1046 Madison Ave. Assocs., LLC v. Bern

• Court: New York Supreme Court
• Writing for the Court: HON. CAROL R. EDMEAD, J.S.C.
• Citation: 1046 Madison Ave. Assocs., LLC v. Bern, 2017 NY Slip Op 30121(U), Index No.: 154990/2016 (N.Y. Sup. Ct. Jan 20, 2017)
• Decision Date: 20 January 2017
• Docket Number: Index No.: 154990/2016
• Parties: 1046 MADISON AVENUE ASSOCIATES, LLC, Plaintiff, v. FIMA BERN and ARNOLD BERN, Defendants.

2017 NY Slip Op 30121(U)

1046 MADISON AVENUE ASSOCIATES, LLC, Plaintiff, v. FIMA BERN and ARNOLD BERN, Defendants.

Index No.: 154990/2016

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 35

January 20, 2017

Motion #001

HON. CAROL R. EDMEAD, J.S.C.:

DECISION AND ORDER

This is an action to recover damages for fraudulent inducement. Defendants, Fima Bern ("Fima") and his son Arnold Bern ("Arnold") (collectively "Defendants") move pursuant to CPLR §§ 3211(a)(1), (a)(3), (a)(5), and (a)(7) to dismiss the Amended Complaint of plaintiff, 1046 Madison Avenue Associates, LLC ("Plaintiff").

FACTUAL BACKGROUND

According to the complaint, on March 11, 2012, Plaintiff, as landlord, entered into a commercial lease agreement ("Lease") Fima Bern D/B/A Phil's Custom Shoe Repair, as tenant, for the premises known as Store No. 2A in the basement ("Premises") located at 1046 Madison Avenue, New York, NY 10075, to begin on April 1, 2012 and end on May 31, 2019.

In November 2015, Fima and Arnold informed Steven Leader ("Leader"), a representative of Plaintiff, of Fima's poor health and desire to retire from the shoe business, and requested to terminate the Lease prior to its expiration. Fima also advised that he found a new tenant, Lukure Inc. ("Lukure"), to lease the premises for the remainder of the Lease term for the same rental rate set forth in the Lease. Defendants stated that Lukure agreed to pay Fima $90,000.00 as "key money" for permission to assume the remainder of the lease (meaning "bonus" money for taking over the Premises, over and above the rent and additional rent Lukure also agreed to pay (Id. at ¶ 13)). Leader then explained that such arrangement would make Lukure as subtenant, and entitle Plaintiff, under Article 67(H) to the $90,000 as "consideration received by Tenant from any subtenant in excess of the rent and additional rent. . . ." (¶ 14) Defendants then requested that plaintiff permit Fima to keep the $90,000 instead of tendering it to Plaintiff "as a good deed solely because Fima was old and retiring from the business." (¶15).

Notwithstanding Fima's liability under the Lease for the rent and additional rent through the Lease term, plaintiff agreed to forego its right to receive the $90,000 and entered into a Lease Termination Agreement terminating the Lease on January 10, 2016 (the "Termination Agreement") on the condition that Fima confirmed in writing that he was retiring from the business (¶¶16, 19, 20).

By subsequent letter dated December 16, 2016, Fima stated:

My name is Fima Bern. I am leaving my business located on 1046 Madison Ave. I am retiring from this business.

(Id. at ¶ 17; Am. Compl. Ex. B).

The Letter was signed by Fima and Leader, as a witness (Id. at ¶ 17). And, Fima allegedly received the key money in December 2015 (Id. at ¶ 21).

Thereafter, in May 2016, Plaintiff discovered that Fima was "working as an owner or employee of another entity called Phil's Shoe Repair, located at 1214 Lexington Avenue, New York, NY" (Id. at ¶ 23) and this action for fraudulent inducement ensued.

Plaintiff alleges that it only agreed to the Termination Agreement and to waive its right to receive the $90,000 based on Defendants' oral representation and Fima's written representation that Fima was retiring from the shoe business" (Id. at 25). Plaintiff agreed to the deal "in order toperform a good deed for the aging Fima" (id.)

Defendants' Motion

In support of Defendants' motion to dismiss pursuant to CPLR § 3211(a)(7) and (a)(1), Defendants' argue that Plaintiff's allegation that defendants' representations were false does not meet the requirement that fraud be pleaded with sufficient particularity. There are no facts indicating a fraudulent intent to induce Plaintiff's reliance to its detriment, and no facts indicating how Defendants knew that Fima's representation that he was retiring was false or would induce Plaintiff to terminate the lease early.

Further, Defendants attest that they made no misrepresentations to Plaintiff; Fima's intention was to retire from the business, and he did as Fima is "too old and too tired to run my own store" (Fima Aff. at ¶ 24). "Retirement life is not for everyone, and I needed to be out of the house a few days week. So to keep myself busy, I asked my son if I could help out at one of his stores a few days a week." (Id. ¶ 26) Arnold attests that Fima "helps me out in one of my stores a few days a week" (Arnold Aff., ¶ 16). Fima states that he is not an employee or owner of any business.

Moreover, Defendants argue that Plaintiff failed to allege any statements made by Arnold, or that Arnold knew Fima was not retiring. Arnold also denies being present for discussions concerning the Lease and Termination Agreement (¶ 9).

And, Plaintiff failed to demonstrate that it relied on the Fima's statement that he was retiring as the Termination Agreement is silent on any such statement. Furthermore, Plaintiff was not obligated to terminate the Lease based on Fima's retiring.

Finally, as to damages, terminating the lease early did not harm Plaintiff since it receivedthe same amount of rent pursuant to its agreement with Lukure as it did the Lease.

Defendants argue that the Complaint should be dismissed also pursuant to CPLR § 3211(a)(5) on the grounds of payment and release. First, Defendants posit that pursuant to Article 67¹, Plaintiff would have consented to any assignment to or sublease by Lukure, and thus, Plaintiff would have received rent payments from Lukure, and remained in the same financial position as it is presently. Also, Plaintiff failed to substantiate that it could have collected a higher rent from Lukure. Second, Defendants' argue that the Termination Agreement prohibits Plaintiff from bringing the action. The Termination Agreement states that Fima "and Landlord hereby mutually release each other . . . of and from all claims, demands, actions and causes of every kind and nature whatsoever arising out of the Lease . . ." (¶ 5). Further, the confidentiality clause in the Termination Agreement prohibits Defendant Fima from discussing the terms of the agreement to any third party, entity or individual. (¶ 9)

As to Arnold, Defendants argue that dismissal for lack of standing and capacity to sue is warranted under CPLR § 3211(a)(3) because Arnold lacks any contractual or business relationship with Plaintiff. Arnold simply assisted Fima translate documents needed to terminate the Lease, and there are no allegations of what statement Arnold made to induce Plaintiff to enter the Lease with Lukure.

Finally, Defendants argue that they are entitled to attorney's fees in the amount of $2,400.

Plaintiff's Opposition

Plaintiff first argues that Defendants' reliance on paragraph 5 of the TerminationAgreement to dismiss the Amended Complaint is incorrect. Specifically, in an action where plaintiff sufficiently pleads facts alleging fraudulent inducement, a motion to dismiss should be denied. Plaintiff properly alleged fraud in the inducement, therefore Defendants may not rely on the release. To support its argument, Plaintiff cites to Gonzalez, inter alia, wherein the appellate court held that dismissal of the cause of action at the pleading stage was premature because plaintiff demonstrated that the release may have been fraudulently obtained (Gonzalez v. 40 W. Burnside Ave. LLC, 107 A.D.3d 542, 544, 968 N.Y.S.2d 50 [1st Dept 2013]; see also Bloss v Va'ad Harabonim of Riverdale, 203 A.D.2d 36, 37 [1st Dept 1994] ([w]here fraud . . . in the procurement of a release is alleged, a motion to dismiss should be denied")).

Next, Plaintiff argues that Defendants' claim that Plaintiff does not have standing is erroneous, since Plaintiff's claim is based on Arnold's misrepresentation: that Fima was retiring from the business. Furthermore, the caselaw cited by Defendants is distinguishable, as they do not involve a claim for fraud.

Finally, Plaintiff argues that Defendants are not entitled to attorney's fees because neither an agreement nor statute authorizes the Court to grant attorney's fees in this action.

Defendants' Reply

First, Defendants' add that the Amended Complaint should be dismissed pursuant to CPLR § 3211(a)(7) because Fima did not intentionally misrepresent his intention to retire. Fima speaks and understands limited English, and therefore the language in the letter "may mean . . . that he is retiring from his specific business at 1046 Madison Avenue" (Def. Reply Aff., at ¶ 7). Defendant argues that it is "farfetched" to assume that Fima misrepresented his intent to retire to Plaintiff, since Fima sought a new tenant and was forthcoming to Plaintiff about the $90,000 keymoney (Id. at ¶ 23).

Next, Defendants argue that Plaintiff's reliance on Article 67(H) of the Lease is misplaced, since it only address consideration for a sublease, and not assignment.

Further, Defendants argue that the caselaw cited by Plaintiff is distinguishable.

Lastly, with regard to attorney's fees, Defendants simply argue that if "Defendants' Motion to Dismiss is granted there is nothing deterring Plaintiff from filing another frivolous Complaint against them" (Def. Reply Aff., at ¶ 35).

Discussion

CPLR § 3211(a)(7)

In determining a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), the Court's role is deciding "whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law a motion for dismissal will fail" (African Diaspora Maritime Corp. v. Golden Gate Yacht Club, 109 A.D.3d 204, 968 N.Y.S.2d 459 [1st Dept 2013]; Siegmund Strauss, Inc. v. East 149th Realty Corp., 104 A.D.3d 401, 960 N.Y.S.2d 404 [1st Dept 2013]). On a motion to dismiss made pursuant to CPLR § 3211, the court must "accept the facts as alleged in the complaint as true, accord plaintiffs "the benefit of every possible favorable inference," and "determine only whether the facts as alleged fit within any...