Court Opinion

ID: 9916488
Source: CourtListenerOpinion
Date Created: 2024-01-10 01:07:56.953385+00
Date Added: 2024-06-11T13:25:30.034854
License: Public Domain

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
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 This opinion is uncorrected and not selected for official
                       publication.
  FILED: KINGS COUNTY CLERK 01/02/2024 10:46 AM                                                                    INDEX NO. 534783/2022
  NYSCEF DOC. NO. 43                                                                                         RECEIVED NYSCEF: 01/02/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF KINGS : PART 9
                                                                                           x

            OMAR MASON,
                                                           Plaintiff,                             DECISION/ORDER
                     - against -
                                                                                                  Index No. 534783/2022
            PEMBROKE NY LLC,                                                                      Motion Seq. No. 1 & 2
                                                           Defendant.
                                                                                           x

            Recitation, as required by CPLR 2219(a), of the papers considered in the review of defendant’s
            motion for summary 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…………..                                    25-37
            Affirmations and Affidavits in Opposition and Exhibits.................…….                            38
            Reply Affirmations................................................................................    39

                     Upon the foregoing cited papers, the Decision/Order on these motions is as

            follows:

                     This is an action for breach of contract with regard to a two-family property located

            at 31 Montauk 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 about June 9, 2022. Plaintiff is the proposed

            purchaser, and defendant the seller. A copy of the contract is annexed to the complaint.

            The sale price is $900,000, and a $31,500 deposit was paid, which is presumably still held

            in escrow by the seller’s attorneys, Vaysbaum & Kazakevich PC, as escrowee. The

            mortgage contingency clause permits purchaser to finance up to $720,000. The closing

            date is stated (Par 15) to be “60 days from receipt of executed contract by purchaser’s

            attorney” [P15], which would have been around mid-August of 2022. This action was

            commenced on November 28, 2022.

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                   The complaint alleges that the plaintiff could not obtain a mortgage commitment,

            and his attorney notified defendant’s attorneys of his cancellation of the contract on or

            about November 7, 2022, but defendant’s attorneys refused to return the downpayment.

            The first cause of action alleges 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

            defendant.    The third cause of action seeks to “impress a vendee’s lien against the

            property.” The wherefore clause asks for a judgment cancelling the contract and ordering

            the return of the down payment with interest from November 7, 2022, and “impressing a

            lien against the property until plaintiff is paid.”

                   Defendant answered the complaint and asserted counterclaims for breach of

            contract, negligence, and fraudulent inducement. The breach of contract claim asserts that

            plaintiff applied for a mortgage of $883,698, which was much more than the sum permitted

            in the contract, and thus he breached the contract. The negligence claim asserts that the

            seller (defendant) 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,

            materially 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 continues “In the absence of the

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  FILED: KINGS COUNTY CLERK 01/02/2024 10:46 AM                                           INDEX NO. 534783/2022
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            agreement/arrangement between the parties, Defendant would not have performed said

            repairs, 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

            negligence, carelessness, and recklessness, as set forth above, in the amount to be

            determined at trial.” The fraudulent inducement counterclaim asserts that, among 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.” Defendant’s wherefore clause seeks a judgment dismissing 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, defendant had not taken title to the property

            until February 8, 2022, just weeks before the contract of sale at issue here was executed

            by plaintiff.

                    The first of the motions 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 damages, (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 inducement.”

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  NYSCEF DOC. NO. 43                                                                 RECEIVED NYSCEF: 01/02/2024

                   The cross motion (MS#2), filed by plaintiff, seeks an order granting plaintiff 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 against the premise until Plaintiff is

            paid the Down Payment together with costs.

                   In support of the defendant’s motion, defendant provides an affirmation of counsel,

            an affidavit from the managing member of defendant, Erik Moseyev, a copy of seller’s

            deed, the contract of sale, a document described as “Doc 19, time of an essences letter”

            which is completely unreadable, a letter dated 11/14/22 from plaintiff’s current attorney to

            defendant’s attorneys [Doc 20], which rejects the time of the essence letter, and avers that

            defendant breached the contract and should return the down payment, the 11/4/22 letter

            [Doc 21] to plaintiff that his mortgage application was denied, and the pleadings.

                   Mr. Moseyev states in his affidavit that the time is of the essence letter scheduled

            the closing for 11/15/22, that it was rejected by plaintiff’s attorney, that the letter denying

            plaintiff’s mortgage application indicates in the attachment that he had applied for a

            mortgage of $883,698, and that the mortgage contingency clause only permitted plaintiff

            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 under the contract which entitles the seller to

            keep the down payment as and for his liquidated damages. He also notes that the contract

            provides for attorneys’ fees to the prevailing party should there be a dispute. Finally, he

            says that “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 rescinded” [Doc 16 ¶13]. He continues “In the absence of

            the agreement/arrangement between the parties, Defendant would not have performed

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  FILED: KINGS COUNTY CLERK 01/02/2024 10:46 AM                                               INDEX NO. 534783/2022
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            said repairs, improvements, construction and renovations on the Property” [id. ¶15].

            Defendant’s attorney provides an affirmation which cites 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 states 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,

            Purchaser.”

                   Counsel for defendant does not provide any additional evidence. It is not known

            why the seller was going to renovate and rebuild 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 delay in signing the contract for three months after plaintiff signed it. The only thing

            that is provided is the contract, signed by plaintiff in March of 2022, and the letter from

            purchaser’s attorney dated in November of 2022, notifying defendant’s attorney that the

            plaintiff’s mortgage application had been denied and he elected to cancel the contract. The

            “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 his application was denied because he had

            “insufficient funds to close.”

                   In support of plaintiff’s cross-motion, plaintiff provides an affirmation of counsel, an

            affidavit from plaintiff, Exhibits A to J, which plaintiff’s counsel couldn’t bother to properly

            label, and a reply affirmation. Defendant only submitted an affirmation in opposition, with

            no further exhibits. Exhibit A is yet another copy of the contract of sale. Exhibit B is a

            readable copy of the Time is of the Essence Letter dated October 13, 2022. It was sent to

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  FILED: KINGS COUNTY CLERK 01/02/2024 10:46 AM                                                INDEX NO. 534783/2022
  NYSCEF DOC. NO. 43                                                                    RECEIVED NYSCEF: 01/02/2024

            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 supposed 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 why defendant delayed in counter-signing it. Exhibit C is the email dated 11/7/22

            from plaintiff’s prior attorney to defendant’s attorney which transmitted the letter dated

            11/4/22 denying plaintiff’s mortgage application. Exhibit D is an email from plaintiff’s prior

            attorney to defendant’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 her that he has been retained and

            also rejecting the time is of the essence letter. Exhibit G is the summons and complaint.

            Exhibit H is plaintiff’s reply to defendant’s counterclaims, as is Exhibit I. Exhibit J is a

            printout from a website, from something called an “FHA Handbook.” It explains that a

            borrower under the FHA program is permitted to apply for a mortgage of up to 96.5% of

            the purchase price.

                   Plaintiff’s affidavit [Doc 27] states that the rider to the contract permitted him to apply

            for “an FHA or other government 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 him to apply for a mortgage

            of $883,698, which was “perfect fully permissible under the contract.” Plaintiff’s counsel

            provides the same opinion in his affirmation in support. He avers that plaintiff’s cancellation

            of the contract was in full compliance with the terms of the contract. He does not provide

            any case law in support of his claim that the Rider which permitted plaintiff to apply for an

            FHA mortgage meant that plaintiff was not limited to the cap on the financed amount in the

            mortgage contingency clause. He states, “practitioners of real estate law all know that FHA

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  NYSCEF DOC. NO. 43                                                                 RECEIVED NYSCEF: 01/02/2024

            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 down payment and

            attorneys’ fees.

                                                     Discussion

                   In a real estate transaction such as this, the 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.

                   The mortgage contingency clause, at paragraph 8 of the form contract, states, in

            pertinent part, 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 pursuant 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 satisfactory to the Institutional Lender. . . . If such commitment
                    is not issued on or before the Commitment 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 forth 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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                   Paragraph R3 of the “Purchaser’s Rider” states in its entirety “Paragraph 8 of the

            Contract is modified to permit 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 fell on a weekend. There is nothing

            in the record to indicate that the plaintiff cancelled the contract pursuant to its terms. The

            earliest communication provided from plaintiff’s attorney to defendant’s attorney was in

            November of 2022. Therefore, the purchaser waived his right to cancel the contract. The

            attempt in the Purchaser’s Rider to include a savings clause is unavailing, the court notes.

            It states, at paragraph R2, that “Notwithstanding anything in the Contract 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 “through no fault of purchaser” prevents the court from considering that this clause

            somehow supersedes paragraph 8 of the form contract.

                   It is black letter law in the Second Department that a purchaser who applies for a

            mortgage for a far greater amount than the amount set forth in the contract does not have

            grounds to cancel the contract (NY Ctr. for Esthetic & Laser 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]). Further, 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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            contemplated in the contract. Thus, by 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 NYS2d 512 [2d Dept 2012]; Humbert v Allen, 89 AD3d 804,

            807, 932 NYS2d 155 [2d Dept 2011]).

                   There is nothing in the record which indicates that plaintiff was granted an extension

            of time in which to obtain financing, nor is there anything which indicates that the provision

            in the purchaser’s rider which removed the form contract’s bar on applying for an FHA

            mortgage somehow changed the amount specified in the contract that 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 contract 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 therefore also

            entitled to reasonable attorneys’ fees incurred in connection with this litigation. 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 R19 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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            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

            unsuccessful 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 expenses

            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 declaratory judgment against plaintiff, defendant may recover reasonable attorney's fees

            incurred in defending against the within action pursuant to the express terms of the subject

            contract.

                   For these reasons, the 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

            negligence and fraudulent inducement is denied, and those claims are dismissed. When

            both parties have moved for summary judgment, the court is permitted to search the record

            and address those claims not included in the motion. The retention of the deposit is

            provided for in the contract as seller’s liquidated damages. This means the amount of

            damages the 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 enabled the defendant to sell it almost immediately

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            after plaintiff’s breach, and for a higher price than plaintiff had agreed to pay, are not

            permitted in addition to defendant’s liquidated damages.

                                                Conclusions of Law

                    Accordingly,

                    It is hereby ORDERED, ADJUDGED AND DECLARED that defendant is entitled to

            summary judgment on its first counterclaim for breach of contract. The plaintiff breached

            the subject contract and defendant is entitled to payment/retention of the contract

            downpayment in the amount of $31,500.00 as liquidated damages, and the contract of sale

            is declared to be null and void and of no further force or effect; and it is further

                    ORDERED that Vaysbaum & Kazakevich PC., as escrowee shall disburse the funds

            held in escrow of $31,500 to defendant promptly; and it is further

                    ORDERED that plaintiff’s complaint is dismissed; and it is further

                    ORDERED that defendant is entitled to an award of attorney’s fees and costs; and

            it is further

                    ORDERED that unless 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 simultaneously 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 completed Information

            Sheet, upon the Special Referee Clerk in the General Clerk's Office (Room 482), who is

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            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 immediately preceding paragraph will

            result in the dismissal of the defendant’s claim in its answer with counterclaims, for

            attorneys’ fees, unless good cause is shown; and it is further

                    ORDERED that other than the defendant’s claim for attorneys’ fees and costs, the

            defendant’s counterclaims, for negligence and fraudulent inducement, are dismissed; and

            it is further

                    ORDERED that 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 denied in light of the above

            determinations.

                    This constitutes the decision and order of the court.

            Dated: January 2, 2024
                                                                 ENTER:

                                                                   Hon. Debra Silber, J.S.C.

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