Opinion
116716/05.
Decided July 17, 2006.
Sol Mermelstein, Esq., (Sol Mermelstein, Esq.), Brooklyn, New York, For Plaintiff:
Paykin Greenblatt Lesser Krieg LLP, (David J. Wolkenstein, Esq.), New York, New York, For Defendants:
Defendants Paykin Greenblatt Lesser Krieg LLP (PGLK) and Intertrade International Ltd. (Intertrade) move by way of order to show cause for summary judgment (CPLR 3212) dismissing the complaint in its entirety and on their counterclaim for a judgment declaring that Intertrade is entitled to retain plaintiff Michael Gindi's downpayment of $500,000, as liquidated damages for his alleged breach of contract. Gindi cross-moves for a default judgment against Intertrade pursuant to CPLR 3215 on the ground that Intertrade failed to answer the amended complaint. Alternatively, Gindi cross-moves for summary judgment (CPLR 3212) directing the specific performance of a contract of sale for the purchase of real property and an abatement of the purchase price.
The downpayment is being held in escrow by PGLK.
Plaintiff Gindi commenced this action seeking specific performance of a contract for the sale of real property owned by Intertrade, located in Harlem, Manhattan. The real property is comprised of five lots, upon which three buildings stood. According to Intertrade, the buildings were "broken down and uninhabitable," and vacant with the exception of holdover tenants residing in the building located on Park Avenue (Park Avenue Property) (Affidavit of Jan Gross, ¶ 5). The Park Avenue Property was condemned by the City of New York (City) in April of 2002, although its demolition was temporarily stayed by application of the holdover tenants ( id.).
On July 6, 2005, Intertrade entered into an agreement (Agreement) with Gindi for the sale of the property for $8,500,000. The parties executed a rider to the Agreement (Rider), and Gindi delivered a check for $500,000 as downpayment for the purchase, while the closing was scheduled to take place on August 15, 2005. Thereafter, Gindi retained an environmental engineer to inspect the premises, which was conducted on July 21, 2005. According to Intertrade, Gindi was advised that access to the interior of the buildings could not be granted because of the presence of the holdover tenants in the Park Avenue Property (Affidavit of Jan Gross, ¶¶ 14-15). Intertrade maintains that at the time of inspection, Gindi made no objection to the lack of access afforded to his environmental inspector, while Gindi alleges that Intertrade improperly refused to permit the environmental inspection of the interior of the buildings to proceed.
On August 4, 2005, upon receipt of a title report of the property, Gindi demanded that Intertrade cure exceptions cited in the property's title report prior to closing, which included encroachments and outstanding judgments (Affidavit of Jan Gross, Exhibit 8). Intertrade responded by stating that while some exceptions had been cured, the remainder would be remedied at closing; additionally, assurances were sought that the closing would take place as scheduled (Affidavit of Jan Gross, Exhibit 9). Gindi responded that all exceptions required clearance prior to the closing scheduled for August 15, 2005 (Affidavit of Jan Gross, Exhibit 10). Gindi did not appear for the closing.
Subsequently, the parties arranged to meet to discuss outstanding issues. According to Intertrade, it offered to credit Gindi $10,000 of the purchase price in lieu of repairing the encroachments, which Gindi allegedly rejected unless Intertrade agreed to lower the purchase price by $1,100,100, which Intertrade, in turn, rejected.
Subsequent to this meeting, Intertrade retained services for the removal of the encroachments, which were allegedly removed in late August (Affidavit of Jan Gross, ¶¶ 26-27). Thereafter, Intertrade applied for a demolition permit for the Park Avenue Property, although the application was abandoned prior to the permit's issuance.
On August 24, 2005, Intertrade advised Gindi of the removal of the encroachments and of obtaining a warrant of eviction for the holdover tenants (Affidavit of Jan Gross, Exhibit 13). Further, Intertrade stated that it was proceeding with closing on a time of the essence basis and that it was tendering title "as is," citing to a contractual provision in the Rider which provides that in the event that Intertrade is unable to convey "good and marketable title," its sole obligation is to "refund to the purchaser the deposit made hereunder and to reimburse the purchaser for the net cost of title examination . . . [t]he purchaser may, nevertheless, accept such title, as the seller may be able to convey without abatement in price and without any other liability on the part of the seller" (Rider, annexed to the Affidavit of Jan Gross, Exhibit B, at ¶ 3).
On September 8, 2005, Gindi rejected Intertrade's overture to accept title "as is" and to close on September 19, 2005, maintaining that Intertrade was in default of the Agreement due to its inability to deliver insurable title, and citing exceptions listed in the title report that he alleges were uncured (Affidavit of Jan Gross, Exhibit 14; Affirmation of Sol Mermelstein, Exhibit B).
Upon Gindi's failure to appear at the closing fixed by Intertrade, it declared him in default, indicating that the downpayment would be paid over to Intertrade as liquidated damages (Affidavit of Jan Gross, Exhibits 15, 16). Intertrade alleges that several days later, the Park Avenue Property partially collapsed of its own accord. The City's Department of Buildings subsequently inspected the property, and in deeming the premises "unsafe and in imminent peril," ordered the demolition of the remainder of the building, which was undertaken by the City itself (Affidavit of Jan Gross, Exhibits 17, 18). The holdover tenants were removed by the City's Sheriff in October of 2005. Gindi disputes this account, maintaining that Intertrade itself improperly demolished the Park Avenue Property in an attempt to cure encroachments (Reply Affirmation of Sol Mermelstein, Esq., ¶ 10).
In December of 2005, Gindi commenced this action seeking specific performance of the Agreement, and alleging five violations of the Agreement on Intertrade's part: (1) wrongfully obtaining a permit for the demolition, and actual demoliton of the Park Avenue Property; (2) failure to remove encroachments; (3) failure to cure and clear all emergency repair and Environmental Control Board violations, as of September 8, 2005; (4) failure to pay and satisfy a judgment against it in the amount of $20,090; and (5) failure to provide access to the buildings. Simultaneous with the filing of the complaint, Gindi filed a Notice of Pendency against the Property.
Intertrade filed a verified answer including a counterclaim seeking a declaratory judgment that it was entitled to receive the downpayment as liquidated damages for Gindi's material breach of the Agreement. On January 25, 2006, Gindi served an amended complaint, which served only to change the identity of the named defendant, Cesar Fernandez, Intertrade's former counsel, to the law firm of PGLK, Intertrade's current counsel, who additionally holds the downpayment in escrow (Affirmation of Sol Mermelstein, Esq., Exhibit A). According to Gindi, Intertrade failed to interpose an answer to the amended complaint.
On March 9, 2006, PGLK served an answer to Gindi's amended complaint (Affidavit of Jan Gross, Exhibit 2). According to Gindi, PGLK served the answer on behalf of itself and not Intertrade, which Intertrade does not dispute.
Defendants move for summary judgment on the complaint, maintaining that Gindi never tendered performance, as he was required, prior to declaring Intertrade in default of the Agreement. Additionally, defendants move for summary judgment on Intertrade's counterclaim to retain Gindi's downpayment as liquidated damages for his alleged breach of the Agreement and failure to close within the time of the essence period declared by Intertrade.
Gindi cross-moves for a default judgment against Intertrade on the ground that it failed to answer the amended complaint served upon it. Alternatively, Gindi cross-moves for summary judgment directing specific performance of the Agreement, an abatement of the purchase price representing the value of the Park Avenue Property that was allegedly wrongfully demolished, and for an additional abatement of $200,000 for environmental conditions on the Property, arising out of Intertrade's alleged refusal to permit an environmental inspection of the interior of the buildings. According to Gindi, Intertrade anticipatorily breached the Agreement by wrongfully declaring Gindi in default, despite Intertrade's failure to cure title exceptions.
Generally, in order for a purchaser of real property to place a seller in default for failure to provide clear title, the purchaser must first tender performance and demand good title ( Ilemar Corp. v. Krochmal, 44 NY2d 702, 703). However, where, as here, a contract for real property states that the seller shall tender title at closing that a reputable title company will insure, the burden of producing insurable title has been construed as a condition precedent to the seller holding the purchaser in default without first tendering performance ( Gargano v. Rubin, 200 AD2d 554, 555 [2nd Dept 1994]; Gilchrest House v. Guaranteed Title Mtge. Co., 277 App Div 788, 789 [2nd Dept 1950], affd 302 NY 852). Generally, a title company's approval of title must be unequivocal, unless the exceptions to title are those contemplated by the contract itself ( Laba v. Carey, 29 NY2d 302, 307, rearg denied 30 NY2d 694). Thus, in order to defeat Gindi's cross-motion for summary judgment, it is incumbent upon Intertrade to demonstrate that at the time fixed for closing, it was prepared to deliver insurable title in accordance with the Agreement ( Gargano, 200 AD2d at 555).
The Agreement provided that Intertrade was required to deliver a title that a reputable insurance company would approve and insure (Affidavit of Jan Gross, Exhibit B, Agreement, at § 1.02, Schedule D, at ¶ 1).
For the reasons stated below, Intertrade has failed to demonstrate that it could deliver insurable title at the time fixed for closing.
In support of its cross-motion for summary judgment and in opposition to Intertrade's motion for the same, Gindi maintains that Intertrade was not ready to close because it failed to cure title exceptions, could not deliver insurable or marketable title as required by the Agreement, and committed an anticipatory breach of the Agreement by wrongfully claiming Gindi in default. In attempting to establish that Intertrade could not deliver insurable title without exceptions, Gindi submits the affidavit testimony of title counsel to National Granite Title Insurance Agency LLC (National Granite), a title insurance company designated by Gindi to approve and insure title to the property. The title counsel testified that at the time a title report was conducted on June 1, 2005, Intertrade could not deliver insurable title without remedying nineteen exceptions, which exceptions included the satisfaction of money judgments and the removal of encroachments (Affidavit of Sol Mermelstein, Esq., Exhibit H; Complaint, ¶ 11; Affirmation of Sol Mermelstein, Esq., ¶ 10).
According to Intertrade, it had cured nearly all exceptions to title prior to closing and was prepared to remedy the remainder of the exceptions at closing. According to National Granite, however, conducting another title survey would be required in order to determine if the exceptions had been cured, for the purpose of insuring title (Affidavit of Sol Mermelstein, Esq., Exhibit H). It is undisputed that Intertrade did not request that an additional survey be conducted prior to the two scheduled closings, in August and September of 2005. Further, Intertrade does not dispute that it never contacted National Granite to provide proof that the exceptions to title had been cleared or that an additional title examination was conducted.
Having assumed the burden of delivering insurable title and Intertrade having failed to demonstrate that it was in a position to do so at the time fixed for closing, on August 15 and September 19, Intertrade could not declare Gindi in default of the Agreement as it did not fulfill the condition precedent to such declaration (Affidavit of Jan Gross, Exhibit 15), and, consequently, Gindi is entitled to the return of his downpayment despite his failure to appear at closing ( see Gargano, 200 AD2d at 555).
Moreover, Gindi's entitlement to the return of his downpayment is not altered by his failure to appear at the closing fixed by Intertrade, purportedly, on a time of the essence basis. While Intertrade attempted to make time of the essence by its letter dated August 24, 2005 (Affidavit of Jan Gross, Exhibit 13), it did not provide sufficient notice that failure to attend would result in a default on Gindi's part. Where time is not made of the essence in the original agreement, one party may subsequently give notice to that effect, provided that the notice is "clear, distinct and unequivocal and must fix a reasonable time within which to perform" ( Dub v. 47th E. 74th St. Corp., 204 AD2d 145, 145 [1st Dept], lv dismissed 84 NY2d 850; Mohen v. Mooney, 162 AD2d 664, 665 [2nd Dept 1990]). Additionally, the notice must inform the other party that if he does not perform by that date, he will be considered in default and that an action will be commenced against him ( id.; Guippone v. Gaias, 13 AD3d 339, 340 [2nd Dept 2004]).
Intertrade's letter of August 24, 2005 did not provide unequivocal notice that time was of the essence, because the letter did not advise Gindi that his failure to perform by the date designated would be considered a default ( cf. Guippone, 13 AD3d at 340; see also Cave v. Kollar, 296 AD2d 370, 371-72 [2nd Dept 2002] [letter which did not inform the other party that they would be considered in default if they did not perform by a specified date was insufficient to make time of the essence]).
Because the letter did not provide sufficient notice that failure to attend the closing date specified would result in a default, the letter did not inadequately make time of the essence. Therefore, Gindi's failure to appear at closing was not an anticipatory breach as Intertrade failed to make a prima facie showing that it made a sufficient demand for performance upon Gindi prior to declaring Gindi in default ( see Cave, 296 AD2d at 372).
Accordingly, Intertrade's motion for summary judgment on its counterclaim for a declaratory judgment entitling it to retain Gindi's downpayment as liquidated damages is denied.
Notwithstanding Intertrade's failure to meet its burden and demonstrate that it was able to deliver insurable title in accordance with the Agreement, Gindi is not entitled to specific performance. Consequently, Intertrade's motion for summary judgment dismissing the complaint is granted.
Generally, purchasers who seek specific performance must demonstrate that they are ready, willing and able to perform prior to commencing the action ( Moray v. DBAG, Inc., 305 AD2d 472, 473 [2nd Dept 2003]). However, a party seeking specific performance or damages for the nonperformance of a contract need not demonstrate that a tender of its own performance was made where the necessity for such a tender is excused by acts of the other party amounting to an anticipatory breach or an inability to perform under the contract ( Madison Investments v. Cohoes Assoc., 176 AD2d 1021, 1021-22 [3rd Dept 1991], lv dismissed 79 NY2d 1040).
Regardless of Intertrade's failure to make time of the essence, Gindi maintains that his own failure to appear at the closing date was excused due to Intertrade's breach of the Agreement by failing to cure exceptions to title that would render title marketable. According to Gindi, Intertrade breached the Agreement by wrongfully demolishing the Park Avenue Property, failing to remedy encroachments, failing to satisfy judgments, failing to cure Environmental Control Board violations and failing to make the buildings accessible for the purpose of environmental investigations (Amended Complaint, ¶ 11), which excused his obligation to tender performance.
While the provisions clearly contemplate that at the time fixed for closing, defects will be either remedied or paid for by Intertrade for the purpose of delivering marketable title, the Agreement additionally contains a provision that in the event Intertrade is unable to convey "good and marketable title" at closing, its sole obligation is to refund Gindi his deposit and reimburse him for the cost of title examination, upon which Gindi has no further claims against Intertrade, although Gindi has the option to accept title "as is," without the possibility of an abatement of the purchase price or any other liability on the part of Intertrade (Affidavit of Jan Gross, Exhibit B, Rider, at § 3). Accordingly, the Agreement limited Gindi's remedies in the event that Intertrade was unable to convey marketable title. In fact, while not conceding that it was unable to convey marketable title, Intertrade indicated to Gindi that it was proceeding to closing on the basis of this provision and "tender[ing] title in the form that . . . [it] is able to convey" (Affidavit of Jan Gross, Exhibit 13). Thus, as Intertrade was prepared to perform by tendering title in accordance with the Agreement, any assertion on Gindi's part that his performance was somehow excused by Intertrade's inability to perform is necessarily defeated ( see Madison Investments, 176 AD2d at 1021-22).
Moreover, even assuming that Intertrade improperly cancelled or breached the Agreement which relieved Gindi of the obligation to appear at the closing, this does not discharge Gindi's obligation to demonstrate that he was financially capable of performing on the closing date ( Madison Equities, LLC v. MZ Mgt. Corp., 17 AD3d 639, 640 [2nd Dept], lv dismissed 5NY3d 849 [2005]). Here, Gindi makes no showing whatsoever of his financial ability to perform on the closing date. The failure to demonstrate financial capability is fatal to an action for specific performance ( id.; Internet Homes v. Vitulli, 8 AD3d 438, 339 [2nd Dept 2004]).
Therefore, having failed to demonstrate that he was ready and able to perform at closing or that his performance was excused by Intertrade's inability to perform, Gindi is not entitled to specific performance. Gindi's cross-motion for summary judgment on the complaint is denied.
Finally, I reject Gindi's contention that Intertrade is in default for failing to answer the amended complaint, which, in substance, constituted a supplemental pleading. While an amendment seeks to change the pleading, a supplement serves to make an addition to the original complaint ( Lovisa Constr. Co., Inc. v. Facilities Dev. Corp., 148 AD2d 913, 914 [3rd Dept 1989]). Further, while an amended complaint serves to supercede the original pleading, a supplemental complaint does not supercede the original pleading, and thus, the answer which has already been served continues to remain in effect ( Stella v. Stella, 92 AD2d 589, 589-90 [2nd Dept 1989]).
The amended complaint served upon Intertrade and PGLK served only to change the identity of the named defendant, escrow agent, Cesar Fernandez, to Intertrade's current counsel, PGLK. It is otherwise identical to the first complaint served, repeating verbatim the allegations of the original complaint. Although labeled an amended complaint, in actuality, the pleading was a supplemental complaint, serving merely to make an addition to the original complaint. Therefore, the supplemental complaint served by Gindi does not supercede the original complaint he served and the original answer served by Intertrade remains in effect ( see Stella, 92 AD2d at 589-90), and Gindi's cross-motion for default judgment is denied.
Accordingly, it is
ORDERED that the motion by Paykin Greenblatt Lesser Krieg LLP and Intertrade International Ltd. for summary judgment is granted only to the extent of dismissing the complaint, and the complaint is dismissed; and it is further
ORDERED that Paykin Greenblatt Lesser Krieg LLP and Intertrade International Ltd.'s motion for summary judgment on the counterclaim to retain the downpayment as liquidated damages is denied and the counterclaim dismissed; and it is further
ORDERED and ADJUDGED that Michael Gindi is entitled to the return of his downpayment and that Paykin Greenblatt Lesser Krieg LLP, attorneys for Intertrade International Ltd., and the escrow agent under the Agreement, is directed to release to counsel for Michael Gindi the downpayment that is currently being held in escrow pursuant to the Agreement, within five business days from the date of service of a copy of this order with notice of entry; and it is further
ORDERED that Michael Gindi's cross-motion for a default judgment is denied as is his cross-motion for summary judgment; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.