Court Opinion

ID: 5868161
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:39:28.903118+00
Date Added: 2024-06-11T08:44:37.828820
License: Public Domain

Asch, J. P. (dissenting in part).
I agree with the majority in its affirmance of that portion of the judgment which dismissed the action against the individual defendant Abraham Hirschfeld. Concededly, the corporate entity may be disregarded where it is used as a cloak for fraud or illegality. However, where the law has been employed to accomplish a result which all the parties desired, and where there has been compliance with the law, there is no authority authorizing the court to pierce the corporate veil so as to impose personal liability against a principal of the corporation.
I disagree with the affirmance as to that portion of the judgment which granted judgment against the corporation, defendant State Street Garage Corporation, on the grounds of innocent misrepresentation.
*388The trial court in its decision, after this nonjury trial, dismissed the five causes of action contained in the complaint, all of which were grounded in fraud. (The fifth cause of action sought attorney’s fees “by reason of the fraudulent conduct and deceit” of the defendants.) The trial court held that scienter was unproven. As it explained in its dismissal of the second cause of action: “The judgment of Mr. Hirschfeld and of his architect clearly showed that they believed that more than the minimum of 475 spaces was present. There is no proof whatever that either Mr. Hirschfeld or Mr. Ho, the architect, was aware that the garage had an insufficient number of spaces when the mortgage application was either made or closed and indeed they strongly urge to the present time that there were and are 491 spaces or more as testified by the architect Ho. Scienter is a necessary element in proof of fraud [Channel Master Corp. v Aluminum Ltd. Sales, Inc., 4 NY2d, 403] and there is no proof of it here.”
The court also denied plaintiff’s motion to amend its complaint to allege mutual mistake. It stated that to grant the motion would unfairly prejudice the defendant inasmuch as the defense was prepared on the basis of depositions, etc., with a view to resisting a fraud claim and not a claim of mutual error. Nevertheless, the court then went on to state: “In my view, there has been sufficient proof of misrepresentation without fraud to warrant the entry of judgment for the plaintiff.”
The prejudice to defendants which led the trial court to deny the plaintiff’s motion to amend its complaint to allege mutual mistake should have operated to prevent the court from its sua sponte determination that a cause of action for innocent misrepresentation existed.
Focusing on the issue of scienter, defendants rested at the end of plaintiff’s case. Thirteen months later they were faced with a decision and judgment based upon a cause of action against which they had no opportunity to defend.
In any event, plaintiff failed to make out a legally sufficient case of innocent misrepresentation. “[G]ranted that * * * [i]t is not necessary in order that a contract may be rescinded for fraud or misrepresentation that the party making the misrepresentation should have known that it *389was false. Innocent misrepresentation is sufficient” (Seneca Wire & Mfg. Co. v Leach & Co., 247 NY 1,7-8). It is well settled that an innocent misrepresentation of a material fact permits rescission even though made without an intent to deceive. It is also well settled that statements of opinion are treated differently than cases involving misrepresentations of objective fact (see Stern v Satra Corp., 539 F2d 1305, 1308; Samuels v Eleonora Beheer, B. V., 500 F Supp 1357,1364). Although finding that there was an “innocent misrepresentation”, the trial court at three different places in its decision also held that the “garage capacity”, allegedly the object of the “innocent misrepresentation,” was a matter of judgment or opinion. The court states: “From the evidence it appears that the parking capacity of a garage is a matter of opinion, particularly in the case of attendant parking where, in order to fit more cars in, no lines are drawn on the floors to indicate parking ‘slots’ ”. At another point, the court wrote: “As indicated previously, what constitutes sufficient space to park a standard sized American automobile is a matter of judgment. The judgment of Mr. Hirschield and of his architect clearly showed that they believed that more than the minimum of475 spaces was present.” Finally, the court noted: “As indicated previously, the capacity of a parking garage is not easily ascertainable to the untrained eye. Frequently it is a matter of both opinion and the capability of the persons parking the cars.”
Thus, the trial court correctly characterized the representation as one of opinion and judgment but erred in not drawing its legal conclusion on this determination.
In addition, the trial court found that plaintiff relied upon the representations in advancing the $1,500,000. This finding is against the clear weight of the evidence. The testimony and other evidence submitted establishes that plaintiff bank relied upon the independent appraisal of Sanders A. Kahn, Inc., which was accepted by its own staff appraisers. This independent appraisal was concerned exclusively with the valuation of the property as a whole at $2,115,000. The testimony of Bertram Mock, plaintiff’s mortgage officer at the time of the transaction, showed that the loan was expressly conditioned on receipt of a *390satisfactory outside appraisal. This actual reliance was confirmed in his commitment letter and in his handwritten notes in which he emphasized that the sine qua non of the loan was the independent appraisal. The minutes of the board of directors of the plaintiff bank further show that reliance was actually placed on the independent appraisal. Confirmation of this is seen in plaintiff’s commitment letter to Mr. Hirschfeld, which in a four-page, single-spaced letter agreement, contains not even a single reference to the capacity of the garage. If the $1,500,000 loan was given in reliance on the provision for capacity in this one lease, the commitment letter would and should have made it an express representation.
Finally, assuming, arguendo, that plaintiff actually relied on the representation as to the garage’s capacity, it was not legally justified in so doing. “The law is well settled that one to whom an alleged false representation is made may not rely thereon under the following circumstances: ‘if 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’ (Schumaker v. Mather, 133 N.Y. 590, 596)” (Sylvester v Bernstein, 283 App Div 333, 336).
Mr. Leonard Saltzman, plaintiff’s mortgage officer, more than a year after the consummation of the subject loan, testified that after the operator vacated the garage, plaintiff retained a consulting engineer to make “a thorough study of the [garage] facilities, firstly with respect to the parking capacity.” Thus, knowledge of the garage capacity was not peculiarly within defendants’ knowledge. Plaintiff, West Side, must be deemed sophisticated and knowledgable in requiring assurances of collateral, etc., before lending money. This is shown by its commissioning of an independent appraisal. It could just as easily have commissioned the engineer’s study also before the loan closed. Since the means were available to it of knowing the truth or “real quality” of the representation, it should have made use of those means (Sylvester v Bernstein, supra).
*391Accordingly, the judgment of the Supreme Court, New York County (Stecher, J.), entered after a nonjury trial, on June 11,1982, which, inter alia, dismissed the action with prejudice as to the individual defendant Hirschfeld and adjudged that a loan in the principal amount of $1,500,000 to defendant State Street Garage Corporation evidenced by a note and mortgage dated December 21, 1972 be rescinded, should be modified, the complaint dismissed against defendant State Street Garage Corporation, and otherwise affirmed.
Silverman, Fein and Kassal, JJ., concur with Lynch, J.; Asch, J. P., dissents in part in a separate opinion.
Judgment, Supreme Court, New York County, entered on June 11, 1982, affirmed. Plaintiff-appellant-respondent shall recover of defendant-respondent Hirschfeld and defendant-respondent-appellant one bill of $75 costs and disbursements of this appeal.