Gonzalez v Strand Condominium

[*1] Gonzalez v Strand Condominium 2007 NY Slip Op 52347(U) [17 Misc 3d 1139(A)] Decided on November 13, 2007 Supreme Court, New York County Goodman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 13, 2007
Supreme Court, New York County

Miguel Gonzalez and Scarlett Mckinney, Plaintiffs,

against

The Strand Condominium, a/k/a the Strand, The Strand, Board of Managers of the Strand Condominium, Board of Managers of The Strand, Ronnie Britton and Goodstein Management, Inc., Defendants. The Strand Condominium, a/k/a the Strand, The Strand, Board of Managers of the Strand Condominium, Board of Managers of The Strand, Ronnie Britton and Goodstein Management, Inc., Third-Party Plaintiffs, Tower Building Services, Inc., Third-Party Defendant. The Strand Condominium, a/k/a the Strand, The Strand, Board of Managers of the Strand Condominium, Board of Managers of The Strand, Ronnie Britton and Goodstein Management, Inc., Second Third-Party Plaintiffs, Anthony Accardo, P.E., individually and d/b/a Accardo Enginnering, Second Third-Party Defendants.



105863/04

Emily Jane Goodman, J.

This action was commenced by plaintiffs Miguel Gonzalez and Scarlett McKinney, husband and wife (collectively, Gonzalez), against The Strand Condominium, a/k/a The Strand, The Strand, Board of Managers of The Strand Condominium, Board of Managers of The Strand and Ronnie Britton (collectively, The Strand), as well as Goodstein Management, Inc. (Goodstein), the property manager for The Strand (the action). The Strand and Goodstein [FN1] commenced a third-party action against Tower Building Services, Inc. (Tower), a construction company that employed Gonzalez, asserting contribution and indemnity claims against Tower (the Tower Action). Strand also commenced a second third-party action against Anthony Accardo, individually and d/b/a Accardo Engineering (collectively, Accardo), asserting, among other things, negligence and professional malpractice claims against Accardo (the Accardo Action).

By motion dated January 25, 2007 (Motion Sequence Number 001, Strand Motion), Strand seeks leave of court to amend its third-party complaint filed in the Tower Action to add a cause of action for contract reformation. Tower filed a cross motion for summary judgment seeking dismissal of the complaint. On March 15, 2007, Accardo filed a motion (Motion Sequence Number 002, Accardo Motion) seeking an order dismissing the third-party complaint filed in the Accardo Action or severing the Accardo Action from the action. The Strand Motion, the cross motion and the Accardo Motion are consolidated for disposition.

Background

The Strand owns the building located at 500 West 43rd Street, New York City (the Building). The action, commenced in April 2004, arose out of an accident that occurred on October 20, 2003, in which Gonzalez, a Tower employee, was allegedly injured in the course of his employment when he fell from a scaffold erected by Tower for the Building. Goodstein, as property manager for The Strand, retained Tower pursuant to a contract dated September 24, 2002, to perform facade restoration work for the Building (the Contract). The Contract was signed by Samuel Lewis, the president of Goodstein, and Anthony Mamounas, the president of Tower. The Contract was prepared by Accardo, a professional engineer, whose responsibilities included, among other things, preparation of bids, specifications, and contracts in connection with repair and improvement work for the Building. [*2]The Contract was based on a standard contract form of the American Institute of Architects (AIA), and was entitled "AIA Document A107, Abbreviated Form of Agreement Between Owner and Contractor For Construction Projects of Limited Scope where the Basis of Payment is a Stipulated Sum."

The signed Contract is missing page 7. Specifically, the Contract, as signed, is sequentially numbered up to page 6 (which ends in paragraph 9.7 of Article 9), then skips page 7, and continues the sequential numbering for Articles 11 through 21. Also, the last sentence on page 6, which is ending sentence of paragraph 9.7, has nothing to do with the "carryover" sentence (i.e. it starts at mid-sentence) on page 8, which deals with arbitration and is intentionally crossed out. Moreover, the first full paragraph on page 8 begins with paragraph 11.1 of Article 11, which means that a page containing Article 10 and the paragraphs thereunder is missing (i.e page 7). Thus, the signed Contract is an incomplete document on its face.

A copy of the missing page 7 is annexed as Exhibit C to the Affirmation of Arnold Stream (Strand's counsel) in Opposition and Reply to Tower's Cross Motion (the Stream Affirmation). Notably, the missing page 7 contains indemnity provisions, pursuant to which Tower agreed to indemnify Strand for claims and damages arising from the work performed by Tower at the Building.

Based on the record, the parties have conducted substantial discovery. At his deposition, Accardo testified that he prepared the standard AIA form contract at Goodstein's request, and that the draft contract was faxed to both Goodstein and Tower. Accardo also testified that he intended to send to the parties all pages of the Contract that he had prepared. Accardo Deposition Transcript, page 23, a copy of which is annexed as Exhibit LL to the Affirmation of Gary Rome (Tower's counsel) in Support of the Cross Motion (the Rome Affirmation).

In the Tower Action, Strand seeks to assert, among others, a claim against Tower based on contractual indemnity, the provisions of which are contained on page 7 of the Contract. Tower denies it has any indemnity obligation because the Contract, when signed, did not contain page 7, and that there is no evidence that Tower had orally agreed to indemnify Strand. Strand states that the "only issue before the Court at this time is whether the Third-Party Complaint against Tower should be amended so as to allow the assertion of a cause of action for reformation [of contract]." Strand Motion, ¶ 12.[FN2] Attached to the motion, as Exhibit A, is a copy of Strand's Amended Third Party Complaint.

With respect to the Accardo Action, Accardo asserts that the third-party action against it should be dismissed or severed because, among other things, there has been a protracted delay by Strand in commencing the Accardo Action (i.e. 2 years and 8 months after the action was commenced), and that such delay has prejudiced his rights in seeking discovery of all parties or any additional parties, especially when the discovery is sought in the context of the impending trial of the action. In opposition, Strand argues that there was no delay in commencing the [*3]Accardo Action because it was brought within two months after Accardo's deposition, and that there is little that has not been asked as to the missing page, as well as Accardo's role in the preparation and transmission of the Contract.

Discussion

I. The Tower Action

CPLR 3025 (b) provides, in relevant part, that a party may amend his pleadings at "any time by leave of court," and that leave shall be "freely given upon such terms as may be just." Applicable case law reflects that discretionary leave to amend should be freely granted, absent prejudice or surprise to the non-moving party. See e.g. Cherebin v Empress Ambulance Service, Inc., 43 AD3d 364 (1st Dept 2007). In the instant case, there is no surprise to Tower that Strand seeks to amend its third party complaint, via reformation of contract, to assert a contractual indemnity claim. Undisputedly, the parties have engaged in significant discovery regarding the missing page that contains the indemnity clause, which is an integral element of Strand's claim. Before granting leave to amend, however, the court must determine whether the proposed amendment is palpably sufficient as a matter of law. Norte & Co. v The New York And Harlem Railroad Co., 222 AD2d 357 (1st Dept 1995). As explained below, Strand's proposed amendment is not palpably insufficient.

It is evident that the signed Contract is an incomplete document, because the missing page 7 does not provide coherence and continuity between pages 6 and 8, as explained earlier. Because the Contract is incomplete on its face, parol evidence may be considered to determine the parties' intent. Belknap v Dean Witter & Co., Inc., 92 AD2d 515, 517 (1st Dept 1983)(an incomplete contract falls within one of the limited exceptions to the parol evidence rule). Further, a contract may be reformed if it was executed under mutual mistake. Chimart Associates v Paul, 66 NY2d 570, 573 (1986)(if contract reformation was appropriate due to mutual mistake, parol evidence rule would not bar the use of extrinsic evidence to reflect the parties' intent). Moreover, where there is no mistake about the terms of a contract, but only the mistake of the scrivener in reducing the contract to writing that reflects the parties' intent, the contract may be reformed. U.S. Russia Investment Fund v Neal & Co., Inc., 1998 WL 557606 (SD NY Sep. 2, 1998). In U.S. Russia Investment Fund, the federal court permitted plaintiff to reform its contract with defendant to include a promissory note installment payment schedule that was inadvertently omitted from the document. The court equated the inadvertent omission to a scrivener's error, and found that extrinsic evidence showed that the promissory note was to be paid in installments with interest, and not to be paid in one lump sum at maturity, as defendant had argued.

In this case, the Contract was prepared by Accardo, who testified that he intended to transmit all pages of the Contract to the parties, and that he was not aware of any request made by the parties to omit any provisions of the Contract. Accardo Deposition Transcript, pages 43-46. Accardo also testified that neither Tower nor Goodstein had ever requested that he omit the indemnity provisions of the AIA-form contract, with respect to other projects that he had worked with them in the past. Id. at pages 57-58.[FN3] Copies of the prior contracts between Goodstein (as manager on behalf of its managed building owners) and the Tower entities (as contractor) are [*4]annexed as multiple exhibits to the Stream Affirmation. Like the instant Contract, Accardo had prepared these other AIA-form contracts, and such contracts all contained page 7, the very page (with identical indemnity provisions) that is missing from the Contract. The record also reflects that Samuel Lewis of Goodstein and Anthony Mamounas of Tower have each testified that the Contract they had signed was missing page 7, but that they were unaware of this when they signed it. Lewis Deposition Transcript, pages 27-29, 51-52 and Mamounas Deposition Transcript, pages 19, 54; copies of which are annexed as Exhibits HH and JJ to the Rome Affirmation.

Based on the foregoing, Strand has sufficiently alleged that: (1) the Contract should contain all provisions of the AIA-form contract (including the indemnity provisions), just like other AIA-form contracts that were prepared by Accardo for Goodstein and Tower; (2) Goodstein and Tower were unaware that the Contract was missing page 7 at the time they signed it; (3) the parties did not intend to omit the missing page from the Contract; and (4) the omission was likely caused by a clerical error (tantamount to a "scrivener's error") in photocopying or faxing the document. Notably, the indemnity provisions contained in the missing page do not conflict with other provisions of the signed Contract. In fact, the Contract incorporates by reference provisions of other contract documents, including the subject indemnity provisions, as discussed below.

More specifically, Article 6 of the Contract, entitled "Enumeration of Contract Documents," states, in relevant part, that the "Supplementary and other Conditions of the Contract are those contained in the Project Manual," and includes "Document A201-1987" entitled "General Conditions of the Contract for Construction." In turn, Article 7 of the Contract, entitled "Contract Documents," provides, in relevant part, that "[T]he Contract Documents consists of this Agreement with Conditions of Contract (General, Supplementary and other Conditions) ... issued prior to execution of this Agreement ... The intent of the Contract Documents is to include all items necessary for the proper execution and completion of the work by the Contractor." In turn, the "General Conditions of Contract," as contained in Document A201-1987, a copy of which is annexed as Exhibit D to the Stream Affirmation, provides in paragraph 3.18 therein indemnity provisions that are identical to those contained in the missing page 7 of the Contract. Specifically, the indemnity provisions state, in relevant part, that "[t]o the fullest extent permitted by law, the Contractor shall indemnify and hold harmless the Owner [FN4] ... from and against claims, damages ... arising out of or resulting from performance of the Work."

Based on the foregoing, Strand argues that even though the Contract is missing page 7 (through inadvertence), the indemnity provisions are incorporated by reference through operation of Articles 6 and 7 of the Contract, as well as the "General Conditions." Strand's "incorporation by reference" argument is supported by applicable law. See e.g. Gabriel Capital, LP v CAIB Investmentbank Atktiengesellschaft, 28 AD3d 376, 378 (1st Dept 2006)(court enforced arbitration clause via incorporation by reference); Liberty Management & Construction Ltd. v Fifth Avenue & Sixty-Sixth Street Corp., 208 AD2d 73. 77-78 (1st Dept 1995)(using the incorporation by [*5]reference doctrine, court enforced arbitration clause and found that it was of no consequence that such clause appeared in the General Conditions of the AIA-form contract rather than in the main contract); Spiegler v Gerken Building Corp., 35 AD3d 715, 717 (2nd Dept 2006)(court ruled that subcontractor was not entitled to dismissal of general contractor's action based on contractual indemnity, because issues of fact remained as to whether the parties intended that the indemnity provisions of the AIA's standard form of contract were to be incorporated by reference into the parties' contract).

However, Tower contends that under New York, indemnity clauses cannot be incorporated by reference. Tower relies on Goncalves v 515 Park Avenue Condominium (39 AD3d 262 [2nd Dept 2007)), and Bussanich v 310 East 55th Street Tenants (282 AD2d 243 [1st Dept 2001], in support of its proposition of law. In Goncalves, the court stated that "[I]corporation clauses in a construction subcontract, incorporating prime contract clauses by reference into a subcontract, bind a subcontractor only as to prime contract provisions relating to the scope, quality, character, and manner of the work to be performed by the subcontractor." Id. at 262; Bussanich (same). Tower's reliance on such cases is misplaced. Importantly, those cases involved subcontractors seeking to incorporate the prime contract's indemnity clauses by reference into their subcontracts to hold the sub-subcontractors liable. In the instant case, Tower is not a subcontractor or sub-subcontractor, and Strand is not a contractor (it is the Owner) and does not seek to incorporate by reference indemnity provisions of another prime contract into the Contract. Because there are "no second-tier subcontractors" in this case, the facts in Goncalves and Bussanich (which dealt with general contractors, subcontractors and sub-subcontractors) are distinguishable and, accordingly, the holding in those cases has no application here. Simply put, unlike Goncalves and Bussanich, this case involves only a direct contractual relationship between Strand, as owner, and Tower, as contractor.

Undeniably, Tower is a contractor that has worked on many construction projects, and is familiar with various AIA contract forms, including the ones at issue here. Indeed, as noted above, Tower had entered into many contracts with Goodstein that were prepared by Accardo, using the same AIA forms as the ones in this case. Thus, even though the "General Conditions" were not delivered to Tower with the Contract, they may be incorporated by reference. At a minimum, Strand's motion for leave to amend its complaint has alleged sufficient facts to warrant court approval, for the reasons stated above.

On the other hand, Tower seeks a summary judgment dismissing Strand's third party complaint. In setting forth the standards for granting or denying a motion for summary judgment, the Court of Appeals noted, in Alvarez v Prospect Hospital (68 NY2d 320, 324 [1986]}, the following:

As we have stated frequently, the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact. Failure to make such ... showing requires a denial of the motion, regardless of the sufficiency of the opposing papers. Once this showing has been made, however, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary support in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action [internal citations omitted]. [*6]

In support of its cross motion for summary judgment, Tower submits an affidavit of its president, Anthony Mamounas, a copy of which is annexed as Exhibit NN to the Rome Affirmation (the Mamounas Affidavit). In his Affidavit, Mr. Mamounas stated, among other things, that (1) it was his practice to review every contract carefully prior to signing; (2) although he could not remember whether the issue of indemnity was discussed with Strand, he never intended Tower to indemnity Strand under any circumstance; (3) under current economic conditions and rising insurance premiums, indemnity provisions and agreements to purchase insurance for parties retaining Tower's services are at the forefront of contract negotiations; and (4) if Tower were required to indemnity Strand, he would have requested a higher payment for the work performed by Tower. Mamounas Affidavit, ¶¶ 9, 11, 12, 21 and 23.

Opposing Tower's cross motion, Strand argues, among other things, that (a) the Contract was based on similar AIA-form contracts that Goodstein had entered with Tower before, all of which contained identical indemnity clauses; (b) Lewis and Mamounas had agreed to enter into the "usual" AIA form contract in respect of Tower's work on the Building; and (c) Lewis has been managing buildings for Goodstein for over 30 years and was fully aware of the importance of the inclusion of indemnity agreements with contractors. Affidavit of Samuel Lewis, ¶¶ 3, 4 and 7, a copy of which is annexed as Exhibit 1 to the Stream Affirmation. Moreover, paragraph 17.1 of the Contract requires Tower to obtain "contractual liability insurance applicable to Contractor's obligations under Paragraph 9.12," the very paragraph under which Tower is required to indemnify Strand contractually. However, such paragraph is on the missing page, thus making the Contract incomplete on its face, due to the lack of internal coherence and inability to cross reference. In light of all of the above, summary judgment cannot be granted with respect to Tower's cross motion.

II.The Accardo Action

Accardo requests, pursuant to CPLR 1010, that the court either dismiss the third-party complaint, or sever the Accardo Action from the action. In support of its requests, Accardo argues, among other things, that (1) Strand delayed two years and eight months in bringing the Accardo Action; (2) Accardo needs to retain an expert to fully evaluate the malpractice claim asserted by Strand; (3) Accardo needs to conduct discovery of all parties and facts, including discovery of Gonzalez, as well as the design and maintenance of the Building; and (4) Accardo has been prejudiced by the delay, in that it is now unable to timely complete its discovery and to file a summary judgment motion.

CPLR 1010 provides, in relevant part, that the court "may dismiss a third-party complaint without prejudice" or "order a separate trial of the third party claim" in the exercise of its discretion, and "the court shall consider whether the controversy between the third-party plaintiff and the third-party defendant will unduly delay the determination of the main action or prejudice the substantial rights of any party." Based on the statutory authority and the reasons stated herein, Accardo's motion seeking severance of the Accardo Action is granted.

The action was commenced by Gonzalez in April 2004, and the Tower Action was brought by Strand against Tower in December 2004, but the Accardo Action was not brought against Accardo until December 2006, two years after the Tower Action was started. Strand has not explained why, in connection with the Tower Action, it did not discover the missing page 7 until June 2006, pursuant to which contractual indemnity is sought against Tower. Thus, the [*7]long delay is unjustified. On the other hand, Accardo's assertion that it needs time to fully evaluate the malpractice claim and to conduct discovery regarding the Building's structure is without merit. The malpractice claim simply deals with Accardo's alleged failure to transmit a complete contract, and does not involve "intricacies of engineering acumen," as noted by Strand. Strand's Affirmation in Opposition, ¶ 3. Thus, any discovery regarding the Building's design and maintenance is unnecessary. Further, based on the record, the parties have conducted significant discovery as to the manner in which the Contract was prepared and transmitted by Accardo, and in such regard, there appears to be little that has not been investigated and asked with respect to the missing page. Also, deposition transcripts and medical documents regarding Gonzalez's injuries can be readily made available to Accardo. Accordingly, even though there is a protracted delay by Strand in bringing the Accardo Action, such delay does not appear to have significantly impaired Accardo's substantive rights.

However, the Accardo Action and the action involve different claims (personal injury claims versus professional malpractice claims), and are based on unrelated facts and circumstances. As a determination of the issues raised in the Accardo Action will unduly delay the action to the prejudice of plaintiffs, the Accardo Action should be severed from the action.[FN5]

Accordingly, it is

ORDERED that the motion (Motion Sequence Number 001) by Strand, the third party plaintiffs, seeking leave to amend the third party complaint in the Tower Action (Index No. 591289/04) is granted, and that the cross motion of Tower, the third party defendant in the Tower Action, seeking dismissal of the Tower Action is denied; and it is further

ORDERED that the Amended Third Party Complaint against Tower, a copy of which is annexed as Exhibit A to the Strand Motion, is deemed served on Tower, and that Tower shall file a responsive pleading to the Amended Third Party Complaint within 10 days of receipt of a copy of this Decision and Order; and it is further

ORDERED that the motion (Motion Sequence Number 002) by Accardo, the second third-party defendants in the Accardo Action (Index No. 591178/06), seeking severance of the Accardo Action from the action (Index No. 105863/04) is granted, and the severed action should be randomly reassigned, but the alternative relief seeking dismissal of the Accardo Action is denied; and it is further

ORDERED that the second third-party defendants are directed to take all actions needed to effectuate this severance; and it is further

ORDERED that the parties appear before this Court on December 13, 2007 for a settlement conference, and should the action not settle, the parties will be immediately sent out to pick a jury for trial.

This constitutes the Decision and Order of the Court.

Dated: November 13, 2007

ENTER: [*8]

____________________

J.S.C. Footnotes

Footnote 1: Unless otherwise specified, The Strand and Goodstein will be referred to hereinafter collectively as "Strand."

Footnote 2: Strand also notes that the issue of whether the Contract should be reformed to include page 7 would be "the subject of a summary judgment motion and probable cross motion." Id.

Footnote 3: Accardo's testimony is neither contested nor contradicted by Goodstein or Tower.

Footnote 4: The Contract, on its covering page, defines The Strand as the Owner, and Tower as the Contractor.

Footnote 5: The request to dismiss the Accardo Action is without merit and unsupported by the facts. In light of the determination that the Accardo Action should be severed, it is necessary to address the remaining contentions of the parties.