Treeline Garden City Plaza, LLC v Berkley-Arm, Inc.
Annotate this CaseDecided on July 10, 2006
Supreme Court, Nassau County
TREELINE GARDEN CITY PLAZA, LLC, Plaintiff,
against
BERKLEY-ARM, INC., WILLIAM C. KAVAN and MARK KOTTLER, Defendants
5315-05
COUNSEL FOR PLAINTIFF
Silverstein, Perlstein & Acampora, LLP
100 Jericho Quadrangle, Suite 300
Jericho, New York 11753
COUNSEL FOR DEFENDANT/THIRD PARTY PLAINTIFF
Goodman & Jacobs, LLP
75 Broad Street - 30th Floor
New York, New York 10004
Leonard B. Austin, J.
Third party Defendant CB Richard Ellis, Inc. moves for an order pursuant to CPLR 3211 dismissing the third party complaint on the grounds that it fails to state a cause of action in negligence and that documentary evidence precludes any claim based upon breach of contract. Third party Plaintiff, Affinity Insurance Services, Inc. f/k/a Berkeley-Arm, Inc. cross-moves for an order granting leave to replead.
BACKGROUND
The main action was commenced by Plaintiff-landlord Treeline Garden City Plaza, LLC ("Treeline") against Defendant Berkeley-Arm, Inc. ("Berkeley") as a holdover tenant based upon its failure to remove certain office equipment and debris from the leased premises as required in the lease agreement. Treeline seeks to recover for damage to the premises as well as rent for each month in which Berkeley's equipment remained in the premises.
Third party Plaintiff Affinity Insurance Services, Inc., ("Affinity"), successor-in-interest to Berkeley, seeks indemnity from Third party Defendant CB Richard Ellis, Inc. ("CBRE"), on the ground that CBRE was responsible for the proper surrender of the premises under a Project Management Consulting Agreement dated July 21, 2004 ("Agreement").
Berkeley was not a party to the Agreement. Nevertheless, it seeks to recover over against CBRE for breach of contract in the event that it is held liable to Treeline. Berkeley also asserts a cause of action in tort for negligent performance of the Agreement.
CBRE and non-party Aon Services Corporation ("Aon") entered into the Agreement by which CBRE was retained to serve as a consultant for a corporate [*2]relocation project. Four Aon affiliated corporations from varying locations were to be set up in a single space in Jericho, New York. Berkeley was one of the four. Aon, as well as Berkeley, was a wholly owned subsidiary of Aon Corporation.
In addition to consulting duties with respect to the set up of the new facility, the Agreement's "Scope of Services" included the obligations to "manage the closeout of contracts" (¶ 1.3[l]) and to "decommission existing space after move to new facility . . ." (¶ 1.3 [m]). Third party Plaintiff alleges that ¶ 1.3 (m) was breached.
Significantly, ¶ 5.5 of the Agreement provides that there would be no third party beneficiaries stating "Nothing contained in this Agreement shall create a contractual relationship with or a cause of action in favor of a third party against either Client [AON] or Consultant [CBRE]." Only Aon, the contracting party, was designated as "client".
Another significant provision is ¶ 7.0, which provides for binding arbitration of "any dispute between Client and Consultant relating to [the] Agreement...".
DISCUSSION
A.Privity/Third Party Beneficiary
There is no contractual relation between CBRE and Affinity/Berkeley as Berkeley was not a party to the Agreement. Thus, there can be no cause of action for breach of contract. Nor can Berkeley claim status as a third party beneficiary, as it urges here. A portion of CBRE's performance ran directly to Berkeley. Thus, there is at least a presumption that it was an intended third party beneficiary. Nepco Forged Products, Inc. v. Consolidated Edison Co. of New York, Inc., 99 AD2d 508, (2nd Dept. 1984).
That presumption is rebutted as a matter of law by the Agreement since the dispositive test for third party beneficiary status is the intention of the parties to the contract. The best evidence of whether contracting parties intended their contract to benefit third parties "remains the language of the contract itself." Id. When a contract "expressly negates enforcement by third parties, that provision is controlling." Morse/Diesel v. Trinity Industries, Inc., 859 F.2d 242, 249 (2nd Cir 1988), citing Edward B. Fitzpatrick, Jr. Constr. Corp. v. County of Suffolk, 138 AD2d 446, 447 (2nd Dept. 1988); and Schuler-Haas Elec. Corp. v. Wager Constr. Corp., 57 AD2d 707 (4th Dept. 1977). The Agreement contains such a negating clause, thereby foreclosing Berkeley's theory of recovery. India.Com, Inc. v. Dalal, 412 F.3d 315, 321 (2nd Cir. 2005).
B.Agency
Affinity attempts to assert that there was an agency relation between its predecessor, Berkeley, and CBRE. Although CBRE communicated directly with Berkeley's landlord Treeline - while performing under the Agreement with Aon Services, that communication does not establish an agency relation. Berkley clearly did not have the right to control CBRE. The basic tenet of the principal-agent relation is that "the principal retains control over the conduct of the agent with respect to maters entrusted to the agent, and the agent acts in accordance with the direction and control of the principal." William Steven, Ltd. v. Kings Village Corp., 234 AD2d 287, 288 (2nd Dept. 1996). As it was Aon that controlled CBRE's conduct, the agency argument must fail. [*3]
C.Negligence
Affinity/Berkeley also asserts a cause of action sounding in negligence, alleging that if Treeline sustained damages as a result of Berkeley's move, then those damages were "the result of the negligence, carelessness or culpable conduct of CBRE".
CBRE seeks dismissal of this cause of action on the grounds that a breach of contract action cannot be transformed into a tort action by the simple expedient of alleging negligent performance of the contractual duties. It also avers that it owned no legal duty to Berkeley.
Merely alleging a breach of a duty of care and "employing language familiar to tort law, does not, without more, transform a simple breach of contract into a tort claim." Stardial Communications Corp. v. Turner Construction Co., 305 AD2d 126, 127 (1st Dept. 2003); and Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 NY2d 382 (1987).
Third party Plaintiff has done no more than attempt to transform the contract action in this manner.
Under New York law, whether a duty exists in a particular case is a question of law for the court. Purdy v. Public Adminstrator of Westchester Co., 72 NY2d 1, 8 [1988]). A contractual obligation, standing alone, "will generally not give rise to tort liability in favor of a third party." Eaves Brooks Costume Co. v. Y.B.H. Realty Corp., 76 NY2d 220, 226 (1990). On the other hand, the Court of Appeals has recognized "that under some circumstances, a party who enters into a contract thereby assumes a duty of care to certain persons outside the contract." Palka v. Servicemaster Mgt. Services. Corp., 83 NY2d 579, 586 (1994) (comprehensive contract to maintain safety of premises).
Determining the existence and scope of duty "is usually a legal, policy-laden declaration" (Id. at 585), and the "nature of the harm" can be determinative Hall v. United Parcel Serv. of America, 76 NY2d 27, 31 (1990). Public policy is more likely to support a finding of duty in the case of personal injury rather than economic loss. Id.; and Palka v. Servicemaster Mgt. Services Corp., supra at 587.
Where, as here, only economic loss is concerned, recovery is permitted under few circumstances; e.g., loss due to reliance upon a negligent representation. Credit Alliance Corp. v. Andersen & Co., 65 NY2d 536 (1985). A cause of action for negligent representation is viable "where there is actual privity of contract between the parties or a relationship so close as to approach that of privity." Ossining Union Free School District v. Anderson LaRocca Anderson, 73 NY2d 417, 424 (1989). A relationship sufficiently close to privity may be found where the obligor's performance was the "end and aim of the transaction" and was relied upon by a third party to his detriment. See, Glanzer v. Shepard, 233 NY 236, 238-9 (1922) (public weigher hired by sellers of beans - weighing for third party to assess payment was end aim of contract and transaction).
Here, CBRE's obligation was to Aon to consult with respect to the preparation of a new facility and to facilitate Aon and related entities' move while minimizing any business interruption. The Agreement specifically called for insurance to cover both Aon and CBRE by those contractors hired to perform the labor. Under such circumstances, had Aon hired CBRE solely to relocate Berkeley, a stronger argument would be presented. However, the scope of services under the Agreement is much broader. [*4]Policy considerations do not operate in third party Plaintiff's favor.
D.Assignment
Third party plaintiff finally avers Aon could assign its rights under the Agreement to affiliated entities such as Berkeley. In the event of such transfer, Berkeley would be in a position to assert a contract cause of action as an assignee for any damage caused by CBRE. No assignment is alleged and the reason is apparent. Were such assignment to take place, then Berkeley would be bound by Aon's obligations as well and its rights. It could then only recover for damages under the Agreement by proceeding to arbitration. Any policy allowing a duty in tort here would run counter to the public policy which favors arbitration. See, Flores v. Lower East Side Service Ctr., 4 NY3d 363, 370 (2005).
E.Amendment
Insofar as third party Plaintiff seeks leave to replead to allege a breach of a duty outside the agreement, it has failed to identify any such duty. "In cases where the proposed amendment is palpably insufficient as a matter of law or is totally devoid of merit, leave should be denied." Ricca v. Valenti, 24 AD3d 647 (2nd Dept. 2005). As there is no basis for imposing a duty for the third party Plaintiff's economic damages, under New York law, leave to amend must be denied and the third party complaint dismissed.
Accordingly, it is,
ORDERED, that third party Defendants' motion to dismiss the third party complaint is granted; and it is further,
ORDERED, that third party Plaintiff's cross-motion to amend its complaint is denied; and it is further,
ORDERED, that counsel are to appear for a status conference on August 21, 2006 at 9:30 a.m. to reschedule discovery and a new trial date.
This constitutes the decision and Order of the Court.
Dated: Mineola, NY _____________________________
July 10, 2006 Hon. LEONARD B. AUSTIN, J.S.C.
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