United States District Court, Southern District of New York
May 5, 2003
MARK J. DIGIULIO, PLAINTIFF, AGAINST FRANKLIN ROBIN, DEFENDANTS.
The opinion of the court was delivered by: Constance Baker Motley, United States District Judge
MEMORANDUM OPINION AND ORDER
This case involves a claim of breach of contract regarding the sale of a cooperative apartment in Manhattan, brought into federal court on the basis of diversity jurisdiction. Plaintiff has moved for summary judgment. For the reasons that follow, that motion is granted.
Plaintiff, Mark DiGiulio ("DiGiulio"), originally brought suit seeking specific performance on a contract for the purchase and sale of a cooperative apartment — specifically, Penthouse A of the apartment building located at 433 East 51st Street, New York, New York ("the apartment" or "Penthouse A"), owned by defendant Franklin Robin ("Robin"). Under the terms of the contract, Robin was to sell his apartment to DiGiulio for $225,000. After signing that contract, DiGiulio assigned his rights in the contract to Carl and Marsha Hewitt ("the Hewitts") for $390,000. At that point, according to plaintiff, Robin refused to close on the apartment, believing that he had been defrauded. Robin has asserted a counterclaim based on, inter alia, fraudulent inducement by DiGiulio, who, Robin claims, told him that $225,000 was a reasonable price and that he had knowledge that comparable apartments in the building had sold for approximately that amount.*fn1
Robin is eighty-five years old and is in failing health. Amended Answer at 5. Prior to the events that have brought the parties to court, Penthouse A was occupied by Joseph Mann ("Mann"), who was a close personal friend of Robin, id.; Robin has never lived in the apartment. See Certification of Kevin N. Starkey, Ex. E ("Robin Deposition") at 21. Mann passed away on May 6, 2000. Answer, ¶ 10. Soon thereafter, DiGiulio and Robin communicated with each other (whether through a third party or not is in dispute) to discuss the sale of the apartment by Robin to DiGiulio. Id., ¶ 11. Robin claims that DiGiulio "falsely and fraudulently" told Robin that the market value of the apartment was $225,000, and that he knew that was the market value based on the sale prices of comparable apartments in the same building. Id., ¶¶ 13-14.
Robin and DiGiulio entered into a contract for the purchase and sale of the apartment. Pl.'s Statement of Material Facts Pursuant to Local Rule 56.1 ("Pl.'s 56.1 Statement"), ¶ 5 & Ex. 5 ("Contract").*fn2 Robin was represented by an attorney, Charles Starkey, Esq., in connection with the transactions at issue in this case. Id., ¶ 3. Neither Robin nor his attorney made any effort to ascertain the market value of the apartment before signing the contract and delivering it to DiGiulio Id., ¶ 13. After the contract was signed but before the closing, DiGiulio assigned his rights to the apartment under the contract to the Hewitts. Id., ¶ 20. Robin agreed, in writing and represented by counsel, to DiGiulio's assignment of his rights to a third party. Id., ¶¶ 15, 19 & Ex. 9 ("Assignment of Contract"). The consideration for the agreement was DiGiulio's agreement to pay Robin's entire "flip tax" at closing. Pl.'s 56.1 Statement, ¶ 16; Assignment of Contract.
Plaintiff filed suit in New York Supreme Court; defendant removed to federal court based on diversity jurisdiction pursuant to 28 U.S.C. § 1332 and 1441. Originally, the Hewitts joined DiGiulio in suing for specific performance. Later, they reached a settlement with Robin wherein he sold them the apartment for $225,000, the same amount DiGiulio was supposed to pay him under the terms of the contract. Judge Batts, to whom this case was originally assigned, approved the settlement between Robin and the Hewitts over DiGiulio's objection. Stipulation of Dismissal With Prejudice dated March 19, 2002. Accordingly, the specific performance claim dropped out (there no longer being an object of the contract), and DiGiulio was left with a claim for roughly $165,000 (plus interest) in damages.
I. Legal Standards — Summary Judgment
A motion for summary judgment should only be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 n. 4 (1986). "[G]enuineness runs to whether disputed factual issues can reasonably be resolved in favor of either party, [while] materiality runs to whether the dispute matters, i.e., whether it concerns facts that can affect the outcome under the applicable substantive law." Mitchell v. Washingtonville Cent. Sch. Dist., 190 F.3d 1, 5 (2d Cir. 1999) (internal quotations and citations omitted).
In deciding such a motion, the court must "assess the record in the light most favorable to the non-movant and . . . draw all reasonable inferences in its favor." Delaware and Hudson Railway Co. v. Connecticut Rail Corp., 902 F.2d 174, 177 (2d Cir. 1990). In order to prove that a genuine issue of material fact exists, the party opposing the motion "may not rest upon the mere allegations or denials of the pleading[s]," but must by affidavit or otherwise "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); Celotex Corp., 477 U.S. at 324; Twin Lab. Inc. v. Weider Health & Fitness, 900 F.2d 566, 568 (2d Cir. 1990). In this vein, the Second Circuit has noted that "conclusory statements, conjecture or speculation by the party resisting the motion will not defeat summary judgment." Kulak v. City of New York, 88 F.3d 63, 71 (2d Cir. 1996). Further, "[t]here must be more than a scintilla of evidence and more than some metaphysical doubt as to the material facts." Cablevision Systems Corp. v. Town of East Hampton, 862 F. Supp. 875, 880 (E.D.N.Y. 1994), affd, 57 F.3d 1062 (2d. Cir. 1995). This Circuit has declared summary judgment a useful "tool to winnow out from the trial calendar those cases whose facts predestine them to result in a directed verdict." United Nat'l Ins. Co. v. Tunnel, Inc., 988 F.2d 351, 355 (2d Cir. 1993).
II. Defendant's Claims of Fraud Fail as a Matter of Law
Robin's first and third causes of action in his counterclaim are fraudulent inducement and conspiracy to defraud, respectively. Both claims fail as a matter of law.
It is well settled under New York Law that there are four elements to a claim of common law fraud: (1) misrepresentation of material fact; (2) scienter; (3) reasonable reliance; and (4) injury. See e.g., Giannacopoulos v. Credit Suisse, 37 F. Supp.2d 626, 632 (S.D.N.Y. 1999) (citing Abrahami v. UPC Constr. Co., 638 N.Y.S.2d 11, 13 (1st Dep't 1996)); Vermeer Owners. Inc. v. Guterman, 585 N.E.2d 377 (1991). Even assuming, for the sake of argument, that all of defendants allegations regarding plaintiffs actions to be true, defendant cannot make out a claim of fraud as a matter of law.*fn3
Defendant claims that DiGiulio "represented [to Robin] that the market value of Penthouse A was $225,000." Amended Answer at 6. Further, Robin claims that DiGiulio told him he knew the market value of the apartment was $225,000 because comparable apartments in the same building had sold for about that much. Id. It is, however, as plaintiff notes, "hornbook law in New York" that representations regarding the value of real property are considered matters of opinion, not fact; inaccuracies in statements as to value cannot be considered fraudulent. Pl.'s Mem. in Supp. at 12.
It is therefore a well-settled principle, which
pervades the law of fraud in its application to
various business transactions, that representations of
value with respect to property are ordinarily to be
regarded as mere expressions of opinion or
commendatory trade talk, and when such is the case,
they do not constitute fraud or the basis thereof.
Thus, a false affirmation of value by a seller
generally cannot be made the basis of a charge of
fraud by the buyer, since it is the buyer's own folly
to credit an assertion of that nature, and since, in
any event, value rests to a large extent on judgment
and estimation, as to which many persons may differ. A
statement as to value is preeminently one to which the
maxim of caveat emptor applies. . . .
N.Y. Jur.2d, Fraud & Deceit, § 76 (citations omitted). See also Simms v. Biondo, 816 F. Supp. 814, 819-20 (E.D.N.Y. 1993) ("The long-established rule in New York is that statements concerning the value of real property are generally not actionable under a theory of fraud or fraudulent inducement" (citing Ellis v. Andrews, 56 N.Y. 83, 85-87 (1874); Brang v. Stachnik, 257 N.Y.S. 671, 672 (1st Dep't 1932), aff'd 185 N.E. 761 (1933)).
There are exceptions to this general rule, but they do not apply to the case at bar. Defendant offers two exceptional cases which he claims are on point. The first is Merry Realty Co. v. Martin, 169 N.Y.S. 696 (Sup.Ct. Kings Cty. 1918), aff'd, 174 N.Y.S. 627 (2d Dep't 1919), rev'd on other grounds, 230 N.Y. 316 (1920), in which the sellers duped the buyers by telling them that they were independent brokers in a scheme which involved issuing phony deeds of sale. Merry Realty is similar to the instant case, argues defendant, because "one party (DiGiulio) put together a complex ruse to deceive the other party (Robin)." Def. Mem. in Opp. at 12. Even if the court were to credit Robin's account of the transaction, the "ruse" concocted by DiGiulio consisted of telling Robin he knew how much the apartment was worth because he knew the price at which similar apartments had recently sold. Unlike the con-artists in Merry Realty, he made no effort to pretend to be a disinterested party or to be an actual expert on the issue. The Merry Realty exception simply does not apply to the instant case.
Defendant next points to Cristallina S.A. v. Christie, Manson & Woods Int'l. Inc., 502 N.Y.S.2d 165 (1st Dep't 1986), in which the agent of a well-known auction house knowingly misrepresented the market price of certain paintings. The court held that even if such representations constituted opinions, not facts, agents at auction houses are bound to opine the truth when quoting market prices (in part because of the fiduciary duties they owe to those who have entrusted them with their artwork for sale). Id. at 172. Again, however, Cristallina S.A. is distinguishable from the case at bar since DiGiulio is not a well-known apartment broker with presumptive expertise as to the value of New York residential real estate.
Plaintiff offers Carney v. Morrison, 228 N.Y.S. 308 (1st Dep't 1928), which, although quite old, remains good law and contains facts so on point they seem nearly reincarnated in the instant case. The court summarized defendant's claim of fraud as follows:
[F]or many years prior to the conveyance the defendant
was a nonresident of New York City, where the property
was located, and had been in ill health and
incapacitated. . . . [Defendant] alleges that during
all this time he was unfamiliar with the fair and
reasonable market value of the premises conveyed,
and, owing to ill health, it was "impractical" for him
to use diligence in ascertaining the fair market value
of the property at the time he sold to the plaintiff;
that, on the other hand, the plaintiff was a resident
here for a long time prior to the date of conveyance,
and knew that the property was valuable and constantly
increasing in value, and that it had a value of some
$5,000 in excess of the purchase price; that with such
knowledge, and also with knowledge of defendant's ill
health and lack of knowledge of market value, the
plaintiff represented to the defendant that the
property was worth less than the purchase price, and
that, in reliance thereon, the defendant agreed to
convey at the price received by him. . . .
Id. at 312. Robin, like the defendant in Carney, lives outside the city, claims ill-health and unfamiliarity with market conditions and asserts that DiGiulio, like the plaintiff in Carney, knew the real value of the property in question and misrepresented it to him. The court explained, however, that even on those facts, defendant was bound to lose:
It is true that, if the representations are
fraudulently made of particulars in relation to which
the party acting in reliance thereon has not equal
means of knowing, and, where he is induced to forbear
inquiries which otherwise would have been made,
liability will follow. The pleading here in question,
however, does not come within the exception. There is
nothing to show that the defendant, in the exercise of
reasonable diligence, could not have acquainted
himself with the true value. He alleges merely that it
was impractical for him so to do. This is clearly
Id. at 312-13 (citations and internal quotation marks omitted).
Like the defendant in Carney, neither Robin nor his attorney made any effort to ascertain the market value of the apartment prior to its sale; for that reason, Robin cannot be said to have reasonably relied on DiGiulio's statements. See Simms, 816 F. Supp. at 820 ("Facts which are accessible as a matter of public record bar a claim of justifiable reliance necessary to sustain a cause of action for fraud" (citing, inter alia, Grumman Allied Industries. Inc. v. Rohr Industries, Inc., 748 F.2d 729, 737 (2d Cir. 1984); Danann Realty Corp. v. Harris, 157 N.E.2d 597, 600 (1959)). As a shareholder in the cooperative, Robin had ready access to the sale prices of comparable apartments. As a private citizen represented by independent counsel, he could have hired a real-estate broker to appraise his apartment. There is simply no excuse for his, and his lawyer's, failure to exercise due diligence with respect to this transaction.
Because Robin can show neither the misrepresentation of a material fact, the first element of a claim of common law fraud, nor reasonable reliance on that misrepresentation, the third element, he cannot sustain an action for fraud. Accordingly, the first and third causes of action in his counterclaim fail as a matter of law.
III. Robin's Claims of Breach of Fiduciary Duty and Negligent
Misrepresentation Also Fall as a Matter of Law.
Robin's second cause of action in his counterclaim is for breach of fiduciary duty, premised on the fact that "Robin considered DiGiulio to be a friend in whom Robin placed trust and confidence." Amended Answer at 9. Robin admits, however, that he and DiGiulio were not friends; accordingly, that claim must fail. Pl.'s 56.1 Statement; Def.'s Response to Pl.'s 56.1 Statement. Robin's fourth cause of action is for negligent misrepresentation. Under New York Law, however, liability for negligent misrepresentation is imposed "only on those who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified." Murphy v. Kuhn, 682 N.E.2d 972, 974 (1997) (citing Kimmell v. Schaefer, 675 N.E.2d 450, 454 (1996)). Since DiGiulio neither has specialized expertise regarding real estate nor occupies a special position of confidence with respect to Robin, he cannot be liable for negligent misrepresentation.
IV. Defendant's Affirmative Defenses of Unclean Hands and Unilateral
Mistake Are Without Merit.
As noted before, defendant has asserted ten affirmative defenses. The court will address only the two he raised in his opposition papers: unilateral mistake and the doctrine of unclean hands.*fn4
See Def.'s Mem. in Supp. at 14-16. First, it is well settled that the defense of unilateral mistake is only available to a defendant who has exercised ordinary care. See, e.g., William E. McClain Realty. Inc. v. Rivers, 534 N.Y.S.2d 530, 531 (3rd Dep't 1988) (citing 21 N.Y. Jur 2d, Contracts, § 121, at 529). Robin's failure to determine the market value of his own apartment precludes him from asserting the defense of unilateral mistake. Second, defendant's assertion of the doctrine of unclean hands is misplaced since that doctrine applies only to actions at equity, and this case was converted into an action for money damages when Judge Batts ordered the stipulated settlement between Robin and the Hewitts. See In re Gulf Oil/Cities Service Tender Offer Litigation, 725 F. Supp. 712, 742 (S.D.N.Y. 1989) (citing Pecorella v. Greater Buffalo Press, Inc., 486 N.Y.S.2d 562, 563-64 (4th Dep't 1985)).
Since defendant's counterclaims fail as a matter of law and since there is no question that defendant signed a binding contract while represented by independent counsel, plaintiffs motion for summary judgment is hereby granted. The Clerk of the Court is ordered to enter Judgment in plaintiffs favor for the sum certain of $165,020.00 plus interest.