Apthorp Assoc., LLC v 390 W. End Assoc., L.L.C.

[*1] Apthorp Assoc., LLC v 390 W. End Assoc., L.L.C. 2009 NY Slip Op 50407(U) [22 Misc 3d 1132(A)] Decided on March 6, 2009 Supreme Court, New York County Fried, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 6, 2009
Supreme Court, New York County

Apthorp Associates, LLC, Plaintiff,

against

390 West End Associates, L.L.C. and ANTHONY P. UZZO, Defendants.



601721/08



FOR PLAINTIFF

Steven Landy, Esq.

Steven Landy & Associates, PLLC

270 Madison Avenue, Suite 1400

New York, New York 10016

FOR DEFENDANTS

Paul D. Sarkoze, Esq.

Hogan & Hartson LLP

875 Third Avenue

New York, New York 10022

Bernard J. Fried, J.

BACKGROUND

Defendants move to dismiss the complaint, pursuant to CPLR 3211 (a) (1) and (a) (7).

Defendant 390 West End Associates, L.L.C. (West End) sold the property known as 2211 Broadway, New York, New York (Apthorp Property), to plaintiff for $425 million. Defendant Anthony P. Uzzo (Uzzo) is a trustee for a trust alleged to be one of the four managing members of West End.

On September 28, 2005, West End entered into a contract with Kay Waterproofing Corp. (Kay) to provide exterior repair work to the Apthorp Property, including repairs to the decorative stones, masonry, stucco coating, and parapet wall of the property. The contract made no mention of repairing any of the exterior wall's underlying steelwork.

One year later, on August 30, 2006, Kay's architect, Epstein Engineering, P.C. (Epstein), sent a letter to West End stating that, when the stonework was removed, the fact that the underlying steelwork was deteriorating was brought to Kay's attention for the first time. The exterior stone work had previously concealed the steelwork, but was exposed as Kay was performing the repairs. Epstein recommended repairs to the steelwork, but such repairs were not part of the contract West End had [*2]with Kay. Epstein sent a second letter, on March 8, 2007, recommending that professionals be retained to remedy the steelwork.

West End put the building up for sale, and during September and October, 2006, one of plaintiff's principles, Maurice Mann (Mann), inspected the property approximately 10 times. Mann is neither an architect nor an engineer. During these inspections, Mann was accompanied by the property manager, Barbara Ross (Ross). According to the complaint, during these visits Mann specifically asked about the condition of the exterior of the subject premises, such questions arising because of the visible scaffolding put up by Kay. Ross stated that West End would take care of it. Complaint ¶¶ 9-10. In a supplemental affidavit submitted in opposition to this motion, Mann corrected this statement to aver that he also asked about the steelwork.

On November 7, 2006, the parties, represented by counsel, entered into a contract for the sale of the property. This contract specified the work being performed by Kay, and guaranteed plaintiff, its architects, engineers and designers, access to the premises in order to perform due diligence. The sales contract also specified that the property was being sold as is, subject to all notes, notices of violations, and any condition or state of repair or disrepair. Additionally, The sales contract included a merger and disclaimer clause, stating that the buyer was not purchasing the property based on any representations of the seller not included in the contract or attachments thereto.

In his affidavit in opposition, Mann states that West End only provided part of the Epstein report dealing with the exterior facade in response to plaintiff's "specific inquiries regarding the facade and exterior of the building." Aff. ¶ 8. Plaintiff alleges that defendants' failure to provide the complete report, which details the deterioration of the internal steelwork, constitutes fraudulent concealment of a material fact. Conversely, defendants maintain that their response was specifically directed to the inquiry. They further state that they provided plaintiff with Epstein's name, address and telephone number, indicating that plaintiff, in the performance of due diligence, could have contacted Epstein directly, or asked defendants for more detailed materials. Defendants also assert that all of the reports were available for plaintiff's inspection during the period of due diligence.

On or about February 15, 2007, the New York City Department of Buildings filed a Local Law 11 report (Local Law 11 Report) that found the facade of the building unsafe due to the steelwork. This report is a matter of public record.

In February of 2007, prior to the filing of the Local Law 11 Report, Mann and Uzzo had a meeting at which Uzzo informed Mann that the exterior work being performed by Kay would not be completed by the closing date. Uzzo proposed a credit of $20,000.00 to have plaintiff assume the contract with Kay. Mann refused the offer, but agreed to extend the time for the exterior work to be completed. In his opposition affidavit, Mann states that Uzzo did not discuss or disclose the deteriorated condition of the property's exterior wall, and was led to believe by Uzzo that the problem with the exterior wall and facade was relatively minor.

The parties closed on March 8, 2007. At the closing, the parties entered into additional negotiations, memorialized as the Letter Agreement, by which West End agreed to pay Kay for the "cost of completing the original scope of work specified in the Kay contract without amendment, modification or addition," and further agreed to be responsible to the cost of completing the work as originally described in the contract with Kay. West End eventually paid $32,000.00 to Kay as final payment on the repair contract. The Letter Agreement contained no representations or warranties as to the physical condition of the building, the exterior wall, or its underlying steelwork. [*3]

On March 4, 2008, one year after closing, plaintiff sent West End a letter demanding $1,687,189.00 to indemnify it for the costs incurred in repairing the steelwork. Counsel for West End rejected the demand, stating that West End was not responsible for any work not contained in the original scope of the work appearing in the contract with Kay. This lawsuit resulted, plaintiff alleging three causes of action: one, breach of contract; two, fraudulent inducement; and three, fraudulent concealment.

CPLR 3211 (a), Motion to dismiss cause of action, states that"[a] party may move for judgment dismissing one or more causes of action asserted against him on the ground that:

(1) a defense is founded upon documentary evidence; or ...

(7) the pleading fails to state a cause of action ... .

On a motion to dismiss pursuant to CPLR 3211, the pleading should be liberally construed, the facts alleged by the plaintiff should be accepted as true, and all inferences should be drawn in the plaintiff's favor (Leon v Martinez, 84 NY2d 83 [1994]); however, the court must determine whether the alleged facts "fit within any cognizable legal theory." Id. at 88. Further, "[a]llegations consisting of bare legal conclusions ... are not presumed to be true [or]accorded every favorable inference." Biondi v Beekman Hill House Apt. Corp., 257 AD2d 76, 81 (1st Dept 1999), affd 94 NY2d 659 (2000).

Under CPLR 3211 (a) (1) a dismissal is permissible only when the documentary evidence conclusively establishes a defense to the asserted claims as a matter of law. Leon v Martinez, 84 NY2d 83 (1994). As stated in Ladenberg Thalmann & Co., Inc. v Tim's Amusements, Inc., 275 AD2d 243, 246 (1st Dept 2000),

"The court's task is to determine only whether

the facts as alleged, accepting them as true

and according plaintiff every possible favorable

inference, fit within any cognizable legal theory

(Leon v. Martinez, 84 NY2d 83, 87-88 (1994).

Dismissal pursuant to CPLR 3211 (a) (1) is

warranted only if the documentary evidence

submitted conclusively establishes a defense to

the asserted claims as a matter of law (Id. at 88)."

To defeat a pre-answer motion to dismiss pursuant to CPLR 3211 (a) (1), the opposing party need only assert facts which fit within anycognizable legal theory. Bonnie & Co. Fashions, Inc. v Bankers Trust Co., 262 AD2d 188 (1st Dept 1999). Further, if any question of fact exists with respect to the meaning and intent of the contract in question, based on the documentary evidence supplied to the motion court, a dismissal pursuant to CPLR3211 (a) (1) is precluded. Khayyam v Doyle, 231 AD2d 475 (1st Dept 1996).

That portion of defendants' motion seeking to dismiss plaintiff's first cause of action for breach of contract is granted.

Defendants demonstrated that the real property purchase contract contained a specific disclaimer that the property was sold "as is," and that defendants would not be responsible for any representations that did not appear in the contract or as attachments thereto. Kagan v Freedman, 55 AD3d 558 (2d Dept 2008). Therefore, "the plaintiff's cause of action to recover damages for breach [*4]of contract against [West End] must fail since the contract expressly provided that the premises were being sold as is,' and because it is barred by the doctrine of merger." Mancuso v Rubin, 52 AD3d 580, 584 (2d Dept 2008).

That portion of defendants' motion that seeks to dismiss plaintiff's second cause of action for fraudulent inducement is also granted.

"The fraud claim is also defective because [a]s a

matter of law, a sophisticated plaintiff cannot

establish that it entered into an arm's length

transaction in justifiable reliance on alleged

misrepresentations if that plaintiff failed to

make use of the means of verification that were

available to it [citations omitted]."

Dragon Investment Co. II LLC v Shanahan, 49 AD3d 403, 404 (1st Dept 2008). "A party cannot claim reliance on a misrepresentation when he or she could have discovered the truth with due diligence." KNK Enterprises, Inc. v Harriman Enterprises, Inc., 33 AD3d 872, 872 (2d Dept 2006).

In the instant matter, the Local Law 11 Report, indicating the state of the premises' steelwork, was a matter of public record, made public three weeks prior to closing. Because the Local Law 11 Report could have been discovered at this point by the exercise of due diligence, plaintiff could have avoided closing had it so chosen. Moreover, there is no assertion on the part of plaintiff that it attempted to search West End's records, but was thwarted in the attempt, or that it even had an engineer or architect inspect the property. See UST Private Equity Investors Fund, Inc. v Salomon Smith Barney, 288 AD2d 87 (1st Dept 2001).

"Further, a party cannot claim fraud if the party

could have, with due diligence, discovered a defect.

... Further, as the facts herein were not peculiarly

within the knowledge of defendant, the specific merger

clause in the contract [bars] plaintiff from claiming

fraudulent inducement [citations omitted]."

East 15360 Corp. v The Provident Loan Society of New York, 177 AD2d 280, 280 (1st Dept 1991); Jachetta v Vivona Estates, Inc., 249 AD2d 512 (2d Dept 1998); Rodas v Manitaras, 159 AD2d 341 (1st Dept 1990).

Similarly, that portion of defendants' motion seeking to dismiss plaintiff's third cause of action for fraudulent concealment is granted.

To maintain an action based on a theory of fraudulent concealment, the allegedly injured party must establish a fiduciary relationship between himself and the defendant. See Blake v Ford Motor Company, 41 AD3d 150 (1st Dept 2007). Such a fiduciary relationship does not exist in the case at bar.

"The parties, businesses on opposite sides of a

transaction, and each represented by counsel, were

not in a confidential or fiduciary relationship, and

the allegedly concealed information, [the state of [*5]

steelwork], were matters of public record that [plaintiff]

could have discovered by the exercise of ordinary

diligence [citations omitted]."

Alpha GmbH & Co. Schiffsbesitz KG v BIP Industries Co., 25 AD3d 344, 345 (1st Dept 2006) (motion court applied law concerning fraudulent concealment and public records); National Union Fire Ins. Co. of Pittsburgh, Pa. v Red Apple Group, Inc., 273 AD2d 140 (1st Dept 2000).

It is well established that, absent this fiduciary relationship between the parties, a duty to disclose only arises under the "special facts" doctrine, which holds that "one party's superior knowledge of essential facts renders a transaction without disclosure inherently unfair." Jana L. v West 129th St. Realty Corp., 22 AD3d 274, 277 (1st Dept 2005). "The special facts' doctrine requires the satisfaction of a two-pronged test: that the material fact was information peculiarly within the knowledge of [West End], and that the information was such that could not have been discovered by [plaintiff] through the exercise of ordinary intelligence [internal quotation marks and citations omitted]." Id. at 278.

The cases cited by plaintiff to support its contention that this cause of action is viable are all distinguishable. In each cited instance, the party being charged actively engaged in conduct designed to mislead, and the facts concealed were not matters of public record, but within the particular knowledge of the concealing party. (17 E. 80th Realty Corp. v 68th Assocs., 175 AD2d 245 [1st Dept 1991] [seller installing a dummy ventilation system to hide the fact that no ventilation existed]; Haberman v Greenspan, 82 Misc 2d 263 [Sup Ct Richmond County 1975] [cracks covered by seller with plasterboard]).

Based on the foregoing, because the facts that were allegedly concealed were matters of public record, and no fiduciary relationship existed between the parties, defendants' motion is granted.

Additionally, plaintiff's allegations of fraudulent concealment as against Uzzo are conclusory and lack sufficient particularity to satisfy the requirements of CPLR 3016 (b), which requires that the complaint set forth the misconduct complained of in sufficient detail to clearly inform each defendant of what their respective roles were in the alleged deception.

As stated by the court in Friedman v Anderson (23 AD3d 163, 166 [1st Dept 2005]),

"[a] mere recitation of the elements of fraud

is insufficient to state a cause of action"

(National Union Fire Ins. Co. of Pittsburgh,

Pa. v Christopher Assoc., 257 AD2d 1, 9 [1st Dept])

Furthermore, a plaintiff seeking to recover

for fraud and misrepresentation is required

to set forth specific and detailed factual

allegations that the defendant personally

participated in, or had knowledge of any

alleged fraud' (Handel v Bruder, 209 AD2d 282,

282-283 [1st Dept 1994])."

[*6]Based on the foregoing, it is hereby

ORDERED that the motion to dismiss is granted and the complaint is dismissed with cost and disbursements to defendants as taxed by the Clerk of the Court; and it is further

ORDERED that the Clerk is directed to enter judgment accordingly.

Dated: _______________

ENTER:

___________________________

J.S.C.