Schulhof v. Jacobs, Index No. 157797/2013, 2/27/17 (Ramos, J.)

Breach of Contract; Breach of Fiduciary Duty; Fraud; Restitution; Unjust Enrichment; Compensatory Damages; Punitive Damages; CPLR § 3212; CPLR § 3211; Summary Judgment

By: Natalie Deneen Russell | Staff Writer

Plaintiff, the executor of an estate, entered into a written agreement (the “Agreement”) with Defendant for the sale of a painting (the “Work”) from decedent’s art collection. The Agreement required Defendant to sell the Work for a minimum of $6 million in exchange for a $50,000 fee; Defendant was prohibited from accepting fees “in cash or in kind.” Defendant later entered into a contract with a purchaser for the sale of the Work for $6.5 million. Defendant, failing to tell Plaintiff the true sales price, told Plaintiff she “was able to get the [buyer] up to 5.5 million” and Plaintiff agreed to sell the Work for that price. Defendant therefore received her $50,000 fee and $1 million in profit. Plaintiff discovered the discrepancy and filed suit, alleging five causes of action: (1) breach of fiduciary duty; (2) fraud; (3) breach of contract; (4) restitution; and (5) unjust enrichment. Plaintiff then brought the instant motion for summary judgment pursuant to CPLR § 3212, seeking compensatory damages, punitive damages, and attorneys’ fees. In opposition, Defendant filed a cross-motion for summary judgment, pursuant to CPLR § 3211, to dismiss the complaint for failure to comply with the Power of Attorney provisions and New York General Obligations Law § 5-1507, and that no fiduciary duty existed between Plaintiff and Defendant.

Plaintiff argued that Defendant misrepresented the purchase price and wrongfully profited $1 million from the sale of the Work. Defendant conversely argued that prior to the Agreement, the decedent permitted her to keep a “buyers premium” and thus she was entitled to the $1 million profit.

The Court granted Plaintiff’s summary judgment motion in part and dismissed Defendant’s cross-motion in its entirety. First, the Court found Defendant misrepresented the purchase price, inducing Plaintiff to reasonably rely on the misrepresentation in his decision to sell the Work. There was no issue as to damages because the record was clear that Plaintiff was damaged in the amount of $1 million. Second, based on the longstanding business relationship between decedent and Defendant combined with the Agreement, a fiduciary duty existed between Plaintiff and Defendant thus obligating Defendant to perform. Third, the Defendant’s failure to disclose the $6.5 million purchase price constitutes fraud because Plaintiff intentionally misled Defendant to believe $5.5 million was the best offer price. Fourth, by secretly keeping the $1 million profit, Defendant violated the Agreement. As a faithless servant, Defendant had a duty to disclose the $1 million profit and her disloyalty causes her to also forfeit her $50,000 compensation. Lastly, Court did not evaluate Plaintiff’s unjust enrichment claims, as they were duplicative of the breach of contract claims.

Schulhof v. Jacobs, Index No. 157797/2013, 2/27/17 (Ramos, J.)

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