Title: Mandarin Trading Ltd. v. Guy Wildenstein

State: new-york

Issuer: New York Appellate Court

Document:

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This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 10  
Mandarin Trading Ltd.,
            Appellant,
        v.
Guy Wildenstein, et al.,
            Respondents.
Clifton S. Elgarton, for appellant.
Steven R. Schindler, for respondents.
JONES, J.:
In a dispute arising from the purchase and sale of the
painting Paysage aux Trois Arbres by Paul Gauguin, this Court is
asked to determine whether claims sounding in fraud, negligent
misrepresentation, breach of contract, and unjust enrichment were
properly pleaded in the plaintiff's complaint.
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No. 10
In July 2000, J. Amir Cohen approached plaintiff
Mandarin Trading Ltd.* to solicit interest in the purchase of the
painting for investment purposes.  Cohen explained that he could
arrange a transaction for the sale and subsequent resale of the
painting at an auction.  Mandarin was interested in the
opportunity, but sought (1) an appraisal of the painting, (2) a
report of its condition, and (3) a report of its prior ownership. 
Cohen agreed to obtain the requested information and recommended
defendant Guy Wildenstein, an allegedly renowned expert on
Gaugin, for the appraisal.
On July 28, 2000, Wildenstein presented a written
appraisal letter to Michel Reymondin, which stated that the
painting was worth $15 million to $17 million.  Neither
Reymondin's role in the transactions, nor his relationship to the
parties is pleaded.  Furthermore, the letter is addressed solely
to Reymondin and neither indicates the purpose of the letter nor
who requested the valuation of the painting.  While the letter
revealed that the painting was part of Mrs. Arthur Lehman's
collection and was once sold by Wildenstein, it did not disclose
any contemporaneous ownership interest.  Mandarin received the
letter, the complaint does not say from whom, on August 12, 2000.
On August 9, 2000, Cohen contacted and informed
* Phoenix Capital Reserve Fund is the parent corporation of
Mandarin.  Phoenix Capital's director, Patrick Blum was
approached by Cohen to determine interest in purchase of the
painting.
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No. 10
Mandarin that if the painting was purchased expeditiously, it
could be sold at auction through Christie's at an optimum price. 
Christie's had outlined the logistics of the auction in a letter
to Cohen in which Christie's proposed to hold an auction for the
painting in New York with a reserve price of $12 million -- a
price below which the painting would not sell.  Christie's
estimated that the painting could sell for $12 million to $16
million.
Mandarin purchased the painting through a series of
transactions that occurred during the period of August 16, 2000
to August 30, 2000.  First, Peintures Hermes S.A., a company
allegedly owned by Wildenstein, forwarded an invoice to Calypso
Fine Art Ltd., an intermediary for the sale transaction. 
Mandarin then wired $11.3 million for the purchase of the
painting to Calypso's account.  Finally, Calypso paid $9.5
million to Peintures in exchange for the painting and then
transferred the painting to Mandarin.  It is further alleged that
Peintures deposited $8.8 million into a bank account owned by
Wildenstein.
On November 8, 2000, Christie's held an auction for the
painting, but the highest bid failed to exceed the reserve price
and the painting was not sold.  Mandarin has since retained
ownership of the painting.
Before discovery, Supreme Court granted Wildenstein's
CPLR 3211 (a)(1) and (a)(7) motion to dismiss Mandarin's
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No. 10
complaint.  Supreme Court held that Mandarin's fraud claims
failed because the complaint did not allege that Wildenstein
intended to defraud Mandarin through a misstatement of fact upon
which Mandarin could justifiably rely.  The negligent
misrepresentation claim was dismissed for lack of a special
relationship, privity, or a privity-like relationship between the
parties.  In addition, the breach of contract claims were
dismissed for failure to plead the existence of a contract. 
Finally, the unjust enrichment claim was dismissed because
Supreme Court concluded that Mandarin unjustifiably relied upon
the appraisal.
In a 3-2 decision, the Appellate Division affirmed
dismissal of Mandarin's complaint by holding that the pleadings
did not sufficiently allege claims for fraud, negligent
misrepresentation, breach of contract, and unjust enrichment (65
AD3d 448 [1st Dept 2009]).  One dissenting Justice voted to
affirm dismissal of the claims at law, but to reinstate the
equity claim of unjust enrichment, while the other dissenting
Justice sought to reinstate Mandarin's entire complaint. 
Mandarin appeals to this Court as of right, from the two-Justice
dissent, pursuant to CPLR 5601(a).
In the context of a CPLR 3211 motion to dismiss, the
pleadings are "to be afforded a liberal construction.  [The
Court] must accept the facts as alleged in the complaint as true,
[and] accord plaintiffs the benefit of every possible favorable
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No. 10
inference" (Leon v Martinez, 84 NY2d 83, 87-88 [1994]; see also
Morone v Morone, 50 NY2d 481, 484 [1980]).  Even affording
Mandarin all favorable inferences, the complaint fails to
sufficiently plead its claims, and we now affirm.
Fraud
Generally, in a claim for fraudulent misrepresentation,
a plaintiff must allege "a misrepresentation or a material
omission of fact which was false and known to be false by
defendant, 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" (Lama Holding
Co. v Smith Barney Inc., 88 NY2d 413, 421 [1996];
see also Channel Master Corp. v Aluminum Ltd. Sales, 4 NY2d 403,
406-407 [1958]).  Furthermore, where a cause of action is based
in fraud, "the circumstances constituting the wrong shall be
stated in detail" (see CPLR 3016 [b]; see also Lanzi v Brooks, 43
NY2d 778, 780 [1977] ["[CPLR 3016] requires only that the
misconduct complained of be set forth in sufficient detail to
clearly inform a defendant with respect to the incidents
complained of"]).
Mandarin argues that the complaint properly pleads that
Wildenstein's omission of its ownership interest in the painting
when providing the appraisal was a fraudulent, material
misrepresentation intended to induce Mandarin's reliance. 
Wildenstein asserts that the complaint fails to plead that
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Wildenstein specifically intended to defraud Mandarin, and also
owed a fiduciary duty to disclose an alleged ownership interest. 
Wildenstein's letter regarding the painting's value
constituted nonactionable opinion that provided no basis for a
fraud claim (see Jacobs v Lewis, 261 AD2d 127 [1st Dept 1999] [".
. . alleged misrepresentations amounted to no more than opinions
and puffery or ultimately unfulfilled promises, and in either
case were not actionable as fraud"]).  The letter merely
disclosed Wildenstein's familiarity with the painting, a belief
that the painting was worth $15 million to $17 million, and an
acknowledgement that the letter was addressed in response to
Reymondin, with no mention of Mandarin.
  Furthermore, with respect to a claim of fraudulent
omission, the complaint fails to allege that Wildenstein owed a
fiduciary duty to Mandarin (see P.T. Bank Central Asia v ABN AMRO
Bank N.V., 301 AD2d 373, 376 [1st Dept 2003] ["A cause of action
for fraudulent concealment requires, in addition to the four
foregoing elements [of fraudulent misrepresentation], an
allegation that the defendant had a duty to disclose material
information and that it failed to do so"]).  
The narrative within the complaint is devoid of facts
indicating any connection between Mandarin and Wildenstein that
would give rise to a fiduciary duty.  Highlighting this
deficiency are pleadings that require leaps of fact and logic
such as the unknown role played by Reymondin -- the man who
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allegedly received the appraisal from Wildenstein.  By failing to
plead the role played by Reymondin or how he was related to the
parties, no inference can be drawn, for example, that Wildenstein
misrepresented its alleged ownership interest or the painting's
value, knowing that Reymondin would transfer the information to
Mandarin.  Moreover, the letter offers no assistance to
Mandarin's claim, in light of the fact that the letter was
addressed solely to Reymondin, and in the absence of allegations
creating a bridge between Mandarin and Wildenstein.  Rather than
alleging that Wildenstein misrepresented its ownership to
Mandarin specifically, an insufficient, general allegation is
proferred that Wildenstein was required to disclose its interest
because it should have known that a hypothetical purchaser would
rely on the appraisal letter (see Garelick v Carmel, 141 AD2d
501, 502 [2d Dept 1988] ["Moreover, in order to plead a valid
cause of action sounding in fraud, the complaint must set forth
all of the elements of fraud, including the making of material
representations by the defendant to the plaintiff"]).
As such, Mandarin's fraud claims were properly
dismissed.
Negligent Misrepresentation
It is well-settled that "[a] claim for negligent
misrepresentation requires the plaintiff to demonstrate (1) the
existence of a special or privity-like relationship imposing a
duty on the defendant to impart correct information to the
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No. 10
plaintiff; (2) that the information was incorrect; and (3)
reasonable reliance on the information" (J.A.O. Acquisition Corp.
v Stavitsky, 8 NY3d 144, 148 [2007]; see also Parrott v Coopers &
Lybrand, 95 NY2d 479, 483-484 [2000]).  
Mandarin argues that the Appellate Division majority
erred in affirming dismissal of this claim because, here, a
buyer-seller relationship established privity.  Wildenstein
responds that no relationship existed between the parties.
A special relationship may be established by "persons
who possess unique or specialized expertise, or who are in a
special position of confidence and trust with the injured party
such that reliance on the negligent misrepresentation is
justified" (Kimmell v Schaeffer, 89 NY2d 257, 263 [1996]). 
Although Mandarin generally pleads that "a special relationship
of trust or confidence" existed between the parties, the lack of
allegations showing a relationship with Wildenstein mandates
dismissal of this claim.  The complaint does not allege whether
Wildenstein had any contact with Mandarin, whether Mandarin
solicited the appraisal directly from Wildenstein, whether
Wildenstein knew the purpose of the appraisal letter, or whether
Wildenstein was even aware of Mandarin's existence.  
In Kimmell, the defendants sought to induce plaintiffs
to invest in a business venture by directly sending them a memo
regarding business projections, meeting with them personally, and
sending out correspondence to assure the safety of the
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No. 10
investment.  We held that the record supported a finding that the
defendants established a special relationship with the plaintiffs
because of the financial skill and expertise of the defendants,
and their continued attempts to communicate directly with the
plaintiffs to induce their investment (id. at 264).  
Ravenna v Christie's, Inc. (289 AD2d 15 [2001])
involved a similar issue in the context of the sale of a painting
where the plaintiffs alleged negligent misrepresentation after
meeting with a Christie's representative and receiving advice on
the value of a painting.  The Appellate Division held that the
single meeting of gratuitous advice, "which did not even create a
business relationship, cannot be said to have created a
relationship of trust and confidence" (id. at 16).  
Here, the pleadings fail to allege the existence of any
relationship between Mandarin and Wildenstein that would support
a negligent misrepresentation claim.  Unlike the defendant in
Kimmell, there are no allegations here that Wildenstein ever met
with Mandarin, was retained by Mandarin for an appraisal, or knew
that the appraisal would be used by Mandarin for the purpose of
purchasing the painting (see Spitzer v Christie's Appraisals,
Inc., 235 AD2d 266 [1st Dept 1997]).  And this case has an even
more tenuous basis for finding privity, or a privity-like
relationship as it lacks even the bare, minimal contact of the
parties in Ravenna.  Wildenstein's art expertise alone cannot
create a special relationship where otherwise, the relationship
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No. 10
between the parties is too attenuated.
Mandarin further argues that Wildenstein should have
known or foreseen that the appraisal was requested by a purchaser
for the purpose of buying the painting, but this Court has
"previously rejected a rule 'permitting recovery by any
foreseeable plaintiff who relied on the negligently prepared
report, and have rejected even a somewhat narrower rule that
would permit recovery where the reliant party or class of parties
was actually known or foreseen' but the individual defendant's
conduct did not link it to that party" (Parrott, 95 NY2d at 485). 
Accordingly, without further allegations establishing a
relationship between the parties, Mandarin's complaint fails and
was properly dismissed.
Breach of Contract
Mandarin alleges that it has sufficiently pleaded a
breach of contract claim because it was an intended third-party
beneficiary to an appraisal contract between Wildenstein and
Reymondin.  However, the failure to allege a relationship between
the parties again proves fatal to this claim as well.
Generally, a party alleging a breach of contract must
"demonstrate the existence of a . . . contract reflecting the
terms and conditions of their . . . purported agreement"
(American-European Art Assocs., Inc. v Trend Galleries, Inc., 227
AD2d 170, 171 [1st Dept 1996]).  In the context of a third-party
beneficiary claim, the plaintiff must establish: "(1) the
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existence of a valid and binding contract between other parties,
(2) that the contract was intended for their benefit, and (3)
that the benefit to them is sufficiently immediate . . . to
indicate the assumption by the contracting parties of a duty to
compensate them if the benefit is lost" (Mendel v Henry Phipps
Plaza W., Inc., 6 NY3d 783, 786 [2006]).
The complaint only offers conclusory allegations
without pleading the pertinent terms of the purported agreement. 
We are left to speculate as to the parties involved and the
conditions under which this alleged appraisal contract was
formed.  Consequently, by failing to plead the salient terms of a
valid and binding contract, Mandarin cannot show that the
contract was intended for its immediate benefit. 
Unjust Enrichment
"The essential inquiry in any action for unjust
enrichment  . . . is whether it is against equity and good
conscience to permit the defendant to retain what is sought to be
recovered" (Paramount Film Distrib. Corp. v State of New York, 30
NY2d 415, 421 [1972]).  A plaintiff must show "that (1) the other
party was enriched, (2) at that party's expense, and (3) that it
is against equity and good conscience to permit [the other party]
to retain what is sought to be recovered" (Baron v Pfizer, Inc.,
42 AD3d 627, 629-630 [3d Dept 2007]; Citibank, N.A. v Walker, 12
AD3d 480, 481 [2d Dept 2004]).
Mandarin's unjust enrichment claim fails for the same
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deficiency as its other claims -- the lack of allegations that
would indicate a relationship between the parties, or at least an
awareness by Wildenstein of Mandarin's existence.  Although
privity is not required for an unjust enrichment claim, a claim
will not be supported if the connection between the parties is
too attenuated (see Sperry v Crompton Corp., 8 NY3d 204, 215
[2007]).  
Moreover, under the facts alleged, there is no indicia
of an enrichment that was unjust where the pleadings failed to
indicate a relationship between the parties that could have
caused reliance or inducement.  Without further allegations, the
mere existence of a letter that happens to find a path to a
prospective purchaser does not render this transaction one of
equitable injustice requiring a remedy to balance a wrong. 
Without sufficient facts, conclusory allegations that fail to
establish that a defendant was unjustly enriched at the expense
of a plaintiff warrants dismissal (see North Salem Psychiatric
Servs., P.C. v Medco Health Solutions, Inc., 50 AD3d 986 [2d Dept
2008]; Vassel v Vassel, 40 AD2d 713 [2d Dept 1972] aff'd Vassel v
Vassel, 33 NY2d 533 [1973]). 
Accordingly, the order of the Appellate Division should
be affirmed, with costs.
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*   *   *   *   *   *   *   *   *   *   *   *   *   *   *   *   *
Order affirmed, with costs.  Opinion by Judge Jones.  Chief Judge
Lippman and Judges Ciparick, Graffeo, Read, Smith and Pigott
concur.
Decided February 10, 2011
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