Results: $2.5 Million Win - Without Discovery
On May 12, 2021, our client, Rydan Realty Inc., won a speedy and decisive victory in a $2.5 million real estate dispute. Based on our early motion, Justice McShan of the Commercial Division, Supreme Court Bronx County, held that on behalf of Rydan, we had established as a matter of law that 110 East 138th LLC, i.e., the putative purchaser of Rydan’s commercial property, breached the contract of sale when it refused to close based upon our client's purported inability to deliver good title.
The dispute arose from a November 2017 contract for the sale of Rydan’s $17 million commercial property abutting the Harlem River. The contract contained exceptionally broad “permitted exceptions” appended to the contract, which included “restrictions … of record” and “facts which an accurate survey would disclose.” Additionally, the contract provided for a three-month due diligence period during which the purchaser could terminate for “any reason or no reason.” However if 110 East did not terminate within the diligence period, it waived the right to terminate as provided in the diligence clause.
Ultimately, in May 2020 – after several years of Rydan granting adjournments so the buyer could perform – 110 East issued a notice of termination, pointing to a “1983 Appropriation" -- an underwater sliver of the property located in the Harlem River, which was taken by New York State as part of a 1983 condemnation. 110 East claimed that the 1983 Appropriation rendered the contract’s warranties false and entitled it to a return of its downpayment. Rydan and 110 East filed competing lawsuits the day the COVID-19 moratorium was lifted.
The Slarskey team boldly moved to dismiss 110 East’s breach of warranty claim under CPLR 3211(a), i.e., that the undisputed documentary evidence – the contract of sale and a title report incorporated by reference – established Rydan’s entitlement to judgment on the pleadings. Rydan also moved to dismiss 110 East’s handful of tort and quasi-contract theories under CPLR 3211(7) (failure to state a claim).
Justice McShan issued a 15-page decision adopting our arguments, and holding that 110 East terminated the contract without lawful excuse for two, independent reasons. First, the rules of contract interpretation require reading the warranties in the context of the permitted exceptions. The Court found that documentary evidence “conclusively establishes” that the 1983 Appropriation is a permitted exception, such that 110 East was not permitted to terminate thereon. Second, even if the contract was not made subject to the 1983 Appropriation, pursuant to the contact, 110 East waived its right to terminate based on the 1983 Appropriation when it failed to do so within the three-month diligence period. Justice McShan separately noted “on this record that Plaintiff was clearly aware of the 1983 Appropriation before the expiration of the due diligence period” because 110 East’s November 2017 title report, incorporated by reference into a March 2018 amendment, flagged the 1983 Appropriation. The Court also dismissed 110 East’s tort and quasi-contract theories as duplicative of contract.
Rydan’s victory is notable for several reasons. Under New York law, Rydan’s successful liability finding entitles it to retain a $2.5 million downpayment. Rydan prevailed in less than a year, despite COVID-related delays and a busy commercial litigation docket -- and crucially, our team won the case without getting bogged down in discovery. The decision underscores that when “documentary evidence” undercuts a party's legal position (here, a both the contract and a title report), the New York courts may consider those documents and resolve a dispute on a motion to dismiss.
Slarskey LLC attorneys Evan Fried and David Slarskey represented Rydan in this action.