appraisal value, the Sellers reminded plaintiff that it was she who was "adamant that the deal needed to be done quickly."...They continued, "[i]t is worrisome to us that after agreeing to the terms and signing the contract, you have done nothing but hedge and seek a lower price, causing delays."[.]

Plaintiff submitted the required documentation to the Corporation on December 17, 2013. When Majewski reviewed the documentation, he found that plaintiff had listed a personal loan of $177,000, which had not been listed on any prior financial documents. Majewski immediately emailed plaintiff about this discrepancy, stating, "[p]art of our decision to offer you the apartment was because of your high cash reserves. It is very concerning if this is a loan that you did not disclose to us, and are hopeful that there is some misunderstanding."[.]

In response, plaintiff advised that, although she did list her financial information correctly, her aunt "mentioned the possibility of needing some of the money she gifted to me back, but this is not certain. . . . Even with the deduction, there is still more than $100K of post-closing liquidity in my bank account...so I'm not sure that there would be an issue with the board."[.]

Plaintiff ultimately removed the loan from her application. Plaintiff's counsel emailed the Sellers' lawyer regarding the discrepancy and stated, "I am working with [plaintiff]. She wants the unit so don't please [sic] do not think she wants out of the deal."[.]

The record indicates that there is a letter from plaintiff's aunt, who signed a gift certification on November 7, 2013, prior to the board application. The gift certification advised that, on September 30, 2013, plaintiff's aunt "made a wire transfer to my niece, Regina Chen, in the amount of $102,000.00 for her home purchase. This was noted on the [transfer tax] form as a loan. Since then, I have decided to give the funds to her as a gift without repayment."[.]

Plaintiff met with the Corporation on January 6, 2014. Although not mentioned in the complaint, the record indicates that, right after plaintiff's interview, the board of directors approved the sale of the apartment, pending a credit report and registry check report on Liu. The Corporation reviewed financial and other documentation plaintiff submitted. The Corporation was aware that Liu would be living in the apartment with plaintiff and that plaintiff classified her as plaintiff's dependent.

Subsequently, on the morning of January 7, 2014, the board of directors informed the parties that it approved the sale of the apartment from the Sellers to plaintiff.

Also in the morning of January 7, 2014, plaintiff emailed her attorney and advised him to speak to the Sellers' attorney about reducing the price of the apartment. Plaintiff stated that she met with the Corporation and that, among other things, she was completely surprised to learn about an increase in maintenance of approximately $100 a month, and was surprised to learn that she would probably not be allowed to have a washer/dryer in the unit.

Plaintiff advised her attorney that, based on this "drastic increase," the price of the apartment should be adjusted to $523,500...She concluded, "[t]he 8% increase in maintenance immediately devalues the unit from the contract price of $560,000 to $523,500. This was totally not within my expectation when I signed the contract...[and] unless the sellers adjust the selling price...I would honestly have to let the board know that I could not afford the purchase."...She concluded, "[p]lease discuss with the seller's attorney as soon as you can as I need to send communication to the management company."[.]

A few hours later, plaintiff emailed the managing agent and requested that the agent email the Corporation the following information:

The truth is, I am not at all comfortable with making the monthly payments as it is over a 30% debt-to-income ratio. . . . Having to support 2 people on a single income, the original price was already a stretch for me, but with an 8% increase in maintenance . . . the apartment will become a burden for me. I know that the board has already sent you their decision, but could you please forward my concerns to them as it was their request that I would let them know[.]

After receiving plaintiff's email, the board members discussed the situation. In one email, a board member advised, "[w]ell, if we have a prospective shareholder that is uncertain of her financial resources, then it is in the building's best interest to reject this candidate. Based on [plaintiff's] email, I propose that we reject the shareholder."[.]

In the interim, Tamanaha emailed plaintiff, congratulating her on the Corporation's approval of the sale. Tamanaha stated that she was aware of plaintiff's claim that she could not afford the apartment due to the maintenance increase. She reminded plaintiff of the previous reduction in the price of the apartment to account for any future maintenance increase. Nevertheless she concluded,

in any case, in order to avoid potential litigation and the precious time we have all invested in this process, we would like to offer you an additional $2,500 decrease in price. That will cover an additional 27 months of the maintenance increase! Please consider this before claiming to the Board that you cannot afford the unit. Your financials prove that you can, indeed, afford the unit, as evident in both the Board and Bank approvals[.]

A few hours later, on January 7, 2014, the building's managing agent issued another letter to the Sellers advising them that the Corporation had denied the sale from the Sellers to plaintiff.

Plaintiff argues that her conduct in no way rises to the level of bad faith and that she did not make any misrepresentations regarding her income. She states that, "[a]t that meeting, I was informed for the first time that there was an 8% increase in maintenance and there would likely be increases for each of the next 2 to 3 years."...She states that the Corporation asked her if the increases would impact her ability to pay for the apartment. Plaintiff alleges that she advised them that she would need to review her budget and then she could give them an answer.

Plaintiff notes that, at the outset of negotiations, she had concerns about the price of the apartment and whether she could afford it with future maintenance increases. She claims that the Sellers are "attempting to misconstrue my honesty in sending the January 7, 2014 email as bad faith."...Plaintiff further argues that there was no fraudulent misrepresentation on her part regarding her income or other information.

According to plaintiff, the board members uniformly agreed that plaintiff should be rejected. She points to an email sent prior to her interview, where a board member had questions about plaintiff's finances.

Sellers' contentions:

The Sellers maintain that plaintiff is not entitled to the return of the deposit because she acted in bad faith throughout the negotiation and purchase process for the apartment, and intentionally sabotaged her interview with the Corporation. As noted above, plaintiff made numerous demands for the Sellers to lower the purchase price, even after she already signed the Contract and after the Corporation had initially approved the sale.

According to Sellers, plaintiff further acted in bad faith when she submitted her application to the Corporation, because this information contradicted plaintiff's actual financial documentation and plaintiff's previous continuous representations that she wanted the apartment. When plaintiff applied for the apartment, she stated that she had no loans or debt and that she had enough cash reserves for 100 mortgage and maintenance payments. She applied for and received a mortgage, and also the Corporation's approval, based on her financial documentation. The Corporation only rescinded their approval based on plaintiff's email, whereby she advised that the apartment would be a burden for her. Plaintiff had already received the approval and then, after asking for another price reduction from the Sellers, emailed the Corporation.

The Sellers argue that plaintiff further attempted to undermine the approval process by intentionally delaying in submitting her financial information to the Corporation and by listing false information on the application. For example, plaintiff listed a $177,000 loan on her application that she had never mentioned previously.

In addition, the Sellers contend that plaintiff's assertions that she was surprised or could not afford a maintenance increase, are mere pretext. They note that they addressed plaintiff's concerns regarding a proposed maintenance increase and reduced the price of the apartment based on those concerns. Further, the Sellers allege that they never made any representations in the Contract about a washer/dryer, and that this further demonstrates plaintiff's bad faith.

The Sellers also argue that plaintiff acknowledged that the contract included all representations regarding the apartment, including maintenance fees. The Sellers maintain that plaintiff cannot use her concern for maintenance fees as a legitimate basis to undermine the approval process.

Concluding that:

While the Contract provides that plaintiff may cancel the Contract if she does not receive the Corporation's approval, it also indicates that, if the Corporation's refusal is due to the purchaser's bad faith, the purchaser shall be in default. Here, plaintiff has failed to make a prima facie showing that there are no material issues of fact in dispute as to whether she satisfied the terms of the Contract, or as to whether her actions frustrated the Corporation's approval process. Even if plaintiff had met her burden, the Sellers raise issues of fact as to whether the Corporation's refusal to approve the sale was due to plaintiff's bad faith conduct.

Courts routinely deny summary judgment motions by purchasers seeking the return of their contract deposit, when issues of fact remain as to whether the Corporation's denial was due to the purchaser's bad faith conduct[.]

Here, triable issues of fact remain as to whether the Corporation's refusal to approve the sale was attributable to plaintiff's bad faith. In pertinent part, after plaintiff's initial interview and its review of the financial documentation plaintiff had submitted, the Corporation approved the sale of the apartment. However, the Board rescinded this approval based on a post-interview email from plaintiff. In that e-mail, plaintiff advised the Corporation that a planned increased of approximately $90-100 in maintenance each month would be burdensome for her, in light of having to support two people with one income.

Although plaintiff claimed surprise at the maintenance increase, the record contains multiple indications that plaintiff was aware of or should have known about the potential for maintenance increases. Specifically, after her initial due diligence, plaintiff informed the Sellers that she was revising her initial offer price, because, among other things, "issues point to an increase in maintenance and assessments at regular intervals, which was totally unexpected."...In response to these concerns, the Sellers offered to reduce the agreed-to price. Plaintiff then executed the Contract for the apartment.

Plaintiff claims that she did not act in bad faith when she contacted the Corporation about her concern that she could not afford the apartment. However, this conflicts with her continuous representations to Sellers regarding her ability to pay multiple years' worth of mortgage and maintenance payments based on her salary, assets and job. Even after the discrepancy on her application regarding the $177,000 loan, plaintiff assured Sellers that she still had more than $100K of post-closing liquidity, and that her cash reserves had gone up $26,000 since she submitted her offer. The Sellers even agreed to take $2,500 more off the sale price, to cover an additional 27 months of the maintenance increase.

Moreover, at no point, prior to her email to the Corporation, did plaintiff ever suggest that it would be hard for her to support two people on her single income. The Court further notes that, after receiving the board's approval, plaintiff informed the Sellers that, unless they negotiated and reduced the price to $523,500, she would have to inform the Corporation that she could not afford the apartment.

Plaintiff claims that all board members agreed that she could not afford the apartment, and points to concerns that one board member shared with the other members prior to the interview. However, there was no uniform conclusion by the Corporation, prior to plaintiff's post-approval email, that plaintiff could not afford the apartment.

Further, courts have dismissed purchasers' claims, seeking the return of deposit money, when they have acted in bad faith during the cooperative application process[.]

Here, credibility issues remain as to whether plaintiff, in good faith, submitted the documentation to the Corporation as required for the sale process. The record indicates that plaintiff received a gift of $102,000 prior to the application process. Nevertheless, during her deposition, plaintiff testified that, although $102,000 was a gift, she wrote down on her application that she owed a loan for $177,000, because her aunt might ask her to return the $102,000 gift, as well as to return some additional sums. "A motion for summary judgment should not be granted where the facts are in dispute, where conflicting inferences may be drawn from the evidence, or where there are issues of credibility."[.]

In addition, "a party may not frustrate the performance of an agreement by bringing about the failure of a condition precedent."...Here, the Contract was clear that the sale was subject to the approval of the Corporation, and the Corporation did initially approve plaintiff's application. However, it is not surprising that, after creating the impression that she could be a liability, the Corporation rescinded its approval. Accordingly, issues of fact remain as to whether plaintiff's actions caused the Corporation to rescind its approval and whether plaintiff made material misrepresentations to induce defendants into the contract and to take their property off the market.

Pastor v. Degaetano, 2018 NY Slip Op 32531(U), Sup. Ct. NY Co. (October 3, 2018)

Supreme Court, entertaining cross-motions for summary judgment in an action with respect to a $2.75 million downpayment held in escrow, summarized the facts:

This action arises from a contract of sale...executed by Buyer and Seller on March 21, 2012, for the purchase of a penthouse apartment...in a co-operative building...in New York. Buyer agreed to pay $27.5 million for the Penthouse and placed $2.75 million in escrow as a deposit. The Contract did not have a set closing date.

Under the Co-op's proprietary lease, the terrace appurtenant to the Penthouse is for the "exclusive use" of the Penthouse owner. Shortly after the Contract was entered, in May 2012, the Co-op's board...advised Buyer and Seller that the upper roof, "accessible by the stairs on the [Penthouse] terrace," "may be used by [all Co-op] shareholders at any time as a common area of the building," and that shareholder "[a]ccess to [the terrace] stairs is via the fire stairs, and a short path on the [Penthouse] terrace level." Next, in August 2012, the Board informed Buyer and Seller that the Board's consent to the sale was contingent on Buyer and Seller executing a conditional consent agreement...which contained the following acknowledgements and waivers:

the Co-operative and its shareholders have the right to use, maintain, reposition and replace the [terrace] Stairway...for the purpose of obtaining access to the [upper roof].

[Buyer] shall under no circumstances impede [Co-operative or shareholder] access to the Stairway[, and]...[a]ny violation of this provision shall constitute a default under the Lease; and [Seller and Buyer] each release the Co-operative, its officers, directors, employees, agents and shareholders, from any and all claims, demands and causes of action, of any nature whatsoever, regarding any right to use in conjunction with the Penthouse any portion of the roofs of the Building except as specifically described herein as being included within the Plan of the Penthouse.

Buyer and Seller refused to sign the Conditional Agreement. Seller then commenced [the Related Action] in this court, in September 2012, against the Co-op and the Board...seeking, among other things, a judgment declaring that the terrace is for the exclusive use and access of the Penthouse owner under the proprietary lease and enjoining the Co-op and Board from interfering with the Penthouse owner's rights.

The related action:

In the Related Action, Seller also sought the plan for the Penthouse referred to...the proprietary lease...which provides that the Penthouse owner "shall have and enjoy the exclusive use of the [terrace] as shown on the plan of the penthouse." That Proprietary Plan was not available when the Contract was executed; instead, annexed to the Contract was a floor plan of the penthouse and the terrace...Paragraph 52 of the Contract's rider required: "Seller shall deliver to [Buyer] at or prior to Closing the 'plan of the penthouse' referred to in the Proprietary Lease...from the [Co-op] or an agent thereof, addressed to the [Buyer] which [Proprietary] Plan shall be substantially similar to that of the floor plan annexed [to the Contract]."

Over the course of the Related Action, the Board withdrew its demand that Buyer and Seller execute the Conditional Agreement. Additionally, after entry of an interim order in the Related Action, dated May 23, 2013...the Co-op provided Seller with a floor plan for the penthouse and terrace...By letter, dated May 28, 2013, from counsel for the Co-op and Board, Robert J. Pariser to Buyer's attorney...Buyer was informed that "the Board has waived the [C]onditional [Agreement]" requirement," and attached a copy of the May Plan.

The subsequent developments:

The following day, May 29, 2013, Buyer's counsel notified Seller's counsel and the escrow agent...by letter that Buyer elected to cancel the Contract, and requested the return of the $2.75 million deposit, because the May Plan "is not substantially similar" to the Contract Plan. Buyer's counsel noted that the May Plan differed from the Contract Plan by including "a large stairway extending into the southeast terrace."

By letter, dated June 12, 2013, Seller's counsel rejected the cancellation, asserted that Seller had until the closing date to provide Buyer with the Proprietary Plan, and attached a new floor plan...also obtained through the Related Action. Seller's counsel stated that the June Plan "has been adopted by the Board...and which is substantially similar to...the [Contract Plan]," satisfying Seller's obligation under paragraph 52 of the rider...Seller's counsel further wrote that this court, on the record of the June 11, 2013 proceeding in the Related Action..."decreed that [the June Plan] is substantially similar to [the Contract Plan]"...In the letter, Seller's counsel scheduled a closing date of July 3, 2013, "time being of the essence"[.]

Buyer did not appear on the closing date, the parties' disputed entitlement to the deposit, and this action was commenced by Buyer in July 2013.

The prior proceedings:

By order, dated May 28, 2014, and on the record in the related oral argument, this court determined that Seller was ready, willing, and able to close at the time-of-the-essence closing, and Seller was entitled to retain the deposit due to Buyer's default...The court further dismissed Buyer's claims for breach of contract and return of the deposit, rescission based on mutual mistake, and breach of the implied covenant of good faith and fair dealing[.]

The prior appeal:

Buyer appealed...and the ruling was modified on appeal. The First Department found that "questions of fact remain[ed] as to whether the seller obtained unequivocal assurances that the coop's board of directors would not interfere with the buyer's right of exclusivity [to the terrace]"; thus, "the seller has not demonstrated that it was ready, willing, and able to close the sale"...The First Department further found that "there [were] questions of fact as to whether the seller breached the implied covenant of good faith and fair dealing[.]"

Specifically, the First Department, viewing the evidence in the light most favorable to Buyer, and based on the pre-discovery record with which it was provided, observed the following:

— The May Plan and the Co-op's statement that the Board waived the Conditional Agreement did not resolve the exclusivity issue to [Buyer's] satisfaction;

— The May Plan included a terrace stairway, not identified in the Contract Plan, which was the same maintenance stairway that the Board referenced in its May 2012 letter; and

— While the Co-op's attorney...stated that the Board would adopt the June Plan disclosed to Seller in the Related Action, and the Board had withdrawn its requirement that the parties sign the [Conditional Agreement], the Board did not withdraw its position as stated in the May 2012 letter, nor did it unequivocally and affirmatively acknowledge [Buyer's] right of exclusive use over the Terrace or state that the Board would refrain from taking future action to interfere with that right[.]

The First Department modified this court's May 2014 order by denying summary judgment to Seller on its counterclaim for breach of contract. The First Department explained that Seller had not, on that record, carried its burden of demonstrating that it was "ready, willing, and able" to perform on the closing date because Seller had "not adduced evidence that the Coop unequivocally withdrew its position with respect to the penthouse owner's right of exclusivity granted in the proprietary lease"; specifically, Seller had "not shown that the Board categorically recognized [Buyer's] right to exclusively use the terrace or stated that it would not seek to abrogate that right in the future"...Further issues of fact existed as to whether the any "of the plans provided by the Coop are the [Proprietary] Plan, because the Coop admitted that the original plan was lost and the [Seller] has not shown whether the Board formally adopted any of the new plans"[.]

The First Department noted that "the record [on appeal] suggests that [Seller] failed to achieve a sufficient resolution of the exclusivity issue" as it "abandoned" the Related Action without obtaining a decision on the merits — specifically, a declaratory judgment as to the Penthouse owner's rights...Thus, the First Department found:

In the context of the Board's previous attempts to interfere with [Buyer's] right of exclusivity, and contentious litigation between the [Seller] and the Coop — in which the Coop submitted the May Plan, which [Buyer] understood as representing the Coop's unwavering intent to convert the rooftop into a common area accessible via the [terrace's] maintenance stairs — anything short of an unequivocal assurance was inadequate. Even the subsequent June Plan, without more, would not suffice. Without the Board's affirmative and unequivocal acknowledgment that the shareholders have no right to traverse the terrace, and that [the Board] would not take future action to revoke [Buyer's] exclusive right to use that space, [Buyer] lacked adequate assurances that his right of exclusivity (and the market value of the apartment) would remain undisturbed if he consummated the sale[.]

Inasmuch as Seller had not demonstrated that Buyer was given those assurances, Seller had "failed to demonstrate its ability to close," and, "absent a showing that [Buyer] received unequivocal assurances that the Coop would not interfere with his right of exclusivity going forward, [Seller] cannot show that [Buyer] lacked a lawful excuse to abstain from attending the closing"...The First Department noted, however, that discovery "may reveal that the [Buyer] was given the requisite assurances, and that at least one of the plans offered at the closing was 'substantially similar' to the Contract Plan"[.]

The First Department further found that questions of fact existed as to whether Seller breached the implied covenant of good faith and fair dealing "when it submitted the May Plan," which was "substantially dissimilar to the Contract Plan," and set a time-of-the-essence closing date; thus, Buyer had raised questions of fact as to whether Seller and the Co-op had colluded "in order to force the closing, irrespective of whether the Board intended to take future action to interfere with [Buyer's] right of exclusivity"[.]

Concluding as to the buyer's motion for summary judgment that:

Buyer moves...for entry of a judgment against Seller in the amount of the deposit, $2.75 million, plus interest. Buyer argues that the First Department "ruled that he was excused from closing on the purchase unless he received clear and unequivocal assurances that" "the Co-op recognized his right to exclusivity with respect to the Terrace" and that it "would not, in the future, attempt to interfere with that right"[.]

In support of this argument, Buyer submits excerpts of the deposition of Maureen Klinsky, President of the Co-op and a member of the Board, who testified, generally that: the Board's position during the Related Action was always that that the upper roof was common area for all shareholders, solely accessible at that time by the terrace stairway, and that the Board never retracted its statements in the May 2012 letter...Buyer also submits his own affidavit stating that he never received any assurances that the Co-op would not interfere with his right of exclusivity if the transaction closed...Buyer asserts that, absent the unequivocal assurances contemplated in the decision on appeal, Buyer had no obligation to close and did not breach the Contract.

Seller responds that Buyer has not met his burden as to any of the four causes of action in the amended complaint.

*     *     *

In his notice of motion or moving papers, Buyer does not identify the cause(s) of action upon which he contends he is entitled to summary judgment. Buyer's four claims in the amended complaint allege:

(1) under the Contract, escrow agent DeGaetano was notified of Buyer's cancellation, did not receive timely notice of objection from Seller, and, therefore, Buyer is entitled to the deposit (first cause of action);

(2) the May Plan presented to Buyer is not the Proprietary Plan — which neither Seller nor the Co-op could locate...in any event, the May Plan was not substantially similar to the Contract Plan due to inclusion of the terrace stairway; thus, Buyer properly cancelled, and did not breach, the Contract (third cause of action);

(3) Buyer relied on the May Plan, changed his position and cancelled the Contract, then purchased a different, unrelated property that he located as a back-up in case . . . the Penthouse fell through. Accordingly, Seller is estopped from asserting that the [May Plan] is not the plan of penthouse approved by the Co-op, or that any later plan is the Proprietary Plan (fifth cause of action)[.]

(4) Seller breached the implied covenant of good faith and fair dealing when it, in bad faith, set a time-of-the-essence closing date without obtaining a final judgment in the Related Action; thus, Seller is estopped from claiming that it was ready, willing and able to perform (sixth cause of action)[.]

"Where a seller draws a prospective buyer into a transaction when it cannot possibly convey marketable title and then itself stymies the efforts of the buyer to remove the encumbrance, the seller may not rely on the language of the rider to keep the buyer's down payment"; additionally, where a seller is "in material breach of its contractual obligations to [the purchaser]," the purchaser may have "a lawful excuse for his failure to appear on the...closing date," precluding the seller from retaining the deposit under certain circumstances[.]

Here, Buyer has not established prima facie entitlement to judgment as a matter of law on any of its four claims. First, Buyer has not demonstrated entitlement to summary judgment as to its first cause of action, for breach of paragraph 27.1 of the Contract, which is dismissed for the reasons stated below[.]

As for the third cause of action, even if Buyer had demonstrated that the May Plan was a Proprietary Plan under the Contract, or was a plan approved by the Board, summary judgment is precluded by issues of fact as to whether the later plans tendered satisfied...the rider, which states that Seller had to present the Proprietary Plan "at or prior to Closing"...Issues of fact also exist as to whether Buyer had a lawful excuse to not appear at closing: his own statements that he received no assurances as to the exclusivity of the Penthouse owner's access to the terrace are insufficient to eliminate all triable issues of fact, and Klinsky's excerpted deposition testimony is equivocal.

Likewise, even if Buyer has met his burden of demonstrating prima facie entitlement for his fifth cause of action sounding in estoppel, Seller raises triable issues of fact as to whether Buyer's reliance in its evidence establishing that Buyer was involved with purchasing the unrelated property before the May Plan was tendered. Thus, there is an issue of fact as to whether the May Plan or the unrelated property transaction prompted Buyer to send the notice of cancellation[.]

As to his sixth cause of action, Buyer has not eliminated triable issues of fact as to Seller's alleged breach of the implied covenant of good faith and fair dealing in setting the time-of-the-essence closing date. Specifically, whether Seller acted in good or bad faith exist in that Seller obtained the May and June Plans through its efforts in the Related Action, and the June Plan may have been sought to cure Buyer's objection to the stairway in the May Plan. Apart from speculative and conclusory assertions, there is no evidence before the court establishing that Seller colluded with the Board, or sought to force the sale knowing that the Co-op or Board would not honor the Penthouse owner's rights regarding the terrace.

Finally, the court rejects Buyer's argument that it is entitled to the deposit because, absent unequivocal assurances to exclusivity from the Board, Seller could not force Buyer to close. On this motion, it is Buyer's burden to establish prima facie entitlement to judgment as a matter of law by eliminating triable issues of fact. Buyer has not demonstrated an absence of factual issues as to whether Seller was in material breach of its obligations between May 2013 or at closing in July 2013, there are issues of fact as to whether the May or June Plans were the Proprietary Plan or formally approved by the Board, and whether those Plans are substantially similar to the Contract Plan. Accordingly, there are issues of fact as to whether Buyer properly canceled the Contract or had a lawful excuse to not perform on the closing date.

And as to seller's cross-motion for summary judgment:

Seller next contends that Buyer's third cause of action must be dismissed because the Contract does not limit Seller to just one opportunity to provide a Proprietary Plan that is substantially similar to the Contract plan; rather, if there was a defect in the May Plan, Seller had the opportunity to, and did, cure that defect in tendering the subsequent June Plan.

Buyer responds that the inclusion of the staircase in the May Plan is not a "defect" which can be cured; it is "a factual position taken by [Seller] as to the scope of the `plan of the penthouse' and it was relied on by [Buyer]"[.]

Paragraph 52 of the Contract's rider does not limit Seller to one opportunity to providing Buyer with a Proprietary Plan substantially similar to the Contract Plan; Seller is plainly required to perform that obligation "at or prior to closing"...Nevertheless, issues of fact preclude summary judgment in favor of Seller as to this claim.

[F]actual issues exist as to whether the May Plan, or the June Plan, were formally approved by the Board, and whether Buyer did, in fact, rely on the May Plan in issuing the notice of cancellation. Furthermore, the evidence submitted by Seller as to the Co-op's assurances regarding access to the terrace are equivocal, incomplete, and/or conclusory. While Buyer's assertion that he received no assurances does not, itself, raise a triable issue of fact sufficient to defeat a motion for summary judgment, Seller has not met its burden of demonstrating that Buyer was presented with assurances beyond the Board's withdrawal of its requirement that he sign the Conditional Agreement to obtain approval.

For instance, [the attorney's] affirmation in support of the Co-op and Board's motion to dismiss the Related Action states that "the Co-op Board has no current plans to develop the upper roof (which, by the way, is not part of any known floor plan of the Penthouse unit). [The Estate/Seller] will not grant a thoroughfare to the upper roof via the terrace and there are no plans to force the issue by trying to force [Seller to] grant a thoroughfare"; however, [the attorney] added that "[t]here can be no personal liability running to any board member for merely thinking of developing a wonderful public space or thinking if there is some other way of accessing it"[.] Those statements are not sufficient to eliminate triable issues of fact and are contradicted by other evidence submitted in opposition to Seller's motion. Moreover, the evidence does not demonstrate that an unequivocal retraction of the Board's May 2012 position was communicated to Buyer.

For those same reasons, Seller has not demonstrated that there are no triable issues of fact as to whether Buyer had [a] contractual right to cancel the transaction in May 2013. The Board's waiver of the Conditional Agreement requirement does not retract the Board's May 2012 statement, as noted on appeal by the First Department, and none of Seller's submissions demonstrate that any further assurances were communicated to Buyer. These factual issues go to whether Seller was ready, willing, and able to close, when Seller was capable of performing, and whether Buyer has a lawful excuse not to close on the transaction.

Seller has likewise failed to eliminate all triable issues of fact in connection with Buyer's fifth cause of action sounding in estoppel. Seller argues that Buyer cannot simply cancel the contract without granting Seller an opportunity to cure the claimed defect — the inclusion of the stairway in the May Plan — and, in fact, the objection to the May Plan was cured by the June Plan submitted to Buyer.

Buyer responds that he justifiably relied on Seller's delivery of the May Plan, changed his position, and opted to purchase the unrelated property. To the extent there are issues of fact pertaining to Buyer's reliance, and whether such reliance was justified in light of the circumstances surrounding the Board's interference, the ongoing Related Action, and the inclusion of the stairway in the May Plan that was central to the issue of the Related Action, this prong of Seller's motion must be denied. The parties' equivocal and contradictory statements and submissions do not warrant summary dismissal.

[I]ssues of fact also preclude Seller's motion for summary judgment dismissing Buyer's sixth cause of action for breach of the implied covenant of good faith and fair dealing. Seller has not eliminated all triable issues of fact as to whether it was ready, willing, and able to close, whether it was capable of performing its obligations when it set the closing date, or whether the closing date was set in bad faith. Issues of fact also exist as to whether any of the plans were the Proprietary Plan contemplated in the Contract and the proprietary lease, even as of the closing date. Seller's evidence that Buyer was engaged in the transaction to purchase the unrelated property before the May Plan was sent, and that Buyer ultimately did purchase the unrelated property, but not the Penthouse, does not eliminate all triable issues of fact.

Finally, Seller's motion is denied as to its first counterclaim. [T]here are issues of fact as to whether Seller was ready, willing, and able to close, and whether Buyer has a lawful excuse for his failure to appear and perform at the time-of-the-essence closing. Seller's submissions in support of this counterclaim are insufficient to eliminate those and other triable issues of fact.

Monaghan v. Cole, 2018 NY Slip Op 32027(U), Sup. Ct. N.Y. Co. (August 15, 2018)

Supreme Court, addressing plaintiff's motion for summary judgment, described the pending motion:

This is a breach of contract action relating to a contract to purchase a cooperative apartment in a building located at 165 Perry Street, New York, New York...[T]he seller, plaintiff William S. Monaghan...as Trustee of the Monaghan Qualified Personal Residence Trust...moves...for an order granting summary judgment in his favor on his request for a declaratory judgment against defendant Eric Cole...the buyer...[C]ole moves for summary judgment in his favor on his counterclaims against Monaghan.

The complaint:

The complaint alleges that the Trust owns 23 shares of stock in the 165 Housing Corp., the owner of the residential cooperative building located at 165 Perry Street...The 23 shares owned by the Trust are allocated to Apartment 6 and the garage space in the basement allocated to the apartment...The complaint further alleges that, as of July 28, 2017, the Trust and Cole entered into a contract pursuant to which the Trust agreed to sell, and Cole agreed to purchase, the 23 shares allocated to the Unit, for a sum of $17,500,000.00, with a contract deposit of $1,750,000.00. In conformity with the contract of sale, Cole deposited $1,750,000.00 with the escrowee.

The complaint alleges that, prior to entering into the contract, Monaghan was in a dispute with the cooperative corporation...concerning the number of shares that should be allocated to the Unit. According to the complaint, on October 20, 2017, Monaghan informed Cole that he was negotiating a settlement with the Coop Board that would include a 15% increase in the maintenance for the Unit, but would not require any additional payment from Cole. The complaint alleges that Cole advised Monaghan that he was "'only prepared to proceed provided that the maintenance does not increase by more than 15%.'"...According to the complaint, on December 7, 2017, Monaghan sent Cole copies of the as yet unsigned agreements settling the dispute with the Coop. The agreements provided, among other things, that the Trust would purchase an additional 5 shares that would be allocated to the Unit, and that the maintenance for the Unit would increase by 15%. On December 12, 2017, Monaghan sent Cole copies of the signed agreements and notified Cole that the dispute had been settled, and that an interview of Cole by the Board was scheduled for January 6, 2018 at 10 a.m.

On December 15, 2017 and December 19, 2017, Cole was again notified of the scheduled interview. On December 20, 2017, however, Cole notified Monaghan that he had elected to cancel the contract of sale "'due to Seller's material default of its obligation not to enter into an agreement that would be binding upon Mr. Cole after closing'"...and demanded the return of his contract deposit.

On December 21, Monaghan gave Cole formal notice that he objected to the return of the contract deposit, considered Cole's action an anticipatory repudiation of the contract, and demanded that the deposit be remitted to the Trust, as liquidated damages for breach of contract. On January 8, 2018, Monaghan filed this action seeking a declaratory judgment that Cole had defaulted under the contract, and that Monaghan is entitled to receive the contract deposit as liquidated damages for breach of contract and default.

The answer and counterclaims:

On January 29, 2018, Cole filed his answer and counterclaims, alleging that the settlement agreement entered into between Monaghan and the Coop Board regarding the shares allocated to the Unit contained additional unrelated matters that imposed new conditions on Cole's use and occupancy of the Unit, in breach of their agreement. According to Cole, those new conditions far exceeded the terms of the proprietary lease, shifting the responsibility from the Coop to the shareholder for: 1) repair and replacement of all non-original windows in the Unit; 2) maintaining adjacent roof areas, including cleaning and inspecting those areas; 3) maintaining the air-conditioning portions of the combined air-conditioning/heating system; and 4) maintaining the portion of the garage area associated with the Unit. Additionally, the counterclaim alleges that the terms of the settlement agreement mandating that the vestibule adjacent to the 6th floor elevator, the service elevator and the stairwell would not be considered part of the Unit, and limiting the Unit owner's use of that space, and placing conditions on his use of the freight elevator, materially and adversely affected Cole's use and occupancy of the Unit. The counterclaim alleges that by agreeing to those terms without Cole's approval, Monaghan breached the contract, and that Cole is, therefore, entitled to a return of the contract deposit. Finally, Cole alleges that Monaghan breached the contract by making alterations to the Unit, without amending the building's certificate of occupancy...in violation...of the Contract.

As a second counterclaim, Cole alleges that he fully performed all of his obligations under the Contract, and, therefore, the seller's failure to return his deposit constituted a breach of the duty of good faith and fair dealing.

The contract of sale:

The printed Contract of Sale entered into by Monaghan and Cole is accompanied by a Rider and a Purchaser's Rider...which are collectively deemed the Contract...In addition, there is a side-letter to the Contract addressed to Cole and signed by Monaghan, dated July 28, 2017[.]

Section 4.1.6. of the printed Contract of Sale states:

Seller has not made any material alterations or additions to the Unit without any required consent of the Corporation or, to Seller's actual knowledge, without compliance with all applicable law. This provision shall not survive the closing.

Section 4.1.7 of the printed Contract of Sale states:

Seller has not entered into, shall not enter into, and has no actual knowledge of any agreement (other than the Lease) affecting title to the Unit or its use and/or occupancy after Closing, or which would be binding on or adversely affect Purchaser after Closing (e.g. a sublease or alteration agreement)[.]

Paragraph 34 of the Rider to the Contract of Sale states as follows:

Seller has advised Purchaser, and Purchaser acknowledges, that Seller is in a dispute with the Corporation with respect to how many Shares should be allocated to the Unit, and the monthly Maintenance amount. Purchaser acknowledges that Seller has no obligation to resolve such dispute with the Corporation or expend any funds in connection with the dispute. Seller may, in Seller's sole and absolute discretion, settle the dispute on any terms Seller finds acceptable, and Purchaser consent is not required in connection with any such settlement. However, in the event this dispute is not resolved by settlement or by a final, non-appealable court order, by December 31, 2017, or the Closing has not occurred by December 31, 2017 for any other reason, this Contract shall automatically terminate and thereafter, (i) the Contract Deposit and all interest accrued thereon shall be promptly returned to Purchaser, (ii) this Contract shall be of no further force or effect and (iii) neither party shall thereafter have any further rights or claims against the other and the Seller may sell the Unit to any third party as though this Contract had never been entered into[.] (underscoring in original)

The Side-Letter:

In addition, the Side-Letter states as follows:

Pursuant to paragraph 34 of Seller's rider to the Contract, Seller and Purchaser have agreed that, in the event the dispute between Seller and the Board...is not settled by December 31, 2017...the Contract shall automatically terminate by its terms...For the avoidance of doubt, if the Dispute is resolved prior to the Termination Date or Extended Termination Date (if Purchaser elects to extend the Termination Date), the Contract shall remain in full force and effect and the remaining terms of the Contract shall control Seller's and Purchaser's obligations thereunder.

*     *     *

Further to the above, Seller agrees to keep Purchaser informed with regard to any settlement discussions between Seller and the Board regarding the Dispute. If Seller intends to settle the Dispute and such settlement requires either (i) a payment for periods prior to the date a settlement is reached which Seller demands that Purchaser pay, or (ii) an increase in the Maintenance in excess of fifteen (15%) percent of the Maintenance as of the date hereof, Purchaser shall have the option to be exercised no later than five (5) business days after receiving notice from Seller of a proposed settlement of the Dispute, to terminate the Contract and receive return of the Contract Deposit in which case the Contract shall terminate[.]

Paragraph 31 to the Rider to the Contract of Sale states:

To the extent that there may be any conflict or inconsistency between provisions of this Rider, any provision of the main body of this Contract of Sale and any other rider attached hereto or thereto, the provisions of this Rider shall govern[.]

Plaintiff's arguments:

Monaghan's makes essentially two arguments in support of his motion for summary judgment. Monaghan first argues that [in Contract, Cole] agreed that Monaghan could "in Seller's sole and absolute discretion, settle the dispute [with the Coop concerning the number of shares allocated to the Unit] on any terms Seller finds acceptable, and Purchaser consent is not required in connection with any such settlement."...According to Monaghan, the only limitation on his discretion concerning the terms of the settlement was that if the settlement resulted in a maintenance increase for the Unit of more than 15% or a requirement that Cole make any payments for periods prior to the date of settlement, Cole had the option to terminate the contract, as memorialized in the Side Letter...Thus, according to Monaghan, since the maintenance increase was limited to 15%, and Cole was not required to make any payments involving the pre-settlement period, Cole had no basis for challenging any of the other provisions in the settlement agreement between Monaghan and the Coop.

Next, addressing the specific items of the settlement to which Cole objects, Monaghan notes generally that the number of shares that are allocated to an apartment fix the proportionate share of the Coop's expenses paid by the apartment as monthly maintenance. Therefore, a dispute about the number of shares to be allocated to the Unit, would impact the amount of maintenance to be paid by the shareholder. Monaghan argues that, for example, shifting of financial responsibility for the newly installed windows relates directly to the Coop's cash requirements. Had he not agreed to that shifting of responsibility, as a result of the increase in the number of shares allocated to the Unit, the maintenance for the Unit would have been increased, unless some other measures were taken to provide for the payment of certain costs. With respect to other costs specified in the settlement agreement such as the responsibility for cleaning and inspecting the roof adjacent to the Unit, Monaghan contends that, pursuant to...the Proprietary Lease, the Unit owner was already responsible for keeping "the terrace, balcony or portion of the roof appurtenant to his unit clean and free of snow, ice, leaves and other debris and shall maintain all screens and drain boxes in good condition."...Similarly, with respect to maintenance and repair of the garage, to the extent that portions of the garage are allocated for the exclusive use of the Unit, pursuant to...the Proprietary Lease, the shareholder is responsible for their maintenance and repair as part of the Unit[.]

With respect to whether the elevator lobby or vestibule is considered part of the Unit, Monaghan argues that nothing in the Contract suggests that the elevator lobby or vestibule is part of the apartment, and that, on the floor plan for the unit, the vestibule area is not labeled with dimensions, in contrast with the rooms within the apartment which are so labeled. In any case, according to Monaghan, the items deemed objectionable by Cole are reasonably related to the amount of maintenance that would otherwise be allocated to the Unit, and, therefore, well within his discretion to accept as conditions of the settlement.

Finally, with respect to Cole's objection about the limitations on his use of the freight elevator, Monaghan contends that, as noted in the Coop's offering plan, the freight elevator has manually operated doors...and that under...the Building Code of the City of NY, such elevators must be operated by a designated elevator operator[.]

Defendant's response:

[C]ole contends that the portions of the settlement agreement relating to the shifting of financial responsibility from the Coop to the shareholder constitute conditions adversely "affecting title to the Unit or its use and/or occupancy after Closing, or which would be binding on or adversely affect Purchaser after Closing," in violation of section 4.1.7 of the Contract of Sale.

Cole argues that despite...the Rider to the contract giving Monaghan the discretion to enter into a settlement with the Coop, that by agreeing to the additional terms discussed above, Monaghan abused his discretion...According to Cole, one of the benefits of the Contract was the acquisition of the Unit without any additional conditions or obligations, other than those disclosed in the proprietary lease, and that under...the Contract, Monaghan could not use his discretion to enter into a settlement agreement that would place such additional conditions on Cole. Moreover, according to Cole, Monaghan could have settled the dispute with the Coop without adversely affecting his use and occupancy of the Unit.

Cole further contends that the portion of the settlement which treats the lobby adjacent to the freight and passenger elevators as common space does not comport with the floor plan of the Unit that he was given. According to Cole, under the terms of the settlement, "approximately 100 square feet of space from the Unit and [were converted] it into common space"...and he was prohibited from installing built-in furniture or fixtures or using the space for storage, and thus "materially reduced the size of the Unit."...Cole notes that certain areas within the apartment such as the bathrooms, hallways and storage spaces are not labeled with dimensions on the floor plan. He argues that, as a result, the absence of vestibule dimensions on the floor plan would not have put him on notice that the vestibule is not considered part of the apartment. He also contends that the fact that the freight elevator is not for general use, may only be used for moving bulky items and special deliveries, can only be operated by the superintendent, and will remain locked when not in use, constitute "substantial additional restrictions on the Unit owner's ability to use the freight elevator."...By agreeing to these conditions, which according to Cole, violate...the Contract, Monaghan is in breach of the Contract.

Finally, Cole states that "[i]t is undisputed that Plaintiff made various alterations to the Unit, including altering the sixth-floor courtyard and the seventh-floor terrace areas. Plaintiff, however, failed to amend the Building's Certificate of Occupancy to include the terrace areas as usable space."...According to Cole, under the Administrative Code, no building or open space may be used without a C of O...and changes to an existing building or its open space must be reflected in a revised C of O...Thus, according to Cole, Monaghan's failure to amend the C of O constitutes a violation of...the Contract which states: "Seller has not made any material alterations or additions to the Unit without any required consent of the Corporation or, to Seller's actual knowledge, without compliance with all applicable law. This provision shall not survive Closing."[.]

With respect to his counterclaim for breach of good faith, Cole also argues that by entering into the settlement agreement which placed additional conditions on the Unit, Monaghan violated...the Contract and thereby defaulted on the Contract and that Cole, as the non-breaching party may elect to terminate the contract[.]

Plaintiff's reply:

In reply, Monaghan argues that Cole's reliance on section 4.1.7 of the contract fails, both because of section 34 which gave him absolute discretion to settle the dispute with the Coop regarding the allocation of shares and the maintenance for the Unit, and because the parties agreed, in paragraph 31 of the Rider and paragraph 47 of the Purchaser's Rider, that, to the extent that there was a conflict between the terms in the main body of the contract and any rider to the contract, the provisions in the rider would prevail.

As Monaghan contends, "[i]t is a fundamental principle of contract interpretation that when a handwritten or typewritten provision conflicts with the language of a preprinted form document, the former will control, `as it is presumed to express the latest intention of the parties.'"...Here, section 4.1.7 was part of the pre-printed contract, and paragraph 34, which gave Monaghan absolute discretion, was part of the typewritten rider, the provisions of which, the parties specifically agreed would prevail.

"[W]hen parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms."...Here the parties clearly agreed that the terms of the Riders would govern over the terms of the pre-printed contract, and that Monaghan had total discretion in reaching a settlement regarding the shares and maintenance allocated to the Unit, with the sole limitation that the maintenance would not be increased more than 15% and, that the buyer would not be required to make any payments for the period of time prior to the date of the settlement, as memorialized in the Side-Letter. Thus, the court need not reach Cole's argument that agreeing to the additional terms which are part of the settlement agreement constituted an abuse of discretion by Monaghan, or his contention that those additional terms constituted an improper burden on his use and occupancy of the Unit.

With respect to Cole's allegations that Monaghan made material alterations to the Unit without amending the C of O, Monaghan submits an affidavit in reply stating that he was one of the sponsors of the cooperative conversion of the Building and that:

  1. The sixth floor courtyard and the Penthouse terrace areas of Apartment 6 were constructed pursuant to plans approved by the New York City Department of Buildings.
  2. The sixth floor courtyard and the Penthouse terrace areas of Apartment 6 were part of Apartment 6 when the Certificate of Occupancy for Apartment 6 was issued on April 26, 1982.
  3. All alterations to Apartment 6 since 1982 were made pursuant to plans filed with and approved by the Department of Buildings under the existing April 26, 1982 Certificate of Occupancy.
  4. I have no actual knowledge of any material alterations or additions to Apartment 6 that were made without compliance with applicable law.

Concluding that:

The court notes that not all alterations to a building require a change in the C of O. Rather...the Administrative Code, relied on by Cole, requires the issuance of a new C of O where the alteration "change[s] from one occupancy group to another, or from one zoning use group to another, either in whole or in part." There is no suggestion that such changes of occupancy group or zoning group resulted from the alleged alterations.

In any case, in light of Monaghan's sworn statement, Cole's claim that it is undisputed that alterations were made that were not included in the C of O is clearly not correct, and his unsupported allegation that various unspecified alterations were made to the Unit after the original C of O was filed is inadequate to assert a violation...of the Contract of Sale.

The court concluded that Cole had no basis to terminate the contract and was not entitled to the return of his deposit.

Rao's City Views, LLC v. 215 Enterprises LLC, 2018 NY Slip Op 31445(U), Sup Ct. NY Co. (June 29, 2018)

Supreme Court, entertaining cross-motions for summary judgment, summarized the facts:

In November 2015, Rao entered into a written contract with 215 to sell 265 Pleasant Avenue, a/k/a 455 East 114th Street New York, New York to 215. The contract provided that if the New York City Department of Buildings did not issue a final certificate of occupancy...for the Building by closing, Rao would be required to deposit $500,000 of the sale proceeds in escrow, and would have nine months to obtain the C of O. If the C of O was issued by that deadline, Rao would be entitled to the escrow. If, on the other hand, the C of O was not issued by the deadline, 215 would be entitled to the escrow. On February 11, 2016, Rao conveyed the title of the property to Defendants 215 and 265 as 75% and 25% tenants-in-common respectively. Rao deposited $500,000 to an escrow account given to Stein. On November 10, 2016, the deadline date, the Department of Buildings issued a C of O for the entire Building. Rao demanded return of the escrow, but Stein still holds it. Rao alleges that it satisfied the Escrow Agreement by obtaining the C of O within the nine months and that it is entitled to the funds. Rao now moves for summary judgement on the ground that Rao fulfilled its duties in the Escrow Agreement, and 215 and 265 now cross-moving, seeking to obtain the escrow funds.

The breach of contract template:

A court should grant summary judgement if there is no disputed material fact and a judgement can be made as a matter of law..."To obtain summary judgment it is necessary that the movant establish [its] cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment in [its] favor"...."To state a claim for breach of contract, a Rao must allege: (1) the parties entered into a valid agreement; (2) plaintiff performed; (3) defendant failed to perform; and (4) damages."...The parties agree that the escrow agreement was valid. Rao claims that there is no dispute of fact that it performed under the escrow agreement and defendants did not.

The prior proceedings:

Contrary to what defendants argue, Rao has stated a cause of action for breach of the escrow agreement...Defendants also rely on res judicata. "[T]he party seeking to invoke the doctrine of res judicata must demonstrate that the critical issue in a subsequent action was decided in the prior action"...Here, defendants allege that a court has already decided the issue at hand, that being whether or not Rao obtained the C of O within the time specified. Defendants 215 and 265 rely on the fact that on November 8, 2016, Rao commenced an action against them for a declaration that Rao had substantially complied with the Escrow and was entitled to recover the funds. However, after obtaining the C of O two days later, Rao considered the lawsuit moot and discontinued it without prejudice. As this lawsuit was never adjudicated on the merits and was discontinued without prejudice it cannot be the basis for a res judicata claim here.

As to the pending action:

Defendants 215 and 265 also claim that Rao failed to obtain the C of O by the deadline, and therefore breached the contract, and that 215 and 265 are entitled to the $500,000. The Purchase and Sales agreement identifies the Premises in question as "Lot 22." The Second Amendment to the agreement modified the agreement so that the description of the property would also include Lot 121. Therefore, defendants argue that the C of O should cover lots 22 and 121. Defendants allege that the C of O is instead for lot 21 instead of for lots 22 and 121. True, the first page of the C of O only mentions lot 21. However, at the end of the second page of the C of O, it states "These Premises . . . Lots 22 . . . 121 . . . have been declared as one zoning regulation and have been recorded at the office of city register". Clearly, the Department of Buildings erred on the first page, and the second page, containing the text of the C of O, is more particular, and controls here. Defendants do not argue that they attempted to use the C of O and were denied anything because of this error on the first page. They were not prejudiced at all. Thus, Rao substantially complied with contract. Based on the C of O, lots 22 and 121 are indeed included in the C of O, contrary to defendants' allegations. Therefore, Rao did indeed obtain the requisite C of O by the deadline.

Defendants 215 and 265 further allege that they are owed damages because, contrary to what the escrow agreement required, Rao never turned over all the files that would enable the defendants to obtain a permanent C of O. They complain that due to this, they are unable to rectify the double taxing done by the City on their property as a result of Rao acquiring the C of O for the wrong property lots. However, the escrow agreement prefaces this requirement with the statement, "If the permanent certificate of occupancy is not issued on or before November 10, 2016. . . ." Rao did in fact obtain a permanent certificate of occupancy before this deadline, and so there was no need, as dictated in the escrow agreement, for Rao to turn over the files to the defendants. Rao is not liable for the city's double-taxation.

The Court ordered release of the funds held in escrow to plaintiff.

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