| Commander Terms., LLC v Commander Oil Corp. |
| 2010 NY Slip Op 01755 [71 AD3d 623] |
| March 2, 2010 |
| Appellate Division, Second Department |
| Commander Terminals, LLC, et al.,Appellants, v Commander Oil Corporation et al.,Respondents. |
—[*1] Richman & Levine, P.C., Garden City, N.Y. (Seth A. Levine and Keith H. Richman ofcounsel), for respondent Commander Oil Corporation. Dollinger, Gonski & Grossman, Carle Place, N.Y. (Matthew Dollinger and Leslie A. Foodimof counsel), for respondents Estate of Harold D. Shapiro and Mark Shapiro and Karen Schwartz,as executors of the Estate of Harold D. Shapiro.
In an action, inter alia, to recover damages for breach of an employment agreement, breachof a noncompetition agreement, breach of fiduciary duty, and fraud, the plaintiffs appeal, aslimited by their brief, from so much of an order of the Supreme Court, Nassau County (Austin,J.), entered June 25, 2008, as denied those branches of their motion which were for summaryjudgment on the first through sixth, ninth through twelfth, and sixteenth causes of action, ineffect, denied those branches of their motion which were for summary judgment dismissing thecounterclaim and the first through sixth affirmative defenses asserted by the defendants estate ofHarold D. Shapiro and Mark Shapiro and Karen Schwartz, as executors of the estate of HaroldD. Shapiro, and granted those branches of the cross motion of those defendants and the separatecross motion of the defendant Commander Oil Corporation which were for summary judgmentdismissing the eleventh and twelfth causes of action insofar as asserted against each of them.
Ordered that the order is modified, on the law, by deleting the provision thereof, in effect,denying that branch of the plaintiffs' motion which was for summary judgment dismissing thefirst through sixth affirmative defenses asserted by the defendants estate of Harold D. Shapiroand Mark Shapiro and Karen Schwartz, as executors of the estate of Harold D. Shapiro, andsubstituting therefor a provision granting that branch of the motion; as so modified, the order isaffirmed insofar as appealed from, without costs or disbursements.
On March 1, 2001, the plaintiff Commander Terminals, LLC (hereinafter Terminals),purchased from the defendant Commander Oil Corporation (hereinafter Commander Oil) an oilstorage facility located in Oyster Bay, as well as certain "thru-put" agreements Commander Oilhad with third parties. Terminals assigned its interest in the "thru-put" agreements to the plaintiffCommander Terminals Holdings, LLC (hereinafter Holdings). Holdings then entered into anemployment agreement with Harold D. Shapiro (hereinafter Shapiro), who was to act as thevice-president of Terminals for a fixed period of three years. At that time, Shapiro was thepresident of Commander Oil, and a noncompetition agreement signed by him in conjunctionwith the employment agreement expressly stated that his continued management of CommanderOil's operations at other facilities would not violate the employment agreement, provided that heengaged in no acts or omissions adverse to Terminals.
Although the sale of the facility and the "thru-put" agreements did not close until March 1,2001, a contract of sale referable to that transaction was signed on June 7, 2000, and a rider tothat contract included a provision acknowledging the existence of a certain environmental audit,prepared in connection with the property on which the facility was situated, which revealedspecified contamination at the facility, and outlined steps necessary to remediate thecontamination. That provision stated that the purchase price had been reduced as a result ofcrediting, to the purchaser, costs arising from Commander Oil's contribution to theenvironmental conditions described in the audit, and also in order to indemnify Commander Oilfrom liability for contributing to those conditions.
On June 29, 2000, the New York State Department of Environmental Conservation(hereinafter the NYSDEC) conducted an investigation at the Oyster Bay terminal and discoveredsignificant petroleum seepage from the terminal into the adjacent waters of Oyster Bay andWhites Creek. The NYSDEC informed Commander Oil that certain remediation steps had to betaken to prevent further seepage, and required Commander Oil to submit a remediation proposalfor review by a specified date. Commander Oil submitted the required remediation proposals tothe NYSDEC, but did not disclose this issue to the plaintiffs. The plaintiffs became aware of theproblem only after the closing of sale, at which time they were required by the NYSDEC toconduct costly remediation activities. Approximately one year after the closing of sale,Terminals' relationship with Shapiro had deteriorated to the point that Terminals terminated hisemployment.
Subsequently, the plaintiffs commenced this action alleging, among other things, that, duringhis employment with Terminals, Shapiro spent most of his time working on Commander Oilbusiness, and had breached his fiduciary duty as well as the employment agreement withTerminals. The plaintiffs also alleged that Shapiro requested and received the sum ofapproximately $1,000 per month in order to lease an automobile, but that he later admitted thathe had never leased any vehicle. The plaintiffs further alleged that Commander Oil had a duty todisclose the oil seepage but, instead, fraudulently concealed the problem.
The plaintiffs moved for summary judgment, inter alia, on the first through sixth, ninth, andtenth causes of action, all alleging breach of the employment agreement and/or breach of thenoncompetition agreement; the eleventh cause of action, alleging breach of fiduciary duty; thetwelfth and sixteenth causes of action, each alleging fraud; and dismissing the counterclaim andthe first through sixth affirmative defenses asserted by the defendants estate of Harold D.Shapiro and Mark Shapiro and Karen Schwartz, as executors of the estate of Harold D. Shapiro(hereinafter collectively the estate defendants). The estate defendants cross-moved, andCommander Oil separately cross-moved, inter alia, for summary judgment dismissing theeleventh, twelfth, and sixteenth causes of action insofar as asserted against each of them. TheSupreme Court denied the plaintiffs' motion, and granted those branches of the defendants' crossmotions, inter alia, which were for summary judgment dismissing the eleventh and twelfthcauses of action insofar as asserted against each of them.
The Supreme Court properly determined that the plaintiffs failed to meet their burden ofdemonstrating entitlement to judgment as a matter of law on the sixteenth cause of action,alleging fraud based on the defendants' failure to disclose the oil seepage problem (cf.Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). "New York adheres to the doctrine ofcaveat emptor and imposes no duty on the seller [for failing] to disclose any informationconcerning the premises when the parties deal at arm's length, unless there is some conduct onthe part of the seller . . . which constitutes active concealment" (Jablonski v Rapalje, 14 AD3d484, 485 [2005]; see Daly vKochanowicz, 67 AD3d 78, 91-92 [2009]; Platzman v Morris, 283 AD2d 561,562 [2001]; Glazer v LoPreste, 278 AD2d 198 [2000]; London v Courduff, 141AD2d 803, 804 [1988]). Contrary to the plaintiffs' contention, they failed to prove that the [*2]defendants made a misrepresentation upon which the plaintiffsjustifiably relied (cf. Eurycleia Partners,LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]; Ross v Louise Wise Servs., Inc., 8NY3d 478, 488 [2007]; Lama Holding Co. v Smith Barney, 88 NY2d 413, 421[1996]). Moreover, the Supreme Court properly determined that there were triable issues of factas to whether, under the circumstances of this case, the oil seepage at issue was somethingpeculiarly within the knowledge of Commander Oil, and was something the plaintiffs could nothave discovered and did not discover through the exercise of reasonable diligence (see Richardson v United Funding, Inc.,16 AD3d 570, 571 [2005]).
The Supreme Court also properly awarded summary judgment to the defendants dismissingthe eleventh cause of action alleging breach of fiduciary duty as duplicative of the breach ofemployment agreement causes of action (cf. Bullmore v Ernst & Young Cayman Is., 45 AD3d 461, 463[2007]; Pergament v Roach, 41AD3d 569, 572 [2007]). Contrary to the plaintiffs' contention, they failed to demonstratetheir entitlement to judgment as a matter of law on the causes of action alleging breach of theemployment agreement and breach of the noncompetition agreement, and on the estatedefendants' counterclaim alleging wrongful termination of employment. The assertions by two ofTerminals' employees that Shapiro failed to conduct any "meaningful work" for Terminals, andinstead spent "virtually all" of his time on the affairs of Commander Oil, were insufficient toprove, as a matter of law, that Shapiro breached the employment agreement. Moreover, thenoncompetition agreement expressly permitted Shapiro to continue to manage Commander Oil'soperations while simultaneously acting as Terminals' vice-president.
The twelfth cause of action, although described as a cause of action to recover damages forfraud, is premised upon an alleged breach of contract. Consequently, the Supreme Court properlyawarded summary judgment to the defendants dismissing that cause of action (see Krantz vChateau Stores of Canada, 256 AD2d 186 [1998]; see also In re CINAR Corp. Sec.Litig., 186 F Supp 2d 279 [2002]), as the plaintiffs are, under the circumstances of thisaction, limited to asserting a cause of action sounding in breach of contract since the allegedfraud relates to a breach of contract (seeBiancone v Bossi, 24 AD3d 582, 583 [2005]; Rosen v Watermill Dev. Corp., 1 AD3d 424, 426 [2003]).Specifically, the misrepresentations alleged by the plaintiffs were not collateral to the provisionof the employment agreement permitting Shapiro to lease the automobile, and the cause of actionwas dependent upon the existence of the employment agreement. Accordingly, the facts allegedin connection with Shapiro's use of the money allocated to the automobile lease did not supportan independent cause of action alleging fraud (see Americana Petroleum Corp. v NorthvilleIndus. Corp., 200 AD2d 646, 647-648 [1994]).
Finally, the plaintiffs were entitled to summary judgment dismissing the first through sixthaffirmative defenses asserted by the estate defendants. The estate defendants asserted in thoseaffirmative defenses that Terminals owed certain money to Commander Oil for certain "thru-put"agreements. These assertions, even if true, would not defeat the plaintiffs' claims against theestate defendants (cf. P.J.P. Mech.Corp. v Commerce & Indus. Ins. Co., 65 AD3d 195, 200 [2009]). Moreover, the estatedefendants lacked standing to assert these claims, which belong to Commander Oil, whichasserted them as counterclaims in its own answer to the amended complaint (cf. Citibank vPlapinger, 66 NY2d 90, 93 n [1985]; Niles v New York Cent. & Hudson Riv. R.R.Co., 176 NY 119 [1903]). Mastro, J.P., Angiolillo, Balkin and Sgroi, JJ., concur. [PriorCase History: 20 Misc 3d 1110(A), 2008 NY Slip Op 51298(U).]