Opinion
11231/13
03-10-2015
Joseph W. Tucciarone and ANITA TUCCIARONE, as husband and wife, Plaintiffs, v. The Hamlet on Olde Oyster Bay Homeowners Association, Inc., JEROME CLINE, MARK KOHN, LAURA LEWIN, LEN FRUCHTER, ALBERT GOLD, BARBARA GETTENBERG and FRANK BIANCULLI, Defendants.
Attorney for Plaintiff Stanley S. Zinner, P.C. By: Stanley S. Zinner, Esq. 10 Bayview Drive Plainview, New York 11803 Attorney for Defendant Cantor, Epstein & Mazzola, LLP By: Jacqueline L. Aiello, Esq. 49 West 37th Street, 7th Floor New York, NY 10018
Attorney for Plaintiff
Stanley S. Zinner, P.C.
By: Stanley S. Zinner, Esq.
10 Bayview Drive
Plainview, New York 11803
Attorney for Defendant
Cantor, Epstein & Mazzola, LLP
By: Jacqueline L. Aiello, Esq.
49 West 37th Street, 7th Floor
New York, NY 10018
Daniel R. Palmieri, J.
The motion by the plaintiffs to amend their complaint to assert causes of action sounding in breach of fiduciary duty and unjust enrichment, and to assert a prayer for the imposition of exemplary damages, is granted to the extent that the plaintiffs may assert a new cause of action sounding in breach of fiduciary duty on the part of the individual members of the Board of Directors ("Board") of the defendant corporation, but not as against the corporation itself, and they may assert a prayer for the imposition of exemplary damages against such individual members, but not as against the corporation. The motion is otherwise denied. The Amended Verified Complaint shall be deemed served on the defendants as of the date of this Decision and Order, except that the cause of action sounding in unjust enrichment shall be deemed stricken therefrom. Trial is stayed until June 30, 2015 to permit additional discovery by defendants, and the deadline for service of summary judgment motions is extended until May 31, 2015.
As previously indicated in this Court's order granting the plaintiffs a preliminary injunction, this case arises from the actions taken by the defendants against the plaintiffs for the latter's alleged responsibility for the spread of invasive bamboo planted on their property. The injunction barred the defendants from taking away plaintiffs' rights in the amenities of the development where they lived, including parking, while this matter is pending. The plaintiffs now move to amend their complaint. Although the motion was made at the time the case was certified as ready for trial, the electronic records of the Clerk, of which the Court takes judicial notice, indicate that the note of issue had not yet been filed (motion made 12-8-14, note of issue filed 1-23-15), and the movant asserts that it was based on recently completed disclosure. The Court therefore will not reject this application as untimely. See Favia v Harley-Davidson Motor Co., Inc., 119 AD3d 836 (2d Dept. 2014).
In the absence of prejudice or surprise to the opposing party, leave to amend pleadings is to be freely given, provided the proposed amendment is not palpably insufficient or patently devoid of merit. Trataros v Constr., Inc. v New York City School Constr. Auth., 46 AD3d 874 (2d Dept. 2007); see also, Edenwald Contr. Co. v City of New York, 60 NY 957 (1983); Janssen v Incorp. Vil. of Rockville Centre, 59 AD3d 15 (2d Dept. 2008). The Court's review of the merits of proposed new claims is thus limited accordingly. See Lucido v Mancuso, 49 AD3d 220 (2d Dept. 2008); Trataros v Constr., Inc. v New York City School Constr. Auth., 46 AD3d 874, supra.
As to those merits, the Court agrees with the defendants and Justice Scarpulla of Supreme Court, New York County, that the Board entity, as a corporation, owes no fiduciary duty to individual unit owners. Argyrides v River Terrace Apartments LLC, 2014 WL 255712 (Sup Ct New York County), citing Stalker v Stewart Tenants Corp., 93 AD3d 550, 552 (1st Dept. 2012) and Peacock v Herald Sq. Loft. Corp., 67 AD3d 442, 443 (1st Dept. 2009). However, it is also the law that individual members of the Board do owe such a duty. Murphy v State of New York, 14 AD3d 127, 136 (2d Dept. 2004); Michaelson v Albora, 12 AD3d 648, 649-650 (2d Dept. 2004); Board of Mgrs. at N. Hills Condominium v Fairway at N. Hills, 193 AD2d 322 (2d Dept. 1993).
Here, there is a sufficient basis for permitting plaintiffs to amend their pleading to assert a violation of that duty by the individual defendants. The deposition transcripts of Board members arguably show their lack of good faith in addressing the issue of the invasive bamboo, including imposing fines and restrictions on plaintiffs for their failure to abate the condition on private property belonging to a neighbor. The evidence presented by plaintiffs tends to show that the Board members knew that the neighboring owner was not cooperative, could not be forced to cooperate, and had denied the plaintiffs access.There is also evidence that the Board members disregarded the written rules of the defendant Homeowners Association. Plaintiffs contend that a Greivance Committee, which had the authority under those rules to overturn the Board's actions regarding the punishment meted out to plaintiffs, did so (at least until the current litigation was concluded), and yet this was ignored by the Board members.
There is a contrary argument and evidence presented by the defendants regarding these factual claims. The Court is also mindful of the business judgment rule, which protects Board members such as the individual defendants here, provided they act in good faith and in the best interests of the condominium/home owners association. See Berenger v 261 West LLC, 93 AD3d 175 (1st Dept. 2012); see also Skouras v Victoria Hall Condominium, 73 AD3d 902 (2d Dept. 2010) [summary judgment in favor of Board under business judgment rule where termination of plaintiff's parking privileges was done in good faith and in furtherance of condominium's legitimate interests].
Nevertheless, the Court cannot say as a matter of law that the proposed breach of fiduciary cause of action is so lacking in merit, and/or that the business judgment rule is so clearly available to defendants, that the addition of this claim should not be allowed even under the liberal pleading rules noted above. Further, the allegations underlying the cause of action are not merely duplicative of the breach of contract claim. Cf., Hylan Elec. Contr., Inc. v MasTec N. Am., Inc., 74 AD3d 1148 (2d Dept. 2010).
The Court also finds that the defendants have not demonstrated prejudice. While they complain that because discovery is closed they cannot conduct any additional inquiry into this claim, they have not articulated what additional discovery is needed, nor how the discovery already exchanged is inadequate, especially as the plaintiffs rely solely on discovery already conducted and do not allege any new facts in the amended pleading that may have surprised the defendants.
Nevertheless, to insure that defendants have an opportunity to conduct any additional discovery they deem necessary regarding the breach of fiduciary duty cause of action, they may serve reasonable demands therefor, and the Court hereby stays the trial of this action until June 30, 2015 to abide the event. The plaintiffs are directed to comply with any reasonable disclosure demand addressed to that claim. In view of the foregoing, the time within which the parties may make motions for summary judgment under this Court's certification order is extended to May 31, 2015.
The Court agrees with the defendants that the unjust enrichment claim is essentially duplicative of the breach of contract claim. It seeks reimbursement of fines plaintiffs claim were improperly assessed, which is available as damages for the alleged breach of contract. See Benham v eCommission Solutions LLC, 118 AD3d 605, 607 (1st Dept. 2014). Accordingly, the plaintiffs will not be allowed to assert this proposed cause of action.
Finally, the allegations of the deliberate wrongful conduct underlying the breach of fiduciary duty cause of action sustains the claim for punitive damages against the individual Board members, and in such a case the need to demonstrate a public wrong is not required. Kleinerman v 245 East 87 Tenants Corp., 105 AD3d 492 (1st Dept. 2013); Bishop v 59 W. 12 th St. Condominium, 66 AD3d 401 (1st Dept. 2009).
The Court notes that neither the issuance of the preliminary injunction, nor the result of this motion, should be interpreted as a predictor of how it would rule on a summary judgment motion, where the standards and burdens of proof are different. See Favia v Harley-Davidson Motor Co., Inc., 119 AD3d 836, supra.
This shall constitute the Decision and Order of this Court.
E N T E R:
DATED: March 10, 2015
_____________________________
HON. DANIEL PALMIERI
Supreme Court Justice