United States District Court, Southern District of New York
May 16, 2000
BRUCE GEBHARDT AND CELESTE GEBHARDT, PLAINTIFFS,
ALLSPECT, INC., DEFENDANT.
The opinion of the court was delivered by: William C. Conner, Senior District Judge.
OPINION AND ORDER
Plaintiffs Bruce and Celeste Gebhardt bring the instant action
against defendant Allspect, Inc. alleging that defendant
improperly performed an inspection of their home. Plaintiffs
claim that they purchased the home in reliance on defendant's
inspection and suffered damages as a result. Defendant now moves
to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6),
arguing that the action is barred by the three-year statute of
limitations applicable to nonmedical malpractice actions set
forth in N.Y.C.P.L.R. § 214(6). Plaintiffs claim that the action
is an action for breach of contract or, in the alternative,
negligence in the performance of defendant's home inspection
obligations, and is thus subject to the six-year statute of
limitations provided by N.Y.C.P.L.R. § 213. For the reasons that
follow, defendant's motion is denied.
The following discussion of the facts is based on the
allegations in plaintiffs' complaint.*fn1 Plaintiffs, husband
and wife, purchased their residence on Lookout Road in Tuxedo
Park, New York for $1.5 million in 1996. The residence had been
advertised as an historic home and the sellers represented to
plaintiffs that the home needed no significant repairs and was
essentially in "move-in" condition. However, the sellers would
make no representations or warranties as to the condition of the
Prior to closing on the purchase of the house, plaintiffs hired
defendant to perform a building inspection and issue a report
indicating the condition of the house, including any significant
defects requiring repair. The parties entered into a Home
Inspection Authorization Agreement dated August 2, 1996, whereby
defendant agreed to use its "best efforts and abilities to
perform the inspection and prepare the report in accordance with
the CODE OF ETHICS and STANDARDS OF PRACTICE of the American
Society of Home Inspectors, Inc." (Complt., Ex. B.) On or about
August 4, 1996, defendant issued a report of its inspection.
The report, which was attached to the Complaint, listed defects
plaintiffs claim were consistent with representations made to
plaintiffs by the sellers of the house. A "Defects Summary" was
included in the report. The Defects Summary listed several
defects uncovered during inspection of the home and the estimated
cost of repairing them. (Complt., Ex. A.) According to this
summary, taking the upper limits of
the ranges of estimates, the estimated total cost of repairs was
$6,205. (See id.)
In reliance on the report, including the Defects Summary and
the report's conclusion that no major repairs were necessary,
plaintiffs purchased the house for $1.5 million and moved in
shortly thereafter. Plaintiffs claim that "[a]lmost immediately"
after moving into the house, they began to notice unsafe
conditions omitted from defendant's report. (Complt. ¶ 13.)
Plaintiffs contend that, among other things, defendant failed to
discover that the roof of the residence was substantially
separated from the facade of the house and the house lacked a
proper drainage system.
Plaintiffs state that they have spent $1 million on repairs to
date and that more repairs are necessary.
I. Standard of Review
On a motion to dismiss under Rule 12(b)(6), the issue is
"whether the claimant is entitled to offer evidence to support
the claims." Scheuer, 416 U.S. at 236, 94 S.Ct. 1683, 40
L.Ed.2d 90 (1974), overruled on other grounds, Davis v.
Scherer, 468 U.S. 183, 104 S.Ct. 3012, 82 L.Ed.2d 139 (1984). A
complaint should not be dismissed for failure to state a claim
"unless it appears beyond doubt that the plaintiff can prove no
set of facts in support of his claim which would entitle him to
relief." Padavan v. United States, 82 F.3d 23, 26 (2d Cir.
1996) (quoting Hughes v. Rowe, 449 U.S. 5, 10, 101 S.Ct. 173,
176, 66 L.Ed.2d 163 (1980)). Generally, "[c]onclusory allegations
or legal conclusions masquerading as factual conclusions will not
suffice to prevent a motion to dismiss." 2 JAMES WM. MOORE ET
AL., MOORE'S FEDERAL PRACTICE § 12.34[b] (3d ed. 1997); see
also Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1088 (2d
In assessing the legal sufficiency of a claim, the Court may
consider not only the facts alleged in the complaint, but also
any document attached as an exhibit to the Complaint or
incorporated by reference. See Fed.R.Civ.P. 10(c); Allen v.
WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991). The
Complaint incorporates by reference the Home Inspection
Authorization Agreement into which the parties entered and the
report prepared by defendant pursuant to that agreement.
Accordingly, these documents will be considered by this Court in
the disposition of defendant's motion.
II. The Three-Year Statute of Limitations for Nonmedical
The Complaint alleges that this Court has subject matter
jurisdiction over this action pursuant to 28 U.S.C. § 1332
because there is complete diversity between plaintiffs, residents
of New York, and defendant, a New Jersey corporation. The parties
agree that New York law applies to the dispute.
The issue here is whether a home inspector is entitled to the
three-year statute of limitations set forth in N.Y.C.P.L.R. §
214(6). The statute, as amended in 1996, states, in relevant
The following actions must be commenced within three
6. an action to recover damages for malpractice,
other than medical, dental or podiatric malpractice,
regardless of whether the underlying theory is based
in contract or tort. . . .
N YC.P.L.R. § 214(6).
The statute does not define "malpractice." New York's appellate
courts have not delineated the criteria for determining the types
of professional services which qualify for the three-year statute
of limitations, but have applied N.Y.C.P.L.R. § 214(6) to
attorneys, accountants, architects and engineers. See Port
Authority of N.Y. and N.J. v. Evergreen Int'l Aviation, Inc.,
179 Misc.2d 674, 678, 686 N.Y.S.2d 269 (N.Y.Sup.Ct. 1999) and
cited therein; New York and Presbyterian Hosp. v. Tishman
Constr. Co., 180 Misc.2d 193, 195, 688 N.Y.S.2d 424 (N.Y.Sup.Ct.
1999). At least one New York lower court used the definition of
malpractice from Black's Law Dictionary as the starting point of
the court's analysis of whether a defendant can invoke the
three-year statute of limitations. See Port Authority of N Y
and N.J., 179 Misc.2d at 677, 686 N.Y.S.2d 269. Black's Law
Dictionary defines malpractice as "`[p]rofessional misconduct or
unreasonable lack of skill'" and the "`[f]ailure of one rendering
professional services to exercise that degree of skill and
learning commonly applied under all the circumstances in the
community by the average prudent reputable member of the
profession.'" Id. (citing Black's Law Dictionary 959 (6th ed.
The Port Authority court listed the following factors to be
considered in determining whether a given activity constitutes
the practice of a profession:
(1) a long-term educational background generally
associated with a degree in an advanced field of
science or learning; (2) the requirement of a license
which indicates sufficient qualifications have been
met prior to engaging in the occupation; (3) the
control of the occupation by standards of conduct,
ethics and malpractice liability; and (4) the barrier
to carrying on the occupation as a corporation.
Id. at 678, 686 N.Y.S.2d 269; see also New York and
Presbyterian Hosp., 180 Misc.2d at 196, 688 N.Y.S.2d 424.
Although the parties have not directed our attention to, and we
have not found, any case in which a home inspector sought to
invoke the three-year statute of limitations set forth in section
214(6), the Supreme Court of New York County held that an
"exterior walls consultant" was not subject to the professional
malpractice statute of limitations in New York and Presbyterian
There, the defendant contracted with a hospital to "supplement
the Architect's skill in design, detailing and specification
preparation, and the Contractor/Manager's skill in building
construction." Id. at 194, 688 N.Y.S.2d 424. The court,
applying the four factors set forth above, held that although the
defendant's consulting practice "appears to involve work
associated with the professions of both architecture and
engineering," the defendant was not entitled to the shorter
limitations period. See id. at 196-97, 688 N.Y.S.2d 424.
The court's decision turned on the fact that the defendant was
an ordinary business corporation rather than a licensed
professional service corporation under the New York Business
Corporation Law. Id. The court noted that N.Y. Bus. Corp. Law.
§ 1501 et seq. "sets forth the exclusive means by which
professionals may practice in the corporate form, and a
corporation not licensed to render professional services may not
do so." Id. at 196, 688 N.Y.S.2d 424; see also Charlebois v.
J.M. Weller Assocs., Inc., 72 N.Y.2d 587, 592, 535 N.Y.S.2d 356,
531 N.E.2d 1288 (N.Y. 1988). The court continued:
Thus, defendant's "exterior wall consulting practice"
is not subject to the educational, regulatory and
disciplinary mechanisms of the state's licensing
authority. . . . [T]here was clearly no barrier to
[defendant's] carrying on its business as a
corporation, because that is precisely what it did.
Defendant thus availed itself of the usual
protections of the corporate form, rather than
subjecting its employees to personal professional
liability under BCL 1505. Having elected to secure
that advantage, defendant should not be allowed to
enjoy an additional benefit which was intended, in
part, to compensate professionals for their inability
to limit their liability through incorporation.
New York and Presbyterian Hosp., 180 Misc.2d at 196-97,
688 N.Y.S.2d 424.
Like the defendant in New York and Presbyterian Hospital,
defendant here has determined to avail itself of the protections
of the corporate form rather than expose
its employees to professional liability. Although it appears that
defendant adhered to industry standards of practice and a code of
ethics set forth by the American Society of Home Inspectors,
(see Complt., Ex. A.), defendant was not subject to a licensing
Defendant states in its reply memorandum in support of its
motion to dismiss that Bruce Rickard, the president of defendant
Allspect, is a licensed professional engineer and that "he has a
bachelor of science degree and a masters degree in mechanical
engineering; he is a licensed professional engineer in New York,
New Jersey and Illinois; he is a licensed building inspector for
residential commercial structures in New Jersey and a member of
the American Society of Home Inspectors." (Def. Reply Mem. Supp.
Mot. Dismiss at 1.) First, we may not consider these factual
allegations. "[A] district court errs when it considers
affidavits and exhibits submitted by defendants . . . or relies
on factual allegations contained in legal briefs or memoranda . .
. in ruling on a 12(b)(6) motion to dismiss." Friedl v. City of
New York, 210 F.3d 79, 2000 WL 353210, at *3 (2d Cir. April 4,
2000) (internal citations and quotations omitted).
However, even if we were to consider that defendant's president
is a licensed engineer, this would not entitled defendant to the
benefit of the three-year statute. Although engineers when acting
individually get the benefit of that statute, see IFD Constr.
Corp. v. Corddry Carpenter Dietz and Zack, 253 A.D.2d 89, 91-92,
685 N.Y.S.2d 670 (N.Y.App. Div. 1999), Rickard was not sued in his
personal capacity. The defendant in the instant action is an
unlicensed corporation that performs home inspections, not
engineering services. Nowhere in the report defendant prepared,
nor in the agreement between plaintiffs and defendant, does
defendant purport to perform engineering services. Rickard signed
the agreement as an "Inspector." (See Complt., Ex. B.)
In the Supplementary Practice Commentaries to C.P.L.R. §
214(6), Professor Vincent C. Alexander observes:
The demarcation between professional and conventional
businessperson, which will in turn determine whether
the alleged wrongdoing is malpractice or simply a
breach of contract for services, will be shadowy in
many cases. The strict, four-factor test applied by
the Port Authority and New York and Presbyterian
Hospital courts, however, seems an appropriate
approach to the problem. The Legislature presumably
sought to confer the protections of CPLR 214(6) on a
relatively small group of defendants. Otherwise, it
would have shortened the six-year breach of contract
period to three years for all contracts for services.
Practice Commentaries N.Y.C.P.L.R. 214(6).
This Court therefore concludes that the three-year statute of
limitations of N.Y.C.P.L.R. § 214(6) is inapplicable to this
action. The six-year statute of limitations applicable to actions
for breach of contract set forth in N.Y.C.P.L.R. § 213(2) will be
applied. See Video Corp. of Am. v. Frederick Flatto Assocs.,
Inc., 58 N.Y.2d 1026, 1028, 462 N.Y.S.2d 439, 448 N.E.2d 1350
(N.Y. 1983) ("[A]n action for failure to exercise due care in the
performance of a contract insofar as it seeks recovery for
damages to property or pecuniary interests recoverable in a
contract action is governed by the six-year contract Statute of
Limitations (CPLR 213, subd. 2).").
The instant action was filed on January 5, 2000, about three
years and four months after defendant issued its report and well
within the six-year statute of limitations.
For the reasons stated above, defendant's motion to dismiss the
complaint is denied.