HOME CONTRACTS, DOWN PAYMENTS IN ESCROW AND INDEMNIFICATION

Another dispute over a down payment.

Licht v. Rosenberg, Date filed: 2022-03-11, Court: Supreme Court, New York, Judge: Justice Louis Nock,  Case Number: 000624-20/HE:

"DECISION + ORDER ON MOTION Upon the foregoing documents, it is ordered that plaintiffs’ motion for summary judgment is determined as follows. BACKGROUND

Defendants DANIEL B. ROSENBERG and IRINA ROSENBERG a/k/a IRINA GABICHVADE (the “Sellers”), are the owners of 154 shares of 40 E. 9th St. Owners Corp. and the proprietary lease associated with Unit 5A (the “Unit”) of the property located at 40 East 9th Street, New York, New York 10003 (the “Premises”). On or about February 28, 2020, the Plaintiffs, LAURIE LICHT, MARK SMITH, and ANDREW SMITH (the “Purchasers”), and Sellers entered into a contract for the purchase and sale of the Unit of the Cooperative located at 40 East 96th Street, New York, New York 10003 (the “Contract” [NYSCEF Doc. No. 2]). Pursuant to the Contract, Purchasers delivered $175,000.00 as a contract deposit (the “Contract Deposit”), which was paid to Seller’s Attorney, as Escrowee, by wire transfer on February 28, 2020. Purchasers tendered $175,000.00 for the Contract Deposit, and Escrowee confirmed receipt of the Contract Deposit into Seller Attorney’s escrow account at Citibank, N.A., (the “Escrow Account”) (see, NYSCEF Doc. No. 3)

Paragraph 6.1 of the Contract of Sale provides that the “sale is subject to the unconditional consent of the Corporation.” Purchasers prepared and submitted a comprehensive board application (the “Board Application”) (NYSCEF Doc. No. 4) and, as requested, attended an interview before the Corporation’s Board of Directors, which was held on May 11, 2020, (the “Board Interview”). The Contract of Sale and Board Application are entirely consistent, with both naming all three Plaintiffs herein as the sole purchasers and applicants.

On May 20, 2020, the Corporation issued a decision on the Purchasers’ Board Application which was communicated to Purchasers’ real estate agent by e-mail from an employee at the managing agent’s office, Hoffman Management, named Gordon Noah (NYSCEF Doc. No. 5). The e-mail stated that “the Board will approve the application subject to the son [Andrew Smith] as the sole holder of shares with the parents [Laurie Licht and Mark Smith] as guarantors. Please let me know if they wish to move forward.” Upon receipt of the such conditional approval issued by the Corporation’s Board of Directors, the Purchasers elected to terminate the Contract in accordance with paragraph 6.3 of the Contract of Sale and requested the return of the Contract Deposit (see, NYSCEF Doc. No. 6). Per paragraph 6.3 of the Contract of Sale: “Either Party, after learning of the Corporation’s decision, shall promptly advise the other Party thereof…. If such consent is refused at any time, either Party may cancel this Contract by Notice. In the event of cancellation pursuant to this

6.3, the Escrowee shall refund the Contract Deposit to Purchaser.” Purchasers have demanded the return of their Contract Deposit, which Sellers and Escrowee have refused to do.

This action was commenced by summons and complaint filed June 25, 2020, asserting causes of action against Sellers for breach of the Contract of Sale and for related declaratory relief, and causes of action against Escrowee — defendant Law Offices of Nathaniel Muller, P.C. — for related declaratory relief. All causes of action are imbued with the purpose of obtaining a return of the Contract Deposit in accordance with the Contract of Sale on account of the absence of unconditional approval to the sale by the Cooperative Corporation’s Board.

An answer with counterclaims was filed by Sellers on August 4, 2020 (NYSCEF Doc. No. 11). The counterclaims seek, in effect, a declaration that they are entitled to receive and keep the Contract Deposit, and for $65,000 in attorneys’ fees, and for punitive damages in an amount of $50,000.

Escrowee filed an answer on August 4, 2020 (NYSCEF Doc. No. 16), which seeks an order allowing it to deposit the Contract Deposit with the County Clerk and asserting a counterclaim for legal fees.

Purchasers now move for summary judgment on the complaint. The motion is opposed by Sellers. Escrowee opposes the motion only to the extent that it seeks interest on the escrowed Contract Deposit.

DISCUSSION

“To obtain summary judgment it is necessary that the movant establish his cause or defense sufficiently to warrant the court as a matter of law in directing judgment; in is favor, and he must do so by tender of evidentiary proof in admissible form” (Zuckerman v. City of N.Y., 49 NY2d 557, 562 [1980]). To defeat summary judgment, “the opposing party must assemble and lay bare its affirmative proof to demonstrate that genuine triable issues of fact exist.” (Kornfeld v. NRX Technologies, Inc., 93 AD2d 772, 773 [1st Dept 1983], affd 62 NY2d 686 [1984]). “Similarly, the issues must be shown to be real, not feigned since a sham or frivolous issue will not preclude summary relief” (id.). Mere conclusions or unsubstantiated allegations will not defeat the moving party’s right to summary judgment (Zuckerman, supra).

Summary judgment is appropriate here because there is no credible dispute that the Corporation’s approval was expressly conditional upon the use of a guarantor. Paragraph 6.1 of the Contract clearly states that “[t]his sale is subject to the unconditional consent of the Corporation.” Paragraph 6.3 further provides that: “Either Party, after learning of the Corporation’s decision, shall promptly advise the other Party thereof. If the corporation has not made a decision on or before the Scheduled closing date, the Closing shall be adjourned for 30 business days for the purpose of obtaining such consent. If such consent is not given by such adjourned date, either Party may cancel this contract by Notice, provided that the Corporation’s consent is not issued before such Notice of cancellation is given. If such consent is refused at any time, either Party may cancel this contract by Notice. In the event of cancellations pursuant to this

6.3, the Escrowee shall refund the contract Deposit to Purchaser.” (Id.)

A contract is to be construed in accordance with the parties’ intent, which is generally discerned from the four comers of the document itself. Consequently, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms (Obstfeld v. Thermo Niton Analyzers, LLC, 112 AD3d 895, 897 [2d Dept 2013] [citing MHR Capital Partners LP v. Presstek Inc., 12 NY3d 640, 645 [2009]).

Binding First Department precedent instructs that a contract for the sale of a cooperative apartment may be terminated upon the co-op board’s conditional approval of the sale (see, e.g., Lovelace v. Krauss, 60 AD3d 579, 579-80 [1st Dept] [affirming motion court's declaration that contract of sale had been cancelled and directing escrowee to return plaintiff's deposit where only a conditional approval was granted to the purchaser of a co-op apartment], lv denied 12 NY3d 714 [2009]). The Appellate Division noted that “[c]o-op board approval was required as a condition precedent to defendants’ sale of these premises to plaintiff,” and “where there was still an area of disagreement to be resolved, there was no unconditional approval of the Board” (id.). As is the case here, “[t]he plain language of the contract permitted either party to cancel if unconditional approval was not obtained” (id.; see also, Albert & Kimmel v. Herman, 276 AD2d 413, 413-14 [1st Dept 2000] (affirming return of escrowed money to purchaser where buyer declined to meet conditions requested by co-op board]).

Here, the Board voted and granted conditional approval, requiring a personal guarantor of plaintiff Andrew Smith’s obligations (see, NYSCEF Doc. No. 5), and were clearly material. That condition to Board approval constituted a refusal to provide “unconditional consent” pursuant to section 6.1 of the Contract of Sale, giving rise to the plaintiffs’ unequivocal right to terminate the Contract of Sale “at any time” (id.). The plaintiffs promptly provided formal notice of cancellation to Sellers and Escrowee (NYSCEF Doc. No. 23). Consistent with the plain terms of the Contract of Sale, the plaintiffs properly exercised their right to terminate and are entitled to return of their Contract Deposit (see also, Moran v. Erk, 11 NY3d 452, 456 [2008] ["We do not ordinarily read implied limitations into unambiguously worded contractual provisions designed to protect contracting parties]).

Sellers, in opposition, point to the Board Application, which contains an answer by Purchasers to question 7 thereof, asking whether any part of the purchase price will be borrowed. Said plaintiff answered “Yes, a $300,000 mortgage will be taken by Andrew Smith. The remaining $1,450,000 will be paid in cash from Andrew Smith’s bank accounts.” (NYSCEF Doc. No. 21.) Sellers also point to a letter from Andrew Smith to the Board, dated April 5, 2020, stating that he would “be responsible for the mortgage and maintenance payments….” (NYSCEF Doc. No. 39.) However, the Contract of Sale does not contain any term of sale, or condition of sale, requiring a guaranty by any of the Purchasers. Nor is the Board Application or any other extrinsic document referenced in, or incorporated into, the Contract of Sale. Where the Contract of Sale found it useful or necessary to make extrinsic reference, or to incorporate a separate document, it was perfectly able to do so as it did concerning its Riders (contained in NYSCEF Doc. No. 2) which are “Attached to and Forming a Part of Contract of Sale” (the “Purchaser’s Rider”) and which make it clear that in the event of “any inconsistency or conflict between the terms of the printed portion of the Contract, Seller’s Rider, and this Rider (collectively referred to as this ‘Contract’), the terms and provisions of this Rider shall govern and be binding” (id.). Considering that all three plaintiffs are designated in the Contract of Sale, and in all other relevant documents (i.e., both Riders, and the Board Application), as the Purchaser, and, indisputably, all three plaintiffs would be the shareholders of the Cooperative shares underlying the Contract of Sale (see, Contract of Sale and Board Application), the unambiguous clause in the Contract of Sale making “[t]his sale subject to the unconditional consent of the Corporation” (Contract of Sale

6.1) applied equally to all three plaintiffs. The Corporation’s May 2020 insistence that the deal be different than that set forth in the February 2020 Contract of Sale (to wit: “the Board will approve the application subject to the son as the sole shareholder of shares with the parents as guarantors”) is, most decidedly, a condition which is inconsistent with the Contract of Sale. Purchasers had every right to cancel the Contract of Sale at that point and seek restitution of their Contract Deposit. Therefore, plaintiffs are entitled to summary judgment on their complaint, seeking restitution out of escrow of their Contract Deposit, to the extent set forth hereinbelow, and defendants’ counterclaims are dismissed.

As for plaintiff’s request for a sanction against defendants, it is denied. Although this court has recognized plaintiffs’ substantive position in this lawsuit to be imbued with merit, defendants’ point of view in opposition does not rise to the level of “frivolous conduct” (22 NYCRR §130-1.1). Escrowee’s opposition to the motion for summary judgment is limited to that part of the motion that seeks interest on the Contract Deposit. Escrowee has also asked for an order requiring plaintiffs to cover its legal costs in defending this matter. The Contract of Sale, at paragraph 1.24, specifically states that the parties agree that the contract deposit will be held in a non-interest bearing IOLA account. Therefore, no interest is due on the Contract Deposit.

Escrowee’s counterclaim seeks an award of the reasonable value of its efforts expended in defending plaintiffs’ claim against it for release from escrow, to plaintiffs, of the Contract Deposit. That counterclaim finds its grounding in a thoroughly unambiguous provision in the Contract of Sale stating:

Escrowee will serve without compensation. Escrowee is acting solely as a stakeholder at the Parties’ request and for their convenience. Escrowee shall not be liable to either Party for any act or omission unless it involves bad faith, willful disregard of this Contract or gross negligence. In the event of any dispute, Seller and Purchaser shall jointly and severally (with right of contribution) defend (by attorneys elected by Escrowee), indemnify and hold harmless Escrowee from and against any claim, judgment, loss, liability, cost and expenses incurred in connection with the performance of Escrowee’s acts or omissions not involving bad faith, willful disregard of this Contract or gross negligence. This indemnity includes, without limitation, reasonable attorneys’ fees either paid to retain attorneys or representing the fair value of legal services rendered by Escrowee to itself and disbursements, court costs and litigation expenses.

(NYSCEF Doc. No. 2

27.3 [emphasis added].)

The Appellate Division, First Department, in the highly instructive case of Breed, Abbott & Morgan v. Hulko (139 AD2d 71 [1st Dept 1988], affirmed 74 NY2d 686 [1989]), dealt with the question whether escrowee indemnification clauses in real estate sales contracts were exclusively limited to third party actions against the escrowee or, as in the present case, an action brought by one of the parties (in this case, the Purchasers). After noting an argument that such a clause only “relates to actions by third parties, and that somehow a different rule applies where the promise to indemnify is sought to be applied to recover legal expenses incurred in defending against an action brought by the promisor itself[,]” that court stated that “ [n]o plausible reason for such a distinction has been presented. Indeed, it is a curious notion that a broad indemnification clause will be interpreted to embrace counsel fees…where the action is brought by third parties, but will not be so interpreted where the action is brought by the promisor.” (Id., at 74-75.)

According to the foregoing appellate sentiment, Escrowee’s counterclaim herein, seeking an award from plaintiffs of the reasonable value of its efforts in defending this action, possesses theoretical merit. However, the analysis does not end there. The Appellate Division in that case made clear that the party which should bear the responsibility of such an indemnification clause must “sens[ibly be]” the unsuccessful party in the action (id., at 76).1 Naturally, in view of the within disposition granting Purchasers’ motion for summary judgment and dismissing Sellers’ counterclaims, Purchasers should not be the parties responsible for the escrow indemnification clause pertinent to this case. Therefore, Escrowee’s counterclaim seeking the reasonable value of its efforts herein from Purchasers is dismissed.2

Accordingly, it is

ORDERED and ADJUDGED that plaintiffs motion for summary judgment on their complaint is granted to the extent that defendant Office of Nathaniel Muller, P.C., shall release from escrow, to counsel for the plaintiffs, the sum of $175,000.00 escrowed in connection with the contract of sale that is the subject of this action, no later than ten business days from the date of filing hereof; and it is further

ORDERED that the part of plaintiffs’ motion seeking a sanction is denied; and it is further

ORDERED that the defendants’ counterclaims are dismissed.

This will constitute the decision and order of the court.

CHECK ONE: X     CASE DISPOSED NON-FINAL DISPOSITION GRANTED DENIED X           GRANTED IN PART OTHER

APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE

Dated: April 12, 2022

Footnotes

1. The appellate articulation was: "We should have supposed that common sense and familiar, universally accepted indemnification principles would make it undisputably clear that as between the two parties to the transaction, the ultimate responsibility for indemnification of litigation expenses would rest on the party whose unjustified lawsuit gave rise to those expenses." (139 AD2d at 77.) As noted earlier in this decision, this court has not found defendants' unsuccessful position to rise to the level of "frivolous conduct" within the meaning of the sanction regulation (22 NYCRR §130-1.1). Thus, this court's application of the foregoing appellate articulation to the outcome of this matter, in which defendants did not ultimately succeed, should not be construed to imply anything beyond the ultimate finding herein that defendants' position was incorrect.

2. The court takes note of the fact that Escrowee has not asserted a cross-claim against Sellers --- its co-defendants --- in this action. Thus, nothing has been presented by Escrowee to this court which could possibly result in an order granting its requested fee relief as against Sellers."

DIVORCE - WHEN CAN COURT ORDER SALE OF MARITAL HOME

There were two dissents.

TAGLIONI v. Garcia, 2021 NY Slip Op 5936 - NY: Appellate Div., 1st Dept. 2021:

"At issue on this appeal is whether the parties consented to the pendente lite sale of their jointly owned marital home, a townhouse located in Manhattan. There were preliminary discussions with Supreme Court at the January 28, 2021 and March 30, 2021 conferences to sell the townhouse for $6 million. However, the parties could not reach an agreement as to the material conditions for the sale. Nor did the wife or her attorney consent to the sale on the terms proposed by the husband. Accordingly, Supreme Court should not have ordered the sale of the townhouse.

As stated by this Court in Schorr v Schorr (106 AD3d 544, 544 [1st Dept 2013]), "It is well-settled that, prior to entry of a judgment altering the legal relationship between spouses by granting divorce, separation or annulment, courts may not direct the sale of marital property held by spouses as tenants by the entirety, unless the parties have consented to sell" (quoting Moran v Moran, 77 AD3d 443, 444 [1st Dept 2010]). Moreover, "courts must respect conditions placed on a party's consent to the sale of such property, and lack the authority to direct a sale where those conditions have not been met" (Harrington v McManus, 303 AD2d 368, 368 [2d Dept 2003]; see Kahn v Kahn, 43 NY2d 203, 209-210 [1977]; Kayden v Kayden, 234 AD2d 345 [2d Dept 1996]; Berk v Berk, 170 AD2d 564, 565 [2d Dept 1991]).

We find that the record "did not reflect a meeting of the minds and did not contain specific terms" (Schorr, 106 AD3d at 544; see Kahn, 43 NY2d at 209) sufficient to evince the wife's consent to the ordered sale. The record establishes that, contrary to the determination of the court below, the parties did not agree to listing their jointly owned townhouse at $6 million or to the sale of the townhouse. Although the parties identified targets of their negotiations, neither the wife nor her counsel ever explicitly agreed to the contemplated sale pendente lite. As indicated during the parties' conferences before the court and by the parties' competing proposed orders, the wife's negotiating targets remained at all times contingent on stipulation of other disputed material terms.

At the January 28, 2021 status conference, the wife's attorney described her position, in relevant part:

"So, to be clear, our client at the end of this case, she is agreeing, she's not planning on keeping this family townhome. She has no intention of keeping it. Her concern is that this litigation is going to go on for another couple of years minimally, and that essentially she needs a place to live with her daughters. . . . So what we're proposing is, is that if this townhouse is sold on a pendente lite basis, that plaintiff [husband] as the monied spouse should pay for a reasonable rental for our client in Manhattan" (emphasis added). Although the wife's counsel stated that she "will speak with my client about what the Court just suggested about the proceeds," there is no suggestion in the record that the parties agreed to or ever attempted to negotiate the "reasonable rental" condition proposed by the wife's counsel. After multiple exchanges between the judge and counsel, Supreme Court unilaterally stated that the terms of the sale were as follows: "[The husband] wants this townhouse, and I already said I think this townhouse needs to go on the market 30 days after these repairs are done, so I think your client [the wife] should agree to that." Notably, the wife, by her counsel, did not assent to this term.

At the March 30, 2021 status conference, the parties indicated that little progress had been made. Early in the conference, the husband's counsel stated: "We had prepared a stipulation. We have now learned that the problem is that [the wife] has no intention of selling the townhouse and that she has changed her position." Significantly, the record contains no executed stipulation by the parties or their attorneys to sell the townhouse.^[1]

Rather, following the March 30, 2021 status conference, the parties submitted, at the direction of the court, competing proposed orders. The husband's proposed order contained many of the conditions imposed by Supreme Court in the order on appeal, including scheduled mandatory price reductions and required acceptance of certain offers. The wife's proposed counter order, on the other hand, contained no proposed initial list price, no procedure for list price reduction or reevaluation, and no required acceptance of offers at any price level. As to a potential sale, the wife's proposed counter order provided that the property "should either be listed for sale or the Wife shall advise the Husband in writing that she intends to buy-out his interest in the Townhouse" and, further, that "[t]he Townhouse will only be sold under the terms of an agreed Stipulation between the parties."

The order on appeal reflects that Supreme Court adopted the husband's order with minimal revisions, essentially rejecting the wife's preconditions to the sale of the townhouse and imposing its own additional conditions. The dissent faults the wife's attorney for not raising the issue of the sale of the townhouse being conditioned on the husband paying for a "reasonable rental" at the March 30 conference. However, that issue was expressly raised at the January 28 conference and was never resolved, evincing that there was never a meeting of the minds on the material terms of the sale. The husband's counsel acknowledged the parties' differences when counsel informed the court that they had "now learned that the [wife] has no intention of selling the townhouse and that she has changed her position." Thus, even assuming arguendo that the dissent is correct that the wife initially agreed to the sale of the townhouse, she revoked her consent because the parties were unable to agree on the material terms of the sale (see Harrington, 303 AD2d at 368-369.)

Additionally, the court erred in imposing conditions on the sale of the property that were not discussed or agreed to on the record, namely, that the townhouse be listed before the repairs were made, that the price be reduced in specified amounts at set dates, and that the parties accept a purchase price offer of 95% or more of the list price (see Harrilal v Harrilal, 128 AD2d 502, 503-504 [2d Dept 1987]).

Finally, we have already rejected the husband's argument that the appeal should be dismissed because the wife is not aggrieved; in a prior order, we denied the husband's motion to dismiss the appeal on that basis. In any event, the argument is unavailing. The order, which largely tracked the husband's proposed order, adversely affected the wife's interests.

Accordingly, the order of the Supreme Court, New York County (Michael L. Katz, J.), entered May 18, 2021, which, to the extent appealed from, directed the sale of the parties' jointly owned marital residence, should be reversed, on the law and the facts, without costs, and the ordered listing and sale rescinded in its entirety.

All concur except Webber, J.P. and Scarpulla, J. who dissent in part in a separate Opinion by Webber, J.P.

WEBBER, J.P. (dissenting in part).

I agree that Supreme Court erred in imposing additional conditions on the sale of the marital townhouse that were not discussed or agreed to on the record, namely, that the townhouse be listed before the repairs were made, that the price be reduced in specified amounts at set dates, and that the parties accept a purchase price offer of 95% or more of the list price (see Harrilal v Harrilal, 128 AD2d 502, 503-504 [2d Dept 1987]).

However, I disagree with the majority that the record "did not reflect a meeting of the minds and did not contain specific terms" to evince the wife's consent to the sale of the jointly owned townhouse, which was the marital residence (see Kahn v Kahn, 43 NY2d 203 [1977]; Schorr v Schorr, 106 AD3d 544 [1st Dept 2013]). In my opinion, a review of the record as a whole establishes that the parties agreed to sell the townhouse pendente lite, for a list price of $6 million within 30 days of the completion of the necessary repairs. The plan was articulated by the wife's attorney during the January 28, 2021 status conference. At that conference, the wife's attorney stated that her client was prepared to immediately do the repairs that the brokers had recommended.

"The court: But all I'm saying if the plan is to sell the townhouse, we know that kind of a niche market that sometimes you don't just have an open house and necessarily get an offer that minute. It has to be marketed a certain way. It doesn't make sense to get that process going and. . . . money can be put in escrow. There is a support issue in a support order in effect and I just don't know if it makes sense to delay that.

Ms. Schanfield: I understand, your honor. Our client is prepared to immediately do the repairs that the brokers had recommended."

Her acknowledgment that she was prepared to go forward with the repairs recommended by the brokers confirms her acquiescencein the sale of the townhouse (see Frisina v Frisina, 178 AD2d 460, 460 [2d Dept 1991]).

This was further confirmed by the husband's attorney, who stated that the parties had a deal, and that the repairs were the issue that was holding the parties back. Although the wife now contends that her agreement to the sale of the townhouse was conditional on the husband paying for her Manhattan rental, she failed to engage in any discussion of this issue on the record and made no mention of it during the March 30, 2021 conference. While the majority notes that during the January 28, 2021 status conference, the wife's attorney described her position, "that if this townhouse is sold on a pendente lite basis, that plaintiff [husband] as the monied spouse should pay for a reasonable rental for our client in Manhattan," the majority ignores what preceded the noted quote:

"So, to be clear, our client at the end of this case, she is agreeing, she's not planning on keeping this family townhome. She has no intention of keeping it. Her concern is that this litigation is going to go on for another couple of years minimally, and that essentially she needs a place to live with her daughters. . . . (emphasis added) So what we're proposing is, is that ifthis townhouse is sold on a pendente lite basis, that plaintiff [husband] as the monied spouse should pay for a reasonable rental for our client in Manhattan."

Thus, counsel was raising the wife's concern of being without a residence should the litigation continue for a number of years and not that she did not agree to the sale of the townhouse.

The majority also incorrectly asserts that there is no suggestion in the record that the parties agreed to or ever attempted to negotiate the "reasonable rental" condition proposed by the wife's attorney. However, if theparties had not agreed to or negotiated this condition, the wife's attorney never stated thaton the record. Rather, on March 30th, counsel asserted that there was water damage in the townhouse, that the wife had consented to manage the repairs if she had access to the monies, that the husband was not releasing the monies, that there was a history of the wife not being reimbursed, and that the new insurance policy was inadequate. Clearly, if the "reasonable rental" condition was still an issue, counsel would have argued on March 30th that the parties did not agree or negotiate the "reasonable rental" condition. Instead, counsel stated that circumstances had changed because the children "had no place to go" and not because of any issue with the "reasonable rental" condition.

Further, during the March 30, 2021 conference, the court specifically reiterated the previously agreed upon sale of the townhouse.

"So I know that I've read the transcripts over this morning and we talked about necessary repairs to the townhouse and we [sic] very specific necessary repairs meant repairs that the broker said needed to be done, and Ms. Garcia was going to contact the workers to do it, she was going to obtain written estimates and forward them to Mr. Taglioni, and then we came to an understanding if any of the work turned out to be more than ten percent above the estimate, then Ms. Garcia was going to forward that documentation to Mr. Taglioni so he could have input and approve it. And then within 30 days after that, the townhouse was going to go up for sale."

The court closed the conference with the following statement:

"That's another issue that was discussed ad nauseum and it should get done. I mean, the point of these conferences is not to go backwards, it's to go forwards. So the deal was that there was going to be a buyout of East Hampton, the deal was the townhouse was going to be sold after necessary repairs. The deal was that the Chubb monies were going to be used for the repairs of the townhouse. There's no reason to keep on revisiting these issues, just get it done."

Neither the wife nor her counsel challenged this assertion, in fact, counsel thanked the judge.

Finally, in her proposed counter order, the wife never offered any alternative terms regarding the listing and sale of the townhouse, nor did she state any objections to the sale. Upon review of the terms set forth in the husband's proposed order, she neither suggested any different terms regarding the listing and sale of the townhouse in her counter order or objected to the sale of the townhouse.

While the majority points to the wife's inclusion in the counter order of a statement that the sale of the townhouse would be pursuant to the terms of an agreed stipulation between the parties as an indication of disputed material terms, such a conclusion is not supported by the record as a whole. Further, as noted by the husband, any proposed terms of a proposed stipulation, if different from the proposed order, would properly be presented in the counter order.

For the reasons stated above, in my opinion, Supreme Court properly implemented the parties' contemplated agreement as to the sale of the townhouse (see Kahn v Kahn, 43 NY2d at 210).

All concur except Webber, J.P. and Scarpulla, J. who dissent in a separate Opinion by Webber, J.P.

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

[1] The dissent refers to the court's "specific[ ] reiterat[ion]" of "the previously agreed upon sale of the townhouse" during the March 30, 2021 conference. Although the court indeed referred to what "the deal was," the full context of the record shows that this phrase referred not to any concrete agreement but to the court's desire for resolution."

IMPLIED WARRANTY IN NEW HOMES

Caveat Emptor - let the buyer beware - but not with the sale of new homes in New York: Article 36-B of the New York General Business Law imposes a warranty in favor of the buyers of new homes. But not for every newly built home as illustrated recently by a court in CARMEN E. MAESTRO FAMILY TRUST v. 449 WASHINGTON LLC, 2020 NY Slip Op 32054 - NY: Supreme Court June 22, 2020:

"The cause of action for breach of the implied housing merchant warranty, however, must be dismissed, since General Business Law article 36-B, which codified the common law housing warranty, applies only to new single-family homes or new for-sale units in a multi-unit residential structure of five stories or less, and not the seven story condominium at issue (see General Business Law § 777[5]). The common-law housing warranty embodied in Caceci v Di Canio Constr. Corp. (72 NY2d 52 [1988]) was supplanted by General Business Law article 36-B (see Fumarelli v Marsam Dev., 92 NY2d 298 [1998]). The statutory housing merchant warranty scheme codified under General Business Law article 36-B applies only to buildings of five stories or less, and not to the subject condominium, and the ruling in Fumarelli abrogates whatever common-law housing warranty may have existed with respect to buildings taller than five stories prior to the statutory codification (see Board of Mgrs. of Beacon Tower Condominium v 85 Adams St., LLC, 136 AD3d 680, 683 [2d Dept 2016]; 20 Pine St. Homeowners Assn. v 20 Pine St. LLC, 109 AD3d 733, 734 [1st Dept 2013])."

A SALE OF HOME GOES BAD - DELAY IN RETURN OF DOWN PAYMENT

When a contract of sale is contingent on a mortgage commitment, the buyer should document its attempt at getting the loan. Otherwise, the issue of returning the down payment may be litigated.

Doony, Inc. v Palmiotto, 2019 NY Slip Op 02065, Decided on March 20, 2019, Appellate Division, Second Department:

"On June 23, 2017, the plaintiff entered into a contract to purchase real property from the defendant Mark Palmiotto (hereinafter the seller) for $435,000 and, upon execution of the contract, it tendered a down payment of $43,500. Pursuant to the contract, the plaintiff was required to promptly apply to one or more institutional lenders for a mortgage loan in the amount of $391,500. The plaintiff's obligations to complete the sale were contingent upon the issuance of a commitment from an institutional lender on or before 30 days from receipt by its attorney of a fully executed contract (hereinafter the commitment date). The contract of sale expressly provided that "a commitment conditioned on the Institutional Lender's approval of an appraisal shall not be deemed a Commitment' hereunder until an appraisal is approved."

On August 7, 2017, the plaintiff obtained a commitment from a lender conditioned upon an appraisal showing an "as is" fair market value of the property of not less than $435,000. The appraisal, which was performed on August 18, 2017, and issued on August 31, 2017, valued the premises at $395,000. As a result, the plaintiff asserted that no commitment as defined by the contract had been issued, and demanded the return of its down payment, but the defendants refused to return the funds. In January 2018, the plaintiff commenced this action to recover its down payment, and after joinder of issue but prior to discovery, moved, inter alia, for summary judgment on the complaint. As relevant here, the Supreme Court denied that branch of the plaintiff's motion which was for summary judgment on the complaint.

The plaintiff failed to establish its prima facie entitlement to judgment as a matter of law (see Alvarez v Prospect Hosp., 68 NY2d 320; Samson v Sapphire Capital, Inc., 74 AD3d 1172). In her supporting affidavit, the plaintiff's principal conceded that the plaintiff delayed in filing an [*2]application for a mortgage loan, and she failed to state when the plaintiff applied and the number of institutional lenders to which application was made. Moreover, the plaintiff failed to set forth the date on which its attorney received the fully executed contract, thereby rendering it impossible to ascertain if the lender's denial was timely, so as to trigger the plaintiff's right to cancel. Under such circumstances, the plaintiff failed to eliminate all triable issues of fact as to whether, inter alia, it made a prompt application for a mortgage loan and whether it properly cancelled the contract (see Dazzo v Kilcullen, 127 AD3d 1126, 1128; Hsieh v Pravder, 106 AD3d 694, 695; Samson v Sapphire Capital, Inc., 74 AD3d at 1173). Since the plaintiff failed to meet its prima facie burden, we need not consider the sufficiency of the opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851; Miloslavskaya v Gokhberg, 126 AD3d 678, 679).

Accordingly, we agree with the Supreme Court's determination denying that branch of the plaintiff's motion which was for summary judgment on the complaint."

WHEN BUYING A HOME

Consider, in addition to your regular pre-contract inspection, a C. L. U. E. report.

From Bankrate.com


"A home's CLUE loss history report provides insurance company names and policy numbers and any claim numbers. The report lists the dates of any claims, the loss types and amounts paid for losses, and it will tell if a claim was denied.

Weather-related losses, fires, theft, vandalism and water damage are some of the types of claims listed, says Passmore. But the report doesn't indicate what part of the property or home was affected. You'd need to ask the homeowner for those details.
 
A report might be blank, for two reasons:

• The homeowner did not make any claims in the past seven years.
• The home was covered by an insurance company that doesn't participate in CLUE.

"Claims for the property under a different owner also won't be included either, and therefore not considered when rated for insurance," says Jeffrey Ill, a vice president for homeowners insurance at Esurance in San Francisco.

How to get a CLUE

A free CLUE report can be obtained once a year from database giant LexisNexis. Requests can be made online or by calling (866) 312-8076.

Here's the catch for a homebuyer: Only the owner of a property may access its CLUE report.

"You must request the report from the owner of the home you're considering buying," says Karl Newman, president of the NW Insurance Council in Seattle.

Newman says a savvy seller should obtain a CLUE report before showing the home, make several copies and have those available for potential buyers.

Even a homeowner who's not in the market to sell may want to get a CLUE report -- to check for any inaccuracies.

"Since the CLUE report is one of many pieces of information that an insurer might look at, what is in the report can influence your premiums positively or negatively," says Passmore. "So if there are any inaccuracies, it's important to get them corrected, just as it would be for your credit report."

Read more: http://www.bankrate.com/finance/insurance/clue-report.aspx#ixzz4RxjrIeco
Follow us: @Bankrate on Twitter | Bankrate on Facebook"

A NEW TYPE OF PRE-CONTRACT INSPECTION

In residential sale and purchases, it is typical to have certain inspections performed by the buyer prior to contract signing ranging from an engineer's report to termite inspection.

How about finding out if the house is haunted? Or would a buyer walk away because previously someone died in the home? What if there was a murder in the home?

See http://www.diedinhouse.com/

MORE ON HOME AFFORDABILITY AND FORECLOSURE

So why do people default on their mortgage - whether due to divorce, illness, unexpected expenses, loss of employment, etc. - the answer is the same: the house is unaffordable.

Yesterday, MSN had the following post:

"What you must earn to buy a home in 25 cities in 2014
By Tim Manni of HSH.com

How much salary do you need to earn to afford the principal and interest
payments on a median-price home in your metro area?

To find out, HSH.com took the National Association of Realtors'
fourth-quarter data for median home prices and HSH.com's fourth-quarter
average interest rate for 30-year, fixed-rate mortgages to determine how
much of your salary it would take to afford the base cost of owning a
home -- the principal and interest -- in 25 metro areas.

We used standard 28 percent "front-end" debt ratios and a 20 percent down
payment subtracted from the NAR's median-home-price data to arrive at our
figures. There is no doubt that your income will need to be much higher to
cover taxes, insurances and other expenses to live in the home, plus any
other debts you might have.

While the NAR continues to report strong year-over-year price growth, home
prices and mortgage rates retreated from the third to fourth quarter in
2013. While homeowners continue to praise home-price growth as it adds to
their equity positions, some homebuyers have actually been stymied by the
rapid growth as home prices have been rising faster than incomes."

And this was the result for New York - these figures do not cover taxes and other expenses to live in the home which are quite high in Nassau and can add that monthly figure to almost another $1000 a month and the required income figure to almost $90,000 a year.:

"What you must earn to buy a home in 25 cities in 2014
New York: $66,167.27
Mortgage rate: 4.38 percent

Quarterly change: -0.22 percent
Home price: $386,300

Quarterly change: -4.71 percent
YOY change: +2.8 percent
Monthly payment: $1,543.90

Salary: $66,167.27

Quarterly change: -$5,088
If you're on the cusp of affordability in the Big Apple, you must "buy on
the dips." The fourth quarter of 2013 would have been your time to pounce.
Lower mortgage rates and a $19,000 drop in home prices improved salary
conditions by $5,000."

NEW YORK HOME SALES - SELLER'S CONCESSION

There was a discussion recently regarding language for the use of a "Seller's Concession" - which is a method utilized to assist Buyers by a financing of the Closing costs.

There are ethical questions on this practice which has been addressed by the NYSBA as basically what these concessions are is a“grossing up” the sales price of a residential property in an amount matched by a “seller’s concession”. The ethical opinions require full disclosure to all parties.

I personally do not agree with this process. If housing is unaffordable, then do not buy it. I recently found a blog post which had additional concerns too:

NY State Bar Ethics Opinion Doesn’t Go Far Enough by Robert J. Smith

NEW YORK HOME SALE - EXPEDITORS LICENSING IN SUFFOLK

The Suffolk County law to monitor expeditors in order to better protect consumers took effect this month. According to Legislator Kate Browning: "Too many residents and business owners have to come to me over the years because they were ripped off and had no where to go. For years this had been an underground profession with no oversight, but now Suffolk County registers expeditors, and can revoke a license for impropriety. I am hoping the towns will follow Suffolk's example."

Expeditors can help homeowners pass town inspections, attain variances, get your property surveyed, or obtain new and existing permits for your home.

HOME SALES NEW YORK - MORTGAGE FINANCING

As I have a new matter with a home sale contingent on Buyer financing, I am submitting this link to an online MSN article I recently read:

What makes you unmortgageable?

SELLING A HOME IN TODAY'S MARKET

But if the Property Disclosure Statement is not delivered to the Buyer (and Buyer receives $500 credit) or if the disclosure regarding the Certificate of Occupancy is marked "Unknown", what is the next step for the Buyer?

SELLING A HOME IN TODAY'S MARKET

Thus the Property Disclosure Statement, if delivered, would advise the Buyer as follows:

"9. Are there certificates of occupancy related to the property? If No, explain below . . . . . . . . .
            Yes             No                Unkn                  NA"

SELLING A HOME IN TODAY'S MARKET

Of course, if the Seller does not have all C of O's and furnishes a Property Disclosure Statement, the the Buyer should be advised of this issue.

SELLING A HOME IN TODAY'S MARKET

Now if the Seller and Buyer want to go to contract but the Seller does not have all C of O's, should the Seller first inform the Buyer?

SELLING A HOME IN TODAY'S MARKET

Note the statement from yesterday's post: "Many banks and lending institutions require an up-to-date Certificate of Occupancy before they will issue a mortgage."

However, even if no bank was involved, even if a bank was involved and did not require the C of O, every Buyer should insist upon it.

SELLING A HOME IN TODAY'S MARKET

Basically, a certificate of occupancy is a document issued by a local government agency or building department certifying a building's compliance with applicable building codes and other laws, and indicating it to be in a condition suitable for occupancy. I refer to a discussion in the website of a New York engineering firm Heimer® Engineering PC:

"When all the requirements of the building code and all other local municipal requirements have been met, a Certificate of Occupancy is issued. The Certificate of Occupancy generally means that the building complies with all codes and regulations applicable at the time of construction.

Prior to issuing the Certificate of Occupancy, a building inspector has probably checked the construction project several times during the project. Even so, the Certificate of Occupancy is not a guarantee from the building department that the building is perfect. The inspection is limited to areas that could be examined during the building inspector's inspection. The Certificate of Occupancy gives you some assurance that the building complied with applicable codes and regulations at the time of construction.

Many banks and lending institutions require an up-to-date Certificate of Occupancy before they will issue a mortgage. In some cases a Certificate of Occupancy cannot be issued because no building permit was issued prior to construction, and the building inspector was not called in during construction. In these cases, the building department may issue a Certificate of Alteration, Certificate of Compliance, or Certificate of Completion. A similar document may be issued for outside items like decks and pools, or inside items like a wood burning stove. Consult your local building department for more information if you are looking at a building that has been altered."

SELLING A HOME IN TODAY'S MARKET

Here is a problem I have discovered in two different residential sales. It is based on the following clause that is contained in the standard RESIDENTIAL CONTRACT OF SALE Jointly Prepared by the Real Property Section of the New York State Bar Association, the New York State Land Title Association, the Committee on Real Property Law of the Association of the Bar of the City of New York and the Committee on Real Property Law of the New York County Lawyers' Association. (11/00):

" 16. Conditions to Closing. This contract and Purchaser's obligation to purchase the Premises are also subject to and conditioned upon the fulfillment of the following conditions precedent:

........................

(b) The delivery by Seller to Purchaser of a valid and subsisting Certificate of Occupancy or other required certificate of compliance, or evidence that none was required, covering the building(s) and all of the other improvements located on the property authorizing their use as a family dwelling at the date of Closing."

SELLING A HOME IN TODAY'S MARKET

In Nassau County, the custom is to have the Seller's counsel draft the contract of sale. Counsel will usually send it to Buyer's counsel with the following language:

"Attached please find the proposed Contract of Sale.

If the Contract meets with your clients' approval, please forward four (4) originally executed copies to me, together with the down payment check in the sum of $XXXXXXX, payable to "YYYYYYY, as attorney". I will then review the terms with my clients and, provided the terms are acceptable, I will have them execute the Contracts and return two (2) fully executed copies to you. I will deposit the escrow check at the time I forward the fully executed copies to you at which time the Contract shall be binding."

SELLING A HOME IN TODAY'S MARKET

The two cases cited and discussed illustrate the ambiguity that may arise when contracts are "in the mail" but not yet signed.

This is a common practice in many types of agreements - rather than having a sit down contract execution, arrangements are made through the mail.

But when residential sale contracts are executed that way, an issue may then arise as to when a binding contract exits.

SELLING A HOME IN TODAY'S MARKET

The decision in Church of God v. 4TH CHURCH, 76 AD 2d 712 (App. Div. 2nd Dept. 1980):

"This is an appeal by the defendant from a judgment of the Supreme Court, Kings County, which awarded the plaintiff money damages for breach of a contract to sell real property owned by the defendant and upon which its church edifice was erected. The plaintiff cross-appeals from so much of the judgment as failed to direct specific performance of the contract.

Because of a decline in its membership the defendant, Fourth Church of Christ, Scientist, of Brooklyn, New York, decided to sell its house of worship and move to a smaller facility which it also owned. Plaintiff, Church of God of Prospect Plaza, offered to buy the real property and, after negotiations, defendant's membership voted unanimously to sell the same in accordance with plaintiff's offer. In accordance with defendant's instructions, its attorneys prepared a proposed contract and sent it to plaintiff. Plaintiff executed the contract and returned it with a deposit according to the instructions given by the attorneys for the defendant.

At about the same time, defendant received an offer from a sister church to merge their congregations and also received an all cash offer for the property from yet another prospective purchaser. Subsequent to the return of the contract signed by the plaintiff, defendant's membership voted to consolidate with the sister church and to rescind the acceptance of plaintiff's offer. The contract was never executed by the defendant.

In light of the merger, plaintiff was content to forego its rights to purchase the property, but when it subsequently developed that the merger was not permitted by defendant's mother church and defendant entered into a contract of sale with the other buyer which had made an "all cash" offer, plaintiff decided to commence this action. In fact, the merger was eventually approved, the contract between defendant and the second offeree was canceled and that offeree purchased the property of defendant's sister church. Defendant's attorneys, who had obtained court leave approving all the transactions except the contract with the plaintiff, never informed the court of the plaintiff's status.

On a prior appeal in this action, we reversed an order granting summary judgment to the defendant and remitted the action to determine whether certain signed corporate minutes of the defendant authorizing the sale constituted a sufficient memorandum of the contract of the parties to satisfy the Statute of Frauds (Church of God of Prospect Plaza v Fourth Church of Christ, Scientist, of Brooklyn, 59 AD2d 732). Pursuant to court-ordered discovery, plaintiff obtained the defendant's signed corporate minutes authorizing the sale and thereafter it sought summary judgment. Special Term held that the "corporate minutes were duly executed and constituted a sufficient signing to satisfy the Statute of Frauds and an adequate acceptance of the plaintiff's offer" and it set the action down for a determination of the fairness of the contract and as to whether there were any valid reasons for refusing plaintiff's request for performance of the agreement (see Religious Corporations Law, § 12). After an evidentiary hearing the Referee determined that the contract was fair and enforceable and offered the defendant an alternative of either specifically performing the contract or paying damages in the amount of the difference between the contract price of $150,000 and the fair market value of $225,000 at the date of the hearing, plus plaintiff's attorney's fees. The judgment appealed from was entered in accordance with the defendant's election to pay damages.

The corporate minutes of the defendant indicate that its membership unequivocally accepted the offer of the plaintiff to purchase its church property on the terms proposed by the plaintiff. Although the vote of defendant's membership constituted an acceptance, such acceptance was not effective until communicated to plaintiff (see White v Corlies, 46 N.Y. 467, 469; 1 Corbin, Contracts, § 67; Simpson, Contracts [2d ed], § 36). At defendant's direction, its attorneys sent plaintiff a written instrument for execution on its behalf which embodied the same terms as had been proposed by plaintiff and agreed upon at defendant's membership meeting. The sending of the transmittal letter and this formal written instrument for execution constituted sufficient notice of acceptance.

Defendant contends that it never intended to be bound until the written contract was executed by both parties. In determining whether the parties entered into a contract, it is necessary to examine the words and deeds of the parties which constitute the objective manifestations of their intent 715*715 (see Brown Bros. Elec. Contrs. v Beam Constr. Corp., 41 N.Y.2d 397, 399). A review of the record demonstrates that the parties had come to a meeting of minds on the terms of their contract and all that remained was the mere memorialization of their agreement in a formal document. As the Court of Appeals explained in the case of Matter of Municipal Consultants & Publishers v Town of Ramapo (47 N.Y.2d 144, 148-149): "Generally, where the parties contemplate that a signed writing is required there is no contract until one is delivered (Scheck v Francis, 26 N.Y.2d 466; Schwartz v Greenberg, 304 N.Y. 250). This rule yields, however, when the parties have agreed on all contractual terms and have only to commit them to writing. When this occurs, the contract is effective at the time the oral agreement is made, although the contract is never reduced to writing and signed. Where all the substantial terms of a contract have been agreed on, and there is nothing left for future settlement, the fact, alone, that it was the understanding that the contract should be formally drawn up and put in writing, did not leave the transaction incomplete and without binding force, in the absence of a positive agreement that it should not be binding until so reduced to writing and formally executed (Disken v Herter, 73 App Div 453, affd 175 N.Y. 480; 1 Williston, Contracts, § 28; see, also, Matter of Meister, 39 AD2d 857, affd 32 N.Y.2d 626; Belmar Contr. Co. v State of New York, 233 N.Y. 189, 194)." Neither the minutes of the defendant's corporate meeting at which plaintiff's offer was accepted nor the transmittal letter expressly or impliedly reserved the effectiveness of the agreement until the formal contract was signed. Accordingly, we find that the parties duly contracted for the sale of defendant's church edifice to plaintiff.

Defendant next contends that that contract is unenforceable by reason of the Statute of Frauds (see General Obligations Law, § 5-703, subd 2). It is our opinion, however, that the plaintiff's written offer, the signed corporate minutes of the defendant accepting the terms of that offer and the formal unsigned contract prepared by defendant's attorneys which unequivocally refers to the same transaction, when read together, constitute a sufficient memorandum of the contract to satisfy the Statute of Frauds (see Scheck v Francis, 26 N.Y.2d 466, 470-471; Crabtree v Elizabeth Arden Sales Corp., 305 N.Y. 48, 54-56; DFI Communications v Greenberg, 41 N.Y.2d 602, 606-607).

The next question is whether the Referee to hear and determine erred in granting approval of the contract between plaintiff and defendant pursuant to the provisions of certain relevant statutes. Subdivision 1 of section 12 of the Religious Corporations Law provides that in order to sell any of its real property, such a corporation must apply for and obtain leave of court pursuant to section 511 of the Not-For-Profit Corporation Law. Subdivision (d) of section 511 provides that the court may authorize the sale if it appears to the court's satisfaction that: "the consideration and the terms of the transaction are fair and reasonable to the corporation and that the purposes of the corporation or the interests of the members will be promoted [thereby]".

The law is clear that a religious corporation can enter into a valid contract for the sale of its real property without first obtaining court approval (Muck v Hitchcock, 149 App Div 323, 328-329, revd on other grounds 212 N.Y. 283; Congregation Beth Elohim v Central Presbyt. Church, 10 Abb Prac [NS] 484, 488-489; Sun Assets Corp. v English Evangelical Lutheran Church of Ascension of Borough Park, Brooklyn, 19 Misc 2d 187, 192). Although a court of equity may decree specific performance of an executory contract for the sale of the real property of a religious corporation (Muck v Hitchcock, 149 App Div 323, 328-329, supra; Sun Assets Corp. v English Evangelical Lutheran Church of Ascension of Borough Park, Brooklyn, supra, p 192; Bounding Home Corp. v Chapin Home for Aged & Infirm, 19 Misc 2d 653; Congregation Beth Elohim v Central Presbyt. Church, supra, p 490), it must first determine, in accordance with subdivision (d) of section 511 of the Not-For-Profit Corporation Law, that the terms and consideration of the transaction are fair and reasonable and that the purposes of the corporation or interests of its members will be promoted by the sale (cf. Associate Presbyt. Congregation of Hebron v Hanna, 113 App Div 12, 14). The purpose of this requirement is to protect the members of the religious corporation, the real parties in interest, from loss through unwise bargains and from perversion of the use of the property (Bowen v Trustees of Irish Presbyt. Congregation in City of N. Y., 6 Bosw 245; Muck v Hitchcock, 212 N.Y. 283, 287, supra; Congregation Beth Elohim v Central Presbyt. Church, supra, pp 488-489; Madison Ave. Baptist Church v Baptist Church in Oliver St., 1 Abb Prac [NS] 214, 224; Reformed Prot. Dutch Church in Garden-St. v Mott, 7 Paige Ch 77, 83-84).

It thus appears that the Legislature intended the test to have two prongs. First, the court must determine that the terms and consideration of the transaction were not unwise. In assessing the prudence of the bargain, it is our view that the court should look to the conditions prevailing at the time it was struck. Measured in that light, we agree with the Referee that the contract between plaintiff and defendant was fair and reasonable when made. However, the second prong of the test requires the court to determine that the sale would benefit the corporation or that the best interests of its members would be promoted thereby. We hold that in applying this second prong of the test the court may consider whether corporate purposes would have been served or the best interests of the membership promoted at the time the contract was made, but it should be guided primarily by whether those ends would be realized in light of conditions prevailing at the time the issue is presented to the court (cf. Wilson v Ebenezer Baptist Church, 17 Misc 2d 607, 608-609). Examined in this light, it clearly appears that conveyance of defendant's church edifice would now be highly detrimental to the purpose of the corporation and the interests of its members. Sale is now unanimously opposed by defendant's membership because the congregation has merged with another congregation that sold its church as part of the consolidation. Specific performance of this contract would leave the combined congregation of two churches without a house of worship.

It has been said that in making the determination required by section 12 of the Religious Corporations Law and section 511 of the Not-For-Profit Corporation Law the court must either "ratify or veto" the contract of the parties (Matter of Minister, Elders & Deacons of Ref. Dutch Church in Saugerties, 16 Barb 237, 241-242). In the case of Congregation Beth Elohim v Central Presbyt. Church (10 Abb Prac [NS] 484, 492-493, supra), the court clearly explained that although a contract made by a religious corporation for the sale of its property is valid, it is "liable * * * to be defeated" where the court finds it not to be in the best interests of the membership and that where consent to the alienation of the property has been withheld by the court, the contract of sale is "inoperative". It thus appears that contracts for the sale of the real property of a religious corporation are valid, subject to being defeated by the veto of the court, i.e., they are voidable by the court where the two-pronged test of subdivision (d) of section 511 of the Not-For-Profit Corporation Law 718*718 has not been met. For the reasons stated above, we cannot approve the sale of defendant's property under the present conditions and therefore the contract of sale between it and plaintiff is vetoed and rendered inoperative.

By this determination we do not wish to be understood as holding that a religious society may, at its whim, change its mind as to the sale of its real property after it has entered into a contract of sale but before the requisite court approval has been obtained. Where the seller refuses to perform and the buyer sues for specific performance, the trial court must satisfy itself that the test prescribed in subdivision (d) of section 511 of the Not-For-Profit Corporation Law has been met before awarding relief to the plaintiff. Such a determination must be made on a case-by-case basis because it entails the assessment of differing and often complex facts. Suffice it to say that where the terms and price are reasonable and the sale is only opposed by the membership because of a slightly better offer from some other party, a court of equity should not hesitate to approve the contract and decree specific performance. But where, as here, the sale is opposed by the membership because of merger with another church and the combined congregations now use the edifice, the contract is not in the present best interests of the membership and must be disapproved.

The final issue raised by defendant concerns the question of the money damages awarded by the Referee. Since the contract has been voided, that issue has become academic.

Accordingly, the judgment appealed from should be reversed and plaintiff's complaint dismissed.

Judgment of the Supreme Court, Kings County, entered July 5, 1979, reversed, on the law and the facts, without costs or disbursements, and plaintiff's complaint is dismissed."