W.W.W. Associates, Inc. v. Giancontieri

• Decision Date: 13 December 1989
• Citation: 152 A.D.2d 333,548 N.Y.S.2d 580
• Parties: W.W.W. ASSOCIATES, INC., Appellant, v. Frank GIANCONTIERI, et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 580

548 N.Y.S.2d 580

152 A.D.2d 333

W.W.W. ASSOCIATES, INC., Appellant, v. Frank GIANCONTIERI, et al., Respondents.

Supreme Court, Appellate Division Second Department.

Dec. 13, 1989.

Dollinger, Gonski, Grossman, Permut & Hirschhorn, Carle Place (Matthew Dollinger, of counsel), for appellant.

Raskin, Haas & Poli, Huntington (John G. Poli III, of counsel), for respondents.

Before BRACKEN, J.P., and KUNZEMAN, EIBER and SPATT, JJ.

SPATT, Justice.

This appeal affords us the opportunity to further clarify the law involving contingency clauses contained in a contract to sell real property. Notwithstanding the fact-specific holdings of the cases decided in this area of law, some rules of general application have evolved. While the formulation of broad, sweeping rules of contract interpretation with respect to contingency clauses would be unwise and unworkable, if not impossible, the case law provides some guidelines to aid parties entering into such contracts as well as their counsel and the courts. As the circumstances of the instant case illustrate, foremost among these guidelines is the intent of the parties in including the contingency clause in the contract, as discerned from the language of the clause and the actual impact of the contingency.

In this case, the subject real property was encumbered by a notice of pendency as a result of an action commenced by a third-party against the defendant sellers. At the request of the plaintiff purchaser, a clause was inserted in the contract of sale which provides, inter alia, that "in the event such litigation is not concluded, by or before 6/1/87, either party shall have the right to cancel this contract". Under the facts of this case, in the absence of any persuasive reason to the contrary, we find that this clause was intended for the sole benefit of the plaintiff purchaser and could be timely and unilaterally waived by it without the consent of the defendant sellers.

I

By contract dated October 16, 1986, the individual defendants Frank and Louis Giancontieri agreed to convey to the plaintiff a parcel consisting of two acres of real property situated in the Town of Babylon, Suffolk County. A notice of pendency had been filed against the real property in question as a result of an action commenced by a third-party against Frank and Louis Giancontieri in the Supreme Court, Suffolk County.

During the negotiations prior to the execution of the contract, the plaintiff was assured by the defendant Louis Giancontieri that the pending action was totally without merit and was an attempt to harass him. Nevertheless, the existence of the notice of pendency was of concern to the plaintiff because it would cause potential problems in obtaining a construction loan in order to finance building and in procuring title insurance. Consequently, the plaintiff took the precaution of obtaining the defendants' consent to insert the following clause in the contract of sale:

"31. The parties acknowledge that Sellers have been served with process instituting an action cercerned (sic) with the real property which is the subject of this agreement. In the event the closing of title is delayed by reason of such litigation it is agreed that closing of title will in a like manner be adjourned until after the conclusion of such litigation provided, in the event such litigation is not concluded, by or before 6-1-87 either party shall have the right to cancel this contract whereupon the down payment shall be returned and there shall be no further rights hereunder" (emphasis supplied).

The closing of title was initially scheduled for December 1, 1986, and the sale was not contingent upon the plaintiff's obtaining financing from any institutional lender. In March 1987, the plaintiff was allegedly informed that the defendants were doing nothing to defend the action and were waiting for June 2, 1987, the first available cancellation date pursuant to clause 31, in order to cancel the contract. On April 10, 1987, the plaintiff moved to intervene in the underlying action to protect its interest as contract vendee. The plaintiff then determined that it could obtain financing and title insurance, notwithstanding the action and the notice of pendency and, apparently, elected to waive its right to cancel. On or about May 13, 1987, the plaintiff conveyed its willingness to take title subject to the notice of pendency by notifying the defendants in writing of its desire to close title and to schedule a closing for May 28, 1987. This letter constituted an implicit waiver of the plaintiff's right to cancel as set forth in clause 31. The defendants replied that the litigation was still pending and rejected the plaintiff's offer to close. As conceded in their brief submitted on this appeal, the defendants "chose to ignore the demand letter [by plaintiff requesting a closing] and elected to cancel the contract pursuant to the * * * litigation contingency provision".

On or about May 30, 1987, the plaintiff commenced the instant action against the defendants for specific performance of the contract. On June 2, 1987, the defendants purportedly exercised their right to cancel the contract by reason of the pending litigation by notifying the plaintiff in writing "that the contract is hereby cancelled as of this date" and by enclosing the deposit. On June 3, 1987, the plaintiff returned the deposit to the defendants, advising them that the instant action had been commenced.

The defendants moved for summary judgment dismissing the complaint on the basis of the litigation contingency clause in the contract. The Supreme Court, Suffolk County, by order and judgment dated November 20, 1987, granted summary judgment in favor of the defendants and dismissed the complaint on the ground that the agreement was clear and unambiguous and conferred a right on either party to cancel. The court further noted that the plaintiff failed to show that the contingency provision at issue was intended solely for the plaintiff's benefit. We disagree.

II

A party for whose benefit a condition is included in a contract may waive the condition prior to the expiration of the time period set forth in the contract and accept the subject of the contract in an "as is" condition (see, Satterly v. Plaisted, 52 A.D.2d 1074, 384 N.Y.S.2d 334, affd. 42 N.Y.2d 933, 397 N.Y.S.2d 1008, 366 N.E.2d 1362; Weinprop, Inc. v. Foreal Homes, 79 A.D.2d 987, 434 N.Y.S.2d 471; South Shore Skate Club v. Fatscher, 17 A.D.2d 840, 233 N.Y.S.2d 372; 62 N.Y.Jur. Vendor and Purchaser § 34; 22 N.Y.Jur.2d, Contracts § 330). A review of the record reveals that under the circumstances of this case the language of clause 31 was intended to protect the plaintiff from having to purchase the property burdened by a notice of pendency filed as a result of the underlying action which could prevent the plaintiff from obtaining clear title and would impair its ability to obtain subsequent construction financing.

It is well established that certain types of contingent provisions in a contract are inserted solely for the benefit of the purchaser, even though a particular clause may itself provide that either side can cancel. For example, in BPL Dev. Corp. v. Cappel, 86 A.D.2d 591, 446 N.Y.S.2d 134, a clause in a contract for the sale of real property conditioned the sale upon the purchaser obtaining subdivision approval within two months of the date of signing. As in the instant case, the language of the clause entitled either party to give notice of cancellation. The plaintiff obtained conditional approval within one month, gave notice of its desire to close, and proposed a date for closing. On the proposed closing date, the defendants notified the plaintiff that the contract was cancelled because subdivision approval had not been obtained. This court determined that the subdivision approval condition was for the benefit of the purchaser and could be waived by the purchaser, as follows:

"The language of paragraph 8 was designed to protect the plaintiff, a land developer, from having to purchase the property if the planning board refused to approve the proposed subdivision. This being so, when the planning board notified the plaintiff that conditional approval had been granted, plaintiff could proceed to close if it deemed the approval to satisfy the paragraph, which had been inserted for its benefit. The fact that the paragraph provided that the sellers could also cancel the contract if the necessary approvals were not obtained does not change the result. The clear intent of the parties, as expressed in the contract, was to set a time limit on plaintiff's efforts to obtain subdivision approval. Thus, regardless of whether subdivision approval was obtained since the plaintiff was ready, willing and able to close by the date set in the contract, the defendants did not have the right to cancel" ( BPL Dev. Corp. v. Cappel, supra, at 591, 446 N.Y.S.2d 134 [emphasis supplied].

Similarly, in De Freitas v. Holley, 93 A.D.2d 852, 461 N.Y.S.2d 351, the contract provided that the purchaser, at her own expense, could have a termite inspection made within 10 days of the contract date; and that if such inspection revealed a termite condition which the seller was unwilling to correct, the "purchaser or the seller" could opt to cancel the contract (De Freitas v. Holley, supra, at 853, 461 N.Y.S.2d 351). The plaintiff had an inspection conducted and it disclosed substantial termite damage and infestation. The seller expressed his unwillingness to remedy the situation and elected to cancel the contract. The plaintiff then wrote expressing her intention to proceed to closing and stating that she was not concerned about the termite infestation. This court reversed the judgment of the Supreme Court, which upheld the defendant's cancellation of the contract, stating:

"The language of paragraph 4 was intended to protect plaintiff from having to purchase the property in the event that a...