It is well established that a subsequent contract regarding the same matter will supersede the prior contract. See College Auxiliary Servs. of State Univ. College, Inc. v. Slater Corp., 90 A.D.2d 893, 894, 456 N.Y.S.2d 512 (3d Dept. 1982). Here, Barnum assented to the modification of the contract to which she was a third-party beneficiary when she signed the Form Consent agreeing to the Note. As a result, the terms of the Note supersede any third-party beneficiary rights Barnum may have had under the Agreement.
Additionally, the parties to an agreement may subsequently modify the agreement even without the consent of the creditor beneficiary as long as the creditor beneficiary has not accepted, adopted or relied upon the original agreement. See Worldwide Sugar Co. v. Royal Bank of Canada, 609 F. Supp. 19, 24 (S.D.N.Y.), aff'd, 751 F.2d 373 (2d Cir. 1984); Restatement [Second] of Contracts §§ 311 (2), (3) (1979).
Under either theory, Barnum's consent to the Note, and its resultant modification of the original Agreement, must be binding.
For the reasons set forth above, Barnum is bound by the terms of the Note and her breach of contract claim is dismissed.
II. Barnum's Fraud Claim Must Fail
Barnum's second claim is rooted in common law fraud. "The elements of common law fraud are a material, false representation, an intent to defraud thereby, and reasonable reliance on the representation causing damage to the plaintiff." Kregos v. Associated Press, 795 F. Supp. 1325, 1334 (S.D.N.Y. 1992) (citing Katara v. D.E.Jones Commodities Inc., 835 F.2d 966, 970-71 (2d Cir. 1987)), aff'd, 3 F.3d 656 (2d Cir. 1993), cert. denied, 114 S. Ct. 1056 (1994); Zaro Licensing, Inc. v. Cinmar, Inc., 779 F. Supp. 276, 284 (S.D.N.Y. 1991) (citing same). For the reasons set forth below, Barnum fails to adequately plead the elements necessary to sustain her fraud claim.
A. Many of Barnum's Allegations Are Irrelevant
Only two of Barnum's allegations, concerning Reis' letter of November 1991, can be considered relevant to her fraud claims. The other allegations, as described immediately below, are irrelevant to her common law fraud claim and must be dismissed out of hand.
1. Irrelevant Allegations of Fraud
First, Barnum complains that the Second Amendment does not adequately describe the non-recourse provisions of the Note. This allegation cannot be seriously considered as a copy of the exact Note that she signed was attached to the Second Amendment she concededly reviewed. In addition, nothing in the Second Amendment states that the Note is fully recourse. Therefore, there could not have been any misrepresentation.
Second, Barnum's contention that the December 26, 1990 Millbrook Meadows "Restated Offering Plan" does not give notice of Plaintiff's right to the return of her entry fee is irrelevant to her fraud claim as it is an offering plan for prospective purchasers -- and contains no indication that it effects terminated residents such as Barnum. In addition, the "Restated Offering Plan" was filed well after Barnum had consented to her Note and consequently could have had no possible impact on her decision to accept the non-recourse Note.
Third, Barnum's concedes that although her Note was nonrecourse, the Declaration of Covenants, Restrictions, Conditions and Reacquisition, (Am. Compl. Ex. F), does not repeat the nonrecourse language. However, Barnum has not indicated that the language contained in this document is false or perpetrates a fraud in a manner sufficient to sustain a common law fraud claim.
Fourth, Reis' choice of wording (i.e. "prepay" and "prepayment" in lieu of "repay" and "repayment") in his letter seeking amendment to the Note cannot adequately sustain a fraud claim, especially in light of Barnum's concession that "it is unclear at this stage . . . whether or not . . . the repeated erroneous use of the word prepay for repay was merely poor grammar on Reis' part or wilful obfuscation." (Am. Compl. P 35.)
Fifth, Barnum alleges that the information that she received, after having already agreed to the modification of her Note, about the number of terminated residents ahead of her was fraudulently misleading. (Am. Compl. PP 39, 40.) However, according to the Amended Complaint, Barnum received the information that $ 679,150 had to be paid out before her turn to be repaid arose. This statement does not appear to be a fraudulent misrepresentation, rather simply another way to answer the same question, and accordingly, this claim has no merit.
Sixth, Barnum asserts that on December 12, 1992 the Defendants set forth a "bleaker financial picture" than they had the previous year in their December 12, 1991 letter. (Am. Compl. P 41.) As Barnum has not alleged that either statement is false, a claim of common law fraud on this assertion simply cannot prevail. Likewise, the Plaintiff's conclusory allegation that the sum of the foregoing activities make up a "fraudulent scheme," (Am. Compl. P 43), cannot prevail in the absence of any individual fraudulent acts.
2. The November, 1991 Letter
The only allegedly false statements made by the Defendants appears to be in their letter of November 1991 which requested the modification of the Note to allow Millbrook to use Vacant Pooled Funds to pay interest, and not just principal, as was initially intended.
Barnum contends that Millbrook's characterization that the modifications to the Note were "slight" constitutes fraud. However, aside from this characterization, the text of the letter quoted in the Amended Complaint appears to describe all the changes sought by the Defendants. Hence, the characterization, that the proposed modifications were "slight," is merely a non-actionable opinion and does not constitute a material misrepresentation of fact. See Zaro Licensing, Inc. v. Cinmar, Inc., 779 F. Supp. 276, 284 (S.D.N.Y. 1991); Hershfang v. Citicorp, 767 F. Supp. 1251, 1256 (S.D.N.Y. 1991); cf. Friedman v. Mohasco Corp., 929 F.2d 77, 79 (2d Cir. 1991) (finding statements about future events that are expressions of opinions and not guarantees are not actionable under federal securities fraud statue).
Barnum's second allegation concerning the November 1991 letter is that Reis falsely represented that Robert Levine was Barnum's attorney when, in fact, Levine was the attorney for the Millbrook Resident Association. However, this claim may not prevail as Barnum does not establish in the Amended Complaint that she relied on Reis' assertion that Levine was her attorney.
Further, even if she was "induced" to agree to the modification of her Note based on this alleged misrepresentation, she does not indicate how such reliance would have been justified. Royal Am. Managers, Inc. v. IRC Holding Corp., 885 F.2d 1011, 1016 (2d Cir. 1989); Burke v. Bevona, 866 F.2d 532, 539 (2d Cir. 1989); Lanzi v. Brooks, 54 A.D.2d 1057, 1058-59, 388 N.Y.S.2d 946 (1976), aff'd, 43 N.Y.2d 778, 402 N.Y.S.2d 384, 373 N.E.2d 278 (1977).
Aside from the fact that presumably Barnum would know the identity of her own attorney, Barnum's allegedly justified reliance is obviated by Reis' statement that Levine "does not object to the form of the amendment, although the decision as to whether or not to accept it is, of course, up to you." (Am. Compl. P 36.). Further, the plain language of this statement indicates merely that Levine approved the "form" and not necessarily the substance of the modification. In any event, Reis clearly states that Barnum is free to accept or reject the modification, hence justifiable reliance is not adequately alleged by the Amended Complaint. See 225 W. End Ave. Assocs. v. Bittorf, 744 F. Supp. 67, 71 (S.D.N.Y. 1990) (finding that plaintiff's reliance on misrepresentations by defendant in an unsuccessful application to the New York Attorney General for approval to convert premises to a cooperative/condominium was unjustified).
Accordingly, Barnum's claim for common law fraud, is dismissed pursuant to Fed. R. Civ. Pro. Rule 12(b)(6).
III. Emotional Distress/Prima Facie Tort Claim
Barnum's final claim realleges the prior paragraphs of the complaint and states that "by reason of the [Defendants'] foregoing acts, Plaintiff has been subjected to intense distress and mental suffering" and should be awarded $ 1,000,000. No further elucidation of her distress and mental suffering, and its etiology, is described by the Amended Complaint.
Under New York law, the four elements required to state a claim for intentional infliction of emotional distress are:
(i) extreme and outrageous conduct; (ii) intent to cause, or disregard of substantial probability of causing, severe emotional distress; (iii) a causal connection between the conduct and the injury; and (iv) severe emotional distress.
Howell v. New York Post Co., 81 N.Y.2d 115, 121 (1993). In this case Barnum has failed to even minimally establish two of the four elements necessary to sustain a claim of intentional infliction of emotional distress -- outrageous conduct or Defendants' intent to cause emotion distress.
As a preliminary matter, it must be noted that the New York Court of Appeals has never found a case in which the conduct complained of was sufficiently outrageous in character to state a claim for intentional infliction of emotion distress. See Howell, 81 N.Y.2d at 122. Nevertheless, outrageous conduct is defined to be "so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community." Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 303, 461 N.Y.S.2d 232, 448 N.E.2d 86 (1983) (quoting Restatement (Second] of Torts § 46, comment d (1979)); see also Piesco v. City of New York Dep't of Personnel, 753 F. Supp. 468, 479 (S.D.N.Y. 1990), aff'd in part, rev'd in part and remanded on other grounds, 933 F.2d 1149 (2d Cir.), cert. denied, U.S. , 112 S. Ct. 331 (1991).
Here, the failure or inability of Millbrook to pay the entire amount of its obligations under a non-recourse Note, while unfortunate, does not constitute, as a matter of New York law, conduct which may be deemed outrageous or beyond the possible bounds decency. Accordingly, Barnum has not adequately alleged outrageous conduct necessary to sustain this claim.
Second, Barnum has not pleaded sufficient facts to allege that any of the Defendants intended to cause her severe emotional distress -- or such disregard which has the probability of causing severe emotional distress. Millbrook, at worse, was selfishly pursuing its own business interests at Barnum's expense. "If a defendant's primary purpose was to advance its own business interests, and any conduct that harmed plaintiff was incidental, defendant has not committed the New York tort of intentional infliction of emotional distress." Preston v. Martin Bregman Prods., Inc., 765 F. Supp. 116, 120 (S.D.N.Y. 1991) (quoting Rooney v. Witco Corp., 722 F. Supp. 1040. 1045 (S.D.N.Y.) 1989); see also Martin v. Citibank N.A., 762 F.2d 212, 220 (2d Cir. 1985).
Therefore, Barnum's claim of intentional infliction of emotional distress may not prevail and is dismissed.
Barnum likewise cannot sustain a claim of prima facie tort which, under New York law, also consists of four elements: (1) infliction of intentional harm, (2) without excuse or justification, (3) by an act or series of acts which would otherwise be lawful, (4) resulting in special damages. Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314, 332, 464 N.Y.S.2d 712, 451 N.E.2d 459 (1983); WFB Telecommunications, Inc. v. NYNEX Corp., 188 A.D.2d 257, 258, 590 N.Y.S.2d 460 (1st Dept. 1992).
As with the intent requirement for intentional infliction of emotional distress, if a defendant's motive is tainted by self interest, profit or business advantage, a prima facie tort action cannot be sustained. See Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314, 332, 464 N.Y.S.2d 712, 451 N.E.2d 459 (1983). Here, the facts alleged by Barnum in the Amended Complaint indicate that the Defendants were motivated by their own financial interests and not "disinterested malevolence." Id. (citing American Bank & Trust Co. v. Federal Bank, 256 U.S. 350, 358, 65 L. Ed. 983, 41 S. Ct. 499 (1921) (Holmes, J.)); Bassim v. Hassett, 184 A.D.2d 908, 909, 585 N.Y.S.2d 566 (3d Dept. 1992). Under either label, Barnum has not stated a claim for relief and, accordingly, her third cause of action is dismissed.
Although this is Plaintiff's second opportunity to amend her complaint, after viewing the Defendants' briefing of the deficiencies in the original Complaint, she has yet to adequately amend her complaint to withstand dismissal under Rule 12(b)(6). As a result, a dismissal of her Amended Complaint with prejudice is appropriate. See, e.g., Armstrong v. McAlpin, 699 F.2d 79, 93-94 (2d Cir. 1983) (dismissing second amended complaint with prejudice); Sendar Co., Inc. v. Megaware, Inc., 705 F. Supp. 159, 163 (S.D.N.Y. 1989) (denying leave to replead); Avnet, Inc. v. American Motorists Insurance Co., 684 F. Supp. 814, 816 (S.D.N.Y. 1988) (same).
Accordingly, for the reasons set forth above, Barnum's Amended Complaint is dismissed with prejudice.
It is so ordered.
New York, N. Y.
May 12, 1994
ROBERT W. SWEET