Community Counseling & Mediation Servs. v New Visions for Pub. Schools

[*1] Community Counseling & Mediation Servs. v New Visions for Pub. Schools 2008 NY Slip Op 50193(U) [18 Misc 3d 1124(A)] Decided on January 31, 2008 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 31, 2008
Supreme Court, Kings County

Community Counseling & Mediation Services, Plaintiff,

against

New Visions for Public Schools, Defendant.



15086/07



Attorney for Plaintiff

Tristan C. Loanzon

Loanzon Law Firm

386 Park Avenue South, Suite 1914

New York, New York 10016

Attorney for Defendant

William T. Russell

Simpson, Thatcher & Barlett, LLP

425 Lexington Avenue

New York, New York 10017

Carolyn E. Demarest, J.

In this action by plaintiff Community Counseling & Mediation Services (CCM) alleging two causes of action, for breach of an implied contract and breach of fiduciary duty, defendant New Visions for Public Schools (New Visions) moves for an order, pursuant to CPLR 3211 (a) (7) and (1), dismissing CCM's complaint.[FN1] [*2]

A New Century High Schools Initiative grant (the New Century grant) is a grant designed to support the development of small high schools and is funded by monies received from the Carnegie Foundation, the Bill & Melinda Gates Foundation, and the Open Society Institute (collectively, the Funding Foundations). The New Century grants are administered by New Visions, a not-for-profit organization. In January 2004, New Visions issued a request for proposals for New Century grants. In May 2004, CCM, a not-for-profit corporation, formed a partnership with another not-for-profit organization, NYC Leadership Academy, Inc. (Academy). This partnership, known as the Regional-Community Partnership (the Partnership), was formed by CCM and Academy in order to receive a New Century grant to support the development of a new high school to be called High School for Youth and Community Development (YCD). The Partnership submitted a 46-page proposal for a New Century grant to be awarded to the Partnership, with CCM as the Lead Partner, to support the development of YCD. Marie Prendergast (Prendergast) represented Academy and served as the principal of YCD. Academy was to be responsible for the teaching staff, while CCM was to have authority over its own non-teaching personnel.

On May 14, 2004, New Visions accepted the Partnership's proposal and awarded the Partnership an initial grant of $80,000, for the period April 1, 2004 to June 30, 2005, to be used to staff YCD and for other overhead costs associated with the administration of YCD. By letter dated May 12, 2005, New Visions extended the grant to the Partnership for three more years, from July 1, 2005 through June 30, 2008, and awarded additional funding of $320,000. CCM accepted the written terms of this grant extension.

In August 2006, CCM and Principal Prendergast disagreed over the termination of an employee hired by CCM and began experiencing problems in their working relationship. Specifically, CCM alleges that as the Lead Partner, it was authorized to make personnel decisions, and that after it had terminated a CCM employee, Academy, acting through Prendergast, re-hired the terminated employee. CCM further alleges that, in a unilateral "power grab" by Academy, by letter dated August 24, 2006, Prendergast notified CCM that all personnel decisions would be taken over by Academy. Upon becoming aware of the disagreement between CCM and Academy/YCD, New Visions made efforts to try to repair the rift between CCM and Academy/YCD. New Visions exchanged correspondence, mostly by e-mail, with CCM and Academy/YCD regarding their disagreement, and met with CCM and Academy three times over the course of several months to discuss the difficulties. In September 2006, Robert Chaluisan, the Vice-President of Programs at New Visions, conducted a meeting between Academy and CCM's President and CEO, Emery Brooks, to mediate the disagreement.

Notwithstanding these efforts, the dispute between CCM and Academy/YCD persisted. Consequently, by letter dated November 20, 2006 (the Termination Letter), received by CCM on January 6, 2007, on behalf of New Visions, Ronald Chaluisan noted [*3]that "the supports provided by CCM and the services required to promote school goals [w]ere not currently aligned" since "the organizations d[id] not share a common vision for the partnership" and "the communication channels between the respective leadership teams ha[d] broken down." In that letter, New Visions "acknowledge[d] the dissolution of the partnership" between CCM and YCD, and informed both CCM and Ms. Prendergast, as Principal of YCD, that the acknowledgment terminated CCM's responsibilities as Lead Partner, effective upon receipt of a final financial report and the return of any unspent grant funds. New Visions also explained that CCM would have to "obtain New Visions' written approval for all actions which would obligate the expenditure of any potential grant funds after the date [of the letter]," and that "[a]ll contractual obligations [required] New Visions' express written approval after the date of th[e] letter."

On May 1, 2007, CCM brought this action against New Visions. CCM's complaint alleges only two causes of action. CCM's first cause of action seeks recovery of no less than $332,440 for termination of an implied contract between it and New Visions. CCM's second cause of action also seeks damages of at least $332,440 based upon an alleged breach of fiduciary duty by New Visions in terminating CCM as the Lead Partner in the Partnership.

In the instant motion, New Visions asserts that CCM's complaint fails to state any viable cause of action, and that the documentary evidence, i.e., the 2005 Grant which is the contract that governs the parties' relationship, establishes the lack of merit of, and its defense to CCM's complaint. "In the context of a motion to dismiss pursuant to CPLR 3211, the court must afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference" (EBC I, Inc. v Goldman Sacks & Co., 5 NY3d 11, 19 [2005], citing, Goshen v Mutual Life Ins. Co. of NY, 98 NY2d 314, 326 [2002]). Under CPLR 3211 (a) (7), a court should dismiss a complaint for failure to state a cause of action only "where, viewing the allegations as true, the plaintiff cannot establish a cause of action" (Asgahar v Tringali Realty, Inc., 18 AD3d 408, 409 [2005]). In this regard, "evidentiary material [submitted by a defendant] may be considered on a CPLR 3211 (a) (7) motion to assess the viability of a complaint, and where such evidence demonstrates that a material fact alleged by the plaintiff to be true is not a fact at all,' the complaint should be dismissed" (Illions v Allstate Ins. Co., 2 AD3d 686, 686 [2003], quoting Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]).

In opposition to New Visions' motion, plaintiff, while acknowledging that the existence of an express written contract would preclude recovery under an implied contract, argues that its first cause of action for breach of an implied contract states a valid cause of action because the 2005 Grant does not contain provisions for termination. It asserts that by terminating the Partnership without adequate basis and process, New Visions breached its implied duties of good faith and fair dealing.

It is well settled that there can be no recovery under a theory of implied contract where there is an express contract covering the subject matter involved(see Julien J. Studley, Inc. v NY News, 70 NY2d 628, 629 [1987]; see also Recon Car Corp. of NY v Chrysler Corp., 130 AD2d 725, 730 [1987]). "The existence of a valid and enforceable [*4]written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter" (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]; see also Goldman v Metropolitan Life Ins. Co., 5 NY3d 561, 572 [2005]; Stark v City of New York, 31 AD3d 530, 531 [2006]; Ross v DeLorenzo, 28 AD3d 631, 635-636 [2006]).

CCM contends that there is no express written contract between CCM and New Visions. This position is belied, however, by New Visions' submission of the letter of May 12, 2005, upon New Visions' letterhead, describing in detail the terms and conditions of the 2005 Grant. (Grant Letter). This Grant Letter contains all material terms of the parties' agreement, is conceded to have been accepted by plaintiff and is supported by consideration in the acknowledged partial performance of both parties. It, therefore, constitutes an express written contract (see Hernandez v M.H.S. Realty Corp., 2005 NY Slip Op 52317[U] [Sup Ct, Kings County 2005], citing Express Indus. & Terminal Corp. v New York State DOT, 93 NY2d 584 [1999]; see also Morton's of Chicago/Great Neck LLC v Crab House, Inc., 297 AD2d 335, 337 [2d Dept 2002].) Thus, the relationship between New Visions and CCM was governed by the terms of a valid, express written contract.

CCM contends however, that although the Grant Letter outlines the obligations of New Visions and the Partnership under the grant, it fails to cover relevant aspects of the parties' relationship. In particular, CCM asserts that the Grant Letter does not contain terms regarding the parties' rights to terminate, the process by which termination should be exercised, and the lawful grounds for termination. CCM argues that since the 2005 Grant Letter does not fully cover the subject matter of termination, plaintiff may properly assert a cause of action for breach of an implied agreement.

CCM's argument lacks merit. There can be no bona fide dispute that the 2005 Grant Letter governs the relationship between CCM and New Visions with respect to the subject matter for which CCM seeks to recover and that CCM's claims arise solely out of its rights under such Grant (see Julien J. Studley, Inc., 70 NY2d at 629; Clark-Fitzpatrick, Inc., 70 NY2d at 388). There is also no evidence of any modification of the 2005 Grant Letter or other documents which cover the dispute between CCM and New Visions (compare Nenno v Blue Cross & Blue Shield of W.NY, 303 AD2d 930, 932 [2003], cited by plaintiff). Thus, CCM cannot claim that New Visions breached an independent implied contract not to terminate the 2005 Grant. It is clear that the gravamen of plaintiff's complaint is the alleged wrongful termination of the 2005 Grant which would constitute a breach of the terms of the written Contract for which plaintiff seeks damages. Dismissal of CCM's first cause of action for breach of an implied contract must be granted (see CPLR 3211 [a] [1], [7]).

CCM also asserts that its second cause of action alleges a valid claim for breach of a fiduciary duty owed to CCM by New Visions. There is no logical or factual basis for this claim. It is well established that a fiduciary duty exists between two parties only if the parties have created " their own relationship of higher trust'" (EBC I, Inc., 5 NY3d 11, 20, quoting Northeast Gen. Corp. v Wellington Adv., 82 NY2d 158, 162 [1993]; see also Brooks v Key Trust Co. Natl. Assn., 26 AD3d 628, 630 [2006]). "A fiduciary relationship exists [*5]between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation'" (EBC I, Inc. at 19, quoting, Restatement [Second] of Torts § 874, Comment a). Where there is a contract governing the relationship between the parties, the court first looks to the agreement to determine whether they intended to create a fiduciary relationship (Id. at 19-20). "If the parties . . . do not create their own relationship of higher trust, courts should not ordinarily transport them to the higher realm of relationship and fashion the stricter duty for them" (Id. at 20, quoting Northeast Gen. Corp., 82 NY2d at 162).

To support its claim that New Visions owed it a fiduciary duty, CCM relies upon the "Fiduciary Responsibility" provision in the 2005 Grant. CCM claims that this provision described New Visions as a "fiduciary agent" with respect to the Partnership. This provision states:

"Fiduciary Responsibility: New Visions shall exercise due diligence (i.e., on a prompt basis and applying reasonable standards in recognition of its role as a fiduciary agent) in requiring [CCM] to substantiate data regarding the actual expenditure of the Grant. New Visions reserves the right to audit or review the financial records pertaining to this grant."

CCM's reliance on this provision is misplaced. The clear import of this provision is that New Visions was acting as a fiduciary, not to CCM, but to the funders of the grants awarded by New Visions on their behalf. The duty of New Visions under this provision was to require CCM to substantiate its data regarding the actual expenditure of the 2005 Grant and to audit or review CCM's financial records. Such duty does not suggest a relationship of "higher trust" between New Visions and CCM (see EBC I, Inc., 5 NY3d at 19-20; Northeast Gen. Corp., 82 NY2d at 162; Brooks, 26 AD3d at 630). The right reserved to New Visions to audit the financial records of CCM pertaining to the 2005 Grant is inconsistent with CCM's interpretation of this provision as creating a fiduciary duty owed by New Visions to it since a fiduciary agent would not be auditing its principal. In fact, the fiduciary duty CCM claims on its own behalf would actually conflict with New Visions' stated fiduciary duty to the Funding Foundations to ensure that CCM's performance was consistent with the purpose of the Grant.

Nothing in the provisions of the 2005 Grant Letter suggests any fiduciary duty owed by New Visions to CCM. Instead, the provision at issue recites New Visions' fiduciary duty to the Funding Foundations to ensure that the money provided by them is being spent properly and serves to alert plaintiff to New Visions' authority to audit its performance (see, e.g., Board of Mgrs. of Fairways at N. Hills Condominium v Fairway at N. Hills, 193 AD2d 322, 325 [1993]). Thus, the context of the term "fiduciary agent" demonstrates that this provision refers to New Visions' role as a fiduciary agent for, and its fiduciary responsibility to, the Funding Foundations who supplied the monies for the 2005 Grant, and does not refer to any fiduciary duty to CCM who was a recipient of the 2005 Grant monies.

Nor does New Visions' role as dispenser of the funds to CCM and provider of technical assistance create a fiduciary duty as plaintiff suggests. CCM cites the dissenting [*6]language in Northeast Gen. Corp. (82 NY2d at 173, quoting United States v Read, 601 F Supp 685, 708 [SD NY 1985], revd in part on other grounds 773 F2d 477 [2d Cir 1985]), that "[t]he essential elements of a fiduciary relation are the concepts of reliance, and de facto control and dominance;'" however, there are no factual allegations that would rationally establish a fiduciary duty in the contractual relationship at bar. CCM's mere reliance on funding from New Visions cannot create a fiduciary duty. Nor can the fact that one contracting party provides certain development activities, reflective retreats, and networking opportunities to another contracting party in the course of performance of the contract be held to create the requisite relationship of higher trust upon which to base a fiduciary duty. Rather, the terms of the funding are controlled by the contractual terms of the 2005 Grant and, as noted above, there are no contractual terms which impose any fiduciary duty upon New Visions with respect to CCM. Thus, the court finds that the complaint fails to plead a fiduciary relationship between CCM and New Visions sufficient to sustain a breach of fiduciary duty cause of action.

Finally, in support of its claim that a fiduciary duty was breached by New Visions, CCM alleges that the true reason for the termination was New Visions' intent to replace CCM as the Lead Partner of the Partnership because Lead Partners receive a portion of the grant. CCM annexed to its complaint a newspaper article which discusses an e-mail sent by New Visions to six other schools chosen to receive New Century grants in 2007. The newspaper article reports that, in this e-mail, New Visions stated that these schools were required to hire New Visions to serve as their partner support organization (PSO) under a new City-wide program requiring all schools to have a PSO or other support organization to assist with curriculum and planning. The relevance of this information to the instant action cannot be determined upon the pleadings. A self-serving purpose on the part of a contracting party does not alone establish a breach of fiduciary duty though, if true, such allegations might give rise to other causes of action not pleaded here.

However, it is well settled that upon a motion pursuant to CPLR 3211, the role of the court is to determine whether the plaintiff has a cause of action, not whether it has stated one (see Leon v Martinez, 84 NY2d 83, 88 [1994], quoting, Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1997]). While the court denied CCM's cross motion for leave to amend its complaint for failure to annex a copy of its proposed amended complaint (see Chang, 20 AD3d at 502), CCM maintained, in its cross-moving papers, that it has a cognizable claim for breach of an express contract. Clearly, the evidence annexed by plaintiff demonstrates the existence of an express written contract and the complaint alleges a breach thereof. The absence from the written contract of a provision for its termination does not preclude an action for breach of that express contract. Extrinsic evidence would be admissible to supply the particular intention not expressed in the writing (see Geothermal Energy Corp. v Caithness Corp., 34 AD3d 420, 424 [2d Dept 2006]; Pierson v Willets Point Contracting Corp., 899 F Supp 1003, 1042 [EDNY 1995]). Moreover, the 2005 Grant Letter itself suggests that other written documents may provide the omitted provision by cross reference. Although plaintiff's theory that defendant breached a fiduciary duty to it is belied by the intent expressed in the language of the 2005 Grant Letter, there may be other legal theories that would provide relief based upon plaintiff's claims.

Leave to amend the complaint should be freely granted absent prejudice. CPLR 3025[b]; Edenwald Contracting Co., Inc. v City of New York, 60 NY2d 957 [1983]. There is no indication [*7]of prejudice to defendant in granting plaintiff leave to serve an amended complaint based upon the very contract contained in the motion to dismiss.

Accordingly, while the instant causes of action pleaded must be dismissed for failure to state a cause of action, leave is granted to plaintiff to serve an amended complaint within thirty days of service upon it of a copy of this order with notice of entry. Following service and filing of such amended complaint, and answer thereto, a preliminary conference will be held. This case is calendared for May 7, 2008 as a control. If no amended complaint has been filed, the matter will be dismissed.

This constitutes the decision, order, and judgment of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1:CCM's cross motion for an order, pursuant to CPLR 3025 (b), granting it leave to amend its complaint to add a cause of action for breach of contract, was denied, at oral argument, based upon CCM's failure to annex its proposed amended complaint (see Chang v First Am. Tit. Ins. Co. of NY, 20 AD3d 502, 502 [2005]; Ferdinand v Crecca & Blair, 5 AD3d 538, 540 [2004]).