Real Property Law

In modifying, the Appellate Division concluded that there was insufficient evidence to support the $750,000 compensatory damage award. Plaintiffs submitted no evidence on the cost of restoration of the property, relying instead on a theory based on diminution in value. Their expert appraiser testified that the property had a value of $1,000,000 before the development, and a value of zero as a result of the encroachments. The Appellate Division, however, concluded that Supreme Court's conclusion that the property now had zero value was not supported by the weight of the evidence, and concluded instead that the diminution in value was $325,000. The court held, however, that because the intrusion was intentional and developer did not remove the I-beams despite landowner's request, the landowner was entitled to punitive damages in the amount of $250,000. The court also held that even if the roof cap and façade intrusions were de minimis, landowner was entitled to an injunction against intrusion into their air space.

Questions of Fact About Readiness to Perform

533 Park Avenue Realty, LLC v. Park Avenue Building & Roofing Supplies, LLC
NYLJ 12/22/17, p. 24., col. 5., AppDiv, Second Dept (memorandum opinion).

In contract vendee's action for return of the down payment or for specific performance, contract vendees appealed from Supreme Court's dismissal of the complaint and cancellation of the notice of pendency. The Appellate Division reversed and reinstated the complaint and the notice of pendency, concluding that questions of fact remained about whether each party was ready, willing, and able to perform.

By contract dated March 31, 2014, seller agreed to sell three contiguous parcels in Brooklyn for a price in excess of $4 million. Contract vendee paid $575,489 as a down payment, with the balance due at closing, which was to take place on April 30, 2014, time being of the essence. On April 23, contract vendee sought an adjournment because its mortgage lender had not yet scheduled an appraisal. On April 29, the parties communicated with respect to the release of escrow funds. On April 30, sellers' lawyer appeared at the closing. When contract vendee did not appear, seller terminated the contract and retained the down payment, prompting this action by contract vendee. Supreme Court awarded summary judgment to seller, relying on contract vendee's failure to appear on the closing date. Supreme Court rejected contract vendee's argument that sellers were not ready to close because of a provision in the sale contract requiring contract vendee to raise title objections prior to closing. Contract vendee appealed.

In reversing, the Appellate Division relied on the rule that in order to retain a down payment, a seller must prove that it was ready, willing, and able to perform on the law day. In this case, the mortgage indebtedness on the property was more than $11 million, and seller had satisfied only $8,850,000 of that indebtedness by October 2014, nearly six months after the closing. Although the court acknowledge the contract provision requiring contract vendee to raise title objections prior to closing, the court relied on a subsequent contract provision requiring removal of mortgages . The court also concluded that there were questions of fact about contract vendee's readiness to perform. The court noted that seller's failure to respond to the request for an adjournment might be construed as assent in light of the parties' prior relationship, an issue not suitable for resolution on a motion for summary judgment.

Issues of Fact Preclude Summary Judgment in Action for Brokerage Commission

Regency Homes Realty Group, Inc. v. Leo and Laura LLC
NYLJ 12/1/17, p. 27., col. 2., AppDiv, Second Dept (memorandum opinion).

In an action to recover a brokerage commission, seller appealed from Supreme Court's grant of broker's summary judgment motion. The Appellate Division reversed and remanded, holding that issues of fact remained about whether seller and the prospective buyer ever reached a meeting of the minds.

On Oct. 24, 2013, seller and broker entered into an exclusive listing agreement obligating seller to pay a 6% commission if, during the listing period, the property was sold, the property was subject to a contract of sale, or the seller and a buyer reached a verbal agreement regarding the material terms of a sale. On Nov. 9, 2013, a buyer made an offer of $4,730,000, and seller counteroffered at $4,800,000. Buyer then offered $4,755,000 and seller sent an email stating that he agreed to accept. On Nov. 19, seller prepared a purchase memorandum calling for a $200,000 deposit with payment of the balance at closing, without specifying how the balance was to be paid. The memorandum also stated that the contract was contingent upon a phase I inspection. On Dec. 4, seller prepared a new memorandum with a purchase prices of $4.8 million, and a provision that at closing seller would take back a second mortgage for $300,000. Seller's lawyer prepared a contract providing that the purchase price would be paid with the $200,000 deposit and assumption of a pre-existing $4.6 million mortgage. In January 2014, at a meeting with the buyer, the seller, and the broker, the seller refused to go forward with the deal because the existing mortgage only amounted to $1.6 million. Broker then brought this action for a commission, and Supreme Court awarded summary judgment to broker, finding that seller had reached a verbal agreement with buyer as to the contract's material terms. Seller appealed.

In reversing, the Appellate Division noted that the various memoranda included two different purchase prices, and revealed major issues as to payment terms. As a result, the court held that there were triable issues of fact about whether seller and buyer had reached a verbal agreement about material terms.

No Meritorious Defense to Foreclosure Action

Emigrant Bank v. Rosabianca
NYLJ 12/19/17, p. 22., col. 1., AppDiv First Dept (4-1 decision; majority memorandum; dissenting memorandum by Gesmer, J.).

In a mortgage foreclosure action, mortgagors appealed from Supreme Court's denial of their motion to file a late answer. The Appellate Division affirmed, holding that Supreme Court had properly exercised its discretion in light of mortgagors' failure to raise a meritorious defense.

Mortgagors have owned a home in Brooklyn since 1974. In 2008, shortly before their son purchased Manhattan condominium, they gave their son a short-form general power of attorney which included the power to deal with real property. The power of attorney recited, in bold type, that it was created “for the express, limited purpose of authorizing and empowering the agent to do any and all acts connected with the refinance of the residential property known as 2342 Benson Avenue.” When the son purchased his Manhattan condominium, he signed a note and a mortgage secured by his parents' home, and also signed a collateral mortgage in his parents' name. Apparently, no note was signed with respect to the collateral mortgage. The son defaulted on the mortgages, resulting in a foreclosure action on the parents' home (as well as the Manhattan apartment). Although the parents were served, they did not appear, relying on their son to represent them. Ultimately, the son failed to appear and mortgagee moved for a default judgment of foreclosure. When parents subsequently hired counsel and moved for leave to file a late answer, Supreme Court denied the motion, and the parents appealed.

In affirming, the Appellate Division majority concluded that of the five factors relevant in deciding whether to grant leave to enter a late answer, the “most notable” is the existence or absence of a meritorious defense. The majority concluded that the parents had suggested no meritorious defense, and observed that the fact that their son cheated them did not create a meritorious defense. Justice Gesmer, dissenting, relied on the limiting language of the power of attorney which, in her view, put mortgagees on notice that the son did not have express authority, and perhaps did not have apparent authority, to execute the mortgage agreement with respect to his parents' home.