Love v Rebecca Dev., Inc.

[*1] Love v Rebecca Dev., Inc. 2012 NY Slip Op 51578(U) Decided on August 20, 2012 Supreme Court, Kings County Schmidt, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 August 20, 2012
Supreme Court, Kings County

Charles Love, Plaintiff,

against

Rebecca Development, Inc., Rebecca Inc., Max Enterprises, L.L.C., Homes 2 Buy, Inc., Home Buyers Inc., Zohar Zauber, David Ettedgui, Iderle B. Amedee & Freed Amedee, , Defendants. Rebecca Development, Inc., Rebecca Inc., Max Enterprises, L.L.C., Homes 2 Buy, Inc., Home Buyers Inc., Zohar Zauber, David Ettedgui, Third-Party Plaintiffs, Gerald T. O'Buckley P.L.S., Third-Party Defendant. Rebecca Development, Inc., Rebecca Inc., Max Enterprises, L.L.C., Homes 2 Buy, Inc., Home Buyers Inc., Zohar Zauber, David Ettedgui, Second Third-Party Plaintiff, The Tabriz Group, Shamloo Bakhtiar a/k/a Bob Bakhtiar, Harivanash Nath Soni a/k/a Soni Hari and John Doe Individually & Doing Business as the Tabriz Group and/or Tabriz Design Group, Second Third-Party Defendant. Iderle B. Amedee and Fred D. Amedee, Third Third-Party Plaintiff, Gerald T. O'Buckley, P.L.S., The Tabriz Group, Shamloo Bakhtiar a/k/a Bob Bakhtiar, Harivanash Nath Soni a/k/a Soni Hari and John Doe Individually & Doing Business as the Tabriz Group and/or Tabriz Design Group, Third Third-Party Defendant. Charles Love, Plaintiff, The Tabriz Group, Shamloo Bakhtiar a/k/a Bob Bakhtiar, Harivanash Nath Soni a/k/a Soni Hari, Defendant.



Charles Love, Plaintiff, - against -

against

The Tabriz Group, Shamloo Bakhtiar a/k/a Bob Bakhtiar, Harivanash Nath Soni a/k/a Soni Hari, Defendant.



24622/05



Plaintiff Attorney: Adam Leitman Bailey, P.C., 120 Broadway, 17th Fl., New York, NY 10271

Defendant Attorney: Elan Wurtzel, P.C., 527 Old Country Rd., Plainview, NY 11803

David Schmidt, J.

The following papers numbered 1 to 17 read herein:

Papers Numbered

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed1-2, 3-4, 5-8, 9-11

Opposing Affidavits (Affirmations)

Reply Affidavits (Affirmations)12-13, 14-15, 16, 17

Affidavit (Affirmation)

Other Papers

Upon the foregoing papers, defendants, third-party plaintiffs and second third-party [*2]plaintiffs [FN1] Zohar Zauber and David Ettedgui (collectively referred to as "Zauber & Ettedgui"), move for an order: (1) pursuant to CPLR 3212, granting them summary judgment dismissing the complaint as against them; (2) in the alternative, precluding plaintiff from offering evidence on the issue of piercing the corporate veil or compelling plaintiff to provide a Bill of Particulars pertaining to the piercing the corporate veil; (3) striking the action from the trial calender and vacating the note of issue.

Defendants and third third-party plaintiffs Iderle B. Amedee and Fred D. Amedee (collectively referred to as "The Amedees") move for an order, pursuant to CPLR 3212 granting them partial summary judgment dismissing so much of the second amended verified complaint dated December 13, 2006, in which plaintiff Charles Love asserts (or which could be read to assert) causes of actions against The Amedees based on damage to plaintiff's property located at 540 Hinsdale Street resulting from or arising out of construction of a new building located at 542 Hinsdale Street.

Plaintiff cross-moves for an order: (1) amending the caption of Action No. 2 to correct the misnomer of defendant, the Tabriz Group; and (2) granting plaintiff leave to file the instant untimely cross-motion for summary judgment, and upon the grant of such leave, granting plaintiff summary judgment, pursuant to CPLR 3212, on the issue of liability as against defendants, Homes 2 Buy Inc., Home Buyers Inc., Rebecca, Inc., Zohar Zauber and David Ettedgui. By way of a separate cross-motion, plaintiff cross-moves for an order granting plaintiff leave to file the instant untimely motion for summary judgment, and upon the grant of such leave, granting plaintiff summary judgment, pursuant to CPLR 3212, on the issue of liability as against The Amedees relating to the encroachment against plaintiff's premisses known as 540 Hinsdale Street, Brooklyn, New York.

Zauber & Ettedgui's motion is granted to the extent that it requests that the action against Zauber & Ettedgui be dismissed, the complaint is dismissed as against Zauber & Ettedgui, and the action is severed accordingly. Zauber & Ettedgui's motion is otherwise denied. The Amedees' motion is granted, and the second amended verified complaint dated December 13, 2006 is dismissed to the extent that it alleges or could be read to allege causes of actions against The Amedees based on damage to plaintiff's property located at 540 Hinsdale Street resulting from or arising out of construction of a new building located at 542 Hinsdale Street. Plaintiff's cross-motion as against Homes 2 Buy Inc., Home Buyers Inc., Rebecca, Inc., Zohar Zauber and David Ettedgui is denied except respect to the portion of the motion requesting leave to amend the caption in Action No. 2 to correct the misnomer of the Tabriz Group, which is granted. The amended caption with respect to Action No. 2 shall read: -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X

Charles Love,

Plaintiff,

- against -Action No. 2

Index No. 7007/09

The Tabriz Group, Shamloo Bakhtiar a/k/a

Bob Bakhtiar, Harivanash Nath Soni a/k/a [*3]

Soni Hari, John Doe Individually & Doing

Business as the Tabriz Group and/or Tabriz

Design Group,

Defendant. -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X

Plaintiffs' cross-motion as against The Amedees is denied.

Plaintiff, who owns a house located at 540 Hinsdale Street in Brooklyn, New York, alleges that defendants caused damage to his house during the construction of a three-family house on the adjoining property, known as 542 Hinsdale Street, Brooklyn, New York. Plaintiff also alleges that the neighboring house encroaches onto his property, and also encroaches onto a two and one-half foot wide easement along the adjoining edge of 542 Hinsdale that benefits his property and burdens 542 Hinsdale.

The underlying facts are essentially undisputed. Ettedgui & Zauber are real estate developers, who, through various companies they own in common, purchase properties, build houses or apartments on them, and resell the properties after the building is constructed. In this case, through a company owned by Ettedgui & Zauber known as Rebecca, Inc., on or around May 7, 2004, they purchased 542 Hinsdale, which at that time was a vacant lot. Rebecca, Inc., (or one of Ettedgui & Zauber's other entities) thereafter hired third-party defendant Tabriz Group (Tabriz) (a/k/a Tabriz Design Group) to provide architectural services, which including preparing a plan for a three-family house to be built on the property and applying for building permits, hired third-party defendant Gerald T. O'Buckley, P.L.S., to survey the property and defendant Max Enterprises, L.L.C., (Max) (also known as Joney Construction) as a general contractor to build the house on the property. Max began construction of the structure on or around October 19, 2004.

On December 2, 2004, the New York City Department of Buildings (DOB) issued notices of violation to Home Buyers, Inc.,[FN2] for violating a section of the Administrative Code of the City of New York apparently requiring fencing around the work site,[FN3] and for violating section 26-1032 of the Administrative Code of the City of New York requiring shoring or bracing of the excavation.[FN4] The notice relating to the lack of shoring or bracing noted that [*4]the excavation was approximately 15 feet deep. Thereafter, notices of violations were issued to Max on January 3, 2005 for violations of Administrative Code of the City of New York §§ 27-146 [The notice stated that there were no approved plans at the worksite] and 27-1009 [The notice stated that there were no guardrails on edges of the excavation, no points of egress at site of excavation and no DOT permits for crossing the sidewalk.], on January 4, 2005, for violation of Administrative Code of the City of New York § 27-201 [The notice stated that the work did not comply with approved plans], and April 29, 2005, for violation of Administrative Code of the City of New York § 27-1018 [the notice stated that there was inadequate housekeeping at the site]). Of note, none of the notices mentioned damage to the adjoining buildings.

On or around July 21, 2005, Rebecca, Inc., transferred its interest in 542 Hinsdale to Home 2 Buy, Inc., another entity owned by Ettedgui and Zauber. Plaintiff commenced this action in August 2005, and, in November 2005, following the completion of construction work, The Amedees purchased the 542 Hinsdale and title was transferred to them by way of a deed dated November 9, 2005.

In the second amended verified complaint dated December 13, 2006, plaintiff alleged causes of action for: (1) negligence based on the alleged damage to 540 Hinsdale caused by defendants' construction activities; (2) intentional or reckless conduct based on the continuation of the construction work despite defendant's knowledge that they were causing damage to plaintiff's property; (3) trespass based on the structure built at 542 Hinsdale encroaching on an easement favoring plaintiff's property and encroaching onto plaintiff's property; (4) piercing the corporate veil of Rebecca Development Inc., Rebecca Inc., and Max, Homes 2 Buy Inc., in order to allow plaintiff to obtain a judgment directly against Home Buyers Inc. and Zauber & Ettedgui; and (6) for the recovery of reasonable attorney's fees from Rebecca Development Inc., Rebecca Inc., Max, Homes 2 Buy Inc., Home Buyers Inc., Zauber and Ettedgui.[FN5]

Zauber & Ettedgui thereafter moved to dismiss the complaint against them because plaintiff had failed to allege a cause of action for piercing the corporate veil. In an order dated September 20, 2007, the court (Jacobson, J.) denied the motion. The Appellate Division, Second Department, in an order dated November 25, 2008, affirmed this denial, stating, "[c]ontrary to the appellants' contention, the plaintiff sufficiently alleged that [Zauber & Ettedgui] exercised complete domination and control over the assetless corporation in order to commit a wrong against plaintiff" (Love v Rebecca Dev., Inc., 56 AD3d 733, 734 [2008]).

TIMELINESS OF THE SUMMARY JUDGMENT MOTIONS[*5]

Plaintiff filed the note of issue on December 15, 2011. As such, Zauber & Ettedgui's motion, made on February 11, 2012 and The Amedees' motion made on February 14, 2012, are both timely (see CPLR 3212[a]; Kings County Uniform Civil Term Rule Part C[6] and former Rule 13 [both requiring summary judgment motions to be made on or by 60 days from the filing of the note of issue]; Lennard v Khan, 69 AD2d 812, 813-814 [2010][motion made on the date that it is served]). Plaintiff's cross-motions, both made on February 28, 2012, a date more than 60 days after the filing of the note of issue, are untimely.

Plaintiff, however, has demonstrated good cause warranting consideration of the portion of his cross-motion addressing the issue of piercing the corporate veil of the entities owned by Zauber & Ettedgui, as this issue is identical to the issue raised by Zauber & Ettedgui in their own summary judgment motion and thus could be addressed by the court through a search of the record even without a motion by plaintiff (McCallister v 200 Park, L.P., 92 AD3d 927, 928 [2012]; Lennard, 69 AD3d at 814; CPLR 3212[b]). On the other hand, plaintiff has failed to demonstrate good cause warranting consideration of the remaining grounds for summary judgment raised in his cross-motions.

Namely, plaintiff asserts that the Court of Appeals recent decision in Yenem Corp. v 281 Broadway Holdings (18 NY3d 481 [2012]), which was decided on February 14, 2012, provides good cause for consideration of the portion of the motion holding Rebecca Development Inc., Rebecca Inc., Max, Homes 2 Buy Inc., Home Buyers Inc., Zauber and Ettedgui liable for the damage to plaintiff's house based on the construction activities. In Yenem Corp., the Court held that an owner or contractor may be held strictly liable for a violation of Administrative Code of the City of New York § 27-1031(b)(1) when an adjoining structure suffers damage as the result of an excavation that "exceeds ten feet below the legally established curb level" (Yenem Corp., 18 NY3d at 489-491). Plaintiff asserts that he could not have previously raised this argument until the Court of Appeals' decided Yenem Corp. because the Appellate Division, First Department had held that section 27-1031(b)(1) was not a basis for strict liability (see Yenem Corp. v 281 Broadway Holdings, 76 AD3d 225, 231 [1st Dept 2010], reversed 18 NY3d 481 [2012]). If this court was in the First Department, this argument might have merit (see Chevere v Hyundai Motor Co., 188 Misc 2d 449, 451 [Sup Ct, Bronx County 2001][abrogation of Court of Appeals decision by United States Supreme Court after time for moving for summary judgment had expired provided good cause for consideration of untimely motion]; see also Forte v Weiner, 214 AD2d 397, 398 [1995]). Courts in the Second Department, however, were not affected by the First Department's holding in Yenem Corp. as binding, longstanding Second Department precedent held that prior, essentially identical, versions of section 27-1032(b)(1) imposed strict liability (see Post v Kerwin, 133 App Div 404, 405-406 [2d Dept 1909]; see also Yenem Corp., 18 NY3d at 490; Hart v City Theatres Co., 215 NY 322, 325-326 [1915]; Victor A. Harder Realty & Constr. Co. v City of New York, 64 NYS2d 310, 317-318 [Sup Ct, NY County 1946]). Accordingly, the Court of Appeals reversal of the First Department's decision in Yenem does not provide good cause for considering the portion of plaintiff's cross-motion requesting summary judgment relating to the damage caused by the construction work.[FN6]

With respect to his cross-motion against The Amedees, plaintiff essentially asserts that his motion should be considered in the interest of judicial economy. The interest of judicial [*6]economy, however, does not, in and of itself, satisfy the good cause requirement (see Brill v City of New York, 2 NY3d 648, 652 [2004]). Further, as plaintiff's relief requested against The Amadees is wholly unrelated to that requested by The Amedees in their own motion, consideration of The Amedees timely motion does not provide good cause for consideration of plaintiff's untimely cross-motion (see Whitehead v City of New York, 79 AD3d 858, 860-861 [2010]; Filanniono v Triborough Bridge & Tunnel Auth., 39 AD3d 280, 280-282 [2006]).

ZAUBER & ETTEDGUI'S MOTION & PLAINTIFF'S CROSS-MOTION

Turning to the issues of piercing the corporate veil raised by Zauber & Ettedgui's motion and plaintiff's cross-motion, "[a] party seeking to pierce the corporate veil must establish that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in the plaintiff's injury' " (Millennium Constr., LLC v Loupolover, 44 AD3d 1016, 1016 [2007], quoting Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 141 [1993]). The party seeking to pierce the corporate veil must establish both of these elements. Thus, even if a party establishes that the corporate form was abused, he or she will not be entitled to pierce the corporate veil absent a showing that the corporation abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will intervene (see 210 86th Street Corp. v Grasso, 305 AD2d 156 [2003]; Matter of Island Seafood Co. v Golub Corp., 303 AD2d 892, 895 [2003]; Seuter v Lieberman, 229 AD2d 386 [1996]; see also Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d at 142; Weinstein v Willow Lake Corp., 262 AD2d 634, 635 [1999]).

In moving to dismiss the action as against them individually, Zauber & Ettedgui rely on their own deposition testimony to demonstrate that they observed corporate formalities and did not otherwise misuse the corporate form and that the corporate form was not used as a means to harm plaintiff or otherwise commit fraud against him. This testimony fails to show as a matter of law that they observed corporate formalities in the running of the corporations. In particular, Ettedgui testified: (1) that he could not recall whether Rebecca Development Inc., Rebecca Inc., Max, Homes 2 Buy Inc., and Home Buyers Inc. maintained separate bank accounts; (2) that these entities each shared an address and an office; (3) that each entity was controlled by him and/or Zauber; (4) that a holding corporation, 147-26 Holding Corp., was used to handle the expenses associated with each of the properties; (5) that this holding corporation made out the checks for the purchase of 542 Hinsdale; (6) that The Amadees' checks for the purchase of 542 Hinsdale from Homes 2 Buy, Inc., were made out to Zed Development (another company owned and controlled by Zauber & Ettedgui) and that he conceded that in the application for a building permit the owner of the property was listed as Home Buyer's Inc. and the owner of the property listed on the sign at the construction site was Rebecca Development Inc., a nonexistent entity.

Nevertheless, Zauber & Ettedgui's testimony is sufficient to demonstrate, prima facie, that they did not abuse the corporate form to commit a fraud or wrong against plaintiff. Of note, in this regard, Ettedgui testified that they created the entities at issue for the legitimate business purpose of purchasing and developing properties. In addition, Ettedgui asserted that he and Zauber transferred 542 Hinsdale from Rebecca, Inc., to Homes 2 Buy, Inc., an entity that they had formed more than 10 years ago, because a bank required the transfer as part of a loan refinancing relating to several properties. While Ettedgui conceded that he knew of the building violations, he asserts that he was not aware of any damage to plaintiff's property at any time prior to the transfer of the property from Rebecca, Inc. to [*7]Homes 2 Buy. Indeed, Ettedgui asserted that he only learned of plaintiff's claims of damage and trespass after plaintiff commenced the instant action . Although Zauber and Ettedgui's evidence does not address whether the entities owned by them were adequately capitalized or insured, undercapitalization or the carrying of minimal insurance alone does not constitute a fraud or wrong warranting the piercing of the corporate veil (see Walkovszky v Carlton, 18 NY2d 414, 419-421 [1966]; Brito v DILP Corp., 282 AD2d 320, 321 [2001]; Bowles v Errico, 163 AD2d 771, 773 [1990]).

It is worth emphasizing in this regard that any physical damage to plaintiff's property was caused by the acts of the contractor hired by Rebecca, Inc., or the subcontractors hired by the contractor, and was not caused by any acts of Zauber or Ettedgui or the entities owned by them. Similarly, any trespass was the result of reliance on title searches that failed to discover the reciprocal driveway easements contained in earlier deeds, not any direct fraudulent act of Zauber or Ettedgui or any of the entities owned by them.

In opposition, plaintiff, relying on essentially the same proof as defendants, has failed to demonstrate the existence of a factual issue with respect to the piercing of the corporate veil warranting denial of the motion.[FN7] For the same reason, plaintiff's motion for summary judgment in his favor on the piercing of the corporate veil claim must be denied. Accordingly, Zauber & Ettedgui's motion must be granted to the extent that plaintiff's piercing the corporate veil claims are dismissed and plaintiff's cross-motion must be denied with respect to plaintiff's piercing the corporate veil claim.

The portion of Zauber & Ettedgui's motion requesting that plaintiff should be precluded from offering evidence with respect to the piercing of the corporate veil cause of action or required to serve a bill of particulars on the issue based on an alleged failure to comply with a request for a bill of particulars has been rendered academic in light of the grant of summary judgment dismissing the piercing the corporate veil claims against them.

ADMINISTRATIVE CODE § 27-1031(b)(1)

Assuming, arguendo, that plaintiff has demonstrated good cause for consideration of the portion of his untimely cross-motion for summary judgment based on Administrative Code of the City of New York § 27-1031(b)(1), this court finds that he has failed to demonstrate, prima facie, that section 27-1031(b)(1)[FN8] was violated. In this regard, plaintiff's only evidence that the excavation was more than 10 feet below the "legally established curb level" is the notation in the violation notice issued by the DOB with respect to the failure to comply with Administrative Code of the City of New York § 27-1032(a). Although the notice states that the excavation was 15 feet deep, it does not state from where the 15 feet was measured. As section 27-1032(a) applies when the bottom of the excavation is more than five feet below the "adjacent ground surface," the measurements in the notice are likely to have been made from the edge of the excavation. As such, the 15 foot finding in the [*8]notice, does not demonstrate, as a matter of law, that the excavation was more than 10 feet below the legally established curb level. Additionally, the conclusory assertion by plaintiff's engineer that certain damage to plaintiff's house was caused by this excavation fails to demonstrate, as a matter of law, that the damage was proximately caused by the violation of the statute (cf. Yenem Corp., 18 NY3d at 491; Romano v Stanley, 90 NY2d 444, 451-452 [1997]). Plaintiff's cross-motion in this regard must thus be denied regardless of the sufficiency of the opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).

Nevertheless, in the absence of any opposition, the portion of plaintiff's motion requesting that the caption be amended to correct a misnomer is granted.

THE AMEDEES' MOTION

As plaintiff does not oppose the relief requested by The Amedees in their motion, and in the absence of any other opposition, The Amedees' motion is granted and the complaint in Action No. 1 is dismissed as against The Amedees to the extent that it may be read to hold them liable for any damage to plaintiff's property caused by the construction activities at 542 Hinsdale.[FN9]

This constitutes the decision, order and judgment of the court.

E N T E R,

J. S. C.

Footnotes

Footnote 1: As most of the issues raised in instant motions and cross-motions solely involve action no. 1, this order's references to a party's status relate to the party's status in action no. 1 unless otherwise noted.

Footnote 2: Homebuyers, Inc., is an entity owned by Ettdgui which Tabriz had listed as the owner of the property on the building permit application.

Footnote 3: The Administrative Code section alleged to have been violated is illegible in the copy of the notice provided to the court.

Footnote 4: Although the legible notice refers to Administrative Code of the City of New York § 26-1032, it would appear that the inspector intended to reference former section 27-1032, as section 27-1032 governs the shoring and bracing of the sides of excavations over five feet deep. These provisions have been moved renumbered in a new Title 28 of the Administrative Code of the City of New York. Section 27-1032 (a) provides that:

Shoring and bracing and sheeting. With the exception of rock cuts, the sides of all excavations, including related or resulting embankments, five feet or greater in depth or height measured from the level of the adjacent ground surface to the deepest point of the excavation, shall be protected and maintained by shoring, bracing and sheeting, sheet piling, or by other retaining structures. Alternatively, excavated slopes may be inclined not steeper than forty-five degrees or stepped so that the average slope is not steeper than forty-five degrees with no step more than five feet high, provided such slope does not endanger any structure, including subsurface structures. All sides or slopes of excavations or embankments shall be inspected after rainstorms, or any other hazard-increasing event, and safe conditions shall be restored. Sheet piling and bracing used in trench excavations shall be at least equivalent in strength to that specified in tables 19-1 and 19-2*.

Footnote 5: The only causes of action specifically alleged against The Amedees are the trespass causes of action (the fourth and fifth causes of action in the complaint) relating to the alleged encroachment of the house at 542 Hinsdale onto the easement benefitting plaintiff's property and onto plaintiff's property.

Footnote 6: In any event, as discussed below, the court also finds that plaintiff has failed to demonstrate his initial summary judgment burden of showing that section 27-1031(b)(1) was violated as a matter of law.

Footnote 7: Of note, Zauber and Ettedgui's current summary judgment motion, based on evidentiary proof, is not in any way precluded by the prior denial of their motion to dismiss the piercing the corporate veil claims under CPLR 3211(a)(7) (see Bernard v Grenci, 48 AD3d 722, 724 [2008]).

Footnote 8: Section 27-1031(b)(1) provides that, "When an excavation is carried to a depth more than ten feet below the legally established curb level the person who causes such excavation to be made shall, at all times and at his or her own expense, preserve and protect from injury any adjoining structures, the safety of which may be affected by such part of the excavation as exceeds ten feet below the legally established curb level provided such person is afforded a license to enter and inspect the adjoining buildings and property."

Footnote 9: The court notes that the trespass causes of action (the third and fourth causes of action pled in the complaint in Action 1) are the only causes of action expressly pled against The Amedees.