- Summary Judgment Denied in Construction Financing Arrangement: Markham Gardens L.P. v 511 9th LLC
- December 28, 2012 | Author: James M. Wicks
- Law Firm: Farrell Fritz, P.C. - Hauppauge Office
In a September 10, 2012 decision by Justice DeStefano, the Court denied plaintiff’s motion for summary judgment and for leave to amend, and granted the cross-motion of one of the defendants for summary judgment, dismissing the complaint as against it.
The case arose out of a 421-a Purchase Agreement (“421-a Agreement”) with Vista Developers Corporation , pursuant to which Vista agreed to sell 92 negotiable certificates to defendant 511 9th. Markham obtained an assignment from Vista of its rights and claims under the 421-a Agreement. Markham is a developer of an affordable housing development in Staten Island.
The closing date is set forth in the agreement: “’Closing Date’ shall mean the date on which Seller elects to deliver the Negotiable Certificates to Purchaser, as specified in a Notice to Purchaser, which Notice shall be delivered to Purchaser at least fifteen (15) days prior to the Closing Date: provided, that, in no event shall the Closing Date be (i) earlier than September 30, 2007, and (ii) later than September 30, 2008, as may be extended for up to ninety (90) days by Force Majeure.”
Defendant PB Capital was the construction lender. The parties executed a “set-aside agreement”, whereby PB was to set aside funds from the construction financing 511 9th was receiving from PB. The amount set aside, which was to be used to pay for the certificates, was equal to the full purchase price. The agreement provided that PB “agreed to provide a loan to refinance an existing acquisition loan and to construct the project”, and that the set aside amount would not be advanced unless “the conditions to the making of the advance of the Set-Aside Amount pursuant to the Construction Loan Documents have been satisfied . . . .” The agreement contained a notice provision which set forth that PB was to give notice to Markham in the event 511 9th defaulted with respect to any of its obligations under the construction loan within 10 days after PB notified 511 9th of the default.
Markham argued that 511 9th breached the 421-a Agreement by failing to close by the “time of the essence” closing date set forth in its letter. The Court found, however, that it was not Markham’s letter that made time of the essence, but rather the 421-a Agreement, which set its own time of the essence period. The Court also found triable issues of fact existed as to whether 511 9th elected to continue the contract. The Court noted that the set-aside agreement was entered into just one month prior to the last possible date in which to close, suggesting that the parties’ contemplated the 421-a Agreement continuing past the closing period.
Markham also sought summary judgment on its claim against PB, arguing that PB breached the set-aside agreement by not funding the construction loan to 511 9th in an amount sufficient to fund the purchase price of the certificates. The claim arose out of PB’s alleged failure to appear for the closing and to deliver the Purchase Price of the 421-a certificates. The Court noted, however, that the certificates have since been sold for an amount more than the price set forth in the 421-a Agreement and, as such, there were no damages. In the absence of any damages, held the Court, Markham did not establish entitlement to judgment as a matter of law on its claim for breach of contract against PB. PB’s cross motion for summary judgment dismissing the complaint as against it was granted.
Finally, the Court denied Markham’s motion for leave to amend the complaint to add a claim for fraud, finding that the proposed claim was devoid of any merit.
Markham Gardens L.P. v. 511 9th LLC, Sup Ct, Nassau County, September 10, 2012, DeStefano, J, Index No. 026709-09.