Park v Zbarsky

[*1] Park v Zbarsky 2009 NY Slip Op 51165(U) [23 Misc 3d 1137(A)] Decided on May 21, 2009 Supreme Court, New York County Stallman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 21, 2009
Supreme Court, New York County

Jin Young Park, Plaintiff,

against

Oksana Zbarsky, Vadim Zbarsky, and Craig F. Meltzer, Esq. As Escrowee, Defendants.



116761/08



Appearances:

For Plaintiff:

Anderson & Ochs, LLP

By: Steven S. Anderson, Esq.

61 Broadway, Suite 2900

New York, New York 10006

(212) 344-3600

For Defendants:

Stephen Lazman, Esq.

276 Fifth Avenue, Suite 306

New York, New York 10001

(212) 532-3368

Michael D. Stallman, J.

Defendants, Oksana and Vadim Zbarsky, sellers of a cooperative apartment (the sellers), and Craig F. Meltzer (Meltzer), seller's escrowee, move, pursuant to CPLR 3212, for summary judgment to dismiss the complaint and to retain the contract deposit paid by plaintiff, pursuant to a contract for the sale of the apartment. Defendants also seek reasonable attorneys fees. Plaintiff purchaser has cross-moved for summary judgment, pursuant to CPLR 3212, seeking a return of the contract deposit, and injunctive relief against the escrowee.

BACKGROUND

The facts in the case are not in dispute. In July 2008, the sellers and plaintiff's assignor entered into a contract for the sale of a cooperative apartment, for a total selling price of $4,000,000, with a deposit of $400,000. The original purchaser was [*2]JYP R & D Center, Inc., of which plaintiff represented himself to be the sole shareholder, director and officer. On October 1, 2008, the contract of sale was assigned to plaintiff, allegedly at the request of the cooperative board.

Plaintiff was interviewed by the cooperative board and the building's management agent, and on October 21, 2008, the managing agent proposed that plaintiff provide one year's maintenance payment in advance as part of the board's approval of the purchase. By letter to plaintiff's counsel from the managing agent, dated November 5, 2008, the managing agent acknowledged that plaintiff had agreed, on October 28, 2008, to prepay one year's maintenance. That same day, November 5, 2008, plaintiff's counsel contacted Meltzer, who was representing the sellers as well as acting as their escrowee, and informed Meltzer that plaintiff changed his mind and was unwilling to prepay one year's maintenance.

On November 6, 2008, Meltzer wrote to the managing agent, informing them that the sellers were willing to fund, on behalf of plaintiff, the one-year's maintenance. On November 7, 2008, the managing agent wrote to Meltzer, acknowledging the sellers' proposal, and enclosed an escrow agreement to be signed by the parties, formalizing the arrangement. By an escrow agreement between the cooperative board and the sellers made as of November 13, 2008, which plaintiff also signed, the sellers put $38,558.76 as security for the payment of maintenance charges and assessments, which the cooperative board could drawn upon if plaintiff defaulted in payments of maintenance charges or assessments or other charges of the cooperative.

By letter dated November 19, 2008, plaintiff's counsel wrote to Meltzer, saying that plaintiff was cancelling the purchase, asserting that closing was originally set for October 2, 2008, and required the unconditional approval of the cooperative board, neither of which had occurred. Plaintiff's counsel also stated that plaintiff was unable to obtain the financing he needed, due to the worldwide economic depression, which he referred to as an "Act of God." In this letter, plaintiff requested the return of the deposit that Meltzer was holding in escrow.

By letter dated November 21, 2008, the managing agent confirmed its willingness to close on the sale upon receipt of the signed escrow agreement. On November 28, 2008, plaintiff's counsel again wrote to Meltzer, indicating that plaintiff was unwilling to close because of the economic situation, which he again referred to as an "Act of God." Meltzer responded on December 2, 2008, advising plaintiff that the sellers were prepared to close, and set a closing date for December 15, 2008. In his cross motion papers, plaintiff asserts that the sellers were attempting to establish December 15, 2008, as a time of the essence clause, which would constitute an impermissible modification of the contract.

The pertinent provisions of the contract are: [*3]

Paragraph 6.3:

"Either Party, after learning of the Corporation's

decision shall promptly advise the other Party thereof.

If the Corporation has not made a decision on or before

the Scheduled Closing Date, the Closing shall be

adjourned for 30 business days for the purpose of

obtaining that consent. If such consent is not given

by such adjournment date, either Party may cancel this

Contract by Notice, provided that the Corporation's

consent is not issued before such Notice or cancellation

is given. 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 Purchaser."

Paragraph 13.1:

"In the event of a default of misrepresentation by

Purchaser, Seller's sole and exclusive remedies shall

be to cancel this Contract, retain the Contract Deposit

as liquidated damages and, if applicable, Seller may

enforce the indemnity in ¶ 13.3 as to brokerage commission

or sue under ¶ 13.4. Purchaser prefers to limit Purchaser's

exposure for actual damages to the amount of the Contract

Deposit, which Purchaser agrees constitutes a fair and

reasonable amount of compensation for Seller's damages

under the circumstances and is not a penalty. The

principles of real property law shall apply to this

liquidated damages provision."

Paragraph 13.3

"Subject to the provisions of ¶ 4.3,[FN1] each Party indemnifies

and holds harmless the other against and from any claim,

judgment, loss, liability, cost or expense resulting from

indemnitor's breach of any of its representations or

covenants stated to survive Closing, cancellation or

termination of this Contract. Purchaser indemnifies and

holds harmless Seller against and from any claim, judgment,

loss, liability, cost or expense resulting from the Lease

obligations accruing from and after the Closing. Each

indemnity includes, without limitation, reasonable attorneys' fees and disbursements, court costs and litigation expenses arising from the defense or any

claim and enforcement or collection of a judgment under [*4]

this indemnity, provided the indemnitee is given Notice

and opportunity to defend the claim. This ¶ 13.3 shall

survive Closing, cancellation or termination of this

Contract."

Paragraph 37:

"At Closing Purchaser shall cooperate with the Corporation

by providing such reasonable corporate documentation of

authority, personal guarantee(s) or maintenance escrow

as the Corporation may reasonably require."

Paragraph 39:

"Purchaser acknowledges that this contract is not

contingent on financing."

DISCUSSION

"The proponent of a summary judgment motion 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 from the case [internal quotation marks and citation omitted]." Santiago v Filstein, 35 AD3d 184, 185-186 (1st Dept 2006). The burden then shifts to the motion's opponent to "present facts in admissible form sufficient to raise a genuine, triable issue of fact." Mazurek v Metropolitan Museum of Art, 27 AD3d 227, 228 (1st Dept 2006); see Zuckerman v City of New York, 49 NY2d 557, 562 (1980). If there is any doubt as to the existence of a triable fact, the motion for summary judgment must be denied. See Rotuba Extruders v Ceppos, 46 NY2d 223, 231 (1978).

It is well-settled under New York law that "a vendee who defaults on a real estate contract without a lawful excuse cannot recover the down payment." Maxton Builders, Inc. v Lo Galbo, 68 NY2d 373, 378 (1986); Rivera v Konkol, 48 AD3d 347 (1st Dept 2008); Gillette v Meyers, 42 AD3d 654 (3d Dept 2007). Therefore, the court must determine whether the excuses proffered by plaintiff are legally sufficient to warrant the return of his down payment.

In support of his cross motion, plaintiff has indicated three reasons why he is entitled to the return of his deposit: (1) the contract was cancelled because the cooperative board failed to give its unconditional approval for the sale by inserting a condition precedent requiring the prepayment of one-year's maintenance; (2) the economic downturn in the economy constitutes an "Act of God" vitiating the agreement; and (3) the sellers' attempt to insert a time of the essence provision for the closing is an impermissible modification of the contract, and the sellers have failed to establish that they could tender performance on the closing date they selected. Each of these excuses shall be addressed in turn.

Contrary to what plaintiff asserts, the cooperative board did grant its approval of the sale on October 21, 2008, provided that [*5]plaintiff fund one-year's maintenance in advance. Plaintiff asserts that this prepayment created a condition precedent, thereby negating the board's unconditional approval.

"As a general rule, it must clearly appear from the contract itself that the parties intended a provision to operate as a condition precedent . . . and that where there is ambiguity in a contractual term, the law does not favor a construction which creates a condition precedent.'" Gallo v Rea Motors, 34 AD3d 635, 636 (2d Dept 2006)(citations omitted). Here, according to paragraph 37 of the contract noted above, placing maintenance in escrow was one of the conditions to which plaintiff agreed, separate and distinct from the cooperative board's approval. Moreover, even if the approval of the co-op board prior to the scheduled closing on October 2, 2008 were a condition precedent, plaintiff's action in signing the escrow agreement on November 13, 2008, constitutes a waiver of any such condition. See Vincent v Seaman, 152 AD2d 841 (3d Dept 1989). Consequently, this first argument posed by plaintiff is unavailing.

Plaintiff's second argument, that the worldwide economic downturn is an "Act of God," is an assertion that is totally unsupported by any statutory or judicial precedent, and one that the Court finds to be specious. Since the contract specifically stated that obtaining financing was not a contingency, this assertion by plaintiff that the contract should be deemed cancelled is unconvincing.

Lastly, plaintiff maintains that the sellers were impermissibly attempting to insert a time of the essence clause, and, regardless, that the sellers were unable to tender performance on that date because their cooperative shares were encumbered by a security interest held by JP Morgan Chase Bank. The security interest held by JP Morgan Chase Bank appears to be the mortgage given to it by the sellers when they financed the apartment.

According to the contract, the closing date originally scheduled could be extended pending cooperative board approval. The approval was given on October 21, 2008, and confirmed on November 13, 2008, when plaintiff and the sellers signed the escrow agreement. Once again, according to the contract, the closing date could be set 30 days after such approval, and the date established by the sellers fits within those parameters.

Regardless of how the December 15, 2008, date is characterized, it was plaintiff who refused to close, as evidenced by his letter of November 19, 2008, barely six days after signing the escrow agreement. When plaintiff stated that the sellers were to "consider this letter as the cancellation of the Contract and return the contract deposit money in the amount of $400,000.00 immediately to this office. This notice is final (Defendants' Ex. L)," plaintiff repudiated the agreement prior to the closing. This anticipatory breach entitled the sellers to seek immediate damages [*6](Acacia National Life Ins. Co. v Kay Jewelers, Inc., 203 AD2d 40 [1st Dept 1994]), since the reasons for the termination articulated by plaintiff are insufficient to terminate the agreement, as discussed above. When the sellers set a December 15, 2008, closing date, under these facts, they were affording plaintiff an opportunity to cure his breach, which he failed to do.

Plaintiff's averment that it was the sellers who breached, because they could not deliver a clear title, is an argument that goes against general legal principles.

"[I]n order to place a vendor of realty under a contract

of sale in default for a claimed failure to provide clear

title, the purchaser normally must first tender performance

himself and demand good title [and] [t]ender of performance

by a purchaser is excused only if the title defect is not

curable [internal quotation marks and citations omitted]."

Texter v Trotta, 48 AD3d 455, 456 (2d Dept 2008).

Since plaintiff failed to tender performance, and the security interest held by JP Morgan Chase Bank is presumably capable of being cleared at the time the purchaser has the funds to complete the sale, this argument does not warrant a finding in plaintiff's favor.

Finally, pursuant to paragraph 13.3 of the contract, defendants are entitled to the reasonable attorneys' fees and costs associated with this litigation.

CONCLUSION

Based on the foregoing, it is hereby

ORDERED that defendants' motion for summary judgment is granted to the extent of dismissing the complaint, with costs and disbursements to defendants as taxed by the Clerk of the Court, and the Clerk of the court is to enter judgment in defendants' favor

accordingly; and it is further

ORDERED that defendant Meltzer, as escrowee, is directed to turn over the deposit held in escrow to defendants Oksana Zbarsky and Vadim Zbarsky, upon service of a copy of this order with notice of entry; and it is further

ORDERED that defendants are granted summary judgment as to liability on their third counterclaim, seeking the recovery of attorneys' fees, which is severed and referred to a Special Referee to hear and determine; however, upon the filing of a stipulation of the parties, as permitted by CPLR 4317, another person designated by the parties to serve as referee, shall determine the attorneys' fees; and it is further

ORDERED that plaintiff's motion for summary judgment is denied.

Footnotes

Footnote 1: This paragraph concerns the veracity of the parties' covenants, and states that the covenants shall survive the closing, but any action based on them must be instituted within one year of closing.