Opinion
19643/06.
Decided December 18, 2007.
Ashley Normand, Esq., Brill Meisel, New York, New York, Attorney for Plaintiff.
Robert T. Holland, Esq., Belkin Burden Wenig Goldman LLP, New York, New York, Attorney for Defendant.
In this action by plaintiff Board of the Arches at Cobble Hill Condominium (plaintiff) alleging various causes of action arising out of the conversion and sale of residential apartments at the condominium development known as the Arches at Cobble Hill (the Arches), defendants Hicks Warren, LLC (H W), 397 Hicks Street, LLC (397 Hicks), Triangle Equities Development Company, LLC (Triangle), and Lester Petracca (Petracca) move for summary judgment dismissing plaintiff's second, ninth, and tenth causes of action as against H W, and dismissing plaintiff's second, sixth, seventh, eighth, ninth, and tenth causes of action as against 397 Hicks, Triangle, and Petracca. Plaintiff cross-moves for summary judgment in its favor as against H W on its fourth, fifth, sixth, seventh, eighth, and ninth causes of action, and as against Triangle on its fourth and fifth causes of action. Plaintiff's cross motion, in the alternative, seeks an order, pursuant to CPLR 3212 (g), deeming certain facts admitted and undisputed. Plaintiff's cross motion additionally seeks an award of sanctions and costs pursuant to Rules of the Chief Administrator (22 NYCRR) § 130-1-1 et seq.
On June 29, 2001, Triangle formed H W for the purpose of acquiring real property located at 397 Hicks Street and 101-117 Warren Street, in Brooklyn, New York. The sole members of H W are 397 Hicks and St. Peters LLC (St. Peters). The majority member of 397 Hicks is Petracca (who is also Triangle's principal and president), and the sole member of St. Peters is Stanley Listokin (Listokin). The real property acquired by H W consisted of a rehabilitated church structure, a rectory, and a nursing academy. In order to reconstruct the premises into a residential complex, containing 59 units located on the basement through fifth floors with a street level lobby and three shared garden courtyards, H W, as the owner, entered into a construction contract, dated October 18, 2002, with the Stegla Group, Inc./ White Rose Contracting, Inc. (Stegla), as the contractor, for this renovation of the premises (the Stegla contract). Scarano Associates (Scarano) was the architect for the project.
H W prepared and submitted an Offering Plan for the purpose of converting the premises to condominium ownership. The Sponsor's Certification of the Offering Plan, sworn to on June 19, 2003, was certified by H W, by 397 Hicks, as manager, and executed by Petracca, as 397 Hick's member. It was also entered into by H W's members, i.e., 397 Hicks and St. Peters LLC, and executed by Petracca, as 397 Hick's member, and by Petracca, individually, and by Listokin, as St. Peter's member, and by Listokin, individually. The Offering Plan was accepted for filing with the Attorney General in October 2003. H W was the sponsor and selling agent for the premises, pursuant to the Offering Plan for the sale of the residential units, which was dated October 20, 2003 and subsequently amended. On October 23, 2003, H W presented the Offering Plan to proposed purchasers and commenced the Offering for sale of the residential units at the premises.
Under the Offering Plan, prospective unit owners entered into Purchase Agreements with H W, as the seller, under which the purchasers agreed to purchase their condominium units, together with the undivided interest in the common elements appurtenant thereto, as depicted in the Offering Plan. Upon the closing, each unit owner received a written Limited Warranty (Rider 2 to Purchase Agreement) from H W. Title to the first unit was transferred on or about January 24, 2005.
Petracca concedes that Stegla and its subcontractors failed to perform their work on the renovations in connection with the residential condominium project in accordance with the requirements of the Stegla contract. By letter dated February 17, 2005, H W declared Stegla to be in default of its contractual obligations and terminated the Stegla contract. H W, in its February 17, 2005, letter, enumerated various alleged substantial breaches of the Stegla contract by Stegla. By a Demand for Arbitration dated February 18, 2005, H W commenced an arbitration proceeding concerning its breach of the Stegla contract and for fraud as against Stegla, which is presently ongoing.
Plaintiff is the Board of Managers of the Arches, which represents the Arches' owners, and it is empowered to maintain an action on their behalf as to causes of action relating to the common elements of more than one unit ( see Real Property Law § 339-dd; Residential Bd. of Mgrs. of Zeckendorf Towers v Union Sq. — 14th St. Assoc., 190 AD2d 636, 636). On June 30, 2006, plaintiff filed this action as against H W, 397 Hicks, St. Peters, Listokin, Petracca, Triangle, Stegla, Scarano, and others.
Plaintiff's 74-page complaint alleges 18 causes of action, seeking monetary damages. The first, second, fourth, fifth, sixth, seventh, eighth, and ninth causes of action are asserted against both "the Sponsor" and "the Developer." The term, "the Sponsor," is used by plaintiff to be inclusive of H W, 397 Hicks, Petracca, St. Peters, and Listokin. The term, "the Developer," is used by plaintiff to mean Triangle and Petracca. The third cause of action is asserted against the Sponsor, the Developer, and Tracy Petracca (Tracy) (who is Petracca's wife), and Brett Goldman (Goldman) (who is Triangle's Director of Acquisitions and an agent for both Triangle and H W) both of whom served on the Arches' Board of Managers at H W's designation prior to the election of the first resident Board on July 26, 2005. The tenth cause of action is asserted solely as against the Sponsor. The balance of the causes of action are asserted as against Stegla, Scarano, and other defendants. H W, 397 Hicks, Triangle, Petracca, Tracy, and Goldman interposed an answer dated August 31, 2006. H W has asserted cross claims, seeking contribution and/or indemnification from both Stegla and Scarano.
By decision and order dated February 20, 2007, this court granted a motion by Stegla to dismiss plaintiff's complaint as against it, pursuant to CPLR 3211 (a) (1) and (7), on the ground that plaintiff was not a third-party beneficiary of the Stegla contract. The court, by that decision and order, additionally granted a motion by St. Peters and Listokin for an order dismissing plaintiff's second, third, sixth, seventh, eighth, ninth, and tenth causes of action as against them.
H W, 397 Hicks, Triangle, and Petracca, by their motion, do not seek dismissal of plaintiff's first cause of action for fraud, deceit, and misrepresentation; plaintiff's fourth cause of action for deceptive trade practices under General Business Law § 349; or plaintiff's fifth cause of action for false advertising under General Business Law § 350. H W, 397 Hicks, Triangle, and Petracca, in support of their motion, relying upon this court's February 20, 2007 decision and order, argue that plaintiff's second, third, sixth, seventh, eighth, ninth, and tenth causes of action should be dismissed as against 397 Hicks, Triangle, and Petracca, and that the second, ninth, and tenth causes of action should be dismissed as against H W based upon the same grounds that they were dismissed as against Listokin and St. Peters.
Plaintiff's sixth cause of action alleges a claim for breach of contract against H W, 397 Hicks, Triangle, and Petracca based upon a breach of the Purchase Agreement entered into by each unit owner of the Arches. Plaintiff's seventh cause of action asserts a claim of breach of express warranties against H W, 397 Hicks, Triangle, and Petracca based upon the representations made in the Offering Plan, which were incorporated into the Purchase Agreement. Plaintiff's eighth cause of action sets forth a claim for breach of implied warranties against H W, 397 Hicks, Triangle, and Petracca based upon implied warranties under General Business Law § 777a, which, it alleges, these defendants were obligated to provide, as part of the individual unit owners' Purchase Agreements.
397 Hicks, Triangle, and Petracca argue that only H W was the sponsor and selling agent for the condominium conversion. They assert that only H W was a party to the Offering Plan and Purchase Agreements, and that H W was the only entity which gave any written warranty in connection with the sale of units in the Arches. They contend that, therefore, only H W was in privity of contract with plaintiff.
397 Hicks asserts that, like St. Peters, it is only a member of H W, a limited liability company, and it is, thus, statutorily shielded from individual liability ( see Limited Liability Company Law § 609). Petracca claims that, like Listokin, he is merely a member of 397 Hicks and is, thus, even further removed from individual liability. Petracca further claims that Triangle is only an entity in which he is the principal, but which was not involved in the condominium's conversion, and that it, therefore, should be exempt from any liability.
In rendering its February 20, 2007 decision and order, the court relied upon the statutory exemption, given to a member of a limited liability company, from individual liability for the contractual obligations of the limited liability company ( see Limited Liability Company Law § 609; Retropolis, Inc. v 14th St. Dev. LLC , 17 AD3d 209, 210; Collins v E-Magine, LLC, 291 AD2d 350, 351; Hamlet on Olde Oyster Bay Home Owners Assn. v Holiday Organization, 12 Misc 3d 1182 [A], 2006 NY Slip Op 51378 [U], *15 [2006]). The court thus found that since H W was a properly formed limited liability company, St. Peters, as its member, could not be held liable for H W's contractual obligations, and Listokin, who was even further removed from H W, as St. Peter's member, also could not be held liable for H W's contractual obligations. Consequently, as St. Peters and Listokin were not parties to the Purchase Agreements with the residential owners of the condominium units represented by plaintiff, the court ruled that privity of contract between these parties and plaintiff was lacking. It, therefore, dismissed plaintiff's sixth, seventh and eighth causes of action against St. Peters and Listokin since they cannot be maintained in the absence of privity.
Triangle and Petracca, however, do not stand in the same positions as St. Peters and Listokin. Specifically, plaintiff's complaint alleges that the Developer, i.e., Triangle and Petracca, shared common ownership, officers, directors, members, and other personnel with H W; provided inadequate capitalization of H W; commingled their assets with those of H W; lacked separate paraphernalia indicative of the corporate form; exercised complete dominion over H W with respect to the Arches, which was H W's only business operation; and used H W as a mere instrumentality, and as their agent and alter ego. These allegations, if supported, could establish a basis upon which to pierce H W's corporate veil ( see International Credit Brokerage Co. v Agapov, 249 AD2d 77, 78).
" Generally . . . piercing the corporate veil requires a showing that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in [the] plaintiff's injury'" ( Shisgal v Brown , 21 AD3d 845, 848; quoting Matter of Morris v New York State Dept. of Taxation Fin., 82 NY2d 135, 141; Williams Oil Co. v Randy Luce E-Z Mart One, 302 AD2d 736, 739-740). Usually considered in determining whether to pierce the corporate veil and hold the corporation liable for the acts of another are such factors as whether there is an overlap in ownership, officers, directors, and personnel, inadequate capitalization, a commingling of assets, or an absence of separate paraphernalia that are part of the corporate form ( see John John, LLC v Exit 63 Dev., LLC , 35 AD3d 540 , 541; Matter of Island Seafood Co. v Golub Corp., 203 AD2d 892, 893-894). The doctrine of piercing the corporate veil applies to limited liability companies ( see Retropolis, Inc., 17 AD3d at 210; Williams Oil Co., 302 AD2d at 739-740).
While plaintiff's complaint raises allegations as to whether H W is the corporate alter ego of Triangle and Petracca, the issue of piercing the corporate veil was not before the court in ruling on St. Peters and Listokin's motion to dismiss as there were no allegations contained in plaintiff's complaint which alleged any piercing of the corporate veil theory with respect to St. Peters or Listokin. Thus, the previous analysis of the sixth, seventh, and eighth causes of action, as asserted against St. Peters and Listokin, cannot be applied pro forma to Triangle and Petracca as the circumstances and involvement of these parties differ.
It is well settled that where individual business owners and affiliated businesses ignore or abuse the corporate form, courts will preclude them from hiding behind it in order to shield themselves from personal liability to third parties ( see Shisgal, 21 AD3d at 848; Matter of Island Seafood Co., 303 AD3d at 893-894; Williams Oil Co., 302 AD3d at 739-740). Moreover, where a related business holds itself out as creating, controlling, or being responsible for certain premises, that entity may be held liable for claims asserted against it under a veil-piercing theory ( see Weinstein v Willow Lake Corp., 262 AD2d 634, 635).
Petracca and Triangle assert that plaintiff's piercing of the corporate veil theory is predicated on nothing more than speculation, innuendo, and conjecture. Petracca, however, admits that H W, Triangle, and 397 Hicks (of which Petracca is a member) have the same office address as well as common employees and agents. Petracca does not assert that these entities conduct substantially different businesses. Furthermore, as noted above, Triangle formed H W to acquire the subject real property, and Petracca was personally involved as a Board member on the Arches' original three-person Board prior to the election of the first resident Board by the unit owners on July 26, 2005.
Contrary to Petracca's assertion that Triangle was not involved in the condominium's conversion, plaintiff has submitted evidence that Triangle has and continues to hold itself out as the owner and manager of the Arches. Triangle's website boasts that the Arches is one of the real estate projects it owns. Triangle's "Property Portfolio" section on its website lists the Arches first among its residential properties, with a photograph of an interior at the Arches, and a detailed description of these residences. Absent is a reference to H W in this statement or anywhere else on Triangle's website. Rather, Triangle describes itself, in its "Corporate Overview" section on its website, as "both an owner as well as an investor in the real estate projects it develops."
Triangle's "Residential Group" section on its website is further indicative of its role as an owner and investor in the Arches. After generally stating that Triangle "creates value through a wide range of housing projects," it further states that "[o]ne project in particular has distinctive quality and character," specifically referring to the Arches as "an example of Triangle's ability to not only transform an underutilized building, but to contribute to a landmarked district." Additionally, the Arches at Cobble Hill's sales website (which is now defunct) claims, on its introductory pages, that "[t]he Arches at Cobble Hill's is a Triangle . . . residential development" (with a link to Triangle's website). No where does this website identify H W. Indeed, the website's designer identifies the developer, Triangle, as its client.
Moreover, James Lotito (Lotito), a member of plaintiff, in his sworn affidavit, attests that Goldman, who (as noted above) is Triangle's Director of Acquisitions, advised him, around the time that he purchased his apartment, that the Arches was owned and developed by Petracca (who, as noted above is Triangle's president) and Triangle. Lotito asserts that in the months and years following the purchase of his apartment, his dealings (both individually and as a member of the Arches' Board of Managers) with H W have always been conducted through Goldman, who has regularly communicated with the Arches' Board using his Triangle e-mail address. In addition, the Arches' December 2004 application for New York Workers' Compensation and Employers' Liability Insurance identifies Goldman as the Arches' alleged "Developer" and also as the Arches "proprietor" or "executive officer," working from 36-56 Whitestone Expressway.
There is evidence that the other residents of the Arches also directed their complaints to Triangle. For example, when unit owners faced problems with rotten flooring, leaks, and other deficiencies, they dealt with Goldman and Petracca at Triangle. The minutes of a July 7, 2005 meeting to discuss the turnover of the original Board (i.e., Petracca, Goldman, and Tracy) to the resident Board indicate that Triangle was the entity that would be directly responding to complaints, and that Goldman indicated that "they [i.e., Petracca, Goldman, and Tracy] w[ould] stay until the work is completed." In fact, it specifically recommended that "everyone should get their complaints in now with Triangle." A "recap" to an August 18, 2005 Board meeting agenda, shows that, on that date, residents and the Arches' Board were still dealing with Goldman, as a Triangle employee, to obtain help with irrigation problems, teak benches in outdoor spaces, repainting the gates, fixing the gutters, and helping correct HVAC problems. It also states that "Triangle continues to hire contractors doing shoddy work."
" Veil piercing is a fact-laden claim that is not well suited for summary judgment resolution'" ( Damianos Realty Group, LLC v Fracchia , 35 AD3d 344 , 344, quoting First Bank of Ams. v Motor Car Funding, 257 AD3d 287, 294; see also Forum Ins. Co. v Texarkoma Transp. Co., 229 AD2d 341, 342). Before dismissal can be granted, a plaintiff is entitled to obtain necessary discovery to ascertain whether there are grounds to pierce the corporate veil ( see First Bank of Ams., 257 AD2d at 294; Aubrey Equities v SMZH 73rd Assoc., 212 AD2d 397, 398).
Here, plaintiff, on January 4, 2007, served Petracca, Triangle, and H W with a notice for discovery and inspection, which included demands for documents pertinent to establishing an alter-ego relationship among Petracca, Triangle, and H W. Plaintiff asserts that these defendants did not produce responses to its document demands, and that it needs such documents, which are in the defendants' exclusive possession, in order to properly respond to their instant motion. In view of plaintiff's need for discovery (which these defendants have failed to provide), the court has ordered that discovery continue, during the pendency of this motion.
Pursuant to CPLR 3212 (f), summary judgment will not be granted where "facts essential to justify opposition may exist but cannot [presently] be stated." Thus, summary judgment will be denied as premature where the parties have been unable to undertake sufficient discovery, since absent discovery, the facts upon which the summary judgment motion is predicated lie exclusively within the knowledge of the moving party ( see Giarguaro S.p.A. v Amko Intl. Trading, 300 AD2d 349, 350; First Bank of Ams., 257 AD2d at 294; Aubrey Equities, 212 AD2d at 398).
In the case at bar, plaintiff seeks to pierce the corporate veil and has demanded the discovery of documents which would tend to prove the factual allegations in its complaint that Triangle and Petracca served as H W's alter ego. Therefore, inasmuch as additional evidence of these defendants' abuse of the limited liability company form lies in their exclusive possession, an opportunity for further discovery must be afforded to plaintiff ( see CPLR 3212 [f]; Giarguaro S.p.A, 300 AD2d at 350; First Bank of Ams., 257 AD2d at 294; Aubrey Equities, 212 AD2d at 398). In this regard, it is noted that in a decision and order dated April 11, 2006 in a Civil Court action commenced by Lotito against H W and Triangle based on breach of warranty, Judge Bernard J. Graham denied a motion to dismiss by Triangle. In doing so, Judge Graham observed that Triangle had "admit[ted] that [it] and [H W] share a common principal or principals and [Lotito] ha[d] offered evidence in his opposition [papers] that Triangle . . . may hold itself out as an owner-developer relative to the underlying claim." Judge Graham, therefore, ruled that it was premature to dismiss Triangle from that action.
A complaint which seeks to pierce the corporate veil should be upheld unless it can be said that it " is totally devoid of solid, nonconclusory allegations'" ( International Credit Brokerage Co., 249 AD2d at 78, quoting Sequa Corp. v Christopher, 176 AD2d 498, 498; see also Whitmore Group Ltd. v Zurich Am. Ins. Co., 11 Misc 3d 1069 [A], 2006 NY Slip Op 50440 [U], *4 [2006]). In the case at bar, the complaint is not so totally devoid of such allegations so as to warrant its dismissal prior to affording plaintiff an opportunity to request outstanding discovery ( see CPLR 3212 [f]; Giarguaro S.p.A., 300 AD2d at 350; First Bank of Ams., 257 AD2d at 294; International Credit Brokerage Co., 249 AD2d at 78; Aubrey Equities, 212 AD2d at 398). Indeed, plaintiff has already made evidentiary submissions to support that a basis for its piercing of the corporate veil theory exists with respect to Triangle and Petracca ( see Shisgal, 21 AD3d at 849; Williams Oil Co., 302 AD2d at 739-740; Forum Ins. Co., 229 AD2d at 342). Therefore, since plaintiff has privity of contract with H W and it has sufficiently alleged that H W exists as the alter ego of Triangle and Petracca so as to support a piercing of the corporate veil theory, plaintiff may, at this juncture, maintain its sixth, seventh, and eighth causes of action as against Triangle and Petracca.
397 Hicks, however, is not included in the complaint's definition of "the Developer" and no piercing of the corporate veil allegations are made with respect to it. Plaintiff has not alleged, in its complaint, that 397 Hicks is the alter ego of H W nor does it make any specific allegations as to 397 Hicks in response to this motion. Thus, 397 Hicks, as a member of a limited liability company, H W, is statutorily exempted from individual liability for the contractual obligations of H W ( see Limited Liability Company Law § 609; Retropolis, Inc., 17 AD3d at 210; Collins, 291 AD2d at 351). Consequently, plaintiff's sixth, seventh, and eighth causes of action must be dismissed as against 397 Hicks.
Plaintiff's third cause of action alleges a breach of fiduciary duty, waste, and mismanagement based upon the failure to repair construction defects "in accordance with the terms of the Plan." To the extent that this claim sounds exclusively in contract with respect to the Sponsor and Developer Triangle, it is redundant of other causes alleged against those defendants and should be dismissed as to them. Insofar as the third cause of action alleges a self-serving breach of fiduciary duty by the Sponsor-designated individual Board members, including, Tracy, Goldman, and Petracca, individually, all three of whom served on the three-person Arches' Board prior to the election of the first resident Board on July 26, 2005, since a board member has a fiduciary duty to the residential unit owners, this cause of action may be maintained as against them ( see Board of Mgrs. of Acorn Ponds at Hills Condominium I v Long Pond Invs., 233 AD2d 472, 472-473; Board of Mgrs. of Fairways at N. Hills Condominium v Fairways at N. Hills, 193 AD2d 322, 324-325).
Plaintiff's ninth cause of action alleges a breach of the covenant of good faith and fair dealing. It asserts that by refusing to repair and correct the alleged defects found in the buildings and by failing to provide items promised in the Offering Plan and/or promotional materials, H W, 397 Hicks, Triangle, and Petracca have breached this covenant. However, "all contracts imply a covenant of good faith and fair dealing in the course of performance" ( 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 153). While plaintiff argues that this claim is somehow distinct from its breach of contract claim, the conduct of which it complains is also the predicate for its breach of contract claims and alleges the same damages. Thus, it must be dismissed as redundant and duplicative of its breach of contract claim ( see Pludeman v Northern Leasing Sys., Inc. , 40 AD3d 366 , 368).
Plaintiff's second cause of action alleges a claim of negligence in that H W, Triangle, Petracca, and 397 Hicks purportedly negligently disseminated the Offering Plan, the Architect's Report and certification, and the promotional materials, which were allegedly inaccurate with respect to the condition of the premises. These allegations of negligent conduct pertain to representations contained in the Offering Plan and are barred by the Martin Act ( see Rego Park Gardens Owners v Rego Park Gardens Assoc., 191 AD2d 621, 622). To the extent that plaintiff has any claim regarding the promotional materials, this cause of action is subsumed within its fourth and fifth causes of action of which this cause of action is duplicative. There is otherwise no evidence of a duty running from these defendants to plaintiff independent of the contractual obligations stemming from the Purchase Agreements, which are subsumed within plaintiff's sixth cause of action for breach of contract ( see Clark-Fitzpatrick, Inc. v Long Is. R. R. Co., 70 NY2d 382, 389). Consequently, dismissal of plaintiff's second cause of action is warranted ( see CPLR 3211 [a] [3], [7]; 3212 [b]).
Plaintiff's tenth cause of action alleges a claim for breach of Real Property Law § 339-p, which requires that the floor plans of the building must be filed in the office of the recording officer, simultaneously with the recording of the declaration of condominium, showing the layout, location, and approximate dimensions of the unit. Plaintiff alleges that these floor plans have never been filed and that H W, Triangle, Petracca, and 397 Hicks have, therefore, violated Real Property Law § 339-p. While plaintiff asserts that H W was the sponsor and, therefore, had an obligation to file these floor plans, and that Petracca and Triangle also each had this obligation, as H W's alter ego, any such failure to file does not create a private right of action to sue for damages. Consequently, this cause of action must be dismissed ( see CPLR 3211 [a] [7], 3212).
Plaintiff, in its cross motion, seeks partial summary judgment in its favor on its fourth and fifth causes of action as against H W and Triangle, and on its sixth, seventh, eighth, and ninth causes of action as against H W. Plaintiff's fourth cause of action alleges deceptive trade practices under General Business Law § 349 based upon the dissemination of the promotional materials to potential purchasers of the condominium units. It asserts that the representations in the promotional materials were false and misleading. Plaintiff's fifth cause of action alleges a claim for false advertising under General Business Law § 350 due to the dissemination of the promotional materials. It asserts that the omissions and statements in the promotional materials constituted false advertising. As noted above, plaintiff's sixth, seventh, and eighth causes of action allege claims for breach of contract, breach of express warranty, and breach of implied warranty, respectively.
Plaintiff's ninth cause of action has been dismissed as set forth above.
To support its cross motion, plaintiff points to the fact that Petracca admitted, in his affidavit, that "Stegla and its subcontractors failed to perform their work on the renovations in accordance with the requirements of the construction contract between [H W] and Stegla," and that "on or about February 18, 2005, [H W] declared Stegla in default of its contractual obligations and terminated the construction contract." Plaintiff further points to the fact that Petracca's letter dated February 17, 2005, which terminated the Stegla contract, read as follows:
"Stegla's substantial breaches of the Contract include, but are not limited to, its failure to (a) complete construction of the Project by the scheduled completion date; (b) adequately supply and mobilize sufficient properly-skilled workers to construct the Project; (c) perform the work in accordance with the Contract Documents; (d) perform the work in a good and workmanlike manner, free from fault or defects; (e) make payments to its subcontractors; and (f) arrange for the prompt satisfaction or discharge of record of all mechanics' liens."
The Stegla contract dated October 18, 2002 states that "[t]he Work . . . includes sitework and building construction required for the renovation and rehabilitation of existing space previously used as a Church, rectory, and school into a residential condominium complex," and it is undisputed that the scheduled completion date had passed some time prior to February 17, 2005. Plaintiff points out that H W closed on its contract with Lotito just three days before it terminated the Stegla contract based on a failure to build to specifications. Plaintiff asserts that despite the termination of the Stegla contract, H W and Triangle continued to engage in selling activities after February 17, 2005, and used the promotional materials toward their desired ends with the full knowledge that these promotional materials made false promises.
On December 27, 2006, plaintiff and several individual unit owners were served with a complaint by Stegla, alleging a mechanic's lien foreclosure seeking more than $3 million in outstanding monies due for the performance of work and furnishing of materials under the construction contract between Stegla and H W. Plaintiff states that it has had to incur additional attorneys' fees to appear in that action.
Plaintiff argues that all of the foregoing shows that H W (and Petracca and Triangle under an alter-ego theory) had failed to meet their obligations under the Offering Plan's section 18 (i) and (j), under the Architect's Report, and under the Sponsor's certification. Plaintiff contends that it has thus established its entitlement to summary judgment on its breach of contract and breach of express and implied warranties claims (its sixth, seventh, and eighth causes of action). Plaintiff also contends that H W and Triangle's continued dissemination of the promotional materials, after the contract with Stegla had been terminated, establishes its entitlement to summary judgment on its General Business Law § 349 and § 350 claims (its fourth and fifth causes of action).
Plaintiff alternatively seeks an order, pursuant to CPLR 3212 (g), declaring that it is admitted and undisputed that H W sold units in the Arches' to the individual purchasers with full knowledge that: (1) the Arches' construction job remained incomplete as of the time individual unit owners closed on their condominium units, (2) the Arches construction job was not adequately staffed with sufficiently skilled workers, (3) the Arches was not constructed in accordance with the Stegla contract (which was referenced in the Offering Plan and the individual Purchase Agreements), (4) the Arches was not constructed in a good and workmanlike manner free from fault or defects, (5) subcontractors performing work on the Arches were not and remain unpaid, and (6) mechanic's liens, which are H W's obligation, have not been discharged as pertains to the work on the Arches.
In opposition, H W does not dispute that it terminated Stegla by letter dated February 17, 2005 due to Stegla's defaults in complying with its obligations under the Stegla contract. However, Petracca, in his affidavit, asserts that after Stegla was terminated, H W undertook to complete the renovations itself, using its own subcontractors. H W contends that the renovations were thereafter substantially completed in accordance with the requirements of the Offering Plan, and all that remained to be done, at the time this action was commenced, was various "punch list" work. H W and Triangle dispute that they engaged in any deceptive trade practices or any false advertising with respect to the Arches or that H W breached its contractual obligations.
In response, plaintiff points out that H W fails to identify the subcontractors it hired, the work that was allegedly undertaken, and the dates on which this work was started or completed. However, the issue of whether renovations were completed in accordance with the Offering Plan and whether H W delivered possession of the condominium as required under the Offering Plan is at the crux of the dispute between plaintiff and defendants. Thus, inasmuch as triable questions of fact exist as to this issue, plaintiff's contract-based causes of action (its sixth, seventh, and eighth causes of action) cannot be summarily determined by plaintiff's cross motion. Similarly, triable issues of fact exist with respect to whether there was any misleading advertising or marketing and whether the purchasers' reliance thereon was reasonable under the circumstances( see Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 27; Brenkus v Metropolitan Life Ins. Co., 309 AD2d 1260, 1263). Consequently, plaintiff's fourth and fifth causes of action are not ripe for summary judgment disposition.
Insofar as plaintiff's cross motion seeks an order, pursuant to CPLR 3212 (g), such an order must specify facts that shall be "deemed established for all purposes in the action." The court may make an order under CPLR 3212 (g) where it "may aid in the disposition of the action."
In addressing the "admissions" set forth by plaintiff, Goldman, in his affidavit, asserts that it is irrelevant that H W sold units in the Arches while the construction remained incomplete. He points out that in December 2004, a temporary certificate of occupancy had been issued. He states that H W thereby met all of the "Prerequisites to Closing," as set forth in the Offering Plan, before closing on the units commenced.
Goldman also asserts that it is similarly irrelevant whether Stegla undertook the renovations with sufficiently skilled workers and/or did not complete the renovations in accordance with the Stegla contract. He contends that this is because once Stegla was discharged, H W substantially completed the renovations, in a good and workmanlike manner, using sufficiently skilled subcontractors, and in accordance with the Offering Plan and related documents. Goldman further asserts that whether Stegla's subcontractors were paid by Stegla and whether there are mechanic's liens are not relevant to a resolution of plaintiff's contract-based claims in this action, and, thus, a CPLR 3212 (g) ruling with respect thereto, would not limit the issues for trial herein.
Moreover, Stegla opposes plaintiff's cross motion to the extent that it requests the court to make findings of fact regarding Stegla's performance at the subject construction project. It asserts that the issues that comprise the subject matter of plaintiff's cross motion are the same issues involved in the ongoing arbitration proceeding between it and H W. The court thus finds that it would be inappropriate to issue a ruling with respect to the extent of Stegla's nonperformance of its contractual obligations. While H W contends that Stegla breached its contract with it, it disputes that the Arches was not ultimately constructed in a good and workmanlike manner, free from fault or defects. Consequently, the court declines to grant plaintiff's request for an order pursuant to CPLR 3212 (g) ( see generally Van Ostberg v Crane, 273 AD2d 895, 896).
Plaintiff's cross motion, insofar as it seeks an award of sanctions pursuant to Rules of the Chief Administrator (22 NYCRR) § 130-1.1.et seq., must also be denied as the moving defendants' motion was not "completely without merit" or frivolous.
Accordingly, H W, 397 Hicks, Triangle, and Petracca's motion is granted insofar as it seeks summary judgment dismissing the second, ninth, and tenth causes of action as against all of them, and the third cause of action as to 397 Hicks and Triangle, and the sixth, seventh, and eighth causes of action as against 397 Hicks; it is denied in all other respects. It is noted that H W did not move for dismissal of the third cause of action although that defendant, like 397 Hicks and Triangle, would not be liable for breach of fiduciary duty as it does not owe such a duty to plaintiff. Plaintiff's cross motion is denied in its entirety.
This constitutes the decision and order of the court.