Opinion
INDEX NO. 156363/2020
03-09-2021
PROSPEROUS VIEW LLC, Plaintiff, v. 170 MERCER LLC,JOHN DOES, JASPAN SCHLESINGER LLP AS ESCROWEE, Defendant.
NYSCEF DOC. NO. 26 PRESENT: HON. ARLENE P. BLUTH Justice MOTION DATE 03/08/2021 MOTION SEQ. NO. 001
DECISION + ORDER ON MOTION
The following e-filed documents, listed by NYSCEF document number (Motion 001) 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25 were read on this motion to/for JUDGMENT - SUMMARY.
The motion by plaintiff for summary judgment is granted.
Background
This action arises out of the sale of a commercial condo unit at 170 Mercer Street in Manhattan. Plaintiff claims it purchased the condo for $6.7 million and paid the down payment of $350,000 (to be held in escrow by defendant Jaspan Schlesinger LLP). Plaintiff contends that the sale was contingent on plaintiff being assigned an existing mortgage on the property. It argues that it complied with its obligation to apply for the mortgagee's consent to assume the mortgage. It alleges that the mortgagee began demanding onerous provisions in order for the assumption of the mortgage to be finalized, including an additional security payment of $1 million to be placed on deposit for the life of the loan. Plaintiff contends that the seller (defendant 170 Mercer LLC) refused to pay the additional cost of complying with this condition.
Plaintiff acknowledges that the deadline to complete the assumption of the mortgage (March 1, 2020) passed without plaintiff completing this agreement. It claims that it then requested return of the down payment and cancelled the contract. Plaintiff maintains that the refusal of the seller to return the deposit was not made in good faith and it points to a provision of the sale contract (paragraph 31A) which purportedly capped the expenses that could be incurred by plaintiff in connection with obtaining the mortgagee's consent.
Plaintiff now moves for summary judgment. It points out that the seller has commenced litigation against the lender (who refused to assign the mortgage) on the ground that the onerous conditions were demanded in bad faith. It claims that because the assignment was not completed by March 1, 2020, plaintiff was entitled to cancel the contract and to a return of the down payment.
In opposition, defendants claim that issue has not been joined. Defendants also argue that the reason for the delay in getting the assignment of the mortgage is a material issue of fact which compels denial of the instant motion. They contend that plaintiff failed to comply with various procedural requirements, including the submission of an affidavit of material facts and that plaintiff did not reply to the amended counterclaim (plaintiff only responded to the original pleading from defendants).
On the merits, defendants claim that plaintiff failed to properly cancel the contract. They argue that plaintiff unjustifiably repudiated the contract despite the fact that the lender (mortgagee) was engaged in negotiations with 170 Mercer LLC.
In reply, plaintiff insists that it can move for summary judgment and that defendants are embracing form over substance. It contends that the contract gave plaintiff the right to cancel on March 13, 2020 and that defendants are trying to rewrite the contract.
Discussion
To be entitled to the remedy of summary judgment, the moving party "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact from the case" (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853, 487 NYS2d 316 [1985]). The failure to make such a prima facie showing requires denial of the motion, regardless of the sufficiency of any opposing papers (id.). When deciding a summary judgment motion, the court views the alleged facts in the light most favorable to the non-moving party (Sosa v 46th St. Dev. LLC, 101 AD3d 490, 492, 955 NYS2d 589 [1st Dept 2012]).
Once a movant meets its initial burden, the burden shifts to the opponent, who must then produce sufficient evidence to establish the existence of a triable issue of fact (Zuckerman v City of New York, 49 NY2d 557, 560, 427 NYS2d 595 [1980]). The court's task in deciding a summary judgment motion is to determine whether there are bonafide issues of fact and not to delve into or resolve issues of credibility (Vega v Restani Constr. Corp., 18 NY3d 499, 505, 942 NYS2d 13 [2012]). If the court is unsure whether a triable issue of fact exists, or can reasonably conclude that fact is arguable, the motion must be denied (Tronlone v Lac d'Amiante Du Quebec, Ltee, 297 AD2d 528, 528-29, 747 NYS2d 79 [1st Dept 2002], affd 99 NY2d 647, 760 NYS2d 96 [2003]).
As an initial matter, the Court rejects defendants' procedural arguments. Plaintiff's motion for summary judgment can be considered regardless of defendants' counterclaim; plaintiff only moved for summary judgment on its claims and did not seek to dismiss the counterclaim. Moreover, while plaintiff should have complied with the newly-enacted rules regarding motions (which include submitting an affidavit of facts), the Court will overlook it here. And since it is an e-filed case, the Court can easily access all documents uploaded to the docket.
While the Court will overlook plaintiff's error in this instance, the Court expects that litigants will comply with the applicable trial rules going forward. --------
The central question on this motion is whether plaintiff was entitled to cancel the contract when it did not obtain an assignment of the mortgage. Paragraph 31 of the contract provides that "It is a condition precedent to Seller and Purchaser's obligations to close that Mortgagee consent in writing . . . to Purchaser's assumption of the Existing Mortgage upon the sale of the Unit to Purchaser" (NYSCEF Doc. No. 12).
The contract also states that "Purchaser agrees to pay any and all fees, costs and expenses incurred in connection with obtaining Mortgagee's Consent up to $11,162.50 and Seller shall pay any additional costs and expenses beyond said amount" (id. ¶ 31[A]). The cancellation provision of this section provides that "Either party may cancel this Contract upon written notice to the other if Mortgagee's Consent is not obtained by January 31, 2020, which date may be extended by Seller to March 1, 2020 provided Purchaser is making a diligent good faith effort to obtain Mortgagee's Consent. Escrowee will return the Down Payment to Purchaser if the parties do not secure Mortgagee's Consent, provided that Purchaser has made a diligent good faith effort to obtain Mortgagee's Consent and has performed its obligations under this Section. The Down Payment will otherwise be non-refundable" (id. ¶ 31[B]).
Here, the Court grants the motion. The language of the contract did not provide a deadline by which plaintiff had to cancel the contract in the event that the lender did not assign the mortgage to plaintiff. In fact, the contract specifically says that the contingency (to get the assignment) applies to both plaintiff and the seller. In other words, neither plaintiff nor the seller had an obligation to close if the lender did not give its consent.
There is no dispute that the lender withheld consent. Instead, the facts submitted on this motion evidence a lender making demands, including that plaintiff post $1 million as cash collateral for the loan. And defendants admit they sued the lender based on this conduct; that lawsuit was commenced on February 28, 2020 (before plaintiff cancelled the contract). Accordingly, there is no issue of fact with respect to whether plaintiff made a diligent effort to obtain the lender's consent.
Plaintiff asserts, and defendants do not sufficiently dispute, that plaintiff completed all the forms, negotiated in good faith with the lender and simply did not want (or have the cash) to post an additional $1 million to assume the mortgage. It is also important to point out that the contact specifically limited the amount plaintiff would have to pay in connection with the mortgage assignment to $11,162.50. It is unsurprising that plaintiff decided to cancel a contract where it was told it would have to come up with an additional $1 million on top of making a down payment for $350,000 and assuming a multi-million-dollar mortgage.
Defendants' position that plaintiff waived its right to cancel the contract as of January 31, 2020 is without merit. Cleary, the parties kept negotiating after the January 31, 2020 date specified in the contract to obtain the lender's consent. According to 170 Mercer LLC's manager, negotiations were ongoing throughout January, February, and March 2020 (NYSCEF Doc. No. 16 at 4-6). Based on this affidavit, it also clear that seller (at least through its actions) extended the deadline to complete the assumption to March 1, 2020 as provided in the contract.
But even if the deadline was January 31, 2020, the fact is that the parties did not include a deadline for cancellation in the contract of sale. Defendants attempt to analogize this case to Sanjana v King (172 AD3d 476, 101 NYS3d 289 [1st Dept 2019]), where the First Department found that purchasers had waived their right to a return of the down payment by not obtaining a mortgage commitment before the commitment date, is misplaced. In that case, the prospective purchaser had an obligation to obtain a mortgage commitment by a certain date and, in the event a commitment could not be obtained, a written cancellation had to be submitted within five days after the commitment date. The purchaser did not comply with these obligations and lost the down payment. Those obligation- to submit the cancellation or get a mortgage commitment- was on the purchaser, whereas, here, the obligation to close by either party was contingent on the mortgage assignment.
And, here, the parties did not include a date by which plaintiff (or the seller) had to cancel the contract based on the lender's refusal to assign the mortgage. While the Court questions why the parties did not include a deadline for the cancellation, the Court must enforce the provisions of a contract between two sophisticated parties. Even if the Court were to impose some sort of equitable deadline by which the parties had to cancel, the fact is that plaintiff cancelled the contract on March 13, 2020 only 12 days after the March 1, 2020 deadline and only a month and a half after the original deadline.
Summary
This is a straightforward set of circumstances: the parties agreed to the sale of an apartment contingent on the assignment of the mortgage to plaintiff. It appears, according to all parties, that the lender imposed arduous conditions on the mortgage assignment. After months of negotiating, plaintiff decided it did not want to go forward and wants the down payment back. The contract permits that relief and defendants did not raise an issue of fact to deny the motion in opposition.
Defendants' suggestion that plaintiff repudiated the contract and instead tried to explore a 1031 exchange (a tax strategy) is beside the point. All that was required for plaintiff to be able to cancel the contract was 1) the lender's failure to assign the mortgage to plaintiff and 2) plaintiff's showing that it made good faith efforts to get the assignment. Nothing presented in these papers raises an issue of fact about either requirement.
Accordingly, it is hereby
ORDERED that the motion by plaintiff for summary judgment is granted on liability and the amount of compensatory damages as well as reasonable attorneys' fees shall be determined at trial; and it is further
ORDERED that this matter shall continue with respect to defendants' counterclaim and it is further
DECLARED that defendant Jaspan Schlesinger LLP, the defendant sued herein as escrow agent, shall return the down payment to plaintiff within 21 days of the date this order is uploaded to NYSCEF.
Remote Conference: May 27, 2021. 3/9/2021
DATE
/s/ _________
ARLENE P. BLUTH, J.S.C.