Liani v. Baker et al

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Case 1-05-01556-jbr Doc68 Filed 05/04/09 Entered 05/04/09 15:18:02

UNITED STATES BANKRUPTCY COURT
FASTERN DISTRICT OF NEW YORK

we ee ee ee eee xX
Inre: Case No. 1-01-24227-dem
ASTON BAKER, Chapter 11
Debtor.
ee ee ee xX
SIMON LIANI,
Plaintiff, Adv. Proc. No.: 05-1556-dem

ASTON BAKER and SHELDON GOOD &
COMPANY AUCTIONS NORTH EAST, LLC,
as Escrow Agent,

Defendants.

DECISION AND ORDER ON MOTIONS AND
CROSS-MOTION FOR SUMMARY JUDGMENT

Appearances:

Avrum J. Rosen, Esq.
Attomeys for Simon Liani

38 New Street

Huntington, New Y ork 11743

Roy J. Lester, Esq.

Lester & Weitz, P.C.

Attomeys for Aston Baker

600 Old Country Road, Suite 229
Garden City, New Y ork 11530

Heidi J. Sorvino, Esq.

Katten Muchin Rosenman LLP

Attomeys for Sheldon Good & Company Auctions, NorthEast LLC
975 Madison Avenue

New Y ork, New Y ork 10022-2585

DENNIS E. MILTON
United States Bankruptcy Judge
INTRODUCTION
The matter is before the Court on the motions of the plaintiff and the cross-
motions of the defendants for summary judgment. On December 12, 2005, Simon Liani
(“Liani”) brought this adversary proceeding against Aston Baker (“debtor”) and Sheldon Good
& Company Auctions North East, LLC as Escrow Agent (“Sheldon Good”) (“defendants”). On
October 12, 2007, Liani filed a Motion for Summary Judgment against the defendants. On
October 19, 2007, the debtor filed a Cross-Motion for Summary Judgment against the plaintiff,
and Sheldon Good filed a Motion for Summary Judgment against Liani and the debtor. This
Court held hearings on these motions on October 30, 2007. Based upon the papers submitted
and the arguments of counsel, the Court finds that the parties have established that no genuine
issue of material fact exists and that an award of summary judgment is appropriate. The Court
denies Liani’s application for summary judgment. The Court grants the application of the debtor
for summary judgment and denies the Cross-Motion of Sheldon Good.
JURISDICTION
This Court has jurisdiction over this core proceeding under 28 U.S.C. §§1334(b)
and 157(b)(2)(c) and the Eastern District of New York standing order of reference dated August
28, 1986. This Memorandum Decision and Order constitutes the Court’s findings of fact and
conclusions of law to the extent required by Fed. R. Bankr. P. 7052.
FACTUAL BACKGROUND
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Familiarity with the prior proceedings in this case is assumed. The facts relevant
to this Application are as follows. On November 15, 2001, the debtor filed a voluntary petition
for relief under Chapter 7 of the Bankruptcy Code. On January 25, 2002, the case was converted
to a case under Chapter 11 of the Bankruptcy Code. 	On June 20, 2005, the Court approved an
Order authorizing the retention of Sheldon Good as the exclusive auctioneer to sell four of the
debtor’s properties (the “Auctioneer Order”).1 The Auctioneer Order approved the terms and
conditions set forth in the Exclusive Real Estate Auction Agreement between Sheldon Good and
the debtor (the “Auctioneer Agreement”). The debtor failed to execute the Auctioneer
Agreement.
On September 27, 2005, Sheldon Good conducted a public auction and sold the
debtor’s property located at 490 New York Avenue, Brooklyn, New York (the “New York
Avenue Property”) to Liani. 	The Purchase and Sale Agreement provided that the Purchaser
agreed to purchase the Property “as is” and in its present condition subject to reasonable use,
wear, tear, and natural deterioration....” Purchase and Sale Agreement at ¶21. 	In connection
with the purchase and sale of the New York Avenue Property, Liani executed an affidavit in
which he acknowledged
THAT THE PROPERTY WILL BE SOLD “WHERE IS” IN
AN “AS IS” CONDITION WITH NO WARRANTY, EXPRESS
OR IMPLIED, ABOUT SUCH CONDITION (SELLER AND
BROKER EXPRESSLY DISCLAIMING ANY WARRANTIES
OF HABITABILITY, FITNESS FOR INTENDED USE OR
OTHER IMPLIED WARRANTIES) AND WITH THE
UNDERSIGNED ACCEPTING ALL DEFECTS, BOTH
APPARENT AND LATENT, AT THE UNDERSIGNED’S
1 The debtor’s real properties were located at (i) 1980 Campbell Road, Wall Township, New Jersey; (ii) 490
New York Avenue, Brooklyn, New York; (iii) 2325 Foster Avenue, Brooklyn, New York; and (iv) 135 Old
Northwest Road, East Hampton, New York (the “Properties”).
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OWN, ABSOLUTE AND EXCLUSIVE RISK; (b) that
neither Seller nor Auctioneer will have any liability or
obligation whatsoever, for the physical condition of the
Property, or for any inaccuracy in or omission from any
of the written information and material about the Property...
See Exhibit E to Affidavit of Glen Hubbard dated October 18, 2007 (Upper Case in original).
As required under the Purchase and Sale Agreement, Liani gave Sheldon Good,
as escrow agent, a deposit of $325,000.00. 	According to the Purchase and Sale Agreement,
Liani was required to tender a subsequent deposit payment of $212,500.00. However, Liani
defaulted on his obligation. 	On October 27, 2005, this Court noted Liani’s default and
instructed debtor’s counsel to provide notice of the default. By letter dated October 28, 2005,
debtor’s counsel provided notice to Liani that he was in default. 	In a letter dated October 31,
2005, Liani advised the debtor that he would not tender the additional down payment based upon
the debtor’s misrepresentations in connection with the sale. Liani also demanded the return of
his down payment in the amount of $325,000.00.
On November 29, 2005, the Court issued an Order approving the sale of the New
York Avenue Property (the “New York Avenue Sale Order”). In that Order, the Court retained
jurisdiction to implement and enforce the terms and provisions of the New York Avenue Sale
Order, the Auctioneer Order and the Purchase and Sale Agreement for the New York Avenue
Property. 2
On December 22, 2005, Liani commenced this adversary proceeding against the
2 The thirteenth decretal paragraph of the New York Avenue Sale Order provided in pertinent part:
“ORDERED, that the Court shall retain jurisdiction to implement and enforce the terms and provisions of
the Auctioneer Order, the New York Avenue Sale Agreement and the New York Avenue Sale Order, including any
disputes relating thereto or with respect to the Auction of the Properties.” Order dated November 29, 2005 at 5.
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defendants. In his complaint, Liani sought a judgment (1) declaring that plaintiff was not the
successful bidder of the New York Avenue Property (2) declaring the Purchase and Sale
Agreement for the New York Avenue Property invalid based on the alleged misrepresentations
of the defendants; and (3) directing the defendants to return the $325,000.00 down payment
made in connection with the Purchase and Sale Agreement for the New York Avenue Property.
On March 13, 2006, Sheldon Good filed a counter-claim against the plaintiff and a cross-claim
against the debtor. On December 15, 2006, the Court issued an Order assigning the adversary
proceeding to mediation but the parties were unable to reach a consensual resolution.
On October 12, 2007, Liani filed a Motion for Summary Judgment against the
debtor and Sheldon Good. On October 19, 2007, the debtor filed a Cross-Motion for Summary
Judgment against Liani and Sheldon Good filed a Motion for Summary Judgment against the
Plaintiff and the debtor. In his motion, the debtor sought an order dismissing Liani’s complaint
and an order denying codefendant Sheldon Good’s cross claim for indemnification and attorneys
fees from the debtor. In its motion, Sheldon Good sought an order dismissing Liani’s complaint
against Sheldon Good and an order awarding Sheldon Good attorneys fees and expenses and
one-half of the earnest money deposit ($162,500.00). On October 30, 2007, this Court held
hearings on these motions and took the matter under advisement.
DISCUSSION
It is well settled that summary judgment will be awarded when there is no
genuine issue of material fact, and the prevailing party is entitled to judgment as a matter of law.
Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). Pursuant to
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Fed.R.Civ.P. 56(c), made applicable to these proceedings by Fed.R.Bank.P. 7056, a moving
party is entitled to summary judgment as a matter of law if “the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that the moving party is entitled to judgment as a
matter of law.” Id. 	A “material” fact is one “that might affect the outcome of the suit under
governing law,” and a “genuine” issue is one for which “the evidence is such that a reasonable
jury could return a verdict for the non-moving party.” Anderson, 477 U.S. at 248.
In the Second Circuit, the summary judgment standard is clear. See Marvel
Characters Inc. v. Simon, 310 F.3d 280, 285 (2d Cir. 2002). The Second Circuit has stated that
to determine whether a genuine issue of material facts exists “a Court must examine the evidence
in the light most favorable to, and draw all inferences in favor of, the non-movant . . . Summary
judgment is improper if there is any evidence in the record that could reasonably support a jury's
verdict for the non-moving party.” Id. at 286. In evaluating these motions, “the inferences to be
drawn from the underlying facts . . . must be viewed in the light most favorable to the party
opposing the motion.” Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574,
587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538, 533 (1986). The existence of a factual dispute
alone is insufficient to defeat a motion for summary judgment; the non-moving party must offer
probative evidence tending to support its position. Anderson, 477 U.S. at 256. Summary
judgment may be entered against any party “who fails to make a showing sufficient to establish
the existence of an element essential to that party’s case, and on which that party will bear the
burden of proof at trial.” Celotex Corp., 477 U.S. at 321.
The Court has conducted a hearing and reviewed the documentary evidence
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submitted by the parties. In the present case, there are no genuine issues of material fact and
summary judgment is appropriate.
FINDINGS OF FACT
The Court finds that no genuine dispute exists as to the following material facts.
1. Plaintiff, Simon Liani, is an individual who resides at 502 New York Avenue,
PH 6A, Brooklyn, New York 11225. Pl.’s Compl. at ¶ 7.
2. Aston Baker, the debtor, is an individual who resided at the time of the
commencement of the adversary proceeding at 1403 Ditmas Avenue, Brooklyn, New York
11226. Pl.’s Compl. at ¶ 8.
3. Sheldon Good is a fully owned subsidiary of a larger real estate auction
company with a place of business at 18 East 41st Street, 16th Floor, New York, NY 10019.
Mem. of Law in Supp. Sheldon Good’s Mot. for Summ. J. at p. 2.
4. On June 20, 2005, the Court entered an order (the “Auctioneer Order”)
granting the debtor’s application to employ Sheldon Good as its exclusive auctioneer in
accordance with terms of the Auctioneer Agreement. 3 Although the Court approved the
Auctioneer Agreement, the parties did not execute it. See Aff. of Jeffrey Hubbard, Sheldon
Good’s Executive Managing Director at ¶ 3 n. 1. (“Hubbard Aff.”)
3 The Auctioneer Agreement provides, inter alia, that
IF EARNEST MONEY OR SIMILAR DEPOSITS MADE BY A PROSPECTIVE
PURCHASER OR TENANT ARE FORFEITED, IN ADDITION TO ANY
OTHER RIGHTS OF AUCTIONEER PURSUANT TO THIS AGREEMENT,
AUCTIONEER AND SELLER SHALL DIVIDE THE MONIES EQUALLY
PROVIDED, HOWEVER AUCTIONEER’S PORTION SHALL NOT EXCEED
THE TOTAL ANTICIPATED COMMISSION.
Aston Baker’s Cross-Mot. for Summ. J., Exhibit A, Auctioneer Agreement at p. 5. (Upper Case in Original).
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5. The Auctioneer Order specifically addressed the commission and
reimbursement of marketing expenses to be paid to Sheldon Good upon the sale of property.
The Order made no mention of any compensation to Sheldon Good in the event of a forfeiture.
The Order also provided that:
[T]his Court hereby retains and reserves jurisdiction to determine,
upon appropriate application therefore by Sheldon Good… any
allowances and/or payments of compensation or reimbursement of
distributions to Sheldon Good, relative to the rendition of the
auctioneer services and the services described in the Application and
the Auction Agreement, notwithstanding the terms and conditions of
compensation 	set 	forth 	in 	the 	Application 	and 	the 	Auction
Agreement…
6. In connection with the sale of the New York Avenue Property, Sheldon Good
prepared a Bidder’s Information Packet (“Bidder’s Packet”). Hubbard Aff., Exhibit B. The
Bidder’s Packet was available to any interested party for $30.00. Id. at ¶ 7. The Bidder’s Packet
contained property information and information concerning the conduct of the auction. The
Bidder’s Packet contained the following language:
The information included herein is believed to be correct, but it is not
guaranteed. 	No investigation or review has been made as to its
accuracy; some information furnished is from outside sources
deemed to be reliable, but it is not certified as accurate by the Seller,
Broker or Auctioneer, or any of their affiliates. 	All information
contained herein is subject to corrections, errors and omissions. All
offers must be based on the offeror’s own investigation of any
property offered herein and not on any representation made by the
Seller, Broker Auctioneer or other party. Neither Seller nor Broker
nor Auctioneer make any representation or warranty, express or
implied, with respect to the property identified herein, and the
property sold in an “AS-IS, WHERE-IS, WITH ALL FAULTS”
condition except as specifically
stated in the Purchase and Sale Agreement.
All prospective buyers are specifically advised to refrain from
reliance on the information provided herein as a basis for making a
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bid on the property. Prospective purchasers are further encouraged
to conduct a personal inspection of the property which they
contemplate purchasing...
Id. at Exhibit B, Tab 1. The Bidder’s Packet provided for nine dates on which the property was
available for inspection from 10 a.m. to 1 p.m. Id. at Exhibit B, Tab 2. Under the dates listed, it
stated that the property was being sold on an “ ‘as is, where is’ ” basis. Id. Prospective buyers
were invited to bring experts to inspect the property. See id.
7. In the section entitled “Property Information,” the Bidder’s Packet provided
that there was “underground parking for 17 cars and outdoor parking for an additional 15
vehicles.” Hubbard Aff. at Exhibit B, Tab 2. This information is incorrect. Id. at ¶ 10. The
Bidder’s Packet also includes a section entitled “Certificate of Occupancy.” The Certificate of
Occupancy section provided that the property had a “fifteen (15) car garage and off-street
parking space [for] eight (8) cars.” Id. at Exhibit B, Tab 7. This information is correct. Id. at ¶
10.
8. The Bidder’s Packet also included a Specimen Purchase and Sale Agreement.
Among other things, the Specimen Purchase and Sale Agreement provided:
[21]. CONDITION OF PROPERTY: Purchaser has inspected the
buildings on the Property and the personal property included in this
sale and is thoroughly acquainted with their physical condition and
state of repair. Purchaser agrees to purchase them “as is” and in their
present condition subject to reasonable use, wear, tear, and natural
deterioration between now and Closing. Purchaser shall have the
right, after reasonable notice to Seller, to inspect on one occasion
before Closing...
[25.] 	NO 	REPRESENTATION: 	PURCHASER’S 	DUTY 	TO
REVIEW: A. The Property and any Persona Property sold pursuant
to this Agreement are sold in an “As-Is” condition. Purchaser
acknowledges that Purchaser has not relied upon any architect’s
plans, sales plans, selling brochures, advertisements, representations,
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warranties, statements or estimates or any nature whatsoever, whether
written or oral, made by the Seller, the Seller’s Broker or others,
including, but not limited to, any relating to the description or
physical condition or state of repair to the Property, the building, or
the size of the dimensions of the building or property or the rooms
therein contained or any other physical characteristics thereof, or any
other data, except as may be specifically represented herein.
Purchaser 	has 	relied 	on 	Purchaser’s 	own 	examination 	and
investigation thereof...
B. Any factual information such as Property dimensions, floor plans,
square footage or sketches shown to Purchaser or set forth herein are
or may be approximate and Purchaser represents to Seller that
Purchaser has inspected and verified the facts and information prior
to the execution of this Agreement. No liability for inaccuracies,
errors or omissions is assumed by the Seller or its agents...
[36]. NO ORAL CHANGES: The Agreement cannot be changed or
any provision waived orally. ANY CHANGES OR ADDITIONAL
PROVISIONS OR WAIVERS MUST BE SET FORTH IN A RIDER
ATTACHED 	HERETO 	OR 	IN 	A 	SEPARATE 	WRITTEN
AGREEMENT SIGNED BY THE PARTIES...
[42]. DISCLOSURE INFORMATION - LEAD-BASED PAINT
AND/OR LEAD-BASED PAINT HAZARDS: Annexed to this
Agreement as “Exhibit D” is a Disclosure of Information and
Acknowledgment of Lead-Based Paint and/or Lead-Based Paint
Hazards. In addition, the Seller has provided herein any available
records or reports pertaining to the presence of lead-based paint
hazards. 	The Seller advises all prospective buyers that they are
expected to waive the opportunity to conduct a risk assessment or
inspection for the presence of lead-based pain and/or lead-based paint
hazards or their bids or offers to purchase will not be considered.
Incorporated herein is the pamphlet entitled Protect Your Family
From Lead In Your Home...
Hubbard Affidavit, Exhibit B, Tab 6.
9. The Bidder’s Packet also included a Specimen Bidder’s Affidavit, which was
required to be signed by any bidder at an auction. The Specimen Bidder’s Affidavit provided:
[1]. The undersigned 	has received and carefully reviewed and
understood, prior to the execution hereof, copies of each of the
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following items: (a) Terms and Conditions of Sale for Purchasing the
Property at Auction; (b) Brochure describing the Auction; and (c)
Bidder’s Information Packet (‘Bid Package’) for the Property, which
includes among other items, a copy of the real estate contract and its
exhibits (“Agreement”) for the Property...
[3]. The undersigned has independently inspected and reviewed the
following conditions of the Property, including but not limited to, (a)
title of Seller; (b) the condition and state of repair and/or lack of
repair of all improvements thereon and has had the opportunity to
obtain testing and reports; (c) the existence and condition of any
and/or all personal property at the Property; and (d) the nature,
provisions and effect of all health, fire, environmental, building,
zoning, subdivision and all other use and occupancy laws, ordinances
and regulations applicable thereto.
[4.] 	The undersigned understands and agrees: (a) THAT THE
PROPERTY WILL BE SOLD “WHERE IS” IN AN “AS IS”
CONDITION WITH NO WARRANTY, EXPRESS OR IMPLIED,
ABOUT 	SUCH 	CONDITION 	(SELLER 	AND 	BROKER
EXPRESSLY 	DISCLAIMING 	ANY 	WARRANTIES 	OF
HABITABILITY, FITNESS FOR INTENDED USE OR OTHER
IMPLIED WARRANTIES) AND WITH THE UNDERSIGNED
ACCEPTING ALL DEFECTS, BOTH APPARENT AND LATENT,
AT 	THE 	UNDERSIGNED’S 	OWN, 	ABSOLUTE 	AND
EXCLUSIVE RISK; (b) that neither Seller nor Auctioneer will have
any liability or obligation whatsoever, for the physical condition of
the Property, or for any inaccuracy in or omission from any of the
written information and material about the Property...
Hubbard Aff., Exhibit B, Tab 8 (Upper Case in original).
10. On July 20, 2005, the Plaintiff ordered the Bidder’s Packet. Hubbard Aff.,
Exhibit C, The Bidder’s Information Packet Order Form.
11. The Plaintiff received the Bidder’s Packet approximately two weeks later.
Sheldon Good’s Mot. For Summ. J., Exhibit F. Dep. Of Simon Liani at 48:20-25 (“Pl.’s Dep.”).
Plaintiff stated that he did not review the information in the Bidder’s Packet. Id. at 92:22-24.
12. Prior to the auction, plaintiff was familiar with the New York Avenue
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Property. Plaintiff lives next door to the New York Avenue Property and has rented a parking
spot located on the New York Avenue Property. See Pl.’s Dep. at 6:15-16 and 162:13-163:12.
13. The Plaintiff failed to attend any of the open houses at the New York Avenue
Property prior to the auction. See Pl.’s Dep. at 68:3-7.
14. The Plaintiff failed to conduct an inspection of the property prior to the
auction. See id. at 72:18-74-10.
15. The Plaintiff did not request that Sheldon Good conduct a lead-based paint
inspection prior to the auction. See id. at 143:25-144:15.
16. On September 27, 2005, the New York Avenue Property was sold at public
auction. Aston Baker’s Cross-Motion for Summ. J. at ¶ 11.
17. Plaintiff attended the auction and signed an Open House Inspection
Registration Form, in which he acknowledged that he “has attended a scheduled Open House for
and has had the opportunity to inspect the Property.” Hubbard Aff., Exhibit D, Open House
Inspection Registration Form. Plaintiff also executed a “Bidder’s Affidavit” prior to the auction.
Hubbard Aff., Exhibit E, Bidder’s Signed Affidavit. The Bidder’s Affidavit signed by the
plaintiff contains identical language to the Specimen Bidder’s Affidavit.
18. At the conclusion of the auction, plaintiff was the highest bidder for the New
York Avenue Property with a bid of $5,000,000. Aston Baker’s Cross-Motion for Summ. J. at ¶
11. Plaintiff executed a Purchase and Sale Agreement with exhibits for a total purchaser price of
$5,375,000. Id. at ¶ 15. In connection with the Purchase and Sale Agreement plaintiff tendered
a check in the amount of $325,000 as a non-refundable initial deposit required under the
Purchase and Sale Agreement (“Initial Deposit”). Hubbard Aff., Exhibit H, Cashier’s Check.
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19. The Purchase and Sale Agreement signed by the plaintiff on September 27,
2005 contains identical language to the Specimen Purchase and Sale Agreement previously
provided to the plaintiff.
20. Plaintiff signed the Purchase and Sale Agreement and initialed each exhibit.
Hubbard Aff., Exhibit G. Plaintiff initialed Exhibit D, “Disclosure of Information and
Acknowledgment Lead-Based Paint and/or Lead-Based Paint Hazards,” but did not place his
initials alongside the specific waiver language in the Exhibit. Id. Plaintiff also initialed the
pamphlet, “Protect Your Family From Lead In Your Home.” Id. Plaintiff did not request to
make an inspection of the New York Avenue Property for lead-based paint at the time of
execution of the Purchase and Sale Agreement. See id. at ¶ 22. See also Pl.’s Dep. at 144:17-25.
21. Under the Purchase and Sale Agreement, the Plaintiff was required to make
an additional deposit in the amount of $212,500 (the “Additional Deposit”) on or before 12:00
noon on the second business day following the date of the auction. Hubbard Aff., Exhibit G. at ¶
3-4. Plaintiff failed to deliver this deposit.
22. The Purchase and Sale Agreement signed by the plaintiff contains an “Events
of Default” clause which provided:
A. Relative to Events of Default, the Purchaser shall be in default
under this agreement if any of the following occur: (I) Purchaser fails
to pay the balance of the Purchase Price on or before the Closing
Date set forth in this Agreement; (ii) The failure to pay, perform or
observe any of Purchaser’s obligations hereunder, including but not
limited to, the Purchaser’s failure to pay the Initial Deposit and
Additional Deposit, if any, when due; time being of the essence with
respect to the payment of any deposit when due hereunder...
B. If any payment or any other covenant of Agreement hereof is not
made, tendered or performed by either Seller or Purchaser, as herein
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provided, then this Agreement, at the option of the party who is not
in default, may be terminated by such party... In the event of such
default by Purchaser, if Seller elects to treat this Agreement as
terminated, then all payments made hereunder shall be forfeited to
and retained by Seller as Seller’s sole remedy as and for liquidated
damages...
If the non-defaulting party elects to cancel, the defaulting party shall
have seven (7) days from the giving of the cancellation notice within
which defaulting party must cure the specified default. If the default
is not cured within the aforementioned seven (7) days, the Agreement
is automatically canceled. The Seller shall have the right to retain, as
and for liquidated damages, the Total Deposit... it being agreed that
the Seller’s damages in case of Purchaser’s default might be
impossible to ascertain and that the Total Deposit constitutes a fair
and reasonable amount of damages under the circumstances and is
not a penalty.
Hubbard Aff., Exhibit G, Purchase and Sale Agreement at ¶ 24
23. By letter dated October 24, 2005, counsel for the plaintiff requested from
counsel for the debtor the return of the Initial Deposit or a date and time for a lead paint
inspection of the New York Avenue Property. Pl.’s Mot. for Summ. J., Exhibit E.
24. At a hearing held on October 27, 2005, plaintiff filed an Objection to the
Order Approving the Auction and Sale of the debtor’s Properties to the Successful Bidders, and
noted his objections to the sale of the New York Avenue Property on the record.
25. Counsel for the debtor advised the plaintiff in a letter dated October 28, 2005,
that he was in default under the Purchase and Sale Agreement for failing to deliver the
Additional Deposit. Pl.’s Mot. for Summ. J., Exhibit F. The letter gave the plaintiff until
October 31, 2005 to cure the default. See id.
26. By letter dated October 31, 2005, plaintiff advised that he would not be
tendering the Additional Deposit and requested the return of the Initial Deposit in the amount of
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$325,000.
27. On October 31, 2005, the Court entered the Order Approving the Auction and
Sale of the debtor’s Properties to the Successful Bidders, except for the sale to the Successful
Bidder of the New York Avenue Property.
28. On November 29, 2005, the Court issued an order noting Liani’s default and
approving the subsequent sale of the New York Avenue Property by Sheldon Good. The New
York Avenue Property was sold for $4,250,000.
29. Plaintiff brought this adversary proceeding on December 12, 2005 against
Aston Baker and Sheldon Good as Escrow Agent. Plaintiff sought (1) judgment declaring that
Simon Liani was not a “Successful Bidder” and directing Sheldon Good to return the Initial
Deposit to the Plaintiff; (2) judgement declaring that the Purchase and Sale Agreement is invalid
based on alleged misrepresentations of the Defendants and directing Sheldon Good to return the
Initial Deposit to the Plaintiff; and (3) judgment directing the Defendants to return the Initial
Deposit to the Plaintiff. See Pl.’s Compl. at p. 10.
30. On February 14, 2006, the debtor filed an Answer to Plaintiff’s Complaint.
On March 13, 2006, Sheldon Good filed an Answer to Plaintiff’s Complaint and made a
Counterclaim against Plaintiff and a Cross-Complaint against the Defendant Aston Baker for
one-half of the Initial Deposit money held by Sheldon Good. See Sheldon Good’s Answer and
Counterclaim at p. 10. On April 26, 2006, the debtor filed a Reply to Sheldon Good’s
Counterclaim and Cross-Claim.
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ARGUMENT
Liani Has Failed to Meet His Burden of Proof and Has Failed to
Establish His Entitlement to Summary Judgment
Liani seeks an order directing entry of summary judgment (1) declaring that
plaintiff was not the successful bidder of the New York Avenue Property; (2) declaring the
Purchase and Sale Agreement for the New York Avenue Property invalid based on the alleged
misrepresentations of the defendants; and (3) directing the defendants to return the $325,000.00
down payment made in connection with the Purchase and Sale Agreement for the New York
Avenue Property. As shown below, the application lacks a factual basis. Liani was the
successful bidder at the auction sale of the New York Property. The Sale of the New York
Property was on an “as is, where is” basis and thus Liani’s complaint about alleged
misrepresentations of the defendants is unavailing. Since Liani has defaulted on the Purchase
and Sale Agreement, he is not entitled to the return of his down payment of $325,000.000
A. 	Liani Was the Successful Bidder at the Auction Sale of the
New York Property.
Liani first claims that summary judgment is appropriate because he did not waive
the opportunity to conduct a risk assessment for the premises or inspection for the presence of
lead-based paint and/or lead based paint hazard. For this reason, Liani claims that he did not
become a bidder and that under Paragraph 42 of the Purchase and Sale Agreement his offer to
purchase should not have been considered. Liani’s reliance upon this paragraph is misplaced. In
advancing this argument, Liani ignores that the Purchase and Sale Agreement provided that the
Purchaser agreed to purchase the Property “as is” and in its present condition subject to
reasonable use, wear, tear, and natural deterioration....” Purchase and Sale Agreement at ¶21.
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Liani’s conduct belied his claim. Liani executed an affidavit which acknowledged
that the Property was to be sold “‘WHERE IS’ IN AN ‘AS IS’ CONDITION WITH NO
WARRANTY, EXPRESS OR IMPLIED, ABOUT SUCH CONDITION ....” 	Hubbard Aff.,
Exhibit B, Tab 8 (Upper Case in original). Liani purchased and received a Bidders Packet which
provided that the Purchaser agreed to purchase the Property and the personal property included
in the sale “‘as is’ and in their present condition....” Bidder’s Packet at ¶21. Liani executed the
Purchase and Sale Agreement. Liani attended the auction in person, and gave Sheldon Good the
deposit of $325,000.000. From September 22 through September 27, Liani failed to take any
steps to withdraw from the auction or to obtain the return of his initial deposit of $325,000.00.
B. 	The New York Property was sold on an “as is, where is” basis.
Liani’s claim that the representations of the defendants have rendered
the Purchase and Sale Agreement invalid lacks a legal and factual basis.
Liani next claimed that due to the debtor’s misrepresentations in connection with
the sale of the Property regarding the presence of lead-based paint and/or lead based paint
hazard, he did not tender the additional down payment. Liani further contended that these
misrepresentations rendered the Purchase and Sale Agreement invalid and that he was therefore
entitled to the return of his down payment of $325,000.00.
These claims are without merit. The Purchase and Sale Agreement expressly
provided that the Purchaser had not relied upon any representation by the Seller:
[25.] NO REPRESENTATION: PURCHASER’S DUTY TO REVIEW:
A. The Property and any Persona Property sold pursuant to this Agreement
are sold in an “As-Is” condition. Purchaser acknowledges that Purchaser
has not relied upon any architect’s plans, sales plans, selling brochures,
advertisements, representations, warranties, statements or estimates or
any nature whatsoever, whether written or oral, made by the Seller,
the Seller’s Broker or others, including, but not limited to, any
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relating to the description or physical condition or state of repair
to the Property, the building, or the size of the dimensions of the
building or property or the rooms therein contained or any other
physical characteristics thereof, or any other data, except as
may be specifically represented herein. Purchaser has relied
on Purchaser’s own examination and investigation thereof...
Purchase and Sale Agreement at ¶ 25. In addition, Liani purchased and received the Bidders
Packet, which contained similar language:
The information included herein is believed to be correct, but it is
not guaranteed. No investigation or review has been made as to its
accuracy; some information furnished is from outside sources
deemed to be reliable, but it is not certified as accurate by the Seller,
Broker or Auctioneer, or any of their affiliates. All information
contained herein is subject to corrections, errors and omissions.
All offers must be based on the offeror’s own investigation of any
property offered herein and not on any representation made by the
Seller, Broker Auctioneer or other party. Neither Seller nor Broker
nor Auctioneer make any representation or warranty, express or
implied, with respect to the property identified herein, and the
property sold in an “AS-IS, WHERE-IS, WITH ALL FAULTS”
condition except as specifically stated in the Purchase and Sale
Agreement.
All prospective buyers are specifically advised to refrain from
reliance on the information provided herein as a basis for making
a bid on the property. Prospective purchasers are further encouraged
to conduct a personal inspection of the property which they
contemplate purchasing...
Hubbard Aff., Exhibit B , Tab 1.
Liani also signed the Bidder’s Affidavit, which set forth the nature of the sale and
absolved the Seller and Auctioneer from any liability:
[4.] The undersigned understands and agrees: (a) THAT THE
PROPERTY WILL BE SOLD “WHERE IS” IN AN “AS IS”
CONDITION WITH NO WARRANTY, EXPRESS OR IMPLIED,
ABOUT SUCH CONDITION (SELLER AND BROKER EXPRESSLY
DISCLAIMING ANY WARRANTIES OF HABITABILITY, FITNESS FOR
INTENDED USE OR OTHER IMPLIED WARRANTIES) AND WITH THE
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UNDERSIGNED ACCEPTING ALL DEFECTS, BOTH APPARENT AND
LATENT, AT THE UNDERSIGNED’S OWN, ABSOLUTE AND EXCLUSIVE
RISK; (b) that neither Seller nor Auctioneer will have any liability or obligation
whatsoever, for the physical condition of the Property, or for any inaccuracy in or
omission from any of the written information and material about the Property...
Hubbard Aff., Exhibit B, Tab 8 (Upper Case in original).
C. 	Since Liani Has Defaulted under the Purchase and Sale Agreement,
He Is Not Entitled to the Return of His down Payment.
Finally, Liani seeks an Order directing the defendants to return the down payment
of $325,000.00 made pursuant to the Purchase and Sale Agreement for the New York Avenue
Property. The basis for this claim is the alleged invalidation of the Purchase and Sale
Agreement. As noted above, Liani has failed to set forth any factual or legal basis for that result.
Since Liani is in default under a valid Purchase and Sale Agreement, he is not entitled to the
return of his down payment.
D. Sheldon Good Is Not Entitled to Payment of One Half
of Liani’s down Payment.
In its Answer to the Complaint, Sheldon Good filed a Cross-Complaint against
the debtor in which it sought one-half of the initial deposit money upon the court’s determination
that Liani had forfeited his deposit, and for expenses and attorneys fees as provided in the
Auctioneer Agreement. These claims are without merit and easily resolved. With regard to its
claim against the debtor for one half of the initial deposit money, Sheldon Good relied upon the
following language in the Auctioneer Agreement:
IF EARNEST MONEY OR SIMILAR DEPOSITS MADE
BY A PROSPECTIVE PURCHASER OR TENANT ARE
FORFEITED, IN ADDITION TO ANY OTHER RIGHTS
OF AUCTIONEER PURSUANT TO THIS AGREEMENT,
AUCTIONEER AND SELLER SHALL DIVIDE THE
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MONIES EQUALLY PROVIDED, HOWEVER AUCTIONEER’S
PORTION SHALL NOT EXCEED THE TOTAL ANTICIPATED
COMMISSION.
Aston Baker’s Cross-Mot. for Summ. J., Exhibit A, Auctioneer Agreement at p. 5. (Upper Case
in Original). The Court declines to enforce those terms of the Auctioneer Agreement for several
reasons. The Court finds that neither the debtor nor any authorized representative of Sheldon
Good signed the Auctioneer Agreement. None of the terms by which Sheldon Good alleged that
the debtor agreed to pay one-half of the forfeited deposit to Sheldon Good were specifically
disclosed to, or approved by, the Court. The Auctioneer Order approving the employment of
Sheldon Good provided that this Court retained jurisdiction to determine any allowances and/or
payments of compensation or reimbursement of expenses to Sheldon Good, upon appropriate
application by Sheldon Good in accordance with Sections 327 through 331 of the Bankruptcy
Code. 	Under Section 330(a)(1) of the Bankruptcy Code, only “reasonable compensation for
actual, necessary services” rendered by Sheldon Good or “reimbursement for actual, necessary
expenses” may be sought from the estate. The sum of one-half of Liani’s forfeited initial deposit
(approximately $162,500.00) does not represent either “reasonable compensation for actual,
necessary services” rendered by Sheldon Good or “reimbursement for actual, necessary
expenses[.]” 	Indeed, it would appear, as to Sheldon Good, to consist of nothing short of an
unsupported windfall.4 The forfeited Liani Initial Deposit belongs to the debtor’s estate, and
should be returned there.
Sheldon Good also seeks indemnification from the debtor for legal fees of the law
firm of Arent Fox in representing Sheldon Good in this adversary proceeding pursuant to the
4 It appears that Sheldon Good has collected almost $800,000.00 in commissions pursuant to the
Auctioneer Agreement.
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Auctioneer Agreement. The Court denies this application for several reasons. The Bankruptcy
Code requires court approval of the employment of the law firm of Arent Fox as counsel for
Sheldon Good at the estate’s expense. Sheldon Good has not sought such an Order. Such
approval would have been unlikely, given the law firm’s prior representation of one of the
debtor’s largest creditors, Gallster Capital. In addition, as counsel for the debtor noted,
indemnity provisions are looked upon with disfavor in bankruptcy proceedings.
CONCLUSION
As set forth more fully above, the Court finds that the parties have established
that no genuine issue of material fact exists and that an award of summary judgment is
appropriate. The Court denies Liani’s application for summary judgment. The Court grants the
application of the debtor for summary judgment and denies the Cross-Motion of Sheldon Good.
IT IS SO ORDERED.
Dated: Brooklyn, New York
May 4, 2009
S/Dennis E. Milton
DENNIS E. MILTON
United States Bankruptcy Judge
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