Cooperatives & Condominiums

Condo Purchaser May Maintain Notice of Pendency

Asensio v. Casa 74th Development, LLC

NYLJ 12/27/10, p. 18, col. 4

AppDiv, First Dept.

(3-2 decision; memorandum opinion; dissenting memorandum by Nardelli, J.).

In condominium purchaser's action for specific performance and damages, purchaser appealed from Supreme Court's cancellation of its notice of pendency. A divided Appellate Division modified to reinstate the notice of pendency, holding that purchaser had not elected to abandon its claim for specific performance.

In 2007, the condominium sponsor entered into an option agreement with purchaser for sale of unit 24C in a proposed condominium building on East 74th Street in Manhattan. The offering plan, which was expressly incorporated into the option agreement, provided that if the sponsor's improvements were substantially but not fully completed at the time of closing, the sponsor would remain liable for incomplete work, even after closing, but failure to complete the work would not be grounds for purchaser to delay closing or to refuse to pay the full balance of the purchaser price at closing. The agreement also provided that if purchaser did not attend the closing and pay the purchase price, the contract would be deemed cancelled and the sponsor would be entitled to retain the down payment. Closing was originally set for January 2009, but was rescheduled several times. When sponsor notified purchaser that closing had been rescheduled for April 15, purchaser's architect reported 104 construction defects, and purchaser took the position that the unit was not substantially complete. Purchaser refused to close, and sponsor declared purchaser in default. Purchaser then sought return of the down payment, and filed an application with the state attorney general asserting that the agreement was unenforceable and void. Purchaser then sought rescission, or, if the agreement were found enforceable, a reasonable opportunity to close. Later, after it became apparent that sponsor had found another purchaser for the apartment, purchaser withdrew the claim before the Attorney General, and brought this action, filing a notice of pendency. Supreme Court denied sponsor's summary judgment motion, both on the main claim and on sponsor's counterclaims, but cancelled the notice of pendency. Purchaser appealed.

In modifying, the Appellate Division majority held that purchaser had never elected remedies, and therefore was entitled to go forward with its specific performance claim. Disputed questions of fact on that claim precluded summary judgment. As a result, sponsor was not entitled to mandatory cancellation of its notice of pendency. Moreover, the majority concluded that there was not sufficient basis in the record to establish that the delay in bringing this action was motivated by a desire to impede the sale to a third party. Consequently, the court concluded that the record did not establish discretionary cancellation of the notice of pendency.

Justice Nardelli, dissenting for himself and Justice Friedman, concluded that the late filing of the specific performance claim, after purchaser learned of the contract with another purchaser, made it clear that the claim was brought to obtain leverage over sponsor by requiring sponsor to carry the costs of the unit while the dispute was litigated. As a result, the dissenters would have cancelled the notice of pendency.

COMMENT

CPLR 6514 gives courts the discretion to cancel a notice of pendency when the plaintiff has not commenced or prosecuted the action in good faith. Courts most commonly cancel a notice of pendency for lack of good faith when the plaintiff fails to follow through on the action protected by the notice pendency. Thus, in Williams v. Harrington, 216 A.D.2d 761, where the plaintiff repeatedly did not respond to a demand for a bill of particulars despite being given several extensions of time to do so, the Appellate Division cancelled the notice of pendency, ruling that the numerous extensions given and ignored by the Plaintiff constituted a failure to prosecute the action. By contrast, a court's belief that plaintiff will not prevail on the merits does not warrant cancellation of a notice of pendency. In Jamestown Place Corp. v. 153 West 33rd Street Corp., 74 A.D.2d 525, the court refused to cancel a noticed of pendency and ruled “[t]he fact that we think the contract is void under the Statute of Frauds does not mean that the 'plaintiff has not commenced or prosecuted the action in good faith.'”

When the plaintiff's action does not affect any interest in the land, a notice of pendency is improper under CPLR 6501. In Khanal v Sheldon, 55 A.D.3d 684, the Appellate Division vacated plaintiff's notice of pendency because plaintiff in a purchase contract dispute only asserted a claim for return of their down payment, not right, title or
interest in property itself.

The purpose of a notice of pendency is to preserve a plaintiff's right to a remedy, not to gain leverage over an adversary by holding up their sale of property. Thus, in Lazar v. Maragold, 150 A.D.2d 645, a case that bears a resemblance to Ascensio, the Appellate Division vacated a notice of pendency when plaintiff's specific performance claim appeared inconsistent with plaintiff's initial attempt to obtain return of its down payment. When the seller initiall declared plaintiff in default, plaintiff referred a third party to the seller in the hope of brokering a sale and recouping payments already made. Only when it became clear to the plaintiff that the down payment would not be refunded did plaintiff commenced the action for specific performance and file the notice of pendency, effectively blocking the sale contract between the defendants and the third party. In vacating the notice of pendency, the court relied on plaintiff's election to pursue the return of the down payment as a remedy. By contrast, in Asensio, the court was unwilling to hold that plaintiff's initial attempt to reclaim the down payment was enough to warrant cancellation of the notice of pendency.

Condo Purchaser May Maintain Notice of Pendency

Asensio v. Casa 74th Development, LLC

NYLJ 12/27/10, p. 18, col. 4

AppDiv, First Dept.

(3-2 decision; memorandum opinion; dissenting memorandum by Nardelli, J.).

In condominium purchaser's action for specific performance and damages, purchaser appealed from Supreme Court's cancellation of its notice of pendency. A divided Appellate Division modified to reinstate the notice of pendency, holding that purchaser had not elected to abandon its claim for specific performance.

In 2007, the condominium sponsor entered into an option agreement with purchaser for sale of unit 24C in a proposed condominium building on East 74th Street in Manhattan. The offering plan, which was expressly incorporated into the option agreement, provided that if the sponsor's improvements were substantially but not fully completed at the time of closing, the sponsor would remain liable for incomplete work, even after closing, but failure to complete the work would not be grounds for purchaser to delay closing or to refuse to pay the full balance of the purchaser price at closing. The agreement also provided that if purchaser did not attend the closing and pay the purchase price, the contract would be deemed cancelled and the sponsor would be entitled to retain the down payment. Closing was originally set for January 2009, but was rescheduled several times. When sponsor notified purchaser that closing had been rescheduled for April 15, purchaser's architect reported 104 construction defects, and purchaser took the position that the unit was not substantially complete. Purchaser refused to close, and sponsor declared purchaser in default. Purchaser then sought return of the down payment, and filed an application with the state attorney general asserting that the agreement was unenforceable and void. Purchaser then sought rescission, or, if the agreement were found enforceable, a reasonable opportunity to close. Later, after it became apparent that sponsor had found another purchaser for the apartment, purchaser withdrew the claim before the Attorney General, and brought this action, filing a notice of pendency. Supreme Court denied sponsor's summary judgment motion, both on the main claim and on sponsor's counterclaims, but cancelled the notice of pendency. Purchaser appealed.

In modifying, the Appellate Division majority held that purchaser had never elected remedies, and therefore was entitled to go forward with its specific performance claim. Disputed questions of fact on that claim precluded summary judgment. As a result, sponsor was not entitled to mandatory cancellation of its notice of pendency. Moreover, the majority concluded that there was not sufficient basis in the record to establish that the delay in bringing this action was motivated by a desire to impede the sale to a third party. Consequently, the court concluded that the record did not establish discretionary cancellation of the notice of pendency.

Justice Nardelli, dissenting for himself and Justice Friedman, concluded that the late filing of the specific performance claim, after purchaser learned of the contract with another purchaser, made it clear that the claim was brought to obtain leverage over sponsor by requiring sponsor to carry the costs of the unit while the dispute was litigated. As a result, the dissenters would have cancelled the notice of pendency.

COMMENT

CPLR 6514 gives courts the discretion to cancel a notice of pendency when the plaintiff has not commenced or prosecuted the action in good faith. Courts most commonly cancel a notice of pendency for lack of good faith when the plaintiff fails to follow through on the action protected by the notice pendency. Thus, in Williams v. Harrington, 216 A.D.2d 761, where the plaintiff repeatedly did not respond to a demand for a bill of particulars despite being given several extensions of time to do so, the Appellate Division cancelled the notice of pendency, ruling that the numerous extensions given and ignored by the Plaintiff constituted a failure to prosecute the action. By contrast, a court's belief that plaintiff will not prevail on the merits does not warrant cancellation of a notice of pendency. In Jamestown Place Corp. v. 153 West 33rd Street Corp., 74 A.D.2d 525, the court refused to cancel a noticed of pendency and ruled “[t]he fact that we think the contract is void under the Statute of Frauds does not mean that the 'plaintiff has not commenced or prosecuted the action in good faith.'”

When the plaintiff's action does not affect any interest in the land, a notice of pendency is improper under CPLR 6501. In Khanal v Sheldon, 55 A.D.3d 684, the Appellate Division vacated plaintiff's notice of pendency because plaintiff in a purchase contract dispute only asserted a claim for return of their down payment, not right, title or
interest in property itself.

The purpose of a notice of pendency is to preserve a plaintiff's right to a remedy, not to gain leverage over an adversary by holding up their sale of property. Thus, in Lazar v. Maragold, 1 50 A.D.2d 645, a case that bears a resemblance to Ascensio, the Appellate Division vacated a notice of pendency when plaintiff's specific performance claim appeared inconsistent with plaintiff's initial attempt to obtain return of its down payment. When the seller initiall declared plaintiff in default, plaintiff referred a third party to the seller in the hope of brokering a sale and recouping payments already made. Only when it became clear to the plaintiff that the down payment would not be refunded did plaintiff commenced the action for specific performance and file the notice of pendency, effectively blocking the sale contract between the defendants and the third party. In vacating the notice of pendency, the court relied on plaintiff's election to pursue the return of the down payment as a remedy. By contrast, in Asensio, the court was unwilling to hold that plaintiff's initial attempt to reclaim the down payment was enough to warrant cancellation of the notice of pendency.