PJ Hanley'S Corp. v Esposito

[*1] PJ Hanley'S Corp. v Esposito 2012 NY Slip Op 51249(U) Decided on June 29, 2012 Supreme Court, Kings County Schmidt, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 29, 2012
Supreme Court, Kings County

PJ Hanley's Corp.,, Plaintiff

against

Kim Esposito, John Esposito, Deborah Hanley, Kiwi Pub Corp., 4449-451 Court Street Corp., and Jane Doe and Jane and John Doe No's 1-10, Defendants.



21835/11



Plaintiff Attorney: Stern & Stern, 50 Court Street, Suite 1100, Brooklyn, NY 11201

Defendant Attorney: Victor & Bernstein, 18 East 41st Street, 10th Floor, New York, NY 10017

David Schmidt, J.

The following papers numbered 1 to 13 read on this petition:

Papers Numbered

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed1-5

Opposing Affidavits (Affirmations)6 , 8-9

Reply Affidavits (Affirmations)7,10

Affidavit (Affirmation)

Other Papers Defendants' Memorandum of Law11-13

Upon the foregoing papers, defendant 449-451 Court Street Corp., (449-451) moves for an order pursuant to CPLR 3211 (a) (1) , (5) and (7) dismissing plaintiff PJ Hanley's complaint as asserted against 449-451. Defendants Kiwi Pub Corp., Kim Esposito, John Esposito and Deborah Hanley (collectively "the Kiwi defendants") move pursuant to the same statute for the same relief.

Background

PJ Hanley's is the owner of a bar/restaurant located at 449-451 Court Street in Brooklyn. Plaintiff purchased the bar/restaurant pursuant to a contract dated August 31, [*2]2005, between plaintiff's assignor [FN1]as purchaser and Kiwi as seller. Kiwi had occupied the restaurant pursuant to a written lease agreement dated June 15, 1995 with 449-451, which owned the building. The closing of the sale between Kiwi and plaintiff occurred on October, 11, 2005. At that time Kiwi and plaintiff entered into a sublease agreement for the ground floor with Kiwi as sub landlord and plaintiff as subtenant.

In 2011, plaintiff instituted the instant litigation against defendants alleging four causes of action: fraud, breach of contract, and seeking reformation and an injunction.Plaintiff contends that defendants made numerous false misrepresentations that induced plaintiff to enter into a contract and lease agreement.

In November 2009, James McGown had instituted litigation in this court alleging the same facts alleged in the instant complaint and seeking the same relief. 449-451 moved to dismiss the prior action for failure to state any congnizable claim against it. By decision and order dated May 6, 201, this court granted 449-451's motion and dismissed the complaint, this order was never appealed.

449-451's Motion

449-451 moves for an order pursuant to CPLR 3211 (a) (1) , (5) and (7) dismissing plaintiff PJ Hanley's complaint as asserted against 449-451.

Applicable Law

A party seeking to dismiss pursuant to CPLR 3211(a)(1) on the ground that its

defense is based on documentary evidence must submit documentary evidence that resolves all factual issues as a matter of law and conclusively disposes of the plaintiff's claim (Galvan v 9519 Third Avenue Restaurant Corp., 74 AD3d 743 [2010]; Elow v Svenningsen, 58 AD3d 674, 675 [2009]; see Leon v Martinez, 84 NY2d 83, 88 [1994]; Martin v New York Hosp. Med. Ctr. of Queens, 34 AD3d 650 [2006].

It is well-settled that on a motion to dismiss a complaint for failure to state a cause of action pursuant to CPLR 3211(a)(7), the pleading is to be liberally construed, accepting all the facts alleged in the complaint to be true and according the plaintiff the benefit of every possible favorable inference . . ." (Jacobs v Macy's East, Inc., 262 AD2d 607, 608 [2005]; Leon, 84 NY2d 83 [1994]). The court does not determine the merits of a cause of action on a CPLR 3211(a)(7) motion (see Stukuls v State of New York, 42 NY2d 272 [1977]; Jacobs, 262 AD2d at 608), and the court will not examine affidavits submitted on a CPLR 3211(a)(7) motion for the purpose of determining whether there is evidentiary support for the pleading (see Rovello v Orofino Realty Co., Inc., 40 NY2d 633 [1976]).

CPLR 3211 (a) (5) is a grounds for dismissal of a claim when the cause of action may not be maintained because of arbitration and award, collateral estoppel, discharge in bankruptcy, infancy or other disability of the moving party, payment, release, res judicata, statute of limitations, or statute of frauds. Initially, this defendant notes that the doctrines of collateral estoppel and res judicata bar plaintiff from asserting the same claims against it that were already dismissed in the prior action. New York utilizes the transactional analysis approach in deciding res judicata issues, so that "once a claim is brought to final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy" (O'Brien v City of Syracuse, 54 NY2d 353, 357 [1981] citing Matter of Reilly v Reid, 45 NY2d 24, 28 [1978]). [*3]

Under the doctrine of res judicata, a disposition on the merits bars litigation between the same parties or those in privity with them of a cause of action arising out of the same transaction or series of transactions as a cause of action that either was raised or could have been raised in the prior proceeding" (Greenstone/Fontana Corp. v Feldstein, 72 AD3d 890, 893 [2010] quoting Goldstein v Massachusetts Mut. Life Ins. Co., 32 AD3d 821 [2006]; see Matter of Hunter, 4 NY3d 260, 269 [2005]). "The doctrine of collateral estoppel, a narrower species of res judicata, precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same" (Buechel v Bain, 275 AD2d 65, 71 [2000]; Ripley v Storer, 309 NY 506, 507 [1956]; see also, Restatement, Judgments 2d, § 27; 46 Am Jur 2d, Judgments, § 415; 9 Carmody-Wait 2d, NY Prac, Judgments, § 63:205)."

The court notes that "a dismissal for failure to state a cause of action is not on the merits and, thus, will not be given res judicata effect" (Pereira v St. Joseph's Cemetery, 78 AD3d 1141 [2010]; see Maitland v Trojan Elec. & Mach. Co., 65 NY2d 614, 615 [1985]; Asgahar v Tringali Realty, Inc., 18 AD3d 408 [2005]; see also Sullivan v Nimmagadda, 63 AD3d 908, 909 [2009]).

However, the court notes that here, plaintiff was in privity with the plaintiff in the prior action within the meaning of the res judicata rules because plaintiff in the prior action is the president of the corporate plaintiff in this action and actively participated in the litigation of the prior action, and thus had a full and fair opportunity to contest the issues (Matter of Shea, 309 NY 605, 617[ ]; Bankers Trust Co. v Javeri, 105 AD2d 638, 639 [1984]; North Fork Housing Guild v Mackay, 97 AD2d 433, 434 [ ]).

Based upon the foregoing 449-451's motion for dismissal is granted.

Kiwi Defendants' Motion

The Kiwi defendants argue that plaintiff's complaint fails to state a cause of action for fraud and breach of contract as based upon these defendants' misrepresentation that plaintiff would have a right of first refusal if the property was ever sold and a fifteen year option to renew its lease. Moreover, they argue that such claim are barred by the Statute of Frauds which mandates that any interest in real property, such as the ones claimed in this action, must be in writing and thus a contract which is void under the Statute of Frauds cannot furnish the predicate for a cause of action in fraud (Lilling v Slaauenwhite, 145 AD2d 471 [1988]). Additionally, defendants claim that fraud must be premised upon the misrepresentation of an existing fact and not on a statement that defendant will or would do something in the future.

"To properly plead a cause of action to recover damages for fraud, the plaintiff must allege that (1) the defendants made a representation of fact which was false and which the defendants knew to be false, (2) the misrepresentation was made in order to induce the plaintiff's reliance, (3) there was justifiable reliance on the part of the plaintiff, and (4) the plaintiff was injured by the reliance" (Nettles v LSG Sky Chefs, 94 AD3d 726, 731 [2012]; see Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d 1077 [2010]). Importantly, "a representation of opinion or a prediction of something which is hoped or expected to occur in the future does not sustain an action to recover damages for fraud" (Coccia v Liotti, 70 AD3d 747, 756 [2010]; see Chase Invs. v Kent, 256 AD2d 298, 299 [1998]).

"A right of first refusal is preemptive right that requires the owner, when and if s/he or it decides to sell his/her or its property, to offer the property to the holder so that the holder [*4]may meet the offer by a third party or buy the property at some other price set by a previously stipulated method' (Jeremy's Ale House Also, Inc. v Joselyn Luchnick Irrevocable Trust, et al., 22 AD3d 6, 10 [2005] citing LIN Broadcasting Corp. v Metromedia, Inc., 74 NY2d 54 [1989] and other cases).

General Obligations Law § 5-703 (2) provides, in relevant part, that a contract for the sale of any real property, or an interest therein, is void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged. Thus the underlying instrument must designate all parties, identify and describe the subject matter and state all of the essential terms of a complete agreement. Courts have held that a right of first refusal is an interest in real property within the statute which requires a signed writing describing the specific terms (see Pfeil v Cappiello, 29 AD3d 1187, 1188 [2006]; see also Naldi v Grunberg, 80 AD3d 1 [2010]; Bright Beginnings Day Care, Inc. v Driftwood Day Camp, Inc., 16 AD3d 449 [2005]). Although this provision requires a writing, partial performance by the parties which is unequivocally referable to an alleged oral modification of the written agreement may obviate the need for a writing but only if the partial performance is unequivocally referable to the oral agreement. However, if partial performance can be reasonably explained by the possibility of other reasons for the conduct, the performance is equivocal and renders the oral modification unenforceable (see Rose v Spa Realty Assoc., 42 NY2d 338, 341 [1977]; Harlem Suites, LLC v 231 Norman Ave., LLC, 88 AD3d 532 [2011]; Community Prods., LLC v. Northvale Prop. Assoc., LLC, 61 AD3d 806 [2009]; Kennedy v Leibowitz, 303 AD2d 375, 376 [2003]).

Here, it is undisputed that there is no right of first refusal or 15 year lease renewal option contained in the writings entered into between these parties in violation of General Obligations Law § 5-703 (2) and thus any claims relating thereto are barred under the Statute of Frauds. Additionally the court notes that plaintiff cannot demonstrate partial performance unequivocally related to an alleged oral agreement between these parties. Any investment and improvements made to the premises by plaintiff can be explained as having been undertaken to enhance his business, and are, thus, not unequivocally referable to any oral right of first refusal or lease option. Accordingly, any claim of fraud or fraudulent inducement asserted by plaintiff against these defendants as based upon a right of first refusal or lease option is dismissed.

Defendants further argue that plaintiff has failed to allege a cause of action for fraud or fraudulent inducement based upon alleged misrepresentations regarding the ownership of the yard adjacent to the bar, insufficient soundproofing and that heat was included in the rent. Defendants maintain that any reliance on the part of plaintiff regarding the ownership of the yard was not justified because he had the ability to discover the boundaries of the property, through ordinary diligence, by checking public records. Moreover, defendants note that plaintiff was represented by counsel during the negotiation of the contract and lease documents. Finally, defendants argue that any claims relating to the yard are barred as a matter of law by specific contract disclaimers. Specifically, defendants point to paragraph 12 of the contract which states in pertinent part

"The Purchaser (plaintiff herein) hereby represents and warrants that there were no representations, oral or written, made by the seller (449-451) , nor is purchaser relying on any statement , promise or representation made by seller or any other person, with respect to . . . conditions of the premises. . . .purchaser acknowledges that it is relying only on the express representations specifically set forth in this agreement. . . " [*5]

Defendants next point to paragraph 14 of the sublease which states that "Owner makes no representation as to the location of the property line of the building. and paragraph 20 which states that "neither owner nor owner's agents have made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the demised premises. . ."

"While a general merger clause is ineffective to exclude parol evidence of fraud, a specific disclaimer will defeat any allegation that the contract was executed in reliance upon contrary oral representations" (DiBuono v Abbey, LLC, 944 NYS.2d 280 [2012] see Danann Realty Corp. v Harris, 5 NY2d 317, 320-321 [1958]; McGowan v Winant Place Assocs., 270 AD2d 466 [2000]; Busch v Mastropierro, 258 AD2d 492, 493 [1998]). Here the disclaimers contained in the contract and the sublease are specific enough to defeat plaintiff's allegation that defendants represented that the yard was included in the property leased.

The court notes that "New York adheres to the doctrine of caveat emptor and imposes no duty on the seller or the seller's agent to disclose any information concerning the premises when the parties deal at arm's length, unless there is some conduct on the part of the seller or the seller's agent which constitutes active concealment" (Perez-Faringer v Heilman, 2012 NY App. Div. LEXIS 3400, 1-2 quoting Jablonski v Rapalje, 14 AD3d 484, 485 [2005]; see Bernardi v Spyratos, 79 AD3d 684, 687 [2010]; Laxer v Edelman, 75 AD3d 584, 586 [2010]; Rozen v 7 Calf Cr., LLC, 52 AD3d 590, 593 [2008]; Mancuso v Rubin, 52 AD3d 580, 584 [2008]).

Additionally, a "party cannot claim reliance on a misrepresentation when he or she could have discovered the truth with due diligence (see East 15360 Corp. v Provident Loan Socy. of NY, 177 AD2d 280 [1991]; KNK Enterprises, Inc. v Harriman Enterprises, Inc., 33 AD3d 872 [ 2006]). "If the facts represented are not peculiarly within the representor's knowledge and the other party has the means available to him of knowing by the exercise of ordinary intelligence the truth or real quality of the subject of the representation he must make use of those means or he will not be heard to complain that he was induced to enter the transaction by misrepresentation" (DiFilippo v Hidden Ponds Associates, 146 AD2d 737 [1989]; see also Spinelli v Ivezaj, 83 AD3d 688, 689 [2011];East End Cement & Stone, Inc. v Carnevale, 73 AD3d 974, 975 [2010]; Colasacco v Robert E. Lawrence Real Estate, 68 AD3d 706, 708 [2009]; F.A.S.A. Constr. Corp. v Degenshein, 47 AD3d 877, 879 [2008]). Based upon the foregoing, the court finds that plaintiff has failed to state a cause of action sounding in fraud or fraudulent inducement based upon alleged misrepresentations regarding the ownership of the yard adjacent to the bar and that the documentary evidence submitted resolves all factual issues as a matter of law and conclusively disposes of the plaintiff's claim (Galvan, 74 AD3d at 743; Elow, 58 AD3d at 675; see Leon, 84 NY2d at 88 [1994]; Martin, 34 AD3d at 650).

Plaintiff's complaint also alleges that defendants failed and refused to disclose to plaintiff that there was insufficient soundproofing in the subject premises to be suitable for use as a bar and restaurant. Defendants argue that the specific disclaimers in the contract and sublease bar any cause of action relating to soundproofing. Defendants again point to paragraph 12 of the contract referenced above which states that plaintiff was relying only on the express representations in the contract as well as its own independent investigation and examination. Defendants further point to paragraph 15 of the sublease which states that plaintiff was accepting the premises "as is" subject to violations whether or not of record.

As discussed above, unless there has been some conduct on the part of the seller that constitutes active concealment, New York does not impose liability on a seller for failing to [*6]disclose information regarding the premises when the parties deal at arm's length (see Margolin v I M Kapco, Inc., 89 AD3d 690, 691 [2011]); Laxer, 75 AD3d at 585; Daly v Kochanowicz, 67 AD3d 78, 87 [2009]; Simone v Homecheck Real Estate Servs., Inc., 42 AD3d 518, 520 [2007]; Platzman v Morris, 283 AD2d 561, 562 [2001]; cf. Real Property Law §§ 462, 465). Moreover, a cause of action alleging fraudulent inducement may not be maintained if specific disclaimer provisions in the contract of sale disavow reliance upon oral representations (see Danann, 5 NY2d 317 [1959]; Roland v McGraime, 22 AD3d 824, 825 [2005]; Fabozzi v Coppa, 5 AD3d 722, 723-24 [2004]; Platzman v Morris, 283 AD2d 561, 562-63 [2001]; Masters v Visual Bldg. Inspections, 227 AD2d 597, 597-598 [1996]). Here, the specific provisions in the contract and sublease bar the causes of action alleging fraudulent inducement. Plaintiff expressly represented in the contract that they had not relied on any statements by defendants regarding the condition of the premises. Accordingly, that branch of plaintiff's complaint alleging fraud and fraudulent inducement based upon soundproofing is dismissed.

Plaintiff's complaint also alleges that defendants represented that heat was included in the rent at the subject premises and seeks a declaratory judgment stating that heat is included in the rent. Defendants argue that plaintiff has failed to state a cause of action based upon misrepresentations relating to heat stating that plaintiff has not alleged that the representation that heat was included was false.The court notes that paragraph 30 of the lease says "[a]s long as tenant is not in default under any of the covenants of this lease, Owner shall, if and insofar as existing facilities permit furnish heat to the demised premises, when and as required by law, on business days from 8:00 a.m to 6:00 p.m. and on Saturdays from 8:00 a.m. to 1:00 p.m.

The court finds that this lease provision merely states that heat will be provided by the landlord but there is nothing in the lease stating that the cost of that heat was or was not included in the rent. The lease clearly sets forth that the tenant will pay for all water consumed as well as the costs associated with the cost of refuse and rubbish removal but it is silent as to which party incurs the cost associated with the provision of heat to the premises. Accordingly, the court finds that plaintiff has failed to state a cause of action that defendants have made a misrepresentation about the heat being included and, thus, are not entitled to a declaratory judgment in their favor on this issue.

Plaintiff's complaint also seeks reformation of the contract based upon the fact that the actual value of the contract and sublease is significantly less that what was represented by defendants due to the fact that the defendants did not own the yard and that the premises has violations.

"A party seeking reformation of a contract by reason of mistake must establish, with clear and convincing evidence, that the contract was executed under mutual mistake or a unilateral mistake induced by the other party's fraudulent misrepresentation" (Yu Han Young v Chiu, 49 AD3d 535,536 [2008]; see M.S.B. Dev. Co., Inc. v Lopes, 38 AD3d 723, 725 [2007]; Matthews v Castro, 35 AD3d 403, 404 [2006]; Kadish Pharm. v Blue Cross & Blue Shield of Greater NY, 114 AD2d 439 [1985]; Janowitz Bros. Venture v 25-30 120th St. Queens Corp., 75 AD2d 203, 215 [1980]). Inasmuch as the court has found that plaintiff has failed to state a valid cause of action for fraud or fraudulent misrepresentation based upon the claims asserted in the complaint there can not be a finding by this court that the contract or lease was entered into based upon a unilateral mistake induced by defendants' misrepresentation requiring reformation. Accordingly, that branch of defendants' motion seeking dismissal of this cause of action is granted. [*7]

Finally, defendants seek dismissal of plaintiff's cause of action seeking an injunction directing defendants to forthwith pay their contractors and complete the work designated in the permits that they applied for at the New York City Buildings on the subject premises. Defendants argue that this claim should be dismissed as plaintiff has failed to allege that it lacks a remedy at law or that it will suffer irreparable harm, nor are there facts alleged that demonstrate that monetary damages would be inadequate.

Injunctive relief requires that a movant demonstrate a likelihood of success on the merits, a danger of irreparable harm unless the injunction is granted and a balance of the equities in his or her favor (see Aetna Ins. Co. v Capasso, 75 NY2d 860 [1990]; W.T. Grant Co. v Srogi, 52 NY2d 496, 517 [1981]; Merscorp, Inc. v Romaine, 295 AD2d 431 [2002]; Neos v Lacey, 291 AD2d 434 [2002]). Proof of a likelihood of success on the merits requires the movant to demonstrate a clear right to relief which is plain from the undisputed facts (Related Properties, Inc. v Town Bd. of Town/Village of Harrison, 22 AD3d 587 [2005]; Abinanti v Pascale, 41 AD3d 395, 396 [2007]; Gagnon Bus Co., Inc. v Vallo Transp. Ltd., 13 AD3d 334, 335 [2004]). A plaintiff can not be found to have suffered irreparable harm warranting injunctive relief where its alleged injuries are compensable by money damages (see Rowland v Dushin, 82 AD3d 738 [2011]; Family-Friendly Media, Inc. v Recorder Television Network, 74 AD3d 738 [2010]; White Bay Enterprises v Newsday, 258 AD2d 520 [1999]) (lower court's order granting preliminary injunction reversed where record demonstrated that alleged injuries compensable by money damages); Schrager v Klein, 267 AD2d 296 [1999]) (lower court's order granting preliminary injunction reversed where record failed to demonstrate likelihood of success on merits or that injuries were not compensable by money damages).

Here, defendants correctly point out that plaintiff has not established any clear legal right which requires the protection of an injunction. Neither the contract nor the sublease contain any requirement that defendants perform certain work on the premises nor is there any representation that all permits and sign offs have been obtained. Specifically plaintiffs agreed to take possession of the premises "as is" and the sublease states that "the taking of possession of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was taken, except as to latent defects." Moreover, if plaintiff has been forced to perform certain repairs because defendants failed to pay contractors it had hired to perform this work prior to the contact and sublease, plaintiff has an adequate remedy at law in that it can seek monetary damages for the costs it has incurred to remedy any such conditions. Accordingly, that branch of defendants' motion seeking dismissal of plaintiff's cause of action seeking injunctive relief is granted.

The foregoing constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1:The contract of sale was originally entered into between James McGown as purchaser and Kiwi as seller. McGown thereafter assigned his rights under the contract to his corporation, PJ Hanley's ).