Mills Studio, Inc. v. Chenango Val. Realty Corp.

• Decision Date: 22 November 1961
• Citation: 15 A.D.2d 138,221 N.Y.S.2d 684
• Parties: MILLS STUDIO, INC., Plaintiff-Respondent-Appellant, v. CHENANGO VALLEY REALTY CORP., and Leroy H. Scheidelman, Defendants-Appellants, Family Bargain Centers, Inc., Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 684

221 N.Y.S.2d 684

15 A.D.2d 138

MILLS STUDIO, INC., Plaintiff-Respondent-Appellant, v. CHENANGO VALLEY REALTY CORP., and Leroy H. Scheidelman,

Defendants-Appellants, Family Bargain Centers,

Inc., Defendant-Respondent.

Supreme Court, Appellate Division, Third Department.

Nov. 22, 1961.

Ferris, Kehoe & Cardamone, Utica (Richard O'C. Kehoe, Utica, of counsel), for defendants-appellants.

Latham & Mogavero, Unadilla (Livingston S. Latham, Unadilla, of counsel), for plaintiff-respondent-appellant.

Coleman & Jackson, Norwich, for defendant-respondent.

Before BERGAN, P. J., and COON, GIBSON, REYNOLDS and TAYLOR, JJ.

TAYLOR, Justice.

Defendants, Chenango Valley Realty Corp. and Scheidelman, appeal from a judgment of the Supreme Court, at Trial Term, Chenango County, in favor of plaintiff. Plaintiff cross-appeals from a judgment dismissing its complaint as to the defendant, Family Bargain Centers, Inc.

Plaintiff is a family corporation owned by Mr. and Mrs. Mills. For some time prior to May 1959 it had been conducting in Sidney, New York a photographic studio and a retail store which stocked for sale photographic equipment and supplies, greeting cards and a general line of gift shop marchandise. Mr. Mills devoted his time and efforts largely to the operation of the studio and Mrs. Mills managed the retail sales aspect of the business of the corporation.

Defendant Scheidelman was the president of Chenango Valley Realty Corp. then engaged in developing a shopping center in Norwich, New York.

In May, 1959 Mr. Scheidelman came to plaintiff's store in Sidney, inspected and admired it and encouraged them to join the shopping center community in Norwich. To house the proposed shop would require the erection of a new building by the owner. Scheidelman explained that such would be undertaken only after a lease between his corporation and plaintiff had been executed. After several conferences between the parties, the lease was prepared and signed and the building constructed. Upon its completion plaintiff opened a retail store similar to that conducted in Sidney, operated it at a loss for 12 months, thereupon discontinued the business and instituted this action for rescission of the leases and damages on the ground of fraud.

Mrs. Mills testified that at the initial conference of the parties she expressed apprehension concerning the presence at the shopping center of a discount department store operated by defendant, Family Bargain Centers, Inc., then engaged in selling similar lines of merchandise particularly photographic supplies, gift items and greeting cards and observed that it seemed pointless for plaintiff to open an adjacent store in the face of such competition, the impact of which had been felt in the relatively distant store in Sidney. According to her testimony Mr. Scheidelman then assured her that upon the opening of the new store the competing lines of merchandise would be removed from sale by defendant, Family Bargain Centers, Inc. In answer to her inquiry as to the manner in which this so simply could be accomplished, she stated that he said 'Well, I own 25 percent of the Family Bargain Center and all I have to do is tell them to remove these items.' Mr. Mills testified that he overheard this conversation. It is conceded that defendant, Family Bargain Centers, Inc., despite plaintiff's demand to desist continued to carry the competing merchandise. The record indicates that Scheidelman was not the owner of 25% of the capital stock of Family Bargain Centers, Inc. and possessed no managerial authority in connection with its business.

Mr. Scheidelman denied that he told Mr. and Mrs. Mills that he owned 25% of the stock of Family Bargain Centers, Inc. He recalled some conversation with one or the other of them about use sale of film at cut-rate prices in the competing store and that he had stated that he 'had some influence around the Center; and if it were to hurt them, [he] would see what [he] could do about getting it removed' and that he 'didn't have any authority, only a method of explaining the thing in a sympathetic manner.'

Appellants argue that fruad was not proved since the terms of the lease which contained no covenant expressive of Scheidelman's representation were fixed after considerable negotiations, and that the representation was merely promissory in nature and that plaintiffs should not have relied on his statements without investigating his authority to make them.

The court properly charged the essential constituents of the action, i. e., a representation of a material fact, falsity, scienter, deception and injury. In response to the jury's request made in the course of its deliberations, the Trial Judge reiterated this portion of the charge.

The divergent versions of the conversations which preceded the execution of the lease presented a factual question. There was ample evidence in the record from which the jury could find that the statements and representations relied upon constituted a "specific affirmation' of an arrangement under which something was to be done when the part [ies] making the affirmation knew perfectly well that no such thing would be done.' (Sabo v. Delman, 3 N.Y.2d 155, 160, 164 N.Y.S.2d 714, 716, 717, 143 N.E.2d 906, 908, 909.) Such statements and representations, when false, are actionable and not immunized by the existence of a written instrument. (Adams v. Gillig, 199 N.Y. 314, 92 N.E. 670, 32 L.R.A.,N.S., 127; Channel Master Corp. v. Aluminum, Ltd., 4 N.Y.2d 403, 406-407, 176 N.Y.S.2d 259, 261-262, 151 N.E.2d 833, 834, 835; Terris v. Cummiskey, 11 A.D.2d 259, 203 N.Y.S. 445; Sabo v. Delman, supra.)

Appellants argue that plaintiff failed sufficiently to prove its damages. Plaintiff was entitled to be indemnified for pecuniary loss sustained as a direct of the defendant's wrong. (Reno v. Bull, 226 N.Y. 546, 124 N.E. 144, motion for reargument denied 227 N.Y. 591, 125 N.E. 924; Ochs v. Woods, 221 N.Y. 335, 341, 117 N.E. 305, 307; Urtz v. New York Central & Hudson River R. R. Co., 202 N.Y. 170, 174, 95 N.E. 711, 712.) The principles enunciated in Dunkel v. McDonald (272 App.Div. 267, 270, 70 N.Y.S.2d 653, 656, affd. 298 N.Y. 586, 81 N.E.2d 323) are pertinent here: 'A plain...