Opinion
113934/07.
Decided June 1, 2009.
Motion sequence numbers 001 and 002 are hereby consolidated for disposition.
Suzanne Kelley, the buyer of a cooperative apartment in the West Village, brings this action alleging that both the sellers and the broker knowingly made false representations about excessive noise in that apartment, emanating from an adjacent nightclub, the PM Lounge, which is located in New York's trendy "Meat Market" district. Plaintiff further maintains that defendants actively prevented her from determining that the apartment was virtually uninhabitable due to this noise. However, as a result of the doctrine of caveat emptor, this lawsuit must be dismissed, even in the light of plaintiff's credible allegations regarding the sellers and broker's numerous and troubling attempts to mislead her with respect to the noise issue.
Defendants The Corcoran Group, Inc. and Michael A. Jones (collectively, the broker) and the sellers of the apartment at issue, defendants Jonathan R. Larkin and Christina D. Sfakianos, separately move, pursuant to CPLR 3211 (a) (7), to dismiss the complaint for failure to state a cause of action. Larkin and Sfakianos also move, under CPLR 3211 (a) (1), arguing that the complaint must be dismissed on the basis of documentary evidence, to wit, the Contract of Sale and a report prepared by an independent acoustic expert, which plaintiff admittedly received prior to signing the Contract of Sale, and which reported an unreasonable and illegal level of noise in the subject apartment.
The complaint alleges that defendants Larkin and Sfakianos purchased Unit 1-A in the cooperative building located at 838 Greenwich Street, New York, New York, but quickly put the apartment back on the market in early 2005. Plaintiff alleges, upon information and belief, that Larkin and Sfakianos wanted to sell the apartment because of excessive music and noise emanating into the apartment from the PM Lounge, which shared a party wall with a bedroom of the apartment, and that Larkin and Sfakianos had great difficulty in selling the apartment due to this problem.
In early 2006, plaintiff and her husband, non-party Ross Henderson, toured the apartment as prospective purchasers at the broker's suggestion. When plaintiff asked about noise, she was told by the broker that, while there was noise from the street and neighborhood, the apartment was in the back of the building and, thus, it was quieter than the front of the building. The broker advised her to visit the apartment again, and another visit was scheduled for midnight on June 15, 2006 — a time the Brokers said the noise would be at its peak. Plaintiff, however, alleges that defendant Michael A. Jones and the sellers knew that the noise from the PM Lounge did not reach its peak until approximately 2:00 a.m.
When plaintiff and her husband arrived for the midnight inspection, Jones had shut the windows and turned on both air conditioning units in order to mask much, if not all, of the noise coming from PM Lounge. Despite this, plaintiff alleges that she and her husband "perceived some slight but perceptible music coming from the exposed brick wall in the bedroom of the Apartment." Complaint, ¶ 33. Jones informed them that the bedroom shared a party wall with PM Lounge, but emphatically denied that the sellers had ever had any problems with noise coming from the night club.
Thereafter, plaintiff decided against purchasing the apartment. She alleges that, through the broker, Larkin and Sfakianos continued to communicate with her about whether the noise problem could be remedied. Plaintiff alleges that Larkin and Sfakianos misrepresented to her that they were happy living in the apartment and provided a rational explanation as to why they put the apartment back on the market so quickly and why it had not sold in order to induce her to purchase the apartment.
Defendants then arranged for and retained the services of an acoustic consultant, Acoustilog Inc., to perform an independent and neutral acoustic inspection of the apartment. In a letter dated June 24, 2006, Acoustilog allegedly determined that "the noise problem is definitely remediable" (Complaint, ¶ 44), with very minor construction to the exposed brick wall in the bedroom at a cost of approximately $3,000. The actual report, attached to the plaintiff's opposing affidavit, states as follows:
Dear Mr. Larkin:
Here are suggestions of items you can do right now to soundproof the 2nd bedroom of your apartment.
Your idea of building out closets and sealing up the fireplace is an excellent one.
Based on my experience, the soundproofing cost should be in the range of $3000, not including the basic cost of the closets themselves and their cosmetics.
* * *
Midrange noise at the sound levels which I measured, will become inaudible.
Bass levels will be reduced significantly, greater than a 50% subjective reduction.
Kelley Aff., Exh. D thereto.
After receiving this report, Henderson had a phone conversation with Acoustilog's president, Alan Fierstein, during which Fierstein allegedly disclosed that Acoustilog had prepared a second report, which was only sent to the broker and the sellers.
Prior to releasing the second Acoustilog report, Julia Hoagland, a broker employed by defendant Corcoran Group, told plaintiff and her husband in an e-mail dated June 30, 2006, that the report was written in "legalese" and was prepared only in the event Larkin and Sfakianos decided to pursue legal action against the PM Lounge. More specifically, Hoagland stated that:
Apparently Alan [Fierstein of Acoustilog] . . . is quite expensive to engage. Since the sellers did not know going in what the outcome of Alan's study would be (i.e., whether or not the noise issue would be remediable or whether it was going to be an issue of approaching the club), in an effort to kill two birds with one stone they had Alan approach it from both angles. The remaining part of the report (which they don't actually need as the situation is in fact remediable) is vis-á-vis the club and what the seller's attorney would have needed to do had the noise levels been "illegal" (which as I understand it is not). He explained that this would give him the ammunition he needed should, say, an irresponsible staff member or manager of the club turn the noise up to such a level as it exceeded noise regulation limits.
Kelley Aff., Exh. G thereto. The second Acoustilog report was forwarded to plaintiff and her husband later that day. In her e-mail forwarding the report, Hoagland clarified that:
[T]his "Part II" was done to set the stage in the event the sound issue was not remediable by soundproofing the apartment. . . . My understanding was incomplete it seems that there is actually evidence of the club's violating local sound ordinances; however, if the issue can be solved with interior (to the apartment) soundproofing the noise from the club becomes somewhat irrelevant.
Kelley Aff., Exh. H thereto.
The second Acoustilog Report, also dated June 24, 2006, states that Fierstein performed acoustical testing at midnight in the apartment, presumably sometime in June of 2006. He reported that: "Music was being played in the nightclub P.M.' behind the rear of your apartment, and adjacent to your second bedroom. The bedroom shares a brick wall with the nightclub, and the sound of the nightclub music was coming right through the wall, and to a lesser extent, through the floor and ceiling of the bedroom." Kelley Aff., Exh. I thereto, at 1. From his testing Fierstein concluded that "the nightclub has not installed proper soundproofing" and the "readings show an extreme violation of the Noise Code [referred to earlier as N.Y.C. Admin. Code § 24-241.1]." Id. at 3. "In other words, this sound level is more than 6 times louder than the acceptable level for a background noise in an apartment, and is of a much more disturbing character." Id. Fierstein suggested that Larkin show this report to his attorney, because "[s]ince the club has denied there is a problem in the past, and has never taken sound readings in your apartment, they apparently have no desire to see for themselves the true nature of your problem. Thus, legal action will have to be taken." "Of course, the most damaging evidence is the audio recording, which will allow the judge to experience the totally unreasonable noise level in your apartment caused by the gross negligence of the club." Id. at 3-4. "The club may not realize the serious consequences of the disturbance it has caused and is continuing to cause you. I suggest you immediately start a lawsuit for a preliminary injunction to shut the facility down." Id. at 4.
After receiving Acoustilog's second report, plaintiff instructed her attorney to review all minutes of meetings by the cooperative's board of directors for any mention of PM Lounge or noise problems affecting the building, but the minutes contained no such references. Plaintiff alleges she also attempted to speak with members of the cooperatives' board of directors, but they refused to discuss the matter with her, having been previously warned by Larkin and Sfakianos to make no statements about the noise issue to any potential purchasers of the apartment.
Allegedly in reliance on the seller's representations that they had been very happy living in the apartment and that the slight noise problem could be remedied for a nominal amount of money, plaintiff signed a Contract of Sale on July 12, 2006, which contained the following representation:
39. Neither Seller nor anyone acting on Seller's behalf has made any written complaint to the Corporation within the last 24 months regarding any nuisance type item (i.e., noise, offensive odor, dimunition [sic] of services, etc.)
Verified Complaint, ¶ 55. Larkin and Sfakianos countersigned the Contract of Sale on or about July 17, 2006. However, when plaintiff received the executed copy, she noticed that the sellers had inserted a qualification to paragraph 39, which states:
Sellers had communications with the [cooperative's] board about noise from the adjacent club "PM" in May 2005. No formal complaint was made to the co-op by the sellers. The issue was thereafter rectified to the sellers' satisfaction. After May 2005 and through their vacating the apartment in the middle of July 2005, sellers did not observe or communicate noise problems.
Complaint, ¶ 58.
Since this qualification was allegedly "the first affirmative representation to [plaintiff] that Sellers had ever had a noise issue in the Apartment" (Complaint, ¶ 60), plaintiff alleges that she immediately telephoned the sellers. Plaintiff alleges she spoke to Sfakianos who said she "barely noticed any noise in the Apartment at all" ( id., ¶ 61), and reassured plaintiff that she and Larkin moved out in July 2005, because Sfakianos had become pregnant and the stairs were too difficult to deal with. Based on the defendants' oral and written assurances, and plaintiff's own investigation, she closed on the apartment on October 17, 2006, after negotiating a $25,000 reduction in the purchase price to compensate for any renovations she might have to undertake to remedy the noise condition.
On October 25, 2006, plaintiff, her husband, and two young children moved into the apartment. Two nights later, her family was awakened at around 2:00 a.m. by loud music and thumping bass sounds coming through their bedroom walls, which continued until 4:00 a.m., and was significantly louder than the noise on the night of midnight inspection back in June. When plaintiff called Acoustilog about the remediation they had recommended, she was told that the noise from PM Lounge is like "a nuclear bomb going off" and the problem won't be fixed without work inside the nightclub. Complaint, ¶ 71. The sellers were also contacted, but continued to deny any noise problems. On November 9, 2006, plaintiff's husband had a meeting with the manager of the nightclub, who stated that Larkin and Sfakianos had made frequent complaints to him and other PM Lounge employees about excessive music and noise and that defendant Larkin was "often furious" about the noise levels. Id., ¶ 76.
Plaintiff decided to engage her own acoustical expert to see if the noise levels violated the New York City Administrative Code. Plaintiff's expert conducted nine acoustic measurements over the course of three months, and concluded that the noise levels in the apartment emanating from the PM Lounge exceed legal limits by as much as five times. As a result, plaintiff and her family "have virtually abandoned their home and have been deprived of the use and enjoyment of the Apartment." Complaint, ¶ 80. In December of 2006, she and her husband commenced an action against the owners and operators of PM Lounge in this court. Plaintiff commenced this action on October 16, 2007, suing Larkin and Sfakianos for making affirmative misrepresentations about the noise problem and charging all of the defendants with fraudulent concealment.
Defendants move to dismiss the complaint on the basis of caveat emptor, arguing that plaintiff was fully aware, prior to purchasing the apartment, that there was a noise problem in the apartment. Having negotiated a price based upon extant conditions in the apartment, defendants argue that plaintiff should not be allowed to now seek to negotiate more favorable terms. The sellers further contend that they could not offer any opinion about the noise levels in the apartment between June and October of 2006, since they had not lived in the apartment since July 2005.
Additionally, defendants rely on paragraph 36 of the Contract of Sale, which states, in relevant part:
Purchaser acknowledges that neither Seller nor anyone on behalf of Seller has made any representations or held out any inducements to Purchaser as to the physical condition or state of repair of the Premises, its cost or market value, . . ., its use, . . ., or to any other matter affecting or related to the Premises. Purchaser further acknowledges and agrees that Purchaser is satisfied by Purchaser's own thorough investigation regarding all matters relating to the premises, including its physical condition, and transaction contemplated by this Contract. Purchaser is entering into this Contract based solely upon such investigation and not upon information, data, statements or representations given or made by Seller or its representatives, or any other person or entity.
Defendants contend that this specific disclaimer clause bars plaintiff from claiming that she was fraudulently induced into entering into the Contract of Sale due to any oral misrepresentations by the sellers or their representatives regarding a noise condition in the apartment.
"New York adheres to the doctrine of caveat emptor and imposes no duty on the seller to disclose any information concerning the premises when the parties deal at arm's length, unless there is some conduct on the part of the seller which constitutes active concealment." Platzman v Morris, 283 AD2d 561, 562 (2d Dept 2001), citing Stambovsky v Ackley, 169 AD2d 254, 257 (1st Dept 1991); London v Courduff, 141 AD2d 803, 804 (2d Dept 1988). To maintain a cause of action to recover damages for active concealment in the context of a fraudulent nondisclosure, the plaintiffs must show, in effect, that the seller thwarted the plaintiffs' effort to fulfill their responsibilities fixed by the doctrine of caveat emptor. Simone v Homecheck Real Estate Servs., Inc. , 42 AD3d 518 , 520 (2d Dept 2007); London v Courduff, 141 AD2d at 804; Jee Foo Realty Corp. v Leme, 259 AD2d 401, 402 (1st Dept 1999). Active concealment has been found where a seller constructed a dummy ventilation system ( 17 E. 80th Realty Corp. v 68th Assoc., 173 AD2d 245 [1st Dept 1991]), or where the sellers erected plasterboard to conceal massive cracks and fissures in the building's foundation ( Haberman v Greenspan, 82 Misc 2d 263 [Sup Ct, Richmond County 1975]).
Plaintiff argues that she has adequately alleged a cause of action for fraudulent concealment of the true extent of a late-night noise problem, which she contends has no tell-tale signs of existence and is a "you gotta hear it to believe it" sort of defect. She argues that the defendants actively thwarted her from discovering the true extent of the noise problem before she purchased and moved into the apartment by: (1) initially failing to disclose that an after-hours nightclub, PM Lounge, shared a party wall with the apartment, although the proximity of the nightclub to the apartment is not visible from the street; (2) misrepresenting that the sellers never experienced any excessive noise in the apartment, although the sellers frequently and furiously complained to the manager of the nightclub; (3) misrepresenting that the noise peaked at midnight, despite knowledge that it typically peaked much later; (4) masking the excessive noise condition by shutting the windows and turning on both air conditioning units during the midnight inspection of the apartment on June 15, 2006; and (5) misrepresenting that plaintiff could rely on the conclusion of the first Acoustilog report that the apartment could be sound-proofed with some minor alterations.
However, Plaintiff does not allege that she objected to either the windows being closed or the air conditioning units being turned on or that she was not able turn the units off or open the windows herself, even though the apparent purpose of the inspection was to detect a noise problem. Nor does she explain how closed windows would mask the music, which all agree was coming through the exposed brick wall in the bedroom of the apartment. See Complaint, ¶¶ 33, 66; see also Kelley Aff., ¶ 49 ("loud music and thumping bass sounds coming through the bedroom walls from PM Lounge"). More importantly, even assuming that defendants initially failed to disclose that the apartment shared a party wall with a nightclub or even orally misrepresented that the noise was not excessive to Larkin and Sfakianos or peaked at midnight as opposed to 2:00 a.m., the second Acoustilog report clearly and unequivocally put plaintiff on notice about the existence of the party wall and that there was an excessive, illegal and serious noise problem in the apartment that was detected at midnight, when the noise was not even at its peak. The second Acoustilog report, finding noise levels exceeded legal limits by more than six times in June 2006, is completely consistent with plaintiff's own acoustic expert who found that the noise levels exceeded legal limits by as much as five times. Plaintiff's claim that she believed that Acoustilog had measured a "similar soft perceptible noise problem" akin to the "soft music we heard during the Midnight Inspection" (Kelley Aff., ¶ 28) is flatly contradicted by the second Acoustilog report which described the noise as an "extreme violation of the Noise Code" and that a simple audio-tape recording would allow a judge to "experience the totally unreasonable noise level" in the apartment. In addition, the second Acoustilog report advised that legal action will have to be taken against PM Lounge since "the club has denied there is a problem in the past, and has never taken sound readings in your apartment" putting plaintiff on notice that complaints had been made to the nightclub by Larkin or Sfakianos or someone on their behalf. Thus, although the alleged prior representations of the sellers and the broker and seeming efforts to prevent the release of the second report could have supported plaintiffs' fraudulent concealment claim, once plaintiff received the second report, plaintiff could no longer justifiably rely on any such representations.
In addition, the rider to the Contract of Sale contained a specific provision, as opposed to a general merger clause, that the plaintiff was fully aware of the condition of the apartment based upon her own inspection and investigation, and not based upon any information or representations, written or oral, made by the sellers, and thus plaintiff cannot now claim she was defrauded. Kay v Pollak, 305 AD2d 637, 638 (2d Dept 2003); Platzman v Morris, 293 AD2d 562-63; Busch v Mastropierro, 258 AD2d 492, 493 (2d Dept 1999); Schwartz v Ross, 233 AD2d 229, 230 (1st Dept 1996); Mahn Real Estate Corp. v Shapolsky, 178 AD2d 383, 385-86 (1st Dept 1991).
Plaintiff's argument that defendants cannot rely on this disclaimer clause, because the excessive late night noise condition was "peculiarly within the seller's knowledge," relying on such cases as Yurish v Sportini, 123 AD2d 760 [2d Dept 1986]), and Hi Tor Indus. Park v Chemical Bank, 114 AD2d 838 [2d Dept 1985]), is unavailing. Plaintiff admits that she visited the apartment at midnight due to concern over noise levels; was aware that the apartment shared a party wall with PM Lounge, an adjacent after hours nightclub; does not allege that PM Lounge's hours of operation was a secret nor within the defendants' exclusive possession; admits receiving the two reports from Acoustilog, the second of which clearly advised her of the extreme nature of the apartment's noise problem, that it violated local ordinances, and that the sellers had complained to PM Lounge at some point in time; spoke directly with the seller's acoustic expert; and was on notice, via the Contract of Sale, that the sellers also had made an informal complaint to the cooperative board about noise from PM Lounge.
Thus, the second cause of action for fraudulent concealment is dismissed for failure to state a cause of action and based on unequivocal documentary evidence as to plaintiff's knowledge of a serious noise problem in the apartment.
To plead a claim for common-law fraud against Larkin and Sfakianos, plaintiff must plead that they lied about a material fact, which was known by these defendants to be false and intended to be relied on when made, and that there was justifiable reliance by the plaintiff and resulting injury. Gaidon v Guardian Life Ins. Co. of Am., 94 NY2d 330, 348 (1999); Friedman v Anderson , 23 AD3d 163 , 166 (1st Dept 2005).
In her complaint, plaintiff alleges that the sellers' addendum to the Contract of Sale rider is demonstrably false, because they "intentionally misrepresented to Kelley that only one noise complaint was made to the Co-operative's Board of Directors." Complaint, ¶ 83. Plaintiff now argues that the first part of the addendum is false, not because sellers actually made more than one complaint to the cooperative's board, but because the minutes of the board's meetings contain no mention of any noise complaints as a result of PM Lounge, and counsel for the cooperative, in a letter dated January 31, 2007, denied "receiving any other claims from residents of the Building complaining making [sic] similar accusations." Kelley Aff., Exh. L thereto. Even if plaintiff were allowed to amend her complaint to change her theory of fraud, she fails to allege how she was injured by the sellers volunteering that they had made an informal complaint to the cooperative board in May 2005 about a noise problem emanating from PM Lounge. Plaintiff also complains about paragraph 39 of the Contract of Sale, which states that the noise "issue was thereafter rectified to the sellers' satisfaction" after May 2005 and prior to July 2005. Even assuming that such as statement could be actionable as fraud ( compare Jacobs v Lewis, 261 AD2d 127, 128 [1st Dept 1999]), and even assuming that discovery reveals evidence that the sellers made complaints directly to PM Lounge during that period, indicating a lack of satisfaction, plaintiff has not demonstrated how she justifiably relied on that statement, in light of the second Acoustilog report.
For the foregoing reasons, it is hereby
ORDERED that the motion of defendants The Corcoran Group, Inc. and Michael A. Jones (mot. seq. no. 001) to dismiss the complaint is granted; and it is further
ORDERED that the motion of defendants Jonathan R. Larkin and Christina D. Sfakianos (mot. seq. no. 002) to dismiss the complaint is granted; and it is further
ORDERED that the Clerk is directed to enter judgment in favor of the defendants dismissing the complaint in its entirety, without costs and disbursements to the defendants.
This Constitutes the Decision and Order of the Court.