PS & A. REALTIES v. Lodge Gate Forest

• Decision Date: 07 January 1954
• Citation: 205 Misc. 245
• Parties: P. S. & A. Realties, Inc., et al., Plaintiffs,<BR>v.<BR>Lodge Gate Forest, Inc., et al., Defendants.
• Court: New York Supreme Court

205 Misc. 245

P. S. & A. Realties, Inc., et al., Plaintiffs,

v.Lodge Gate Forest, Inc., et al., Defendants.

January 7, 1954.

Ralph L. Bernstein for plaintiffs.

Henry A. Panoff for Sol G. Atlas, defendant.

Hyman Grill for Lodge Gate Forest, Inc., and others, defendants.

WALTER, J.

By written contract of October 4, 1952, defendant Lodge Gate Forest, Inc., agreed to sell to plaintiff William Proopis a plot of ground improved by a one-story building containing seven retail stores, known as 525-537 Plandome Road, Manhasset, Long Island, for $251,000, of which $12,500 was paid upon the signing of the contract, $37,500 was to be paid upon delivery of the deed, $130,000 was to be paid by taking title subject to a mortgage for that amount which the seller was then arranging to obtain from a savings bank, and for the balance of which the purchaser was to give the seller a bond or note for $71,000 secured by a second mortgage upon the property. In so contracting Proopis was acting for himself and for plaintiffs David T. Sommer and Adolph Austin and the seller was advised of that fact.

The contract was assigned to plaintiff P. S. & A. Realties, Inc., a corporation organized and controlled by the individual plaintiffs, and the purchase was consummated on November 7, 1952, by payment of the $37,500 and the execution of the $71,000 bond and mortgage, and the conveyance of the property to plaintiff P. S. & A. Realties, Inc., which simultaneously conveyed the premises to the individual plaintiffs.

Plaintiffs assert that the purchase was induced by false representations with respect to the tenants of the stores and the terms of their leases, and by this action they seek rescission of the transaction on that ground.

The property was first brought to the attention of Proopis by brokers employed by Lodge Gate Forest, Inc., who gave him a typewritten statement, based on statements made to them by defendant Deitch, describing the property and setting forth that the "rent roll" of the stores was as follows:

1. Records and Music $3,000 to 6/ 1/56 2. Bookshop 4,200 to 6/ 1/57 3. Klix Cleaners (chain) 2,400 to 1/31/57 4. Rhea Nichols Shoes (chain) 4,200 to 1/31/57 5. Kiddy Fair 3,180 to 2/28/57 6. Longley Dresses 4,200 to 7/ 1/56 7. Grand Prix Foreign Motors 8,400 to 10/ 1/53, ___________ $9,000 to $29,580 10/ 1/54 
                

Proopis and the brokers drove to the property and looked at it from the outside. It was dark and rainy and the stores were closed, but Proopis says he could see that six of the stores were occupied and one was not occupied.

Proopis and the brokers then went to the home of defendant Deitch, who owned and controlled defendant Lodge Gate Forest, Inc., and who, in answer to the request of Proopis for all information about the property, said, among other things, that the empty store had been rented to Rosemary Crawford, an experienced woman competent to run a bookshop, who had a lease and had paid rent since July, but was then sick in Paris and had cabled him to prepare the store for her occupancy at the end of the month, that the tenants and occupants of the other stores were all good tenants doing good business and paid their rent promptly, and that there were no modifications of or concessions from the existing written leases.

At the conference at the office of the seller's attorney on October 4, 1952, which resulted in the signing of the written contract of purchase, the seller exhibited to the purchaser, and the purchaser initialed, seven leases by the seller to the following tenants on the following terms:

Morec Mail, Inc., 525 Plandome Road, for sale of records and musical instruments, five years, May 1, 1951, to April 30, 1956, $3,000 per year;

Rosemary Crawford, doing business as Crawford Book Shop, 527 Plandome Road, for bookshop, greeting cards, stationery and gifts, five years, July 1, 1952, to June 30, 1957, $4,200 per year Klix Cleaners, 529 Plandome Road, for dry cleaning, five years, February 1, 1952, to January 31, 1957, $2,400 per year;

Rhea Nichols Enterprises, Inc., 531 Plandome Road, for shoeshop, five years, February 1, 1952, to January 31, 1957, $4,200 per year;

Irene Hanrahan, 533 Plandome Road, children's and infants' wear and accessories, five years, March 1, 1952, to February 28, 1957, $3,180 per year;

Mildred E. Longley, doing business as Marion Flack Dress Shop, 535 Plandome Road, dress shop and women's apparel, five years, July 1, 1951, to June 30, 1956, $4,200 per year;

Charles J. P. Kotchan & Co., Inc., 537 Plandome Road, automobile showroom, three years, October 1, 1951, to September 30, 1954, $8,400 per year for first and second years, and $9,000 for third year.

At the closing of title on November 7, 1952, Deitch told Proopis that Rosemary Crawford had found she would be unable to open her bookshop because she had found that she would not be able to obtain a certain line of cards for sale therein, but that he had done Proopis a great favor by getting for him a first-class, highly responsible tenant, Furniture Factory Outlet Corp., which was owned by Mr. Simmons, the head of Simmons Furniture Co.; that a lease of the Crawford store to Furniture Factory Outlet Corp. had been signed but had been inadvertently left at his office and would be sent to him the next day; and Deitch thereupon produced the Crawford lease with a notation on the back signed by Deitch stating that a new lease on the same terms had been executed with Furniture Factory Outlet Corp. It was not until long after the closing, however, that the lease to Furniture Factory Outlet Corp. was actually supplied to the buyers.

Those representations were false in many material respects. The lease to Rhea Nichols Enterprises, Inc., had been accompanied by a letter fixing the rent thereunder at $250 per month for the first year instead of $350 per month, and at $300 per month for the second year instead of $350 per month. The lease to Mrs. Hanrahan had been accompanied by a letter fixing her rental at $200 per month up to February 26, 1953. Charles J. P. Kotchan & Co. had been given a letter waiving rent of their store for October, November and December, 1951, and reducing their rent for the first year of their lease to $600 per month. Rosemary Crawford had not paid any rent and it is at least doubtful if she had signed any lease or ever had any intention of opening a store. She was married to defendant Deitch on December 18, 1952, and it is at least a fair inference that she and Deitch were contemplating marriage at least as early as October 1, 1952. Deitch says that he was paying the rent for her. Furniture Factory Outlet Corp. was not owned by a Mr. Simmons who was the head of Simmons Furniture Co. It was in reality nothing but another name for defendant Deitch, and what was represented as a lease to it was not in reality a real lease to anyone. Klix Cleaners, also, had been given a concession of $25 per month from the rent stated in the written lease, and they actually had paid $175 per month instead of the $200 specified in the written lease. Mrs. Longley, tenant of No. 535 under lease calling for $4,200 per year, actually had paid no rent other than $150 paid as a deposit when she moved into the store.

Those representations as to the leases, tenants and rentals clearly were material and such as were intended and calculated and likely to influence a prospective purchaser and bring about a sale, and they clearly were relied upon; and the respects in which they were untrue are so material and substantial that their untruth constitutes an adequate ground for rescission (Thaw v. Schwartz, 303 N.Y. 678; Windsor Residences v. 201 East 18th St. Corp., 25 N. Y. S. 2d 329; Shapiro v. Kawon Realty Corp., 35 N. Y. S. 2d 613; Sedgefield Holding Co. v. 440 West End Ave. Corp., 228 App. Div. 138; Kreshover v. Berger, 135 App. Div. 27).

The written contract of sale contains the provision: "Purchaser represents to seller that purchaser has examined the premises * * * is fully satisfied with the physical condition thereof and that neither seller nor any agent or representative of seller has made any representation concerning the condition thereof or the leases or tenancies affecting the same or in regard to any other matter pertinent to this sale, except as expressly set forth in this agreement." But the contract also states that the sale is "subject to seven leases, all of which have been initialed by the purchaser. The seller shall have the right to rent any vacant store now or hereafter existing in said premises prior to the closing of title at rent not less than shown on the said leases and for terms not exceeding five years."

The representation that there were the seven leases above mentioned is thus expressly set forth in the written agreement, and it hence is unnecessary to consider what would be the effect of the clause first quoted in the preceding paragraph hereof if the contract had made no reference to the leases (see, however, Bridger v. Goldsmith, 143 N.Y. 424; Angerosa v. White Co., 248 App. Div. 425, affd. 275 N.Y. 524; Benedict Co. v. McKeage, 201 App. Div. 161; Mione Acres v. Chatmas Orchards, 277 App. Div. 425, and Jackson v. State of New York, 210 App. Div. 115, 119).

By instrument dated and acknowledged March 30, 1953, Lodge Gate Forest, Inc., assigned to defendant Deitch the $71,000 bond and mortgage executed by P. S. & A. Realties, Inc., to Lodge Gate Forest, Inc., at the time of the closing on November 7, 1952; and by another instrument likewise dated and acknowledged March 30, 1953, defendant Deitch assigned that bond and mortgage to Arcadia Knitting Mills, Inc. Inasmuch, however, as those assignments were made after the filing of a notice of the pendency of this action, they do not affect plaintiffs' rights (Civ. Prac. Act, § 121).

Because of that filing of a notice of pendency of action before those assignments were made, this case differs from Cachules v. 116 East 57 St. (N. Y. L. J., Dec. 21, 1953, p. 1517, col. 4),...