Collier v Home Plus Assoc., Ltd.

[*1] Collier v Home Plus Assoc., Ltd. 2007 NY Slip Op 52526(U) [18 Misc 3d 1121(A)] Decided on December 21, 2007 Supreme Court, Kings County Jacobson, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 21, 2007
Supreme Court, Kings County

Daphne Collier, Plaintiff,

against

Home Plus Associates, Ltd., et al., Defendants.



43841/03

Laura Lee Jacobson, J.

Upon the foregoing papers, plaintiff Daphne Collier (plaintiff or Collier) moves, pursuant to CPLR 5015(a), to vacate the February 6, 2007 dismissal of the complaint for failure to appear at a compliance conference, and for an order, pursuant to CPLR 3025, for leave to amend the complaint.

Pursuant to a contract dated August, 2001, plaintiff, a registered nurse, purchased a new house, located at 1620 Dean Street, from defendant Home Plus Associates, Ltd. (Home Plus). Plaintiff received a loan from defendant Budget Mortgage Bankers (Budget Mortgage) to purchase the house. Title closed on or about November 15, 2001. According to plaintiff and her counsel, Home Plus breached the express terms of the contract, the implied warranty of fitness, and the implied covenant of good faith and fair dealing because the house contained many defects requiring extensive repairs, and because Home Plus failed to take the necessary steps to issue a tax abatement and to provide plaintiff with a certificate of occupancy. In this regard, on or about February, 2003, the Department of Buildings (DOB) issued a violation to plaintiff for occupying the premises without a certificate of occupancy, and identified 24 of 38 jobs which the seller left unfinished. With respect to Budget Mortgage, plaintiff contends that it defrauded her by persuading her that her interests were protected, and by aiding Home Plus to sell defective and unmarketable homes without a certificate of occupancy.

In November, 2003, plaintiff filed a pro se verified complaint. The first cause of action alleges that defendants failed to properly construct, maintain and/or make the necessary repairs to the house, which caused plaintiff injuries, physical illness, and stress, and constituted negligence and breach of contract. The second cause of action for negligent [*2]infliction of emotional distress is also based upon defendants' failure to properly construct the house. Plaintiff also asserts a claim for punitive damages. Defendants Home Plus, Albert Rabizadeh, George Rabizadeh, and Joseph Rabizadeh answered the complaint. Thereafter, plaintiff, acting pro se, moved for summary judgment, which was denied by this court with leave to renew at trial. On November 4, 2005, plaintiff, still appearing pro se, missed a calendar call. That day, the case was marked disposed, namely "Other Final Disp. Pre-Note." Plaintiff thereafter retained her current counsel on November 3, 2006. Subsequently, plaintiff's counsel moved to restore the case to the trial calendar. The motion was granted by this court and the case was restored on January 2, 2007. On that date, a compliance conference was scheduled for February 6, 2007, but plaintiff's counsel failed to appear, and the case was marked disposed on that date. Plaintiff then made the instant motion to vacate the dismissal and to amend her complaint.

Discussion

Plaintiff moves to vacate the February 6, 2007 dismissal of her complaint.

In support of this branch of her motion, plaintiff's counsel states that he did not appear at the February 6, 2007 conference call because "he did not quickly check the calendar to find the February 6, 2007 compliance conference until May, 2007;" that he did not receive "notice of the hearing except the posting date upon the court's calendar soon after the case had been restored;" and that "[w]hile preparing a motion in May, 2007, following the failure of settlement discussions, [he] was . . . surprised to discover [on the court's web site] the record of a February 6, 2007 appearance date with the notion Other Final Disp. Pre Note.'" Counsel states that his failure to appear constituted law office failure, that it was not willful, that defendants were not prejudiced (except insofar as hiring a per diem attorney to discuss discovery on that date); and that the delay was not lengthy since he made the instant motion one week after learning of the default. Counsel also notes that neither party made any motion returnable on February 6, 2007 because following restoration of the case, Home Plus requested that plaintiff submit an offer of settlement. As a result, plaintiff hired an engineer to compute the cost of repairs necessary to obtain a certificate of occupancy, which was sent to defendant by letter dated April 14, 2007.

Counsel also asserts that plaintiff has meritorious claims. First, counsel states that plaintiff has a viable breach of contract claim because defendant failed to provide plaintiff with a certificate of occupancy, as promised in the contract, and failed to complete all necessary measures to secure a 10 year tax abatement, as specified in the Repair Rider. Counsel annexes plaintiff's affidavit which affirms the above. Plaintiff also states in her affidavit that defendant left the house in severe disrepair, including failing to provide proper drainage and insulation, and installing improperly positioned gas pipes, unsupported overhanging bricks, and floors which shift, all of which breach Home Plus' merchant warranty, namely that the house is unfit for occupancy as a home. Counsel also argues that the DOB's List of Uncompleted Jobs, and plaintiff's affidavit, evidence that Budget Mortgage was negligent in providing financing for a building which lacked a certificate of occupancy, [*3]and that defendants were negligent in failing to perform the construction in a workman-like manner.Further, counsel contends that defendant Joseph Rabizadeh, President of Home Plus, fraudulently assured plaintiff that the certificate of occupancy would be forthcoming when the DOB had not even inspected the premises; that Home Plus and Budget Mortgage falsely convinced plaintiff that she was purchasing a home she could rent to others when in fact such occupation was illegal without a certificate of occupancy; and that the house was habitable, when it was plagued by defects.

In opposition, defendants argue that plaintiff's counsel has not offered a reasonable excuse for his nonappearance since he was aware on January 2, 2007 that a compliance conference had been scheduled for February 6, 2007; that the February 6, 2007 nonappearance, coupled with plaintiff's previous failure to appear, constitutes a pattern of noncompliance in this case; that counsel's explanation for his nonappearance cannot be considered law office failure; and that when plaintiff's counsel called him in May, 2007 to discuss a settlement, plaintiff's counsel was already aware that he had missed the conference on February 6, 2007. Counsel also argues against vacatur because plaintiff delayed the case from July, 2005 to November, 2006 when she turned over her "file" to several attorneys who did not move to restore her case to the trial calendar until current counsel was hired.

As to whether the plaintiff's claims have merit, defendants assert that plaintiff's affidavit is not sufficiently specific to allege any viable claims; that the breach of contract claim is without merit since plaintiff failed to show that the various breaches resulted in foreclosure; and that plaintiff's affidavit, the affidavit of defendant John Rabizadeh, President of Homes Plus, and the contract, show that plaintiff agreed to close without a certificate of occupancy and also made it impossible for the DOB to inspect the premises so that a certificate of occupancy could be obtained.

"A case dismissed pursuant to CPLR 3216 or . . . [22 NYCRR] 202.27 may be restored only if the plaintiff can demonstrate both a reasonable excuse for the default in complying with the 90-day notice or in failing to appear at a conference, respectively, and that a meritorious action exists. Such a motion must be made within one year after service of the order or judgment entered upon the default (see, CPLR 5015 [a] [1]). The plaintiff must establish a reasonable excuse and a meritorious cause of action assuming that he or she moves to vacate the default within one year" (Lopez v Imperial Delivery Serv., 282 AD2d 190, 197 [2001], lv denied 96 NY2d 937, 759 [2001] [internal citations omitted]).

Here, plaintiff's counsel explained that he was not aware of the date the compliance conference because he did not receive notice of the conference, and did not expect the matter to be heard so quickly after the matter was restored, particularly while settlement negotiations were ongoing. As such, the court finds that plaintiff's counsel's failure to appear at the February 6, 2007 compliance conference constituted law office failure (see Harwood v Chaliha, 291 AD2d 234 [2002]). Further, plaintiff's affidavit and the DOB violation, when viewed in conjunction with the allegations of the original complaint, sets forth a meritorious [*4]cause of action for breach of contract. While the original complaint does not specifically allege the provisions in the contract upon which the claim is based (Maldonado v Olympia Mechanical Piping & Heating Corp., 8 AD3d 348, 350 [2004]), it identifies the contract entered into between plaintiff and Home Plus, alleges that plaintiff entered into the contract with defendant to purchase a newly constructed home, and states that defendant failed to properly construct, maintain and/or make necessary repairs to the house. Further, plaintiff states in her affidavit that the DOB issued her a violation for occupying the house without a certificate of occupancy and identified 24 of 38 jobs which the seller left uncompleted. In addition, according to plaintiff, pursuant to the Repair Rider, defendants failed to provide the property with proper drainage and a 10 year tax abatement. Under the circumstances, the merits of this cause of action have been sufficiently established. In sum, inasmuch as plaintiff has set forth a reasonable excuse for her default and a meritorious cause of action, the motion to vacate the dismissal of this action is granted, and the matter is restored to the trial calender.

Plaintiff also moves to amend the complaint to add causes of actions for breach of contract (already found to be adequately alleged); breach of the implied covenant of good faith and fair dealing; violation of deceptive business practices under General Obligations Law § 349; violation of the Consumer Protection Law of the City of New York (New York City Administrative Code § 20-702); violation of the Truth in Lending Act (15 USC § 1639); fraud; negligence, and punitive damages. In support of this branch of plaintiff's motion, plaintiff's counsel states that the amended complaint alleges new theories concerning the identical set of facts alleged in the original complaint, and thus would not prejudice defendants.

In opposition, defendants argue that the proposed amended complaint, unaccompanied by a supporting affidavit, adds new factual allegations absent from the original complaint; that the statute of limitations has expired on most of the proposed causes of action; that the additional causes of action do not relate back to the original complaint; that they will be prejudiced by plaintiff's delay in asserting these claims; and that the proposed causes of action are not viable as a matter of law.[FN1]

"Leave to amend a complaint shall be freely given unless the proposed amendment would cause prejudice or surprise to the opposing party" (39 Coll. Point Corp. v Transpac Capital Corp., 27 AD3d 454 [2006]). "A court hearing a motion for leave to amend will not examine the merits of the proposed amendment unless the insufficiency or lack of merit is clear and free from doubt" (Long Is. Tit. Agency, Inc. v Frisa,AD3d, 2007 NY Slip Op 9000, 1 [2007])."In cases where the proposed amendment is palpably insufficient as a matter of law or is totally devoid of merit, leave should be denied (id. [internal citations omitted]). [*5]

As an initial matter, defendants have failed to satisfy their burden of demonstrating that the proposed causes of action are barred by the statute of limitations. In this regard, defendants have merely listed the limitations periods for the proposed causes of action, but have failed to address, let alone establish, "when the [plaintiff's] causes of action accrued" (Swift v New York Med. Coll., 25 AD3d 686 [2006]).

As for the viability of these claims, as noted above, the amended complaint sufficiently alleges a cause of action for breach of contract. Notably, the amended complaint

alleges that defendants failed to provide plaintiff with a certificate of occupancy, and a house reasonably fit for the purpose for which it was intended. Next, " [i]mplied in every contract is a covenant of good faith and fair dealing which is breached when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement'" (Samide v Roman Catholic Diocese of Brooklyn, 194 Misc 2d 561, 574 [ 2003], quoting Jaffe v Paramount Communications, 222 AD2d 17, 22-23, [1996] [citations omitted]). Here,

the complaint alleges a breach of the covenant of good faith and fair dealing by asserting that defendants failed to provide plaintiff with a certificate of occupancy and a house which was fit for the purpose for which it was intended, in other words, a house without defects. "Thus, such claim, in essence, is tantamount to a cause of action for breach of contract and is redundant of such a claim" (Board of Mgrs. of the Arches at Cobble Hill Condominium v Hicks & Warren, LLC, 14 Misc 3d 1234A [2007]; NY Slip Op 50297U, * 8 [2007]). Accordingly, the motion to amend the complaint to add this cause of action is denied.

As for the negligence cause of action, it is settled that "[t]he mere breach of a contract does not give rise to a tort cause of action unless a legal duty independent of the contract has been violated" (Feinman v Parker, 252 AD2d 869, 869 [1998]. Here, although the amended complaint sets forth a negligence cause of action, in reality this claim is for breach of contract since the complaint does not allege that a legal duty independent of the contract was violated (id.; Merritt v Hooshang Constr., 216 AD2d 542, 543 [1995]). Thus, the motion to amend the complaint to add this cause of action is denied.

The complaint does not sufficiently allege a violation of General Obligations Law § 349. While this cause of action alleges that "defendants' knowing sale of a defective house, by the use of false promises, deception, and misrepresentations," violated the statute and damaged plaintiff, it fails to allege that the deceptive act (the breach of contract) impacted consumers or the public at large (Canario v Gunn, 300 AD2d 332, 333 [2002]). Thus, the motion to amend the complaint with respect to this cause of action is denied.

The complaint fails to sufficiently allege a cause of action for breach of merchant warranty. "[T]here are no longer implied warranties based on the common law. Thus, the New York Court of Appeals has held that the statutory housing merchant implied warranty set forth in General Business Law article 36-B is a full substitute for the antecedent common-law housing merchant implied warranty, recognized in Caceci v Di Canio Constr. Corp., 72 NY2d 52, 56 [1998]'" (Lupien v Bartolomeo, 5 Misc 3d 1025A, *6, Fn [2004], [*6]2004 NY Slip Op 51533U, [2004], quoting Fumarelli v Marsam Dev., Inc., 92 NY2d 298, 300-301 [1998]).Since this cause of action merely alleges a breach of common law implied warranty, as opposed to a violation of the relevant statutes, the motion to amend with respect to this cause of action is denied.

The complaint does not contain a viable cause of action pursuant to New York City Administrative Code § 20-702 as a claim under that section may only be brought by the Commissioner of Consumer Affairs (New York City Administrative Code § 20-703[c]). Thus, the motion to amend the complaint with respect to this cause of action is denied.

The complaint does not sufficiently allege a cause of action for fraud. In this regard, the complaint essentially alleges that defendants "made fraudulent representations to the plaintiff which induced the plaintiff to purchase the house" (Merrit, 216 AD2d at 542). However, review of the amended complaint reveals that the "statements" allegedly made by defendants "are not actionable under a fraud theory of liability because they are based on the same allegations that give rise to a breach of contract cause of action" (id.). Thus, the motion to amend the complaint to add this cause of action is denied.

Finally, the amended complaint sufficiently alleges a cause of action under the Home Ownership and Equity Protection Act of 1994 (HOEPA) (15 USC § 1639[h]), an amendment to the Truth in Lending Act [FN2] (TILA), in that it alleges that Budget Mortgage "offered plaintiff a loan based upon her collateral without regard to her repayment ability, including the consumers' current and expected income, current obligations, and employment;" and that in violation of Regulation Z promulgated thereunder (12 CFR § 226.6[a]), Budget Mortgage "never disclosed meaningfully to the plaintiff that the amount of her monthly payments could increase substantially from the amount agreed upon at the beginning of the loan" and that "defendant did not disclose its loan terms in an accurate and non-deceptive manner." However, insofar as the complaint alleges violations of the Real Estate Settlement Procedures Act (12 USC § 2601 et seq. [RESPA]), namely 12 USC § 2603 and 12 USC § 2604, it does not set forth a viable cause of action because §§ 2603 and 2604 do not provide for a private right of action (Mercado v Playa Realty Corp., 2005 U.S. Dist. LEXIS 14895, *26-28 [D.NY 2005]). Further, the amended complaint fails to sufficiently allege a cause of action under 12 USC § 2608. [*7]

Finally, that branch of the motion to amend the complaint to add a cause of action for punitive damages is denied. "The claim for punitive damages is not a separate cause of action" (Rivera v City of New York, 40 AD3d 334, 344 [2007]).

In summary, the motion to vacate is granted and the motion to amend the complaint is granted to extent of permitting plaintiff to add a cause of action alleging a violation of HOEPA (16 USC 1639[h]).

This constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1:Defendants abandoned their claim with respect to the claim for punitive damages.

Footnote 2:"TILA was enacted to protect consumers by requiring lenders to make meaningful disclosures about loans and their costs so the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing' 15 U.S.C. § 1601(a); see generally id. §§ 1601-1667f" (Cunningham v Nationscredit Fin. Servs. Corp., 497 F.3d 714, 717 [7th Cir. 2007]).

"It was subsequently amended by HOEPA, which requires lenders to make additional disclosures to borrowers of high-cost' or high-rate' loans. See id. § 1639" (id.).