In Rivera v. Konkol, Annette Rivera’s downpayment was in jeopardy when she was unable to pay the balance of her new home’s purchase price.

While Rivera claimed that some of those funds had been embezzled by her attorney, seller Kent Konkol still had his attorney send a letter advising Rivera that she had violated the contract of sale’s “time of the essence” provision and thus forfeited her downpayment.

When Rivera filed suit, the Bronx County Supreme Court sided with her, and found the letter sent by Konkol’s lawyer hadn’t provided a clear and unequivocal statement her failure to close on or before October 18, 2006, would be considered a default upon which she would lose her down payment.

On appeal, the Appellate Division, First Department, reversed because any irregularity with the attorney’s letter wasn’t “the dispositive issue.” According to the AD1, neither the alleged embezzlement nor her failure to obtain a mortgage, excused Rivera’s non-performance. Thus, her downpayment could be released to the seller.

Clearly, Konkol was on solid ground.*

 

 

To download a copy of the Appellate Division’s decision, please use this link: Rivera v. Konkol

*Konkolo is Zulu for “concrete” or “solid foundation.”

Posted by Lucas A. Ferrara, Esq. at 12:00 PM | Permalink | TrackBacks (0) | Comments (0)

Typically, "time of the essence" means that a specified performance obligation must occur on or before the date specified in the parties' agreement. Without that "mumbo jumbo," the governing deadlines contained in a contract may not be "set in stone."
 
A case in point is ADC Orange, Inc. v. Coyote Acres, Inc. In that dispute, ADC agreed to buy (from Coyote) a plot of land in Orange County, New York, for $600,000.

ADC made an initial down payment of $100,000 and was to make an additional payment of $250,000 "upon the later of the preliminary approval [of the contemplated construction] … from the applicable authorities for the subdivision or December 31, 2001, but in no event later than December 31, 2001."  The $250,000 payment wasn’t made until on or about January 11, 2002.
 
After attempts to reach a settlement failed, ADC filed suit in the Orange County Supreme Court seeking "specific performance" -- an order compelling the seller to convey the property in accordance with the contract of sale’s terms. Coyote, on the other hand, alleged that ADC violated the agreement by its failure to timely remit the $250,000, and this default entitled Coyote to walk away from the deal and keep the $100,000 down payment. (Coyote also claimed that the deal ended when ADC was unable to secure final approval of the subdivision by the applicable deadlines.)
 
The Supreme Court found that Coyote improperly repudiated the contract, as there was no “time of the essence” clause, and granted ADC’s “specific performance” request.

On appeal, the Appellate Division, Second Department, found that ADC’s failure to tender payment in a timely fashion had materially breached the contract’s terms thereby allowing Coyote to cancel the contract and keep ADC’s downpayment.

On review, the New York State Court of Appeals concluded that the absence of a “time of the essence” provision implied a reasonable time for payment. Standing alone, the payment due date, without a default provision, did not afford ADC adequate notice that a delay would jeopardize the contract. Additionally, our state’s highest court found that there were questions -- or “material issues of fact” -- as to whether Coyote had intentionally frustrated ADC’s ability to perform, and remitted those issues to the Supreme Court for further review and consideration.

Get the essence of that decision? (We’re outta time!)

For a copy of the Court of Appeals’ decision, please use this link: ADC Orange, Inc. v. Coyote Acres, Inc.
 
For a copy of the Appellate Division's decision, please use this link: ADC Orange, Inc. v. Coyote Acres, Inc.

Posted by Lucas A. Ferrara, Esq. at 12:00 PM | Permalink | TrackBacks (0) | Comments (0)

In May 2006, after Klaiber, LLC paid $35,000 to Richard and Kimberly Coon as a downpayment toward the purchase of real property, a title search revealed there were four judgments against Richard Coon.

As a result of that development, the scheduled closing date of July 6, 2006 was adjourned.  Unable to get a new closing date, Klaiber notified the Coons that it had decided not to proceed  with the purchase and requested the return of the downpayment.

Even though it received notice of a proposed closing date in December 2006 -- at which that the Coons were purportedly prepared to offer clear title to the property -- Klaiber filed a lawsuit to recover the contract downpayment.

Klaiber argued that the Coons’ failure to set a closing date (due to the title defects) comprised a breach of contract, entitling the purchaser to a refund, while the Coons contended that Klaibers broke the deal.

After the Columbia County Supreme Court denied Klaiber’s request, the Appellate Division, Third Department, explained that when title defects are curable, in order to place a seller in default for a failing to provide clear title, a purchaser must first “tender performance.” However, according to the AD3, when the seller knows of a defect prior to the scheduled closing date, and does nothing to correct it until after the closing date, the purchaser need not tender performance.

Here, the title defects were not corrected prior to the closing date.  In fact, it took until June 2007 -- almost a year after the original closing date -- to eliminate the impediments.

Given the Coons’ failure to provide clear title within a “reasonable time,” the AD3 believed that judgment should have been granted in Klaiber’s favor.

In other words, the Coons got skinned.

To download a copy of the Appellate Division’s decision, please use this link: Klaiber, LL v. Coon

Posted by Lucas A. Ferrara, Esq. at 12:00 PM | Permalink | TrackBacks (0) | Comments (0)

In Kendall v. Kendall, Sherwood Kendall filed a case against his ex-wife, Beverly, seeking to force the sale of a marital investment property.

According to a stipulation of settlement which had been incorporated into a judgment annulling the marriage, Sherwood was entitled to refinance the mortgage on the property -- which was actually in Beverly’s name -- prior to April 30, 2005. If Sherwood opted to refinance, Beverly agreed to transfer title to Sherwood. If he did not elect to refinance, Beverly then had two options: She could pay Sherwood $220,000 prior to August 30, 2005, which represented his “equitable distribution share in the property,” or, she could “place the property on the open market for sale and the net proceeds from the sale were to be paid to [Sherwood] as equitable distribution.”

When Sherwood missed the April 30th refinancing deadline, Beverly informed him that she intended to exercise her option. However, Beverly neither paid the specified sum prior to the August 30th deadline, nor put the property up for sale.

Several months later, when Beverly sent Sherwood a check for $220,000, he refused the payment and sought to compel his ex to sell the property.

After the Kings County Supreme Court denied Sherwood’s motion, he appealed to the Appellate Division, Second Department, which disagreed with the lower court’s decision.

The AD2 held that “an option contract must be strictly complied with, in the manner and within the time specified.” Beverly’s failure to exercise her option prior to the specified date was fatal to her rights under the agreement.

Although Beverly argued that Sherwood had waived his right to insist upon strict compliance with the stipulation, the AD2 was unmoved by that argument since the settlement's terms required any changes or modifications to be in written form.

Where's Robin Hood when a lady needs him?

For a copy of the Appellate Division’s decision, please use this link: Kendall v. Kendall

Posted by Lucas A. Ferrara, Esq. at 12:00 PM | Permalink | TrackBacks (0) | Comments (0)

Diamonds are reported to be the hardest minerals known to humankind. On the "Mohs' scale of mineral hardness," here's how diamonds rate (with a 10 being the highest rank on the scale):

1. Talc
2. Gypsum
3. Calcite
4. Fluorite
5. Apatite
6. Orthoclase Feldspar
7. Quartz
8. Topaz
9. Corundum
10. Diamond

In West 45th Partners, LLC v. Moneta Diamonds, Inc., Moneta Diamonds met considerable resistance when it attempted to vacate a stipulation of settlement or to excuse its nonperformance of the terms of the parties' agreement. (Like any contract, these documents are usually enforced in accordance with their terms, particularly in the absence of any vagueness, ambiguity, or other significant irregularity.)

In this instance, Moneta Diamonds reportedly failed to honor certain "time of the essence" payment provisions. Since the tenant had been represented by counsel when it acquiesced to these "unambiguous" terms, the Appellate Term, First Department, viewed the agreement as rock solid and was concrete in its resolve that, absent a good explanation for the default, an eviction could ensue.

Undeniably, this particular settlement agreement didn't prove to be Moneta Diamonds's best friend.

(How does that old song go?)

For a copy of the Appellate Term's decision, please use this link: West 45th Partners, LLC v. Moneta Diamonds, Inc.

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To view our other blog posts on this topic, please use this link: Stipulations

Posted by Jonathan H. Newman, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)

A few years ago, the Appellate Division, First Department, issued an interesting decision on "time is of the essence" provisions incorporated into landlord-tenant settlement agreements (or "stipulations of settlement"). Responding to a reluctance by lower courts to enforce these agreements as written, the appellate court concluded in 1029 Sixth LLC v. Riniv Corp., that when the document is subject to extensive negotiation and includes terms advantageous to both sides, the agreement must be honored despite any hardship or inconvenience that may be subsequently encountered by a party. As the court observed:

The parties having conditioned the tenants' right to the contemplated payments on the landlord's absolute right to obtain possession of the premises, broom clean, on the vacate date, their failure to so deliver possession undermines the tenants' claims to sympathy or the consideration of equity. Their references to hardworking families do not suffice; nor do claims of fiscal hardship...In a situation completely of their own making, they are the victims of a strict stipulation provision they agreed to in order to obtain the advantage of another provision favorable to themselves.

If the insertion in the stipulation of the provisions requiring strict compliance with the requirement to vacate the premises turned out to be harsh, it was nevertheless an important, negotiated term of the agreement, and as such, must be enforced....

Thus, when an agreement provides "time is of the essence," that language will typically signify that the agreement's performance obligations are steadfast, concrete, and immalleable.

A recent case which further exemplifies this point, is 291 Pleasant Ave., LLC v. Morris, wherein the tenant, Deanna Morris, is reported to have had difficulty honoring the "time of the essence" payment terms of a settlement agreement reached within the context of holdover case. Apparently, Ms. Morris filed "no fewer than six orders to show cause seeking extensions and other relief." Ultimately, a Judge of the Housing Part of the New York County Civil Court denied the tenant additional time within which to make a required payment and authorized an eviction. On appeal, the Appellate Term, First Department, affirmed quoting from Mill Rock Plaza Associates v. Lively, another Appellate Division case:

"Strict enforcement of the parties' settlement stipulation...is warranted based upon the principle that the parties in a civil dispute are free to chart their own litigation course...."

While stipulations are preferred dispute-resolution mechanisms, litigants must tread cautiously for noncompliance with the terms of these agreements can undoubtedly have dire consequences. (Are you willing to stipulate to that?)

For a copy of the Appellate Division's decision in 1029 Sixth LLC v. Riniv Corp, please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2004/2004_04134.htm

For a copy of the Appellate Term's decision in 291 Pleasant Ave., LLC v. Morris , please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2006/2006_50958.htm

Posted by Lucas A. Ferrara, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)