DECISION AND ORDER Plaintiff is the former owner of certain real property located at 302 East Shore Drive in the Town of Adirondack, Warren County, which property is located on Schroon Lake. On August 29, 2020, plaintiff contracted to sell this property to defendant for $655,000.00 cash. The contract required defendant to make an initial deposit of $10,000.00, followed by an additional deposit of $40,000.00 on September 18, 2020. The remaining balance of $615,000.00 was to be paid at the closing. The contract further provided, in pertinent part: “[Plaintiff] shall convey and [defendant] shall accept the property subject to all covenants, conditions, restrictions and easements of record and zoning and environmental protection laws so long as the property is not in violation thereof and any of the foregoing does not prevent the intended use of the property for the purpose of [a] personal residence, also subject to any existing tenancies, any unpaid installments of street and other improvement assessments payable after the date of the transfer of title to the property, and any state of facts which an inspections and/or accurate survey may show, provided that nothing in this paragraph renders the title to the property unmarketable.” On August 22, 2020, plaintiff executed a Property Condition Disclosure Statement. In this Statement plaintiff responded “Yes” to question No. 4, which inquired whether “anybody other than [plaintiff had] a lease, easement or any other right to use or occupy any part of [the] property.”1 Question No. 7 then inquired if “there [were] any features of the property shared in common with adjoining landowners” and plaintiff responded, “Yes[, s]ection of the north driveway entrance.” Defendant countersigned this Statement on August 27, 2020 to acknowledge receipt. Defendant made the initial deposit of $10,000.00 and the additional deposit of $40,000.00, with both deposits held in escrow by Najer Realty, the listing broker. On September 2, 2020, counsel for defendant sent correspondence to counsel for plaintiff advising that he had “reviewed the contract with his client and approve[d] the same subject to and conditioned upon” ten enumerated items, with item No. 9 stating as follows: “If the premises are sold subject to easements, covenants, conditions or restrictions, these must be disclosed in detail and approved by [defendant], through our office. This qualification of approval shall continue up to ten (10) days following the issuance of the title report by the…title company, unless objection to same are communicated in the interim.” On September 8, 2020, counsel for plaintiff emailed counsel for defendant, attaching “copies of [plaintiff's] deed and title policy, the driveway easement referenced in these documents and a filed map.” She advised that “the driveway easement was made very clear to [defendant] prior to him signing the contract[, and c]onsequently [she] excluded [it] from item [No.] 9″ in counsel for defendant’s September 2, 2020 correspondence. Counsel for plaintiff then countersigned the September 2, 2020 correspondence and attached it to the email, with item No. 9 revised to state as follows: “If the premises are sold subject to easements other than the driveway easement provided with the return of this letter, covenants, conditions or restrictions, these must be disclosed in detail and approved by [defendant], through our office. This qualification of approval shall continue up to ten (10) days following the issuance of the title report by the…title company, unless objection to same are communicated in the interim.” The title report was thereafter completed on September 12, 2020 and noted the easement over the driveway, as well as a restriction on commercial use of the property. In this regard, the “Map of a Survey for Gary Garstens” annexed to plaintiff’s deed provides that “[n]o commercial use shall be permitted” on the property. On October 28, 2020, counsel for defendant sent an email to counsel for plaintiff with a proposed Affidavit of Historic Use attached thereto, requesting that she have her client execute the same. The proposed Affidavit stated, inter alia, that “[t]he premises has been used as a commercial use, having been continuously used as a vacation rental property since 1996.” Counsel for plaintiff’s assistant thereafter responded as follows: “We provided your Affidavit to our client for review and he will not sign it as it is not accurate. He has only owned the property since 2013 and did not continuously rent it during his ownership — it has been his primary residence for the past 3 years.” The closing was scheduled for November 5, 2020. On November 4, 2020, counsel for defendant sent correspondence to counsel for plaintiff advising that the closing had to be postponed because his client “still [had] concerns regarding the easements that encumber the property and the prohibition on commercial use from both a covenant and restriction standpoint.” Counsel for plaintiff then responded on November 5, 2020, advising that — as per the terms of counsel for defendant’s September 2, 2020 correspondence — defendant had ten (10) days from issuance of the title report to enter his objections, with those ten (10) days having expired. Counsel for plaintiff further stated as follows: “If this transaction has not closed by the end of the day today then I will send a law day letter.” On November 6, 2020, counsel for defendant sent correspondence to counsel for plaintiff advising that “[plaintiff] is unable to deliver marketable title to the premises[ and, a]s a result, [defendant] is…terminating the contract.” Counsel for plaintiff then sent correspondence that same date “to give notification…that TIME IS OF THE ESSENCE with respect to closing [the subject] transaction.” Counsel for plaintiff further stated as follows: “[W]e hereby declare a law day closing for November 20, 2020, at 10:00 A.M. at my office[. Defendant's] failure to close on November 20, 2020, at 10:00 AP.M [sic] will be deemed a default under the terms of the contract resulting in the forfeiture of the contract deposits.” Defendant did not appear for the closing on November 20 and, on December 10, 2020, plaintiff commenced the instant action alleging breach of contract and seeking to recover the $50,000.00 deposit still held in escrow. Issue was joined with defendant asserting a counterclaim demanding return of the $50,000.00 deposit because of plaintiff’s alleged inability to perform under the contract. Presently before the Court is (1) plaintiff’s motion for summary judgment granting the relief requested in the complaint and dismissing the counterclaim; and (2) defendant’s cross motion for summary judgment dismissing the complaint and granting the relief requested in his counterclaim. The motion and cross motion will be addressed ad seriatim. “The movant seeking summary judgment has the initial burden to ‘establish its prima facie entitlement to judgment as a matter of law by presenting competent evidence that demonstrates the absence of any material issue of fact’” (Hope v. Hadley-Luzerne Pub. Lib., 169 AD3d 1276, 1277 [2019], quoting Aretakis v. Cole’s Collision, 165 AD3d 1458, 1459 [2018] [internal quotation marks and citations omitted]). “Upon this showing, the burden then shifts to the opposing party to [submit] ‘evidence demonstrating the existence of a triable issue of fact’” (Hope v. Hadley-Luzerne Pub. Lib., 169 AD3d at 1277, quoting Aretakis v. Cole’s Collision, 165 AD3d at 1459 [internal quotation marks and citation omitted]; see CPLR 3212 [b]). Turning first to plaintiff’s motion for summary judgment, plaintiff contends that defendant breached the contract by failing to close on the established law date and that he is therefore entitled to keep the $50,000.00 deposit. In support of these contentions plaintiff has submitted both his affidavit and that of his counsel. These affidavits detail the real estate transaction and attach copies of the contract, the title report — with deeds to the property annexed thereto — and all relevant communications between the parties. At the outset, the Court finds that plaintiff has succeeded in demonstrating defendant’s breach of the contract as a matter of law. “It is settled…that when a contract requires that written notice be given within a specified time, the notice is ineffective unless the writing is actually received within the time prescribed” (Maxton Bldrs. v. Lo Galbo, 68 NY2d 373, 378 [1986]). Here, the contract included an “Attorney Approval” provision stating, in pertinent part: “This agreement is contingent upon [p]urchaser and [s]eller obtaining approval of this agreement by their attorney as to all matters, without limitation. This contingency shall be deemed waived unless [p]urchaser’s or [s]eller’s attorney on behalf of their client notifies agents and attorneys in writing…of their disapproval of the agreement no later than 09/02/2020.” Indeed, counsel for defendant’s September 2, 2020 correspondence was sent pursuant to this provision, advising that he approved the contract contingent upon, inter alia, his client having ten (10) days from issuance of the title report to object to any easements, covenants, conditions or restrictions of record relative to the property. To the extent that this report was issued on September 12, 2020, the ten (10) days expired on September 22, 2020 — with no objections made. Indeed, it was not until October 28, 2020 that counsel for defendant sent the proposed Affidavit of Historic Use to counsel for plaintiff, and not until November 4, 2020 that he postponed the closing on defendant’s behalf.2 Additionally, the contract itself provides that “[t]he [s]eller shall convey and the [p]urchaser shall accept the property subject to all covenants, conditions, restrictions and easements of record…so long as the property is not in violation thereof and any of the foregoing does not prevent the intended use of the property for the purpose of personal residence” [Contract, at 10]. Counsel for defendant did not express any objections to this provision in his September 2, 2020 correspondence, with September 2 being the deadline for the parties’ attorneys to express their disapproval of the agreement. It certainly cannot be argued that either the easement over the driveway or the prohibition on commercial use prevented the property from being used as a personal residence. The Court further finds that plaintiff has demonstrated his entitlement to the $50,000.00 deposit as a matter of law. It is well settled that a buyer “who defaults on a real estate contract without lawful excuse, cannot recover the down payment,’…where…that down payment represents 10 percent or less of the contract price” (Pizzurro v. Guarino, 147 AD3d 879, 880 [2017], quoting Maxton Bldrs. v. Lo Galbo, 68 NY2d at 378; see Cipriano v. Glen Cove Lodge #1458, B.P.O.E., 1 NY3d 53, 62 [2003]; Lawrence v. Miller, 86 NY 131, 140 [1881]; Gillette v. Meyers, 42 AD3d 654, 655 [2007]). Here, the $50,000.00 deposit constitutes less than 10 percent of the $655,000.00 contract price. With plaintiff having established his entitlement to summary judgment, the burden now shifts to defendant to raise a triable issue of fact. In this regard, defendant contends that plaintiff breached the contract because he was unable to transfer marketable title. Specifically, defendant contends that “[m]arketable title is defined as ‘good title, one that is free and clear of encumbrances or material defects, one reasonably certain not to be called into question’” (Khanal v. Sheldon, 35 Misc 3d 1225[A], 2012 NY Slip Op 50897[U], *5 [Sup Ct, Queens County 2012], quoting 91 NY Jur 29, Real Property Sales and Exchanges §71) and, further, that an easement is an encumbrance and a purchaser need not accept title subject thereto (see Rhodes v. Astro-Pac, Inc., 41 NY2d 919, 920 [1977]). Indeed, “[i]t is settled that an easement is an encumbrance and obviously a purchaser need not accept title subject to an encumbrance if the contract specifies conveyance of title free of all encumbrances” (id. [emphasis added]). Here, the contract did not specify a conveyance of title free of all encumbrances. Rather, the contract expressly indicated that the property was being conveyed subject to all covenants, conditions, restrictions and easements of record, so long as none prevented use of the property as a personal residence. Again, neither the easement over the driveway nor the prohibition on commercial use prevented the property from being used as a personal residence. The Court thus finds defendant’s contention to be without merit. Briefly, the Court must note that defendant sent plaintiff a letter on August 28, 2020 — the day before the contract was signed — wherein he stated as follows: “I plan to live in the home as my residence year-round and invest in preserving its tradition and beauty. I work full time for the Veterans Health Administration as a physician in charge of national programs to improve access and quality of healthcare for Veterans nationwide. My work for the VA is telework, which means [I] will be living and working from home. This will provide me both the time and resources to maintain its beauty and integrity. I plan on having my family here year-round, and extended family and friends here as much as possible and during holidays.” The letter then concluded with a photograph of defendant and a woman — presumably his wife — standing happily in front of the home. Under the circumstances, defendant certainly knew that the property was being sold for use as a personal residence, and he seemingly exploited this knowledge for his own purposes. Indeed, given his subsequent actions, the contents of this letter appear less than genuine. Defendant next contends that plaintiff is not entitled to keep the $50,000.00 deposit because the contract does not include a liquidated damages provision and is otherwise silent as to what happens in the event of a default. According to defendant, plaintiff sold the property to third parties Shane and Erin Maltbie for $655,000.00 on March 5, 2021 and, as such, incurred no actual damages. In support of this contention, defendant quotes the following language from the Court of Appeals decision in Maxton Bldrs. v. Lo Galbo (supra) (hereinafter Maxton): “In cases, as here, where the property is sold to another after the breach, the buyer’s ability to recover the down payment would depend initially on whether the agreement expressly provides that the seller could retain it upon default. If it did, the provision would probably be upheld as a valid liquidated damages clause in view of the recognized difficulty of estimating actual damages and the general acceptance of the traditional 10 percent down payment as a reasonable amount” (id. at 382). That being said, defendant has taken this quote entirely out of context. Maxton involves a case very similar to that presently before the Court where the defendants canceled a real estate contract after the deadline for doing so expired and the plaintiff then “commenced [an] action against [them] to recover the amount of the down payment claiming that the defendants breached the contract” (id. at 508).3 The defendants in Maxton argued “that the Appellate Division erred in permitting the plaintiff to recover the entire down payment, and should instead have limited recover to actual damages” (id. at 509). The Court of Appeals thus considered whether the rule established in Lawrence v. Miller (supra) in 1881 “that a vendee who defaults on a real estate contract without lawful excuse, cannot recover the down payment” (Maxton Bldrs. v. Lo Galbo, 68 NY2d at 509) should be continued or, alternatively, abandoned in favor of traditional contractual rules which “permit[] a party in default to seek restitution for part performance” (id. at 511). The language quoted by defendant is taken from a portion of the decision analyzing how this latter approach would operate in the context of a real estate transaction. After this analysis, however, the Court of Appeals proceeded to uphold the rule in Lawrence v. Miller. Specifically, the Court stated as follows: “[R]eal estate contracts are probably the best examples of arm’s length transactions. Except in cases where there is a real risk of overreaching, there should be no need for the courts to relieve the parties of the consequences of their contract. If the parties are dissatisfied with the rule in Lawrence v. Miller (supra), the time to say so is at the bargaining table” (id. at 512). It must also be noted that more recent case law has found that the rule established in Lawrence v. Miller (supra) applies even in the absence of a liquidated damages clause (Pizzurro v. Guarino, 147 AD3d at 880). Under the circumstances, defendant has failed to raise any triable issues of fact. Plaintiff’s motion for summary judgment granting the relief requested in the complaint and dismissing the counterclaim is therefore granted, and defendant’s cross motion is denied. The $50,000.00 deposit being held in escrow shall be paid to plaintiff within thirty (30) days of the date of this Decision and Order. Therefore, having considered NYSCEF documents 13 through 33 and 35 through 62, and oral argument having been heard on December 2, 2021 with Paula Nadeau Berube, Esq. appearing on behalf of plaintiff and Jeffrey R. Meyer, Esq. appearing on behalf of defendant, it is hereby ORDERED that plaintiff’s motion for summary judgment granting the relief requested in the complaint and dismissing the counterclaim is granted; and it is further ORDERED that defendant’s cross motion is denied; and it is further ORDERED that the $50,000.00 deposit being held in escrow shall be paid to plaintiff within thirty (30) days of the date of this Decision and Order; and it is further ORDERED that any relief not specifically addressed has nonetheless been considered and is expressly denied. The original of this Decision and Order has been e-filed by the Court. Counsel for plaintiff is hereby directed to serve a copy of the Decision and Order with notice of entry in accordance with CPLR 5513. Dated: January 19, 2022
