Opinion
003145/04.
Decided February 16, 2006.
This is an action for Declaratory Judgment by plaintiff, seeking to declare defendant in default of a contract of sale for the purchase of 440 shares in a cooperative apartment located at 21 Barstow Road, Great Neck, New York. Seller, plaintiff filed an action by Summons and Complaint on March 5, 2004. Issue was joined, together with a counterclaim by defendant for damages, on September 24, 2004.
Plaintiff moves for Summary Judgment for Declaratory Judgment and to dismiss the defendant's Answer and Counterclaim and requests that the Court permit plaintiff's attorney to release the down payment, plus interest to his client. Plaintiff's attorney further requests permission to be released from all obligations as escrowee under the contract of sale.
Defendant cross moves for summary judgment and requests a trial on damages. Plaintiff's motion for Summary Judgment for Declaratory Judgment is denied. That part of plaintiff's motion seeking to dismiss defendant's answer is denied. Plaintiff's motion to dismiss defendant's counterclaim is hereby granted. Defendant's cross-motion for Summary Judgment is granted in part and denied in part.
FACTS
As a result of defendant seeking to purchase shares in a cooperative, he entered into a contract of sale, tendering a check as a down payment in the amount of $20,000, payable to the plaintiff's attorney, as escrowee. The check was returned for insufficient funds. Plaintiff advised the defendant of the insufficiency on October 9, 2004, and a replacement check was thereafter tendered by the defendant.
The terms of the contract of sale were for the sale of 440 shares in a cooperative apartment, at a purchase price of $200,000 (see, paragraph 1.11 of the contract). The balance of $180,000 was due at closing, with a closing date of "on or about July 24, 2001". (See paragraph 1.10 of the contract of sale.)
Paragraph 1.14 of the contract of sale states the following with regard to mortgage financing:
"If Paragraph 19 (Finance Contingency) applies.
1.15.1 the "Loan Terms" are
Amount Financed: $160,000 or any lower amount applied for as acceptable to Purchaser.
Payment Terms and Charges: The customary payment terms (including prevailing fixed or adjustable interest rate, prepayment provisions and maturity) and charges (including points, origination and other fees) then currently being offered to purchasers of cooperative apartments by the Institutional Lender (defined in Par. 19.5.1) to which Purchaser applies.
The Rider to the contract also states in paragraph 32.1:
"Purchasers represents that Purchasers have no knowledge of any matter relating to Purchasers' character and financial standing that would constitute a reasonable ground for the refusal of a lending institution to issue an unconditional mortgage commitment, and particularly that Purchasers have not filed a bankruptcy or insolvency proceeding or been convicted of a penal offense. Furthermore, purchasers make the same representations regarding any disclosed tenant or permitted occupant of the premises."
The contract, however, does not contain any paragraph 19, which allegedly was deleted from the contract as it was executed.
On October 29, 2001 the plaintiff corresponded with the defendant, stating that his time to obtain financing had expired and requested that a closing be scheduled within five (5) days.
On December 14, 2001, plaintiff wrote to defendant again, stating that a closing was unilaterally scheduled for December 19, 2001 at 10 a.m. in Sellers' office, otherwise the defendant would be held in default. Defendant failed to appear at the closing. However, the evidence in the form of the original envelope containing the letter dated December 14, 2001, is postmarked December 17, 2001, Long Island, New York. The defendant alleges that he did not receive the notice until the day of the closing. Defendant resides in Connecticut.
THE LAW
In a contract for the sale of real property, the rule in New York is well settled.
Time is not assumed to be of the essence . . . unless the parties have specifically so stated. Accordingly, one party to a contract may not unilaterally make time of the essence without reasonable and sufficient notice to the other party. 6 Warren's Weed, New York Real Property, Vendee Vender. § 2.04 [b][v] [4th ed.]
Where a contract for the sale of real property does not specify that time is of the essence, either party is entitled to a reasonable adjournment of the closing date. 3M Holding Corp. V. Wagner, 166 AD2d 580 (2nd Dept. 1990), citing, Sohayegh v. Oberlander, 155 AD2d 436 (2nd Dept. 1989).
Once the closing date set forth in the contract has passed, either party can declare time of the essence by giving a clear, distinct and unequivocal notice along with a reasonable time for the other party to act. See, Ballen v. Potter, 251 NY 224 (1929); Sohayegh v. Oberlander, supra; Xhelili v. Larstanna, 150 AD2d 560 (2nd Dept. 1989).
Plaintiff in his letter dated October 29, 2001, demanded that a closing date be scheduled, however a law date was not set forth until plaintiff's letter dated December 14, 2001. Defendants' letter of December 14, 2001 set a closing for December 19, 2001 at 10 a.m. in the plaintiff's attorney's office. The plaintiff attempted to place the defendant in default, but failed to provide adequate notice of the closing date to the defendant. Permitting five (5) days notice by mail (and less given the postmark date), of a closing is insufficient notice. 3M Holding Corp. v. Wagner, 166 AD2d 580. (2nd Dept. 1990)
Under these circumstances, there was no law date by which plaintiff's performance can be measured. This resulted in an indefinite adjournment. See, 3M Holding Corp., supra; Steinberg v. Linzer, 2002 NY Slip Op 50034 (Sup.Ct. Suffolk Co.). Since the letter sent by plaintiff regarding the closing was ineffective, it left the contract in full, force and effect. Therefore, plaintiffs were not entitled to cancel the contract and its subsequent acts constituted a wrongful repudiation. Steinberg, supra. The five (5) month delay in obtaining financing, gave plaintiff ample time to provide defendant adequate notice of the closing. Defendant should not be penalized for the plaintiff's failure to schedule a properly noticed closing date. Therefore, plaintiff's motion for Summary Judgment seeking declaratory judgment for the forfeiture of the down payment is denied.
Defendant in his cross motion seeks damages in the form of the difference between the sale price and subsequent purchase price, interest and punitive damages. Defendant states that the contract contained a mortgage contingency clause permitting him time to close and had he been provided with adequate notice of the closing date he would have had the funds available to close.
Before a purchaser is entitled to specific performance or damages on a contract, he must demonstrate that he substantially performed his contractual obligations and that he is ready, willing and able to satisfy those obligations not yet performed, regardless of any alleged anticipatory breach by the other party. Johnson v. Phelan, 281 AD2d 394 (2nd Dept. 2001); Petrelli Associates Inc. v. Germano, 268 AD2d 573 (2nd Dept. 2000); 3M Holding Corp. v. Wagner, 166 AD2d 580 (2nd Dept. 1990); Xhelili v. Arstanra, 150 AD2d 560 (2nd Dept. 1989) The purchaser alleges that the contract provided a mortgage contingency. However, the issue of whether a mortgage contingency existed is not an issue necessary to determine this motion.
The contract was executed in July 2001. Plaintiff's correspondence dated December 14, 2001 indicates that the mortgage application was incomplete. The record is devoid of any evidence that defendant made a good faith effort to acquire financing. Defendant fails to submit any proof of a mortgage application or commitment or proof that he had the funds available to purchase the property five months after the contract of sale were executed. Thus, the defendant fails to raise an issue of fact that he was ready, willing and able to consummate the sale then or now. Johnson v. Phelan, supra, Xhelili v. Larstanna, supra.
Bare unsupported conclusory assertions in the affidavit of the defendant, that he would have purchased the property regardless of a mortgage, is insufficient to satisfy his burden for damages. 3M Holding Corp. v. Wagner, 166 AD2d 580 (2nd Dept. 1990); Madison Investments Inc. v. Cohoes Associates, 176 AD2d 1021 (3rd Dept. 1991). Defendant has also failed to allege any facts that would justify the imposition of punitive damages.
In compliance with paragraph 28.2, defendant demanded return of his deposit, pursuant to a letter dated, February 18, 2002. Pursuant to a letter dated February 21, 2002, plaintiff refused to return the down payment. A review of the agreement entered by the parties details the status of a down payment in escrow. It states:
"Upon Closing, Escrowees shall deliver the contract deposit to seller. In all other cases, if either Party makes a demand upon Escrowee for delivery of the Contract Deposit, Escrowee shall give Notice to the other Party of such demand. If a Notice of objection to the proposed payment is not received from the other Party within 7 business days after the giving of Notice by Escrowee, time being of the essence, Escrowee is hereby authorized to deliver the Contract Deposit to the Party who made the demand. If Escrowee receives a Notice of objection within said period, or if for any other reason Escrowee is good faith elects not to deliver the Contract Deposit, then Escrowee shall continue to hold the Contract Deposit and thereafter pay it to the Party entitled when Escrowee receives (a) a Notice from the objecting Party withdrawing the objection, or (b) a Notice signed by both Parties directing disposition of the Contract Deposit or (c) a judgment or order of a court of competent jurisdiction."
Accordingly, upon the foregoing papers, plaintiff's motion for summary judgment is denied, plaintiff's motion to dismiss defendant's Answer is denied, and the motion to dismiss defendant's counterclaim as to actual anticipatory and punitive damages is granted. Defendant's cross-motion for summary judgment dismissing the complaint is granted insofar as he seeks the return of the down payment, plus any accrued interest pursuant to the escrow agreement.
Based upon the actions of the parties and the language of the contract, defendant is entitled to a return of the contract deposit. Plaintiff is directed to return the down payment to the defendant within thirty (30) days of service of a copy of this Order. Upon return of the down payment to the defendant pursuant to the terms of the escrow agreement, the plaintiff's attorney shall be released from all obligations as escrowee under the contract of sale.
This shall constitute the Order and Decision of the Court.