Steinhardt Group, Inc. v. Citicorp
| Decision Date | 30 May 2000 |
| Citation | 272 A.D.2d 255,708 N.Y.S.2d 91 |
| Parties | STEINHARDT GROUP, INC., et al., Appellants,<BR>v.<BR>CITICORP et al., Respondents. |
| Court | New York Supreme Court — Appellate Division |
In essence, plaintiffs and their subsidiaries (the plaintiffs in the companion appeal, Bristol Oaks v Citibank (272 AD2d 258 [decided herewith]) contracted to purchase from defendants certain low-grade assets consisting of $457 million in non-performing residential mortgage loans and parcels of residential realty repossessed through foreclosure proceedings. Anxious to remove these illiquid assets from their inventory, defendants settled on a strategy of "securitization," which involved the formation of limited partnerships that would market to third-party investors a series of non-recourse bonds secured by these assets. Plaintiffs were allegedly induced to invest $41.5 million in this program, conditioned on the understanding that the loans in question were all first mortgages, and that the real estate was free of liens, encumbrances and realty tax indebtedness. Defendants' valuation of the assets was to be verified by a reputable, independent accounting firm that would assure plaintiffs in writing as to the validity and accuracy of defendants' pricing methodology. The dispute centers on the ultimate valuation of these assets.
That methodology utilized a pricing model structured from Broker Price Opinions given by licensed real estate brokers, unique to each of the properties, based upon updated appraisals to be furnished by defendants. Once the bonds were sold to the public, there would be no recourse against the limited partnerships, and the bond purchaser's only security for repayment of the bonds would be the assets whose valuation is now at issue. Plaintiffs challenge the validity of the underlying appraisals. For example, they allege that the overvaluation of these assets was based on defendants' knowing use of outdated appraisals and the serious underestimation of property repair costs.
The first two causes of action allege that defendants, knowing that plaintiffs would rely on the property values in deciding whether to invest, misrepresented their stated intention to use the latest available appraisals, and concealed the fact that in many cases "origination" appraisals were offered instead, thus inflating the appraised value of the properties by $140 million. Defendants averred, inter alia, that plaintiffs were estopped from making such a challenge by reason of their own sophistication and opportunity to evaluate the assets before purchase. To the extent that defendants rest on plaintiffs' lack of due diligence, this does not undermine the allegations in the complaint, and can be asserted affirmatively in defendants' answer.
A claim for fraud is barred by the existence of a specific disclaimer and failure to exercise reasonable diligence (Danann Realty Corp. v Harris, 5 NY2d 317). The IAS Court attributed to plaintiffs a disclaimer in the sale agreement that the buyer does not rely on any representations by the seller as to "value, marketability, condition or future performance" of the...
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Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC
...is alleged to have involved deliberate concealment of facts known only to Magnetar and Defendants. Cf. Steinhardt Grp. Inc. v. Citicorp, 272 A.D.2d 255, 708 N.Y.S.2d 91, 93 (1st Dep't).Lack of reasonable reliance may ultimately prove to be a successful defense. It does not, however, warrant......
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...matter ( see e.g. Silver Oak Capital L.L.C. v. UBS AG, 82 A.D.3d 666, 667, 920 N.Y.S.2d 325 [1st Dept.2012];Steinhardt Group v. Citicorp, 272 A.D.2d 255, 256, 708 N.Y.S.2d 91). In other words, in view of the disclaimer, no representations exist and that being so, there can be no reliance ( ......
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...Hence, to reiterate, the facts allegedly misrepresented were not peculiarly within UBS's knowledge ( cf. Steinhardt Group v. Citicorp, 272 A.D.2d 255, 257, 708 N.Y.S.2d 91 [2000] ). And the high degree of leverage in the position HSH assumed as holder of the NS4 notes, while obvious on the ......
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