101123 LLC v. Solis Realty LLC

23 A.D.3d 107, 801 N.Y.S.2d 31
CourtAppellate Division of the Supreme Court of the State of New York
DecidedSeptember 20, 2005
StatusPublished
Cited by25 cases

This text of 23 A.D.3d 107 (101123 LLC v. Solis Realty LLC) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
101123 LLC v. Solis Realty LLC, 23 A.D.3d 107, 801 N.Y.S.2d 31 (N.Y. Ct. App. 2005).

Opinion

OPINION OF THE COURT

Saxe, J.P.

When a contract for the sale of real property contains a clause specifically setting forth the remedies available to the buyer if the seller is unable to satisfy a stated condition, fundamental rules of contract construction and enforcement require that we limit the buyer to the remedies for which it provided in the sale contract. We find these fundamental rules to be dispositive here, and hold the case of S.E.S. Importers v Pappalardo (53 NY2d 455 [1981]), in which specific performance was awarded notwithstanding a restricted remedies provision, to be inapplicable.

The parties entered into a contract of sale dated May 18, 2001, by which defendant Solis Realty LLC agreed to sell its five-story, six-apartment building at 101 Morningside Avenue to plaintiff 101123 LLC. The contract provided that the seller must convey the building “free and clear of leases, tenancies or occupancies,” and added, in paragraph 7 (b):

“If Seller is . . . unable to convey title in accordance with the terms of this Contract, then Purchaser may elect either (I) to terminate this Contract, or (ii) to accept such title as Seller may convey and shall complete the transaction as otherwise contemplated by this Contract, but in no event shall Purchaser be entitled to any abatement of the Purchase Price or to any lost profits or other damages, deduction, offset or credit.”

The contract further provided, in paragraph 18:

“In the event that Seller . . . defaults under the terms of this Contract, the sole liability of Seller will be to instruct the Escrow Agent to return to Purchaser the Contract Deposit, together with any interest earned thereon, and pay the net title exam[109]*109ination costs, without policy, and upon such return being made this Contract shall automatically terminate and be deemed cancelled, and neither party shall thereafter have any further liability or obligation to the other hereunder; provided, however, that if Seller wilfully defaults under this Contract and fails to close on the sale of the Premises in accordance with the terms of this Contract, Purchaser shall have the right to bring an action for specific performance against Seller and exercise any other remedies at law or in equity.” (Emphasis added.)

The contract specified a closing date of July 18, 2001.

At the time the contract was executed, the only tenant residing in the building was an elderly rent-stabilized tenant named James McLean, who was believed to be suffering from Alzheimer’s disease and other possible medical and psychological difficulties.

Despite repeated adjournments of the closing date in order to allow the seller time to arrange for McLean to relocate, by April 2, 2002, McLean still remained in his apartment. On that date, the buyer’s attorney wrote a letter to the seller’s attorney emphasizing that the closing had initially been scheduled to occur on July 18, 2001, adding:

“At closing, the Seller is obligated to deliver the premises free and clear of leases, tenancies or occupancies . . . We have been informed that a tenant remains at the premises as of the date of this writing. Our client has been extremely patient, however, if title cannot close within twenty (20) days, our client will have no other recourse but to declare the Seller in default.”

In response, also on April 2, 2002, the seller’s attorney faxed a letter to the buyer’s attorney advising, “[d]espite Seller’s efforts to cause the Property to be free of tenancies or occupancies, Seller is unable to deliver the Property free and clear of tenants or occupants.” The seller’s attorney referred to the buyer’s options under paragraph 7 (b) of the contract, and interpreted the buyer’s assertion that “our client will have no other recourse but to declare the Seller in default” as an election to terminate the contract:

“We have received your letter . . . and understand the same as an election by [Buyer] to terminate the [110]*110Contract. Accordingly, we are prepared to instruct the escrow agent to release the contract deposit to [Buyer] provided that mutual releases with respect to the Contract are exchanged by Seller and [Buyer].”

However, in a letter dated April 4, 2002, the buyer’s attorney rejected the seller’s characterization of its (the buyer’s) position, and explained that it was not electing to cancel the contract. The buyer also disputed the seller’s asserted inability to convey clear title, noting that the seller had shown it no evidence that it had even asked McLean to leave. The buyer’s attorney took the position that the seller’s failure to remove McLean constituted a breach of its obligation under the contract. This action for specific performance was then commenced. As it happened, after issue was joined, the premises were vacated.

Finding a question of fact as to whether the seller had made adequate good faith efforts to arrange for the tenant’s relocation, the IAS court denied both parties’ motions for summary judgment, and a nonjury trial was held. After trial the IAS court found that the seller had made reasonable efforts to induce the tenant to relocate, and dismissed the complaint.

On appeal, the question presented is whether the buyer is limited to the remedies provided for in the parties’ contract, entitling it only to either take the property as it was or to rescind the contract, and precluding specific performance except in the event the seller willfully defaulted on its contractual obligations. The buyer relies on the S.E.S. case (53 NY2d 455 [1981], supra) to argue that it is entitled to specific performance of the contract here despite the lack of a willful default on the seller’s part.

While there are similarities between this case and S.E.S., we conclude that its holding is not controlling here.

In S.E.S., a contract for the sale of real property included a provision similar to paragraph 7 (b) in the parties’ contract here, regarding the buyer’s remedies in the event of the seller’s inability to convey clear title. The contract there contemplated that the seller would successfully complete the eviction of the tenants of an apartment in the building before closing. It provided that “[i]f, for any reason not the fault of the seller hereunder, seller cannot convey title in accordance with the terms of this contract,” the buyer could either take the property with the defect or rescind the contract and receive its [111]*111money back (id. at 460). On the date set by the seller for the closing, the seller was unable to satisfy the contract term requiring that the action against the tenants be “determined in favor of the landlord [with] no appeals . . . pending” (id. at 459), since it could furnish neither a final judgment in the Housing Court matter against the tenants nor a written surrender of the lease by the tenants. Rather than either accepting title as it was, or rescinding the contract, the buyer sued for specific performance. Months after the specific performance action was commenced, but prior to trial, the tenants surrendered the lease (id. at 461).

The trial court in S.E.S.

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Cite This Page — Counsel Stack

Bluebook (online)
23 A.D.3d 107, 801 N.Y.S.2d 31, Counsel Stack Legal Research, https://law.counselstack.com/opinion/101123-llc-v-solis-realty-llc-nyappdiv-2005.