5303 Realty Corp. v. O & Y Equity Corp. , 98 A.D.2d 632 ( 1983 )

Order entered April 27, 1983 in Supreme Court, New York County (Louis Grossman, J.), denying defendants’ motion to vacate a lis pendens, affirmed, with costs. This is an action for specific performance of what is essentially a contract for the transfer of real property, and as such we agree with Special Term “that a lis pendens is proper in this situation”. In June of 1982 the original negotiations between plaintiff and the first named defendant, O & Y, were had with respect to the subject real estate. A contract was drawn up by O & Y for this sale, but closing was postponed to September. In August of that year O & Y proposed a variant scheme whereby, in essence, plaintiff would purchase the entire stock of 41 Fifth Avenue Realty Corp., 97% owner of 41 Fifth Avenue Associates, and the 3% interest in 41 Fifth Avenue Associates held by several other named defendants. With title to the real estate already having been transferred to Associates, plaintiff’s acceptance of this contract had the same net effect of a purchase of the property, but allowed defendant O & Y to avoid over half a million dollars in New York City real property transfer tax, as well as other similar taxes. Assuming the legality of such a tax avoidance scheme does not change the essential nature of what was clearly a contract to convey real property. The written agreement, among other things, specifically describes the property, provides for payment by plaintiff in part by purchase money note and mortgage and provides that plaintiff shall “take the shares with the Property ‘as is’.” While we express no opinion as to plaintiff’s entitlement to specific performance, we do find that plaintiff’s complaint seeking it alleges the requisite fraud on the part of defendants entitling plaintiff to a lis pendens until a trial can be had on the merits. (Mageloff v Sarkin, 52 Mise 2d 737, 739; compare Lusher v Tannen, 90 AD2d 118.) Defendant’s reliance on our recent decision in Chambi v Navarro, Vives & Cia (95 AD2d 667) is misplaced. Although plaintiff there alleged fraud in the conduct of a foreclosure sale, her cause of action was mainly concerned with the alleged usurious interest rates in the loan contract at issue, and her subsequent loss, via the sale, of the corporate stock she had secured the loan with. The corporation which owned the real estate was never made a party to the action, and the case is thus readily distinguishable from the matter at hand. As the Court of Appeals long ago observed, “The usual object of filing a notice of lis pendens is to protect some right, title or interest claimed by a plaintiff in the lands of a defendant which might be lost under the recording acts in event of a transfer of the subject property by the defendant to a purchaser for value and without notice of the claim * * * The theory of preventing sales of lots in the tract by defendants by a lis pendens is not that defendants are likely to become insolvent but rather that there is an issue affecting the title or right to enjoyment of the defendants’ real property.” (Braunston v Anchorage Woods, 10 NY2d 302, 305; CPLR 6501.) Concur — Murphy, P. J., Ross and Carro, JJ.