Mackey v My Little Saltbox, LLC

[*1] Mackey v My Little Saltbox, LLC 2022 NY Slip Op 50814(U) Decided on August 23, 2022 Supreme Court, Washington County Muller, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 23, 2022
Supreme Court, Washington County

William Mackey, Plaintiff,

against

My Little Saltbox, LLC, DARCY NUTTER, DAVID NUTTER, SPIRE INSPECTIONS, LLC, and LAWRENCE MCGANN, Defendants.



Index No. EC2021-33009


Maynard, O'Connor, Smith & Catalinotto, LLP, Albany (Bridget M. Schultz of counsel), for plaintiff.

Gilchrist Tingley, P.C., Troy (Andrew W. Gilchrist of counsel), for defendants My Little Saltbox, LLC, Darcy Nutter and David Nutter.

Hall Booth Smith P.C., New York (Marc R. Wilner of counsel), for defendants Spire Inspections, LLC and Lawrence McGann.
Robert J. Muller, J.

On June 7, 2019, defendant My Little Saltbox, LLC (hereinafter Saltbox) entered into a contract to sell certain real property — located at 1089 Beadle Hill Road in Valley Falls, Washington County — to plaintiff for the sum of $126,805.00. On May 7, 2019, defendants Darcy Nutter and David Nutter — who own Saltbox — executed a Property Condition Disclosure Statement (hereinafter PCDS) relative to the single-family home on the property, with a copy of this PCDS given to plaintiff prior to execution of the contract. This PCDS indicated as follows:

• No "rot or water damage to the structure."• No "termite, insect, rodent or pest infestation or damage."• No "known material defects" with respect to the "roof/roof covering."• No "known material defects in any of the following structural systems: footings, beams, girders, lintels, columns or partitions."• No "known material defects" to the "electric."• No "flooding, drainage or grading problems . . . on any portion of the property."• Basement has "seepage that results in standing water [a]t spring thaw.""known material defects" to the "[p]lumbing system" or "[f]oundation/slab."

According to the complaint, plaintiff visited the property prior to execution of the [*2]contract. At that time the home "was fully furnished" and the lights/electricity in the basement [were] not working[, as the result of which he] was only able to observe the condition of the basement through a flashlight." The complaint further alleges as follows:

"On or about June 4, 2019, plaintiff hired [defendant] Spire [Inspections, LLC (hereinafter Spire)] to conduct a residential home inspection, and paid Spire a fee therefore."Upon information and belief, [defendant Lawrence] McGann[, the owner and principal of Spire,] conducted the inspection . . . ."Upon information and belief, McGann instructed plaintiff not to attend the inspection."Upon information and belief, . . . McGann told plaintiff he did not need to go back to the [p]roperty to view it before the closing."Upon information and belief, McGann prepared a home inspection report following the inspection."Upon information and belief, the home inspection report was 15 pages in total. . . ."Upon information and belief, McGann only provided the last page of the inspection report (i.e., page 15) to [p]laintiff."

The last page of this report included a summary of the most substantial defects found in the home, including defects in the roof ("[p]lumbing [v]ents . . . to be 1-3 feet above the roof eave and 10 feet from any bed room window"); structure ("[w]ood [p]ost[ n]ot supporting anything" in the basement); plumbing ("[d]rain [t]ube [m]issing" in basement water heater); and electrical outlets in the downstairs bathroom and second-floor bedroom.

The closing took place on August 14, 2019 and plaintiff thereafter moved into the home with his family. According to plaintiff, when he "started moving . . . furniture into the [p]roperty, he began to notice cracks and floor sloping." He also "notice[d] that water was profusely leaking into the basement and in the roof." According to plaintiff, these conditions had previously been concealed by paint, the placement of furniture and the lack of lighting in the basement. In February 2021, plaintiff hired an engineer to inspect the home and he found several problems including, inter alia, that

"[m]any floor joist under the kitchen are resting on grade and have major section loss and [are] structural[ly] unsound[; t]he exterior grade on the west and north side of the structure is higher than [the] foundation and the grade is sloping toward the building causing water to rest on the exterior creating deterioration and rot[; f]loor beams and floor joist in main portion of the house has evidence of insect infestation[ and i]n many location[s] the beams and joists have become soft and powdery[; t]here is constant flow of water in the basement coming from pour [sic] drainage on the outside of the building[; and t]he support columns are showing signs of deterioration at the bases from water exposure [and t]he columns and column foundations are not up to standards."

Plaintiff thereafter obtained estimates for repairs, which will allegedly cost in excess of $100,000.00. Plaintiff commenced this action on June 21, 2021, asserting seven causes of action:

(1) that Saltbox breached the contract of sale and, further, that Saltbox fraudulently induced him to enter into the contract;(2) that Saltbox violated the requirements of RPAPL article 14, which governs the execution of a PCDS;(3) that Saltbox is liable for fraud and misrepresentation;(4) that Spire breached the contract relative to inspection of the property;(5) that Spire is liable for negligence and gross negligence;(6) that plaintiff is entitled to pierce the corporate veil relative to Saltbox and hold the Nutters personally liable; and(7) that plaintiff is entitled to pierce the corporate veil relative to Spire and hold McGann personally liable.

Presently before the Court is (1) Saltbox and the Nutters' pre-answer motion to dismiss plaintiff's first and third causes of action under CPLR 3211 (a) (1) and (7); and (2) Spire and McGann's motion to dismiss the complaint as against them under CPLR 3211 (a) (1), (5) and (7).[FN1] The motions will be addressed ad seriatim.

Saltbox and the Nutters' Motion to Dismiss

Saltbox and the Nutters contend that they are entitled to dismissal of the first cause of action under the doctrine of merger, which provides that the "provisions in a contract for the sale of real estate merge into the deed and are thereby extinguished absent the parties' demonstrated intent that a provision shall survive transfer of title'" (Arnold v Wilkins, 61 AD3d 1236, 1236 [2009], quoting Hunt v Kojac, 245 AD2d 858, 858-859 [1997]; see Schoonmaker v Hoyt, 148 NY 425, 429-430 [1896]; Alexy v Salvador, 217 AD2d 877, 878 [1995]). According to Saltbox and the Nutters, the property was "sold 'as is' without warranty as to condition" under the terms of the parties' contract — with no provisions surviving transfer of title. As a result, Saltbox and the Nutters contend that plaintiff cannot succeed on a breach of contract cause of action relative to this contract.

Saltbox and the Nutters further contend that they are entitled to dismissal of the first cause of action under the doctrine of caveat emptor, which "'imposes no duty upon a vendor to disclose any information concerning the property in an arm's length real estate transaction'" (Stoian v Reed, 66 AD3d 1278, 1279 [2009], quoting Bethka v Jensen, 250 AD2d 887, 887-888 [1998]; accord Meyers v Rosen, 69 AD3d 1095, 1096 [2010]). In Pettis v Haag (84 AD3d 1553 [2011]), the Third Department further explained as follows:

"Although New York traditionally adheres to the doctrine of caveat emptor in an arm's length real property transfer, a seller may be liable for failing to disclose information if the conduct constitutes active concealment. A false representation in a disclosure statement may constitute active concealment. To prevail upon such a claim, plaintiffs must demonstrate that the false representation prevented fulfillment of their own [*3]obligations imposed by the doctrine of caveat emptor and that they justifiably relied upon the false representation. Justifiable reliance does not exist [w]here a party has the means to discover [a falsehood] by the exercise of ordinary intelligence, and fails to make use of those means" (id. at 1554-1555 [internal quotation marks and citations omitted]).

According to Saltbox and the Nutters, plaintiff cannot succeed on a fraudulent inducement cause of action relative to the contract because he had ample means to discover any falsehood in the PCDS and failed to make use of those means. In this regard, the contract expressly provided that plaintiff could complete a "structural inspection" prior to closing, and plaintiff alleges that he in fact did so.

At the outset, the Court declines to find that Saltbox and the Nutters are entitled to dismissal of the first cause of action under CPLR 3211 (a) (1). "'A motion pursuant to CPLR 3211 (a) (1) to dismiss the complaint as barred by documentary evidence may be properly granted only if the documentary evidence utterly refutes the plaintiff's factual allegations, conclusively establishing a defense as a matter of law. To qualify as documentary evidence, the evidence must be unambiguous and of undisputed authenticity'" (Koziatek v SJB Dev. Inc., 172 AD3d 1486, 1486 [2019], quoting Calhoun v Midrox Ins. Co., 165 AD3d 1450, 1450 [2018] [internal quotation marks, brackets and citations omitted]; see Doller v Prescott, 167 AD3d 1298, 1299 [2018]). "'Materials that clearly qualify as documentary evidence include documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable'" (Koziatek v SJB Dev. Inc., 172 AD3d at 1487, quoting Ganje v Yusuf, 133 AD3d 954, 956-957 [2015] [citations omitted]; see Midorimatsu, Inc. v Hui Fat Co., 99 AD3d 680, 682 [2012], lv dismissed 22 NY3d 1036 [2013]). Here, there is no question that the contract of sale qualifies as documentary evidence — but it in no way refutes plaintiff's allegations that Saltbox actively concealed defects in the home.

The Court further declines to find that Saltbox and the Nutters are entitled to dismissal of the first cause of action under CPLR 3211 (a) (7). On a motion to dismiss for failure to state a cause of action, the Court "'must afford the complaint a liberal construction, accept as true the allegations contained therein, accord the plaintiff the benefit of every favorable inference and determine only whether the facts fit within any cognizable legal theory'" (Rodriguez v Jacoby & Meyers, LLP, 126 AD3d 1183, 1185 [2015], lv denied 25 NY3d 912 [2015], quoting He v Realty USA, 121 AD3d 1336, 1339 [2014] [internal quotation marks and citations omitted]; see Snyder v Brown Chiari, LLP, 116 AD3d 1116, 1117 [2014]).

Here, accepting all of the facts alleged as true — namely, that Saltbox and the Nutters purposely lied on the PCDS and then used paint and furniture placement to conceal defects in the home — the Court cannot find the doctrine of merger applicable as a matter of law. Indeed, this doctrine does not apply where there exists a cause of action based upon fraud (see Berger-Vespa v Rondack Bldg. Inspectors, 293 AD2d 838, 840 [2002]). While Saltbox and the Nutters contend that the doctrine of caveat emptor defeats any allegation of fraud — since plaintiff had unfettered access to the home and could have discovered the problems they were trying to hide — the Court is again unpersuaded. The doctrine of caveat emptor does not apply where a plaintiff demonstrates (1) that a false representation in a PCDS prevented him from fulfilling his obligations under the doctrine; and (2) that he justifiably relied on the false representation. Notwithstanding Saltbox and the Nutters' contention that plaintiff had unfettered access to the property, there has been no discovery in this regard — and the Court cannot help but wonder if [*4]unfettered access exists where a seller has used paint and furniture to conceal problems. Given the Nutters' statements in the PCDS, "the exercise of ordinary intelligence" would perhaps not require a close inspection of the paint on the walls or the placement of furniture (Pettis v Haag, 84 AD3d at 1555). Under the circumstances — and mindful of the relevant standard — the Court finds that plaintiff has stated a claim in his first cause of action.

For the reasons set forth hereinabove, the Court further finds that Saltbox and the Nutters are not entitled to dismissal of the third cause of action — alleging fraud and misrepresentation — under either CPLR 3211 (a) (1) or (7).

Based upon the foregoing, Saltbox and the Nutters' pre-answer motion to dismiss is denied in its entirety. Saltbox and the Nutters are hereby directed to serve their answer to the complaint within thirty (30) days of the date of service of this Decision and Order with notice of entry thereon.

Spire and McGann's Motion to Dismiss

Turning now to Spire and McGann's motion to dismiss, they contend that plaintiff cannot succeed on his fourth cause of action alleging breach of contract against Spire because there is no contractual privity between the parties. According to Spire and McGann, it was not plaintiff but the Nutters who retained Spire to conduct an inspection of the property. More specifically, Darcy Nutter signed an agreement with Spire on June 4, 2019 which included a fee of $450.00 for the inspection. This agreement provides, in pertinent part:

"Our inspection and report are for your use only. You must give us permission to discuss our observations with real estate agents, owners, repair persons, or other interested parties. You will be the sole owner of the report and all rights to it. We are not responsible for use or misinterpretation by third parties, and third parties who rely on it in any way do so at their own risk and release us . . . from any liability whatsoever."

Darcy Nutter signed a check for $450.00 to Spire on June 4, 2019 and it appears — based upon the report prepared by McGann on behalf of Spire — that the inspection was conducted on that same date. The report, which consists of 15 pages, lists "David and Darcy Nutter" next to "client name."

McGann has submitted an affidavit in support of the foregoing facts, stating that he "did not enter into any agreement, written or oral, with . . . plaintiff at any time regarding the inspection of [the p]roperty." McGann further states that he "never received any payment from . . . plaintiff . . . in connection with the inspection[, and] was . . . unaware of any agreements between the Nutters and plaintiff pertaining to the findings and use of the [i]nspection [r]eport that [he] prepared." Finally, he states that he "never spoke with . . . plaintiff and never instructed him to not attend the inspection or advised him that he did not need to view the subject property prior to the closing," nor did he "provide . . . plaintiff with only the last page of [the r]eport."

In opposition, counsel for plaintiff has submitted an affirmation alleging in broad and conclusory fashion that Spire entered into a separate agreement with plaintiff relative to the inspection of the property. There is, however, no copy of this agreement — nor even any [*5]indication as to whether it was oral or in writing.[FN2] As proof of the agreement, counsel for plaintiff has attached to her affirmation a copy of the last page of the report prepared by Spire for the Nutters — again arguing that it was given to plaintiff by McGann — but no further details are provided. It is unclear when it was given to plaintiff, as well as why only the last page was given. In this regard, the last page — labeled "Page 15 of 15" — clearly states across the top: "This summary is not the entire report. The complete report may include additional information of concern to the client. It is recommended that the client read the complete report." In view of this, it is unclear why plaintiff did not request the entire report.[FN3] There is unfortunately no affidavit from plaintiff himself — nor anyone else with personal knowledge.[FN4]

"'Liability for breach of contract does not lie absent proof of a contractual relationship or privity between the parties" (Collyer v LaVigne, 202 AD3d 1335, 1341 [2022], quoting Arroyo v Central Islip UFSD, 173 AD3d 814, 816 [2019] [internal quotation marks and citations omitted]). Here, the Court has been provided with nothing more than conclusory — and, quite frankly, implausible — allegations of a contractual relationship between plaintiff and Spire. The favorable treatment accorded to a plaintiff's complaint on a motion to dismiss under CPLR 3211 (a) (7) "is not limitless and, as such, conclusory allegations — claims consisting of bare legal conclusions with no factual specificity — are insufficient to survive [the] motion" (Rodriguez v Jacoby & Meyers, LLP, 126 AD3d at 1185 [citations and internal quotation marks omitted]; accord Barnes v Hodge, 118 AD3d 633, 633 [2014]; see Wiggins & Kopko, LLP v Masson, 116 AD3d 1130, 1131-1132 [2014]). Under the circumstances, the Court finds that Spire and McGann are entitled to dismissal of the fourth cause of action for failure to state a claim.

The Court must also note that plaintiff cannot succeed as a third-party beneficiary of the contract between Spire and the Nutters. "As a general rule, a party seeking to recover as a third-party beneficiary under a contract must establish that a valid and binding contract exists between other parties, that the contract was intended for his benefit and that the benefit is immediate rather than incidental" (Bonwell v Stone, 128 AD2d 1013, 1014 [1987], see Burns Jackson Miller Summit & Spitzer v Lindner, 59 NY2d 314, 336 [1983]). "If the party cannot show the intent of the contracting parties to benefit him, he is simply an incidental beneficiary and has no right of recovery" (Bonwell v Stone, 128 AD2d at 1014; see Benedictine Hosp. v Hospital Underwriters Mut. Ins. Co., 103 AD2d 553, 556 [1984]). Given the terms of the contract between Spire and the Nutters, there is no question that plaintiff was simply an incidental beneficiary with no right of recovery.

The Court further finds that Spire and McGann are entitled to dismissal of the fifth cause [*6]of action sounding in negligence and gross negligence under CPLR 3211 (a) (7). "In order to prevail on a negligence claim, 'a plaintiff must demonstrate (1) a duty owed by the defendant to the plaintiff, (2) a breach thereof, and (3) injury proximately resulting therefrom'" (Pasternack v Laboratory Corp. of Am. Holdings, 27 NY3d 817, 825 [2016], quoting Solomon v City of New York, 66 NY2d 1026, 1027 [1985]). "In the absence of a duty, as a matter of law, there can be no liability" (Pasternack v Laboratory Corp. of Am. Holdings, 27 NY3d at 825; see Solomon v City of New York, 66 NY2d at 1028; see also Lauer v City of New York, 95 NY2d 95, 100 [2000] ["Without a duty running directly to the injured person there can be no liability in damages, however careless the conduct or foreseeable the harm."]). Here, there was no privity of contract and, as such, neither Spire nor McGann owed any duty to plaintiff. As a result, there is no liability.

Finally, the Court finds that Spire and McGann are entitled to dismissal of the seventh cause of action, with plaintiff having failed to state a claim against McGann for piercing the corporate veil. "To pierce the corporate veil and hold a corporation owner ... individually liable, plaintiffs must show that he [or she] exercised complete domination of the corporation concerning the transaction at issue and that this domination was used to commit a fraud or wrong against plaintiffs, causing injury" (ARB Upstate Communications LLC v. R.J. Reuter, L.L.C., 93 AD3d 929, 931 [2012]; see Matter of Morris v. New York State Dept. of Taxation & Fin., 82 NY2d 135, 141 [1993]). Here, plaintiff's conclusory allegations that McGann dominated Spire and used the company to commit a fraud against him are wholly insufficient.

Given the documentary evidence submitted — namely, copies of the written agreement between the Nutters and Spire, the $450.00 check signed by Darcy Nutter and the inspection report listing the Nutters as clients — CPLR 3211 (a) (1) likely provides another ground for dismissal of the fourth, fifth and seventh causes of action.

Briefly, Spire and McGann also move to dismiss under CPLR 3211 (a) (5), contending that the action is barred by the statute of limitations. In this regard, the agreement between Spire and Darcy Nutter provides that the client "will have no cause of action against [Spire] after one year from the date of the inspection." By its express language, this provision applies solely to the client — i.e., the Nutters — and not to plaintiff. Plaintiff commenced the action well within the applicable statutes of limitation — six years for breach of contract and three years for negligence (see CPLR 213 [2], 214 [4]). This contention is therefore without merit.

Based upon the foregoing, Spire and McGann's motion is granted and the complaint is dismissed as against them. To the extent that Spire and McGann's cross claims against Saltbox and the Nutters are effectively rendered moot by this determination, they too are dismissed.

Therefore, having considered NYSCEF document Nos. 8 through 12, 17, 18, 22 through 32, and 37 through 41, and oral argument having been heard on August 17, 2022 with Bridget M. Schultz, Esq. appearing on behalf of plaintiff, Andrew W. Gilchrist, Esq. appearing on behalf of Saltbox and the Nutters, and Marc R. Wilner, Esq. appearing on behalf of Spire and McGann, it is hereby

ORDERED that Saltbox and the Nutters' pre-answer motion to dismiss is denied in its entirety; and it is further

ORDERED that Saltbox and the Nutters shall serve their answer to the complaint within thirty (30) days of the date of service of this Decision and Order with notice of entry thereon; and it is further

ORDERED that Spire and McGann's motion is granted, and the complaint is dismissed [*7]as against them; and it is further

ORDERED that Spire and McGann's cross claims against Saltbox and the Nutters are dismissed as moot.

The original of this Decision and Order has been e-filed by the Court. Counsel for plaintiff is hereby directed to serve a copy of the Decision and Order with notice of entry in accordance with CPLR 5513.

Dated: August 23, 2022
Lake George, New York

s/___________________________
ROBERT J. MULLER, J.S.C.
ENTER: Footnotes

Footnote 1: Spire and McGann served an answer with cross claims on February 1, 2022. Saltbox and the Nutters then served an answer to the cross claims on March 18, 2022. Saltbox and the Nutters have not served an answer relative to the second and sixth causes of action, with plaintiff consenting to an extension of time pending the determination of these motions.

Footnote 2: Counsel for plaintiff did clarify during oral argument that there was no written agreement between plaintiff and Spire.

Footnote 3: The remainder of the report listed, inter alia, several "marginal" defects in the home including problems with grading and slope ("[n]egative slope in back, minor slope in front"); structure ("bulging on [the] west wall, [with a] structural engineer . . . suggested to evaluate and estimate repairs"); basement ("[d]ampness on the floor" and open electrical boxes); and plumbing ("[d]rain [p]ipes . . . leaking").

Footnote 4: It must also be noted that the complaint is not verified by plaintiff — nor is it even verified by counsel, whose office is in Albany County (see CPLR 3020 [d] [3]).