Opinion
38561-2010
09-08-2011
Town of Huntington, Plaintiff, v. American Manufacturers Mutual Insurance Company and HALF HOLLOW CONSTRUCTION CO., LLC, Defendants.
Attorney for Plaintiff John J. Leo, Town Attorney Attorney for Defendant AMMI Co. Torre, Lentz, Gamell, Gary & Rittermaster, LLP Attorney for Defendant HHC Co. John A. Harras, Esq. Harras, Bloom & Archer, LLP
Attorney for Plaintiff John J. Leo, Town Attorney
Attorney for Defendant AMMI Co. Torre, Lentz, Gamell, Gary & Rittermaster, LLP
Attorney for Defendant HHC Co. John A. Harras, Esq. Harras, Bloom & Archer, LLP
Emily Pines, J.
Defendant, Half Hollow Construction Co. LLC ("Half Hollow") moves (motion sequence No. 001) pursuant to CPLR 3211(a)(1), (5), and (7), for an order dismissing the complaint as asserted against it. Defendant, American Manufacturers Mutual Insurance Company ("AMMIC") moves (motion sequence # 002) pursuant to CPLR 3211(a)(1), (5), and (7), for an order dismissing the complaint as asserted against it. Plaintiff, Town of Huntington ("Town") opposes both motions.
FACTUAL AND PROCEDURAL BACKGROUND
Half Hollow was involved in the development of a senior residential community known as The Greens at Half Hollow ("The Greens") located in the Town. In connection with the project, Half Hollow provided performance bonds in favor of the Town. AMMIC issued Performance Bond No. 3SE01219500 in the amount of $8,889,160 on behalf of Half Hollow as principal, guaranteeing performance of the site improvements on Phase I of The Greens, and Performance Bond No. 3SE0303755 in the amount of $2,589,952 on behalf of Greens at Half Hollow, LLC, as principal, guaranteeing performance of the site improvements on Phase 2 of the project.
In 2005, the Town commenced an action against AMMIC, Half Hollow and others in this Court entitled The Town of Huntington v. American Man. Mut. Ins. Co., et al., under Index No. 27910/05 ("2005 Action"), seeking, among other things, recovery under the performance bonds based upon AMMIC's and Half Hollow's alleged breach of their obligations under the performance bonds. The Town alleged, among other things, that Half Hollow failed to complete the work in accordance with the requirements as set forth in the performance bonds.
By Settlement Agreement dated July 31, 2008, between Greens at Half Hollow, LLC ("GHH"), the developer and sponsor of the Greens and the Town, "So Ordered" by this Court (Cohalan, J.), the parties settled the 2005 Action together with three related actions commenced in 2006. The Settlement Agreement provides, in relevant part:
1. GHH will diligently complete all remediation work . . . detailed in the joint engineering report (the "Joint Engineering Report"), dated June 27, 2006 . . . The Parties, acting through their respective engineers, shall consult in good faith with each other no later than thirty (30) days after execution of this Agreement in connection with determining the method and timing of the remediation work specified in the Joint Engineering Report (the "Agreed Work") . . .
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3. The work identified in paragraphs 1 and 2 above will be completed within one year of the execution of this Agreement. All performance bonds provided by GHH in connection with The Greens Community shall be released and cancelled, and all related cash bonds previously delivered by GHH shall be returned to GHH, after the work identified in paragraphs 1 and 2 above is completed and only after approval of such work by Greenman-Pederson, which approval shall not be unreasonably withheld. Within fifteen days after the cancellation of the aforementioned performance bonds and return of the related cash bonds, GHH shall deliver to the Town a new performance bond in the amount of One Million Dollars ($1,500,000) [sic]. Such new performance bond shall be held for one year from the date of its delivery to the Town, and will secure that the work identified in paragraphs 1 and 2 above, as well as required improvements to the common areas in the Greens affordable housing area (i.e. "Condominium V"), are completed in a satisfactory manner and in accordance with generally accepted engineering practices. After the expiration of the one year term, the new bond shall be cancelled automatically unless earlier cancelled by the Town.
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12. Within ten (10) days of the signing of this Agreement, the Parties will execute and file Stipulations of Discontinuance with Prejudice of the Litigation Matters in the form annexed as Exhibit "A" hereto . . . The filing of such stipulations shall be without prejudice to Parties' rights to enforce this Agreement. The Supreme Court shall retain jurisdiction over this matter as to enforcement of the terms and conditions of this Agreement.
In the 2005 Action, A Stipulation Discontinuing Action With Prejudice was executed by counsel for the parties and filed with the County Clerk on September 17, 2008.
On or about October 28, 2010, the Town commenced the instant action against AMMIC and Half Hollow, seeking a "declaratory judgment and monetary relief arising from breach of the terms of a construction agreement and Defendants' flagrant and bad faith breaches of a surety performance and payment bond executed in connection with the construction of a site plan entitled "The Greens at Half Hollow" and the flagrant and bad faith breach of a So-Ordered Settlement Agreement entered in connection to on-going litigation pending in the Courts of the State of New York." The Verified Complaint alleges, among other things, that "[t]he work outlined in the Settlement Agreement related to extensive and serious drainage and grading problems and the unfinished and defective paving and curb work that has not been completed within the time frame ordered in the Settlement Agreement." It is also alleged that the Greens' contractor/sponsors violated the Settlement Agreement in April and May of 2009, by refusing to conduct the required joint field assessments and engineering meeting, or complete the necessary work as outline in the Settlement Agreement. The Verified Complaint sets forth two causes of action alleging that AMMIC breached its legal and contractual obligations under the performance bonds and seeking recovery thereunder.
In its motion, Half Hollow contends that the instant action is barred by the doctrines of res judicata and collateral estoppel. Half Hollow argues that the prior actions by the Town, discontinued with prejudice in 2008 pursuant to the terms of the Settlement Agreement, involved the same claims against the performance bonds that are asserted in the instant action. Therefore, Half Hollow asserts that the claims asserted by the Town in this action are barred as a matter of law because the discontinuance of the prior actions with prejudice precludes the Town from re-litigating claims involving the performance bonds. Additionally, Half Hollow contends that the Verified Complaint as asserted against it must be dismissed because the Town issued certificates of occupancy by which it purportedly acknowledged that all work secured by the performance bonds was completed in accordance with all applicable plans and approvals issued by the Town.
In opposition to Half Hollow's motion to dismiss, the Town argues that the scope of the work required pursuant to the Settlement Agreement, which it is claiming was breached by Defendants, was more narrow in scope that the work it claimed was improperly performed in the 2005 Action. Additionally, the Town points out that the Settlement Agreement provides that the performance bonds were to be released only after the work required pursuant to the Settlement Agreement was completed and approved. The Town contends that the work was never completed and approved and, therefore, GHH did not deliver a new performance bond to the Town in the amount of $1,500,000, as required by the Settlement Agreement. The Town also relies on the provision of the Settlement Agreement which states that the filing of the Stipulation of Discontinuance with Prejudice "shall be without prejudice to the parties rights to enforce this Agreement." The Town contends that the claims it now asserts, breach of the Settlement Agreement and recovery therefor on the performance bonds, are not barred since they are not the same claims asserted in the 2005 Action. With regard to Half Hollow's argument that the Town's issuance of certificates of occupancy bars the Town from claiming that the required work has not been fully/properly performed, the Town contends that this argument was rejected by Justice Cohalan in a prior order issued in the 2005 Action and, therefore, Half Hollow's is collaterally estopped from raising this issue.
In reply, Half Hollow contends, among other things, that because the Town's complaint does not allege any event that purportedly arose after the Town executed the Stipulation of Discontinuance with Prejudice in the 2005 Action, it must be dismissed. Further, Half Hollow argues that the "without prejudice" language in paragraph 12 of the Settlement Agreement "simply clarified that the stipulation of discontinuance would not affect the operation of the so-ordered settlement agreement, nor render the rights and obligations under that agreement inoperable."
In its motion, AMMIC argues that the Settlement Agreement and the Stipulation of Discontinuance with prejudice terminated the Town's claims against AMMIC under the bonds, leaving the Town only with rights and obligations under the Settlement Agreement, to which AMMIC is not a party. It claims that since the claims asserted against it in this action are the same claims as those asserted in the 2005 Action, the claims asserted in this action are barred under the principle of res judicata. AMMIC further contends that because it is not a party to the Settlement Agreement, it is not bound by the provision therein providing that the performance bonds will be released and cancelled only after the work required by the Settlement Agreement is completed and approved. It claims that the intent and effect of the Settlement Agreement and the Stipulation of Discontinuance with Prejudice was to terminate the Town's claims under the bonds, notwithstanding the aforementioned provision. Finally, AMMIC argues that although the parties to the Settlement Agreement reserved their rights to enforce the Settlement Agreement, the Town has no rights against AMMIC pursuant to the Settlement Agreement because it was not a party thereto.
In opposition, the Town argues that the claims it asserts in the instant action are not identical to the claims asserted in the 2005 Action as the scope of the work required pursuant to the Settlement Agreement, which it is claiming was breached by Defendants, was more narrow in scope that the work it claimed was improperly performed in the 2005 Action. Additionally, the Town relies on the provision in the Settlement Agreement that the bonds were not to be released and cancelled until after the work was completed and approved. While acknowledging AMMIC's argument that it is not bound by the Settlement Agreement because it did not sign it, the Town contends that AMMIC is nevertheless bound by the terms of the Settlement Agreement because it has the force and effect of a court order having been "So Ordered" by Justice Cohalan. Thus, the Town argues that the Stipulation of Discontinuance with Prejudice did not release AMMIC from claims that the Settlement Agreement was breached.
In reply, AMMIC repeats its argument that the claims asserted against it in this action, as a surety for the developer by reason of the developer's alleged breach of the Settlement Agreement, are barred because they are the same claims that were asserted against it as a surety for the developer in the 2005 Action, which was settled and discontinued with prejudice.
DISCUSSION
In considering a motion to dismiss a complaint pursuant to CPLR 3211(a)(7):
The complaint must be liberally construed and the plaintiff given the benefit of every favorable inference (citations omitted). The court must also accept as true all of the facts alleged in the complaint and any factual submissions made in opposition to the motion (citations omitted). If the court can determine that the plaintiff is entitled to relief on any view of the facts stated, its inquiry is complete and the complaint must be declared legally sufficient (citations omitted). While factual allegations contained in the complaint are deemed true, bare legal conclusions and facts flatly contradicted on the record are not entitled to a presumption of truth (citations omitted).(Symbol Tech., Inc. v. Deloitte & Touche, LLP, 69 AD3d 191, 193-195 [2d Dept 2009]).
Here, although both Half Hollow and AMMIC cite to CPLR 3211(a)(7) as providing a basis for dismissal of the Town's Verified Complaint, neither articulates an argument that the Verified Complaint fails to state a cause of action. Therefore, to the extent that the defendants' motions seek dismissal of the Verified Complaint pursuant to CPLR 3211(a)(7), the motions are denied.
"A motion to dismiss a complaint pursuant to CPLR 3211(a)(1) may be granted only where the documentary evidence submitted by the movant utterly refutes the plaintiff's allegations against it and conclusively establishes a defense as a matter of law" (Cog-Net Bldg. Corp. v. Travelers Indem. Co., 86 AD3d 585 [2d Dept 2011]).
As recently noted by the Appellate Division, Second Department in Wisell v. Indo-Med Commodities, Inc. (74 AD3d 1059, 1060 [2d Dept 2010]):
The doctrine of collateral estoppel "precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes ofAlthough "[t]he general rule is that a stipulation of discontinuance with prejudice' is afforded res judicata effect and will bar litigation of the discontinued causes of action . . . the language with prejudice' is narrowly interpreted when the interests of justice, or the particular equities involved, warrant such an approach" (Van Hof v. Town of Warwick, 249 AD2d 382, 382 [2d Dept 1998]).
action are the same" (Ryan v. New York Tel. Co., 62 NY2d 494, 500, 478 N.Y.S.2d 823, 467 N.E.2d 487; Chiara v. Town of New Castle, 61 AD3d 915, 916, 878 N.Y.S.2d 755). Pursuant to the doctrine of res judicata, a final judgment precludes reconsideration of all claims which could have or should have been litigated in the prior action or proceeding against the same party (see Parker v. Blauvelt Volunteer Fire Co., 93 NY2d 343, 347, 690 N.Y.S.2d 478, 712 N.E.2d 647).
It is clear that the thrust of the defendants' motions is whether the instant action is barred by the doctrines of res judicata and/or collateral estoppel due to the Stipulation of Discontinuing Action with Prejudice filed in the 2005 Action. Here, despite similar allegations contained the the 2005 Action and the instant action, the Verified Complaint in the instant action clearly and unequivocally alleges that the defendants violated the Settlement Agreement entered into with respect to the 2005 Action. The Settlement Agreement in the 2005 Action was not entered into until July 2008. Thus, it is obvious that in 2005 the Town could not have made a claim that the defendants breached the Settlement Agreement as it was not entered into until 2008. Moreover, the Settlement Agreement explicitly provides that the filing of Stipulations of Discontinuance with Prejudice was without prejudice the rights of the parties to enforce the Settlement Agreement. Thus, although the claims now asserted against the performance bonds are similar to the claims asserted in the 2005 Action in that both seek recovery on the performance bonds, the breach alleged by the Town in the instant action is the defendants' alleged breach of the Settlement Agreement entered into in 2008, which is not a claim which could have or should have been litigated in the 2005 Action. Accordingly, the Court finds that the Stipulation Discontinuing Action with Prejudice filed in connection with the 2005 Action should not be afforded res judicata effect and does not bar the claims asserted in the instant action.
Contrary to AMMIC's contention, the Settlement Agreement and Stipulation Discontinuing Action with Prejudice did not terminate the claims asserted by the Town against AMMIC in the instant action, as they are substantively different than the claims asserted in the 2005 Action. Although AMMIC is not a party to the Settlement Agreement, as a surety its liability is derived from that of its principal, Half Hollow (see MacKennan v. American Cas. Co. of Reading, Pennsylvania, 169 AD2d 709, 710 [2d Dept 1991]).
Finally, Half Hollow's argument that the Town's claims are barred by documentary evidence in the form of certificates of occupancy issued by the Town certifying that all required work at The Greens was completed in accordance with the Town's requirements was previously raised by Half Hollow and rejected by this Court (Cohalan, J.) in the 2005 Action by order dated October 20, 2007, among other things, denying Half Hollow's motion to dismiss. In said Order, the Court stated, in relevant part:
The Greens' narrow argument that the Town's issuance of Cos to the homeowners to occupy their homes somehow entitles the Greens to assert that all site plan improvements or non-improvements are acceptable to the Town is flawed and ignores the status of this problem plagued residential development. The Town Code §87-29 for the issuance of Cos, provides:
"Upon completion, under a permit, of any building or structure . . ., the Director shall issue a certificate of occupancy' for habitable or non-habitable space, stating that the work has been completed substantially in accordance with the permit approved . . .
Clearly the issuance of a CO to the homeowner in one particular residence to occupy his/her residence in a planned development under construction does not translate to a "carte blanche" approval of the defendants' work product. To suggest other wise would prevent the completion of any development project and prevent the sale of any homes in a piecemeal fashion, requiring instead a massive house closing and the issuance of Cos by the Town on a project all at once, a near impossibility. The issuance of a homeowner's CO to occupy his/her home does not translate into an approval of the complete site plan project so as to foreclose the Town's right to move against the performance bonds filed for failure to complete site plan improvements required by the Town.
Thus, the Court finds that Half Hollow is collaterally estopped from relitigating this issue in the instant case.
Accordingly, it is
ORDERED that Half Hollow's motion for an order dismissing the complaint as asserted against it is denied, and it is further
ORDERED that AMMIC's motion for an order dismissing the complaint as asserted against it is denied.
This constitutes the DECISION and ORDER of the Court.
Riverhead, New York
EMILY PINES
J. S. C.