Epstein v. Scally

Order, Supreme Court, New York County (Edward J. Greenfield, J.), filed on March 1, 1983, which denied plaintiff’s motion for summary judgment in lieu of a complaint and directed [714] the service of a formal complaint, is affirmed, with costs. Those facts of this case which are uncontested by the parties are fairly stated in the dissent. However, the facts that are at the heart of this dispute are sharply disputed by the parties and thus require a trial, as Special Term correctly held. Defendant has asserted that he was fraudulently induced to execute the promissory note and contract of sale for the purchase of plaintiff’s deceased brother’s medical practice. He claims that plaintiff made oral representations that the medical practice was comprised of 891 active patients and underscored that representation with the assurance that he was familiar with his brother’s practice and was certain the numbers would bear out. Defendant asserts that when he questioned the accuracy of the representation that there were 891 active patients, he was refused access to the patient charts and patient cards. Based upon his experience as a practicing doctor and taking into account the representations made, defendant calculated that 20%, or approximately 180, of the active patients were chronic patients and would require treatment approximately once every two months. He determined that the 90 chronic patient visits per month together with “regular” patient visits would translate into 25 patient visits per week. However, it developed that he saw no more than 10 patients a week. Defendant counted the patient cards received from plaintiff and found only 752, approximately 16% fewer than the number represented by plaintiff. He wrote to each of the 752 patients on file. Some 40% of these letters were returned as undeliverable. Various reasons for the drop-off are asserted, including the fact that some patients had moved from the address on file and left no forwarding address, and some were dead, one apparently for some three years. Thus, defendant claims that plaintiff’s representations as to the number of active patients, upon which he relied, was false and that he was fraudulently induced thereby to enter into the transaction. He claims to have been misled by these representations into believing the practice was more valuable than it in. fact was. While plaintiff denies having made any representations, he relies primarily upon the assertion that defendant is barred from claiming any reliance on any representation because of the contract of sale provision which recites that defendant had examined all the property sold (including all records of patients and furniture, furnishings and equipment), and accepted the same “as is”, a position adopted by the dissent. We disagree and at the outset, remark again that summary judgment is a drastic remedy, the procedural equivalent of a trial (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 404), and should not be granted where triable issues of fact are raised that cannot be resolved on conflicting affidavits. Issue finding, not issue determination, is the appropriate function of summary judgment (Magi Communications v Jac-Lu Assoc., 65 AD2d 727; Schoolsky v Dalvin, 51 AD2d 1026). If in fact made, as claimed by defendant, plaintiff’s alleged representation that there were 891 active patients of the practice would be a substantial and material representation as to an existing fact and would bear directly upon the value of the practice. This allegation, in our view, sufficiently raises issues of fact to warrant a trial. The dissent’s reliance on the “as is” clause in the agreement as establishing irrefutably that no such representation was made is misplaced. Whether the language of the disclaimer is “sufficiently explicit as to subject matter”, as to warrant the conclusion that it was meant to refer to the number of patient cards, is subject to question. Nevertheless the critical factor in respect to the representation is not alone that the number of patients was 16% less than the 891 claimed, but that some 40% of the 752 patients apparently were not active patients. Thus the practice was of a significantly lesser value, a fact that may have not been apparent from an examination of the patient cards. Moreover, an “as is” disclaimer more generally relates to the physical condition of identified goods in a sales [715] contract rather than the inherent worth or value of the goods. (Pete’s Corner v E-Miljud, Inc., 84 AD2d 761.) In Pete’s Comer (supra), plaintiff sought to recover damages for fraud based on defendant’s misrepresentation as to the value of a business inventory under a contract in which plaintiff specifically stated that it had inspected the inventory, was familiar with it and its condition, and was taking it “as is”. The court held that although the provisions of the contract “would be adequate to bar plaintiff from bringing this action were it contesting either quantity or quality of the inventory, the same cannot be said where the action is one seeking damages for fraudulent representations as to value.” The fact that defendant may have examined and accepted the medical records “as is”, if that is indeed the fact, does not preclude evidence of a misrepresentation as to the value of the practice. It is the number of active patients, i.e., those who regularly patronize the medical practice, that gives evidence of the value of the practice. Concur — Sandler, J. P., Ross, Asch and Alexander, JJ.