Eastside Floor Serv., Ltd. v Ibex Constr., LLC 2012 NY Slip Op 33416(U) August 15, 2012 Sup Ct, New York County Docket Number: /09 Judge: Anil

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1 Eastsde Floor Serv., Ltd. v bex Constr., LLC 2012 NY Slp Op 33416(U) August 15, 2012 Sup Ct, New York County Docket Number: /09 Judge: Anl C. Sngh Cases posted wth a "30000" dentfer,.e., 2013 NY Slp Op 30001(U), are republshed from varous state and local government webstes. These nclude the New York State Unfed Court Systems E-Courts Servce, and the Bronx County Clerks offce. Ths opnon s uncorrected and not selected for offcal publcaton.

2 [* FLED: 1] NEW YORK COUNTY CLERK 08/28/2012 NDEX NO /2009 NYSCEF DOC. NO. 56 RECEVED NYSCEF: 08/28/2012 SUPREME COURT OF THE STATE OF NEW YORK - PRESENT: Justce NEW YORK COUNTY PART.-b... \_ NDEX NO. - v - MOTON DATE ~:...:,.._ MOTON SEQ. NO. CC)\ MOTON CAL. NO. The followng papers, numbered 1 to were read on ths moton to/for Notce of Moton/ Order to Show Cause - Affdavts - Exhbts... PAPERS NUMBERED -en -z 0 en ct w a: C!1 wz (J - = en ~..J :::>..J -, 0 0 LL ~w c :c w~ a: a: a: 0 ~ LL w a: >..J..J :::> LL ~ (J w Q. en w a: en w en ct 0 -z 0 ~ Answerng Affdavts - Exhbts Replyng Affdavts C M. C Y r- N ross- ot1on: J es l ; o Upon the foregong papers, t s ordered that ths moton Dated: 5 L fr[ ~~. -- s Sf:NGH J.S.C. L FNAL DSPOSTON UPREME COURT JUSTttE ~ON-FNAL DSPOSTON --- Check ~.J DO NOT POST [~ REFERENCE :~ SUBMT ORDER/J\JDG 1 SETTLE ORDER/ JUDG.

3 [* 2] SUPREME COURT OF THE ST A TE OF NEW YORK COUNTY OF NEW YORK: AS PART 61 : : x EASTSDE FLOOR SERVCES, LTD, Plantff, : ndex No /09 BEX CONSTRUCTON, LLC and WESTCHESTER FRE NSURANCE COMPANY, Defendants ~ X BEX CONSTRUCTON, LLC,. j Thrd-Party plantff, -aganst- -aganst- ndex No /11 ECLPSE DEVELOPMENT, NC. and EQUNOX HOLDNGS, NC., Thrd-Party Defendants. : x SNGH, J.: :! J n ths acton for breach of contract a~d an account stated, thrd-party plantff, bex Constructon, LLC (bex) seeks dsmssal o(thrd-party defendants Eclpse Development, nc. (Eclpse) and Equnox Holdngs, nc.s (Equnox) frst, second, thrd, fourth, sxth, and seventh, counterclams, pursuant to CPLR 3211 (a) (1), (3) and (7), on the grounds of a defense founded upon documentary evdence, the party assertng the acton does not have the legal capacty to sue,.1 and the pleadng fals to state a cause of acton. : bex s a constructon company authorzed to do busness n the state of New York. Eclpse s a wholly owned subsdary: of Equnox and serves as the constructon manager

4 [* 3] and Equnoxs representatve for the development of Equnox Ftness Clubs. Equnox s a : " Delaware corporaton. t owns and operates ftness centers across the country. t has several locatons n New York Cty, one of whch s located at 208 West 76 1 h Street (Premses). The underlyng acton nvolves a clam by Eastsde Floor Servces, Ltd. (Eastsde) based!. on bexs falure to remt payment for materals and labor provded n the nstallaton of wood floorng at the Premses, as per a subcontractng agreement. t s seekng damages n the amount. of $132,777. bex subsequently commenced a thrd-party acton aganst Eclpse and Equnox for breach of contract and an account stated. bex alleges that on July 30, 2008, Eclpse hred t as the general contractor for a constructon project at the Premses. The partes sgned an agreement (Contract) and bex subsequently entered nto a subcontract agre~ment wth Eastsde. bex further alleges that t tmely commenced performance under the Contract and completed the renovatons at the Premses. However, Eclpse has faled to pay bex for the work completed, despte bexs repeated demand for payment.,j n the answer to the thrd-party complant, Eclpse and Equnox assert that bex had a December 26, 2008 deadlne to complete work at the Premses pror to ts January 2009 openng. The partes agreed to a guaranteed maxmum prce of $7.35 mllon dollars for the work. Eclpse and Equnox devoted a substantal amount of human and fnancal resources to develop, market, and promote the event. Despte bexs assurances, bex faled to complete the project pror to the deadlne. The Premses opened to the publc. on February 12, 2009, and much of the contracted < 1 work remaned ncomplete followng bexs cessaton of the work. After bex dscontnued ts work at the Premses, Eclpse and Equnox were forced to compensate subcontractors for ther 2

5 [* 4] work at the Premses because bex faled to pay them from the desgnated trust account. They also ncurred addtonal costs after several subcontractors fled a mechancs len on the Premses. ~1 ; As a result, Eclpse and Equnox combenced a thrd-party counterclam aganst bex,, allegng causes of acton for fraud, neglgenc~, promssory estoppel, unjust enrchment, breach of contract and volatons of trust provsons of the New York Len Law. They are seekng damages n excess of $3,000,000, together wth nterest, costs, dsbursements, and reasonable attorneys fees. bex argues that t s enttled to dsmssal of Eclpse and Equnoxs counterclams for: (1) fraud, (2) neglgence, (3) promssory estoppel, and (4) unjust enrchment because those clams are duplcatve of the breach of contract clam. bex also argues that Eclpse and Equnox lack standng to assert clams based upon alleged volatons of the New York Len Law because: (1) as owners of the project, the thrd-party defendants are not benefcares wthn the meanng of Artcle 3-A of the Len Law, and (2) pursuant to Len Law 77 (2), the acton s tme-barred. ;: bex also argues that Equnox has no standng to brng a counterclam for breach of contract ; because t s not a sgnatory to the Contract. :!,, Pursuant to CPLR 3211 (a) (1), bex,s enttled s dsmssal of Eclpses frst, second, thrd and fourth counterclams for fraud, neglgence, promssory estoppel and unjust enrchment. The partes transactons are controlled by an; express agreement, and thus ther rghts and labltes are to be determned solely on theores of breach of contract. n order to preval on a moton to dsmss based on documentary evdence, the documents reled upon must defntely dspose of plantffs clam (Blonder & Co. nc. v Ctbank, NA., 28 3

6 [* 5] AD3d 180, 182 [pt Dept 2006]). Secton 4.3; of the Contract1 provdes: "The Contractor shall acheve Substantal Completon of the entre ; w ork not later than December 26, 2008" (Exhbt A 1!. to Affrmaton of Erc P. Blaha, dated Octob~r 12, 2011) (Blaha Aff.). Secton of the Contract further provdes: (Exhbt A to Blaha Aff.). "The sum of the Cost of the Work and the Contractors Fee s guaranteed by the Conttactor not to exceed Seven Mllon Three Hundred Ffty Thousand Dollars and Zero Cents ($7,350,000.00), subject to addtons and deductons by Change Order as provded n the Contract Documents. Such maxmum sum s referred to n the Contrac1Documents as the Guaranteed Maxmum Prce. Costs whch would cause the Guaranteed Maxmum Prce to be exceeded shall be pad by the Contractor wthout rembursement by the Owner" Eclpses frst counterclam s for fraud. Eclpses alleges that bex commtted fraud when t entered nto an agreement wth Eclpse and Equnox to make mprovements to the. Premses by December 2008, for the guaranteed prce of $7.35 mllon dollars, and then faled to :j adhere to those terms. ;! "A fraud clam may coexst wth a breach of contract cause of acton only where the alleged fraud consttutes the breach of a dutyjseparate and apart from the duty to abde by the terms of the contract" (Verzon N. Y, nc. v Optcal Communcatons Group, nc., 91 AD3d 176, [1st Dept 2011 ]). However, as n th.s case, "[a] cause of acton allegng fraud does not.,. 1 The Contract conssts of: AA Document Al ttled "Standard Form of Agreement Between Owner and Contractor where the bass for payment s COST OF THE WORK PLUS A FEE wth a negotated Gua~anteed Maxmum Prce," dated October 21, 2008 (ncludng attachments theren), and accompanyng AA Document A ttled "General Condtons of the Contract for Constructon.: See Exhbt C to Affdavt of Jeffrey M. Wenhaus, dated October 14,

7 [* 6] 1... le where the only fraud clam relates to a breach of contract... A present ntent to deceve must be alleged and a mere msrepresentaton of an ntenton to perform under the contract s nsuffcent to allege fraud" (Ross v DeLoreryzo, 28 AD3d 631, 636 [2d Dept 2006] [nternal quotaton marks and ctaton omtted]). : Eclpse and Equnox do not allege that they were nduceq to enter the agreement by a msrepresentaton of any materal fact collat~ral to the Contract. The allegatons for fraud arse out of the dentcal facts and crcumstances as ther ffth counterclam allegng breach of contract. Any allegaton that there was a msrepresentaton of an ntenton to perform under the contract s nsuffcent to sustan a counterclam allegng fraud n the case at bar (d.). 1., bex s enttled to dsmssal of Eclps~s second counterclam for neglgence. "[M]erely allegng that a party breached a contract because t faled to act wth due care wll not transform a strct breach of contract clam nto a neglgence clam" (Verzon N. Y, nc. v Optcal : Communcatons Group, nc., 91 AD3d at 1 ~O). n ths context, the harm alleged s merely economc and the Court of Appeals has declned to extend a legal duty beyond a contractual.,. oblgaton n cases nvolvng only economc harm (New York Unv. v Contnental ns. Co., 87. NY2d 308 [ 1995]). Thus, "a tort cause of acton that s based upon the same facts underlyng a contract clam wll be dsmssed as a mere duplcaton of the co:tract cause of acton," partcularly where, as here, both seek dentckl damages (Duane Reade v SL Green Operatng Partnershp, LP, 30 AD3d 189, 190 [1st Dept 2006]). bex s also enttled to dsmssal of Eclpses thrd counterclam based on promssory ~ estoppel. A clam for promssory estoppel cannot stand when there s an exstng contract. ~ between the partes (see Susman v Commerzbank Captal Mkts. Corp., 95 AD3d 589, 590 [P 1 5

8 [* 7] Dept 2012]). bex s enttled to dsmssal of Eclps~s fourth counterclam for unjust enrchment. The partes transactons are controlled by an express agreement, and thus "ther rghts and labltes are to be determned solely on theores of br~jach of contract" (Apfel v Prudental-Bache Sec., 81. NY2d 470, 479 [1993]). bex s enttled to dsmssal of Equnoxs ffth counterclam for breach of contract because t lacks legal capacty to sue. n a moton to dsmss, pursuant to CPLR 3211 (a) (3), ] dsmssal wll be granted when the movant e~tablshes that the party assertng the clam lacks legal capacty to sue (see Securty Pac. Natl. ; Bank v Evans, 31 AD3d 278, 279 [ 1 51 Dept 2006]). 1 The doctrne of legal capacty "concerns a ltgants power to appear and brng ts grevance before the court" (d.). Here, t appears that the ssue nvolves Equnoxs standng. Equnox s J not a sgnatory to the Contract alleged to have been breached. Accordngly, Equnox lacks standng to recover damages for sad counterclam. Although Eclpse and Equnox have establshed that they have the legal capacty to sue n the sxth and seventh counterclams, bex ha~ demonstrated ts enttlement to dsmssal of those ;l clams because they are tme-barred under se~ton 77 (2) of the Len Law. As stated above, n a moton to dsmss, pursuant to CPLR 3211 (a) (3), dsmssal wll be granted when the movant establshes that the party assertng the clam lacks legal capacty to sue (see Securty Pac. Natl, Bank v Evans, 31 AD3d 278, supra). "Artcle 3-A of the Len Law creates trust funds out of certan constructon payments or. funds to assure payment of subcontractors, supplers, archtects, engneers, laborers, as well as specfed taxes and expenses of constructonj" (ppolto v TJC Dev., LLC, 83 AD3d 57, 64 [2d J,, 6

9 [* 8] Dept 2011] [ctaton omtted]). Secton 70 defnes trusts created thereunder. t provdes, n part: "The funds descrbed n ths s~cton... receved by a contractor under or n connecton wth a contract for an mprovement of real property, J or home mprovement, or a co.ntract for a publc mprovement n ths state, or receved by a subcontractor under or n coru.ecton wth a subcontract made wth the codtractor for such mprovement of real property ncludng a home mprovement contract or publc mprovement or made wth any subcontractor under any such contract, and any rght of acton for any such funds due or earned or to become due or earned, shall consttute assets of a trust for the purposes provded s secton seventy-one of ths chapter." : (Len Law 70 [ 1 ]). Len Law 77 (1) provdes: "A trust arsng under ths art,ble may be enforced,, 1 by the holder of any trust clam, ncludng any " person subrogated to the rgh(of a benefcary of the trust holdng a trust clam." ; Eclpse and Equnox argue that bex neglected to remt payment to ts subcontractors, ncludng Eastsde, for ther completed work. They alsp allege that n order to save ther own property they were forced to pay a mechancs len due to?exs falure to pay or arrange for drect payment to J sad subcontractors, and thus, they have subrogated rghts and, consequently, standng to enforce the trust. The equtable doctrne of subrogaton "s applcable to cases, [lke here], where a party., :,1 s compelled to pay the debt of a thrd perso~ to protect hs own rghts, or to save hs own property" (Broadway Houston Mack Dev., LLC, v Kohl, 71 AD3d 937, 937 [2d Dept 2010]). Thus, Eclpse and Equnox have demonstrated ther legal rght to assert the sxth and seventh ; counterclams n ths acton. 7

10 [* 9] However, the sxth and seventh counterclams are tme-barred under secton 77 (2) of the Len Law. t provdes n part: "Such acton may be mantaned at any tme durng the mprovement of real property... No such acton shall be mantanable f commenced more than one year after the completon of such mprovement, or n the case of subcontractors or tjlateralman, after the expraton of one year from the date on whch fnal payment Jnder the clamants contract became due, whchever s later, except an acton by the trustee for fnal settlement of hs accounts and for hs dscharge" (Len Law 77 [2]). Heren, the work at the Premses was completed n February Equnox and Eclpse fled an answer to the thrd-party complant along wth ts counterclams on June 16, 2011, a date that was commenced more than one year after the completon of sad mprovements (Exhbt K to Blaha Aff.). Eclpse and Equnox argue that ther sxth and seventh counterclams are tmely under CPLR 203 because they relate back to vrtua(ly dentcal ssues brought by Eastsde n the, underlyng acton. Contrary to Eclpse and Equnoxs contentons, the sxth and seventh 11 counterclams are not saved by CPLR 203. "[C]ounterclams relate back only to the nterposton of the thrd-party complant" (Benedct v Wh.tman Breed Abbott & Morgan, 77 AD3d 867, 869 [2d Dept 20 OJ). Here, the thrd-party compl,ant was nterposed n Aprl As mentoned above, bex ceased ts work n January of 2009, and, thus, CPLR 203 does not prevent the sxth and seventh counterclams from beng tme-barred. Accordngly, t s 8

11 [* 10] ;!.1 : ~ ORDERED bex Constructon, LLC~ moton to dsmss s granted as follows: the frst, < second, thrd, fourth, sxth, and seventh counterclams of the thrd-party complant are dsmssed.1 f aganst Eclpse Development, nc., and the ftst, ffth, sxth and sevenths counterclams of the thrd-party complant are dsmssed aganst Equnox Holdngs, nc.; and t s further - :J. ORDERED that the acton n all other respects contnues Dated: S{ to "-. : 1: : ENTER: J. S. C HON. ANL C. SNGH ; SUPREME COURT JUSTCE ; 1 9

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