Opinion
No. 500724/11.
2012-07-2
RENAISSANCE EQUITY HOLDING, LLC, Plaintiffs, v. AL–AN ELEVATOR MAINTENANCE CORPORATION a/k/a Al' An Elevator Corp., Lawrence Flood and Anthony DiNapoli, Defendants.
The Silber Law Firm New York, NY, for Plaintiff. Nicholas Raymond Caputo, Esq. New York, NY, for Defendant.
The Silber Law Firm New York, NY, for Plaintiff. Nicholas Raymond Caputo, Esq. New York, NY, for Defendant.
DAVID SCHMIDT, J.
Upon the foregoing papers, defendant Al–An Elevator Maintenance Corp. (Al'An), Anthony DiNapoli (DiNapoli) and Lawrence Flood (Flood) move for an order, pursuant to CPLR 3211(a)(1), (7) and (5), dismissing plaintiff's complaint.
Factual Background
Plaintiff Renaissance Equity Holdings, LLC (hereinafter, plaintiff or REH) is a limited liability company that controls a number of entities, which together own and manage a 59 building residential housing complex in Brooklyn, New York, know as Flatbush Gardens housing complex (Flatbush Gardens). Al'An is an elevator installation and maintenance company. Sometime in 2005, REH purchased the Flatbush Gardens complex from Gateway Sherman, Inc. (Gateway), not a party herein. Sometime prior to that, Gateway had entered into a contract with Al'An for the sale and installation of elevators and their systems and equipment (Installation Agreement). REH maintains that it assumed the Installation Agreement when it purchased Flatbush Gardens from Gateway in 2005. Over the next two years, Al'An replaced the elevators in exchange for which the plaintiff paid more than $4,500,000. On or about December 13, 2006, REH and Al'An entered into a 10–year maintenance agreement pursuant to which Al'An agreed to provide maintenance and services, parts and labor on the 59 elevators installed at Flatbush Gardens. Plaintiff alleges that Al'An eventually stopped providing maintenance and repair services although it continued to receive the fees plaintiff paid. As a result, many of the elevators at Flatbush Gardens fell into disrepair and were put out of service. Additionally, numerous New York City Department of Buildings (DOB) code violations were issued against REH. Plaintiff claims that the defendant initially made some repairs to address the code violations, but ultimately stopped responding to REH's calls for help. In August 2011, Al'An notified REH that it would no longer perform any services under the agreement. REH alleges that it was thereafter forced to retain the services of another elevator company to make extensive repairs to the Flatbush Gardens elevators.
The plaintiff subsequently commenced the within action against Al'An, DiNapoli and Flood. In its amended complaint, the plaintiff asserts five causes of action: (1) breach of the installation agreement; (2) breach of the maintenance agreement; (3) conversion; (4) unjust enrichment; and (5) fraud, fraudulent inducement. Defendants have collectively moved for an order, pursuant to CPLR 3211(a)(1), (7) and (5), dismissing plaintiff's complaint in its entirety. By order dated February 2, 2012, this court dismissed the third cause of action for conversion and fourth cause of action for unjust enrichment, with prejudice, and the punitive damages claims were withdrawn by the plaintiff. By order dated April 2, 2012, this court dismissed the first cause of action alleging breach of the installation agreement, with prejudice, and with respect to the fraud cause of action, the parties stipulated that said claim does not include or relate to the installation agreement. Based upon the foregoing, only plaintiff's remaining claims for breach of the maintenance agreement (second cause of action) and the fraud claim (fifth cause of action) will be addressed herein.
Discussion Defendants move for an order, pursuant to CPLR 3211(a)(1) and (7), to dismiss the plaintiff's breach of contract and fraud claims. On a motion to dismiss pursuant to CPLR 3211(a)(7), the pleadings are liberally construed, and the court accepts the facts alleged in the complaint as true, according plaintiffs the benefit of every favorable inference. The court considers only whether the facts, as alleged in the complaint, fit within any cognizable legal theory ( see Leon v. Martinez, 84 N.Y.2d 83, 87–88 [1994];Uzzle v. Nunzie Court Homeowners Assn., Inc ., 55 AD3d 723 [2008];Simmons v. Edelstein, 32 AD3d 464 [2006];Hartman v. Morganstern, 28 AD3d 423 [2006];Ark Bryant Park Corp. v. Bryant Park Restoration Corp., 285 A.D.2d 143, 150 [2001] ). The court may freely consider affidavits and other documentary evidence submitted by the plaintiff to remedy any defects in the pleading ( see Leon, 84 N.Y.2d at 88;Ackerman v. 305 East 40th Owners Corp., 189 A.D.2d 665, 666 [1993];see also Well v. Yeshiva Rambam, 300 A.D.2d 580, 580 [2002];Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 635–636 [1976] ). Therefore, in addition to the allegations asserted in the complaint, the facts alleged in plaintiff's affidavit submitted in opposition to the defendants' motions must also be assumed to be true and considered in determining the motion.
To succeed on a motion to dismiss pursuant to CPLR 3211(a)(1), the documentary evidence that forms the basis of the defense must be such that it resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff's claim ( see AG Cap. Funding Partners, L.P. v. State Street Bank and Trust Co., 5 NY3d 582, 590–591 [2005];511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 152 [2002];Held v. Kaufman, 91 N.Y.2d 425, 430–431 [1998];Cohen v. Nassau Educators Fed. Credit Union, 37 AD3d 751 [2007];Sheridan v. Town of Orangetown, 21 AD3d 365 [2005];Teitler v. Max J. Pollack & Sons, 288 A.D.2d 302 [2001];Museum Trading Co. v. Bantry, 281 A.D.2d 524 [2001];Jaslow v. Pep Boys–Manny, Moe & Jack, 279 A.D.2d 611 [2001];Brunot v. Joe Eisenberger & Co., 266 A.D.2d 421 [1999] ). If the documentary evidence disproves an essential allegation of the complaint, dismissal is warranted even if the allegations, standing alone, could withstand a motion to dismiss for failure to state a cause of action ( see Snyder v. Voris, Martini & Moore, LLC, 52 AD3d 811 [2008];Peter F. Gaito Architecture, LLC v. Simone Dev. Corp., 46 AD3d 530 [2007] ).
Breach of Maintenance Agreement
Plaintiff's second cause of action alleges a breach of the maintenance agreement between REH and Al'An. The amended complaint alleges that Al'An and REH entered into a 10–year maintenance contract
, dated December 13, 2006, pursuant to which REH was to pay a monthly fee of $11,800.00 in exchange for which Al'An agreed to provide maintenance and repair services, parts and labor on he 59 elevators it installed at Flatbush Gardens. Pursuant to the terms of the maintenance contract, Al'An was required to, among other things, visit each site at least twice monthly, have an “A” mechanic on the premises on a daily basis, perform maintenance repair services, keep the elevators in safe operating conditions, promptly send qualified employees to respond to emergency calls, and cure and obtain dismissals of any violations found by any governmental agency or other authorities ( see Maintenance Contract, ¶¶ 7, 13 and 14).
The maintenance contract was for a term of 10 years commencing on December 1, 2006 and ending November 30, 2016.
In its amended complaint, plaintiff alleges that Al'An breached the maintenance agreement by failing to properly staff Flatbush Gardens as it agreed to do, and by failing to make proper repairs to the elevators when needed. Specifically, plaintiff alleges that, during the course of the agreement time-period, Al'An eventually stopped having an “A” mechanic on site as required under the contract, and routinely dispatched inexperienced and unskilled elevator repair persons who were unable to sufficiently address problems that arose with the elevators, thereby exasperating the problems. As a result, plaintiff alleges that several DOB code violations were assessed against it, and that several elevators were shut down. Despite numerous complaints and requests that Al'An make the necessary repairs and address the DOB violations, plaintiff claims that Al'An demanded to be paid a higher fee, and ultimately failed to address the mounting problems. Even though REH paid the requested increase, in early August 2011, Al'An terminated the agreement and refused to perform any further maintenance services. As a result, plaintiff alleges that it was ultimately forced to hire another company, at an increased expense, to remedy Al'An's breach.
In support of their motion to dismiss, defendants initially argue that the breach of maintenance agreement claim should be dismissed because the contract required the plaintiff to send a notice of default to Al'An prior to declaring it in breach, which defendants claim the plaintiff failed to do. In this regard, the defendants rely upon paragraph 25 of the maintenance agreement which provides as follows:
“In the event of a breach of this agreement by Contractor the Owner shall promptly notify Contractor in writing to such breach and, in the event such breach is not remedied within 10(ten) days of the sending of such notice, the owner may terminate this Agreement.”
In support of this contention, DiNapoli, a principal of Al'An, avers, in a sworn affidavit, that the plaintiff failed to send Al'An a notice of default as required under this provision of the contract.
Defendants additionally argue that the documentary evidence demonstrates that Al'An was forced to remove its mechanics from the Flatbush Gardens buildings because the plaintiff allowed the condition of the premises to deteriorate to such a point that it was jeopardizing the safety and health of Al'An's mechanics, as well as its own employees, tenants and guests. In support of this contention, the defendants have submitted a copy of an U.S. Occupational Safety and Health Administration (OSHA) regional news release, dated April 19, 2011, which noted that REH was cited for 20 alleged code violations of workplace safety and health standards affecting the maintenance workers at Flatbush Gardens in 2011 including, but not limited to, failure to keep basements clear of raw sewage, failure to provide protective equipment such as waders to employees required to enter those basements, failure to determine presence of and inform employees about asbestos contained in pipe insulation, uncovered floor holes and several electrical hazards ( see DiNapoli Affidavit, Exhibit E). It is the defendants' contention that the condition of the premises prevented Al'An from making repairs to the elevators.
Lastly, defendants argue that paragraph 34 of the maintenance agreement bars the recovery of any consequential damages. Paragraph 34 states, in pertinent part, that “[i]n no event shall [Al'An] be liable for special, indirect Consequential or liquidated damages for default or delay.”
In opposition, the plaintiff argues that notice of its dissatisfaction with Al'An's contract performance is well documented. In support of this contention, plaintiff has submitted the sworn affidavit of one of its principals, Jacob Schwimmer, wherein he avers that REH sent numerous emails to Al'An complaining of the open unaddressed DOB violations and demanding that repairs be made ( see Schwimmer Affidavit, Exhibit E). Additionally, plaintiff argues that Al'An's termination of the maintenance agreement relieved it of any obligations to serve Al'An with a notice of its breach thereafter. Indeed, plaintiff maintains that Al'An was the one who initially terminated the maintenance contract by letter dated August 1, 2011, wherein it advised REH that it would no longer provide elevator maintenance services at Flatbush Gardens as of August 16, 2011 (Silber Affirmation, Exhibit A). Further, plaintiff notes that its counsel sent a response letter to Al'An dated August 3, 2011, warning that if Al'An did not address the numerous problems and DOB violations with the elevators promptly, it would take steps to protect its property and repair the elevators. Based upon the foregoing, it is plaintiff's contention that it sent numerous complaints to Al'An regarding its failure to perform under the contract and that, in any event, it was not required to send Al'An a notice to cure breach when it was the one who initially terminated the contract.
With respect to defendants' allegations that Al'An's mechanics were unable to make the necessary repairs because of the poor condition of the premises, Schwimmer asserts that such allegations are false and are merely Al'An's attempt to avoid its obligations under the maintenance agreement. In fact, Schwimmer references a July 27, 2011 email wherein REH advised that a walk-through of the premises revealed no evidence of any sewerage in any of the basements. Schwimmer claimed that the defendants never responded to the email, and days later, notified REH that it was terminating the agreement. Contrary to defendants' contention, plaintiff maintains that Al'An was fully capable of performing its maintenance obligations under the agreement. The plaintiff additionally argues that the waiver of consequential damages does not apply to damages for lost profits arising directly from the work and that, in any event, discovery is necessary to ascertain the extent of such damages.
As an initial matter, the court finds that the plaintiff has stated a cause of action for breach of contract.
However, the documentary evidence submitted by the defendants fails to definitively establish a defense to such claim as a matter of law. Construing the pleadings liberally and granting plaintiff the benefit of every favorable inference, as I must ( see Goshen v. Mutual Life Ins. Co. of NY, 98 N.Y.2d 314, 326 [2002];Ullmannglass v. Oneida, Ltd., 86 AD3d 827, 829 [2011] ), the court finds that the defendants have not produced sufficient documentary evidence to warrant a dismissal of the breach of maintenance agreement pursuant to CPLR 3211(a)(1). As set forth above, a dismissal under CPLR 3211(a)(1) can only be granted where the documentary evidence conclusively establishes a defense to the claims asserted by the movant as a matter of law ( see Goldman v. Metropolitan Life Ins Co., 5 NY3d 561, 571 [2005] ). Defendants have failed to make such showing.
The elements of a claim for breach of contract are (1) the existence of a contract, (2) due performance of the contract by plaintiff, (3) breach of the contract by defendant, and (4) damages resulting from the breach ( see Elisa Dreier Reporting Corp. v. Global Naps Networks, Inc., 84 AD3d 122, 127 [2d 2011]; JP Morgan Chase v. J.H. Elec. of NY, Inc., 69 AD3d 802 [2010] ).
Here, defendants rely upon paragraph 25 of the maintenance agreement and their assertion that REH failed to provide Al'An with the requisite notice of its breach of the agreement. Paragraph 25 sets forth that, in the event of a breach by Al'An, REH must provide it with written notice and a 10 day period to cure said breach. Contrary to defendants' assertion, however, and based upon the parties' submissions, questions of fact exist as to whether REH in fact failed to notify Al'An of any alleged breaches under the maintenance agreement. Indeed, REH has submitted copies of various emails to Al'An wherein it complained of its failure to have mechanics on site to repair the elevators and made numerous demands to rectify the problems. Moreover, the documentary evidence submitted herein establishes that Al'An was the entity that initially terminated the contract, not REH. Therefore, in light of Al'An's termination, it is questionable whether REH was still required to give any further notice of breach to Al'An. In any event, the court finds that the defendants have failed to establish as a matter of law that it has a defense to the plaintiff's breach of contract claim ( see Montes Corp. v. Charles Freihofer Baking Co ., Inc., 17 AD3d 330 [2005] ).
Furthermore, although defendants' submission of an OSHA news release and news articles indicates that REH was cited for various health and safety violations on the Flatbush Gardens premises, such evidence does not resolve all factual issues as to Al'An's ability to perform its contractual obligations under the maintenance agreement, nor does it conclusively dispose of the plaintiff's breach of claim as a matter of law ( see Montes Corp, 17 AD3d at 330–331;Teitler v. Pollack & Sons, 288 A.D.2d 302 [2001] ). Indeed, such evidence fails to utterly refute the plaintiff's allegations that Al'An was physically capable of performing the maintenance services but chose not to do so ( see Trade Source v. Westchester Wood Works, Inc., 290 A.D.2d 437 [2002];Teitler, 288 A.D.2d 302). Accordingly, that branch of defendants' motion seeking to dismiss plaintiff's breach of maintenance contract claim is hereby denied.
However, those portions of plaintiff's breach of contract claim which seek consequential damages must be dismissed. “A clear contractual provision limiting damages is enforceable absent a special relationship between the parties, a statutory prohibition, or an overriding public policy” (Smith—Hoy v. AMC Prop. Evaluations, Inc., 52 AD3d 809, 810 [2008];see also Peluso v. Tauscher Cronacher Prof'l Eng'rs, PC, 270 A.D.2d 325, 325 [2000] ). Moreover, a party cannot avoid liability for damages caused by “conduct that evinces a reckless disregard for the rights of others or smacks' of intentional wrongdoing” (Obremski v. Image Bank, Inc., 30 AD3d 1141, 1142 [2006] quoting Colnaghi, U.S.A. v. Jewelers Protection Servs., 81 N.Y.2d 821, 823–824 [1993] ). Here, REH clearly and unambiguously waived its right to seek consequential damages in paragraph 34 of the maintenance contract. In light of the fact that the parties to the subject agreement were both corporate entities, and since the complaint does not allege any basis not to enforce this limitation of liability provision, REH is barred from seeking any consequential damages in relation to the breach of contract claim.
Fraudulent Inducement
In support of their motion insofar as they seek dismissal of plaintiff's fifth cause of action for fraudulent inducement, defendants rely upon the general legal principle that a cause of action seeking damages for fraud cannot be sustained when the only fraud charged relates to a breach of contract or where the fraud claim is duplicative of a breach of contract claim ( see Selinger Enters., Inc. v. Cassuto, 50 AD3d 766, 768 [2008];Ross v. DeLorenzo, 28 AD3d 631, 636 [2006];Lee v. Matarrese, 17 AD3d 539, 540 [2005];Egan v. New York Care Plus Ins. Co., 227 A.D.2d 652, 653 [2000];Non–Linear Trading Co. v. Braddis Assoc., 243 A.D.2d 107, 118 [1998];Alamo Contract Bldrs. v. CTF Hotel Co., 242 A.D.2d 643, 644 [1997];Weitz v. Smith, 231 A.D.2d 518, 519 [1996];Gordon v. Dino De Laurentiis Corp., 141 A.D.2d 435, 436 [1988] ). Defendants argue that plaintiff's fraud claim impermissibly attempts to convert its breach of maintenance contract claim into a fraud cause of action. Defendants point out that in order to plead fraud, the plaintiff must allege “[a] present intent to deceive,” and that “a mere misrepresentation of an intention to perform under the contract is insufficient to allege fraud” (WIT Holding Corp. v. Klein, 282 A.D.2d 527, 528 [2001] ). Indeed, general allegations that a defendant entered into a contract with the intent not to perform are insufficient to support a fraud claim ( see New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 318 [1995];Univec, Inc. v. American Home Prods. Corp., 265 A.D.2d 403, 403 [1999] ). Conversely, a misrepresentation of material fact, which is collateral to the contract and served as an inducement for the contract, is sufficient to sustain a cause of action alleging fraud ( see Ross v. DeLorenzo, 28 AD3d 631, 636, 2006];WIT Holding Corp, 282 A.D.2d at 528). Unlike a misrepresentation of future intent to perform, a misrepresentation of present facts, which is collateral to the contract, involves a separate breach of duty ( see GoSmile, Inc. v. Levine, 81 AD3d 77, 81 [2010];Selinger Enters., Inc., 50 AD3d at 768).
Here, plaintiff's fraud claim is premised upon the allegations that Flood and DiNapoli, who are both principals of Al'An, knowingly made false promises and statements to plaintiff regarding the maintenance agreement in order to induce it to enter into same. Specifically, plaintiff alleges that, prior to entering into the maintenance agreement, Flood and DiNapoli falsely represented that Al'An would make all necessary repairs and remove any elevator violations in a prompt and timely fashion ( see Amended Complaint, ¶¶ 102–107). Plaintiff further alleges that the defendants had no intention of complying with the promises, and only made them in order to reap substantial fees from the plaintiff. Plaintiff further alleges that the defendants knew from the start that they would not comply with their obligations to properly repair the elevators when they broke down. Additionally, plaintiff alleges that it entered into the maintenance agreement and subsequently agreed to pay a higher contract fee because it relied upon the defendants' misrepresentations.
Here, the alleged misrepresentations that defendants (Al'An) would promptly provide the necessary maintenance to the elevators involve representations of future intent to perform that arise out of Al'An's contractual obligation under the maintenance agreement and, therefore, not an obligation collateral to said contract ( see Manas v. VMS Associates, LLC, 53 AD3d 451, 454 [2008] ). Thus, the court finds that plaintiff's fraud claim is merely a disguised contract claim since the gravamen of the fraud claim is that defendants promised that Al'An would provide maintenance and repair services, and that it failed to do so. As noted above, an action for fraud may not be maintained when it relates to a breach of a contractual obligation ( see Heffez v. L & G General Const., Inc., 56 AD3d 526 [2008];McGee v. J. Dunn Const. Corp., 54 AD3d 1010 [2008];Gibraltar Mgt. Co., Inc. v. Grand Entrance Gates, Ltd., 46 AD3d 747,749 [2007] ). Since the plaintiff's claims against Al'An arise out of the alleged deficient performance of the underlying maintenance contract, the fifth cause of action for fraud must be dismissed as against Al'An ( see Non–Linear Trading Co. Inc. v. Braddis Assoc., Inc., 243 A.D.2d 107, 118 [1998] ).
The fraud claim insofar as asserted against the individual defendants Flood and DiNapoli is also hereby dismissed inasmuch as plaintiff fails to allege that said defendants, principals of Al'An, breached any duty owed to it separate and apart from the alleged contractual obligations under the maintenance contract ( see Rivas v. Amerimed USA, Inc., 34 AD3d 250, 250 [2006] [holding “court properly dismissed plaintiff's fraud claims ... as duplicative of their breach of contract claims”]; Non–Linear Trading Co., 243 A.D.2d at 118
[“cause of action for breach of contract cannot be converted into one for fraud by merely alleging that defendant did not intend to fulfill the contract”] [internal quotation marks and citation omitted] ).
Plaintiff's reliance upon WIT Holding Corp. v. Klein, 282 A.D.2d 527 (2001) is misplaced. That action arose out of an agreement by the plaintiff to purchase a stock interest in a corporate defendant. The plaintiff paid $500,000 and never received the stock interest in return. In its complaint, the plaintiff asserted claims, inter alia, for breach of contract and fraud in the inducement. Unlike here, the plaintiff's fraud in the inducement cause of action was premised upon allegations that defendant's corporate officers made material misrepresentations of fact separate and apart from the corporation's obligations to perform under the stock purchase agreement ( id at 528). For instance, prior to entering into the agreement, the corporate officers allegedly misrepresented their status as principal shareholders of the corporation and misrepresented that the corporation was in compliance with certain regulatory requirements. Both misrepresentations were deemed collateral to the stock purchase agreement ( id.)
In the present case, however, the allegations that Flood and DiNapoli misrepresented that Al'An would make repairs to the elevators amount to nothing more than a misrepresentation of an intention of future performance of the maintenance contract obligations ( see Yenrab, Inc. v. 794 Linden Realty, LLC, 68 AD3d 755 [2009] ). Accordingly, plaintiff's fifth cause of action for fraud is hereby dismissed as against all of the defendants.
Conclusion
In sum, that branch of defendants' motion seeking to dismiss plaintiff's second cause of action for breach of the maintenance agreement is denied, except that plaintiff's claim
insofar as it seeks consequential damages is hereby dismissed. Plaintiff's fifth cause of action for fraud is hereby dismissed as against all defendants, with prejudice.
The foregoing constitutes the decision and order of the court.