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Kevin Schlosser Authors, "Fraud Claims Barred by Signed Contracts Even if Not Read or Even Understood"

Nov 15, 2016Commercial LitigationLitigation & Dispute Resolution
Media Source: The courts do not have much patience for parties who enter into contracts and then claim that they should not be bound by the agreement they admittedly signed but allegedly did not read or understand. If you sign the contract, you are bound by it, because you have a duty to read and understand the contract before you sign it. This is essential to preserve the integrity of agreements and the law of contracts. These principles apply in the context of attempted fraud claims, where parties to a signed contract seek to allege they were fraudulently induced to sign the contract in question or otherwise try to assert fraud claims apart from the contract. A recent decision of the New York Appellate Division, Second Department, makes the point clear. In Nerey v Greenpoint Mtge. Funding, Inc., 2016 NY Slip Op 07167 (2d Dep’t Nov. 2, 2016), the plaintiffs purchased a single family home in Queens. The defendant Gina Hyun Soon Park (Park) acted as the real estate agent and was associated with the defendant ReMax Universal Real Estate (ReMax). In connection with their purchase, the plaintiffs obtained two mortgages from the defendant Greenpoint Mortgage Funding, Inc., through the defendant Steven Weiss, mortgage broker of the defendant Mortgage Mall, Inc. The plaintiffs commenced the action against those parties and others, alleging that the defendants engaged in a scheme to defraud them into purchasing a property that they clearly could not afford through misrepresentations as to the purchase price, appraisal value of the home, and terms of the mortgage. The alleged misrepresentations that the plaintiffs asserted were directly contradicted by the actual terms of the mortgage documents that plaintiffs signed at the closing. Park, the defendant Tayseer Razik, and ReMax (collectively the ReMax defendants) moved for summary judgment dismissing the complaint insofar as asserted against them. The Supreme Court granted the motion, and the Second Department affirmed in all respects. The Second Department ruled that the ReMax defendants established their prima facie entitlement to judgment as a matter of law on the second cause of action, alleging misrepresentation as to the mortgage terms, by demonstrating that Park acted as the seller's agent and had no involvement in setting the terms of the mortgages. The Court noted: "Absent a present intent to deceive, a statement of future intentions, promises or expectations is not actionable as fraud" (Lane v McCallion, 166 AD2d 688, 690).” The Court continued: “Further, where the alleged misrepresentation concerns a future matter completely beyond the defendant's control and outside of the defendant's particular knowledge, reliance on the alleged misrepresentation is not justifiable (see Stangel v Zhi Dan Chen, 74 AD3d 1050, 1052-1053; F.A.S.A. Constr. Corp. v Degenshein, 47 AD3d 877, 879).” While the plaintiffs alleged that Park had a present intent to deceive them concerning the mortgage terms and intentionally organized the parties and controlled the transaction, the Second Department found that in opposition to the motion for summary judgment, plaintiffs “relied on mere surmise, suspicion, speculation, and conjecture, which are insufficient to defeat a motion for summary judgment (see Fredette v Town of Southampton, 95 AD3d 939, 940; Jeansimon v Lumsden, 92 AD3d 640, 641; Anesthesia Assoc. of Mount Kisco, LLP v Northern Westchester Hosp. Ctr., 59 AD3d 473, 478).” The Second Department then found it particularly compelling that the mortgage documents that plaintiffs signed contradicted their present claims of fraud, noting that the mortgage documents accurately reflected the mortgage terms. The Court observed: “‘A party who executes a contract is presumed to know its contents and to assent to them’” (Moon Choung v Allstate Ins. Co., 283 AD2d 468, 468; see Pimpinello v Swift & Co., 253 NY 159). ‘An inability to understand the English language, without more, is insufficient to avoid this general rule’ (Holcomb v TWR Express, Inc., 11 AD3d 513, 514; see Pimpinello v Swift & Co., 253 NY 159). It is incumbent upon such parties to make a reasonable effort to have the contract read to them (see Holcomb v TWR Express, Inc., 11 AD3d at 514; Kassab v Marco Shoes 282 AD2d 316; Sofio v Hughes, 162 AD2d 518, 520), and they will be bound by their signatures unless the contents of the document were misread or misrepresented to them (see Pimpinello v Swift & Co., 253 NY at 163; Golden Stone Trading, Inc. v Wayne Electro Sys., Inc., 67 AD3d 731, 733; Cash v Titan Fin. Servs., Inc., 58 AD3d 785, 788; Holcomb v TWR Express, Inc., 11 AD3d 513).” The Court found that “the plaintiffs' submissions demonstrated that, despite having an interpreter present at the closing, they made no effort to have the mortgage documents translated. Accordingly, the plaintiffs failed to raise a triable issue of fact as to whether they justifiably relied on any earlier representations by Park regarding the mortgage terms (see Colasacco v Robert E. Lawrence Real Estate, 68 AD3d 706, 708; Golden Stone Trading, Inc. v Wayne Electro Sys., Inc., 67 AD3d at 733; Daniel Gale Assoc. v Hillcrest Estates, 283 AD2d 386).” The Second Department’s decision is a good summary of the law and a stark reminder that signed contracts will be enforced as written. The courts will flatly reject belated claims by a party who signs a contract that it did not read or understand the contract’s terms.