| Rasul v O'Brien |
| 2008 NY Slip Op 51086(U) [19 Misc 3d 1140(A)] |
| Decided on May 19, 2008 |
| Civil Court Of The City Of New York, Richmond County |
| Straniere, J. |
| Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. |
| This opinion is uncorrected and will not be published in the printed Official Reports. |
Ghulam Rasul, Plaintiff,
against James J. O'Brien, Jr., DOROTHY B. O'BRIEN and MICHAEL WALSH, as Stakeholder, Defendants. |
Plaintiff, Ghulam Raul, as purchaser, commenced this action against the defendants, James J. O'Brien, Jr., Dorothy B. O'Brien, as sellers, and Michael Walsh as Stakeholder, alleging that the defendants failed to return a deposit posted for the purchase of the premises, 660 Targee Street, Staten Island, New York. Currently before the court is a motion by the purchaser seeking to have the monies being held in escrow by defendant Walsh, released to him and awarding plaintiff damages for defendants' breach of the contract. There is a cross-motion by defendants O'Brien seeking dismissal of plaintiff's complaint and awarding defendants' the monies being held in escrow as damages for plaintiff's alleged breach of the contract. Plaintiff filed a reply. Both sides are represented by counsel.
On October 2, 2007, the parties entered into a written contract in which defendants O'Brien agreed to convey to plaintiff the premises 660 Targee Street for a sale price of $285,000.00. Pursuant to the terms of the contract, plaintiff deposited $10,000.00 to be held in escrow with defendant Walsh, the sellers' closing attorney. The closing of title was scheduled for October 31, 2007.
The court notes that there are certain anomalies in the contract. First, paragraph 8, mortgage contingency, gave the purchaser 45 days from the date of receipt of an executed contract to obtain a mortgage commitment, while paragraph 15 of the contract set the closing for October 31, 2007. The contract is dated October 2, 2007. This is another example of a situation where a date certain should be used for the mortgage contingency and not 45 days after the contract date. Second, the contract calls for the seller to deliver only insurable title, while the Rider refers to uninsurable and unmarketable title and paragraph 41 of the Rider states that the paragraphs of the Rider control over those in the contract. Third, the plaintiff's mortgage commitment was issued on October 31, 2007 yet its lock-in rate expired on November 27, 2007 prior to the parties agreed initial closing date of December 3, 2007. There is no showing that there was a mortgage commitment in effect [*2]either on the date of closing or the time of the essence date.
Certain facts are not in dispute. The property is on the corner of Targee Street and Steuben Street and is approximately 46 feet wide and 100 feet deep. A title report prepared for plaintiff revealed a "30 foot setback" line affecting the property along the entire Steuben Street frontage of 100 feet. Neither party has attached the title report to their pleadings. Plaintiff ordered a new survey which was certified to plaintiff, JP Morgan Chase Bank, NA, the proposed mortgagee, and United General Title Insurance Company. The survey also sets forth the setback or widening line and reveals that the setback line runs through the one family structure currently existing on the property. If the setback was for any reason enforced by the City of New York, it would run through about 15 feet of the structure for its entire length. The survey notes "setback line as shown on final map V543-2403."
Based on this encumbrance, plaintiff sought to cancel the contract on the grounds that the setback rendered the property "uninsurable and unmarketable." The defendants rejected plaintiff's attempt to cancel the contract, asserted that they could produce a title company willing to insure the premises and scheduled a "time of the essence" closing for January 4, 2008.
It is alleged in the motion papers that the building was constructed prior to the setback line being adopted by the City of New York. There is no exhibit confirming this fact. A check of the Buildings Department records reveals that no certificate of occupancy exists for the house, leading to the conclusion that it was constructed prior to January 1, 1938, although the "certificate of occupancy" category in the records does not designate it as a "old building." Closing counsel for the sellers issued a letter dated November 30, 2007 alleging that the setback was adopted in October 1973, fifteen years after the certificate of occupancy was issued. There is no independent evidence of either of these allegations. Defendants have not shown that there was a valid certificate of occupancy. The failure to deliver a certificate of occupancy or establish that the premises pre-dates the need for one would also be grounds to cancel the contract.
The Rider to Contract contains the following paragraph:
30. The premises are sold subject to:
A) Any state of facts an accurate survey would show provided same does not render title unmarketable or uninsurable;
B) Covenants, easements, or consents of record, restrictions, zoning plans and regulations, if any, affecting the premises, so far as same may now be in force and effect provided same are not violated by existing structures or their present use;...
G) Any proposed or actual widening of the street on
which this property is situatedor of any street or highway that abuts or adjoins the street on which
the subject property is situated, provided however, that the building or buildings thereon are not
affected thereby.
Handwritten in the margin bracketing this paragraph is the following language:
"provided same do not render premises unmarketable or uninsurable."
[*3]Paragraph 13 of the preprinted contract
provides:
Insurable Title. Seller shall give and Purchaser shall accept such title as ANY
LICENSED COMPANY shall be willing to approve and insure in accordance with its standard
form of title policy approved by the New York State Insurance
Department,...
General City Law 35 is applicable to the facts of this case. It sets forth a procedure for a property owner to request a variance for land situated within the bed of a mapped street. It further provides:
Permits for building in the bed of mapped street.
Where a proposed street widening or extension has been shown on such official map or plan for ten years or more and the city has not acquired title thereto, the city may, after a hearing on notice as hereinabove provided, grant a permit for a building and/or structure in such street or highway and shall impose such reasonable requirements as are necessary to protect the public interest as a condition of granting such permit, which requirements shall inure to the benefit of the city.
Plaintiff alleges that the defendants were unable to deliver marketable and insurable title to the premises because the setback line runs through the structure. In situations such as this, the general rule is that the structure may remain as it exists and if the municipality decides to widen the street to its mapped width, the property owner would be compensated through a condemnation proceeding. Plaintiff speculates in his papers that if the premises were damaged in a fire or he wanted to renovate the structure, he would be precluded from doing so because of the violation of the setback line. This contention is not actually correct. As set forth in the General City Law §35, the land owner may make application to the municipality for a variance.
As to the issue of whether title was unmarketable and uninsurable, it must be pointed out that the preprinted contract paragraph 13, required that the sellers deliver only "insurable title." Sellers allege that their title company would insure the title as it currently exists even if the one selected by the purchaser would not and therefore the sellers are in compliance with the contract terms.
This is not dispositive of the issue however, since paragraph 30 of the Rider to Contract set forth above contains specific covenants concerning survey exceptions (30A) and street widenings (30G) and was amended by the parties to require that none of the seven exceptions would render title unmarketable or uninsurable. As pointed out above, paragraph 41 of the Rider states the terms of the Rider prevail over those of the contract.
New York courts have consistently held that there is a difference between insurable title and marketable title (Voorheesville Rod and Gun Club, Inc. v E. W. Tompkins Co. Inc., 82 NY2d 564 (1993); Laba v Carey, 29 NY2d 302(1971)). Marketable title is title that is free from encumbrances and any doubt as to its validity and is title that a reasonably intelligent [*4]person, who is well informed of the facts and their legal implications would be willing to accept. On the other hand, insurable title is title that a reputable title insurance company is willing to insure. Paragraph 13 required the sellers to deliver "insurable title" and not marketable title. In such a situation, absent some other contract provision to the contrary, the purchaser must close even if the seller cannot deliver "marketable title" (Crown Enterprises, Inc. v Trustco Bank National Association, 2001 WL 914287). In this case the above cited clauses are contrary provisions which required the sellers to deliver marketable title.
Under the definition of "marketable title" it is apparent that the setback line renders this title unmarketable. No reasonably intelligent person would want to purchase a home with the potential legal problems this premises has, resulting from the existence of the setback line.
Case law indicates that the restrictive use imposed by section 35 of the General City Law would not render title unmarketable unless a substantial portion of the property lies within the bed of the street and the property would be rendered useless thereby, or there is evidence of misrepresentation or a violation of the statute (O.W. Siebert Company, Inc. v Kramer, 107 Misc 2d 520, 521 (1980).
Clearly the fact that 30 feet of a 46 foot wide lot would be lost should the City widen the street renders the property useless.[FN1]
In Goldstein v Stern (32 Misc 2d 779(1962)) where ten feet of the property was
affected, the court stated:
A restriction imposed by the provisions of section 35 of the General City Law is an
encumbrance upon real property and a variance of five feet between the contract provision and
the Final Topographical Map of the City of New York would be sufficient to warrant the
rescinding of such contract since the de minimus rule does not apply under these circumstances.
If the misrepresentations were innocent a buyer still may rescind and sue to recover the
consideration paid.
Under the terms of the contract the plaintiff was
entitled to cancel the contract. Defendants have no legal basis for retaining the deposit and must
return it to the plaintiff.
B. Are Defendants Entitled to Summary Judgment on Their Cross-Motion?
As stated above, the court has determined that the contract of sale required that the [*5]defendants deliver marketable title and that the setback line rendered title unmarketable. In their cross-motion defendants are alleging that title is marketable since the widening line did not violate any covenants, easements or consents of record, restrictions, zoning plans and regulations if any as set forth in the Rider Paragraph 30(B). Defendants are correct. The setback does not violate any of these enumerated encumbrances. The setback requirement does not fit into any of these exceptions to title. However, defendants are ignoring Paragraph 30(A) and 30(G) which specifically address the widening issue. This setback was instituted by the municipality. If the setback were established by a covenant in a master deed or subdivision, then perhaps 30(B) would come into play, but that is not the case. The issue is not whether title is insurable, the issue is whether it is marketable and it is not.
Defendants further argue that the plaintiff contracted for a one-family home on the property and that is what they are ready, willing and able to deliver. Defendants assert the fact that at sometime in the future the premises might be damaged as a result of a calamity is pure speculation and even if that were to occur, there is no certainty that the premises could not be rebuilt in the same location or even expanded. General City Law 35 does not prohibit the construction; it only requires that a permit be acquired. However, if the City were to deny that application the plaintiff would be unable to rebuild that which he had purchased and would suffer a financial loss.
Defendants' cross-motion for summary judgment must be denied.
C. Is the Plaintiff Entitled to Damages?
Plaintiff, in addition to seeking the return of the deposit is seeking damages for expenses incurred in searching title, obtaining a new survey, making application for a mortgage and legal fees.
Paragraph 21 ( c) of the contract provides:
If this contract is cancelled pursuant to its terms, other than as a result of Purchaser's default, this contract shall terminate and come to an end, and neither party shall have any further rights, obligations or liabilities against or to the other hereunder or otherwise, except that: (i) Seller shall promptly refund or cause the Escrowee to refund the Downpayment to Purchaser and, unless cancelled as a result of Purchaser's default or pursuant to paragraph 8, to reimburse Purchaser for the net cost of examination of title, including any appropriate additional charges related thereto, and the net cost, if actually paid or incurred by Purchaser, for updating the existing survey of the Premises or of a new survey, and (ii) the obligations under paragraph 27 shall survive the termination of the contract.
In order for either
party to succeed on a claim for damages, that party must prove that it was ready, willing and able
to close title on the terms set forth in the contract. Although it is alleged that the plaintiff had
obtained a mortgage commitment, there is no proof of that fact. The copy of the alleged mortgage
commitment attached as an exhibit contains only three of its four pages, there is no showing that
it was ever accepted by the purchaser. As pointed out above, the lock-in rate of the alleged
commitment expired prior to the parties seeking to schedule a closing in December 2007. There
is no showing that the [*6]commitment was ever accepted, let
alone in effect on the initial closing date or on the time of the essence closing date. If the
purchaser did not obtain a mortgage commitment, then the purchaser could cancel the contract
and receive back the downpayment pursuant to the terms of paragraph 8 of the contract. It can be
concluded from the actions of the parties that they continued to act as if a mortgage commitment
was still in effect, however, neither party has proven that contingency was met. For the plaintiff
to hold the defendant in breach of the contract so as to entitle
plaintiff to damages, plaintiff was required to prove he was ready, willing
and able to close had not the defendant failed to deliver marketable title. Plaintiff has not met that
burden of proof and cannot collect any damages.
Conclusion:
Plaintiff's motion for summary judgment is granted to the extent plaintiff is entitled to the refund of the $10,000.00 downpayment. The facts establish that the thirty-foot setback line renders the title "unmarketable" and the parties agreed that the defendants would deliver marketable title.
Defendant Walsh, as stakeholder, is directed to pay the downpayment of $10,000.00 currently being held in escrow to plaintiff's by June 1, 2008. Upon release of those funds, defendant Walsh will be released of any liability.
Plaintiff's motion for damages is denied. Plaintiff has not proven he was ready, willing and able to close pursuant to the terms of the contract but for defendants' inability to deliver marketable title. For example, there is no showing that there was an enforceable mortgage commitment in place.
Defendants' motion for summary judgment is denied. Defendants' counterclaim is dismissed on the merits.
The foregoing constitutes the decision and order of the court.
Dated: May 19, 2008___________________________
Staten Island, NYHON. PHILIP S. STRANIEREJudge, Civil Court
ASN by ______ on __________.
A P P E A R A N C E S
Counsel for Plaintiff:Marc E. Scollar, Esq.
1031 Victory Blvd.
Staten Island, NY 10301
718-720-4505
[*7]
Counsel for Defendant:Christopher Fitzpatrick,
Esq.
Jacobi, Sieghardt, Bousanti,
Piazza & Fitzpatrick, P.C.
235 Forest Ave.
Staten Island, NY 10301
718-442-4600