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Keywords

contractplaintiffdefendanthearingsummary judgmentforeclosure
contractplaintiffdefendantappealhearingmotionsummary judgment

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Simar Holding Corp. v. GSC, 87 A.D.3d 688, 928 N.Y.S.2d 592, 2011 N.Y. Slip Op. 06346

Facts

In August 2003, GSC owned a property in Brooklyn Heights, which was under threat of foreclosure due to unpaid taxes. On September 15, 2003, Jane Doe, representing GSC, entered into a contract to sell the property to Brooklyn Heights Management, Inc. The contract included a purchase price of $401,500, contingent upon Jane Doe vacating the premises. Shortly after, Jane Doe allegedly entered into a second contract for the same property with Simar Holding Corp. This led to a dispute, with GSC seeking to rescind the first contract on the grounds of unconscionability.

In August 2003, the defendant third-party plaintiff GSC owned certain real property in the Brooklyn Heights section of Brooklyn, upon which a five-story brownstone building was situated.

Issue

Did the Supreme Court err in granting summary judgment to the vendor on the grounds of unconscionability without a hearing?

The third-party defendants appeal from so much an order dated May 10, 2010, as granted, in effect, that branch of the cross motion of the third-party plaintiffs which was for summary judgment on the first cause of action in the third-party complaint to rescind the contract on the ground of unconscionability.

Rule

A determination of unconscionability generally requires a showing that the contract was both procedurally and substantively unconscionable when made, and where there is doubt as to whether a contract is fraught with elements of unconscionability, there must be a hearing.

A determination of unconscionability generally requires a showing that the contract was both procedurally and substantively unconscionable when made.

Analysis

The court found that the third-party plaintiffs did not sufficiently demonstrate that the contract was unconscionable at the time of signing. Specifically, they failed to show that Jane Doe suffered from psychiatric disorders that would have created an imbalance in understanding between the parties. Additionally, the court noted that a hearing was necessary to assess the procedures used in soliciting the sale and whether Jane Doe had a meaningful choice in entering the contract. The lack of clarity regarding the purchase price and the appraised value of the property further necessitated a hearing.

However, 'procedural and substantive unconscionability operate on a ‘sliding scale’; the more questionable the meaningfulness of choice, the less imbalance in a contract's terms should be tolerated and vice versa.'

Conclusion

The Appellate Division reversed the Supreme Court's order granting summary judgment, concluding that there were unresolved issues regarding unconscionability that required a hearing.

Accordingly, the Supreme Court erred in granting, in effect, that branch of the third-party plaintiffs' cross motion which was for summary judgment on the first cause of action in the third-party complaint to rescind the contract on the ground of unconscionability since the third-party plaintiffs did not establish their entitlement to judgment as a matter of law.

Who won?

The third-party defendants prevailed in the case because the court determined that the issues of unconscionability could not be resolved without a hearing.

The Appellate Division reversed this decision, stating that there were unresolved issues regarding the existence of unconscionability that required a hearing.

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