Opinion
No. 150613/2012.
2012-11-13
Charles Andrew SALZBERG and Anita Salzberg, Plaintiffs, v. Jennifer Schweitzer BROOKS, Defendant.
Peter T. Salzler, Esq., Michael B. Kramer & Associates, for Plaintiff. Steven I. Fox, Esq., Wrobel & Schatz LLP, for Defendant.
Peter T. Salzler, Esq., Michael B. Kramer & Associates, for Plaintiff. Steven I. Fox, Esq., Wrobel & Schatz LLP, for Defendant.
ANIL SINGH, J.
In this action for alleged breach of contract in a residential real estate transaction, plaintiffs Charles Andrew Salzberg and Anita Salzberg move for partial summary judgment, pursuant to CPLR 3212, in their favor on the complaint. Defendant Jennifer Schweitzer Brooks
opposes, and cross-moves for summary judgment, pursuant to CPLR 3212, on her two counterclaims.
Defendant states that her first name is Jenifer. Brooks Aff., ¶ 1.
Background
On or about December 21, 2011, the parties entered into a written contract for the sale of the shares owned by defendant for Unit 7D (the Apartment) in a cooperative apartment building, located at 4 East 95th Street, New York County (the Building). Motion, Ex. A. The price agreed upon for the transaction was $1,415,000, and plaintiffs placed $141,500 in escrow with Karen Hirsch, Esq. (Hirsch), defendant's real estate attorney. The sale of the Apartment was subject to the approval of the Building's board. The contract, at paragraph 1.20.3, explicitly states that “Purchaser shall not apply for financing in connection with this sale.” The contract also includes riders originated by seller/defendant and purchaser/plaintiffs, fully executed by the parties. Paragraph 31.1 .1 of the seller's rider states that “Purchaser has, and will at Closing have, available unencumbered cash and cash equivalents (including publicly traded securities) in a sum at least equal to (and having a then current value of) the Balance [of the purchase price].”
The complaint states that, “as early at the first weeks of January, 2012,” plaintiffs advised defendant that they were applying for a $400,000 loan to partially finance the purchase, allegedly for tax planning purposes. Complaint, ¶ 17. Shortly thereafter, plaintiffs submitted their application for approval to the Building's board.
The package of documents composing the application was reviewed by defendant's agent prior to submission, and it included a loan commitment letter to plaintiffs for $400,000 (Motion, Ex. C).
The contract was signed by plaintiffs on December 20, 2011, and defendant on December 21, 2011. The document package submitted to the Building's board contains a Credit Check Application, signed by plaintiffs on January 4, 2012; a Financial Statement, signed by plaintiffs on January 3, 2012, which does not reflect a $400,000 debt; and, the lender's commitment letter, dated January 19, 2012, and countersigned by plaintiffs the same day. Motion, Ex. E. The cover letter for this package, however, itemizing the contents, including the loan commitment letter, is dated December 8, 2011, which must be a typographical error in light of the other dates.
On February 22, 2012, the Building's board denied approval of the transaction, without explanation. Plaintiffs requested return of their deposit, on February 27, 2012, but were refused. Defendant, in turn, demanded retention of the deposit as liquidated damages, identifying plaintiffs' application for financing as a breach of contract. Plaintiffs commenced the instant action on March 6, 2012, asserting causes of action for: (1) breach of contract; and (2) costs, expenses and reasonable attorney's fees, pursuant to the contract. Motion, Ex. J. Defendant answered and asserted two counterclaims for breach of contract, and costs, expenses and reasonable attorney's fees, pursuant to the contract. Id., Ex. K.
Legal Standard for Summary Judgment
“The proponent of a motion for summary judgment [pursuant to CPLR 3212] must demonstrate that there are no material issues of fact in dispute, and that it is entitled to judgment as a matter of law.” Dallas–Stephenson v. Waisman, 39 AD3d 303, 306 (1st Dept 2007), citing Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 (1985). Upon proffer of evidence establishing a prima facie case by the movant, “the party opposing a motion for summary judgment bears the burden of produc[ing] evidentiary proof in admissible form sufficient to require a trial of material questions of fact.' “ People v. Grasso, 50 AD3d 535, 545 (1st Dept 2008), quoting Zuckerman v. City of New York, 49 N.Y.2d 557, 562 (1980). If there is any doubt as to the existence of a triable issue of fact, summary judgment must be denied. Rotuba Extruders v. Ceppos, 46 N.Y.2d 223, 231 (1978); Grossman v. Amalgamated Hous. Corp., 298 A.D.2d 224, 226 (1st Dept 2002). Where a party fails to meet its prima facie burden, its summary judgment motion shall be denied regardless of the sufficiency of the opposing papers. Matter of Siegel, 90 AD3d 937, 940 (2d Dept 2011), citing Winegrad, 64 N.Y.2d at 853.
Discussion
After the Building's board denied plaintiffs' application, defendant's new counsel wrote Hirsch, on February 27, 2012, objecting to the release of the deposit to plaintiffs, and requested that it be released to defendant, because the “Contract of Sale precluded the Purchaser from applying for financing.” Motion, Ex. I.
Plaintiffs' Position
Plaintiffs maintain that defendant was fully on notice of their intention to partially finance their purchase by inclusion of the commitment letter in their application. The prospective lender made the commitment after its appraiser examined the apartment, on January 11, 2012, by arrangement with defendant's broker, according to an affidavit from plaintiffs' broker. Benalloul Aff., ¶ 9. Plaintiffs' broker also avers that she discussed the prospective financing with defendant's agent soon after learning of plaintiffs' plans to seek a $400,000 loan. Id., ¶¶ 6–8. The Building permitted up to 50% financing of such a transaction. Benalloul Aff., ¶ 6.
Indisputably, plaintiffs first sent their application to “the Selling Broker [defendant's real estate broker] for final review and comments,” in accordance with paragraph 34 of the seller's rider.
While paragraph 6.2.1 of the contract required purchasers to submit their application directly to the Building's board or its managing agent, paragraph 55 of the purchaser's rider amended the requirement so that delivery of the application package “to the Seller's Broker pursuant to paragraph 34 of the Seller's Rider constitutes satisfaction of Purchaser's obligations under 6.2.1 as if said Board package had been delivered directly to the Cooperative of ( sic ) the Managing Agent.”
The date that the complete document package was delivered to defendant's broker is unspecified. There are several e-mail messages, dated January 13, 2012, between the parties' brokers concerning some of the materials in the document package. Motion, Ex. F. However, there is no reference to the loan commitment letter in this exchange.
Plaintiffs also contend that defendant failed to comply with the contract's requirement of a written notice of cure before asserting a breach of contract claim, pursuant to paragraph 63 of the purchaser's rider: “Before either party claims entitlement to any remedy to which he may be entitled arising from a breach of Contract, other than the Closing date, the non-breaching party shall provide the breaching party with notice of the breach and a five (5) day opportunity to cure.” Without written notice of the alleged breach, defendant's retention of the deposit is itself a breach of contract, according to plaintiffs.
Plaintiffs argue that the unambiguous terms of the contract entitle them to summary judgment. While acknowledging that paragraph 1.20.3 of the contract barred financing in the purchase of the shares and lease for the Apartment, they note that the unnumbered introduction to the purchaser's rider (which they designate as “paragraph 1”) provides that “[i]n the event of an inconsistency between the provisions of this Rider and those contained in the Contract to which this Rider is annexed or any Seller's Rider which is annexed to the Contract, the provisions of this Rider shall govern and control.” Plaintiffs conclude that enforcement of paragraph 1.20.3, therefore, is subject to the written notice requirement of paragraph 63. See Putman High Yield Trust v. Bank of NY, 7 AD3d 439 (1st Dept 2004) (defendant had no obligation to act to cure default absent receipt of a written notice of default per parties' agreement); Carnegie Successors v. Gross, 166 A.D.2d 224 (1st Dept 1990) (10 days written notice for default was required to be given under the contract and failure to do so precluded seller from repudiating the contract).Plaintiffs also find precedent for dismissing defendant's counterclaims under these circumstances. See Environmental Safety & Control Corp. v. Board of Educ. of Camden Cent. School Dist., 179 A.D.2d 1012, 1013 (4th Dept 1992) (“Defendant's remaining counterclaims based upon alleged breach of contract should also have been dismissed based upon defendant's failure to comply with the condition precedent of written notice as required by [the contract]”). Plaintiffs additionally argue that defendant's counterclaim for breach of contract should be dismissed under the doctrine of waiver. Their intention to arrange financing was manifest before January 11, 2012, when the bank's appraiser came to the apartment as arranged by defendant's broker. The loan commitment letter was part of the document package submitted to defendant's broker, and subsequently to the Building's board. E-mail messages exchanged between defendant's broker and plaintiffs' broker refer to the pending loan commitment. Motion, Ex. D. “Contractual rights may be waived if they are knowingly, voluntarily and intentionally abandoned.” Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgt., L.P., 7 NY3d 96, 104 (2006). At the same time, the Court of Appeals cautioned that “[g]enerally, the existence of an intent to forgo such a right is a question of fact.” Id.
Finally, plaintiffs propose that the counterclaim for breach of contract be dismissed under the doctrine of equitable estoppel.
“In order for estoppel to exist, three elements are necessary: (1) Conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are otherwise than and inconsistent with, those which the party subsequently seeks to assert; (2) intention, or at least expectation, that such conduct will be acted upon by the other party; (3) and, in some situations, knowledge, actual or constructive, of the real facts. The party asserting estoppel must show with respect to himself: (1) lack of knowledge of the true facts; (2) reliance upon the conduct of the party estopped; and (3) a prejudicial change in his position.”
BWA Corp. v. Alltrans Express U.S.A., 112 A.D.2d 850, 853 (1st Dept 1985) (internal quotation marks and citations omitted). Plaintiffs argue that defendant knew the real facts about the financing, allowed plaintiffs to submit the document package to the Building's board in good faith reliance upon defendant's broker's review, and denied plaintiffs the opportunity to cure the alleged breach of contract.
Defendant's Position
Defendant claims that “the Purchase Price was significantly lower than what I would have accepted if the Salzbergs had been purchasers with financing.” Brooks Aff., ¶ 9. They had always represented that it would be an “all-cash” deal, and defendant believed that it would be “much more attractive ... to a cooperative board reviewing a proposed transaction.” Id., ¶ 11. Defendant states that, had she known that plaintiffs would submit an offer with financing, “I would not have agreed to sell the Apartment at the Purchase Price.” Id., ¶ 12. She says that plaintiffs applied for financing after the contract was executed, and insists that she “did not consent, in writing or otherwise, to any financing in connection with the sale of the Apartment,” and only became aware of it after submission of plaintiffs' document package to the Building's board. Id., ¶ 15. She also states that she was unaware that plaintiffs' request for access to the apartment on January 11, 2012 was for the purpose of an appraisal in conjunction with their loan application. Id., ¶ 16. Had she known the purpose, she claims that she would have refused access. Id. She acknowledges that the document package was submitted to the Building's board via her real estate broker, although she claims not to have seen it prior to submission. Id., ¶ 20.
Defendant claims that her real estate broker did not inform her of the prospective financing, and defendant “ did not at any time authorize [her real estate broker] or any other individual to waive the provisions of the Contract of Sale related to financing.” Id., ¶ 16. She notes that the contract, at paragraph 14.2, requires that, except for the contract's time limitations, “[a]ny other provision of this Contract may be changed or waived only in writing signed by the Party or Escrowee to be charged.” Additionally, the contract provides, at paragraph 4.2.5, that “Purchaser shall not make any representations to the [cooperative building] Corporation contrary to the foregoing.”
Defendant contends that her failure to observe the notice of cure provision was “a technicality,” because she only learned of plaintiffs' intention to finance after the board package had already been submitted. Brooks Aff., ¶ 26. She maintains that “notice of a breach of contract and the opportunity to cure, even when called for in a contract, is not necessary when such notice and opportunity would be futile.” Defendant's Memorandum of Law at 5. See Hicksville Mach. Works Corp. v. Eagle Precision, 222 A.D.2d 556, 557 (2d Dept 1995) (“the record does not indicate that the plaintiff could have mitigated its damages by giving the defendant a reasonable opportunity to cure the defects”); 1537 Assoc. v. Temlex Indus., 128 A.D.2d 384, 386 (1st Dept 1987) (“Triable issues of fact precluding summary judgment are presented as to whether ... a notice was not required because the tenant's alleged default and wrongful course of conduct constituted an incurable breach”); Sea Tow Servs. Intl., Inc. v. Pontin, 607 F Supp 2d 378, 389 (ED N.Y.2009) (“adherence to the cure provision of a contract is not required where it would be a futile act”) (applying New York law). “This breach was incurable.” Brooks Aff., ¶ 26. The contract states, at paragraph 13.1: “In the event of a default or misrepresentation by Purchaser, Seller's sole and exclusive remedies shall be to cancel this Contract, retain the Contract Deposit as liquidated damages and, if applicable, Seller may enforce the indemnity in ¶ 13.3 as to brokerage commission or sue under ¶ 13.4.”
Conclusion
Defendant is correct, up until a point. Plaintiffs breached the contract by seeking financing, by changing the terms of the contract without a writing, and by making a representation to the Building's board contrary to the contract's terms. The first two were effectively simultaneous, and fully revealed to defendant's real estate broker before submission of the document package to the Building's board, the occasion of third breach. However, defendant's after-the-fact dismissive view of the notice requirement in paragraph 63 does not meet the facts of this case, unlike the finding of the Court in Hicksville Mach. Works, supra. Charles Salzberg is a plastic surgeon, who listed over $1.4 million as his 2010 income on plaintiffs' financial statement, included in their document package submitted to the Building's board. The financial statement showed a net worth for plaintiffs of over $3.7 million. They claimed cash of almost $1.2 million (the deposit aside), stocks and bonds worth over $475,000, real estate over $1 million, and a pension plan over $950,000. This alleged financial position exceeds the requirement in seller's rider (Paragraph 31.1.1) that purchaser will have available at closing “unencumbered cash and cash equivalents (including publicly traded securities) in a sum at least equal to (and having a then current value of) the Balance [of the purchase price],” $1,273,500 in this case. Defendant claims that plaintiffs “did not have sufficient assets to pay the Purchase Price entirely in cash; doing so would have required them to completely deplete their entire savings and then liquidate more than $100,000 in investment assets.” Brooks Aff., ¶ 10. This, defendant speculates, “would leave them unsuitable in the eyes of just about any cooperative board.” Id. n 1.
It was not defendant's role, however, to guess at the suitability of plaintiffs to “just about any cooperative board,” and determine that their initial two breaches were incurable, denying plaintiffs the opportunity to cure and prevent the third breach, the submission of an “unsuitable” financial position to the Building's board, prior to the application being submitted to the Building's board. Also, defendant's view of plaintiff's financial strategy if they were to forgo outside financing is speculative and self-serving. Apparently, defendant's real estate broker had greater confidence in plaintiffs' financial position after reviewing their document package, because she submitted it to the Building's board. The financial red flag that defendant now sees so sharply was not recognized by her real estate broker at the time. Defendant's failure to observe the requirement of paragraph 63 that she provide “notice of the breach and a five (5) day opportunity to cure” is a critical element in resolving this dispute. It is unacceptable for defendant to insist that she deserves to keep the deposit as liquidated damages when she did not provide plaintiffs the opportunity to meet (unstated) objections, and set a course presumably desired by all parties.
Under these circumstances, plaintiffs' motion for summary judgment is granted, and the escrowee shall be directed to return their deposit. Defendant's cross motion to the contrary is denied.
Both sides request the invocation of paragraph 48 of the purchaser's rider that provides that “the prevailing party' in any litigation regarding this contract shall be entitled to a judgment against the non-prevailing party for all expenses and costs incurred, including reasonable attorney's fees, as a consequence of such litigation.” See G.M. Data Corp. v. Potato Farms, LLC, 95 AD3d 592, 594 (1st Dept 2012) (“The court's calculation of damages properly included an award of reasonable attorneys' fees and costs, as provided for in the parties' agreements”). The term “prevailing party” shall be construed according to New York law. “To be considered a prevailing party,' one must simply prevail on the central claims advanced, and receive substantial relief in consequence thereof.” Sykes v. RFD Third Ave. I Assoc., LLC, 39 AD3d 279, 279 (1st Dept 2007). In the instant action, the central claim is for the award of the deposit held in escrow, and plaintiffs have prevailed on that issue. Therefore, they are entitled to recover “all expenses and costs incurred, including reasonable attorney's fees” in this litigation.
Accordingly, it is
ORDERED that plaintiffs Charles Andrew Salzberg and Anita Salzberg's motion for partial summary judgment, pursuant to CPLR 3212, is granted; and it is further
ORDERED that escrowee Karen Hirsch, Esq. is directed to pay plaintiffs Charles Andrew Salzberg and Anita Salzberg the amount of $141,500, the contract's deposit amount, with accrued interest, within 14 days of receipt of a copy of this order with notice of entry; and it is further
ORDERED that plaintiffs Charles Andrew Salzberg and Anita Salzberg are entitled to expenses and costs incurred in this litigation, including reasonable attorney's fees, and it is further
ORDERED that the issue of the amount of plaintiff's reasonable attorney's fees is severed, and is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issues; and it is further
ORDERED that this motion for attorney's fees is held in abeyance, pending receipt of the report and recommendations of the Special Referee and a motion pursuant to CPLR 4403 or receipt of the determination of the Special Referee or the designated referee; and it is further
ORDERED that counsel for the party seeking the reference or, absent such party, counsel for the plaintiff shall, within thirty (30) days from the date of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet, upon the Special Referee Clerk in the Motion Support Office in Rm 119 at 60 Centre Street, who is directed to place this matter on the calendar of the Special Referee's Part (Part 50 R) for the earliest convenient date, and it is further
ORDERED that defendant Jennifer Schweitzer Brooks's cross-motion for summary judgment, pursuant to CPLR 3212, on her two counterclaims, is denied.