Fairy Tale of High-End New York Real Estate

     MANHATTAN (CN) – “Only in New York,” a federal judge said as he refused to refund the $4.68 million deposit a woman paid for an “absolutely fabulous” Upper East Side hotel unit that lacked basic utilities.
     Roberta Campbell, the ex-wife of wealthy software executive William Campbell, signed an $18.75 million contract in January 2008 for a suite in Manhattan’s Mark Hotel.
     “In the fifteen month interval between the contract signing and the scheduled closing, Lehman Brothers collapsed and the United States tumbled into a recession,” U.S. District Judge William Pauley III summarized in his 23-page order. “In April 2009, issues arose with heat, hot water, closet rods, and attorneys’ egos, and the parties’ deal never closed.”
     She subsequently sued the hotel for the return of her down payment.
     “Campbell now lives at 15 Central Park West, one of the most desirable addresses in Manhattan,” Pauley wrote. “Meanwhile, the luxury co-ops at the Mark Hotel remain unsold. Over the last three years, [the hotel] has managed to sell only two of the forty-two suites originally offered for sale, despite significant price reductions. Ultimately, Campbell may have made a wise lifestyle decision to abandon her purchase at the Mark Hotel. Had she closed in the spring of 2009, even today Campbell would be one of the only owner/residents atop the Mark Hotel.”
     But the evidence from of a four-day bench trial and the terms of the “one-sided” agreement convinced the judge that Campbell has no real claim to the down payment.
     While the contract touted access to a doorman, a concierge, elevator service, a package room, maintenance personnel, a fitness center, room service and dry cleaning, it held the hotel blameless “for the availability, interruption, discontinuance or quality of any such services,” the judge noted.
     “The offering plan contemplated that construction would be ongoing for at least one year after closings began,” the order states.
     During this time, the hotels pulled elevators from service, reassigned staff to construction duties and limited guest amenities.
     When Campbell inspected the suite on April 15, 2009, she brought two attorneys, an architect and a home inspector, who spotted unfinished floors, “dangerously large gaps between the pavers on the terrace,” and non-functioning heat, hot water, air conditioning, and cooking gas, the order states.
     But Pauley said that none of these, or other, defects, broke the parties’ agreement.
     “The absence of heat, hot water, and air conditioning on April 15 did not prevent Campbell’s occupancy of the suite because the relevant systems were completely and properly constructed, heat and air conditioning in fact were available, and gas service credibly could have been activated within Con Edison’s next eight hour shift,” the order states.
     Hours after the inspection, Campbell wrote in an email that she found the place “absolutely fabulous,” the court found.
     Though Campbell later testified that she was referring to the hotel’s potential, not its condition, Pauley would not let go.
     “Nonetheless, Campbell’s response-on the eve of her scheduled closing-agreeing that the Suite was ‘absolutely fabulous’ undercuts the alleged seriousness of many of her criticisms of the Suite and the building,” Pauley wrote.
     Campbell started apartment hunting and looking for a way out of her contract days after inspection, according to the order.
     “These e-mail exchanges suggest that Campbell’s team had mobilized to find reasons to delay the closing,” Pauley wrote.
     Mark Hotel attorney Jonathan Canter made the situation worse by refusing to give Campbell “reinspection” rights to see the progress of improvements, the judge said.
     “Canter did not act in bad faith in rejecting Cohen’s demand for a ‘reinspection,’ which was a right Campbell did not expressly have under the purchase agreement,” Pauley wrote. “But Canter’s refusal to allow Campbell back into the suite before a closing certainly reflected poor judgment, and would understandably raise an alarm in any purchaser’s mind.”
     The judge found Campbell’s lawyer, Richard Cohen, equally stubborn.
     “For transactional lawyers in the business of closing deals, Canter and Cohen acted myopically,” he wrote. “At trial, Cohen contended that Canter’s conduct would have rendered further efforts to revisit the suite ‘fruitless,’ … while Canter retorted that Cohen’s conduct would have rendered efforts to set a mutually agreeable closing date a ‘futile act.’ In comparison to a three year gauntlet of litigation-including a motion to dismiss, 150,000 pages of document discovery, sixteen depositions, expert discovery, dueling motions for summary judgment, and a full trial-a simple phone call to the other party’s attorney would seem anything but futile, even if the attorney initiating the call thought it would be fruitless.”
     Campbell’s lawyer asked the New York attorney general to return his client’s down payment in May 2009. After he let the closing deadline pass, he then signed another contract for Campbell on a Central Park West apartment.
     The three-year litigation wrapped up in favor of the hotel Monday.
     Typically, a hotel in this situation would be entitled to legal fees, but their “lopsided contract” changes things, the judge said.
     “While the parties’ lopsided contract dictates that [the hotel] is entitled to the down payment as liquidated damages, both parties share some blame for the unraveling of this transaction,” Pauley wrote. “Accordingly, this court will closely scrutinize any fee application by [the hotel]. The parties are encouraged to exercise some common sense and resolve the question of legal fees forthwith.”

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