        SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

1261
CA 16-00545
PRESENT: CENTRA, J.P., PERADOTTO, LINDLEY, NEMOYER, AND SCUDDER, JJ.


THE PIKE COMPANY, INC., PLAINTIFF-RESPONDENT,

                    V                               MEMORANDUM AND ORDER

JERSEN CONSTRUCTION GROUP, LLC, AND WESTERN
SURETY COMPANY, DEFENDANTS-APPELLANTS.
(ACTION NO. 1.)
-------------------------------------------------
JERSEN CONSTRUCTION GROUP, LLC,
PLAINTIFF-APPELLANT,

                    V

THE PIKE COMPANY, INC. AND FIDELITY AND
DEPOSIT COMPANY OF MARYLAND,
DEFENDANTS-RESPONDENTS.
(ACTION NO. 2.)
-------------------------------------------------
JERSEN CONSTRUCTION GROUP, LLC,
PLAINTIFF-APPELLANT,

                    V

FIDELITY AND DEPOSIT COMPANY OF MARYLAND,
DEFENDANTS-RESPONDENTS,
ET AL., DEFENDANTS.
(ACTION NO. 3.)


MASTROPIETRO LAW GROUP, PLLC, SARATOGA SPRINGS (ERIC W. GENTINO OF
COUNSEL), FOR DEFENDANTS-APPELLANTS AND PLAINTIFF-APPELLANT.

PHILLIPS LYTLE LLP, ROCHESTER (MARK J. MORETTI OF COUNSEL), FOR
PLAINTIFF-RESPONDENT AND DEFENDANTS-RESPONDENTS.


     Appeal from an order of the Supreme Court, Monroe County (Matthew
A. Rosenbaum, J.), entered October 27, 2015. The order granted the
motion of The Pike Company, Inc. and Fidelity and Deposit Company of
Maryland to dismiss the counterclaim for fraud against The Pike
Company, Inc. in action No. 1.

     It is hereby ORDERED that the order so appealed from is
unanimously reversed on the law without costs, the motion is denied
and the fifth counterclaim of Jersen Construction Group, LLC in action
No. 1 is reinstated.
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                                                         CA 16-00545

     Memorandum: In these three consolidated actions, Jersen
Construction Group, LLC (Jersen), a defendant in action No. 1 and the
plaintiff in action Nos. 2 and 3, and Western Surety Company
(Western), a defendant in action No. 1, appeal from an order that
granted the CPLR 3211 motion of The Pike Company, Inc. (Pike), the
plaintiff in action No. 1 and a defendant in action No. 2, and
Fidelity and Deposit Company of Maryland (Fidelity), a defendant in
action Nos. 2 and 3, seeking dismissal of Jersen’s counterclaim for
fraud against Pike in action No. 1. We agree with Jersen and Western
that Supreme Court erred in granting the motion, and we therefore
reverse the order, deny the motion, and reinstate that counterclaim.

     Pursuant to a contract with the State University Construction
Fund, Pike was the general contractor for a construction project at
the State University College at Plattsburgh. In its second amended
complaint in action No. 3, Jersen alleged that Pike entered into a
subcontract with Jersen pursuant to which Jersen would perform masonry
work after the “concrete foundations were installed, structural steel
was in place, metal framing was erected and the concrete floors had
been poured.”

     After the actions were consolidated by stipulation, Jersen filed
a third amended answer with counterclaims in action No. 1, which
realleged its four original causes of action from action Nos. 2 and 3
as counterclaims and added a fifth counterclaim, for fraud. The fraud
counterclaim is the sole focus of this appeal. In that counterclaim,
Jersen alleged that, before it began work on the project, Pike was
informed by at least one of its other subcontractors that its
substrate work was not “accurate, flat or level,” i.e., was deficient.
Nevertheless, Pike represented to Jersen that the substrate work “had
been erected in accordance with the contract requirements and was
plumb, level, and true and that [Pike] had performed a professional
survey of the structural steel to confirm the same.” Jersen alleged
that Pike’s representations to Jersen “were false,” and that Pike
“concealed and recklessly withheld from Jersen knowledge that the
substrate was not dimensionally accurate, flat or level.”
Additionally, Jersen alleged that Pike made those false
representations “in order to deceive Jersen and induce Jersen to
commence installation upon the substrate.” Jersen further alleged
that it relied on Pike’s representations and would not have commenced
installation of the masonry work had Pike not misrepresented to
Jersen that the substrate had been installed in accordance with the
contract requirements. According to Jersen, it suffered damages as a
result of its reliance on Pike’s false representations.

     We agree with Jersen and Western that the court erred in relying
on the disclaimer clause found in section 1.8 of the subcontract in
granting the motion to dismiss the fraud counterclaim pursuant to CPLR
3211 (a) (1). Section 1.8 of the subcontract discusses site
inspection visits, and provides that “[Jersen] accepts responsibility
for the inspection of conditions that could affect the Subcontract
Work at the Project site, and based on that inspection, and not in
reliance upon any opinions or representations of [Pike], its officers,
agents or employees, acknowledges its responsibility to satisfactorily
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                                                         CA 16-00545

perform the Subcontract Work without additional expense to [Pike].”
Jersen and Western contend that section 1.8 is a typical site
investigation disclaimer, which “attempts to place the risk of changed
conditions on the [sub]contractor by requiring it to investigate the
site before bidding and to familiarize itself with all conditions
under which the job will be performed” (Biser, Rubin & Brown, New York
Construction Law Manual § 5.8 [2d ed 33 West’s NY Prac Series 2016]).
Thus, they contend that the disclaimer applies only to site
inspections and representations that occurred before execution of the
subcontract, and not to any representations occurring after execution
of the subcontract. That contention is buttressed by the fact that
the remainder of section 1.8 is written in the past tense and concerns
conditions of the site, rather than referring to conditions of the
work performed by others.

     Generally, “[a] claim for fraud is barred by the existence of a
specific disclaimer and failure to exercise reasonable diligence”
(Steinhardt Group v Citicorp, 272 AD2d 255, 256), and a disclaimer
clause will preclude a fraud claim only where the clause “specifically
disclaims representations concerning the very matter to which the
fraud claim relates” (Agristor Leasing-II v Pangburn, 162 AD2d 960,
961; see Basis Yield Alpha Fund [Master] v Goldman Sachs Group, Inc.,
115 AD3d 128, 137; see generally Danann Realty Corp. v Harris, 5 NY2d
317, 320-321).

     We conclude that the subcontract is ambiguous whether the
disclaimer clause in section 1.8 precludes Jersen from relying on any
opinions or representations concerning work performed by others after
Jersen executed the subcontract, and thus that section 1.8 does not
“conclusively establish[ ] a defense” to the counterclaim for fraud
(Leon v Martinez, 84 NY2d 83, 88). Although Pike and Fidelity contend
that various other contractual provisions required Jersen to inspect
the site and work of other trades, those provisions do not contain
disclaimer clauses that would bar the fraud counterclaim (see
generally Steinhardt Group, 272 AD2d at 256).

     We also agree with Jersen and Western that Jersen’s fraud
counterclaim is not duplicative of its counterclaim for breach of
contract. Construing the fraud counterclaim liberally and affording
every favorable inference to the facts alleged in that counterclaim
(see Held v Kaufman, 91 NY2d 425, 432), we conclude that it is “based
upon representations that [Pike] made that are separate and distinct
from [Pike’s] obligations under the [subcontract]” (Forty Cent. Park
S., Inc. v Anza, 130 AD3d 491, 492; cf. Niagara Foods, Inc. v Ferguson
Elec. Serv. Co., Inc., 86 AD3d 919, 919; see generally Deerfield
Communications Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954, 956).
Pike’s denial of the allegations in the fraud counterclaim merely
raises issues of fact that cannot be resolved on the instant motion
(see Basis Yield Alpha Fund [Master], 115 AD3d at 139).

     Finally, we agree with Jersen and Western that the fraud
counterclaim was pleaded with sufficient particularity (see CPLR 3016
[b]; Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486, 491-492).
Upon considering the affidavits submitted in opposition to the motion
                                 -4-                          1261
                                                         CA 16-00545

“to remedy pleading problems” (Sargiss v Magarelli, 12 NY3d 527, 531),
we conclude that Jersen alleged therein that Pike “(1) made a
representation to a material fact; (2) the representation was false;
(3) [Pike] intended to deceive [Jersen]; (4) [Jersen] believed and
justifiably relied on the statement and in accordance with the
statement engaged in a certain course of conduct; and (5) as a result
of the reliance, [Jersen] sustained damages” (Heckl v Walsh [appeal
No. 2], 122 AD3d 1252, 1255; see Eurycleia Partners, LP v Seward &
Kissel, LLP, 12 NY3d 553, 559). Based on our resolution of this
issue, we do not reach the alternative request of Jersen and Western
for leave to amend the counterclaim.




Entered:   February 10, 2017                   Frances E. Cafarell
                                               Clerk of the Court
