Unique Custom Design Bldrs., Inc. v Agugliaro

[*1] Unique Custom Design Bldrs., Inc. v Agugliaro 2007 NY Slip Op 51244(U) [16 Misc 3d 1103(A)] Decided on May 2, 2007 Supreme Court, Suffolk County Pines, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 2, 2007
Supreme Court, Suffolk County

Unique Custom Design Builders, Inc., Reon Real Estate Owners Network and Cassaga Builders, Inc., Plaintiff,

against

Francis A. Agugliaro a/k/a Frank Agugliaro, Defendant.



2714-05



Attorney for Plaintiff Unique Design & REON

Pitnick & Margolin, LLP

6800 Jericho Tuenpike, Suite 206W

Syosset, New York 11791

Attorney for Plaintiff Cassaga Builders

Fredrick Stern & Associates, PC

54 West Main Street

East Islip, New York 11730

Attorney for Defendant and Third Party Plaintiff

Steinberg & Boyle, LLP

136 East Main Street

East Islip, New York 11730

Attorney for Third Party DefendantPollina

Pollina & Pollina

180 East Main Street

Smithtown, New York 11787

Emily Pines, J.

ORDERED, that the motion by Defendant, FRANCIS A. AGUGLIARO, pursuant to CPLR §3212, for summary judgment dismissing the separate complaints of Plaintiffs UNIQUE CUSTOM DESIGN BUILDERS, INC., REON REAL ESTATE OWNERS NETWORK and CASSAGA BUILDERS, INC., is determined to the extent indicated below; and it is further

ORDERED, that the application by Defendant, FRANCIS A. AGUGLIARO for costs is denied; and it is the further

ORDERED, that the third-party action against Third-Party Defendant STEVEN A. POLLINA is severed and continued.

This is a consolidated action wherein Plaintiffs, UNIQUE CUSTOM DESIGN BUILDERS, INC. ("UNIQUE") and REON REAL ESTATE OWNERS NETWORK ("REON") and CASSAGA BUILDERS, INC. ("CASSAGA), seek specific performance of separate real estate contracts with Defendant FRANCIS A. AGUGLIARO ("AGUGLIARO") for the purchase of property located at 249 Commack Road, Islip, New York ("the subject premises"). The actions were consolidated by Order (HUDSON, J.) dated November 15, 2005, which Order also denied the motion by UNIQUE and REON for summary judgment. In that Order, the Court found that UNIQUE and REON had not demonstrated a prima facie entitlement to summary judgment in that they did not demonstrate that they were ready, willing, and able to purchase the property. AGUGLIERO has also commenced a third-party action against Third-Party Defendant, STEVEN A. POLLINA, sounding in legal malpractice.

THE FACTS

[*2]The REON/UNIQUE Contract

In September of 2003, AGUGLIARO, represented by POLLINA, entered into a contract with REON for the sale of the subject premises for $500,000. AGUGLIARO claims that he signed the contract first and then it was sent to REON, who made certain unilateral changes to the contract. Specifically, AGUGLIARO claims that REON assigned an interest in the contract to UNIQUE, and that the closing date was scheduled for February 1, 2004 "within 10 days of an approved subdivision". The contract provided for a down payment of $20,000 to be paid upon the signing of the contract. It appears undisputed that while two checks, each in the amount of $10,000 were delivered to POLLINA, in November of 2003, one of the checks was returned to him for insufficient funds. AGUGLIARO claims that POLLINA did not notify him that one of the checks was dishonored until January of 2005. On or about January 24, 2005, POLLINA sent a letter to the attorney for REON and UNIQUE, returning the $10,000 being held in escrow and advising that the September 2003 contract was null and void due to the failure to pay the full down payment. On or about January 26, 2005, the lawyer for REON and UNIQUE returned to POLLINA his $10,000 escrow and indicated that "the failure to return the deposit within a reasonable amount of time can only be deemed a ratification of the contract."

Thereafter, on or about February 1, 2005, REON and UNIQUE commenced the within action against AGUGLIARO for specific performance of the contract. AGUGLIARO then retained new counsel who, on February 3, 2005, sent a law day letter to counsel for REON and UNIQUE, and scheduled a time of the essence closing for February 15, 2005 at 1:00 p.m. The letter indicated that if REON and UNIQUE were unable to close on that day, it would be considered a breach of contract. By response dated February 8, 2005, counsel for REON and Unique rejected the time of the essence closing as "defective and improper" in that a hearing on the subdivision approval was scheduled for February 24, 2005. Counsel advised that "once a decision is rendered, my clients will be able to close in accordance with the terms of the contract." As anticipated, REON and Unique did not appear at the closing. Issue was joined in this action by AGUGLIARO's service of a Verified Answer on or about May 10, 2005. [*3]

The Casaga Contract

The record reflects that upon AGUGLIARO's purported cancellation of the REON/UNIQUE contract on January 24, 2005 via letter from POLLINA, he then, without the benefit of counsel, entered into a contract with CASAGA for the sale of the subject premises for the price of $550,000. AGUGLIARO executed this contract in the office of the attorney for CASAGA. The contract provided for the payment of a down payment in the amount of $15,000.00 to be paid on the signing of the contract, "by check subject to collection to be immediately released to the Seller." It is largely undisputed that AGUGLIARO did not receive the $15,000.00 on the signing of the contract. Rather, the attorney for CASAGA purportedly deposited the funds into his escrow agreement. What is disputed is whether such deposit was with the consent of AGUGLIARO, pending his retention of new counsel. Although, the contract provided for the payment and the release of funds to AGUGLIARO, paragraph 5 of the contract also provided that the down payment was to be held in escrow by the "Seller's attorney until the time of closing".

Upon AGUGLIARO's retention of new counsel, on February 1, 2005, she wrote to CASAGA's counsel and advised that the contract was null and void for failure to pay the down payment. In response, CASAGA's counsel rejected the cancellation by letter also dated February 1, 2005 and enclosed the escrow check in the amount of $15,000.00. AGUGLIARO's counsel then returned the check by letter dated February 3, 2005 and CASAGA commenced this action by filing a Summons and Verified Complaint on February 14, 2005. Issue was joined by AGUGLIARO's service of a Verified Answer on or about March 22, 2005.

The Subdivision

The contract between AGUGLIARO and REON/UNIQUE provided that the closing would take place on February 1, 2004 "within 10 days of an approved subdivision". The rider to the contract, at ¶21, provided that if the closing was to occur on October 1, 2004 or later, that the closing date would be extended until January 1, 2005.[FN1] [*4]

The submissions reflect that from October, 2003 on, REON and UNIQUE submitted applications to the New York State Department of Environmental Conservation ("DEC"), the Town of Islip and the Suffolk County Department of Health to obtain approval for the subdivision of the subject premises. Apparently, subdivision approval was granted by the Town of Islip Department of Planning and Development on July 6, 2005, approximately four months after the commencement of the within lawsuits. Final approval has not been granted by the Suffolk County Department of Health, purportedly because AGUGLIARO will not sign the requisite documents.

The Third-Party Action

AGUGLIARO commenced a third-party action for malpractice against POLLINA by filing of a Verified Third-Party Complaint on or about September 28, 2005. Issue was joined by the service of a Verified Answer on or about October 24, 2005.[FN2]

The Prior Order

As set forth above, by Order (HUDSON, J.) dated November 15, 2005, the actions by REON/UNIQUE and CASAGA were consolidated. REON/UNIQUE also moved for summary judgment which was denied by the Court on the ground that they failed to establish a prima facie case that they were ready, willing and able to purchase the subject premises on February 15, 2005 pursuant to the law day letter.

Agugliaro's Motions for Summary Judgment

AGUGLIARO now moves for summary judgment dismissing the complaints of both REON/UNIQUE and CASAGA. AGUGLIARO asserts that the REON/UNIQUE contract should be dismissed because there is no genuine issue of fact that REON and/or UNIQUE failed to pay the full contract down payment of $20,000 and thus he had the absolute right to cancel the contract; that there is no genuine issue of fact that REON/UNIQUE did not close on the law date and so they are not entitled to specific performance; and [*5]REON/UNIQUE were not ready, willing and able to close at the time they commenced the instant action. Regarding the CASAGA complaint, AGUGLIARO argues that it should be dismissed because there is no genuine issue of fact that CASAGA did not pay the contract down payment and therefore, he had the right to rescind the contract.

A party moving for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, offering sufficient evidence to demonstrate the absence of any material issues of fact. Winegrad v. New York University Medical Center, 64 N.Y2d 85, 487 NYS2d 316 (1985); Zuckerman v. City of New York, 49 NY2d 557, 562, 404 NE2d 718, 427 NYS2d 595 (1980). Of course, summary judgment is a drastic remedy and should not be granted where there is any doubt as to the existence of a triable issue but once a prima facie showing has been made, the burden shifts to the party opposing the motion to produce evidentiary proof in admissible form sufficient to establish material issues of fact which require a trial. State Bank of Albany v. McAullife, 97 AD2d 607, 467 NYS2d 944 (3d Dept. 1983).

Dismissal of the Casaga Complaint

As set forth above, the contract between AGUGLIARO and CASAGA provided for a purchase price in the amount of $550,000, for the subject premises with a down payment of $15,000 to be "immediately released to the Seller". It is undisputed that on the date of the execution of the contract, no portion of the down payment was paid to AGUGLIARO. Thus, he argues that he had the right to rescind the contract in that there was a failure of a condition precedent or alternatively a breach of a material term of the contract.

In opposition, CASAGA, by affidavit of its president, Anthony Caldara ("Caldara"), states that it was agreed at the contract signing that its lawyer would hold the down payment check until Agugliaro retained counsel. The funds, Caldara states, were left on deposit with CASAGA's attorney, to remain in escrow, pending AGUGLIARO's notification of who represented him. CALDARA claims that when CASAGA's attorney was notified that Alicia Gryn, Esq., represented CASAGA, he forwarded a check [*6]for the down payment but that she (Gryn) refused to accept the funds and returned the check. CASAGA argues that although the contract states that the funds were to be released to Agugliaro , that was not the intent of the agreement.

The law is well settled that the failure to make the down payment required by a real estate contract will generally constitute a material breach of the agreement warranting rescission of the contract. RR Chester, LLC v. Arlington Building Corp., 22 AD3d 652, 803 NYS2d 100 (2d Dept. 2005). Here, it is undisputed that CASAGA did not tender the $15,000 down payment to AGUGLIARO at the time of the execution of the contract on January 24, 2005. Thus, AGUGLIARO has met his prima facie burden of demonstrating the absence of any material issue of fact, thus shifting the burden to CASAGA. Although CASAGA attempts to argue that there was some sort of agreement between the parties that the funds would not be released until AGUGLIARO retained counsel, such argument is without merit. Whether the funds were to be "released" to AGUGLIARO or held in escrow by his counsel, the fact remains that the down payment was not paid at the time of the execution of the contract. Furthermore, pursuant to paragraph 19(d) of the contract, it could not be changed except in writing. Thus, CASAGA's argument that the parties had a different, oral agreement regarding the down payment is insufficient to defeat the motion for summary judgment. See, Moutafis v. Osbourne, 7 AD3d 686, 777 NYS2d 194 (2d Dept. 2004).

AGUGLIARO's motion for summary judgment dismissing CASAGA's complaint is therefore, granted and the action is dismissed. The Suffolk County Clerk is hereby directed to vacate and cancel the lis pendens filed against the subject premises upon service of a copy of this Order with notice of entry.

Dismissal of the REON/Unique Complaint

AGUGLIARO basically asserts two grounds for dismissal of the REON/UNIQUE Complaint. First, he argues that, like CASAGA, REON/UNIQUE failed to tender the full down payment, thus warranting his rescission of the contract. Specifically, as detailed above, one of the $10,000 down payment checks was dishonored for insufficient funds and therefore, there was a breach of a material condition of the contract or alternatively, [*7]a failure of a condition precedent.[FN3] Second, AGUGLIARO argues that REON/UNIQUE was not ready, willing and able to close on the law day established by his attorney's letter dated February 3, 2005. Nor, were they ready, willing and able to close prior to the commencement of this action in that the subdivision approval was not granted until several months after commencement.

In opposition to the motion, REON/UNIQUE advances several theories. Initially, they argue that AGUGLIARO's decision to accept the $10,000 down payment amounted to an amendment of the contract of sale and that AGUGLIARO's election to continue the transaction amounted to a further ratification of the contract. Next, REON/UNIQUE argues that it relied on the existence of the contract of sale in proceeding through the arduous process of obtaining subdivision approval for the subject property. Essentially, it argues that AGUGLIARO should be equitably estopped from rescinding the contract on the basis of the failure to tender the full down payment. Finally, REON/UNIQUE argues that AGUGLIARO was unable to hold a "time of the essence" closing as set forth in the law day letter because he would not have been able to convey title because of a lis pendens filed against the subject property by CASAGA.

In reply, AGUGLIARO argues that since he did not become aware that one-half of the down payment funds had not been paid until January 2005, it cannot be said that he amended the contract to require only a $10,000 deposit. Thus, he argues, that when he learned of the breach, he immediately rescinded the contract and there was no modification of the terms. In response to what is essentially an equitable estoppel argument, AGUGLIARO argues that REON/UNIQUE did not obtain the subdivision approval within a reasonable time and thus it had the right to cancel the contract.

Were this merely a case where the buyer failed to tender the down payment pursuant to a real estate contract, AGUGLIARO would be entitled to summary judgment dismissing the complaint of REON/UNIQUE. However, a convergence of several factors demonstrate the existence of genuine issues of fact warranting a [*8]trial. Initially, the Court recognizes, that, as set forth above, the failure to make the down payment constitutes a material breach warranting a rescission of the contract. RR Chester, supra . Likewise, the dishonor of a down payment check constitutes a material breach of the agreement. Daimon v. Fridman, 5 AD3d 426, 773 NYS2d 441 (2d Dept. 2004). See also, Rawcliffe v. Aguayo, 108 Misc 2d 1027, 438 NYS2d 697 (Sup. Ct. Kings Co. 1981). But, in this case, more than one year elapsed before AGUGLIARO sought to cancel the contract on the ground that REON/UNIQUE failed to tender the entire down payment. During this time, the buyers expended significant time and resources in the process of securing subdivision approval for the subject premises, with the alleged knowledge of AGUGLIARO. Therefore, a question of fact exists as to whether AGUGLIARO waived his right to rely on the failure to pay the full down payment as a basis for rescission or should be estopped from arguing that the failure to pay the full down payment was a material breach. RR Chester, supra .

AGUGLIARO has also failed to establish a prima facie case that no genuine issue of fact exists regarding REON/UNIQUE's failure to close on the law day established by his counsel's letter dated February 1, 2007. The Second Department addressed an almost identical issue in Lieberman Properties, Inc., v. Braunstein, 134 AD2d 55, 522 NYS2d 874 (2d Dept. 1987). In that case, the Plaintiff/buyer sought specific performance of a real estate contract for the sale of a parcel of real property that was subject to subdivision approval. In December of 1982, the Defendant/seller had entered into a contract with the Plaintiff/buyer that provided that the sale was conditioned upon subdivision approval and called for a closing within 20 days of approval. The contract also required the Defendants to cooperate to enable the plaintiff to conduct whatever tests were required to obtain the subdivision approval. The Plaintiff proceeded with the subdivision process and at some point the Defendant failed to give permission for certain testing required by the Planning Board as a condition of the approval. In April of 1983, Defendants attempted to cancel the contract, Plaintiffs rejected the cancellation and continued to attempt to obtain the subdivision approval. When Defendants still refused to consent to certain conditions of the Planning Board, Plaintiff commenced an action for specific performance. The Supreme Court, after a [*9]nonjury trial, granted specific performance and directed defendants to consent to the application for a subdivision and to allow Plaintiff to enter the property to obtain data, tests, etc., required by the Planning Board in conjunction with the application.

The Second Department affirmed the lower court on the issue of directing the defendants to consent to the subdivision application and cooperate with plaintiff in allowing access to the property. However, the Court vacated the Supreme Court's judgment granting specific performance. The Court found that "the Defendants could not be bound indefinitely to the contract and ultimately compelled to specifically perform. Rather, their obligation to cooperate and to perform can only be enforced for a reasonable time." The Court remitted the matter to the Supreme Court for a determination of "what, under the circumstances, is a reasonable time within which the approval must be obtained" taking into consideration "the parties' understanding, the manner in which the proceedings before the board were pursued, and the defendants' conduct in frustrating the Plaintiff's efforts."

The issue in the case at bar is substantially similar to that found in Lieberman. Although close to two years elapsed before REON/Unique obtained subdivision approval, a question of fact exists as to whether that time was reasonable under all of the circumstances of the case as set forth above. Moreover, although AGUGLIARO's counsel sent a law day letter establishing a closing date, it is not clear from the record that he could close title since CASAGA had filed a lis pendens on the subject premises. Again, a question of fact exists as to whether it was reasonable for AGUGLIARO to have set a time of essence closing under all the facts of this case.

Based upon the foregoing, AGUGLIARO's motion for summary judgment dismissing the REON/UNIQUE complaint is denied.

The Motions to Sever

CPLR §603 provides that "In furtherance of convenience or to avoid prejudice the court may order a severance of claims, or may order a separate trial of any claim, or of any separate [*10]issue." AGUGLIARO also moves to sever the third-party complaint against POLLINA in the event both

complaints are dismissed and CASAGA also cross-moves to sever. POLLINA has not interposed any opposition to the motion. Unique does not address the request to sever in its opposition papers.

Based upon the foregoing, the Court, in the exercise of its discretion is severing the third-party action against STEVEN A. POLLINA.

Conclusions

AGUGLIARO's motion for summary judgment dismissing the complaints of REON/UNIQUE and CASAGA is granted as to CASAGA only and that complaint is dismissed in its entirety. The action shall proceed on the complaint of REON/UNIQUE. A compliance conference in that matter is scheduled for May 10, 2007 at 9:30 a.m. before the undersigned.

The motions to sever the third-party complaint against STEVEN A. POLLINA is granted and that action is severed and continued. Counsel in that action are directed to appear for a preliminary conference at D.C.M., Room 203A, Griffing Avenue Annex on June 14, 2007 at 9:30 a.m.

All other requests for relief not specifically addressed herein are denied.

Counsel for defendant/third-party plaintiff is directed to serve a copy of this Decision and Order with Notice of Entry on all counsel and the Clerk of the County of Suffolk.

The foregoing constitutes the DECISION and ORDER of the Court.

Dated: May 2, 2007

Riverhead, New York



Emily Pines

J. S. C. Footnotes

Footnote 1:AGUGLIARO states that he requested this provision due to certain tax consequences.

Footnote 2:Counsel for Casaga claims in the cross-motion to sever that he has never been served with the pleadings in the third-party action.

Footnote 3:Parenthetically, the Court notes that, to date, neither REON nor Unique ever provided or offered to provide good funds to replace the dishonored $10,000 check.