Revital Realty Group, LLC v Ulano Corp.

[*1] Revital Realty Group, LLC v Ulano Corp. 2012 NY Slip Op 51760(U) Decided on September 7, 2012 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 September 7, 2012
Supreme Court, Kings County

Revital Realty Group, LLC, Plaintiff,

against

Ulano Corporation a/k/a Ulano Corp., Defendant.



6702/2012



Attorney for plaintiff:

Joseph R. Curto, Esq.

Veneruso, Curto, Schwartz & Curto, LLP

35 East Greasy Sprain Road, Suite 400

Yonkers, NY 10710

Attorneys for defendants:

Charles E. Knapp, Esq.

Irwin Siegel, Esq.

Siegel & Reiner, LLP

900 Third Avenue, 17th Floor

New York, NY 10022

Carolyn E. Demarest, J.

The following papers read on this motion:NYSCEF Document Number:

Notice of Motion

3

Knapp Affirmation / Exhibits41004

Siegel Affirmation / Guerico Affidavit / Exhibits41102

Memorandum of Law in Support14

Curto Affirmation / Exhibit15-16

Zoldan Affidavit / Exhibits17-22

Response to Statement of Material Facts23 [*2]

Memorandum of Law in Opposition24

In this action, for specific performance and damages for breach of a real estate contract, defendant Ulano Corporation a/k/a Ulano Corp. moves, pursuant to CPLR 3212, for summary judgment dismissing plaintiff Revital Realty Group, LLC's complaint and awarding damages on its two counterclaims, for inappropriate filing of a lis pendens and breach of contract, and, pursuant to CPLR 6514, for cancellation of the lis pendens that plaintiff filed in connection with its complaint.

BACKGROUND

On November 30, 2011, plaintiff entered into a contract with defendant to purchase commercial real property located at 594 Dean Street, Brooklyn, NY (the "Property") for $4,550,000.00. Section 6 of the contract mandates that defendant "not permit occupancy of, or enter into any new lease for, space" within the Property and deliver it to plaintiff "free of any tenants, occupants or tenancies" and "with all of [defendant's] equipment within the Building envelope removed." Pursuant to the contract, plaintiff tendered two down payments for a combined deposit of $200,000.00, which has been held in escrow pending full payment and closing of title. Defendant claims that this was "a reduced contract deposit of five percent (5%) rather than the traditional ten percent (10%)," which it accepted in exchange for an "all-cash deal with no financing contingency"[FN1] and with the "certainty of an identified Closing Date." Plaintiff contends, to the contrary, that the deposit "was not a reduced amount for any particular reason."

The contract states, at Section 3.01, that the closing shall take place on a specific date, defined at Schedule D as the "one hundred twentieth (120th) day following the date of this contract," which was March 29, 2012. While the contract contains "time is of the essence" clauses at Section 17.04, establishing an absolute deadline for plaintiff to exercise its option to terminate the contract at the definite expiration date of the due diligence period, and at Schedule C, fixing the date of the second $100,000.00 deposit, there is no such clause concerning the closing date. Defendant claims that the March 29, 2012 closing date was essential because the requirement that it keep the Property vacant has and continues to cost it roughly $700.79 per day, including, but not limited to, maintenance expenses, interest on a loan, real estate taxes, and lost income.[FN2]

On March 13, 2012, defendant's counsel sent a letter to plaintiff's counsel confirming the March 29, 2012 closing date and proclaiming that "[s]uch date is time of the essence to the Contract." By letter dated March 19, 2012, new counsel for plaintiff asserted that "there is no time of the essence clause in the subject contract of sale"[FN3] and that "under well established contract law, [*3][plaintiff] is entitled to a reasonable opportunity to close after said 120th day." Defendant's counsel responded by letter dated March 20, 2012, in which it rejected this argument and stated that defendant "is ready, willing and able to Close," that the "Closing will take place on March 29, 2012 at out offices commencing at 10:00 AM," and that plaintiff "will be in default if it fails to close on such date and time." By letter dated March 21, 2012 plaintiff's counsel requested an adjournment of the closing to April 25, 2012, warning that, should the adjournment not be granted by March 23, 2012, "we shall file a lis pendens in light of the anticipatory breach of contract and will seek specific performance of the contract." On the same day, defendant's counsel sent a letter explaining its "per diem expenses . . . in maintaining the Property both physically and financially" and enclosing a proposed amendment to the contract, which would explicitly acknowledge that time is of the essence regarding the closing date; require a third deposit of $255,000.00, paid directly to defendant, upon its execution; direct the escrow agent to remit the initial two down payments to defendant; and require payment to defendant, upon its execution, in the amount of $27,731.15, equal to the expenses that defendant would purportedly incur from the delay in closing. Plaintiff did not agree to such amendment, and, on March 29, 2012, defendant held a closing before a notary public, at which plaintiff failed to appear and during which defendant tendered all the documents required to close title and declared plaintiff to be in material breach of the contract.

On March 28, 2012, plaintiff initiated the instant action, seeking specific performance on the grounds of anticipatory breach of the contract, and filed a lis pendens against the Property. Plaintiff amended its complaint on April 25, 2012, adding a second cause of action for breach of contract and seeking the return of its deposit in the event that the Court does not grant specific performance. Plaintiff claims that defendant denied it access to the Property in violation of Section 9.06 of the contract, which provides that defendant must allow plaintiff or plaintiff's representative, while accompanied by defendant's real estate broker, to access to the Property "at reasonable times upon reasonable prior notice to [defendant] and its broker." While defendant claims that this cause of action is "based on conclusory and deliberately vague allegations of a claimed refusal to allow unspecified persons access to the Property at unspecified times . . . after March 29, 2012," plaintiff asserts that its own real estate agent was not allowed to show the Property to potential tenants well before this date and that its financing agent later requested and was denied access. Plaintiff provides an email chain, dated March 28, 2012, wherein defendant's broker stated to plaintiff's financing agent that he was not allowed to grant access to the building on March 30, 2012 due to plaintiff's impending failure to close or amend the contract[FN4] and an email from defendant's broker, sent on January 18, 2012, stating that its rental listing of the Property "has caused a real problem" because its real estate agent "will not be allowed any access to the building."

On May 9, 2012, defendant interposed an answer in which it asserted two counterclaims seeking damages, in the amount of its per diem costs, for inappropriate filing of a lis pendens and, in the amount of plaintiff's deposit, for breach of contract. Without any supporting factual allegations, defendant contends that plaintiff filed the lis pendens "inter alia to gain a tactical advantage in litigation and to cause Defendant economic damage" rather than to protect its own interest in the Property. Defendant further claims that plaintiff breached the contract by failing to [*4]appear and tender full payment at the March 29, 2012 closing and that defendant is therefore entitled to retain plaintiff's two deposit payments as liquidated damages. Plaintiff interposed a reply, in which it denied defendant's allegations, on May 30, 2012.

On June 15, 2012, defendant filed the instant motion for summary judgment seeking dismissal of both of plaintiff's causes of action and awarding damages on its two counterclaims and for cancellation of the lis pendens filed against the Property. Defendant argues that, because a specific date was chosen for the closing, there was no financing contingency in the contract, and plaintiff failed to give an adequate reason for its request for an adjournment, plaintiff breached the contact by failing to appear at the March 29, 2012 closing. Defendant further claims that plaintiff is not entitled to specific performance because it was not ready, willing, and able to close title on the date specified in the contract. Moreover, defendant claims that plaintiff's second cause of action lacks merit because the purported refusal to grant access to the Property occurred after plaintiff breached the contract, excusing any nonperformance. In opposition, plaintiff contends that, because there is no "time is of the essence" clause with respect to the March 29, 2012 closing, defendant's unilateral contention that it was a "time of the essence" date was insufficient to change the terms of the contract and that it was entitled to a reasonable adjournment of the closing. Accordingly, plaintiff argues that defendant anticipatorily breached the contract by refusing to grant such adjournment and further breached the contract by failing to allow its representatives access to the Property. Furthermore, plaintiff claims that, despite the fact that its counsel did not provide a reason for its request for an adjournment in its letters to defendant's counsel, defendant had actual knowledge that plaintiff was working to obtain financing and to show the Property to potential tenants. No discovery was conducted prior to this motion.

DISCUSSION

Upon motion for summary judgment, the movant has the initial burden to produce admissible evidence sufficient to "warrant the court as a matter of law in directing judgment in [its] favor" (CPLR 3212 [b]; see Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065, 1067 [1979]). Once the movant establishes its prima facie entitlement to judgment, the burden shifts to the opposing parties to "demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action" (Zuckerman v City of New York, 49 NY2d 557, 560 [1980]; see CPLR 3212 [b]; Friends of Animals, 46 NY2d at 1067-68). While all "facts must be viewed in the light most favorable to the non-moving party'" (Vega v Restani Constr. Corp., 18 NY3d 499, 503 [2012], quoting Ortiz v Varsity Holdings, LLC, 18 NY3d 335, 339 [2011]), mere conclusory allegations or defenses are insufficient to preclude summary judgment (see Zuckerman, 49 NY2d at 562). "If it shall appear that any party other than the moving party is entitled to a summary judgment, the court may grant such judgment without the necessity of a cross-motion" (CPLR 3212 [b]).

"The elements of a cause of action for specific performance of a contract are that the plaintiff substantially performed its contractual obligations and was willing and able to perform its remaining obligations, that defendant was able to convey the property, and that there was no adequate remedy at law" (EMF Gen. Contr. Corp. v Bisbee, 6 AD3d 45, 51 [1st Dept 2004]). Where the contract is for the sale of real property, the requirement that there be no adequate remedy at law is presumed, "on the premise that each parcel of real property is unique" (id. at 52; see Lezell v Forde, 26 Misc 3d 435, 442 [Sup Ct, Kings County 2009]). In the instant case, it is not disputed that defendant was, at closing, and still is, able to convey the Property to plaintiff. However, defendant argues that [*5]plaintiff's failure to close on March 29, 2012 constitutes a material breach of the contract and that plaintiff is therefore not entitled to specific performance.

Where a real property contract does not specify that time is of the essence, "either party is entitled to a reasonable adjournment of the closing date," even if a date is provided in the contract (Baltic v Rossi, 289 AD2d 430, 430 [2d Dept 2001]; see Grace v Nappa, 46 NY2d 560, 565 [1979]; Brum Realty v Takeda, 205 AD2d 365, 366-67 [1st Dept 1994]). It is well established that "where time was not made of the essence in the original contract, one party may subsequently give notice making time of the essence," provided that such notice is "clear, distinct and unequivocal" and "fix[es] a reasonable time within which to perform" (Sahoyegh v Oberlander, 155 AD2d 436, 438 [2d Dept 1989]; see, e.g., ADC Orange, Inc. v Coyote Acres, Inc., 7 NY3d 484, 490 [2006]; Baltic, 289 AD2d at 430; Zev v Merman, 134 AD2d 555, 557 [2d Dept 1987]). Nevertheless, a party may not "declare that time [is] of the essence before the date set forth in the contract" (Baltic, 289 AD3d at 430); rather, the notice must "afford the [party] a reasonable time after the . . . closing date set forth in the contract within which to perform" (Savitsky v Sukenik, 240 AD2d 557, 558-59 [2d Dept 1997] [emphasis added]).

In the case at bar, although defendant did provide clear notice to plaintiff that the closing date of March 29, 2012 "is time of the essence," it sent such notice prematurely and without giving plaintiff sufficient time to fulfill its contractual obligations. Because the closing date was not originally deemed "time of the essence," plaintiff was entitled to a reasonable adjournment, upon which defendant could have, by reasonable notice, deemed time to be of the essence (see Miller v Almquist, 241 AD2d 181, 185 [1st Dept 1998]). Although defendant argues that plaintiff had no reason to request an adjournment in light of the fact that the contract has no financing contingency, plaintiff still had the ability to obtain financing and should have been granted more time to do so (see id. at 182, 185 [holding that the purchaser was entitled to adjourn the closing to obtain financing even though the contract was not contingent upon receipt of such financing]; Sobayegh, 155 AD2d at 436-38 [same]). Moreover, it is clear from the face of the contract that defendant did not initially bargain for a definite closing date, as other deadlines, but not the March 29, 2012 closing, were specifically designated as "time of the essence" (see GDJS Corp. v 917 Props. Inc., 99 AD2d 998, 999 [1st Dept 1984] [holding that time was not of the essence where the parties discussed and ultimately rejected a "time of the essence" clause in their contract]). Therefore, plaintiff's failure to appear at the closing and tender full payment on March 29, 2012 was not a material breach of contract. On the contrary, defendant's refusal to adjourn the closing constitutes an anticipatory repudiation of the contract (see Baltic, 289 AD2d at 430; Savitsky, 240 AD2d at 559; GDJS Corp., 99 AD2d at 999; see also Palmetto Partners, L.P. v AJW Qualified Partners, LLC, 83 AD3d 804, 807 [2d Dept 2011]).

Nevertheless, there remains a question of fact as to whether plaintiff would have been able to raise sufficient funds to purchase the Property had defendant consented to a reasonable adjournment of the closing.[FN5] Plaintiff provides an affidavit stating that it "fully expected to be [*6]prepared to close on April 25, 2012, the requested adjourn date," but it provides no proof that it had succeeded in obtaining financing or that it would otherwise have been able to tender full payment. Therefore, plaintiff has not yet established its entitlement to specific performance (see Huntington Min. Holdings v Cottontail Plaza, 60 NY2d 997, 998 [1983]).

However, defendant's reliance on Lusker v Tanner (90 AD2d 118, 124 [1st Dept 1982], quoting Hun v Bourdon, 57 App Div 351, 354 [3d Dept 1901]) for the proposition that the Court should, in equity, rewrite the terms of the contract where it would otherwise "involve one of the parties in a serious loss" is misplaced. The Lusker court merely describes the rule of equity that time is not of the essence unless deemed so expressly or by implication (see id.). In the case at bar, defendant conspicuously omitted a "time is of the essence" clause in connection with the closing, and the contract contains a merger clause at Section 18.02, stating that it "embodies and constitutes the entire understanding between the parties with respect to the transaction contemplated herein." Additionally, plaintiff claims that it did not specifically bargain for the Property to be vacant at the time of closing, but that defendant offered the Property to potential buyers as a vacant space. Under these circumstances, defendant cannot claim that it was implied that the closing date is "time of the essence," no matter how much it stood to lose from a short delay in the transfer of title. Defendant, the drafter of the contract, is a sophisticated business entity, and had it wanted "the certainty of an identified Closing Date" it should have included a provision to that effect. Therefore, defendant's motion for summary judgment dismissing plaintiff's first cause of action is denied.

Defendant also requests summary judgment dismissing plaintiff's second cause of action, for breach of contract, on the grounds that the contract had already terminated, by plaintiff's breach, by the time it requested, and was purportedly denied, access to the Property. This argument must fail because defendant, by refusing to allow plaintiff to close title on any date after March 29, 2012, anticipatorily breached the contract. "[U]nder the doctrine of anticipatory repudiation, where one party repudiates its contractual obligations prior to the time designated for performance,' the nonrepudiating party may immediately claim damages for total breach and be absolved from its obligations of future performance" (Palmetto Partners, 83 AD3d at 806-07). Because of defendant's repudiation, plaintiff did not breach the contract by failing to appear at the closing that defendant wrongfully declared "time of the essence" or by thereafter failing to close title, and defendant was not absolved of its duty to perform under the contract. Furthermore, while plaintiff's financing agent was purportedly denied access to the Property on March 30, 2012, after defendant held its closing and declared plaintiff to be in material breach of the contract, plaintiff also claims that its real estate agent was not allowed to access the Property to show it to potential tenants as early as January of 2012, well before any dispute over the closing date occurred. Therefore, defendant's request for summary judgment dismissing plaintiff's second cause of action is denied.

Defendant further requests that the Court cancel the lis pendens and grant summary judgment awarding damages on its two counterclaims, for inappropriate filing of a lis pendens and for breach of contract. Defendant claims that the lis pendens "was filed for a purpose other than to protect Plaintiff's rights but was done for the inappropriate purpose of inter alia to gain a tactical advantage in litigation and to cause Defendant economic damage." Pursuant to CPLR 6514 (b), "[t]he court, upon motion of any person aggrieved and upon such notice as it may require, may direct any county [*7]clerk to cancel a notice of pendency, if the plaintiff has not commenced or prosecuted the action in good faith." "Where a plaintiff is using the notice of pendency for an ulterior purpose, a finding of lack of good faith can be made" (Lessard Architectural Group, Inc., P.C. v X & Y Dev. Group, LLC, 88 AD3d 768, 770 [2d Dept 2011], quoting Nastasi v Nastasi, 26 AD3d 32, 41 [2d Dept 2005]). In the instant case, however, it is clear, based upon the demonstrated merits of plaintiff's claims, that plaintiff has brought and maintained this action in good faith and filed the lis pendens only to protect its interest in the Property pending adjudication of its demand for specific performance. Therefore, the Court declines to cancel the lis pendens. Moreover, as there is no merit to defendant's first counterclaim, it is dismissed. Furthermore, as defendant's refusal to adjourn the closing date specified in the contract constituted an anticipatory breach, plaintiff was absolved of its duty to close title upon the Property, and defendant's second counterclaim, for breach of contract, is also dismissed.

CONCLUSION

Accordingly, defendant's motion is denied in its entirety, and defendant's first and second counterclaims are dismissed. Counsel are to appear for a preliminary conference on October 25, 2012.

The foregoing constitutes the decision and order of the Court.

E N T E R :

__________________________________

HON. CAROLYN E. DEMAREST, J.S.C. Footnotes

Footnote 1: While the contract was not contingent on financing, plaintiff correctly notes that nothing in the contract precluded it from obtaining financing for the purchase.

Footnote 2: In his affidavit, defendant's President Alfred Guerico breaks down the various expenses and computes this total per diem cost. However, in its answer, as well as its letter to plaintiff's counsel and proposed amendment to the contract, defendant states that its per diem costs and expenses are approximately $749.35.

Footnote 3: This is incorrect, as there are "time is of the essence" clauses at Section 17.04 and Schedule C, although neither concern the date of closing.

Footnote 4: While defendant's broker did initially state that he was not allowed to grant access, he later stated that he would "find out" if he could show the Property at the requested date and time.

Footnote 5: Defendant claims that, to avoid "rewrit[ing] the agreement to include a financing contingency that the Plaintiff has expressly bargained away," "the Court may only consider [whether] Plaintiff's liquid assets . . . were sufficient to make the final payment." However, this argument is meritless because plaintiff was entitled to a reasonable adjournment to obtain financing and tender full performance under the contract.