CORLEY v. ALLSTATE REALTY ASSOC.

Full title: W.B. CORLEY, Plaintiff, v. ALLSTATE REALTY ASSOCIATES and 100 STREET TRI…

Court: Supreme Court of the State of New York, New York County

Date published: Mar 16, 2011

2011 N.Y. Slip Op. 50713 (N.Y. Sup. Ct. 2011)

2011 N.Y. Slip Op. 30656

Opinion

400026/10.

March 16, 2011.

DECISION AND ORDER

JOAN A. MADDEN, J.

Plaintiff William Corley (s/h/a W.B. Corley) (hereafter "Corley") moves for an order granting reargument of this court's decision and order dated September 21, 2010 ("the original decision"), which denied his motion for a default judgment and granted defendants' cross motion to dismiss the complaint or, in the alternative, an order permitting him to amend his complaint to assert a newly pleaded cause of action for fraud. Defendants oppose the motion.

Background

Corley resides at 1955 First Avenue, New York, NY, which is known as The Aspen. Defendant 100 Street Tri Venture LLC (Tri Venture) is the owner of The Aspen. Defendant Allstate Realty Associates (Allstate) is an entity involved in the management of The Aspen. Corley alleges that he has lived in the Aspen since December 1, 2004, and was the first occupant of Apartment No. 540. He currently pays a "market rate" monthly rental of $2,054.

The Aspen was a City-owned building which was deeded to Tri Venture, as sponsor, on November 4, 2002, for purposes of rehabilitation. Thereafter, on November 13, 2003, Tri Venture signed a Regulatory Agreement with the HDC (hereinafter "the Regulatory Agreement") providing for various restrictions on Tri Venture's use of the apartments, or units, in exchange for over $46 million in financing from the New York City Housing Development Corporation (HDC).

The Aspen is regulated by HDC under a "50-30-20" program. In particular, under the terms of the Regulatory Agreement, The Aspen rents approximately 50% of its 232 apartments at market rate, 30% are designated middle income apartments also known as "New HOP Apartments," and the remaining 20% are designated as low income building. The agreement was made in connection with the New Housing Opportunities Program, known as the New HOP program, which is sponsored by HDC.

Low income tenants are defined as individuals or families with income below 50% of the area median income, as defined by the United States Department of Housing and Urban Development (HUD). For 2010, New York's area median income, as defined by HUD, is $62,300 per annum. Thus, at least 20% of the units must be rented to individuals or families with incomes not exceeding $31,150 per annum.

Under the Regulatory Agreement, a "New HOP Unit" or middle income unit is defined, inter alia, as "any unit that is occupied by a tenant who qualified under this Agreement as a New HOP Tenant prior to initial occupancy of such tenant's unit" Thus, a New HOP unit is any unit that is occupied by a tenant who qualified under the Regulatory Agreement as a New HOP Tenant when he or she moved in. By contrast, under the Regulatory Agreement, a "Market-Rate Unit" is "any unit that is not Originally Designated [a] Low Income Unit, a New HOP Unit or a Superintendent Unit."

In addition to the terms of the Regulatory Agreement, the Aspen must comply with all HDC's rules and policies. Moreover, HDC allows the Aspen to establish certain policies of its own in renting the subsidized apartments which must be applied with strict uniformity. At the Aspen these policies include setting a minimum of $55,000 annual income for New Hop tenants and in selecting subsidized tenants not to rent to those with outstanding civil judgments, prior criminal convictions, or multiple delinquent accounts.

The gravamen of this action involves the purportedly wrongful refusal of defendants to offer Corley a regulated apartment at a moderate or low-income rate. Defendants argue that Corley does not qualify for a regulated apartment and that they are not required to offer one to him since the Aspen also has market rate apartments.

In its original decision, the court granted defendants' cross motion to dismiss the complaint for failure to state a cause of action, including the first cause of action for fraud. The court based its dismissal of the fraud claim on Corley's failure to "specifically set forth the material misrepresentation relied upon, Plaintiff has failed to comply with the pleading requirements of CPLR 3016 (b)." In addition, the court wrote that:

assuming that [Corley's] complaint is, as alleged in his affidavit, that defendants misrepresented to him that the minimum income level for a moderate-rate apartment was $55,000, when, according to [Corley], it is the maximum income level, [Corley] is mistaken. The HDC requires that tenants pay no more than a certain percentage of their income as rent, and the minimum level of income for a middle-income apartment at the Aspen is $55,000.

By interim order dated November 18, 2010, this court granted the instant motion for reargument only to the extent of permitting him to submit for the court's consideration a newly pleaded cause of action for fraud, and directed him to submit the proposed amended pleading and memorandum of law in support by December 3, 2010, and directed that any opposition by defendants be submitted by December 17, 2010.

Accordingly, the only remaining issue is whether the fraud cause of action in proposed amended complaint states a cause of action. The proposed fraud claim is based on alleged misrepresentations made to Corley by Brain Loftman ("Loftman"), an agent and employee of defendants, in response to Corley's request to rent a regulated apartment at the Aspen. According to the proposed amended complaint, Corley made this request by letter to Loftman dated November 15, 2005, and that, at that time of the request, Corley was able to meet the income requirements for a low income apartment and, upon information and belief, low income units were available. It is further alleged that Corley received no response to the letter but was allowed to meet with Loftman at which time Corley inquired about renting a low or moderate income apartment. In response to Corley's inquiry, Loftman allegedly "first took [Corley] to look at a moderate income apartment and told [Corley] that in order to be eligible for a moderate income apartment he needed to have at least $55,000 in income and that Loftman himself was not able to get anyone into a low income apartment [and that] Loftman specifically said that he was unable to get a low income apartment for Adam Clayton Powell's relative." (Proposed Amended Complaint ¶ 10).

The proposed claim alleges that the above representation regarding the unavailability of low income apartments in the Aspen was false, and that defendants knew the representation was false as "there were not pre-qualifications to apply for low and moderate income apartments [and that] anyone was eligible to submit an application in 2005. . .[and] today." (Id., ¶ 14). It is further alleged that the representation was made to induce Corley "not to submit an application for a low or moderate income apartment [and that] [Corley] justifiably relied on Loftman's representation as Loftman held himself out as the sole authority for defendants as to whom could submit an application to an apartment, [and that Corley] was harmed by defendants' misrepresentation by not being permitted to submit an application for a low income apartment, which result in a loss of at least $325,000 to [Corley]." ((Id., ¶ 's 15,16,17)

Defendants oppose the motion on the ground that the statements made to Corley regarding the unavailability of low-income apartments were true, and submit documentary evidence and Loftman's affidavit in support of their position. In any event, defendants note that although not mentioned in the proposed amended complaint, Corley eventually sought to apply for a low income apartment and paid for a credit report and criminal background check. However, the credit report and criminal background check, copies of which are submitted by defendants, show that as of 2005, when Corley allegedly sought to apply for a regulated apartment, he had several unsatisfied civil judgments and at least one criminal conviction for the offense of Criminal Possession of a Forged Instrument in the Second Degree. On December 1, 2009, The Aspen denied Plaintiffs application for a low-income unit.

Discussion

Under CPLR 3025(b) motions to amend are freely granted in the absence of prejudice or unfair surprise resulting from delay, unless the proposed amendment is plainly lacking in merit. Thomas Crimmins Contracting Co., Inc. v. City of New York, 74 NY2d 166 (1989). Defendants do not claim prejudice or unfair surprise. Therefore, the only issue is whether the proposed amendment has merit.

To demonstrate merit, "proponent must allege legally sufficient facts to establish a prima facie cause of action or defense in the proposed amended pleading. If the facts alleged are incongruent with the legal theory relied on by the proponent the proposed amendment must fail as matter of law." Daniels v. Empire-Orr, Inc., 151 AD2d 370, 371 (1^st Dept. 1989) (citations omitted). When the proponent meets this initial burden, "the merit of the alleged pleading must be sustained . . .unless the alleged insufficiency or lack of merit is clear and free from doubt." Id.

To plead a viable cause of action for fraud, it must be alleged that the defendant made a misrepresentation of a material existing fact or a material omission of fact, which was false and known to be false by the defendant when made, for the purpose of inducing reliance, justifiable reliance on the alleged misrepresentation or omission by the victim of the fraud, and injury. Lama Holding Company v Smith Barney Inc., 88 NY2d 413, 421 (1996). "An essential element of any fraud. . .claim is that there must be reasonable reliance, to a party's detriment, upon the representations made." Water Street Leasehold LLC v. Deloitte Touche, LLP, 19 AD3d 183, 185 (1^st Dept 2005), lv denied, 6 N.Y.3d 706 (2006).

Here, even assuming arguendo that proposed fraud claim sufficiently alleges reasonable reliance on the purported misrepresentation regarding the unavailability of low income apartments, the documentary evidence submitted on this motion establishes that Corely was not eligible for a low income apartment in 2005, so that it cannot be said that Corely relied on the misrepresentation to his detriment. Specifically, as indicated above, the credit report and criminal background check for Corley show that, as of 2005, Corely had several civil judgments against him and a criminal conviction, thus making him ineligible for a regulated apartment at the Aspen. Under these circumstances, the proposed fraud claim is without merit, and Corely's request to revive his action by amending complaint to add the proposed claim is denied. See e.g., Laub v. Faessel, 297 AD2d 28, 31 (1^st Dept 2002) (holding that plaintiffs claims for fraud must fail in the absence of allegations or evidence that "the misrepresentations directly and proximately caused his investment losses").

Accordingly, it is

ORDERED that Corely's motion to amend his complaint to assert a newly pleaded cause of action for fraud is denied.