Howard v Baxter St. Dev. Co., LLC

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[*1] Howard v Baxter St. Dev. Co., LLC 2009 NY Slip Op 51612(U) [24 Misc 3d 1225(A)] Decided on July 16, 2009 Supreme Court, New York County Gische, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 16, 2009
Supreme Court, New York County

Stacey Howard and NEIL HOWARD, Plaintiffs,

against

Baxter Street Development Company, LLC, Defendant.



114093/08

Judith J. Gische, J.



This is a breach of contract action. Plaintiffs move for summary judgment for, inter alia, return of a deposit plus accrued interest and legal fees. CPLR § 3212. Plaintiffs also move, pursuant to CPLR § 3211 (a) (2), to dismiss defendant's counterclaim for a declaratory judgment. Defendant opposes the motion.

The note of issue has not yet been filed, but issue has been joined; therefore summary judgment relief is available. Brill v. City of New York, 2 NY3d 648 (2004).

Defendant is the sponsor and owner of the condominium development construction project/building located at 123 Baxter Street, New York, New York. On August 15, 2006, the Attorney General of the State of New York accepted for filing defendant's Condominium Offering Plan For Residential Units in a Condominium known as Baxter Street Condominium (the "Offering Plan"). The Offering Plan states in relevant part, the following: The Sponsor expects the first closing of a Unit to occur on or about July 1, 2006. A purchaser will be offered rescission if Sponsor is unable (unless such inability arises or results from the purchaser's default) to close under a Purchase Agreement within twelve (12) months after the anticipated date of first closing of a unit (emphasis added).

In addition, a copy of the Purchase Agreement in the Offering Plan states that July 1, 2006 is the anticipated date of closing. Paragraph numbered "22" of the Approved Purchase Agreement in the Offering Plan states the following: Right of Rescission. You expect the first closing of a Unit to occur on or about July 1, 2006. A purchaser will be offered rescission if Sponsor is unable (unless such inability arises or results from the purchaser's default) to close under a Purchase Agreement within twelve (12) months after the anticipated date of first closing of a unit (emphasis added).

Plaintiffs Neil Howard, and his daughter, Stacey Howard, and the defendant [*2]entered into a Purchase Agreement dated June 15, 2007 (the "Agreement") to purchase Unit 3D (the "unit"). Paragraph 22 of the Agreement provides as follows: Right of Rescission. You expect the first closing of a Unit to occur on or about July 1, 2007. As purchaser I will be offered rescission if you are unable (unless such inability arises or results from my default) to close under this Agreement within twelve (12) months after the anticipated date of first closing of a unit (emphasis added).

Paragraph 29 of the Agreement states in pertinent part: Entire Agreement. This Agreement, which is deemed to incorporate the Offering Plan, states the entire understanding between us and you shall not be bound by any oral or other representations and/or agreements except as otherwise may be set forth herein or in the Offering Plan. Any conflict between this Purchase Agreement and the Offering Plan shall be resolved in favor of the Plan (emphasis added).

This action arises from the inconsistent dates set forth in the Offering Plan and Approved Purchase Agreement, as compared to the Agreement, to wit: July 1, 2006 versus July 1, 2007. Mr. Howard maintains in his affidavit that prior to plaintiffs' purchase of the unit, he was "assured that the [u]nit would be ready to close by mid-July 2007, but no later than August 31, 2007" and based upon this representation, as well as the Offering Plan, plaintiffs entered into the Agreement to purchase the unit for $1,265,000. Mr Howard states that it was "essential" that Ms. Howard move into the unit prior to August 31, 2007 because the lease on the apartment which she was renting at the time was due to expire and her classes at the School of Visual Arts would commence shortly thereafter.

Mr. Howard provides extensive detail as to conversations between him and representatives of the defendant about scheduling a closing date for the unit in July 2007. A closing date was originally scheduled for August 27, 2007. In preparation for the closing, Mr. Howard states that he scheduled a walk-thru of the unit, hired an interior designer and purchased furniture specifically for the units. Nonetheless, on August 11, 2007, Mr. Howard learned that the August 27, 2007 closing date had been adjourned by the defendant because the "Declaration of Condominium" would not be recorded in time to proceed with the closing. According to Mr. Howard, the new closing date for the unit was then scheduled between September 17, 2007 and October 2, 2007. Mr. Howard thereafter indicated to the defendant that he and his daughter wished to exercise their right to rescind the Agreement.

Defendant refused to honor such right, claiming that the 2006 dates contained in the Offering Plan and the Approved Purchase Agreement were typographical or scrivener's errors and that under the Agreement, plaintiffs' right to rescind would not vest until July 1, 2008..

On or about September 21, 2007, the plaintiffs filed an Application with the New York State Attorney General's Office for a Determination of the Disposition of Their Down Payment. Defendant opposed that application. On October 24, 2008, the [*3]plaintiffs withdrew their Application before the Attorney General and, thereafter, brought this action.

Discussion

On this motion for summary judgment, plaintiffs bear the initial burden of setting forth evidentiary facts to prove their prima facie case that would entitle them to judgment in their favor, without the need for a trial. CPLR § 3212; Winegrad v. NYU Medical Center, 64 NY2d 851 (1985); Zuckerman v. City of New York, 49 NY2d 557, 562 (1980). Only if this burden is met, will it then shift to the defendant, who must then establish the existence of material issues of fact, through evidentiary proof in admissible form, that would require a trial of this action. Zuckerman v. City of New York, supra . If plaintiffs fail to make out their prima facie case for summary judgment, however, then the motion must be denied, regardless of the sufficiency of the opposing papers. Alvarez v. Prospect Hospital, 68 NY2d 320 (1986); Ayotte v. Gervasio, 81 NY2d 1062 (1993).

Granting a motion for summary judgment is the functional equivalent of a trial, therefore it is a drastic remedy that should not be granted where there is any doubt as to the existence of a triable issue. Rotuba Extruders v. Ceppos, 46 NY2d 223 (1977). The court's function on these motions is limited to "issue finding," not "issue determination." Sillman v. Twentieth Century Fox Film , 3 NY2d 395 (1957). When only issues of law are raised in connection with a motion for summary judgment, the court may and should resolve them without the need for a testimonial hearing. Hindes v. Weisz, 303 AD2d 459 (2d Dept. 2003).

The elements of a cause of action for breach of contract are: (1) formation of a contract between the parties; (2) performance by plaintiff; (3) defendants' failure to perform; and (4) resulting damage. Furia v. Furia, 166 AD2d 694 (2nd Dept. 1990). "To create a binding contract, there must be a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms." Express Industries and Terminal Corp. V. New York State Dept. Of Transportation, 93 NY2d 584 (1999).

Plaintiffs seek summary judgment on their first cause of action for breach of contract, arguing that the defendant breached the Agreement by failing to close on the unit before July 1, 2007. They claim that they thereafter timely rescinded the Agreement, but the defendant failed to return the down payment. However, there is no dispute that under the Agreement, plaintiffs' right to rescind did not vest until July 1, 2008.

Plaintiffs' original argument on this motion was that defendant could not enforce the Agreement because the defendant violated GBL § 352-e and 13 NYCRR 20.3(o)(17) by failing to provide to plaintiffs the Approved Purchase Agreement for signature. Plaintiffs maintain that the Agreement was unenforceable because it was not submitted to or approved by the Attorney General. By virtue of this argument, plaintiffs seek to transform a simple breach of contract action to a private cause of action under GBL § 352-e, also known as the Martin Act, and under the regulations of the Attorney General compiled at 13 NYCRR § 20.3. There is no private cause of action under the Martin Act (see 885 W.E. Residents Corp. v. Coronet Properties Co., 220 AD2d 305, 632 NYS2d 556 [1 Dept 1995]), or under 13 NYCRR § 20.3 (see Vermeer Qwners, Inc. v. Guterman, 78 NY2d 1114 [1991]). Therefore, plaintiff arguments based upon the [*4]aforementioned statutory and regulatory violations are rejected.

The only other argument advanced by plaintiffs, then, is that under paragraph 29 of the Agreement, which provides that any conflicting language between the Agreement and Offering Plan should be decided in favor of the Offering Plan, the date upon which plaintiffs' right to rescind the Agreement vested should be July 1, 2007 as per the Offering plan. Defendant, however, contends that there are numerous issues of fact about whether the 2006 dates contained in the Offering Plan and Approved Purchase Agreement are mere "scrivener's errors" and should therefore be disregarded, and the Agreement be enforced according to its plain meaning. In support of this argument, defendant points to the followings facts and/or documentary evidence: [1] the Attorney General did not accept the Offering Plan until 45 days after the alleged anticipated closing date; [2] the Offering Plan was not declared effective until June 25, 2007, [3] the Declaration of Condominium was not filed until September 28, 2007; [4] the Projected Budget under the Offering Plan was not scheduled to begin until January 1, 2007; [5] Paragraph 2 of the Agreement provides that the earliest possible closing date would be the forty-fifth day after the date of the agreement, which would have been July 30, 2007; and [6] Paragraph 22 of the Agreement did not provide for a right of rescission prior to July 1, 2008. Moreover, defendant argues that summary judgment is premature since substantial discovery remains outstanding.

Plaintiffs' counter-argument is that they should not be penalized for defendant's careless errors with respect to its drafting of the Offering Plan and Approved Purchase Agreement. Plaintiffs maintain that the Offering Plan should be "enforced as written, paying no attention to the Defendant's implausible excuses for breaching the Plaintiffs' contract."

Generally, the contract is to be interpreted so as to give effect to the intention of the parties as expressed in the unequivocal language employed (see, Matter of Wallace v. 600 Partners Co., 86 NY2d 543 [1995]; Breed v. Insurance Co. of North Amer., 46 NY2d 351 [1978]). Here, however, the date of rescission in the Agreement clearly contradicts with the date of rescission set forth in the Offering Plan which is incorporated into the Agreement via Paragraph 29. Plaintiffs have failed to establish that the general provision contained in Paragraph 29 which incorporates the terms of the Offering Plan should, as a matter of law, supersede the specific provision which provides that plaintiffs' right to rescind the contract vested on July 1, 2008. At most, plaintiffs have established an ambiguity in the contract, which is not susceptible to summary adjudication. Even if plaintiffs could establish a prima facie case on this motion, defendant has raised issues of fact that preclude summary judgment Accordingly, plaintiffs are not entitled to summary judgment on their breach of contract claim. Having failed to prevail on the substantive claim, plaintiffs are certainly not entitled to reimbursement for their legal fees.

Plaintiffs also seek dismissal of defendant's counterclaim for declaratory judgment: [1] determining the validity of the Agreement; [2] the rights and liabilities of the parties under the Agreement; [3] that there was a mutual mistake between the plaintiffs and the defendant arising from a scrivener's or typographical error in the Offering Plan that the first closing of a unit was to occur on or about July 1, 2006, when in truth and in fact the date should have been July 1, 2007; [4] that the plaintiffs' right to rescind did not arise until July 1, 2008 and not July 1, 2007, as set forth in the Offering Plan; and [5] that defendant is entitled to retain the trust funds presently held by Hartmand and Craven. Plaintiffs' argument is that since the Agreement contained a [*5]modification from the Approved Purchase Agreement, to wit, the closing date of July 1, 2007 versus July 1, 2006, the Agreement is unenforceable since it was not "properly reviewed and approved by the Attorney General's Office for distribution to the public" and therefore, defendant's declaratory judgment is "not ripe for adjudication" under GBL § 352-e and 13 NYCRR 20.1 et seq.

Although the Martin Act gives the Attorney General the power to commence an action based upon fraudulent or misleading statements contained in an condominium offering plan (see GBL § 352-e; see also State v. 7040 Colonial Road Associates Co., 176 Misc 2d 367 [NY Sup, NY Co 1998]), these provisions do not impose a limitation on defendant's rights to seek a judicial determination as to the validity of the Agreement. Accordingly, plaintiffs' motion to dismiss defendant's counterclaim for declaratory judgment is denied.

Conclusion

In accordance herewith, it is hereby:

ORDERED that the motion for summary judgment is denied.

The court hereby schedules a preliminary conference to be held in this matter on August 13, 2009 in Part 10, 60 Centre Street, Room 232.

Any requested relief not expressly addressed has nonetheless been considered and is hereby denied.

This shall constitute the decision and order of the Court.

Dated:New York, New YorkSo Ordered:

July 16, 2009_______________________

Hon. Judith J. Gische, J.S.C.

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