Wansdown Properties Corporation N.V. v. 29 Beekman Corp.

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	:
:
WANSDOWN PROPERTIES CORPORATION 	:
N.V., 	:
: 	Chapter 11
: 	Case No. 19-13223 (SMB)
Debtor. 	:
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:
WANSDOWN PROPERTIES CORPORATION 	:
N.V., 	:
:
Plaintiff, 	:
:
- against - 	:
: 	Adv. Pro. No. 20-01056 (SMB)
29 BEEKMAN CORP., 	:
:
Defendant. 	:
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MEMORANDUM DECISION AND ORDER DENYING
CROSS-MOTIONS FOR SUMMARY JUDGMENT
A P P E A R A N C E S:
BLANK ROME LLP
1271 Avenue of the Americas
New York, New York 10020
Ira L. Herman, Esq.
Evan J. Zucker, Esq.
Of Counsel
Special Litigation Counsel for Plaintiff
THE SERBAGI LAW FIRM
488 Madison Avenue, Suite 1120
New York, New York 10022
Christopher Serbagi, Esq.
Of Counsel
Attorney for Defendant
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STUART M. BERNSTEIN
United States Bankruptcy Judge:
This is a case of buyer’s remorse. The defendant 29 Beekman Corp. (“Beekman”
or “Purchaser”) agreed to buy real property owned by the debtor Wansdown Properties
Corporation N.V (“Debtor” or “Seller”). 	Beekman backed out of the contract, and this
adversary proceeding involves the right to the down payment. Both parties have moved
for summary judgment. (See Debtor’s Memorandum of Law in Support of Motion for
Summary Judgment and in Opposition to Defendant’s Motion to Dismiss Complaint
(“Debtor’s Motion”), ECF Doc. # 12) 1; 29 Beekman’s Memorandum of Law in
Opposition to Debtor’s Motion for Summary Judgment and in Support of 29
Beekman’s Cross-Motion for Summary Judgment (“Beekman Motion”), ECF Doc. #
28).) For the reasons that follow, both motions are denied because whether the Debtor
was ready, willing and able to close following Beekman’s breach presents a disputed
issue of material fact.
BACKGROUND
A. 	Purchase Agreement
The Debtor was formed under the laws of Curacao in 1979 as a holding company
to own and manage a townhouse located at 29 Beekman Place, New York, New York
10022 (the “Townhouse”) for Princess Achraf Pahlavi, the sister of the Shah of Iran. The
Townhouse is the Debtor’s main asset. On September 25, 2019, the Debtor entered into
a Residential Contract of Sale (“Purchase Agreement”) to sell the Townhouse to
1 	Unless otherwise specified, references to docket entries are to documents filed on the electronic
docket of Wansdown Properties Corporation, N.V. v. 29 Beekman Corp. (Adv. Pro. No. 20-01056).
References to the docket entries in the main bankruptcy case are denoted as “Main Case ECF.”
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Beekman for $10,300,000. (Declaration of Ira L. Herman in Support of Plaintiff’s
Motion for Summary Judgment (“Herman Decl.”), Ex. A (EFC Doc. # 14.).) Beekman
delivered a down payment of $1,030,000 (“Downpayment”) to be held in escrow “until
Closing or sooner termination of this contract.” (Purchase Agreement ¶¶ 3-4.)
The sale could occur in one of three ways. The Purchase Agreement
contemplated that the Debtor would file a chapter 11 case, and the “consummation of
the transactions contemplated herein is subject to Seller’s receipt of requisite authority
under the Bankruptcy Code pursuant to, among other things, the entry of an order
confirming the Plan, or if not possible, then approving a 363 Sale.” (Purchase
Agreement ¶ 51(a) (emphasis added).) 2 The parties also agreed that the Purchase
Agreement was still binding even in the absence of any bankruptcy proceeding. (See
Purchase Agreement ¶ 51(a) (“[I]f Seller does not file such [chapter 11] proceeding or it
is dismissed for any reason, then this Contract shall remain a binding obligation of
Seller to sell and Purchaser to buy the Premises as set forth herein apart from the
contemplated Bankruptcy Court proceeding.”).)
A sale under § 363 (or outside of a bankruptcy case) rather than under a
confirmed plan would have a significant financial impact on Beekman. New York State
imposes a so-called “Mansion Tax” on conveyances of certain real estate such as the
Townhouse. Based on the $10,300,000 sale price, the Mansion Tax would total
$334,750. See N.Y. T AX L AW § 1402-b(a)(4). The Mansion Tax is similar to a stamp tax
2 	The order, whether confirming the plan or approving the sale under § 363, was defined as the
“Confirmation Order.” (Purchase Agreement ¶ 51(a).)
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within the meaning of 11 U.S.C. § 1146(a) (formerly § 1146(c)), see In re Jacoby–Bender,
Inc., 40 B.R. 10, 13 (Bankr. E.D.N.Y. 1984) (discussing N.Y. T AX L AW § 1402), aff’d, 758
F.2d 840 (2d Cir. 1985), and is not imposed in connection with a transfer under a
confirmed plan. 11 U.S.C. § 1146(a).
Beekman agreed that it would be responsible for paying any Mansion Tax.
(Purchase Agreement ¶ 40.) Thus, if the sale was consummated under a plan, Beekman
would not have to pay it. If, on the other hand, the sale was consummated pursuant to
section 363 before a plan was confirmed, the exemption under Bankruptcy Code §
1146(a) would not apply. See Florida Department of Revenue v. Piccadilly Cafeterias,
Inc., 554 U.S. 33, 52-53 (2008). And obviously, the section 1146(a) exemption would
not apply if the transfer occurred when no bankruptcy case was pending.
Important to the present dispute, the Debtor represented that “the net proceeds
of a sale under this Contract would be sufficient to satisfy all claims against Seller and,
as reasonably projected, Seller’s contemplated estate in bankruptcy.” (Purchase
Agreement ¶ 51(b).) Beekman’s obligation to purchase the Townhouse was subject to
the fulfillment of several conditions precedent, including the “accuracy, as of the date of
Closing, of the representation and warranties of Seller made in this contract.” (Purchase
Agreement ¶ 13 (a)(i).) 3
3 	In the event that representations related to the conditions precedent to Closing were not satisfied,
either party could adjourn the Closing at the Seller’s or Purchaser’s option for a reasonable period for the
Seller to remedy the defect or reduce the purchase price by the reasonable cost of remedying the defect.
(Purchase Agreement ¶ 33.) Neither party exercised this right.
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The Closing Date was set to take place no later than forty-five days after the
Confirmation Order became final and non-appealable, “provided, however, that in no
event shall the Closing take place later than January 31, 2020, subject to extension of
the Final Date.” (Purchase Agreement ¶¶ 51(e), 52(d).) Beekman could, in this regard,
extend the Final Date “on one or more occasions, until the earlier of 30 days after the
entry of the Confirmation Order or January 31, 2021 by notice to Seller prior to the
passing of the then effective Final Date.” (Purchase Agreement ¶ 52(d).)
Finally, the Purchase Agreement contained an integration clause:
All prior understandings, agreements, representations and warranties,
oral or written, between Seller and Purchaser are merged in this contract;
it completely expresses their full agreement and has been entered into
after full investigation, neither party relying upon any statement made by
anyone else that is not set forth in this contract.
(Purchase Agreement ¶ 25.)
B. 	Bankruptcy
The Debtor commenced this chapter 11 case on October 8, 2019 and filed its
modified plan (“Plan”) and modified disclosure statement (“Disclosure Statement”) on
December 9, 2019. The Plan contemplated that the Debtor would sell the Townhouse to
Beekman and the sale proceeds would be sufficient to pay all creditors except Gholam
Reza Golsorkhi, the managing director and president of the Debtor, who had agreed to
subordinate his asserted general unsecured claim in the approximate amount of $7.5
million to the payment of all other creditors. On December 12, 2019, the Court
preliminarily approved the Disclosure Statement and scheduled the hearing on the final
approval of the Disclosure Statement and confirmation of the Plan for January 14, 2020.
(Order (I) Preliminarily Approving Disclosure Statement, and (II) Scheduling Hearing
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on Final Approval of Disclosure Statement and Confirmation of Debtor’s Chapter 11
Plan, dated Dec. 12, 2019 (Main Case ECF Doc. # 32).) The schedule would allow the
Debtor to obtain a final, non-appealable order confirming the Plan by the January 31,
2020 deadline. See F ED. R. B ANKR . P. 8002(a) (requiring a notice of appeal to be filed
within fourteen days of the order appealed from).
The Debtor soon hit a snag. On December 31, 2019, the Debtor’s sole
shareholder, Pelmadulla Stiftung Vaduz (“Pelmadulla”), filed a general unsecured proof
of claim in the sum of $3,243,941.19 based on a purported loan to the Debtor
(“Pelmadulla Claim”). (Declaration of Christopher Serbagi in Opposition to
Wansdown’s Motion for Summary Judgment and in Support of 29 Beekman’s Cross-
Motion for Summary Judgment (“Serbagi Decl.”), dated Dec. 31, 2019, Ex. 8 (EFC Doc.
# 23).) As a result, the Debtor could not confirm the 100% Plan that it had filed
because, although it disputed the Pelmadulla Claim, the sale to Beekman would not
generate sufficient proceeds to reserve for the Pelmadulla Claim. Consequently, the
Debtor switched gears and determined to consummate the transaction with Beekman
through a section 363 sale instead of under a confirmed plan.
The Debtor filed a sale motion on January 7, 2020, (see Motion Pursuant to 11
U.S.C. §§ 363 and 365 and Fed. R. Bankr. P. 2002 and 6004 for an Order Approving
the Sale of the Debtor’s Real Property, dated Jan. 7, 2020 (“Sale Motion”) (Main Case
ECF Doc. # 38)), and the Court scheduled the sale hearing for January 14, 2020. (See
Order Shortening Notice on Debtor’s Motion Pursuant to 11 U.S.C. §§ 363 and 365 and
Fed. R. Bankr. P. 2002 and 6004 for an Order Approving the Sale of the Debtor’s Real
Property, dated Jan. 7, 2020 (Main Case ECF Doc. # 40).) The Court expedited the sale
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hearing to allow the Debtor to meet the contractual requirement of a final, non-
appealable sale order by January 31, 2020.
The hearing on the Sale Motion went forward on January 14. The Court noted at
the hearing that it would not be possible for the Debtor to solicit votes on a revised plan,
which it had not yet filed, by the January 31, 2020 Closing deadline. (Herman Decl., Ex.
B, at 19:20-20:2.)4 At the hearing, Beekman’s attorney referred to Beekman’s objection
(none had been filed), but informed the Court that the parties had reached a tentative
settlement in which case Beekman would waive its objection. (Id. at 9:21-10:4; 18:7-10.)
The sale hearing was adjourned to January 16, 2020 to allow the Debtor to deal with
Beekman’s and certain other objections to the sale.
On January 15, 2020, Beekman sent a letter (“January 15 Letter”) to the Debtor
that requires some parsing. (Herman Decl., Ex. C.) The tentative settlement referred to
the previous day and described in the letter had fallen through. Beekman first
characterized the Debtor’s temporal problem as rendering compliance with the January
31 deadline “not convenient or not desirable” for the Debtor, but “not impossible.”
(January 15 Letter at 2-3.) The January 15 Letter then referred to the Debtor’s
concession that “a plan is still possible through its express request for a 45-day
extension of the January 31, 2020 deadline,” (id. at 2), as proof that a confirmed plan
4 	The Debtor would have had to file a revised plan and disclosure statement and the hearing to
approve the disclosure statement required a twenty-eight-day notice period. F ED. R. BANKR. P. 3017(a).
Assuming the Court approved the disclosure statement, see 11 U.S.C. § 1125(b), it would then fix (i) a
period within which the Debtor had to transmit the approved disclosure statement and the plan to the
creditors, (ii) the time within which they could vote to accept or reject the plan and (iii) the date for the
confirmation hearing. F ED . R. BANKR. P. 3017(d). For the order confirming such a plan to be final and
non-appealable by January 31, 2020, it would have had to be entered by January 16, 2020, or within two
days of the January 14 hearing.
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was still possible. This was disingenuous. The issue was not whether it was “still
possible” to confirm a revised plan. The issue was whether it was possible to obtain a
final order confirming a plan by January 31, 2020. It was not, and besides, Beekman
refused the forty-five-day extension.
Consequently, the Debtor’s only alternative was to sell under section 363 by
January 16, 2020, and thereby procure a final non-appealable Confirmation Order
under the Purchase Agreement by January 31, 2020 but Beekman was only willing to do
so if the Debtor assumed the obligation to pay the Mansion Tax which the Debtor
apparently refused to do.
The January 15 Letter then went on to change the deal. It refused to close under
a section 363 sale and intended to terminate the Purchase Agreement if an order
confirming a bankruptcy plan was not final and non-appealable by January 31, 2020:
So, although the buyer is not willing to extend the January 31, 2020
deadline, the buyer will elect to terminate the contract of sale if a
bankruptcy plan is not final and non-appealable in time for a closing to
occur by the current deadline, January 31, 2020. Buyer will await that
outcome, but is withdrawing from any further voluntary participation in a
pre-plan 363 sale.
Despite what appeared to be an anticipatory repudiation of Beekman’s obligation
to close under an order approving a section 363 sale because a final confirmation order
by January 31 was no longer “possible,” the Debtor elected to press forward with the
sale. The Court conducted an evidentiary hearing on the Sale Motion on January 16,
2020 and entered an order approving the sale that same day. (Serbagi Decl., Ex. 6
(“Sale Order”).) Beekman was present through counsel, Seth Akabas, Esq., at the Sale
Hearing. He requested a moment to confer with all counsel and declined the invitation
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to cross-examine Golsorkhi, the Debtor’s only witness. (Herman Decl., Ex. G, at 41:8-
42:10.) The Court took a brief recess though what it concerned or accomplished is
uncertain. Nevertheless, Beekman never objected to the assumption of the Purchase
Agreement or the proposed sale.
The Sale Order signed the same day approved the terms and conditions of the
Purchase Agreement, authorized the Debtor to assume the Purchase Agreement,
concluded that the sale was negotiated by the Debtor and Beekman at arm’s length,
without collusion or fraud, and in good faith within the meaning of section 363(m) of
the Bankruptcy Code. (Sale Order ¶ C.) The Court retained “exclusive jurisdiction to
interpret, implement, and enforce the terms and provisions of, and to resolve any and all
disputes that may arise under or in connection with, this Order and the Purchase
Agreement.” (Sale Order ¶ 12.) The Sale Order became final and non-appealable on
January 30, 2020, and hence, met the January 31, 2020 deadline.
On January 23, 2020, the Debtor sent notice to Beekman scheduling the closing
for January 31, 2020 and representing that the Debtor was ready, willing and able to
close on that date. (Herman Decl., Ex. I.) In response, Beekman notified the Debtor via
email that it was exercising its right pursuant to Paragraph 52(d) of the Purchase
Agreement to extend the Final Date to February 10, 2020. 5 (Herman Decl., Ex. Q.) On
January 31, 2020, the Debtor scheduled the closing for February 10, 2020 at 10:00 a.m.
(“Adjourned Final Date”) at the offices of the Debtor’s counsel and advised Beekman
5 	Beekman could adjourn the Closing Date for up to thirty days after the January 16, 2020 Sale
Order. (See Purchase Agreement ¶ 52(d).) The thirtieth day fell on Saturday, February 15, 2020, and the
following Monday was Presidents’ Day. Hence, the Closing Date could be extended by Beekman to
February 18 but not later without the Debtor’s consent.
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that time was of the essence with respect to the Adjourned Final Date. 6 (Herman Decl.,
Exhibit R (“Time of the Essence Letter”).)
The deal never closed. On the Adjourned Final Date, Beekman advised the
Debtor that it was exercising its right pursuant to Paragraph 52(d) of the Purchase
Agreement to extend the closing to March 10, 2020. This date, however, fell beyond the
Final Date permitted under the express terms of the Purchase Agreement. (See Herman
Decl., Ex. U.) On February 18, 2020, the Debtor notified Beekman it was terminating
the Purchase Agreement based on Beekman’s failure to close by the Adjourned Final
Date and intended to retain the Downpayment as liquidated damages. (Serbagi Decl.,
Ex. 1.) The Debtor eventually sold the Townhouse for $11,500,000 to another buyer
under a revised plan. (See Disclosure Statement for Second Amended Chapter 11 Plan
of Wansdown Properties Corporation N.V., dated June 9, 2020, at ¶ E (Main Case ECF
Doc. # 114); Order Granting Final Approval of Disclosure Statement and Confirming
the Debtor’s Second Amended Chapter 11 Plan, dated July 16, 2020, at ¶ 27 (Main Case
ECF Doc. # 130).)
B. 	This Adversary Proceeding
The Debtor commenced this adversary proceeding on February 26, 2020
asserting claims for breach of contract based on Beekman’s failure to close by February
15, 2020 and sought a declaratory judgment stating that (i) the Debtor is entitled to
retain the Downpayment as liquidated damages, (ii) the Downpayment is property of
the Debtor’s estate pursuant to section 541 of the Bankruptcy Code, and (iii) Beekman’s
6 	The Debtor also stated time was of the essence in a similar letter to Beekman dated January 30,
2020 in which it acknowledged receipt of Beekman’s extension of the Final Date. (Serbagi Decl., Exhibit
7.)
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rights title, and interest in and to the Downpayment had been extinguished and
terminated. (Complaint, dated Feb. 26, 2020, ¶¶ 79-96 (ECF Doc. # 1).) Beekman filed
its own adversary proceeding to recover the down payment. (See Complaint, dated Mar.
23, 2020 (ECF Doc. # 1) and Amended Complaint, dated Apr. 23, 2020 (ECF Doc. #3),
both filed in Adv Pro. No. 20-01063 (SMB).) That adversary proceeding and this
adversary proceeding were consolidated pursuant to the Order Consolidating
Adversary Proceedings for Procedural Purposes and Fixing Briefing Scheduling, dated
May 1, 2020 (Adv. Pro. No. 20-01063 (ECF Doc # 4).)
The parties subsequently filed cross-motions for summary judgment. 	The
Debtor’s Motion asserts that Beekman breached the Purchase Agreement by failing to
close by the Adjourned Final Date. (Debtor’s Motion ¶¶ 18-22.) The Debtor also alleges
that Beekman anticipatorily breached the Purchase Agreement on January 15, 2o20 by
stating it would terminate the Purchase Agreement if the order confirming a bankruptcy
plan was not final and non-appealable by January 31, 2020. (Id. ¶¶ 14-17.)
Beekman opposed the Debtor’s Motion and cross-moved for summary judgment,
arguing that it was not required to close by the Adjourned Final Date, and instead, had
until March 1, 2020 – forty-five days after entry of the Sale Order – to perform.
(Beekman Motion at 2-11.) It also disputed that it anticipatorily breached the Purchase
Agreement because it did not refuse to perform its obligations under the Purchase
Agreement and the Debtor is foreclosed from making the argument because it treated
the Purchase Agreement as a valid contract after the alleged repudiation. (Id. at 19-25.)
Moreover, even if it had breached the Purchase Agreement, its non-performance is
excused by the Debtor’s failure to show it was ready, willing and able to close. (Id., at
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15-17.) Finally, the Purchase Agreement was induced by fraud because the Debtor failed
to disclose the Pelmadulla Claim. (Id., at 31-37.)
DISCUSSION
A. 	Jurisdiction
The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C.
§§ 157 and 1334(b), the Amended Standing Order of Reference, No. M 10-468, 12 Misc.
00032 (S.D.N.Y. Jan. 31, 2012) and paragraph 12 of the Sale Order.
This is a core proceeding. Although the Purchase Agreement is a pre-petition
contract, the Court authorized the assumption of Purchase Agreement through the Sale
Order, and the adversary proceeding implicates the interpretation and enforcement of
the Sale Order, a proceeding over which this Court retained exclusive jurisdiction.
The Court has the authority to enter a final judgment on all claims. In
accordance with Rule 7008 of the Federal Rules of Bankruptcy Procedure, the Debtor
expressly consented to the Court’s authority to enter a final judgment in paragraph 11 of
its original Complaint, dated Feb. 26, 2020 (ECF Doc. # 1). Beekman did not file an
answer or state whether it did or did not consent to the entry of a final judgment as
required by Rule 7012(b) of the Federal Rules of Bankruptcy Procedure. In its own
adversary proceeding, Beekman alleged that the Court had authority to enter a final
judgment but did not expressly include the allegation required by Federal Bankruptcy
Rule 7008. See Complaint, dated Mar. 23, 2020, at ¶ 11 (Adv Pro. No. 20-01063 (SMB)
ECF Doc. # 1) and Amended Complaint, dated Apr. 23, 2020, at ¶ 8 (Adv Pro. No. 20-
01063 (SMB) ECF Doc. #3).)
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Despite its failure to make the express allegation required by Federal Bankruptcy
Rules 7008 and 7012(b), Beekman was made aware of the opportunity to withhold its
consent to the Court’s authority to enter a final judgment by virtue of the allegation in
the Debtor’s complaint. In addition, Beekman engaged in substantial litigation before
the Court relating to the merits of the Debtors’ claims, including its motion to dismiss
and its cross-motion for summary judgment, without objecting to the Court’s authority.
Accordingly, it impliedly consented to the Court’s authority to enter a final judgment.
See LaMonica v. Harrah’s Atlantic City Operating Co., LLC (In re JVJ Pharmacy, Inc.),
Adv. Pro. No. 18-01853 (SMB), 2020 WL 4251666, at *5 (Bankr. S.D.N.Y. July 24,
2020).
B. 	Summary Judgment Standards
Although the Purchase Agreement does not include a governing law provision, it
concerns the sale of real property in New York and is governed by New York law. See
Riley v. Rivers, No. 15-CV-5022 (DLI), 2016 WL 11263672, at *5 (E.D.N.Y. Sept. 19,
2016) (“For claims that are wholly concerned with title to real property, New York’s
choice of law rules apply the law of the state where the property is located.” (internal
citation and quotation marks omitted)), aff'd, 710 F. App'x 503 (2d Cir. 2018); Madison
Realty, Inc. v. Neiss, 676 N.Y.S.2d 672, 673 (N.Y. App. Div. 1998) (Under New York
choice of law principles, “contracts referring to the transfer of title to land are governed
by the law of the place where the land is situated.” (internal citation and quotation
marks omitted)). When asked to interpret contractual language, the question under
New York law is “whether the contract is unambiguous with respect to the question
disputed by the parties.” Law Debenture Tr. Co. of N.Y. v. Maverick Tube Corp., 595
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F.3d 458, 465 (2d Cir. 2010) (quoting Int’l Multifoods Corp. v. Commercial Union Ins.
Co., 309 F.3d 76, 83 (2d Cir. 2002)). Ambiguity presents a question of law. Id. A
contract is ambiguous if it “could suggest more than one meaning when viewed
objectively by a reasonably intelligent person who has examined the context of the entire
integrated agreement and who is cognizant of the customs, practices, usages and
terminology as generally understood in the particular trade or business.” Int’l
Multifoods, 309 F.3d at 83 (internal quotation marks and citation omitted); accord
Cont’l Ins. Co. v. Atl. Cas. Ins. Co., 603 F.3d 169, 180 (2d Cir. 2010); Maverick Tube,
595 F.3d at 466. An agreement is not ambiguous if it has a definite and precise
meaning, and unambiguous language does not become ambiguous because a party urges
a different interpretation that strains the language beyond its ordinary meaning.
Maverick Tube, 595 F.3d at 467; Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d
425, 428 (2d Cir. 1992). Where the dispute concerns a provision of the contract, the
Court must consider the contract “as a whole to ensure that undue emphasis is not
placed upon particular words and phrases,” Bailey v. Fish & Neave, 868 N.E.2d 956,
959 (N.Y. 2007); accord Maverick Tube, 595 F.3d at 468, and “seek to give ‘[e]ffect and
meaning . . . to every term of [a] contract.’” XL Specialty Ins. Co. v. Level Glob. Inv’rs,
L.P., 874 F. Supp. 2d 263, 284 (S.D.N.Y. 2012) (quoting Reda v. Eastman Kodak Co.,
649 N.Y.S.2d 555, 557 (N.Y. App. Div. 1996)). If the contract is ambiguous, “‘the court
may accept any available extrinsic evidence to ascertain the meaning intended by the
parties during the formation of the contract.’” Morgan Stanley Grp. Inc. v. New
England Ins. Co., 225 F.3d 270, 275-76 (2d Cir. 2000) (quoting Alexander & Alexander
Servs., Inc. v. These Certain Underwriters at Lloyd’s, London, 136 F.3d 82, 86 (2d Cir.
1998)).
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B. 	The Deadline to Close
I conclude that the Purchase Agreement is not ambiguous with respect to the
deadline by which the parties were obligated to close. The Purchase Agreement provided
that the Closing shall take place no later than forty-five days after the Confirmation
Order, a term that included the Sale Order, but “in no event shall the Closing take place
later than January 31, 2020, subject to extension of the Final Date.” (Purchase
Agreement ¶ 51(e).) The Purchaser could extend the Final Date up to the earlier of
thirty days after the Confirmation Order or January 31, 2021. The Sale Order was
entered on January 16, 2020, the last day to appeal was January 30, 2020, and hence,
the Sale Order was final and non-appealable on January 31, 2020. Read together, these
provisions required the parties to close by January 31, 2020, unless Beekman extended
the Final Date up to thirty days after January 16, 2020. As stated, because of weekend
and holidays, Beekman could extend the Final Date up to February 18, 2020 and, in fact,
exercised its option to extend the Closing Date to February 10, 2020. 7
Despite the unambiguous language of the Purchase Agreement, Beekman argues
through the offer of extrinsic evidence that the parties intended for the Purchase
Agreement to close forty-five days after the entry of the Confirmation Order. Seth
7 	Beekman’s counsel appears to argue that the closing by January 31, 2020 was a condition to
Beekman’s obligation to purchase under paragraph 52(d) and because the Closing did not occur by that
date, it was relieved of that obligation. (See Declaration of Seth Akabas (“Akabas Decl.”), dated May 7,
2020, at ¶¶ 22, 28(d), (g) (ECF Doc. # 24).) This interpretation ignores the language that permitted
Beekman to extend the Closing Date up to thirty days after the entry of the Sale Order and obligated the
parties to close by the extended, Final Date. (Purchased Agreement ¶ 51(e).) In addition, having
exercised the option to extend the Closing Date beyond January 31, Beekman cannot argue that it was
relieved of its obligation to purchase based on the failure to close by January 31, 2020. See M. O'Neil
Supply Co. v. Petroleum Heat & Power Co., 19 N.E.2d 676, 679 (N.Y. 1939).
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Akabas, Beekman’s lawyer who negotiated the Purchase Agreement on its behalf,
recounted the negotiations leading up to the Purchase Agreement and the discussions
that Beekman needed and insisted on forty-five days to close after the entry of the
Confirmation Order because it did not want to tie up $10 million while the Debtor
obtained the necessary Court approvals. (Akabas Decl. ¶¶ 3, 14.) In addition, Beekman
submitted reports by two “experts” who did not participate in the negotiations but
nonetheless opined that the parties intended to have up to forty-five days after the
Confirmation Order to close because that is the custom and practice. (Expert Report of
Alexander Suslensky, dated May 5, 2020 (“Suslensky Report”) ¶ 12 (“The primary
purpose of providing for a 45-day period between the issuance of the Confirmation
Order and closing date was to allow Purchaser adequate time to liquidate investments
necessary to provide the balance of the purchase price of approximately ten million
dollars. No other interpretation of the Contract would explain the 45-day period
included in the provision.”); ¶ 16 (“For the reasons set forth above, I believe that the
intent of the pertinent provision of the Contract was to allow purchaser up to forty-five
days after the entry of the Confirmation Order to obtain necessary funds to close the
transaction.”)(ECF Doc. # 26); Expert Report of Stacie Handwerker, dated May 5,
2020 (“Handwerker Report”), ¶ 17 (“[I]t makes the most sense that the only date by
which the Purchaser would agree to be bound to close, and be in Default upon failure to
close, is the date that is the specified number of days after the Bankruptcy Court
approves the sale as evidence by the issuance of the Confirmation Order. I have no
doubt whatsoever that this is what was intended when the Purchaser's Rider was drafted
and the only way the Contract would have made sense to the Purchaser to enter.”) (ECF
Doc. # 25).)
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These declarations/reports ignore and contradict the plain language that
specifically granted Beekman only thirty days after the Confirmation Order as the
outside date by which the parties had to close if Beekman exercised its option to extend
the Final Date. Despite Akabas’s and the experts’ contrary statements, the parties
obviously agreed that thirty days was sufficient time for Beekman to liquidate the funds
it needed. In fact, Beekman implied in its January 15 Letter that it was ready to close
(that is, it had the cash) on January 31, 2020 because it stated it would close on that
date pursuant to a final order confirming a plan. Furthermore, Akabas’ testimony
regarding the negotiations leading up to the execution of the Purchase Agreement
violates the parol evidence rule and ignores the integration clause.
Furthermore, the experts’ opinions ignore a critical requirement of the Purchase
Agreement and bankruptcy law. Both opined that the Purchase Agreement must be
read to permit a closing within forty-five days of the Confirmation Order; otherwise, it
could require the parties to close before the Court entered a Confirmation Order.
(Suslensky Report ¶ 12 (“To read it otherwise would mean that a party could be in
default by January 31, 2020 if the Confirmation Order did not occur before then or
occurred less than forty-five days prior to the January 31, 2020 date.”); Handwerker
Report ¶ 17 (“[I]n order to conclude that Purchaser had an affirmative obligation to
close by the “Final Date” (which initially was January 31, 2020 as extended to February
10, 2020), then Seller’s reading of the Contract means that, in the scenario in which
Seller filed a bankruptcy proceeding, Purchaser would have been required to close on
January 31, 2020 (or shortly thereafter) even if this date was prior to the entry of a
Confirmation Order.”) These arguments ignore that bankruptcy law does not permit the
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Debtor to transfer the Townhouse without Court approval, 11 U.S.C. § 363(b)(1), and the
Purchase Agreement conditioned the obligation to close on a final and non-appealable
Confirmation Order. (Purchase Agreement ¶ 51(e); see also ¶ 51(a), (c).) And where, as
here, the entry of the Confirmation Order was delayed, Beekman still had the absolute
right to extend the Closing Date to thirty (instead of forty-five) days after the entry of the
Confirmation Order.
Finally, Beekman spills a great deal of ink arguing that the Debtor has made a
judicial admission that it had forty-five days after the Confirmation Order to close and
is, therefore, estopped from taking a contrary position. (Beekman Motion at. 3-7.) The
Debtor submitted a declaration signed by Golsorkhi at the beginning of the case
required by the Court’s Local Bankruptcy Rule 1007-2, which mandates the disclosure of
information about the Debtor, its business and its financial affairs. Golsorkhi disclosed
the then-pending sale to Beekman and stated, at paragraph 20, that “[t]he closing of the
transactions contemplated in RSA are scheduled to take place no later than the fortyfive
(45) days after the entry of an order confirming a chapter 11 plan.”).) According to
Beekman, this statement was a judicial admission.
I disagree. “A judicial admission is a statement made by a party or its counsel
that has the effect of withdrawing a fact from contention and which binds the party
making it throughout the course of the proceeding.” Pillars v. General Motors LLC (In
re Motors Liquidation Company), 957 F.3d 357, 360 (2d Cir. 2020). A party’s
statement interpreting a contract cannot be a judicial admission because it constitutes a
legal conclusion rather than a factual admission. See Int'l Cards Co., Ltd. v.
MasterCard Int'l Inc., 2017 WL 1133425, at *5 (S.D.N.Y. Mar. 24, 2017) (party’s
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interpretation of a notice provision in a contract is “a legal argument rather than a
factual statement” and therefore “is not a judicial admission that precludes [a party]
from asserting the legally correct interpretation of the contract.”), aff'd, 741 F. App’x 41
(2d Cir. 2018); Meehancombs Glob. Credit Opportunities Master Fund, LP v. Caesars
Entm’t Corp., 162 F. Supp. 3d 200, 212 (S.D.N.Y. 2015) (“the statements are not judicial
admissions because they concern the legal effect of certain transactions.”). Golsorkhi’s
interpretation of the Purchase Agreement’s Closing requirement does not, therefore,
constitute a judicial admission and neither the Debtor nor the Court is bound by his
interpretation of its terms.
C. 	Beekman’s Breaches
1. 	Anticipatory Repudiation
Beekman committed at least two breaches of the Purchase Agreement. The first
was an anticipatory repudiation. An anticipatory repudiation occurs when a party to a
contract (1) states that he cannot or will not perform his obligations, or (2) commits a
voluntary affirmative act that renders the obligor unable or apparently unable to
perform his obligations. Norcon Power Partners, L.P. v. Niagara Mohawk Power
Corp., 705 N.E.2d 656, 659 (N.Y. 1998) (quoting R ESTATEMENT (S ECOND) OF C ONTRACTS
§ 250 (1981)); see Lucente v. Int'l Bus. Mach. Corp., 310 F.3d 243, 258 (2d Cir.2002);
De Lorenzo v. Bac Agency, Inc., 681 N.Y.S.2d 846, 848 (N.Y. App. Div. 1998); JOHN D.
CALAMARI & J OSEPH M. PERILLO , THE L AW OF CONTRACTS § 12–4, at 525 (3rd ed.1987);
RESTATEMENT (SECOND ) OF CONTRACTS § 250 cmt. a (1981). “For a statement to
constitute an anticipatory breach, ‘the announcement of an intention not to perform
[must be] positive and unequivocal.’” Argonaut P'ship, L.P. v. Sidek, S.A. de C.V., No. 96
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Civ. 1967(MBM), 1996 WL 617335, at *5 (S.D.N.Y. Oct. 25, 1996) (quoting Tenavision,
Inc. v. Neuman, 379 N.E.2d 1166, 1168 (N.Y. 1978)), aff'd on grounds stated in district
court op., 141 F.3d 1151 (2d Cir. 1998). If an anticipatory repudiation occurs, the non-
breaching party has two mutually exclusive options. He may elect to treat the contract
as terminated and exercise his remedies or he may continue to treat the contract as
valid. Lucente, 310 F.3d at 258; ESPN, Inc. v. Office of the Comm'r of Baseball, 76 F.
Supp. 2d 383, 388 (S.D.N.Y.1999); Strasbourger v. Leerburger, 134 N.E. 834, 835 (N.Y.
1922); Inter–Power of New York, Inc. v. Niagara Mohawk Power Corp., 686 N.Y.S.2d
911, 913 (N.Y. App. Div. 1999), leave to appeal denied, 717 N.E.2d 699 (N.Y. 1999).
Ordinarily, anticipatory repudiation presents a question of fact but when the
anticipatory repudiation is expressed in writing it may be decided as a question of law.
Best Payphones, Inc v. Manhattan Telecomms. Corp. (In re Best Payphones, Inc.), 450
F. App’x 8, 11 (2d Cir. 2011) (summary order).
The January 15 Letter constituted an anticipatory repudiation. It stated that
Beekman would not close under a section 363 sale and intended to terminate the
Purchase Agreement if an order confirming a bankruptcy plan was not final and non-
appealable by January 31, 2020:
So, although the buyer is not willing to extend the January 31, 2020
deadline, the buyer will elect to terminate the contract of sale if a
bankruptcy plan is not final and non-appealable in time for a closing to
occur by the current deadline, January 31, 2020. Buyer will await that
outcome, but is withdrawing from any further voluntary participation in a
pre-plan 363 sale.
For the reasons stated, a final order confirming a plan was no longer possible by
the January 31, 2020, and the January 15 Letter imposed a deadline that was impossible
to meet. The Debtor had the contractual right to insist on a sale under section 363, and
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Beekman’s statement was an unambiguous and unequivocal repudiation of its
obligation to close pursuant to a section 363 sale order.
2. 	The Failure to Close
Despite Beekman’s repudiation, the Debtor exercised its right to ignore the
anticipatory breach and insist on compliance with the Purchase Agreement. It went
forward with the sale hearing the next day and obtained the Sale Order. Beekman
attended the Sale Hearing but did not object to the Debtor’s motion or contend that it
was not obligated to close under a § 363 sale order. On January 23, 2020, the Debtor
sent notice to Beekman scheduling the closing for January 31, 2020 and representing
that the Debtor was ready, willing and able to close on that date. (Herman Decl., Ex. I.)
After some back and forth between the parties, the Debtor advised Beekman on January
27 th that its failure to close on January 31, 2020 would be deemed a material breach
entitling the Debtor to keep the down payment and asked Beekman to state whether it
would close on January 31. (Herman Decl., Ex. K.) In response, Beekman notified the
Debtor via email on January 29, 2020 that it was exercising its right pursuant to
Paragraph 52(d) of the Purchase Agreement to extend the Final Date to February 10,
2020. (Herman Decl., Ex. Q.)
On January 31, 2020 the Debtor advised Beekman by letter that the closing had
been scheduled for February 10, 2020 at 10:00 a.m. (“Adjourned Final Date”) and
warned Beekman:
As Seller continues to incur substantial carrying costs with
respect to the Property, Seller hereby advises that TIME IS OF
THE ESSENCE with respect to the Closing now scheduled at
Purchaser's request for February 10, 2020. The Closing shall
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take place at the offices of Blank Rome LLP, 1271 Sixth Avenue,
New York, New York, 16th Floor at 10 a.m.
(Time of Essence Letter (boldface in original).) On the Adjourned Final Date, Beekman
advised the Debtor that it was exercising its right pursuant to Paragraph 52(d) of the
Purchase Agreement to extend the closing again, this time to March 10, 2020. (See
Herman Decl., Ex. U.) The proposed new Adjourned Final Date was more than thirty
days after the Sale Order. In fact, it was fifty-four days after the Sale Order. On
February 18, 2020, the Debtor notified Beekman it was terminating the Purchase
Agreement based on Beekman’s failure to close by the Adjourned Final Date and
intended to retain the Downpayment as liquidated damages. (Serbagi Decl., Ex. 1.)
Under New York law, each party to a real estate contract must tender
performance when time is of the essence with respect to the closing date. Donerail
Corp. N.V. v. 405 Park LLC, 952 N.Y.S.2d 137, 142 (N.Y. App. Div. 2012) (“[W]hen a
party to a real estate contract declares time to be of the essence in setting a closing date,
each party must tender performance on that date, and a failure to perform constitutes a
default.”). “Where time is not of the essence, ‘the law permits the respective parties a
reasonable time in which to tender performance, regardless of whether the contract
specifies a particular date on which such performance is to be tendered.’” In re 1111
Myrtle Ave. Grp. LLC, 575 B.R. 567, 579 (Bankr. S.D.N.Y. 2017) (quoting Mader v.
Mader, 476 N.Y.S.2d 195, 197 (N.Y. App. Div. 1984)). Time is not considered of the
essence unless the real estate contract contains a clear provision stating such or it is
understood from the nature and circumstances of the contract. See Myrtle Ave. Grp.
LLC, 575 B.R. at 578. However, even if a contract does not contain a time of the essence
provision, a party “may, unilaterally, give subsequent notice to that effect and avail
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himself of forfeiture on default, provided such notice is clear, distinct and unequivocal,
fixes a reasonable time within which to perform, and informs the other party that a
failure to perform by that date will be considered a default.” Liba Estates, Inc. v. Edryn
Corp., 577 N.Y.S.2d 19, 20 (N.Y. App. Div. 1991); accord Suslensky Report ¶ 10.
The Purchase Agreement did not include a “time of the essence” clause but the
Debtor gave notice to Beekman that time was of the essence with respect to the
Adjourned Final Date in its Time of Essence Letter. The latter conspicuously and
unequivocally stated that time was of the essence because of the substantial carrying
costs the Debtor was incurring, informed Beekman of the time and place of the Closing
and stated that the Debtor was ready, willing and able to deliver free and clear title to
the Townhouse at that time.
It also gave Beekman a reasonable time to close. Beekman had selected the
Adjourned Final Date of February 10, 2020. Moreover, the January 15 Letter indicated
that Beekman was prepared to close on January 31, 2020 if a final confirmation order
was in place (“[T]he buyer will elect to terminate the contract of sale if a bankruptcy
plan is not final and non-appealable in time for a closing to occur by the current
deadline, January 31, 2020.”). Thus, it had the cash by then and has not stated that it
needed time beyond February 10 to raise the cash.
Finally, the Time of Essence Letter informed Beekman that it would forfeit its
Downpayment if it did not close by then (“Be rest assured that calling a time of the
essence closing at this juncture, thereby requiring-Purchaser to close on the Final
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Adjourned Date or forfeit its deposit, is unequivocally supported by the circumstances in
this matter and firmly grounded under New York law.”)
Beekman argues that because the Purchase Agreement provided it until forty-five
days after the Sale Order to close, or by March 1, 2020, (Beekman Motion at 2), any time
of the essence notice sent before that date was invalid. The argument suffers from two
obvious flaws. First, the Purchase Agreement did not give it forty-five days after the
Sale Order to close; it gave Beekman thirty days. Second, even if the Purchase
Agreement gave Beekman forty-five days, Beekman sought to extend the Closing to
March 10, fifty-four days after the entry of the Sale Order. This it had no right to do
even under its own interpretation of the Purchase Agreement.
Furthermore, Beekman’s principal contrary authority is distinguishable. In
North Triphammer Dev. Corp. v. Ithaca Associates, 704 F. Supp. 422 (S.D.N.Y. 1989),
the defendant agreed to sell real property to the plaintiff’s predecessor. The sale
agreement provided that the closing would occur within 120 days but did not say that
time was of the essence. The 120 th day was September 3, 1987. On August 6, one month
before the contractual deadline, the defendant wrote to the plaintiff’s predecessor, “[b]y
way of postscript, I merely want to note that time is of the essence for a closing and your
cooperation would be greatly appreciated.” Id. at 424. The parties did not close by
September 3, and on April 7, 1988, the plaintiff’s predecessor wrote to the defendant
declaring that it was ready to close on or about May 25, 1988, but no closing date was
set, and the lawsuit followed. Id. at 425.
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One of the issues in the case was whether the plaintiff had committed a material
breach by failing to close by September 3, 1987. The Court concluded that time was not
of the essence despite the defendant’s pre-deadline declaration that it was. After setting
out the general rules relating to making time of the essence (which I have already
discussed), see id. at 429, the District Court first concluded that the words used in the
defendant’s August 6 letter, “by way of postscript”—and “your cooperation would be ...
appreciated”— were too ambiguous and vague. Id. at 430. In addition, “[n]o case has
been cited, and none has been found, where time was unilaterally made of the essence of
a contract before the date set forth in the contract has passed.” Id. In contrast, the
Debtor’s Time of Essence Letter was clear and unequivocal for the reasons stated and
was sent after Beekman selected a new closing date that fell beyond the January 31,
2020 contractual deadline.
Accordingly, Beekman committed a material breach by failing to close by
February 10, 2020, and its attempt to further extend the Closing for a date later than the
outside deadline set forth in the Purchase Agreement was ineffective. This conclusion,
however, is subject to the proviso that its obligation to close was not excused by the
failure of the condition discussed immediately below.
D. 	Ready, Willing and Able
In order to recover damages, the Debtor must prove that it was ready, willing and
able to perform on February 10. Pastor v. DeGaetano, 8 N.Y.S.3d 79, 83 (N.Y. App. Div.
2015) (“[I]n order to obtain summary judgment permitting it to retain the deposit, the
Estate ‘must establish that it was ready, willing, and able to perform on the time-of-the-
essence closing date, and that the purchaser failed to demonstrate a lawful excuse for its
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failure to close.”) (quoting Donerail Corp., 952 N.Y.S.2d at 142). It is undisputed that
the Debtor was ready, willing and able to transfer title to Beekman on the Adjourned
Closing Date. Beekman asserts, however, that it was excused from non-performance on
the Adjourned Final Date because the Debtor failed to satisfy a condition precedent to
Closing and was thus not ready, willing and able to close. See Serdarevic v. Centex
Homes, LLC, No. 08 CV 5563 VB, 2012 WL 5992744, at *2 (S.D.N.Y. Nov. 7, 2012)
(“Defendant's performance, however, is nonetheless excused because the town's zoning
law caused a failure of a condition precedent to closure.”). Specifically, the Debtor
represented in the Purchase Agreement that “a sale under this Contract would be
sufficient to satisfy all claims against Seller and, as reasonably projected, Seller’s
contemplated estate in bankruptcy. . . .,” (Purchase Agreement ¶ 51(b), and under ¶
8(b), “Seller covenants and warrants that all of the representations and warranties set
forth in this contract shall be true and c0rrect at Closing.”
As a rule, a vendor that cannot satisfy a condition to closing is not ready, willing
and able. Merritt Hill Vineyards, Inc. v. Windy Heights Vineyard, Inc., 460 N.E.2d
1077, 1081-82 (N.Y. 1984); Jobin Org., Inc. v. Bemar Realty, LLC, 86 N.Y.S.3d 166, 169
(N.Y. App. Div. 2018); RESTATEMENT (S ECOND) OF CONTRACTS § 225(1) & (2) (1981).
Although a party’s obligation to perform is excused only where the other party has
committed a “breach of the contract . . . so substantial that it defeats the object of the
parties in making the contract,” Frank Felix Assocs., Ltd. v. Austin Drugs, Inc., 111 F.3d
284, 289 (2d Cir. 1997), the materiality of a failure of a condition is generally irrelevant
unless circumstances render the condition impossible to perform. See Edelman Arts,
Inc. v. Art Intern. (UK) Ltd., 841 F.Supp.2d 810, 828 (S.D.N.Y. 2012). “Nonetheless,
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the nonoccurrence of the condition may yet be excused by waiver, breach or forfeiture.
The Restatement posits that ‘[t]o the extent that the non-occurrence of a condition
would cause disproportionate forfeiture, a court may excuse the non-occurrence of that
condition unless its occurrence was a material part of the agreed exchange.’”
Oppenheimer & Co., Inc. v. Oppenheim, Appel, Dixon & Co., 660 N.E.2d 415, 418 (N.Y.
1995) (quoting R ESTATEMENT (S ECOND) OF CONTRACTS § 229). “In determining whether
the forfeiture is ‘disproportionate,’ a court must weigh the extent of the forfeiture by the
obligee against the importance to the obligor of the risk from which he sought to be
protected and the degree to which that protection will be lost if the non-occurrence of
the condition is excused to the extent required to prevent forfeiture.” R ESTATEMENT
(SECOND) OF CONTRACTS § 229 cmt. b.
Whether the Debtor was ready, willing and able to meet the condition raises
several factual questions. First, could the Debtor pay all creditor claims “as reasonably
projected,” as of February 10, 2020. The phrase is inherently ambiguous particularly
since the proceeds would never be enough to satisfy all claims, including Golsorkhi’s
subordinated unsecured claim, yet Beekman was willing to close under the Plan. And
that the asserted claims exceeded the projected proceeds does not answer the question.
For example, the Pelmadulla Claim, asserted in excess of $3 million, has since been
settled for $250,000. What then, was a reasonable projection of the allowed amount of
that claim as of February 10? Furthermore, the claim of Azari, the largest aside from the
mortgagee and Golsorkhi, is the subject of litigation and the same question arises as to
the reasonable projection of the allowed amount of that claim. In essence, it appears
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that the Court might have to estimate these claims to determine their reasonably
projected allowed amount.
Second, if the Debtor could not satisfy the condition, would the enforcement of
the condition cause a disproportionate forfeiture to the Debtor. If the condition is not
excused, the Debtor (and the Debtor’s creditors, which includes Golsorkhi) will forfeit
the Downpayment. However, the Debtor retained title to the Townhouse following
Beekman’s breach and eventually sold the Townhouse for $11,500.000. Thus, the
extent of the forfeiture raises a factual question.
Third, the “importance to [Beekman] of the risk from which [it] sought to be
protected and the degree to which that protection will be lost if the non-occurrence of
the condition is excused,” also raises factual issues. According to Akabas, the risk was
one of delay. Beekman preferred a sale under a plan and the sufficiency of the proceeds
might affect whether the Debtor could quickly confirm a plan that paid all creditors in
full and did not require any voting. On the other hand, Beekman had also agreed under
certain conditions to buy the Townhouse pursuant to § 363 or even if no bankruptcy was
pending and pay the Mansion Tax. In either case, the sufficiency of the sale proceeds
and the confirmation of a plan would be irrelevant, and the sale could proceed without
delay as it did.
Accordingly, whether the Debtor was ready, willing and able to comply with its
representation regarding the sufficiency of the proceeds, and if not, whether it would
cause a disproportionate forfeiture, requires a trial.
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E. 	Rescission
Finally, Beekman’s cross-motion includes a brief discussion of rescission based
on fraudulent inducement arising from the failure to disclose the Pelmadulla Claim.
(Beekman Motion at 31-33.) Beekman’s amended complaint in the adversary
proceeding it had commenced did not assert a claim for rescission, its submissions on
these motions do not include any other reference to rescission and it has not pointed to
any act on its part promptly exercising its right to rescind. Allen v. WestPoint–
Pepperell, 945 F.2d 40, 47 (2d Cir.1991) (“An action for rescission must be initiated
without unreasonable delay.”); Banque Arabe et Internationale D’Investissement v. Md.
Nat’l Bank, 850 F. Supp. 1199, 1211 (S.D.N.Y. 1994) (“Promptness is an element of a
prima facie rescission action and the burden of proof is on plaintiff”), aff’d, 57 F.3d 146
(2d Cir. 1995); Schenck v. State Line Telephone Co., 144 N.E. 592, 594 (N.Y 1924)
(Cardozo, J.) (“[W]e do not deny that rescission to be effective must be announced
without unreasonable delay.” (citation omitted)).
In addition, although Beekman alluded to an objection at the January 14 hearing
that it would waive under the parties’ tentative settlement, the settlement had fallen
through by January 15 and on January 16, Beekman never raised an objection the Sale
Motion. By then, it was armed with all of the facts that it now contends support
rescission. The Pelmadulla Claim was the subject of the January 14 hearing and the
January 15 Letter referred to newly-asserted claims. The January 15 Letter speculated
that the Debtor might not have known about the Pelmadulla Claim, but according to
Beekman, even an innocent misrepresentation will support a rescission claim. (See
Beekman Motion at 33.) Thus, Beekman could have opposed the Sale Motion by
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arguing that the Purchase Agreement had been induced by fraud and should be
rescinded. It did not, and the Sale Order, at ¶ C, included an express finding that “[t[he
sale of the Property pursuant to the Purchase Agreement and this Order was negotiated
by the Debtor and the Purchaser at arm’s-length, without collusion or fraud, and in good
faith within the meaning section 363(m) of the Bankruptcy Code.” Beekman’s claim of
rescission, to the extent it is making such a claim, constitutes a collateral attack on the
Sale Order which, as noted, is final and non-appealable.
CONCLUSION
Accordingly, the Debtor’s Motion and the Beekman Motion are denied. The
Court has considered the parties’ remaining arguments and concludes that they are
without merit.
So ordered.
Dated: New York, New York
October 5, 2020
/s/ Stuart M. Bernstein
STUART M. BERNSTEIN
United States Bankruptcy Judge
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