| 141 Sunnyside LLC v M. Zoarez, Inc. |
| 2013 NY Slip Op 51826(U) [41 Misc 3d 1224(A)] |
| Decided on November 1, 2013 |
| Supreme Court, Kings County |
| Schmidt, J. |
| Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. |
| As corrected in part through November 22, 2013; it will not be published in the printed Official Reports. |
141 Sunnyside
LLC, Plaintiff,
against M. Zoarez, Inc., Defendant, 573 Elton Corp., Intervener-Defendant. |
David I. Schmidt, J.
The following papers numbered 1 to 8 read herein:Papers Numbered
Notice of Motion/Order to Show Cause/
Petition/Cross Motion and
Affidavits (Affirmations) Annexed1-4
Opposing Affidavits (Affirmations)5, 6, 7
Reply Affidavits (Affirmations)8[*2]
Affidavits (Affirmations)
Other Papers
Upon the foregoing papers, intervener-defendant 573 Elton Corp. (573 Elton) moves for an order: (1) pursuant to CPLR 6514, directing the County Clerk to cancel and discharge the Notice of Pendency filed by plaintiff on September 15, 2012 against the real property located and known as 256 Monroe Street, Brooklyn, New York 11216, Kings County, Block 1818, Lot 24 (Premises); and (2) pursuant to CPLR 3211 and 3212, dismissing Plaintiff's causes of action to the extent that they seek specific performance and/or any other relief as against 573 Elton.
573 Elton's motion is granted and (1) the County Clerk is directed to cancel and discharge the Notice of Pendency filed by plaintiff on September 15, 2012 against the real property located and known as 256 Monroe Street, Brooklyn, New York 11216, Kings County, Block 1818, Lot 24 and (2) 573 Elton is granted summary judgment dismissing plaintiff 141 Sunnyside LLC's (Sunnyside) complaint to the extent that Sunnyside seeks specific performance on its contract of sale with defendant M. Zoarez, Inc., (M Zoarez) and to the extent that it seeks any other relief as against 573 Elton.
Sunnyside commenced this action on or around September 15, 2011 alleging that M Zoarez breached an August 24, 2011 contract of sale (Sunnyside Contract) of the Premises to Sunnyside by improperly canceling the contract and returning Sunnyside's down payment. As is relevant here, Sunnyside seeks specific performance of the Sunnyside Contract based on this alleged breach. Sunnyside also filed a notice of pendency against the Premises on September 15, 2011.
At least for the purposes of this motion, the underlying facts are essentially undisputed. On or around August 24, 2011, Sunnyside and M Zoarez executed a contract in which M Zoarez agreed to sell the Premises to Sunnyside for $300,000 and which provided for a time of the essence closing date of October 5, 2011. On that same date, Sunnyside gave M Zoarez's real estate attorney, Jose Polanco, Esq., a down payment check in the amount of $15,000 to be held in escrow by Polanco until the closing. By way of an e-mail dated August 31, 2011, Polanco informed Sunnyside that the October 5, 2011 closing date in the Sunnyside Contract was a mistake, and that the correct date was September 5, 2011. As September 5, 2011 was a holiday, Polanco stated that M Zoarez would agree to closing on September 6, 2011. Sunnyside did not appear on September 6, 2011, and, by way of a September 7, 2011 letter, Polanco informed Sunnyside that M Zoarez had elected not to proceed with the sale to Sunnyside and tendered back the $15,000 down payment. As noted above, Sunnyside commenced this action and filed the notice of pendency on September 15, 2011. [*3]
After it commenced the action, Sunnyside learned that M Zoarez had sold the Premises to 573 Elton. It is undisputed that M Zoarez transferred its interest in the Premises to 573 Elton by way of a deed dated September 7, 2011 that was recorded on September 26, 2011. By way of an order dated May 8, 2012, the court gave 573 Elton permission to intervene in the action, and 573 Elton has since made the instant motion alleging that it is entitled to the cancellation of the notice of pendency and summary judgment dismissing any relief in the form of specific performance because it is a bona fide purchaser for value. In its initial opposition papers, Sunnyside argued that determination of both issues was premature as the facts relating to whether 573 Elton is a bona fide purchaser for value are within 573 Elton's exclusive possession. As such, the court, by way of an order dated April 16, 2013, adjourned submission of the motion in order to allow Sunnyside to obtain discovery with regard to whether 573 Elton is a bona fide purchaser for value. Such discovery has now taken place, and both parties have submitted supplemental papers addressing the merits of 573 Elton's assertion that it is a bona fide purchaser for value.
Initially, before addressing the merits of the motion, the court notes that, although 573 Elton did not attach a copy of the pleadings to its moving papers, Sunnyside did not object to on that ground and has thus waived any objection to the failure to attach the pleadings (see Petrozza v Franczen, 109 AD3d 650, 652 [2d Dept 2013]; Marcel v Chief Energy Corp., 38 AD3d 502, 503 [2d Dept 2007]). In addition, while it is not entirely clear whether 573 Elton has joined issue, the parties have charted a summary judgment course through their proceeding to obtain discovery with respect whether 573 Elton is a bona fide purchaser for value and by submitting the factual issues to the court for resolution (see Kaplan v Roberts, 91 AD3d 827, 828 [2d Dept 2012]; Burnside 711, LLC v Nassau Regional Off-Track Betting Corp., 67 AD3d 718, 720 [2d Dept 2009]). Under these circumstances, the court will address the motion on the merits.
Turning to the merits of the motion, it is undisputed that Sunnyside did not record the Sunnyside Contract pursuant to Real Property Law §§ 291 or 294.[FN1] Under these recording statutes an unrecorded contract of sale is deemed void as against a subsequent purchaser who records his or her conveyance as long as the subsequent purchaser is a bona fide purchaser for value (see Mortgage Electronic Registration Systems, Inc. v Rambarran, 97 AD3d 802, 803-804 [2d Dept 2012]; Foster v Piasecki, 259 AD2d 804, 805-806 [3d Dept 1999]; Real [*4]Property Law §§ 291and 294[3]). A person claiming to be a bona fide purchaser for value in a case involving a prior contract of sale must demonstrate, prima facie, that he or she purchased the property for valuable consideration, that he or she did not have notice of the prior contract and that he or she did not have "knowledge of facts that would lead a reasonably prudent purchaser to make inquiry" about the prior contract (TCJS Corp. v Koff, 74 AD3d 1188, 1189 [2d Dept 2010]; Matter of Jenkins v Stephenson, 293 AD2d 612, 614 [2d Dept 2002]; Yen-Te Hsueh Chen v Geranium Dev. Corp., 243 AD2d 708, 709 [2d Dept 1997], lv dismissed 91 NY2d 921 [1998]).
573 Elton has demonstrated, prima facie, that it paid valuable consideration for the Premises. In this respect, it has submitted affidavits from Assaf Sanilovich, a principal of 573 Elton, and Drew Lontos, Esq., the attorney who represented 573 Elton in the purchase of the Premises, both of whom stated that 573 Elton paid M Zoarez $320,000 for the Premises. In addition, 573 Elton has submitted documents, including copies of cover pages and attached documents filed with the Office of City Register, showing that 573 Elton paid city and state real property transfer taxes, obtained a mortgage in the amount of $280,000 to finance a portion of the purchase, and thereafter obtained the discharge of a tax lien on the Premises. Sunnyside does not submit any evidentiary facts that would raise an issue of fact with respect to the payment of valuable consideration and does not otherwise raise any legal challenge to the sufficiency 573 Elton's showing in this respect (see Nethaway v Bosch, 199 AD2d 654, 654 [3d Dept 1993]; Berger v Polizzotto, 148 AD2d 651, 652 [2d Dept 1989], lv denied 74 NY2d 612 [1989]; Pinnock v Rush, 2011 NY Slip Op 31678 [U] [Sup Ct, Queens County 2011]).[FN2]
Through Sanilovich and Lonto's affidavits, 573 Elton has also demonstrated, prima facie, that it did not have notice of the Sunnyside contract or knowledge of any facts that would have required it to make inquiry (see Berger, 148 AD2d at 652; cf. Yen- Te Hsueh Chen, 243 AD2d at 709; Morrocoy Mar. v Altengarten, 120 AD2d 500, 500-501 [2d Dept 1986]).
Based on deposition transcripts from the parties involved in the M Zoarez and 573 Elton sale that Sunnyside has attached to its supplemental opposition papers, Sunnyside argues that inconsistencies in the testimony are sufficient to demonstrate factual issues with respect to whether 573 Elton should have made further inquiry. The inconsistencies that Sunnyside points to relate to the dates when 573 Elton first learned that the Premises was for sale and when 573 Elton signed the contract of sale and down payment check. Sunnyside, however, has failed to explain how earlier knowledge that the property was for sale or an earlier date for signing the contract of sale in any way suggest that 573 Elton had or should have had knowledge that another purchaser had already entered into a contract with M [*5]Zoarez. These immaterial inconsistencies do not suggest that the testimony of 573 Elton's witnesses may not to be believed as a matter of law and the inconsistencies likewise do not warrant denial of the motion (see Westphal v Greyhound Lines, Inc., 32 AD3d 429, 430 [2d Dept 2006]; Rodriguez v Forest City Jay St. Assoc., 234 AD2d 68, 69-70 [1st Dept 1996]).
Sunnyside also asserts that factual issues are raised based on M Zoarez's desire to speedily close the transaction, the fact that M Zoarez does not appear to have signed the contract before the closing or deposited the down payment check, the existence of issues with respect to building violations, liens and title, and 573 Elton's obtaining title insurance in an amount $100,000 more than the purchase price. As with its assertions with respect to when 573 Elton learned of the contract, Sunnyside has failed to demonstrate how these facts would have suggested to 573 Elton that it ought to inquire about the possibility of other contracts. Of note, in this regard, M Zoarez's failure to sign the contract and deposit the down payment check appear to relate to its desire to close speedily, a desire that can be attributed to numerous reasons other than the possible existence of another purchaser in-contract. In any event, any issue relating to the absence of a signed contract would appear to be rendered moot once the deed was delivered (see Lunal Realty, LLC v Di Santo Realty, LLC, 88 AD3d 661, 662-663 [2d Dept 2011] [upon delivery of deed, merger doctrine extinguishes contractual claims that are not expressly reserved]; Van Decar v Streeter, 136 Misc 206, 210 [Sup Ct, Warren County 1930] [deed duly executed and delivered ratifies oral contract]). Further, the return of the 573 Elton's down payment check did not change the purchase price, since the closing statement for the sale to 573 Elton shows that the full price was paid at the closing without any deduction for a down payment. Finally, both Lontos, 573 Elton's attorney at the closing, and a representative from the title insurer suggested in their deposition testimony that 573 Elton likely purchased additional title insurance to cover renovations to the property. In sum, none of these facts, considered separately or together, would suggest to 573 Elton that M Zoarez had already signed a contract with another purchaser.
Sunnyside also argues that the filing of the notice of pendency precludes any finding that 573 Elton is a bona fide purchaser. Since Sunnyside did not file its notice of pendency until September 15, 2011, a date after M Zoarez conveyed to property to 573 Elton on September 7, 2011, the notice of pendency did not provide 573 Elton with constructive notice of Sunnyside's interest in the premises before the conveyance and thus did not affect the bona fides of 573 Elton's purchase (compare TCJS Corp. v Koff, 74 AD3d 1188, 1189 [2d Dept 2010] [notice of pendency filed after conveyance]; with Kelly v Hajdok, 285 AD2d 451, 452 [2d Dept 2001] [notice of pendency provided constructive notice of prior interest where filed prior to conveyance], lv denied 97 NY2d 606 [2001]; Letizia v Flaherty, 207 AD2d 567, 569 [3d Dept 1994]; American Auto. Ins. Co. of St. Louis v Sansone, 206 AD2d 445, 445 [2d Dept 1994]).
The power of a notice of pendency to bind a party to a judgment likewise does not affect 573 Elton's interest here. "The purpose of a notice of pendency is to afford [*6]constructive notice from the time of the filing so that any person who records a conveyance or encumbrance after that time becomes bound by all of the proceedings taken in the action" (Corporation of Presiding Bishop of Church of Jesus Christ of Latter-Day Sts. v Solow Bldg Corp., 52 AD2d 533, 534 [1st Dept 1976]; see also Grid Realty Corp. v Winokur, 43 NY2d 956, 957 [1978]; Goldstein v Gold, 106 AD2d 100, 102-103 [2d Dept 1984], affd in part 66 NY2d 624 [1985]). A notice of pendency, however, does not create any rights that do not already exist and is no substitute for the recording of a conveyance or contract (see DLJ Mtg. Capital, Inc. v Windsor, 78 AD3d 645, 647 [2d Dept 2010]; TCJS Corp., 74 AD3d at 1189; 2386 Creston Ave. Realty, LLC v M-P-M Mgt. Corp., 58 AD3d 158, 160-161 [1st Dept 2008], lv denied 11 NY3d 716 [2009]). Accordingly, the notice of pendency would only bind 573 Elton to the outcome of the litigation if Sunnyside had an enforceable interest in the premises superior to 573 Elton's interest (see 2286 Creston Ave. Realty, LLC, 58 AD3d at 161). 573 Elton, however, has demonstrated that its interest is superior to that of Sunnyside through its showing that it (573 Elton) is a bona fide purchaser for value that recorded its conveyance first (see TCJS Corp., 74 AD3d at 1189; 2386 Creston Ave. Realty, LLC, 58 AD3d at 161; Avila v Arasada Corp., 34 AD3d 609, 610 [2d Dept 2006]; Real Property Law §§ 291 and 294).
Some decisions addressing the impact of the filing of a notice of pendency, at first
glance, appear to support Sunnyside's argument (see e.g. Novastar Mtge., Inc. v Mendoza, 26 AD3d 479,
479-480 [2d Dept 2006]; Matter of Jenkins, 293 AD2d at 613-614; Morrocoy
Mar., 120 AD2d at 500-501; Goldstein, 106 AD2d at 102-103). These cases
are generally distinguishable from the instant facts because they either involve a plaintiff
who already had an established interest in the property or a defendant who was not a
good faith purchaser (see 2386 Creston Ave. Realty, LLC, 58 AD3d at 161-162).
In any event, it is clear from the majority of cases addressing factual situations similar to
those here, including recent Appellate Division, Second Department Cases, that
Sunnyside's filing of the notice of pendency after the conveyance had no impact on 573
Elton's priority or its ability to claim bona fide purchaser status (see DLJ Mtg.
Capital, Inc., 78 AD3d at 647 [2d Dept 2010]; TCJS Corp., 74 AD3d at
1189 [2d Dept 2010]; 2386 Creston Ave. Realty, LLC, 58 AD3d at 160-162 [1st
Dept 2008]; Avila, 34 AD3d at 610 [2d Dept 2006]; Finkelman v Wood,
203 AD2d 236, 238 [2d Dept 2006]; Varon v Annino, 170 AD2d 445, 445 [2d
Dept 1991]; La Marche v Rosenblum, 50 AD2d 636, 636 [3d Dept 1975]). 573
Elton is thus entitled to summary judgment dismissing Sunnyside's claim for specific
performance and an order
directing the clerk to cancel the notice of pendency (see TCJS Corp.,
74 AD3d at 1189; 2386 Creston Ave. Realty, LLC, 58 AD3d at 163).
This constitutes the decision, order and judgment of the court [*7]
E N T E R,
J. S. C.