Mason v Pembroke NY LLC 2024 NY Slip Op 30018(U) January 2, 2024 Supreme Court, Kings County Docket Number: Index No. 534783/2022 Judge: Debra Silber Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001 (U), are republished from various New York State and local government sources, including the New

York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF KINGS : PART 9 x OMAR MASON , Plaintiff,

- against - PE MBROKE NY LL C, Defendant

. x DECISION/ORDER Index No. 5 34783 /20 22 Motion Seq. No. 1 & 2

Recitation, as required by CPLR 2219(a), of the papers considered in the review of defendant ’ s motion f or s ummary judgment and plaintiff ’s cross motion for summary judgment Papers NYSCEF Doc. Notice of Motion , Affirmation and Exhibits Annexed

.................. . ... ... 13

- 23 Notice of Cross Motion Affirmations, Affidavits and Exhibits......

........ 25

- 3 7 Affirmations and Affidavits in Opposition and Exhibits.................

....... 38 Reply Affirmations........................................................................

........ 39 Upon the foregoing cited papers, the Decision/Order on th ese motions is as follows: This is an action for breach of contr act with regard to a two

- fami ly property located
at 3 1 M ontauk Avenue , Brooklyn, NY (Block 3976 Lot 22 )

. The complaint avers that a contract of sale was executed by plaintiff ( purchaser ) on or about March 12, 2022 , and then

wasn ’ t signed by the seller until on or abou t June 9, 2022 . P laintiff i s the proposed purcha ser, and defendant the seller

. A c o py of the co ntract is annexed to the complaint. The sale price is $ 90 0,000 , and a $ 31 , 5 00 deposit was paid, which is presumably still held in escrow by the seller’s attorney s , Vaysbaum & Kazakevich PC , as escrowee . The mortgage contin gency clause permits purchaser to finance up to $720,000. The closing date is stated ( Par 15) to be “ 6 0 days from receipt of executed contract by purchaser’s attorney” [P15] , which would have been around mid

- A u gust of 2022

. This action was commenced on Nov ember 2 8 , 20 22

. 

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### [* 1]The complaint alleges that the plaintiff could not obtain a mo rtgage commitm e nt,

and his attorn ey notifi ed defen d ant ’s attorneys of his cancellation of the contract on or about November 7, 2022, but defendant ’s attorn eys refused to return the do wnpayment. The first cause of action allege s that the defendant has breached the contract by refusing to return the down payment. The second cause of action asserts that the escrowee is in breach of the escrowee ’s obligations, however, the escrowee law firm is not a party d efendant. The thir d cause of action seeks to “impress a vendee ’s l ien against the property. ” The wherefore clause asks for a judgment cancelling the contract and order ing the return of the down payment with interest from November 7, 20 22, and “ impressing a lien against the property until plaintiff is paid. ” Defendant answered the complaint and asserted cou nterclaims for brea ch of
contract , negligence, and fraudulent inducement

. The breach of contract claim asserts that plaintiff applied for a mortgage of $883, 698, which w as much more than th e sum permitted in the contract, and thus he breache d the contract. The negligence claim asserts that the seller ( defen d ant ) between April 2022 and October 2022, “ performed costly repairs, improvements, construction, and renovations on the Property as a precondition of the sale of the Property by Defendant to Plaintiff. ” However, defendant claims that “ Plaintiff failed to timely notify Defendant of the fact that Plaintiff applied for a mortgage loan in the amount, materia lly greater than the amount set forth in the Mortgage Contingency Clause. Additionally, Plaintiff failed to timely notify Defendant that his mortgage loan application was rescinded by the potential lender: Defendant was notified by Plaintiff of the subject rescission on or about per the letter submitted to Defendant’s counsel, November 4, 2022, however the reason for denial was known to plaintiff as of August 8, 2022 , per the recession [sic] letter ” [Doc 3 ¶ 49]. The counterclaim contin ues “ In the absence of the 

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### [* 2]agreement/arrangement between the parties, Defendant would not have performed said

re pairs, improvements, construction, and renovations on the Property. As a result, Defendant incurred financial damages. By reason of the foregoing, Defendant seeks indemnification and judgment for financial damages based upon Plaintiff’s active neglig ence, carelessness, and recklessness, as set forth above, in the amount to be determined at trial

. ” The fraudulent inducement c ounterclaim asser ts that , amon g other things, “ Plaintiff fraudulently induced Defendant into entering the Contract based on false representations that Plaintiff had sufficient funds when, in fact, the opposite was true. Had Plaintiff disclosed it financial conditions / standing, Defendant would not have entered into a contract and would not have performed costly and time

- consuming construction work on the Property

. ” De fendant ’ s wherefore clause seeks a judgment dis missing the complaint and “ granting defendant ’ s counterclaims

. ” Plaintiff replied to the counterclaims. The case is not as yet on the trial calendar. The last recorded deed indicates that the defendant sold the property to someone else on April 19, 2023 for $950.000. Further, d efendant had not take n title to the property until February 8, 2022, just weeks before the contract of sale at issue here was ex ecuted by plaintiff

. Th e first of the motion s now before the court , motion sequence #1, filed by defendant , seeks summary judgment in defendant ’ s favor, “ declaring Plaintiff to be in default of the subject contract and declaring that Defendant is entitled to payment/retention of the contract downpayment in the amount of $31,500.00 as liquidated dama ges, (ii) dismissing Plaintiff’s Complaint, (iii) awarding Defendant attorney’s fees in the amount to be determined at the hearing on the amount to be awarded, (iv) pursuant to CPLR 603 severing Defendant’s counterclaims for negligence and fraudulent induc ement

. ” 

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### [* 3]The cross motion (MS#2) , filed by plaintiff , seeks an order granting plai ntiff summary

judgment “ (1) to release the down payment of Plaintiff in the amount of THIRTY

- ONE THOUSAND FIVE HUNDRED DOLLARS, ($31,500) (2) cancelling the contract of sale for real property between the parties, (3) impressing a lien agains t the premise until Plaintiff is paid the Down Payment together with cost s. In s upport of the defendant ’ s motion, defendant provides an affirmation of counsel, an affidavit from the managing member of defendant, Erik Moseyev, a co py of seller ’ s d eed, the contrac t of sale, a document described as “ Doc 19, time of an es sences letter ” which is completely unreadable, a letter dated 11/14/22 from plaintiff ’ s current attorney to defendant ’ s attorn eys [Doc 2 0] , which rejects the time of the essence letter, and avers that defendant breached the contra ct and should return the down payment, the 11/4/22 letter [Doc 21] to plaintiff that his mortgage application was d enied, and the plea d ings. Mr. Moseyev states in his affi davit that the time is of the essence letter sche d uled the closing f or 11 /15/22 , that it was rejected by plaintiff ’ s attorney , that the letter denying plaintiff ’ s mortgage application indicates in the attach ment that he had applied for a

mor tgage of $883,698, and that the mortgage contingency clause only per mitted plaint iff to apply for up to $720,000. He claims that the plaintiff’s failure to apply for a mortgage permitted by the contract was a willful default und er the contract which entitles the selle r to keep the down payment as and for his liquidated da ma ges. He also notes that the co ntract provides for attor neys ’ fees to the prevailing party should there be a dispute. Finally, he

sa ys t hat “ Defendant extended substantial amounts of money towards improvement of the Property, per Plaintiff's directions. Plaintiff failed to timely notify Defendant that his mortgage loan application was re scinded ” [Doc 16 ¶ 13]. H e continues “ In the absence of the agreement/ar rangement between the parties, Defendant would not have performed 

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### [* 4]said repairs, improvements, construction and renovations on the Property ” [ id. ¶ 15].

Defendant ’ s attorney provides a n affirmation which cite s numerous cases in support of defendant ’ s claim that the plaintiff breached the contract. Paragraph 28 of “ Purchaser ’ s Rider ” at Page 30 of Doc 1 state s in its entirety that

“ Seller shall, at Seller's expense, renovate and rebuild the Premises, including installation of the systems and appliances reference in Par. 2 of the Contract, at no less a standard than what would commonly be referred to as "high

- end" appliances. Seller shall, prior to any construction, consult with and receive instruction from, and written approval from, Purchase r. ” Counsel for defendant does not provide any additional evidence. It is not know n why the seller was going to renovate and rebui ld the premises, or how long that took , or who asked for more time to close , seller or buyer. There is no explanation offered for seller ’ s del ay in signing the contract for three months after p laintiff signed it. T he only thing that is provided is the contract, sign ed by plaintiff in March of 2022, and the letter from purchaser ’ s attorney dated in November of 2022 , notifying defendant ’ s attorney t hat the plaintiff ’ s mortgage applica tion had been denie d and he elected to cancel the co ntract

. T h e

“ Statement of Credit Denial, Termination, or Change ” is dated 11/3/22 and states that plaintiff applied for a loan of $883, 698, and that h is application was d enied because he had

“ insuf fic ient funds to close. ” In support of plaintiff ’ s cross - motion, plaintiff provi des an affirmation of counsel, an affidavit from plaint iff, Exhibits A to J, which plai ntiff ’ s counsel couldn’t b other to properly lab el, and a rep ly affirmation. Defendant only su bmitted an affirmation in opposition, with no further exhib its. Exhibit A is yet another copy of the contract of sale

. Exhibit B is a read able copy of the Time is of the Essence Letter dated October 13, 2022. It was sent to 

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### [* 5]plaintiff ’ s transaction attorney, not his attorney in this litigation, and states that the contract

of sale is dated June 9, 2022, and the closing was suppo s ed to be on or about August 9,
2022. The court again notes that plaintiff signed the contract on March 12, 2022, but it is not clear wh y defendant delayed in counter

- sign ing it. Exhibit C is the email dated 11/7/22 from plaintiff ’ s prior attorney t o de fendant ’ s attorney wh ich transmitt ed the letter dated 11/4/22 denying plaintiff’s m ortga ge application. Exhibit D is an email from plaintiff ’ s prior
atto rney to de fendant ’ s attorney rejecting the time is of the essence letter. Exhibit E is another copy of the mortgage denial. Exhibit F is the letter from plaintiff’s current attorney to defendant ’ s attorney dated November 14, notifying h er that he has been retained and also rejecting the time is of the ess ence letter. Exhibit G is the summons and complaint. Exhibit H is plaintiff’s reply to de fendant ’ s counterclaims , as is E xhibit I. Exhibit J is a print out from a website, from something ca lled an “ FHA Handbook. ” It explain s that a borrower under the FHA program is permitted to apply for a mortgage of up to 96.5% of the purchase pri ce. Plaintiff ’ s affidavit [Doc 27] states that the rider to the co ntract perm itted him to apply for “ an FHA or other governm ent insured mortgage ” and that he had applied for an FHA loan of 96.5% of the purchase price , which is one of the FHA products, and that by permitting him to apply for an FHA loan, defendant permitted hi m to apply for a mortgage of $883,698 , which was “ perfe ct fully permissi b l e under the contract. ” Plaintiff ’ s cou nsel provides the same opinion in his affirmation in support. He avers that plaintiff ’ s cancel l ation of the contract was in full co mpliance with the terms of the contract. He does not provide any case law in support of his claim that the Rider which perm itted plaintiff to apply for an FHA mortgage meant that plaintiff was not li mited to the cap on the financed amount in the mortgage contin gency clause. H e states, “ practi tioners of real estate law all know that FHA 

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### [* 6]loan are never for 80 % of the purchase price. ” He also argues that since the contract had

an attorneys ’ fees clause, that plaintiff is entitled to the return of his d own payment and attorneys ’ fees. Discussion In a real estate transaction such as this, t he sending of the signed contract by the buyer, along with the down payment check, is considered under NY law to be an offer. The offer must be accepted by the signing of the contract by the seller

. Here, the seller signed and returned the contract on or about June 9 , 2022, accepting the plaintiff’s offer and forming a binding contract.
T h e mo rtgage contingency clause, at paragraph 8 of the form contract, states , in
pe r tinent pa r t, as follows:

“ The obligations of Purchaser hereunder are conditioned upon issuance, on or before 30 days from date purchaser’s attorney receives a fully executed contracts of sale (the “Commitment Date”), of a written commitment from any Institutional Lender purs uant to which such Institutional Lender agrees to make a first mortgage loan, other than a VA, FHA or other governmentally insured loan, to purchaser, at Purchaser’s sole cost and expense, of $720,000.00 or such lesser sum as Purchaser shall be willing to accept, at the prevailing rate of interest

. .

. . for a term of at least 15/30 years and on other customary commitment terms, whether or not conditional upon any factors other than an appraisal sa tisfactory to the Institutional Lender.

. . . If such commitment is not issued on or before the Commi tment Date, then, unless Purchaser has accepted a commitment that does not comply with the requirements set forth above, Purchaser or Seller may cancel this contract by giving Notice to Seller within 5 business days after the Commitment Date, in which case this contract shall be deemed canceled and thereafter neither party shall have any further rights against, or obligations or liabilities to, the other by reason of this contract, except that Downpayment promptly refunded to Purchaser and except as set for th in Paragraph 27 [ regarding the broker]

. If Purchaser fails to give notice of cancellation or if the Purchaser shall accept a commitment that does not comply with the terms set forth above, then Purchaser shall be deemed to have waived Purchaser’s right to cancel this contract and to receive a refund of the Downpayment by reason of the contingency contained in this paragraph. ” [emphasis added]. 

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### [* 7]Paragraph R3 of the “ Purchaser ’ s Rider ” states in its entirety “ Paragraph 8 of the

Contract is modified to perm it an FHA or other government insured mortgage. ” The “ commitment date ” under this contract, pursuant to its terms, was 30 days after the seller ’ s attorney sent the signed contract back to the purchaser ’ s attorney, which was on or about July 9 , 2022, or the next business day if it f e ll on a wee kend

. There is nothing in the record to indicate that the plaintiff cancelled the co ntract pursuant to its terms. The earliest communication provided from plaintiff ’ s attor ney to defendant ’ s attorney was in No vember of 2022. Therefore, the purchaser waived his right to cancel the contract. The attempt in the Purchas er ’ s Rider to inc lude a sa vings clause is unavailing , the court notes. It states, at paragraph R 2, that “ Notwithstanding anything in the Contrac t or Riders to the contrary , if, through no fault of Purchasers, the Institutional Lender either denies Purchasers’ loan application or, having issued a Commitment Letter, rescinds said commitment to loan, Purchasers shall be entitled, on written notice to Seller along with Lender’s written denial or recission, to cancel the Contract and receive a refund of the Contract Deposit. ” [emphasis added]. Here, the requirement that the denial or rescission be “ t hrough no fault of purcha ser ” prevents the court from considering th at this clause

some how supersedes paragraph 8 of the form contract. It is black letter law in the Second Department that a purchaser who applies for a

mor tgage for a far gr eater amount than th e amount set forth in the contract does not have grounds to cancel the contract ( NY Ctr. for Esthetic & Las er Dentistry v VSLP United LLC , 159 AD3d 567 [1st Dept 2018] , citing Post v Mengoni , 198 AD2d 487 [2d Dept 1993] ; Silva v Celella , 153 AD2d 847 [2d Dept 1989])

. F urther, plaintiff here never made a good faith effort to obtain the permitted financing, as he never sought a loan in the amount 

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### [* 8]contemplated in the contract. T h us, b y applying for a mortgage in an amount significantly

greater than that stated in the contract, the buyer breached the contract, as a matter of law ( Kweku v Thomas , 144 AD3d 1109, 1111 [2d Dept 2016] citing HSM Real Estate, Inc. v Dragon , 94 AD3d 702, 941 NYS2 d 512 [ 2d Dept 2012]; Humbert v Allen , 89 AD3d 804, 807, 932 NYS2d 155 [ 2d Dept 2011] ).
T h ere is nothing in the record which indicates that plaintiff was granted an extension of time in which to obtain financ ing , nor is there anything which indicates that the provision in the purchaser ’ s rider which removed the form contract ’ s bar on applying for a n FHA mortgage somehow changed the amount specifie d in the con tract th at the purchaser was limited to financing. Accordingly , the court finds that the plaintiff purchaser breached the contract by failing to comply with the terms of the mortgage contingency clause , as modified by the rider

. Moreover, pursuant to the express terms of the mortgage contingency clause, plaintiff waived his right to cancel the co ntract and to receive a refund of the down payment , because he also failed to give the seller notice of cancellation of the contract within five business days after the commitment date , on or about July 9, 2022

. The contract further specifies that, where, as here , there is a default by the buyer , the seller is entitled to retain the down payment as liquidated damages. The rider also provides that the prevailing party is entitled to attorneys ’ fees. Defendant is th erefo re also entitled to reasonable attorneys ’ fees incurred in connection with this litiga tion. Generally, "[a]n attorney's fee is merely an incident of litigation and is not recoverable absent a specific contractual provision or statutory authority" ( Levine v Infidelity, Inc., 2 AD3d 691, 692 [2d Dept 2003] ). Here, paragraph R 19 of the “ purchaser ’ s rider ” to the subject contract of sale states, “ Notwithstanding anything to the contrary contained herein this Contract, if 

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### [* 9]at any time either Seller or Purchaser shall institute any action or proceeding against the

other relating to the provisions of this Contract or any default hereunder, then the

uns uccessful party in such action or proceeding agrees to reimburse the successful party for the reasonable expenses for attorneys' fees, paralegal fees and disbursements incurred therein by the successful party. Such reimbursement shall include all legal exp enses incurred prior to trial, at trial and at all levels of appeal and post

- judgment proceedings. This Paragraph shall survive the Closing or termination of this Contract

. ” Inasmuch as the court has awarded defendant seller summary judgment dismissing plaintiffs' complaint and summary judgment on its counterclaim for breach of contract and a dec laratory judgment against plaintiff , defendant may recover rea sonable attorney's fees incurred in defending against the within action pursuant to the express terms of the subject
contract. For these reasons, th e defendant ’ s motion (MS#1) for summary judgment dismissing the complaint, and for summary judgment in its favor on the counterclaim for breach of contract and a declaratory judgment and attorneys ’ fees against plaintiff is granted. However, the branch of the motion which seeks to sever the counterclaims for negligen ce and fraudulent inducement is denied, and those claims are dismissed. W h en both parties have moved for summary judgment, the court is permitted to se arch the record and address those cl aims not included in the motion. T h e retention of the deposit is provided for in t he contract as seller ’ s liquidated damages . Th is means the amount of damages th e seller would be entitled to if plaintiff breached could not be ascertained, so it

was agreed that if plaintiff breached the contract, retention of the down payment , plus attorneys ’ fees if the matter went to court, would be its damages. Additional damages for fixing up the property , which clearly enable d the defendant to sell it almost imme diat ely 

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### [* 10]after plaintiff ’ s breach, and for a higher price tha n plaintiff had ag re ed to pay, are not

permitted in addition to defendant ’ s liquidated damages

. Conc l usions of Law Accordingly, It is hereby ORDERED, ADJUDGE D AND DECLARED that defendant is entitled to summary judgment on its f irst counterclaim for breach of contract . T h e p laintiff breached the subject contract and d efendant is entitled to payment/retention of the contract downpayment in the amount of $31,500.00 as liquidated dama ges , and the contra ct of sale is declared to be null and void and of no fu rther force or effect ; and it is fur ther ORDERED th at Vaysbaum & Kazakevich PC

. , as escrowee shall disburse the funds held in escrow of $31,500 to defendant promptly; and it is fu rther ORDERED th at p laintiff’s c omplaint is dismissed; and it is further ORDERED th at d efendant is entitled to an award of attorney’s fees and costs ; and it is further ORDERED th at u nless there is filed a stipulation of settlement between the parties

as is permitted by CPLR 4317, this matter is referred to a Special Referee pursuant to a Referee Referral Order issued sim ultaneously herewith , to hear and determine the defendant ’ s claim for attorneys’ fees

. Defendant ’ s attorney is to provide the Special Referee with copies of her firm ’ s billing and time records, together with a summary and breakdown of the categories of legal services provided, and the hours attributed to each category of services; and it is further ORDERED that counsel for the defendant shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a com pleted Information Sheet, upon the Special Referee Clerk in the General Clerk's Office (Room 482), who is 

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### [* 11]directed to place this matter on the calendar of the Special Referee's Part (Part 82) for the

earliest convenient date; and it is further ORDERED that failure to comply with the immediate ly preceding paragraph will result in the dismissal of the defendant ’ s cl aim in its answer with counterclaims , for attorneys ’ fees , unless good cause is shown ; and it is further ORDERED th at other than the defendant ’ s claim for attorneys ’ fees and costs, the defendant ’ s counterclaims , for negligence and fraudulent induc ement , are dismissed ; and it is further ORDERED th at plaintiff ’ s motion (MS # 2) for summary judgment declaring that the contract is cancelled, and that he is entitled to the return of the down payment and a common law vendee's lien against the property must be d eni ed in li ght of the abo ve determinations

. This constitute s the decision and order of the court. Dated: January 2 , 2024 E N T E R :

Hon. Debra Silber, J.S.C. 

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