Extell, Carlyle ordered to pay $5.8M interest in Rushmore escrow dispute

TRD New York /
May.May 23, 2013 11:30 AM

Extell Development and Carlyle Realty Partners must pay $5.8 million to 40 former buyers in their Rushmore condominium for the interest on funds that the purchasers had in escrow, a state court judge has ruled.

The Decision Wednesday By New York State Supreme Court Justice Anil Singh is another blow to Extell and Carlyle in a three-year dispute with the group over the escrow funds.

In December, another court denied an appeal by the companies and ordered them to return $16 million to the former buyers.

In his directive, however, Justice Singh refused the group’s request to hold Extell and Carlyle in contempt for failing to heed his earlier order to place the interest funds into escrow.

Ed Normand, a partner at Boies Schiller & Flexner, which represents the developers, declined to comment after the ruling. Extell was not immediately available for comment.

Lawyers for the former purchasers, despite losing the contempt motion, praised Justice Singh’s decision.

“We are pleased that Justice Singh has reaffirmed his award of 9 percent statutory interest to purchasers because sponsor deprived purchasers of the use of their money,” said John Coleman Jr., attorney for 33 of the former buyers.

The Rushmore case is one of the most contentious escrow disputes in the history of New York real estate. It dates to February 2009, when buyers began complaining to the office of then-Attorney General Andrew Cuomo that Extell and Carlyle failed to close their first apartment sale by September 2008; the deadline would have allowed the buyers to get out of their contracts for the multi-million apartments at The 80 Riverside Boulevard tower. The developers, however, countered that the closing date was a misprint that should have read September 2009.

At least one of the original 41 buyers in the group has settled with the developers.

In April 2010, Cuomo, who is now governor, ordered Extell and Carlyle to make the refunds; however, the developers filed multiple appeals — in federal and state courts — on the grounds that Cuomo had violated their constitutional rights by not allowing them to cross examine the former buyers under oath.

Federal and state courts ordered Extell and Carlyle to refund the deposits pending the resolution of the appeals, but the companies’ lawyers defied the directives, claiming their appeals allowed them to retain the money with escrow agent Stroock & Stroock & Lavan.

Singh, in September 2012, ordered the developers to put $5 million into an escrow fund on top of a previously ordered $1 million bond, citing their unwillingness to return the deposits.

In the court hearing Wednesday, lawyers for the developers told a visibly upset Justice Singh that they believed a prior stipulation agreement between them and the former buyers allowed them to hold onto the funds.

“With respect, we did not ignore your Honor’s orders, we thought we had a stipulation,” Normand said.

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