Houlihan/Lawrence, Inc. v. Duval

In Houlihan/Lawrence, Inc. v. Duval (228 AD2d 560 [2d Dept 1996]), the plaintiff, a real estate broker, represented to the defendant that the residence he was purchasing was designed by a renowned architect. The defendant purchaser refused to pay the commission because, upon resale, he allegedly realized a reduced sale price because of the real estate broker's inability to prove the representations about the design of the house. The Supreme Court had dismissed the counterclaim for negligent misrepresentation because the parties were not in privity and did not have any kind of special relationship necessary for the imposition of liability. (Id., at 561.) The Appellate Division found that the court had erred in finding, as a matter of law, that the relationship between the parties was insufficient. The Court reasoned, "the evidence submitted in opposition to the motion demonstrated that the plaintiff allegedly misrepresented the authenticity of the design of the house to a known party with whom it had personal, direct dealings and whose reliance thereupon could be reasonably anticipated." (Id., at 562.) The Second Department described the standard in cases of negligent misrepresentation: "There may be liability for negligent misrepresentation where there is a relationship between the parties such that there is an awareness that the information provided is to be relied upon for a particular purpose by a known party in furtherance of that purpose, and some conduct by the declarant linking it to the relying party and evincing the declarant's understanding of their reliance ... To state it somewhat more succinctly, the relying party 'must have been a person for whose use the representation was intended' or 'he must at least have been a member of some very small group of persons for whose guidance the representation was made'." (Id., at 561 .)