28TH Highline Assocs., L.L.C. v. Roache
| Decision Date | 22 February 2019 |
| Docket Number | 18 Civ. 1468 |
| Parties | 28TH HIGHLINE ASSOCIATES, L.L.C., Plaintiff, v. IAIN ROACHE, Defendant. |
| Court | U.S. District Court — Southern District of New York |
APPEARANCES:
Attorneys for Plaintiff
CLARICK GUERON REISBAUM LLP
New York, NY 10001
By: Emily Reisbaum, Esq.
Nicole Gueron, Esq.
Ashleigh Hunt, Esq.
Attorneys for Defendant
SMITH, GAMBRELL & RUSSELL, LLP
1301 Avenue of the Americas, 21st Floor
New York, NY 10019
By: Michael P. Regan, Esq.
Sweet, D.J.
Plaintiff 28th Highline Associates, L.L.C. ("Plaintiff" or "Highline") has moved for judgment on the pleadings pursuant to Fed. Rule Civ. P. 12(c) and for fees and costs pursuant to the parties' agreement.
Plaintiff seeks the release of a deposit on a luxury apartment pursuant to a written agreement between the property seller and purchaser after the Defendant failed to close on the purchase. Under the agreement dated December 2015 (the "Agreement"), Defendant agreed to purchase from Plaintiff a condominium apartment, a storage unit, and a parking space in a building then under construction in Manhattan. As required, Defendant placed a 20 percent deposit on the property, in the amount of $2,113,000.00, to be held in escrow until the closing of title and Defendant's transfer to Plaintiff (the sponsor/seller) of the remainder of the purchase price.
When construction completed in July 2017, Plaintiff notified Defendant of the scheduled closing date, but Defendant did not close on the sale within the time prescribed by the Agreement. Pursuant to the Agreement, Plaintiff issued a noticeof default on November 9, 2017, giving Defendant 30 days to cure and close. Defendant failed to close within the prescribed cure period.
After fruitless discussions between the parties, on January 19, 2018, Plaintiff wrote Defendant that it was planning to terminate the Agreement pursuant to its explicit termination provisions. In response, Defendant issued a notice to the escrow agent claiming that he was fraudulently induced into the Agreement through alleged oral misrepresentations, and instructed the escrow agent to hold the deposit. On January 24, 2018, Plaintiff terminated the Agreement and demanded that the escrow agent release the deposit. However, under the Agreement, the escrow agent may not release the deposit until either: (1) the parties jointly execute a statement in writing directing that it be released; or (2) a final, non-appealable order or judgment of a court is entered. This action therefore ensued seeking release of the deposit. The Defendant filed counterclaims alleging fraudulent inducement and repudiation. Based upon the conclusions set forth below, the motion of the Plaintiff is granted, and the cross-motion of the Defendant is denied.
In 2014, construction began on 520 West 28th Condominium (the "Condominium"), located at 520 West 28th Street, New York, NY 10001 (the "Building"). . The Building was designed by the Pritzker Prize-winning architect Zaha Hadid and is located immediately adjacent to the High Line. (Id. ¶ 16). Plaintiff, the sponsor under the offering plan of the Condominium, began listing planned apartments for sale while construction of the Building took place. (Id. ¶¶ 15, 17). One planned apartment was Unit 33 (the "Apartment"), a three-bedroom apartment located on the 17th floor of the Building. (Id. ¶ 17).
Defendant is a non-citizen who resides in Gibraltar. (Reisbaum Decl. Ex. 2 ("Roache Decl."), ¶ 1). He is the Chairman of Domain Venture Partners, where he manages a structured investment fund for experienced investors. (Id. ¶¶ 11-12). In December 2015, with the advice of two lawyers (his in-house counsel and a specialized New York City real estate attorney), Defendant agreed to buy the Apartment and related property. (See Reisbaum Decl. Ex. 3, Plaintiff's Reply to Counterclaims ("Reply"), ¶ 8; Ex. M). The purchase was documented in anagreement and related riders, dated and executed on December 22, 2015 (altogether the "Agreement"). (Compl. Ex. A). The Agreement explicitly incorporated by reference the Condominium's offering plan (the "Offering Plan"), which provided additional details regarding the Building and the Apartment. (Id. at ¶ 11.2). Defendant received a copy of the Offering Plan, and all amendments. (Id. at ¶ 11.1; see also Reisbaum Decl. Ex. 4, ("Answer") ¶ 20).
Defendant agreed to purchase the Apartment for $9,795,000.00. (Compl. Ex. A. ¶¶ 2, 3.1). He also agreed to purchase licenses for the right to a storage unit (the "Storage Vault") and parking space (the "Parking Space") (the Apartment, Storage Vault License, and Parking Space License altogether, the "Property"), in the Building for $250,000 and $520,000 respectively, for a total of $10,565,000.00 (the "Purchase Price.") (Compl. Ex. A. Rider to Agreement Re: Storage Vault License ¶ 1.A; Rider to Agreement Re: Parking Space License ¶ 1.A.).
Defendant agreed that he would place a 20% deposit on the Property, in the amount of $2,113,000.00 (the "Deposit"), at the date of signing, to be held in escrow by Levitt & Boccio, LLP (the "Escrow Agent"), until the close of title on theApartment (the "Closing"). (Compl. Ex. A. ¶¶ 3.1, 4.1; Rider to Agreement Re: Storage Vault License ¶ 1.B; Rider to Agreement Re: Parking Space License ¶ 1.B.; Escrow Rider ¶ 10). Plaintiff would designate the date of the Closing on 30 days' notice, subject to Defendant's right to "one (1) adjournment of the closing for a period not to exceed thirty (30) calendar days[.]" (Compl. Ex. A. ¶ 5.1, see also Rider to Purchase Agreement ¶ A). At the Closing, Defendant would pay the balance of the Purchase Price, $8,452,000.00, to Plaintiff, the Escrow Agent would release the Deposit to Plaintiff, and Defendant would receive the deed to the Apartment. (Id. ¶ 3.1(b); Escrow Rider ¶ 10(a)).
The Agreement defined certain events that would constitute Defendant's default under the contract (an "Event of Default"), and the consequences stemming therefrom. (Id. ¶ 12). Defendant's failure to pay the Balance on the closing date designated by Plaintiff, after the expiration of all adjournment rights granted to Defendant, constituted an Event of Default. (Id. ¶ 12; see also Rider to Purchase Agreement ¶ A, B).2 After Plaintiff had given Defendant notice of the same, the Agreement provided Defendant an additional 30 days to cure, during which time was "of the essence." (Compl. Ex. A. ¶ 12(b)). If Defendant failed timely to cure, Plaintiff had "sole discretion" to cancel the Agreement, and as its sole remedy, the right to retain asliquidated damages the Deposit and any interest earned thereon. (Id.). The Agreement also gave Plaintiff sole discretion not to strictly enforce the cure period without waiving any of its Default rights, such that Plaintiff could subsequently invoke the default provisions for Defendant's failure timely to close. (Id. at ¶ 30.)
The Parties explicitly agreed that neither would challenge the validity of the Agreement with respect to the liquidated damages, nor Plaintiff's right to retain the Deposit in the event of Defendant's default. (Id. ¶ 12(d).) This damages provision was agreed to "VOLUNTARILY, AFTER NEGOTIATION, WITHOUT DURESS OR COERCION BY ANY PARTY UPON ANY OTHER PARTY," and with each party having been, or having the full and adequate opportunity to be, represented and advised by "COUNSEL, ACCOUNTANTS, BROKERS, APPRAISERS AND OTHER EXPERTS AND ADVISORS OF ITS OWN CHOOSING." (Id.) Defendant was in fact represented by counsel, Jesse Gordon of Costello & Gordon LLP, during the Agreement's negotiation, as well as his in-house counsel. (Reply, ¶ 8; Ex. M.)
In addition to the representations in the Agreement and Offering Plan, Defendant agreed that he had not relied on any other representations, warranties, architect's plans,statements, or estimates, written or oral, in deciding to enter into the Agreement, and that this provision would survive closing of title or termination of the Agreement. (Compl. Ex. A. ¶ 20). The parties also agreed that the Agreement could not be orally modified. (Id. ¶ 42). Instead, any changes were required to be set forth in a separate written agreement signed by the parties and referring to the Agreement. (Id.) No such separate agreement exists. (Answer, Counterclaims ¶ 16 (); see also Reply ¶ 16 (substantially same)).
Finally, the Agreement contained a one-way fee-shifting clause, which provided that if Defendant defaulted, he would be obligated to reimburse the Plaintiff, among others, for any legal fees and disbursements it incurred in enforcing its rights thereunder. (Compl. Ex. A. ¶ 35). This provision also survives the termination of the Agreement. (Id.).
The Agreement, and its associated Riders, was executed on December 22, 2015. (Compl. Ex. A). On or about December 21, 2015, Defendant, through his attorneys, paid the Deposit. (Answer ¶ 33). The Deposit was then transferred into an individual escrow sub-account in Defendant's name, within the Escrow Agent's master escrow account. (Compl. ¶ 33).
With construction complete, on June 21, Plaintiff notified Defendant that the Closing was scheduled to occur on July 24, 2017. (Compl. Ex. C). Pursuant to the Agreement, on July 18, 2017, Defendant elected to exercise his right to adjourn the closing date by 30 days, further requesting that the closing occur at a "mutually agreeable date and time no later than August 23, 2017 at 2:00 P.M." (Compl. Ex. D; see also Answer ¶ 10).
Defendant did not close title on or before August 23, 2017, or any time thereafter. (Compl. ¶ 37; see also Answer ¶ 37 (); ¶ 40 ()).
On September 8, 2017, Gregory Gushee ("Gushee"), the...
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