- Let The Buyer Beware!
- An Additional 3-Day Demand For Rent Not Required After Proceeding To Court
- Female NBA Employee Sues
Let The Buyer Beware!
Recently in Verma v. Vanegas a Court relied upon the time honored principle of caveat emptor in dismissing an action by potential buyers against the sellers for the return of the down payment.
Generally, caveat emptor, a Latin term for “let the buyer beware,” is the contract law principle that controls the sale of real property. The phrase arises from the fact that buyers typically have less information about the property they are purchasing, while the seller has more information. The quality of this situation is known as “information asymmetry.” Defects in the property may be hidden from the buyer, and only known to the seller.
New York adheres to this doctrine which relieves the seller from liability for failing to disclose information about a property to a buyer when the two parties deal at arms’ length. A seller may only be held liable if there is some conduct by the seller which constitutes the active concealment of conditions or facts which would not otherwise be readily discovered by a buyer upon reasonable examination. For concealment to be actionable as fraud, the defrauded buyer must show that the seller “thwarted” the due diligence efforts made by the buyer. Otherwise the seller will not be held responsible under the doctrine of caveat emptor.
Here, plaintiffs, potential buyers of a building, sought to recover their deposit, and attorney fees, alleging breach of contract and fraud. In their complaint, they claimed the sellers specifically told them they would be able to evict the current tenants of the premises upon expiration of their existing leases, but “willfully and fraudulently misrepresented,” or “failed to disclose” that the property was subject to the Rent Stabilization Law (“RSL”).
Upon the sellers’ motion to dismiss the complaint, plaintiffs argued they never would have entered into the contract to purchase the property had they known it was covered under the RSL. However, the Court stated “New York adheres to the doctrine of caveat emptor” and the “seller’s mere silence, without an affirmative act or deception, is not actionable as fraud. To maintain a cause of action to recover damages for active concealment, the plaintiff must show, in effect, that the seller or the seller’s agents thwarted the plaintiff’s efforts to fulfill his [or her] responsibilities fixed by the doctrine of caveat emptor. Where the facts represented are not matters peculiarly within the party’s knowledge, and the other party has the means available to him of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentations.”
Here, the Court reasoned that although it was alleged that the “defendants allegedly did not respond truthfully when questioned by plaintiffs about the rent stabilization status of the current tenants or leases, such status was a matter of public record, as established by the Registration Rent Rolls and copies of the existing leases annexed to the Additional Rider to the Contract submitted as documentary evidence in support of their motion, and was not information exclusively within the knowledge of defendants. Defendants thus established that they did not actively conceal such status from plaintiffs or otherwise thwart them from fulfilling their responsibilities in due diligence.”
The Court further reasoned that “to state a cause of action for fraud, the following elements must be alleged, with sufficient particularity: representation of a material existing fact, falsity, scienter, deception and injury.” The Court concluded that the plaintiffs failed to detail not only the specific misrepresentations that were allegedly made, but when and by whom as well.” The complaint’s “conclusory allegations of fraud against defendants based ‘upon information and belief’ are insufficient to permit a reasonable inference of the alleged conduct. Any reliance on alleged misrepresentations by defendants would be unreasonable, as due diligence would have revealed the truth of the matter.”
The Court dismissed the case.
An Additional 3-Day Demand For Rent Not Required After Proceeding To Court
In 36 Main Realty Corp. v. Wang Law Office, PLLC, a tenant appealed from a final judgment awarding its landlord possession and over $7,000 in a commercial nonpayment summary proceeding. The proceeding was premised on tenant’s failure to pay rent and additional rent for January 2013. On appeal, the tenant argued, among other things, it was improper for Civil Court to permit amendment of the petition to include May rent as no demand for it was made. The Appellate Court rejected the argument finding no basis to require landlord to make an additional rent demand following institution of a nonpayment proceeding.
In New York, when a commercial tenant fails to pay the rent the landlord usually has two options, depending upon the lease terms. It may either serve a three day demand for rent under the Real Property Actions and Proceedings Law, and if the tenant fails to pay within three days, it may commence a nonpayment summary proceeding, or the landlord may serve a notice to cure under the provisions of a lease which allows it to terminate the lease in the event the breach is not timely cured. In the latter case, the landlord may then commence a holdover summary proceeding.
Here, the landlord served a three day demand for rent as a prerequisite to a nonpayment summary proceeding, and upon the tenant’s failure to pay, commenced the proceeding premised on tenant’s failure to pay rent and additional rent for January 2013. The tenant defended the proceeding on the ground that it had been constructively evicted from the subject premises. At a non-jury trial, the Civil Court granted the landlord’s application to amend the petition to include rent for May 2013 (it was not clear why the application did not also include February, March and April). After the trial, the Court awarded the landlord possession and the sum of $7,376.328, which included May rent, finding that “obligations to make repairs within the subject premises were the obligation of the respondent, which petitioner assumed without waiver of its right to collect rents.” The Court further found that the necessary repairs had been timely made after notice, rejecting the constructive eviction claim.
One of the tenant’s arguments on appeal was that it was improper for the Court to allow the amendment of the petition to include May rent, as no three day demand for the May rent had been made. The Court rejected this argument finding “no basis in the law to require that a landlord make an additional rent demand following the institution of a nonpayment proceeding in order to amend a petition with leave of court at trial to allow for the recovery of rent that accrued subsequent to the commencement of the proceeding.”
The Court reasoned that the “the primary ‘purpose of a nonpayment summary proceeding is to recover possession of the subject premises.’ RPAPL 711 (2), the statutory source of the right to maintain a summary proceeding to recover possession based on the nonpayment of rent, requires, as a condition precedent to the commencement of the proceeding, that a demand for the rent have been made or a three days’ notice served, and it must be alleged in the petition that a proper demand for rent has been made or a three days’ notice served. However, once the proceeding has been properly commenced, it is the petition which alleges the relevant facts upon which the proceeding is based and sets forth the relief sought,” and “leave to amend [a petition] ‘shall be freely given’ absent prejudice or surprise resulting directly from the delay.”
The Court concluded that it was undisputed that the proceeding was predicated on a proper demand for January rent as required by RPAPL 711 (2), thereby satisfying the condition precedent to the maintenance of the proceeding and that the tenant did not demonstrate to the Civil Court that landlord’s requested amendment to include May rent was prejudicial or a surprise.
Female NBA Employee Sues
In litigation, determining who to sue, and who not to sue is often not as easy as one might think, particularly in employment discrimination contexts. Sometimes, a case can be years old before a plaintiff finally determines that anther party should be added as a defendant. That is exactly what happened in Hardwick v. Auriemma, where a former female director in the Security Department of the National Basketball Association (“NBA”), alleged that the former head coach of the USA Women’s National Team, Geno Auriemma, discriminated against her by relieving her of her prior duties and work assignments, among other things, after she spurned his unwanted sexual advances.
In addition to Auriemma, the plaintiff named two other NBA employees as defendants, as well as the NBA itself. Against the NBA, the plaintiff alleged that it maintains a discriminatory workplace where she was continually denied promotions based on her gender, and assigned to perform duties that would afford her less opportunity for advancement, than similarly situated male employees.
Now, over two years after the commencement of this action, plaintiff sought to amend her complaint to add former NBA Commissioner David Stern as a defendant. Plaintiff also sought to include an additional charge of “constructive discharge” to her complaint, as she resigned from her position on February 17, 2014. To state a claim for constructive discharge, a plaintiff must allege facts showing that a defendant “deliberately created working conditions so intolerable, difficult or unpleasant that a reasonable person would have felt compelled to resign.” Both Stern and the other defendants argued against such a late amendment, but the Court allowed it.
“Motions for leave to amend pleadings should be freely granted, absent prejudice or surprise resulting therefrom, unless the proposed amendment is palpably insufficient or patently devoid of merit.” On a motion for leave to amend, the movant is not required to establish the merit of the proposed new allegations “but simply show that the proffered amendment is not palpably insufficient or clearly devoid of merit.”
With respect to adding Stern as a defendant, the Court noted that the defendants failed to identify any prejudice they would face — absent the two-year delay itself — and that it is well-settled that “mere lateness is not a barrier to the amendment. It must be lateness coupled with significant prejudice to the other side.”
With respect to the addition of the constructive discharge claim, the Court also ruled in plaintiff’s favor, noting that the amended complaint contained several significant new allegations demonstrating merit, including that defendants:
(1) issued a revised dress code directed at plaintiff; (2) isolated plaintiff from her workplace, kept her out of meetings and treated her differently than her counterparts; (3) denied plaintiff a second round interview for the position of Vice President, Security Operations and Strategy after she was told by the Vice President of Recruitment that she had the requisite experience and skill set for the position and would be recommenced for the next round of interviews; (4) reassigned all of her NBA teams to other managers in an attempt to disrupt her long-standing relationships with these teams and their players; (5) ignored her complaints that her work conditions had further deteriorated and that her direct supervisor, defendant James Cawley, was continuing to engage in action designed to retaliate against her; and (6) told her, in a very antagonistic way, “You are not being promoted, you will not receive an increase, and you will not receive a bonus!” The court finds that these allegations are sufficient to establish that plaintiff’s constructive discharge claim is not clearly devoid of merit.
Thus, the amendment was allowed in its entirety.