## Facts

- Lawrence Hall and Melville Hall contracted in writing to sell Mokar Properties Corporation two parcels of Manhattan real estate improved with apartment houses.
- The contract represented that the Halls were the record owners and required them to deliver title that a responsible title company would approve and insure.
- Mokar paid a $25,000 down payment on signing and agreed to pay $145,000 at closing, with the balance to remain subject to existing mortgages.
- The contract required Mokar to deliver written title objections at least seven days before the scheduled closing.
- Mokar’s title company raised objections tied to a prior conveyance from Melhar Realty Company, Inc. to the Halls, alleging the Halls owned two-thirds of Melhar’s stock and that the transfer was based on cancellation of corporate debt.
- The title company demanded documentation and assurances, including proof of proper stockholder approval (or an action to bar a claim by the remaining stockholder), proof of corporate solvency at the time of the transfer, and tax clearance relating to corporate dissolution.
- On the closing date, Mokar alleged it tendered the $145,000 required at closing.
- Mokar alleged the Halls failed to produce the documents needed to satisfy the title objections, failed to supply required instruments and assurances, and failed to tender a deed.
- The contract included a limitation-of-liability provision stating that if the seller was unable to convey title as required, the seller’s sole liability would be to refund amounts paid on account of the purchase price and pay the net cost of examining title (up to stated limits).
- After the failed closing, the Halls refunded Mokar about $25,863, consisting of the down payment and title examination fees.
- Mokar sued for additional damages (about $50,000), alleging the Halls’ default was willful and deliberate and that the title issues could have been cured with reasonable diligence.
- The Halls moved to dismiss for failure to state a cause of action and argued that, because Mokar accepted the refund, Mokar had released any further claim.
- The trial court denied the motion to dismiss, and the Halls appealed.

## Issues

1. Whether a seller may obtain dismissal at the pleading stage based on a contract clause limiting the buyer’s remedy to a refund and title costs when the buyer alleges the seller willfully and deliberately failed to cure curable title defects.
2. Whether the buyer’s acceptance of the refunded down payment and title costs constitutes a release or settlement barring further recovery as a matter of law on the pleadings.

## Decision

- The Appellate Division, First Department, affirmed the order denying the Halls’ motion to dismiss.
- The allegations of willful default and curable title defects were sufficient to state a claim not defeated on the pleadings by the contract’s refund-and-cost limitation.
- The asserted release based on the refund did not require dismissal as a matter of law at the pleading stage.

## Legal Principles

- A contractual clause limiting a real estate seller’s liability to refund of the down payment and title examination costs applies where the seller is genuinely unable, acting in good faith, to convey the required title.
- A seller cannot use a “sole liability” refund clause to avoid ordinary contract damages when the buyer plausibly alleges the seller’s willful, deliberate failure to take reasonable steps to clear title objections and complete the conveyance.
- On a motion to dismiss for failure to state a cause of action, the court accepts the complaint’s factual allegations as true and does not resolve disputes about good faith, ability to cure, or intent.
- Acceptance of a refund made under a limitation-of-liability clause does not, by itself and on the face of the pleadings, establish a binding release or settlement barring suit for additional damages.

## Conclusion

Mokar Properties Corporation v. Hall holds that a seller is not entitled to dismissal based solely on a refund-only remedy clause when the purchaser pleads that the seller willfully refused to cure remediable title problems and failed to convey as promised, and that the purchaser’s acceptance of the returned deposit and title costs does not automatically amount to a release that bars further claims at the pleading stage.


Mokar Properties Corporation v. Hall, 179 N.Y.S.2d 814 (1958)