list of home price after hurricane sandy was impossible
A. Cohen Law Firm News
By avi cohen
A.R., Plaintiff v. G.R., Defendant
Referee Marie F. McCormack, Esq.
Decided: May 3, 2016
Counsel for the Plaintiff: Joseph A. Brancato, Jr., Esq.
Counsel for the Defendant: Keith H. Richman, Esq.
DECISION AND ORDER AFTER HEARING
Before the Court is a post-judgment hearing. The plaintiff/former wife (“plaintiff”) filed an order to show cause for contempt and/or for a money judgment against the defendant/former husband (“defendant”) for alleged failure of the defendant to comply with certain provisions of the parties’ stipulation of settlement (“stipulation”), dated October 1, 2012, which was incorporated, without merger, into the parties’ judgment of divorce (Bennett, J.), entered on March 12, 2013. The issues raised in the order to show cause were referred to a hearing, and the parties consented to the undersigned Referee hearing and determining this matter. The matter was referred to the undersigned Referee by order (Zimmerman, J.) dated August 5, 2014. A hearing was held on the following dates: 9/30/14, 10/9/14, 2/10/15, 4/28/15, 8/19/15, 11/13/15, 12/4/15, and 12/14/15. The parties agreed to waive a hearing regarding counsel fees and agreed to have counsel fees determined on papers. Additionally, the parties agreed to have the issue of the apportionment of college expenses determined on papers. Post-trial memoranda and counsel fee submissions were submitted on February 19, 2016. The Court requested two additional submissions, regarding the tax impact of personal property loss and insurance reimbursement for personal property loss, and such documents were submitted on 4/20/16. The plaintiff is represented by Brancato, Brancato §Brancato, by Joseph A. Brancato, Jr., and the defendant is represented by Richman & Levine, P.C. by Keith H. Richman, Esq.
The parties were married in 1991, and this divorce action was commenced on March 30, 2009. The parties were married approximately seventeen years at the time of
commencement, and the judgment of divorce was entered on March 12, 2013. As a result of an order of protection, the defendant was ordered to vacate the marital residence in June of 2009, and the plaintiff had exclusive use and occupancy of the marital residence until its sale in November of 2014. There are two children of the marriage, J., who was born in 1993, and is now twenty-two years old, and G., who was born in 1995, and is now twenty years old. The parties’ children have been residing with the defendant since prior to the start of the school year in 2009.
The parties signed the stipulation on October 1, 2012. At the time of the signing of the stipulation, the martial residence, which was located on the canal in Massapequa, New York, had already been listed for sale at a price of $1,399,000.00. Unfortunately, on October 29, 2012, less than one month after signing the stipulation, Super Storm Sandy (“Sandy”) occurred, causing widespread devastation to Long Island, and particularly to homes near the water. The marital residence sustained extensive damage due to Sandy, and this was the primary genesis of the parties’ post-judgment legal disputes.
The parties could not agree on a listing price for the marital residence, post-Sandy. The plaintiff claims that she acted reasonably as to the repair and sale of the marital residence after Sandy. She asserted that she reduced the listing price, post-Sandy, to reflect the changed circumstances and that she otherwise complied with the stipulation. In view of this, she claims that she is entitled to certain reimbursements for carrying charges and repairs to the marital residence.
In contrast, the defendant claims that the vast majority of the aforesaid expenses incurred by the plaintiff were the result of the plaintiff’s breach of certain provisions of the stipulation, in failing to reduce, reasonably, the listing price of the marital residence, given the devastation caused by Sandy, and in failing to sell the marital residence “as is.” He further claims that the plaintiff did not prepare, in a proper manner, the marital residence for the impending storm. He claims that the plaintiff’s own actions caused her to incur unnecessary expenses in relation to the marital residence, and thus, she is not entitled to reimbursement for the aforesaid expenses.
Ultimately, the marital residence was sold on November 25, 2014, with a sales price $500,000.00. The parties also received $250,000.00 in insurance proceeds. The proceeds of the sale were placed in escrow and are being held by the plaintiff’s attorney. There is currently $317,072.03 being held in escrow pending the decision and order of this Court. The central focus of the instant hearing was the division of these proceeds. The plaintiff seeks reimbursement for: carrying charges on the marital residence up until the time it was sold, onehalf the cost of repairs to the marital residence due to Sandy, foreclosure fees, one-half the fee for the public adjuster, college expenses and the legal fees she incurred in bringing this application. Additionally, she seeks enforcement of the stipulation with regard to preparation of a Qualified Domestic Relations Order (“QDRO”). The defendant is claiming that the plaintiff is not entitled to the reimbursements which she seeks, and further, he is claiming that he is entitled to reimbursements for his personal property, which was left in the marital residence.
Both the plaintiff and the defendant testified. In addition, Nicholas B., a public adjuster, Carolyn S., one of the listing brokers for the marital residence, Robert L., the co-listing broker for the marital residence, and R.A., who is the son of the former wife from a previous marriage, also testified. The relevant portions of the testimony will be discussed below. As to credibility, the Court had the opportunity to assess the credibility of all witnesses. The Court found both parties to be fairly credible; however, there were some portions of the testimony where the plaintiff was vague, particularly relating to the pricing of the home and the status of the personal property.
The Plaintiff’s Testimony
The plaintiff testified that she is entitled to reimbursement for one-half the carrying charges of the marital residence for the period July 1, 2012 through January 1, 20131, as set forth in the parties’ stipulation. The plaintiff presented evidence of those carrying charges at the hearing. The defendant does not dispute that he owes the plaintiff this reimbursement. Accordingly, the plaintiff is entitled to credit of $11,849.18 (one-half of $23,968.36) from the proceeds.
The plaintiff further testified that she is entitled to reimbursement for one-half the carrying charges for the marital residence for the period commencing January 1, 2013.
Article XI, ¶6 of the parties’ stipulation states:
Commencing January 1, 2013, the Husband shall contribute his fifty (50 percent) share of said expenses on a monthly basis through the date of closing.
The “said expenses” are delineated in the stipulation and consist of the mortgage payment, real estate tax, homeowners insurance obligations, and landscaping charges. She asserted that she is entitled to this reimbursement in that she was compliant with the terms of the stipulation. She stated that she acted reasonably with regard to the sale of the marital residence, post-Sandy. The plaintiff claimed that she agreed to even greater reductions than were required by the stipulation. The plaintiff asserted that she was required to make certain repairs to the marital residence (for example, heating and electrical repairs) in order that she could live in home pending a sale, and additionally, the repairs were necessary in order for a potential buyer to obtain a mortgage. The marital residence sustained severe damage due to Sandy, and she submitted an engineer’s report detailing the damage. She also provided detailed bills regarding the repairs made.
The plaintiff continued to pay one-half (her share) of the monthly payment on the primary mortgage, as the defendant was not contributing to these payments. She continued to do so until September 2013, when the lender refused to accept partial payments. The total amount she paid on the primary mortgage after January 1, 2013 was $7,839.63. She continued to pay one-half (her share) of the monthly payment on the home equity loan until February 2013, when the lender refused to accept partial payment. The total amount she paid after January 1, 2013 on the home equity loan was $378.66. She thus claimed that the defendant owes her $4,109.14 (one-half the amount that she paid). The plaintiff further asserted that the defendant also owes her 50 percent of the insurance premiums for the post-January 1, 2013 period, which equal $1,153.74 (defendant’s 50 percent share). She claimed that as a result of the defendant’s failure to make mortgage and home equity payments post January 1, 2013, the lenders initiated foreclosure proceedings, resulting in foreclosure fees totaling $7,823.64 ($2,534.59 for the primary mortgage and $5,289.05 for the home equity loan); and thus, she claims, she should be reimbursed for these charges from the proceeds in escrow.
The Defendant’s Testimony
The marital residence was already listed for sale at the time the stipulation was signed, and the stipulation provided for periodic reductions in the purchase price, if needed to effectuate a sale. The defendant claimed that the problem arose, however, when Sandy caused substantial damage to the marital residence, and consequently substantially reduced its market value. Not only did Sandy damage the marital residence itself, but it also wreaked havoc on the waterfront real estate market. These assertions were confirmed by the testimony of the real estate broker, Carolyn S., in that she testified that there was great uncertainty regarding the pricing of waterfront homes. Obvious concerns for buyers were potential flood damage and the cost of flood insurance for such waterfront homes. Sandy thus caused a dispute between the parties regarding an appropriate listing price for the home. The defendant claimed that Sandy was a catastrophic event that made performance of the stipulation with regard to the sales price impossible to implement. The stipulation states, in pertinent part,
The parties acknowledge that the residence is on the market for sale at a listing price of $1,399,000.00. which listing price shall be reduced by five (5 percent) percent every thirty (30) days until the price is listed at $1.1M, unless otherwise agreed upon by the parties in writing. After 1 full year of a listing price at $1.1, the house will be decreased by 5 percent every 3 months until sold.
(Stipulation, Article XI, ¶3 [punctuation as in original]). The defendant claimed that it was impossible to follow the terms of the stipulation as to sales price, as Sandy greatly reduced the market value of the residence. According to his testimony, the defendant wanted to list the home “as is” for a greatly reduced price, immediately after Sandy. In November of 2012, six days after Sandy, the defendant wrote an email, which is in evidence, to Carolyn S., the real estate broker, stating that “I want this house sold as is. Look at the house and call me with a price.” The
defendant testified that he wanted the house sold for $500,000.00 and additionally he anticipated $250,000.00 in insurance proceeds. The defendant claimed that he does not owe the plaintiff for carrying charges incurred after January 1, 2013 because the marital residence should have been sold immediately after Sandy (October 29, 2012). He argued that if the marital residence was listed immediately at a substantially reduced price, it would have been sold by January 1, 2013, and there would not have been carrying charges after this date. The defendant further asserted that if the marital residence was sold “as is”, the $39,276.74 in repair expenses incurred by the plaintiff would have been unnecessary, and therefore, his position was that he does not have to reimburse her for one-half of the cost of these repairs.
The defendant further claimed that if the martial residence was sold in late 2012, the wife would not have incurred foreclosure expenses, as the residence would have been sold prior to the incurring of such expenses.
Additionally, the defendant claimed that he should not be responsible for the charges of the public adjuster. He testified that he did not sign the agreement with the public adjuster, and further, he was not consulted with regard to the hiring of the adjuster. Moreover, he claimed that there was no proof offered that the public adjuster was necessary. Further he asserted hat the parties would have received the full $250,000.00 in insurance proceeds, even if the public adjuster had not been hired.
The defendant also asserted that the plaintiff did not prepare, properly and in a reasonable manner, the marital residence for the impending storm. He claimed that as a result, the residence sustained damage that would have been preventable. Moreover, he testified that this lack of preparation also caused destruction to his personal property, which he valued at $55,000.00, according to his 2012 tax return, which is in evidence.
It is well settled that a stipulation of settlement in a matrimonial action is an enforceable contract between the parties (Petrovovich v. Obradovic, 40 AD3d 1063,1065 [2d Dept 2007]). In Etzion v. Etzion, 84 AD3d 1015, 1016 (2d Dept 2011), the Court stated,
[p]arties are free to enter into agreements that ‘not only bind [ ]them, but which the courts are bound to enforce’ (Greve v. Aetna Live-Stock Ins. Co., 30 NYS 668, 670 ). Marital contracts are ‘subject to principles of contract [construction and] interpetation’ (Rainbow v. Swisher, 72 NY2d 106,109 ; see Matter of Meccico v. Meccico, 76 NY2d 822, 823-824 ; Girardin v. Girardin, 281 AD2d 457, 457 ).
“Where such an agreement is clear and unambiguous on its face, the parties’ intent must be construed within the four corners of the agreement and not from extrinsic evidence” Khorshad v. Khorshad, 121 AD3d 857, 857 [2d Dept 2014][internal quotation marks
omitted][citations omitted]). “[C]ontract language is unambiguous where it ‘has a definite and precise meaning, unattended by danger of misconception in the purport of [contract] itself, and concerning which there is no reasonable basis for difference of opinion’” (Chase Manhattan Bank v. Traffic Stream (BVI), 86 F.Supp.2d 244, 256 (S.D.N.Y. 2000) quoting Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 [2d Cir 1992] [alteration in original]). “Nor does ambiguity exist where one party’s view strain[s] the contract language beyond its reasonable and ordinary meaning” (Chase Manhattan at 257 quoting Seiden Assocs., Inc. at 428 [internal quotations omitted][alteration in original].
The defendant argues that the clause of the contract regarding the initial listing price of $1,399,000.00 was impossible to perform due to Sandy and the resultant destruction to the marital residence and the waterfront real estate market. The doctrine of impossibility of performance has been described as follows:
Impossibility excuses a party’s performance only when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible. Moreover, the impossibility must have been produced by an unanticipated event that could not have been foreseen or guarded against in the contract.
(Chase Manhattan at 255 quoting Kel Kim Corp. v. Central Markets, Inc., 70 NY2d 900, 902 (1987). Furthermore, “[u]nder New York law, where ‘the risk which causes the alleged impossibility of performance is foreseen, accounted for, and allocated in the contract, failure to perform cannot be excused.” Chase Manhattan at 255 quoting Bank of Am. Nat’l Trust & Savings Assoc. v. Envases Venezolanos, S.A., 740 F.Supp. 260, 267 (S.D.N.Y. 1990).
Here, the husband claims that the following provision of the stipulation was impossible to perform:
3. The parties acknowledge that the residence is on the market for sale at a listing price of $1,399,000.00. which listing price shall be reduced by five (5 percent) percent every thirty (30) days until the price is listed at $1.1M, unless otherwise agreed upon by the parties in writing. After 1 full year of a listing price at $1.1, the house will be decreased by 5 percent every 3 months until sold.
(Stipulation, Article XI, ¶3 [punctuation in original]). The husband asserts that due to the damage caused by Sandy to both the marital residence itself and the waterfront real estate market, it was impossible to sell the marital residence at $1,399,000.00 or even at 1.1 million. He argues that, therefore, the parties were bound by other provisions of the stipulation to act reasonably and to cooperate with each other to list and to sell the martial residence. He points to pertinent
language from the parties’ stipulation to support his position. The stipulation states, “[t]he parties shall use their best efforts and work together to sign a contract of sale with prospective purchaser as soon as possible.” (Stipulation, Article XI, ¶3). The stipulation further states,
4. Both parties shall cooperate with each other on a timely basis to use their best efforts to maximize the sales price of said premises available in the market and mutually agree upon a gross offering price. They shall list said premises with a broker that they mutually agree upon and shall proceed in a cooperative manner in all respects in dealing with each other, the real estate broker and/or brokers and prospective purchasers in connection with the selling of the marital residence…
(Stipulation, Article XI, ¶4).
The defendant argues that the above provisions of the stipulation required both parties to have cooperated and to have reduced the listing price in a reasonable manner in light of the circumstances. The testimony of both brokers indicated that there was a great reduction in market value in waterfront property, and, in particular, the area in which the marital residence was located. The broker, Ms. S., testified that it was a very erratic market after Sandy and there was a lack of sales after Sandy. There were “bottom feeders”-buyers looking for people in a desperate situation. Mr. L., the co-listing broker, wrote an email dated April 27, 2013 supporting this position. He wrote, “[the highest sale price for a damaged home has been $850,000.00 and it only had exterior damage-the house was elevated.” It should be noted that the marital residence had interior and exterior damage and it was not elevated. The defendant provided evidence that he wanted the marital residence sold “as is.” He desired to list the house at $500,000 and collect the insurance proceeds of $250,000.00. His position on the price was supported by Ms. S., who wrote, “[i]mmediately after Sandy in its damaged condition the property would have sold max $500,000.” Had the marital residence been sold immediately after Sandy, the parties would not have had to spend any money on repairs or incur mortgage costs. He argues that the plaintiff refused to cooperate with him, she did not consult him before hiring the public adjuster, and she did not consult him before making repairs. He indicated that she would not even grant him access to the house to inspect it until late April of 2013 (nearly six months after Sandy), and that was the one and only time she granted him access to the house.2 The defendant further argues that the plaintiff had exclusive use and occupancy and that she benefitted from delaying the sale. In addition, the defendant claims that the plaintiff did not prepare, properly, the house for the impending storm, thus the house and its contents sustained damage that could have been, to a large extent, avoidable. In this regard, he claims that she violated the following provision of the stipulation: “6. Until such time as the house is sold, the parties shall maintain the premises in good and reasonable care…” (Stipulation, Article XI, ¶6).
In contrast, the plaintiff asserts that the doctrine of impossibility of performance does not apply in that the risk was foreseen and addressed in the stipulation, as follows: “11. In the event of a fire or major destruction at the premises prior to closing of title, the parties agree to utilize the insurance recovery toward the repair of the home…” (Stipulation, Article XI, ¶11). She claims that, even though she was not required to do so, she reduced the purchase price at reasonable intervals, at the suggestion of the brokers. She stated that the divorce was acrimonious, and cooperation between the parties was not possible. The plaintiff further claims that the repairs were necessary in order to attract potential buyers and also to make the home habitable. She claims that she required the services of the public adjuster in order to obtain the full insurance proceeds.
The evidence regarding the listing price history of the marital residence was not entirely clear. The full real estate file was not available because it was maintained by the company for which the broker had previously worked. At the time of Sandy (October 29, 2012), the listing price was $1,399,000.00. There is an email which demonstrates that the plaintiff approved a reduction to $899,990.00 on April 28, 2013. The evidence did establish that on April 11, 2014, Mr. L., the co-listing broker recommended a listing price of $699,000.00, and that sometime in April of 2014, the listing price was reduced to $599,000.00. After this reduction, a contract of sale was signed on May 21, 2014, about one month after the reduction to $599,000, according to the testimony. The house sold for $500,000.00, and the closing took place on November 25, 2014, over two years after Sandy.
This Court finds that the doctrine of impossibility of performance is applicable herein. Sandy was an extraordinary weather event that could not have been foreseen and that caused mass devastation to homes on Long Island, particularly waterfront homes. Additionally, Sandy caused damage to the market for waterfront homes. Although the contract anticipated that insurance proceeds would be used if “major destruction” of the home occurred, this clause did not anticipate the devastation to the waterfront home market which resulted from Sandy. In other words, even if the home was repaired, fully, with insurance proceeds, its value was substantially reduced due to the occurrence of Sandy. The testimony of the real estate brokers, and other evidence revealed that there was a great reluctance to purchase waterfront property, particularly homes that were not raised, such as the marital residence.
As it was impossible to list and sell the marital residence pursuant to initial portion of Article XI, ¶3 of the stipulation, this Court now turns to other applicable provisions of the stipulation.3 The stipulation states, “[t]he parties shall utilize their best efforts and work together to sign a contract of sale with a prospective purchaser as soon as possible.” (Stipulation, Article XI, ¶3). The stipulation further requires that the parties “shall proceed in a cooperative manner in all respects in dealing with each other, the real estate broker and/or
brokers and prospective purchasers in connection with the selling of the marital residence…” (Stipulation, Article XI, ¶4). This language is clear and unambiguous. It requires the parties to cooperate and to work together to sell the marital residence as soon as possible. The stipulation also requires the parties “to use their best efforts to maximize the sales price of said premises available in the market and mutually agree upon a gross offering price.” (Stipulation, Article XI, ¶4). The stipulation therefore required the parties to cooperate and to sell the marital residence as soon as possible, given the market conditions. The stipulation did not require that the marital residence shall be sold for any price, but rather, a reasonable price, given the market conditions. The evidence will thus be evaluated in light of the aforesaid requirements of the stipulation.
Carrying Charges from July 1, 2012 through January 1, 2013
As set forth above, the defendant does not dispute that he was responsible for one-half the carrying charges for the period from July 1, 2012 through January 1, 2013. Accordingly, the plaintiff is entitled to credit of $11,849.18 (one-half of $23,968.36) from the escrow funds.
Carrying Charges Post-January 1, 2013
Before the Court can address this issue, it must determine whether the plaintiff cooperated with the defendant in the sale of the marital residence. This Court finds that she did not. She did not communicate with him regarding the listing price of the residence. She did not permit him access to the home, despite his requests, until late April of 2013, nearly six months after Sandy. She did not consult with him regarding the repairs made to the martial residence. She did not consult with him regarding the hiring of the public adjuster. The evidence established that there was no contact with the defendant prior to the hiring of the public adjuster. The evidence further demonstrated that the plaintiff did not even discuss or consider the defendant’s desire to sell the marital residence, “as is”, immediately after Sandy. His expressed intent was to sell the marital residence for $500,000.00 and additionally obtain the insurance proceeds of $250,000.00, which would yield gross proceeds from the sale in the amount of $750,000.00. The contract of sale was not entered into until May of 2014. An email from one of the co-listing brokers indicated that as late as December 5, 2013, over thirteen months post-Sandy, the house was still listed at $899,000.00. The plaintiff was not acting reasonably with regard to the listing price of the marital residence. The evidence demonstrates that, due to the plaintiff, it was listed for an unreasonable price for an unreasonable period of time. The Court notes that the plaintiff benefitted from the delay in sale, as she had exclusive use and occupancy of the marital residence pending the sale, and the defendant was responsible for one-half the carrying charges. The email from the broker suggesting the $899,000.00 listing price was sent on April 27, 2013. The Court infers that this suggestion did not take into consideration the input of the defendant, but rather, it reflected the plaintiff’s position. It would have been reasonable to list the home at this price for one month. By May 31, 2013, the house should have been listed at $550,000.00, the price suggested by the defendant plus enough to cover the price of the repairs. This would have given the plaintiff seven months to sell the home at the price that she had chosen. By that time, it was clear that the listing price was too high, and the defendant’s desired.
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