41-45 Property Owner, LLC v. CDM1, LLC et al

Filing 85

OPINION & ORDER re: 77 CROSS MOTION for Summary Judgment . filed by 41-45 Property Owner, LLC, 71 MOTION for Summary Judgment . filed by CDM1, LLC. The parties' cross-motions for summary judgment are DENIED. The Clerk of Court is respectfully directed to close the motions at Dkt. Nos. 71 and 77. (Signed by Judge Lorna G. Schofield on 8/30/2024) (tro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
41-45 PROPERTY OWNER, LLC,
:
Plaintiff,
:
:
:
-against:
:
CDM1, LLC,
Defendant. :
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22 Civ. 8634 (LGS)
OPINION & ORDER

LORNA G. SCHOFIELD, District Judge:
Plaintiff 41-45 Property Owner, LLC, the sponsor of a luxury condominium, brings this
civil action against Defendant CDM1, LLC. The Complaint’s only surviving claim is for breach
of contract regarding Defendant’s failure to close on the purchase of a condominium unit.
Defendant asserts a counterclaim for breach of contract regarding Plaintiff’s failure to perform
under the parties’ purchase and sale agreement. The parties cross-move for summary judgment.
For the reasons below, the motions are denied.
I.

BACKGROUND
The following facts are drawn from the parties’ evidentiary submissions in connection

with the cross-motions, including their Local Civil Rule 56.1 statements, and are undisputed. On
the respective cross-motions, all reasonable inferences are drawn in favor of the nonmoving
party. See N.Y. State Teamsters Conf. Pension & Ret. Fund v. C & S Wholesale Grocers, Inc.,
24 F.4th 163, 170 (2d Cir. 2022) (on summary judgment, “construing all evidence, and drawing
all reasonable inferences, in favor of the nonmoving party”).
Plaintiff is the sponsor of a new construction luxury condominium project (the
“Condominium”). Defendant is a limited liability company with two individual members. In
approximately 2017, Defendant became interested in purchasing Unit PH-58 (the “Unit”) in the

Condominium. The Unit (i.e., the apartment) is located adjacent to an automatic fire pump (the
“Pump”), which is part of the Condominium’s fire suppression system. The Pump consists of a
water tank (the “Tank”), a pump to distribute water and a “jockey” pump to maintain pressure in
the Tank.
On September 21, 2017, Defendant’s agent wrote to the director of sales for the
Condominium regarding “a few areas where we’d like some more information or comfort,”
“mainly including the Fire Suppression Tank Room (safety, noise, the easement, etc.).” In the
September 21, 2017, email, Defendant’s agent stated, “As you can see, and probably have
discerned from your conversations with us, there is nothing we are overly concerned about but
rather, just want some additional guidance and comfort about.”
The parties executed an Option Agreement (the “Agreement”) on October 6, 2017, in
which Plaintiff agreed to sell, and Defendant agreed to buy an option to purchase the Unit. The
Agreement set the purchase price at $34 million, including a deposit in the amount of $8,500,000
due upon execution of the Agreement. Section 17.3 of the Agreement states:
Prior to the date of Closing of Title to the Unit, Sponsor will have taken all reasonable
measures to test, verify and specifically ensure Purchaser that the mechanical functioning
of said Tank and Pump system does not create any sound or noise that will impair
Purchaser’s quiet enjoyment and use of the Unit, except in an emergency or routine
maintenance.
Prior to closing, on December 27, 2018, Defendant emailed Plaintiff, stating, “I have a
very unhappy client. They are unhappy with the way the sponsor has treated them throughout
the process.” The email identified several alleged issues, including that “[n]o one has reached
out to them to evidence sponsor’s compliance with Section 17.3 of the option agreement . . . . In
this respect, by now, sponsor should have provided a copy or copies of all reports obtained by
sponsor from acoustical engineers it employed for this purpose. Sponsor’s failure to do so

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suggests, disturbingly, that sponsor may not have complied with Section 17.3.”
On January 3, 2019, Defendant sent another email to Plaintiff, stating, “The buyer’s
position is no different from the sponsor’s and the buyer intends to enforce all of its contractual
rights under the option agreement. To that effect, the buyer would like to know what actions the
sponsor took to comply with sponsor’s pre-closing obligations per 17.3 of the option agreement.”
That same day, Plaintiff responded, stating, “With respect to section 17.3 of the option
agreement, we confirm that Sponsor has consulted with its sound consultant, who has confirmed
that the Tank and Pump system is not anticipated to create sounds or noise that would impair
purchaser’s quiet enjoyment and use of the unit, except potentially during an emergency or
routine maintenance.”
On January 10, 2019, Plaintiff emailed Defendant a report generated by Plaintiff’s sound
consultant regarding sound testing performed in the Unit. On January 17, 2019, Defendant
emailed Plaintiff a document in response to the sound consultant’s report, alleging shortcomings
with the report.
On February 11, 2019, after repeated adjournments of the scheduled closing date,
Plaintiff served Defendant with a notice of default which stated that Defendant must close title
on March 15, 2019, or the Agreement would be deemed cancelled without further notice and
Plaintiff would have the right to retain Defendant’s $8,500,000 deposit. On February 26, 2019,
Defendant responded to the notice, stating, “Sponsor cannot declare Purchaser in default because
Sponsor failed to satisfy its pre-closing obligations in violation of the Option Agreement.
Sponsor’s refusal to perform -- and its election to instead invoke the cancellation remedy in
Section 13.2 of the Option Agreement by sending a Default Notice -- constitutes a repudiation of

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the Option Agreement by Sponsor and entitles Purchaser to a return of the Premium Payment in
its entirety.”
Defendant did not close title on March 15, 2019. In 2022, Plaintiff sold the Unit to
another purchaser.
II.

STANDARD
Summary judgment is appropriate where the record establishes that “there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). “An issue of fact is genuine if the evidence is such that a reasonable jury could
return a verdict for a nonmoving party.” Frost v. N.Y.C. Police Dep’t, 980 F.3d 231, 242 (2d Cir.
2020). 1 “Only disputes over facts that might affect the outcome of the suit under the governing
law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986); accord Saleem v. Corp. Transp. Grp., 854 F.3d 131, 148 (2d Cir.
2017). In evaluating a motion for summary judgment, a court must “construe the record
evidence in the light most favorable to the non-moving party and draw all reasonable inferences
in its favor.” Torcivia v. Suffolk Cnty., 17 F.4th 342, 354 (2d Cir. 2021). On cross-motions for
summary judgment, “the court evaluates each party’s motion on its own merits and all
reasonable inferences are drawn against the party whose motion is under consideration.”
Roberts v. Genting N.Y. LLC, 68 F.4th 81, 88 (2d Cir. 2023).
The Agreement contains a New York choice of law provision. In addition, the parties
cite New York law in their motion papers. “[S]uch implied consent is sufficient to establish the
applicable choice of law.” Trikona Advisers Ltd. v. Chugh, 846 F.3d 22, 31 (2d Cir. 2017).

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Unless otherwise indicated, in quoting cases, all internal quotation marks, footnotes and
citations are omitted, and all alterations are adopted.
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III.

DISCUSSION
The parties cross-move for summary judgment on their respective breach of contract

claims. Under New York law, breach of contract requires that “(1) a contract exists; (2) [the
moving party] performed in accordance with the contract; (3) [the opposing party] breached its
contractual obligations; and (4) [the opposing party’s] breach resulted in damages.” 34-06 73,
LLC v. Seneca Ins. Co., 198 N.E.3d 1282, 1287 (N.Y. 2022).
Plaintiff argues that Defendant breached the Agreement by failing to close on the
purchase of the Unit after Plaintiff adequately performed under Section 17.3 of the Agreement.
Defendant argues that its performance is excused because Plaintiff materially breached the
Agreement by failing to perform under Section 17.3. The dispositive question for both motions
for summary judgment is whether Plaintiff performed under Section 17.3. The motions are
denied because genuine issues of material fact exist regarding Plaintiff’s performance under
Section 17.3.
A. Defendant’s Motion for Summary Judgment
Defendant’s motion for summary judgment is denied because, resolving all factual
disputes in Plaintiff’s favor as the non-moving party, a reasonable fact finder could conclude that
Plaintiff performed under Section 17.3. Section 17.3 states:
Prior to the date of Closing of Title to the Unit, Sponsor will have taken all reasonable
measures to test, verify and specifically ensure Purchaser that the mechanical functioning
of said Tank and Pump system does not create any sound or noise that will impair
Purchaser’s quiet enjoyment and use of the Unit, except in an emergency or routine
maintenance.
First, evidence in the record construed in Plaintiff’s favor supports a finding that Plaintiff
satisfied its obligation to “have taken all reasonable measures to test” and “verify.” In January
2019, Plaintiff obtained a report from a sound consultant. The report states that sound levels

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were measured in the bedroom adjacent to the pump room and the living room; the report
concludes that “the measured levels in both spaces were found to be quieter than [American
Society of Hearing, Refrigerating and Air-Conditioning Engineers] guidelines” and that “there
was no noise coming from the Tank and Pump adjacent to the bedroom.” The report also states
that “some of the variation in sound level” registered between the bedroom and living room
“may be attributable to outside noise intrusion, rather than purely interior-generated sounds” and
that the “rooms were bare, without residential furnishings which tend to absorb sound and lower
interior-sound levels.” In addition, deposition testimony states that Plaintiff had a “construction
manager on-site,” “an acoustical engineer” and “had people walk the building” to comply with
Section 17.3 as of December 2018.
Second, evidence in the record construed in Plaintiff’s favor supports a finding that
Plaintiff satisfied its obligation under Section 17.3 to “specifically ensure the Purchaser.”
Plaintiff reported to Defendant by email on January 3, 2019, that Plaintiff had “consulted with its
sound consultant, who has confirmed that the Tank and Pump system is not anticipated to create
sounds or noise that would impair purchaser’s quiet enjoyment and use of the unit, except
potentially during an emergency or routine maintenance.” On January 10, 2019, Plaintiff
emailed Defendant a copy of the sound consultant’s January 7, 2019, report.
Defendant interprets Section 17.3’s requirement to take “all reasonable measures to test,
verify and specifically ensure” to demand more from Plaintiff. What “all reasonable measures”
requires from Plaintiff is ambiguous and is a question best resolved by the finder of fact. “The
resolution of an ambiguous provision, for which extrinsic evidence may be used, is for the trier
of fact.” Rhoda v. Rhoda, 110 N.Y.S.3d 35, 37 (2d Dep’t 2019). “Ambiguity in a contract arises
when the contract, read as a whole, fails to disclose its purpose and the parties’ intent or when

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specific language is susceptible of two reasonable interpretations.” Ellington v. EMI Music, Inc.,
21 N.E.3d 1000, 1003 (N.Y. 2014). As detailed above, Plaintiff submits evidence of its conduct
regarding each step of testing, verifying and specifically ensuring Defendant. Reasonable minds
might differ on whether that conduct satisfies “all reasonable measures.” The dispute regarding
Plaintiff’s performance -- specifically whether it was tantamount to “all reasonable measures” -is a factual inquiry that cannot be resolved as a matter of law. Zev v. Merman, 533 N.E.2d 669,
670 (1988) (“The determination of reasonableness must by its very nature be determined on a
case-by-case basis” and “depends upon the facts and circumstances of the particular case.”);
Wenning v. On-Site Manager, Inc., No. 14 Civ. 9693, 2016 WL 3538379, at *18 (S.D.N.Y. June
22, 2016) (New York law) (noting “the general presumption that reasonableness is a jury
question”).
Finally, evidence in the record construed in Plaintiff’s favor supports a finding that the
Pump activates only as permitted under the exception for “emergencies and routine
maintenance” in Section 17.3. The January 2019 sound consultant report states that the Pump in
the room adjacent to the bedroom is “activated only during emergencies.” Deposition testimony
also states that “water is not intended to flow through the system except either during testing or
when the system is actively extinguishing a fire” and that the Pump was turned off during
normal water flow testing, draining, and filling and therefore would not make noise during those
operations. An acoustic survey performed on May 2, 2023, states, “Based on our understanding
of the use of the Automatic Fire Pump and Jockey Pump, the Automatic Fire Pump is not
expected to function (and therefore not make noise) unless called upon (e.g. in cases of routine
servicing or during an emergency).”

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B. Plaintiff’s Motion for Summary Judgment
Plaintiff’s motion for summary judgment is denied because, resolving all factual disputes
in Defendant’s favor as the non-moving party, a reasonable fact finder could find that Plaintiff
materially breached the Agreement by failing to perform under Section 17.3.
First, the evidence in the record construed in Defendant’s favor supports a finding that
Plaintiff did not “take[] all reasonable measures to test” and “verify” that the Pump would not
impair Defendant’s quiet enjoyment and use of the Unit. Deposition testimony indicates that
Defendant did not conduct sound testing until January 2019, after the original closing date of
November 27, 2018. In addition, Defendant’s document in response to the sound consultant
report states that even when Plaintiff did conduct the sound testing, no tests were performed
while the Pump was in operation. Deposition testimony states that when the Pump is in
operation, it produces noise within the Unit that exceeds the New York City Noise Code.
Evidence construed in Defendant’s favor also supports a finding that Plaintiff did not
“specifically ensure” Defendant. Plaintiff failed to provide specific information regarding sound
levels when Defendant requested and did not allow Defendant to visit the Tank Room or allow
Defendant to measure the noise caused by the system when it was running. Defendant also
emailed a document to Plaintiff in response to Plaintiff’s sound consultant report, which
expressed several concerns with the report. During the purchase process, Defendant sent several
emails to Plaintiff indicating that it was concerned about the noise level.
Finally, construing the evidence in Defendant’s favor, the record supports a finding that
the Pump activates outside of “emergencies or routine maintenance.” Deposition testimony
states that the Pump runs when the pressure drops below a preset threshold, including situations

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that Defendant argues do not qualify as “emergencies or routine maintenance” under Section
17.3, such as “doing sprinkler work in an apartment.”
Plaintiff argues that summary judgment should be granted on its breach of contract claim
because Section 17.3 is not a condition precedent to Defendant’s obligation to close title on the
Unit. However, to succeed on its breach of contract claim, Plaintiff must prove that it
“performed in accordance with the contract.” 34-06 73, LLC, 198 N.E.3d at 1287. A party’s
failure to perform can constitute breach even if the provision is not a condition precedent. See,
e.g., Parlux Fragrances, LLC v. S. Carter Enters., LLC, 164 N.Y.S.3d 108, 118 (1st Dep’t 2022)
(finding provisions were not conditions precedent but were contractual promises for which
“triable issues of fact exist as to the extent plaintiffs breached”). In addition, Section 32 of the
Agreement grants each party “the right . . . to insist upon the strict performance by the other
party of any and all provisions of this Agreement to be performed by such party.”
Plaintiff also argues that the December 27, 2018, email from Defendant to Plaintiff
constituted complete repudiation and breach of the contract. Plaintiff is not entitled to summary
judgment based on repudiation. “Anticipatory repudiation occurs when, before the time for
performance has arisen, a party to a contract declares its intention not to fulfill a contractual
duty.” Condor Funding, LLC v. 176 Broadway Owners Corp., 46 N.Y.S.3d 99, 101-02 (1st
Dep’t 2017). “Whether a party has anticipatorily breached a contract is ordinarily a question of
fact reserved for a jury, but a court may decide the issue as a matter of law when the purported
repudiation is embodied in an unambiguous writing.” Princes Point LLC v. Muss Dev. L.L.C.,
24 N.Y.S.3d 292, 296 (1st Dep’t 2016), rev’d on other grounds, 87 N.E.3d 121 (N.Y. 2017).
Although Defendant’s alleged repudiation is embodied in writing, the writing is ambiguous at
best. The December 2018 email states that Defendant “ha[s] reassessed the situation and now

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would prefer not to live in the building” and Defendant’s “proposal, provided we have a speedy
and amicable resolution, is to terminate the option agreement and forfeit the $3.4m of the
premium payment, with the balance returned to them.” However, the email also states, “nothing
stated herein should be construed in any way as indicating that CDM1 LLC . . . has repudiated
the Option Agreement and/or that CDM1, LLC will not be ready, able, and willing to Close on
January 4, 2019.” Defendant sent emails regarding the Unit after the December 2018 email,
including an email to Plaintiff on February 13, 2019, “to schedule a walk through appointment.”
Finally, Plaintiff argues that the noise level of the Pump -- even when construing the
evidence in Defendant’s favor -- does not rise to the level of constructive eviction and therefore
as a matter of law does not impair Defendant’s “quiet enjoyment” of the Unit as required under
Section 17.3. Even crediting Plaintiff’s argument that “quiet enjoyment” requires more than the
evidence Defendant offers, Plaintiff still has not demonstrated that it complied with its
obligations under the Agreement as a matter of law. Section 17.3 refers to “noise that will
impair Purchaser’s quiet enjoyment and use of the Unit.” (emphasis added). Plaintiff’s argument
fails to resolve whether the noise affects Defendant’s “use of the Unit” as a matter of law.
IV.

CONCLUSION
The parties’ cross-motions for summary judgment are DENIED. The Clerk of Court is

respectfully directed to close the motions at Dkt. Nos. 71 and 77.
Dated: August 30, 2024
New York, New York

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