Khanal v Sheldon

[*1] Khanal v Sheldon 2012 NY Slip Op 50897(U) Decided on May 15, 2012 Supreme Court, Queens County Kitzes, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 15, 2012
Supreme Court, Queens County

Tara Khanal, Plaintiff,

against

Dave Sheldon a//k/a DAVID SHELDON DARREN K. KEARNS AND LAU & ASSOCIATES, P.C., as Escrow Agent, Defendants.



2958/07

Orin R. Kitzes, J.

The following papers numbered 1 to 11 read on this motion by plaintiff for an order granting summary judgment in her favor on the first cause of action for breach of contract and second cause fo action for specific performance under the contract of sale and the return of her down payment in the sum of $50,000.00, together with a money judgment against defendant DAVE SHELDON a//k/a DAVID SHELDON, ("defendant") in the amount of the $50,000.00 down payment with interest thereon from the date of the breach by reason of the defendant's refusal to return the down payment upon due demand.

PAPERSNUMBERED

Notice of Motion-Affirmations-Exhibits.....................................1-4

Affirmation in Opposition & Request For Judgment-Exhibits....5-8

Reply Affirmation-Exhibits..........................................................9-11

Upon the foregoing papers it is ordered that this motion by plaintiff for an order granting summary judgment in her favor on the first cause of action for breach of contract and second cause fo action for specific performance under the contract of sale and the return of her down payment in the sum of $50,000.00, together with a money judgment against defendant in the amount of the $50,000.00 down payment with interest thereon from the date of the breach by reason of the defendant's refusal to return the down payment upon due demand is granted, for the following reasons:

According to the complaint, this action arises from a contract entered into on or about September 19, 2006, wherein plaintiff was to purchase from defendants Dave Sheldon and Darren Kearns the premises known as 148-18 Laburnum Avenue, Flushing, NY. Thereafter, plaintiff commenced the instant action for the return of her down payment.

Initially, the Court will address defendant's claim that the motion should be denied since it was not made within 120 days from the filing of the Note of Issue in this action and as such was untimely pursuant to CPLR 3212(a). Pursuant to CPLR 3212(a) a motion for summary judgment must be made no later than one hundred twenty days after the filing of the [*2]

note of issue, except with leave of court on good cause shown. CPLR 3212[a] requires "a showing of good cause for the delay in making the motion, a satisfactory explanation for the untimeliness rather than simply permitting meritorious, non-prejudicial filings, however tardy" (Brill v City of New York, 2 NY3d 648 [2004]). Here, plaintiff has shown the existence of a "good cause" excuse that prevented the timely filing of this motion. Id. See, Dettman v Page, 18 AD3d 422 (2d Dept 2005.) Plaintiff correctly claims that significant outstanding discovery may, in certain circumstances, constitute good cause for the delay in making a motion for summary judgment. See, Tower Ins. Co. of NY v. Razy Assoc., 37 AD3d 702 ( 2d Dept 2007) Here, plaintiff has shown that she filed the Note of Issue on February 4, 2011, pursuant to a Compliance Conference Order dated October 26, 2010, to avoid dismissal of the action which was commenced on or about February 1, 2007. The Note of Issue stated in the attached Certificate of Readiness that discovery was not completed and further specified that the depositions of the Plaintiff, TARA KHANAL, and the Defendant DAVE SHELDON a/k/a DAVID SHELDON had not been concluded. Khanal appeared on April 8, 2011 and her deposition was concluded on that date. Sheldon, however, was not deposed until June 1, and he had limited recollection of material facts concerning plaintiff's action for specific performance. Consequently, plaintiff served Kearns with a subpoena for the records and testimony which Sheldon was unable to respond. Kearns rejected the subpoena, and plaintiff made a motion to compel which was heard on November 2, 2011.

In an Order of this Court, dated November 7, 2011, this Court found that Kearns' possessed information that was material to this action and he should be deposed. The Court ordered Kearns to appear for a deposition on or before December 7, 2011, and appear at this deposition with the items requested in the subpoena dated June 1, 2011. Kearns failed to appear on December 7, 2011, but did appear on January 20, 2012, at which time he produced documents with regard to the acquisition and sale of the premises as well as the partnership arrangement with Sheldon. This motion was filed on April 10, 2012, which was more than 120 days after the filing of the Note of Issue, but less than 120 days from the completion of discovery. Given the circumstances surrounding the filing of the Note of Issue and the delay in completing discovery, and the stipulation regarding discovery instead of vacating the Note of Issue, this court finds a "good cause" for the late filing of a late summary judgment motion. Dettmann v Page, 18 AD2d 422 (2d Dept 2005.) See, Brill v City of New York, 2 NY3d 648 (2004.) Furthermore, plaintiff has established that the outstanding information was essential to making a summary judgment motion and that it could not have been sought prior to the completion of all depositions and the production of documents pursuant to the Kearns subpoena.

Regarding the summary judgment motion, it is axiomatic that the Summary Judgment remedy is drastic and harsh and should be used sparingly. The motion is granted only when a party establishes, on papers alone, that there are no material issues and the facts presented require judgment in its favor. It must also be clear that the other side's papers do not suggest any issue exists. Moreover, on this motion, the court's duty is not to resolve issues of fact or determine matters of credibility but merely to determine whether such issues exist. See, Barr v County of Albany, 50 NY2d 247 (1980); Miceli v Purex, 84 AD2d 562 (2d Dept. 1981); Bronson v March, 127 AD2d 810 (2d Dept. 1987.) Finally, as stated by the court in Daliendo v [*3]Johnson, 147 AD2d 312,317 (2d Dept. 1989), "Where the court entertains any doubt as to whether a triable issue of fact exists, summary judgment should be denied." Here, the Court finds that plaintiff has established, prima facie, that she is entitled to the return of her down payment pursuant to the express terms of the contract of sale. See Rosenthal v Oakes, 41 AD3d 305 (2007).

In support of her motion, plaintiff has submitted, inter alia, the contract of sale, the complaint, various correspondence, loan application documents, the deposition testimony of defendants Sheldon and Kearns, and an affidavit of plaintiff. This evidence shows that on September 19, 2006, the plaintiff entered into a Contract of Sale to purchase the premises known as 148-18 Laburnum Avenue, Flushing, NY (Block 5485, Lot 28) from Sheldon and a co-defendant Kearns for the sum of $675,000.00. Upon execution of the Contract of Sale, and in accordance with its terms, the plaintiff tendered a down payment check in the sum of $50,000.00, payable to JAY LAU, ESQ., as Escrow Agent ("Lau"). Lau was the real estate attorney for Sheldon and Kearns. The Contract of Sale, at Section 8, contained a Mortgage Contingency Clause (the "Contingency Clause"), that in pertinent part states the following:

8. Mortgage Commitment Contingency.

(a) The obligation of Purchaser to purchase under this contract is conditioned upon issuance, on or before 30 days after a fully executed copy of this contract is given to Purchaser or Purchaser's attorney in the manner set forth in paragraph 25 or subparagraph 8(k) the "Commitment Date" of a written commitment from an institutional Lender pursuant to which such Institutional Lender agrees to make a first mortgage loan, other than a VA, FHA or other governmentally insured loan, to Purchaser, at Purchaser's sole cost and expense, of $525,000.00 for a term of at least 30 years (or such lesser sum or shorter term as Purchaser shall be willing to accept) at the prevailing fixed or adjustable rate of interest and on other customary commitment terms (the "Commitment") ... Purchaser's obligations hereunder are conditioned only on issuance of a Commitment. Once a Commitment is issued, Purchaser is bound under this contract even if the lender fails or refuses to fund the loan for any reason.

(b) Purchaser shall make prompt application to one or, at Purchaser's election, more than one Institutional Lender for such mortgage loan, ...

( c ) ...[p]rompt submission by Purchaser of an application to a mortgage broker registered pursuant to Article 12-D of the New York Banking Law ...shall constitute full compliance with the terms and conditions set forth in subparagraph 8(b)(I), ...

(d) If all Institutional Lenders to whom applications were made deny such applications in writing prior to the Commitment Date, Purchaser may cancel this contract by giving Notice thereof to Seller, with a copy of such denials...

(e) If no Commitment is issued by the Institutional Lender on or before the Commitment Date, then, unless Purchaser has accepted a written commitment from an Institutional Lender that does not conform to the terms set forth in subparagraph 8(a), Purchaser may cancel this contract by giving Notice to Seller within 5 business days after the Commitment Date,...

(f) If this contract is canceled by Purchaser pursuant to subparagraphs 8(d) or (e), neither party shall thereafter have any further rights against, or obligations or liabilities to, the [*4]other by reason of this contract, except that the Down payment shall be promptly refunded to Purchaser...

(I) The attorneys for the parties are hereby authorized to give and receive on behalf of their clients all Notices and deliveries under this paragraph 8.

On September 11, 2006, plaintiff made an application to an institutional mortgage lender for a first mortgage. As alleged by plaintiff, she met with Shams Uddin of Network Mortgage, Inc. located at 60-41 Fresh Pond Road, Maspeth, NY 11378 and retained them to secure a mortgage for her to purchase the subject premises. On October 18, 2006, the plaintiff's attorney, DAVID J. MELO, ESQ. ("Melo") informed Lau that she had not obtained a mortgage commitment, and the parties agreed to extend the Commitment Date under the Contract of Sale to November 6, 2006. Within five days of the Extended Commitment Date, Melo gave notice based on an expected Declination Letter that plaintiff's application for a first mortgage was declined. On November 9, 2006 (within 5 days of the Extended Commitment Date), Melo forwarded to Lau the Action Taken Form issued by Option One Mortgage Corporation establishing that plaintiff's application for a mortgage commitment was denied. Melo made a second request for the return of plaintiff's Down payment, but the sellers refused to return the plaintiff's Down payment. At his deposition, defendant Sheldon acknowledged having received notice, on or about November 9, 2006, from plaintiff's attorney, of plaintiff's inability to obtain a mortgage and proof of the denial of her application for same, Based on the above, plaintiff has established her entitlement to summary judgment on the ground of satisfying the terms in the mortgage contingency clause. .

Plaintiff also claims that the motion should be granted based on defendant's inability to deliver the property with clear title. This is based on the pendency of a foreclosure action on the subject property, that was commenced by New York Community Bank, the holder of a pre-existing first mortgage. In that action, plaintiff claims that the Bank prevailed on its claim. Thereafter, defendants satisfied the first mortgage, however, a Satisfaction of Mortgage was not executed until September 21, 2010, four years after the signing of the subject contract of sale. Plaintiff claims this inability to deliver clear title is an anticipatory breach of the contract, thereby entitling plaintiff to the return of her Down payment. She also asserts that whether she could perform on the contract is not material to this entitlement.

Defendant opposes the branch of the motion regarding the mortgage contingency clause, by claiming that plaintiff and her mortgage broker did nothing during the contract period or during the extended contract period to obtain a mortgage. Defendant claims that the real estate contract was effective September 19, 2006, and the extension was effective on October 18, 2006 through November 6, 2006. However, plaintiff and her mortgage broker first submitted her application to Option One Mortgage Corporation on November 7, 2006. Defendant claims that inaccurate and fraudulent information was provided by plaintiff on her September 11, 2006 application, thus rendering it a nullity and an indication of her bad faith. Defendant also claims that no denials of plaintiff's mortgage applications were received prior to the Commitment date because she never submitted her application until after the real estate contract had expired including the extension. As such, plaintiff failed to comply with her obligations under paragraph 8 . Moreover, defendant claims that plaintiff's attorney's requests for the return of the Down payment were are ineffective because of plaintiff's breach of [*5]multiple provisions under the real estate contract under paragraphs 8(b) & 8 ( c ). In particular, plaintiff's failure to even attempt to apply for a loan until after the real estate contract had expired proves her breach of the liquidated damages clause of the real estate contract under paragraph 38 ( c ) and her failure to provide accurate information on her loan application. Exhibit 8. Based on these facts and evidence of the case, defendants claim they were legally entitled to retain the Down payment under paragraph 38(c) of the real estate contract.

The Court finds that defendant has failed to raise an issue of fact regarding plaintiff having acted in a timely manner, and in good faith in her attempts to obtain a mortgage for the purchase of the house. Her attempts were not successful and seller was notified of her inability to obtain the necessary financing. Any inaccuracies in her application were not made in an attempt to delay or prevent her purchase of the house, but rather, were made to facilitate her purchase. Contrary to defendant's claim, there is no basis to ignore the September 11, 2006 application, since there is no indication it was made in bad faith relating to defendants or as an attempt to thwart the sale of the house. As such, there is no issue regarding plaintiff having timely sought to obtain a mortgage for the purchase of the subject house. Thereafter, plaintiff made demands for the return of her down payment and contrary to defendant's claim, there is no basis to ignore the timely demand for the down payment. Once again, defendant's claim of bad faith to nullify this timely notice is without merit since there is no indication of plaintiff demonstrating a bad faith regarding defendants or the sale of the house. See e.g. Goldsmith v Layton, 300 AD2d 353 (2d Dept. 2002.)

The Court also finds that defendant has failed to raise an issue of fact regarding defendants' inability to deliver clear title. The contract, at paragraph 14, provides that the Seller shall deliver to purchaser "a BARGAIN AND SALE deed with covenants against grantor's acts in statutory form for recording, duly executed and acknowledged, so as to convey to Purchaser fee simple title to the Premises free and clear of all encumbrances except as otherwise herein listed. "

The contract, at paragraph 13, in relevant part, obligates the Seller to give and the Purchaser to accept:

"such title as a reputable New York State title insurance company shall be willing to approve and insure in accordance with its standard form of title policy approved by the New York State Insurance Department, subject only to the matters provided for in this contract. Title must be marketable."

Where, as here, " the contract requires such title as a title company will insure and also requires conveyance of a fee simple free of all encumbrances save those specified in the contract, the buyer is entitled to insist on both insurable title and title which is free of all encumbrances save those specified in the contract' (Hudson-Port Ewen Assoc. v Chien Kuo, 165 AD2d 301, 304-305 [1991], affd 78 NY2d 944 [1991]; cf. Creative Living v Steinhauser, 78 Misc 2d 29, 31 [1974], affd 47 AD2d 598 [1975], lv denied, 36 NY2d 643 [1975)]" (Patten of New York Corp. v Geoffrion, 193 AD2d 1007, 1008 [1993]). Hence, under the terms of the contract, the Seller would have had to tender both marketable and insurable title at the closing (see Patten of New York Corp. v Geoffrion, 193 AD2d 1007 [1993], supra). Marketable title has been defined as " a good title, one that is free and clear of encumbrances or material defects, on reasonable certain not to be called into question' (91 NY Jur 2d, Real Property Sales [*6]and Exchanges, § 71, at 164); in short, a title that is free from reasonable doubt and is readily subject to resale (see Laba v Carey, 29 NY2d 302, 311 [1971])" (see Patten of New York Corp. v Geoffrion, 193 AD2d at 1009). Thus, the failure by the Purchaser to show it was unable to obtain title insurance in compliance with paragraph 3, does not resolve the matter of whether the Seller was able to deliver title which was free of those encumbrances not specified in the contract. The lis pendens, the first mortgage, and the foreclosure action on the first mortgage were no specified in the contract. Contrary to defendant's assertion, whether any claims regarding the first mortgage were easily remedied is not sufficient to satisfy the contractual obligation to deliver marketable title. Clearly, a first mortgage is an encumbrance rendering title unmarketable. Moreover, a purchaser's requirement to tender performance can be excused if the title defect is not curable for in such a case the tendering of performance would be an idle and useless ceremony (see LLemar v Corp. v Krochmal, 44 NY2d 702, 703-704 [1978], supra; Anderson v Meador, 56 AD3d 1030 [2008], supra; R.C.P.S. Assoc. v Karam Devs., 258 AD2d 510, 511 [2d Dept. 1999]). Here, the title defects created by the first mortgage were significant enough to have resulted in litigation and as such, it would have been extremely difficult, for the Seller to have been able to cure these defects within a reasonable time period after the signing of the contract on September 19, 2006 (cf. Anderson v Meador, 56 AD3d 1030 [2008], supra; Gentile v Sang Y. Kim, 101 AD2d 939, 940 [1984]). Importantly, the Satisfaction of Mortgage for the first mortgage was not filed until four years after the signing of the contract of sale of the house. The existence of the first mortgage and its concomitant legal actions relieved plaintiff from any duty to terminate the contract and vested the right to the deposit in the plaintiff. Consequently, plaintiff has established her entitlement to summary judgment on the ground of defendant's inability to deliver clear and marketable title.

The Court finds that defendant's request for judgment in his favor is denied since requests for relief cannot be set forth in opposition papers to a motion. Moreover, based on the above, were this Court to consider defendant's request for relief, it would be denied

Based on the above, the motion by plaintiff is granted in its entirety and plaintiff is entitled to the return of sum of $50,000.00, with interest at the statutory rate from the date of the breach of contract, which is deemed to have been on November 9, 2006, the date defendant had knowledge of the letter demanding the return of the down payment.

.



Dated: May 15, 2012..........................................

ORIN R. KITZES, J.S.C.