The Bd. of Managers of the Marcy Villa Condo. v. 594 Marcy Villa LLC

Full title: THE BOARD OF MANAGERS OF THE MARCY VILLA CONDOMINIUM, on its own behalf…

Court: Supreme Court, Kings County

Date published: May 30, 2024

2024 N.Y. Slip Op. 31887 (N.Y. Sup. Ct. 2024)

Opinion

Index No. 509583/2022 Motion Seq. No. 1 & 3

05-30-2024

THE BOARD OF MANAGERS OF THE MARCY VILLA CONDOMINIUM, on its own behalf and on behalf of the individual unit owners, Plaintiffs., v. 594 MARCY VILLA LLC, SHARONE MEISHAR, and OHAD MEISHAR, MRE PROPERTY MANAGEMENT LLC, ZARINA KINDS d/b/a ZARINA KINDO, RA, BAKUAR SHAMLOO d/b/a TABRIZ GROUP DESIGN, JOSEPH A. GULINO d/b/a STRUCTURAL ENGINEERING SYS, PLLC and JOHN/JANE DOE, and ABC CORPORATION, Defendants,

HON. LEON RUCHELSMAN, JUDGE

Unpublished Opinion

DECISION AND: ORDER

HON. LEON RUCHELSMAN, JUDGE

The defendants Sharone Meishar, and Ohad Meishar have moved pursuant to CPLR §3211 seeking to dismiss all the causes of action of the complaint filed by the plaintiff on the grounds it fails to state a cause of action. The defendant 594 Marcy Villa LLC, has moved seeking to dismiss all the causes of action except for the first cause of action for breach of contract and the third cause of action for breach of express warranty. The defendant Joseph A. Gulino d/b/a Structural Engineering Sys, PLLC [here infater "Gulino"] has moved seeking to dismiss all the causes of action. The plaintiff opposes the motions. Papers were submitted by the parties after reviewing all the arguments this court now makes the following determination.

The lawsuit concerns the sale of condominium units at a newly constructed condominium building located at 594 Marcy Avenue in Kings County. Specifically, the plaintiff, on its own behalf and on behalf of the unit owners, initiated the current action on the grounds the units were essentially defective. The complaint alleges causes of action for breach qf contract, negligence, breach of express warranty, fraud, breach of a common law warranty, a violation of General Business Law §349, negligent supervision, a violation of the Interstate Land Sales Full Disclosure Act (15 USC §1703 (a) (2)), specific performance and a breach of the implied warranty of good faith and' fair dealing. The motions to dismiss has now been filed and as noted they are opposed.

Conclusions of Law

It is well settled that upon a motion to dismiss the court must determine, accepting the allegations of the complaint as true, whether the party can succeed upon any reasonable view of those facts (Perez v. Y &M Transportation Corporation,. 219,AD3.d 1449, 196 N.Y.S.3d 145 [2d Dept., 2023]). Further, all the allegations in the complaint are deemed true and all reasonable inferences may be drawn in favor of the plaintiff (Archival Inc., v. 17 7 Realty Corp., 220 A.D.3d 909, 198 N.Y.S.2d 567 [2d Dept., 2023]). Whether the complaint will later survive a motion for summary judgment, or whether the plaintiff will ultimately be able to prove its claims, of course, plays no part in the determination of a pre-discovery CPLR §3211 motion to dismiss (see, Lam v. Weiss, 219 A.D.3d 713, 195 N.Y.S.3d 488 [2d Dept., 2023]).

It is well settled that if the: defendant so dominated the activities of the corporation then piercing of the corporate veil would be permitted and defendant could then be liable personally (see, Matter of Morris v. New York State, 82 N.Y.2d 135, 603 N.Y.S.2d 807 [1993])- However, dominance of a corporation, standing alone is insufficient to pierce the corporate veil (First Capital Asset Management Inc., v. N.A. Partners, L.P., 300 A.D.2d 112, 755 N.Y.S.2d 63 [1^st Dept., 2002]) . New York courts take piercing the corporate veil very seriously and will pierce the corporate veil only when necessary to prevent fraud or to achieve equity (see, Morris v New York State Department of Taxation and Finance, 82 N.Y.2d 135, 603 N.Y.S.2d 807 [1993]) . To succeed on a request to pierce the corporate veil the plaintiff must demonstrate that "(1) the owners exercised complete dominion of the corporation in respect to the transaction attacked and (2) that such dominion was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff's injury" (Conason V. Megan Holding LLC, 25 N.Y.3d 1, 6 N.Y.S.3d 206 [2015]) . As the Court of Appeals observed, at the pleading stage "a plaintiff must do more than merely allege that [defendant] engaged in improper acts or acted in 'bad faith' while representing the corporation" (East Hampton Union Free School District v. Sandpebble Builders Inc,, 16 N.Y.3d 775., 919 N.Y.S.2d 496 [2011]). Rather, the plaintiff must allege facts demonstrating such dominion over the corporation and that "through such domination, abused the privilege of doing business in the corporate form to perpetuate a wrong or injustice against the plaintiff such that a court in equity will intervene" (Oliveri Construction Corp., v. WN weaver Street LLC, 144 A.D.3d 7 65, 41 N.Y.S.3d 59 [2d Dept,., 2016]) . "Factors to be considered in determining whether an individual has abused the privilege of doing business in the corporate or LLC form include the failure to adhere to [corporate or] LLC formalities, inadequate capitalization, commingling of assets, and the personal use of [corporate or] LLC funds" (see, Grammas v. Lockwood Associates LLC, 95 A.D.3d 1073, 944 N.Y.S.2d 623 [2d Dept., 2012]). Thus, mere conclusory statements that the individual dominated the corporation are insufficient to defeat a motion to dismiss (AHA Sales Inc., v. Creative Bath Products Inc,., 58 A.D.3d 6, 867 KYS2d 169 [2d Dept., 2008;]).

In this case the complaint states in conclusory fashion that the "the sole purpose of the Sponsor's entity status Is to shield the Meishars from liability for actions like those contemplated herein" (Verified Complaint, ¶135 [NYSCEF .Doc. No. 1])). However, there are no facts whatsoever supporting that allegation. The complaint further states that the corporate: entity is merely the alter ego cf the individual defendants but fails to allege any facts at all supporting that allegation. Thus, the complaint does not explain how the individual defendants disregarded the corporate form, inadequately capitalized the company or used corporate funds for personal purposes. Thus, merely reciting the legal standard or blanket allegations without any supporting facts renders the cause of action conclusory. In Albstein v, Elany Contracting Corp., 30 A.D.3d 210, 818 N.Y.S.2d 8 [1st Dept., 2006] the court granted the motion seeking to dismiss the piercing of the corporate veil on the grounds the plaintiff alleged "nothing more than that the corporation was 'under capitalized' and functioned as" the individual's "alter ego" (id).. The court further noted the plaintiff failed to "plead any facts to substantiate such conclusory claims" and did not "sufficiently allege that the corporate form was used to commit a fraud against her" (id).

Therefore, based on the foregoing, the motion seeking to dismiss all of the causes of action against defendants Sharone Meishar and: Ohad Meishar is granted.

Turning to the specific causes of action pertaining to the remaining defendants, generally, merely alleging that a breach of a contract duty arose from a lack of due care will not transform a breach of contract claim into a tort claim (Sommer v. Federal Signal Corp., 79 N.Y.2d 540, 583 N.Y.S.2d 957 [1992]). The court in Sommer explained that legal duties independent of contract claims could be imposed upon professionals, common carries and bailees as a matter of policy where there is a duty owed by the professional independent of the duty imposed by the contract. Indeed, while some states recognize the tort of negligent breach of contract (see, Hayton Farms Inc., v. Pro-Fac Corp., Inc., 2010 .Wli 5174349 [Western District of Washington 2010]) in New York there is no tort cause of action for the negligent performance of a contract (see, Attallah v. New York College of Osteopathic Medicine, 189 A.D.3d 1324, 134 N.Y.S.3d 793 [2d Dept., 2020]), Thus an examination of the two causes of action is necessary. The breach of contract claim against the defendant is essentially contained within paragraph 144 of the verified complaint. That paragraph states that the "sponsor failed to comply with the terms and conditions of the Purchase Agreements, in that the Sponsor failed, among others things to: a. Construct the Building and the □nits, including the materials, equipment and fixtures to be installed therein, substantially in accordance with the Plan and the plans and specifications; b. Correct any defects in the construction of the Building to the extent required in the Plan; and c. Construct the Building in accordance with the plans and specifications, and with all applicable zoning and building laws; and d. Perform such work and supply such materials as is necessary in order to complete the construction of the Building with a quality of construction comparable to the currently prevailing local standards customary in the particular trades involved" (see, Verified Complaint, ¶144 [NYSCEF Doc. No. 1.]) . The allegations supporting the professional negligence cause of action is essentially contained within paragraph 157 of the verified complaint. That paragraph states that due to the defendant's negligent breach of duty "said breach: (a) caused the many construction defects previously described herein, (b) caused the construction of the Condominium to bo non-compliant with the specific standards called for by applicable code and laws, (c) resulted in Sponsor's failure to construct and deliver the Units and Building in accordance with the terms, conditions, and representations set forth in the Plan, (d) resulted in the Sponsor's failure to construct and deliver the Units and Building in accordance with the plans and specifications submitted to the New York Department of Buildings:, and (e) resulted in the Sponsor's failure to construct and deliver the Units and the Building in accordance with local industry standard" (see. Verified Complaint, ¶157 [NYSCEF Doc. No. 1]) . The allegations supporting the negligent supervision claim are contained within paragraph 208 of the verified complaint. That paragraph states that due to the defendant's negligent supervision many defects resulted and that such breach "(a) caused the many construction defects described herein; (b) caused the Condominium to be noncompliant and in honcompliance with the specific standards called for by the NYC Building Code; (c) resulted in Sponsor's failure to construct and deliver units and the Building in accordance with the terms, conditions, and representations set forth in the Offering Plan; (d) resulted in the Sponsor's failure to construct and deliver units and the Building in accordance with the plans and specifications submitted to the New York City Department of Buildings; (e) resulted in the Sponsor's failure to construct and deliver units and the Building in accordance with the industry standard" (see. Verified. Complaint, ¶208 [NYSCEF Doc. No. 11).

The negligence cause of action does not contain any specific conduct that is different from the breach of contract allegation. As the court held in Dormitory Authority of the State of New York v. Samson Construction Co., 30 N.Y.3d 704, 70 N.Y.S.3d 893 [2018] where the negligence allegations are merely a "restatement" of the breach of contract allegations the negligence action must be dismissed (see, Board of Managers of Beacon Tower Condominium v, 85 Adams Street LLC, 136 A.D.3d 680, 25 N.Y.S.3d 233 [2d Dept., 2016]).

Therefore, the motion seeking to dismiss the second and seventh causes of action as to all defendants is granted.

Next, to state a claim for fraudulent misrepresentation the plaintiff must establish a misrepresentation of fact that was false when made for the purpose of inducing another to rely upon it and they justifiably relied upon it to their detriment (Mandarin Trading Ltd., v. Wildenstein, 16 N.Y.3d 173, 919 N.Y.S.2d 465 [2011]). Therefore, misrepresentations made before the formation of a contract which induce a party to enter into the contract can support claims for fraudulent misrepresentation (Cohen v. Koenig, 25 F.3d 1168 [2d Cir. 1994]j. Thus, "although fraud may exist in the inducement of a contract., where, as here, it is based solely on the failure to perform a promised future act, plaintiff's remedy lies: in an action on the contract" (see, Locascio v. James V. Acquavella M.D. P.C., 185 A.D.2d 689, 586 N.Y.S.2d 78 [4^th Dept., 1992]). Consequently, the misrepresentation must concern a present fact, not a future promise (see, Scialdone v. Stepping Stones Associates L.P., 148 Ap3d 953, 50 N.Y.S.2d 413 [2d Dept., 2017]j. The verified complaint in this case does hot allege any misrepresentation of any present fact. Rather, it solely concerns itself with promises made to the plaintiff That were allegedly not kept. For example, the verified complaint alleges the defendants promised to construct the building according to the plans and specifications and that it would perform such work in a quality manner. Those allegations concern future promises and not present facts. Moreover, the verified complaint does, not allege any of the misrepresentations which induced reliance at all. Indeed, this claim is contained in Paragraphs 169-184 of the verified complaint which states, essentially, that the defendants "represented that the Building and the Units, including the material, equipment and fixtures to be installed therein, would be constructed substantially in accordance with the Plan and the plans and specifications" and that "the Sponsor represented that the Building's construction could be completed in accordance with the terms and conditions of the Plan'" (see, Verified Complaint, ¶¶170, 171 [NYSCEF Doc. No. 1]). Notably, there are no specific facts at all comprising the inducement. The verified complaint does not elaborate with any of requisite specificity what was said and how those statements induced the plaintiff to enter into the agreement (Anos Diner Inc., v. Pities Gourmet Ltd., ICC A.D.2d 948, 475 N.Y.S.2d 86 [2d Dept., 1984]). Thus, mere: statements contained in a complaint that asserts, without any basis, that fraudulent inducement took place is insufficient to allege fraudulent inducement (see, MM Arizona Holdings LLC v. Bonnano, 658 F.Supp.2d 589 [S.D.N.Y. 2009-]) . In any even, to the extent any of the fraud claims concern present facts they are duplicative of the breach of contract cause of action (McKernin v. Fanny Farmer Candy Shops Inc., 176 A.D.2d 233, 574 N.Y.S.2d 58, [2^nd Dept., 1991]). Therefore, the motion seeking to dismiss the fraudulent misrepresentation cause of action is granted.

Turning to the cause of action for breach of the housing merchant implied warranty, it is well settled that a builder or vendor such as the defendants in this case may modify express warranties as long as the purchase agreement contains a limited warranty pursuant to General Business; Law §777-b (see, Eumarelli v. Marsam Development Inc., 92 KY2d 298, 680 N.Y.S.2d 440. [1998]). In this case, the offering plan specifically stated that since the building was taller than five: stories "the Housing Merchant implied Warranty does not apply to this offering" (see, Condominium Offering Plan, A. SPECIAL RISKS ¶28 [NYSCEF Doc. No. 35]). Again, the Offering Plan states that "since this condominium building contains more than five (5) stories, the Housing Merchant Implied Warranty is not applicable hereto" (see, Condominium Offering Plan, R. RIGHTS AND OBLIGATIONS OF SPONSOR ¶18 [NYSCEF Doc. No. 35]). Moreover, the application filed with the Department of Buildings indicated the job type was a "new building" (see, PW 1 Plan/Work Application, Part 5 [NYSCEF Doc. No. 37]) and the job approval from the Department of Buildings indicated the job was designated as a "new building" see, (Application Details, Part 5 [NYSCEF Doc. No. 38]). Indeed, the verified complaint explicitly states that "upon information and belief, the Meishars filed their plans with the New York city Department of Buildings on or about October 9, 2014 to construct a new building at the Property" (see:, Verified Complaint, ¶¶17 0, 2C [NYSCEF Doc.. No. 1]) . Thus, there is no merit to the argument that the condominium was not new because it was purchased beforehand. In any event, to the extent even applicable, the offering included a warranty that comported with the requirements of General Business Law §777-b but expressly limited such warranty (see, Condominium Offering Plan, Exhibit D [NYSCEF Doc. No. 35 ] j - This generally bars a cause of action based upon the implied warranty (see, 20 Pine Street Homeowners Association v. 20 Pine Street LLC, 109 A.D.3d 733, 971 N.Y.S.2d 289 [1^st Dept., 2013];. Therefore, the motion to dismiss this cause of action is granted.

Concerning General Business Law §349, it is well settled that to state a claim under this statute a pleader must allege (1) acts or practices that are "consumer oriented," (2) that such acts or practices are misleading in a. material way, and (3) that the pleader has suffered actual harm by reason of those acts (see, Guidon v. Guardian Life Ins Co of America, 94 N.Y.2d 330, 704 N.Y.S.2d 177 [1999]). A cause of action pursuant to General Business Law §349 is applicable where there are allegations of deceptive practices in the advertisement and sale of condominium units (see, Board of Managers of Bayberry Greens Condominium v, Bayberry Green Associates, 174 A.D.2d 595, 571 N.Y.S.2d 496 [2d Dept., 1991]). However, any claims based upon General Business Law §349 that are exclusively based upon filings required by the: Martin Act or the Attorney General's implementing regulations are preempted by the Martin Act which is the exclusive mechanism whereby the Attorney General may investigate such claims of misrepresentations concerning the sale of condominium units (511 West 232^nd Owners Corp., v. Jennifer Realty Co., 285 A.D.2d 244, 729 N.Y.S.2d 34 [1^ST Dept., 2001]). Thus, allegations of misrepresentations that are not contained in those. filings such as oral misrepresentations may be pursued by asserting a claim pursuant to General Business Law .§34 9 (see, Board of. Managers of Marke Gardens Condominium v. 240/242 Franklin Avenue LLC, 71 A.D.3d 935, 898 N.Y.S.2d 564 [2d Dept., 2010]) . Further discovery will enhance these allegations and if after discovery there are no questions of fact this statute was not violated then summary motions will resolve its applicability; At this juncture, accepting the allegations as true, the motion seeking to dismiss this claim is denied.

The eight cause of action asserts claims pursuant to the Interstate. Land Sales Full Disclosure Act codified at 15 JSC §1701 et seq. These statutes are designed to protect consumers in sales of land through various disclosures and anti-fraud provisions and are applicable to the sale of condominium units (see, Beauford v. Helmsley, 740 F.Supp. 201 [S.D.N.Y. 1990]). However, the act is inapplicable to "the sale or lease of lots in a subdivision containing: less than twenty-five lots" (15 USC §1702(a)(1)). Therefore, where a condominium contains less than twenty-five units the statute is inapplicable (see, Iman v. Hall, 2009 WL 960474 [Western District of Virginia 2009]). There is no dispute the condominium in this case contains less than twenty-five units. Therefore, the motion seeking to dismiss this cause of action is granted.

The ninth cause of action seeks specific performance requiring the defendants to honor the implied housing merchant warranty. However, that warranty is inapplicable to this lawsuit and thus the cause of action seeking specific performance is likewise dismissed. summary judgement regarding the negligence cause of action is denied.

The last cause of action asserts a claim for the breach of the covenant of good faith and fair dealing. It is well settled that cause of action is premised upon parties to a contract exercising good faith while performing the terms of an agreement (Van Va1kenburgh Nooqer &Neville v. Hayden Publishing Co., 30 N.Y.2d 34, 330 N¶S2d 329 [1972]j• However, that cause of action is not applicable when it is duplicative of a breach of contract claim (P.S. Finance LLC v. Eureka Woodworks Inc., 214 A.D.3d 1, 184 A.D.3d 114 [2d Dept., 2023]). Even if pled in the alternative, the claim of any breach of any implied covenant is based upon the same facts as the breach of contract claim, namely the failure to satisfy all the contractual provisions. That is duplicative of the breach of contract and consequently, the motion seeking to dismiss the tenth count is granted.

The motion seeking to dismiss all the causes of action against Gulino is granted. The verified complaint does not allege any claims against Gulino at all.

Thus., all the causes of action are dismissed as to Gulino and Sharone Meishar and Ohad Meishar. Further, all the causes of action except the cause of action pursuant to General Business Law §349 are dismissed as to defendant 594 Marcy Villa LLC.

So ordered.