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Latipac Corp v. Bmh Realty LLC

February 2, 2012

LATIPAC CORP., PLAINTIFF-APPELLANT,
v.
BMH REALTY LLC, ET AL., DEFENDANTS-RESPONDENTS.



The opinion of the court was delivered by: Friedman, J.

Latipac Corp. v BMH Realty LLC

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on February 2, 2012

SUPREME COURT, APPELLATE DIVISION First Judicial Department

David Friedman, J.P. John W. Sweeny James M. Catterson Dianne T. Renwick Nelson S. Roman, JJ.

Plaintiff appeals from orders of the Supreme Court, New York County (Joan A. Madden, J.), entered March 9, 2009, and August 14, 2009, which denied its successive motions for preliminary injunctive relief.

FRIEDMAN, J.P.

The parties entered into an agreement for the purchase and sale of an apartment building for which the owner received J-51 tax benefits. The agreement included a representation that, as of its date, nine of the building's apartments were fair-market rental units; the owner had deemed those units deregulated pursuant to the luxury decontrol provisions of the Rent Stabilization Law. Before the transaction closed, this Court issued a decision (subsequently affirmed by the Court of Appeals) holding that rent-stabilized apartments in a building receiving J-51 tax benefits were not subject to luxury decontrol (Roberts v Tishman Speyer Prop., L.P., 62 AD3d 71 [2009], affd 13 NY3d 270 [2009] [Tishman]). The primary question on this appeal is whether Tishman, which rejected the interpretation of the Rent Stabilization Law then followed by the State Division of Housing and Community Renewal (DHCR), had any effect on the purchaser's contractual obligation to close. We hold that it did not.

Plaintiff Latipac Corp., as purchaser, and defendant BMH Realty LLC, as seller, entered into a written agreement, dated July 15, 2008, for the purchase and sale of the apartment building located at 417-419 East 74th Street in Manhattan, for a purchase price of $6.2 million. Paragraph 41 of the agreement provides: "Seller represents that the monthly rents listed on the annexed Schedule B are those rents being currently billed to said tenants for the month of July, 2008, but Seller makes no representation as to the continued occupancy of said Premises or any parts thereof by any tenant or tenants now in possession. In the event that there is any inconsistency between the terms and conditions set forth in the leases and the rent schedule annexed hereto, the terms and conditions set forth in the leases shall prevail. Seller shall notify Purchaser of any vacancy that arises, but same shall not affect Purchaser's obligations to close hereunder." The annexed Schedule B, entitled "Rent Roll," sets forth, among other information, the monthly rental of each of the building's units (22 residential and two commercial) and each residential unit's regulatory "status," either "FM" (fair market) or "RS" (rent-stabilized). Nine of the residential units are identified as having "FM" status; the "legal rent" of each of these nine units is described as "above $2000."

Several other provisions of the agreement are relevant to this appeal. Paragraph 35 provides, in pertinent part: "This Contract, as written, contains all the terms of the Contract entered into between the parties, and the Purchaser acknowledges that the Seller has made no representations, is unwilling to make any representations, and held out no inducements to the Purchaser, other than those herein expressed, and the Seller is not liable or bound in any manner by expressed or implied warranties, guarantees, promises, statements, representations or information pertaining to the said Premises as to the physical condition, income, expense, operation, or to what use the Premises can be applied, including but not limited to any matter or thing affecting or relating to the said Premises, except as herein specifically set forth."

Paragraph 43 provides: "If there are any complaints, challenges or proceedings pending for the reduction of any of the rentals or if any are filed prior to the closing of title the Seller will comply with and discharge same prior to closing at the Seller's own cost and expense; and if said complaints, challenges or proceedings are not discharged by the Seller, the Seller shall give to the Purchaser a credit for the cost of such discharge of complaints or proceedings at the closing of title. Seller shall remain responsible for any rent rollbacks, overcharges or refunds for the period prior to the closing of title."

Finally, paragraph 48 provides, in pertinent part: "If the Seller . . . shall be unable to comply with the obligations, representations or conditions on the part of the Seller to be performed as set forth herein, the sole obligation of the Seller shall be to refund Purchaser's down payment made hereunder, and to reimburse the Purchaser for the cost of title examination, and upon making such refund and reimbursement, this Contract shall wholly cease and terminate . . ."

The closing of the transaction, which the agreement set for September 16, 2008, was postponed by a series of adjournments. By year-end, relations between the parties had become adversarial, with Latipac raising a number of issues that, if not resolved, it deemed grounds for withdrawing from the deal. By letter dated December 29, 2008, BMH set January 30, 2009 as the time-of-the-essence closing date. Latipac responded by letter dated January 6, 2009, in which it claimed that, by reason of, inter alia, unresolved decreased service orders by DHCR concerning two of the apartments (one dating back to 1988, the other ...


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