On August 23, 2023, the New York Appellate Division, Second Department (“the Court”) issued its opinion – currently pending publication – in the matter of Hillary Dev., LLC v Sec. Tit. Guar. Corp. of Baltimore, ___A.D.3d___, 2023 NY Slip Op 04370 [2023], in which the Court reaffirmed the pleading requirements of fraudulent concealment and prima facie tort claims in the title insurance and property sale context.

Background

On November 18, 2014, Defendant Naomi Cohen-Tsedek (“Defendant”) obtained a $269,145 judgment (“the Judgment”) against Steven Browd (“Browd”).  Defendant docketed the Judgment with the Queens County Clerk on the same date it was obtained, as Browd owned real property (“the Property”) in Queens, New York.  Years later, in 2019, Browd – utilizing the alternate name Shraga Browd as opposed to Steven Browd – sold the Property to Plaintiff Hillary Developer, LLC (“Hillary”), with Security Title Guarantee Corporation (“Security Title”) issuing Hillary a title insurance policy in connection with this sale.  The Judgment was never satisfied from the sale proceeds.

After closing on the transaction with Browd, Hillary subsequently learned that the Property had also been sold to a different buyer at a prior sheriff’s sale held to satisfy the Judgment, with this discovery prompting Hillary to file suit against Browd, Defendant, and Security Title, alleging that it had never been informed of the Judgment’s existence.  In response, Defendant filed an Answer containing Third-Party claims against SSS Settlement Services, LLC (“SSS Settlement”) – the entity that had served as Security Title’s issuing agent – raising causes of action for fraudulent concealment, based upon SSS Settlement having allegedly concealed both the existence of the additional sale and Browd’s alternate name, as well as for prima facie tort.

SSS Settlement later moved before the trial court to dismiss Defendant’s Third-Party claims, with the trial court denying this motion.  SSS Settlement then appealed the denial before the Court.

The Appeal

In addressing SSS Settlement’s appeal, the Court first observed the elevated pleading standard applicable to fraud causes of action, identifying that a party pleading fraud must, with “requisite particularity,” allege that there existed a material misrepresentation or omission which the issuing party knew to be false, made for the purpose of inducing reliance, and which was actually relied upon.  Turning to Defendant’s claims, the Court found that she had failed to allege the existence of a material omission by SSS Settlement upon which she had relied, and had also failed to identify any duty under which SSS Settlement would have owed her an obligation to disclose the existence of the additional sale or name.  Accordingly, the Court held that the trial court had erred and that this cause of action should have been dismissed.

As to Defendant’s prima facie tort claim, the Court observed that sustaining such a cause of action requires a demonstration of the intentional infliction of harm motivated by a “malicious intent or disinterested malevolence.”  The Court found that Defendant had failed to allege the existence of such a state of mind, as she had claimed that SSS Settlement’s alleged conduct had been performed “for its own pecuniary benefit,” an allegation which could not satisfy the required standard.  The Court thus likewise held that this cause of action also should have been dismissed by the trial court.

Therefore, based on the above reasoning, the Court ultimately held that the trial court “should have granted SSS Settlement’s motion” to dismiss Defendant’s third-party causes of action, reversing the lower court’s ruling and ordering the dismissal of these claims.

Takeaways

This decision demonstrates that when pleading a fraudulent concealment claim premised upon a failure to disclose information, it is still necessary to identify the specific duty imposing the obligation for the subject disclosure.  It also reaffirms that where alleged fraudulent action is taken for the advancement of a party’s own pecuniary benefit, it will not be held to satisfy the intent requirements underlying a prima facie tort claim.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, James Mazewski at jmazewski@riker.com, Kevin Hakansson at khakansson@riker.com, or Kori Pruett at kpruett@riker.com.