New York Law Review

Tag: Repudiation

  • Pesa v. Yoma Development Group, Inc., 18 N.Y.3d 527 (2012): Establishing Readiness, Willingness, and Ability to Perform in Real Estate Contract Breach

    Pesa v. Yoma Development Group, Inc., 18 N.Y.3d 527 (2012)

    In a breach of contract action for the sale of real property where the seller has allegedly repudiated the contract, the buyer must prove they were ready, willing, and able to close the transaction to recover damages.

    Summary

    This case addresses the requirements for a buyer to recover damages when a seller allegedly breaches a real estate contract. The New York Court of Appeals held that a buyer seeking damages for a seller’s repudiation must demonstrate that they were ready, willing, and able to complete the purchase. The Court reasoned that damages are only recoverable if they were actually caused by the breach and that requiring the buyer to prove their ability to perform places the burden on the party with easier access to relevant evidence. The Court also found that the seller’s transfer of the property to an affiliated entity did not automatically constitute repudiation, creating a factual issue requiring further examination.

    Facts

    Yoma Development Group, Inc. (seller) entered into three separate contracts to sell properties to Mario Pesa and other plaintiffs (buyers). The seller planned to build three-family dwellings on each property. The contracts specified a purchase price and required the seller to deliver certificates of occupancy or “appropriate sign-offs.” Each contract contained a mortgage contingency clause allowing either party to cancel if the buyer didn’t obtain a mortgage commitment within 60 days. The seller transferred the properties to Southpoint, Inc., an affiliated corporation, over three years after the contracts were signed. Subsequently, the seller attempted to cancel the contracts, citing the buyers’ failure to obtain mortgage commitments. The buyers then sued for specific performance and damages.

    Procedural History

    The Supreme Court granted summary judgment to the buyers on liability, finding the seller anticipatorily breached the contracts by transferring title. The Appellate Division affirmed, holding that a buyer seeking damages for anticipatory breach need not prove they were ready, willing, and able to close. The Court of Appeals granted the seller leave to appeal.

    Issue(s)

    1. Whether a buyer seeking damages for a seller’s breach of a real estate contract must prove they were ready, willing, and able to close the transaction.
    2. Whether the seller’s transfer of the properties to an affiliated corporation constituted a repudiation of the contracts as a matter of law.

    Holding

    1. Yes, because damages for breach of contract are only recoverable if caused by the breach, and the buyer is in a better position to demonstrate their ability to perform.
    2. No, because the transfer between affiliated entities does not, by itself, make it impossible for the seller to close the transaction, and therefore does not automatically constitute repudiation.

    Court’s Reasoning

    The Court of Appeals reversed the lower courts, holding that a buyer seeking damages for a seller’s repudiation of a real estate contract must prove they were ready, willing, and able to close. The court cited treatises and cases from other jurisdictions to support this rule, aligning with the Third and Fourth Departments’ stance. The court reasoned that the “ready, willing, and able” requirement is supported by common sense, as damages are only recoverable if the breach caused them. The burden of proof is placed on the buyers because they can more readily produce evidence of their own intentions and resources. The Court distinguished American List Corp. v. U.S. News & World Report, noting that this case involved a long-term contract where proving future financial condition would have been unduly burdensome.

    The court also found that the transfer of the properties to Southpoint, Inc., an affiliated corporation, did not automatically constitute repudiation. The court explained that such transfers could be done for various reasons and did not necessarily indicate an unwillingness to perform the contract. While there was evidence suggesting the transfer was inconsistent with the contract, the court determined that conflicting affidavits created a factual issue requiring further examination. The court quoted Deforest Radio Tel. & Tel. Co. v Triangle Radio Supply Co., stating, “Where one party to a contract repudiates it and refuses to perform, the other party by reason of such repudiation is excused from further performance, or the ceremony of a futile tender. He must be ready, willing and able to perform, and this is all the law requires”.

    The court affirmed the denial of the seller’s cross-motion for summary judgment because the record did not conclusively prove that the buyers were not ready, willing, and able to close, nor that the Southpoint transfer was not a repudiation. The court also noted that the buyers’ claim that their failure to get mortgage commitments resulted from the seller’s non-performance remained an open issue, citing Arc Elec. Constr. Co. v Fuller Co., “ ‘(T)he defendant cannot rely on (a) condition precedent . . . where the non-performance of the condition was caused or consented to by itself’ ”.

  • Matter of Barabash, 31 N.Y.2d 78 (1972): Repudiation of Fiduciary Duty and Statute of Limitations

    Matter of Barabash, 31 N.Y.2d 78 (1972)

    For the Statute of Limitations to bar a petition for an accounting from a fiduciary, the fiduciary must openly and unequivocally repudiate their obligation, and the beneficiary must have knowledge of such repudiation.

    Summary

    This case concerns whether an administrator of an estate sufficiently repudiated their fiduciary duty to invoke the Statute of Limitations defense against a petition for a compulsory accounting. The administrator, decedent’s nephew, claimed to be the sole distributee, but later, decedent’s children from the Soviet Union sought an accounting. The court held that the administrator’s actions, specifically the correspondence between attorneys, did not constitute a clear and unequivocal repudiation, and thus, the Statute of Limitations did not bar the petition. The court also found the defense of laches unavailable because the beneficiaries’ delay was justified and caused no prejudice to the administrator.

    Facts

    Decedent died intestate in 1951, and his nephew, the respondent, was appointed administrator of the estate in 1952, claiming to be the sole distributee. In 1960, decedent’s children, the appellants residing in the Soviet Union, learned of their father’s death and attempted to contact the respondent. Unsuccessful initially, they retained counsel in 1963, who contacted the respondent’s attorney, leading to a conference that is central to the dispute. After determining that the respondent was unwilling to provide an accounting, the appellants commenced proceedings in 1969 to compel one.

    Procedural History

    The Surrogate directed the respondent to provide an accounting, rejecting the Statute of Limitations and laches defenses. The Appellate Division reversed, finding a letter from the appellants’ counsel to the respondent’s attorney as evidence of repudiation, starting the Statute of Limitations. The New York Court of Appeals reversed the Appellate Division, reinstating the Surrogate’s order.

    Issue(s)

    1. Whether the administrator of an estate openly repudiated his fiduciary duty to the beneficiaries such that the Statute of Limitations began to run, barring the beneficiaries’ petition for a compulsory accounting.
    2. Whether the doctrine of laches barred the petition for a compulsory accounting.

    Holding

    1. No, because the administrator’s actions and communications, particularly the correspondence between the attorneys, were equivocal and did not constitute a clear and open repudiation of trust responsibility.
    2. No, because the beneficiaries’ delay in bringing the suit was justified due to their residence in the Soviet Union, and the administrator failed to demonstrate prejudice resulting from the delay.

    Court’s Reasoning

    The court emphasized that a fiduciary must “openly repudiated his obligation to administer the estate” for the Statute of Limitations to begin running, citing Matter of Jacobs, 257 App. Div. 28, 29. The court held that “mere lapse of time is not sufficient, but an act of repudiation is necessary.” The court found the correspondence between the attorneys to be an “equivocal course of conduct” falling short of the required clear and open repudiation. While the letter from the appellants’ counsel threatened a compulsory accounting, the respondent’s attorney’s subsequent responses hinted at a possible settlement and requested further documentation, indicating a lack of clear repudiation.

    Regarding laches, the court stated that it “is defined as such neglect or omission to assert a right as, taken in conjunction with the lapse of time, more or less great, and other circumstances causing prejudice to an adverse party, operates as a bar in a court of equity.” The court found the beneficiaries were justifiably ignorant of the facts giving rise to the cause of action because they resided in the Soviet Union. Additionally, the court reasoned that respondent failed to affirmatively show any change of position prejudicial to him due to appellants’ alleged delay in instituting suit. Furthermore, “A fiduciary is not entitled to rely upon the loches of his beneficiary as a defense, unless he repudiates the relation to the knowledge of the beneficiary.”