| Cathy Daniels, Ltd. v Weingast |
| 2012 NY Slip Op 00025 [91 AD3d 431] |
| Jnury 5, 2012 |
| Appellate Division, First Department |
| Cathy Daniels, Ltd., et al., Appellants, v Robin S. Weingastet al., Respondents, et al., Defendant. |
—[*1] Kaufman Dolowich Voluck & Gonzo LLP, Woodbury (Janene M. Marasciullo of counsel),for Weingast respondents. Kelley Drye & Warren LLP, New York (Neil Merkl of counsel), for John Hancock LifeInsurance Company of New York, respondent.
Order, Supreme Court, New York County (Richard B. Lowe, III, J.), entered September 10,2010, which granted the motions of defendants Robin S. Weingast and Robin S. Weingast &Associates, Inc. and John Hancock Life Insurance Company of New York to dismiss thecomplaint, unanimously modified, on the law, the cause of action for breach of contractreinstated as against the Weingast defendants, and otherwise affirmed, without costs.
Plaintiff Cathy Daniels, Ltd. is a women's clothing business owned and managed by plaintiffsHerbert L. Chestler, Daniel Chestler, and Steven M. Chestler. Defendants Robin S. Weingast andRobin S. Weingast & Associates, Inc. (the Weingast defendants) are insurance agents authorizedto sell insurance for defendant John Hancock Life Insurance Company of New York. At somepoint before June 15, 2005, plaintiffs engaged the Weingast defendants as their insuranceadvisors and consultants.
According to the complaint, the Weingast defendants told plaintiffs that an Internal RevenueCode § 419 (e) Single Employer Trust Employee Welfare Benefits Plan (BETA plan)would enable them to purchase life insurance where the premiums would be fully tax deductible.Plaintiffs, in alleged reliance upon the Weingast defendants' representations, purchased BETAplan life insurance policies from John Hancock.
On June 15, 2005, each of the individual plaintiffs signed a one-page acknowledgment anddisclosure form; individual defendant Weingast signed the forms on behalf of John Hancock.Each form states: "John Hancock has not made a determination that this plan achieves anyspecific tax or other objectives . . . [I]t is important that you speak with your [*2]independent tax/legal advisors before you complete the purchase ofthe policy and go forward with your plan. (An Independent tax/legal advisor is one that is notprovided, recommended, chosen or paid for by your John Hancock representative.). . . John Hancock has not authorized its representatives to provide you with tax orlegal advice, and you may not rely on any such advice provided by your John Hancockrepresentative . . . By signing this form you are stating that you understand thisinformation, and that you have obtained from your independent advisors whatever advice youdeem necessary or appropriate concerning your plan's risks and benefits."
On September 15, 2005, the corporate plaintiff, Cathy Daniels, Ltd., signed a BETAIndividual Employer Welfare Benefit Plan Waiver and Representation Agreement wherein itacknowledged and agreed that claims of deductibility may be subject to challenge by the InternalRevenue Service, that the BETA plan has not been ruled on by the IRS, and that any taxdeductions taken in connection with participation in the Plan may be subject to challenge ordisallowance. Several other forms signed that day included similar acknowledgments.
In October 2007, the IRS published a revenue ruling which, according to the complaint,effectively disallowed deductions for payment of premiums under the BETA plan. The IRSsubsequently audited plaintiffs and disallowed all prior deductions made for payment ofinsurance premiums under the BETA plan. As a result, the individual plaintiffs became subject tofederal and state tax adjustments on their personal tax returns. Plaintiffs allege that without thetax deductions, they were unable to afford the policies and were forced to sell them at asubstantial loss.
The cause of action for breach of fiduciary duty was properly dismissed. In the absence of aspecial relationship, a claim against an insurance agent or broker for breach of fiduciary dutydoes not lie (Bruckmann, Rosser,Sherrill & Co., L.P. v Marsh USA, Inc., 65 AD3d 865, 867 [2009]; People v Liberty Mut. Ins. Co., 52AD3d 378, 380 [2008]; see Murphy v Kuhn, 90 NY2d 266, 270 [1997]). Here, theallegations in the complaint establish that the parties had nothing more than a typical insuranceagent-customer relationship. Even if a fiduciary relationship existed, the extensive disclaimerssigned by plaintiffs make clear that defendants had no duty to provide tax advice concerning theBETA plan. For the same reason, the negligence claims were properly dismissed. In light of thisdisposition, we need not determine whether the negligence and breach of fiduciary duty claimsare barred by the statute of limitations.
The disclaimer forms are also fatal to plaintiffs' fraud cause of action. To sustain a claim forfraud, a plaintiff must allege material misrepresentation of a fact, knowledge of its falsity, anintent to induce reliance, justifiable reliance by the plaintiff and damages (Eurycleia Partners, LP v Seward & Kissel,LLP, 12 NY3d 553, 559 [2009]). The disclaimers here show that plaintiffs expresslyacknowledged that defendants were not authorized to provide tax advice, and they would not relyon any such advice provided. Thus, the documentary evidence flatly contradicts plaintiffs' claimthat they justifiably relied on any tax information provided by defendants (see KSW Mech. Servs., Inc. v Willis ofN.Y., Inc., 63 AD3d 411, 412 [2009]).
In the breach of contract cause of action, plaintiffs allege that on November 13, 2006, severalof the individual plaintiffs met with individual defendant Weingast. At that meeting, Weingastpurportedly made an oral promise that she, her company and John Hancock would indemnify andreimburse plaintiffs if they suffered any losses as a result of disallowance of the tax deductions.[*3]
The motion court improperly concluded that the contractclaim was barred by the statute of frauds. An oral agreement will not be enforceable when theagreement "[b]y its terms is not to be performed within one year from the making thereof"(General Obligations Law § 5-701 [a] [1]). The Court of Appeals has interpreted thisprovision "to encompass only those contracts which, by their terms, have absolutely nopossibility in fact and law of full performance within one year. As long as the agreement may befairly and reasonably interpreted such that it may be performed within a year, the Statute ofFrauds will not act as a bar however unexpected, unlikely, or even improbable that suchperformance will occur during that time frame" (Cron v Hargro Fabrics, 91 NY2d 362,366 [1998] [internal quotation marks and citations omitted]).
Here, Weingast's alleged promise to indemnify plaintiffs was capable of full performancewithin a year and thus did not violate the statute of frauds (see Financial Structures Ltd. v UBS AG, 77 AD3d 417, 418[2010]). Defendants argue that the contract could not have been performed within a year becausethe IRS did not issue its disallowance ruling or complete its audit until more than a year after theagreement was made. However, the question is not what the actual performance of the contractwas, but whether the contract required that it should not be performed within a year (Foster v Kovner, 44 AD3d 23, 26[2007]). Defendants have not shown that there was "absolutely no possibility in fact and law"that the IRS could have issued its ruling and completed an audit within a year's time(Cron, 91 NY2d at 366).
Defendants argue that the contract claim is barred by the parol evidence rule and certainmerger clauses contained in the documents underlying the transaction. However, the alleged oralpromise was made more than a year after plaintiffs entered into the transactions. Neither the parolevidence rule nor the merger clauses preclude a breach of contract claim based on a subsequentadditional agreement (see Getty Ref. & Mktg. v Linden Maintenance Corp., 168 AD2d480 [1990]; Local 50, Bakery, Confectionery & Tobacco Workers Union, AFL-CIO vAmerican Bakeries Co., 73 AD2d 862 [1980]).
Nor is the contract claim foreclosed by a waiver of liability clause contained in one of thetransaction documents. In that document, the corporate plaintiff agreed to hold harmless andwaive liability against defendant Designs for Finance, Inc., its employees, agents, officers,directors or other persons it controls or is controlled by. In the absence of evidence of therelationship between Designs for Finance, Inc. and the other defendants, it cannot be said thatthis document conclusively establishes a waiver of plaintiffs' contract claim.
Although plaintiffs have sufficiently pleaded a breach of contract claim against the Weingastdefendants, the claim was properly dismissed as against John Hancock. The complaint fails tosufficiently allege that individual defendant Weingast had actual or apparent authority to bindJohn Hancock to an agreement to indemnify the losses, particularly in light of a provision in thepolicies to the contrary.[*4]
The motion court's dismissal of the General BusinessLaw § 349 cause of action was proper. The complaint contains insufficient allegations of abroad impact on consumers at large (seeBhandari v Ismael Leyva Architects, P.C., 84 AD3d 607, 608 [2011]).Concur—Tom, J.P., Andrias, Acosta, Freedman and Richter, JJ.