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Smart Summary

Factual and Procedural Background

Plaintiff contracted to purchase real property from defendant Astro-Pac, Inc., with a closing date set "on or before July 15, 1974." Before that date, defendants made time of the essence and demanded closing on July 15 or forfeiture of the $5,000 deposit. The purchaser raised several title objections, primarily concerning an easement over the property which he claimed rendered the title unmarketable. The closing was adjourned to resolve objections, but the easement issue remained unresolved. The purchaser requested further delay to assess the easement so the seller could correct it. On July 29, the seller’s attorney declared time of the essence again, demanding closing by July 31 and dismissing the purchaser’s easement objections as "ridiculous." The purchaser rejected the title and on August 23 sued to recover the $5,000 deposit, alleging breach of contract for failure to deliver marketable title and failure to comply with Syracuse housing laws, and also alleging fraud and misrepresentation. The purchaser moved for summary judgment on all causes of action, which was denied at Special Term. On appeal, the purchaser sought summary judgment only on the breach of contract claim for failure to deliver marketable title.

Legal Issues Presented

  1. Whether the seller breached the contract by failing to deliver marketable title due to the existence of an encumbering easement.
  2. Whether the purchaser was entitled to summary judgment recovering the $5,000 deposit and additional attorney’s fees and expenses.
  3. Whether the purchaser was required to tender performance despite the seller’s failure to deliver marketable title.

Arguments of the Parties

Appellant's Arguments

  • The seller failed to deliver marketable title because of an encumbrance created by an easement over the property.
  • The purchaser is entitled to recover the $5,000 deposit plus $630 in attorney’s fees and expenses related to title search and survey.
  • The purchaser was not required to tender performance because it was clear the seller could not or would not perform.

Respondents' Arguments

  • Defendants contended the purchaser was required to tender performance before claiming breach.
  • Other contentions by defendants were raised but found meritless by the court.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Isse Realty Corp. v Trona Realty Corp., 24 A.D.2d 1000 Contract termination where time is made of the essence and parties fail to close or extend closing date. Established that the contract ended when closing did not occur by the final date made of the essence.
Sorosis Build Corp. v Prolay Realty Corp., 230 App. Div. 683 An easement as an encumbrance renders title unmarketable if not excepted in the contract. Confirmed the easement rendered the seller’s title unmarketable, constituting breach of contract.
Iannelli Bros. v Muscarella, 24 N.Y.2d 779; affg 30 A.D.2d 698 A purchaser is not required to tender performance when it is clear the seller cannot or will not perform. Supported the court’s rejection of defendants’ argument that plaintiff had to tender performance.
Greene v Barrett, Nephews Co., 238 N.Y. 207 Reinforces the principle that tender is unnecessary if seller’s performance is impossible or refused. Used to bolster the court’s reasoning on tender requirements.
Ziehen v Smith, 148 N.Y. 558 Related precedent concerning tender and contract performance obligations. Referenced for comparison and clarification of tender rules.
Segal v Kulch, 13 A.D.2d 1011; affd 11 N.Y.2d 834 Interest calculation on sums due from the date of breach. Applied to award interest on the recovery amount from July 15, 1974.

Court's Reasoning and Analysis

The court determined that although the original contract did not make time of the essence, the seller’s attorney’s letters effectively imposed that condition, culminating in a final closing date of July 31. The failure to close by this date without extension ended the contract. The court found the easement to be an encumbrance that rendered the seller’s title unmarketable, as it was not excepted in the agreement. This breach entitled the purchaser to summary judgment. The court rejected the defendants’ argument that the purchaser was required to tender performance, citing established precedent that tender is unnecessary when the seller cannot or will not perform. The court awarded the purchaser the deposit plus attorney’s fees and interest from the original closing date.

Holding and Implications

The court affirmed the order granting summary judgment to the purchaser on the first cause of action for breach of contract due to failure to deliver marketable title. The purchaser was awarded recovery of the $5,000 deposit plus $630 for attorney’s fees and expenses, with interest from July 15, 1974. The decision directly resolves the dispute between the parties by terminating the contract and requiring the seller to return the deposit and costs. The opinion does not establish new precedent beyond applying existing principles regarding marketable title, tender requirements, and contract termination when time is made of the essence.

GERALD I. RHODES, Appellant, v. ASTRO-PAC, INC., et al., Respondents.

Order unanimously modified, on the law, in accordance with memorandum and as modified affirmed, with costs to appellant. Memorandum: Plaintiff contracted to purchase the real property of defendant Astro-Pac, Inc., the closing to take place "on or before July 15, 1974." Prior to that date, however, defendants made time of the essence and demanded that plaintiff close on July 15 or forfeit his $5,000 deposit. The purchaser had several objections to the title, but the main dispute concerned an easement over the property which he claimed rendered the title unmarketable. The closing was adjourned and several of the objections were resolved. The objection to the easement was not. The purchaser requested further delay to determine the extent of this easement so that the seller might correct it. On July 29, 1974 the seller's lawyer once again wrote the purchaser's attorney and declared time to be of the essence, demanded that the purchaser close on July 31, 1974, and termed the purchaser's objections to the easement "ridiculous". The purchaser rejected the title and on August 23 he sued to recover his $5,000 down payment. He alleges two causes of action for breach of contract based upon failure to deliver a marketable title and failure to comply with the Syracuse housing laws, and a third cause of action for fraud and misrepresentation. He moved for summary judgment on all three causes of action and the motion was denied by Special Term. On this appeal plaintiff purchaser seeks summary judgment only on his first cause of action for breach of contract because of defendants' failure to deliver a marketable title. He asks return of the $5,000 down payment and $630 for attorney's fees and expenses incurred in the title search and survey. The defendants do not question the reasonableness of the attorney's fees and expenses. While the original contract of purchase did not make time of the essence, it is clear that the letters by the seller's attorney did so, that the closing was set finally for July 31 and that time was of the essence. The parties having failed to close or further extend the date for closing on that date, the contract was at an end (Isse Realty Corp. v Trona Realty Corp., 24 A.D.2d 1000). Since the easement over defendant's property in favor of the adjoining land owner was an encumbrance which rendered the seller's title unmarketable (Sorosis Build Corp. v Prolay Realty Corp. 230 App. Div. 683), and it was an encumbrance which had not been excepted by the seller's agreement to convey marketable title, the seller breached its contract and the purchaser is entitled to summary judgment on the first cause of action in the amount of $5,630 plus interest. We find no merit to defendants' contentions that plaintiff was required to tender performance. A purchaser is not required to make a tender when it is apparent that the seller cannot or will not perform (Iannelli Bros. v Muscarella, 24 N.Y.2d 779, affg 30 A.D.2d 698; Greene v Barrett, Nephews Co., 238 N.Y. 207; and cf. Ziehen v Smith, 148 N.Y. 558). We find no merit to defendants' other contentions. Plaintiff is entitled to judgment on the first cause of action with interest from July 15, 1974 (see Segal v Kulch, 13 A.D.2d 1011, affd 11 N.Y.2d 834).

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RHODES v. ASTRO-PAC, INC
(Jan 16, 1976)