OPINIONUpon the consent of both parties, a trial was held before an arbitrator of the Civil Court on June 20, 2019. (22 NYCRR §208.41[n][2]). The claimant, Shamel Potter, sought the amount of $1,170.00 in damages allegedly caused by the defendant, City Talk, Inc., fraudulently inducing him to become indebted to a third party. Morris Schekalo (Schekalo), the manager of the store, testified on behalf of City Talk, Inc. Based upon the evidence adduced at trial, the Claimant is awarded $730.00. The Claimant’s CaseOn May 2, 2019, the claimant went to the defendant’s store to purchase a new Apple Watch series 4. Schekalo informed the claimant that the defendant did not have the product in stock but that they had another store location that did have it in stock. Schekalo advised the claimant it would take an hour for the product to be delivered to the defendant’s current location. The claimant agreed to wait. Two hours later, Schekalo notified the claimant that the product had been delivered from the other store and that he would now need to run the claimant’s credit. Schekalo then told the claimant that he did not qualify for installment payments for an Apple Watch series 4 but did qualify for $400.00 in installment payments of $21.50 per month toward the purchase of an Apple Watch series 3 (“the watch”), at the purchase price of $440.00. Schekalo informed the claimant that in order to purchase the watch, he would first need to pay $40.00 toward the purchase price of the watch and then an additional down payment of $53.00 to enroll in the installment payment plan for the balance of the purchase price. There was no mention of interest or any payment in excess of the purchase price. The claimant wanted to rebuild his credit and agreed to accept the installment plan. Schekalo then entered information on a computer, which included the claimant’s debit card information. Schekalo provided the claimant with an Apple Watch series 3 in an open box, claiming that he opened it to show the claimant that the watch was in working condition. Schekalo did not give the claimant a receipt or the purchase agreement. The claimant asked for the receipt and a copy of the purchase agreement. Schekalo retorted that the claimant would receive his papers in an email by the next day.Later in the evening of May 2, 2019, the claimant attempted to connect the watch to his Apple iCloud account via his iPhone. The watch did not sync with the claimant’s iCloud account, but instead it prompted for a password for another iCloud account that was already associated with the watch. The claimant introduced a photograph of the message that showed that the watch was associated with another iCloud account. The claimant then checked his email and saw that the purchase agreement had arrived, but the receipt was not included. The claimant introduced the purchase agreement into evidence. Next to each paragraph of the purchase agreement were the typewritten letters “SP,” and on the signature line at the bottom was the typewritten name “Shamel Potter.” The purchase agreement reads, inter alia:1. The watch is to be purchased by Progressive Leasing;2. The purchase agreement is an agreement to enter into a separate lease agreement with Progressive Leasing;3. The claimant will make weekly payments of $21.50 for a grand total of $1,170.00 to purchase the watch from Progressive Leasing;4. The claimant could accelerate payment and purchase the watch at any time;5. The claimant could return the watch at any time, forfeit the money paid, and cancel any further payments;6. The claimant had five days from the date of purchase to cancel the purchase agreement, return the watch, and receive a full refund;7. “You agree by signing this acknowledgement that you read, understood, and received a copy of this document and your lease agreement.”The next day, May 23, 2019, the claimant returned to the defendant’s store and stated a series of objections to the purchase: (1) the watch was already associated with an existing iCloud account, (2) he was concerned that the watch was either stolen or used, (3) he did not agree to weekly payments of $21.50 for a total of $1,170.00 with Progressive Leasing, and (4) he wanted to cancel the purchase agreement and give back the watch for a full refund. Schekalo refused to take the watch back or give the claimant a refund. Instead, he sent the claimant to his other store location to see if they could do anything to access the watch. When the claimant arrived at the defendant’s other store location, he was told that the watch was a used display model and was attached to the owners iCloud account. After the watch was accessed, the claimant returned to the defendant store and attempted once again to cancel the purchase agreement Again, Schekalo refused to terminate the purchase agreement and give a full refund, stating that the claimant could return the watch only if he forfeited the money he had already paid. The claimant immediately initiated the instant claim. To date, the claimant has not received a copy of the lease agreement.The Defendant’s CaseSchekalo testified that when the claimant arrived, he first checked the claimant’s credit and then informed the claimant that he could only be approved for $400.00 to be paid in installments for an Apple Watch series 3 but not for an Apple Watch series 4. Schekalo could not explain why the claimant’s $400.00 credit approval could only be applied to purchase an Apple Watch series 3 and not an Apple Watch series 4. The claimant agreed to pay $40 in cash and lease the balance. The claimant agreed to lease from a third party, Progressive Leasing. Under the terms of the purchase agreement, he would be charged a low interest rate at the time of signing that would balloon after ninety days, unless the $400.00 was paid in full. Progressive Leasing was a company that the defendant worked with to allow people with bad credit to purchase merchandise at the defendant’s store. Schekalo told the claimant that it was an open box product. He explained the terms of the contract to the claimant and then typed in the claimant’s initials, “SP,” next to each paragraph after confirming that the claimant understood the terms. Schekalo swore that the claimant chose to pay $21.50 per week (equal to $86.00 per month) for the sum total of $1,170.00 instead of three equal monthly payments of $133.34 for the sum total of $400. He did not give the claimant a printed copy of the purchase agreement or allow the claimant to read the computer screen because Progressive Leasing would email a copy of the purchase agreement and lease agreement to the claimant. Schekalo testified that he only gives receipts to customers if they ask for a copy. Schekalo said that the claimant returned to the store the day after the purchase, demanding to return the watch because he was dissatisfied with the weekly payment of $21.50 and because the watch was associated with another existing iCloud account. Schekalo refused to accept the watch, cancel the contract, or refund the claimant’s money. Schekalo told the claimant that he could forfeit the money he had already paid and leave the watch, or he could go to the defendant’s other store to see if they could get the watch unlocked. Schekalo testified that he knew the terms of the purchase agreement “very well,” as he had explained it “many times” to his customers. However, when he explained the terms of the purchase agreement at trial, the explanation did not comport to the plain meaning of the written purchase agreement in evidence. Schekalo stated that the terms of the purchase agreement are that (1) the customer purchases the watch, (2) the accelerated payment is for the balance of the purchase price in the amount of $400.00, (3) the purchase price balloons to $1,170.00 only if the $400.00 balance of the purchase price was not paid off in three months from the date of sale, (4) the purchase agreement could only be cancelled by forfeiting the watch and payments, and no refund was otherwise available, and (5) the defendant is not required to give the claimant a copy of the purchase agreement or lease agreement at any time. None of these assertions are correct. The written terms of the purchase agreement are that (1) Progressive Leasing purchases the watch not the claimant, (2) the lease price is $1,170.00 not $400.00, (3) the accelerated payment is for the full lease price of $1,170.00 and not $400.00, (4) the contract could be cancelled for a full refund within five days of purchase, and (5) the claimant agrees to have read and receive both the purchase agreement and lease agreement prior to signing the purchase agreement. Although Schekalo knew the instant trial was related to a contractual dispute with the claimant’s purchase agreement, he did not bring a copy of the purchase agreement, lease agreement, or any other document regarding the transaction with the claimant at the time of trial. Findings of Fact In determining the intentions of the parties when they negotiated the purchase agreement, the evidence adduced at trial turns in large part upon the credibility of the claimant and Schekalo. The claimant’s testimony was detailed and credible. (Telsey v. Harris Water Main & Sewer Contractors, Inc., 51 Misc.3d 146[A] [App. Term 2d Dep't. 2016]). The findings of fact are as follows: The claimant went to the defendant’s store to purchase a new Apple Watch series 4. The defendant offered the claimant an Apple Watch series 3 at the cost of $440.00. The claimant accepted the Apple Watch series 3. The payment terms offered by the defendant was that if the claimant paid $40.00 up front, and for an additional $53.00 down payment, he could pay the remaining $400.00 in monthly installments of $21.50 to the defendant. However, these terms were never made part of the written purchase agreement. According to the written purchase agreement, Progressive Leasing purchased the watch from the defendant for an undisclosed amount and required that the claimant make weekly payments of $21.50 for a grand total of $1,170.00 to Progressive Leasing. The claimant was not given an opportunity to read the written purchase agreement, did not sign, or cause to be electronically signed, the purchase agreement, and did not agree to lease from Progressive Leasing. Schekalo intentionally mislead the claimant regarding numerous material terms of the contract. The claimant then paid $93.00 to unknowingly lease the watch from Progressive Leasing. The lease terms required payment of $21.50 per week for a total of $1,170.00, after which, the claimant would own the watch. The claimant has the option to accelerate payment of the $1,170 without penalty and purchase the watch outright, pay the weekly amount, or return the watch, forfeit any money already paid, and terminate the lease. There is no option for the claimant to purchase the watch from Progressive Lease for the offered price of $440.00. The claimant was also given an option to cancel the purchase agreement within five days of the date of purchase. Schekalo intentionally misled the claimant into believe that he had just opened the box to show the claimant that the watch was in working order despite having received it from the defendant’s other store open and already associated with an existing iCloud account. The day after the purchase, the claimant tried twice to cancel the purchase agreement. The defendant refused to accept the watch and refund the claimant’s money on both occasions. The claimant never signed nor received a separate lease agreement from Progressive Leasing.Conclusions of LawTo establish a cause of action for fraud, the claimant must allege that (1) the defendant intentionally made a misrepresentation which the defendant knew to be false or an omission of a material fact, (2) the misrepresentation or omission was made for the purpose of inducing the claimant to rely upon it, (3) there was justifiable reliance on the misrepresentation or material omission, and (4) the claimant suffered an injury as a result. (Ambac Assurance Corporation v. Countrywide Home Loans, Inc, 31 N.Y.3d 569, 578 [2018]). Schekalo, the manager of the defendant’s store, knowingly misrepresented the essential terms of the purchase agreement. The defendant told the claimant that (1) he was purchasing an Apple Watch series 3 for $440.00 and not for $1,170.00, (2) he was purchasing a watch and not a lease agreement, (3) the installment was $21.50 per month and not $21.50 per week, (4) the product was new and not used, and (5) the agreement to make monthly installment payments was with the defendant and not Progressive Leasing. The claimant, a customer at the defendant’s store, justifiably relied upon the misrepresentations made by the defendant. As a result of these misrepresentations and reliance thereon, the claimant became indebted to Progressive Leasing for $1,170.00, almost three times the offered purchase price of the watch. (id.). The misrepresentations were intentional as evidenced by the defendant’s refusal to allow the claimant to read and sign the purchase agreement, and failure to provide the claimant with a copy of the purported lease agreement. Moreover, even if the purchase agreement had been valid, the claimant cancelled the contract the day after purchase and was entitled to a full refund. The defendant breached the terms of the contract by refusing to give the claimant a full refund on May 23, 2019.However, since the claimant is satisfied with the watch, and expressed an intention to retain it after the trial, he should be held to the original offered purchase price of $440.00. (UCC §2-204). Accordingly, the Claimant is awarded $730.00 for the damages caused by the defendant’s fraudulent inducement.The foregoing constitutes the opinion of the arbitrator.Dated: June 25, 2019Jamaica, New York
