KWAN v. 100 LLC (2025)

Order, Supreme Court, New York County (Lyle E. Frank, J.), entered on or about January 3, 2024, which, to the extent appealed from as limited by the briefs, denied plaintiffs’ motion for injunctive relief, unanimously affirmed, with costs.

As an initial matter, any contractual waiver of plaintiffs-buyers’ right to seek specific performance or a preliminary injunction was superseded by the May 2022 letter amendment to the real estate contracts, which provides that “nothing in this letter agreement shall be construed as a waiver of Purchasers’ right ․ to seek specific performance if a closing for the sale of the Units to Purchasers does not take place within the period specified herein.”  In addition, the prior order's vacatur of the lis pendens was based on the agreements’ express provisions that plaintiffs could not file lis pendens against the two units that plaintiffs contracted to buy (Kwan v. HFZ Capital Group, LLC, 227 A.D.3d 592, 211 N.Y.S.3d 348 [1st Dept. 2024]).  Respondents’ argument that specific performance or injunctive relief is barred under the law of the case doctrine is thus unavailing, as it relies on an overbroad interpretation of the prior order.

However, because plaintiffs did not meet their burden of demonstrating a likelihood of success on the merits, the court providently denied plaintiffs’ application for a preliminary injunction preventing defendants from directly or indirectly, transferring, selling, disposing or otherwise encumbering the two units (see Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 N.Y.3d 839, 840, 800 N.Y.S.2d 48, 833 N.E.2d 191 [2005]).  As to breach of contract and the request for specific performance of the contract, plaintiffs have not submitted evidence establishing a prima facie showing of defendants’ bad faith (see generally Four Times Sq. Assoc. v. Cigna Invs., Inc., 306 A.D.2d 4, 5–6, 764 N.Y.S.2d 1 [1st Dept. 2003]).  Moreover, respondents correctly contend that plaintiffs have not demonstrated their ability to pay the nearly $1 million balance to purchase the units, and therefore their willingness and ability to close (see M & E 73–75 LLC v. 57 Fusion LLC, 189 A.D.3d 1, 6, 128 N.Y.S.3d 200 [1st Dept. 2020], lv dismissed 36 N.Y.3d 1086, 142 N.Y.S.3d 884, 166 N.E.3d 1062 [2021]).  They also assert that a condition precedent to the closings has not been satisfied because intervenor's mortgage subjects the units to valid liens that remain outstanding.

As to plaintiffs’ cause of action for unjust enrichment, “the existence of a valid contract governing the subject matter generally precludes recovery in quasi contract for events arising out of the same subject matter” (see EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 23, 799 N.Y.S.2d 170, 832 N.E.2d 26 [2005]).  For the same reason, plaintiffs are not entitled to a constructive trust (see Sharp v. Kosmalski, 40 N.Y.2d 119, 121, 386 N.Y.S.2d 72, 351 N.E.2d 721 [1976]).  Moreover, the relationship between plaintiffs and defendants is insufficient to trigger a constructive trust (see Evans v. Rosen, 111 A.D.3d 459, 459, 976 N.Y.S.2d 18 [1st Dept. 2013]).