Opinion
Index No.: A00020/2013
02-06-2018
CATLYN & DERZEE, INC. Plaintiff, v. AMEDORE LAND DEVELOPERS, LLC, and VAN ALLEN APARTMENTS, LLC, Defendants.
Appearances: Lemery Greisler, LLC Attorneys for Petitioners By: Peter M. Damin, Esq., and Paul A. Levine, Esq. 50 Beaver Street, 2nd Floor Albany, New York 12207 O'Connell & Aronowitz, P.C. Attorneys for Defendants- By: Jeffrey A. Siegel 54 State Street, 9th Floor Albany, New York 12207
NYSCEF DOC. NO. 71 DECISION AND ORDER
RJI No.: 01-13-110575 Appearances: Lemery Greisler, LLC
Attorneys for Petitioners
By: Peter M. Damin, Esq., and
Paul A. Levine, Esq.
50 Beaver Street, 2nd Floor
Albany, New York 12207 O'Connell & Aronowitz, P.C.
Attorneys for Defendants-
By: Jeffrey A. Siegel
54 State Street, 9th Floor
Albany, New York 12207 David A. Weinstein, J. :
This case, which concerns a contractual dispute arising out of a residential development in the Town of North Greenbush, New York, has been the subject of three prior trial court opinions, and one decision by the Appellate Division. It is before this Court once again, for a ruling on defendant's motion for leave to amend its counterclaim pursuant to CPLR 3025(b), and to conform the pleadings to the evidence pursuant to CPLR 3025(c).
BACKGROUND
A. Relevant Facts and Procedural History
First, some brief background: Plaintiff Catlyn & Derzee, Inc. ("C & D") commenced this action by summons and complaint filed January 17, 2013. A first amended complaint named as defendants Amedore Land Developers, LLC ("Amedore" or "ALD") and Van Allen Apartments, LLC ("Van Allen"). At the outset of the events at issue, C & D owned 52.97 acres of land in North Greenbush. In February 2008, defendant Amedore entered into a contract with C & D for the purchase of 21 acres of that land, which set forth a plan to develop the property. The contract was later amended by an Agreement dated May 25, 2010, which allocated responsibilities for developing and paying for the property's infrastructure.
At the time of these agreements, the development was governed by Local Law No. 8 of 2007. On August 23, 2012, the North Greenbush Town Board passed Local Law No. 4 of 2012, which is the genesis of much of the dispute between the parties. The new law increased the number of residential units at the site and provided for additional parking and extensions of sewer and water. C & D argued that it was entitled to compensation for the additional units, and objected to the documentation submitted by Amedore in support of a claim to a $210,000 credit. This litigation followed.
In the amended complaint, plaintiff pled five causes of action: (1) breach of contract for Amedore's failure to compensate C & D for the 60 additional units it constructed; (2) breach of contract for Amedore's assertion of the $210,000 credit without proper support; (3) declaratory judgment that Amedore is in breach of the contract, and C & D is relieved from further obligations thereunder; (4) unjust enrichment by Amedore and Van Allen, "[i]n failing to pay C & D any further compensation for the additional approved units or to reimburse C & D the unjustified credit taken at closing" (Am. Comp. ¶ 68); and (5) breach of the duty of good faith and fair dealing. Defendants answered the amended complaint, and counterclaimed for a declaratory judgment, stating as follows:
"Plaintiff seeks to avoid its obligations with respect to installation of infrastructure as more particularly set forth in the Contract, as amended. Defendants seek a declaration that the Contract has not been breached by defendants and a declaration setting forth plaintiff's continuing obligations thereunder" (Am Ans ¶ 62).
The parties cross moved for partial summary judgment. On those motions, Judge McNamara dismissed plaintiff's first cause of action for breach of contract, and denied the motions in all other respects. Plaintiff appealed, and the Third Department affirmed (Catlyn & Derzee, Inc. v Amedore Land Developers, LLC, 132 AD3d 1202, 1207 [3d Dept 2015]). In, regard to plaintiff's third cause of action for a declaratory judgment relieving it of further obligations under the parties' agreements, the Appellate Division held that defendants were not in breach of contract in regard to the pricing scheme, and the other alleged breaches did not "defeat the very purpose of the parties in entering into the contract so as to justify its termination" (see id.). Since defendants had not moved against this cause of action, however, no order was entered directing its dismissal.
The parties then renewed their summary judgment motions with respect to the fourth and fifth causes of action before this Court, differing on the meaning of the Third Department ruling. They also served cross motions on discovery: a motion by plaintiff to compel responses to its discovery demands, and by defendants to quash certain third-party subpoenas. In a Decision and Order dated April 7, 2017 ("Apr. 7 D&O"), I granted plaintiff's motion to compel and defendants' motion to quash in part, granted defendants' motion for summary judgment as to plaintiff's fourth and fifth causes of action, and dismissed those claims. In regard to plaintiff's third cause of action, I noted that while it had never been dismissed, the earlier decisions left "no legal basis for it to remain viable" (Apr. 7 D&O at 10). Plaintiff moved to reargue, and I adhered to my initial rulings by Decision and Order dated July 17, 2017. On the basis of representations made by the parties at a conference before the Court, I understand that an appeal from these orders is pending.
According to defendant's present application, a conference was conducted at the Third Department before the Civil Appeals Settlement Program, at which plaintiff took the position that defendants' declaratory judgment counterclaim does not encompass a claim for money damages. C & D reiterated this position at a court conference before me on September 7, 2017. By its current motion defendants seek to remedy this, and add a new counterclaim for damages against plaintiff arising out of C & D's alleged failure to meet its contractual obligations in regard to infrastructure on the site. The proposed counterclaim also includes various additional allegations which purport to reflect the Court's prior rulings in this case.
B. Defendants' Proposed Amendments
Appended to the motion as Exhibit A is a proposed Second Amended Answer to the Amended Complaint with Affirmative Defenses and Counterclaims ("Proposed Second Amended Answer" or "Prop Sec Am Ans"). The pleading contains a new twelfth affirmative defense asserting that "no response is required to the First, Third, Fourth and Fifth Causes of Action in the Amended Complaint" because "they have either been dismissed or have been held not to be viable" (Prop Sec Am Ans ¶ 61). In addition, defendants propose to add a fourteenth affirmative defense and second counterclaim for breach of contract. The essence of the new counterclaim is that the contract required that plaintiff complete infrastructure work; defendants made demand upon plaintiff that it perform certain work (the installation of "infrastructure and roadways") (id. ¶¶ 89-91); plaintiff "failed and refused to pay for the infrastructure work" despite such demand (id. ¶ 91); and as a result defendant was compelled to pay for the work to complete its project and mitigate damages (id. ¶ 93). It seeks monetary damages for these alleged breaches.
This aspect of the amendment seems superfluous, since the Court's rulings govern the claims regardless of whether such an affirmative defense is pled. Neither of the parties address the matter, however. In the absence of any opposition to this defense or any apparent harm in allowing it to be pled, and in light of the principle that amendments to the pleading are to be freely given absent prejudice or surprise, I will allow this aspect of the amendment.
The contractual provision which serves as the basis of the counterclaim, Paragraph 2 of the 2008 Amendment, reads as follows (in which the "Seller" is C & D and the "Purchaser" is ALD): "2) the costs of the site work shall be borne as follows:
A.) Water.
i) The water main as depicted on Sheet "OS-1" Dated 11/13/2009 by Environmental Design, titled "Offsite Utility Plan", shall be paid for solely by Seller;
ii) The cost of the water main from the termination of water main depicted on sheet "OS-1" to Station 3+25 shown on sheet "S-7" titled "Utility Plan" shall be born 78.6% by the Purchaser and 21.4% by the Seller.
iii) Each party shall bear the cost of any water main from Station 3+25 to and through its own property.
B.) Sewer.
The cost of the Pump Station and auxiliary facilities for the pump station to be constructed on the Purchaser's Property shall be borne equally by the parties. The cost of the outflow from the Pump Station to its termination at Rock Cut Road as depicted in Sheet "OS-1" shall be borne equally by the parties. Each party shall be responsible for any other Sewer in-flow costs incurred.
The parties agree that the Seller may develop a plan to connect to a line coming through the Commercial Property. If such plan results in lesser costs to the parties, Seller may present such plan to Purchaser for consideration. If Purchaser agrees to said alternative path, the construction of such line shall replace the cost of the line contemplated herein from Station 3+25 outflowing from the Pump Station.
Paragraph 6 provides, in relevant part: "All the representations, covenants and promises by the Seller and Purchaser contained in the Contract shall survive the Closing contemplated hereunder arid the delivery and recording of the deed . . ." (Defendants' Affidavit in Support of Motion ["Aff in Supp"], Ex B).
C.) Access Road and Storm Water Management System serving the Access Road. Except for the costs set forth above for Water and Sewer, all other costs associated with the construction of the road through the Easement granted by Niagara Mohawk Power Corporation, including but not limited to grading, storm water management, pavements, sidewalks, lighting and other improvements required in the Plans or by the Easement agreement shall be borne equally by the parties.
D.) Seller shall undertake the work called for in Paragraph (6)(A)(i) above (Water Line) within 90 days of being requested by Purchaser, weather permitting.
E.) The party doing the work shall bill the other party in monthly installments for its share of the cost, if any, and said bill shall be paid within 30 days unless objected to for reasonable cause."
The different spellings of "born"/"borne" are in the original.
Attached to and cited by the Proposed Second Amended Answer are several letters. On September 11, 2013, counsel for defendants wrote to C & D President and General Counsel Edward Feinberg and one Rex Ruthman, stating: "pursuant to the agreements, the Seller is required to undertake the work called for in Paragraph 6(A)(i) above (Water Line) within 90 days of being requested by Purchaser, weather permitting" (id.). The letter indicated that it was a request that plaintiff undertake this work, and asked that C & D meet with Van Allen to coordinate (id.). According to the proposed amended pleading, plaintiff either did not respond to the letter or refused to do the work (Prop Sec Am Ans ¶¶ 86, 88, 90).
A response by Feinberg to this letter, dated September 19, 2013, is contained in plaintiff's submission (see Feinberg Aff, Ex 1). It asked that defendants provide C & D with a set of up-to-date plans, although it also noted that plaintiff "rel[ies] on the claims set forth in the Complaint for resolution of the legal position of the parties" (id.). According to Feinberg, as set forth in an affidavit submitted by C & D, defendants did not respond to his request for the plans (Feinberg Aff ¶ 38). Feinberg also asserts that except for the water line letter, defendants sent no other letters to C & D "related to any of the other site development/ infrastructure work" (id. ¶ 41), and plaintiff received no information on costs until April 28, 2017, when Amedore turned over cost information for work already performed as part of a discovery response (id. ¶ 45).
The proposed counterclaim references and appends two additional letters: One, from Van Allen's attorney to counsel for C & D was sent on April 3, 2014. It was materially the same as the first, except it stated that Van Allen's previous demands had been ignored, asserted that "the recent court decision in the pending matter [i.e., Judge McNamara's summary judgment ruling] . . . clarifies that your clients may not repudiate their obligations" and "demanded" that the work be undertaken (Prop Sec Am Ans, Ex 4). It stated that if C & D did not carry out what it characterized as the "required Site Work," Van Allen would do so and would "hold [C & D] and the guarantors, jointly and severally liable, for all damages" (id.). A further letter, dated June 23, 2015, stated that plaintiff had been given adequate time to act and had failed to do so, and Van Allen would therefore "proceed in its own best interests" and hold C & D liable for damages (id., Ex 5).
Defendants also submit two additional letters dated June 29 and July 31, 2015 which respond to letters by plaintiff not included in the submission, and concern the latter's request that Van Allen provide it with the approved plans for the site (Prop Sec Am Ans, Ex 6).
Additionally, the proposed second counterclaim alleges that plaintiff commenced this litigation "[i]n furtherance of its attempt to avoid its obligations concerning the infrastructure" (Prop Sec Am Ans ¶¶ 79-80). Specifically, it cites plaintiff's Third Cause of Action for the declaratory relief as the source of this breach.
Defendants contend that plaintiff will suffer no prejudice from the amended pleading, since it has already received all discovery relevant to the counterclaim (Aff in Supp ¶ 40). For the alleged breaches, defendants seek damages "believed to exceed $500,000" (Prop Sec Am Ans, Demand for Relief ¶ c).
C. Plaintiff's Opposition to the Proposed Amendment
In opposition to the motion, plaintiff submits a memorandum of law and Feinberg's affidavit, which attack the proposed amendment on numerous grounds.
Most significantly, plaintiff asserts that the contractual documents make clear there is no basis to the counterclaim. In support of this argument, C & D points to the requirement in paragraph 2(E) of the 2010 Amendment that the party performing the work bill the other party for its costs on a monthly basis.
Plaintiff also cites Paragraph 14(b)(4) of the original contract, which states: "Seller agrees that the costs to be borne by the hotel area, as set forth above, shall be either (A) timely paid by Sellers or its [sic] successors, transferees and/or assigns or (B) shall be a credit against the purchase price.
Plaintiff contends that the only work specifically assigned to it was construction of the water line upon notice, and "if Plaintiff did not undertake construction, Defendant could proceed in its place" (Pl Mem of Law at 5). In short, it reads the contract as stating that plaintiff had the right to install the water main, but was not required to do so (Feinberg Aff ¶ 21). Thus, C & D's failure to undertake such work did not damage defendants, but merely waived plaintiff's right to proceed (Pl Mem of Law at 6). Moreover, Feinberg maintains that defendants never billed plaintiff for any work it carried out, and thus there was nothing for C & D to pay (see id. ¶ 44; Pl Mem of Law at 13). Put otherwise, plaintiff asserts that the sending of bills is an "express condition precedent" to C & D making payment, and defendants' failure to comply with that condition relieved plaintiff of any contractual obligation it had to pay for the infrastructure (Pl Mem of Law at 10-11). In sum, plaintiff argues that the proposed amendment is meritless, because "neither the Contract nor the Amendment created any duty on the part of Plaintiff to construct any facilities referred to in the contract"; instead, both parties had the right to undertake the work and bill for the other's share of the costs, and no such bills were ever sent (Feinberg Aff ¶ 68; Pl Mem of Law at 5).
Feinberg avers that, following closing, there was no contact between the parties "for years." Specifically, he maintains that defendants did not communicate with plaintiff regarding the Contract or site revisions, or the effect of such on the project initially approved (id. ¶ 30). Instead, in alleged violation of the contract, defendants proceeded without notice to or the participation of C & D, on the basis of a different set of plans and obligations than those referred to in the Contract (id. ¶ 32).
Plaintiff also argues that defendants cannot show damages from the alleged breaches as a result of a series of maneuvers through which they are alleged to have surrendered their contractual rights. In 2010, Amedore assigned its claims in the C & D contract to Van Allen (see Feinberg Aff, Ex 8). Then, on July 15, 2015, Van Allen conveyed the premises to North Greenbush Apartment Partners, LLC ("North Greenbush" or NGAP) (id. ¶ 49, Ex 8). NGAP subsequently contracted with Trinity Construction, Inc. to construct the premises and infrastructure (id. ¶ 71). A copy of that contract is appended to the opposition papers, listing NGAP as the owner of the property (id., Ex 2). Given the foregoing, plaintiff contends that the work at issue was paid for and carried out by parties not in privity with plaintiff (NGAP and Trinity), and defendants therefore have no right to recover damages for such work (Feinberg Aff ¶ 72).
In 2017, Van Allen apparently assigned any claims against Feinberg and Ruthman back to Amedore (see Aff in Opp, Ex 8).
C & D also argues that defendants' proposed counterclaim reflects improper "claim splitting" between this case and a separate action Amedore commenced against Feinberg and Ruthman on June 21, 2017. Plaintiff submits a copy of the complaint from that case, in which ALD seeks to recover damages against these individuals for the infrastructure work at issue here, in their capacity as guarantors of the Contract (id., Ex 3). That lawsuit alleges, like the proposed counterclaim here, that the guarantors are liable in damages for C & D's failure to either perform the infrastructure work provided for by the contract or to pay for Amedore's performance (id. ¶ 21). Plaintiff argues that this action provides grounds for denying the amendment, since "Defendants cannot recover the same damages twice" (id. ¶ 86).
In general, plaintiff contends that allowing defendants to proceed on the counterclaim for damages would be unfair, since they have failed to share information with C & D, including cost information which would have enabled C & D to secure costs savings; and they gained approval of Local Law No. 4 through use of plaintiff's intellectual property (id. ¶ 90). Also, plaintiff asserts that because the contract specifically references costs expended pursuant to Local Law No. 8, there can be no recovery for Amedore, since all the work at issue was carried out pursuant to Local Law No. 4 (see Pl Mem of Law at 8). Plaintiff makes a host of other arguments which generally seek to portray the transaction at issue as unfair, and defendants' conduct as improper. Here are a few examples:
• "Defendants engaged in a systematic pattern of disloyalty and faithlessness in performing their contract duties both as agent and when acting under authority of Plaintiff's development rights" (id. at 17).
• "Amedore owed the duty to act in good faith under the contract, and because of the inherent conflict it undertook with its roles of agent and purchaser . . . the higher duty to act uberrima fides in the matter of incurring and accounting for all expenses" (id. at 21).
• "There is no way to know how many other examples of self-dealing, withholding and faithlessness Defendants engaged in" (id. at 24).
For the most part, none of these general broadsides have anything to do with the standard for amending a pleading, although plaintiff tries to connect the dots between what it deems to be defendant's prejudicial conduct in the transaction and the prejudice to it from the proposed amendment (see e.g. id. at 22 [defendants' "pattern of non-cooperation and concealment of expense records and transactions . . . constitute[] a fundamental prejudice to the interests of plaintiff in the Contract and in the present legal proceedings"]). As detailed below, plaintiff makes some more specific arguments as to prejudice, in particular that the delay has deprived it of evidence relevant to the costs of the infrastructure except that which can be obtained directly from defendants (see Pl Mem of Law at 24-25). Finally, plaintiff contends that because of the delay in defendants seeking the proposed amendment, it should be denied under the doctrine of laches (Feinberg Aff ¶ 90).
D. Defendants' Reply
In a reply submission, defendants make several rejoinders to these arguments. For one thing, they contend that they properly notified C & D that it should undertake the infrastructure work at issue. As support for this claim, they provide a copy of another letter from Amedore to C & D dated May 23, 2012, prior to enactment of Local Law No. 4. It states that Amedore "hereby requests that you . . . commence your scope of work for offsite utility work, in accordance with the First Amendment to Contract, dated February 15, 2008" (Reply Aff, Ex A). The letter also asked plaintiff to meet with them to discuss and coordinate the offsite Work, as well as "onsite shared utility work" (id.).
Exhibit A is a compendium of all of the letters discussed below.
In regard to the sale of the property to North Greenbush, defendants provide the affidavit of George Amedore, Sr., a member of both ALD and Van Allen. He confirms that on or about July 30, 2015, Van Allen conveyed the property at issue to NGAP, a company in which Van Allen owns a 50% interest (Amedore Aff ¶ 3-4). He states that ALD nevertheless is entitled to damages for the alleged breach of contract because it "funded the cost of the infrastructure work for which defendants seek reimbursement" (id. ¶ 6).
Finally, defendants submit the deposition testimony of Gavin Vuillaume, the engineer in charge of the project, by which they seek to show that the infrastructure at issue was not affected by the amendment to the Local Law. For example, he attests that the roads being developed are those approved before the amendment to the Local Law, and the location of the water and sewer lines were not changed post-Local Law No. 4 (see Reply Aff, Ex B at 59-66).
DISCUSSION
I. Standard of Review
A motion for leave to amend a pleading should be freely granted in the absence of prejudice or surprise to the opposing party, unless the proposed amendment is "palpably insufficient" or "patently devoid of merit" (Ferguson v Hart, 151 AD3d 1242, 1243 [3d Dept 2017]). Moreover, leave to amend will be granted when the proposed amendment "only changes the theory of liability without adding any new facts to those pleaded in the original complaint" (Carco, Inc. v Beltrone Const. Co., 183 AD2d 984, 985 [3d Dept 1992], or fleshes out the case with additional factual averments (see Woodbrook Houses v Hercoform Mktg., 129 AD2d 1001, 1001-1002 [4th Dept 1987] [permitting amendment to complaint where party seeks "only to specify with greater particularity the items of damage resulting from the alleged breach of contract" and "defendants have always been on notice of the underlying claim"]).
While plaintiff contends that the movant must set forth a "sufficient evidentiary showing" in support of the proposed amendment (see Pl Mem of Law at 1), that is not so. There is indeed caselaw setting forth such a requirement (see e.g. Cowsert v Macy's E., Inc., 74 AD3d 1444, 1445 [3d Dept 2010]), but the Third Department recently joined the other three Departments in overturning its prior decisions stating such a rule, and making clear instead that "[n]o evidentiary showing of merit is required under CPLR 3025 (b)" (NYAHSA Servs., Inc., Self-Ins. Trust v. People Care Inc., 156 AD3d 99, 102 [3d Dept 2017]). Rather, "[i]f the opposing party [on a motion to amend] wishes to test the merits of the proposed added cause of action or defense, that party may later move for summary judgment [or to dismiss] upon a proper showing" (id. [citation omitted]).
That said, a breach of contract claim cannot be adequately pled on the basis of conclusory allegations of damages (see Gawrych v Astoria Fed. Sav. & Loan, 148 AD3d 681, 684 [2d Dept 2017] [trial court "should have granted dismissal pursuant to CPLR 3211(a)(7) of so much of the breach of contract cause of action as is predicated on these alleged breaches of the defendant's contractual obligations, since the complaint only contains conclusory allegations of damages resulting from the alleged breaches"]; Gordon v Dino De Laurentiis Corp., 141 AD2d 435, 436 [1st Dept 1988] [dismissing breach of contract cause of action on pleadings since it "contains only boilerplate allegations of damage"; finding that "[i]n the absence of any allegations of fact showing damage, mere allegations of breach of contract are not sufficient to sustain a complaint, and the pleadings must set forth facts showing the damage upon which the action is based"]); see also Krouner v Travis, 290 AD2d 917, 918 [3d Dept 2002] [conclusory allegations of breach of contract do not meet CPLR 3025 standard]).
In particular, the pleading must set forth the specific contractual provisions breached (see Darby Group Cos., Inc. v Wulforst Acquisition, LLC, 130 AD3d 866, 867 [2d Dept 2015]). Further, in assessing the sufficiency of a breach of contract cause of action, it is appropriate for the Court to consider the actual contractual language, since a breach of contract claim may be dismissed on the pleadings if "the contract itself precludes the claim" (Plaza PH2001 LLC v Plaza Residential Owner LP, 98 AD3d 89, 100 [1st Dept 2012]; see also Smith-Hoy v AMC Prop. Evaluations, Inc., 52 AD3d 809, 810-811 [2d Dept 2008] [denying motion for leave to amend where clear clause in contract limited damages claim]; Corman v LaFountaih, 38 AD3d 706, 707 [2d Dept 2007] [denying leave to amend to add breach of contract claim against particular defendant where agreement was "clear and complete on its face," and made clear that "no valid contract cause of action" existed against that defendant]; West Branch Realty Corp. v Exchange Ins. Co., 260 AD2d 473, 474 [2d Dept 1999] [denying leave to amend when cause of action barred by "terms of written insurance policy"]). Moreover, in this case the counterclaim specifically incorporates the terms of the contract by reference, and thus the question of whether the cause of action is consistent with those terms is encompassed by the pleadings themselves (see Manchester Equip. Co. v Panasonic Indus. Co., 141 AD2d 616, 617 [2d Dept 1988], lv denied 73 NY2d 703 [1988] [dismissing breach of contract claim on the pleadings when it was "completely undermined and rendered legally insufficient by the very terms of the contract which was appended to the complaint and incorporated by reference into the complaint."]).
With these principles in mind, I proceed to address the arguments against the amendment made by plaintiff.
II. Plaintiff's Arguments Against the Proposed Amendments
As an initial matter, one aspect of the proposed amendment is clearly without merit. Defendants allege that plaintiff breached the contract by the commencement of this action, and specifically by interposing its third cause of action for a declaratory judgment that "defendants were in material breach of the contract," and it was therefore "relieved, excused, and/or discharged from any further obligations or performance" under the Amended Contract (Prop Sec Am Ans ¶¶ 80-82). This cannot be the basis for a breach of contract claim. A declaratory judgment action "does not constitute an anticipatory breach . . . because a declaratory judgment action merely seeks to define the rights and obligations of the parties" (Princes Point LLC v Muss Dev. L.L.C., 30 NY3d 127, 133434 [2017] [citations and internal quotation marks omitted]). C & D's third cause of action did nothing more than this, and any breach of contract claim based on this allegation would be meritless on its face.
Plaintiff's remaining arguments, however, do not present a basis for denying the motion as to any other aspect of the proposed amendment. As noted above, much of plaintiff's submission on this motion consists of an attack on the conduct of defendants during the course of the parties' contractual relationship, including broad allegations of bad faith, lack of disclosure and breach of fiduciary duty. In particular, it argues at length that defendants have repudiated the contract they now seek to enforce, noting that this argument was "laid out" in its third cause of action (see Pl Mem of Law at 27). But the Third Department has rejected plaintiff's contention that it is "entitled to a declaration that it was relieved of all outstanding obligations under the contract" based on defendants' alleged wrongdoing (Catlyn & Derzee, 132 AD3d at 1206), and I specifically found that this ruling leaves "no legal basis" for this claim (see supra p 3). Why plaintiff continues to reassert this argument here as a basis for opposing the proposed amendment - without noting that it has already been rejected in prior opinions - is a mystery. It goes without saying that it does not provide a ground for denying plaintiff's motion.
In noting that its efforts to be relieved of its obligations under the Contract are "set forth as the third cause of action," plaintiff expresses regret that this issue was not "resolved sooner," but suggests it could be resolved on this motion (see Pl Mem of Law at 33). But the issue has been conclusively resolved, just not in the manner plaintiff would like.
Plaintiff also argues that the proposed counterclaim is defective because breach of contract is either insufficiently pled or at odds with the factual record. First, it argues that since Van Allen has transferred the property where the development is being constructed, neither of the present defendants contracted for performance of the work at issue. Moreover, the entity that did contract for that work (NGAP) is not a party to this litigation or the contracts which set forth plaintiff's responsibilities. Defendants do not deny the facts set forth by C & D, but rather assert via the Amedore affidavit that "ALD actually funded the work for which defendants seek reimbursement" (Amedore Aff ¶ 6).
This argument requires an evidentiary inquiry inappropriate for consideration on a motion to amend. The role of NGAP is not apparent from the face of the pleading, nor is the extent and manner in which ALD bore the infrastructure expenses, or whether it did so under any legal obligation. These matters are appropriate fodder for summary judgment or trial, not for a determination as to whether the amended pleading is palpably insufficient (see Thompson v Cooper, 24 AD3d 203, 206 [1st Dept 2005] [standard for granting leave to amend "much less exacting than on a motion for summary judgment"]).
Plaintiff's argument that the amendment is precluded by defendants' non-compliance with the contractual provision for monthly billing presents a thornier question.
The language of the contract cited in the proposed counterclaim states explicitly that "the party doing the work shall bill the other party in monthly installments for its share of the cost . . . and said bill shall be paid within 30 days unless objected to for reasonable cause" (Prop Sec Am Ans ¶ 75). C & D argues that the breach of contract claim is devoid of merit, because Van Allen never alleges that it billed plaintiff for the work performed in accordance with Contract Amendment ¶ 2(E) (Pl Mem of Law at 11).
In its response, defendants do not assert that billings have, in fact, been sent. Instead, they point to plaintiff's failure to perform under the contract following demand, specifically in relation to the construction of the water line (Reply Aff ¶ 24). In addition, they argue that plaintiff has misconstrued the billing provision, arguing as follows:
Defendants also argue that because plaintiff breached the contract in not carrying out the water line work, it "cannot use the agreements it breached first as a defense" (id.). Even assuming that the alleged breach by plaintiff could be deemed "so substantial that it defeats the object of the parties in making the contract" so as to excuse defendants' performance (see Catlyn & Derzee, 132 AD3d at 1206), it is not clear how this helps defendants. They are the parties who in the proposed counterclaim are trying to enforce the contract, and the issue therefore is not plaintiff's rights thereunder, but whether plaintiff's obligations are subject to conditions precedent. I can find no legal principle under which a breach by a party to a contract allows the counterparty to rewrite the agreement so as to remove any conditions to which its own enforcement rights are subject.
"[S]ubmission of periodic billing was not a condition precedent to plaintiff's obligation to contribute to shared costs. All the Amended Contract states is that "[t]he party doing the work shall bill the other party in monthly installments for its share of the cost, if any, and said bill shall be paid within thirty days unless objected to for reasonable cause." It does not say what happens if there is an objection, reasonable or otherwise, or how an objection is resolved. Whether or not defendants sent monthly invoices while the work was done has no effect on defendants' entitlement to payment or plaintiff's right to make reasonable objections to the invoices it now has received. Moreover, it is the sharing of the cost of the work, not the frequency of the invoices, that is material. For plaintiff to claim it is excused from contributing over $500,000 to infrastructure costs based solely on the timing of invoice - and after plaintiff failed to perform any of its infrastructure obligation - it not a position worthy of consideration" (Reply Aff ¶ 25).
Defendants' argument faces a number of problems. While they demanded broadly that plaintiff perform work beyond that of the water line (see Def Ltr of June 23, 2015 in Prop Sec Am Ans, Ex 5 [demanding that plaintiff "complete installation of infrastructure and roadways"]), there is no contractual provision cited in the Proposed Second Amended Answer which authorizes defendants to require plaintiff to carry out infrastructure work beyond the water main. Nor is it apparent how plaintiff could be in breach for failing to pay its share of any specifically allocated costs, if plaintiff is correct that it has never been billed for them (see John J. Kassner & Co. v City of New York, 46 NY2d 544, 550 [1979] ['as a general rule, when the right to final payment is subject to a condition, the obligation to pay arises . . . only when the condition has been fulfilled"]). The proposed claim does not seek a declaration of rights, but damages for plaintiff's failure to hold up its end of the bargain. If the bargain is that plaintiff will pay the share of the cost for which it is properly and reasonably billed, and no bill has been sent, then there has been no breach and no damage. Whatever hypothetical difficulties might arise from the assertion of an objection or an untimely bill does not alter this conclusion.
Nevertheless, I find the proposed amendment is not palpably insufficient, for two reasons.
First, the question of whether or when billings were sent is a evidentiary matter which cannot be decided on the face of the proposed pleading or documents which it incorporates by reference.
Plaintiff argues that timely billing is a "condition precedent" to payment (see id.; Pl Mem of Law at 10-11), that is, an act or event "which must occur before a party is obliged to perform a promise made pursuant to an existing contract" (Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690 [1995]). But even if this characterization is accurate, it is not a viable attack on the pleading itself. New York law is explicit that to state a breach of contract cause of action, "[t]he performance or occurrence of a condition precedent in a contract need not be pleaded" (see CPLR 3015 [a]). As I am restricted in deciding this motion to the face of the pleading, I cannot deny the motion based on an issue not addressed within the four corners of the proposed counterclaim: whether defendants billed plaintiff for infrastructure work.
Second, one basis for the proposed amendment - the alleged failure of C & D to perform work on the water line following demand - sets forth a colorable basis for a breach of contract claim at this stage of the proceedings, even if I could find on the present record that no bills have been sent. Notably, the term of the Contract Amendment regarding the water line work (Section 2.D) is different from those allocating responsibility to C & D for a share of the costs of the water line and for other projects. While the other relevant provisions divvy up the parties' share of the expenses, this term imposes a specific task upon plaintiff. The crux of the counterclaim in this regard is not that defendants were damaged from plaintiff's failure to pay a sum owed, but that plaintiff harmed defendants in that the latter had to carry out work that C & D was contractually obliged to perform.
On the face of the proposed pleading, and the contractual documents incorporated therein, defendants have sufficiently alleged this breach and damage for pleading purposes to support a breach of contract cause of action (see generally Clearmont Prop., LLC v Eisner, 58 AD3d 1052, 1055 [3d Dept 2009] [articulating the elements of a cause of action for breach of contract]). Moreover, it is unclear from the face of the contract whether the billing provision would apply in these circumstances, i.e., where recovery is sought not for plaintiff's stated share of the costs, but for damages resulting from C & D's alleged failure to meet an explicit contractual obligation. Nor can I read the contract to say - as C & D suggests - that it had a choice of whether to perform the water line work or not; paragraph 2(D) states that the seller "shall undertake the work" upon demand. In light of the foregoing, I cannot find the claim meritless as a matter of law (see Berkeley Research Group, LLC v FTI Consulting, Inc., ___ AD3d ___, 2018 NY Slip Op 00222, *3 [1st Dept 2018] [where there is more than one reasonable interpretation of contractual provision, trial required on parties' intent]; Ruttenberg v Davidge Data Sys. Corp., 215 AD2d 191, 196-197 [1st Dept 1995] [denying summary judgment on breach of contract claim where contract is ambiguous as to whether particular term is a condition precedent]).
Plaintiff's other challenges to the amendment involve issues well beyond the face of the proposed pleading. This is true, for example, of plaintiff's argument that Local Law No. 4 and "the permits and plans, the water and sewer system" were all created after the Contract and Amended Contract, and therefore are not covered by the contract (Pl Mem of Law at 9), or that the allocation of infrastructure costs was based on the development permitted by Local Law No. 8 (see id. at 31). Defendants contend via the testimony of Vuillaume that the new law did not change the substance of the parties' infrastructure obligations, and therefore did nothing to undo the prior agreement. Whatever the merits of these contentions, they reflect evidentiary disputes appropriate for a summary judgment motion or trial.
Plaintiff also does not show that because of defendants' parallel action against the contract's guarantors, the amendment reflects an improper splitting of claims. The prohibition against "claim-splitting" bars the initiation of separate suits on contractual provisions that are "interrelated and constitute but separate integral parts of the whole," and therefore are part and parcel of a "single obligation" which "requires the plaintiff to assert its entire claim in one action" (930 Fifth Corp. v King, 42 NY2d 886, 887 [1977]). Typically, this occurs where a party seeks attorneys' fees in one action under a contract that is the basis for a separate case (see e.g. id.; Century Factors v New Plan Realty Corp., 41 NY2d 1040, 1041 [1977]; Landmark Properties v Olivo, 62 AD3d 959, 961 [2d Dept 2009]). I have found no authority for the proposition that this principle prevents recovery from different parties, on different grounds - in one case under the contract itself, in the other under an individual guarantee. That is particularly so where the breach of contract claim at issue is being asserted as a counterclaim in an existing lawsuit, and thus raising it in this action itself reflects an economy of bringing claims arising out of the same transaction in a single litigation. The presence of parallel suits may warrant consolidation, and any award secured by defendants would, of course, be subject to the bar against double recovery. But neither of those principles render the counterclaim here meritless at the present time, where consolidation has not been sought, and no recovery has been had in either action.
III. Prejudice and Laches
C & D's arguments that I should reject the proposed amendment because the motion will cause it prejudice, or because it was filed long after the contract dispute arose and is barred by the doctrine of laches, are similarly unavailing.
Prejudice requires "some indication that the [other party] has been hindered in the preparation of [its] case or has been prevented from taking some measure in support of his position" (see Kocourek v Booz Allen Hamilton Inc., 85 AD3d 502, 504 [1st Dept 2011] [citations and internal quotation marks omitted]). The nub of plaintiff's prejudice argument is set forth in its memorandum of law as follows: "The passage of up to ten years regarding some transactions or occurrences, the faded or forgotten recollections of witnesses essential to a meaningful review of construction and billing, matters now long past, cannot be recreated" (Pl Mem of Law at 22). C & Dcontends in particular that as a result of such delay, it must now obtain all relevant information from defendants (see id. at 25).
There are two problems with this argument. The first is that defendants' counterclaim for declaratory judgment has raised the matter of plaintiff's obligations to supply infrastructure under the contract since the inception of this suit. Second, the June 2015 letter sent by Van Allen to C & D. demanding fulfillment of its obligations under the contract specifically placed it on notice that defendants would seek damages from plaintiff if it failed to carry out the work demanded of it. The present amendment, then, cannot be said to be a surprise to plaintiff, nor can plaintiff base its prejudice argument on the assertion that it could not prepare itself against any claim of breach until now (see Thomas, 34 AD3d at 116 [granting leave to amend after nine years of litigation to add damages claim for breach of contract, where claim for specific performance had already been pled]; Barnes Coy Architects, P.C. v Shamoon, 53 AD3d 466, 467 [2d Dept 2008] [granting amendment to existing breach of contract claim when amendment was only to add allegations and increase damages; no prejudice or surprise to defendants would result]; Kocourek, 85 AD3d at 505 [no prejudice when party "had notice of the claim from the inception and should not have to change their strategy in any significant way to defend the new claim]; Nassau County v Incorporated Vil. of Roslyn, 182 AD2d 678, 680 [2d Dept 1992], lv dismissed 80 NY2d 972 [1992] [no prejudice when amendment "merely seeks to reflect the current status of the defendants' indebtedness as a result of the alleged on-going breach of contract"]). All that is left is a general assertion that evidence is more difficult to obtain with the passage of time, which is insufficient to defeat an application to amend a pleading (see Lanpont v Savvas Cab Corp., Inc., 244 A.D.2d 208, 210 [1st Dept 1997] [conclusory allegations of prejudice insufficient basis to deny motion to amend pleading]).
In addition, plaintiff argues that defendants have engaged in a pattern of "disloyalty and faithlessness" which imposed "undue prejudice . . . upon plaintiff in attempting to secure evidence and address the issues" in this case (Pl Mem at 17-18). In essence, C & D contends that defendants have prejudiced its ability to respond to the amendment by concealing information from it (id. at. 22). Much of this argument reiterates positions plaintiff has taken in this litigation - some of which have already been rejected in the prior opinions of this Court and the Third Department (see e.g. id. at 18 ["There is no question defendants acted outside the Contract when they secured approval of Local Law No. 4"]). In any event, as plaintiff's memorandum of law makes clear, this argument is based on a lengthy set of factual claims, inappropriate for resolution on the determination of whether to allow the proposed amendment.
Further, it is apparent from the exhibits submitted by the parties on this motion that some of the events underlying defendants' claimed damages (such as some of the correspondence demanding performance of work by plaintiff) did not occur until after the litigation commenced. And plaintiff itself sought a declaratory judgment that it was relieved of any infrastructure obligations because of defendants' alleged breach - and it was appropriate for defendants to delay amendment until that issue was resolved (see Kocourek, 85 AD3d at 505 [party entitled to wait on amendment until motion to dismiss was decided]).
As to plaintiff's contention that defendants' delay in seeking this amendment bars it under the doctrine of laches, that is essentially plaintiff's prejudice argument in a different form, and must be denied for the reasons set forth above (see Edenwald Contr. Co. v City of New York, 60 NY2d 957, 959 [1993] [citation omitted] ["Mere lateness is not a barrier" to amendment of pleading; rather "[i]t must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine"]; Thomas v Laustrup, 34 AD3d 1115, 1116 [3d Dept 2006] [citations omitted] ["Mere lateness is not a ground for denying leave to amend, unless it is coupled with "significant prejudice" to the moving party's adversary]). Plaintiff adds one twist to its laches claim: the assertion that it was prejudiced by defendants' delay in requesting that it perform infrastructure work for three years, from May 2010 (when plaintiff maintains defendants had all requisite permits) to September 2013 (see Pl Mem of Law at 43-45). This argument presumes that defendants should have commenced the construction prior to the approval of Local Law No. 4, which set forth the present scope of the development and did not occur until August 2012. This is consistent with plaintiff's position that the adoption of this law was improper and a violation of defendants' duties, but it is not the conclusion the Courts have reached to date, and it cannot be the factual premise on which leave to amend is denied.
In light of the foregoing, defendants' motion for leave to amend its answer is granted. Defendants may file and serve the Proposed Second Amended Answer within 20 days of the date of this Decision & Order, omitting paragraph 80.
A conference call with the parties shall take place on February 16, 2018 at 2:00 p.m., to be initiated by the Court.
This Decision & Order is being transmitted to counsel for defendants for filing, and service on plaintiff, with such service to be effectuated by both regular mail, and certified mail, return receipt requested. The signing of this Decision & Order shall not constitute entry or filing under CPLR Rule 2220, and counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.
ENTER. Dated: Albany, New York
February 6, 2018
/s/_________
David A. Weinstein
Acting Supreme Court Justice Papers Considered: 1. Defendant's Notice of Motion, dated September 14, 2017, Affidavit in Support and Exhibits annexed;
2. Plaintiff's Affirmation in Opposition, dated October 19, 2017 and Exhibits annexed;
3. Plaintiff's Memorandum of Law in Opposition, dated October 19, 2017;
4. Defendant's Reply Affidavit, dated October 24, 2017 and Exhibits annexed; and
5. Defendant's further Affidavit in Support of Motion, dated October 24, 2017.