Morgan & Brother Manhattan Storage Co. v. Balin

Lane, J. Morgan and Brother Manhattan Storage Company, Ine. (Morgan Storage) and H & W Enterprises Co. (B & W) entered into an agreement for the sale of certain real property in New York City. Morgan Storage was purchasing, the build [87] ing for the specific purpose, of storing records and archives. The parties anticipated the possibility that the existing certificate , of occupancy would not allow for use of the building as required by Morgan Storage. Accordingly, clause 24 of the contract provided that the purchaser (Morgan Storage) would make “ prompt and diligent application ” to the municipality for amendment of the certificate of occupancy to. allow for use of the premises as a record or archive storage warehouse. The amended certificate of occupancy was to be obtained within 30 days from the date-of tho contract. Subdivision B of clause 24 provided that if the purchaser, in order to obtain the amended certificate of .occupáncy, was required to make improvements to the premises, then a •written statement specifying the necessary improvements and their estimated cost was to be ascertained/and certified by a licensed engineer mutually acceptable to, the parties. Such statement was to be submitted to the seller within 30 days of the signing of the contract. The next two subdivisions explicitly delineated the method of apportioning costs of the improvements between the parties. It also provided for holding funds in escrow subsequent to closing toxcover the estimated costs of any necessary building modifications. The contract provided that the purchaser had the right to elect to cancel the contract in the event an amended certificate of occupancy could not be obtained. Furthermore, if the cost of the estimated building improvements necessary to obtain the certificate of occupancy exceeded $5,000, then the seller had the right to elect to cancel. On February .16, 19.71, the parties executed the contract in question and the purchaser deposited ,$58,000 in escrow pending closing of title on the premises' and subject to the contractual rights of the respective parties. / On the. very day of the signing of the contract, E. Sadler Morgan (Morgan), the president of Morgan Storage, arranged an appointment with an official,of the Department of Buildings, tin February 18, Morgan and a Mr. Santoro, a civil engineer retained by Morgan, met with a Mr. Minkin, an executive engi-. neer affiliated with the Department of Buildings. Morgan' was informed that the existing certificate Of occupancy would not permit for use óf the building as contemplated. Morgan did not file a formal application for a certificate of occupancy nor explore with Mr. Minkin .the possibility of reinforcing the structure to increase the load capacity to such an extent that an amended certificate of '"occupancy would issue; [88] Instead, Morgan Storage sent a letter to H & W stating that an amended certificate of occupancy could not be obtained and that Morgan elected to cancel the contract. This cancellation letter was rejected by H & W. Morgan then sent a second letter of cancellation enclosing a reply of Mr. Minkin which stated in pertinent part: “ You are advised that an Alteration Application must be filed by a Registered Architect or Licensed Professional Engineer for the proposed change of use, with appropriate plans. Said application and plans will be examined for compliance with applicable building laws; and, if satisfactory, approved after which a permit may be taken out to perform any desired or required work. “ Upon completion of all work, a certificate of occupancy would be issued upon application therefor, after final inspection verifies completion of all work in conf ormance with approved plans. “ However, it is noted that certificate of occupancy No. 3262 indicates that the live load capacity of the seventh to eleventh floors is only 60 psf., which is inadequate for the proposed change of use on these floors from offices to warehouse storage use. ’ ’ After rejection by H & W of the second letter of cancellation, Morgan Storage instituted this action for recovery of its down payment. H & W counterclaimed for specific performance of the contract. Trial Term dismissed the complaint and granted judgment in favor of H & W on its counterclaim for specific performance. We would affirm. Our dissenting brethren seize upon the first portion of clause 24 to find that Morgan Storage complied with its contractual obligations. However, clause 24 of the contract, read in its entirety, required not only inquiry regarding the status of the then extant certificate of occupancy but also required affirmative action on the part of the purchaser in the form of building improvement to obtain amendment of the certificate of occupancy. Morgan Storage concededly made no further inquiry. Cancellation of the contract which required inability to obtain an amended certificate of occupancy was therefore unavailable to Morgan Storage and, furthermore, the right to return of the down payment was forfeited. In sum, plaintiff was prompt but not diligent. Furthermore, H & W was not limited to its remedy of retention of the down payment as damages. H & W could have opted as it did for specific performance of the contract. [89] The mere fact that breach by the vendee would allow the vendor to retain the down payment does not preclude the granting of specific performance (5A Corbin, Contracts, '§ 1213). A vendor may be entitled to specific performance on the theory of inadequacy of the remedy at law (Restatement, Contracts, § 360; Woodruff v. Germansky, 233 N. Y. 365, 369; Kroll v. Zimmerman, 274 App. Div. 1070); that the ends of justice would so best be served (cf. 5A Corbin, Contracts, § 1136); or under a theory of mutuality of remedy (cf. 5A Corbin, Contracts, § 1136; Baumann v. Pinckney, 118 N. Y. 604). The law in this State was succinctly outlined by Judge Pound when he stated: “ The New York rule is thus stated: ‘As early as 1835, it was said by Chancellor Walworth that a suit in equity against a vendee to compel a specific performance of a contract to purchase land has always been sustained as a part of the appropriate and acknowledged jurisdiction of a court of equity, although the vendor has, in most cases, another remedy by an action at law upon the agreement to purchase. (Brown v. Haff, 5 Paige 235.) One of the earliest decisions of this court was to the same effect (Crary v. Smith, 2 N. Y. 60) and the right of a vendee to maintain specific performance is too well settled to require further discussion. ’ (Baumann v. Pinckney, 118 N. Y. 604, 612.) ” (Woodruff v. Germansky, 233 N. Y. 365, 369.) Accordingly, the judgment entered May 13, 1974 dismissing the complaint and granting judgment on the counterclaim for specific performance should be affirmed with costs. (dissenting). The agreement of February 16,