Citi Mgt. Group, Ltd. v Highbridge House Ogden, LLC

[*1] Citi Mgt. Group, Ltd. v Highbridge House Ogden, LLC 2007 NY Slip Op 52574(U) [21 Misc 3d 1123(A)] Decided on August 3, 2007 Supreme Court, Bronx County Schachner, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 3, 2007
Supreme Court, Bronx County

Citi Management Group, Ltd., Plaintiff-Counterclaim, Defendant,

against

Highbridge House Ogden, LLC, Defendant-Counterclaim Plaintiff. HIGHBRIDGE HOUSE OGDEN, LLC, Third-Party Plaintiff, LESLIE M. WESTREICH, AND HIGHBRIDGE HOUSE COMPANY L.P. a/k/a HIGHBRIDGE HOUSE, INC. and MORTY J. YASHAR, Third-party Defendant.



7137/07

Larry S. Schachner, J.

Plaintiff/counterclaim defendant, Citi Management Group, Ltd. (plaintiff or CMG) commenced this action claiming, among other things, that it is legally occupying the commercial premises located at 1131 Ogden Avenue in the Bronx, utilized as a parking garage, pursuant to an initial lease it had entered into with the prior owner of the property, third-party defendant Highbridge House Company (HHC) with a term which does not expire until February 28, 2019. Defendant/counterclaim plaintiff/third-party plaintiff Highbridge House Ogden, LLC (defendant or Highbridge Ogden) contends that plaintiff surrendered all of its rights to occupy the garage premises in a "Surrender Agreement" signed by plaintiff's principal and delivered to defendant's counsel on June 29, 2006 at a closing for the purchase of the property. Plaintiff purportedly received consideration for such early termination but claims it was an error and the money was returned. Plaintiff also claims to have entered into a "Letter Agreement" which invalidates the "Surrender Agreement" if any of its conditions are not timely met or if defendant accepted rent from plaintiff after the sale. Plaintiff contends that the "Letter Agreement" was breached by defendant. [*2]

Defendant claims that it was not provided with the "Letter Agreement" until after the commencement of this action and has set forth in its Amended Answer both counterclaims against CMG for its breach of contract and related tortious conduct, and third-party claims against HHC, its principal Leslie M. Westreich (Westreich), and plaintiff's principal, Morty J. Yashar (Yashar), relating to their tortious conduct in connection with CMG's occupancy of the garage premises. Highbridge Ogden alleges, among other things, that CMG, Yashar and the Westreich defendants either (a) falsified and fabricated the "Letter Agreement" after the commencement of this action or (b) purposely did not disclose the existence of the "Letter Agreement" to Highbridge Ogden on or before the June 29, 2006 closing, thereby fraudulently inducing Highbridge Ogden to proceed with the closing.

Plaintiff and the third-party defendants now move to dismiss most of the claims made against them in defendant/counterclaim plaintiff/third-party plaintiff's Amended Verified Answer, Counterclaims and Third Party Complaint, dated April 23, 2007, pursuant to CPLR 3211 (a) (1) and (7) upon the grounds that a defense is founded upon documentary evidence and that defendant/counterclaim plaintiff/third-party plaintiff has failed to state viable claims. Specifically, plaintiff CMG and third-party defendant Yashar move to dismiss a portion of the third, fourth, fifth and sixth counterclaims [FN1]; the first, second and third-party claims to the extent asserted against Yashar; and the first, second, third and fifth affirmative defenses of defendant/counterclaim plaintiff/third-party plaintiff Highbridge Ogden. Third-party defendants Westreich and HHC move to dismiss the third-party complaint filed bythird-party plaintiff Highbridge Ogden. Defendant/counterclaim plaintiff/third-party plaintiff Highbridge Ogden opposes the motions. The motions are consolidated for disposition.

On a motion to dismiss, "the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law..." Guggenheimer v Ginzburg, 43 NY2d 268, 275 (1977) (citation omitted). Moreover, "[w]hen evidentiary material is considered, the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one, and, unless it has been shown that a material fact as claimed by the pleader is not a fact at all and unless it can be said that no significant dispute exists regarding it, dismissal should not eventuate." id. Further, on a motion to dismiss, the factual allegations must be accepted as true and the complaint liberally construed in favor of the pleader. Anguita v Koch, 179 AD2d 454, 457 (1st Dept 1992) (citation omitted).

Highbridge Ogden's third counterclaim seeks recovery against CMG for its breach of the "Surrender Agreement" by failing to vacate the premises and by breaching the implied covenant of good faith and fair dealing. Highbridge Ogden alleges, among other things, that CMG concealed the existence of the "Letter Agreement" from Highbridge Ogden and sought to prevent performance of the "Surrender Agreement." Where a party's actions allegedly frustrate the rights and reasonable expectations of the other party to the contract, a claim for breach of the duty of fair dealing will survive a motion to dismiss notwithstanding a concurrentpleading of a breach of contract claim. See Richmond Shop Smart, Inc. v Kenbar Dev. Ctr., LLC, 32 AD3d 423 (2d Dept [*3]2006)

The fourth, fifth and sixth counterclaims as well as the third-party claims involve fraud, fraudulent concealment and tortious interference with prospective economic advantage. The court finds that these claims are sufficiently pleaded and state viable causes of action. Regarding the fraud and fraudulent concealment claims, "CPLR 3016 (b) requires only that the misconduct complained of be set forth in sufficient detail to clearly inform [the third-party defendants] with respect to the incidents complained of and is not to be interpreted so strictly as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud." P.T. Bank Cent. Asia v ABN AMRO Bank N.V., 301 AD2d 373, 378 (1st Dept 2003) (internal quotation marks omitted) (citations omitted). As pleadedthe fraud claims include allegations containing the necessary elements of: (1) misrepresentation or concealment of a material fact; (2) falsity; (3) scienter on the part of the wrongdoer; (4) justifiable reliance; and (5) resulting injury. See Small v Lorillard Tobacco Co., 94 NY2d 43, 57 (1999). Thus, if all required elements to establish a claim for fraud are sufficiently set forth then the pleading should withstand a motion to dismiss. See World Wide Adjustment Bureau v Edward S. Gordon Co., Inc., 11 AD2d 98 (1st Dept 1985). In addition, the "Special Facts" doctrine, provides that a duty to disclose arises "where one party's superior knowledge of essential facts renders a transaction without disclosure inherently unfair." P.T. Bank Cent. Asia v ABN AMRO Bank N.V., supra, at 378 (internal quotation marks omitted) (citations omitted). Therefore, whether or not there existed a duty to disclose the "Letter Agreement" is an a issue of fact where the "Special Facts" doctrine may be applicable precluding dismissal of a fraud claim at this juncture. See id.

With respect to establishing a claim for tortious interference with prospective business advantage, a party must allege "that the conduct by defendant that allegedly interfered with plaintiff's prospects either was undertaken for the sole purpose of harming plaintiff, or that such conduct was wrongful or improper independent of the interference allegedly caused thereby." Jacobs v Continuum Health Partners, Inc., 7 AD3d 312 (1st Dept 2004) (emphasis added) (citation omitted). "In addition to establishing the element that defendants acted solely out of malice or employed wrongful means,' plaintiff must also demonstrate that a contract would have been entered into but for' defendants' conduct." American Preferred Prescription v Health Mgt., Inc., 252 AD2d 414, 418 (1st Dept 1998) (citations omitted). " Wrongful means' includes physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure." id. (citations omitted). These elements have been sufficiently pleaded as well. Defendant claims that it could not deliver possession and was unable to comply with the terms of a new lease entered into on December 6, 2006 (in reliance on the executed Surrender Agreement) with Daval-Ogden LLC but for the wrongful conduct of plaintiff and the third-party defendants. CMG and Yashar have alleged that a copy of the "Letter Agreement" was in the file with the Lease for the premises and was reviewed by [Highbridge Ogden] prior to the closing, furnished to [Highbridge Ogden] at the closing and an additional copy was delivered to Highbridge Ogden on August 26, 2006 along with its rent payment. Highbridge Ogden vehemently denies these allegations and contends that it was not provided with the "Letter Agreement" until after the commencement of this action in CMG's reply papers, dated March 12, 2007, in further support of its order to show cause for a preliminary injunction and in opposition [*4]to Highbridge Ogden's cross motion to dismiss this action. The court did note in its decision at that time that plaintiff failed to include a copy of or any reference to the "Letter Agreement" and the "Surrender Agreement" in its initial application; relevant facts germane to the issue in dispute. Thus, there exists a significant factual dispute over the alleged facts so the counterclaims and third-party claims should not be dismissed. Guggenheimer v Ginsberg, supra, at 275.

Finally, with respect to the affirmative defenses, it is premature to dismiss any of them at this juncture.[FN2] CLR 3018 (b) provides, in relevant part, that "[a] party shall plead all matters which if not pleaded would be likely to take the adverse party by surprise or would raise issues of fact not appearing on the face of a prior pleading..." Certain defenses, including affirmative defenses, must be pleaded in the answer or risk being waived. See generally CLR 3211.

Accordingly, both motions are denied in their entirety.

This constitutes the decision and order of the court.

___________________________

LARRY S. SCHACHNER, J.S.C.

Dated: August 3, 2007

Footnotes

Footnote 1:Dismissal of the second counterclaim is withdrawn by plaintiff as per the Reply Affidavit of Steven J. Shore, footnote 2.

Footnote 2:The Fifth Affirmative Defense, that the complaint is barred by the Statue of Limitations [Frauds] is withdrawn by defendant as per Highbridge Ogden's Memorandum of Law, footnote 16.