PRG Planning & Dev., LLC v Latenite Magic, Inc.
Annotate this CaseDecided on August 25, 2006
Supreme Court, New York County
PRG Planning & Development, LLC, Plaintiff,
against
Latenite Magic, Inc., et al., Defendants.
114077/99
Appearances:
Attorneys for Plaintiff:
Atlas & Marantz, LLP
143 Madison Avenue
New York, NY 10016
Tele. No. (212) 213-9666
By: Neil G. Marantz, Esq.
Louis M. Atlas, Esq.
Attorneys for Defendants
Conseco Variable &
Conseco Annuity Assurance
Skadden, Arps, Slate, Meagher & Flom, LLP
Four Times Square
New York, NY 10036
Tel. No. (212) 735-3000
Of Counsel:Andrew Muscato, Esq.
Louis B. York, J.
At the conclusion of a nine-week bench trial, the plaintiff seeks to recover several million dollars for its efforts in the failed construction of a themed restaurant inspired by and based on the magic of the famous illusionist, David Copperfield.
Motion to Preclude
During the course of the trial, defendants moved to preclude plaintiff from introducing a number of exhibits on the ground that they had never been revealed during discovery. The Court reserved decision and now decides that motion. Defendant also moved to prevent the introduction of bank statements which plaintiff used to establish a foundation for the introduction of certain checks, for which plaintiff could only produce copies, by showing they had been cancelled.
After carefully reviewing the submissions of both sides, the Court denies the motion.
Plaintiff categorically denied that it had failed to produce these checks during discovery. Although not apparent from defendants' original motion papers, it eventually became clear that the defendants' objection was based on the production in discovery of only copies of the front of these checks.
Defendant objects to the production of the originals because the cancellation on the backs of the checks were not produced in discovery. There were also some checks for which plaintiff could only produce copies. On their own, copies could not be introduced into evidence without proof that they were cancelled; accordingly, plaintiff introduced its bank statements to successfully establish the foundation for the production of the copies.
The trial of an action is not the proper place to make motions which should have been made during the discovery phase of the trial. Defendants had all of the information necessary for them to make such a motion during discovery, and didn't do so. When they received only copies of the front of the checks, they could have moved for proof of cancellation at that time, instead of making their objections only after the trial had started. The Court also notes that despite defendants' objections to several checks which they said they did not receive at all, plaintiffs were able to show that these checks were actually bate-stamped by the [*2]defendant.
Even though defendants' motion contained exhibits of its Demands for Discovery and Inspection and Interrogatories, nowhere in these overly broad demands for information were there any requests for copies of checks. Plaintiff also asserts and defendants do not deny that the parties eventually superseded all of their discovery demands, by resorting to open file discovery. Thus, defendants had access to plaintiff's files and if they wished, they could have searched for the originals in plaintiff's files, or even just simply have asked for them. As for the use of the bank statements that had not been previously introduced, they were not the source of any information that defendants did not have notice of, but merely provided the means to introduce evidence about which defendants had been previously notified.
Moreover, plaintiff has established that this motion could easily have been and should have been brought prior to trial when discovery was ongoing. They have not willfully failed to comply with any discovery orders and defendants have not suffered any prejudice by any failure to disclose. Therefore, preclusion will not be granted (Colome v Grand Concourse, 302 AD2d 251, 754 NYS2d 536 [1st Dept 2003]).
Facts
David Copperfield envisioned a restaurant consisting of a panoply of various illusions based on his magic. He participated in forming defendant LateNite Magic, Inc. ("LateNite") for the purpose of building a restaurant containing the magic designed by David Copperfield. It proceeded to construct a building to house the restaurant and Copperfield illusions in Times Square.
Plaintiff's, whose subsidiary eventually merged into plaintiff, was hired to construct and install the illusions. There are virtually no contractors with any experience in the building of this kind of facility. The plaintiff was hired because of its substantial experience in building large theme park style attractions, such as Universal Studios Terminator 2, The Cat in the Hat and constructing large automatic machines, and moving scenery, known as show action equipment.
At the time of hiring, defendants made a $250,000 payment to the plaintiff along with a letter of intent stating that plaintiff would construct and install the show action equipment for the illusions for a fee of $3,200,000 which could be increased only up to $3,750,000 if the total costs were greater than $3,200,000. This figure was the rock bottom price negotiated by the parties which was to recover the costs that plaintiff anticipated it would incur without making a profit. The aim here was to build a prototype restaurant, the success of which would serve as a prototype for similarly themed David Copperfield magic themed restaurants in various other locales in the country. For those projects, plaintiff would be paid at a sum which would result in a substantial profit. The letter of intent stated that it was to be superseded by a formal, binding contract that would completely supercede the letter of intent. That never happened.
All types of problems developed almost immediately. Because the housing for the restaurant was started before the plaintiff started to build the equipment for the illusions, at [*3]least one of the larger pieces of mechanical equipment had to be re-designed after it was fully manufactured because the appointed space for it could not accommodate it. Early on, David Copperfield withdrew from supervising the illusion installations and the project went on without any overall supervision. After several months, Tim Merrell, a professional magician, was retained to supervise the design and installation of the equipment. This resulted in further redesign of much of the equipment that did not satisfy his standards. Several months later, David Copperfield re-entered the picture and set upon re-designing a number of completed illusions, causing plaintiff to begin again on many of the illusions.
As the work progressed, plaintiff made three demands for payment for work up to the time of the demand. None of the payments were made, although in a show of good faith James Carafalli, who was hired by defendant LateNite to oversee the day-to-day operations of the project and to get it started again after plaintiff and its subsidiaries stopped all work, convinced defendant LateNite's board to issue a check to plaintiff for $100,000 to show defendants' good faith in paying the plaintiff for all work it had done including the anticipated completion of the project. The $250,000 down payment and the $100,000 good-faith payment were the only payments received by plaintiff for the work it had done.
Up until it stopped work because of LateNite's inability to make payments, plaintiff completed a substantial amount of the mechanical underpinnings for the themed attractions at its New Windsor Connecticut facility where the equipment was being fabricated. For example, the debriefing room was in fact an elevator that created the illusion that it was going up when, in fact, it was going down. It transported those customers who had participated in the illusions in some way, such as the people who appeared to be sawed in half by the suspended in space death saw, to be let out at the gift shop and then out of the building so they couldn't share the secrets they learned with the rest of the restaurant's patrons. The levitating bar was a working bar which levitated about 2 ½ feet off the floor without any visible means of support. The Court finds it to have been mechanically complete and ready to be installed. The levitating banquettes consisted of three circulating booths that could hold 6-8 people. They floated up in the air 3 to 12 feet without any apparent support. The head mover was inside an elevator that brought customers into the restaurant. It was a disembodied head sliding back and forth and talking. Although still at the New Windsor location, it was mechanically complete and ready to be installed. The transformational wall was an ordinary wall that would suddenly move. The telescoping column was the major piece. It was basically assembled and appeared to be ready to be installed. For the death saw illusion, customers were placed inside a locked box. The death saw would move through the air. The box was opened and found to be empty. The patrons were then spotted in the head of the replica of The Statute of Liberty. These appeared to be very much on the way to substantial completion.
Audio visual machines called the Davids replicated the voice of David Copperfield. There were several of them to be placed at various locations in the restaurant, and narrated what was going on illusion-wise. [*4]
Plaintiffs also constructed electric and hydraulic power mechanisms to power the machines. Plaintiff installed hydraulic power units, an air dryer and an electric motor starter.
The motor control system and show action control systems, constituting the nerve center or brains for the running of the illusion equipment along with the specialized lighting equipment were substantially fabricated.
Through its subcontractor, Specialized Audio-Visual, Inc., ("SAVI"), the audio-visual equipment was partially complete. SAVI was made a defendant in the action in order to establish its claim for work, labor and services. Its claim was represented throughout the litigation by plaintiff.
Mr. Caparelli, who was at that time coordinating the work for LateNite Magic, inspected the mechanical equipment at the New Windsor location, found it to be of the highest quality. He agreed that the job should be completed for $5 million, and found that plaintiff had completed 80% of the work. David Piper, plaintiff's expert in the area of large show action equipment testified that the value of plaintiff's efforts was between $4.5 and $5 million. He also testified that the equipment created by plaintiff was designed to last for at least ten years and that they were permanent installations. David Copperfield testified that plaintiff was doing the job to the best of his expectations and the work was of a very high quality. Tim Merrell, employed by defendant LateNite for his magic expertise, testified that plaintiff's work was "very good" and that parts of the work was "really amazing" and "looked terrific". I find all of these witnesses to be very credible. Accordingly, I find that the value of the completed work would have been $5 million, and that 80% of the work was complete when all work was stopped.
The Discharge Bonds
Plaintiff filed two liens. The first while work was ongoing and the second one on April 28, 1999 after the work had stopped, and three months before July 7, 1999, the date that this action was filed.
The Conseco Insurance companies and American Casualty Company of Reading, PA ("the Surety"), filed bonds discharging the second lien. Since a separate suit was filed against the surety; the Court issued an Order consolidating that action with this action. As a result, the surety is also a defendant on that portion of this action against the bond.
Pertinent Provisions of the Pleadings
Defendant Conseco also successfully moved to intervene in this action as a party defendant based on the assignment of the lease from LateNite to it. Plaintiff then amended the complaint. In Paragraph 33 of the amended complain it alleged:
Conseco alleges that the work, labor and services provided and material furnished by plaintiff of the subject premises were for the benefit of Conseco.
This allegation was admitted in Paragraph 33 of defendant's answer to the amended complaint. The counterclaim in Conseco's answer states that it stands in the shoes of [*5]co-defendant Conseco by virtue of the assignment of the lease, the performance of the work, and is entitled to all the benefits derived therefrom.
Conclusions of Law
Letter of Intent
The Letter of Intent did not constitute a formal, binding contract. It clearly stated that the parties intended to enter into a formal agreement that would supersede the Letter of Intent. It lacked such essential terms as the dates for the beginning and final completion of the work. It left the undertaking of future projects - which plaintiff relied on in undertaking this project at below a market rate - for future negotiation. It is therefore unenforceable, (Prospect Street Ventures I v Eclipsys Solution Corp., 23 AD3d 213, 804 NYS2d 301 [1st Dept 2005]) ["Letter agreement upon which plaintiffs relied was agreement to agree rather than enforceable contract since it was expressly conditioned on execution of definitive agreement ... intent not to be bound was also manifested in references in letter to proposed' commitment and proposed' transaction];(Carmon v Soleh Boneh, 206 AD2d 450, 614 NYS2d 555 [2nd Dept 1994])("... the letter of intent was merely an agreement to agree which contained open terms, called for future approval, anticipated future preparation and execution of contract documents, and was too uncertain and indefinite as to material terms to be enforceable." [206 AD2d 451]) lv to app den 85 NY2d 804, 626 NYS2d 756 (1995)
Even assuming, arguendo that the letter of intent was a binding contract, the failure to make timely payments after plaintiff made demands for such was a breach of contract under General Bus Law §76-a which requires that in construction contracts payment should be made within 30 days of the demand for work actually done. Plaintiff made three such demands and none of them were honored. This provision exists because of the enormous costs that are borne by a construction contractor. In many instances, failure to pay could wreak financial ruin in large construction cases such as this. In this jurisdiction, it is settled law, that where one party to a construction contract breaches, the other party has the alternative of suing on the contract or suing in quantum meruit (Raile v Peerless American Products, 192 AD 506, 508, 182 NYS 721, 723 [1st Dept 1920]). In LB Foster Co. V Terry Contracting, Inc., the Court stated at 34 AD2d 638, 638-639, 310 NYS2d 76, 77 [1st Dept 1970]) that where there is a breach, the non-breaching party has a "right to disregard the contract price and to press its claim in quantum meruit." Therefore, whether or not the letter agreement was a binding contract, plaintiff may recover its damages in quantum meruit, which it has elected to do.
Both Conseco and American Casualty were liable in quantum meruit on the discharge bond filed to free the property from the lien filed by plaintiff (See, Sections 3 and 4 of the Lien Law). The lien was valid because it was supported by improvements to the property. Even though a considerable portion of the mechanical equipment remained at the New Windsor facility. Equipment manufactured for the property but not delivered is lienable (See, §§ 4 and 9 of the Lien Law.
Direct Liability
[*6]
Conseco is directly liable to plaintiff by having agreed to the assignment of the lease from LateNite when it appeared that LateNite was not able to meet its financial obligations. An assignee stands in the shoes of its assignor, and is entitled to the benefits as well as the obligations of the assignor (Wald v Marine Midland Business Loans, 270 AD2d 73, 704 NYS2d 564 [1st Dept 2000]. Moreover, Conseco made a formal admission that it benefitted from the work of plaintiff when it admitted to that claim by the plaintiff in Paragraph 33 of the complaint. That admission remained unchanged for the five years of this litigation. It is far too late to deny it now.
Damages
The value of the work labor and services provided by the plaintiff amounts to $5,000,000. The Court has made a factual finding that 80% of the work was completed. This results in damages of $4,000,000 less the $350,000 in payments received by plaintiff. Under this approach, plaintiff is entitled to $3,650,000 on the discharge bond against Conseco and American Casualty Company and directly against Conseco.
From the abundance of documents regarding the expenses incurred by plaintiff on this project, the Court concludes that plaintiffs costs amounted to $3,745,000, a figure remarkably close to the $3.75 baseline that had been anticipated by plaintiff at the beginning of this project. A 10% figure for costs and overhead amounts to $374,500. This amounts to $4,119,500. Subtracting $350,000 from that leave us with $3,769,500. Accordingly, plaintiff is entitled to judgment in the sum of $3,769,500 with interest from December 16, 1997, the date when work stopped, together with costs and disbursements.
Retrieval of exhibits may be obtained from the Clerk of the Part by making an appointment to simultaneously appear to obtain the exhibits.
Settle Judgment.
Dated: August 25, 2006Enter:
_______________________
Louis B. York, J.S.C.
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