First Keystone Consultants, Inc. v DDR Constr. Servs.

[*1] First Keystone Consultants, Inc. v DDR Constr. Servs. 2008 NY Slip Op 52579(U) [22 Misc 3d 1102(A)] Decided on December 15, 2008 Supreme Court, Queens County Hart, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on December 15, 2008
Supreme Court, Queens County

First Keystone Consultants, Inc., et al., Plaintiffs,

against

DDR Construction Services, et al., Defendants/Third-Party Plaintiffs, SCHLESINGER ELECTRICAL CONTRACTORS, INC., et al., Third-Party Defendants.



270952005

Duane A. Hart, J.

Schlesinger Electrical Contractors, Inc., First Keystone Consultants, Inc. and DDR Construction Services, Inc. formed SFD Joint Venture Associates. Schlesinger alleges that DDR withdrew from the joint venture, whereupon Schlesinger and First Keystone formed a new partnership. DDR denies that it voluntarily withdrew from the joint venture. Defendant DDR contends that the plaintiffs and the third-party defendants perpetrated a fraud by wrongfully ousting it from the joint venture. On or about December 19, 2005, First Keystone Consultants, Inc. began an action in the New York State Supreme Court, County of Queens, against DDR and other parties (First Keystone Consultants, Inc. v DDR Construction Services, Queens Index No. 27095/05) (Action No. 1). First Keystone sought, inter alia, a judgment declaring that SFD was dissolved. First Keystone subsequently brought a second action in the New York State Supreme Court, County of Nassau, against Schlesinger and other parties (First Keystone Consultants, Inc. v Schlesinger Electrical Contractors, Inc., (Nassau Index No. 22828/07) (Action No. 2). The second action has been transferred to the New York State Supreme Court, County of Queens under Queens Index No. 7706/08. By decision and order (one paper) dated [*2]November 19, 2008, this court combined Action No. 1 and Action No. 2 for the purposes of discovery and a joint trial. On August 5, 2008, the defendants filed a note of issue, and on or about August 19, 2008, the plaintiffs served a demand for a jury trial.

The plaintiffs complaint asserts seven causes of action. The first cause of action is for a judgment against DDR and Clifford Weiner declaring, inter alia, that they are not entitled to share in the profits accruing from SFD's work on a construction project (the 26th Ward Project) for failure to answer a capital call. The second cause of action, which is for fraud and which seeks damages in the amount of $200,000 from the defendants, alleges that defendant Clifford Weiner and defendant DDR made false representations to First Keystone to induce the plaintiff to loan and pay money to them in connection with a joint venture between First Keystone and Schlesinger (the Coney Island project) on which DDR served as a construction manager. The third cause of action, brought by plaintiff Jane Solomon against defendant Clifford Weiner and Debbie Weiner for damages amounting to $113,777.18, alleges that the defendants defaulted on the payment of a promissory note in the principal amount of $50,000 executed in March, 2000 and on the payment of another promissory note in the principal amount of $32,000 executed on May 30, 2003. The fourth cause of action, brought by plaintiff Robert Solomon against defendant Debbie Weiner and her company, defendant Speco Electric, Inc., seeks damages in the amount of $104,000 based on the alleged breach of a contract entered into on October 1, 2002 whereby Solomon provided consultant's services in 2003, but was not paid. The fifth cause of action, brought by First Keystone against Speco and Debbie Ann Weiner, seeks damages in the amount of $427,584.35 for a default in the payment of a promissory note in the principal amount of $349,210.85. The sixth cause of action, brought by First Keystone against Clifford Weiner, seeks damages in the amount of $36,547.50 for failure to repay personal loans made to him. The plaintiffs asserted their seventh cause of action for the purpose of "piercing the corporate veil" and reaching the personal assets of the Weiners for debts owed by Speco and DDR.

A cause of action which is equitable in nature is triable without a jury. (See, Motor Vehicle Mfrs. Assn. of U.S., Inc. v State, 75 NY2d 175; Cohn v Adler, 139 AD2d 481.) The first cause of action asserted by the plaintiffs herein is for a declaratory judgment concerning the rights of the parties to a joint venture. "The declaratory judgment action, which was created in 1921, can be legal or equitable in nature, and to determine whether a party is entitled to a jury trial, it is necessary to examine which of the traditional actions would most likely have been used to present the instant claim had the declaratory judgment action not been created' ***." (State Farm Mut. Auto. Ins. Co. v. Sparacio, 25 AD3d 777, 778-779, quoting Independent Church of Realization of Word of God v Board of Assessors of Nassau County, 72 AD2d 554, 555.) A joint venture is similar to a partnership (see, 16 NY Jur2d, "Business Relationships," § 1937), and "and the rules of law governing partnerships, if relevant, apply to a joint venture." (16 NY Jur2d, "Business Relationships," § 1937; see, Framson, Inc. v Queens Inner Unity Cable Systems, 168 AD2d 419 [action, inter alia, to declare the rights of the parties pursuant to an agreement establishing a joint venture where one member was expelled for failure to honor funding obligations]; Hooker Chemicals & Plastics Corp. v International Minerals & Chemical Corp., 90 AD2d 991.) Partnership Law § 63(1)(d) provides for the judicial dissolution of a [*3]partnership when "A partner wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him ***." (See, Seligson v Russo, 16 AD3d 253.) In the case at bar, the plaintiffs contend that DDR breached the joint venture agreement by failing to answer a capital call. An action for the judicial dissolution of a partnership is equitable in nature, and there is no right to a trial by jury in an action for the judicial dissolution of a partnership (see, 15A NY Jur2d, "Business Relationships," § 1664; see, Hausner v Mendelow, 198 AD2d 210 ["By joining equitable claims for an accounting and dissolution of a partnership with a legal claim to recover damages for conversion, the plaintiff waived his right to a jury trial"]; Scherer v Scherer, 121 NYS2d 810.) In the case at bar, the plaintiffs' first cause of action is equitable in nature.

CPLR 4101 provides in relevant part: "In the following actions, the issues of fact shall be tried by a jury ***: 1. an action in which a party demands and sets forth facts which would permit a judgment for a sum of money only; ***; and 3. any other action in which a party is entitled by the constitution or by express provision of law to a trial by jury." (See, Behrins & Behrins, P.C. v Chan, 15 AD3d 515; Kilfoil v Ullrich, 275 AD2d 53.) The plaintiffs' second cause of action which seeks damages for the tort of fraud is triable by a jury. (See, Matter of DES Market Share Litigation, 79 NY2d 299; Decana Inc. v Contogouris, 45 AD3d 363.) CPLR 4101(1) "has been held to include actions in tort and contract." (Matter of DES Market Share Litigation, supra , 305.) The plaintiffs' third, fourth, fifth, and sixth causes of action, which sound in breach of contract and seek damages only, are triable by a jury. (See, Harris v Trustco Bank New York, 224 AD2d 790.) "A cause of action seeking money damages for breach of contract is quintessentially an action at law ***." (Hudson View II Associates v Gooden, 222 AD2d 163, 168.)

The seventh cause of action, which is partially based on all of the allegations in the first six causes of action, seeks to "pierce the corporate veil" (see, Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135) for the purpose of holding "Clifford Weiner and Debbie Ann Weiner personally liable for any and all sums recovered by the plaintiffs in this action." "An action to pierce the corporate veil and to hold the owners liable for an underlying corporate obligation is equitable in nature' and dependent on the attendant facts and equities' ***." (Rotella v Derner, 283 AD2d 1026, quoting Matter of Morris v New York State Dept. of Taxation & Fin., supra , 141.) There is no right to a trial by jury since "[p]iercing the corporate veil is an action that sounds in equity" (U.S. v Golden Acres, Inc., 684 F Supp 96, 103), although the weight of authority allows a jury to determine the issue. (See, American Protein Corp. v AB Volvo, 844 F2d 56; Cantiere DiPortovenere Piesse S.p.A. v Kerwin, 739 F Supp 231.) The court notes that the plaintiffs' attorney has stipulated that his clients "do not seek a jury trial for this [the seventh] cause of action." (See affirmation of Kerry K. Jardine, Esq. dated September 3, 2008, p 6.)

The next issue presented is whether the plaintiffs waived their right to a jury trial on their legal causes of action by joining them with equitable causes of action. (See, Winterview Inc. v [*4]Karin Models, LLC, 294 AD2d 120.) CPLR 4102(c) provides in relevant part: "A party shall not be deemed to have waived the right to trial by jury of the issues of fact arising upon a claim, by joining it with another claim with respect to which there is no right to trial by jury and which is based upon a separate transaction ***." (See, Poley v Rochester Community Sav. Bank, 184 AD2d 1027; Fleischer v Institute For Research in Hypnosis, 57 AD2d 535.) In the case at bar, the plaintiffs did not waive their right to a jury trial on their legal claims by joining the first cause of action, which is equitable in nature, with the second through sixth causes of action, which are legal in nature, because the former is based on a transaction separate from the transactions on which the latter are based. However, despite the fact that issues pertaining to piercing the corporate veil have been submitted to juries, whether advisory (see, CPLR 4212) or otherwise, the plain language of CPLR 4102(c) compels the conclusion that the plaintiffs did waive their right to a jury trial on their second, fourth, and fifth causes of action by joining their seventh cause of action, which is equitable in nature, with them. The third and sixth causes of action are asserted against the Weiners alone, not against any of their corporations, and the plaintiffs did not waive their right to a jury trial on these causes of action.

The final issue presented is whether the plaintiffs are entitled to a jury trial on the counterclaims asserted by the defendants. Both parties have a right to a trial by jury of a counterclaim legal in nature (see, 8 Weinstein-Korn Miller NY Civ Prac, ¶ 4102.20; Forrest v Fuchs, 126 Misc 2d 8), and a plaintiff who has joined legal and equitable causes of action based on the same transaction, thereby losing his right to a jury trial on the former, does not thereby also lose his right to a jury trial of a counterclaim which is legal in nature. (See, Forrest v Fuchs, supra .) In the case at bar, the defendants have asserted or are attempting to assert counterclaims for, inter alia, fraud, breach of contract, and defamation, and such causes of action are triable by jury. (See, Matter of DES Market Share Litigation, supra ; Hudson View II Associates v Gooden, supra ; Segal v Barnett, 24 AD2d 809.)

In sum, the court finds that there are legal causes of action asserted by the plaintiffs and legal counterclaims asserted by the defendants to which the plaintiffs have a right to a trial by jury.

Dated: December 15, 2008

J.S.C.