SICIGNANO, III, HENRY v. DIXEY, LARAMIE N.

SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
1234
CA 14-00743
PRESENT: SCUDDER, P.J., PERADOTTO, LINDLEY, SCONIERS, AND VALENTINO,
HENRY SICIGNANO, III, PLAINTIFF-APPELLANT,
V MEMORANDUM AND ORDER
LARAMIE N. DIXEY AND CELESTE M. HOLLANDS,
DEFENDANTS-RESPONDENTS.
DUKE, HOLZMAN, PHOTIADIS & GRESENS, LLP, BUFFALO (CHARLES C. RITTER,
JR., OF COUNSEL), FOR PLAINTIFF-APPELLANT.
HOGAN WILLIG, PLLC, AMHERST (DIANE R. TIVERON OF COUNSEL), FOR
DEFENDANTS-RESPONDENTS.
Appeal from an order of the Supreme Court, Erie County (Diane Y.
Devlin, J.), entered June 26, 2013. The order, insofar as appealed
from, granted defendants’ cross motion for summary judgment, dismissed
plaintiff’s amended complaint and granted defendants judgment against
plaintiff for their reasonable attorneys’ fees and costs.
It is hereby ORDERED that the order insofar as appealed from is
unanimously reversed on the law without costs, the cross motion is
denied, the amended complaint is reinstated, and the award of
attorneys’ fees and costs to defendants is vacated.
Memorandum: In June 2009, plaintiff executed a contract to
purchase a home owned by defendants. On the property condition
disclosure statement, which was attached to the contract, defendants
answered “no” to question No. 30 (“Are there any flooding, drainage or
grading problems that resulted in standing water on any portion of the
Property?”) and question No. 31 (“Does the basement have seepage that
results in standing water?”). Several months after plaintiff took
possession of the property, he allegedly began to experience “huge
water problems,” including “severe flooding, standing water, [and
sump] pumps that r[a]n for five or six days” at a time. Plaintiff
thereafter commenced this action seeking damages for violation of
article 14 of the Real Property Law, fraud, and breach of contract in
connection with the transaction. We agree with plaintiff that Supreme
Court erred in granting defendants’ cross motion for summary judgment
dismissing the amended complaint and, thus, in awarding them
attorneys’ fees and costs.
Real Property Law § 462 (1) requires sellers of residential real
property to “complete and sign a property condition disclosure
statement” and to provide such statement to a prospective buyer “prior
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to the signing by the buyer of a binding contract of sale.” Real
Property Law § 462 sets forth the disclosure form, which instructs the
seller to complete the form based upon his or her “ACTUAL KNOWLEDGE,”
and contains the seller’s certification that “THE INFORMATION IN THIS
PROPERTY CONDITION DISCLOSURE STATEMENT IS TRUE AND COMPLETE TO THE
SELLER’S ACTUAL KNOWLEDGE AS OF THE DATE SIGNED BY THE SELLER.” Where
a seller provides a property condition disclosure statement and
“willful[ly] fail[s] to perform the requirements” set forth in article
14 of the Real Property Law “[such] seller shall be liable for the
actual damages suffered by the buyer in addition to any other existing
equitable or statutory remedy” (Real Property Law § 465 [2]).
Here, even assuming, arguendo, that defendants met their initial
burden on that part of the cross motion with respect to the cause of
action asserted pursuant to the Real Property Law by denying actual
knowledge of any flooding or seepage resulting in standing water, we
conclude that plaintiff raised an issue of fact in opposition (see
generally Zuckerman v City of New York, 49 NY2d 557, 562). Plaintiff
submitted, inter alia, defendants’ responses to his interrogatories
and their deposition testimony, and defendants admitted therein that
the basement had flooded on two occasions during their ownership of
the property. Although defendants blamed those two incidents on power
failures rather than a property defect, the fact remains that they
experienced at least two instances of standing water in the basement
despite their representations to the contrary (see Meyers v Rosen, 69
AD3d 1095, 1099; Calvente v Levy, 12 Misc. 3d 38, 39-40). Plaintiff
also submitted affidavits from 13 neighbors, all of whom averred that
there were “chronic drainage problems and flooding” at the property
and that, at times, the flooding was so severe that water pumped from
the property’s basement flooded the adjacent roadway. The neighbors
specifically averred that they had “observed such flooding at the
[p]roperty when it was owned by [defendants].” Although defendants
speculated that the neighbors were confusing defendants with the prior
owners of the property, there is no evidence to support that assertion
and, in any event, issues of credibility may not be resolved upon
summary judgment (see Rew v County of Niagara, 115 AD3d 1316, 1318).
We therefore conclude that plaintiff raised an issue of fact with
respect to defendants’ actual knowledge of flooding on the property
(see Pettis v Haag, 84 AD3d 1553, 1555; Meyers, 69 AD3d at 1097).
With respect to the fraud cause of action, it is well settled
that, “[t]o establish a cause of action for fraud, plaintiff must
demonstrate that defendants knowingly misrepresented a material fact
upon which plaintiff justifiably relied and which caused plaintiff to
sustain damages” (Klafehn v Morrison, 75 AD3d 808, 810; see Mikulski v
Battaglia, 112 AD3d 1355, 1356; Pettis, 84 AD3d at 1554). “[F]alse
representation in a [property condition] disclosure statement may
constitute active concealment in the context of fraudulent
nondisclosure” (Klafehn, 75 AD3d at 810; see Sample v Yokel, 94 AD3d
1413, 1415; Pettis, 84 AD3d at 1554-1555). For the reasons set forth
above, we conclude that plaintiff raised an issue of fact with respect
to whether defendants knowingly misrepresented a material fact, i.e.,
the property’s history of flooding and standing water, on the property
condition disclosure statement (see Mikulski, 112 AD3d at 1356-1357;
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Pettis, 84 AD3d at 1555; Jablonski v Rapalje, 14 AD3d 484, 486). We
likewise conclude that plaintiff raised an issue of fact with respect
to whether he justifiably relied on defendants’ alleged
misrepresentations (see Jablonski, 14 AD3d at 487-488; Bethka v
Jensen, 250 AD2d 887, 888). Plaintiff testified that he toured the
property, including the basement, on two separate occasions, and that
he saw no evidence of water infiltration or water damage. Plaintiff
hired a home inspector, who noted a “grading issue” on the property,
but did not identify any water issues in the basement or drainage
issues on the property (see Pettis, 84 AD3d at 1555; Jablonski, 14
AD3d at 488; cf. Klafehn, 75 AD3d at 809-811; Daly v Kochanowicz, 67
AD3d 78, 84). Although defendants assert that the dry wells on the
property were “readily observable” and thus should have placed
plaintiff on notice of water issues, defendant Laramie N. Dixey
testified that he learned about the dry wells only because the prior
owner took him around the property and showed him the location of the
wells. Plaintiff testified that he first learned of the dry wells
from a plumber he hired to address the flooding on the property, and
that “[u]nless you’re looking for [the dry wells], you would never
find them.” Further, the fact that plaintiff previously lived in the
general vicinity of the property does not establish as a matter of law
that he knew or should have known of the property’s history of
flooding.
Finally, we agree with plaintiff that the court erred in
dismissing his cause of action for breach of contract. Although the
provisions of a contract for the sale of real property are generally
merged in the deed and therefore extinguished upon the closing of
title (see Franklin Park Plaza, LLC v V & J Natl. Enters., LLC, 57
AD3d 1450, 1451-1452; Goldsmith v Knapp, 223 AD2d 671, 673), that rule
does not apply “ ‘where the parties have expressed their intention
that [a] provision shall survive delivery of the deed’ ” (NVR, Inc. v
Edwards, 21 AD3d 1309, 1310; see Matter of Mattar v Heckl, 77 AD3d
1390, 1391; Franklin Park Plaza, LLC, 57 AD3d at 1452). Here, the
contract provides that “[a]ny claim arising from failure to comply
with Paragraph[] 5 [of the contract],” which encompasses defendants’
representations in the property condition disclosure statement, “shall
survive for 2 years after the Closing or cancellation of this
Contract” (see generally Bibbo v 31-30, LLC, 105 AD3d 791, 792;
Franklin Park Plaza, LLC, 57 AD3d at 1452). In any event, we note
that “the merger doctrine [is] inapplicable where, as here, there
exists a cause of action based upon fraud” (Berger-Vespa v Rondack
Bldg. Inspectors, 293 AD2d 838, 840; see Gilpin v Oswego Bldrs., Inc.,
87 AD3d 1396, 1399; Woodworth v Delgrand, 174 AD2d 1011, 1011).
Entered: January 2, 2015 Frances E. Cafarell
Clerk of the Court