Defendants move for summary judgment on grounds of no material question of fact as to liability for breach of contract and plaintiff cross-motion for summary judgment on same grounds.

First Issue: Whether the escrow agreement for termite damage is binding upon the sellers and requires payment for repair and abatement of termite damage exceeding the funded account amount of $3,000.00?

On November 18, 2004, plaintiffs David Rosenberg and Helene Rosenberg entered into a residential contract with defendants Thomas J. Dwyer and Rose Dwyer Quinn for the sale of the premises at 170 Castle Avenue, Westbury, New York. As per the terms of the contract, the Plaintiffs obtained a termite inspection of the premises. The inspection findings revealed termite damage in various parts of the residence and detached garage structure. The cost for treatment and repair was estimated at $2,600.00. In response to these findings, Defendants obtained an independent termite inspection. The subsequent report documented damage and repairs totaling $650.00, a significantly different outcome from the Plaintiffs' inspection report.

Unable to resolve the discrepancy between the two reports, but wishing to close, plaintiffs and defendants executed an escrow agreement for the purpose of addressing the termite damage. [*2]

The Escrow Agreement provides in part:

Seller agrees to obtain, at Sellers' expense, within ten business days of this date, a third Termite Inspection by a duly licensed and insured pest control operator who shall be agreeable to Purchasers (herein "independent termite inspector") and the determination of the independent termite inspector as to the treatment and repair shall be binding upon the Sellers and Purchasers. Purchasers hereby authorize their attorney, Richard L. Reers, Esq., to bind them in this matter. The cost of the treatment and repair shall be paid by the Escrow Agent from the Escrow Fund and proof of the treatment, repair and payment shall be promptly sent to Purchaser whereupon the Escrow Agent is authorized to pay over the remaining monies to the Sellers.

As per the terms of the escrow agreement, executed at the closing on December 30, 2004, Defendant deposited $3,000.00 into the account to be used for termite treatment and repair. Additional terms of the agreement required that a third, independent inspection be obtained by the defendants at their expense and that the findings of said inspection would serve as the final determination of any and all required termite treatment and repair. The initial third inspection, conducted on January 3, 2005, revealed damage and repairs amounting to $2,090.00. A follow-up inspection on January 6, 2005 of previously inaccessible portions of the premises revealed further damage requiring additional treatment and repair at an added cost of $3,800.00, as follows:

1/6/05 damage to approximately 38 feet of sill plate, damage to Cripple studs, Jack studs, & portion of rim plate. Repairs = $3800

Soil Removed from Crawl space.

Following submission of the third report, Defendants informed the Plaintiffs that a check in the amount of $2,090.00 would be issued to cover the cost of termite abatement and repair in accordance with the initial third report and that no additional liability was warranted as the damage discovered in the previously inaccessible areas of the premises occurred post-closing. The Plaintiffs contend that the terms of the escrow agreement are clear on their face and that by entering into said agreement Defendants agreed to be bound by its terms and, therefore, are responsible for the additional $3,800.00 in treatment and repairs.

It is well settled law that the provisions of a residential sale contract are merged in the deed and, therefore, terminate upon closing of the title, see 15 NY Jur, Deeds, §75, p. 151. In Crowley Marine Associates v. NYConn Associates, L.P., 292 AD2d 334, 738 N.Y.S.2d 681 (2nd Dept 2002), the court dismissed the purchasers claim that the seller misrepresented property taxes in the tax provision clause of the contract. The [*3]Crowley court held that there was a clear intent evidenced by the parties that the tax provision would not survive closing.

In Lunal Realty, LLC v. DiSanto Realty, LLC, 88 AD3d 661, 930 N.Y.S.2d 619 (2nd Dept 2011), the court found that certain provisions to a rider in a contract for sale of combined residential and commercial space did not "survive the delivery of the deed." In Lunal, the rider specified that the seller represented an accurate rent roll to the purchaser. At the time of closing, two tenants filed complaints alleging rent overcharges totaling $57,525.99. The purchaser was directed to repay the tenants for the overage and new maximum monthly rents were ordered. The purchaser sued the seller alleging breach of contract, fraud and negligent misrepresentation. The court granted summary judgment to the seller finding no clear evidence of intent by the parties that the rider would survive the closing. The deed had been delivered and any claims by the purchasers with respect to the rider terminated at that time.

An exception to the doctrine of merger is found when parties to the contract have demonstrated a clear intent that a particular provision of the contract survive delivery of the deed. (Joel D. Davis, et al. v. Sidney Weg, et al.,104 AD2d617, 619, N.Y.S.2d 553, 555 [2nd Dept 1984]) In Davis, the court found language of the contract provision requiring the seller to deliver the premises to the purchaser free of health code violations and appropriate subdivision approvals survived the closing of the title by the plain language of the provision which stated, "this provision of the contract shall survive delivery of the deed." A clear intent by the parties that the provision survive delivery of the deed was evidenced.

In H.B. Singer, LLC v. Thor Realty, LLC, 57 AD3d 613, 869 NYS2d 203 (2nd Dept 2008), the Court held that the retention of the escrow funds as per the escrow agreement was for "satisfying obligations still outstanding after the closing." The merger doctrine was not applicable.

In the case at bar, the parties entered into an escrow agreement at closing for the purpose of remedying a termite condition on the premises. Specifically, the escrow agreement required the seller to deposit funds in escrow and obtain an independent inspection. Both parties agreed to be bound by the findings of the report and specified course of action for treatment and repair. Here, the plain language of the agreement, "the determination of the independent termite inspection shall be binding upon sellers and purchasers" evidenced a clear intent by the Plaintiffs and Defendants that the terms of the escrow agreement would survive the closing.

The court rejects Defendants' contentions that its liability would be limited to $3,000.00. Plaintiffs and Defendants both agreed that they would be bound by the determination of All County Pest Control. All County found additional damage to the premises in the sum of $3,800.00. which was described in their report addressed prior herein. [*4]

In Pleasant Hill Developers v. Foxwood Enterprises, LLC, 65 AD3d 1203, 885 NYS2d 531 (2nd Dept 2009), the Court found that defendants failed to make a prima facie showing that the $15,000.00 escrow deposit provided for by agreement was intended as a general limitation on their liability. In the case at bar, there is no clear indication that Defendants' liability was limited to $3,000.00

Therefore, Plaintiff is awarded judgement in the sum of $3,800.00.

Second Issue: Is the Plaintiffs' second cause of action, whether based upon contract or fraud, barred by the statute of limitations? Does the merger doctrine bar the second cause of action?

The rider to the aforementioned residential contract contained a provision representing the premises as being connected to a municipal sewer system. In 2006, during the installation of a patio, the Plaintiffs discovered that a septic rather than sewer system connection existed. Plaintiffs contend that Defendants breached the contract representation and claim damages in the amount of $6,200.00. Defendants argue that the cause of action is barred by the statute of limitations and further that the Plaintiffs had an opportunity to inspect the premises before the sale was finalized and agreed to accept the property "As Is". Defendant further argues that the merger doctrine applies to bar any claim for the failure of the premises to be connected to the sewer system.

The statute of limitations in New York State bars a cause of action for breach of contract brought more than six years after the breach occurred, see CPLR 213 [2]. As per CPLR 203 (a), the statute of limitations commences when the cause of action occurs. In contract cases, the statute of limitations begins to run and the cause of action accrues at the time the breach occurs. (The West 90th Owners Corp. v. Arthur D. Schlechter, 137 AD2d 456, 525 N.Y.S.2d 33) . In The West 90th Owners Corp., the court held that the breach of contract claim regarding the terms of a lease contained in a contract for sale occurred at the time the contract was signed. Therefore, the statute of limitations for the alleged breach began to run at signing of the contract and not from delivery of the deed at closing:

The motion court properly dismissed the breach of contract and fraud claims based on the contract representations. "In contract cases, the cause of action accrues and the Statute of Limitations begins to run from the time of the breach. (Kassner & Co. v. City of New York, 46 NY2d 544, 550, 415 N.Y.S.2d 785, 389 N.E.2d 99). The representation as to the terms of the restaurant lease was false when made. Thus, the breach [*5]occurred at the time of the execution of the contract. While plaintiff presumably could not have sought damages for the loss of 1987-95 increased rent until it took title in 1981, it could have sued for rescission in 1979 or 1980. Thus, at the time of breach plaintiff had a remedy.

The Court of Appeals has held that the awareness of the injured party to the existence of the breach is immaterial as to when the statute of limitations begins to run. (Ely-Cruikshank Co., Inc., v. Bank of Montreal et al.,NY2d 399, 615 N.E.2d 985, 599 N.Y.S.2d 501.) Therefore, whether plaintiffs were cognizant of the alleged breach is immaterial.

Applying the law to the facts herein, the breach of contract with respect to the premises being connected to the sewer system occurred at the time the contract was signed by the Plaintiffs on November 18, 2004. The cause of action was brought December 29, 2010, thereby, rendering it barred by the six year statute of limitations. See West 90th Owners Corp., supra. See also, Fabozzi v. Coppa, 5 AD3d 722, 774 NYS2d 555 (2nd Dept 2004), wherein the Court dismissed the purchaser's action against the vendors for breach of contract and fraudulent inducement based upon the six year statute of limitations:

The causes of action alleging breach of contract are time-barred because the action was commenced more than six years after the alleged breach (see CPLR 213[2] Ely-Cruikshank Co. v. Bank of Montreal, 81 NY2d 399, 402, 599 NYS2d 501, 615 NE2d 985).

Plaintiffs contend that they are not suing the Defendants for fraud, but solely for breach of contract in the second cause of action. Plaintiffs' attorney Richard L. Reers writes in his affirmation dated January 16, 2014, submitted in support of the cross motion on pages 2 and 4 that the second cause of action is based upon contract and not fraud:

The second cause of action which is also for breach of contract alleges that defendants are liable to plaintiffs for the sum of $6,200.00 representing the cost of connecting the premises to the municipal sewer system (herein "sewer system") which was represented in the Contract of Sale to have been connected to the sewer system and which, in fact, was connected to a septic tank and not to the sewer system contrary to the specific representation of the defendants set forth in the Contract of Sale.

Defendants' argument that the second cause of action sounds in fraud is mistaken since the operative terms of the Contract of Sale at ¶47 (Ex. 5) aver that the "defendants have knowingly breached the representation made by them in the residential contract of sale resulting in damages to [*6]the plaintiffs in the sum of $6,200.

Even if one would consider the second cause of action to be based upon fraud, the claim would still be barred by the six year statute of limitation. Plaintiffs had an inspector inspect the premises prior to closing who recommended that the Plaintiffs investigate the status of the premises being connected to a sewer. Plaintiffs contacted the Village of Westbury which told Plaintiffs that the premises was connected to the sewer. Any fraud claim arose before closing of title and is barred by the six year statute of limitations. See Fabozzi v. Coppa, 5 AD3d 722, 774 NYS2d 555 (2nd Dept 2004).

The closing of title occurred without any provision being made for the survival of the contractual representation that the premises were connected to the sewer. Thus, any claim by Plaintiffs in the second cause of action is barred by the merger doctrine. See Ka Foon Lo v. Curtis, 29 AD3d 525, 815 NYS2d 131 (2nd Dept 2006), wherein the Court held that the first cause of action was in actuality a claim for breach of contract because the alleged falsity was a term of the contract of sale. The Court barred any claims for breach of contract based upon the merger doctrine:

The plaintiff also failed to state a cause of action to recover damages for breach of contract. Because title to the property had closed and the deed was delivered, "any claims the plaintiff might have had arising from the contract of sale were extinguished by the doctrine of merger unless there was a 'clear intent evidenced by the parties that a particular provision of the contract of sale [would] survive the delivery of the deed'" (Crowley Mar. Assoc. v. NYConn Assoc., 292 AD2d 334, 335, 738 N.Y.S.2d 681, quoting Davis v. Weg, 104 AD2d 617, 619, 479 N.Y.S.2d 553; see Noufrios v. Murat, supra at 791, 598 N.Y.S.2d 82).

See also Crowley Marine Associates v. NYConn Associates, L.P., 292 AD2d 334, 738 NYS2d 681 (2nd Dept 2002), barring a claim for misrepresentation of the amount of real estate taxes because of the merger doctrine.

Likewise, the merger doctrine barred any contract claim in Lunal Realty, LLC v. DiSanto, LLC, 88 AD3d 661, 930 NYS2d 619 (2nd Dept 2011).

Lastly, any claim by Plaintiffs based upon fraud would fail because there was no justifiable reliance upon the alleged misrepresentation of Defendants concerning the sewer connection. Plaintiffs had an inspector and consulted with the Village of Westbury about the status of the premises being connected prior to closing. See Daly v. Kochanowicz, 67 AD3d 78, 884 NYS2d 144 (2nd Dept 2009).

Plaintiff is granted on the first cause of action the sum of $3,800.00. [*7]

Plaintiffs' second cause of action is dismissed with prejudice for the reasons set forth herein.

So Ordered:

/s/ Hon. Scott Fairgrieve

DISTRICT COURT JUDGE

Dated:March 11, 2014

cc:Purcell & Ingrao, P.C.

Law Offices of Richard L. Reers, P.C.