This was originally posted on the SGR Blog.
Did Buyer Have Cognizable Fraud and Other Claims Against Sellers and Brokers?
Michael Vella purchased real property located at 2 Dellworth Drive, Yorktown Heights, New York, from Michael E. Straub and Erin L. Cummings Straub pursuant to a contract of sale dated July 9, 2018. The property was located next to several acres of state owned land.
The Straubs retained Coldwell Banker Real Estate LLC as their selling broker. Karen O’Connor executed the exclusive right to sell agreement on behalf of Coldwell.
Vella retained Michael Kahns of Berkshire Hathaway Home Services Hudson Valley as his broker in connection with the purchase of the property.
The listing for the sale of the home, which was viewed by Vella on Zillow, described the property as “[a] great home that is situated next to 750 acres of state owned land at the end of a quiet road! …Enjoy the outdoors and barbecues in the backyard!” After viewing the listing, Vella visited the property on five separate occasions in June and July 2018 prior to making an offer. Vella alleged that he did not hear any noise from the adjacent state property during those visits.
After closing, Vella moved into the home on August 24, 2018. On September 8, 2018, he became aware of noise from the adjacent state property caused by all-terrain vehicles. It was then Vella learned that the state property was regularly used by ATVs at all times of day and night. Vella contacted the State Police about the noise, but the ATV activity remained ongoing.
Vella sued Coldwell, O’Connor as agent for Coldwell, Berkshire Hathaway, Kahns as agent for Berkshire Hathaway, and the Straubs alleging that they negligently and fraudulently misrepresented that the property was quiet. The complaint asserted that Vella was interested in the property based upon the listing describing the property as “quiet” and that he would be able to enjoy the outdoors. The complaint alleged that Vella would not have purchased the property had he been made aware of the noise from the ATV activity. Vella alleged that the Straubs and brokers were aware or had reason to be aware of the noise and that the failure to disclose the noise was a material misrepresentation. The complaint asserted causes of action against Coldwell and O’Connor for negligent misrepresentation, fraudulent misrepresentation, and fraud.
Coldwell and O’Connor moved for summary judgment dismissing the complaint. They argued that the causes of action for fraud and fraudulent misrepresentation should be dismissed because any noise emanating from the state property could have been discovered by Vella’s own due diligence. They also argued that the negligent misrepresentation cause of action should be dismissed as they had no duty to disclose the noise. Coldwell and O’Connor also sought sanctions against Vella, arguing that the action was frivolous.
In support of the motion, O’Connor attested that she was the sales person representing the Straubs on behalf of Coldwell for the sale of the property. O’Connor executed the exclusive right to sell agreement as an agent of Coldwell. She stated that she described the premises as “quiet” on the listing “because the seller described the subject premises as ‘quiet’ on a ‘quiet street’ and ‘next to state property.’” During the course of her representation, O’Connor visited the property twelve to fifteen times and never heard any noise. O’Connor stated that neither she nor anyone else from Coldwell restricted Vella from visiting the property prior to closing or did anything to conceal any alleged noise or restrict Vella from ascertaining information related to the property.
Vella opposed the motion and cross-moved to amend the complaint to add a cause of action for private nuisance. Vella argued that, since the facts already contained in the original complaint asserted a claim for public nuisance, the Straub’s and the brokers were unable to claim any surprise by the amendment.
Vella argued that numerous issues of fact existed and the motion for summary judgment was premature—because, despite serving various notices for discovery and inspection, no responses to such demands had been received.
Vella argued that this was not a case of caveat emptor but of negligent and fraudulent misrepresentation, and is conduct was not frivolous and sanctions were not warranted. Vella attested that the complaint as filed stated what he believed occurred and that he was seeking discovery that remained outstanding.
Coldwell and O’Connor argued that Vella should not be entitled to discovery on the mere hope of ascertaining facts to support his frivolous claims, and Vella’s proposed amendments were devoid of merit and palpably insufficient.
Berkshire Hathaway and Michael Kahns opposed Vella’s cross-motion to amend, arguing that a cause of action for private nuisance was devoid of merit because Vella did not contend that they invaded his property.
The essential elements of a cause of action sounding in fraud are a misrepresentation or a material omission of fact which was false and known to be false, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation, or material omission and injury.
The Court found that Coldwell and O’Connor failed to demonstrate entitlement to summary judgment dismissing the complaint. The listing for the property, which was prepared by O’Connor on behalf of Coldwell and attached to the complaint, described the property as “quiet.” In viewing the evidence in the light most favorable to Vella, issues of fact existed including, but not limited to, whether the alleged misrepresentation of the property as “quiet” was false, known to be false, and made for the purpose of inducing Vella to rely upon it. It could not be said that Vella’s reliance on the alleged misrepresentation was unreasonable as a matter of law.
In any event, Vella demonstrated that the motion was premature. A party who contends that a summary judgment motion is premature is required to demonstrate that discovery might lead to relevant evidence or the facts essential to justify opposition to the motion were exclusively within the knowledge and control of the movant. Vella met that burden, and the Court declined to grant the request for sanctions.
As a general rule, leave to amend a pleading should be freely granted in the absence of prejudice or surprise to the opposing party and where the amendment is not palpably insufficient or patently devoid of merit.
A party seeking leave to amend a pleading need not make an evidentiary showing of merit, and leave to amend will be granted unless insufficiency or lack of merit is clear and free from doubt. The decision whether to grant leave to amend a complaint was committed to the sound discretion of the Court.
There was no prejudice from the proposed amendment of the complaint, particularly since no discovery had taken place. The Court found that the proposed amendment was not clearly lacking in merit. The Straub’s and the brokers motions for summary judgment were denied. Vella’s motion to amend his complaint was granted.