Specific performance is a remedy in which a Court requires a party to perform a particular act, more often than not what is set in a contract. Thus, specific performance is usually sought to complete a previously-established transaction (e.g. to convey title). Given the volatility of the real estate market, our Court system regularly and routinely adjudicates specific performance claims. Four recent examples follow:
929 Flushing LLC v. 33 Dev. Inc., 2016 NY Slip Op 26055 (Sup. Ct. K. Co. March 1, 2016) [Demarest, J.]
Supreme Court summarized the action:
The instant action arises out of the execution of a short form agreement titled “Binder of Sale” (the “Binder”) pertaining to real property located at 929 Flushing Avenue, Brooklyn, New York 11206 (the “Premises”). Though the parties never fully executed a formal agreement, Plaintiff contends that the Binder, executed by Joel Jacob as purchaser and Anita Wong “as managing agent,” without further identifying the seller, created a legally enforceable contract that requires Defendant to sell the Premises to Plaintiff.1
And the motion before the Court:
33 Development Inc. (the “Defendant”) moves to dismiss the present complaint brought by 929 Flushing LLC (the “Plaintiff”) and vacate the Notice of Pendency. Plaintiff cross-moves for summary judgment and specific performance.
The “Binder”:
At execution of the Binder on May 4, 2015, both parties were represented by counsel. The terms of the Binder set forth, inter alia, the address of the property to be sold, and the purchase price of $3,820,000, $382,000 of which (inclusive of the Binder deposit) was to be paid in “cash on signing more formal contract” as a 10% “cash down payment”. The Binder stated a closing date of August 18, 2015, and included a “Contract Signing,” provision which specified:
If offer is accepted by owner, usual formal contract shall be signed and delivered by the seller and purchaser at the office of the seller’s attorney or the office of the broker on or before May 18th, 2015.
Upon execution of the Binder, Joel Jacob paid the $500.00 deposit as acknowledged in the Binder. In addition to the purchase price and down payment, the Binder also represented that the Premises would be delivered vacant. A brokerage fee in the amount of 3.5% of the sale price, to Siu Wai Cheung, the named licensed agent for the sale, was further stated.
As to the parties to the Binder, the document lacks a full recitation of the intended individuals and or entities to be charged under the agreement. The document designates Joel Jacob as “Purchaser,” and includes a signature under “Seller’s Acceptance” of an “Anita Wong as managing agent.” Ms. Wong affirms she signed the Binder, but discounts its contractual effect. While Mr. Jacob is named as “Purchaser” in the Binder, he later affirms that the seller, the broker, and the seller’s attorney were aware that the Binder was signed on behalf of an entity to be formed at a later date, which he contends is typical of this type of real estate transaction. The present Plaintiff, 929 Flushing LLC, does not appear by name on the Binder and, per Mr. Jacob’s own affirmation, was not incorporated until May 27, 2015. The Court also notes the lack of designation of “33 Development” as selling entity anywhere on the Binder. Subsequent to the signing of the Binder, on May 22, 2015, seller’s counsel e-mailed to purchaser’s counsel a proposed unsigned long form contract of sale for the Premises.
The proposed contract of sale:
On May 27, 2015, purchaser’s counsel returned by e-mail, a signed proposed contract that had been significantly modified. Among the alterations made to the long form agreement were a reduction of the amount payable upon signing from 10% to 5% of the purchase price, as well as a $50,000 increase in the amount of credit buyer would receive from seller in the event there was defect in title. Buyer’s counsel also changed the designated purchasing party by crossing out “Joel Jacob or LLC to be formed,” and writing in “929 Flushing LLC.” Additionally, “Schedule C” of the proposed contract, describing the payment of the “Purchase Price”, was modified. The markup altered the down payment provision to allow $191,000, only 5% of the purchase price, rather than the $382,000, or 10% down, as stated in the Binder. Alterations to the “Rider to Contract of Sale of 929 Flushing Avenue, Brooklyn NY 11206” were made as well. A provision in the proposed contract rider, titled, “Tenancies,” which provided for a list of leases to which the sale would be subject (no list annexed), shows a handwritten revision that the Premises are to be delivered vacant. The final signature page, contains an asterisk next to “Seller,” with additional conditional language. The added language, though not wholly legible, makes reference to, inter alia, the purchaser’s right to cancel in the event any environmental issues arise, inserting additional conditions to closing into the final agreement.
Subsequent developments:
On June 1, 2015, an e-mail exchange was initiated by seller’s transaction counsel, Wing Y. (Wendy) Yu, Esq., regarding the terms of the proposed formal agreement. Ms. Yu stated, in response to buyer’s proffered changes, that “Seller agreed to 5% contract deposit but closing in 60 days and buyer to take subject to tenant.” Allen Herman, Esq., replying on behalf of buyer, stated that it would be fine to “change vacant to subject to tenant and the 90 to 60 in the contract…” Ms. Yu further replied that “In addition to the contract, I will have our client to signed [sic] the attached. Please review.” The evidence submitted does not reflect what was attached to the e-mail exhibit. On May 27, 2015, 929 Flushing wired $191,000, to the escrow account of Ms. Yu’s law firm, Kee and Lau-Kee, PLLC, but seller never executed the modified contract.
The litigation:
On June 2, 2015, Plaintiff filed a Notice of Pendency against the Premises. On June 4, 2015, Ms. Yu sent a letter to Mr. Herman, enclosing the 5% contract deposit, and stating that she was writing to confirm that seller no longer wished to proceed and would like to know why a Notice of Pendency was filed against the Premises, whereupon Plaintiff filed its instant complaint on June 4, 2015. At this point, communication between transaction counsel ceased.
The Court addressed whether the “Binder” satisfied the statute of frauds:
Defendant filed its instant motion pursuant to CPLR § 3211, which provides that a cause of action may not be maintained where there is a failure to satisfy the statute of frauds. New York General Obligations Law § 5-703 states that a contract concerning real property is “void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged…”. As Defendant states, and Plaintiff does not dispute, no long form contract concerning the sale of the Premises was ever executed. Notwithstanding language in the Binder reflecting such intent, however, a short form document or memorandum, which contemplates a more formal agreement at a later date, may nonetheless be sufficient to create a contractual obligation under New York law if it contains all the essential material terms of the agreement. In other words, the failure to execute a more formal writing does not, per se, impair the effectiveness of such document…The primary issue at bar with respect to Defendant’s motion to dismiss is therefore whether the Binder contains all of the essential elements of the parties’ agreement and evidences their intent to be bound by its terms. Upon examination of the evidence, the Court concludes that the Binder, on its face, is unenforceable as a contract as a matter of law as it was merely an agreement to agree at a later time.
The applicable law:
Contract interpretation is within the ambit of the court and may be resolved as a matter of law …”[w]hen the terms of a written contract are clear and unambiguous, the intent of the parties must be found within the four corners of the contract, giving practical interpretation to the language employed and the parties’ reasonable expectations”…Relative to this action, a real estate binder of sale “can be enforced as a contract where it identifies the parties, describes the subject property, and recites the essential terms and is signed by the party to be charged.”… If these conditions are met, binder agreements may represent enforceable contracts provided that all of the essential elements are recited therein and the document reflects a meeting of the minds.
And applied the law to the facts:
Here, however, while the [B]inder states a price, and a time for closing, it fails to designate the parties to be charged. The named “Purchaser” in the Binder is Joel Jacob and no reference to the Plaintiff at bar, 929 Flushing Avenue LLC, or any “LLC to be formed” is otherwise made on the face of the document. That neither Plaintiff nor Defendant is identified in the Binder is fatal to its enforcement as a binding contract in that the parties to be charged are not identified. Plaintiff contends that at the time of the execution of the Binder, while it had not yet been incorporated, the parties were aware that Mr. Jacob was the principal and agent for a single-purpose entity to be formed at a later date for the purpose of executing the purchase. With respect to judicial enforcement of an agreement, however, “if the contract is incomplete and it is necessary to resort to parol evidence to ascertain what was agreed to, the remedy of specific performance is not available.”…Despite the alleged relationship between Mr. Jacob and the Plaintiff, the actual named party to act as buyer to the transaction is an essential element of a binding agreement and the limited liability entity now bringing suit for performance under the purported agreement is nowhere recited as a party to the disputed transaction, nor was it even in existence at the time the Binder was executed. As defendant title-holder is also nowhere identified, and there is no evidence of Ms. Wong’s authority to bind the title holder, the Binder is woefully insufficient as to its designation of the parties to be charged, precluding the Court from finding an enforceable agreement.
Concluding that:
Moreover, a basic principle of contract interpretation is that the language of the agreement is to be construed according to the intent of the parties…In this case, the Binder clearly indicates that the execution of “the usual formal contract” by May 18, 2015, was intended as a condition precedent to the formation of a binding agreement to sell at the stated price. As Defendant did not sign a “formal” contract, it incurred no obligation to sell. Finally, a binder does not satisfy the statute of frauds in the event that essential terms are left open for further negotiation…That the parties continued negotiating well past the purported signing date stated in the Binder, coupled with buyer’s proffer of significant changes in the terms of the contract proffered by seller, further indicates a lack of reliance on the Binder and a failure to agree on the terms set forth therein. Defendant’s motion to dismiss the complaint is thus granted, given that a viable signed writing was never executed by the parties at bar and no evidence has been presented that would indicate the parties intended to be bound under the terms of the Binder.
Little Cherry, LLC v. Two Bridges Hous. Dev. Fund Co., 2016 NY Slip Op 30435(U) (Sup. Ct. N.Y. Co. March 17, 2016) [Oing J.]
Supreme Court set forth the factual background:
[Two Bridges Housing Development Fund Company] is a not-for-profit corporation which owns the Manhattan premises located at 235-247 Cherry Street (the “Premises”)…Little Cherry maintains that the remaining defendants are alter egos of each other and HDFC[.]
In a Contract of Sale, dated June 1, 2012 (the “Contract”), HDFC agreed to sell Little Cherry the Premises for $4 million…The Contract contemplated that a new building would be constructed on the Premises which would include “at least 70 rent stabilized one, two and three bedroom apartment units for low-income households” (the “Building”)…In order for construction on the Building to proceed, Little Cherry – or an entity it designated as the developer of the Building – had to obtain certain consents to the Building from neighboring property owners (the “Plan Consents”)…In addition, a Permit Modification from the New York City Department of City Planning was required for the project to move forward…The Contract provided that if the Plan Consents and Permit Modification were not obtained within twelve months after the execution of the Contract the “Development Agreement” (which was not defined in the Contract) would terminate…Little Cherry was permitted to extend its “right to obtain both the Plan Consent and DCP Permit Modification” for up to six three-month periods as long as certain conditions were satisfied…Each of the first three extensions increased the amount of the down payment Little Cherry would pay for the Premises, while each of the final three extensions increased the total purchase price of the Premises…Little Cherry and HDFC agreed to “consult in good faith and cooperate with each other with respect to obtaining city zoning and development approvals” and that the applications for these approvals would be handled by counsel retained by Two Bridges, at Little Cherry’s sole cost and expense, under the joint direction of Little Cherry and Two Bridges[.]
Defendants also agreed to use their best efforts to obtain any necessary approvals from the New York State Attorney General’s Office and New York State Supreme Court pursuant to Not-for-Profit Corporation Law §§ 510, 511 and 511-a. If defendants’ good-faith ·efforts to do so failed, the Contract would terminate[.]
The closing of the sale was to take place approximately ninety days after, inter alia: (i) the Plan Consents were obtained; (ii) the Permit Modification was approved by the Department of City Planning; and (iii) the plans for the Building were approved by the Department of Buildings[.]
The disputed contentions of the parties:
On February 20, 2014, defendants filed a Pre-Application Statement Form (“PAS”) with the Department of City Planning, commencing the process to obtain the Permit Modification…Little Cherry maintains that the twenty month delay between the execution of the Contract and the submission of the PAS was caused solely by defendants’ failure to settle on a proposal to submit to the Department of City Planning…Defendants, by contrast, maintain that plaintiff caused the delay by failing to select an architectural team or development team to develop the design plan to be submitted with the PAS[.]
Plaintiff also alleges that, after the PAS was filed, defendants failed to cooperate in obtaining the Plan Consent and Permit Modification by: (i) instructing plaintiff not to attend a March 21, 2014 meeting with the Department of City Planning to discuss subsequent steps in obtaining the Permit Modification; (ii) notifying plaintiff on or about March 28, 2014 that the Contract was terminated (although this notice was subsequently withdrawn on May 23, 2014); (iii) cancelling an April 8, 2014 meeting with plaintiff and the architect involved in the project, based on the March 28, 2014 termination; and (iv) failing to provide their Plan Consent to plaintiff…Plaintiff asserts that neither the Plan Consents nor the Permit Modification were obtained by November 30, 2014 as a result of defendants’ actions[.]
Subsequent developments:
On or about December 2, 2014, Two Bridges notified Little Cherry that the Contract was terminated due to Little Cherry’s failure to obtain the Plan Consent and Permit Modification on or before November 30, 2014[.]
The nature of the action:
Little Cherry now brings this action seeking: (1) a declaration that the Contract is not terminated and/or is extended due to either the defendants’ breaches or defendants’ failure to provide plaintiff with notice and an opportunity to cure its failure to obtain the Permit Modification and Plan Consent; (ii) specific performance and injunctive relief directing defendants to cooperate in obtaining the Permit Modification and Plan Consent and close on the sale of the Premises; (iii) specific performance and injunctive relief directing defendants to close on the sale of the Premises; or, alternatively, for damages for (iv) breach of contract; and (v) tortious interference with Contract[.]
The claim for specific performance:
In its third cause of action, plaintiff alleges that, while it has substantially performed its obligations under the Contract and remains ready, willing, and able to perform all of its remaining obligations thereunder, defendants have refused to perform their obligations under the Contract, including cooperating in obtaining zoning approvals and obtaining any necessary approvals from the New York State Attorney General and Supreme Court, thereby breaching the Contract and causing plaintiff to lose the opportunity to develop the Premises…Plaintiff seeks a judgment directing specific performance of the Contract and an injunction directing defendants to perform their obligations under the Contract, including cooperating in obtaining the Plan Consent and Permit Modification and closing on the sale of the Premises.
The applicable law:
As specific performance is a remedy for a breach of contract claim, rather than an independent cause of action…and a grant of injunctive relief depends on “its proponent [being able to] establish the merits of its substantive cause of action against that defendant”…plaintiff’s third cause of action will be treated as a breach of contract claim.
Defendants’ arguments:
Defendants argue that this claim should be dismissed because the Contract automatically terminated on November 30, 2014 due to plaintiff’s failure to procure the Permit Modification and Plan Consents…In fact, the Contract does not state that it will be terminated upon the failure to gain approval for the Permit Modification and Plan Consents by that date, but, instead states that “this Development Agreement” will terminate. What is unclear is whether the “Development Agreement” refers to the Contract, especially in light of the fact that subsequent provisions of the Contract expressly contemplate its termination if the Building Plans were not obtained within a certain window…As the Contract is ambiguous on this point, summary judgment is inappropriate…Furthermore, even assuming arguendo that the “Development Agreement” refers to the Contract, Two Bridges may not rely on this provision in its motion for summary judgment in light of plaintiff’s claim that it failed to obtain the Permit Modification and Plan Consents by the deadline set forth in the Contract because defendants delayed in submitting the PAS to the Department of City Planning[.]
Defendants next argue that this claim must be dismissed because an injunction directing defendants to “cooperate” in obtaining the Plan Consent and Permit Modification would fail to “define specifically what the enjoined person must or must not do, in language so clear and explicit that a layman can understand what he is expected to do, or refrain from doing”…and would, as a result, create a situation requiring judicial supervision over an extensive period of time to determine whether defendants were adequately cooperating.
The application of the facts to the law:
Contrary to defendants’ concern, the relief sought here is sufficiently specific to avoid dismissal…Furthermore, dismissal of this claim based on concerns of continued judicial superintendence of the defendants’ performance would be premature at this juncture.
Concluding that:
In its fourth cause of action, plaintiff repeats the allegations set forth in its third cause of action and further alleges that it has “repeatedly requested that Defendants close on the sale of the Premises, even without the Plan Consent and DCP Permit Modification”, and seeks specific performance of the Contract and an injunction directing the defendants to close on the sale of the Premises without the Plan Consent and Permit Modification[.]
As the Plan Consent and Permit Modification are conditions precedent to the Closing and a grant of specific performance depends on the satisfaction of conditions precedent specific performance may not be granted…In addition, plaintiff fails to provide any legal authority to support its request for injunctive relief ignoring the requirements of the Contract. As such, defendants’ motion for summary judgment dismissing the fourth cause of action is granted, and it is dismissed.
Mattes v. Aquart, 2016 NY Slip Op 30517(U) (Sup. Ct. N.Y. Co., March 7, 2016) [Mills, J.]
Supreme Court summarized the pending motions:
This is a dispute over a contract to sell a six-unit multiple dwelling building located at 9 East 124th Street, New York, New York 10025 (the premises). Defendants Emanuel and Cheryl Vanessa Aquart (the sellers) move, pursuant to CPLR 3212, for summary judgment dismissing the complaint of plaintiffs Joshua Mattes and Trista Huang (the purchasers) and for an inquest and/or assessment of damages on their counterclaim for damages from the alleged wrongful filing of a notice of pendency against the premises.
The background:
On or about May 24, 2013, the parties entered into a contract for the sale of the premises for a total purchase price of $1,350,000. The parties’ agreement consisted of a standard “Residential Contract of Sale,” plus two riders, one apparently requested by the sellers and one by the purchasers (together, the Contract).
Paragraph 39 of the sellers’ rider provides:
“The subject premises shall be delivered Vacant. In the event Seller shall not be able to relocate the Tenants/Occupants currently in possession, then Seller shall have the option to cancel this Contract and refund the downpayment to Purchasers. Purchasers shall have the option of continuing to proceed with the purchase as an occupied property or obtain refund of downpayment. Seller shall not be responsible to reimburse Purchaser for any expenses incurred as a result of cancellation of this Contract.”
Paragraph 13 of the purchasers’ rider provides, in pertinent part:
“At closing, Seller shall deliver possession of the Premises to Purchaser vacant and free of any and tenancies, leases, occupants, and rights of others to possession. In the event Seller is not able to deliver vacant possession and close title pursuant to the Contract on or before July 31, 2013, Purchaser shall thereafter have the right to cancel the Contract upon at least five (5) days written notice to Seller … “
By letter dated April 4, 2014, the sellers advised that they had made diligent efforts to obtain possession of the units, but were unable to evict or come to a reasonable settlement with the tenants and were canceling the contract and returning the purchasers’ $47,250 downpayment…By letter dated April 8, 2014, the purchasers rejected the April 4th letter and purported termination of the Contract, contending that the sellers had “no basis in the contract or equity” for terminating their agreement…The downpayment check was returned and the purchasers demanded that the sellers close title on or before May 16, 2014, “time being of the essence [emphasis in original]”…A second letter dated May 12, 2014 was sent advising that a closing had been scheduled at the office of the purchasers’ counsel on May 16, 2014 at 11:00 A.M.[.]
The sellers responded to the May 12th letter on May 14th, again advising that they could not deliver vacant possession of the premises and enquiring if the purchasers were willing to accept the premises “as is” with the current tenant in possession for the same purchase price…The purchasers’ attorney responded that same day, advising that, unless the sellers were willing to make a substantial price concession to compensate for the reduced value of an occupied building, the purchasers were insisting that the sellers deliver the premises vacant with certificates of non-harassment for each tenant…The purchasers’ attorney then advised:
“It is my understanding that the recalcitrant tenant did make a demand for a sum of money as compensation for relinquishing her rights as a tenant. While her offer may have been higher than your clients anticipated, it was clearly within the capacity of the sellers to pay and they cannot simply refuse to proceed with vacating the premises because the arithmetic was not as favorable to them as they expected.”
This letter further states that the purchasers were ready, able and willing to close on May 16, 2014, but would agree to a short extension in order for the sellers to complete a transaction with the remaining tenant.
The undisputed facts:
It is undisputed that the purchasers appeared at their counsel’s office on May 16, 2014 for a closing and that the sellers failed to appear. This action was commenced on May 23, 2014. The complaint alleges a single cause of action seeking specific performance or damages for breach of the [c]ontract. The sellers answered the complaint on or about July 1, 2014, asserting a counterclaim for damages for the wrongful filing of a notice of pendency.
Seller’s contentions:
In support of their motion for summary judgment, the sellers contend that their actions were completely within their contractual rights pursuant to paragraph 39 of the sellers’ rider. The sellers also maintain that the deposition testimony of plaintiff Joshua Mattes and the failure and/or refusal of the purchasers to produce, in discovery, any evidence that establishes that the purchasers were ready, willing and able to close the transaction on May 16, 2014 warrants dismissal of the complaint.
Purchaser’s response:
In opposition to the motion, the purchasers submit an affirmation from their counsel, Peter J. Kelley, Esq., by which he argues that the sellers’ broker did obtain vacant possession of all but one of the apartments in the premises, along with certificates of no harassment, but that the tenant of the single remaining occupied apartment on the parlor floor, which was subject to rent stabilization or rent control, “refused to vacate without substantial but not unreasonable or unusual compensation,” which he alleges was “only $100,000”…Mr. Kelley then opines that the sellers stood to gain more than $1.2 million from the transaction, such that the sellers were clearly “able” to obtain and deliver at closing the vacant possession of the premises together with the required non-harassment letters. The purchasers also submit an affidavit from their real estate broker, Jeffrey Burger, who opines that, although the $100,000 demanded was “clearly a high price,” it was not unreasonable in view of the “huge profit to be reaped by the seller”…Plaintiff Joshua Mattes also submits an affidavit in which he avers that he and wife “repeatedly renewed and extended [our] loan commitment, at great cost and expense, to guarantee that we would be ready to proceed with the sale should defendants comply with the contract terms”[.]
And dismissed the complaint:
The motion for summary judgment dismissing the complaint is granted. The evidence establishes that the sellers exercised their option to cancel the Contract and refund the downpayment after they reasonably determined that they were unable to deliver possession of the premises vacant. Where, as here, a provision in a contract for the sale of real property provides that a seller may cancel the contract and return the downpayment if the seller is unable to convey good title or a vacant building, it requires only that the seller act in good faith and that the default not be willful or of the seller’s own volition…Accepting the truth of the purchasers’ own evidence, there is no question that the sellers proceeded in good faith to obtain vacant possession of this multi-unit building. They apparently hired a broker who was successful in relocating five of the six existing tenants, a feat which is highly unlikely to have been accomplished at no cost to the sellers. The sellers’ broker then apparently made efforts to negotiate a deal with the last tenant, but that this individual demanded a $100,000 buyout which, according to the purchasers’ own purported expert, was “high.” The term “shall not be able to relocate” in paragraph 39 of the sellers’ rider does not mean “shall not be possible at all cost to relocate” as the purchasers contend.
The purchasers then, under the terms of the Contract, had two options: (1) continuing to proceed with the purchase as an occupied property; or (2) accept the proffered refund of their downpayment. Demanding a price concession by the sellers in order to proceed was not part of the deal. “When a contract for the sale of real property contains a clause specifically setting forth the remedies available to the buyer if the seller is unable to satisfy a stated condition, fundamental rules of contract construction and enforcement require that [the court] limit the buyer to the remedies for which it provided in the sale contract”[.]
Explicating as to specific performance that:
Furthermore, in order to be entitled to specific performance or damages, the purchasers must demonstrate that they were ready, willing and able to perform pursuant to the Contract on the day they insisted upon closing…And, in accordance therewith, the purchasers must show that they possessed the financial ability to complete the purchase…“When a purchaser submits no documentation or other proof to substantiate that it had the funds necessary to purchase the property, it cannot prove, as a matter of law, that it was ready, willing, and able to close”…The alleged anticipatory breach by the sellers does not affect this obligation[.]
Noting that:
There is insufficient proof that the purchasers possessed the necessary funds or had access to the credit needed to purchase the premises in May 2014. The only proof offered are two mortgage commitment letters from Wells Fargo. The first letter is for an FHA 203 loan in the amount of $1,427,959, with the sum of $220,400 to be held in escrow for construction work post-closing. However, this loan commitment expired on June 28, 2013…Even if this were sufficient funds to close, a mortgage commitment letter which, by its own terms, expired nearly a year prior to May 16, 2014, does not constitute a valid tender of performance…The second letter offers the purchasers a conventional loan of $1,200,000; however, this letter was issued on July 7, 2014…and is clearly not an extension of the first mortgage commitment. No proof is offered to substantiate the testimony of plaintiff Mattes that the purchasers repeated[ly] renewed and extended their loan commitment or had several hundred thousand dollars in personal funds ready to close on May 16, 2014[.]
Eichengrun v. Matarazzo., 2016 NY Slip Op 01225 (App. Div. 3rd Dept., February 18, 2016) [McCarthy, J.]
The Appellate Division summarized the facts:
In November 2013, plaintiff, the purchaser, and defendant, the seller, entered into a contract for the sale of real property. In March 2014, plaintiff commenced this action against defendant seeking, among other things, specific performance of the contract. Defendant answered and made certain counterclaims.
Proceedings in the Court below:
Defendant answered and made certain counterclaims. Defendant thereafter moved for summary judgment dismissing plaintiff’s complaint and for a default judgment against plaintiff on his counterclaims. Supreme Court granted defendant’s motion for summary judgment dismissing the complaint, concluding that plaintiff was in default under the contract, but implicitly denied defendant’s motion for a default judgment against plaintiff on the counterclaims[.]
The applicable law:
In order to establish his entitlement to judgment as a matter of law, defendant was required to establish that the contract was properly terminated and is therefore unenforceable or that, even if it was not, plaintiff had not been ready, willing and able to perform on a properly set “time is of the essence” closing date…A party may convert a non-time is of the essence contract into one where time is of the essence, but that party must, among other things, give the other party proper notice[.]
And the application of the law to the facts:
Defendant failed to establish that he properly terminated the contract pursuant to the agreement’s mortgage contingency clause. That clause established certain rights that the parties maintained in the event that plaintiff was unable to obtain a specified mortgage commitment by a specified date. While the contract unambiguously provided for certain rights to the parties in the event that plaintiff failed to secure the mortgage commitment—including the right for either party to terminate the contract—all such rights were contingent, according to the plain language of the contract, upon providing written notice “within five business days.” Although it is uncontested that plaintiff failed to secure the mortgage commitment by the specified date, defendant submitted no proof that either party exercised any of the rights that were triggered by that failure or provided written notice of an intent to do so within five business days. Accordingly, defendant failed to establish that the contract was unenforceable due to its termination or that the mortgage contingency clause has any effect on the contract given that neither party exercised any rights pursuant to that clause[.]
Defendant’s proof also failed to establish that he properly set a time is of the essence closing date. In his answer, defendant conceded that he only sent notice of a time is of the essence closing date to plaintiff’s attorney. However, the contract provided the terms by which notice was to be provided to the parties. That agreement unambiguously specifies that “[a]ll notices” from defendant were to be provided directly to, among others, plaintiff. Given this admitted failure to comply with the terms of the agreement regarding proper notice, defendant failed to properly establish a time is of the essence closing date…Accordingly, defendant failed to establish as a matter of law that the contract had been terminated or that plaintiff was not ready to perform on a properly set time is of the essence closing date, and, therefore, defendant’s motion for summary judgment dismissing the complaint must be denied[.]
Lessons learned:
- Specific performance is a remedy, not a cause of action.
- Relief of specific performance is not available unless and until the moving party has satisfied all applicable conditions precedent.
- And the party seeking specific performance of a contract of sale must be prepared to establish that the movant was and is ready, willing and able to perform.