HFZ 301 W. 53rd St. Owner LLC v. Xue

Full title: HFZ 301 WEST 53RD STREET OWNER LLC Plaintiff, v. XIULI XUE, Defendant.

Court: SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PART IAS MOTION 42EFM

Date published: Apr 17, 2020

2020 N.Y. Slip Op. 31338 (N.Y. Sup. Ct. 2020)

Opinion

INDEX NO. 653031/2017

04-17-2020

HFZ 301 WEST 53RD STREET OWNER LLC Plaintiff, v. XIULI XUE, Defendant.

HON. NANCY M. BANNON Justice

NYSCEF DOC. NO. 88 PRESENT: HON. NANCY M. BANNON Justice MOTION DATE 01/02/2020 MOTION SEQ. NO. 001

DECISION + ORDER ON MOTION

The following e-filed documents, listed by NYSCEF document number (Motion 001) 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84 were read on this motion to/for JUDGMENT - DEFAULT.

In this action for breach of a real estate purchase agreement, the plaintiff-seller, HFZ 301 West 53^rd Street Owner LLC, moves for default judgment pursuant to CPLR 3215, seeking a judgment declaring that it is entitled to (i) retain the $335,000.00 contract deposit paid by the defendant, Xiuli Xue, currently being held in escrow with an escrow agent, (ii) the bank interest that has accrued on the contract deposit while in escrow, (iii) attorneys' fees and costs pursuant to the purchase agreement, and (iv) statutory interest on the contract deposit from February 15, 2017. No opposition was submitted. The motion is granted in part.

On December 6, 2016 the parties entered into the real estate purchase agreement for the defendant to purchase Unit 20CD at 301 West 53^rd Street from the plaintiff for a purchase price of $3.35 million. Pursuant to Section 3.1(a) of the contract, the defendant paid a 10% contract deposit into the IOLA account of the law firm of Kramer Levin Naftalis & Frankel LLP, the agreed-upon escrow agent in the purchase agreement. A rider to the purchase agreement designated the time for the closing as December 27, 2016 at 11:00 a.m. The rider further provided that the "[defendant] shall have the right, on one occasion only, on not less than five days advance notice to [the plaintiff], to adjourn the date and time for the closing." Section 13 of the agreement defines an event of default to include the "[defendant]'s failure to pay the balance or any closing apportionment or closing cost required to be paid by the [defendant]... or the failure to pay, perform or observe any of [the defendant's] other obligations." The agreement also included 30-day cure period for any default, time being of the essence, under which, if the defendant failed to comply, the plaintiff could either cancel the agreement or seek specific performance. The agreement further states "[i]f [the plaintiff] elects to cancel this agreement, then this agreement shall be deemed canceled, and [the plaintiff] may retain all sums deposited by [the defendant] hereunder, together with interest earned thereon, as liquidated damages."

Prior to closing, and pursuant to paragraph 10 of the rider, the defendant adjourned the closing date from December 27, 2016 to January 10, 2017. On January 4, 2017, the plaintiff's attorney sent a revised closing statement to the defendant's attorney by email. However, neither the defendant nor her attorney responded or appeared for the January 10, 2017 closing. On January 11, 2017 the plaintiff's attorney sent the defendant a notice of default stating that the plaintiff was ready, willing, and able to close title to the apartment, and that the plaintiff had elected to exercise its right to cancel the purchase agreement unless the defendant cured the default and closed title to the unit pursuant to the purchase agreement on February 15, 2017, time being of the essence. The defendant failed to close by the cure deadline or any date thereafter. The deposit has been held by the escrow agent in accordance with the terms of the agreement. The plaintiff alleges that the defendant, through her attorney, notified the escrow agent in writing objecting to the release of the deposit. However, the defendant and her attorney have failed to appear in this action or oppose the instant motion.

"On a motion for leave to enter a default judgment pursuant to CPLR 3215, the movant is required to submit proof of service of the summons and complaint, proof of the facts constituting the claim, and proof of the defaulting party's default in answering or appearing." Atlantic Cas. Ins. Co. v RJNJ Services, Inc. 89 AD3d 649 (2^nd Dept. 2011); see also CPLR 3215. "CPLR 3215 does not contemplate that default judgments are to be rubber-stamped once jurisdiction and a failure to appear have been shown. Some proof of liability is also required to satisfy the court as to the prima facie validity of the uncontested cause of action [see, 4 Weinstein-Korn-Miller, NY Civ Prac. paras. 3215.22-3215.271." Joosten v Gale, 129 AD2d 531, 535 (1^st Dept 1987); see also Martinez v Reiner, 104 AD3d 477 (1^st Dept 2013); Beltre v Babu, 32 AD3d 722 (1^st Dept 2006); Atlantic Cas. Ins. Co. v RJNJ Services, Inc., supra. While the "quantum of proof necessary to support an application for a default judgment is not exacting... some firsthand confirmation of the facts forming the basis of the claim must be proffered." Guzetti v City of New York, 32 AD3d 234, 236 (1^st Dept. 2006). The proof submitted must establish a prima facie case. See Guzetti v City of New York, supra.

It is well-settled that absent a breach on the part of the seller, a purchaser who defaults on a real estate contract without lawful excuse cannot recover its down payment. See Lawrence v Miller, 86 NY 131 (1881); Rivera v Konkol, 48 AD3d 347 (1^st Dept. 2008); Uzan v 845 UN Ltd. Partnership, 10 AD3d 230 (1^st Dept. 2004). Furthermore, when a party to a real estate contract declares time to be of the essence in setting or complying with a closing date, each party must tender performance on that date, and a failure to perform constitutes a default. See Grace v Nappa, 46 NY2d 560 (1979); Donerail Corp. N.V. v 405 Park LLC, 100 AD3d 131 (1^st Dept. 2012); 115-117 Nassau St., LLC. v Nassau Beekman, LLC, 74 AD3d 537 (1^st Dept. 2010). Thus, where a seller seeks to hold a purchaser in breach of contract, the seller must establish that it was ready, willing, and able to perform on the time-of-the-essence closing date, and that the purchaser failed to demonstrate a lawful excuse for its failure to close. See Diplomat Props., L.P. v Komar Five Assoc., LLC, 72 AD3d 596 (1^st Dept. 2010); Atlantic Dev. Group, LLC v 296 E. 149th St., LLC, 70 AD3d 528 (1^st Dept. 2010); Pinhas v Comperchio, 50 AD3d 1117 (2^nd Dept. 2008).

Here, the plaintiff submits, inter alia, affidavits of service, showing compliance with the alternative service ordered by the court pursuant to an ex parte order dated May 2, 2019, the affidavit of Nir Meir, the managing principal of the plaintiff describing the defendant's default under the purchase agreement, the purchase agreement between the parties, and the January 11, 2017 notice of default. These submissions demonstrate that the plaintiff was ready, willing, and able to perform the closing on January 10, 2017, that the defendant failed to appear for the closing, that the defendant's failure to appear for the closing constituted a default, and that the defendant failed to cure her default prior to February 15, 2017, time being of the essence. The submissions further demonstrate that following the defendant's failure to cure her default, the agreement was properly canceled thereby entitling the plaintiff to retain all sums deposited by the defendant, together with interest earned thereon, as liquidated damages. As the defendant failed to appear or oppose the instant motion, the defendant fails to demonstrate a lawful excuse for her failure to close. Thus, the plaintiff has demonstrated, prima facie, that it is entitled to a judgment declaring that it shall retain the contract deposit and all interest accrued thereon in the interest-bearing escrow account.

The plaintiff further demonstrates that it is entitled to attorneys' fees under the purchase agreement. Attorneys' fees that are merely incidents of litigation are not recoverable absent a specific contractual provision or statutory authority. See Flemming v Barnwell Nursing Home and Health Facilities, Inc., 15 NY3d 375 (2010); Coopers & Lybrand v Levitt, 52 AD2d 493 (1^st Dept. 1976); see also Goldberg v Mallinckrodt, Inc., 792 F2d 305 (2^nd Cir. 1986); Rich v Orlando, 108 AD3d 1039 (4^th Dept. 2013). Here, paragraph 37 of the agreement expressly states that: "[The defendant] shall be obligated to reimburse [the plaintiff] for any legal fees and disbursements incurred by [the plaintiff] ...in canceling this agreement or otherwise enforcing [the plaintiff's] obligations hereunder." As such, the plaintiff's application for attorneys' fees is granted to the extent that the plaintiff shall submit its calculation of such fees, along with supporting proof, within 60 days of this order.

However, the plaintiff fails to establish that it is entitled to an award of prejudgment interest under CPLR 5001(a). The terms of the purchase agreement, requiring that the deposit be placed in an interest-bearing account, so that the party entitled to the deposit would receive compensation for the deprivation of its use of the money in the form of the accrued interest, sufficiently demonstrates that additional interest paid at the statutory rate was not contemplated by the parties at the time the contract was formed, and that the interest accrued should be the exclusive remedy of the wronged party. See Ithilien Realty Corp. v 176 Ludlow, LLC, 139 AD3d 582 (1^st Dept. 2016) quoting J. D'Addario & Co., Inc. v Embassy Indus., Inc., 20 NY3d 113 (2013).

Accordingly, it is hereby,

ORDERED that the plaintiff's motion for default judgment pursuant to CPLR 3215 seeking a declaratory judgment is granted in part; and it is further,

ADJUDGED and DECLARED that the plaintiff is entitled to deposit paid by the defendant, Xiuli Xue, currently held in escrow, and all interest accrued thereon, and the escrow agent currently in possession of the deposit, Kramer Levin Naftalis & Frankel LLP, shall release and remit the $335,000.00 deposit and all interest accrued thereon, to the plaintiff; and it is further,

ORDERED that the plaintiff's application for attorneys' fees is granted to the extent that the plaintiff shall submit its calculation of such fees, along with supporting proof, within 60 days of this order; and it is further,

ORDERED that the portion of the plaintiff's motion seeking statutory interest on the contract deposit from February 15, 2017, is denied.

This constitutes the Decision, Order, and Judgment of the court. 4 /17/2020

DATE

/s/ _________

NANCY M. BANNON, J.S.C.