| Lusins v Cohen |
| 2008 NY Slip Op 02074 [49 AD3d 1015] |
| March 13, 2008 |
| Appellate Division, Third Department |
| Anna Marie Lusins, as Administrator of the Estate of John O.Lusins, Deceased, Appellant, v Stephen H. Cohen et al.,Respondents. |
—[*1] Hiscock & Barclay, L.L.P., Syracuse (Matthew J. Larkin of counsel), for Stephen H. Cohen,respondent. Wilson, Elser, Moskowitz, Edelman & Dicker, L.L.P., Albany (Peter A. Lauricella ofcounsel), for Anne Dobinsky, respondent. Sugarman Law Firm, L.L.P., Syracuse (Timothy J. Perry of counsel), for James McChesney,respondent.
Malone Jr., J. Appeals (1) from an order of the Supreme Court (McDermott, J.), enteredOctober 18, 2006 in Otsego County, which, among other things, partially granted defendants'motions for summary judgment dismissing the amended complaint, and (2) from the judgmententered thereon.
At the time of his death in April 2001, decedent, a physician, owned a number of medicalbusiness entities (hereinafter referred to as the entities) together with another physician,defendant James McChesney. Decedent and McChesney had previously entered into an insuranceescrow agreement which provided that, in the event that one of them died, the other [*2]would be entitled to purchase the deceased partner's share of theentities at a price of not less than $500,000, to be funded by life insurance proceeds from policiesthat each agreed to obtain for the other's benefit. Following decedent's death, his daughter,Gillian Lusins, was appointed executor of his estate, and she retained attorney Scott S. Davidoffto represent the estate in connection with the sale of decedent's interest in the entities. As part ofhis representation, Davidoff engaged in extensive discussions with Philip Elenidis, decedent'scertified public accountant and close family friend, concerning the financial condition of theentities.[FN1]In addition, Davidoff consulted with McChesney, defendant Stephen H. Cohen, an attorney whohad performed work for the entities prior to decedent's death, as well as defendant AnneDobinsky, a certified public accountant who had performed services for some of the entities andwas familiar with their financial circumstances. Following the disclosure to Davidoff ofinformation concerning the entities' financial condition, Lusins, acting on behalf the estate,entered into a settlement and sale agreement with McChesney, under which decedent's interest inthe entities was sold for $500,000, the face amount of his life insurance policy.[FN2]
Thereafter, plaintiff, decedent's widow and the sole heir to his estate, became concerned thatthe value of decedent's interest in the entities far exceeded $500,000. This was based uponinformation provided by Thomas Kwako, plaintiff's personal friend as well as an attorney andcertified public accountant in Maryland, who was of the view that the financial condition of theentities had been misrepresented to the estate prior to the execution of the settlement and saleagreement. As a result, the instant action was commenced against McChesney, Cohen andDobinsky alleging causes of action for fraud against all defendants, an accounting againstMcChesney, and negligent representation as well as breach of fiduciary duty against Cohen andDobinsky.[FN3]Following joinder of issue, defendants each moved for summary judgment dismissing the actionagainst them. Plaintiff, in turn, cross-moved for an order compelling discovery. Supreme Courtdismissed all causes of action against defendants, except the one against McChesney seeking anaccounting, and denied plaintiff's cross motion. Plaintiff now appeals.
Turning first to the fraud cause of action, in order to state such a claim, "a plaintiff mustallege misrepresentation or concealment of a material fact, falsity, scienter by the wrongdoer,justifiable reliance on the deception, and resulting injury" (Zanett Lombardier, Ltd. v Maslow, 29 AD3d 495, 495 [2006]; see Dowdell v Greene County, 14AD3d 750, 751 [2005]). Notably, the element of justifiable reliance has been found lacking "'[w]here a party has the means to discover the true nature of the transaction by the exercise ofordinary intelligence, and fails to make use of those means' " (Tanzman v La Pietra, 8 AD3d 706, 707 [2004], quoting StuartSilver Assoc. v Baco Dev. Corp., 245 AD2d 96, 98-99 [1997]; see Rotterdam Ventures vErnst & Young, 300 AD2d 963, 966 [2002]).[*3]
In the case at hand, Davidoff testified that defendantsprovided him with all of the financial and legal documents requested and that he turned some ofthese over to Elenidis, who was intimately familiar with the entities' operations, to assist in thevaluation of the businesses. He stated that Elenidis determined that the estate would not be ableto establish a valuation greater than $500,000 and that this, combined with the desire to avoid theexpense of an independent business valuation expert, provide plaintiff with an immediate sourceof income and ensure the continued employment of decedent's son by one of the entities, ledLusins to accept the insurance proceeds as the purchase price and as a settlement of the matter.Significantly, Davidoff stated that Elenidis did not convey any information that conflicted withthat provided by Cohen and Dobinsky and that, although Lusins could have compelled avaluation of the entities on behalf of the estate prior to accepting the settlement, she declined todo so. Inasmuch as the facts establish that the estate "could have discovered the underlyingcondition and true nature of [the entities] by ordinary intelligence or with reasonableinvestigation" by compelling a valuation, there can be no claim of justifiable reliance (ZanettLombardier, Ltd. v Maslow, 29 AD3d at 496). Accordingly, Supreme Court properlydismissed the fraud cause of action.
Likewise, we find that Supreme Court properly dismissed plaintiff's cause of action againstCohen and Dobinsky for negligent misrepresentation. As a threshold matter, plaintiff mustdemonstrate "that there was either actual privity of contract between the parties or a relationshipso close as to approach that of privity" (Prudential Ins. Co. of Am. v Dewey, Ballantine,Bushby, Palmer & Wood, 80 NY2d 377, 382 [1992]). The evidence establishes that Cohenwas the escrow agent for the life insurance proceeds and represented the entities as well asdecedent's medical practice before and after his death, but did not render services to the estate orto decedent's family members. In fact, Davidoff believed that Cohen represented McChesney inconnection with his purchase of decedent's interest in the entities. Likewise, while Dobinskyperformed work for some of the entities both before and after decedent's death, she did notperform any services for the estate or for decedent's family members. Davidoff regarded her asthe business accountant and Elenidis as the personal accountant and trusted family advisor.Given that there is no proof that either Cohen or Dobinsky had any type of relationship withplaintiff, Lusins or the estate, privity is lacking. The fact that these individuals performed someservices for the entities and/or decedent's medical practice after his death is insufficient toestablish the relationship necessary to sustain plaintiff's negligent misrepresentation cause ofaction.
Plaintiff's claim against Cohen and Dobinsky for breach of fiduciary duty also must fail. " 'Afiduciary relation exists between two persons when one of them is under a duty to act for or togive advice for the benefit of another upon matters within the scope of the relation' " (Marmelstein v Kehillat New Hempstead:The Rav Aron Jofen Community Synagogue, 45 AD3d 33, 36 [2007], quotingRestatement [Second] of Torts § 874, Comment a). As noted above, there is noevidence of a business relationship between either Cohen or Dobinsky and plaintiff, Lusins or theestate. Absent such a relationship, a fiduciary duty cannot be inferred. Therefore, Supreme Courtproperly dismissed plaintiff's claim against Cohen and Dobinsky for breach of fiduciary duty. Inview of the dismissal of the foregoing claims, plaintiff's cross motion to compel discovery isacademic (see Harris v City of NewYork, 40 AD3d 701, 702 [2007], lv denied 9 NY3d 810 [2007]; cf. Villano vBuilders Sq., 275 AD2d 565, 567 [2000]).
Cardona, P.J., Peters, Carpinello and Rose, JJ., concur. Ordered that the order and judgmentare affirmed, with one bill of costs.
Footnote 1: Elenidis passed away before theinstant action was commenced.
Footnote 2: The estate actually received$503,257.98 inclusive of interest and a premium refund.
Footnote 3: The action was initiallycommenced by Gillian Lusins, but plaintiff was later substituted in her capacity as administratorof the estate.