Plaza PH2001 LLC v Plaza Residential Owner LP

[*1] Plaza PH2001 LLC v Plaza Residential Owner LP 2010 NY Slip Op 52361(U) [30 Misc 3d 1213(A)] Decided on November 17, 2010 Supreme Court, New York County Kenney, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 17, 2010
Supreme Court, New York County

The Plaza PH2001 LLC, Plaintiff,

against

Plaza Residential Owner LP, CPS 1 REALTY LP, EL-AD PROPERTIES NY LLC, and STRIBLING MARKETING ASSOCIATES LLC, Defendants



No.: 600732/2010

Joan M. Kenney, J.

Plaintiff The Plaza PH2001 LLC (plaintiff) signed a purchase agreement for $31 million for a penthouse apartment at the soon-to-be renovated historic Plaza Hotel, without ever viewing the apartment. Plaintiff also signed a purchase agreement for a smaller unit on the same floor. After the construction was complete, plaintiff, unhappy with the outcome of the penthouse, filed a complaint seeking the return of his $6,507,000 deposit.

Defendants Plaza Residential Owner LP (Plaza Residential, or Sponsor), CPS 1 Realty LP (CPS), El-Ad Properties NY LLC (El-Ad) and Stribling Marketing Associates, LLC (Stribling) then moved for an order, pursuant to CPLR 3211 (a) (1), (4), (5) and/or (7), 3013 and/or 3016 (b), dismissing the 11 causes of action in the complaint, awarding attorneys' fees and costs pursuant to the purchase agreement, and awarding further costs and disbursements.

BACKGROUND AND FACTUAL ALLEGATIONS

Plaintiff is a Delaware limited liability partnership, having an address in New York, New York. CPS was the original sponsor of an offering plan, dated December 7, 2005, for the sale of condominium units at the Plaza Hotel (Plaza), located on Fifth Avenue, New York. In April 2006, Plaza Residential became the new Sponsor. El-Ad is an affiliate of CPS and Plaza Residential. Stribling is a real estate brokerage company, and was the selling and marketing agent for the condominium units offered at the Plaza.

Starting in 2005, the Plaza, once a historic hotel, began undergoing renovations for the conversion to apartment units. In August 2007, plaintiff entered into two purchase agreements with the Sponsor, one for a $31,000,000 penthouse apartment and one for another $1,535,000 unit in the building located on the same floor. Plaintiff placed a deposit of $6.2 million for the penthouse apartment and $307,000 for the other apartment. The penthouse apartment would be used as plaintiff's residence and the other apartment would be used for household help.

At the time that plaintiff met with Stribling, the penthouse unit had not yet been constructed. Plaintiff says it was advised, among other things, that the completed unit would [*2]have floor to ceiling windows providing an unobstructed park view, that the kitchen would have four windows plus a skylight, that the dining room would have a large window with a view, and that the stairwell would be grand and open. Defendants' Exhibit B, ¶ 46.

Plaintiff states that it relied on the oral representations made to him by Stribling, the floor plans that were provided by Stribling, a large interactive "mock-up" of the apartment, and a virtual tour on the computer, before it executed a purchase agreement. Plaintiff was unable to see the unit until it performed a walk-through on May 9, 2008.

On August 7, 2008, plaintiff refused to close on either apartment.

In November 2008, plaintiff filed a summons and complaint alleging four claims against defendants, grounded in breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud. Plaintiff demanded a return of its $6,507,000 deposit which it had placed on the penthouse and smaller apartment. Plaintiff claims that, instead of what was represented to it by defendants, the penthouse apartment looked substantially different. Plaintiff was upset that, among other things, the living room did not have floor to ceiling windows, the kitchen area contained two small windows instead of four, and the scale of the rooms was smaller than was promised. In his complaint, plaintiff claims that the constructed unit was "materially and substantially changed" in the following way: (a) the unit did not have the floor to ceiling windows in the living room as required, (b) smaller windows were installed in the living room area of the unit so that there was no unobstructed view of Central Park from the living room, (c) an unsightly gutter was constructed outside the living room and the breakfast nook of the Unit (the gutter was never disclosed to plaintiff) which materially impedes the view of Central Park and detracts from the promised elegance of the unit, (d) the breakfast nook area of the unit was constructed with only two small windows (the floor plan for the unit depicted four windows, (e) the slope of the skylights in the living room and in the breakfast nook are steeper than originally shown which reduces the ceiling heights in said areas, (f) columns constructed in the living room area are larger than promised and therefore impede the use of the rooms, and (g) the scale of the rooms constructed in Penthouse Unit 2001, are, upon information and belief, smaller than the rooms located in the model apartment shown to the plaintiff.

Tarnoff Affirmation, Exhibit 2, ¶ 29.

Plaintiff believes that it was entitled to be told about these changes so that it could have exercised the right of rescission on the purchase agreements. In its complaint, plaintiff also sought punitive damages.

In February 2009, defendants moved, pursuant to CPLR 3211, to dismiss plaintiff's complaint. Defendants contended that plaintiff signed a "no representations" clause in the purchase agreements, by which plaintiff acknowledged that plaintiff "expressly disclaims reliance on any representations outside of the Purchase Agreement and Offering Plan [emphasis in original]." Defendants' Exhibit D, at 5. Since, according to defendants, none of the alleged deficiencies were part of the purchase agreement, but were all pre-contractual representations, plaintiff had no right to rely on them. As such, plaintiff could not rescind its purchase [*3]agreements.

In further support, defendants also provided the merger clause in the purchase agreement which states that the purchase agreement supercedes any other agreement. They also contended that plaintiff had no justification on defaulting simultaneously on the smaller apartment, which purportedly had no defects.

Oral argument was held and the parties submitted memoranda of law and exhibits.

On September 22, 2009, Honorable Marilyn Shafer issued a decision in which she granted defendants' motion to dismiss. In her decision, Justice Shafer explored plaintiff's belief that the finished penthouse apartment was not constructed in accordance with the building plans and also in accordance with the representations made to it. She further noted that plaintiff claimed that it should have been notified of any changes being made to the apartment and then been able to rescind the purchase agreements.

Justice Shafer discussed the "no representations" clause in the parties' purchase agreement. She then cited to Danann Realty Corp. v Harris (5 NY2d 317 [1959]) and stated, "[t]his Court finds that the disclaimer contained in the purchase agreement relates precisely to plaintiff's complaints and establishes a complete defense as a matter of law." Tarnoff Affirmation, Exhibit 1, at 8.

Justice Shafer also held that the plaintiff's "reliance on the Condominium Plan is misplaced," and that the Sponsor reserved the right to make changes that were not "material" to the apartment. Id. She continued that "[t]he right to rescission arises only from changes which are material (for example, variations in square footage in excess of 5%).' Plaintiff's pleadings fail to describe any changes which, under these definitions, would be considered material.'" Id.

Justice Shafer concluded by dismissing plaintiff's complaint, releasing plaintiff's down payment to the Sponsor and allowing the Sponsor to recover legal fees pursuant to section 35 of the purchase agreements. Justice Shafer's order stated that the four causes of action were dismissed due to failure to state a claim and/or that there is a defense to these causes of action found in documentary evidence.

After receipt of the order and decision, plaintiff filed an amended complaint which it later withdrew.

On November 17, 2009, plaintiff filed an appeal of Justice Shafer's decision with the Appellate Division, First Department. The Appellate Division heard oral argument on June 3, 2010 but, upon information and belief, no decision has been rendered yet.

In March 2010, plaintiff filed this current complaint which contains 11 causes of action. This complaint, as in the dismissed complaint, alleges that the penthouse, as a finished apartment, was not what was promised to plaintiff, and, as such, plaintiff seeks to have its down payment of $6,507,000 returned to it. Plaintiff also stated that the Sponsor made material changes to the offering plan without informing plaintiff, and, had plaintiff known of these changes, it would have rescinded its offer to purchase both the penthouse and the smaller apartment.

The 11 causes of action consist of the following: declaratory judgment against the Sponsor for a right of rescission in connection with the purchase agreements; specific performance against the Sponsor; breach of contract against the Sponsor; fraud/fraudulent [*4]concealment against El-Ad and the Sponsor; fraudulent concealment against Stribling; conspiracy to commit fraud against El-Ad and Stribling; aiding and abetting fraud against Stribling; negligent misrepresentation against El-Ad; breach of the implied covenant of good faith and fair dealing against the Sponsor; deceptive trade practices claim pursuant to New York General Business Law (GBL) § 349 against El-Ad and Stribling; and failure to file interstate land sales act statement of record pursuant to 15 USC § 1703 (a).

Plaintiff, as in the dismissed complaint, seeks to rescind its purchase agreements on both the penthouse and the smaller apartment and also seeks damages in the amount of its total deposit, which was $6,507,000.

In response to the current complaint, defendants move, pursuant to CPLR 3211 (a) (1), (4), (5), and/or (7), 3013 and/or 3016 (b), for an order dismissing the complaint with prejudice. Defendants also seek reasonable attorneys' fees and costs pursuant to section 35 of the purchase agreements, and also seek additional costs and disbursements.

DISCUSSION

I. Dismissal:

Defendants moved to dismiss the complaint against them pursuant to CPLR 3211 (a) (1), (4), (5), and/or (7). On a motion to dismiss pursuant to CPLR 3211, the facts as alleged in the complaint are accepted as true, the plaintiff is given the benefit of every possible favorable inference, and the court must determine simply whether the facts alleged fit within any cognizable legal theory. P.T. Bank Central Asia v ABN AMRO Bank N.V., 301 AD2d 373, 375 (1st Dept 2003); see also Mendelovitz v Cohen, 37 AD3d 670, 671 (2d Dept 2007). Under CPLR 3211 (a) (1), a dismissal is appropriate only "if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." Leon v Martinez, 84 NY2d 83, 88 (1994).

Defendants argue that plaintiff's complaint should be barred due to res judicata, since the complaint relates to the same purchase and seeks the same relief as in the prior action before Justice Shafer. Defendants maintain that Justice Shafer dismissed the prior complaint on the merits and, as such, plaintiff cannot relitigate its claims. Defendants also state that, even if res judicata did not apply, plaintiff's claims fail as a matter of law.

Plaintiff argues that since Justice Shafer issued her decision without prejudice, res judicata does not apply. Plaintiff also argues that the new complaint cures any "purported defects upon which Justice Shafer predicated her decision dismissing the earlier complaint." Plaintiff's Memorandum of Law, at 1.

II. Res Judicata:

It is well settled that: Under New York's transactional approach to res judicata issues, once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy. Further, a claim will be barred by the prior adjudication of a different claim arising out of the same factual grouping even if the claims involve materially different elements of proof, and even if the claims would call for different measures of liability or different kinds of relief [internal quotation marks and citations omitted].

[*5]Fifty CPW Tenants Corporation v Epstein, 16 AD3d 292, 293 (1st Dept 2005).

Applying the above principles to the case at hand, res judicata bars plaintiff's complaint. As previously mentioned, Justice Shafer issued a final and comprehensive decision in which she stated that the "disclaimer contained in the purchase agreement relates precisely to plaintiff's complaints and establishes a complete defense as a matter of law." Tarnoff Affirmation, Exhibit 1, at 8. Justice Shafer also stated that plaintiff did not describe any "material" changes which would allow it a right to rescission. After reviewing the parties' exhibits and listening to oral arguments, Justice Shafer disposed of the case on the merits.

Plaintiff's previous complaint and the current complaint, stem from the same transaction and seek the same damages. As such, all of plaintiff's claims relating to its purchase agreements on the two apartments are barred.

Moreover, in its current complaint, plaintiff adds additional causes of action which include new claims of fraud and claims that defendants violated the Martin Act. Even though these causes of action were not litigated in the plaintiff's previous complaint, they all arise from the same central allegation and they could have been brought in the first complaint. The Appellate Division, First Department, has held that "res judicata will only bar those claims, even if arising from the same transaction or series of transactions, that either were or could have been litigated in the previous action." Marinelli Associates v Helmsley-Noyes Company, Inc., 265 AD2d 1, 6 (1st Dept 2000). As such, res judicata will also bar the new claims in the present complaint.

In conclusion, plaintiff has already had a "full and fair opportunity" to litigate its claims before Justice Shafer. Id. at 7. Plaintiff has also appealed Justice Shafer's decision and awaits this decision. Although in the current complaint, plaintiff has created alternate theories of recovery, the res judicata doctrine "would be meaningless if a party could split its cause of action merely to ensure that each alternate theory of recovery received sufficient individualized attention." Schwartzreich v E.P.C. Carting Co., Inc., 246 AD2d 439, 441 (1st Dept 1998). Accordingly, defendants' motion to dismiss the complaint is granted.

Defendants are entitled to fees pursuant to section 35 of the purchase agreements.

The court has considered plaintiff's other contentions and finds them without merit.

CONCLUSION, ORDER AND JUDGMENT

Accordingly, it is

ORDERED that the motion of defendants Plaza Residential Owner LP, CPS 1 Realty LP, El-Ad Properties NY LLC and Stribling [*6]Marketing Associates, LLC to dismiss the complaint herein is granted and the complaint is hereby severed and dismissed in its entirety as against said defendants, with costs and disbursements to said defendants as taxed by the Clerk of the Court, and it is further

ORDERED that the Clerk is directed to enter judgement accordingly in favor of said defendants; and it is further

ORDERED that the issue of fees pursuant to section 35 of the purchase agreements is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further

ORDERED that this motion is held in abeyance pending receipt of the report and recommendations of the Special Referee and a motion pursuant to CPLR 403 or receipt of the determination of the Special Referee or the designated referee; and it is further

ORDERED that counsel for the party seeking the reference or, absent such party, counsel for the plaintiff shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet,[FN1] upon the Special Referee Clerk in the Motion Support Office in Room 119 at 60 Centre Street, who is directed to place this matter on the calendar of the Special Referee's Part (Part 50R) for the earliest convenient date.

Dated: November 17, 2010ENTER:

___________________

J.S.C. Footnotes

Footnote 1:Copies are available in Room 119 at Centre Street, and on the Court's website.