Opinion
40408-2008.
Decided June 4, 2009.
CINQUE CINQUE, P.C., Attorney for Plaintiffs, New York, New York.
DENNIS ARDI ATTORNEY AT LAW PROFESSIONAL CORPORATION, Plaintiff Dennis Ardi,
Beverly Hills, California.
ANTHONY B. TOHILL, P.C., Attorney for the Defendants, Riverhead, New York.
ORDERED that Defendants' motion sequence # 003 for judgment dismissing the amended complaint and for cancellation of the notice of pendency is granted; and it is further
ORDERED that Defendants' motion sequence # 001 is denied as moot; and it is further
ORDERED that the cross motions of the Plaintiffs for summary judgment (sequence # 002, 004) are denied; and it is further
ORDERED that the attorney for the Defendants is directed to enter judgment; and it is further
ORDERED that any judgment prepared by the attorney for the Defendants and submitted for filing must contain a complete legal description of all Notices of Pendency filed by the Plaintiffs and vacated by this order.
In motion sequence # 001, the Defendants, John S. Martin and Margaret C. Martin, have moved to cancel the Notice of Pendency and to dismiss the first Complaint served by the Plaintiffs on the basis of documentary evidence and for the failure to state a cause of action. The Plaintiffs, Dennis Ardi and Margaret C. Martin, then cross moved for summary judgment on the cause of action in the Complaint for rescission of the contract of sale (motion sequence # 002).
After Defendants' motion sequence # 001 was returnable, the Plaintiffs served and filed an amended Complaint dated December 30, 2008. This amended Complaint rendered the first two motions of the Plaintiffs and Defendants moot. The parties have not withdrawn those motions, the parties have referred to documents attached to those motions and the decision issued herein addresses and disposes of these motions.
The Defendants then moved to cancel the amended Notice of Pendency and to dismiss the amended Complaint (motion sequence # 003). The Plaintiffs cross moved for summary judgment on their claim for rescission pleaded as the first cause of action in the amended Complaint (motion sequence # 004).
Certain facts are not in dispute in this civil litigation. On April 14, 2005, John S. Martin and Margaret C. Martin, the Defendants, and Veronica Coleman, the mother of the Defendant Margaret Martin and the mother-in-law of the Defendant John Martin, purchased the subject premises located at 83 Skimhampton Road in Amagansett, New York from Sandra Greer and Amy J. Greer. The deed that conveyed the property to the Defendants and Coleman in 2005 is attached as Plaintiffs' Exhibit "C". This 2005 deed does not specifically list the ownership interests of Coleman and the Martins. The 2005 deed does not indicate whether or not Coleman took an ownership interest of one-third or less than one third of the realty.
Thereafter, on September 17, 2007, a deed was executed and subsequently filed and recorded on October 11, 2007, that specifically stated the respective ownership interests of the Martins and Coleman in the real property and transferred all of Coleman's interest in the property to the Martins. That 2007 deed provided that Veronica Coleman had possessed a 1% fee ownership interest in the real property and Margaret C. Martin and John S. Martin each had a 49.5% interest in the property and that, pursuant to the 2007 deed, Coleman was conveying her entire interest in the realty to the Defendants. The 2007 deed was executed and recorded at least ten months prior to the signing of the contract of sale by these parties.
Veronica Coleman has submitted an affidavit in support of the motion of the Defendants to dismiss wherein she states:
In 2005 I agreed to accommodate my daughter and her co-defendant husband, John S. Martin, an Irish emigre, each without credit sufficient to procure a mortgage, by serving as a nominal one (1) percent owner of the premises now the subject of this action.
In 2007 I readily agreed at the request of the defendants to convey my one (1) percent interest without consideration so my daughter and son-in-law would be the sole owners of the premises.
I signed and delivered to the defendants the deed, a TP-584, and equalization statement and a community preservation fund form in September 2007.
I understood I owned no interest in the premises thereafter.
Thereafter, on or about August 12, 2008, the Defendants John S. Martin and Margaret C. Martin entered into a contract of sale to sell this real property to the Plaintiffs Dennis Ardi and Karen Ford. As part of the terms of the contract of sale, the purchasers deposited $150,000.00 into an escrow account as the down payment for the purchase. Pursuant to the contract of sale, the sellers are entitled to the amount of the down payment as liquidated damages if the purchasers are found to be in default for failing to close title without justification.
The contract of sale provided that a closing should take place on or about September 30, 2009. When that date had passed and a closing had not been scheduled, William J. Fleming, Esq., the attorney retained by the Defendants to represent them on the sale of the residence, sent a letter, dated October 7, 2008, by certified mail, return receipt requested that stated "***unless the closing occurs prior, the closing is hereby set for Wednesday, November 12, 2008, at 2 PM at this office time is of the essence."(Affidavit of William Fleming, Esq. Exhibit "A").
On or about October 17, 2008, after the letter was sent setting November 12, 2008, as the date of the closing, James P. Cinque, Esq., the attorney for the Plaintiffs, sent a letter to William J. Fleming, Esq. attempting to cancel the contract of sale. (Affidavit of William Fleming, Esq. Exhibit "D"). This letter stated that the sellers represented to the Plaintiffs in the contract of sale that they were the sole owners of the premises and "have full right, power and authority to sell, convey and transfer the same in accordance with the terms of the contract." (see also, Plaintiffs' Exhibit "J", motion sequence # 004). Further, this letter stated that as a result of this inaccurate representation, "the contract of sale never had a valid inception and was void ab initio." This letter from James Cinque, Esq. never mentioned that the Plaintiffs were raising the exception for fences listed in the title report as a reason for refusing to close title or as a reason for cancelling the contract of sale. On November 4, 2008, James P. Cinque, Esq. sent another letter to William Flemming, Esq. which stated:
As you know, the contract of sale (which Purchaser nonetheless maintains was void ab initio) obligated your clients as Seller to deliver "marketable title" and to cure any defects at the latest by the date upon which Purchaser's mortgage commitment expired. Because Seller was unable to deliver "marketable title" on or before such date, Purchaser hereby formally demands (my having advised you by telephone previously) that Seller promptly refund Purchaser's $150,000.00 down payment and reimburse Purchaser the net cost of examination of title. (Plaintiffs' Exhibit "K", motion sequence # 004).
It is un-controverted that Veronica Coleman was not named as one of the owners of the real property in the contract and, if she had any ownership interest in the property on the date that the contract of sale was signed, that interest was not disclosed by the Martins in the contract of sale. It is also true that the contract of sale between the parties provides that the "Seller represents and warrants to Purchaser that:***Seller is the sole owner of the Premises and has the full right, power and authority to sell, convey and transfer the same***." However, the contract of sale did not state that the agreement was either voidable or void if this representation was untrue.
In any event, by letter dated October 16, 2008, the title company omitted the exception in the title report that provided that Veronica Coleman was required to convey her alleged interest in the property prior to the closing, thus rendering the Plaintiffs' subsequent objection to title first expressed in November 2008, moot.
Generally, absent clauses in the contract acting as a condition subsequent or precedent, "[i]n order to place the vendor of realty under a contract of sale in default for a claimed failure to provide clear title, the purchaser normally must first tender performance himself and demand good title" ( Capozzola v. Oxman , 216 AD2d 509, 510, 628 NYS2d 777, quoting Ilemar Corp. v. Krochmal , 44 NY2d 702, 703, 405 NYS2d 444, 376 NE2d 917; see also, Cohen v. Kranz , 12 NY2d 242, 238 NYS2d 928, 189 NE2d 473; Oxford Funding Corp. v. James H. Northrup, Inc. , 130 AD2d 722, 516 NYS2d 33). A contract clause in an agreement to sell a house that states that the contract may be terminated by the purchasers if certain specified conditions are not met by the sellers is enforceable (see, Leme Realty Corp. v. Kings Mercantile Co. , 19 AD2d 844, 244 NYS2d 741). The Court of Appeals has stated that "the rights of the seller may be forfeited pursuant to a provision in the contract to the effect that the contract may be terminated by the purchaser if certain specified conditions are not met by the seller." ( 130-164 Ravine Avenue, Inc. v Ravine Associates , 139 AD2d 716, 527 NYS2d 469 citing Abrams v. Thompson , 251 NY 79, 167 N.E. 178; Leme Realty Corp. v. Kings Mercantile Co. , 19 AD2d 844, 244 NYS2d 741).
Here, the contract did not provide that it would be void or voidable if the representation that the sellers were the owners of the property at the time the contract was sold was false although it is clear that unless the Defendants had the ability to convey full ownership as of the date of closing of title, they could convey neither marketable nor insurable title to the property.
The requirement of the "tender of performance," referred to above, on behalf of the purchasers would be excused only where the title defect is not curable and the tendering of performance would be an "idle and useless ceremony" (see, Ilemar Corp. v. Krochmal , supra; Anderson v. Meador , 56 AD3d 1030 , 869 NYS2d 233). While the Plaintiffs could have avoided the need to have tendered performance if the Defendants lacked full ownership of the real property on the date of closing, that is not the fact situation herein. In fact, the documentary evidence submitted by the Defendants establishes that they had full ownership interest of the property both on the date that the contract was signed and on the time of the essence date.
Under the facts of this case, the Plaintiffs have failed to establish (1) that the sellers' representation as to ownership was false, (2) that if the representation of ownership was in error on the date made, that such misrepresentation voided the contract and (3) that there were any defects in insurable title that were incurable and were not cured on the date established to convey title (see, 91 New York Jurisprudence 2d, Real Property Sales and Exchanges , § 145).
The 2008 contract of sale signed by the Plaintiffs and Defendants did not state that the Defendants must provide marketable title and, instead, it provided that the Defendants must deliver insurable title. There is a difference between insurable title and marketable title ( Voorheesville Rod and Gun Club, Inc. v. E.W. Tompkins Co. Inc. , 82 NY2d 564, 606 NYS2d 132, 626 NE2d 917; Laba v. Carey , 29 NY2d 302, 327 NYS2d 613, 277 NE2d 641). Marketable title is title that is free from encumbrances and any doubt as to its validity and it is title that a reasonably intelligent person, who is well informed of the facts and the legal implications of those facts, would be willing to accept from the sellers. Insurable title is title that a reputable title insurance company is willing to insure.
This Court agrees that even innocent misrepresentations are sufficient to make a contract of sale voidable and support an rescission and the return of the down payment if the inaccuracy is a material misrepresentation (see Rosenchein v McNally , 17 AD2d 834, 233 NYS2d 254; see also Mix v Neff , 99 AD2d 180, 473 NYS2d 31). Further, a misrepresentation that renders a title uninsurable where, by the terms of the contract, an insurable title must be delivered would be a material misrepresentation and such a misstatement would be sufficient to support a claim for rescission.
The Defendants in these papers have shown that they were able to tender insurable title on the date set for the closing. Although the title that they conveyed was not required to have been marketable title, they also were able to convey marketable title, as that term has been defined by the cases.
The title report, submitted by both the Plaintiffs and Defendants as Exhibits to their motions, was ordered by the Plaintiffs and it disclosed an apparent ownership interest of Veronica Coleman in Item 20 of Schedule B. This exception stated that John S. Martin, Margaret C. Martin and Veronica Coleman owned the property as equal tenants in common. At that time the title report provided that title would be insured if Veronica Coleman, John Martin and Margaret Martin could convey their ownership interest in the subject premises without reciting percentage. Certainly, if this exception was not omitted as an objection and Veronica Coleman did not comply with the requirement that she join in the conveyance, the contract of sale would be voidable under the analysis provided above. However, the objection in the title report subsequently was omitted by the title company responsible for insuring title and it has been shown by other documentary evidence that Coleman did not have any ownership interest in the property at any time during the year of 2008.
On these motions for summary judgment and in opposition to the motions of the Defendants to dismiss, the Plaintiffs also allege that substantial portions of the subject premises were out of the Defendants' possession as a result of fencing that was located on three sides of the property and that this also justifies the refusal to close title.
It does not appear that the subject of the fences were raised as a reason to cancel the contract in the letter from the attorney for the Plaintiffs to the attorney for the Defendants dated October 17, 2008. However, in any event, the fence issue did not prevent the Defendants from tendering insurable title to the Plaintiffs. The title report indicates that the exception concerning the fencing was omitted on October 16, 2008 (Defendants Exhibit "G", motion sequence # 003).
According to William J. Fleming, Esq, the fences on the property were all constructed by the Defendants after they purchased the realty in 2005, and therefore, the prescriptive period for adverse possession had not run. It is alleged, and not disputed, that the Plaintiffs gave a prior survey of the property to the title company that was not current as of the date of the proposed sale of the property. The Martins, in their successful effort to remove the exception concerning the fences from the title report, submitted an affidavit executed on October 24, 2008, to the title company stating that they "constructed the pool fence in May of 2006" and "the fence along the easterly border was moved on October 16, 2008 to the property line." Further, this affidavit stated that "(d)uring the period from May 2006 until October 16, 2008, no one cultivated that area nor made any claim of right, title or interest to the area between the fence and the easterly property line." (see Exhibit "H" attached to affidavit or William Fleming, Esq.) On November 4, 2008, the title objections addressed and directed to the fencing on the property contained in the title report were omitted by Absolute Abstract (Defendants Exhibit "F", motion sequence # 003).
The treatise New York Jurisprudence 2d states:
Where the seller's action with respect to the property that is the subject of a purchase agreement does not render the seller unable to perform the contract or establish an incurable defect in the title, the prospective purchaser, who does not tender performance or demand good title, is not entitled to rescind and recover the down payment, but rather commits an anticipatory breach by making an advance rejection of the title and demand for return of the down payment. ( 91 New York Jurisprudence 2d, Real Property Sales and Exchanges § 186).
The sellers have established their prima facie entitlement to judgment as a matter of law by submitting documentary evidence showing that they were ready, willing, and able to perform on the day set for the closing and that the purchasers failed to appear at the closing and accept title (see, Pinhas v. Comperchio , 50 AD3d 1117 , 857 NYS2d 616; Engelhardt v. McGinnis , 2 AD3d 572, 769 NYS2d 297). In response to this showing, the purchasers may raise a triable issue of fact by showing that they tendered performance and/or permitted the sellers an opportunity to cure any alleged default (see, Cohen v. Kranz , 12 NY2d 242, 238 NYS2d 928, 189 NE2d 473; Hegner v. Reed , 2 AD3d 683, 770 NYS2d 87; R.C.P.S. Assoc. v. Karam Devs. , 258 AD2d 510, 685 NYS2d 261). The Plaintiffs herein admit that they did not tender performance and the Court finds that they have been unable to show that the Defendants were in default under their obligations to perform as set forth in the contract of sale.
"It has been well settled in this State that a vendee who defaults on a real estate contact without lawful excuse, cannot recover the down payment." ( Maxton Builders v. Lo Galbo , 68 NY2d 373, 378, 509 NYS2d 507, 502 NE2d 184; see generally, Di Blanda v. ADC Pinebrook, PC 44 AD3d 702, 843 NYS2d 429)
Pursuant to the terms of the contract of sale, the sellers are entitled to the amount of the down payment as liquidated damages.
The contract of sale herein required that the sellers give the purchasers "such title as any reputable title company doing business in Suffolk County shall be willing to approve and insure***." Where, as here, the contract provides that the seller must deliver title that a title company will approve and insure, this requires delivery of an insurable title. Generally, by contracting for insurable title, the parties had abrogated the general rule that in the absence of agreement otherwise, the buyer is entitled to marketable title (see, Creative Living, Inc. v. Steinhauser , 78 Misc 2d 29, 355 NYS2d 897, aff'd, 47 AD2d 598, 365 NYS2d 987, motion for leave to appeal denied, 36 NY2d 643, 368 NYS2d 1026).
The requirement of an insurable title stems from the express contract provision, as opposed to the requirement of marketability, which arises from case law, and the two requirements are not necessarily identical because requiring insurable title does not necessarily mean that the title must also be marketable. Where, as here, the Defendant sellers agreed to provide insurable title, they assumed the burden of delivering a title which the title company will approve and insure unconditionally and without exceptions. Therefore, when the Plaintiffs contracted for the receipt of insurable title, not marketable title, to be delivered at the closing, the Plaintiffs' objections were eliminated once the title company agreed to insure the premises without exception (see, Crown Enterprises, Inc. v. TrustCo Bank N.A. , 2001 NY Misc. LEXIS 452, Sup. Ct. Rensselaer County 2001, citing 12 Warren's Weed New York Real Property 4th Ed, Seller and Buyer § 2.01[2][b]).
In both of the Defendants' motions to dismiss, the attorney for the Martins has sought an order that all Notices of Pendency filed by the Plaintiffs against the property be vacated. A copy of the Notice of Pendency is attached to the papers as Defendants' Exhibit "A" and it appears that another one may have been filed with the Clerk on or about December 17, 2008. In light of this decision, where the Court has granted the motion of the Defendants to dismiss and denied the cross motion of the Plaintiffs for summary judgment, the motion to vacate the Notice of Pendency must be granted.
However, even if this Court had denied the motions of the Defendants to dismiss, the Notice of Pendency would have been vacated by the Court in this decision.
CPLR 6501 permits the filing of a notice of pendency only where the action can "affect title to or the possession, use or enjoyment of real property"( CPLR 6501). A Notice of Pendency is not properly filed where the Complaint asserts, in essence, a money claim or seeks merely to recover a judgment on a personal obligation, even though real property may be incidentally involved. Thus, it is not proper to file a Notice of Pendency in an action on a breach of contract such as here, where the Plaintiffs are seeking only a return of their down payment and related damages (see, Rajic v. Sarokin , 214 AD2d 663, 625 NYS2d 94; Tsiporin v. Ziegel , 203 AD2d 451, 610 NYS2d 603; see also, Shkolnik v. Krutoy , 32 AD3d 536, 819 NYS2d 839). This is a contractual dispute over the down payment cannot support the filing of a Notice of Pendency (see, 5303 Realty Corp. v. O Y Equity Corp. , 64 NY2d 313, 476 NE2d 276, 486 NYS2d 877; Savasta v. Duffy , 257 AD2d 435, 683 NYS2d 511).