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THE SELLER WAS NOT OBLIGATED TO EXERCISE AN OPTION IN THE RESTRICTED REMEDIES CLAUSE OF THE REAL ESTATE PURCHASE CONTRACT BECAUSE THE BUYER NEVER DEMANDED SPECIFIC PERFORMANCE OF THE CONTRACT (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Oing, affirming Supreme Court and noting that a motion to dismiss for failure to state a cause of action may be brought at any time, determined the motion to dismiss this action for specific performance of a real estate purchase agreement was properly granted. The buyer argued it was entitled to specific performance because the seller was required to exercise one of the remedies described in the restricted remedies clause of the purchase agreement. The court disagreed and held the buyer never in fact demanded specific performance. Rather, the buyer indicated it would not close unless the seller remedied a tax misclassification and lowered the purchase price:

Supreme Court properly considered the seller’s post note of issue CPLR 3211(a)(7) motion to dismiss for failure to state a cause of action because it can be made at any time (CPLR 3211[e]). Thus, CPLR 3212(a)’s requirement of demonstrating good cause for the delay does not apply … . * * *

… .[T]he buyer maintains that Supreme Court erred in dismissing that claim by misreading Mehlman v 592-600 Union Ave. Corp. (46 AD3d 338 [1st Dept 2007]) in applying the contract’s restricted remedy clause against it. That clause expressly and strictly limited the buyer to two remedies in the event the seller was unable to convey title to the premises pursuant to the terms of the contract: (i) terminate the contract and receive its down payment or (ii) consummate the transaction with a $25,000 credit to remedy any title issue. The buyer argues that our holdings in Mehlman and 101123 LLC v Solis Realty LLC (23 AD3d 107 [1st Dept 2005]) obligate the seller to concede the title defect and demand that the buyer exercise one of the options set forth in the restricted remedies clause at the closing, and that the seller’s failure to satisfy this obligation enables the buyer to maintain its specific performance claim. * * *

…  [A] seller unable to convey clear title for reasons contemplated in the parties’ contract is entitled to invoke the restricted remedies clause in response to a buyer’s demand for specific performance of the parties’ contractual terms. Here, the buyer’s allegations unmistakably demonstrate that it did not demand specific performance from the seller to convey title as alleged in the complaint, namely, by conveying title in accordance with the seller’s contractual representation that there were no negative tax issues associated with the premises. Instead, the buyer alleged in its complaint that it was ready, willing and able to close provided that the seller, inter alia, corrected the tax misclassification and reduced the purchase price to address the tax liabilities arising from the misclassification. In fact, the allegations underlying the claim demonstrate the complete absence of a demand for specific performance of the parties’ contract. Rather, according to those allegations, the buyer’s demand would result only if the seller did not comply with the buyer’s condition to close. These allegations, as a matter of law, demonstrate that the seller was not obligated to invoke the restricted remedies clause. Thus, under these circumstances, the buyer is precluded from seeking from the seller specific performance of their contract. M&E 73-75, LLC v 57 Fusion LLC, 2020 NY Slip Op 04372, First Dept 7-30-20

 

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