Revell v. Guido

• Decision Date: 15 January 2015
• Citation: 124 A.D.3d 1006,2 N.Y.S.3d 252,2015 N.Y. Slip Op. 00411
• Parties: Danny REVELL et al., Respondents, v. Joseph J. GUIDO et al., Appellants. (And a Third–Party Action.).
• Court: New York Supreme Court — Appellate Division

124 A.D.3d 1006

2 N.Y.S.3d 252

2015 N.Y. Slip Op. 00411

Danny REVELL et al., Respondents

v. Joseph J. GUIDO et al., Appellants.(And a Third–Party Action.).

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

Jan. 15, 2015.

Powers & Santola, LLP, Albany (Michael J. Hutter of counsel) and Law Firm of Sheila Galvin, Delmar (Sheila Galvin of counsel), for appellants.

Carter, Conboy, Case, Blackmore, Maloney & Laird, PC, Albany (Kathleen McCaffrey Baynes of counsel), for respondents.

Before: LAHTINEN, J.P., McCARTHY, ROSE, EGAN JR. and CLARK, JJ.

Opinion

EGAN JR., J.

Appeals (1) from a judgment of the Supreme Court (Crowell, J.), entered August 8, 2013 in Saratoga County, upon a verdict rendered in favor of plaintiffs, and (2) from an order of said court, entered September 20, 2013 in Saratoga County, which denied defendants' motion to, among other things, set aside the verdict.

In April 2002, defendant Joseph J. Guido, the sole member of defendant Real Property Solutions, LLC (hereinafter RPS), purchased certain commercial property located on Radar Road in the Town of Stillwater, Saratoga County for $95,000. The property in question consisted of a parcel of land improved by nine single-family ranch-style homes. In conjunction therewith, Guido formed a trust to hold title to the property, and RPS was named as the trustee thereof. At the time of purchase, the property did not have a functioning waste disposal system, and defendants thereafter retained third-party defendant, Harold Berger, an engineer, to design a septic system for the property, which was installed at some point in 2003.

In September 2003, defendants were advised of outstanding code violations with respect to the property, which included the need for Berger to tender a letter “signing off” on the installation of the 2003 septic system. Thereafter, in January 2004, the Environmental Protection Agency notified Guido that testing of the water supply at the property uncovered the possible presence of diesel fuel in samples acquired from four of the residences and, beginning in May 2004, defendants were informed by the Town of Stillwater and the Department of Environmental Conservation (hereinafter DEC) that partially treated sewage had been discovered on the property, requiring immediate remediation of the property's septic system. In response, Guido entered into a consent order with DEC, paid a $1,000 fine and enlisted Berger to design a replacement septic system. The replacement system, which incorporated two 2,000–gallon septic tanks that were part of the original system installed in 2003, was operational as of December 31, 2004. In January 2005, Berger verified that the work was—with two noted exceptions—completed “in accordance with the approved plans,” but indicated that he was unable to issue his “final certification” until certain flow measurements could be performed—presumably in warmer weather. Berger testified that these post-winter testing and assessments were not completed, and there is no indication that a final certification was issued.

Thereafter, in or about June 2005, defendants listed the property for sale for $595,000. In conjunction therewith, defendants' realtor prepared a property information sheet—to be given to prospective buyers—bearing the notation, “Septic system totally new—le[a]ch field totally replaced—new 5000 gallon holding tank,” as well as the general qualification that “all information [was] deemed reliable but not guaranteed.” Subsequently, in September 2005, plaintiffs and the trust established by Guido entered into a purchase and sale contract for the property. The contract, which reflected a purchase price of $545,000 and indicated that the buildings on the premises would be sold “as is,” also contained a waivable septic system contingency. Plaintiffs ultimately did not avail themselves of this contingency—a decision purportedly based, in part, upon plaintiffs' belief that the property contained a new septic system. The contract also contained a mortgage contingency and, as a condition precedent to funding, plaintiffs' bank required the completion of an environmental questionnaire. In completing that questionnaire, Guido, among other things, denied any knowledge of past environmental violations or problems with the property. While the contract was pending, Berger sent a letter to Guido raising various concerns regarding the septic system on the property, but Guido did not advise plaintiffs of these concerns. The closing occurred on November 23, 2005 and, within one month, the septic system failed, requiring plaintiffs to undertake substantial remediation efforts at their own expense. Ultimately, the lender foreclosed on the property and plaintiff Danny Revell declared bankruptcy.

Plaintiffs thereafter commenced this action against defendants for fraudulent misrepresentation. Following joinder of issue and defendants' commencement of a third-party action against Berger, plaintiffs moved for partial summary judgment and defendants cross-moved for similar relief. Supreme Court (Ferradino, J.), among other things, granted plaintiff's motion for partial summary judgment on the issue of liability. Upon appeal, this Court reversed that portion of Supreme Court's order (101 A.D.3d 1454, 956 N.Y.S.2d 343 [2012] ).¹ At the conclusion of the lengthy trial that followed, the jury returned a verdict in favor of plaintiffs and awarded damages in the amount of $353,800.46. Judgment in the amount of $598,821.38, including interest and costs, thereafter was entered. Supreme Court (Crowell, J.) denied defendants' subsequent motion to set aside the verdict or, in the alternative, for a new trial, prompting these appeals.²

We affirm. Initially, we reject defendants' assertion that Supreme Court's various evidentiary rulings operated to deprive them of a fair trial. Without belaboring the point, suffice it to say that “the ‘scope and manner [of cross-examination] are [matters] left to the sound discretion of the trial court’ ” (Matter of Dustin JJ. [Clyde KK.], 114 A.D.3d 1050, 1052, 981 N.Y.S.2d 177 [2014], lv. denied 23 N.Y.3d 901, 2014 WL 1705650 [2014], quoting Salm v. Moses, 13 N.Y.3d 816, 817, 890 N.Y.S.2d 385, 918 N.E.2d 897 [2009] ; see Siemucha v. Garrison, 111 A.D.3d 1398, 1399–1400, 975 N.Y.S.2d 518 [2013] ) and, absent an abuse of such discretion, the trial court's determination in this regard is beyond this Court's review (see Salm v. Moses 13 N.Y.3d at 817, 890 N.Y.S.2d 385, 918 N.E.2d 897 ). Although defendants contend that Supreme Court improperly curtailed their questioning of Revell, the trial transcript reveals that defendants were able to conduct an effective—and extensive—cross-examination of him and, in so doing, challenge his credibility and advance their own defense (see Neissel v. Rensselaer Polytechnic Inst., 54 A.D.3d 446, 449–450, 863 N.Y.S.2d 128 [2008], lv. denied 11 N.Y.3d 716, 874 N.Y.S.2d 5, 902 N.E.2d 439 [2009] ).

Defendants next contend that Supreme Court erred in permitting Revell to testify as to a conversation he had with Berger, wherein Berger indicated that he had discussed the problems with the septic system with Guido. Although we agree that Berger's statements in this regard did not qualify as party admissions and, hence, constituted inadmissible hearsay, other evidence in the record—including Guido's own testimony—established his awareness of problems with the septic system. We therefore deem the admission of Berger's statements to be harmless error (cf. Warner v. Village of Chatham, 194 A.D.2d 980, 981–982, 598 N.Y.S.2d 863 [1993] ).

To the extent that defendants contend that Supreme Court improperly permitted testimony as to certain losses sustained by plaintiffs, the case law makes clear that where, as here, a cause of action for fraud has been asserted, “[t]he true measure of damage is indemnity for the actual pecuniary loss sustained as the direct result of the wrong or what is known as the ‘out-of-pocket’ rule.... Damages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained. Under the out-of-pocket rule, there can be no recovery of profits which would have been realized in the absence of fraud” (Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370 [1996] [internal quotation marks and citations omitted]; see Route 217, LLC v. Greer, 119 A.D.3d 1018, 1019–1020, 990 N.Y.S.2d 276 [2014] ; Howard S. v. Lillian S., 62 A.D.3d 187, 193, 876 N.Y.S.2d 351 [2009], affd. 14 N.Y.3d 431, 902 N.Y.S.2d 17, 928 N.E.2d 399 [2010] ).

Here, the record indeed reflects that both Revell and his accountant testified as to, among other things, the lost rents or lost profits incurred in connection with the property. The record also reveals, however, that the testimony regarding lost rents was stricken from the record, that the jury was specifically instructed to disregard the accountant's testimony in this regard and that any mention of lost profits was removed from the verdict sheet. As a result, we are satisfied that Supreme Court's remedial efforts and curative instructions “were sufficient to alleviate the prejudicial effect of the error” (Dennis v. Capital Dist. Transp. Auth., 274 A.D.2d 802, 803, 711 N.Y.S.2d 836 [2000] ; see Valentine v. Lopez, 283 A.D.2d 739, 742, 725 N.Y.S.2d 714 [2001] ).

Finally, we find no merit to defendants' claim that Supreme Court failed to preside over the trial in a fair and impartial manner. Contrary to defendants' selective reading of the trial transcript, the commentary and colloquies “cited by [defendants] when viewed in their proper context reveal nothing more than an evenhanded attempt towards focusing the proceedings on the relevant issues and clarifying facts material to the case in order to expedite the trial” (Heilbrunn v. Town of Woodstock, 50 A.D.3d 1377, 1380, 857 N.Y.S.2d 279 [2008] [internal quotation marks and citation omitted] ). Defend...