Plaza Penthouse LLLP v CPS 1 Realty LP

[*1] Plaza Penthouse LLLP v CPS 1 Realty LP 2009 NY Slip Op 51799(U) [24 Misc 3d 1238(A)] Decided on August 10, 2009 Supreme Court, New York County Stallman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 August 10, 2009
Supreme Court, New York County

Plaza Penthouse LLLP, Plaintiff,

against

CPS 1 Realty LP and STRIBLING MARKETING ASSOCIATES LLC, Defendants.



100084/09



For Plaintiffs:

David G. Ebert, Esq.

Caitlin L. Bronner, Esq.

INGRAM YUZEK GAINEN CARROLL & BERTOLOTTI, LLP

250 Park Avenue - 6th Floor

New York, NY 10 177

(212) 907-9600

For Defendants:

Jeffrey W. Davis, Esq.

Jonathan L. Fried, Esq.

KRAMER LEVIN NAFTALIS & FRANKEL LLP

1177 Avenue of the Americas

New York, New York 10036

(212) 715-9100

Michael D. Stallman, J.

Plaintiff Plaza Penthouse LLLP signed a purchase agreement for $5.25 million, for what it thought was a two bedroom, park view apartment at the legendary restored Plaza Hotel, without ever laying eyes on the intended penthouse apartment. Upon finding out the apartment had only one bedroom and no park view, plaintiff commenced this action seeking, among other things, the return of its $1.05 million down payment. [*2]

Pursuant to CPLR 3211 (a) (1) and (7), defendants CPS 1 Realty LP and Stribling Marketing Associates LLC move for an order, dismissing each of the four causes of action in the original complaint, declaring that the escrow agent may release the escrow funds to the sponsor, awarding attorneys fees and costs pursuant to the purchase agreement, and issuing sanctions.

BACKGROUND AND FACTUAL ALLEGATIONS

Plaintiff is a Delaware limited liability limited partnership, having an address in New York, New York. Defendant CPS 1 Realty LP (CPS) is the sponsor of an offering plan, dated June 20, 2006, for the sale of condominium units at the Plaza Hotel, located on Fifth Avenue, New York. Defendant Stribling Marketing Associates, LLC (Stribling) is a real estate brokerage company, and is the selling agent for the condominium units offered at the Plaza.

Starting in April 2005, the historic Plaza Hotel started renovations for conversion into condominium apartments. In July 2007, plaintiff entered into a purchase agreement, to purchase from CPS the penthouse unit 2032 in the Plaza Hotel-Condominiums, for a purchase price of $5.25 million. Davis Affirm., Ex A. Pursuant to the purchase agreement, plaintiff paid to the escrow agent a down payment of $1.050 million. Article 18 of the purchase agreement provides for an inspection of the unit prior to closing. Attached to the purchase agreement was an offering plan, which included, on a single page, a floor plan of both floors of the unit 2032, and a plan indicating where the apartment was located in the building.

The plan shows both floors of the penthouse unit. In the upper right hand corner of the plan states, Suite PH 2032 — TERRACE SUITE1 BEDROOMAPPROX 1,393 SQ. FT.

2 BATHS

The floor plan indicates that lower floor of the penthouse unit has two rooms (other than the kitchen and bathroom), one which is designated "L.R.," which measures "20'-8" x 17'-10" and another undesignated room with no room dimensions. The floor plan depicts the upper floor having one room, designated as "B.R.," measuring "13'-4" x 15'-10," a bathroom, and a terrace. See Davis Affirm., Ex C. The top view plan of the location of the apartment shows:

(actual size of building plan depicted)

Ibid. Thus, one side of unit 2032 faces toward Central Park, but the unit itself is not located on Central Park South. Rather, unit 2032 is located in the southern wing of the Plaza.

Plaintiff alleges that, prior to signing this purchase agreement, CPS's broker, Douglas Elliman, sent plaintiff a spreadsheet which represented unit 2032 as having two bedrooms and a park view. Meier Aff., Ex A. Plaintiff also contends that it had conversations with CPS's broker which verified the information on the spreadsheet. Brian Meier, a senior vice president of Douglas Elliman, claims that he asked repeatedly for access to the apartment in order to see the view himself, but was refused access, and told that no one was being permitted to view any of the apartments. Meier Aff. ¶ 7.

After plaintiff signed the agreement, but before the scheduled closing, it learned that the [*3]apartment did not have a park view. Meier Aff. ¶ 8.[FN1] Plaintiff also realized that unit 2032 in fact only had one bedroom. According to the complaint, plaintiff exercised its right to adjourn the scheduled closing date from November 20, 2008 to December 4, 2008, allegedly due to open questions about the apartment's attributes and CPS's alleged refusal to provide information about the apartment. Complaint ¶ 17. Plaintiff claims that it tried to contact defendants for more information about the apartment prior to the closing, but did not receive any response. Id. ¶ 18. The closing did not proceed on December 4, 2008, and CPS declared plaintiff to be in default. According to the default notice, if plaintiff did not proceed with the closing by January 6, 2009, CPS would terminate the agreement and retain the deposit.

On January 5, 2009, plaintiff sought a temporary restraining order enjoining defendants from taking the deposit and also commenced an action by filing a summons and complaint. Davis Affirm., Ex A. On January 6, 2009, following a conference with the court, plaintiff agreed to withdrew its application for a TRO. Plaintiff also agreed to serve the complaint on defendants, and the parties stipulated that the purchase agreement was terminated, and that the deposit would remain with the escrow agent until further notice from the court. Davis Affirm., Ex D.

Plaintiff's complaint contains four causes of action. The first cause of action is for fraudulent inducement, and seeks rescission of the purchase agreement and the return of the deposit, plus interest, to plaintiff. The second cause of action is for negligent misrepresentation. The third cause of action is for a declaration under CPLR 3001 that plaintiff is entitled to the deposit. The fourth cause of action is for violation of "the New York Consumer Protection Act," i.e., General Business Law § 349.

Plaintiff essentially argues that defendants misrepresented the apartment, and that, had plaintiff known that the apartment did not have a park view or that it had only one bedroom, it would not have entered into the purchase agreement. Plaintiff states that it was relying on the verbal and written representations of defendants, as it was unable to see the apartment due to the construction. Furthermore, plaintiff alleges that, even as of January 2008, defendants were still emailing the spreadsheets which advertise certain units in the building as having a park view, when they clearly do not. Plaintiff attaches a spreadsheet of the apartment adjacent to 2032, apartment 2030, which is allegedly advertised as a two bedroom/park view apartment. Meier Aff., Ex C.

DISCUSSION

On a motion to dismiss pursuant to CPLR 3211, the facts as alleged in the complaint are accepted as true, the plaintiff is given the benefit of every possible favorable inference, and the court must determine simply whether the facts alleged fit within any cognizable legal theory. P.T. Bank Central Asia v ABN AMRO Bank N.V., 301 AD2d 373, 375 (1st Dept 2003); See also Mendelovitz v Cohen, 37 AD3d 670, 671 (2d Dept 2007). Under CPLR 3211 (a) (1), a dismissal is appropriate only "if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." Leon v Martinez, 84 NY2d 83, 88 (1994). Under CPLR 3211 (a)(7), however, "a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint and the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one [internal quotations and citations omitted]." Id.

[*4]Fraudulent Inducement

In order to plead a claim for fraud, plaintiff must allege "a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury." Lama Holding Company v Smith Barney Inc., 88 NY2d 413, 421 (1996).

Defendants argue that plaintiff's claims for fraud and negligent misrepresentation fail, as a matter of law, due to the disclaimer and merger clauses in the purchase agreement. Defendants claim that the alleged misrepresentations were, if true, pre-contractual representations made to plaintiff that were specifically disclaimed in the purchase agreement. Article 20 of the purchase agreement, which is entitled "No Representations," states: Purchaser acknowledges that Purchaser has not relied upon any architect's plans, sales plans, selling brochures, advertisements, representations, warranties, statements or estimates of any nature whatsoever, whether written or oral, made by Sponsor, Selling Agent or otherwise, including, but not limited to, any relating to the description or physical condition of the Property, the Building of the Unit, or the size or the dimensions of the Unit or the rooms therein contained or any other physical characteristics thereof ... No oral representations or statements shall be considered a part of this Agreement. Purchaser agrees (a) to purchase the Unit, without offset or claim against, or liability of, Sponsor, whether or not any layout or dimension of the Unit ... as shown on the Floor Plans ... is accurate or correct ... .

Davis Affirm., Ex A, at § 20. The merger clause in the purchase agreement provides, "[t]his agreement, together with the Plan, supercedes any and all understandings and agreements between the parties and constitutes the entire agreement between them with respect to the subject matter hereof." Id. at § 38.

Defendants argue that plaintiff signed the purchase agreement, which incorporates the offering plan which defendants claim illustrates the apartment as having one bedroom and no park view.Plaintiff asserts that it had no independent way to confirm the number of bedrooms and the park view, and that plaintiff had to rely solely on defendants' representations concerning key attributes of the apartment.

In response, defendants assert that all of these alleged written and oral representations were pre-contractual, which plaintiff specifically disclaimed reliance on by signing the purchase agreement. Defendants also contend that plaintiff was aware that it would not be allowed to see the apartment, yet decided to sign the purchase agreement. According to defendants, no one was permitted to view any of the apartments.

A claim for fraud will be barred by the existence of a specific disclaimer and failure to "exercise reasonable diligence." Steinhardt Group Inc. v Citicorp, 272 AD2d 255, 256 (1st Dept 2000), citing to Danann Realty Corp v Harris, 5 NY2d 317 (1958). Plaintiff would not be justified on relying on any alleged misrepresentations if the facts were not peculiarly within defendants' knowledge and plaintiff "had the means to discover the truth by the exercise of ordinary intelligence." Joseph v NRT Inc., 43 AD3d 312 (1st Dept 2007).

Applying these standards to the present case, the Court finds that plaintiff could not reasonably rely on any oral representations made by defendants as to the number of bedrooms of the [*5]penthouse unit, even if it lacked access to the apartment itself. The floor plan of the apartment was disclosed in the offering plan, and plaintiff should have been able to discern that only one bedroom was indicated on the floor plan. In that respect, the Court is not persuaded by plaintiff's argument that the number of bedrooms of the unit was a matter peculiarly within the defendants' knowledge.

As to the alleged misrepresentation of the unit's view of Central Park, "a purchaser may not be precluded from claiming reliance on misrepresentations of facts peculiarly within the seller's knowledge, notwithstanding the execution of a specific disclaimer." Steinhardt Group Inc., 272 AD2d at 257. Plaintiff provides an affidavit from its broker, Brian Meier, who states that he received a spreadsheet from Plaza's business/sales office and also from the seller's broker which indicated that apartment 2032 had a park view and 2 bedrooms. Meier Aff. ¶ 3. Meier states that he inquired further about the park view and he was told that the apartment, which is a duplex, had a partial park view from the top floor. He was also told that, due to the curves and slopes of the building (the apartment side of the building is higher than the side closer to the park), there was a park view from the apartment's top floor. Id. at 2. Meier also indicates that he "repeatedly stressed how important finding out the specifics" of the park view were to the buyer. Id.

Plaintiff claims it was relying on defendant's description of the offering plan with regard to the park view, given that plaintiff was allegedly unable to inspect the property itself because it was under construction. Even though the offering plan also showed the apartment as not facing Central Park, the allegations are sufficient to raise the question as to whether the park view was a matter peculiarly within the defendants' knowledge, one about which plaintiff could not "discover the truth by the exercise of ordinary intelligence." Accordingly, accepting the allegations with regard to the park view, as the Court must do on this motion, defendants' motion to dismiss this cause of action based on the fraudulent misrepresentation of the penthouse unit's park view is denied.

Negligent Misrepresentation

A claim for negligent misrepresentation can only be viable where there is a "special relationship of trust of confidence, which creates a duty for one party to impart correct information to another, the information given was false, and there was reasonable reliance upon the information given." Hudson River Club v Consolidated Edison Co. of New York, 275 AD2d 218, 220 (1st Dept 2000). The present case involves an ordinary business relationship between a buyer and seller who negotiated a contract at arm's length, both being represented by counsel. See e.g. Wright v Selle, 27 AD3d 1065, 1067 (4th Dept 2006); Mirandi v West 19th Street Condo., 248 AD2d 198, 199 (1st Dept 1998). As such, the complaint fails to plead a special relationship existing between plaintiff and defendants, and defendants' motion to the cause of action for negligent misrepresentation is granted.

The New York Consumer Protection Act

Plaintiff asserts that defendants violated the New York Consumer Protection Act (General Business Law § 349) by knowingly "inducing [plaintiff] based on false and misleading representations to enter into the Agreement and make the Deposit, and threatening to retain the down payment unless it closed on an apartment that is materially different from and inferior to the Apartment that CPS and Stribling led [plaintiff] to believe it was purchasing." Davis Affirm., Ex A, at 6. Plaintiff contends that defendants continued to distribute advertisements about unit 2032 and the adjacent apartment, unit 2030, even after knowing that they contained false representations. Meier Aff. ¶¶ 8-9.

To state a viable claim under General Business Law § 349, the alleged acts, if permitted to [*6]continue, must have a "broad impact on consumers at large." Thompson v Parkchester Apts Co., 271 AD2d 311, 311 (1st Dept 2000). Here, the complaint only alleges that plaintiff was provided with a spreadsheet that contained fraudulent representations. Based on this spreadsheet and oral representations, plaintiff asserts that it signed the purchase agreement. Plaintiff does not know whether this spreadsheet was disseminated to the public at large. Accordingly, General Business Law § 349 does not apply here, because the case herein is a private dispute and does not affect the public. Therefore, the fourth cause of action is dismissed.

Finally, because plaintiff states a valid cause of action against defendants for fraudulent misrepresentation, the branch of defendants' motion seeking attorneys' fees is denied as premature. The branch of defendants' motion seeking sanctions against plaintiff is denied.

CONCLUSION

Accordingly, it is

ORDERED that defendants' motion to dismiss is granted, the second and fourth causes of action are dismissed, so much of the first cause of action as alleges fraudulent misrepresentation of the penthouse unit's number of bedrooms is dismissed, and the motion is otherwise denied; and it is further

ORDERED that defendants are directed to answer the remaining cause of action of the complaint within 10 days of service of a copy of this order with notice of entry; and it is further

ORDERED the parties are directed to appear for a preliminary conference in IAS Part 7, 111 Centre St Rm 949, New York, New York, on September 11, 2009 at 9:45 AM.

Dated:

New York, New York

ENTER:

J.S.C. Footnotes

Footnote 1: It is unclear how plaintiff realized that there was no view, given that it is alleged that no one was permitted access to the apartments.