NYCTL 1996-1 Trust v. EM-ESS Petroleum Corp.

Stern purchased an abandoned gas station at a foreclosure sale on June 8, 1999. He subsequently learned that the New York State Department of Environmental Conservation (DEC) had designated the property an “oil spill site” and that, although DEC had expended approximately $1.5 million in cleanup costs, substantial cleanup remained to be completed. Stern’s title insurance company refused to insure the property until it was free of any current or future liens or obligations associated with the cleanup. The Referee who conducted the auction offered to return Stern’s deposit, because the oil contamination had not been disclosed at or before the auction. Stern elected instead, however, to pursue a settlement with DEC for the eventual cost of the cleanup. The cleanup proceeded over the course of several years, and in 2007, a closing was tentatively scheduled. It was not held, however, because the parties could not resolve their dispute as to whether Stern was required to pay the property taxes and interest on the purchase price accrued between the date of the auction and the date of delivery of the deed (April 9, 2008). Stern then brought the instant motion.

Real Property Actions and Proceedings Law § 1354 (2) provides that “[t]he officer conducting the sale shall pay out of the proceeds all taxes, assessments, and water rates which are liens upon the property sold.” Contrary to Stern’s contention, the word “sale” in the statute refers to the auction sale, not to the delivery of the deed; hence, Stern, the purchaser, is required to pay the taxes that became liens on the property after the auction (Wagner v White, 225 App Div 227 [1929]).

The Referee’s terms of sale recited the payment of 10% of the purchase price at the time of Stern’s bid with the balance to be paid on July 8, 1999 “when the Referee’s deed will be ready for delivery” at the Referee’s office. Therefore, it is beyond cavil that July 8, 1999, the date on which the deed was to have been delivered, was the closing date. Under the terms of sale, the Referee reserved the right to unilaterally conduct another foreclosure sale upon Stern’s failure to comply with any of the terms of sale, including the closing date. The terms of sale also provided for Stern’s payment of interest on the entire purchase price in the event of his failure to close the deal on the date specified “unless the Referee shall deem it proper to extend the time for the completion of said purchase.” As noted above, the closing was postponed because Stern was not ready to close on the date specified. Stern contends that the Referee waived the payment of interest by acquiescing in his request for an adjournment of the closing pending completion of the environmental cleanup.

A referee’s terms of sale which comports with a judgment of foreclosure is treated as a contract (cf. Crisona v Macaluso, 33 AD2d 569 [1969]). Hence, upon Stern’s failure to close on July 8, 1999, the Referee had the option to cancel the transaction and conduct another sale or grant an adjournment subject to Stern’s payment of interest. As Stern would have it, the Referee waived interest and deemed it proper to extend the closing date, within the meaning of the contract, simply by granting his request for an adjournment. As a practical matter, a sales transaction cannot be adjourned without the consent of both the buyer and the seller. Nevertheless, under Stern’s interpretation, interest would have been waived whether the closing was adjourned at his instance or that of the Referee. Such a construction would render the interest provision meaningless because it could not be invoked in either event. Contracts should be construed to give force and effect to their provisions and not in a manner so as to render them meaningless (Yoi-Lee Realty Corp. v 177th St. Realty Assoc., 208 AD2d 185, 190 [1995]). Under a proper construction, interest would be waived where the closing is adjourned at the Referee’s instance. CPLR 5001 (a), the provision cited by the motion court, is inapplicable because the instant dispute does not involve a sum of money awarded upon a judgment. We will not, however, disturb the five percent rate of interest fixed by the court considering that Stern and plaintiffs counsel agreed to an even higher rate of interest by letters dated September 25 and October 9, 2007. Concur—Lippman, P.J., Mazzarelli, Buckley and DeGrasse, JJ.