Shen v Signature Dev. Corp.

[*1] Shen v Signature Dev. Corp. 2009 NY Slip Op 52627(U) [26 Misc 3d 1202(A)] Decided on December 29, 2009 Supreme Court, Kings County Battaglia, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 29, 2009
Supreme Court, Kings County

Ziming Shen and Xiaoping Fan, Plaintiffs,

against

Signature Development Corporation, Anthony W. Wan, Sunset Park Capital, L.P.,W.F.I. Realty Company, a Division of W.F. International Group, Inc., W.F. International Group, Inc., Landmark Terrace Condominium, Thomas Sin, BPS Realty LLC, Star America, Inc., Star Center of New York, Inc. and Qing Sheng Wang, Defendants.



35803/04



Plaintiffs Ziming Shen and Xiaoping Fan were represented by David Lackowitz, Esq. of Gersten Savage, LLP. Defendants Signature Development Corporation, Anthony W. Wan, Sunset Park Capital, L.P., W.F.I Realty Company, a Division of W.F. International Group, Inc., W.F. International Group, Inc., Landmark Terrace Condominium, and Thomas Sin were represented by Kenneth Madden, Esq.

Jack M. Battaglia, J.

This is essentially an action for alleged breach of a contract for the sale of real property - - a commercial condominium unit and two parking spaces located at 880-884 60th Street, Brooklyn - - the "Landmark Terrace Condominium." With this motion, several of the named defendants seek an order, pursuant to CPLR 3212, "granting summary judgment . . . on the issue of liability on behalf of the [moving] defendants," and "to dismiss the plaintiffs' Complaint in its entirety as against said defendants" pursuant to CPLR 3211 (a) (5) and (a) (7). (Notice of Motion dated April 17, 2009.)

In their original 2001 Complaint (index no. 25728/01), plaintiffs Ziming Shen and Xiaoping Fan purport to allege three causes of action - - designated "fraud and deceit," "unjust enrichment," and "misappropriation of technical expertise and know how" - - against defendants Signature Development Corporation and Anthony W. Wan. In 2004, Plaintiffs commenced a second action (index no. 35803/04) with a Verified Complaint naming the two defendants in the prior action and nine additional defendants, i.e., Sunset Park Capital, L.P.; W.F.I. Realty Company, a Division of W.F. International Group, Inc.; W.F. International Group, Inc.; [*2]Landmark Terrace Condominium; Thomas Sin; BPS Realty LLC; Star America, Inc.; Star Center of New York, Inc.; and Qing Sheng Wang. The Verified Complaint purports to allege nine causes of action in 118 paragraphs - - designated "fraud and deceit," "unjust enrichment," "misappropriation of the plaintiffs' know how and expertise," "breach of contract," "breach of a covenant of good faith and fair dealing," "tortious interference with plaintiffs' contractual relations," "tortious interference with plaintiffs' prospective economic advantage," "ejectment," and "specific performance."

With a Consolidation Order dated June 24, 2005, Hon. David I. Schmidt consolidated the two actions "for all purposes," and directed the Clerk to consolidate the file of the 2001 action into the file of the 2004 action. The pleadings in each action were ordered to "stand as the pleadings in the consolidated action." The moving Defendants, i.e., Signature Development, Anthony W. Wan, Sunset Park Capital, W.F.I. Realty, W.F. International Group, Landmark Terrace Condominium, and Thomas Sin, answered the original Complaint and the subsequent Verified Complaint, as applicable, asserting affirmative defenses including statute of frauds and statutes of limitations. The parties refer to the moving Defendants as the "Signature Defendants," and so will the Court.

It is worth noting that, although the Verified Complaint names W.F.I. Realty and W.F. International Group as defendants, none of the alleged causes of action are asserted against them, but neither Defendant seeks dismissal on that ground. Of the Signature Defendants, the two "tortious interference" causes of action are asserted only against defendant Thomas Sin. Those causes of action are the only causes of action asserted against the non-moving Defendants, i.e., BPS Realty, Star America, Star Center of New York, and Qing Sheng Wang; and only defendant BPS Realty is the subject of the "ejectment" cause of action. The non-moving Defendants did not file opposition or otherwise appear on the pending motion.

The Signature Defendants seek dismissal of the action as against them based upon two foundational contentions: first, "as there is no written contract of sale between the parties concerning the subject real property transaction in dispute, the plaintiffs' action is fatally flawed pursuant to the strict requirements of the Statute of Frauds," General Obligations Law §5-703; and second, "as the plaintiffs' primary cause of action sounding in breach of contract cannot be sustained, the plaintiffs' numerous ancillary causes of action similarly fail as the same are not only entirely devoid of merit but the underlying basis for these claims remains the flawed breach of contract claim." (Affirmation in Support of Defendants' Motion for Summary Judgment ["Affirmation in Support"], ¶ 2.)

As alleged in the Verified Complaint: Plaintiffs are "directors" of Red Apple Development Center, Inc., "the largest operator of children's day care schools within the City of New York" (¶13); on March 1 and 2, 2001, plaintiff Ziming Shen met with defendant Anthony W. Wan, President of defendant Sunset Park Capital, sponsor of defendant Landmark Terrace Condominium, and they agreed to the purchase and sale of a commercial condominium unit and two parking spaces (later designated as Unit 1A and P4 and P5, respectively) for a purchase price [*3]of $1,180,000; on May 7, Mr. Wan faxed a letter to Mr. Shen concerning the proposed transaction, the complete text of which is provided below; on May 8, Mr. Shen "faxed the letter back to Mr. Wan with his own signature and the words o.k. to proceed for contract of sale' written on the face of the document" (¶39); although "Shen, at all relevant times, was . . . ready, able, and willing to perform in accordance with the terms of the May 7th fax letter" (¶46), on June 20, Mr. Wan informed Mr. Shen that "Wan was cancelling their deal and that the day care facility premises at the Landmark Terrace property were no longer for sale" (¶45); and the condominium was sold to Plaintiffs' "chief competitor in the child day care business" (¶48) for $1,200,000 with only one parking space.

Also according to the Verified Complaint, as a result of the negotiations on March 1 and 2, the space was "thoroughly redesigned" (¶25); and "[i]n reliance on the agreement reached on March 2," one or both Plaintiffs "visited the job site, on more that twenty occasions, to supervise all details concerning the day care facility's construction, including . . . all . . . details of the day care center's decoration and design" (¶31.)

In their Fourth Cause of Action, Plaintiffs contend that the Signature Defendants (designated "Sunset defendants" in the Verified Complaint) "breached their agreement with the plaintiffs, as constituted in the exchange between the parties of copies of the May 7, 2001 faxed Sale Contract Summary Letter, to enter into a formal contract of sale with plaintiffs respecting the children's day care facilities at the Landmark Terrace Condominium" (¶96.) In their Ninth Cause of Action, Plaintiffs assert that, "upon a judgment of ejectment being entered against" the non-moving Defendants, "plaintiffs will be entitled to specific performance . . . of the terms of the May 7, 2001 faxed Sale Contract Summary Letter" (¶118.)

The May 7, 2001 letter is on the letterhead of Signature Development Corporation, and is signed by Anthony W. Wan, President; it is addressed to Mr. Shen at Red Apple Child Development Center. The letter reads in its entirety:

"RE:Day Care Center (Unit 1A) and Parking Space P4 & P5Landmark Terrace Condominium880 60th Street, Brooklyn, NY 11220

Dear Jimmy:

This letter summarizes the terms and the conditions pertaining to the sale of the above referenced premises:

1. Purchase price shall be $1,180,000

2. Subject to mortgage no more than $826,000

3. Closing shall be on or about July 15, 2001

4. Down payment payable at contract signing: 10% of the sellingprice

5. Purchaser shall be responsible for the following expenses:

1. New York State and City Transfer taxes2. Survey Fee: $75[*4]3. Legal and Filing Fee for obtaining the 421A tax abatement:$450

4. Legal Fee for the Sponsor's attorney: $450

Security window guard and front door rolling gate are not included in the sale. If there is any special arrangement, please kindly have your attorney contact the undersigned or our counsel, Mr. Thomas Mahoney. Mr. Mahoney can be reached at 718 898-9400. Upon the clarification of understanding, we would like to forward to you the contract of sale for execution.

Thank you very much for your cooperation."

The parties do not attempt to explain the relationships between and among the Signature Defendants as "seller," nor do they identify the person(s) or entity as putative "buyer." The parties' respective submissions on this motion ascribe no significance to such matters, and neither will the Court.

Also, although, as described, Plaintiffs allege that Mr. Shen responded to the May 7 letter with his own signature and the written words "o.k. to proceed for contract of sale," and Mr. Shen testified to his response at his deposition (Examination Before Trial of Ziming Shen ["Shen Deposition"], Exhibit G to Affirmation in Support, at 41), Mr. Wan asserts in an affidavit submitted in support of the motion that "Signature never received such a counter-signed letter" (Affidavit of Anthony W. Wan in Support of Defendants' Motion for Summary Judgment ["Wan Affidavit"], ¶ 16.) Since the Signature Defendants assume for purposes of this motion that Mr. Shen did sign and return the May 7 letter (Affirmation in Support, ¶ 24), so will the Court.

On this motion, the Signature Defendants contend that "not only was a formal written contract of sale never entered into between the moving defendants and plaintiffs, but also no agreement was ever reached with respect to several essential terms of the subject real property transaction including the terms of financing." (Id., ¶ 4.) Specifically, "there was never any agreement between the parties regarding the amount of secondary financing, whether such secondary financing would be provided, and as to how such financing would ever be paid back." (Id., ¶48.)

The applicable Statute of Frauds provides: "A contract for the leasing for a longer period than one year, or 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, or by his lawful agent thereunto authorized in writing." (General Obligations Law § 5-703 [2].) "The Statute of Frauds was designed to guard against the peril of perjury; to prevent the enforcement of unfounded fraudulent claims." (Cohon & Co. v Russell, 23 NY2d 569, 574 [1969].)

Although "[t]he writing is not itself the agreement, but evidence of it" (see Read v Henzel, 67 AD2d 186, 188 [4th Dept 1979]), and the question of whether there is a sufficient "note or memorandum" to satisfy the Statue of Frauds is, strictly speaking, a different question [*5]from whether the parties have reached a "meeting of the minds" sufficient to make a contract (see Amorge v Kane, 244 NY 395, 398 [1927]; Robinson v Sweeney, 301 AD2d 815, 818 [3d Dept 2003]), the questions are often merged in the caselaw (see Chan v Shew Foo Chin, 67 AD3d 471, 471 [1st Dept 2009]; Nesbitt v Penalver, 40 AD3d 596, 598-99 [2d Dept 2007]; Frankel v Ford Leasing Dev. Co., 7 AD3d 757, 757 [2d Dept 2004]; Ramos v Lido Home Sales Corp., 148 AD2d 598, 599 [2d Dept 1989]; Jaffer v Miles, 134 AD2d 572, 573 [2d Dept 1987].)

It is now said, "To satisfy the statute of frauds, a memorandum evidencing a contract and subscribed by the party to be charged must designate the parties, identify and describe the subject matter, and state all of the essential terms of a complete agreement." (Behrends v White Acre Acquisition, LLC, 54 AD3d 700, 701 [2d Dept 2008] [quoting Walentas v 34-45 Front Street Co., 20 AD3d 473, 474 (2d Dept 2005)]; see also Nesbitt v Penalver, 40 AD3d at 597-98.) "The essential terms' which should be set forth for the writing to be enforceable include those terms customarily encountered in transactions of this nature'." (Id. at 598 [quoting O'Brien v West, 199 AD2d 369, 370 (2d Dept 1993)].) "To satisfy the Statute of Frauds, the writing must set forth the entire contract with reasonable certainty so that the substance thereof appears from the writing alone." (O'Brien v West, 199 AD2d 369, 370 [2d Dept 1993].) "Parol evidence may not be received to supplement an insufficient writing so as to bring it into compliance with the requirements of the Statute of Frauds." (Id.)

The "essential terms" include "the required financing" (see Nesbitt v Penalver, 40 AD3d at 598), mortgage terms generally and for purchase - money mortgages (see Wilmot v Giarraputo, 5 NY2d 250, 253-54 [1959]; Red Hook Marble, Inc. v Hershkowitz v Rosenberg, 15 AD3d 560, 561 [2d Dept 2005]; Wacks v King, 260 AD2d 985, 987 [3d Dept 1999]; Bhutta Realty Corp. v Sangetti, 165 AD2d 852, 853-54 [2d Dept 1990]; Tetz v Schlaier, 164 AD2d 884, 885 [2d Dept 1990] ["issues related to a mortgage are often deemed material"]; Jaffer v Meles, 134 AD2d at 573; Read v Henzel, 67 AD2d at 189.)

Provisions as to financing may not be "essential terms," however, "depending on the factual circumstances of the particular case," and "whether or not . . . unspecified terms were indeed considered material by the parties" for purposes of the Statute of Frauds must at times be resolved at trial. (See Atai v Dogwood Realty of NY, 24 AD3d 695, 698-99 [2d Dept 2005].) And so, where the writing specifies an "all cash" transaction, "any need to agree on terms concerning financing" is "eliminat[ed]" (see id. at 698); where "there is no mortgage contingency contained" in the writing, "the terms of the mortgage cannot be considered material" (see F & S Pharmacy, Inc., v Dandra Realty Corp., 302 AD2d 204, 205 [1st Dept 2003]); and where "the seller is not required to offer a purchase - money mortgage and the buyer is not required to accept it, terms of the contract relating to a purchase - money mortgage should not be considered material" (see Marder's Nurseries, Inc. v Hopping, 171 AD2d 63, 74 [2d Dept 1991].)

Here, plaintiff Ziming Shen testified repeatedly at his deposition that, although $200,000 was requested, defendant Anthony W. Wan agreed to $100,000 in secondary financing, and more was open to negotiation. (See Shen Deposition at 27-28, 35, 37, 40.) And so: [*6]

"He said he can finance one hundred thousand and then I said maybe it's not enough. We need a little more. He said we talk of this later but yes, one hundred thousand." (Id. at 40.)

When asked whether application was ever made to a bank for the "first mortgage" of approximately $800,000, Mr. Shen replied, "not yet, because we don't have the contract or details yet." (Id. at 28.) Mr. Shen acknowledged that Mr. Wan's commitment for secondary financing is not reflected in any writing. (Id. at 42.)

Neither Mr. Wan's deposition testimony (see Examination Before Trial of Anthony Wan ["Wan Deposition"], Exhibit F to Affirmation in Support), nor the affidavit he submits in support of this motion (see Wan Affidavit) addresses Mr. Shen's assertion that $100,000 in secondary financing was agreed to. Mr. Wan states only that neither $180,000 (id., ¶ 8) nor $200,000 (id., ¶ 21) would be loaned. To a degree, however, he supports Mr. Shen's version in that, at the March 2 meeting, he "advised Shen that we would have to consult legal counsel and study the economic feasibility of secondary financing." (Id., ¶ 8.)

According to Mr. Wan, the negotiations over secondary financing continued to June 6. "Shen and Red Apple continued to insist on obtaining a second mortgage from Signature in the amount of $200,000, an amount that Signature was not prepared to loan." (Id., ¶21.) A formal contract of sale was never prepared; "[a]s we ultimately never reached understanding as to . . . essential terms of this proposed transaction with Shen and Red Apple, . . . none was ever warranted." (Id., ¶15.) "[H]aving reached an impasse with Red Apple over the terms of sale, primarily over the issue of the second mortgage, Sunset and Signature decided not to proceed with the transaction with Shen." (Id., ¶22.)

The Signature Defendants have established prima facie that they are entitled to judgment as a matter of law on their Statute of Frauds defense with evidence that secondary financing was an "essential term" of this transaction, which was not included in the May 7 writing, and that the parties did not reach a meeting of the minds on the question of secondary financing. Even if only Mr. Shen's deposition testimony were considered, the seller agreed to provide $100,000 in secondary financing, which was not reflected in the May 7 writing, and negotiations were continuing for a greater amount, with the clear implication that sufficient secondary financing was needed from the seller for the transaction to be consummated.

In opposition, Plaintiffs assert that secondary financing "was not - and could not have — been deemed material" to this transaction. (Plaintiffs' Memorandum of Law In Opposition to Signature Defendants' Motion for Summary Judgment [Plaintiffs' Memorandum of Law"], at 13.) "[O]nce the parties reached agreement on the purchase price and on the down payment, which agreement took place upon Mr. Shen's counter-signing and accepting the Signature Defendants' May 7th offer that defined the Plaintiffs' obligations, nothing further with respect to financing could have been considered material." (Id.) But even if the May 7 writing is deemed to constitute the parties' contract, rather than a memorandum of the parties' oral agreement - - a contention that Plaintiffs support with neither explanation nor authority - - the writing must still [*7]pass muster under the Statute of Frauds in order to be enforceable. (See, for example, Behrends v White Acre Acquisitions, LLC, 54 AD3d at 701 ["two contracts for the sale of real property"]; Frankel v Ford Leasing Dev. Co., 7 AD3d at 757 ["letter . . . executed by the plaintiff . . . and by a real estate agent for the defendant"].)

Plaintiffs submit no affidavit asserting that secondary financing was not "material" to this transaction, or, in effect, that they were willing to proceed with the purchase on the terms stated in the May 7 writing without any secondary financing, and expressed that to Mr. Wan. Plaintiffs do not dispute any statement in Mr. Wan's affidavit, or point to any other evidence on this motion, that would raise a triable issue as to whether secondary financing was an "essential term" of this transaction. Plaintiffs fail to point to any evidence that a meeting of the minds was reached on the question of secondary financing, nor do they even address the absence from the May 7 writing of any reference to the $100,000 that Mr. Shen testified was agreed to.

Plaintiffs' Fourth and Ninth Causes of Action in the Verified Complaint, therefore, designated "breach of contract" and "specific performance," respectively, must be dismissed. Plaintiffs' Fifth Cause of Action, designated "breach of a covenant of good faith and fair dealing," must also be dismissed, since the covenant is alleged to be "implied in the terms of [the Signature Defendants'] agreement with the plaintiffs, as constituted in the exchange between the parties of copies of the May 7, 2001 faxed Sale Contract Summary Letter." (Verified Complaint, ¶ 100.) The relief Plaintiffs seek for breach of the alleged covenant, including "lost profits . . . that they otherwise would have made through the operation of a Red Apple day care facility and school at the Landmark Terrace Condominium" (id., ¶ 103), cannot be obtained for breach of an implied term where the express contract is unenforceable.

The Signature Defendants seek dismissal also of the First, Second, Third, Sixth and Seventh Causes of Action, to the extent asserted against any one of them, on the ground that "the underlying basis for these claims remains the flawed breach of contract claim." (Affirmation in Support, ¶ 13.) Taking the claims in the order in which they appear in the Verified Complaint, Defendants' contention is overstated.

With respect to the First Cause of Action in the Verified Complaint, designated "fraud and deceit," as is the First Cause of Action in the original Complaint, the Signature Defendants rely upon the "well-established principle that a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated." (See Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 389 [1987].) "This legal duty must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract." (Id.) "A cause of action to recover damages for fraud does not lie where the only fraud claimed related to an alleged breach of contract." (Halliwell v Gordon, 61 AD3d 932, 934 [2d Dept 2009].) "[A] cause of action premised upon fraud cannot lie where it is based on the same allegations of the breach of contract claim." (Heffez v L & G Gen. Const., Inc., 56 AD3d 526, 527 [2d Dept 2008].) "The requirement of a writing may not be circumvented by recasting the action as one seeking [*8]damages in tort." (Brown v Brown, 12 AD3d 176, 177 [1st Dept 2004].)

Plaintiffs allege that Mr. Wan falsely represented to Plaintiffs that the Signature Defendants would sell the property to them, knowing that Plaintiffs "had great expertise in the construction and design of children's day care facilities," so as to "induce plaintiffs to enhance the value of the Landmark Terrace Condominium" for the benefit of Defendants, with "no intention of consummating the deal with Shen if, in the interim, due to the enhanced value of the day care facility, a third party made a better offer for those premises." (Verified Complaint, ¶ 70-72.) Plaintiffs further allege that they "justifiably relied" upon Mr. Wan's representations "in providing free services . . . in connection with the construction of the children's day care facility" at the Landmark Terrace Condominium that "increased the potential commercial value of the premises for the [Signature Defendants] in connection with any sale of the premises to a third party." (Id., ¶ ¶ 69, 75.)

The allegations of the original Complaint are essentially the same: the Signature Defendants "entered into an agreement they had no intention of keeping in order to induce the plaintiffs into upgrading the design of the building, which the plaintiffs only did because they thought the property was theirs," "invest[ing] a substantial amount of time and effort fashioning the building into a day care center they intended to operate in a market they had already established." (Complaint, ¶ ¶ 35, 39.)

To the extent that the Signature Defendants contend that the alleged "fraud and deceit" claim must be dismissed because "the pleading fails to state a cause of action" (see CPLR 3211 [a] [7]) in that "the only fraud claimed relates to an alleged breach of contract" (see Halliwell v Gordon, 61 AD3d at 934), the Court disagrees. "On a motion to dismiss pursuant to CPLR 3211 (a) (7), the court must afford the pleadings a liberal construction, accept the allegations of the complaint as true, and provide the plaintiff the benefit of every possible legal inference." (Halliwell v Gordon, 61 AD3d at 933.) "Initially, 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 a motion for dismissal will fail." (Pacific Carlton Dev. Corp. v 752 Pac., LLC, 62 AD3d 677, 679 [2d Dept 2009] [quoting Guggenheimer v Ginzburg, 43 NY2d 268, 275 (1977)].) "[T]he court's function is to determine whether the plaintiff's factual allegations fit within any cognizable legal theory . . . , without regard to whether those allegations ultimately can be established." (Union State Bank v Weiss, 65 AD3d 584, 585 [2d Dept 2009].)

Other than their conclusory statements that the alleged "fraud and deceit" claim, as well as the alleged claims for "unjust enrichment" and "misappropriation," have the same "underlying basis" as the "flawed breach of contract claim" (Affirmation in Support, ¶ ¶ 3, 53, 59; Memorandum of Law in Support of Motion for Summary Judgment Pursuant to CPLR §3212 ["Defendants' Memorandum of Law"], at 7-12), the Signature Defendants make no showing that the allegations of the Complaint and Verified Complaint are in any way dependent upon proof of the elements of a contract claim. The Court cannot say as a matter of law on this record that the [*9]pleading does not state a viable cause of action for "fraud and deceit."

To the extent that the Signature Defendants seek summary dismissal of the "fraud and deceit" claim on evidentiary grounds pursuant to CPLR 3212, Defendants address that claim together with the "unjust enrichment" and "misappropriation" claims (Affirmation in Support, ¶ ¶ 60-68), and the Court will do likewise.

As to the alleged "unjust enrichment," the Second Cause of Action in both the original Complaint and the Verified Complaint, Plaintiffs allege that "[b]ecause of the plaintiff's expertise and know how, the current design" of Unit 1A "has an increased day care capacity of 14 children," and the "day care facility is now able to generate, at least, an additional $9,520.00 per month, which totals $114,240.000 per year" (Verified Complaint, ¶ ¶ 80-82); that "provision by the plaintiffs of their know-how and expertise is valuable and is worth, at least . . . $120,000.00" (id., ¶ 85); and that Plaintiffs "further provided (together) over 50 hours of service supervising the construction and decoration of the site," and "the worth of [such] services . . . is at least $50,000" (id., ¶ 86.)

"The existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter." (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d at 388 [emphasis added].) "A quasi contract' only applies in the absence of an express agreement, and is not really a contract at all, but rather a legal obligation imposed in order to prevent a party's unjust enrichment." (Id.) But where a contract fails because there is no meeting of the minds, or enforcement is precluded by the Statute of Frauds, recovery may still be had in appropriate cases on theories of quasi-contract and unjust enrichment. (See Farash v Sykes Datatronics, 59 NY2d 500, 503-04 [1983]; Paul F. Vitale v Parker's Grille, 23 AD3d 1147, 1147 [4th Dept 2005]; Grimes v Kaplan, 305 AD2d 1024, 1024 [4th Dept 2003]; Kennedy v Leibowitz, 303 AD2d 375, 375-76 [2d Dept 2003]; Moors v Hall, 143 AD2d 336, 337 [2d Dept 1988]; Aluminum Fair v Abdella, 90 AD2d 603, 603 [3d Dept 1982]; Grossberg v Donald H. Licensing Corp., 86 AD2d 565, 565-66 [1st Dept 1982].) There is no exception for transactions related to real property. (See Farash v Sykes Datatronics, 59 NY2d 500; Kennedy v Leibowitz, 303 AD2d 375.)

"To make out a claim in quantum meruit, a claimant must establish (1) the performance of the services in good faith, (2) the acceptance of the services by the person to whom they were rendered, (3) an expectation of compensation therefor, and (4) the reasonable value of the services." (Miranco Contr., Inc. v Perel, 57 AD3d 956, 957-58 [2d Dept 2008].) For example, where the owner of a building performed certain work in the building pursuant to an oral lease that could not be enforced by reason of the Statute of Frauds, the owner was permitted to seek recovery "for the value of the work performed . . . in reliance on statements by and at the request" of the prospective lessee. (See Farash v Sykes Datatronics, 59 NY2d at 503.)

Here, again, the Signature Defendants make no showing that Plaintiffs' "unjust enrichment" claim cannot be sustained as a matter of pleading, and the Court is not prepared to [*10]say that, as a matter of law, "the pleading fails to state a cause of action" (see CPLR 3211 [a] [7].)

As to the claim for "misappropriation," the Third Cause of Action in the original Complaint and the Verified Complaint, Plaintiffs "repeat" their prior allegations and assert that the Signature Defendants "utilized the plaintiffs' expertise and know how for their pecuniary gain under false pretenses," and "stole the plaintiffs' valuable expertise and know - how by defrauding them into an agreement the defendants never intended to keep." (Verified Complaint, ¶ ¶ 90, 92.) Although neither the original Complaint nor the Verified Complaint expressly alleges the appropriation of any "secret" or otherwise proprietary information, the Signature Defendants treat the claim as one for misappropriation of trade secrets (Affirmation in Support, ¶ ¶ 67, 68; Defendants' Memorandum of Law, at 10-11), and the Court will do likewise.

As such, Plaintiffs have alleged that "a legal duty independent of the contract itself has been violated" (see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d at 389), and the Plaintiffs' misappropriation claim also survives attack pursuant to CPLR 3211 (a) (7). Generally, "a trade secret . . . [is] any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it'." (Ashland Mgt. v Janien, 82 NY2d 395, 407 [1993] [quoting section 757 of Restatement of Torts, comment b].) "[A] trade secret must first of all be secret; whether it is is generally a question of fact." (Id.)

Pursuant to CPLR 3212, the Signature Defendants attack the "fraud and deceit," "unjust enrichment," and "misappropriation" claims as a matter of proof with the affidavit of defendant Wan, asserting that any "layout modifications" made in response to Mr. Shen's suggestions "were only a good faith effort on our part to accommodate Shen as a prospective purchaser," as "[a]t this time, we were certainly hopeful that our efforts would result in the consummation of the transaction" (Wan Affidavit, ¶ ¶ 9, 10); and that "[g]iven the amount of additional costs and expenses incurred by Signature in connection with the layout changes requested by Shen and undertaken by Signature, needlessly, during the negotiations with Shen, we certainly did not earn any additional profit by proceeding" with BPS Realty (id., ¶ 24.) Moreover:

"Signature never retained plaintiffs to provide any supervisory services during the construction or decoration of the day-care center. Signature never authorized or asked Shen or his wife to supervise the construction or decoration of the day-care center. Shen may have stopped by the construction site from time to time, or may have been informed by Signature, from time to time, as to the progress of the construction, but such access and information were provided by Signature solely at the request of and as a courtesy to Shen and Red Apple as prospective buyers. . . . All decisions with respect to the design, decoration, and construction of all Landmark units including Unit 1A were made exclusively by Signature.

At no time did Shen or anyone at Red Apple ever provide Signature with anything resembling confidential trade secrets or information relating to operating or designing a day-care [*11]center. Unit 1A had been already been designed as a day-care center by Signature's architect C.H. Tan prior to the commencement of negotiations with Shen. Signature incurred extra financial costs to implement Shen's requested changes such as additional architect costs, additional costs to obtain further approval for the new plans from the Department of Buildings, and additional costs to alter the infrastructure such as the plumbing, electrical and framing. These changes suggested by Shen consisted solely of the repositioning of the kitchen, second floor bathroom and the resizing of the common area. These suggestions were not novel ideas or anything unusual; they were customary layout changes. Shen made these suggestions voluntarily to me and the Signature architect, C.H. Tan, without having entered into a contract of sale, without ever indicating that he considered such layout changes proprietary information, and without ever asking that I or anyone else at Signature sign any type of non-disclosure or confidentiality agreement." (Id., ¶ ¶ 26, 27.)

Mr. Wan also asserts that "the credit-worthiness and financial capacity of Red Apple became important factors for Signature to consider in proceeding with the transaction," and "[a]fter evaluating all the business risks and having reached an impasse with Red Apple over the terms of sale, primarily over the issue of the second mortgage, Sunset and Signature decided not to proceed with the transaction with Shen and commenced negotiations with another prospective buyer." (Id., ¶ ¶ 20, 22.)

The assertions in Mr. Wan's Affidavit are sufficient to establish prima facie that the Signature Defendants are entitled to judgment as a matter of law on Plaintiffs' "fraud and deceit" cause of action, but they are not sufficient to establish prima facie that Defendants are entitled to judgment as a matter of law on either Plaintiffs' "unjust enrichment" or "misappropriation" cause of action. Mr. Wang's assertions as to the value of the services and information admittedly provided by Plaintiffs are somewhat belied by the financial costs incurred to implement them without the assurance of a signed contract, and, more importantly, Mr. Wang is not shown to have the expertise to imbue his opinions with material probative value. Although defendant Qing Sheng Wang, alleged to be the president of defendants BPS Realty, Star America, and Star Center of New York, was also deposed (see Affirmation in Support, Exhibit H), no testimony of his on these issues is cited by the Signature Defendants.

In any event, the allegations of the Verified Complaint, verified by plaintiff Shen (see CPLR 105 [u]), with the deposition testimony of plaintiff Shen and plaintiff Xiaoping Fan (Transmittal Affirmation in Opposition to Signature Defendants' Motion for Summary Judgment, Exhibit C) would raise triable issues as to the "unjust enrichment" and "misappropriation" claims. The Court notes specifically plaintiff Fan's testimony that she supervised the work on Unit 1A at Mr. Wan's request (id. at 22 ["You go there and supervise the place"].)

On the other hand, Plaintiffs' opposition is insufficient to raise triable issues on the "fraud and deceit" claim. Even if "[t]here remains an issue of fact as to what role, if any, was played by the Plaintiffs in connection with the build-out" (Plaintiffs' Memorandum of Law, at 18), Plaintiffs point to no evidence to support their allegation that the Signature Defendants [*12]fraudulently and deceitfully induced their participation.

Plaintiffs' First Cause of Action for "fraud and deceit," as asserted in the Complaint and Verified Complaint, therefore, must be dismissed.

Finally, the Signature Defendants move pursuant to CPLR 3211 (a) (5) for dismissal of the "tortious interference" claims against defendant Thomas Sin, on the ground that they are barred by the statute of limitations. Mr. Sin is alleged to be a real estate broker/agent employed by W.F.I. Realty. Plaintiffs allege that Mr. Sin "knew or understood that Wan and Shen had agreed to all of the material terms of an agreement for the sale to Shen of the day care facility premises at Landmark Terrace Condominium" (Verified Complaint, ¶ 56); that Sin "planned to cut-out [another agent] and obtain for himself the commission due from the sale of the day care facility premises, by upsetting the deal between Shen and Wan" (id., ¶ 59); that Mr. Sin "did in fact act to upset the deal between Shen and Wan" (id., ¶ 60); and that Mr. Sin "wrongfully acted, both individually and in concert" with the Star Defendants (id., ¶ 106, 110.)

The Court notes, in the first instance, that the Signature Defendants make no showing on behalf of defendant Sin as to the statute of limitations applicable to a claim for tortious interference with prospective economic advantage, Plaintiffs' alleged Seventh Cause of Action, nor do they make any showing that Plaintiffs' allegations do not provide a cognizable basis for relief if proved. (Affirmation in Support, ¶ ¶ 69-73; Defendants' Memorandum of Law, at 12-13.) Mr. Sin is not entitled, therefore, to dismissal of the Seventh Cause of Action.

The Signature Defendants do contend that, even apart from the statute of limitations, the Sixth Cause of Action for "tortious interference with Plaintiffs' contractual relations" must fail. "The elements of a claim of tortious interference with contractual relations are: (1) a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of that contract; (3) the defendant's intentional inducement of the third party to breach or otherwise render performance impossible; and (4) damages to the plaintiff resulting therefrom." (Pacific Carlton Dev. Corp. v 752 Pac., LLC, 62 AD3d at 679.) "[T]he degree of protection available to a plaintiff for a . . . tortious interference with contract is defined by the nature of the plaintiff's enforceable legal rights." (NBT Bancorp v Fleet/Norstar Fin. Group, 87 NY2d 614 621 [1996].)

Here, the Court has determined that Plaintiffs have no "enforceable legal rights" under any contract with any of the Signature Defendants. Indeed, Plaintiffs acknowledge in opposition that "[a] judgment against Sin inherently implies the finding of a binding agreement." (Plaintiffs' Memorandum of Law, at 19.) Plaintiffs' alleged Sixth Cause of Action, therefore, "fails to state a cause of action." (See CPLR 3211 [a] [7].)

In sum, the motion of the Signature Defendants is granted to the extent only that the First Cause of Action alleged in the original Complaint, and the First, Fourth, Fifth, Sixth, and Ninth Causes of Action alleged in the Verified Complaint, are dismissed. The motion is otherwise denied. [*13]

December 29, 2009____________________

Jack M. Battaglia

Justice, Supreme Court