Staff v. Lido Dunes, Inc.

• Decision Date: 16 August 1965
• Citation: 47 Misc.2d 322,262 N.Y.S.2d 544
• Parties: Sidney STAFF, Plaintiff, v. LIDO DUNES, INC., Morris Tepperman and Matthew M. Russo, Defendants.
• Court: New York Supreme Court

Page 544

262 N.Y.S.2d 544

47 Misc.2d 322

Sidney STAFF, Plaintiff, v. LIDO DUNES, INC., Morris Tepperman and Matthew M. Russo, Defendants.

Supreme Court, Trial Term, Nassau County, Part VII.

Aug. 16, 1965.

William T. Stevens, Freeport, for plaintiff.

Hein, Bradie, Waters & Klein, Far Rockaway, for defendant Lido Dunes; Philip Waters, Far Rockaway, of counsel.

Kenneth A. River, Far Rockaway, for defendants Tepperman and Russo; Philip Waters, Far Rockaway, of counsel.

BERNARD S. MEYER, Justice.

In April, 1961 plaintiff contracted to purchase from Lido Dunes, Inc. a house which was then in process of erection. On July 10, 1961 plaintiff and his wife took title to the house. Having discovered substantial defects and some omissions in the construction of the house, plaintiff brought this action against the corporation, its president Russo, and one Morris Tepperman. His complaint sets forth six causes of action: the first is based on misrepresentations by Russo and Tepperman that the house, to the extent then completed, had been constructed, and would be completed, in good and workmanlike manner and in conformity with the Building Code of the Town of Hempstead; the second is against Russo and Tepperman for inducing the corporation to breach its contract; the third is against the corporation for breach of contract; the fourth is against the corporation for the same misrepresentations referred to in the first; the fifth is against the corporation for fraudulent concealment of latent defects; the sixth is against the corporation for breach of implied warranty. Defendants plead an affirmative defense of merger and also counterclaim for extras in the amount of $2,849. After trial before the court without a jury, judgment is, for the reasons hereafter stated, awarded as follows: the first, second, fourth, fifth and sixth causes of action are dismissed; plaintiff is awarded $3,375 on the third cause of action and defendant is awarded $175 on the counterclaim and the Clerk is directed to enter judgment in favor of plaintiff for the net amount of $3,200 with interest from October 12, 1962 (the date the action was commenced) and costs and disbursements of the action.

The first, second, fourth and fifth causes of action are dismissed for failure of proof. As to the first and fourth causes, there is no showing that either Russo or Tepperman or anyone on behalf of the corporation made the representations claimed. As to the second, there is no proof that either Russo or Tepperman induced the corporation to breach its contract, or that Russo, who was president of the corporation, acted with a motive for personal gain as distinguished from gain to the corporation, Potter v. Minskoff, 2 A.D.2d 513, 156 N.Y.S.2d 872, aff'd 4 N.Y.2d 695, 171 N.Y.S.2d 88, 148 N.E.2d 303; 32 N.Y.Jur. 191, Interference § 32.

The predicate of the fifth cause of action is fraudulent concealment. If it be assumed that failure to disclose facts known to the seller but unknown to the buyer may constitute an actionable fraud, Greenberg v. Glickman, Sup., 50 N.Y.S.2d 489, mod. and aff'd 268 App.Div. 882, 51 N.Y.S.2d 96, app. denied 268 App.Div. 987, 51 N.Y.S.2d 861; cf. Perin v. Mardine Realty Co., Inc., 5 A.D.2d 685, 168 N.Y.S.2d 647, aff'd 6 N.Y.2d 920, 190 N.Y.S.2d 995, 161 N.E.2d 210 see Annotation: 80 A.L.R.2d 1453, nonetheless, to sustain the action there must be actual knowledge on the seller's part, Jackson v. Goad, 73 N.M. 19, 385 P.2d 279. In the present case the court finds that Mr. Russo was negligent in not discovering the defects in the piers and footings, but does not find that he or the corporation in fact had the required knowledge nor that his negligence was so gross as to warrant the inference of fraud, see Ultramares Corp. v. Touche, 255 N.Y. 170, 186, 174 N.E. 441, 447, 74 A.L.R. 1139; Mohawk Overall Co. v. Brown, 163 App.Div. 157, 148 N.Y.S. 369. It is, therefore, unnecessary to consider the defendant's contention that plaintiff's damage proof does not meet that required in a fraud case, see Luciano v. Oliver, 15 A.D.2d 982, 225 N.Y.S.2d 729; Terris v. Cummiskey, 11 A.D.2d 259, 203 N.Y.S.2d 445; but see Carpenter v. Donohoe, 388 P.2d 399 (Colo.).

The third cause of action is predicated on the contract obligation (p 3) 'to erect and complete a one family dwelling substantially similar to the Model House Type Victorian on exhibit by the Seller, which dwelling shall be constructed in accordance with the requirements as to materials and workmanship of the Municipality wherein it is * * * located' and on a set of plans which the court finds was furnished to plaintiff at the time the contract was signed. The only reference in the contract to plans relates to FHA or VA financed construction, which was not the case with plaintiff's house. The plans are, nevertheless, to be considered since the court finds that plaintiff's house was the first of its type erected and the plans are, therefore, necessary to explain the meaning of 'Model House Type Victorian'. Defendant contends that its contract obligation was fulfilled and that, even if not, plaintiff cannot recover because of Paragraph 24 of the contract. That provision reads: 'Anything herein to the contrary notwithstanding, it is specifically understood and agreed by the parties hereto that the acceptance and delivery of the deed of conveyance at the time of the closing of title hereunder, without specific written agreement which by its terms shall survive such closing of title, shall be deemed to constitute full compliance by the Seller with the terms, covenants and conditions of this contract on its part to be performed. It is further agreed that none of the terms hereof except those specifically made to survive title closing shall survive such title closing.'

Whether obligations of the purchase contract are merged in the deed is generally a matter of the intention of the parties, Disbrow v. Harris, 122 N.Y. 362, 25 N.E. 356; Morris v. Whitcher, 20 N.Y. 41; Siebros Finance Corporation v. Kirman, 232 App.Div. 375, 249 N.Y.S. 497; Lambert v. Krum, 121 Misc. 170, 200 N.Y.S. 452; 15 N.Y.Jur. 147, Deeds § 72; Friedman, Contracts and Conveyances of Real Property, § 7.2; Comment: Merger of Land Contract in Deed, 25 Albany L.R. 122; Annotation: 38 A.L.R.2d 1310. For this reason contract provisions which can only be performed after conveyance of title are held not merged, Industrial Development Foundation of Auburn, New York v. United States Hoffman Mach. Corp., 11 Misc.2d 625, 171 N.Y.S.2d 562, aff'd 8 A.D.2d 579, 183 N.Y.S.2d 1011; Bellanca v. Jubiler, Mun.Ct., 62 N.Y.S.2d 874, n. o. r. Likewise undertakings collateral to the conveyance of the real estate, such as for the construction of a house or the furnishing of personal property, are not merged in the deed, Meyer Woodward-Brown Realty Co., 209 App.Div. 548, 205 N.Y.S. 114, aff'd 239 N.Y. 613, 147 N.E. 218; Price v. Woodward-Brown Realty Co., Sup., 190 N.Y.S. 561, n. o. r., aff'd 201 App.Div. 837, 192 N.Y.S. 947; Appell v. Comstock & Ludlam, Inc., Sup., 118 N.Y.S.2d 634, n. o. r., aff'd 1 A.D.2d 1018, 152 N.Y.S.2d 421; Ferro v. Miller, 41 Misc.2d 331, 246 N.Y.S.2d 149; Terry v. Raif, 205 Misc. 1059, 130 N.Y.S.2d 159; Russ v. Lakeview Development, City Ct., 133 N.Y.S.2d 641, n. o. r.; Kilbane v. Scarsdale Downs Homes, Sup., 132 N.Y.S.2d 234, n. o. r.; Greenfield v. Liberty Const. Corp., Sup., 81 N.Y.S.2d 550, n. o. r.

Plaintiff argues that it is the foregoing rules rather than Paragraph 24 which govern the claim on the contract. The argument is predicated on Cohen v. Polera & Sons Construction Corp., N.Y.L.J. 9/30/58, p. 14, col. 4, which construed the quoted contract provision as simply embodying the common law doctrine of merger in the contract and held that it did not merge collateral agreements and could not be construed as a waiver or advance release of improper workmanship which could not be discovered until long after the contract was executed. That construction ignores the fact that the 'collateral' agreement to construct the house is one of the 'terms, covenants and conditions' of the contract to be performed by the Seller. Under Paragraph 24, delivery of the deed constitutes full compliance with the terms, covenants and conditions of the contract and moreover 'none of the terms hereof except those specifically made to survive title closing shall survive such title closing' (emphasis supplied). Evident from the language of the provision is the intention to merge not only the agreement to convey but also the collateral agreement to construct, and unless contrary to public policy that intention must be given effect.

To the extent that construction defects are discoverable at the time title closes public policy is not violated by enforcement of the contract provision, because the purchaser can protect his interests by either demanding a 'specific written agreement' covering the defect or refusing to close until it has been corrected. With respect to latent defects, however, the provision if enforced is an absolute bar to action with respect to defects which by hypothesis are unknown at the time barred. While limitations may run from breach rather than discovery, Citizens Utilities Co. v. Amer. Locomotive Co., 11 N.Y.2d 409, 230 N.Y.S.2d 194, 184 N.E.2d 171, the construction provisions of the contract are not breached until the defectively constructed residence is conveyed to the purchaser. Thus, with respect to latent defects, the cause of action is extinguished at the moment it is created. It has long been the law of New York that while limitations may be 'prescribed by written agreement', CPLR 201, an unreasonably short limitation period is against public policy and unenforceable, Planet Constr. Corp. v. Board of Educ. of City of New York, 7 N.Y.2d 381, 198 N.Y.S.2d 68, 165 N.E.2d 758, 81 A.L.R.2d 1035; Sapinkopf v. Cunard Steamship Co., 254 N.Y. 111, 172 N.E. 259; Matter of Brown & Guenther v. North Queensview...