Smith v Smith
Annotate this CaseDecided on November 5, 2010
Supreme Court, New York County
Norma Smith, Plaintiff,
against
David Smith, Defendant.
112654/09
For the Plaintiff
Aaron Richard Golub, Esq.
42 East 64th Street
New York, NY 10065
(212) 838-4811
For the Defendant
Robert Stephan Cohen, Esq.
Cohen Lans LLP
885 Third Avenue, 32nd Floor
(212) 980-4500
Matthew F. Cooper, J.
The parties in this plenary action divorced in 2008 after being married for 27 years. Plaintiff ex-wife alleges that the separation agreement that she entered with her ex-husband in anticipation of their divorce ("the Agreement") was conceived in a shroud of fraud and concealment. She points to what she describes as the "deliberate and intentional" failure on the part of defendant ex-husband to disclose assets worth many millions of dollars. Plaintiff contends that it was only after the divorce was finalized that she inadvertently learned of the undisclosed assets. Her complaint sets forth various causes of action that allege in one form or another that defendant cheated her out of assets to which she was entitled in the divorce under equitable distribution.The complaint also pleads a cause of action for breach of contract based on plaintiff's assertion that defendant must indemnify her for a tax deficiency for which he is responsible.
Defendant moves pursuant to CPLR 3211(a) to dismiss the complaint. His basic argument is that
plaintiff is precluded from claiming any concealment of assets or failure to disclose on his part because
she waived all financial discovery when she entered the Agreement and because the Agreement itself
contains numerous releases and the waivers. Plaintiff cross-moves for an order granting leave to amend
the complaint to add an additional cause of action. She also seeks an award of interim attorney's fees.
I. Background
The parties executed the Agreement on August 21, 2008. The Agreement, which was [*2]drafted by plaintiff's former counsel, resolved all aspects of the marriage and distributed the marital property between the parties. Plaintiff received sole ownership of the townhouse on the Upper East Side of Manhattan, as well as all personal property in the townhouse. She also received all property in the parties' flat in London, and the full balance of their joint bank accounts. Finally, plaintiff received, after distribution to defendant of the first $10 million, fifty percent of defendant's interests in the businesses that were listed in the Agreement.
A little more than a month after the Agreement was entered, the parties were divorced, with the judgment being signed on September 25, 2008. The Agreement was incorporated in the judgment by reference, but it survived as a separate enforceable contract that did not merge with the judgment of divorce.
In June 2009, plaintiff, by what she describes as either "chance or divine guidance," happened upon a trove of financial records that, we are told, defendant somehow left in the trunk of a car in London. According to plaintiff, these documents show that at the time the Agreement was negotiated and entered defendant had major assets that he failed to disclose to her. These include a house in California valued at over $10 million, an interest in a racehorse worth more than $1 million, and various luxury automobiles such as Bentleys and Land Rovers. Plaintiff also alleges that the documents found in the trunk of the car detail numerous offshore accounts and foreign business interests, all of which she claims were unknown to her. As a result of having found these documents, plaintiff, in September 2009, commenced this action by serving a complaint setting forth the following causes of action against defendant: fraudulent concealment, fraudulent misrepresentation and inducement, breach of fiduciary duty, negligent misrepresentation, contractual breach of the implied covenant of good faith and fair dealing, tortious breach of the implied covenant of good faith and fair dealing, unjust enrichment, conversion, and the imposition of a constructive trust and equitable lien. The complaint also contains a cause of action for breach of contract.
Plaintiff contends that the "car trunk records" demonstrate that defendant consciously concealed
marital assets prior to the divorce and made material misrepresentations in order to induce her to enter
the Agreement. Because of what she deems to be defendant's fraud, she seeks damages in excess of
$10 million on each cause of action and the imposition of a constructive trust or lien. With regard to the
cause of action for breach of contract, plaintiff seeks to have defendant pay any tax deficiency
assessment imposed against her and the legal fees she will incur in connection with the tax matter.
Defendant contends that there was never any concealment or misrepresentation of any kind and that
plaintiff waived financial discovery simply because the Agreement gave her the deal that she wanted by
providing her with the lion's share of the marital property. [FN1]
II. The Separation Agreement
[*3]Pursuant to the Agreement, the parties settled
"their respective financial, property and estate rights and obligations arising out of their marriage and
their acquisition of property during their marriage," in lieu of their respective rights under the Domestic
Relations Law. In the Agreement, the parties acknowledged that they were each fully represented by
independent counsel of their choice and were fully and independently advised of their legal rights and
obligations, including their right "to compel further financial disclosure from the other and to further
review the financial interests, both personal and business, of the other . . ." They additionally
acknowledged that they relied upon the advice of their respective attorneys and professional financial
experts in negotiating and entering into the Agreement; that they entered into the Agreement freely and
voluntarily without fraud, coercion or duress; that they were apprised of the other's property, assets,
holdings, income, expenses and liabilities; and, that they were satisfied with the Agreement and found it
fair and equitable. Notably, neither party sought to exchange statements of net worth or otherwise
demand financial discovery prior to executing the Agreement.
The Agreement also contains multiple waivers, disclaimers and releases. Pursuant to its terms, the
parties waived and/or released each other from: any right to allege reliance upon any representation,
promise, warranty or commitment in any action involving the Agreement; their right to compel any
additional financial disclosure from the other or to have financial investigators conduct further inspection
of the others' finances and/or property; all matters except for their respective rights, claims, and
obligations under the Agreement; all rights in the marital and separate property of the other, and
equitable distribution or a distributive award of marital property; all rights and interest in the real or
personal property or estate of the other; any right of election under the New York Estates, Powers and
Trusts Law; and all claims up to the date of the execution of the Agreement. In the Agreement, each
party stated that there were no representations or warranties of any kind made to induce the other to
enter into the Agreement and each acknowledged that he or she was not relying on any disclosure or
beliefs concerning the others' present or future finances, assets or income upon entering the Agreement.
Specifically, the Agreement states:
Each party also acknowledges that he/she is executing this Agreement freely and
voluntarily and not as the result of any fraud, coercion or duress. Each party further
acknowledges that he/she is not entering into this agreement on the basis of any representation,
promise, warranty or commitment, and specifically waives any right he/she may have to allege
any reliance upon any representation, promise, warranty or commitment in any action to alter, modify,
or set aside this Agreement or for other similar equitable or legal relief. Each party further
acknowledges that he/she is not relying on any disclosures or beliefs concerning the others' present
or future finances, assets, income, prospects or contracts in making arrangements provided herein.
(Emphasis added).
Article VI of the Agreement is entitled "Distribution of Marital Property." The Article details the
division of personal property, real property, trusts, and bank accounts. It also lists six business interests
in which defendant is an investor, and it sets forth the formula by which those interests are to be
distributed. Nowhere in Article VI, or for that matter anywhere else in the Agreement, does it state that
the assets that are being divided under the Agreement constitute all [*4]of the assets that each party owns, and in particular there is no
representation by the defendant that the six businesses are the only businesses in which he is an investor
and in which he has an interest. Instead, Article VI commences with reciprocal waivers, of which
defendant's reads:
The Husband acknowledges that he has no right, title or interest in and to any bank
accounts, brokerage accounts, money market accounts, retirement accounts, employee benefit plans,
loans receivable, securities, business interests, business ventures, partnerships, real estate or other
assets or property, whether real or personal, tangible or intangible except as provided below,
including without limitation, any licenses, degrees, enhanced earning capacity or goodwill, currently
or hereafter owned by the Wife, held in trust for the Wife, or held jointly by the Wife with any
other person or entity, or which is under the Wife's control.
(Emphasis added).
III. Discussion and Analysis
A. Plenary Action
Prior to addressing the merits of defendant's application, it must be noted that plaintiff's
commencement of a plenary action was the proper procedural mechanism to challenge the Agreement.
Pursuant to the terms of the parties' judgment of divorce, the Agreement was "incorporated in this
Judgment by reference, but shall survive and shall not be merged." The Agreement, therefore, survives
as a separately enforceable contract that may only be set aside by a plenary action so as to establish an
adequate record to properly evaluate plaintiff's claims of inequity, overreaching, and fraud. See
Granto v. Granto, 51 AD3d 589, 590 (1st Dept 2008); see also Frieland v. Frieland, 200
AD2d 484 (1st Dept 1994).
B. Defendant's Motion to Dismiss Those Causes of Action Other Than Breach of
Contract
Defendant's motion to dismiss pursuant to CPLR 3211(a) requires the court to balance the propensity of New York courts to uphold spousal agreements with plaintiff's allegations that the Agreement was the result of fraud and concealment on the part of defendant. Upon considering a motion pursuant to CPLR 3211(a), the court must afford the pleadings a liberal construction, "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory." Leon v. Martinez, 84 NY2d 83, 87-88 (1994). It is only where the factual allegations in the complaint are "flatly contradicted by documentary evidence" or consist of bare legal conclusions that they are not presumed to be true or accorded every possible favorable inference. Biondi v. Beekman Hill House Apt. Corp., 257 AD2d 76, 81 (1st Dept 1999); see CPLR 3211(a)(1,7). To succeed on a motion to dismiss based on documentary evidence, "dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." Leon, 84 NY2d at 88. Upon "assessing a motion under CPLR 3211(a)(7) . . . the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one.' " Id.,quoting Guggenheimer v. Ginzburg, 43 NY2d 268, 275 (1997). [*5]
The documentary evidence relied upon by defendant in support of this motion to dismiss is largely the Agreement itself and the terms contained therein. Defendant asserts that the waivers and releases in the Agreement provide a complete defense to all claims, particularly the nine causes of action sounding in fraud, misrepresentation, breach of fiduciary duty, and the like, as plaintiff waived her right to conduct further financial discovery that would have resulted in the disclosure of the property and business interests in question. Defendant also contends that the "no representations" clause in the Agreement conclusively establishes that plaintiff did not rely on any statement or other representation he may have made prior to the parties entering the Agreement. Defendant further maintains that even if these defenses were found not to be sufficient, plaintiff would nevertheless be estopped from attacking the validity of the Agreement, and in effect seeking to have it vacated, because she has already obtained significant benefits under its terms.
It is the general policy of New York courts to encourage litigants to resolve their actions through privately contracted agreements rather than judicial intervention. See McCaughey v. McCaughey, 205 AD2d 330 (1st Dept 1994); see also Martin v. Martin, 74 AD2d 419 (4th Dept 1980). Validly executed "separation agreements which are regular on their face are binding on the parties, unless and until they are set aside" by the court. Christian v. Christian, 42 NY2d 63, 72 (1977). Separation agreements entered between a husband and wife, however, are subject to heightened judicial scrutiny and are more readily set aside due to the fiduciary relationship that exists between spouses requiring the utmost good faith upon execution. Id. ("Equity is so zealous in this respect that a separation agreement [between spouses] may be set aside on grounds that would be insufficient to vitiate an ordinary contract"); see also Levine v. Levine, 56 NY2d 42, 47 (1982).
Despite this heightened scrutiny, it nevertheless remains true that "absent a showing of fraud,
duress, overreaching, or unconscionablity," courts will generally not modify or set aside the terms of a
separation agreement entered between spouses. Harding v. Naseman, 2009 WL 1953041, 20
(SDNY 2009); see Galasso v. Galasso, 35 NY2d 319 (1974)("stipulations of settlement are
favored by the courts and will not be set aside in the absence of fraud or overreaching"); see also
Christian, 42 NY2d 63; Kojovic v.
Goldman, 35 AD3d 65, 71 (1st Dept 2006), quoting Haynes v. Haynes, 200 AD2d
457 (1st Dept 1994), aff'd. 83 NY2d 954 (1994)(there is a strong presumption that a "
deliberately prepared and executed postnuptial agreement manifest[s] the true intention of the parties'
necessitating a high order of evidence . . . to overcome")(citations omitted). Furthermore, the general
presumption of validity of a separation agreement is especially true where the parties were both
represented by independent counsel upon the agreement's execution. See Harding, 2009 WL
1953041, 24 ("Claims of fraudulent concealment are particularly frowned upon in New York when
each party is represented by independent counsel during the negotiations and execution of a settlement
agreement"); Kavner v. Geller, 49 AD3d
281, 282 (1st Dept 2008)(Rejecting fraud claims where plaintiff "was an intelligent professional
separately represented by counsel in the negotiations in this adversarial proceeding, and chose to forgo
any discovery in the bankruptcy action, out of which arose the settlement of her claims seeking to
enforce the divorce judgment"); Markovitz v.
Markovitz, 29 AD3d 460, 461 (1st Dept 2006); DiSalvo v. Graff, 227 AD2d 298
(1st Dept 1996); Riemer v. Reimer, 31 AD2d 482, 485 (2d Dept 1969).
[*6]The causes of action set forth in the complaint
— specifically fraudulent concealment, fraudulent misrepresentation and inducement, breach of
fiduciary duty, negligent misrepresentation, contractual breach of the implied covenant of good faith and
fair dealing, tortious breach of the implied covenant of good faith and fair dealing, unjust enrichment,
conversion, and constructive trust/equitable lien — are each premised on the assumption that
either the defendant was under a duty to disclose all of his assets, that he affirmed that all of his assets
were addressed in the Agreement, or that his alleged untruthful and intentionally misleading statements
prior to the Agreement's execution were justifiably relied upon by plaintiff. The issue now confronting
the court is whether plaintiff, as a matter of law, has a valid claim under any of these theories despite the
Agreement's waivers and releases.
A valid release or waiver traditionally "constitutes a complete bar to the commencement of an
action which is the subject of that release." Such releases, however, may be set aside on the grounds of
"fraudulent inducement, fraudulent concealment, misrepresentation, mutual mistake or duress." Global Materials and Metals Corp., v.
Holme, 35 AD3d 93, 98 (1st Dept 2006). Particularly in situations where a fiduciary
relationship exists, as it does in the instant matter between spouses, fiduciaries are required to make "full
disclosure" (Birnbaum v. Birnbaum, 73 NY2d 461, 466 [1989]) by "disclos[ing] any
information that could reasonably bear on [the beneficiary's] consideration of [the fiduciary's] offer"
(Dubbs v. Stribling & Assoc., 96 NY2d 337, 341[2001]) which could otherwise not be
"discovered by the other party through reasonable diligence." Harding, 2009 WL 1953041,
23.[FN2] However, where
parties expressly waive any right to discovery, disclaim any reliance on a statement or representation by
the other party, and were represented by independent attorneys, courts are reluctant to retrospectively
amend and redesign an agreement that is fair on its face. See Christian, 42 NY2d at 72; see also Markovitz v. Markovitz, 29 AD3d
460 (1st Dept 2006)(upholding a separation agreement where the parties were "represented by
counsel of their choice, the parties and their lawyers negotiated the settlement agreement over several
months, the agreement was not unconscionable . . . and that they waived their right to financial
disclosure"); DiSalvo v. Graff, 227 AD2d 298 (1st Dept 1996)(finding no fraud lies where,
among other things, the petitioner "was represented by competent, independent counsel, who drafted
the agreement" and waived further disclosure of financial assets after an initial investigation).
In the instant case, while fully represented by a team of experienced matrimonial
[*7]attorneys, plaintiff waived her right to discovery of defendant's
finances, waived her right to request a statement of defendant's net worth, released defendant from any
future action sounding in fraud, and acknowledged that she did not rely on any statement concerning
defendant's finances or assets when she entered the Agreement. Numerous reasons come to mind why
plaintiff, after securing significant assets and cash under the Agreement, might choose to waive all her
rights to disclosure and discovery, going so far as to waive the exchange of net worth statements,
something that is de rigeur even in divorces where the finances are limited and straightforward. It is not,
however, for this court to speculate as to why plaintiff, with the assistance of counsel, would decide to
do what she did. At some point, where there is no evidence of overreaching or
unconscionablity, courts must recognize the freedom of parties to contract regardless of the prudence of
the bargain made, especially where both parties are represented by attorneys who are regarded as
experts in their fields. See Christian, 42 NY2d at 72 (holding that "courts should not intrude so
as to redesign the bargain arrived at by the parties on the ground that judicial wisdom in retrospect
would view one or more of the specific provisions as improvident or one-sided"). While there is a duty
for a fiduciary to disclose those assets that could not have been discovered through the exercise of
ordinary intelligence (see Jana L., 22 AD3d at 278), the fact remains that plaintiff decided not
to demand any financial disclosure whatsoever from defendant, although clearly having the resources
and wherewithal to conduct extensive discovery if she had chosen to do so. See Schumaker,
113 NY 590.
A thorough reading of the Agreement finds no provision containing, or even suggesting, a
representation by defendant that all his assets were addressed or included. Assuming the facts alleged in
the complaint are true and defendant did indeed make an oral representation that everything he owned
or in which he had an interest was included in the Agreement, the First Department has held that a "no
representations" clause bars a litigant from asserting that an oral promise modified the terms of a written
agreement. In Luftig v. Luftig (239 AD2d 225, 226-27 [1st Dept 1997]), the parties'
separation agreement stated that "this Agreement is entered into with neither party relying upon any
statement or representation, not embodied in this Agreement, made by the other." The Appellate
Division held that the ex-wife was barred from asserting that an oral promise modified the agreement
because of that clause, the overall fairness of the terms, the ex-wife's acceptance of benefits under the
agreement, and the parties' waiver of financial disclosure. In this case, the "no representations" provision
contained in the Agreement is even more explicit and comprehensive than that in Luftig v. Luftig.
The provision states:
Each party acknowledges that he/she is not entering this Agreement on the basis of any
representation, promise, warranty or commitment, and specifically waives any right he/she may have to
allege any reliance upon any representation, promise, warranty or commitment in any action to alter,
modify, or set aside the Agreement or for similar equitable relief.
Plaintiff may not claim that the Agreement was unfair, induced by fraud, or otherwise unconscionable as she not only disclaimed a lack of reliance on an oral representation, but she also waived her right to even the most basic discovery and disclosure, and beyond question received significant marital assets and other benefits under its terms. Moreover, it was plaintiff's counsel who drafted the Agreement. Just as a court will not disrupt an agreement simply because it represents a bad bargain for one side, it will not vacate an agreement where one side failed to [*8]do his or her due diligence and where no evidence of fraud or justified reliance on alleged misrepresentations can be found to exist.[FN3] Despite plaintiff's efforts to distinguish this case from Luftig, it is clear that the decision is applicable to the facts presented here.
In support of her assertion that the releases and waivers contained in the Agreement should not be given effect and that the Agreement itself should be vacated, plaintiff cites Chapin v, Chapin (12 AD3d 550 [2d Dept 2004]). In Chapin, the Second Department held that a marital settlement agreement could properly be set aside on the grounds of fraudulent inducement where the husband concealed the fact that he purchased hundreds of acres of waterfront property while orally affirming that he had virtually no assets. Unlike in Chapin, however, the plaintiff here waived financial discovery and both parties affirmed that they were not entering the Agreement in reliance on any contemporaneous oral representations.
Plaintiff also cites to the case of Danann Realty Corp. v. Harris (5 NY2d 317 [1959]), in
support of her argument that the Agreement's release and "no representations" clauses are invalid as
they do not specifically concern the allegedly concealed assets. In Danann, the Court of
Appealsstated that in a cause of action for fraud, "the parol evidence rule is not a bar to showing fraud .
. . despite an omnibus statement that the written instrument embodies the whole agreement, or that no
representations have been made." Id. at 321. Conveniently absent from plaintiff's analysis,
however, is any mention of the Danann court's holding that the "asserted reliance must be found
justifiable under all circumstances before a complaint can be found to state a cause of action in fraud."
Id. at 322. Quoting its earlier decision in Schumaker v. Mather, 133 NY 590 (1892),
the Court made clear that the general rule remains as follows:
If the facts represented are not matters peculiarly within the party's knowledge, and the
other party has the means available to him of knowing, by the exercise of ordinary intelligence, the truth
or the 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 into the transaction by misrepresentations.
While the Danann decision is important for its finding regarding specific versus
general "no representation" clauses, it is its reiteration of a party's duty to conduct basic discovery
where he or she has sufficient means to do so that carries the day. Here, plaintiff unquestionably had the
funds to conduct discovery of defendant's finances. Moreover, the Agreement specifically states that
"[e]ach party further acknowledges that he/she is not relying on any disclosures or beliefs concerning
the other's present or future finances, assets, income, prospects or contracts in making the
arrangements provided herein." This specific disclaimer — when combined with plaintiff's waiver
of discovery, representation by counsel, and "no representations" clause — can [*9]only be interpreted by this court as a waiver of all claims relating to
plaintiff's assets and statements. To hold otherwise would be to invalidate an otherwise valid agreement
and effectively declare that any waiver, release, or "no representations" clause is insufficient to bar
future litigation sounding in fraud.
Finally, plaintiff argues that Article VI, paragraph A.2., as quoted, supra , is an
affirmation by defendant that his entire estate — meaning all his property, holdings and business
interests — were set forth and included in the Agreement. Even a cursory reading of the
provision gives short shrift to this argument. This paragraph, rather than being an affirmation or
representation as to what defendant owns, is clearly an acknowledgment by defendant that, except as
specifically provided for in the Agreement, he has no right, title, or interest in anything owned by
theplaintiff.
Based on the above analysis, it must be concluded that defendant's documentary evidence conclusively establishes a defense to the causes of action contained in plaintiff's complaint that are based, in one form or another, on fraud and failure to disclose. Accordingly, defendant's motion to dismiss must be granted as to those causes of action.
III.Defendant's Motion to Dismiss the Cause of Action for Breach of Contract, and
Plaintiff's Cross-motion
Plaintiff's fourth cause of action for breach of contract is based on Article VII of the
Agreement, which states, in relevant part, that "the Husband represents, warrants and covenants that he
has not incurred and will not incur or contract any debt, charge, obligation or liability for which the Wife
. . . may become liable." Plaintiff alleges that defendant failed to file necessary tax documents and that
this will result in "potential back taxes, interest and penalty exposure, including counsel fees, costs, and
disbursements incidental thereto." As a result, she contends she has incurred legal fees by engaging the
services of an attorney to inquire if she is eligible for the Internal Revenue Service's Offshore Voluntary
Disclosure Program in order to avoid criminal liability for what she contends were defendant's actions.
As stated above, on a motion to dismiss, the court is charged with determining if plaintiff's cause of action fits "within any cognizable legal theory." Plaintiff's claim for breach for contract is based on the existence of a contract, defendant's alleged violation of the Agreement by incurring a debt or debts for which plaintiff may be liable, and resulting damages — namely potential liability for a tax deficiency, fines, penalties and attorney's fees. See Noise In The Attic Prods., Inc. v. London Records, 10 AD3d 303, 307 (1st Dept 2004). Although plaintiff's claim of breach and resulting damages is speculative at this point, inasmuch as the IRS or other tax authority has not actually determined that there is a tax liability, the facts as alleged in the complaint and in the motion papers, including the affidavit of defendant's tax attorney, make out a cause of action for breach of contract sufficient to withstand a motion to dismiss. See Leon, 84 NY2d at 87-88. Moreover, defendant has produced nothing to refute plaintiff's claim and thereby entitle him to dismissal of the cause of action.
With regard to the cross-motion, plaintiff has failed to show a basis for entitlement at this point to
attorney's fees under the terms of the Agreement. Article VII(2) states, in relevant part:
"The Husband agrees to indemnify and hold the Wife harmless for all losses, expenses,
damages and costs and reasonable attorney's fees incurred by her if a claim is made against the Wife in
[*10]connection with or arising out of the Husband's breach of his
foregoing representation, warranty and covenant." Because no claim has been made as of yet against
plaintiff — and because no finding has been made as of yet that defendant has actually breached
the agreement — the application for attorney's fees is premature. In addition, the court finds no
basis to award plaintiff interim attorney's fees in connection with the prosecution of the action.
Plaintiff's application for leave to amend the complaint by adding a cause of action for breach of contract based on defendant's failure to cooperate in securing a Get is appropriate. "Leave to amend a pleading is freely granted in the absence of prejudice or surprise to the opposing party." Spitzer v. Schussel, 48 AD3d 233 (1st Dept 2008). There can be no claim of prejudice or surprise here as defendant specifically represented in the Agreement that he would fully cooperate with plaintiff to obtain the Get. Although a post-judgment action to enforce the Agreement may be more effective in securing the intended result — if the intended result is in fact to obtain a Get — plaintiff is still free to bring a claim for breach of contract.
In light of the foregoing, it is
ORDERED that defendant's motion to dismiss the complaint is granted to the extent that plaintiff's First through Third Causes of Action (fraudulent concealment, fraudulent misrepresentation and inducement, and breach of fiduciary duty) and her Fifth through Tenth Causes of Action (negligent misrepresentation, contractual breach of the implied covenant of good faith and fair dealing, tortious breach of the implied covenant of good faith and fair dealing, unjust enrichment, conversion, and the imposition of a constructive trust and equitable lien) are dismissed; and it is further
ORDERED that defendant's application to dismiss the complaint is denied as to plaintiff's Fourth Cause of Action (breach of contract); and it is further
ORDERED that's plaintiff's cross-motion to amend the complaint is granted; and it is further
ORDERED that plaintiff's cross-motion for attorney's fees is denied without prejudice.
This constitutes the decision and order of the court.
Dated: November 5, 2010Enter:
_________________________
Matthew F. Cooper, J.S.C.
Footnotes
Footnote 1:Defendant contends that under the
Agreement, plaintiff received approximately $50 million in assets out of a marital estate worth $68
million. Plaintiff concedes that she received approximately $37.5 million in assets, but she contends that
the total amount of the estate was far greater than the $68 million. Although defendant has offered to
have a "do-over" by placing everything owned by either party back in the marital property pot and then
dividing it again, plaintiff has shown no interest in doing so.
Footnote 2:Similarly, the "special facts doctrine"
of disclosure imposes a duty to disclose facts where a "party's superior knowledge of essential facts
renders a transaction without disclosure inherently unfair." P.T. Bank Central Asia v. ABN AMRO
Bank N.V., 301 AD2d 373, 378 (1st Dept 2003). A duty to disclose under this doctrine only
exists where "the material fact was information peculiarly within the knowledge' of [defendant], and that
the information was not such that could have been discovered by [plaintiff] through the exercise of
ordinary intelligence.'" Jana L. v. West 129th
Street Realty Corp., 22 AD3d 274, 278 (1st Dept 2005)(quoting Black v.
Chittenden, 69 NY2d 665 [1986]); see also Schumaker v. Mather, 113 NY 590
(1892)("if the other party has the means available to him of knowing ... he must make use of those
means, or he will not be heard to complain that he was induced to enter into the transaction by
misrepresentation").
Footnote 3: In Luftig the Appellate
Division, in affirming the dismissal of the ex-wife's claims of fraudulent misrepresentation, noted that the
parties' agreement, similar to the Agreement in this case, states that "[e]ach party expressly waives the
right to any future financial disclosure and acknowledges that said waiver is made with the full benefit of
legal counsel and knowledge of the legal consequences thereof and that neither party properly can or
shall subsequently assert that this Agreement should be impaired or invalidated by reason of any lack of
financial disclosure or lack of understanding or of fraud, duress or coercion."
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