Opinion
602197/07.
Decided August 20, 2008.
Motion Sequence Nos. 001 and 002 are consolidated for disposition.
In Motion Sequence No. 001, defendants Charles Cortes Cabinetry, Inc. and Charles Cortes Company, Inc. (collectively "Cortes") move pursuant to CPLR 3211(a)(7) for dismissal. In Motion Sequence No. 002, defendants 65th Street Townhouse LLC ("65th St. Townhouse") and James Rinzler ("Rinzler") (collectively "Sponsor Defendants") move for dismissal under CPLR 3211(a)(1), (a)(3) and (a)(7). Plaintiff Kevin Brine ("Brine") opposes both motions, and cross-moves for an order directing Sponsor Defendants to withdraw their objection to the disbursement of certain funds held in escrow.
BACKGROUND
In June 2004, 65th St. Townhouse acquired title to the Ruxcroft House, a six-story townhouse located in mid-town Manhattan, with the intention of converting it into two residential condominiums. It entered into agreements with Cortes and defendant Andrew Freedman Architecture LLC ("Freedman") for contracting services related to the building's renovation.
65th St. Townhouse, through its president Rinzler, negotiated the sale of Unit A with Brine. During these talks, Brine alleges that Sponsor Defendants provided him with various documents concerning the project time-line and completion date; the property's condition; their experience and expertise in constructing luxury homes; and their sound financial condition. On November 30, 2005, 65th St. Townhouse and Brine entered into a sales contract for a $10 million purchase-price. Brine paid a $1 million deposit, with the balance due at the title-closing.
65th St. Townhouse sent Brine notice on February 27, 2006 that the closing would take place on March 29, 2006. On March 22, 2006, it informed him that this could not occur as planned because it had insufficient funds and needed the balance of the sales price to complete the project. At this point, it could not obtain a temporary certificate of occupancy ("TOC").
65th St. Townhouse proposed that Brine agree to close without a TCO based on its promise to deposit $2.5 million from the $10 million purchase price into an escrow account pending the TCO's issuance. These funds were to be used to pay Brine a penalty fee of $1,232.88 for each day beginning on April 6, 2006, with an additional $1,232.88 for each day past May 6, 2006, that the TCO was not issued. After the penalties were paid, the balance would be released to 65th St. Townhouse less 125% of the costs associated with any defects, or "punch-list" items, until such corrections were made. Brine agreed and the contract was modified on April 6, 2006, the same day that they closed, to reflect these changes.
The New York Department of Buildings did not issue a TCO until October 26, 2006, allegedly due to 65th St. Townhouse's delay in completing the project. Brine moved into the condominium on December 1, 2006. He alleges that there were numerous defects with it and that Sponsor Defendants and Cortes never corrected them, despite their promises to do so.
The Escrow Agent calculated that penalty fees owed to Brine, with interest, was $480,088.26. On January 2, 2007, the Escrow Agent only released $205,500.00 to him.
On January 24, 2007, the TCO expired and 65th St. Townhouse was not able to obtain another, allegedly due to the failure to correct the problems. Brine discovered additional defects, which were never cured. In March 2007, he hired structural engineers to evaluate the property, who noted the flaws and prepared a report that offered corrective suggestions. Brine sent this to 65th St. Townhouse. When it allegedly failed to respond, he hired his own contractors to fix the problems.
Brine discovered additional problems that purportedly posed health risks. He vacated the unit on June 5, 2007 because of these hazardous conditions and his fear that he may be exposed to liability for occupying it without a TCO.
On June 27, 2007, Brine demanded that the Escrow Agent release the additional funds he alleges is owned to him. Sponsor Defendants refused to authorize its release.
Brine commenced this action on July 2, 2007 for breach of contract, breach of express and implied warranties, fraud, violations of NY General Business Law § 349, negligent misrepresentation, negligence, professional malpractice, promissory estoppel, and a declaratory judgment that it is entitled to the additional funds held in escrow. In Motion Sequence No. 001, Cortes moves pursuant to CPLR 3211(a)(7) for dismissal of the fraud, negligent misrepresentation, negligence, and promissory estoppel claims against them. In Motion Sequence No. 002, Sponsor Defendants moves to dismiss the breach of warranties; fraud; General Business Law violations; negligent misrepresentation; and declaratory judgment claims against them. Brine opposes both motions, and cross-moves for an order directing Sponsor Defendants to withdraw their opposition to the additional penalty-payment.
DISCUSSION
In the context of a CPLR 3211 motion to dismiss, the court takes the facts alleged in the complaint as true and accords the benefit of every possible favorable inference to the non-movant ( see AG Capital Funding Partners, LP v State Street Bank and Trust Co , 5 NY3d 582 ). "The sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law, a motion for dismissal will fail" ( Ackerman v 204 East 40th Owners Corp., 189 AD2d 665 [1st Dept 1993]).
Fourth Cause of Action Against Sponsor Defendants: Breach of Implied and Express Warranties
In his fourth cause of action, Brine pleads that Sponsor Defendants made "various express and implied warranties as to quality, performance, and timing . . ." (Capolino Aff, Ex. A, Verified Complaint, ¶ 140). They allegedly breached these warranties by "failing . . .to comply with the requirements of the building code, . . .to construct in accordance with proper and approved construction plans, and by failing to employ good design . . ."( id., ¶ 141).
With respect to the alleged breach of the implied warranties, Sponsor Defendants argue that the Housing Merchant Implied Warranty found in General Business Law Article 36-B § 777-a ("GBL Article 36-B") is applicable; supercedes any claim for common-law warranty breaches; and was excluded in this sale. It is true that this statute "is a full substitute for the antecedent common-law [warranty']" ( Fumarelli v Marsam Development, Inc, 92 NY2d 298 and that the offering plan stated that "[it] is not applicable to this offering" ( see, Rinzler Aff'd, Ex. A). But in order to exclude this warranty, the seller must provide the buyer with an alternative limited warranty, which Sponsor Defendants did not ( see GBL § 777-B). Furthermore, this warranty is only applicable to "new homes", defined as "a multi-unit residential structure of five stories or less . . ." (GBL § 777). This building is six stories plus a basement, clearly not within GBL Article 36-B's perimeters.
Fumarelli recognizes that a buyer may not proceed with a common law claim where GBL Article 36-B applies. Since Article 36-B is not applicable, the analysis must revert back to the common law. It is well settled that
"when a remedy existed at common law for the wrong . . .against which a remedial statute is directed . . .but does not deprive [the party] of the remedy that existed at common law . . . the party injured may resort to either [remedy] at [her/his] election"
(McKiney's Statutes § 34).
The common-law implied housing warranty was applied in the context of newly-constructed homes, without limitation to the building's size ( see Caceci v Di Canio Const Corp, 72 NY2d 52; see also Lutz v Bayberry Huntington, 148 NYS2d 762 [Nassau County 1956]); Staff v Lido Dunes, Inc, 47 Misc 2d 322 [Nassau County 1965]). While Ruxcroft House is itself not a new construction per se, Sponsor Defendants remodeled it and created two new condominiums. The subject unit here is indeed newly-constructed, and the common-law implied warranty is applicable. The motion to dismiss this claim is denied.
In order to plead breach of an express warranty, the plaintiff must allege that the defendant failed to abide by an express promise ( see Pitcherello v Moray Homes Ltd, 150 AD2d 860 [3rd Dept 1989]). Here, Brine alleges that Sponsor Defendants expressly promised in the contract that they would abide by the applicable regulations and perform quality workmanship, which they allegedly did not. This claim satisfies the liberal pleading standards and may proceed. The motion to dismiss it is denied.
Fifth, Sixth, and Seventh Causes of Action Against Sponsor Defendants and Cortes: Fraud
In order to sustain a claim for fraud, "there must be a knowing misrepresentation of material fact, which is intended to deceive another party and to induce them to act upon it, causing injury" ( Sokolow, Dunaud, Mercadier Carreras LLP v. Lacher, 299 AD2d 64 [1st Dept. 2003]). "A fraud-based cause of action is duplicative of a breach of contract claim when the only alleged fraud is that the defendant was not sincere when it promised to perform under the contract" ( Manas v VMS Associates LLC, 2008 WL 2796587 [1st Dept], citing, First Bank of Ams v Motor Car Funding, 257 AD2d 287 [1st Dept 1999]).
In his fifth cause of action, Brine pleads that Sponsor Defendants misrepresented their ability to secure a TCO, compensate the contractors, and perform the renovations in accordance with applicable New York zoning and building laws in order to induce him to purchase the condominium ( see Capolino Aff, Ex. A, Verified Complaint, ¶¶ 148 154). He alleges in his sixth cause of action that they falsely stated that they could complete the renovations in a timely manner as an inducement for him to agree to the April 6, 2006 amendment ( id., ¶¶ 157 158). Finally, he pleads that Sponsor Defendants allegedly knew all of these statements were false and that he relied on these statements to his detriment ( id., ¶¶ 151 161).
These fraudulent-inducement allegations are redundant of those for his breach-of-contract claims since the purported misrepresentations pertain exclusively to the condominium sale and renovations. Indeed, Sponsor Defendants' alleged failure to obtain a TCO, pay certain contractors, and perform the work with the agreed-upon time frame form part of the basis for Brine's breach-of-contract claim against them ( id., ¶ 125). Due to this duplicity, the motion to dismiss the fifth and sixth causes of action is granted.
Brine pleads in his seventh cause of action that on April 17, 2006, Cortes and Sponsor Defendants represented to him that the paint cracking in the condominium was caused by "the settling, temperature and humidity levels"( id., ¶ 170) and that "the sub-floor beneath [the entrance foyer] . . .was reinforced . . .with a concrete-like material" ( id., ¶ 172). He alleges that these representations were false, known to be false, were in fact caused by poor workmanship, and that he relied on these to his detriment ( id., ¶¶ 171 173).
This claim against Sponsor Defendants and Cortes must be dismissed because it is duplicative of the breach-of-contract claims against them. Moreover, these alleged statements are not collateral to the contract because these pertain to the exact allegations found therein; namely, that the work performed was substandard and not in accordance with its terms. Accordingly, the seventh cause of action against Sponsor Defendants and Cortes is dismissed.
Eighth Cause of Action Against Sponsor Defendants: Violations of NY General Business Law § 349
GBL § 349 prohibits "deceptive acts or practices in the conduct of any business, trade, or commerce . . ." "[P]arties claiming the benefit of this section must, at the threshold, charge conduct that is consumer oriented" ( New York University v Continental Ins Co, 87 NY2d 308). The conduct must have a broad impact on consumers at large; private contract disputes that are unique, private in nature, or involve a so-called "single-shot" transaction do not fall with the statute's ambit ( see, Oswego Labors Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20).
Here, Brine pleads that Sponsor Defendants made material misrepresentations in the Offering Plan, which was used as the marketing tool to sell the condominium units ( see Capolino Aff, Ex. A, Verified Complaint, ¶ 179). The alleged false representations concerned their financial ability, the construction time-line, their compliance with applicable zoning and housing regulations, and the property's condition ( id., ¶¶ 28-29).
At the onset, it is clear that this is a consumer transaction because Sponsor Defendants were engaged in the task of finding buyers for their property. Furthermore, Brine's allegations do not concern a unique, private, or one-time transaction that fails to find protection under GBL § 349. Rather, he alleges that the Offering Plan was prepared and circulated by Sponsor Defendants for the public-at-large. Indeed, the statements contained therein were intended to entice anyone, not just Brine, to enter into negotiations for either of the two units that were for sale. Accordingly, Brine adequately pleads a claim for violations of GBL § 349 and the motion to dismiss it is denied.
Ninth Cause of Action Against Sponsor Defendants and Cortes: Negligence Misrepresentation "A claim for negligent misrepresentation may only stand where 1) there is a special relationship of trust or confidence between the claimant and the wrongful parties; 2) the relationship creates a duty for one party to impart correct information to another; 3) the information given was false; 4) and there was reasonable reliance upon the information that was given" ( Hudson River Club v Con Ed Co of New York, 275 AD2d 218 [1st Dept 2000]). However, "[m]erely charging a breach of a duty of care' . . .does not . . .transform a simple breach of contract into a tort claim" when the underlying allegations are the same ( Clark-Fitzpatrick, Inc v Long Island Railroad, 70 NY2d 382).
Brine pleads that Sponsor Defendants and Cortes had a special relationship with him and thereby a duty to accurately convey information ( see Capolino Aff, Ex. A, Verified Complaint, ¶¶ 186 191). He further alleges, again, that these defendants made material misrepresentations of fact with respect to their compliance with applicable housing regulations; the quality of construction; and the level of workmanship ( id., ¶¶ 192-193).
Here, Brine's allegations for negligent misrepresentation are simply his breach of contract claims repackaged with a duty-to-inform label attached thereon. The motion to dismiss this claim against Sponsor Defendants and Cortes is therefore granted.
Tenth Cause of Action Against Cortes: Negligence
The elements for a claim for negligence are the existence of a duty, breach of that duty, injury to plaintiff resulting therefrom, and damages ( see Benjamin v City of New York, 99 AD2d 995 [1st Dept 1984]). A claim for negligence that merely restates one for breach of contract cannot be maintained ( see Stardial Communications Corp v Turner Const Co, 305 AD2d 126 [1st Dept 2003]).
As in his previous claim, Brine alleges that Cortes owed him a duty and that it breached that duty when it negligently performed the construction and renovations, failed to comply with applicable zoning and housing regulations, and did not properly supervise the subcontractors ( see Capolino Aff, Ex. A, Verified Complaint, ¶¶ 198-200). But these allegations also serve the basis for his breach of contract claim against Cortes. The motion to dismiss it is therefore granted.
Twelfth Cause of Action Against Cortes: Promissory Estoppel
"To avoid dismissal of a promissory estoppel claim, a plaintiff must allege 1) an unambiguous promise; 2) reasonable and foreseeable reliance on the promise; and 3) injury as a result of that reliance" ( Urban Holding Corp v Haberman, 162 AD2d 230 [1st Dept 1990]). Brine alleges that during the construction and renovations, Cortes "made numerous promises regarding their work . . . services . . .and ability to perform" that were "false and were made to induce [him] to permit [them] to continue to work on the project . . ." ( see Capolino Aff, Ex. A, Verified Complaint, ¶¶ 216 217). Specifically, these promises pertained to the representation that Unit A was being renovated in accordance with the applicable housing regulations and the quality of the work performed ( id., ¶ 192). He further pleads that he relied on their promises, paid them hundreds of thousands of dollars in fees based on these promises, and that they ultimately failed to perform on their promises ( id., ¶¶ 218-220).
Brine clearly satisfies the liberal pleadings requirements for a promissory estoppel claim because he identifies the promises and alleges that he relied on them to his detriment. Accordingly, the motion to dismiss it is denied.
Thirteenth Cause of Action Against Sponsor Defendants: Declaratory Judgment
Brine's breach of contract claim against Sponsor Defendants derives from the allegations that they allowed the TCO to expire, failed to compensate him for the penalties he was entitled to under the Escrow Agreement, and performed shoddy work ( see Capolino Aff, Ex. A, Verified Complaint, ¶ 125). In his thirteenth and final cause of action, he seeks a declaration that he is entitled to a $274,588.26 penalty payment pursuant to the Escrow Agreement.
"A cause of action for declaratory judgment is unnecessary and inappropriate when the plaintiff has an adequate, alternative remedy in . . .breach of contract" ( Apple Records, Inc v Capitol Records, Inc, 137 AD2d 50 [1st Dept 1988]). Brine pleads that Sponsor Defendants breached the April 6, 2006 agreement by failing to compensate him in toto for their delay in securing the TCO. A cause of action sounding in breach of contract is certainly a sufficient remedy for Brine to recover his loss from Sponsor Defendants alleged failure to abide by the agreement's terms. The motion to dismiss this cause of action is granted.
Brine's Cross-Motion
Brine's cross-motion for an order directing Sponsor Defendants to withdraw their objection to the disbursement of escrow funds is denied. In essence, Brine sought summary judgment disposition on his declaratory judgment claim, but failed to proffer the appropriate legal arguments. Moreover, as articulated , supra, this cause of action is unnecessary when recovery is available under a breach of contract claim.
Accordingly, it is
ORDERED that the motion to dismiss the fourth, eighth, and twelfth causes of action is DENIED; and it is further
ORDERED that the motion to dismiss the fifth, sixth, seventh, ninth, eleventh, and thirteenth causes of action is GRANTED; and it is further
ORDERED that the cross-motion is DENIED.
This constitutes the Decision and Order of the Court.