Opinion
No. 299202007.
2008-08-18
Frank J. STANGEL, individually, and Frank J. Stangel, as executor of The Estate of Catherine Stangel, deceased, Plaintiffs, v. ZHI DAN CHEN, Yuen Liang, Rebar Enterprise, Inc., Hong Kong Style Construction, Inc., Louis Cardenas, Re/Max Universal, Inc., Xian Feng Zou, Esq., And Abacus Federal Savings Bank, Defendants.
DENIS J. BUTLER, J.
The following papers numbered 1 to 17 read on this motion by defendants Louis Cardenas and Independent Brokers of Queens, Ltd. d/b/a ReMax Universal Real Estate s/h/a Re/Max Universal, Inc. (ReMax) (collectively the ReMax defendants) pursuant to CPLR 3211(a)(1) and 3211(a)(7) to dismiss the complaint and the cross claims asserted against them with prejudice; and this cross motion by defendant Xian Feng Zou, Esq., appearing pro se, pursuant to CPLR 3211 to dismiss the complaint asserted against him, to impose sanctions against plaintiff and plaintiff's counsel pursuant to 22 NYCRR 130.1, and for an award of costs and disbursements.
+-----------------------------------------------------+ ¦Papers ¦Numbered ¦ +------------------------------------------+----------¦ ¦Notice of Motion—Affidavits—Exhibits ¦1–4 ¦ +------------------------------------------+----------¦ ¦Notice of Cross Motion—Affidavits—Exhibits¦5–8 ¦ +------------------------------------------+----------¦ ¦Answering Affidavits—Exhibits ¦9–13 ¦ +------------------------------------------+----------¦ ¦Reply Affidavits ¦14–17 ¦ +-----------------------------------------------------+
Upon the foregoing papers it is ordered that the motion and cross motion are determined as follows:
In his complaint, plaintiff Frank J. Stangel, alleges that he is currently the executor of the Estate of his deceased mother, Catherine Stangel, and that the primary asset of the Estate was the real property located at 204–0833rd Avenue, Bayside, New York. He alleges that prior to his appointment as executor, he was issued temporary letters of administration, and pursuant to those letters that he listed the premises for sale with defendants ReMax and Cardenas, licensed real estate brokers. When plaintiff engaged the ReMax defendants, he allegedly advised them that it had been his mother's dying wish that the house on the property not be demolished so that the nature and character of property would remain consistent with the other properties in the community. He allegedly further advised them that any sale would be conditioned upon the purchaser's agreement not to demolish the house located there.
The ReMax defendants allegedly listed and advertised the premises for sale, and on or about August 2006, defendant Cardenas introduced defendants Chen and Liang to plaintiff as prospective purchasers. Plaintiff alleges that on the basis of material representations made by defendants Chen and Liang regarding their willingness to comply with his “no demolition” condition, he was fraudulently induced to enter into, on behalf of the Estate, a contract for sale of the property to defendants Chen and Liang for $630,000.00. Plaintiff also alleges that pursuant to the rider to the contract, denominated as “First Rider to Contract of Sale,” defendants Chen and Liang promised not to demolish the house except in certain circumstances, not relevant herein. According to plaintiff, defendant Cardenas notified him during the contract period, that defendants Chen and Liang sought certain improvements and upgrades prior to closing. Plaintiff allegedly complied with such requests and made approximately $18,000.00 in improvements to the property. Plaintiff also alleges that following closing of title on April 12, 2007, defendants Chen and Liang demolished the house in breach of the contract, and built a new three-story house on the property.
Plaintiff thereafter commenced this action in his individual and representative capacities, claiming that defendant Zou, the attorney who represented defendants Chen and Liang at the closing, defendant Abacus Federal Savings Bank (Abacus), the mortgagee which financed the purchase, defendant Rebar Enterprise, Inc. (Rebar), the demolition company, and defendant Hong Kong Style Construction, Inc. (Hong Kong), the construction company which performed construction work at the premises on behalf of Chen and Liang, conspired with Chen and Liang in a fraudulent scheme to induce plaintiff to enter into the contract of sale, and in addition, committed tortious acts. Plaintiff asserts numerous causes of action, and seeks to recover damages, punitive damages and costs and expenses, including attorneys' fees.
The ReMax defendants timely made the instant motion to dismiss in lieu of answering. Defendant Zou, on the other hand, made this cross motion to dismiss the complaint several days after his time to appear or answer had run ( seeCPLR 320).
Plaintiff opposes the motion and cross motion. Defendants Chen, Liang, Abacus, Rebar and Hong Kong did not appear in relation to the motion or cross motion.
Defendant Zou asserts that he inadvertently failed to serve his cross motion on time, and that in any event, plaintiff was not prejudiced by his delay, because plaintiff received two adjournments to reply to the cross motion. In light of the brief, unintentional delay by defendant Zou, the absence of any demonstrated prejudice to plaintiff, the public policy in favor of deciding cases on their merits and defendant Zou's meritorious defense, the excuse of inadvertence or “law office failure” for the delay is reasonable and warrants vacatur ( see Bungay v. Joy Power Products, Inc., 243 A.D.2d 527 [1997];Kennedy v. Cassmon Realty Co., 139 A.D.2d 629 [1988];see also Harley v. Hawkins, 269 A.D.2d 496 [2000];Lichtman v. Sears, Roebuck & Co., 236 A.D.2d 373 [1997] ). As a consequence, the default of defendant Zou is vacated and the cross motion by defendant Zou shall be entertained by the court.
In considering a motion to dismiss a complaint for failure to state a cause of action ( seeCPLR 3211[a][7] ), the facts as alleged in the complaint must be accepted as true, the plaintiff is accorded the benefit of every possible favorable inference, and the court's function is to determine only whether the facts as alleged fit within any cognizable legal theory ( see Leon v. Martinez, 84 N.Y.2d 83, 87–88 [1994];Morone v. Morone, 50 N.Y.2d 481, 484 [1980];Rochdale Vil. v. Zimmerman, 2 AD3d 827 [2003] ). The criterion is whether the proponent of the pleading has a cause of action, not whether it has stated one ( see Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275 [1977] ). “Under CPLR 3211(a)(1), dismissal may be appropriately granted only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law' (Goshen v. Mutual Life Ins. Co. of New York, 98 N.Y.2d 314, 326 [2002] )” (Williams v. Williams, 36 AD3d 693 [2007] ).
Plaintiff asserts causes of action against the ReMax defendants and defendant Zou based upon fraud, fraud in the inducement, fraudulent misrepresentation, conspiracy to commit fraud, intentional and negligent infliction of emotional distress, breach of fiduciary duty, and conspiracy to commit conversion.
Plaintiff alleges that defendants Chen and Liang knew the representations they made to him were false and made them with the intent to deceive him, and that he justifiably relied upon them to his detriment. He claims that the property would have sold for more money had he been willing to sell the property without any restriction against demolition of the house. Plaintiff, however, makes no claim the ReMax defendants made any affirmative misrepresentations to him. Rather, he asserts the ReMax defendants “knew or should have known,” at the time of his execution of the contract, that defendants Chen and Liang had no intention of abiding by the clause in the first rider governing demolition, and the ReMax defendants withheld such information from him, in breach of their fiduciary duty owed to him and as part of a fraudulent scheme orchestrated by defendants Chen and Liang and others to obtain the property under false pretenses.
To the extent plaintiff asserts the fraud and breach of fiduciary duty claims in his individual capacity, he has failed to state a cause of action. “It is elementary that the executors or administrators represent the legatees, creditors and distributees in the administration of the estate; that their duty is to recover the property of the estate; and that the legatees and next of kin ... have no independent cause of action, either in their own right or the right of the estate (McQuaide v. Perot, 223 N.Y. 75, 79 [1918] )” (Jackson v. Kessner, 206 A.D.2d 123, 126 [1994],lv to appeal dismissed85 N.Y.2d 967 [1995];see Gaentner v. Benkovich, 18 AD3d 424 [2005] ). The fraud and breach of fiduciary duty claims asserted by plaintiff in his individual capacity are in essence claims to recover the Estate's assets, i.e. claims that the premises would have sold for a higher price and that the Estate would have been worth more had the alleged fraudulent misrepresentations not been made.
Plaintiff in his capacity as a personal representative of the Estate, asserts claims sounding in fraud., supra ). “[W]here a fiduciary relationship exists, the mere failure to disclose facts which one is required to disclose may constitute actual fraud, provided the fiduciary possesses the requisite intent to deceive' (Whitney Holdings Ltd. v. Givotovsky, 988 F Supp [732, 748] [1997];see also American Baptist Churches v. Galloway, 271 A.D.2d 92, 100 [2000] )” (Kaufman v. Cohen, 307 A.D.2d 113 [2003] ).
“In New York, it is well settled that a real estate broker is an agent and a fiduciary with a duty of loyalty and an obligation to act in the best interests of the principal.' M.R. Dubbs v. Stribling & Assoc., 96 N.Y.2d 337, 340 (2001) (citations omitted)” ( Rokosz v. Belmont Watkins Realty Corp., 5 Misc.3d 1003(A) [2004] ). “Based upon a broker's position of trust, the broker is under a duty, during the course of employment, to disclose to the principal all material information the broker possesses or obtains concerning the transaction involved ( see L.A. Grant Realty, Inc. v.. Cuomo, )” (Dubbs v. Stribling & Associates, 274 A.D.2d 32, 35 [2000],affd96 N.Y.2d 337 [2001],supra; Precision Glass Tinting, Inc. v. Long, 293 A.D.2d 594 [2002] ). In this way, the principal may take steps to protect his or her interests ( see Coldwell Banker Residential Real Estate v. Berner, 202 A.D.2d 949, 952 [1994] ). The failure to disclose such information constitutes a breach of the duty of loyalty, and a disloyal agent is answerable in damages and forfeits the right to compensation ( see Lamdin v. Broadway Surface Adv. Corp., 272 N.Y. 133, 138 [1936];Precision Glass Tinting, Inc. v. Long, 293 A.D.2d 594 [2002],supra; see also TPL Assoc. v. Helmsley–Spear, Inc., 146 A.D.2d 468, 471 [1989] ).
Plaintiff alleges that the ReMax defendants “should have known” of the alleged scheme, devised by defendants Chen and Liang prior to his execution of the contract, to demolish the house notwithstanding any contractual provision prohibiting demolition. However, knowledge of a fraudulent act generally is required and “mere suspicion will not constitute a sufficient substitute” ( see Erbe v. Lincoln Rochester Trust Co., 3 N.Y.2d 321 [1957] ). On the other hand, insofar as plaintiff alleges that the ReMax defendants actually knew of the prearranged plan, but failed to warn him before he executed the contract, the complaint does not allege an intent by the ReMax defendants to deceive. The claim, upon distillation, is that the ReMax defendants owed a fiduciary duty of candor to plaintiff as personal representative of the Estate, and their failure to disclose information regarding the alleged demolition plans of defendants Chen and Liang breached that duty. As a consequence, the allegations of fraud are merely incidental to the breach of fiduciary duty claim and, thus, fail to state a cause of action sounding in fraud, fraudulent inducement or conspiracy to commit fraud ( cf. Erbe v. Lincoln Rochester Trust Co., 3 N.Y.2d 321, 325 [1957],supra; Kaufman v. Cohen, 307 A.D.2d at 120).
The ReMax defendants assert that they met their fiduciary duty by achieving the sale conditioned upon the terms set forth in the rider to the contract. Nevertheless, if plaintiff had received full disclosure from the ReMax defendants regarding the alleged plan of defendants Chen and Liang in advance of his execution of the contract, he could have ended negotiations with Chen and Liang and looked for another purchaser, or demanded a higher price for the property or the inclusion of a contractual provision specifying a remedy in the event of a breach of the proposed “no demolition” clause. As a consequence, plaintiff has sufficiently alleged facts to support a claim in his representative capacity that the actions of the ReMax defendants were a substantial factor in causing an identifiable loss ( see Greenberg v. Joffee, 34 AD3d 426 [2006];Gibbs v. Breed, Abbott & Morgan, 271 A.D.2d 180, 189 [2000] ).
Plaintiff alleges that defendant Zou assured him that the house on the property would not be demolished and the terms of the rider governing the issue of demolition would be “upheld,” but that such assurance was a fraudulent misrepresentation made to induce him to enter into the contract. Plaintiff also alleges that defendant Zou voluntarily undertook the duty to file the contract of sale (including the riders) on his behalf, but failed to do so. Again, to the degree such allegations are made by plaintiff in his individual capacity, they fail to state a claim ( see McQuaide v. Perot, 223 N.Y. 75 [1918],supra ).
To the extent plaintiff alleges defendant Zou misrepresented to him in his individual capacity that the house would not be demolished, the contract was negotiated at arm's length and plaintiff was represented in the transaction by counsel. The contract provided that it constituted the contracting parties' full agreement, entered into after full investigation, and could not be orally modified. It also provided that neither party relied upon any statement, made by anyone else, that was not set forth in the contract. Moreover, the first rider to the contract of sale, in relevant part, provided that the contract of sale was “conditional upon and interlocutory with any agreements reached between the Buyer and Seller as it (sic) pertains to the preserving of the property,” and:
“1. THAT, the premises can not be demolished except that the existing building can be horizontally and/or vertically extended and that the existing building can be converted into a legal two-family dwelling.
2. THAT, the premises may have renovations to the original structure leaving the core foundation in tact (sic).
3. THAT, renovations are permitted and are to be considered internal within the premises; i.e. bathrooms, bedrooms, basement.”
These clauses are sufficiently specific to bar plaintiff from claiming that he, as the personal representative of the Estate, was fraudulently induced into entering the contract because of an oral representation by defendant Zou to the contrary ( see Danann Realty Corp. v. Harris, 5 N.Y.2d 317 [1959];Busch v. Mastropierro, 258 A.D.2d 492, 493 [1999];Masters v. Visual Bldg. Inspections, 227 A.D.2d 597 [1996];Taormina v. Hibsher, 215 A.D.2d 549 [1995];Cohan v. Sicular, 214 A.D.2d 637 [1995];Salerno v. D'Alessandro, 213 A.D.2d 391 [1995];Weiss v. Shaplosky, 161 A.D.2d 707 [1990] ).
With respect to plaintiff's claim that defendant Zou breached his fiduciary duty owing to plaintiff in his capacity as executor of the Estate, damages are a necessary element of a cause of action for breach of fiduciary duty ( see Great American Ins. Co. v. Canandaigua Nat. Bank and Trust Co., 45 AD3d 1299 [2007];Parametric Capital Mgt., LLC v. Lacher, 15 AD3d 301 [2005];see also Kaufman v. Cohen, 307 A.D.2d at 125). Plaintiff has failed to allege the manner in which defendant Zou's alleged omission in filing the contract of sale or the closing documents caused any damage to him as executor. Under such circumstances, the cause of action based upon defendant Zou's alleged breach of a fiduciary duty fails to state a claim.
With respect to the claims for intentional and negligent infliction of emotional distress, such claims do not state a cause of action insofar as they are asserted by plaintiff in his representative capacity. To the extent they are asserted by plaintiff in his individual capacity, the alleged acts of the ReMax defendants and defendant Zou do not rise to the level of extreme and outrageous conduct which is necessary to sustain a cause of action for intentional infliction of emotional distress ( see Howell v. New York Post Co., Inc., 81 N.Y.2d 115 [1993];Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 303 [1983];Schwegel v. Chiaramonte, 4 AD3d 519 [2004];Crispino v. Greenpoint Mortg. Corp., 2 AD3d 478 [2003];Glatter v. Chase Manhattan Bank, 239 A.D.2d 68 [1998];Vasilopoulos on Behalf of Vasilopoulos v. Romano, 228 A.D.2d 669 [1996] ). The cause of action by plaintiff in his individual capacity to recover damages for negligent infliction of emotional distress also fails to state a claim as against the ReMax defendants and defendant Zou because their alleged conduct cannot be said to have unreasonably endangered plaintiff's safety or caused him to fear for his safety ( see Davidovici v. Fritzson, 49 AD3d 488 [2008];Crispino v. Greenpoint Mortg. Corp., 2 AD3d at 480).
To the extent plaintiff asserts a cause of action against the ReMax defendants and defendant Zou for conspiracy to commit conversion, real property cannot be converted ( see Roemer and Featherstonhaugh P.C. v. Featherstonhaugh, 267 A.D.2d 697 [1999];Garelick v. Carmel, 141 A.D.2d 501 [1998] ). Furthermore, to the extent the claim relates to the “conversion” of the dwelling on the real property, such claim also does not lie, because plaintiff no longer had an ownership or superior right to possession of the house at the time of its demolition in either his individual or representative capacities ( see Estate of Giustino v. Estate of DelPizzo, 21 AD3d 523 [2005] ). Thus, at most, the claim is premised upon a breach of a purported contractual promise not to demolish the structure, and a claim to recover damages for conversion cannot be predicated on a mere breach of contract ( see Priolo Communications, Inc. v. MCI Telecommunications Corp., 248 A.D.2d 453 [1998];MBL Life Assurance Corp. v. 555 Realty Co., 240 A.D.2d 375 [1997] ). The cause of action asserted against the ReMax defendants and defendant Zou based upon conspiracy to convert the structure, therefore, fails to state a claim.
Plaintiff asserts several purported causes of action against the ReMax defendants and defendant Zou for punitive damages. New York, however, does not recognize an independent cause of action for punitive damages ( see Rocanova v. Equitable Life Assur. Soc. of U.S., 83 N.Y.2d 603, 616 [1994];Randi A.J. v. Long Island Surgi–Center, 46 AD3d 74 [2007] ). Furthermore, punitive damages can only be awarded upon the showing of wilful, wanton and reckless misconduct, with a high degree of moral culpability ( see Giblin v. Murphy, 73 N.Y.2d 769, 772 [1988] ) or where the conduct is so flagrant as to transcend mere carelessness ( see Frenya v. Champlain Val. Physicians' Med Ctr., 133 A.D.2d 1000, 1001 [1987] ). They are not appropriate in the “ordinary” fraud case ( see Randi A.J. v. Long Island Surgi–Center, 46 AD3d 74, 79–82 [2007],supra ). In this case, plaintiff does not allege the requisite intentional or deliberate wrongdoing, aggravating or outrageous circumstances, fraudulent or evil motive, or conscious act in willful and wanton disregard of another's rights necessary to support a claim for punitive damages against the ReMax defendants and defendant Zou.
With respect to plaintiff's claim for attorneys' fees, “generally an attorney's fee and other expenses incurred in prosecuting an action are considered an incident of litigation and, unless authorized by statute, court rule, or written agreement of the parties, are not recoverable' (Panish v. Panish, 24 AD3d 642, 643–644 [2005];see Hooper Assoc. v. AGS Computers, 74 N.Y.2d 487, 491 [1981];Widewaters Prop. Dev. Co., Inc. v. Katz, 38 AD3d 1220 [2007];Dupuis v. 424 E. 77th Owners Corp., 32 AD3d 720 [2006];St. George Tower & Grill Owners Corp. v. Honig, 232 A.D.2d 475, 476 [1996] )” (Adams v. Washington Group, LLC, 49 AD3d 786 [2008] ). Plaintiff has failed to assert any authority for his claim for attorneys' fees. Even assuming an award of attorneys' fees may be obtained by plaintiff in his capacity as executor, in connection with a recovery based upon breach of fiduciary duty ( see e.g. Birnbaum v. Birnbaum, 157 A.D.2d 177 [1990] [an estate may recover attorney and accountant fees incurred in uncovering a coexecutor's self-dealing and in pursuit of its claims against him or her] ), such award is unwarranted under the set of facts alleged herein ( see Gibbs v. Breed, Abbott & Morgan, 181 Misc.2d 346 [1999],revd on other grounds271 A.D.2d 180 [2000],supra ).
Defendants Chen, Liang and Abacus asserted cross claims against the ReMax defendants for common-law contribution and indemnification. “A claim for contribution exists only when two or more tort-feasors share in responsibility for an injury, in violation of duties they respectively owed to the injured person” (Smith v. Sapienza, 52 N.Y.2d 82, 87 [1981] [citations omitted] ). Nevertheless, the respective duties must be noncontractual duties ( see Board of Managers of Hudson Street Condominium v. 195 Hudson Street Associates, LLC, 37 AD3d 312 [2007] ). The right to implied or common-law indemnification arises “... in favor of one who is compelled to pay for another's wrong” (Margolin v. New York Life Ins. Co., 32 N.Y.2d 149, 152 [1973] ).
In this instance, defendants Chen, Liang and Abacus may not seek contribution from the ReMax defendants since the claims against Chen, Liang and Abacus by plaintiff, at the core, arise out of breach of contract ( see Tempforce, Inc. v. Municipal Hous. Auth. of City of Schenectady, 222 A.D.2d 778, 779 [1995],lv denied87 N.Y.2d 811 [1996] ). In addition, defendants Abacus, Chen and Liang have failed to allege any facts whereby the ReMax defendants would be compelled under law to pay for the alleged wrongs of those codefendants.
That branch of the motion by the ReMax defendants seeking to dismiss those portions of the complaint asserting claims based upon fraud, fraud in the inducement, fraudulent misrepresentation, conspiracy to commit fraud, intentional and negligent infliction of emotional distress, and conspiracy to commit conversion and for punitive damages and attorneys' fees is granted. That branch of the motion by the ReMax defendants to dismiss that portion of the complaint asserting a claim by plaintiff in his individual capacity for breach of fiduciary duty is granted. That branch of the motion by the ReMax defendants to dismiss that portion of the complaint asserting a claim by plaintiff, in his capacity as executor, for breach of fiduciary duty is denied. That branch of the motion by the ReMax defendants to dismiss the cross claims asserted against them by defendants Chen, Liang and Abacus is granted. That branch of the cross motion by defendant Zou to dismiss the complaint asserted against him is granted. That branch of the cross motion by defendant Zou for imposition of sanctions upon plaintiff and his counsel is denied (22 NYCRR 130–1.1).