Kosowsky  v. Willard Mountain, Inc.

• Decision Date: 01 December 2011
• Citation: 2011 N.Y. Slip Op. 08709,934 N.Y.S.2d 545,90 A.D.3d 1127
• Parties: Philip KOSOWSKY Jr. et al., Respondents–Appellants, v. WILLARD MOUNTAIN, INC., et al., Appellants–Respondents.
• Court: New York Supreme Court — Appellate Division

2011 N.Y. Slip Op. 08709

90 A.D.3d 1127

934 N.Y.S.2d 545

Philip KOSOWSKY Jr. et al., Respondents–Appellants,

v.WILLARD MOUNTAIN, INC., et al., Appellants–Respondents.

Supreme Court, Appellate Division, Third Department, New York.

Dec. 1, 2011.

Carter, Conboy, Case, Blackmore, Maloney & Laird, P.C., Albany (James A. Resila of counsel), for appellants-respondents.

Dreyer Boyajian, L.L.P., Albany (James R. Peluso of counsel), for respondents-appellants.

Before: PETERS, J.P., LAHTINEN, STEIN, McCARTHY and GARRY, JJ.

GARRY, J.

Cross appeals from an order of the Supreme Court (Hall Jr., J.), entered August 30, 2010 in Washington County, which, among other things, partially granted defendants' motion to dismiss the complaint.

Defendant Willard Mountain, Inc. (hereinafter WMI) operates a ski and winter sports area on real property owned by plaintiffs in the Town of Easton, Washington County. In 1958, plaintiffs' predecessor in interest leased the property to WMI for a 99–year term under an agreement that, among other things, provides for rental payments computed as a percentage of WMI's sales and income, requires WMI to provide plaintiffs with an annual accounting, and prohibits assignment or subletting without plaintiffs' consent. Defendant Charles Wilson is the principal owner and president of WMI's board of directors and of defendant Willard Development, Inc. (hereinafter WDI), which operates certain concessions at the ski area. In 2008, Wilson allegedly informed plaintiffs that, for a number of years, he had been paying less than the full amount of rent due and falsifying the corporations' annual income reports to correspond with the amounts he had paid. Defendants assert that the amount paid was proper under a 1995 licensing agreement by which WDI pays WMI a percentage of its income; plaintiffs contend that defendants violated the lease prohibition against assignment by failing to disclose this agreement's existence until just before this action was filed, in February 2010.

Plaintiffs asserted seven causes of action, including breach of contract and fraud. Defendants moved to dismiss all the claims except breach of contract for failure to state a cause of action ( see CPLR 3211[a][7] ), and to partially dismiss all the claims as time-barred ( see CPLR 3211[a][5] ). Plaintiffs cross-moved for leave to file an amended complaint. Supreme Court granted defendants' motion pursuant to CPLR 3211(a)(7) in part by dismissing the causes of action seeking an accounting and alleging unjust enrichment and breach of the implied covenant of good faith and fair dealing, determined that the claims were not partially time-barred, and granted plaintiffs' motion for leave to amend their complaint. Defendants appeal and plaintiffs cross-appeal.

Defendants first contend that Supreme Court erred in failing to dismiss the fraud claim as duplicative of the cause of action for breach of contract. Construing the pleadings liberally and granting plaintiffs the benefit of every favorable inference, as we must ( see Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 [2002]; Ullmannglass v. Oneida, Ltd., 86 A.D.3d 827, 829, 927 N.Y.S.2d 702 [2011] ), we disagree. Initially, we note that there are relevant distinctions among the named parties—neither Wilson nor WDI are named parties to the lease, the breach of contract claim is not directed against Wilson and cannot be considered duplicative as to him, and the degree to which WDI is bound by the agreement's terms is disputed. Relative to WMI, as defendants assert, a misrepresentation premised directly on the same actions giving rise to a breach of contract does not give rise to a separate cause of action for fraud ( see Salvador v. Uncle Sam's Auctions & Realty, 307 A.D.2d 609, 611, 763 N.Y.S.2d 360 [2003], lv. dismissed 1 N.Y.3d 566, 775 N.Y.S.2d 783, 807 N.E.2d 896 [2003]; Brumbach v. Rensselaer Polytechnic Inst., 126 A.D.2d 841, 843, 510 N.Y.S.2d 762 [1987] ). Here, however, the fraud claim is not wholly duplicative of the breach of contract claim. Plaintiffs do not merely allege that defendants falsely represented their intent to pay the full amount of rent due; instead, they claim “that, after the contract was entered into, defendant[s] repeatedly misrepresented or concealed existing facts” ( Eagle Comtronics v. Pico Prods., 256 A.D.2d 1202, 1203, 682 N.Y.S.2d 505 [1998] ) by falsifying the annual income reports in order to deceive plaintiffs as to the true amount of rent owed and induce them to accept improperly low payments, as well as by failing to disclose the existence of the 1995 licensing agreement ( see Deerfield Communications Corp. v. Chesebrough–Ponds, Inc., 68 N.Y.2d 954, 956, 510 N.Y.S.2d 88, 502 N.E.2d 1003 [1986]; Freedman v. Pearlman, 271 A.D.2d 301, 304–305, 706 N.Y.S.2d 405 [2000] ). Moreover, despite the absence of a fiduciary relationship, defendants allegedly breached a duty of candor independent from their duty to perform under the contract in that they had superior knowledge unavailable to plaintiffs and knew plaintiffs were relying on the information they supplied ( see Intl. Elecs., Inc. v. Media Syndication Global, Inc., 2002 WL 1897661, *2, 2002 U.S. Dist. LEXIS 15200, *5–*6 [S.D.N.Y.2002]; compare Fourth Branch Assoc. Mechanicville v. Niagara Mohawk Power Corp., 235 A.D.2d 962, 963, 653 N.Y.S.2d 412 [1997] ). Accordingly, the conduct alleged in the fraud cause of action is sufficiently discrete from that underlying the breach of contract claim to state a separate cause of action ( see Deerfield Communications Corp. v. Chesebrough–Ponds, Inc., 68 N.Y.2d at 956, 510 N.Y.S.2d 88, 502 N.E.2d 1003; First Bank of Ams. v. Motor Car Funding, 257 A.D.2d 287, 291–292, 690 N.Y.S.2d 17 [1999] ).

We further disagree with defendants' contention that the fraud claim should have been dismissed for failure to plead the required elements of justifiable reliance and special damages ( see Dube–Forman v. D'Agostino, 61 A.D.3d 1255, 1257, 877 N.Y.S.2d 740 [2009]; State of New York v. Industrial Site Servs., Inc., 52 A.D.3d 1153, 1157, 862 N.Y.S.2d 118 [2008] ). In addition to alleging that defendants knowingly misrepresented material facts, plaintiffs allege that they relied upon the income figures provided by defendants in accepting the rent payments. They claim special damages, in addition to lost rent under the contract, as the alleged fraud prevented them from exercising their right to terminate the lease upon a breach of its terms and thereby deprived them of other business opportunities and of the use and enjoyment of their property.

Plaintiffs' claim against Wilson for tortious interference with contract was not, as defendants claim, subject to dismissal for failure to satisfy the “enhanced pleading standard” that applies when a plaintiff seeks to hold a corporate officer personally liable for a corporation's breach of contract ( Joan Hansen & Co. v. Everlast World's Boxing Headquarters Corp., 296 A.D.2d 103, 109, 744 N.Y.S.2d 384 [2002] ). In this regard, plaintiffs were required to allege that Wilson's actions “either were beyond the scope of [his] employment or, if not, were motivated by [his] personal gain, as distinguished from gain for the corporation” ( Petkanas v. Kooyman, 303 A.D.2d 303, 305, 759 N.Y.S.2d 1 [2003] ). The actions that plaintiffs ascribe to Wilson—that is, deliberately deceiving them by falsifying the income figures of the corporations that he controlled—cannot be construed as within the scope of his corporate responsibilities ( see Murtha v. Yonkers Child Care Assn., 45 N.Y.2d 913, 915, 411 N.Y.S.2d 219, 383 N.E.2d 865 [1978] ). Moreover, the complaint alleges that he took these actions in bad faith for his personal pecuniary gain ( see BIB Constr. Co. v. City of Poughkeepsie, 204 A.D.2d 947, 948, 612 N.Y.S.2d 283 [1994] ). Accordingly, plaintiffs sufficiently stated a claim for tortious interference with contract ( compare Bradbury v. Cope–Schwarz, 20 A.D.3d 657, 659–660, 798 N.Y.S.2d 207 [2005] ). However, we agree with defendants that the claim for termination of the lease and surrender of the property should have been dismissed since it does not constitute a separate cause of action; by its terms, it merely demands relief for the alleged breach of contract.

Defendants next contend that Supreme Court erred in finding that they were estopped from asserting a statute of limitations defense. Under the doctrine of equitable estoppel, a defendant may not rely on the statute of limitations defense when the plaintiff was prevented from commencing a timely action by reasonable reliance on the defendant's fraud, misrepresentation or other affirmative misconduct ( see Zumpano v. Quinn, 6 N.Y.3d 666, 673–674, 816 N.Y.S.2d 703, 849 N.E.2d 926 [2006]; Pulver v. Dougherty, 58 A.D.3d 978, 979–980, 871 N.Y.S.2d 495 [2009]; Cellupica v. Bruce, 48 A.D.3d 1020, 1021, 853 N.Y.S.2d 190 [2008] ). However, “ ‘equitable estoppel does not apply where the misrepresentation or act of concealment underlying the estoppel claim is the same act which forms the basis of [the] plaintiff's underlying substantive cause[s] of action’ ” ( Robare v. Fortune Brands, Inc., 39 A.D.3d 1045, 1046, 833 N.Y.S.2d 753 [2007], lv. denied 9 N.Y.3d 810, 844 N.Y.S.2d 787, 876 N.E.2d 516 [2007], quoting Kaufman v. Cohen, 307 A.D.2d 113, 122, 760 N.Y.S.2d 157 [2003] ). Here, the misrepresentations that allegedly prevented plaintiffs from filing a timely action—that is, defendants' falsified annual income reports—are also the basis for their substantive claims. Accordingly, defendants were not precluded from asserting that plaintiffs' claims were partially time-barred ( see Lucas–Plaza Hous. Dev. Corp. v. Corey, 23 A.D.3d 217, 218, 805 N.Y.S.2d 9 [2005] ).

As to the merits of this claim, plaintiffs' cause of action for breach of contract is time-barred by the applicable six-year statute of limitations to the extent that the...