Matter of Hollenbach

[*1] Matter of Hollenbach 2007 NY Slip Op 51318(U) [16 Misc 3d 1106(A)] Decided on June 29, 2007 Sur Ct, Nassau County Riordan, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through August 1, 2007; it will not be published in the printed Official Reports.

Decided on June 29, 2007
Sur Ct, Nassau County

Application of Dyana Bailo, as Administratrix of the Estate of Douglas J. Hollenbach, for the recovery of moneys owed from Don Faraci.



335676



The appearances of counsel are as follows:

Stanley Edward Bogal, Esq.

471 North Broadway, Suite 112

Jericho, NY 11753

(for Petitioner/Administratrix)

Roy A. List, Esq.

109 Newbridge Road

Hicksville, NY 11801-3908

(for Respondent)

John B. Riordan, J.

Before the court in this proceeding brought by the estate to recover moneys allegedly owed to the estate by respondent, Don Faraci, is Faraci's motion to dismiss the second amended petition pursuant to CPLR 3211 (a) (1), (5) and (7). The estate opposes the motion.

The decedent, Douglas J. Hollenbach, died intestate on May 11, 2001 survived by his wife, Patricia L. Hollenbach, and two daughters, Dyana Bailo and Joanna D. Finno. Letters of administration issued to the decedent's daughter, Dyana Bailo, on February 3, 2005.

The petition is predicated upon an unusual agreement, with addendum, dated June 15, 1988, between the decedent and a friend, the respondent's wife, Nina Piven. The decedent owned a residence located at 50 Sugar Maple Road, Levittown, New York. At the time, the house was subject to a mortgage held by GreenPoint Savings Bank. Additionally, the decedent was indebted to Piven for an unsecured loan, which was due but which the decedent was apparently not then able to repay.

Piven needed funds to purchase a separate piece of property located in Bethpage, New York. Whether because the decedent could not qualify for a loan or for some other reason, the decedent did not obtain a second mortgage on the Levittown property himself to raise the funds to pay Piven. Rather, the agreement provided that the decedent would temporarily transfer ownership of the house to Piven, who would then take a $68,000 second mortgage to finance the down payment on the new purchase in Old Bethpage. Piven agreed to reconvey title to the premises within two years free and clear of any mortgage liens. As part of that agreement, Piven agreed to forgive the outstanding indebtedness by the decedent to her. Piven also agreed to make timely mortgage payments with respect to the then existing GreenPoint Savings Bank mortgage and to satisfy the second mortgage before reconveyance back to the decedent. The decedent continued to reside in the house. The agreement bears the signatures of the decedent, Piven, the attorney who prepared the document, and Piven's husband, respondent Faraci. Piven did not fully comply with the terms of the agreement.

The decedent and Piven then signed a subsequent agreement entitled, "Modification to Agreement between the Parties dated January 15, 1988." The modification agreement is dated January 15, 1996. The effect of the modification was to extend, for eighteen months from the date of that agreement, the obligation of Piven to satisfy a then-existing second mortgage on the house and reconvey the premises to the decedent.

Thereafter, there was a default with respect to payment of both the first and second mortgage loans. Piven filed for bankruptcy in 1997. A foreclosure action was commenced by GreenPoint Savings Bank, and the premises were sold at a foreclosure sale on November 22, 2002. [*2]

The administrator now seeks a money judgment in the amount of $317,000.00, the value of the premises at the time of the foreclosure sale, against Faraci on the grounds that he was a party to the above-mentioned agreements either as a guarantor or as an accommodation maker/endorser. In the second amended complaint, the administrator has added a cause of action against Faraci for fraudulent representation.

PROCEDURAL HISTORY

On March 9, 2006, the administrator filed a petition dated February 23, 2006. Faraci moved to dismiss that petition. The administrator then filed and served an amended petition dated June 20, 2006. Thereafter, Faraci moved to dismiss the amended petition. In response, the administrator filed an affidavit in opposition to Faraci's motion, annexed to which was a second amended petition that she sought leave to file. On December 21, 2006, the court granted the administrator leave to serve and file the second amended petition (Dec. No. 630), which she did. Faraci's motion to dismiss the second amended petition will be decided in this decision.[FN1]

DISCUSSION

Recovery on the Agreement

Faraci has moved to dismiss the cause of action for recovery on the agreement on the ground that the proceeding was not commenced within the applicable six-year statute of limitations period for a breach of contract action (CPLR 213 [2]). The modification agreement, which was executed on January 15, 1996, gave Piven eighteen months from that date to July 15, 1997 to fulfill her obligations under the January 15, 1988 agreement. The administrator contends that Faraci was a signatory to the 1988 agreement and the 1996 modification agreement and is liable as an "accommodation maker/endorser, as a guarantor, or as a secondary obligor with suretyship status."

The administrator argues that the limitations period accrued on November 22, 2002 when the premises were sold at a foreclosure sale since that was the last day for Faraci to cure the breach. That is incorrect. The statute of limitations on a claim for breach of contract "begins to run at the time of the breach, even if no damage occurs until subsequently or the plaintiff is not aware that the breach occurred" (Continental Cas. Co. v Employers Ins. Co. of Wausau, NYS2d , 2007 WL 1345692, *11, 2007 NY Misc LEXIS 3336, **31 [Sup Ct, New York County, May 8, 2007]; General Stencils, Inc. v Chiappa, 18 NY2d 125, 127 [1966] [finding statute of limitations begins running when the wrong is committed]). Thus, the statute of [*3]limitations began to run on July 16, 1997, the day after the eighteen-month period provided in the modification agreement for Piven to perform her obligations under the1988 agreement expired. Thus, the statute of limitations expired on July 16, 2003.

The original petition, dated February 28, 2006, was filed on March 9, 2006, nearly nine years after the cause of action for breach of contract accrued and almost three years after the statute of limitations period expired. Thus, the estate's cause of action for recovery on the agreement is time-barred. However, the estate posits that the expiration of the statute of limitations should not bar the claim for recovery on the agreement based on equitable estoppel.

The second amended petition contains a new cause of action that was not contained in the petition or the amended petition; it is one for fraudulent representation. Based upon Faraci's

alleged fraudulent representations, the estate requests that the court find that Faraci is equitably estopped from asserting that the breach of contract claim is time-barred.

The estate asserts that the decedent and Faraci were friends for more than thirty years and that the decedent was employed by Faraci's swimming-pool company, Tri-County Pool, Inc. The estate alleges that the decedent entered into the agreement and modification agreement based on the friendship. The estate also alleges that, in December 1997, after Piven filed for bankruptcy, the decedent contacted Faraci, who is alleged to have told the decedent, "Don't worry about it, it doesn't concern you." About a month later, the decedent, who was seriously ill at the time, is alleged to have been taken by Faraci to Piven's bankruptcy attorney to attempt to separate the house from the bankruptcy estate. The estate alleges that Faraci told the decedent, "[T]hings are not well . . . but I will continue to work on it." In January or February of 2001, Faraci is alleged to have spoken to the decedent and his wife, Patricia, and told them again that he would continue to work on it. The decedent died on May 11, 2001. At his funeral, Faraci allegedly told Patricia he would take care of it. According to the estate, Faraci continued to recognize the "special relationship" he had with the decedent until the summer of 2003, when he gave one of the decedent's daughters a free swimming-pool liner and had two of his employees install it.

Statutes of limitations represent a balance between protecting individuals from stale claims and not imposing an undue hardship on a litigant with a meritorious claim (Zumpano v Quinn, 6 NY3d 666, 673 [2006]). The doctrine of equitable estoppel arose "from the maxim that no man may take advantage of his own wrong" (Glus v Brooklyn E. Dist. Term., 359 US 231, 232 [1959]; General Stencils, Inc. v Chiappa, 18 NY2d 125, 127 [1966]). Thus, as the New York Court of Appeals pronounced:

"Our courts have long had the power, both at law and equity, to bar the assertion of the affirmative defense of the Statute of Limitations where it is the defendant's affirmative wrongdoing . . . which produced the long delay between the accrual of the cause of action and the institution of the legal proceeding" (General Stencils, Inc. v Chiappa, 18 NY2d 125, 128 [1966]; see General Obligations Law § 17-103 [4] [b]).

"Equitable estoppel requires a lack of knowledge of the true facts; reliance upon the conduct of the party estopped; and a prejudicial change in position (citation omitted)'" (Continental Cas. Co. v Employers Ins. Co. of Wausau, NYS2d , 2007 WL 1345692, *9, [*4]2007 NY Misc LEXIS 3336, **28 [Sup Ct, New York County, May 8, 2007], quoting River Seafoods, Inc. v JPMorgan Chase Bank, 19 AD3d 120, 122 [1st Dept 2005]; Simcuski v Saeli, 44 NY2d 442, 448 [1978]). It requires a showing that he or she was induced by the fraud, deception or misrepresentation from commencing an action within the statute of limitations period (Simcuski v Saeli, 44 NY2d 442, 449 [1978]). The party relying on the doctrine has the burden to establish its applicability (Zumpano v Quinn, 6 NY3d 666, 674 [2006]; Park Assocs. v Crescent Park Assocs., Inc., 159 AD2d 460, 461 [2d Dept 1990]) and a reasonable reliance on the other party's misrepresentations (Simcuski v Saeli, 44 NY2d 442, 449 [1978]). "It is therefore fundamental to the application of equitable estoppel for plaintiffs to establish that subsequent and specific actions by defendants somehow kept them from timely bringing suit" (Zumpano v Quinn, 6 NY3d 666, 674 [2006]).

The court finds that the estate has failed to meet the burden. The petition is devoid of any allegations that the decedent or Bailo, after the decedent's death, lacked the true facts. The fraudulent representations alleged in the petition, which are deemed true and admissible for purposes of this motion to dismiss, are wholly insufficient to warrant equitably estopping Faraci from asserting the statute of limitations on the recovery on the agreement cause of action. Further, there is absolutely no showing that Faraci's actions prevented the decedent or, later, Bailo, as the administrator of the decedent's estate from commencing a proceeding within the statute of limitations period. Significantly, the last affirmative misrepresentation by Faraci is alleged to have been made on May 11, 2001, at the decedent's funeral, more than two years prior to the expiration of the statute of limitations period. The administrator had ample time to commence a proceeding before the statute ran (Simcuski v Saeli, 44 NY2d 442, 449-450 [1978]).The estate's reliance on the doctrine of equitable estoppel is unavailing.

Fraudulent Representation

Faraci also moves to dismiss the cause of action for fraudulent representation under CPLR 3211 [a] [5] on the ground that the statute of limitations has expired. A cause of action sounding in fraud must be commenced six years from when the fraud is alleged to have accrued or two years from the time the plaintiff "discovered the fraud, or could have with reasonable diligence have discovered it, " whichever is the later (CPLR 213 (8); CPLR 203 [g]). "The general rule is that a cause of action accrues, and the Statute of Limitations begins to run, on commission of the wrong. In cases of actual fraud, however, the Legislature adopted the rule that the statute ran from discovery rather than commission because, in the absence of such a rule, a defendant who has been guilty of actual fraud might prevent the plaintiff from recovering by continuing the deception until the statute had run (see McLaughlin, The Discovery Provisions of Article Two of the CPLR and Other Problems With the Statute of Limitations, Tenth Ann. Report of Judicial Conf., [1965], pp. 97-98). The reason for the discovery rule is thus to be found in the nature of the wrong and not in the remedy by which the plaintiff has chosen to seek redress for that wrong. It therefore applies in cases of actual fraud whether the requested relief be legal or equitable in nature" (Abbate v Abbate, 82 AD2d 368, 387 [2d Dept 1981]).

The alleged fraudulent representations continued until May 11, 2001, the date of the decedent's funeral, when Faraci told Patricia he would take care of preventing the premises from being foreclosed. Accordingly, the fraudulent representation claim is not time-barred. [*5]

Faraci also moves to dismiss the claim on the ground that it fails to state a cause of action (CPLR 3211 [a] [7]). He argues that the estate has failed to plead fraud with the degree of particularity required by CPLR 3016(b).

"In the context of a CPLR 3211 (a) (7) motion, directed at the sufficiency of the pleadings, the pleadings are to be afforded a liberal construction, and the court must accept the allegations as true, according the plaintiff the benefit of every reasonable inference to determine whether they come within the ambit of any cognizable legal theory (see Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409, 414 [2001]; Rovello v Orofino Realty Co., 40 NY2d 633, 634 [1976]; Hirschhorn v Hirschhorn, 194 AD2d 768 [2d Dept 1993]). A CPLR 3211 motion should be granted only when, even viewing the allegations as true, the plaintiff still cannot establish a cause of action. The standard is not whether the plaintiff has stated a cause of action, but whether the plaintiff has a cause of action (McGuire v Sterling Doubleday Enters., L.P., 19 AD3d 660 [2d Dept 2005]). The motion must be denied if from the pleadings' four corners, "factual allegations are discerned which taken together manifest any cause of action cognizable at law"' (511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 152 [2002])" (Guggenheimer v Bernstein Litowitz Berger & Grossmann LLP, 11 Misc 3d 926, 930 [Sup Ct, New York County 2006]).

The essential elements of an action for fraudulent representation are representation, falsity, scienter, deception, and injury (Wood v Dudley, 188 App Div 136 [1st Dept 1919]; Guggenheimer v Bernstein Litowitz Berger & Grossmann LLP, 11 Misc 3d 926, 933 [Sup Ct, New York County 2006]). The cause of action as stated in the petition contains all the elements needed to plead a claim for fraudulent representation under CPLR 3016 (b). Contrary to Faraci's contention, the estate alleges that the statements made by Faraci were uttered with a fraudulent intent. " [T]he allegations . . . describe a case where [Faraci] has fraudulently and positively as with personal knowledge stated that something was to be done when he knew all the time it was not to be done and that his representations were false. . . . Such statements and representations when false are actionable" (Channel Master Corp. v Aluminum Ltd. Sales, Inc., 4 NY2d 403, 408 [1958]).

Additionally, Faraci asserts that the claim should be dismissed on statute of frauds grounds pursuant to CPLR 3211 [a] [5]. He argues that Faraci's signature on the agreement and modification agreement does not make him an accommodation maker/endorser, guarantor, secondary obligor or surety and that Faraci has no obligations whatsoever under either agreement, in the absence of words of guarantee or suretyship in the documents (CPLR 3211 [a] [1]). The claim for fraudulent representation is one sounding "in tort, not contract, depending not upon an agreement between the parties, but rather upon deliberate misrepresentation of fact, relied on by [the decedent] to his detriment (Channel Master Corp. v Aluminum Ltd. Sales, Inc., 4 NY2d 403, 408 [1958]). It is for the finder of fact at trial to determine the merits of the estate's cause of action for fraudulent representation, not the court on a motion to dismiss.

Accordingly, Faraci's motion to dismiss the estate's claim for fraudulent representation is denied. He is directed to serve and file an answer to the second amended petition within twenty days of service of notice of entry of the order to be made herefrom. [*6]

Settle order on notice.

Dated: June 29, 2007

John B. Riordan

Judge of theSurrogate's Court Footnotes

Footnote 1:The administrator argues that the motion is procedurally defective because it is supported only by notice of motion and memoranda of law, whereas CPLR 2214 (b) states that a "notice of motion and supporting affidavits shall be served . . . ." By the administrator's theory, every motion that included only one affidavit would be defective, since the rule states supporting "affidavits." The court does not read the rule to require an affidavit in the case of a motion to dismiss, which, in this instance, unlike a motion for summary judgment, does not require personal knowledge on the part of the movant. The court's role in deciding a motion to dismiss on the grounds raised by Faraci is to look within the four corners of the petition to determine if the claims (1) are time-barred, (2) state a cause of action or (3) should be dismissed on statute of frauds grounds.