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July 3, 2001


The opinion of the court was delivered by: Owen. District Judge:


This is a contract action arising from the acquisition and renovation of a commercial property at 58 Walker Street in the Tribeca section of lower Manhattan. Plaintiff Linda Weiss, a citizen of New York, originally filed this action for specific performance of a real estate contract in New York State Supreme Court and, simultaneously, filed a Notice of Pendency*fn1 with the New York County Clerk pursuant to CPLR § 6501. Defendant Alard, LLC, a New Jersey real estate development company, removed the action to this Court based on diversity of citizenship and now moves to vacate the Notice of Pendency.

In early 1999, Weiss became interested in purchasing and developing 58 Walker Street into residential condominiums and obtaining a penthouse unit therein for her personal use. Weiss sought the location because it was close to a restaurant in which she has an interest called "TJA" located on the corner of Walker and Church Streets. In late March 1999, Weiss purchased 58 Walker Street from the SALA Company, a New York partnership, and made a $240,000 down payment. The project would require the renovation of the existing five floors at 58 Walker from commercial to residential space, and the addition of two floors (six and seven), which would contain two penthouse units, one a duplex and the other a triplex. At roughly the same time, in what the parties call a "flip" agreement,*fn2 Weiss contracted to convey the real property and building to defendant Alard for $2,400,000. The portion of this contract at issue deals with the obligations of Alard, as purchaser of 58 Walker, and the benefits Weiss would receive.

The agreement states in relevant part:

6.5 A) Purchaser [Alard] shall pay Seller [Weiss] an amount equal to thirty three percent (33%) of the net profits from the sales of all of the Units, after deducting all costs including but not limited to acquisition, construction, conversion, marketing, interest, and other such costs. . . . [I]n the event, for any reason, Purchaser pursues a different plan for the Building, such as a development of a portion but not all of the Building or a sale of the Building, Seller shall, none the less, be entitled to thirty three percent (33%) of the net profits resulting from such different plan.
B) The Seller shall have the right, upon reasonable notice, to receive (a) A Unit located on the top floor of the Building . . . when a plan for a Condominium is approved, if such plans are utilized and approved, at an agreed value of $925,000, or, to the extent such plans may be modified and/or revised as provided herein, a Unit of comparable size and value. The agreed value of such Unit shall be deducted from the Sellers proportionate share of the net profits, as specified in subparagraph (A) above. In the event thirty three percent (33%) of the net profits is less than nine hundred twenty-five thousand ($925,000), then, in that event, Seller may opt either not to take the Unit or to pay the difference between Seller's share of the net profits and nine hundred twenty-five thousand ($925,000) and to also pay off the Promissory Note referred to in Section 5.1 hereof. Seller may apply all or any part of her share of the net profits as set forth herein, towards the price for such Unit. Under no circumstances shall the Seller be obligated to purchase a Unit, or if purchased, to personally dwell in said Unit or to own said Unit for any specific amount of time.

The agreement also provided that Weiss would be granted a UCC Financing Statement securing the rights to 33 percent of the net profits from the condo project with a lien, but that the UCC-1 lien could not be filed unless a default occurred, or was about to occur.

Plans for 58 Walker were, however, in flux until title closed on July 6, 1999. Weiss had envisioned the use of the "Lombardi Plans" under which she claims the penthouse was approximately 2000 square feet (including 1,650 interior and an outdoor terrace of 400 square feet), but Alard ultimately decided on using drawings by David Shone. Shone made revisions to the Lombardi Plans and concluded, after discussing the matter with Alard's broker and land use attorney, that the addition of the sixth and seventh floors on the existing structure "[w]ould not be feasible in the regulatory environment, would not be readily marketable and would negatively impact the economics of the project." The building plans, as finally designed and approved, now contain five units, with each unit covering an entire floor of roughly 2,000 square feet and ranging in price — according to Alard and its broker — from $1,295,000 to $1,695,000 for the penthouse unit on the fifth floor. Alard further contends that the penthouse unit is actually worth more, that is, somewhere in the area of $1,750,000.

The Condominium Offering Memorandum was accepted for filing by the New York State Attorney General's Office in October 2000. Alard thereafter informed Weiss that, given the Shone plans for proposed renovations and development, circumstances had changed and proposed a meeting. Alard met with Weiss and explained its position that the units, as configured, were not comparable to the units in the contract. Alard proposed that Weiss be permitted to buy any one of the units at 58 Walker she might select, but she would have to make her purchase at market value. This action followed on January 21, 2001 in New York State Supreme Court and was removed, without objection, by Alard on February 14, 2001. Simultaneously with her complaint, Weiss filed a Notice of Pendency with the County Clerk, stating in relevant part:

NOTICE IS HEREBY given of an action now pending [in New York State Supreme Court] upon the verified complaint of . . . Linda Feldman Weiss . . . against . . . defendant Alard, L.L.C. for specific performance of a contract to convey to plaintiff title and possession of the top floor of the building and real property known as 58 Walker Street, Borough of Manhattan, City, County and State of New York (Block 194, Lot No. 3 on the land and tax map of New York County). . . .

Notice of Pendency, Ex. B to Pl.'s Aff. in Opp. (emphasis added). Alard contends that Valley National Bank, which had previously been financing Alard, has now withdrawn its commitment to funding the condo project unless and until the Notice of Pendency is removed in its entirety. Alard now moves to vacate the Notice of Pendency.

New York law provides that a notice of pendency may be filed "[i]n any action in a court of the state or of the United States in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property." CPLR § 6501; see also Fed. R. Civ. P. 64. "The well-known realty actions, such as mortgage, foreclosure, specific performance, partition, etc., easily fall within [this] category. . . ." David D. Siegel, New York Practice § 334, at 509 (3d ed. 1999) (emphasis added). Weiss' complaint seeks specific performance of the real estate contract from Alard and therefore her filing of a notice of pendency is proper. See Whelan v. J.T.T. Contractors, 155 A.D.2d 451, 452 (2d Dep't 1989); Freidus v. Sardelli, 192 A.D.2d 578, 580 (2d Dep't 1993).

After the filing of a notice of pendency, it is presumed that such was valid, see Rose v. Montt Assets, Inc., 250 A.D.2d 451, 451 (1st Dep't 1998), and may only be cancelled for one of the reasons listed in CPLR § 6514 or § 6515. Under CPLR § 6514(a), certain procedural failings make cancellation mandatory, but such failings are not present in this case. The other vehicle for cancellation, CPLR § 6514(b), is discretionary, providing that the notice of pendency may be cancelled "[i]f the plaintiff has not commenced or prosecuted the action in good faith." It should be noted, however, that "[t]he court's scope of review is circumscribed. One of the important factors in this regard is that the likelihood of success on the merits is irrelevant to determining the validity of the notice of pendency." 5303 Realty Corp. v. O & Y Equity Corp., 64 N.Y.2d 313, 320 (1984).

Alard contends that Weiss filed her Notice of Pendency in bad faith because it "[c]overs extensive real property that is not the subject of the underlying dispute. . . ." Alard reaches this conclusion by pointing to the text of the Notice of Pendency and stating that it applies to the whole building, not just the portion of 58 Walker pertaining to this litigation — that is, the top floor penthouse unit. Alard's argument is wholly frivolous because the actual text explicitly makes reference to the "top floor of the building" and, ...

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