Jorge v Piola Prop. Mgt. LLC
Annotate this CaseDecided on June 23, 2017
Supreme Court, Nassau County
Lawrence Jorge, Plaintiff,
against
Piola Property Management LLC and Christian Mantuano, Defendants.
603127-17
Attorneys for Plaintiff
Law Offices of William Cafaro
108 West 39th Street, Suite 602
New York, NY 10018
Attorneys for Defendants
Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara & Wolf, LLP
John S. Cahalan, Esq.
3 Dakota Drive, Suite 300
Lake Success, NY 11042
Daniel R. Palmieri, J.
The following papers have been read on this motion:
Notice of Motion (dated 5-2-17) 1
Affirmation in Opposition (dated 5-30-17) 2
Reply Memorandum (dated 6-5-17) 3
This motion by the defendants pursuant to CPLR 3211(a)(7) to dismiss the complaint on the grounds that it fails to state a claim for breach of contract or under Lien Law article 3-A is granted to the extent that so much of the Second cause of action that seeks punitive damages is dismissed. The motion is otherwise denied.
In his verified complaint the plaintiff, residing at 4000 Avoca Avenue in Bethpage, New York, alleges that defendant Piola Property Management LLC ("Piola") and he entered into a contract for the construction of a single family home at 1 Henry Street in Bethpage in April, 2015 [*2]for a total contract price of $400,000. Defendant Christian Mantuano is identified as an individual also residing in Bethpage who is a "Home Improvement Contractor" under General Business Law § 770(5) and sole member of Piola.
Plaintiff alleges that he made some of the payments by drawing against a line of credit with a named bank, which was secured by a mortgage on the premises. He states that he made certain changes (impliedly, to the design or other elements of the contruction), but that the amount billed for those changes far exceeded the reasonable cost thereof, and that Piola refused to give the plaintiff credit for certain work and materials he did and paid for himself. After the acton was commenced, Piola filed a mechanic's lien against the premises for $443,069. Plaintiff disputes that any money is owed, highlighting the $43,069 in "extras" beyond the $400,000 contract price.
Plaintiff further alleges that by acknowledging unpaid amounts of $134,869, defendants implicitly also acknowledge payment of $308,200 to Piola, which plaintiff states were made. A demand was made by Piola to plaintiff on July 28, 2016 for execution of a new contract for disputed charges, and for payment of $123,269, before it would continue work. An inspection was made by the lending bank on August 2, 2016, which noted that 52% of the work had been completed, after which Piola by email dated August 5, 2016 notified plaintiff that it was ceasing work and that a mechanic's lien would be filed. Plaintiff alleges that the payments made to that point represented 77% of the contract price.
Based on the foregoing, plaintiff alleges breach of contract against Piola(First cause of action) and willful diversion of trust funds by both defendants, and for enforcement of Lien Law article 3-A as a class action (Second cause of action).
As to the First, plaintiff in effect asserts that there was performance on his part; that there was no completion date on the contract, but that delays were "unconscionable"; that payment was made in excess of what was required by the contract; and that Piola breached the contract by refusing to proceed unless its demands were met. Plaintiff asserts cost of completion and other "related and consequential" damages as a result.
The Second alleges that the funds paid to Piola were trust funds under article 3-A of the Lien Law, and that plaintiff has a trust claim. He contends that there may be other entities or persons who may also have a claim, and brings the action on their behalf as well. He alleges that this action is required to be pled as a class action pursuant to Lien Law §77(1), and that the Court may waive the numerosity requirement of CPLR 901(a)(1).
Plaintiff also alleges that pursuant to General Business Law § 771(1)(e), defendant Mantuano did not provide a contractual notice to him as homeowner that, as a home improvment contractor, he was to deposit all funds into escrow in accord with Lien Law § 71-a(4), or post a bond, indemnity contract or irrevocable letter of credit guaranteeing return of funds paid by plaintiff as the homeowner prior to substantial completion of the project. He further alleges that none of this was done, and that as of the time of Piola's notice that it would cease work there had not been substantial completion. Further, as a result of his having paid for over 75% of the contract price where only half the work had been completed the plaintiff claims, in effect, that the difference between what he already had paid and what was owed as of the time defendants ceased work constitutes trust funds which should be turned over to him, and to the extent they are not still being held in escrow defendants have diverted those funds in violation of Lien Law § 72(1).
He also claims by way of certain related allegations concerning Mantuano's relationship to [*3]Piola that Matuano and Piola are jointly and severally liable. Thus, plaintiff contends that each is responsible for diversion of trust assets and "all expenses, losses and other related items of damage flowing therefrom as provided by law."He also seeks a declaration that defendants be declared "trustees" of the $308,200 paid, an accounting of trust funds, return of trust funds, punitive damages, and attorneys' fees.
"In considering a motion to dismiss for failure to state a cause of action pursuant to CPLR 3211(a)(7), the sole criterion is whether from the complaint's 'four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law' " Nasca v. Sgro, 101 AD3d 963, 964 (2d Dept 2012), quoting Guggenheimer v. Ginzburg, 43 NY2d 268, 275 (1977). "[T]he court must afford the complaint a liberal construction, 'accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory (citations omitted) ' " Woss, LLC v 218 Eckford, LLC, 102 AD3d 860, 860 (2d Dept 2013), quoting Leon v. Martinez, 84 NY2d 83, 87—88 (1994); see also, Tanenbaum v. Molinoff, 118 AD3d 774 (2d Dept 2014); Schiller v. Bender, Burrows and Rosenthal, LLP, 116 AD3d 756, 756 (2d Dept 2014); Baron v. Galasso, 83 AD3d 626, 628 (2d Dept 2011); Salazar v. Sacco & Fillas, LLP, 114 AD3d 745 (2d Dept 2014).
This does not extend to mere legal conclusions, however, which are not entitled to the presumption of truth and are not to be accorded every favorable inference. Morris v Morris, 306 AD2d 449, 451 (2d Dept. 2003). Nevertheless, inartfully drawn complaints may be supplemented by affidavits on such a motion in order to sustain a claim. Rovello v Orofino Realty Co., 40 NY2d 633, 635 (1976). The question then becomes not whether a cause of action is stated, but rather whether the pleader has one. Guggenheimer v. Ginzburg, supra.
Based on the complaint, the plaintiff's affidavit, and the other proof he submits, the Court finds that under the generous standards of review set forth above sufficient allegations to support the First cause of action for breach of contract against Piola have been stated. See e.g. Webb v Greater New York Auto. Dealers Assn., Inc., 123 AD3d 1111 (2d Dept. 2014). Plaintiff alleges, in effect, full (or more) installment payments to the point that Piola ceased work. He presents a contract that recites that after the initial deposit was made "Remaining payment installments to be coordinated with bank inspections." Plaintiff alleges that as of the cessation of work by Piola he had paid 77% of the contract price, when the bank inspection noted that only 52% of the work had been done. Under these alleged circumstances the plaintiff had performed by paying the installments due, and cessation of work by Piola thus may be viewed as an anticipatory breach by this defendant of its duty to continue working. This relieved plaintiff from future performance, i.e., payment of future amounts under the contract, and giving him an immediate right of action. See American List Corp. v U.S. News and World Report, Inc., 75 NY2d 38, 44 (1989); Tirse v Andrews, 128 AD3d 1112 (3d Dept. 2015); see also Home Constr. Corp. v Beaury, 149 AD3d 699 (2d Dept. 2017).
The Second cause of action is for relief founded on violations of Lien Law article 3-A, which was designed to establish a trust out of construction funds and thus ensure, or at least make more likely, that those who are entitled to payment therefrom ultimately are paid. See Caristo Constr. Corp. v Diners Fin. Corp., 21 NY2d 507 (1969). The plaintiff correctly cites to authority of the Appellate Division, Second Department, which holds that a homeowner has the standing to sue as a trust beneficiary under this statute. Ippolito v TJC Dev. LLC, 83 AD3d 57 (2d Dept. 2011). An individual owner of an entity, in appropriate circumstances, may be held personally liable for [*4]diversion of trust assets (Id., at 70-71; Holt Constr. Corp. v Grand Palais, LLC, 108 AD3d 593 [2d Dept. 2013]), or simply to account under Lien Law § 77(3)(a)(i). South Carolina Steel Corp. v Miller, 170 AD2d 592, 594-595 (2d Dept. 1991). Thus, the main contention by defendants of lack of standing is insufficient to bar this claim by plaintiff, whose allegations, taken together, support an article 3-A claim as a general matter against both Piola and Mantuano.
Given that the plaintiff has standing to proceed, and that the Second cause of action sounds in enforcement of the Lien Law article 3-A trust, it must be brought as a class action. Lien Law § 77; ADCO Elec. Corp. v McMahon, 38 AD3d 805 (2d Dept. 2007); Brooklyn Navy Yard Dev. Corp. v J.M. Dennis Constr. Corp., 12 AD3d 630 (2d Dept. 2004). As the relief sought by plaintiff is set forth in § 77(3)(a), the Court will not dismiss the claim at the pleading stage. Although it agrees with the defendants that facts regarding a class are absent (for example, there are no allegations that subcontractors or material suppliers have not been paid, or even who they are), the statutory constraint on plaintiff should not cause dismissal when sufficient facts are pled regarding the plaintiff's own right to seek relief under Lien Law article 3-A. He will therefore be given an opportunity to comply with Lien Law § 77(1) and CPLR article 9. ADCO Elec. Corp., supra; Brooklyn Navy Yard Dev. Corp., supra.
Nevertheless, the claim for punitive damages should be dismissed. Although Lien Law § 77 does not expressly provide for the imposition of punitive damages, there is authority that courts are vested with the broad authority to grant such relief under Lien Law § 77(3)(a)(ix). Sabol & Rice v Poughkeepsie Galleria Company, 175 AD2d 555 (3d Dept. 1991).Here, however, the facts alleged do not rise to the necessary level, as the Second Department has reviewed such a claim under Lien Law § 79-a, which covers misappropriation of trust funds and requires a showing of criminal intent. Ippolito v TJC Dev. LLC, supra, at 70.In that regard, "Not every violation of Lien Law article 3-A constitutes the criminal offense of larceny (see e.g. Lien Law § 79-a[2])... the Lien Law... requires proof of larcenous intent" before punitive damages might be appropriate. ARA Plumbing & Heating Corp. v Abcon Assoc., Inc., 44 AD3d 598, 599 (2d Dept. 2007). Under the statute, a contractor who disputes in good faith the existence, validity or amount of a trust claim or disputes that it is due, or disputes that it applied the funds for a purpose other than trust purposes, will not be deemed guilty of larceny on the sole basis that the contractor did not pay over the disputed amount within the period established in § 79. Lien Law § 79-a(1)(b). Here, there are no factual allegations supporting a claim for punitive damages other than a failure to pay over disputed amounts. Conclusory statements of intent and knowing diversion of funds for non-trust purposes are insufficient (Morris v Morris, supra) as an indication of such larcenous intent on the part of the defendants. Cf.. Sabol & Rice v Poughkeepsie Galleria Company, supra [allegations of company's failure to pay contractors, subcontractors and suppliers while paying its partners $28 million from trust funds].
Accordingly, so much of the Second cause of action that calls for the imposition of punitive damages is dismissed.
The claim for attorneys' fees as contained in the Second cause of action cannot be dismissed on the pleading, as they are recoverable as an incident to a class action. Lien Law § 77(1); CPLR 909; ARA Plumbing & Heating Corp. v Abcom Assocs., supra.
All contentions not discussed either are unnecessary to the conclusions reached here or are without merit. All requests for relief not addressed are denied.
All parties shall appear at a preliminary conference at the Supreme Courthouse, 100 Supreme Court Drive, Mineola, NY, on August 4, 2017, at 9:30 a.m., Lower Level. No adjournments of this conference will be permitted without permission of this Court. All parties are forewarned that failure to attend the conference may result in Judgment by Default, the dismissal of pleadings (see 22 NYCRR 202.27) or monetary sanctions (22 NYCRR 130-2.1 et seq.).
This shall constitute the Decision and Order of this Court.
DATED: June 23, 2017
Mineola, NY
HON. DANIEL PALMIERI
Supreme Court Justice
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