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Conversion Action Can Not Be Based Upon Funds Which Came Into Party’s Possession Lawfully (Down Payment)

In a breach of (purchase) contract action, the Second Department explained that a conversion cause of action could not be based upon the down payment in seller’s possession, and an unjust enrichment cause of action could not be based on the same facts as the breach of contract cause of action:

The Supreme Court properly granted that branch of Smith’s motion which was for summary judgment dismissing the cause of action alleging conversion, since he was rightfully in possession of the down payment …. “Where one is rightfully in possession of property, one’s continued custody of the property and refusal to deliver it on demand of the owner until the owner proves his [or her] right to it does not constitute a conversion”…. The Supreme Court also properly granted that branch of the motion which was for summary judgment dismissing the cause of action alleging unjust enrichment as duplicative of the breach of contract cause of action….  Green Complex, Inc v Smith, 2013 NY Slip Op 04575, 2nd Dept, 6-19-13

 

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Sellers Had No Duty to Disclose Recorded Easement—Caveat Emptor

In affirming Supreme Court’s ruling that the defendants had no duty to disclose a recorded easement to the buyers pursuant to the doctrine of caveat emptor, the Second Department wrote:

“New York adheres to the doctrine of caveat emptor and imposes no duty on the seller or the seller’s agent to disclose any information concerning the premises when the parties deal at arm’s length, unless there is some conduct on the part of the seller or the seller’s agent which constitutes active concealment” …. “Mere silence on the part of the seller, without some affirmative act of deception, is not actionable as fraud”…. ” To maintain a cause of action to recover damages for active concealment, the plaintiff must show, in effect, that the seller or the seller’s agents thwarted the plaintiff’s efforts to fulfill his responsibilities fixed by the doctrine of caveat emptor”…. “Where the facts represented are not matters peculiarly within the party’s knowledge, and the other party has the means available to him of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentations”…. Schottland v Brown Harris Stevens Brooklyn, LLC, 2013 NY Slip Op 03982, 2nd Dept, 6-5-13

 

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Only Sellers’, Not Buyers’, Agent Can Be Liable for Failure to Disclose Lead Paint Dangers

In dismissing a complaint seeking damages pursuant to the Residential Lead-Based Paint Hazard Reduction Act (RLPHRA) for the failure to make disclosures regarding the dangers of lead paint, the Second Department noted that only seller’s agents, not buyer’s agents, can be held liable under the act:

The statutory language of the RLPHRA “is unambiguous with regard to the liability of real estate agents; only seller’s agents are liable” for the failure to ensure compliance with its provisions… . Contrary to the plaintiffs’ contention, it would be contrary to the unambiguous language of the statute to construe 24 CFR 35.86 so as to impose a duty on an agent or representative of a buyer… . Accordingly, the Supreme Court should have granted the …defendants’ motion to dismiss the complaint insofar as asserted against them. Felix v Thomas R Stachecki Gen Contr, LLC, 2013 NY Slip Op 03966, 2nd Dept, 6-5-13

 

Time of the Essence Adequately Stated​

In holding that an attorney’s letter sufficiently stated “time of the essence,” the First Department wrote:

“A party need not state specifically that time is of the essence, as long as the notice specifies a time on which to close and warns that failure to close on that date will result in default”… . [The attorney’s] February 11, 2009 letter warned, “[I]n the event you do not close, I shall release the escrow funds to [the seller].” Such language informs a buyer that he risks default by not appearing at the closing… . Accordingly, because this was a time-of-the-essence closing, plaintiffs defaulted by failing to appear, and defendant … was entitled to keep the down payment … .  Westreich v Bosler, 2013 NY Slip Op 03604, 1st  Dept, 5-21-13

 

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Plaintiffs Entitled to Return of Down Payment When Mortgage Application Denied, In Spite of Failure to Apply for “No Income Check” Mortgage

The Second Department determined that it would have been futile for the plaintiffs to apply for a no-income-check mortgage so their failure to do so did not allow the defendants to hang on to the plaintiffs’ down payment:

Here, the plaintiffs made a prima facie showing of their entitlement to judgment as a matter of law on their cause of action for return of their down payment by submitting evidentiary proof demonstrating that they applied to an institutional lender for a mortgage three days before the contract to purchase the defendants’ property was fully executed, that their application was denied through no fault of their own, and that they gave the defendants timely notice that they were exercising their right to cancel the contract pursuant to the mortgage contingency clause … . Under the circumstances of this case, the plaintiffs’ failure to additionally apply for a no-income-check mortgage, as required by a rider to the subject contract, did not raise an issue of fact as to whether they made a good faith effort to secure mortgage financing. The plaintiffs’ mortgage application was already pending as of the date of the contract, and the plaintiffs’ evidentiary submissions demonstrated that it would have been futile for them to additionally apply for a no-income-check mortgage in view of the lender’s determination that, based on their credit history, they were not eligible for a mortgage of any kind … . Etienne v Hochman, 2013 NY Slip Op 02373, 2011-08896, Index No 23466/08, 2nd Dept, 4-10-13

 

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Damages for Breach of Purchase Contract Are Measured by the Difference Between the Purchase Price and the Market Value at Time of Breach

In a lengthy opinion by Judge Read, the Court of Appeals determined that, where a purchase contract for real property has been breached, the measure of damages is the difference between the sale price and the market value of the property at the time of the breach.  The price at which the property subsequently sells can be taken into consideration when determining what the value was at the time of the breach, but it is not the measure of damages.  White v Farrell, et al, No. 43, CtApp, 3-21-13

 

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Pre-Closing Inspection Disallowed Because There Was No Mention of a Pre-Closing Inspection in the Purchase Contract

The Fourth Department determined a purchase contract which contained a merger clause prohibiting oral modifications and which did not have a provision allowing a pre-closing inspection did not provide the buyer with the right to inspect the property.  Under the rules for the interpretation of an unambiguous contract, “ ‘courts should be extremely reluctant to interpret an agreement as impliedly stating something which the parties have neglected to specifically include’ . ..”.  Thirty One Development, LLC v Jeffery Cohen, et al, 161 CA 11-02577, 4th Dept. 3-15-13

 

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Buyer Not Entitled to “Loss of Bargain” Damages for Breach of Purchase Contract

The contract for the sale of a parcel of real property included the following: “It is the understanding of the parties that at the present time, seller is not in title to the property.  Seller is a first mortgage holder and the mortgage is in default.  In the event that the title holder does not agree to signing over a deed in lieu of foreclosure, the seller will institute foreclosure proceedings with the courts.  Seller shall be able to provide good and clear title in accordance with this contract.” The defendant-seller, however, was outbid at the foreclosure sale and could not provide the buyer with good and clear title.  In the lawsuit brought by the buyer, the buyer sought so-called “loss of bargain” damages.  In affirming the trial court’s denial of buyer’s request for “loss of bargain” damages, the Fourth Department explained:

It is well settled that “[t]he vendee in a contract for the sale of land is not ordinarily entitled, upon breach, on failure to convey, to recover of the vendor damages measured by the goodness of his bargain or the financial benefit which would result from performance, and it is only when the vendor is for some reason chargeable with bad faith in the matter that recovery beyond nominal damages on that account can be had” … .Thus, “[i]f a vendee knows of the inability of his vendor to convey the title he has undertaken to convey, the vendee’s damages are not measurable by the loss of his bargain” … .  Khanjani v Schreiber, 141, CA 12-00494, 4th Dept. 3-15-13

 

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Fee Agreement Unenforceable as Vague.

A written agreement concerning a “success fee” and real estate broker’s commissions was deemed unenforceable as vague, “since the agreement fails to set the price or compensation to be received…”.  Magnum Real Estate Services, Ind. Vs 133-134-135 Associates, LLC, 8058, 107850/06 First Dept. 2-14-13

 

Lawyer’s Communication Did Not Make “Time of the Essence.”

The Second Department held that the letter from the buyer’s attorney to the seller’s attorney stating that the buyer was prepared to close “on any date … within the next ten days,” and that the buyer would make himself available “at any time and location so designated by you,” and requested that the seller’s attorney “contact me within the next ten days to schedule a closing” did not make “time of the essence” because “it did not clearly and distinctly set a new date and time for closing, and it did not inform the defendant that he would be considered in default if he did not perform by a given date…”. Latora v Ferreira, 2011-09673, Index No. 20462/05 Second Dept. 1-23-13

 

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