| Kosowsky v Willard Mtn., Inc. |
| 2011 NY Slip Op 08709 [90 AD3d 1127] |
| December 1, 2011 |
| Appellate Division, Third Department |
| Philip Kosowsky, Jr., et al., Respondents-Appellants, v WillardMountain, Inc., et al., Appellants-Respondents. |
—[*1] Dreyer Boyajian, L.L.P., Albany (James R. Peluso of counsel), forrespondents-appellants.
Garry, J. Cross appeals from an order of the Supreme Court (Hall Jr., J.), entered August 30,2010 in Washington County, which, among other things, partially granted defendants' motion todismiss the complaint.
Defendant Willard Mountain, Inc. (hereinafter WMI) operates a ski and winter sports area onreal property owned by plaintiffs in the Town of Easton, Washington County. In 1958, plaintiffs'predecessor in interest leased the property to WMI for a 99-year term under an agreement that,among other things, provides for rental payments computed as a percentage of WMI's sales andincome, requires WMI to provide plaintiffs with an annual accounting, and prohibits assignmentor subletting without plaintiffs' consent. Defendant Charles Wilson is the principal owner andpresident of WMI's board of directors and of defendant Willard Development, Inc. (hereinafterWDI), which operates certain concessions at the ski area. In 2008, Wilson allegedly informedplaintiffs that, for a number of years, he had been paying less than the full amount of rent due andfalsifying the corporations' annual income reports to correspond with the amounts he had paid.Defendants assert that the amount paid was proper under a 1995 licensing agreement by whichWDI pays WMI a percentage of its income; plaintiffs contend that defendants violated the leaseprohibition against assignment by failing to disclose [*2]thisagreement's existence until just before this action was filed, in February 2010.
Plaintiffs asserted seven causes of action, including breach of contract and fraud. Defendantsmoved to dismiss all the claims except breach of contract for failure to state a cause of action(see CPLR 3211 [a] [7]), and to partially dismiss all the claims as time-barred(see CPLR 3211 [a] [5]). Plaintiffs cross-moved for leave to file an amended complaint.Supreme Court granted defendants' motion pursuant to CPLR 3211 (a) (7) in part by dismissingthe causes of action seeking an accounting and alleging unjust enrichment and breach of theimplied covenant of good faith and fair dealing, determined that the claims were not partiallytime-barred, and granted plaintiffs' motion for leave to amend their complaint. Defendants appealand plaintiffs cross-appeal.
Defendants first contend that Supreme Court erred in failing to dismiss the fraud claim asduplicative of the cause of action for breach of contract. Construing the pleadings liberally andgranting plaintiffs the benefit of every favorable inference, as we must (see Goshen v MutualLife Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]; Ullmannglass v Oneida, Ltd., 86 AD3d 827, 829 [2011]), wedisagree. Initially, we note that there are relevant distinctions among the namedparties—neither Wilson nor WDI are named parties to the lease, the breach of contractclaim is not directed against Wilson and cannot be considered duplicative as to him, and thedegree to which WDI is bound by the agreement's terms is disputed. Relative to WMI, asdefendants assert, a misrepresentation premised directly on the same actions giving rise to abreach of contract does not give rise to a separate cause of action for fraud (see Salvador vUncle Sam's Auctions & Realty, 307 AD2d 609, 611 [2003], lv dismissed 1 NY3d566 [2003]; Brumbach v Rensselaer Polytechnic Inst., 126 AD2d 841, 843 [1987]). Here,however, the fraud claim is not wholly duplicative of the breach of contract claim. Plaintiffs donot merely allege that defendants falsely represented their intent to pay the full amount of rentdue; instead, they claim "that, after the contract was entered into, defendant[s] repeatedlymisrepresented or concealed existing facts" (Eagle Comtronics v Pico Prods., 256 AD2d1202, 1203 [1998]) by falsifying the annual income reports in order to deceive plaintiffs as to thetrue amount of rent owed and induce them to accept improperly low payments, as well as byfailing to disclose the existence of the 1995 licensing agreement (see DeerfieldCommunications Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954, 956 [1986]; Freedmanv Pearlman, 271 AD2d 301, 304-305 [2000]). Moreover, despite the absence of a fiduciaryrelationship, defendants allegedly breached a duty of candor independent from their duty toperform under the contract in that they had superior knowledge unavailable to plaintiffs andknew plaintiffs were relying on the information they supplied (see International Elecs., Inc. vMedia Syndication Global, Inc., 2002 WL 1897661, *2, 2002 US Dist LEXIS 15200, *5-6[SD NY 2002]; compare Fourth Branch Assoc. Mechanicville v Niagara Mohawk PowerCorp., 235 AD2d 962, 963 [1997]). Accordingly, the conduct alleged in the fraud cause ofaction is sufficiently discrete from that underlying the breach of contract claim to state a separatecause of action (see Deerfield Communications Corp. v Chesebrough-Ponds, Inc., 68NY2d at 956; First Bank of Ams. v Motor Car Funding, 257 AD2d 287, 291-292[1999]).
We further disagree with defendants' contention that the fraud claim should have beendismissed for failure to plead the required elements of justifiable reliance and special damages(see Dube-Forman v D'Agostino, 61AD3d 1255, 1257 [2009]; State ofNew York v Industrial Site Servs., Inc., 52 AD3d 1153, 1157 [2008]). In addition toalleging that defendants knowingly misrepresented material facts, plaintiffs allege that they reliedupon the income figures provided by defendants in accepting the rent payments. They claimspecial damages, in addition to lost rent under the contract, as the alleged fraud prevented themfrom exercising their right to [*3]terminate the lease upon abreach of its terms and thereby deprived them of other business opportunities and of the use andenjoyment of their property.
Plaintiffs' claim against Wilson for tortious interference with contract was not, as defendantsclaim, subject to dismissal for failure to satisfy the "enhanced pleading standard" that applieswhen a plaintiff seeks to hold a corporate officer personally liable for a corporation's breach ofcontract (Joan Hansen & Co. v Everlast World's Boxing Headquarters Corp., 296 AD2d103, 109 [2002]). In this regard, plaintiffs were required to allege that Wilson's actions "eitherwere beyond the scope of [his] employment or, if not, were motivated by [his] personal gain, asdistinguished from gain for the corporation" (Petkanas v Kooyman, 303 AD2d 303, 305[2003]). The actions that plaintiffs ascribe to Wilson—that is, deliberately deceiving themby falsifying the income figures of the corporations that he controlled—cannot beconstrued as within the scope of his corporate responsibilities (see Murtha v Yonkers ChildCare Assn., 45 NY2d 913, 915 [1978]). Moreover, the complaint alleges that he took theseactions in bad faith for his personal pecuniary gain (see BIB Constr. Co. v City ofPoughkeepsie, 204 AD2d 947, 948 [1994]). Accordingly, plaintiffs sufficiently stated aclaim for tortious interference with contract (compare Bradbury v Cope-Schwarz, 20 AD3d 657, 659-660[2005]). However, we agree with defendants that the claim for termination of the lease andsurrender of the property should have been dismissed since it does not constitute a separate causeof action; by its terms, it merely demands relief for the alleged breach of contract.
Defendants next contend that Supreme Court erred in finding that they were estopped fromasserting a statute of limitations defense. Under the doctrine of equitable estoppel, a defendantmay not rely on the statute of limitations defense when the plaintiff was prevented fromcommencing a timely action by reasonable reliance on the defendant's fraud, misrepresentation orother affirmative misconduct (seeZumpano v Quinn, 6 NY3d 666, 673-674 [2006]; Pulver v Dougherty, 58 AD3d978, 979-980 [2009]; Cellupica vBruce, 48 AD3d 1020, 1021 [2008]). However, " 'equitable estoppel does not applywhere the misrepresentation or act of concealment underlying the estoppel claim is the same actwhich forms the basis of [the] plaintiff's underlying substantive cause[s] of action' " (Robare v Fortune Brands, Inc., 39AD3d 1045, 1046 [2007], lv denied 9 NY3d 810 [2007], quoting Kaufman vCohen, 307 AD2d 113, 122 [2003]). Here, the misrepresentations that allegedly preventedplaintiffs from filing a timely action—that is, defendants' falsified annual incomereports—are also the basis for their substantive claims. Accordingly, defendants were notprecluded from asserting that plaintiffs' claims were partially time-barred (see Lucas-Plaza Hous. Dev. Corp. vCorey, 23 AD3d 217, 218 [2005]).
As to the merits of this claim, plaintiffs' cause of action for breach of contract is time-barredby the applicable six-year statute of limitations to the extent that the alleged breaches occurredbefore February 23, 2004 (see CPLR 213 [2]; Bulova Watch Co. v Celotex Corp.,46 NY2d 606, 611 [1979]; Stalis v Sugar Cr. Stores, 295 AD2d 939, 941 [2002]). Theclaim against Wilson for tortious interference with contract is subject to a three-year limitationsperiod (see CPLR 214 [4]; Andrew Greenberg, Inc. v Svane, Inc., 36 AD3d 1094, 1099[2007]) and is thus time-barred as to claims arising before February 23, 2007. However, no partof the fraud claim is time-barred, as plaintiffs allege that they did not discover the fraud untilWilson advised them of the falsified reports in June 2008, less than two years before this actionwas filed (see CPLR 213 [8]; State of New York v Robin Operating Corp., 16 AD3d 941, 944[2005]).
Turning to plaintiffs' contentions on their cross appeal, the unjust enrichment claim was[*4]properly dismissed as to WMI because recovery in quasicontract is precluded where, as here, there is no dispute as to the validity and enforceability of thecontract governing the dispute (seeM/A-Com, Inc. v State of New York, 78 AD3d 1293, 1293-1294 [2010]; State ofNew York v Industrial Site Servs., Inc., 52 AD3d at 1161). As previously stated, however,the degree to which WDI was bound by the lease is in dispute. Where a disagreement exists as to"whether the scope of an existing contract covers the disagreement between the parties, a partywill not be required to elect his or her remedies and may proceed on both quasi contract andbreach of contract theories" (M/A-Com, Inc. v State of New York, 78 AD3d at 1294).Accordingly, plaintiffs should be allowed to proceed upon their unjust enrichment claim againstWDI (see Matco Elec. Co. v Plaza Del Sol Constr. Corp., 82 AD2d 979, 979-980 [1981],appeal dismissed 55 NY2d 748 [1981]; see generally Bradkin v Leverton, 26NY2d 192 [1970]).
Next, plaintiffs asserted a claim against WMI and WDI for breach of the implied covenant ofgood faith and fair dealing. "This implied obligation encompasses any promise which areasonable person in the position of the promisee would be justified in understanding wasincluded" in a contract and "is breached when a party to [the] contract acts in a manner that,although not expressly forbidden by any contractual provision, would deprive the other party ofthe right to receive the benefits under their agreement" (Just-Irv Sales v Air-Tite Bus.Ctr., 237 AD2d 793, 794 [1997] [internal quotation marks and citation omitted]). Treatingplaintiffs' allegations as true and granting them the benefit of every favorable inference, thiscause of action states a claim, and should not have been dismissed (see Fourth Branch Assoc.Mechanicville v Niagara Mohawk Power Corp., 235 AD2d at 965-966; see also Just-IrvSales v Air-Tite Bus. Ctr., 237 AD2d at 794-795).
Finally, plaintiffs' cause of action seeking an accounting required "factual allegation[s] orevidence of a fiduciary relationship" between plaintiffs and defendants (Village of HoosickFalls v Allard, 249 AD2d 876, 879 [1998], lv denied 92 NY2d 807 [1998]). Asplaintiffs did not allege the existence of a confidential relationship, and no such relationship wascreated by the lease, this claim was properly dismissed (see Dembeck v 220 Cent. Park S., LLC, 33 AD3d 491, 492 [2006];Kastle v Steibel, 120 AD2d 868, 869 [1986]; Alpert v Sebo, 269 App Div 433,433-434 [1945]).
Peters, J.P., Lahtinen, Stein and McCarthy, JJ., concur. Ordered that the order is modified, onthe law, without costs, by reversing so much thereof as (1) granted defendants' motion to dismissthe causes of action for unjust enrichment against defendant Willard Development, Inc. andbreach of the implied covenant of good faith and fair dealing, and (2) denied defendants' motionto dismiss the causes of action for termination of the lease and surrender of the property, breachof contract and tortious interference with contract; said motion (1) denied as to the causes ofaction for unjust enrichment and breach of the implied covenant of good faith and fair dealing,and (2) granted to the extent of dismissing (a) the cause of action for termination of the lease andsurrender of the property, (b) that part of the breach of contract cause of action arising prior toFebruary 23, 2004, and (c) that part of the tortious interference with contract cause of actionarising prior to February 23, 2007; and, as so modified, affirmed.