Plaza PH2001 LLC v. Plaza Residential Owner LP

• Decision Date: 26 June 2012
• Citation: 98 A.D.3d 89,947 N.Y.S.2d 498,2012 N.Y. Slip Op. 05119
• Parties: The PLAZA PH2001 LLC, Plaintiff–Appellant, v. PLAZA RESIDENTIAL OWNER LP, et al., Defendants–Respondents. The Plaza PH2001 LLC, Plaintiff–Appellant, v. Plaza Residential Owner LP, et al., Defendants–Respondents.
• Court: New York Supreme Court — Appellate Division

98 A.D.3d 89

947 N.Y.S.2d 498

2012 N.Y. Slip Op. 05119

The PLAZA PH2001 LLC, Plaintiff–Appellant,

v.PLAZA RESIDENTIAL OWNER LP, et al., Defendants–Respondents.

The Plaza PH2001 LLC, Plaintiff–Appellant,

v.Plaza Residential Owner LP, et al., Defendants–Respondents.

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

June 26, 2012.

Morrison Cohen LLP, New York (Y. David Scharf, Jerome Tarnoff, and Joaquin Ezcurra of counsel), for appellant.

Kramer Levin Naftalis & Frankel LLP, New York (Jeffrey W. Davis and Samantha V. Ettari of counsel), for respondents.

DAVID B. SAXE, J.P., JOHN W. SWEENY, JR., HELEN E. FREEDMAN, SALLIE MANZANET–DANIELS, JJ.

SAXE, J.

This litigation arose because plaintiff's expectations for the penthouse apartment that it had agreed, pre-construction, to purchase were not met by the apartment as built. The question is whether plaintiff is left with any legal recourse, in view of the provisions of the purchase agreements, offering plan, and construction plans that defendants rely on in their current dismissal motion.

On a previous appeal, this Court modified the dismissal of plaintiff's original complaint, reinstating a cause of action for breach of contract ( see79 A.D.3d 587, 914 N.Y.S.2d 26 [2010] ). We are now asked to address the propriety of the motion court's subsequent dismissal of both a new complaint served by plaintiff against the same defendants in a second action and an amended complaint plaintiff served in the first action in the wake of our reinstatement of a portion of the first complaint.

FACTUAL AND PROCEDURAL HISTORYThe First Action

Defendant CPS 1 Realty LP was the original sponsor of a condominium offering plan, dated December 7, 2005, for the sale of luxury residential condominium units at the Plaza Hotel in Manhattan, and defendant Plaza Residential Owner LP took over as sponsor in April 2006; both defendants are allegedly wholly owned by defendant El–Ad Properties N.Y. LLC (those three defendants will be referred to collectively as Sponsor). Defendant Stribling Marketing Associates LLC was the selling agent under the condominium offering plan.

In August 2007, plaintiff, The Plaza PH2001 LLC, entered into two purchase agreements: one for a planned penthouse unit, at a price of $31 million, and the other for a smaller unit, apartment 1602, to be used for the household help employed in the penthouse residence.

When plaintiff's representative was permitted to see the nearly completed penthouse in May 2008, the penthouse was different from the unit plaintiff had expected. Instead of a large, light and airy expanse of open living space with floor-to-ceiling 11–foot–high windows providing expansive views of Central Park, plaintiff found a living area broken up by several large columns that also blocked the view, with small, three-foot-tall windows beginning three feet from the floor and ending at the six-foot line where the sloped skylights in the ceiling began, and a cramped feel to the room due to the low height at which the ceiling and skylights met the wall and windows. Instead of an open, light kitchen space with four large windows and a moderate-sized kitchen island surrounded by sufficient floor space, plaintiff found the kitchen floor space largely taken up by an excessively large island, and an obtrusive, steeply pitched ceiling ending at a height of six feet, which, as in the living room, gave a cramped feel to the breakfast area; in addition, the kitchen had only two small windows instead of four large ones, drastically diminishing the expected view.

Plaintiff also alleged that while the plans had showed the exterior wall of the penthouse as continuous with that of the lower floors, the exterior wall as constructed was set back approximately three feet, and a drainage grate not shown in any plans had been situated directly outside the exterior wall, below the living room and kitchen windows, inside a three-foot ledge.

Based on these alleged changes to the penthouse as constructed, plaintiff first sought rescission of the contracts, then commenced this action.

The original complaint, the subject of the previous appeal, had asserted causes of action for breach of the purchase agreements and fraud, and sought rescission, return of the down payments and legal fees. The allegations included the failure to construct the penthouse in accordance with the plans, model or representations relating to such aspects of the units as room size, ceiling height, number and size of windows, layout, and other design details. Plaintiff also alleged that defendants deliberately failed to provide notice of the changes made, in an effort to deprive plaintiff of its right and ability to rescind the purchase agreements. The cause of action asserted against Stribling Marketing Associates LLC claimed fraudulent inducementbased on the assertion that these defendants made representations, through the use of the model apartment relating to the penthouse's layout and design, that they knew to be untrue.

Defendants' motion to dismiss the original complaint in its entirety was based primarily on the “No Representations” provision contained in both purchase agreements, in which plaintiff acknowledged that it had not relied on “any architect's plans, sales plans, selling brochures, advertisements, representations, warranties, statements or estimates of any nature whatsoever, whether written or oral, made by Sponsor, Selling Agent or otherwise,” except as represented in the purchase agreement or in the plan. The full clause reads as follows:

“No Representations. Purchaser acknowledges that Purchaser has not relied upon any architect's plans, sales plans, selling brochures, advertisements, representations, warranties, statements or estimates of any nature whatsoever, whether written or oral, made by Sponsor, Selling Agent or otherwise, including, but not limited to, any relating to the description or physical condition of the Property, the Building or the Unit, or the size or the dimensions of the Unit or the rooms therein contained or any other physical characteristics thereof ... except as herein or in the Plan specifically represented; Purchaser has relied solely on his or her own judgment and investigation in deciding to enter into this Agreement and purchase the Unit. No person has been authorized to make any representations on behalf of Sponsor. No oral representations or statements shall be considered a part of this Agreement. Purchaser agrees (a) to purchase the Unit, without offset or any claim against, or liability of, Sponsor, whether or not any layout or dimension of the Unit or any part thereof, or of the Common Elements, as shown on the Floor Plans on file in Sponsor's office and [to be] filed in th[e] City Register's Office, is accurate or correct, and (b) that Purchaser shall not be relieved of any of Purchaser's obligations hereunder by reason of any immaterial or insubstantial inaccuracy or error. The provisions of this Article 20 shall survive the closing of title or the termination of this Agreement” (emphasis added).

The motion court dismissed the complaint, holding that this “No Representations” clause established a complete defense to plaintiff's claims as a matter of law. In addition, the court considered, and rejected, plaintiff's reliance on the provision of the condominium offering plan-which was incorporated by reference into the purchase agreements-providing for a right of rescission in the event the sponsor found it necessary to make material alterations in the plans. That provision reads:

“Any such changes, if material (for example, variations in square footage in excess of 5%) shall be disclosed by Sponsor in a duly filed amendment to the Plan.... No such change will be made if the same would materially adversely affect any Purchaser under an Agreement ... unless ... (iii) the same is dictated by construction conditions at the Property (such as coordination of Building systems, conflicts with structural members or elements, conforming with Legal Requirements, unforeseen events, etc. and, in all cases, in good faith, reasonably necessary due to factors not within Sponsor's reasonable control, and where no practicable alternative (in the exercise of sound construction management practices) exists), and in such event, Sponsor will, in the amendment disclosing such material adverse change, offer the affected Purchaser(s) the right, for at least 15 days, to rescind their Agreement(s) and receive a refund of their Deposit(s) ... However, as long as the layout and dimensions of a Residential Unit conform substantially to the Plans and Specifications, a Purchaser will not be excused from purchasing a Residential Unit by reason of a minor, non-material deviation or change and will not have any claim against Sponsor as a result thereof.”

The court held that the complaint “fail[ed] to describe any changes which, under these definitions, would be considered ‘material.’ ”

This Court disagreed in part with the motion court's reasoning, reinstating a cause of action for breach of contract. In our view, while the allegations of the original complaint relied in part on the alleged breach of “extracontractual representations,” which reliance was precluded by the “No Representations” clause, it did not rely solely on the breach of the alleged extracontractual representations. Rather, the original complaint also asserted that the penthouse unit was constructed in a manner materially different from that set forth in the filed plans and specifications, contrary to the requirements of the offering plan, which required that the work be performed substantially in accordance with those filed plans and specifications and that material alterations be the subject of an amendment to the plan. This Court therefore held that:

“Plaintiff stated a cause of action for breach of contract by alleging that certain aspects of the finished penthouse apartment did not conform to the...