Held v. Kaufman

• Decision Date: 07 April 1998
• Citation: 694 N.E.2d 430,91 N.Y.2d 425,671 N.Y.S.2d 429
• Parties: , 694 N.E.2d 430, 1998 N.Y. Slip Op. 3246 Herman HELD, Appellant, v. Ivan KAUFMAN et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 429

671 N.Y.S.2d 429

91 N.Y.2d 425, 694 N.E.2d 430, 1998

N.Y. Slip Op. 3246

Herman HELD, Appellant, v. Ivan KAUFMAN et al., Respondents.

Court of Appeals of New York.

April 7, 1998.

Aronow & Aronow, P.C., New York City (Andoni Economou and David E. Aronow, of counsel), and Opton Handler Gottlieb Feiler & Katz, L.L.P., for appellant.

Meltzer, Lippe, Goldstein, Wolf & Schlissel, P.C., Mineola (Stephen W. Schlissel, Richard A. Lippe and Jeffrey A. Miller, of counsel), for Ivan Kaufman and another, respondents.

Zeichner Ellman & Krause, New York City (David B. Chenkin, of counsel), for Arbor National Holdings, Inc. and another, respondents.

OPINION OF THE COURT

LEVINE, Judge.

This appeal from the preanswer dismissal of plaintiff's complaint presents two questions: first, whether raising additional grounds for dismissal in a reply affidavit violates the "single motion" rule (CPLR 3211[e] ) and second, whether on the merits dismissal was proper. We agree with the Appellate Division that the additional grounds tendered could be considered, but conclude that dismissal of the complaint was not warranted here.

As alleged in his complaint, all of plaintiff Herman Held's causes of action stem from an agreement, made in 1982, with the late Morris Kaufman, husband to defendant Anita Kaufman and father of defendant Ivan Kaufman, whereby Morris Kaufman promised plaintiff a 6% partnership interest in a mortgage lending venture in exchange for plaintiff's advice and assistance in launching the enterprise and for plaintiff's promise to transfer 6% of another real estate partnership to Ivan Kaufman. Plaintiff asserts that he immediately performed by transferring 6% of the real estate interests to Ivan Kaufman and by shepherding the formation of the mortgage lending venture. By 1983, American Equity Funding, Inc., the predecessor in interest to defendants Arbor National Mortgage, Inc. and Arbor National Holdings, Inc. (collectively, Arbor), was incorporated to carry out the mortgage lending project. Morris Kaufman died in 1988.

According to plaintiff, he was fraudulently induced, in February 1992, by defendants Anita and Ivan Kaufman to accept $150,000, paid out over five years, in full satisfaction of all claims against defendant Arbor and its shareholders, including any ownership interest in Arbor. The alleged fraud consisted of misrepresentations involving the value of plaintiff's 6% interest and a denial of any immediate plans by the controlling shareholders to make a public offering of Arbor's shares. In fact, fewer than six months later, Arbor filed a registration statement with the Securities and Exchange Commission for the public offering of its stock. Following the public sale, plaintiff's alleged 6% interest would have been worth $3,600,000.

In addition to fraud in the inducement, the complaint also states a cause of action for breach of contract for failing to convey the promised 6% interest in Arbor and a claim for unjust enrichment in reneging on that promise, seeking to impose a constructive trust over 6% of Arbor's stock.

Defendants made a preanswer motion to dismiss the complaint pursuant to CPLR 3211. In opposition, plaintiff submitted an affidavit which included several facts not contained in the initial complaint, notably that the contract between plaintiff and Morris Kaufman was oral, that Arbor was not incorporated until 1983, and that Ivan Kaufman refused to recognize plaintiff's ownership interest in Arbor as early as 1988. Relying on these averments as judicial admissions, defendants included additional grounds for dismissal in their reply papers, namely, that the contract was unenforceable under the Statute of Frauds, that the contract was void for indefiniteness, and that plaintiff's claims were time barred. The court permitted plaintiff to submit a surreply to the newly asserted defenses.

Supreme Court denied the motion to dismiss, ruling that the additional defenses raised in the reply to plaintiff's answering affidavit violated the "single motion" rule of CPLR 3211(e). The Appellate Division reversed and granted defendants' motion to dismiss, holding that the assertions in plaintiff's answering affidavit " 'conclusively establish that he has no cause of action' " (238 A.D.2d 546, 548, 657 N.Y.S.2d 82, quoting Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 636, 389 N.Y.S.2d 314, 357 N.E.2d 970). We granted plaintiff leave to appeal, and we now modify the order of the Appellate Division, reinstate one of plaintiff's claims, and otherwise affirm.

As an initial matter, we reject plaintiff's contention that CPLR 3211(e), which permits only one preanswer motion to dismiss, bars consideration of the additional defenses raised for the first time in defendants' reply papers. The purpose of CPLR 3211(e) is to "prevent the delay before answer that could result from a series of motions" (Advisory Committee Notes following CPLR 3211, reprinted in N.Y. Cons. Law Serv, Book 4H, at 308 [1994] ). That additional grounds for dismissal were introduced in a reply affidavit on what was a single CPLR 3211 motion violates neither the letter nor the spirit of the single motion rule. Indeed, defendants' arguments could not have been submitted at an earlier juncture because of the indefiniteness of plaintiff's initial pleading. Moreover, plaintiff was afforded an opportunity to respond, thus obviating any danger of prejudice.

Thus, the Appellate Division's reliance upon facts averred in plaintiff's answering papers, as a basis for dismissal, was not erroneous. Although affidavits submitted in response to a motion to dismiss customarily serve the limited purpose of remedying defects in a complaint, "there may be instances in which a submission by plaintiff will conclusively establish that he has no cause of action" (Rovello v. Orofino Realty Co., 40 N.Y.2d, at 636, 389 N.Y.S.2d 314, 357 N.E.2d 970, supra).

Turning to the merits, it is settled law that a CPLR 3211 dismissal may be granted where "documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law" (Leon v. Martinez, 84 N.Y.2d 83, 88, 614 N.Y.S.2d 972, 638 N.E.2d 511). Thus, the issue here is whether the affidavits submitted in response to the motion to dismiss conclusively establish, as held by the Appellate Division, that none of plaintiff's causes of action has any merit.

We agree with the Appellate Division that plaintiff's second and third causes of action, for breach of contract and for a constructive trust based on a breach of fiduciary duty and unjust enrichment, both of which arise out of defendants' refusal to honor the alleged 1982 agreement, should be dismissed. Plaintiff's affidavit admits that Ivan Kaufman disavowed the agreement as early as 1988. Thus, these two claims, asserted in an action commenced seven years later, are time barred (see, CPLR 213[1], [2] ).

We reach a different conclusion with regard to plaintiff's claim for fraud in the inducement. The six-year limitations period for fraud claims is measured, at the earliest, from the time of the fraud (see, CPLR 213[8] ). Here, the allegedly fraudulent misrepresentations of fact that caused plaintiff to settle his...