Smith v Realty USA-Capital Dist. Agency, Inc.

[*1] Smith v Realty USA-Capital Dist. Agency, Inc. 2012 NY Slip Op 50981(U) Decided on May 29, 2012 Supreme Court, Albany County Lynch, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 29, 2012
Supreme Court, Albany County

Doreen F. Smith, Plaintiff,

against

Realty USA-Capital District Agency, Inc., and Henry C. Meier, Defendants.



7388-11



Rosenblum, Ronan, Kessler, & Sarachan, LLP

Michael Kessler, Esq. of counsel

Attorneys for Plaintiff

110 Great Oaks Boulevard

Albany, New York 12203

Meier Law Firm, PLLC

Christina W. Meier, Esq. of counsel

Attorney for Defendant, Henry C. Meier

One Marcus Boulevard, Suite 200

Albany, New York 12205

The Keenan Law Firm

William F. Keenan Esq. of counsel

Attorneys for Defendant, Realty USA

268 Main Street, Suite 302

Buffalo, New York 14202

Michael C. Lynch, J.

In June, 2011, plaintiff (the buyer) entered into an agreement with defendant Henry C. [*2]Meier (seller) to purchase his home in the Town of Bethlehem.[FN1] As part of the purchase and sale agreement, plaintiff remitted a $10,000.00 deposit and reserved her right to conduct a structural inspection. The inspection was completed and a report was issued indicating that there were certain "major defects". Thereafter, plaintiff notified defendant that the contract was deemed cancelled and demanded that the deposit be returned. When defendant refused, plaintiff commenced this action to recover the deposit. Plaintiff also alleges that defendant made false statements in the property condition disclosure statement, and seeks to recover the expense of the property inspection report. In his answer, defendant asserts a counterclaim for breach of contract and seeks damages in the amount of $12,799.15. Defendant now moves for summary judgment dismissing the complaint.

In relevant part, the purchase and sale contract between the parties provided that plaintiff's $10,000 deposit was to be held in escrow by the seller's broker "as part of the purchase price. If Seller does not accept the Purchaser's offer, all deposits shall be returned to Purchaser. If the offer is accepted by the Seller, all deposits will be held in escrow ...until the contingencies and terms have been met. The purchaser will receive credit on the total amount of the deposit toward the purchase price...If the contingencies and terms herein cannot be resolved, or in the event of default by the Seller or the Purchaser, the deposits will be held by the Broker pending a resolution of the disposition of the deposits."

The contract, at paragraph 21, included a structural contingency as follows:

Structural Inspection. A determination by a New York State licensed

home inspector, registered architect or licensed engineer, or a third party who

is qualified or other qualified person, that the premises are free from any

substantial structural, mechanical, electrical, plumbing, roof covering, water

or sewer defects. The term substantial to refer to any individual repair which

will reasonably cost over $1,500 to correct.

This contingency further provided that inspections were to be completed within twelve days following acceptance of the contract, with the reporting of failure no later than two days after the inspections, and,

"If purchaser so notifies, and further supplies written confirmation

by a copy of the test results and/or inspection reports , or letter from inspector,

then the entire agreement shall be deemed cancelled, null and void and all

deposits made hereunder shall be returned to purchaser, or, at purchaser's

option, said cancellation may be deferred for a period of ten days in order to

provide the parties an opportunity to otherwise agree in writing.

By correspondence dated June 22, 2011, accepted by seller on June 23, 2011, the parties agreed to the following modification: Paragraph 21 will be amended to read as follows:[*3]

All inspections must be completed on or before June 30, 2011, the

reporting of any failure to occur no later than three (3) days after the inspections

with regard to structural and wood destroying organisms, and within seven (7)

days after inspection with regard to the radon.

All other terms of Paragraph 21 shall remain the same (see Exhibit "5").

Finally, at paragraph 23, the Agreement provided:

Notices. All notices contemplated by this agreement shall be in writing

delivered by (a) certified or registered mail, return receipt requests, postmarked

no later than the required by (b) by telecopier/facsimile by such date; or (c) by

personal delivery

Plaintiff obtained an Inspection Report dated June 23, 2011 which identified two "Major Defects", as follows:

- The temperature drop at the air conditioning system was inadequate

during operation. The system was run for more than 5 minutes and the

temperature measurement across the coil never exceeded the outdoor temperature.

A qualified heating and cooling technician should be consulted to further

evaluate this condition and the remedies available

- Active leakage from the drainage system was found. When the

second floor bath fixtures were operated, leakage was found flowing down

the outside of a 3 inch drainage pipe into the basement. Additionally water

damage was evident in the drywall in a closet at the first floor in adjacent areas.

The level of water damage behind finished walls/ceilings is unknown and the source of leakage was undetermined. Drywall removal appears needed for a full evaluation of the damage and repairs and determination of the source of leakage.The whirlpool tub was also found leaking into the basement and in need of repairs. Leaking drainage piping is unsanitary, potentially hazardous and should be repaired immediately (see Exhibit "6"at p. 13 of 13)

Plaintiff's counsel sent the Inspection Report to defendant's counsel via electronic mail dated June 24, 2011 (Exhibit "6"). The message read, "Life is never easy - please read the attached inspection report and give me a call at ... so we can discuss it". A number of e-mails by and between counsel with regard to the alleged defects followed (Id). Then, by correspondence dated June 28, 2011 to the seller's attorney, the purchaser's attorney advised that

pursuant to Paragraph 21 of the Contract, you are hereby notified that

there is a substantial defect caused by active leakage from the drainage system

which would require repairs in excess of $1,500. Based on such defect you are

hereby notified that the entire agreement is hereby deemed cancelled, null and [*4]

void. All deposits made hereunder should be returned to the Purchaser (Exhibit "9).

By correspondence also dated June 28, 2011, the seller's attorney objected to the purchaser's failure to obtain an estimate for repairs, advised that the seller did not believe that the leak was a "substantial defect", and rejected the purchaser's attempt to cancel the contract.

Defendant contends that on June 27, 2011, plaintiff contracted to purchase another home in the same subdivision as the premises at issue in this case. On July 5, 2011, defendant accepted another offer to purchase the subject property.

Now, defendant claims that plaintiff is not entitled to a refund of her down payment because the June 28, 2011 notice of cancellation was untimely.Plaintiff counters that the June 24, 2011 e-mail was timely "notice of the failure" and, upon such notice, the contract was "deemed cancelled" and no further action was required.

As a general rule, "when a contract requires that written notice be given within a specified time, the notice is ineffective unless the writing is actually received within the time prescribed" (Maxton Builders, Inc. v. Lo Galbo, 68 NY2d 373, 378 [1986]).Here, as set forth above, the parties agreed that the purchaser's right to cancel the contract based on a determination that a "substantial ...defect" existed (i.e. the structural contingency) was waived unless the purchaser

"notified attorney and brokers pursuant to paragraph 23 [within

three days from the date of the inspection] of failure of any of these tests

and/or inspections" If purchaser so notifies, and further supplies written

confirmation by a copy of the test results and/or inspection reports or letters

from the inspector, than the entire agreement shall be deemed cancelled, null

and void..."

(Agreement at ¶ 21, as modified by letter agreement).

The inspection was held on June 23, 2011 and, pursuant to the June 24, 2011 e-mail, plaintiff's counsel provided defendant's counsel a copy of the report which included a section titled "Major Defect Summary".Within the report, it was recommended that the purchaser consult, "qualified, reputable contractors ...for specific quotations", explaining:

While we make every effort to keep updated with pricing and repair

costs, we do not perform cost estimates....[The inspector] is not responsible

for pricing repair costs. The cost or repair, whether listed as a repair, safety

issue, improvement or major repair may exceed $1500.00.. The cost for repair

should be obtained for any item listed in this section, or any other section of

this report, that is of concer n and may affect or influence your decision I

nvolved with the purchase of the property. This may require notifying your

attorney, real estate sales professional and/or other individual(s) involved in

the purchase prior to a specific date.

The report also included the definition of a "major defect" as "a system or component which is considered significantly deficient with a cost to remedy of $1500 or more to correct and/or has structural, functional, operation implications or poses an immediate safety hazards".

Generally, [*5]

... when parties set down their agreement in a clear, complete document,

their writing should as a rule be enforced according to its terms. Evidence

outside the four corners of the document as to what was really intended but

unstated or misstated is generally inadmissible to add to or vary the writing ... Such considerations are all the more compelling in the context of real property transactions, where commercial certainty is a paramount concern.

(W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 160 [1990]). Here, the plain terms of the purchase and sale contract required the plaintiff purchaser to provide notice of a determination that a "substantial defect" existed, together with a copy of written confirmation of the determination.

The Court agrees with plaintiff's contention that the June 24, 2011 e-mail provided timely notice of the failed inspection, triggering a cancellation of the contract pursuant to paragraph 21. To begin, there is no dispute that defendant's attorney received the June 24, 2011 e-mail, and raised no objection to the format. While defendant now contends the e-mail was not an authorized method of notice under paragraph 23, any such objection was waived (see Rower v. West Chanson Corp., 210 AD2d 7). Strict compliance with contractual notice provisions will not render the notice to be ineffective unless there is a claim that there was no actual notice or that the party suffered prejudice resulting from the form of notice (Suarez v. Ingalls, 282 AD2d 599; Dellicarri v. Hirschfeld, 210 AD2d 584). Once notice and a copy of the nspection report are timely provided, paragraph 21 specifies "then the entire agreement shall be deemed cancelled, null and void and all deposits made hereunder shall be returned to Purchaser..." (emphasis added). The underscored language shows the cancellation is self-operative and thus an express statement of cancellation is not required.

Here, however, we also have plaintiff's attorney's June 24, 2011 e-mail note inviting defendant's attorney to call and discuss the inspection report. Pertinent here and continuing the quote above, paragraph 21 concludes as follows: "or, at Purchaser's option, said cancellation may be deferred for a period of ten (10) days in order to provide the parties an opportunity to otherwise agree in writing". The e-mail exchange between counsel over the next several days shows that they discussed alternatives to address the concerns raised in the inspection report, without resolution (see Exhibit "6"). Even treating the June 24, 2011 e-mail as an election by plaintiff to exercise this option, the ensuing cancellation letter sent by plaintiff's counsel on June 28, 2011 was well within the extended ten (10) day cancellation period, and unequivocal in declaring the agreement cancelled and demanding a return of the down payment (Exhibit "9").

There is no suggestion in this case that plaintiff's inspector was not qualified. As noted above, the inspector' report expressly identifies two "major repair" items, including active leakage from the drainage system that would necessitate the removal of drywall to evaluate. Contrary to defendant's argument, plaintiff was entitled to rely on this report in cancelling the contract, without having to pursue additional repair estimates. That the repairs ultimately may have been completed for less than $1,500 is not the point. This contract allowed plaintiff to cancel the agreement where a qualified inspector identified substantial defects that would reasonably cost over $1,500 to correct — which is the case here.

Given the above, the Court finds that plaintiff is entitled to an award of summary [*6]judgment entitling her to a return of the $10,000 downpayment (see CPLR 3212[b]). It follows that defendant's counterclaims are without merit and are hereby dismissed. The defendant is entitled to a dismissal of plaintiff's claim for a refund of the $450 cost for the inspection report.

By her complaint, plaintiff alleges that "as a result of the false statements in defendants' Property Condition Disclosure Statement, representing a material misrepresentation, the plaintiff was caused to expend the sum of $450.00 for the property inspection report". To establish this part of her claim, plaintiff " must demonstrate that defendant knowingly misrepresented a material fact upon which plaintiff justifiably relied and which caused plaintiff to sustain damages *** (Klafehn v Morrison, 75 AD3d 808 [2010]). In the residential real property transfer at issue here, the seller was obligated to disclose conditions that were within his or her "actual knowledge" in a Property Condition Disclosure Statement (Real Property Law §461; Klafehn, Id.).A purchaser may obtain damages for a seller's active concealment based on a false representation in a disclosure statement where it is demonstrated that, "the false representation prevented fulfillment of the [purchaser's] own obligations imposed by the doctrine of caveat emptor and that they justifiably relied upon the false representation *** Justifiable reliance does not exist [w]here a party has the means to discover [a falsehood] by the exercise of ordinary intelligence, [***4] and fails to make use of those means' ***"

Pettis v Haag, 84 AD3d 1553 [2011] [cit. om. ]).Defendant met its burden on this motion by submitting proof in affidavit form by his son and daughter who completed and signed the Statement, respectively, that neither had any knowledge of a plumbing defect or water damage on the premises (Id.). In response, plaintiff fails to submit evidence of a material question of fact with regard to the validity of this aspect of her claim (Id.).

Accordingly, based on the foregoing, it is

ORDERED, that defendant's motion for summary judgment dismissing plaintiff's complaint is DENIED; and it is further

ORDERED, that defendant's motion for summary judgment in his favor on the counterclaims seeking damages is DENIED, and it is further

ORDERED and ADJUDGED that plaintiff is awarded summary judgment entitling her to a return of the $10,000.00 downpayment, without costs.

This Memorandum constitutes the Decision and Order of the Court. This original Decision and Order are being returned to the attorney for plaintiff. The below referenced original papers are being sent to the Albany County Clerk. The signing of this Decision and Order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the provision of that rule regarding filing, entry, or notice of entry.

SO ORDERED

ENTER.

Dated:May, 2012

Albany, New York [*7]

_________________________________________

Michael C. Lynch

Justice of the Supreme Court

Papers Considered:

(1) Notice of Motion, undated(2) Affirmation of Christina W. Meier, Esq. dated January 25, 2012, with exhibits annexed

(3) Affidavit of Carol J. Meier sworn to January 24, 2012 with exhibits annexed

(4) Affidavit of Steven R. Meier, sworn to January 24, 2012 with exhibits annexed

(5) Affidavit of Gerald Denson sworn to January 20, 2012

(6) Affidavit of Joseph wagner sworn to January 23, 2012

(7) Affidavit of Henry C. Meier sworn to January 24, 2012

(8) Joint affidavit of Lawrence Smith and Doreen Smith sworn to February 7, 2012

(9) Affidavit of Peter H. Schaming sworn to February 8, 2012

(10) Affirmation of Michael W. Kessler, Esq. dated February 7, 2012

(11) Affirmation of Jed Wolkenbreit, Esq. dated February 7, 2012 with exhibits annexed

(12) Reply affirmation of Christina Meier, Esq. dated February 13, 2012

(13) Letter from Attorney William F. Keenan dated February 2, 2012

(14) Letter from Bruce Sutphin, Esq. for Attorney Kessler dated February 15, 2012. Footnotes

Footnote 1:The defendant, Realty USA-Capital District Agency, Inc., has expressly notified the parties and the Court that it will simply defer to the decision of the Court.