AHSANUDDIN v. Morris Fateha, Stakeholder. (2019)

Order, Supreme Court, Bronx County (Donald A. Miles, J.), entered September 11, 2018, which, inter alia, denied defendants' motion to dismiss the complaint and to vacate a notice of pendency, unanimously modified, on the law, to the extent of dismissing plaintiff's causes of action for misrepresentation, fraud, breach of the implied covenant of good faith and fair dealing, and punitive damages, and otherwise affirmed, without costs.

Defendants failed to establish entitlement to summary dismissal of the claims for breach of contract and specific performance.  Plaintiffs' contention that defendants' unexplained ability to sell the property to a third-party, despite their claimed inability to comply with the Bankruptcy Code, support the claimed breach of the parties' contract of sale.  The timing of the sale to the third-party, coupled with the representations by defendants' attorney and real estate agent on November 1, 2017 and November 6, 2017 that they were still waiting for an extension of the short sale approval from the bank, despite the fact that defendants had already signed a contract to sell the property to the third-party on October 31, 2017, bolster these causes of action.

The claims for misrepresentation and fraud are dismissed as duplicative of the breach of contract claim (see Cronos Group Ltd. v. XComIP, LLC, 156 A.D.3d 54, 62–63, 64 N.Y.S.3d 180 [1st Dept. 2017]), as is the claim for breach of the implied covenant of good faith and fair dealing (see Berkeley Research Group, LLC v. FTI Consulting, Inc., 157 A.D.3d 486, 489, 69 N.Y.S.3d 26 [1st Dept. 2018]; Mill Fin., LLC v. Gillett, 122 A.D.3d 98, 104, 992 N.Y.S.2d 20 [1st Dept. 2014]).  Plaintiff's claim for punitive damages is also dismissed, since no separate cause of action for punitive damages lies for pleading purposes (Rocanova v. Equitable Life Assurance, 83 N.Y.2d 603, 616, 612 N.Y.S.2d 339, 634 N.E.2d 940 [1994]; Prote Contracting Co., Inc. v. Board of Education, 276 A.D.2d 309, 310, 714 N.Y.S.2d 36 [1st Dept. 2000]).  Even if it were properly pleaded, a claim for punitive damages would not be appropriate in this case as this action is grounded upon private breach of contract, and does not seek to vindicate a public right or deter morally culpable conduct (Halpin v. Prudential Ins. Co. of Am., 48 N.Y.2d 906, 907, 425 N.Y.S.2d 48, 401 N.E.2d 171 [1979]).

Defendants have not demonstrated that paragraph 39 of the parties' contract requires forfeiture of plaintiff's $20,000 down payment.  In the context of the entire agreement, the remedy set forth in paragraph 39 applies to situations where the seller is unable to satisfy explicit obligations set forth in the contract, not where the seller transfers property to a third-party pending closing (see W.W.W. Assoc. v. Giancontieri, 77 N.Y.2d 157, 162, 565 N.Y.S.2d 440, 566 N.E.2d 639 [1990]).  Moreover, interpreting the contract as proposed by defendants would produce the absurd result of permitting a seller to make a duplicitous transfer of property to a third-party, while also allowing them to retain the purchaser's down payment should the purchaser seek to enforce its rights (Macy's Inc. v. Martha Stewart Living Omnimedia, Inc., 127 A.D.3d 48, 54, 6 N.Y.S.3d 7 [1st Dept. 2015]).

We have considered defendants' remaining arguments and find them unavailing.