Jo Ann Homes at Bellmore, Inc. v. Dworetz, s. 1

Citation302 N.Y.S.2d 799,25 N.Y.2d 112,250 N.E.2d 214
Decision Date02 July 1969
Docket Number2,Nos. 1,s. 1
Parties, 250 N.E.2d 214 JO ANN HOMES AT BELLMORE, INC. et al., Respondents-Appellants, v. Aaron DWORETZ et al., Appellants-Respondents, et al., Defendants. JO ANN HOMES AT BELLMORE, INC. et al., Appellants, v. Aaron DWORETZ et al., Respondents, et al., Defendants. Aaron DWORETZ et al., Respondents, v. JO ANN HOMES AT BELLMORE, INC., Appellant et al., Defendants. Case
CourtNew York Court of Appeals

George C. Pratt, John D. Caemmerer and Frank E. Pitcher, Mineola, for Jo Ann Homes at Bellmore, Inc., and others.

Alfred L. Krasner, Marshall H. Kozinn, New York City, Adolph Koeppel and Irving I. Lesnick, Mineola, for Aaron Dworetz and others.

BURKE, Judge.

Aaron Dworetz, John Arnold and Harvey Kaliff purchased a large peninsula of land in South Bellmore, New York, in 1959 for construction purposes. At that time, the peninsula was marshland, covered with spongy, compressible bog. In reclaiming the land, a dredging operation was necessary to fill it to the required grade. Defendants Dworetz, Arnold and Kaliff began this operation by obtaining a permit from Army engineers to dredge the waters off the peninsula. A second permit was issued by the Hempstead Town Board to dredge and fill 250,000 cubic yards. A subsequent modification increased the authorized dredge to 900,000 yards and extended the permit to February 18, 1962.

While the dredging and filling operation was progressing, defendant processed and filed subdivision maps covering the land. The area was divided by their engineering assistants into 12 sections, composed of 282 lots and the accompanying street profiles. Sections 1 through 7, located in the northern (and inland) portion of the peninsula, were then developed by Harno Construction Corp., a building corporation formed by Dworetz and his associates. Defendant Harno built and sold 126 houses in these sections. The remainder of the development, consisting of 156 lots and constituting the subject matter of this appeal, was listed with a real estate broker as filled, improved lots, located on filed maps. The broker contacted Salvatore Ingrassia, a builder of several developments on Long Island, and told him of this land whih was 'fully improved, filled to grade' with 'maps filed' and 'bonded.' Ingrassia inspected the peninsula and found the northern portion in the process of development. While dredging operations were concluding at that time, the southern area, which was being offered to Ingrassia, was in a totally undeveloped state. Huge piles of hydraulic fill, separated by valleys, made it impossible to determine by mere observation whether the fill, when leveled, would be sufficient to complete the development. Thus, Ingrassia could not verify the agent's assertion that he was selling 'filled to grade' lots.

Ingrassia expressed an interest in the land and negotiations commenced with the defendants Dworetz, Arnold and Kaliff. After some discussion, the price for these filled to grade plots was set at $6,300 for the inland parcels and $8,000 for beach plots. The parties met in February, 1962 to sign the contract, confirming the negoitiations. At that time, plaintiff Ingrassia requested an engineer's certification that there was enough fill and the sellers specify in the contract that these were 'legal building plots.' The engineering concern was unwilling to phrase the certification in the terms suggested by plaintiff Ingrassia and the defendants found the description 'legal building plots' unacceptable so, after a six hour conference, the negotiations broke off. However, on March 14, 1962, the parties met again, at which time the sale was concluded. On that date, Ingrassia was given an engineer's certification that 'there is adequate material on the site to grade all streets in conformance with the approved street profiles and to grade all plots in conformance with the minimum requirements of the Town of Hempstead.' Plaintiff had requested a certification that there was enough fill to complete the job. Unwilling to rely solely upon the above representation, plaintiff's attorney insisted that a clause be included in the contract, in which the seller would guarantee the land to the purchaser. The following was acceptable to all parties: 'The Sellers represent that the property hereinbefore described, at the time of closing, shall be 156 Legal building plots' (emphasis added). A handwritten addition provided the assurance that this representation would survive delivery of the deed. The closing took place on August 21, 1962. At that time various ordinances of the Town of Hempstead dealt with reclaimed land. Two such ordinances are pertinent to this appeal. One dictated the quantity or fill to be used in reclaiming land and the other specified a minimum slope for the shoreline of all waterfront or beach parcels of land. Sometime after the conclusion of this transaction, it became apparent that the land contained insufficient fill and that the shoreline was not properly sloped. The present action followed these discoveries. In a comprehensive complaint, Ingrassia and the building corporation he later formed for the purpose and the the area--Jo Ann Homes at Bellmore--sued the sellers and the engineering firm that had provided the certification. 1 Plaintiffs alleged that defendants Dworetz, Arnold and Kaliff wee liable for breach of contract and fraud and, after a lengthy jury trial, prevailed on both theories. Special findings were made and the jury concluded that damages suffered by plaintiffs on the beach plots totalled $81,600 and that the loss incurred for the inland plots was $51,300. An additional award of $19,363 was made because of the defendant's delay. While plaintiffs were awarded identical verdicts for the inland and beach plots on the different theories of contract and fraud, the maximum liability of the defendants as a result of the jury verdict was $152,263.

Following the jury verdict, the trial court struck the delay damages and the award for breach of contract with reference to the inland plots from the judgment. After an appeal to the Appellate Division, Second Department, the award was again reduced when that court dismissed the fraud cause of action because of insufficient proof of Scienter. However, the breach of contract award of $81,600 for the beach plots was sustained.

Both parties appeal to this court. Defendants Dworetz, Arnold and Kaliff seek, quite naturally, to have the contract cause of action dismissed. Plaintiffs, on the other hand, request the reinstatement of both the fraud cause of action and the award of $19,363 for delay damages.

One additional cause of action in plaintiffs' complaint, not previously discussed, sought a declaration that the mortgage given to the defendants by the plaintiffs was invalid because of the alleged fraudulent representations of these defendants. At that time, the defendants instituted a foreclosure action against Jo Ann Homes, Inc. on this same mortgage. The foreclosure action and the cause of action seeking a declaration of illegality were tried jointly with the damage causes of action and resulted in the dismissal of the declaratory action on the ground that plaintiff had been fully compensated by the jury verdict, and in a judgment against Jo Ann Homes in the foreclosure action. The Appellate Division, Second Department, affirmed that judgment and we granted leave to appeal, so that the entire controversy might come before this court. In the foreclosure action, Jo Ann Homes concedes that, should we fail to reinstate the fraud cause of action, the appeal from the judgment of foreclosure becomes academic.

Upon reviewing the record in this case, we conclude that plaintiff presented evidence to the jury which was sufficient to establish each of the elements of a cause of action in fraud for both the inland and the beach plots. Except for this modification, the orders of the Appellate Division should be affirmed.

Fraud is generally defined by reciting the five elements essential to sustain that cause of action. There must be a representation of fact, which is either untrue and known to be untrue or recklessly made, and which is offered to deceive the other party and to induce them to act upon it, causing injury. (See 24 N.Y.Jur., Fraud and Deceit, § 14.) There is an abundance of evidence in this case which would permit a jury to conclude that the defendant did in fact make such a fraudulent misrepresentation to the plaintiff.

Salvatore Ingrassia repeatedly testified that he concluded this transaction only after he was assured in writing that he was purchasing 'legal building plots.' Ingrassia, an experienced builder, contends his...

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