The Real Deal New York

Judge rules against Extell & Carlyle in Rushmore appeal, orders release of $16M in deposits

By David Jones | January 23, 2012 01:30PM

After nearly three years of litigation in multiple venues, a state Supreme Court judge ruled last week that former Attorney General Andrew Cuomo was correct in his 2010 order for the return of $16 million in disputed escrow deposits at the Rushmore condominium.

Justice Anil Singh, in a 15-page decision, ordered co-developers Carlyle Realty Partners and Extell Development, to return the deposits to 40 buyers at the 80 Riverside Boulevard tower.In February 2009, the buyers asked AG Cuomo to order the refunds after the developers missed a September 2008 deadline to close the deal on the first sale at the 289-unit building, but the developers argued in court filings that the wrong date was published and the oversight was due to an obvious typo, or “scrivener’s error.” They claimed that the buyers only filed for the refunds after the real estate market collapsed demanding a full blown hearing to demonstrate that the buyers never really cared about the actual deadline.

Despite those arguments, Justice Anil Singh agreed with the former AG, who stated there was no scrivener’s error, because the contracts were drafted unilaterally, that the buyers’ intentions cannot be legally considered as evidence and that the developers never provided any evidence to back up the claim that the 2008 deadline was a mistake.

“The court has reviewed the attorney general’s determinations very carefully to determine whether they include any errors of law,” Singh wrote in the Jan. 19 order. “We find no such errors.”

“After over 2.5 years before the attorney general and three different courts, we are very pleased that Justice Singh has agreed with four other judges, and found that the purchasers are entitled to the return of their down payments,” Richard Cohen, attorney for 33 of the 41 condo buyers told The Real Deal in a statement. “We look forward to the escrow agent promptly returning the purchasers’ down payments.”

The developers initially filed an appeal in U.S. District Court, arguing that the entire proceedings at the AG’s office were a violation of due process under the U.S. Constitution. They claimed that there was no opportunity to have cross-examination, discovery and other wide ranging exchanges of evidence at the hearings. They were repeatedly rejected on appeal, and rushed into state court to file the Article 78 suit, which is used in NY State court to appeal local and state administrative hearings.

If successful on appeal, the developers wanted the AG to let them change the language in the offering plan to reflect what they said was their true intent, of a Sept. 1, 2008 closing date. They also wanted the chance to cross examine all of the buyers to find out whether they relied on that deadline to determine whether they wanted their deposits back.

After Cuomo was elected governor, the case was handed off to the then new AG, Eric Schneiderman.

Attorney Andrew Weltchek, who is not involved in the case, said the developers had a tough argument to make because the courts are reluctant to interfere in administrative hearings, such as escrow disputes.

A spokesperson for Schneiderman said the office was reviewing the case, and did not have any immediate statement.

Ed Normand, a partner at Boies, Schiller & Flexner, which represents the developers in this case, said he would have to check with his clients before commenting. Officials at Extell and Carlyle were not immediately available for comment.