Lusins v. Cohen

• Decision Date: 13 March 2008
• Docket Number: 503379.
• Citation: 2008 NY Slip Op 02074,853 N.Y.S.2d 685,49 A.D.3d 1015
• Parties: ANNA MARIE LUSINS, as Administrator of the Estate of JOHN O. LUSINS, Deceased, Appellant, v. STEPHEN H. COHEN et al., Respondents.
• Court: New York Supreme Court — Appellate Division

49 A.D.3d 1015

853 N.Y.S.2d 685

2008 NY Slip Op 02074

ANNA MARIE LUSINS, as Administrator of the Estate of JOHN O. LUSINS, Deceased, Appellant, v. STEPHEN H. COHEN et al., Respondents.

503379.

Appellate Division of the Supreme Court of the State of New York, Third Department.

Decided March 13, 2008.

Appeals (1) from an order of the Supreme Court (McDermott, J.), entered October 18, 2006 in Otsego County, which, among other things, partially granted defendants' motions for summary judgment dismissing the amended complaint, and (2) from the judgment entered thereon.

Malone Jr., J.

At the time of his death in April 2001, decedent, a physician, owned a number of medical business entities (hereinafter referred to as the entities) together with another physician, defendant James McChesney. Decedent and McChesney had previously entered into an insurance escrow agreement which provided that, in the event that one of them died, the other would be entitled to purchase the deceased partner's share of the entities at a price of not less than $500,000, to be funded by life insurance proceeds from policies that each agreed to obtain for the other's benefit. Following decedent's death, his daughter, Gillian Lusins, was appointed executor of his estate, and she retained attorney Scott S. Davidoff to represent the estate in connection with the sale of decedent's interest in the entities. As part of his representation, Davidoff engaged in extensive discussions with Philip Elenidis, decedent's certified public accountant and close family friend, concerning the financial condition of the entities.¹ In addition, Davidoff consulted with McChesney, defendant Stephen H. Cohen, an attorney who had performed work for the entities prior to decedent's death, as well as defendant Anne Dobinsky, a certified public accountant who had performed services for some of the entities and was familiar with their financial circumstances. Following the disclosure to Davidoff of information concerning the entities' financial condition, Lusins, acting on behalf the estate, entered into a settlement and sale agreement with McChesney, under which decedent's interest in the entities was sold for $500,000, the face amount of his life insurance policy.²

Thereafter, plaintiff, decedent's widow and the sole heir to his estate, became concerned that the value of decedent's interest in the entities far exceeded $500,000. This was based upon information provided by Thomas Kwako, plaintiff's personal friend as well as an attorney and certified public accountant in Maryland, who was of the view that the financial condition of the entities had been misrepresented to the estate prior to the execution of the settlement and sale agreement. As a result, the instant action was commenced against McChesney, Cohen and Dobinsky alleging causes of action for fraud against all defendants, an accounting against McChesney, and negligent representation as well as breach of fiduciary duty against Cohen and Dobinsky.³ Following joinder of issue, defendants each moved for summary judgment dismissing the action against them. Plaintiff, in turn, cross-moved for an order compelling discovery. Supreme Court dismissed all causes of action against defendants, except the one against McChesney seeking an accounting, and denied plaintiff's cross motion. Plaintiff now appeals.

Turning first to the fraud cause of action, in order to state such a claim, "a plaintiff must allege misrepresentation or concealment of a material fact, falsity, scienter by the wrongdoer, justifiable reliance on the deception, and resulting injury" (Zanett Lombardier, Ltd. v Maslow, 29 AD3d 495, 495 [2006]; see Dowdell v Greene County, 14 AD3d 750, 751 [2005]). Notably, the element of justifiable reliance has been found lacking "`[w]here a party has the means to discover the true nature of the transaction by the exercise of ordinary intelligence, and fails to make use of those means'" (Tanzman v La Pietra, 8 AD3d 706, 707 [2004], quoting Stuart Silver Assoc. v Baco Dev. Corp., 245 AD2d 96, 98-99 [1997]; see Rotterdam Ventures v Ernst & Young, 300 AD2d 963, 966 [2002]).

In the case at hand, Davidoff testified that defendants provided him with all of the financial and legal documents requested and that he turned some of these over to Elenidis,...