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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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THE HOME-BUILDER’S CONTRACT WAS INVALID BECAUSE IT DID NOT COMPLY WITH THE GENERAL BUSINESS LAW, THE HOMEOWNERS’ BREACH OF CONTRACT COUNTERCLAIM SHOULD NOT HAVE BEEN DISMISSED ON THAT GROUND HOWEVER; CONTRACTOR ENTITLED TO RECOVER IN QUANTUM MERUIT IF, UPON REMITTAL, IT IS DETERMINED THE CONTRACTOR’S BREACH, IF ANY, WAS NOT SUBSTANTIAL (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined the plaintiff contractor’s breach of contract cause of action against defendants-homeowners was properly dismissed because the contract to build the home did not comply with General Business Law 771. The defendants-homeowners refused to make the final payment of approximate $39,000 upon completion of the home, alleging the home was not complete and was not up to code. The homeowners’ counterclaim for breach of contract should not have been dismissed because General Business Law 771 applies only to contractors. The contractor’s quantum meruit cause of action was not precluded by the contractor’s failure to comply with the General Business Law. The agreed price of the work in the “contract” was evidence of the value of the work done by the contractor, even though the contract itself was invalid. The matter was sent back for determination of the homeowners’ breach of contract cause of action, and a determination of whether the contractor committed a substantial breach of the contract, which would preclude the quantum meruit cause of action:

“The elements of a cause of action sounding in quantum meruit are (1) performance of services in good faith, (2) acceptance of services by the person to whom they are rendered, (3) expectation of compensation therefor, and (4) reasonable value of the services rendered” … . Defendants’ argument centers around plaintiff’s failure to establish the fourth element. In its decision, the court stated that, “[a]lthough there was no direct evidence presented regarding the reasonable value of the work performed, the parties’ agreement can furnish evidence of such value.” We discern no error in the court so holding, as “an unenforceable writing may provide evidence of the value of services rendered in quantum meruit” … . …

… [O]on remittal, should the court find that plaintiff breached the contract, it must then also decide if the breach was substantial, and, if so, plaintiff is precluded from recovering in quantum meruit … . Conversely, if the court finds that plaintiff’s breach of contract was not substantial, plaintiff is not precluded from quantum meruit recovery, and the damages due to defendants for plaintiff’s breach of the contract must be offset by plaintiff’s award … . Grey’s Woodworks, Inc. v Witte, 2019 NY Slip Op 04525, Third Dept 6-6-19

 

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PLAINTIFFS BREACHED THE CONTRACT TO PURCHASE THE HOME BUILT BY DEFENDANTS BY CLEARLY INDICATING THEY COULD NOT GO THROUGH WITH THE PURCHASE (ANTICIPATORY REPUDIATION); HOWEVER, DEFENDANTS WERE NOT ENTITLED TO THE FULL AMOUNT PLAINTIFFS HAD ALREADY PAID DEFENDANTS, OVER $220,000, AS DAMAGES FOR THE BREACH, DAMAGES TRIAL ORDERED (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined that plaintiffs breached the contract to purchase the home built by defendants by a clear expression that they did not intend to go through with the purchase (anticipatory repudiation). The plaintiffs had paid defendants about $220,000 toward the purchase price of about $322,000. After the plaintiffs repudiated the contract the builder sold the property to his daughter fore $269,000. Supreme Court allowed the defendants to keep the entire $220,000 paid by plaintiffs as damages. The Third Department determined the damages were excessive in ordered a trial to determine the appropriate amount of damages:

Having determined that plaintiffs breached the contract, the issue distills to whether Supreme Court correctly determined that, as a result thereof, they forfeited, as a matter of law, the $222,241 in payments made to defendants prior to their cancellation of the contract. Defendants argue that we must apply the well-settled rule set forth by the Court of Appeals over a century ago in Lawrence v Miller (86 NY 131 [1881]), which was later reaffirmed in Maxton Bldrs. v Lo Galbo (68 NY2d 373 [1986]), “that a vendee who defaults on a real estate contract without lawful excuse[ ] cannot recover his or her down payment” … . However, we find that forfeiture of the payments made by plaintiffs in this case, which constitute approximately 69% of the total contract amount, represents, on its face, a damages award disproportionally higher than the actual damages incurred by defendants … , such that defendants have failed to establish, as a matter of law, their entitlement to a damages award equivalent to all payments made by plaintiffs  … . Accordingly, Supreme Court should have denied this portion of defendants’ motion. As a result, a trial is required to determine the appropriate amount of defendants’ damages. Burns v Reiser Bros., Inc., 2019 NY Slip Op 04522, Third Dept 6-6-19

 

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PLAINTIFFS’ ACTION SEEKING TO ENJOIN THE CONSTRUCTION OF A HOME PLAINTIFFS CONTENDED WAS IN VIOLATION OF THE TOWN CODE SHOULD HAVE BEEN DISMISSED PURSUANT TO THE DOCTRINE OF LACHES (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the doctrine of laches applied to plaintiffs’ action seeking to enjoin defendant’s construction of a house. Plaintiffs alleged the construction violated the Town Code:

” To establish laches, a party must show: (1) conduct by an offending party giving rise to the situation complained of, (2) delay by the complainant in asserting his or her claim for relief despite the opportunity to do so, (3) lack of knowledge or notice on the part of the offending party that the complainant would assert his or her claim for relief, and (4) injury or prejudice to the offending party in the event that relief is accorded the complainant'” … . ” The mere lapse of time without a showing of prejudice will not sustain a defense of laches. In addition, there must be a change in circumstances making it inequitable to grant the relief sought'” … . “Moreover, as the effect of delay may be critical to an adverse party, delays of even less than one year have been sufficient to warrant the application of the defense” … . …

The plaintiffs commenced this action nearly three years after the building permit was first issued in May 2012 and after [plaintiff] Kverel withdrew his administrative appeal, two years after the parties entered into the stipulation, and more than six months after construction purportedly commenced in August 2014. Although the building permit was amended several times thereafter and as late as February 2015, the record demonstrates that the plaintiffs were aware as early as July 2012, when the subject property remained undeveloped and before the defendant purchased the subject property, of their claim that the defendant’s construction was in violation of the Town Code. Although the record unequivocally demonstrates that the plaintiffs were opposed to the defendant’s construction on the subject property, the plaintiffs did not seek administrative review by the ZBA or injunctive relief until they commenced this action. Kverel v Silverman, 2019 NY Slip Op 04152, Second Dept 5-29-19

 

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PLAINTIFF DID NOT SUBMIT PROOF IT HAD THE FINANCIAL ABILITY TO CLOSE ON THE PURCHASE OF REAL PROPERTY, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT ON ITS ACTION FOR SPECIFIC PERFORMANCE OF THE REAL ESTATE PURCHASE AGREEMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion for summary judgment in this action for specific performance of a real estate purchase agreement should not have been granted. Plaintiff did not submit proof it had the financial ability to close:

“A plaintiff seeking specific performance of a contract for the sale of real property bears the burden of demonstrating that he or she was ready, willing, and able to perform his or her obligations under the contract” … . “[C]onclusory assertions that the plaintiff was ready, willing, and able to perform, are insufficient to satisfy this burden” … .

“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” … . Thus, in moving for summary judgment on a complaint seeking specific performance of a contract for the sale of real property, a plaintiff purchaser must submit evidence demonstrating its financial ability to purchase the property, and in the absence of such evidence, the motion must be denied … .

Here, the plaintiff failed to establish, prima facie, that it was ready, willing, and able to purchase the subject property. More specifically, the conclusory assertions of Gavriel Yakubov, the alleged sole member of the plaintiff, that he had always been, and remained, ready, willing, and able to close, absent any evidence demonstrating the plaintiff’s financial ability to close, were insufficient to establish, prima facie, that the plaintiff was ready, willing, and able to purchase the subject property … . GLND 1945, LLC v Ballard, 2019 NY Slip Op 04143, Second Dept 5-29-19

 

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COMPLAINT STATED CAUSES OF ACTION FOR BREACH OF REAL ESTATE BROKERAGE CONTRACT, QUANTUM MERUIT, UNJUST ENRICHMENT AND PROMISSORY ESTOPPEL, STATUTE OF FRAUDS DID NOT APPLY, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, reversing Supreme Court, determined that plaintiffs’ complaint stated causes of action for breach of contract, quantum meruit, unjust enrichment and promissory estoppel. The contract between plaintiff, a real estate broker, and defendant, a real estate developer, gave plaintiff the exclusive right to broker sales of luxury apartments in return for a reduced commission rate. The complaint alleged defendant accepted plaintiff’s services for two years but refused to pay after defendant received the benefits of the bargain:

Plaintiffs’ failure to identify in the complaint the specific national real estate sales and marketing agency with which plaintiffs were going to partner, along with the terms of such partnership, is not fatal to plaintiffs’ breach of contract claim. The alleged contract would imply a covenant of good faith and fair dealing pursuant to which plaintiffs would propose reasonable entities and defendants would reasonably accept or reject those proposals … . … As to the start and end date of the agreement, it can be inferred from the allegations in the complaint … . With regard to the identity of the promisor, the complaint indicates that all negotiations and interactions were with defendant Kuzinez. …

The complaint should not have been dismissed pursuant to the statute of frauds. As an initial matter, defendants did not move to dismiss based on the statute of frauds and plaintiffs were not afforded the opportunity to address the issue … . Moreover, the statute of frauds is inapplicable here as General Obligations Law § 5-701(a)(10) specifically exempts contracts to pay compensation to licensed real estate brokers, which is the type of contract alleged by plaintiffs.

The declaratory judgment cause of action, which seeks a declaration that plaintiffs have the right to serve as exclusive broker for all residential sales for the subject development, should be reinstated based on our finding that the complaint sufficiently alleges a claim for breach of contract.

Additionally, the quantum meruit, unjust enrichment, and promissory estoppel claims state causes of action. As to quantum meruit, the complaint alleges that plaintiffs provided services to defendants at a reduced cost or no cost, based on the promiseof the oral agreement …. As to promissory estoppel, the complaint alleges that defendants promised plaintiffs that they would serve as exclusive broker and that, in reasonable reliance on that promise, plaintiffs agreed, among other things, to substantially reduced commissions … . Elhanani v Kuzinez, 2019 NY Slip Op 04042, First Dept 5-23-19

 

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DEFENDANT-SELLERS NOT LIABLE FOR MOLD AND MICE IN HOUSE SOLD TO PLAINTIFFS, UNDER THE MERGER DOCTRINE NO PROVISION OF THE CONTRACT SURVIVED THE DELIVERY OF THE DEED, THE DOCTRINE OF CAVEAT EMPTOR APPLIED, NO DUTY OF CARE OWED TO THE PLAINTIFFS OVER AND ABOVE THE CONTRACT PROVISIONS, THE PRIVITY ELEMENT OF NEGLIGENT MISREPRESENTATION WAS ABSENT (SECOND DEPT).

The Second Department determined the defendant-sellers were not liable under breach of contract or negligence theories for the presence of mold and mice in a house sold to plaintiffs:

The contract of sale contained language providing that, unless expressly stated, no covenant, warranty, or representation in the contract survived closing. A rider to the contract stated that the defendants were not aware of any mold or vermin infestation in the house. Prior to the closing, the plaintiffs conducted a home inspection which revealed, among other things, the presence of water staining and evidence of water infiltration on the interior of the house. The home inspection report stated that a mold evaluation was beyond the scope of the inspection and recommended that if the plaintiffs were concerned about potential mold issues, they should call a professional mold abatement company to perform an inspection. The report also stated that the need for some periodic general pest control should be anticipated. The plaintiffs did not undertake a mold inspection. * * *

… [O]nce title to the property closed and the deed was delivered, “any claims the plaintiff[s] might have had arising from the contract of sale were extinguished by the doctrine of merger” since there was no “clear intent evidenced by the parties that [the relevant] provision of the contract of sale [would] survive the delivery of the deed”. … Furthermore, “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” … . …

A simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated … . …

“A claim for negligent misrepresentation requires the plaintiff[s] to demonstrate (1) the existence of a special or privity-like relationship imposing a duty on the defendant[s] to impart correct information to the plaintiff[s]; (2) that the information was incorrect; and (3) reasonable reliance on the information” … . Here, the defendants demonstrated that there was no special or privity-like relationship between themselves and the plaintiffs in this arm’s length transaction … . Rosner v Bankers Std. Ins. Co., 2019 NY Slip Op 04015, Second Dept 5-22-19

 

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DISCLAIMER IN THE REAL ESTATE PURCHASE AND SALE CONTRACT PRECLUDED ACTIONS BASED IN FRAUD ALLEGING THE CONCEALMENT OF A RECURRING MOLD-CAUSING CONDITION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the causes of action alleging fraud in the concealment of a recurring mold-causing condition should have been dismissed. The real estate contract included a disclaimer which stated that plaintiffs relied upon their own inspection of the property and not any representations made by others:

“In an action to recover damages for fraud, the plaintiff must prove a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury” … . In the context of real estate transactions, “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” … . “If however, some conduct (i.e., more than mere silence) on the part of the seller rises to the level of active concealment, a seller may have a duty to disclose information concerning the property” … . “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 [or her] responsibilities fixed by the doctrine of caveat emptor” … .

The presence of disclaimers in a written agreement may preclude a claim of common-law fraud by rendering any resulting reliance unjustified … . Moreover, a specific disclaimer of reliance on representations as to the condition of real property will generally bar related fraud-based claims … . Here, the contract of sale for the subject premises set forth,  a… lia, that the plaintiffs were “fully aware of the physical condition and state of repair of the Premises . . . based on [their] own inspection and investigation thereof,” and that they were “entering into this contract based solely upon such inspection and investigation and not upon any information . . . or representations . . . given or made by Seller or its representatives.” Comora v Franklin, 2019 NY Slip Op 02671, Second Dept 4-10-19

 

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