Mandarin Trading Ltd. v. Wildenstein

• Decision Date: 10 February 2011
• Citation: 944 N.E.2d 1104,919 N.Y.S.2d 465,2011 N.Y. Slip Op. 00741,16 N.Y.3d 173
• Parties: MANDARIN TRADING LTD., Appellant,v.Guy WILDENSTEIN et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

16 N.Y.3d 173
944 N.E.2d 1104
919 N.Y.S.2d 465
2011 N.Y. Slip Op. 00741

MANDARIN TRADING LTD., Appellant,
v.
Guy WILDENSTEIN et al., Respondents.

Court of Appeals of New York.

Feb. 10, 2011.

[919 N.Y.S.2d 467]

Crowell & Moring LLP, New York City (Clifton S. Elgarten, Samaa Haridi, Birgit Kurtz and Daniel Ginzburg of counsel), for appellant.Schindler Cohen & Hochman LLP, New York City (Steven R. Schindler and Daniel E. Shaw of counsel), for respondents.

[16 N.Y.3d 176] [944 N.E.2d 1106] OPINION OF THE COURT JONES, J.

In a dispute arising from the purchase and sale of the painting Paysage aux Trois Arbres by Paul Gauguin, this Court is asked to determine whether claims sounding in fraud, negligent misrepresentation, breach of contract, and unjust enrichment were properly pleaded in the plaintiff's complaint.

In July 2000, J. Amir Cohen approached plaintiff Mandarin Trading Ltd. ^* to solicit interest in the purchase of the painting for investment purposes. Cohen explained that he could arrange a transaction for the sale and subsequent resale of the painting at an auction. Mandarin was interested in the opportunity, but sought (1) an appraisal of the painting, (2) a report of its condition, and (3) a report of its prior ownership. Cohen agreed to obtain the requested information and recommended defendant [16 N.Y.3d 177] Guy Wildenstein, an allegedly renowned expert on Gauguin, for the appraisal.

On July 28, 2000, Wildenstein presented a written appraisal letter to Michel Reymondin, which stated that the painting was worth $15 million to $17 million. Neither Reymondin's role in the transactions, nor his relationship to the parties is pleaded.

[944 N.E.2d 1107 , 919 N.Y.S.2d 468]

Furthermore, the letter is addressed solely to Reymondin and neither indicates the purpose of the letter nor who requested the valuation of the painting. While the letter revealed that the painting was part of Mrs. Arthur Lehman's collection and was once sold by Wildenstein, it did not disclose any contemporaneous ownership interest. Mandarin received the letter, the complaint does not say from whom, on August 12, 2000.

On August 9, 2000, Cohen contacted and informed Mandarin that if the painting was purchased expeditiously, it could be sold at auction through Christie's at an optimum price. Christie's had outlined the logistics of the auction in a letter to Cohen in which Christie's proposed to hold an auction for the painting in New York with a reserve price of $12 million—a price below which the painting would not sell. Christie's estimated that the painting could sell for $12 million to $16 million.

Mandarin purchased the painting through a series of transactions that occurred during the period of August 16, 2000 to August 30, 2000. First, Peintures Hermes S.A., a company allegedly owned by Wildenstein, forwarded an invoice to Calypso Fine Art Ltd., an intermediary, for the sale transaction. Mandarin then wired $11.3 million for the purchase of the painting to Calypso's account. Finally, Calypso paid $9.5 million to Peintures in exchange for the painting and then transferred the painting to Mandarin. It is further alleged that Peintures deposited $8.8 million into a bank account owned by Wildenstein.

On November 8, 2000, Christie's held an auction for the painting, but the highest bid failed to exceed the reserve price and the painting was not sold. Mandarin has since retained ownership of the painting.

Before discovery, Supreme Court granted Wildenstein's CPLR 3211(a)(1) and (7) motion to dismiss Mandarin's complaint (17 Misc.3d 1118[A], 2007 N.Y. Slip Op. 52059[U], 2007 WL 3101235). Supreme Court held that Mandarin's fraud claims failed because the complaint did not allege that Wildenstein intended to defraud Mandarin through a misstatement of fact upon which Mandarin could [16 N.Y.3d 178] justifiably rely. The negligent misrepresentation claim was dismissed for lack of a special relationship, privity, or a privity-like relationship between the parties. In addition, the breach of contract claims were dismissed for failure to plead the existence of a contract. Finally, the unjust enrichment claim was dismissed because Supreme Court concluded that Mandarin unjustifiably relied upon the appraisal.

In a 3–2 decision, the Appellate Division affirmed dismissal of Mandarin's complaint by holding that the pleadings did not sufficiently allege claims for fraud, negligent misrepresentation, breach of contract, and unjust enrichment (65 A.D.3d 448, 884 N.Y.S.2d 47 [1st Dept.2009] ). One dissenting Justice voted to affirm dismissal of the claims at law, but to reinstate the equity claim of unjust enrichment, while the other dissenting Justice sought to reinstate Mandarin's entire complaint. Mandarin appeals to this Court as of right, from the two-Justice dissent, pursuant to CPLR 5601(a).

In the context of a CPLR 3211 motion to dismiss, the pleadings are “to be afforded a liberal construction. [The Court must] accept the facts as alleged in the complaint as true, [and] accord plaintiffs the benefit of every possible favorable inference” ( Leon v. Martinez, 84 N.Y.2d 83, 87, 614 N.Y.S.2d 972, 638 N.E.2d 511 [1994] [citation omitted]; see also Morone v. Morone, 50 N.Y.2d 481, 484, 429 N.Y.S.2d 592, 413 N.E.2d 1154 [1980] ). Even affording Mandarin all favorable inferences

[944 N.E.2d 1108 , 919 N.Y.S.2d 469]

the complaint fails to sufficiently plead its claims, and we now affirm.

Fraud

Generally, in a claim for fraudulent misrepresentation, a plaintiff must allege “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury” ( Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370 [1996]; see also Channel Master Corp. v. Aluminium Ltd. Sales, 4 N.Y.2d 403, 406–407, 176 N.Y.S.2d 259, 151 N.E.2d 833 [1958] ). Furthermore, where a cause of action is based in fraud, “the circumstances constituting the wrong shall be stated in detail” ( see CPLR 3016[b]; see also Lanzi v. Brooks, 43 N.Y.2d 778, 780, 402 N.Y.S.2d 384, 373 N.E.2d 278 [1977] [“(CPLR 3016[b] ) requires only that the misconduct complained of be set forth in sufficient detail to clearly inform a defendant with respect to the incidents complained of”] ).

Mandarin argues that the complaint properly pleads that Wildenstein's omission of his ownership interest in the painting [16 N.Y.3d 179] when providing the appraisal was a fraudulent, material misrepresentation intended to induce Mandarin's reliance. Wildenstein asserts that the complaint fails to plead that Wildenstein specifically intended to defraud Mandarin, and also owed a fiduciary duty to disclose an alleged ownership interest.

Wildenstein's letter regarding the painting's value constituted nonactionable opinion that...