Opinion
115050/2009.
September 16, 2010.
WYS Design Partnership Architects, P.C. (WYS or Petitioner) and Shael Shapiro (Shapiro) (collectively, Petitioners) move for a judgment permanently staying an arbitration demanded against them by the Board of Managers of the 285 Lafayette Street Condominium (the Board or the Condominium) and 271 Mulberry Street Company, LLC (271 Mulberry) (collectively, Respondents).
Background
Respondent, 271 Mulberry, sponsored the conversion of luxury condominiums located at 285 Lafayette Street, New York, New York, which included the construction of an additional five floors (hereinafter "the Conversion"). Pursuant to the terms of 271 Mulberry's operating agreement dated December 29, 1994, Abej, LLC ("Abej") is the managing member of 271 Mulberry, and had the authority to enter into contracts on behalf of 271 Mulberry.
WYS is an architectural firm that was involved in the condominium conversion of a building. Shapiro is an architect and former member of WYS.
On June 16, 1997, WYS entered into a contract for architectural services in connection with the Conversion ("the Contract"). The Contract is a standard form contract between an owner and architect and identifies the owner as Abej and the architect as WYS. Shapiro signed the Contract on behalf of WYS.
The Contract contains an arbitration clause, which provides that:
Claims, disputes or other matters in question between the parties to this agreement arising out of or relating to this Agreement or breach thereof shall be subject to and decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties agree otherwise.
WYS performed the architectural services and the final certificate of occupancy (the Certificate) was issued on August 9, 2002. WYS's final bill was dated September, 19, 2002. the conclusion of WYS's involvement in the Conversion.
In the meantime in May 2002 issues arose relating to construction, including water leaks. An arbitration proceeding was commenced against R.C. Dolner, Inc. and R.C. Dolner, LLC (collectively, Dolner), which was the general contractor for the Conversion, but not against WYS. On September 9, 2003, a tolling agreement was entered into in an effort to resolve potential claims against WYS without litigation and the parties agreed to "the tolling of all statute of limitations effective as of the date hereof with respect to any and all claims that either party may have against the other with respect to the Architect Agreement and/or the Project."
It further provides that the Tolling Agreement "shall continue indefinitely and may be terminated only upon 30 days written notice by both telecopier and first class mail." It is unclear from the record whether respondents complied with the notice provision. However, as the Tolling Agreement does not provide that any action or proceeding commenced in violation of the agreement or the notice provision in particular shall be dismissed, any failure to comply would be insufficient to establish a basis for refusing to invoke the Tolling Agreement. See Normura Asset Capital Corp. v. Cadwalader. Wickersham Taft. LLP, 23 Misc3d 1134(A), * 10(Sup Ct. NY Co., 2009).
In or about October 5, 2009, respondents served upon WYS a demand for arbitration relating to services provided by WYS in connection with the Contract.
Petitioners now seek to stay the arbitration, asserting that neither the Board nor the 271 Mulberry were parties to the Contract, and that Shapiro signed the Contract on behalf of WYS, and not in his individually capacity. Petitioners also argue that the claims are time-barred and that the Tolling Agreement is invalid under the General Obligations Law as it tolled the applicable limitations period "indefinitely." Petitioners also argue that 271 Mulberry is not a party to the Tolling Agreement which is between WYS and Abej.
Respondents counter that Abej is the managing member of 271 Mulberry and that, under the operating agreement, it had the authority to enter into a contract on behalf of the 271 Mulberry, and that WYS knew that Abej was its agent, and that Abej executed the Contract on behalf of 271 Mulberry. In support of its position, respondents submits two one-page affidavits from Shapiro dated December, 1999 and April 2, 2001. In the Shapiro affidavits, Shapiro states that he is a licensed architect, president of WYS, that WYS was retained by 271 Mulberry, that various materials were used in connection with the Conversion and that J-51 tax benefits should be given to 271 Mulberry or the Condominium.
Respondents also assert that the Tolling Agreement is valid and the provision of the General Obligations Law relied on by petitioners applies to breach of contract claims and not to claims for professional malpractice like those asserted against WYS in the arbitration. Respondents also submit a copy of the Tolling Agreement, which includes a handwritten insert of 271 Mulberry as a party and is executed on behalf of 271 Mulberry.
In reply, petitioners argue that the handwritten insertions on the Tolling Agreement submitted by respondents which add 271 Mulberry as a party are not binding on them since the insertions were not initialed by the parties and thus constitute a unilateral modification of a contract.
Discussion
The first issue to be addressed concerns whether the claims asserted in arbitration are barred by the applicable statute of limitations. . It is undisputed that under New York law, this is an issue for the court, and not the arbitrator, to decide. CPLR 7502(b); 7503; Smith Barney, Harris Upham Co. Inc. v Luckie, 85 NY2d 193, 202 (1995).
The Arbitration Demand alleges that Petitioners breached their duty to adequately perform their obligations under the Contract. Such a claim sounds in architectural malpractice and it accrues as of the completion of performance. Amadeo Hotel Ltd. Partnership v Zwicker Elec. Co., 291 AD2d 322, 323 (1st Dept 2002). "[T]he three-year limitation of CPLR 214 controls in a negligence action against a professional, such as an architect or engineer." IFD Constr. Corp. v Corddry Carpenter Dietz Zack, 253 AD2d 89, 91-92 (1st Dept 1999).
WYS sent the final invoice on September 19, 2002 and the Certificate was issued on August 9, 2002. At the latest, the work was complete on September 19, 2002. While Respondents served the Arbitration Demand on October 5, 2009, more than seven years later, the issue here is whether the Tolling Agreement, which was entered into in September 2003, effectively extends the statute of limitations period.
The court finds that it does. First, contrary to petitioners' position, the Tolling Agreement is not void and unenforceable under General Obligations Law § 17-103(1). This provision applies only to "actions arising out of contracts express or implied in fact or in law . . ." See Stantec Consulting Group v. Fonda-Fultonville Cent. School Dist., 36 AD3d 1051 (3rd Dept 2007), lv denied 9 NY3d 807 (2007).
Stantec, like this case, involved the validity of an agreement to indefinitely toll the statute of limitations with respect to claims arising out of the petitioner architect's alleged professional malpractice. In affirming the trial court's decision that the claims against the architect were timely and could proceed to arbitration, the Appellate Division, Third Department explained that as the gravamen of the claims arose out of the architect's alleged breach of his professional duties that the General Obligation Law § 17-103(1) did not apply to such claims.
Based on Stantec and a plain reading of General Obligations Law § 17-103(1), the court finds that the Tolling Agreement is valid. See also, HSBC Bank USA v. Bond. Schoeneck and King PLLC, 16 Misc3d 813 (Sup Ct Erie Co.), reversed on other grounds, 55 AD3d 1426 (4th Dept 2008). Moreover, the cases cited by petitioners are inapposite as they concern claims for breach of contract which are covered by General Obligations Law § 17-103(1). See e.g., Bayridge Air Rights, Inc. V. Blitman Const. Corp., 160 AD2d 589 (1st Dept 1990), aff'd, 80 NY2d 777 (1992) (holding that agreement to extend statute of limitations with respect to breach of contract claim was void and unenforceable).
Next, the court notes that petitioners do not deny that they received a copy of the version of the Tolling Agreement submitted by respondents which includes the handwritten insertions of 271 Mulberry as a party to the agreement nor do they provide evidence that they objected to the insertions. In any event, as explained below, even if the court were to find that the modification did not bind WYS, the Tolling Agreement would nonetheless be sufficient to toll the limitations period on the claims asserted by 271 Mulberry in arbitration based Ajec's status as an agent for 271 Mulberry, its disclosed principal.
The next issue is whether WYS can be required to arbitrate claims against respondents who did not sign the Contract containing the agreement to arbitrate.
"Arbitration is favored in New York State as a means of resolving disputes, and courts should interfere as little as possible with agreements to arbitrate." Shah v Monpat Const., Inc., 65 AD3d 541, 543 (2nd Dept 2009). In arbitration, the parties give up many rights, both substantive and procedural. Id. at 543; Merrill Lynch, Pierce, Fenner Smith v Benjamin, 1 AD3d 39, 43 (1st Dept 2003). For this reason, "a party may not be compelled to arbitrate a dispute unless there is evidence which affirmatively established that the parties clearly, explicitly, and unequivocally agreed to arbitrate the dispute." God's Battalion of Prayer Pentecostal Church. Inc. v Miele Assoc, LLP, 10 AD3d 671, 672 (2nd Dept 2004), aff'd 6 NY3d 371 (2006). Since an agreement to arbitrate involves the "surrender [of] the right to resort to the courts," such an agreement must be clear, explicit, and unequivocal and must not depend upon implication or subtlety. Waldron v. Goddess, 61 NY2d 181, 183-184 (1984).
In this matter, it is undisputed that the Board did not sign the Contract. Consequently, there was no clear agreement to arbitrate the dispute between the Board and Petitioners, and the petition to permanently stay the Arbitration Demand as to the Board must be granted.
Similarly, Shapiro signed the Contract in a representative capacity, rather than as an individual. Therefore, he cannot be compelled to arbitrate and the petition to permanently stay the Arbitration Demand as against him must also be granted. Jeremov v. Crisci, 129 AD2d 179 (1st Dept 1987) (staying arbitration against individual who signed contract containing arbitration clause in his capacity as president of the corporation only).
The remaining issue concerns whether WYS can be compelled to arbitrate a claim brought by 271 Mulberry, based on its agreement to arbitrate with 271 Mulberry's agent, Abej. Here, the record contains evidence in the form of the Shapiro affidavit that WYS knew that Abej was acting as 271 Mulberry's agent. Moreover, while these affidavits post-dated the Contract, in his affidavit submitted in support of the motion to stay arbitration, Shapiro does not deny that he knew that Abej was 271 Mulberry's agent at the time that the Contract was entered into. Since Abej acted as the agent for a disclosed principal, WYS is required to arbitrate the claims asserted against it by 271 Mulberry. See Clyde Fashion Ltd. v. Len Artel, Inc., 15 AD2d 482 (1st Dept 1961) (where seller identified in contract between buyer and seller was an agent for a disclosed principal, an assignee of the principal was entitled to arbitrate claims against buyer based on arbitration clause in contract);Hirschfeld Productions, Inc. v. Mirvish, 218 AD2d 567 (1st Dept 1995),aff'd, 88 NY2d 1054 (1996) (defendants who were officers and directors of a corporation which entered into an arbitration agreement with plaintiff were entitled to arbitrate even though they were not signatories of joint venture agreement with corporation containing arbitration clause).
In addition, under estoppel' principles, a signatory of an arbitration agreement, like WYS, may be bound to arbitrate with a non-signatory such as 271 Mulberry "when the issues the non-signatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed"
Thomson-CSF, S.A. v. American Arbitration Assn., 64 F3d 773, 779 (2d Cir. 1995). Here, the Contract to perform architectural services is intertwined with the issues raised by 271 Mulberry in the arbitration which arises out of design defects allegedly caused by WYS's breach of its professional obligations. Accordingly, WYS is estopped from refusing to arbitrate the claims brought against it by 271 Mulberry.
Conclusion
In view of the above, it is
ORDERED and ADJUDGED that the petition is granted to extent of staying any claims asserted in the arbitration by respondent Board of Managers of the 285 Lafayette Street Condominium, and against petitioner Shael Shapiro and is otherwise denied; and it is further
ORDERED and ADJUDGED that petitioner WYS Design Partnership and respondent 271 Mulberry Street Company, LLC shall proceed forthwith to arbitration and counsel for 271 Mulberry Street Company, LLC shall serve a copy of this decision, order and judgment on the arbitral tribunal.