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INSURANCE REGULATION WHICH PROHIBITS TITLE INSURERS FROM PROVIDING VALUABLE INDUCEMENTS TO ATTRACT TITLE INSURANCE BUSINESS IS NOT UNCONSTITUTIONALLY VAGUE, SUPREME COURT REVERSED (FIRST DEPT).

The First Department, reversing Supreme Court, determined Insurance Regulation 208 (11 NYCRR part 228), which prohibits title insurers from providing valuable inducements to attract title insurance business, is not unconstitutionally vague:

Petitioners contend that section 228.2(c) is unconstitutionally vague in setting forth a non-exhaustive list of activities that are “permissible, provided[,]” among other things, that they are “reasonable and customary, and not lavish or excessive” … . The court should have rejected this vagueness challenge, since section 228.2(c) “is sufficiently definite to give a person of ordinary intelligence fair notice that his contemplated conduct is forbidden,” and “the enactment provides officials with clear standards for enforcement so as to avoid resolution on an ad hoc and subjective basis” … . … [T}he words “lavish” and “excessive,” standing in clear contrast with the word “reasonable,” provide adequate notice of the type of behavior that is proscribed. The word “customary” also sets forth a standard that can be understood by an ordinary person … . …

The provisions of section 228.2(c) generally permitting advertising, charitable contributions, and political contributions are consistent with the right to free speech under the First Amendment to the United States Constitution and article I, § 8 of the New York Constitution. … The content-neutral provisions at issue in this case are narrowly tailored to the substantial government interest of clarifying a statute intended to “prevent consumers from being required to subsidize unscrupulous exchanges of valuable things for real estate professionals” … , and that interest is “unrelated to the suppression of free expression” …  .  Matter of New York State Land Tit. Assn., Inc. v New York State Dept. of Fin. Servs., 2019 NY Slip Op 09366, First Dept 12-26-19

 

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THE DEMAND FOR THE RETURN OF THE DEPOSIT UNDER A REAL ESTATE PURCHASE CONTRACT WAS AN ANTICIPATORY BREACH OF THE CONTRACT AND PLAINTIFF WAS ENTITLED TO KEEP THE DEPOSIT AS LIQUIDATED DAMAGES (SECOND DEPT). ​

The Second Department determined defendant’s demand for the return of its deposit in a real estate transaction was an anticipatory breach of the purchase agreement entitling plaintiff to retain the deposit as liquidated damages. Plaintiff, Lamarche Food, had represented that it was a New York corporation authorized to do business in New York. The corporation had been dissolved in 1992. For that reason defendant claimed plaintiff had breached the contract and demanded the return of the deposit. However, pursuant to Business Corporation Law 1006, a dissolved corporation may continue to function for the purpose of winding up affairs. Apparently defendant acknowledged the “winding up affairs” issue and argued only that its demand for a return of the deposit was not an anticipatory breach:

By letter dated June 23, 2017, a new attorney for the defendant informed the plaintiffs’ attorney that Lamarche Food had defaulted on its obligations under the contract of sale inasmuch as it had represented therein that it was a New York corporation authorized to carry on its business in New York, with all the power and authority to enter into and perform the contract, and yet Lamarche Food was dissolved on June 24, 1992, and, therefore, was not a registered corporation in New York capable of engaging in new business. The defendant’s attorney further stated that in light of the breach, the defendant demanded a refund of its deposit within 10 days. * * *

On appeal, the defendant does not dispute that Lamarche Food could continue to function for the purpose of selling the subject property as part of its winding up of the corporation’s affairs. Rather, the defendant contends that its June 23, 2017, letter to the plaintiffs’ attorney did not constitute an anticipatory breach of the contract of sale. “An anticipatory breach of contract by a promisor is a repudiation of [a] contractual duty before the time fixed in the contract for . . . performance has arrived” … . “For an anticipatory repudiation to be deemed to have occurred, the expression of intent not to perform by the repudiator must be positive and unequivocal'” … . We agree with the Supreme Court’s determination that the June 23, 2017, letter reflected a positive and unequivocal repudiation of the contract by the defendant … , thereby, under the terms of the contract, entitling the plaintiffs to retain the deposit as liquidated damages for the defendant’s anticipatory breach. Lamarche Food Prods. Corp. v 438 Union, LLC, 2019 NY Slip Op 08995, Second Dept 12-18-19

 

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ALTHOUGH THE CONTRACT WAS NEVER SIGNED, IT IS CLEAR THE PARTIES INTENDED TO BE BOUND BY IT (FIRST DEPT)

The First Department noted that a contract need not be signed to be valid. Here the contract was a “termination agreement” which addressed a real estate broker’s entitlement to commissions for sales pending upon termination:

It is true that neither party signed the Termination Agreement. However, where the evidence supports a finding of intent to be bound, a contract will be unenforceable for lack of signature only if the parties “positive[ly] agree[d] that it should not be binding until so reduced to writing and formally executed” … . While the Termination Agreement contained a counterparts clause and signature lines indicating that it could be accepted by signature and countersignature, it did not positively state that the parties could assent only by signing. By contrast, the Engagement Agreement, also drafted by defendants, expressly provided that “in unsigned form [it] does not become an offer of any kind and does not become capable of acceptance.” Thus, defendants knew how to draft an agreement that could be accepted only by signature, but they did not so draft the Termination Agreement. The evidence, i.e., the parties’ months-long email exchanges, during which plaintiff submitted his list of pending transactions, defendants drafted the Termination Agreement and forwarded it to plaintiff, and the parties disagreed about the extent to which transactions listed by plaintiff were covered, supports a finding that the parties intended to be bound by the Termination Agreement, despite their failure to sign it … . Lerner v Newmark & Co. Real Estate, Inc., 2019 NY Slip Op 08611, First Dept 12-3-19

 

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FOUR CLASSES PROPERLY CERTIFIED TO BRING CLASS ACTION SUITS BASED UPON THE CONTAMINATION OF AIR, WATER, REAL PROPERTY AND PEOPLE WITH TOXIC CHEMICALS (THIRD DEPT).

The Third Department, in a full-fledged opinion by Justice Lynch, determined that Supreme Court properly certified four classes bring class action suits against a manufacturer alleging the contamination of water, air, real property and people with toxic chemicals, PFOA and PFOS:

Plaintiffs, residents of the Town, commenced this action as a proposed class action, alleging that defendant’s use and improper disposal of PFOA and PFOS caused personal injury and property damage. In their complaint, plaintiffs proposed four classes: (1) a public water property damage class; (2) a private well water property damage class; (3) a private well nuisance class; and (4) a PFOA invasion injury class. Generally, the putative class members were individuals who owned or leased property in the Town or who ingested contaminated municipal or well water or inhaled PFOA or PFOS particulates in the Town and had demonstrable evidence of elevated levels of the chemical in their blood system. * * *

We agree with Supreme Court’s determination that, in addition to those questions common to the property classes, the answers to certain additional common questions will be applicable to all members of the invasion injury class, for example: (1) whether medical monitoring is an available remedy; (2) the extent of the health hazard presented by exposure to PFOA; and (3) whether the members of the class are at significant increased risk for disease based on the excess accumulation of PFOA in their bodies. Although defendant contends that there are myriad factual questions that are not common to the class, we do not agree that those predominate. Importantly, this is not a case where there is an issue of fact regarding exposure — rather, each class member must establish exposure and accumulation through blood work … . Burdick v Tonoga, Inc., 2019 NY Slip Op 08461, Third Dept 11-21-19

 

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DEFENDANTS DID NOT DEMONSTRATE THAT THE DOCTRINE OF ECONOMIC DISTRESS VOIDED THE PURCHASE AGREEMENT; DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT IN THIS BREACH OF CONTRACT ACTION SHOULD NOT HAVE BEEN GRANTED (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined that the criteria for the doctrine of economic duress to void a contract were not met by the defendants. The defendants had entered an agreement to purchase four McDonald’s restaurants from plaintiffs. The defendants alleged they agreed to an amendment of the contract because of the actions of the plaintiffs which amounted to economic distress:

A party seeking to void a contract on the basis of economic duress must show that he or she was compelled to agree to it because of a wrongful threat precluding the exercise of his or her free will … . “The existence of economic duress is demonstrated by proof that one party to a contract has threatened to breach the agreement by withholding performance unless the other party agrees to some further demand” … . A mere threat to breach a contract, however, does not amount to economic duress if the party who has been threatened can obtain performance of the contract from another source and pursue normal legal remedies for a breach of contract … . …

As the parties relying on economic duress, defendants bore the burden of proving that the agreement could not have been performed by another party. Defendants, however, failed to tender any proof in this regard. …

The record also fails to establish that other legal remedies were not available to defendants. Indeed, [one defendant] testified that, before agreeing to the amendment, [defendants]  weighed whether to take possession of the restaurants and then sue to have the original agreement enforced or not to take possession and then sue plaintiffs for specific performance. The fact that neither of those options was ultimately desirable does not mean that defendants did not have available legal remedies. Because defendants could resort to legal recourse, they cannot claim economic duress … . CRG at Arnot Mall, Inc. v Feehan, 2019 NY Slip Op 08467, Third Dept 11-21-19

 

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PURCHASE AGREEMENT DID NOT ALLOW BUYERS TO TERMINATE THE CONTRACT DURING THE CONTINGENCY PERIOD, BUYERS’ ACTION TO RECOVER THE DOWN PAYMENT PROPERLY DISMISSED (SECOND DEPT).

The Second Department determined the seller’s motion for summary judgment in this action by the buyers for return of the deposit was properly granted. The buyers purported to cancel the real estate purchase contract when the bank denied the mortgage application. But the purchase agreement did not allow the buyers to terminate the contract at that point:

Section 5.8 of the rider clearly and unambiguously provided that if the buyers were unable to obtain a mortgage commitment within 45 days of executing the contract, the seller had the unilateral right to either cancel the contract or extend the mortgage contingency period for an additional 30 days. The buyers were only entitled to cancel the contract upon the expiration of that 30-day period. Neither the rider nor the contract contained any provision permitting the buyers to cancel the contract during the mortgage contingency period upon receiving notice that their application had been denied … .

In opposition, the buyers failed to raise a triable issue of fact. The record does not support the buyers’ contention that their mortgage application was denied on the ground that the subject property constituted “unacceptable collateral,” and that, therefore, their performance under the contract was rendered impossible. Under these circumstances, the buyers willfully defaulted and anticipatorily breached the contract by purporting to cancel the contract during the mortgage contingency period. Federico v Dolitsky, 2019 NY Slip Op 07383, Second Dept 10-16-19

 

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SELLER’S ACTION FOR SPECIFIC PERFORMANCE OF A REAL ESTATE PURCHASE AGREEMENT PROPERLY DISMISSED; THE CONTRACT WAS SUBJECT TO ATTORNEY APPROVAL BUT NO DEADLINE FOR ATTORNEY-APPROVAL WAS SET BY THE AGREEMENT; DEFENDANTS’ COUNSEL INFORMED PLAINTIFF’S COUNSEL THAT DEFENDANTS DID NOT WISH TO GO FORWARD WITH THE PURCHASE EITHER SEVEN OR NINE DAYS AFTER THE CONTRACT WAS EXECUTED, WHICH WAS DEEMED A REASONABLE TIME (SECOND DEPT).

The Second Department determined defendant-purchasers’ motion to dismiss the complaint seeking specific performance of a real estate purchase agreement was property granted. The agreement was subject to attorney approval and defendants’ attorney disapproved the contract either seven or nine days after the agreement was executed. There was no time-limit for attorney approval in the agreement, and seven or nine days were deemed a reasonable time:

… [T]he defendants established their entitlement to dismissal of the complaint pursuant to CPLR 3211(a)(7). “On a motion to dismiss a complaint pursuant to CPLR 3211(a)(7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory” … . “Moreover, where evidentiary material is submitted and considered on a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), and the motion is not converted into one for summary judgment, the motion should not be granted unless it has been shown that a material fact as claimed by the plaintiff to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it” … .

The evidentiary material submitted by the defendants in support of their motion demonstrated that the plaintiff had no cause of action against them. Contrary to the plaintiff’s contention, the evidence conclusively established that the purchase agreement was unenforceable because it was subject to attorney approval, which was not given by the defendants’ attorney. As the purchase agreement contained no time limit within which approval was required “a reasonable time for cancellation thereunder is implied” … . Whether, as acknowledged by the defendants, it was seven days after the parties entered into the purchase agreement that the defendants’ attorney disapproved it, or as alleged by the plaintiff, it was nine days after the parties entered into the purchase agreement that the defendants’ attorney disapproved it, the time between the parties entering into the agreement and the disapproval was minimal, during which no prejudice would inure to the plaintiff, and was a reasonable time period as a matter of law. Makris v Boylan, 2019 NY Slip Op 06598, Second Dept 9-18-19

 

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ALTHOUGH THE EASEMENT WAS NOT RECORDED IN PLAINTIFF’S DIRECT CHAIN OF TITLE, IT WAS INDEXED UNDER A BLOCK AND LOT NUMBER SYSTEM, THEREFORE PLAINTIFF HAD CONSTRUCTIVE NOTICE OF THE EASEMENT AND WAS NOT A BONA FIDE PURCHASER (FIRST DEPT). ​

The First Department, in a detailed opinion by Justice Friedman, determined a reasonable title search would have turned up an easement on the subject property. Therefore, plaintiff was not a bona fide purchaser of the empty lot (57 Crosby). The interesting opinion is too detailed to fairly summarize here. The following excerpt provides the flavor of the reasoning:

The question presented … is whether plaintiff, when it purchased 57 Crosby in 2011, had constructive notice of the 1981 easement, notwithstanding that the indexing of the easement had not been changed by the City Register when 57 Crosby was subdivided from Lot 30 in 1984 and reassigned its previous designation of Lot 9.

… [T]he answer to the foregoing question does not turn on whether the 1981 easement would have been found in a search in 2011 of the direct chain of title to 57 Crosby. Almost 40 years ago, the Court of Appeals held that “the rule limiting constructive notice to recorded conveyances that are within the purchaser’s direct chain of title” does not apply “to instances in which the purchaser had access to a block and lot’ or tract indexing system,” such as the one in use in New York City … . … “[I]n counties using a block and lot’ indexing system, a purchaser is charged with record notice of all matters indexed under the block and lot numbers corresponding to the purchaser’s property, regardless of whether such information also appears in his or her direct chain of title” … . Thus, although … the 1981 easement was not recorded within plaintiff’s direct chain of title, that circumstance has no bearing on the outcome of this appeal … . Akasa Holdings, LLC v 214 Lafayette House, LLC, 2019 NY Slip Op 06447, First Dept 9-3-19

 

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PLAINTIFF LOAN SERVICING COMPANY WAIVED THE TIME OF THE ESSENCE PROVISION BY ITS RELENTLESS EFFORTS TO PREVENT THE FORECLOSURE SALE TO THE HIGHEST BIDDER (TO EXACT A HIGHER PRICE); THE SANCTIONS IMPOSED ON PLAINTIFF WERE NOT SUPPORTED BY A WRITTEN DECISION AS REQUIRED BY THE CONTROLLING REGULATION; SANCTIONS ASPECT REMITTED (FOURTH DEPT).

The Fourth Department determined plaintiff loan company waived the time of the essence provision in this foreclosure sale to the highest bidder, Fox, by its relentless attempts to prevent the sale from going forward (to exact a higher purchase price). The Fourth Department noted that the sanctions imposed upon plaintiff were not supported by a written decision as required by 22 NYCRR 130-1.1 and remanded for compliance with the regulation:

We reject plaintiff’s contention that the court erred in determining that Fox did not breach the time is of the essence clause. It is well settled that “[a] party may waive timely performance even where the parties have agreed that time is of the essence” … , and that such a waiver may be accomplished by the conduct of a party … . Here, we agree with the court that plaintiff’s relentless attempts to prevent the sale from going forward constituted a waiver of the time is of the essence clause.

We also reject plaintiff’s further contention that the court erred in determining that plaintiff engaged in frivolous conduct and in imposing sanctions for such conduct. We conclude that plaintiff’s conduct was “completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law[, and was] undertaken primarily to delay or prolong the resolution of the litigation” (22 NYCRR 130-1.1 [c] [1], [2] …). Nevertheless, we conclude that the court erred in failing to comply with 22 NYCRR 130-1.2 because “it failed to set forth in a written decision the conduct on which . . . the imposition [of sanctions] is based, the reasons why the court found the conduct to be frivolous, and the reasons why the court found the amount . . . imposed to be appropriate’ ” … . We therefore modify the order by vacating the fourth ordering paragraph and we remit the matter to Supreme Court for compliance with 22 NYCRR 130-1.2 … . Bayview Loan Servicing, LLC v Strauss, 2019 NY Slip Op 05866, Fourth Dept 7-31-1

 

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DOCUMENT PURPORTING TO CONSTITUTE A CONTRACT FOR THE SALE OF TWO PROPERTIES DID NOT SATISFY THE STATUTE OF FRAUDS, PLAINTIFF’S ACTION FOR SPECIFIC PERFORMANCE PROPERLY DISMISSED (SECOND DEPT).

The Second Department determined the one page document purporting to be a contract to sell two properties to defendant did not satisfy the statute of frauds. Therefore plaintiff’s action for specific performance was properly dismissed:

In a real estate transaction, the essential terms of a contract typically include the purchase price, the time and terms of payment, the required financing, the closing date, the quality of title to be conveyed, the risk of loss during the sale period, and adjustments for taxes and utilities … . “[W]here a contract’s material terms are not reasonably definite, the contract is unenforceable” … .

Here, the defendant demonstrated her prima facie entitlement to judgment as a matter of law dismissing the complaint on the basis that the agreement did not satisfy the statute of frauds. The agreement did not state all of the essential terms, including allocation of the price between the two properties, whether one property could be sold without the other, the terms of payment, and the risk of loss during the sale period, and did not mention the adjustments for taxes and utilities which would customarily be included in a transaction of this nature … . In addition, the agreement did not include the necessary parties because not all of the owners of the properties executed the agreement … . 443 Jefferson Holdings, LLC v Sosa, 2019 NY Slip Op 05376, Second Dept 7-3-19

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