II v. 164 50 (2010)

Argued-October 20, 2009

DECISION & ORDER

In an action, inter alia, for specific performance of a contract for the sale of real property, the defendants appeal, as limited by their brief, from so much of an order and judgment (one paper) of the Supreme Court, Queens County (Taylor, J.), entered October 30, 2008, as granted that branch of the plaintiffs' motion which was for summary judgment on the cause of action for specific performance of the contract of sale and denied their cross motion for summary judgment dismissing the amended complaint, and the plaintiffs cross-appeal, as limited by their brief, from so much of the same order and judgment as denied that branch of their motion which was for summary judgment on so much of the amended complaint as sought to recover, as damages, among other things, an abatement of the purchase price and purchase money mortgage in the sum of the costs incurred in obtaining a certificate of occupancy, and recoupment of their losses arising from the defendants' alterations, modifications, and changes to the property without their consent.

ORDERED that the order and judgment is modified, on the law, by deleting the provision thereof denying that branch of the plaintiffs' motion which was for summary judgment on so much of the amended complaint as sought to recover, as damages, an abatement of the purchase price and purchase money mortgage in the sum of the costs incurred in obtaining the certificate of occupancy, and recoupment of their losses arising from the defendants' alterations, modifications, and changes to the property without their consent, and substituting therefor a provision granting that branch of the plaintiffs' motion;  as so modified, the order and judgment is affirmed insofar as appealed and cross-appealed from, with costs to the plaintiffs, and the matter is remitted to the Supreme Court, Queens County, for further proceedings consistent herewith.

On August 9, 2002, the plaintiffs contracted to purchase a parcel of multi-purpose commercial real property (hereinafter the premises) from the defendant 164-50 Crossbay Realty Corp. (hereinafter the seller).   The purchase price of $1,200,000 was to be financed by a purchase money mortgage issued by the seller to the plaintiffs.   The contract provided for a closing “on or about” January 15, 2003, and required the seller to deliver a certificate of occupancy and convey “insurable” or “marketable” title.   At the same time that the plaintiffs contracted to purchase the property, they also leased a portion of it for use as a retail store.   The seller agreed not to “extend, modify or alter” or in any way voluntarily affect the validity of any leases on the premises without the prior written consent of the plaintiffs.

In mid-January 2003, the parties exchanged letters which evidenced the seller's continued efforts to obtain the certificate of occupancy and the plaintiffs' intent to continue the contract.   On February 5, March 25, and June 3, 2003, respectively, the plaintiffs sent letters to the seller, inquiring into the status of its obtaining the certificate of occupancy, and conveying the plaintiffs' interest in closing as soon as possible.   By letter dated October 8, 2003, the plaintiffs memorialized that the proposed closing in January 2003 had not occurred, acknowledged that the seller was having difficulty obtaining the certificate of occupancy, and explained that they were willing to take the property at a reduced price.   The letter further requested that the seller cease its plans to allow a tenant to subdivide rental space, as such conduct violated the contract and would delay the obtaining of a certificate of occupancy.   In a letter dated October 15, 2003, the seller's attorney acknowledged receipt of the October 8, 2003, letter and stated that he would forward it to his client.   By letter dated May 25, 2004, the plaintiffs informed the seller that they were acting to obtain the certificate of occupancy by retaining an architect, filing plans, and scheduling an inspection of the premises by the New York City Department of Buildings (hereinafter the Building Department).   By letter dated June 10, 2004, the plaintiffs informed the seller that the only thing the Building Department required to issue the certificate of occupancy was a recent survey, and the plaintiffs requested that the seller send the survey.   By letter dated August 16, 2004, the plaintiffs informed the seller that they had obtained the survey and that the issuance of the certificate of occupancy was imminent.   The plaintiffs asked the seller to contact them about a closing date.

In a letter dated November 1, 2004, the plaintiffs informed the seller that the closing would take place on November 29, 2004, at 1:00 P.M., at the office of the seller's attorney.   The letter also stated that the plaintiffs were willing to extend the closing date to one more convenient to the seller.

By letter dated November 5, 2004, the seller informed the plaintiffs that it was experiencing “irreconcilable differences,” that the delay in closing had cost it approximately $48,000 in lost rent, and, because of this, it was unable to fulfill its obligations under the contract.   Accordingly, the seller opted to exercise its rights under the contract, “which provides that in the event title did not close for any reason,” the seller was to pay the stipulated liquidated damages to the plaintiffs.

The plaintiffs commenced this action, inter alia, for specific performance of the contract of sale on the grounds that the seller refused to schedule a closing of title and that the seller's letter of November 5, 2004, constituted a repudiation of the contract.   The plaintiffs sought consequential damages, an abatement of the purchase price and purchase money mortgage in the sum of the costs incurred in obtaining the certificate of occupancy, damages for loss of a favorable mortgage interest rate, damages arising from the seller's alterations, modifications, and changes to the property without the plaintiffs' consent, and damages resulting from the plaintiffs' loss of profit because the seller rented the property to the plaintiffs' competitors.   The seller answered, interposing, among others, the affirmative defense that the plaintiffs' causes of action were barred by documentary evidence.   The plaintiffs moved for summary judgment, inter alia, on the cause of action for specific performance of the contract on the ground that they were ready, willing, and able to close title, having fully performed under the contract, and on the ground that the seller committed an anticipatory breach of the contract by repudiating the contract in its November 5, 2004, letter.   The plaintiffs also moved for summary judgment on the cause of action seeking consequential damages.   The seller cross-moved for summary judgment dismissing the amended complaint on the grounds that the contract was cancelled because the parties failed to close title within 30 days of January 15, 2003, as specified in the contract, that the condition precedent of obtaining the certificate of occupancy was not fulfilled, and that the plaintiffs' letter of November 1, 2004, failed to fix November 29, 2004, as the law date because the language was equivocal about that date.   In the order appealed from, the Supreme Court granted that branch of the plaintiffs' motion which was for summary judgment on the cause of action for specific performance of the contract, and denied that branch of the plaintiffs' motion which was for summary judgment on the cause of action seeking consequential damages.   We modify.

The Supreme Court improperly denied that branch of the plaintiffs' motion which was for summary judgment on so much of the amended complaint as sought to recover, as damages, an abatement of the purchase price and purchase money mortgage in the sum of the costs incurred by them in obtaining the certificate of occupancy, and recoupment of their losses arising from the seller's alterations, modifications, and changes to the property without their consent.   Inasmuch as these claims are consistent with the parties' contract and, therefore, implicate the plaintiffs' receipt of the benefit of the bargain, the matter must be remitted to the Supreme Court, Queens County, for a hearing on the issue of damages.   At the hearing, the plaintiffs should be afforded an opportunity to present evidence of these claimed damages (see Flowers v. 73rd Townhouse, LLC, 52 AD3d 104).   By their May 25, 2004, letter informing the seller that they would be taking action to obtain the certificate of occupancy, the plaintiffs waived only the requirement that the seller obtain the certificate as a condition precedent to closing.   Thus, the plaintiffs are entitled to present evidence of the costs incurred in obtaining the certificate of occupancy at the hearing.   The plaintiffs' claims for lost amortization and for lost profits do not implicate the real property contract (id.), and the plaintiffs made no separate claims for these damages.

Contrary to the seller's contention, the liquidated damages provision does not operate to preclude the plaintiffs from recouping the costs they incurred in obtaining the certificate of occupancy and their losses arising from the seller's alterations, modifications, and changes to the property without their consent.  “The clause does not ․ specifically limit the amount of actual damages that the plaintiff[s] may recover upon [the seller's] abandonment of the contract” (Town of N. Hempstead v. Sea Crest Constr.   Corp., 119 A.D.2d 744, 746;  see Spectrum Painting Contrs., Inc. v Kreisler Borg Florman Gen. Constr.   Co., Inc., 64 AD3d 565, 575-576).   Furthermore, the contingency provided by the liquidated damages provision was the failure to close within 30 days of the closing date.   The closing date was indefinitely delayed, and the plaintiffs' attempt to establish a closing date was thwarted by the seller.   Therefore, the liquidated damages provision does not apply:  the contingency upon which it was based could not have occurred because no closing date was established.

RIVERA, J.P., FLORIO, MILLER and HALL, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court