Halperin v. Salvan

• Decision Date: 25 February 1986
• Citation: 499 N.Y.S.2d 55,117 A.D.2d 544
• Parties: David HALPERIN, et al., Plaintiffs-Respondents, v. Harry SALVAN, Defendant-Appellant, and Susan Rosner, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

Page 55

499 N.Y.S.2d 55

117 A.D.2d 544

David HALPERIN, et al., Plaintiffs-Respondents, v. Harry SALVAN, Defendant-Appellant and Susan Rosner, et al., Defendants.

Supreme Court, Appellate Division First Department.

Feb. 25, 1986.

S.J. Romer, for plaintiffs-respondents.

Harry Salvan, pro se.

Before KUPFERMAN, J.P., and SULLIVAN, ROSS, CARRO and ROSENBERGER, JJ.

MEMORANDUM DECISION.

Order, Supreme Court, New York County (McCooe, J.) entered July 30, 1984, which denied defendant Harry Salvan's motion to dismiss the complaint, affirmed, without costs; order of the same court (Wallach, J.) entered November 23, 1984, which denied Salvan's motion to dismiss the amended complaint, affirmed, without costs; and, order of the same court (Shainswit, J.) entered December 19, 1984, which denied Salvan's cross motion to dismiss the amended complaint for failure to state a cause of action, affirmed, without costs.

Plaintiffs-respondents David Halperin and David Halperin, P.C. ("Halperin"), an attorney and his professional corporation, represented ESIC Capital, Inc. ("ESIC"), a small business investment corporation licensed under the Small Business Administration Act, in a $225,000 loan transaction with Parachute Designs, Ltd. ("Parachute"). Stanley Rosner and Spencer Kent, the principals of Parachute, together with their wives, guaranteed the loan. The guarantees were secured by mortgages on one-family homes and real property owned by the guarantors. As part of the loan arrangement Parachute entered into a consulting agreement with ESIC Advisory & Consulting Service, Ltd. ("ESIC Advisory") for a fee of $1,600 per month for the entire six year term of the loan. ESIC subsequently resolved a dispute which developed with defendants concerning the value of the consulting services by crediting Parachute's account for the full amount paid as advisory fees. In April 1981, Parachute defaulted on the loan, and ESIC instituted a foreclosure action in Supreme Court, Nassau County.

Thereafter defendants Rosners and Kents, by their attorney, defendant-appellant Salvan, commenced a class action in Supreme Court, Nassau County on behalf of "... all other persons ... who are aggrieved, hurt and have lost their savings, property, their homes and their marriages ..." as a result of doing business with ESIC. Halperin and his professional corporation were two of fourteen named defendants in the purported class action. The complaint in the Rosner class action alleged, inter alia, that the various defendants conspired to commit fraud and usury by placing second mortgages on one-family homes under the guise of a loan guarantee, and extracting additional interest under the guise of a so-called advisory fee. The complaint also alleges that ESIC compelled Parachute and the guarantors to purchase its bonds, forced Parachute and the guarantors into financial ruin, and injured an indeterminate number of people by disrupting their marriages and causing the loss of their homes. The Rosners sought unspecified compensatory damages and $5,000,000 in punitive damages.

The Rosners have not vigorously pursued that action since its inception in 1982. The complaint and a later amended complaint were filed and served on Halperin and some of the named co-defendants. There has never been a motion for an order certifying the class, and there has been no discovery.

In 1984 Halperin commenced the present action for libel and intentional infliction of emotional distress against Salvan and the named plaintiffs in the Rosner class action, and for prima facie tort against Salvan alone. The complaint is based upon the pleadings and affidavits prepared by Salvan and adopted by the Rosners in their purported class action. The complaint was amended and issue was joined by service of defendants' answer in August, 1984.

In these consolidated appeals appellant Salvan contests three orders at Special Term, each of which denied a separate motion to dismiss for failure to state a cause of action pursuant to CPLR 3211(a)(7). By order entered July 30, 1984, Special Term (McCooe, J.) denied Salvan's initial motion holding, inter alia, that the complaint sufficiently alleged a cause of action for libel under CPLR 3016(a). Salvan next moved to dismiss the amended complaint based upon the privilege for reporting judicial proceedings under Civil Rights Law § 74. By order entered November 23, 1984, Special Term (Wallach, J.) held that Section 74 was inapplicable since the amended complaint did not allege a media report or publication of a judicial proceeding. Salvan cross-moved for dismissal of the amended complaint as insufficient in response to a motion for an order directing entry of a default judgment against Rosner for failure to appear. By order entered December 19, 1984, Special Term (Shainswit, J.), inter alia, denied the cross motion on the ground that prior motions for the same relief had been denied, and another such motion was pending before Justice Wallach.

The limited issues presented on this appeal are whether the amended complaint is sufficient to state a cause of action, and whether there is any privilege which requires dismissal as a matter of law. We affirm the three challenged orders, for the reasons discussed below.

On a motion to dismiss for insufficiency the allegations contained in the pleadings will be deemed to be true, and the pleader is given every favorable inference that may be drawn from the pleading. Cohn v. Lionel Corp., 21 N.Y.2d 559, 562, 289 N.Y.S.2d 404, 236 N.E.2d 634 (1968). The instant amended complaint sufficiently states a cause of action for libel since it alleges the specific statements made by defendants, publication (i.e., filing with the court and service upon co-defendants who were also Halperin's clients), and that the statements were made with malice so as to injure Halperin in his profession. Indeed, the statements, which charge the commission of crimes, are libelous per se. See Jordan v. Lewis, 20 A.D.2d 773, 247 N.Y.S.2d 650 (1st Dept, 1964).

The amended complaint is also sufficient to state a cause of action against Salvan for prima facie tort. It alleges that Salvan commenced a baseless lawsuit, an otherwise lawful act, to inflict intentional, apparent, and forseeable harm, without excuse or justification, solely to injure plaintiff in his profession. See ATI, Inc. v. Ruder & Finn, Inc., 42 N.Y.2d 454, 458, 398 N.Y.S.2d 864, 368 N.E.2d 1230 (1977). Compare Drago v. Buonagurio, 46 N.Y.2d 778, 413 N.Y.S.2d 910, 386 N.E.2d 821 (1978). The allegation of malicious intent is arguably substantiated by the inflammatory language describing the purported class in the caption of the complaint and the Rosners' failure to move for an order certifying the class.

Further, the allegations in the amended complaint that extreme emotional distress was intended, and was the result of intentional conduct of an outrageous nature, suffice to state a cause of action for intentional infliction of emotional distress. Paragraph 41 of the amended complaint asserts "[t]he acts of defendants were designed intentionally and solely to malign and harass plaintiff, to shock him into extreme emotional distress, and to thereby exact from him a financial settlement." Paragraph 42 alleges: "[t]he acts of defendants are outrageous, unwarranted and unjustified in that defendants know the class denominated ... cannot be certified...." The issue of whether defendants' conduct in commencing their purported class action was outrageous should await determination at trial. We respectfully disagree with our dissenting colleague that (1) plaintiff's failure to plead special...