321 W16 Prop. Owner, LLC v 321 W. 16th, LLC

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321 W16 Prop. Owner, LLC v 321 W. 16th, LLC 2023 NY Slip Op 33317(U) September 22, 2023 Supreme Court, New York County Docket Number: Index No. 656695/2022 Judge: Lucy Billings Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. FILED: NEW YORK COUNTY CLERK 09/25/2023 11:50 AM NYSCEF DOC. NO. 98 INDEX NO. 656695/2022 RECEIVED NYSCEF: 09/25/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 41 ------------------------ ·--------- ---x 321 W16 PROPERTY OWNER, LLC, Index No. 656695/2022 ·Plaintiff - against·- DECISION AND ORDER 321 W. 16TH, LLC, and AXOS B~NK, Defendants -------- ------------------------ ----x LUCY BILLINGS, J.S.C.: I. INTRODUCTION I Plaintiff is a prospective buyer of an apartment building at 321 West 16th Street, New York County. After defendant refused to sell the building on the closing·dates pursuant to the parties' contract of sale, plaintiff commenced this action for breach of the contract. Defendant now moves to cancel th~ notice of pendency that plaintiff filed on the building ·in 2022. C.P.L.R. § 6514(b). Plaintiff cross-moves for summary judgment on plaintiff's breach of contract claim seeking defendant's specific performance·of its.contract to sell the building to plaintiff· or, alternatively, dismissing defendant's affirmative defenses. C.P.L.R. §§ 32ll(b), 3212(b) and (e). The parties agree that, if the court grants plaintiff's cross-motion, defendant's motion will be academic after performance of the contract. 321w16prop923 [* 1] Plaintiff also agrees that, in that event, plaintiff 1 2 of 8 INDEX NO. 656695/2022 FILED: NEW YORK COUNTY CLERK 09/25/2023 11:50 AM NYSCEF DOC. NO. 98 RECEIVED NYSCEF: 09/25/2023 will discontinue its remaining claim for damages. Defendant discontinues its second affirmative defense, plaintiff's failure to state a claim~ a superfluous defense; fourth affirmative \ defense, plairiti~f's inadequate service,· which defendant has waived, C.P.L:R. § 3211(e); and sixth affirmative defense, the invalidity of plaintiff's declaration that time was of the essence. Defendant principally claims, in its first affirmative defense, that its performance of the contract of sale is impossible, but indicates only that performance will be costly. To close the sale, defendant must repay the loan from defendant's mortgagee, former defendant Axos Bank, an obligation well known to defendant when it entered the contract of sale and therefore riot an intervening or superseding event causing defendant's breach of the contract,· as its seventh affirmative defense claims. Because defendant finds it difficult.to clear the outstanding mortgage, as defendant must under§ 2:s of the contract of sale, defendant's third and fifth affirmative defenses claim that only plaintiff's alternative remedy, defendant's return of plaintiff's deposit, rather than specific performance, is available. II. IMPOSSIBILITY OF PERFORMANCE AND FRUSTRATION OF PURPOSE The doctrine of impossibility excuses performance of'a contract by a party only when performance becomes objectively 32lwl6prop923 [* 2] 2 3 of 8 INDEX NO. 656695/2022 FILED: NEW YORK COUNTY CLERK 09/25/2023 11:50 AM NYSCEF DOC. NO. 98 RECEIVED NYSCEF: 09/25/2023 impossible because the subject of the contract or the party's means of performing has been destroyed. Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900, 902 (1987); Gap, Inc. v. 44-45 Broadway Leasing Co. LLC, 206 A.D.3d 503, 504 (1st Dep't 2022); Valentino U.S.A., Inc. v. 693 Fifth Owner LLC, 203 A.D.3d 480, 480 (1st Dep't 2022). Financial hardship does not qualify as impossibility excusing performance of a contract. Archaeology Ltd. v. 207 E. 57th St. LLC, Urban 68 A.D.3d 562, 562 (1st Dep't 2009). A blanket mortgage covering multiple properties encumbers defendant's building at 321 West 16~h Street and includes (1) a debt service coverage ratio that requires the het op~rating income of all the properties encumbered to be 125% of the debt serviced under the mortgage and (2) a loan-to-value ceiling that limits the loan balance to 55% of the properties' value. Obviously it is not impossible for defendant to reduce the debt serviced under the mortgage or reduce the loan bal~nce. While it may not be profitable for defendant to reduce this debt, nothing has prohibited defendant from doing so~ "[W]here performance is possible, albeit unprofitable, .the legal excuse of impossibility is not available." Warner v Kaplan, 71 A.D.3d 1, 5 (1st Dep't 2009). Nor does the debt service coverage ratio, loan-to-value ceiling, or overall obligation to clear the mortgage frustrate 32lwl6prop923 [* 3] 3 4 of 8 INDEX NO. 656695/2022 FILED: NEW YORK COUNTY CLERK 09/25/2023 11:50 AM NYSCEF DOC. NO. 98 RECEIVED NYSCEF: 09/25/2023 the contract's purpose. The frustration of purp~se·defeµse requires defendant to be completely deprived of the ability to close the sale as contemplated by the contract. Gap, Inc. v ._ 44-45 Broadway.Leasing Co. LLC, 206 A.D.3d-at 504; 1/alentino U.S.A., Inc. v. 693 Fifth ·owner LLC, 203 A.D.3d at 480. Although these requirements may render defendant's consummation of the sale more difficult and less profitable,.defendant is not totally prevented from closing the sale. III. PLAINTIFF'S READINESS, WILLINGNESS, AND ABILITY TO CLOSE Defendant also claims that plaintiff fails to show it was .I'. ready, willing, and able to close the sale on the dates set for the closing, April 27, May 4,: ·and June 3, 2022, and remains ready, willing, afid able to close. ·In support of plaintiff's cross-motion, however, its m_anager attests that . as of April 27, 2022, plaintiff had·received clearance t:rom plaintiff's lender and thus had met its lender's requirements fpr a loan, held the balance of th~ purchase price in its operating account, and therefore was ready, wiliing, and able to close the sale with no impediments. He also attests to and presents communic_ations • • • • ,f • • • between the parties preparatory to the ~losintj that it was scheduled at the office fo the lender's attorney; signaling the lender's commitment to the transaction, which defendant does not dispute. Notably, after defendant -refused to c-lose April 27, 2022, · 321w16prop923 [* 4] 4 5 of 8 INDEX NO. 656695/2022 FILED: NEW YORK COUNTY CLERK 09/25/2023 11:50 AM NYSCEF DOC. NO. 98 RECEIVED NYSCEF: 09/25/2023 due to an earlier noti~e of pendency that the New York City Department of Housing Preservation and Development (HPD) had filed on the building in 2015, on April 29, 2022, plaintiff's attorney asked defendant's attorney to "please let us know if there are any other issues" that impeded the closing. David Gleitman, NYSCEF Doc. 36, ~ 36. Aff. of On May 1, 2022, defendant's attorney responded t~at only HPD's notice of pendency still was troublipg defendant, even though by then plaintiff had agreed to purchase the building subject to HPD's notice of pendency. That response May 1, 2022, was the time for defendant to notify plaintiff that, in defendant's view, plaintiff was not ready, willing, _or able to close the sale. Again, on May 3, 2022, before the scheduled closing May 4, 2022, plaintiff's attorney asked defendant's attorney: closing tomorrow . ?" Id. 51 46. "What is the impediment to Again, on May 4, 2022, defendant's attorney responded that only HPD's notice of pendency posed a concern to defendant. That response May 4, 2022, was another opportunity for defendant to notify plaintiff that defendant considered plaintiff unready, unwilling, or unable to close the sale. Defendant presents no contradictory evidence. Although plaintiff did not present documentary evidence .to support plaintiff's sworn statements regarding clearance from it~ lender and the balance of the purchase ~rice in its operating account 321w16prop923 [* 5] 5 6 of 8 INDEX NO. 656695/2022 FILED: NEW YORK COUNTY CLERK 09/25/2023 11:50 AM NYSCEF DOC. NO. 98 RECEIVED NYSCEF: 09/25/2023 until its reply~ the court provided defendant repeated second chances to oppose plaintiff's cross-motion and another chance to request a surreply, which defendant declined. The unsworn commitment for a $5,436,000 loan from nonparty New York Community Bank and wire trans£er to plaintiff's sole owner and member are inadmissible hearsay in any event, but plaintiff's manager does attest that plaintiff received,the commitment and the wire transfer. Plaintiff's affidavits, defendant's acknowledgment of the commitment by plaintiff's lender to the parties' transaction, and defendant's silence as to plaintiff's readiness, willingness, or ability to close the sale whe~ twice asked to specify any such issue, absent contradictory evidence, demonstrate plaintiff was and is ready, willing, and able to perform the c6ntract of sale. Pesa v. Yoma Dev. Group, Inc., 18 N.Y.3& 527, 532 IV. (2012). SPECIFIC PERFORMANCE Finally, to obtain specific performance, plaintiff need not show that damages are an inadequate remedy, because§ 10.2 of the contract designates specific performance as a remedy for See Vector Media, LLC defendant's default ·at plaintiff's option. v. Go New York Tours Inc., 187 A.D.3d 531, 532 (1st Dep't 2020); BOC Mgt. Servs., LLC v. Singer, 144 A.D.3d 597, 598 201·6). (1st Dep't Therefore. the court dismisses all. affirmative defenses . . . . that defendant has not already discontinu·ed and grants plaintiff's cross-motion for summary judgment as follows . 321w16prop923 [* 6] .6 7 of 8 INDEX NO. 656695/2022 FILED: NEW YORK COUNTY CLERK 09/25/2023 11:50 AM NYSCEF DOC. NO. 98 RECEIVED NYSCEF: 09/25/2023 C.P.L.R. §§ 3211(b), 3212(b) and (e). Within 60 days after entry of this order, unless the parties agree to another deadline, defendant shall perform all acts necessary to transfer ownership of the apartment building at 321 West 16th Street, New York County, in exchange for the purchase price and any further obligations of plaintiff under the parties' contract of sale. The Clerk shall enter a judgment to that effect. Upon compliance with this order, plaintiff discontinues any remaining claims, C.P.L.R. § 3217, and defendant's motion to cancel the notice of pendency on the real property described above will be moot and therefore is denied. DATED: September 22, 2023 LVW1~~.s LUCY BILLINGS, J.S.C. 321w16prop923 [* 7] 7 8 of 8

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