Tag Mech. Sys., Inc. v V.I.P. Structures, Inc.

[*1] Tag Mech. Sys., Inc. v V.I.P. Structures, Inc. 2007 NY Slip Op 52560(U) [20 Misc 3d 1117(A)] Decided on December 11, 2007 Supreme Court, Onondaga County Murphy, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 11, 2007
Supreme Court, Onondaga County

Tag Mechanical Systems, Inc., Plaintiff,

against

V.I.P. Structures, Inc., Defendant.



04-2520



APPEARANCES:

COSTELLO, COONEY & FEARON, PLLC

By: Robert J. Smith, Esq.

Attorneys for Plaintiff

205 S. Salina Street

Syracuse, NY 13202

SUGARMAN LAW FIRM

James G. Stevens, Jr., Esq.

Attorneys for Defendant

360 S. Warren Street

Syracuse, NY 13202

James P. Murphy, J.

In this action commenced by Plaintiff on April 23, 2004, to recover damages suffered for an alleged breach of contract, Plaintiff brings this motion, pursuant to C.P.L.R. § 3212, for summary judgment seeking to dismiss Defendant's counterclaim, and to recover damages in the sum of $205,506.21. In opposition, Defendant, by motion dated September 24, 2007, cross-moves pursuant to C.P.L.R. § 2004 for leave to serve an amended answer, including amending their affirmative defenses and counterclaims, and to extend the time for service of an amended answer.

Plaintiff's complaint alleges that Plaintiff and Defendant entered into four (4) written sub-contracts relating to various projects. Plaintiff performed the required work, which included various installations of air conditioning and heating systems, and furnished labor and materials pursuant to the four (4) subcontracts. Plaintiff provided substantial services for four of Defendant's projects, which are identified as follows: (1) American Woodmark, dated April 3, 2002, located in Tahlequah, Oklahoma; (2) American Woodmark, dated May 6, 2002, located in [*2]Hazard, Kentucky; (3) Handheld Products, dated February 15, 2002, located in Skaneateles, New York; and (4) Niagara Mohawk Power Corporation, on April 1, 2002, located in Syracuse, New York. Plaintiff contends that they were paid for only a portion of their services and subcontracts, however, Plaintiff is still owed a total amount of $205,506.21.

By way of procedural background, Plaintiff brought a prior motion dated April 1, 2005, before the Honorable William R. Roy pursuant to C.P.L.R. §§ 3013 and 3016(b), seeking to dismiss Defendant's counterclaims and/or compel Defendant to amend said counterclaims and affirmative defenses. Judge Roy issued an Order dated June 21, 2005, denying Plaintiff's motion to dismiss Defendant's counterclaim and affirmative defenses and further granted Plaintiff's motion to compel Defendant to amend their counterclaims and affirmative defenses. In addition, Judge Roy's Order, dated June 21, 2005, directed Defendant to amend their counterclaim and affirmative defenses to comply with C.P.L.R. §§ 3013 and 3016(b), within thirty (30) days after the completion of discovery. As a precondition to amending said pleadings, Judge Roy ordered that the parties complete all discovery within ninety (90) days from the date of entry of the Order, June 21, 2005.

Now, two and a half (2½) years after Judge Roy's Order was issued, Plaintiff moves for summary judgment for Defendant's alleged breach of contract. Plaintiff contends that Defendant failed to comply with Judge Roy's order to amend their answer, counterclaim, and affirmative defenses. Defendant, in response, has submitted a Notice of Cross Motion, dated September 24, 2007, seeking leave to serve an amended answer with amended counterclaims and affirmative defenses, and extend the time for service of the amended answer.

Turning first to Defendant's cross-motion, Defendant contends that their failure to serve an amended answer per Judge Roy's earlier court order, dated June 21, 2005, was inadvertent and due to law office failure. Defendant contends that the partner in charge of the file retired from the firm prior to the completion of this case and, therefore, Defendant asserts a reasonable excuse. C.P.L.R. § 2004, which relates to extensions of time, states in pertinent part:

Except where otherwise expressly prohibited by law, the court may extend the time fixed by any statute, rule or order for doing any act, upon such terms as may be just and upon good cause shown, whether the application for extension is made before or after the expiration of the time fixed. C.P.L.R. § 2004.

Additionally, C.P.L.R. § 2005 states:

Upon application satisfying the requirements of subdivision (d) of section 3012 or subdivision (a) of Rule 5015, the court shall not, as a matter of law, be precluded from exercising its discretion in the interest of justice to excuse delay or default resulting from law office failure. C.P.L.R. § 2005.

It is well settled that C.P.LR. § 2005 applies when a party moves for an extension of time to appear or plead, pursuant to C.P.L.R. § 3012(d), and when a party moves for relief from a default judgment pursuant to C.P.L.R. § 5015. Generally, a party moving for relief under either of these provisions must establish both (1) a reasonable excuse for the delay or default; and (2) that the party's claim or defense has merit. See, Law Firm of Joel R. Brandes, P.C. vs. Ferraro, 257 AD2d 610 (2d Dept. 1999). The courts have generally taken a liberal approach to defining what law office failures constitute a reasonable excuse. See, Rockland Transit Mix, Inc. vs. Rockland Enterprises, Inc., 28 AD3d 630 (2d Dept. 2006); see also, C.P.L.R. §3012 (d). [*3]C.P.L.R. § 3012 (d) states in pertinent part: "Upon the application of a party, the court may extend the time to appear or plead, or compel the acceptance of a pleading untimely served upon such terms as may be just and upon a showing of a reasonable excuse for delay or default." Additionally, the accepted standard for amended pleadings states: "In general, leave to amend a complaint rests within the trial court's discretion and should be freely granted in the absence of prejudice or surprise resulting from the delay except in situations where the proposed amendment is wholly devoid of merit."

See, Berger v. Water Com'rs of Town of Waterford, 296 AD2d 649 (3d Dept. 2002).

Here, the Court finds that Defendant's excuse is reasonable, given that the attorney who was principally responsible for handling this case retired and given the somewhat unique Order of Judge Roy. The Court having determined that there was a reasonable excuse for the delay, next turns to whether Defendant's claim is meritorious.

Defendant's proposed amended answer and counterclaim alleges that Plaintiff engaged in fraudulent and illegal activity, as well as commercial bribery, a violation of §180.00 of the Penal Law. Pursuant C.P.L.R. § 3013, "Statements in a pleading shall be sufficiently particular to give the court and parties notice of the transactions, occurrences, or series of transactions intended to be proved and the material elements of action or defense." (emphasis added). Additionally, C.P.L.R.§ 3016(b) states:

(b) Fraud or mistake.

Where a cause of action or defense is based upon misrepresentation, fraud, mistake, willful default, breach of trust or undue influence, the circumstances constituting the wrong shall be stated in detail. C.P.L.R. § 3016(b).

To state a cause of action in fraud for damages, the complaint must allege all of the following: the representation that was made; falsity and materiality; that the representation was made by the defendant and known by the defendant to be false; that the plaintiff relied upon the representation; and that the plaintiff was injured as a result of the misrepresentation. See, Rotterdam Ventures, Inc. vs. Ernst & Young LLP, 300 AD2d 963 (3d Dept. 2002). Moreover, the Court in Glickman vs. Alper dismissed a complaint in a fraud action brought by real estate brokers against customers for the lack of specificity required by C.P.L.R. §3016(b) in failing to state the time and context of the alleged fraudulent statements. Glickman vs. Alper, 236 AD2d 230 (1st Dept. 1997).

Generally, the degree of specificity necessary to comply with C.P.L.R. § 3016(b) must be determined on a case-by-case basis. In Mountain Lion Baseball, Inc. vs. Gaiman, 263 AD2d 636 (3d Dept. 1999), allegations in the complaint of false misrepresentations did not meet the requirements of C.P.L.R. § 3016(b). The complaint failed to set forth the substance of the misrepresentation, the dates upon which they occurred or the persons to whom the alleged misrepresentations purportedly were made. The Court found that the allegations pled fell far short of satisfying the pleading requirement imposed by C.P.L.R. 3016 (b). By simply pleading that certain things were done fraudulently does not meet the specificity requirement of C.P.L.R. § 3016(b). See, 107 Realty Corp. vs. National Petroleum U.S.A., Ltd., 181 AD2d 337 (1st Dept. 1995). In 107 Realty Corp. vs. National Petroleum U.S.A., Ltd., there was an action to recover rent due under a lease, however plaintiff's allegations of fraud were properly dismissed because they were vague and conclusory. Id.

[*4]Turning directly to Defendant's proposed amended answer dated September 20, 2007 [FN1], Defendant alleges the following:

6.At all times relevant, James Orlando was a project manager for V.I.P. and as such owed a duty of loyalty to V.I.P.

7.That Orlando had the authority and responsibility to solicit bids from the subcontractors and award contracts to subcontractors for V.I.P.

8.That Plaintiff was aware of Orlando's role with respect to soliciting bids and awarding subcontracts for V.I.P.

9.That as an inducement to Orlando to award subcontracts to Plaintiff, the Plaintiff did perform certain work, labor, and provide services on Orlando's or Orlando related companies' projects, which work, labor, and services did not provide any benefit to V.I.P.

10.That in exchange for Orlando awarding contracts to Plaintiff, including the American Woodmark Tahlequah, Oklahoma contract, the American Woodmark Hazard, Kentucky contract, the American Woodmark Gas City, Indiana contract, and the Handheld Products, Skaneateles Falls, New York contract, Plaintiff provided such work, labor, services to Orlando, without charge or the expectation of payment

11.That in exchange for the work, labor, services provided by plaintiff to Orlando and his related companies, the subcontracts were awarded in violation of V.I.P.'s standard requirements including multiple bidders, nondisclosure of bid prices of other subcontractors, and at prices that were excessive and not fair and reasonable for the work to be performed and provided.

12.That the Orlando Projects on which he received work, labor, and services from the Plaintiff and which served as improper and illegal inducements for the awarding of V.I.P. contracts were: Channelside Trail, Baldwinsville; Melvin Drive South, Baldwinsville; 2 Oswego Street, Baldwinsville, 30 Oswego Street, Baldwinsville; 34 Oswego Street, Baldwinsville; Genesee Street, Baldwinsville; 49 Lock Street, Baldwinsville; Marble Street, Baldwinsville; and 83 Tappen Street, Baldwinsville.

13.That V.I.P. was unaware of the relationship between the plaintiff and Orlando and did not ratify, participate in, or approve of the relationship hereinbefore described.

14.That because of the fraudulent, collusive, and illegal activity between Orlando and the Plaintiff, which activity constituted a violation of §180.00 of the Penal Law, the contracts alleged in the complaint are void and unenforceable by the Plaintiff. (emphasis added).

In reviewing Defendant's proposed amended answer, dated September 20, 2007, Defendant fails to plead their counterclaim of fraud and illegality against Plaintiff with the specificity required by C.P.L.R. §3016(b), and instead make vague and conclusory statements about Plaintiff, despite having had the opportunity of full discovery per Judge Roy's Order. Defendant failed to include specific dates and times of the alleged fraudulent behavior, and do [*5]not allude to any conversations or evidence regarding the alleged fraudulent occurrences.

Defendant also raises the issue of Section §180.00 of the Penal Code. It appears that this allegation was first raised in Defendant's proposed amended answer attached to its Notice of Cross-Motion dated September 24, 2007, and raised at oral argument before the Court on October 25, 2007. Defendant's counsel, James Stevens, Esq. states: "If you look at the amended answer, it talks about commercial bribery." (Motion Argument - October 25, 2007, Page 6, Line 13). Section §180.00 of the Penal Code states in pertinent part:

§180.00 Commercial Bribing in the Second Degree

A person is guilty of commercial bribing in the second degree when he confers, or offers or agrees to confer, any benefit upon any employee, agent, or fiduciary, without the consent of the latter's employer or principal, with intent to influence his conduct in relation to his employer's or principal's affairs.

In Niagara Mohawk Power Corp. vs. Freed, the Fourth Department Appellate Division held that a claim in commercial bribery can constitute a civil cause of action [FN2], but that such claim must be plead with specificity. See, Niagara Mohawk Power Corp. vs. Freed, 265 AD2d 938 (4th Dept. 1999). The plaintiff in Niagara Mohawk Power Corp. claimed commercial bribery and specifically set forth in their complaint the "time, place, manner, and content of the allegedly fraudulent mailings and communications". Id. at 939. Additionally, the Fourth Department notes that the complaint sets forth in sufficient detail the circumstances constituting the wrong [and] detail[s] the fraudulent scheme involving the defendants. Id. at 939.

Here, Defendant submits James E. Herr's Affidavit, dated September 20, 2007, in support of the allegations that Defendant V.I.P's Project Manager, James Orlando, engaged in unlawful bidding practices by awarding certain projects to Plaintiff in exchange for free work done on Orlando's private projects. While Defendant may have a claim for malfeasance against their former employee, Orlando, the Court finds that Defendant does not meet the heightened specificity and pleading requirements necessary to support a claim of commercial bribery against Plaintiff.

Finally, it must be noted that Defendant has had more than two years to conduct and complete discovery, yet based on Defendant's proposed amended answer to Plaintiff's Complaint, Defendant has not pled allegations of commercial bribery or fraud with any more specificity than in their original Answer dated May 18, 2004.

Moreover, there is evidence to suggest that one of the primary and essential elements of commercial bribery is missing, namely that Orlando received a benefit from Plaintiff in exchange for giving business to Plaintiff. Based on depositions taken from Orlando and Defendant, Orlando clearly paid for the work Plaintiff completed on Orlando's private projects. Thus, there would be no benefit bestowed upon Orlando by Plaintiff. While Orlando may have breached Defendant's rules and procedures by supplying Plaintiff with knowledge of other bid prices and by accepting Plaintiff's bids even though the bid was not the lowest, this does not rise [*6]to the level of commercial bribery on the part of Plaintiff. In light of all the above, the Court ultimately denies Defendant's motion to serve an amended answer and counterclaim in its entirety.

The Court next turns to Plaintiff's renewed motion for summary judgment, dated June 12, 2007, seeking damages in the amount of $205,506.21 pursuant to C.P.L.R. § 3212. Plaintiff seeks payments owed to them based on four (4) separate contracts entered into between Plaintiff and Defendant. On a summary judgment motion, it is well settled that the moving party "must establish its cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment in its favor, CPLR §3212 [b], and he must do so by tender of evidentiary proof in admissible form." See, Friends of Animals vs. Associated Fur Manufacturers, 46 NY2d 1065 (1979). The burden then shifts to the non-moving parties to lay bare their proof to show that a genuine issue of fact exists. See, Oswald vs. City of Niagara Falls, 13 AD3d 1155 (4th Dept. 2004).

Plaintiff has presented proof that they have fully performed pursuant to the terms and conditions set forth in the sub-contracts at issue and are entitled to full payment. According to the deposition testimony of Defendant James Herr, Defendant concedes that the contracts in issue did exist between Defendant and Plaintiff, that Plaintiff performed pursuant to the terms and conditions of the sub-contracts, and that there were no objections to the work performed by Plaintiff. Accordingly, the Court finds that Plaintiff has met their burden of proof, thus shifting the burden to Defendant.

In opposition, while Defendant concedes that Plaintiff performed on the contracts and there is no opposition to the work done, Defendant raises commercial bribery and fraud as a defense to payment. In light of the Court's decision herein, Defendant has failed to raise any questions of fact to defeat Plaintiff's motion for summary judgment. Accordingly, the Court grants Plaintiff's motion for summary judgment on the issue of damages.

Based on the forgoing, the Court grants Plaintiff's motion for summary judgment on the breach of contract. The Court further awards damages to Plaintiff in the sum of $205,506.21, with interest. The above constitutes the Decision of this Court. Plaintiff shall submit a proposed Order, on notice to Defendant, within 15 days of receipt of this Decision.

Dated:December 11, 2007

E N T E R__________________________________________

James P. Murphy

Justice of the Supreme Court Footnotes

Footnote 1: Defendant's proposed amended answer dated September 20, 2007, attached as Exhibit "A" to its Notice of Cross-Motion dated September 24, 2007, is inartfully captioned "Answer to Amended Complaint and Counterclaim." The Court notes that only an original Complaint dated April 23, 2004, is before the Court. The Court, therefore, treats Defendant's Notice of Cross-Motion as requesting relief to serve an Amended Answer and Counterclaim to Plaintiff's Complaint dated April 23, 2004.

Footnote 2: Although the Fourth Department recognizes a civil cause of action for commercial bribery, this notion has been rejected by the First and Second Department. See, Sardonis vs. Sumitomo Corporation, 279 AD2d 225 (1st Dept. 2001), Tzolis vs. Wolff, 12 Misc 3d 1151(A), (1st Dept. 2006) and Wint vs. ABN AMRO Mortgage Group, Inc., 19 AD3d 588 (2d Dept. 2005).