Kutalek v Studer

[*1] Kutalek v Studer 2009 NY Slip Op 52729(U) [26 Misc 3d 1217(A)] Decided on December 8, 2009 Supreme Court, Broome County Lebous, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 8, 2009
Supreme Court, Broome County

Richard Kutalek, Plaintiff,

against

Roy J. Studer, Defendant.



2008-2004



APPEARANCES:

COUNSEL FOR PLAINTIFF:PAUL M. PRICE, ESQ.

PROCTOR BUILDING

25 MAIN STREET

P.O. BOX 1632

BINGHAMTON, NY 13902-1632

COUNSEL FOR DEFENDANT:HINMAN, HOWARD & KATTELL, LLP

BY:CASEY EGAN DOYLE, ESQ., OF COUNSEL

700 SECURITY MUTUAL BUILDING

P.O. BOX 5250 BINGHAMTON, NY 13902-5250

Ferris D. Lebous, J.

Plaintiff, Richard Kutalek, commenced this action for specific performance of a real estate contract dated October 11, 2007. By way of this motion, plaintiff moves for summary judgment and specific performance of said real estate contract. Defendant, Roy J. Studer, opposes the motion in all respects and cross-moves for summary judgment. Plaintiff opposes the cross-motion.

The court heard oral argument from counsel on November 20, 2009.

BACKGROUND

Defendant Roy J. Studer is the owner of two pieces of real property totaling nearly 40 acres located at 122 and 134 Brink Road in the Town of Kirkwood, New York (hereinafter collectively "Subject Property"). In the summer of 2007, defendant placed a "For Sale" sign on the Subject Property. Plaintiff approached defendant regarding a possible purchase because it was adjacent to his parents' farm and brother's property. The parties had some preliminary conversations about the purchase price. Defendant's initial asking price was $90,000 while plaintiff's initial offer was $60,000.

In September 2007, the parties agreed on a $70,000 purchase price for the Subject Property. On October 11, 2007, the parties entered into a handwritten real estate contract (drafted by plaintiff) which states, in its entirety, as follows:

10-11-07

This agreement between Rich Kutalek, and Roy Studer, is for the purchase of 122, and 134 Brink RD. 40 acre parcel, Sale Price $65,000.[FN1] Down payment of $5,000, 10% held if not closed in May 2008. Total Due at closing $65,000.

s/Rich Kutalek

s/Roy J. Studer

(Plaintiff's Exhibit A).

Plaintiff asserts the "May 2008" language was inserted because defendant was leaving to winter in Florida and would not return until that time, while defendant asserts the language was included because plaintiff was unable to finance the purchase in October 2007 and defendant needed an end date for the contract (Plaintiff's EBT, p 10; Defendant's EBT, pp 26-27).

In any event, on October 11, 2007, plaintiff paid defendant $5,000 in cash as a down payment as stated in the contract. [*2]

As anticipated, defendant went south for the winter. Plaintiff and defendant both testified in their depositions that they maintained telephone contact while defendant was out of town. By both parties' admissions, the telephone discussions were focused on the impact the Marcellus Shale and gas leasing rights should have on the previously agreed purchase price.

Defendant did not return to the Broome County area until May 28 or 29, 2008 (Def EBT, p 28).

The closing did not occur in May 2008. However, upon defendant's return to Broome County in the Spring of 2008, defendant made a personal visit to plaintiff described as follows:

I went in and I asked him about - - during conversations over the phone we sort of discussed between ourselves about, yes, it was worth more than that due to the gas rights coming and the gas companies coming in, and we tried to get in agreement with something that would satisfy both of us.

(Def EBT, p 39).

Also in the Spring of 2008, plaintiff stated to defendant that he wanted to close. In the words of defendant himself:

Q.Now, at some point in the spring of 2008 did Mr. Kutalek tell you he doesn't want to change the price, he wants to close?

A.I would say he mentioned he wanted to close, but we still hadn't come to any kind of agreement on what we were going to come up with as far as the land or the money value or the mining rights.

(Def EBT, p 40).

On July 8, 2008, plaintiff's counsel formally notified defendant, in writing, that plaintiff was ready, willing and able to close under the terms of the October 11, 2007 contract.

On July 23, 2008, this action was commenced with the filing of a summons and complaint. Defendant interposed an answer on or about September 30, 2008.

DISCUSSION

A.Contract

In the first instance, this court finds this is a valid contract subject to specific performance (160 Chambers St. Realty Corp. v Register of City of NY, 226 AD2d 606 [2nd Dept 1996]). More specifically, the contract satisfies the statute of frauds because the terms of the entire contract are stated with reasonable certainty, namely the identification of the parties, the property, and the price (O'Brien v West, 199 AD2d 369 [2nd Dept 1993]). The fact that the funding or financing of the purchase price is not addressed is irrelevant since it is assumed that money was the medium of payment (Birnhak v Vaccaro, 47 AD2d 915, 916 [2nd Dept 1975]). Additionally, defendant's [*3]acceptance of a $5,000 cash down payment on the date the contract was signed served as adequate consideration.

B.Time of the Essence

In real estate contracts, "[i]t has been held that time is never of the essence...even if a closing date is stated, unless the contract specifically so provides, or if special circumstances surrounding its execution so require [citations omitted]" (Whitney v Perry, 208 AD2d 1025, 1026 [3rd Dept 1994]).[FN2]

Initially, the court addresses defendant's argument that the presence of another (unidentified) potential buyer equates to special circumstances. Defendant offers no authority for this proposition nor did the court's own research indicate any such authority (compare Andesco, Inc. v Page, 137 AD2d 349, 355-356 [1st Dept 1988] [special circumstances existed in that Federal capital gains taxes were to increase effective on January 1, 1987, so despite absence of words, time was of the essence]). As such, the court finds that there were no special circumstances surrounding the execution of this contract warranting imposition of a time of the essence clause.

The next question before this court is whether this contract specifically contained a

time of the essence provision. The parties disagree on whether the language "Down payment of $5,000, 10% held if not closed in May 2008" equates to a time of the essence clause. Plaintiff argues that this language amounts solely to a penalty clause for any delay past May 2008, but not a default clause. More specifically, plaintiff stated he believed that the only way he could default under the contract was by being unable to provide sufficient funds at the closing (Pl EBT, pp 13-16). For his part, defendant argues that the "10% held if not closed in May 2008" phrase was intended by the parties as both a penalty clause and a default clause as a safeguard for defendant in the event plaintiff was unable to finance the purchase (Def EBT, pp 32-33).

It is undisputed that this contract does not contain the so-called magic words "time is of the essence". It is well-settled that the inclusion of a date by which a real estate contract should close does not, in and of itself, make that date the essence of the contract (Ballen v Potter, 251 NY 224, 228-229 [1929]). By way of comparison, case law establishes that real estate contracts containing the phrase "in no event later than" are not contracts in which time is of the essence (Whitney, 208 AD2d at 1026 [installment payment due by "no event later than" date not a time of the essence clause; ADC Orange, Inc., 7 NY3d at 489 ["in no event later" closing date not a time of the essence clause]). In this court's view, the language here - "10% held if not closed in May [*4]2008" - is comparable to the "in no event later than" language. Consequently, the court finds that the parties' inclusion of the date May 2008 did not make this contract one in which time was of the essence.

Parenthetically, the court finds that even if it had concluded that this contract contained a time of the essence clause, it would have found defendant estopped from asserting said clause.

Both parties' deposition testimony reference negotiations after May 2008 to increase the purchase price or to allow defendant to retain some of the property for himself due to the gas leasing potential.[FN3] Having attempted to renegotiate the deal after May 2008, defendant can not now claim that plaintiff was in default as of May 31, 2008 (Levine v Sarbello, 112 AD2d 197, 200-201 [2nd Dept 1985], affd 67 NY2d 780 [1986]). Moreover, defendant conceded that he did not return to the Broome County area until May 28 or 29, 2008, thereby making a May 2008 closing nearly impossible.

In sum, the court finds that this contract did not contain a time of the essence clause and defendant had no right to declare plaintiff in default as of June 1, 2008. As such, plaintiff had a reasonable time within which to tender performance which he did by requesting a closing date in the Spring of 2008 as noted hereinabove.

C.Specific Performance

Having found that time was not of the essence, the court now turns to that portion of plaintiff's motion seeking specific performance as a matter of law. "Before specific performance of a contract for the sale of real property may be granted, a buyer must demonstrate that it was ready, willing, and able to perform [citations omitted]" (Weiss v Feldbrand, 50 AD3d 673, 674 [2nd Dept 2008]). Said demonstration must relate to the original law day or, if time was not of the essence, on a subsequent date fixed by the parties (Zev v Merman, 134 AD2d 555, 557 [2nd Dept 1987], affd 73 NY2d 781 [1988]). Additionally, it is well-settled that "[t]hough defendant seller's anticipatory breach of contract relieved plaintiff purchaser of its obligation to tender performance, this did not discharge plaintiff's obligation to show that it was ready and able to perform its own contractual undertakings on the closing date, in order to secure specific [*5]performance [citations omitted]" (Huntington Min. Holdings v Cottontail Plaza, 60 NY2d 997, 998 [1983]). Thus, the question becomes whether plaintiff has satisfied his prima facie burden on this motion by establishing he was ready, willing, and able to perform within a reasonable time after the May 2008 date.

With respect to plaintiff's ability to provide sufficient funding for closing, plaintiff concedes he never actually tendered the purchase funds to defendant. However, plaintiff had paid defendant $5,000 in cash as a down payment on October 11, 2007. Next, plaintiff submits financial statements from two institutions showing a combined balance of more than $60,000 in the Spring of 2008 (Pl Ex J). Plaintiff also submits a recent mortgage commitment from Peoples National Bank issued in July 2009 (expired August 30, 2009) (Kutalek Affidavit, Ex A). Additionally, plaintiff submits a joint affidavit from his parents, George and Patricia Kutalek, stating, in pertinent part, as follows:

2.We generally understood back in the Fall of 2007, that our son, Richard, had entered into an agreement to purchase certain real property on Brink Road from Roy Studer, the defendant, and our neighbor. Our understanding was based upon conversations with our son, Richard.

3.We, at all times after speaking with Richard, were prepared to assist Richard with funding the purchase if he required it. We have in the past done this for Richard and his other brothers. See Exhibit A annexed hereto.[FN4]

4.From the Fall of 2007, to date, we have had more than $70,000 in liquid funds available to for assistance to Richard for the purchase if he asked for it. See Exhibit B annexed hereto. In addition we have sufficient actual cash in a secured facility which would be available to Richard. There were never, nor are there now, any pre-conditions to his access to these funds.

(Kutalek joint affidavit, ¶¶ 2-4).

In view of the foregoing, the court finds that plaintiff has established that he possessed the financial wherewithal to purchase the Subject Property within a reasonable time of May 2008 (Alba v Kaufmann, 27 AD3d 816 [3rd Dept. 2006]).

With respect to plaintiff's obligation regarding document preparation for closing such as the title abstract, insurance, deed, note and mortgage, if any, there is no dispute that there were no document preparations by plaintiff in May 2008. Plaintiff alleges that he made no effort toward document preparation until this litigation because of the mutual post-closing negotiations.[FN5] The [*6]court finds that plaintiff was relieved from tendering performance with respect to document preparation due to the parties' subsequent negotiations (Levine, 112 AD2d 197, affd 67 NY2d 780).

In sum, the court finds that defendant's attempts to renegotiate or cancel this deal because of the potentially increased value of the property due to gas leasing rights which arose after the execution of this contract must fail. Moreover, inasmuch as a unique parcel of real property is at issue, specific performance is the appropriate remedy (Fallati v Mackey, 31 AD3d 879 [3 Dept. 2006], lv denied 7 NY3d 711 [2006]).

CONCLUSION

In view of the foregoing, the court finds that specific performance is the appropriate remedy conditioned, of course, upon plaintiff's payment of the balance of the purchase price at a closing to be scheduled within a reasonable time.

This constitutes the order of the court.

Dated: December 8, 2009

Binghamton, New York

s/ Ferris D. Lebous

Hon. Ferris D. Lebous

Justice, Supreme Court Footnotes

Footnote 1:The parties both agree that the sales price should read $70,000.

Footnote 2:An alternative method of converting a contract into a "time of the essence" contract is not applicable here. If a contract does not contain a time of the essence clause, the seller may "[c]onvert a non-time-of-the-essence contract into one making time of the essence by giving the buyer 'clear, unequivocal notice' and a reasonable time to perform" (ADC Orange, Inc. v Coyote Acres, Inc., 7 NY3d 484, 490 [2006]). There is no assertion by defendant that he ever triggered the alternate method of conversion by giving the plaintiff-buyer the requisite notice with reasonable time to perform. As such, the court need not address this alternative method.

Footnote 3:Plaintiff's EBT:

Q.Okay. So, May or early June he [Studer] came to your office?

A.Yes.

Q.And what did he say to you?

A.He wanted to know because he had then - - we both then at that point had heard about the gas leasing, and he wanted to know. He said, I want to be fair with you. And it was kind of a mutual thing.

And with being a friend, you know, I didn't just want to say, well, this is our deal. I'm not talking. So, we talked about - - he said, maybe we come up with $5,000 more or I keep a couple acres.

(Pl EBT, p 21; see also Def EBT, pp 32 & 39).

Footnote 4:Exhibit A is a mortgage dated October 25, 1999 with Richard Kutalek as mortgagor and his parents as mortgagees.

Footnote 5:A proposed copy of the deed is submitted as Plaintiff's Exhibit N.