Opinion
Index No. 500308/19
01-02-2024
BOROUGH CONSTRUCTION GROUP, LLC., Plaintiff, v. RED HOOK 160 LLC, PHILADELPHIA INDEMNITY INSURANCE COMPANY, ACREF1 MORTGAGE LENDING, LLC, TRI STATE LUMBER, AF SUPPLY CORP, UNITED RENTALS (NORTH AMERICA), INC., WORLDWIDE PLUMBING SUPPLY, INC., CASTLE MASONRY, INC., WOODBURY CONSTRUCTION, INC., GO GREENER PLUMBING, INC., PREMIUM BUILDING MATERIALS, INC., UNIVERSAL MARBLE AND GRANITE OF QUEENS AND TPG CONTRACTING, CORP., Defendants, RED HOOK 160 LLC, Third Party Plaintiff, v. BOROUGH EQUITIES LLC, MICHAEL BAUER & EMANUEL KANARIS, Third-Party Defendants., UNITED RENTALS (NORTH AMERICA) INC., Third Party Plaintiff, v. ATLANTIC SPECIALTY INSURANCE COMPANY, a/k/a ATLANTIC SPECIALTY INSURANCE INC., D/b/a ASIC INSURANCE, Third-Party Defendants, UNIVERSAL MARBLE & GRANITE OF QUEENS INC., Third-Party Plaintiff, v. BOROUGH EQUITIES LLC and ATLANTIC SPECIALTY INSURANCE COMPANY, Third-Party Defendants,
Unpublished Opinion
PRESENT: HON. LEON RUCHELSMAN, J.
DECISION AND ORDER
LEON RUCHELSMAN, J.
The defendant/third party plaintiff Red Hook 160 LLC [hereinafter 'Red Hook'] has moved seeking summary judgement dismissing all of the plaintiff's causes of action as. well as granting summary judgement regarding Red Hook's counterclaims for breach of contract and fraud. Borough Construction Group LLC opposes the motion. Papers were submitted by the parties and after reviewing all the arguments, this court now makes the following determination.
As recorded in prior decisions Borough Construction Group LLC entered into a contract with Red Hook concerning the construction and renovation of a project located at 160 Imlay Street in Kings County, Borough Construction sued alleging it is owed over two and a half million dollars. Red Hook asserted various counterclaims. Red Hook has now moved seeking summary judgement arguing there are no questions of fact that Red Hook cannot be liable for any of Borough's claims and that there are no questions of fact Red Hook is entitled to a summary determination concerning its counterclaims. As noted, the motions are opposed.
Conclusions of Law
Where the material facts at issue in a case are in dispute summary judgment cannot be granted (Zuckerman v. City of New York, 49 N.Y.S.2d 557, 427 N.Y.S.2d 595 [1980]). Generally, it is for the jury, the trier of fact to determine the legal cause of any injury, however, where only one conclusion may be drawn from the facts then the. question of legal cause may be decided by the trial court as a matter of law (Marino v. Jamison, 189 A.D.3d 1021, 136 N.Y.S.3d 32'4 [2d Dept., 2021).
Concerning the cause of action seeking a foreclosure of the lien, Red Hook argues there are no questions of fact the plaintiff cannot prevail upon this claim since it exaggerated the lien amounts. Pursuant to Lien Law §39 any lien filed that is wilfully exaggerated "shall be declared void and no recovery shall be had thereon' (id). To dismiss the cause of action, Red Hook must demonstrate the lien has been intentionally and deliberately exaggerated (Fidelity New York, FSB v. Kensington-Johnson Corp., 234 A.D.2d 263, 651 N.Y.S.2d 86 [2d Dept., 1996]).
It is well settled that whether the lien amount, contained in. a mechanic's lien is exaggerated is generally a question of fact (Executive Towers at Lido LLC v. Metro Construction Services, 303 A.D.2d 545, 756 N.Y.S.2d 461 [2d Dept., 2003]). As the court stated in Aaron v. Great Bay Contracting Inc., 290 A.D.2d 326, 736 N.Y.S.2d 359 [1st Dept., 2002] "the validity of the lien plainly turns on a dispute as to whether respondent has completed the work required by the contract, and, accordingly, must await trial of the foreclosure action" (id). Thus, a determination that a lien was willfully exaggerated cannot always be decided summarily (see, Scarano Architect, PLLC v. 6322 Holding Corp,, 35 Misc.3d 1228(A), 954 N.Y.S.2d 761 [Supreme Court Kings County 2012]), However, summary judgement is appropriate where, the evidence of such exaggeration is "conclusive" (see, LMF-RS Contracting Inc., v. Nevzet Kaljic, 126 A.D.3d 436, 2 N.Y.S.3d 351 [1st Dept., 2015], see, also, Casella Construction Corporation v. 322 East 93rd Street LLC, 211 A.D.3d 458, 181 N.Y.S.3d 20 [1st Dept., 2022]). Thus, in Inter Metal Fabricators Inc., v. HRH Construction LLC, 94 A.D.3d 529, 942 N.Y.S.2d 334 [1st Dept., 2012] the court held conclusive proof of a wilful exaggeration of a lien was presented where the evidence demonstrated the costs and expenses were knowingly marked up. Further, the evidence revealed the company's vice president and chief, operating officer admitting to the overcharges and testified that he was "entitled to mark it up to whatever number I want," and, "You know what? People do a lot of things" (id).
In this case Red Hook has presented sufficient evidence that Borough wilfully exaggerated the lien amount. The CM Agreement states that "the term Cost of the Work shall mean actual and documented costs necessarily incurred by the Construction Manager in the proper performance of the Work" (see, CM Agreement, ¶ 6.1.1 [NYSCEF Doc. No. 40]). Thus, Red Hook has submitted the affidavit of Erolind Lino Dumani the principal of a subcontractor, Vitroni, responsible for roofing and other work. Mr. Dumani states, that Vitroni entered into five contracts with Borough for specific sums and that "according to the documents submitted by Borough to the Court on January 25, 2019, and reviewed by me, Borough has grossly overbilled RH160 for the work performed by Vitroni pursuant to the subcontracts annexed hereto" (see, Affidavit of Erolind Lino Dumani, ¶9 [NYSCEF Doc. No. 639]). Moreover, Michael Bauer a representative of the plaintiff testified that Borough billed for certain profits, and overhead to which Borough was not entitled. Mr. Bauer explained that Borough was not able to draw any funds from the bank and therefore adjusted the billing .accordingly (see, Deposition of Michael Bauer, page 265 [NYSCEF Doc. No. 509]). Borough raises numerous reasons seeking to raise questions of fact foreclosing any summary determination.
First, Borough asserts the affidavit of Massimiliano Senise cannot support summary judgement sines his affidavit contradicts his earlier deposition testimony. First, any discrepancies between the affidavit and the deposition testimony are not contradictions which undermine their credibility at all. More importantly, the court need not rely upon Mr. Senise's affidavit so any discrepancies, if they exist, are not the basis for any summary determination.
Next, Borough argues that Red Hook has taken inconsistent positions in this action and is estopped from seeking summary judgement at this juncture when Red Hook previously Opposed summary judgement filed by Borough. First., the doctrine of judicial estoppel, also known as estoppel against inconsistent positions prohibits a party from taking a position in a legal proceeding that is contrary to a position taken in a prior proceeding simply because the interests have changed (Bihn v. Connelly, 162 A.D.3d 626, 78 N.Y.S.3d 243 [2d Dept., 2018]). The rule only applies, where the party seeking to advance the inconsistent position obtained a judgement in its favor in the prior proceeding (Re/Max of New York Inc, v, Weber, 177 A.D.3d 910, 112 N.Y.S.2d 769 [2d Dept., 2019]). Red Hook has not obtained any judgement in any other proceeding to prevent its moving for summary judgement at this time. To the extent Red Hook opposed Borough's motions seeking summary judgement on entirely other grounds that is not a bar preventing Red Hook from moving: for summary judgement on these grounds. Indeed, such a rule would force unready parties to move for summary judgement simply because the other party has so moved. There is no rule Whereby one party is bound by the timetable of the other when moving for or opposing motions for summary judgement. Therefore, the mere fact Red Hook opposed Borough's motions for summary judgement does not mean Red Hook cannot move for summary judgement.
Next, the court did hold that Borough had sufficiently itemized the lien and likewise an expert, Barrett Richards opined that Borough has sufficiently itemized the lien. However, this motion is not about itemization, it is squarely about exaggeration. The issue of lien itemization has been thoroughly litigated. The Appellate Division ruled that Borough was required to produce itemization concerning 'the items and cost of labor, or the items and cost of materials" without regard to' whether that information was exaggerated (see, Red Hook 160 v. Borough Construction, Group LLC, 204 A.D.3d 675, 163 N.Y.S.3d 838 [2d Dept., 2322]). Thus, there has been no law of the case the lien was not wilfully exaggerated. Moreover, the expert, Mr. Richards specifically testified that he did not know whether Borough billed for improper profits and overhead (see, Deposition of Barrett Richards, page 187 [NYSCEF Doc, No. 195]). Consequently, the motion for summary judgement may be considered.
Turning to further arguments opposing summary judgement, Borough insists that there are. questions of fact whether the lien was exaggerated and there cannot be a summary determination about the lien. Further, Borough argues the side agreement superceded the CM. agreement and raises questions concerning its interpretation.
First, the only issue concerning the lien exaggeration is exactly that, whether the lien was intentionally exaggerated.
Thus, regardless of the scope of the work, the definition of the work or whether Borough was acting in furtherance of its contractual obligations the question of lien exaggeration may be resolved. The resolution of the question revolves around discrete issues, namely whether Borough included amounts above: the actual costs in violation of the CM agreement. Borough has failed to raise any questions of fact that Borough did not inflate the costs of work performed by subcontractors. Moreover, other than the conclusory assertion the affidavit has "credibility" issues (see, Memorandum of Law in Opposition, page 3 [NYSCEF Doc. No. 712]) there are no questions of fact challenging the affidavit of Sebastian Boivin (NYSCEF Doc. No. 635) that Borough billed for higher grade marble but ordered lower grade marble, billed for manpower logs that were false and billed for laborers who were never at the site (id). For example, Red Hook has introduced forged manpower logs (NYSCEF Doc. No. 653) . Thus, there is evidence that is unchallenged that Borough exaggerated the lien amount. Therefore, based on the foregoing, the motion seeking summary judgement dismissing the lien foreclosure cause: of action is granted. The lien was wilfully exaggerated as a matter of law.
Turning to the breach of contract cause of action, in a decision dated January 20, 2023 the court, did note that "'specific' and pointed evidence exists that Borough purposefully and willfully performed defective work" thereby breaching the contract (see, Decision and Order, page 7 [NYSCEF Doc. No. 595]). The issue that must be addressed is whether at this juncture there are any questions of fact, foreclosing a summary determination. Borough merely argues that questions of fact exist and that in any event the plaintiff failed to pay Borough amounts owed. Reviewing the evidence demonstrates there is significant evidence, that is not challenged, that Borough breached the agreement.
First, there is really no. dispute that pursuant to the agreement Borough was required to finish completion of the project by a date certain and failed to do so. Further, Section 8.3 of the CM' agreement states that if the contractor wishes to seek an extension of time then. "the Contractor must, as a condition precedent to any such claim, give written notice to the Owner and Owner's Representative, of such claim within five (5) days after the onset of any alleged delay, which notice shall set forth in detail the nature, of each alleged delay" (see, ¶8. 3.1.1 of the CM agreement [NYSCEF Doc. No. 40]). There, is no evidence presented that any such extension request was ever provided. Borough argues that others, besides Borough, were responsible for the delay. Even if true, Borough failed to comply with the express condition precedent of the contract that it seek an extension even if the delays were not its fault.
It is well settled that a condition precedent is an "act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises" (Oppenheimer & Company Inc., v. Oppenheim, Appel, Dixon and Co., 86 N.Y.2d 685, 636 N.Y.S.2d 734 [1995]). Thus, without Borough's express notice seeking an extension no blame may properly be placed on other parties seeking to excuse the delay. Further, without satisfying the condition precedent Borough breached the contract by failing to finish the work in a timely manner pursuant to the express terms of the CM agreement.
Moreover, there is evidence presented, which has not been challenged, that Borough performed defective work. Thus, David Ford, a professional engineer performed an inspection while Borough was the contractor and concluded there were significant defects including "open pipes and improperly connected pipes that appear to have caused leaks (often from spaces enclosed by Borough) which allowed water to pour freely into the Project's walls and ceilings when turned on" (see, Affidavit of David Ford, ¶28 [NYSCEF Doc. No. 631]). In. addition, Sweeney Lee, a subcontractor hired by Red Hook submitted an affidavit and stated that Borough had performed significant defective plumbing and sprinkler work which cost Red Hook approximately two and a half million dollars to remediate. The only opposition raised by Borough is the fact Borough is not a plumber and there is no evidence that Borough performed this defective work. However, Borough was the construction manager and was responsible for all the work performed under its watch. Whether another entity should really be liable is something Borough could pursue. However, Borough was responsible to Red Hook for the overall, oversight of the project. Indeed, Sweeney Lee wrote an email highlighting Borough's defects and noted that there was so much work not done to code and so much work not completed that it was "ridiculous" (see, Email by Peter Sweeney, dated September 11, 2018 [NYSCEF Doc. No. 697]). Significantly, Borough did not submit any affidavits; challenging all these conclusions. Thus, rather, than affidavits factually disputing the assertions of the plaintiff's experts and affidavits, Borough has resorted to selectively quoting testimony and affidavits of the plaintiff's submissions to try and create inconsistencies and hence questions of fact. However, even if trivial inconsistencies exist, and they often do, the overwhelming evidence of Borough's defective work has not been challenged at all. Therefore, the motion seeking summary judgement regarding Borough's breach of contract counterclaim is granted.
Turning to the counterclaim seeking fraud, again, there is significant evidence, that has not been challenged that the manpower logs were forged and that Consequently Red Hook relied upon those false manpower logs and suffered damages thereby.
First, Sebastian Boivin, an employee of Borough submitted an affidavit which stated that "there were times when Mr. Kanaris called and directed me to fill out manpower logs with false manpower numbers. Mr. Kanaris directed me to prepare these false manpower logs and to sign his name. These false manpower logs were attached to the payment requisitions Borough Equities/Borough Construction submitted to Red Hook 160" (see, Affidavit of Sebastian Boivin, ¶16 [NYSCEF Doc. No. 635]). Further, Mr. Boivin reiterated the existence of false manpower logs at his deposition (see, Deposition of Sebastian Boivin, pages 118-120 [NYSCEF Doc. No. 543]). While Mr. Kanaris denied ever forging any documents (see, Deposition of Emanuel Kanaris., page 356 [NYSCEF Doc. No. 512]) he did admit that his purported signature on the manpower logs was not his signature (see, Deposition of Emanuel Kanaris, page 332 [NYSCEF Doc. No. 512]). Thus., there are no questions of fact presented the manpower logs were forged and likewise contained inflated and fraudulent information. Borough, counters that first there are questions of fact whether any such falsification occurred. Moreover, they argue that even if such falsification did occur Red Hook had a duty to verify the manpower at the site and therefore could not have "relied" upon false manpower logs. First, as noted, there really is no question of fact the manpower logs were forged and inflated. Moreover, it is true that there can be no reliance upon a misrepresentation if such misrepresentation can be discovered with due diligence (Avery v. WJM Development Corp., 197 A.D.3d 1141, 153 N.Y.S.3d 511 [2d Dept., 2021]). However, as the court already addressed in a prior decision, Borough,, as the construction manager of the project was the only party in the position to. provide manpower (see, Decision arid Order, September 19, 2022 [NYSCEF Doc. No. 579]). Red Hook's presence at the site would not have enabled Red Hook to pinpoint the precise number of workers on a daily or weekly basis considering the fluid nature of a construction site. Therefore, Red Hook was not subject to any due diligence which would undermine Borough's fraud thereby. Thus, Red Hook reasonably relied upon Borough's manpower logs which Red Hook paid. Further, the existence of any fraudulent' manpower logs is a not a matter which requires expert opinion. Therefore, there are no questions of fact Borough furnished falsified manpower logs which Red Hook reasonably relied. Consequently, the motion seeking summary judgement concerning the fraud counterclaim is granted.
Next, the remaining claims of Borough are all dismissed. There can be no claims for any injunctive relief or unjust enrichment or any claims of any money Red Hook owes to any subcontractors.
Lastly, the parties- shall appear before a judicial hearing officer to determine the precise amount of damages due. The parties will be notified of such hearing date.
So ordered.