A buyer who did not appear at the contractually agreed-upon closing time of a $50 million real estate deal breached his contract with the seller, even though it is undisputed that the parties met three hours after the scheduled closing time and continued to discuss the deal, a unanimous state appeals panel has ruled.
The Jan. 31 opinion by Justice David Saxe (See Profile) of the Appellate Division, First Department, in Nassau Beekman v. Ann/Nassau Realty, 116402/08, held the case up as an example of the importance of putting contract amendments in writing.
"A standard provision included in many commercial contracts is one requiring any modification of the agreement to be in writing," Saxe wrote. "Nevertheless, courts are presented over and over again with litigation arising out of circumstances where one party to a contract wrongly presumes, based on past practice, that an oral modification will be sufficient. This appeal illustrates the problem."
The plaintiff, Nassau Beekman LLC, agreed to buy a piece of property in lower Manhattan from Ann/Nassau Realty LLC in 2007 for $56.7 million, an amount that was later reduced to $50.3 million. At the time of the contract, Nassau Beekman made a down payment of $5 million. The parties originally contracted to close the deal in 2007, but repeatedly amended the contract to push the closing back.
According to Nassau Beekman, it was "standard practice" for the parties first to agree orally to push the date back, and then later formalize it in a written amendment. The parties’ contract required that any amendment be in writing.
The last contractually agreed-upon closing time was noon on Sept. 25, 2008. According to the decision, Ann/Nassau appeared, but Nassau Beekman did not. However, they did meet at 3 p.m. that day, and subsequently exchanged emails referring to a proposed further amendment to the contract, according to the decision. But no such amendment was ever put in writing.
In November 2008, with the sale still not closed, Ann/Nassau informed Nassau Beekman that it was terminating the agreement and keeping the down payment as damages, a remedy set forth in the contract.
Nassau Beekman then sued Ann/Nassau, alleging breach of contract and seeking return of the downpayment and additional damages. Ann/Nassau counterclaimed for breach of contract. Both sides moved for summary judgment
Manhattan Supreme Court Justice Saliann Scarpulla (See Profile) granted Ann/Nassau summary judgment dismissing the complaint, and Nassau Beekman appealed.
In his opinion, Saxe said that, despite the parties’ 3 p.m. meeting and subsequent communications, the parties were bound by the written contract. He rejected Nassau Beekman’s argument that a written agreement was not necessary because the parties actually performed an amendment extending the closing time by meeting at 3.
"At best, that 3:00 p.m. meeting could qualify as partial performance of the alleged oral modification," the judge said.
The emails the parties exchanged later also were not helpful to Nassau Beekman’s case, Saxe said.
"Not only do the emails fail to even indicate that the closing was adjourned by agreement, but all these items were clearly explainable as preparatory steps taken with a view of attempting to arrive at a possible agreement in the future," he said.
"In the absence of a resulting written modification, the mere fact that the parties met at 3:00 p.m. does not negate plaintiff’s default at the 12:00 p.m. closing, or reflect an adjournment of that scheduled closing; it may be understood to merely reflect that defendant was willing to attempt to negotiate a new modification, as the parties had done once before, and which, if accomplished, would have nullified the default," Saxe wrote. "Since plaintiff had already invested $9 million into the project, it had many reasons to continue meeting and negotiating in order to attempt to salvage the deal despite the expiration of the closing deadline, so meetings held after the time set for the closing do not establish that an extension was orally agreed to."
Finally, Saxe wrote, Nassau Beekman’s case "is not saved by the alleged past practice or course of conduct by which the parties orally extended closing dates and only later executed a written modification."
He continued, "The parties’ past ability to arrive at a mutually acceptable written modification does not justify reliance on an assumption that they would be able to agree on the necessary written modification in the future."
Steven Sinatra, a Greenberg Traurig partner who represented Ann/Nassau Realty, said, "We agree with the conclusion reached by the court."
Claude Castro, counsel for Nassau Beekman, could not be reached for comment.
@|Brendan Pierson can be contacted at email@example.com.