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MOELLER v. ZACCARIA

August 30, 1993

HANS MOELLER and INGE MOELLER, Plaintiffs,
v.
JEROME ZACCARIA, SR., FELICE MINGIONE, FRANK BRANCA, and IVAN FRIEDMUTTER, Defendants.


GOETTEL


The opinion of the court was delivered by: GERARD L. GOETTEL

I. FACTUAL BACKGROUND

 Plaintiffs Hans and Inge Moeller sue defendants Jerome Zaccaria, Felice Mingione, Frank Branca, and Ivan Friedmutter for injuries stemming from a purported conspiracy to defraud plaintiffs and the general public in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1964 and Connecticut's laws against fraud.

 The Moellers, who reside in Greenwich, Connecticut, desired to construct an addition to their single family home and remodel their kitchen. In January and April 1985 they received promotional brochures in the mail from Remodelling Consultants, Inc. ("RCI"), a New York corporation that described itself as a "professional design-build firm," advertising their services as remodelling consultants specializing in home improvements and remodelling. The brochures that plaintiffs received were part of a broader mailing to the general public.

 In response to the initial promotional brochure, plaintiffs telephoned the offices of RCI in Mamaroneck, New York to request additional information about RCI's services. Defendant Frank Branca, an RCI representative, contacted plaintiffs by telephone at their Connecticut residence and allegedly described RCI as a "professional design-build firm" that would build an addition to plaintiffs' home designed by two of RCI's licensed architects. In addition, plaintiffs were allegedly told that all the work would be supervised by licensed architects.

 A series of telephone calls ensued between plaintiffs and Frank Branca during which these representations were allegedly repeated. Plaintiffs claim that each defendant had a hand in this scheme. Plaintiffs eventually signed a contract with RCI on August 28, 1985 at which time plaintiffs tendered a downpayment of $ 8,240. Zaccaria was a shareholder, director, and officer of RCI. The other named defendants, Friedmutter, Branca, and Mingione were employees of RCI and also alleged to be shareholders and officers.

 According to Zaccaria, RCI maintained a staff of architects in its architectural department as well as several registered architects employed in its sales force who were referred to as "licensed architectural consultants." Persons in the sales force who were not registered architects, including Larry Zeug and defendant Friedmutter, were designated "architectural consultants." Defendants claim that sales people in the latter category were never held out to the public as registered architects.

 Plaintiffs claim that a series of fraudulent misrepresentations were made by defendants to induce them to sign a contract with RCI. Plaintiffs tendered a downpayment of $ 8,240. In particular, plaintiffs contend that since 1985 defendants have repeatedly misrepresented that Lawrence Zeug and Ivan Friedmutter were licensed architects who would design and supervise construction of their addition and kitchen remodelling.

 In October 1985, Inge Moeller signed an application to the Town of Greenwich Division of Buildings for the issuance of a building permit for construction of the addition to their home. The application was filled out at RCI's offices. In it, RCI was identified as the "Authorized agent and permittee." On behalf of RCI, the application was signed twice by Eric Jacobsen above the lines marked "Permittee" and "Agent."

 As part of the application, a line reads "If architect or professional engineer give Connecticut registration No." The space for the information beside the line was left blank. Inge Moeller contends that when she signed the application she did not notice the absence of architect's registration number. The permit was issued nine days later.

 In January 1986, at a meeting with defendant Friedmutter, the Moellers initialed the plans for their addition which consisted of five pages of print drawings. The plans contained a signature space for an "architect." The space opposite the word "architect" was blank. Below it, next to the words "Drawn By" is listed the name "E. Jacobson." Plaintiffs claim not to have noticed the absence of an architect's name on the plans they signed.

 In the margin of a letter the Moellers received from Ivan Friedmutter, RCI's Westchester Sales Manager, dated December 20, 1985, plaintiff Hans Moeller made a written notation that "delay due to RCI's layoff of architects" and "Ivan [Friedmutter] told us this when drawings were signed." Inge Moeller was told the same thing by defendant Frank Branca. Plaintiffs made no further inquiries concerning the architects or supervision of their additions.

 Construction commenced in March 1986. RCI ceased work, however, the following month due to disputes over changes in specifications made by plaintiffs. By that time, plaintiffs had lodged numerous complaints with RCI about the poor quality of the work being done on their home. After a meeting between plaintiffs and RCI representatives including Zaccaria, an agreement was reached in May 1986. The Moellers paid approximately $ 12,000 into escrow and work recommenced. Before long, problems in the construction resurfaced. Plaintiffs complained of inadequate supervision and shoddy work. Work stopped again in June 1986.

 In December 1986, the Moellers commenced suit against RCI for damages in New York Supreme Court alleging fraudulent inducement of contract and breach of contract. While preparing for state trial, plaintiffs' attorney, at the suggestion of an architect retained by plaintiffs as an expert witness who examined the plans for the addition, contacted licensing officials in New York and Connecticut. He learned that Zeug and Friedmutter were not, and had never been, licensed architects.

 Acting on information furnished by RCI regarding the design error in the roof support of the addition, the Town of Greenwich refused to issue a Certificate of Occupancy and required that the area be sealed off until substantial repairs were made. Defendant Zaccaria also contends that in 1989, during a visit to the Moellers' home, he personally observed two problems, a roof beam support error and an improperly set curtain wall in the foundation. Zaccaria says that he informed plaintiffs of the defects and offered to correct it at RCI's expense.

 On August 2, 1991, the day before the state trial was set to begin, RCI filed for bankruptcy protection under Chapter 11 in the Bankruptcy Court for the Southern District of New York. The bankruptcy was converted to a Chapter 7 bankruptcy in October 1991. In June 1991, plaintiffs filed the present action against the six individual defendants alleging that defendants' fraudulent actions constituted a "pattern of racketeering activity" in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1964. Plaintiffs included pendent state claims for common law fraud. According to plaintiffs, the named defendants were all principals, shareholders, and/or management of RCI who participated either directly or indirectly in the brochure mailings.

 Before the court today are the defendants' motions for summary judgment and plaintiffs' cross-motion for summary judgment. Defendants argue primarily that the plaintiffs' RICO and fraud claims are barred by the statute of limitations. Plaintiffs contend that defendants use of the term "architectural consultant" constituted fraud as a matter of law.

 II. DISCUSSION

 At this point, the standards for resolving a motion for summary judgment border on common knowledge. To prevail, the moving party must demonstrate "that there is no genuine issue as to any material fact and that [it] is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Our function is not to resolve disputed issues of facts but solely to determine if such genuine issues of fact exist. We resolve all ambiguities and draw all inferences in favor of the party defending against the particular summary judgment motion in question. Rattner v. Netburn, 930 F.2d 204, 209 (2d Cir. 1991); Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir. 1985).

 A. RICO Statute of Limitations

 Although not entirely clear, it appears that plaintiffs § 1962(c) RICO claim alleges that defendants formed an enterprise to use non-architects fraudulently passed off as architects, to design and supervise home remodelling projects. In furtherance of their scheme, defendants allegedly committed acts of mail and wire fraud that misrepresented the professional qualifications of the employees who would design a customer's project.

 In a RICO action, the injury alleged must have been proximately caused by a pattern of racketeering activity violating § 1962 or by individual RICO predicate acts. Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23 (2d Cir. 1990). When plaintiffs allege fraudulent representations in the context of an alleged RICO predicate act of mail or wire fraud, those misrepresentations must have been relied on, Metromedia Co. v. Fugazy, 983 F.2d 350, 368 (2d Cir. 1992), cert. denied, 124 L. Ed. 2d 662, 113 S. Ct. 2445 (1993), and plaintiffs must show that their injuries resulted from such misrepresentations. Ferndale Corp. v. Schulman Urban Dev. Assoc., 758 F. Supp. 861, 866 (S.D.N.Y. 1990) (citing County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1311 (2d Cir. 1990)). Here, plaintiffs must prove that they suffered injuries proximately caused by defendants' alleged misrepresentations regarding the professional qualifications of the employees who were to design and supervise construction of their addition.

 The parties agree that RICO is governed by a four-year statute of limitations. Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 97 L. Ed. 2d 121, 107 S. Ct. 2759 (1987). Defendants contend that plaintiffs' § 1964(c) civil RICO claim is barred by this statute of limitations since the claim was not raised until plaintiffs filed their federal action in June 1991. Plaintiffs respond that their RICO cause of action was timely filed because it only accrued in January 1991 when they discovered that defendants Zeug and Friedmutter were not licensed architects despite their titles of "architectural consultants." Plaintiffs also claim that they did not actually discover the design defect in the addition's roof until this time.

 Plaintiffs somewhat misapprehend the key inquiry in determining when their RICO claim accrued by focusing on their discovery of the details of the alleged fraud scheme. In their brief, plaintiffs include the point heading that reads: "The Moellers' Civil RICO Claim Accrued at the Time the Moellers Discovered or Should Have Discovered the Violation." Pl.'s Brief at 4. This statement is legally ...


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