Did Court Err in Giving Buyer An Additional 30 Days to Close?
Shukam Herman sued 818 Woodward, LLC for specific performance of a contract for the sale of real property and to recover damages for breach of contract.
Supreme Court granted Woodwrd’s motion to dismiss the complaint to the extent of directing that a closing take place within 30 days and that failure to close within that time frame would result in dismissal of the complaint. Both Herman and Woodward appealed.
On January 10, 2020, Herman, as buyer, and Woodward and others, as seller, entered into a purchase and sale agreement. Herman agreed to buy two real properties from Woodward for a total of $6,100,000. The contract provided that the closing would occur on or about 60 days from January 10, 2020, and, in the event that the Herman defaulted in the performance of his obligations under the contract and the default continued after a notice to cure, Woodward would be entitled to terminate the contract and retain the down payment of $457,500.
The contract further provided that “[Herman’s] obligations under [the contract] are specifically NOT contingent upon the receipt of any loan commitment or upon the ultimate funding of any loan, mortgage, credit line or promissory note.” Just over 60 days after the contract was executed, Woodward set a closing date and advised Herman that time was of the essence. Despite being offered multiple options for a closing date and Woodward appearing for a closing, Herman did not appear to close and, subsequently, he did not cure his default upon notice from Woodward.
Herman thereafter commenced an action seeking specific performance of the contract. Woodward moved to dismiss the complaint. Supreme Court, in effect, granted the motion to the extent of directing that a closing take place within 30 days and that failure to close within this time frame would result in dismissal of the complaint. Both Herman and Woodward appealed.
To prevail on a cause of action for specific performance of a contract for the sale of real property, a plaintiff must establish that it substantially performed its contractual obligations and was ready, willing, and able to perform its remaining obligations; the seller was able to convey the property; and there was no adequate remedy at law
Here, the Court found that there was no significant dispute as to the relevant facts. By letter dated March 13, 2020, approximately 64 days after the contract was executed, Woodward set April 13, 2020, as the closing date. That letter contained clear, distinct, and unequivocal notice that time was of the essence, and stated that the buyer’s failure to close on April 13, 2020, would constitute a breach and willful default under the contract, which would entitle Woodward to any and all available remedies, including the retention of the down payment as liquidated damages.
Herman rejected the April 13, 2020 closing date and indicated that he was prepared to close on April 20, 2020. Thereafter, Herman attempted to reject the April 20, 2020 closing date, citing “uncertain times, with credit markets and capital markets being uncertain at best and frozen at worst,” and further indicating that he had contracted COVID-19.
By letter dated April 6, 2020, Woodward agreed to the April 20, 2020 closing date and offered to conduct the closing remotely. By letter dated April 20, 2020, Herman attempted to reject the April 20, 2020 closing date as unreasonable due to the COVID-19 pandemic. Meanwhile, on April 20, 2020, Woodward and counsel appeared with a stenographer at a videoconference to conduct the closing. They waited approximately five hours, but neither Herman nor his counsel appeared. At the videoconference, Woodward’s representative swore under oath that he was authorized and prepared to sign the deed and other documents to complete the sale.
In a notice to cure/default letter dated April 24, 2020, Woodward advised Herman that he was in default under the contract and, in accordance with the contract, he had the opportunity to cure his default by tendering the balance of the purchase price by May 11, 2020. By letter dated April 27, 2020, Herman purported to reject the notice to cure, stating that he was not in default and had never been in default. In that letter, Herman did not indicate that he remained ill due to COVID-19 or that he was prevented from closing on that basis.
Under the circumstances here, the Court found that Herman did not have a cause of action for specific performance. Although time was not made of the essence in the contract, Woodward subsequently provided valid notice that time was of the essence insofar as the notice: (1) gave clear, distinct, and unequivocal notice that time was of the essence, (2) gave Herman a reasonable time in which to act, and (3) informed him that if he did not perform by the designated date, he would be considered in default.
What constitutes a reasonable time for performance depends upon the facts and circumstances of the particular case. Although the determination of reasonableness is usually a question of fact, it may become a question of law where, as here, there is no dispute as to the facts.
Contrary to Herman’s contention, he had a reasonable amount of time to perform, where, among other things, he had approximately 62 days to close from the initial closing date. Because he failed to close after the notice to cure was sent, Woodward was entitled, pursuant to the contract, to terminate the contract and retain the down payment as liquidated damages. Further, the parties’ submissions clearly demonstrated that Herman did not substantially perform his contractual obligations, and was not ready, willing, and able to perform his remaining obligations. The allegations that Herman remained ready, willing, and able to close and had fulfilled all of his obligations under the contract were bare legal conclusions, which were not presumed to be true.
And Woodward also established that Herman had no cause of action for breach of contract. Contract language which is clear and unambiguous must be enforced according to its terms. Pursuant to the contract, Woodward had the right to terminate the contract upon Herman’s failure to cure his default. Herman’s contention that Woodward materially breached certain provisions of the contract such that Woodward was unable to close on April 20, 2020, was found to be without merit.
Because Woodward established that Herman had no cause of action, Supreme Court should have granted Woodward’s motion to dismiss Herman’s complaint without giving him 30 days to close. The contract did not provide for such an extension of time where Herman’s default continued after the notice to cure. Courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.