Opinion ID: 727306
Heading Depth: 2
Heading Rank: 2

Heading: Interest Analysis

Text: 21 In the absence of an applicable choice-of-law provision, New York has adopted an 'interest analysis,' which requires that [ ] 'the law of the jurisdiction having the greatest interest in the litigation ... be applied.'  Kalb, Voorhis & Co. v. American Fin. Corp., 8 F.3d 130, 132 (2d Cir.1993) (quoting Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 300 N.Y.S.2d 817, 823, 248 N.E.2d 576, 582 (1969)). See AroChem Int'l, Inc. v. Buirkle, 968 F.2d 266, 270 (2d Cir.1992). As New York law makes clear, [c]ontacts obtain significance only to the extent that they relate to the policies and purposes sought to be vindicated by the conflicting laws. Miller v. Miller, 22 N.Y.2d 12, 290 N.Y.S.2d 734, 737, 237 N.E.2d 877, 880 (1968) (quoting In re Crichton, 20 N.Y.2d 124, 281 N.Y.S.2d 811, 818 n. 8, 228 N.E.2d 799, 806 n. 8 (1967)). Specifically, [t]wo separate inquiries are ... required to determine the greater interest: (1) what are the significant contacts and in which jurisdiction are they located; and, (2) whether the purpose of the law is to regulate conduct or allocate loss. Padula v. Lilarn Properties Corp., 84 N.Y.2d 519, 620 N.Y.S.2d 310, 311, 644 N.E.2d 1001, 1002 (1994) (citing Schultz v. Boy Scouts of Am., Inc., 65 N.Y.2d 189, 491 N.Y.S.2d 90, 95-96, 480 N.E.2d 679, 684-85 (1985)). 22 In all interest analyses, the significant contacts are, almost exclusively, the parties' domiciles and the locus of the tort. AroChem, 968 F.2d at 270 (quoting Schultz, 491 N.Y.S.2d at 95, 480 N.E.2d at 684). Accord Neumeier v. Kuehner, 31 N.Y.2d 121, 335 N.Y.S.2d 64, 67-68, 286 N.E.2d 454, 457-58 (1972). The respective importance of each of those contacts is determined by the nature of the law in question. Where the parties are domiciled in different states, the locus of the tort will almost always be determinative in cases involving conduct-regulating laws, see Padula, 620 N.Y.S.2d at 311, 644 N.E.2d at 1002, Schultz, 491 N.Y.S.2d at 95-96, 480 N.E.2d at 684-85, whereas those cases concerning loss allocation will turn in significant part on the domiciles of the parties, see AroChem, 968 F.2d at 270, Schultz, 491 N.Y.S.2d at 96, 480 N.E.2d at 685. Thus, because the case at hand concerns laws regulating allegedly fraudulent conduct, the proper body of law to be applied turns on the locus of the tort. 23 New York courts have not directly ruled on which state's substantive law is to be applied to a fraud claim. It may well be, as the appellant contends, that New York courts would apply the substantive law of Massachusetts because, while the alleged fraud occurred in New York, the plaintiffs suffered their injuries in Massachusetts. See Schultz, 491 N.Y.S.2d at 94, 480 N.E.2d at 683 (in the context of a negligent supervision claim, the locus ... is determined by where the plaintiff's injuries occurred); Globe Communications Corp. v. R.C.S. Rizzoli Periodici, S.p.A., 729 F.Supp. 973 (S.D.N.Y.1990) (applying Schultz to a fraud claim); cf. Smith Barney, Harris Upham & Co. v. Luckie, 85 N.Y.2d 193, 623 N.Y.S.2d 800, 808, 647 N.E.2d 1308, 1316 (in the context of applying New York's borrowing statute, N.Y.Civ.Prac.L. & R. § 202, fraud claims are governed by the law where the injury occurred--generally, the place where the investors resided and sustained the economic impact of the loss), cert. denied, --- U.S. ----, 116 S.Ct. 59, 133 L.Ed.2d 23 (1995); Klock, 584 F.Supp. at 215 (in context of applying New York's borrowing statute, court noted that [t]o the extent plaintiff became a poorer man, he became a poorer Connecticut resident). However, we need not resolve the issue because even assuming that Massachusetts law applied, the error in the district court's instructions was harmless as explained directly below. 2. Harmless Error 24 Assuming, without deciding the issue, that the district court erred in relying upon New York law in structuring its jury instructions, that error in the context of the present case was harmless. See Memphis Community Sch. Dist. v. Stachura, 477 U.S. 299, 312, 106 S.Ct. 2537, 2545-46, 91 L.Ed.2d 249 (1986); United States v. Masotto, 73 F.3d 1233, 1238 (2d Cir.1996) (An erroneous instruction requires a new trial unless the error is harmless.). While Massachusetts' legal standard concerning fraud differs from that applied in New York, the outcome under both standards is the same. Accordingly, we affirm the judgment of the district court. 25 Unlike New York law in which a party has a duty in certain circumstances to exercise ordinary intelligence to ascertain the truth of a representation, see Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 184 N.Y.S.2d 599, 602, 157 N.E.2d 597, 600 (1959), Massachusetts law makes clear that the failure to investigate the veracity of statements does not, as a matter of law, bar recovery for misrepresentation. Bond Leather Co. v. Q.T. Shoe Mfg. Co., 764 F.2d 928, 937 (1st Cir.1985). To sustain a claim for fraudulent misrepresentation under Massachusetts law, however, reliance upon such representations must be reasonable. Thus, reliance on 'preposterous or palpably false' representations vitiates a misrepresentation claim. Damon v. Sun Co., 87 F.3d 1467, 1480 (1st Cir.1996) (quoting Roadmaster Indus., Inc. v. Columbia Mfg. Co., 893 F.Supp. 1162, 1179 (D.Mass.1995) (in turn quoting Zimmerman v. Kent, 31 Mass.App.Ct. 72, 575 N.E.2d 70, 76 (1991))). 26 It is clear that, at the time of the closing, CPA's prior representations concerning the acreage of the property and its incumbent zoning restrictions were palpably false. Regardless of the nature of CPA's earlier representations, the official documents provided by CPA in support of the closing easily revealed the accurate size of the property and all of its encumbrances. Although Massachusetts law requires no duty to investigate material representations that have been made in the course of business dealings, a party may not rely upon previously-made false representations once the truth of the matter has come to light. See Trifiro v. New York Life Ins. Co., 845 F.2d 30, 33 (1st Cir.1988) (Notwithstanding [defendant's] express written statement to the contrary and petitioner's express written acknowledgement ... petitioner now asks us to hold that he acted reasonably in relying on the earlier oral statement made.... This we cannot do.); Knight v. Brodnax, 1994 WL 51635 at  3 (D.Mass.1994) (Because defendant made clear in written agreements that he was not the owner of the objects in question, the district court held that plaintiffs cannot now claim that defendant made false statements of ownership to induce them to act.). By choosing to ignore that information which flatly contradicted prior representations, Wedgestone vitiated its fraud claim. 27 At the time of the closing, Wedgestone had in its possession several documents that made clear the actual acreage of that land as well as the fact that numerous zoning restrictions encumbered CPA's property. The title to the land expressly contradicted Wedgestone's belief that the land was unencumbered by restrictions on development; specifically, the title stated that any development required the prior approval of the Board of Estimates as well as the discretionary approval of the New York City Planning Commission. Moreover, among the closing documents was a consent decree with the Department of Environmental Conservation requiring the DEC's approval of any development on CPA's waterfront property. 28 With respect to the acreage of the land, Wedgestone had a map specifying the metes and bounds of the property. In fact, Wedgestone's attorney had even traced those boundaries with Gray prior to the closing and noted that more of the property was under water than Wedgestone had previously believed. Despite holding a precise description of the property and noting some discrepancy in the ratio of dry to wet land, Wedgestone never did the simple arithmetic necessary to discover that the land was, in fact, only 21 acres. 2 Such mathematics are hardly the equivalent of further investigation. To the extent that Wedgestone was not aware of the actual acreage at the time of the closing, it was only out of willful ignorance, cf. J. Geils Band Employee Benefit Plan v. Smith Barney Shearson, Inc., 76 F.3d 1245, 1260 (1st Cir.1996) (Unsophisticated or not, plaintiffs cannot shroud themselves in ignorance or expect that their unsophistication will thoroughly excuse their lack of diligence....), and Wedgestone could not reasonably rely upon CPA's earlier representations that the property was twice as large. 29 In light of the explicit information in Wedgestone's possession at the time of the closing, the earlier representations made by CPA were palpably false. Because, under Massachusetts law, Wedgestone may not rely upon such clearly inaccurate representations, its claim of fraud must fail. Accordingly, even if the district court erroneously instructed the jury on New York law, such error was harmless in light of the discussion above. 3. RPAPL § 1371 30 Because Wedgestone did not bring its federal action within ninety days of the delivery of the deed, Gray cross-appeals contending that it was improper for the district court to enforce the personal guarantee against him. Wedgestone's foreclosure action in state court was brought pursuant to Article 13 of the RPAPL. Section 1371 thereunder specifies both the process and timing by which a foreclosing party may seek a deficiency judgment: 31 1. If a person who is liable to the plaintiff for the payment of the debt secured by the mortgage is made a defendant in the action, and has appeared or has been personally served with the summons, the final judgment may award payment by him of the whole residue, or so much thereof as the court may determine to be just and equitable, of the debt remaining unsatisfied, after a sale of the mortgaged property and the application of the proceeds, pursuant to the directions contained in such judgment, the amount thereof to be determined by the court as herein provided. 32 2. Simultaneously with the making of a motion for an order confirming the sale, provided such motion is made within ninety days after the date of the consummation of the sale by the delivery of the proper deed of conveyance to the purchaser, the party to whom such residue shall be owing may make a motion in the action for leave to enter a deficiency judgment upon notice to the party against whom such judgment is sought or the attorney who shall have appeared for such party in such action. 33       34 3. If no motion for a deficiency judgment shall be made as herein prescribed the proceeds of the sale regardless of amount shall be deemed to be in full satisfaction of the mortgage debt and no right to recover any deficiency in any action or proceeding shall exist. 35 RPAPL § 1371 (emphasis added). According to Gray, paragraph three of § 1371 makes clear that once the ninety days had passed, the $500,000 Wedgestone received for the foreclosed property should have been deemed to be in full satisfaction of the mortgage debt. RPAPL § 1371(3). 36 Despite Gray's assertion, it is quite clear that § 1371 cannot serve as a bar to the present judgment. The period of limitations under § 1371 is procedural and not jurisdictional, Mortgagee Affiliates, Inc. v. Jerder Realty Corp., 62 A.D.2d 591, 406 N.Y.S.2d 326, 327 (2d Dep't 1978), aff'd, 47 N.Y.2d 796, 417 N.Y.S.2d 930, 391 N.E.2d 1011 (1979); while the failure to seek a deficiency judgment within ninety days of delivery of the deed is traditionally treated by the New York courts as a complete bar to further recovery, the failure to timely seek a deficiency is waivable and may only be raised at the outset of such a deficiency proceeding. Id. at 327-28. 37 At the conclusion of Wedgestone's state court action, to which Gray was a party, the court issued a final judgment explicitly stating that in lieu of the normal deficiency judgment procedures provided in RPAPL § 1371, Wedgestone could commence another proceeding to recover any deficiency remaining. Gray did not appeal that final judgment but rather allowed the ninety day period of limitations to run before raising his objection in federal court. We will not tolerate such gamesmanship. The state court's grant of leave to file this action was both final and binding and such resort to § 1371's period of limitations is unavailing in this Court. See Antonsen v. Ward, 943 F.2d 198, 201 (2d Cir.1991) (noting that federal courts are bound by final state court judgments).