Board of Managers of the South Star Condominiums v WSA Equities, LLC et al.,
Supreme Court of the State of New York, Appellate Division, First Department. June 2, 2016
Plaintiff, a residential Board of Managers of a condominium commenced this action against the Sponsor, its principles, the selling agents, the architect and the construction manager to recover damages for construction defects in the condominium. The Sponsor, individual defendants, and the managing agent moved to dismiss the complaint on the grounds that the complaint was barred by statute of limitations governing defect claims, barred by the Martin Act, duplicative in causes of action, and failed to allege sufficient facts.
The Supreme Court held the breach of contract cause of action was timely within the six year statute of limitations as the claims do not accrue until the date of the first condominium closing which was January 24, 2007. The cause of action was also not barred by the Martin Act because it was based on featured promised in the purchase agreement, not omissions from the Offering Plan.
The cause of action for fraud in the inducement was held to state a valid cause of action against both the Sponsor and the Sponsor’s principals. The Supreme Court held that this claim was not duplicative of the breach of contract claim because the cause of action alleged misrepresentations in the Offering Plan that were separate and apart from the allegations that the Sponsor failed to perform its obligations under the purchase agreements. The court did not accept Defendants argument that the unit owners could not establish justifiable reliance.
The Appellate Division affirmed the Supreme Court on the validity of the cause of action for breach of contract holding that the Martin Act does not bar a common law breach of contract claim.
The Appellate Division also affirmed the Supreme Court on the validity of the cause of action fraud in the inducement against both the Sponsor and the Sponsor’s principals. The Appellate Division held that to the extent the allegations in the fraud claim were based on affirmative misrepresentations in the Offering Plan, they were not barred by the Martin Act. The fraud allegations that were based on omissions and not affirmative misrepresentations were barred by the Martin Act. The fraud claim was also found not to be duplicative of the breach of contract claim.
In upholding the claim against the Sponsor’s principles, the Appellate Division held that “a corporate officer who participates in the commission of a tort my be held individually liable regardless of whether the corporate veil is pierced.”