Katehis v. Sovereign Assocs., Inc.
| Decision Date | 11 August 2014 |
| Docket Number | No. 150624/2014.,150624/2014. |
| Citation | 999 N.Y.S.2d 797 (Table) |
| Parties | Irene KATEHIS, Plaintiff, v. SOVEREIGN ASSOCIATES, INC., Gregory Healy, and Sachin Inman,, Defendants. |
| Court | New York Supreme Court |
Raiser & Kenniff, P.C. Mineola, for Plaintiff.
Nathan M. Ferst, Esq., New York, for Defendants.
In this action for breach of contract, fraud, aiding and abetting fraud, negligence, negligent misrepresentation, fraudulent concealment, and negligent infliction of emotional distress, defendants Sovereign Associates, Inc. (“Sovereign”), Gregory Healy (“Healy”), and Sachin Inman (“Inman”) move pursuant to CPLR 3211(a)(1) and (7) for dismissal of plaintiff Irene Katehis's (“plaintiff”) complaint. For the following reasons, defendants' motion is granted.
On June 27, 2011, plaintiff executed a lease for 640 Fort Washington Avenue, Apartment 5K (the “Apartment”), in Manhattan (the “Lease”). The Lease was for a one-year term, from July 2011 through the end of June 2012, with a monthly rent of $2,500. Healy and Inman are employees of Sovereign, a real estate brokerage firm, which assisted plaintiff in obtaining the Apartment. At signing, plaintiff provided a $2,500 security deposit along with a total advance rental payment of $30,000. Plaintiff also paid Sovereign a total of $3,600 for its services.
Plaintiff moved into the Apartment on July 25, 2011. Two days later, plaintiff observed a bat flying in the Apartment. The building's superintendent, in response to plaintiff's complaint of the bat, entered the Apartment and caught the bat in a bag and removed it. The superintendent assured plaintiff that the Apartment was free of bats and that this was not a common occurrence.
Four days later, a bat scratched plaintiff around her head area while she was preparing to retire for the night. Plaintiff, along with her mother and aunt (who were also staying at the Apartment), had to stay at a relative's apartment for the evening. Thereafter, plaintiff and her relatives who had been residing with her, sought immediate and emergency medical treatment to prevent rabies. When meeting with her physician, plaintiff also noticed two marks on her arm, and scratches on her legs, which plaintiff believes were caused by a bat while she was asleep in, or when she departed, the Apartment.
Plaintiff and her relatives received a series of shots for rabies at Lenox Hill Hospital. As a result, plaintiff experienced numerous health side effects. Additionally, plaintiff experienced severe anxiety, and has had trouble sleeping. She also had to suspend her college education. Since the incident, plaintiff and her mother have resided at other locations.
Plaintiff alleges that defendants were aware of, or reasonably should have been aware of, a bat infestation in the Apartment. And, defendants willfully, or with willful blindness, failed to warn plaintiff of the infestation before she entered into the Lease and while she was reviewing Lease documents, despite the fact that plaintiff asked defendants about the habitability and presence of vermin therein, and was assured that there were no pest infestations therein.
In her first cause of action (breach of contract), plaintiff alleges that Sovereign entered into a binding oral agreement to act as broker for plaintiff to obtain a habitable apartment. As to the second through sixth causes of action, plaintiff alleges that she was fraudulently induced to execute the Lease based on false representations regarding the Apartment's habitability and presence of bats. The seventh cause of action (negligent infliction of emotional distress) is based on the above, and on allegations that for a full week, plaintiff cohabitated with the bats and was exposed to diseases such as rabies, and the fear of contracting same.
Defendants contend that as to the breach of contract claim, plaintiff's allegation that defendants breached an oral agreement to provide her with a habitable apartment is barred by documentary evidence. The Brokerage Commission Agreement (the “Agreement”), signed by plaintiff, contains a merger clause indicating that the Agreement (and a registration agreement which was not returned incomplete and unsigned) set forth the “entire Agreement between us and supersedes” all other written and verbal agreements. Further, as evidenced in affidavits provided by Healy and Inman, plaintiff thoroughly inspected the Apartment before becoming a tenant and signed an apartment condition rider (the “Rider”) stating that plaintiff was taking the Apartment “as is” and “not sanitized.”
As to the second cause of action (fraud) and third through sixth causes of action (claims derivative of the fraud claim), plaintiff fails to properly plead damages, as required. In this regard, plaintiff fails to plead damages for the “actual pecuniary loss” sustained as a direct result of the wrong (the “out-of-pocket” rule).
Additionally, Healy avers that in response to plaintiff's inquiries about rodents and pests in the building, he stated that “as we were talking about a New York City building, there were of course rodents and pests, but that the building provided exterminator service.” Inman states in his affidavit that four days before the Lease was executed, plaintiff, in his presence, inspected the Apartment for approximately 45 minutes, including all access points, rooms, closets, paint construction, windows, and cabinets. In response to plaintiff's questions about rodents and pests in the building, Inman explained that the building had a monthly exterminator provided to all tenants free of charge by the building.
Defendants further contend that the negligent infliction of emotional distress claim should be dismissed because the complaint fails to allege conduct that is extreme and outrageous.
Also, plaintiff's action is directed at the wrong parties, and would be more appropriately directed at the building's owner and managing agent. Defendants note that in 2011, plaintiff brought an action against the building's owner and managing agent for the same injuries. In 2013, she brought a second action against Sovereign and Inman; however, she never served them with the summons and complaint.
In opposition, plaintiff argues that the breach of contract claim should stand because defendants violated the Code of Ethics and Standards of Practice of the National Association of Realtors (the “Realtors Code”), which provides that realtors pledge themselves to protect and promote the interests of their client. Clients' interests include finding a “habitable” apartment. Thus, there is an implied warranty of habitability that is inherent in all real estate broker agreements, including the Agreement. This requirement for honesty precludes defendants or their employees from relying upon the merger clause included in the Agreement. Moreover, the Realtors Code contains the duty to avoid exaggeration, misrepresentation or concealment of pertinent facts relating to the property or the transaction. This additional requirement for honest and fair dealing required defendants to inform plaintiff of the presence of bats in the Apartment, especially given that a daytime inspection of the Apartment would not reveal the presence of nocturnal creatures.
Thus, defendants' documentary evidence does not utterly refute plaintiff's factual allegations regarding ethical and other unlawful violations of the implied warranty of habitability, and the breach of contract claim must stand.
As to the fraud claim, plaintiff states that the “out-of-pocket” rule does not prevent recovery of other consequential damages proximately caused by reliance on fraudulent misrepresentations, provided that such damages naturally flow from the fraud. Instead, recovery is simply limited to that necessary to restore the plaintiff to the position occupied before the fraud occurred. In any event, plaintiff here seeks only out-of-pocket expenses incurred as a consequence of being induced by defendants into leasing the bat-infested Apartment. Such expenses include the one year's worth of rent advanced at signing, her security deposit, and brokerage fee. They also include the expenses related to vacating the Apartment, finding a new place to live, and seeking medical treatment for the potential of rabies contraction.
The negligent infliction of emotional distress claim is proper because case law provides that incidents involving animal scratches and bites which raise concerns of infectious diseases can provide support for such causes of action.
In reply, defendants contend that the claim regarding the implied warranty of habitability is misplaced and properly directed at the landlord under the lease. Case law provides that the warranty does not bind non-parties to a lease, such as the landlord's agents. Also, as a threshold matter, plaintiff failed to submit an affidavit or any other affidavit in opposition to the motion, and thus failed to controvert any factual statements contained in Healy's and Inman's affidavits. Therefore, the statements therein must be deemed true.
The breach of contract claim remains barred by the Agreement and Rider. The argument based on the Realtors Code is not the law. The documents submitted by defendants utterly refute the purported oral agreement to find a habitable apartment as alleged in the complaint, which in any event, is too vague to be enforced. And, plaintiff's case law cited in support of this cause of action is factually inapposite.
As to the fraud claim, it is now undisputed that Healy and Inman made no misrepresentations regarding the condition of the Apartment, especially as it related to rodents and pests. Moreover, plaintiff concedes that the “out-of-pocket” rule applies to her fraud claims, mandating dismissal. Thus, consequential damages, such as the kind plaintiff seeks here for expenses incurred after the alleged fraud (i.e., costs beyond her rent payment and brokerage commission), are not compensable herein.
And, the...
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