Board of Mgrs. of Marke Gardens Condominium v 240/242 Franklin Ave. LLC

[*1] Board of Mgrs. of Marke Gardens Condominium v 240/242 Franklin Ave. LLC 2008 NY Slip Op 51789(U) [20 Misc 3d 1138(A)] Decided on August 26, 2008 Supreme Court, Kings County Starkey, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 August 26, 2008
Supreme Court, Kings County

The Board of Managers of Marke Gardens Condominium, on its own and on behalf of individual unit owners, Plaintiff,

against

240/242 Franklin Avenue LLC, SCARANO ARCHITECT PLLC F/K/A SCARANO & ASSOCIATES ARCHITECTS, CORCORAN GROUP-BROOKLYN, ROYAL ROOFING AND CONSTRUCTION, INC., and NAMIK MARKE A/K/A MIKE MARKE, Defendant.



29255/2007



For the Plaintiff(s):

DANIEL F. SPITALNIC, ESQ.

Six Grace Avenue, Suite 202

New York, New York 11021

For the Defendant(s): 240/242 Franklin Avenue LLC,

Royal Roofing & Construction, Inc., & Namik Marke a/k/a Mike Marke

GABOR & MAROTTA, LLC

1878 Victory Boulevard

Staten Island, New York 10314

For the Defendant(s): Scarano Architects PLLC

ZETLIN & DE CHIARA, LLP.

801 Second Avenue

New York, New York 10017

No appearance by remaining defendant

James G. Starkey, J.

FACTS AND PROCEDURAL BACKGROUND

Defendant Scarano Architect, PLLC (hereinafter "Architect") moves pursuant to CPLR

§3211(a)(1) and §3211 (a) (7) for an order dismissing three of plaintiff's causes of action against it. Defendant Architect claims that plaintiff cannot sustain either a breach of contract or a negligence claim against it for economic loss damages absent privity or its functional equivalent and that defendant Architect did not disseminate advertisements and was not involved in the sale of any of the subject condominium units, and therefore, plaintiff cannot assert its General Business Law §349 and §350 action against it. Defendants Royal Roofing & Construction, Inc. (hereinafter "Royal") and Namik Marke a/k/a Mike Marke (hereinafter "Marke") move pursuant to CPLR 3211 §(a)(1), §3211(a)(5) and §3211(a)(7), for an order dismissing the tenth, eleventh, twelfth and thirteenth causes of action alleged in the complaint, based upon documentary evidence, alleging plaintiff's failure to state a cause of action, lack of privity and the expiration of the statute of limitations.

Plaintiff commenced this action to recover damages arising from various defects and omissions associated with the construction and conversion of two buildings located at 238 and 240 Franklin Avenue, Brooklyn, New York, now known as the Marke Gardens Condominium (hereinafter "Marke Gardens"). Plaintiff, suing on its own behalf as well as on behalf of the owners of the individual units, is the current Board of Managers of Marke Gardens.[FN1]

Defendant Marke is the sole member of defendant 240/242 Franklin Avenue, LLC, the sponsor of the project. The offering plan was accepted for filing with the Attorney General of the State of New York on February 25, 2004. Certification of the plan was signed individually by defendant Marke and again by him on behalf of the sponsor. Defendant Royal is, according to plaintiff, also owned by Defendant Marke and was hired as the general contractor for the project.

Pursuant to a letter agreement dated December 2, 2002, Defendant Architect was retained by Defendant Marke [FN2] to provide architectural services for the project. As architect of record, defendant Architect certified the offering plan which set forth the anticipated condition of the building upon its completion, to wit: eight units with a common area elevator. According to plaintiff, the condominium units were marketed, through numerous written and verbal representations, as luxury residences. All eight unit owners entered into standard purchase agreements for the purchase and sale of each unit, which expressly incorporated the terms and [*2]conditions of the offering plan.

Construction of Marke Gardens commenced sometime in 2003, and the first closing of a unit occurred on or about August 16, 2004. Plaintiff claims that the unit purchasers relied upon a certification letter, jointly drafted by defendants Royal and Marke, which also incorporated the offering plan. Pursuant to the offering plan, Marke Gardens was designed with a common area elevator. It is undisputed that an elevator was never constructed. Plaintiff alleges that without notice to the prospective unit owners, defendant Marke withdrew a pending application for an elevator permit in order to obtain a Certificate of Occupancy for the premises.

According to plaintiff, after taking occupancy individual unit owners began experiencing problems, primarily leaks, due to numerous construction defects in the building. Plaintiff hired experts to locate these leaks and determine the extent of damage. The first inspection, conducted by Rand Engineering and Architecture over two days, occurred on April 6, 2005 and April 13, 2005. Based upon its inspection findings, Rand Engineering prepared a building evaluation report dated May 9, 2005. In this report, Rand Engineering noted the existence of serious defects in the building's construction, and indicated that major corrective work was required in order to prevent further damage. Rand Engineering performed a second inspection on January 9, 2006. This report contained, inter alia, detailed descriptions of numerous leaks creating mold in individual units, inadequate insulation, and a poorly-designed heating system.

A second firm hired by plaintiff, West New York Restoration of CT., Inc. (WNY) conducted an inspection of the building in December of 2006. WNY also found numerous active leaks and that some of the leaks could be repaired, at an estimated cost of $138,000.00, while others required further testing and exploration.

As a result, plaintiff commenced the instant action alleging in its amended verified complaint thirteen causes of action for:

(1) Breach of contract against the 240/242 Franklin Avenue LLC;

(2) Breach of contract regarding the "Punch List" against 240/242 Franklin Avenue LLC;

(3) Implied covenants of good faith and fair dealing against 240/242 Franklin Avenue LLC;

(4) Breach of implied warranties against 240/242 Franklin Avenue LLC;

(5) Breach of statutory warranties against 240/242 Franklin Avenue LLC;

(6) Negligence against 240/242 Franklin Avenue LLC;

(7) Declaratory judgment action against 240/242 Franklin Avenue LLC;

(8) Breach of contract against Architect;

(9) Negligence against Architect;

(10) Breach of contract against Royal;

(11) Negligence against Royal;

(12) Fraud/Fraudulent Inducement against the sponsor, Marke, and Corcoran Group Brooklyn;[FN3] and

(13) Violations of General Business Law §349 and §350 against all defendants.

[*3]CONTENTIONS OF THE MOVING PARTIES

Defendant Marke contends that plaintiff has no basis for filing a claim against him, individually, as he is only a member of 240/242 Franklin Avenue LLC, the sponsor. Marke, therefore, claims to be entitled to the protections afforded under the New York Limited Liability Corporation Law. Defendant Marke also contends that pursuant to the Limited Warranty made part of the Purchase Agreement(s), plaintiff's claims of defects to the building are untimely and should have been brought within one year from the effective date.[FN4] Defendant Royal contends that plaintiff's claims must fail for lack of privity between it and plaintiff, relying on the offering plan and claiming that is the controlling document as to all claims asserted against it.

Only three of the thirteen causes of action appear to be directed against defendant Architect, which denies that it had any contractual or statutory connection with the construction activities that are alleged to have been improperly performed. Defendant Architect also contends that plaintiff's breach of contract clam must be dismissed because the letter agreement created obligations solely between defendant Architect and defendant Marke, and that plaintiff is neither an intended nor incidental third-party beneficiary of the agreement. Defendant Architect further contends, like defendant Royal, that plaintiff's negligence claims against it must be dismissed because of the absence of privity, or its functional equivalent, which must exist in order to recover for economic loss. Finally, defendant Architect contends that plaintiff's claims under the cited sections of the General Business Law must be dismissed as defendant Architect did not disseminate advertisements or brochures for the Condominium and had no involvement in the sales of any of the Condominium units.

LAW AND APPLICATION

The court for purposes of a motion pursuant to CPLR § 3211 must accept the factual allegations contained in the complaint as true. See Becker v. Schwartz, 46 NY2d 401, 408, 413 NYS2d 895, 386 NE2d 807 (1978). The pleading must also be afforded a liberal construction in making a determination as to whether the facts as alleged fit within any cognizable legal theory. See Leon v. Martinez, 84 NY2d 83, 87, 614 NYS2d 972, 638 NE2d 511 (1994).

It is well settled that if the pleading states a cause of action, and the motion to dismiss is based on documentary evidence, such documentary evidence must conclusively establish a defense to the asserted claims as a matter of law, and conclusively dispose of plaintiff's claims. See Trade Source, Inc. v. Westchester Wood Works, Inc., 290 AD2d 437, 736 NYS2d 605 (2nd Dept. 2002); see also, Roth v. Goldman, 254 AD2d 405, 406, 679 NYS2d 92 (2nd Dept. 1998).

Pursuant to CPLR § 3211(a)(7), a motion to dismiss for failure to state a cause of action must fail if the complaint states in some cognizable form any cause of action recognized by our law. See Rubinstein v. Salomon, 46 AD3d 536, 849 NYS2d 69 (2nd Dept. 2007).

Architect's motion to dismiss pursuant to CPLR § 3211(a)(1) [*4]

Defendant Architect's motion for dismissal of all three causes of action asserted against it under CPLR §3211(a)(1) lacks merit, as defendant has failed to demonstrate that the documents relied upon dispose of all factual issues and claims. Specifically, defendant Architect certified the offering plan which set forth the anticipated common area elevator, which could not be installed. Further, the letter agreement between defendants Marke and Architect required defendant Architect to prepare construction documents and designs in "strict conformance" with the rules and regulations of the New York City Department of Buildings, the New York City Department of Planning, the New York City Tax Department and the New York City Department of Environmental Protection. Plaintiff's amended verified complaint alleges that defendant Architect's documents and designs were defective insofar as the planned elevator could not be installed without violating the American with Disabilities Act, and the specifications contained in the New York City Administrative Code. Such circumstances created a relationship between defendant Architect and plaintiffs so close as to approach that of privity. See Board of Managers v. Schuman, Lichtenstein, 183 A.D.2d 488, 583 NYS2d 398 (1st Dept. 1992). Nor does either document attempt to limit defendant Architect's exposure to liability from third party beneficiaries. See Sokoloff v. Harriman Estates Dev. Corp., 96 NY2d 409, 413, 729 NYS2d 425, 754 NE2d 184 (2001). Accordingly, the court denies defendant's motion as asserted under CPLR §3211(a)(1).

Architect's motion to dismiss pursuant to CPLR § 3211(a)(7)

Plaintiff's eighth cause of action alleges that defendant Architect breached its contractual obligations to plaintiff, as a third party beneficiary of the letter agreement. The ninth cause of action alleges that defendant Architect's negligence resulted in Marke Gardens' improper and inadequate design and construction. As noted, defendant Architect argues that since plaintiff had no contractual or other relationship with it as architect, plaintiff was at best only an incidental, rather than an intended, beneficiary of the contract. Therefore, according to defendant Architect, plaintiff may not recover for breach of contract or negligence from defendant Architect. See Kerusa Co. LLC v. W10Z/515 Real Estate Ltd. Partnership, 50 AD3d 503, 2008 NY Slip. Op. 03687 (1st Dept. 2008). See also, Residential Bd. v. Union Square-14th St. Assoc., 190 AD2d 636, 637, 594 NYS2d 161 (1st Dept. 1993).

Plaintiff argues that the terms of the letter agreement between defendant Architect and Marke, as well as defendant Architect's certification contained in the offering plan, which by its terms was "made for the benefit of all persons to whom this offer is made"and intended for the purpose of "[affording] potential investors and participants an adequate basis upon which to found their judgment concerning the description of the property as it will exist upon completion of construction. . .," gave rise to a relationship so close as to approach that of privity, thereby permitting causes of action for negligence and breach of contract. Plaintiff further alleges that the individual purchasers relied upon the representations contained in the documents relating to the sales of the apartments. For the broad purposes of determining whether plaintiff's complaint states a cause of action against defendant Architect, plaintiff's argument must prevail over that of defendant.

As noted above, it cannot be said that the relationship was not so close as to approach that of privity. See Kidd v. Havens, 171 AD2d 336, 342, 577 NYS2d 989 (4th Dept. 1991).

In defining defendant's duty to plaintiff in circumstances in which the parties are not in privity, [*5]the focus is upon the nature of the transaction. See Kidd v. Havens, supra at 339. In order for liability to attach under the functional equivalent of privity, plaintiff must be demonstrate: (1) an awareness that the representations were to be used for a particular purpose or purposes; (2) reliance by a known party or parties in furtherance of that purpose; and (3) some conduct by defendant linking it to the party or parties and evincing defendant's understanding of the party or parties' reliance. Ibid. See also, Credit Corp. v. Andersen & Co., 65 NY2d 536, 551, 493 NYS2d 435, 483 NE2d 110 (1985).

As defendant Architect correctly points out, the letter agreement between defendants Marke and Architect did not call upon defendant Architect to render any services in connection with the means and methods of construction. However, the letter agreement specifically provided that defendant Architect's architectural services would include (1) preparation, filing and approval of amendments required for final survey which, in turn, provided for the supplying of "[a]ll information . . .consistent with approved architectural plans to be considered valid;" and (2) the preparation and filing of Final Certificate of Occupancy applications. Thus, there is documentary support for plaintiff's allegation that defendant Architect knew and intended that plaintiff, and its individual unit owners, would benefit from its contract with the sponsor.

In reaching a determination as to whether a relationship approaches privity, an important factor for consideration is whether the particular transaction carries with it the potential for reliance by an indeterminate or indefinite number of third parties. If so, the court will be reluctant to find liability. On the other hand, courts have been willing to impose liability upon defendants where the potential plaintiff or class of plaintiffs is fixed, definite, and identifiable. See Kidd v. Havens, supra at 339- 40. Here, where plaintiff sues on behalf of itself and a finite number of similarly-situated individual owner/residents of units in a small condominium project, there is no realistic concern of dissemination to an indeterminate number of people. Moreover, the language of the certification executed by defendant Architect provides that it is "made for the benefit of all persons to whom this offer is made" and "affords potential investors, purchasers and participants an adequate basis upon which to found their judgment concerning the description of the property as it will exist upon completion of construction provided that construction is in accordance with the plans and specifications we examined." Accordingly, defendant Architect's motion for dismissal of the eighth and ninth causes of action pursuant to CPLR 3211(a)(7) is denied.

However, defendant Architect's motion to dismiss must be granted with respect to plaintiff's thirteenth cause of action. That action alleges that defendant Architect participated in the dissemination of the promotional materials and purchase agreements to potential purchasers of the condominium units employing deceptive trade practices under General Business Law §349 and false advertising under General Business Law §350. Plaintiff avers that the representations in the promotional materials and advertising stated that the building would contain an elevator and its appointments would be consistent with the design, engineering and construction standards of a first-class, luxury condominium. However, plaintiff does not dispute defendant Architect's assertions that: (1) it did not disseminate any advertisements and brochures concerning the condominium; (2) it had no involvement in the sales of any of the units and (3) the letter agreement with the defendant Marke related solely to the preparation and filing of plans with the Department of Buildings. Accordingly, dismissal of said cause of action is warranted as to defendant Architect.

The Marke Defendant

In support of his motion for dismissal, defendant Marke asserts that he never executed any document other than as a member of the sponsor, 240/242 Franklin Avenue LLC. Further, it is urged that plaintiff has failed to allege the existence of a written guarantee made by him in his individual capacity, or to plead facts sufficient to pierce the corporate veil.

Defendant Marke's motion must be denied in all respects. Defendant Marke's allegation that he was only a member of the sponsor LLC is reflected in his attorney's affirmation which accompanies the dismissal motion. Such an affirmation has no probative or evidentiary value. See Zuckerman v. City of New York, 49 NY2d 557, 563, 427 NYS2d 595 (1980). Since defendant Marke has not submitted his own affidavit, the record is devoid of any documentary evidence which sets forth the structure of the Sponsor corporation.

Moreover, defendant Marke's counsel's affirmation to the effect that defendant Marke never executed any document other than as a member of the LLC and never intended to bind himself individually, cannot constitute the basis for granting his motion since defendant Marke, individually, co-signed the sponsor certification. See Freidus v. Sardelli, 192 AD2d 578, 579, 595 NYS2d 981 (2nd Dept. 1993). The certification contains the following representations:

(1) an affirmative assertion that defendant Marke had primary responsibility for compliance with article 23-A of the General Business Law [FN5] and such other laws and regulations as may be applicable; (2) that the offering plan contained no untrue statement of material fact and omitted no material fact; (3) that said offering plan would afford potential investors, purchasers and participants an adequate basis upon which to found their judgment. Such representations can be the basis for a separate cause of action against defendant Marke in his individual capacity. See Birnbaum v. Yonkers Contracting Co., 272 AD2d 355, 356, 707 NYS2d 662 (2nd Dept. 2000). On the basis of that determination, there is no need to determine whether the circumstances alleged call for the piercing of the corporate veil. See Marino v Dwyer-Berry Constr. Corp.,

146 AD2d 750, 527 NYS2d 233 (2nd Dept. 1989).

Finally, the court rejects defendant Marke's assertion that the causes of action asserted against him for fraud and violations of GBL §349 and §350 are barred by the Statute of Limitations.[FN6] Pursuant to CPLR §214(2), plaintiff's GBL §349 and §350 claims are subject to a three year statute of limitations. See State v. Rehoboth, 45 AD3d 1136, 846 NYS2d 436 (3rd Dept 2007); see also, Gaidon v. The Guardian Life Ins. Co. of America, 96 NY2d 201, 210, 727 [*6]NYS2d 30, 750 NE2d 1078 (2001). Generally, a cause of action accrues for commencement of the limitations period when all of the factual circumstances necessary to establish a right of action have occurred, thereby entitling plaintiff to relief. See Gaidon v. The Guardian Life Ins. Co. of America, supra at 210. That date at the earliest would be August 16, 2004, when the first closing of the sale of any units in the premises occurred, thereby entitling that owner to bring an action. The summons and complaint in this matter was filed on August 8, 2007, a time before the expiration of the applicable three year period. Plaintiff's common law fraud claims, governed by a six year statute of limitations, are timely as well. See CPLR §213(8).

Finally, defendant's attempt to invoke the contractual restrictions on time to sue for breach of warranty, as set forth in the Rider to the Sales Agreement, are unavailing since defendant has not been sued individually for breach of warranties made by the sponsor LLC. In any event, the Rider expressly provides for a six-year statute of limitations with respect to "latent major structural defects" that result from defective workmanship by Seller, or Seller's agent, employee or subcontractor; defective materials furnished; or defective design, provided by an architect, engineer, surveyor, or other design professional retained exclusively by the Seller. Accordingly, the court denies that branch of defendants' motion for dismissal under CPLR §3211(a)(5).

The Royal Defendant

Defendant Royal's motion for dismissal of the complaint must be granted. Defendant correctly maintains that it executed no documents with respect to the Offering Plan. Plaintiff, in opposition to the motion, admits that there is no privity, per se, between it and defendant Royal. Plaintiff does argue that the functional equivalent of privity exists, but plaintiff's assertions are vague and unsupported. Plaintiff's attempt to demonstrate that Royal was in some way connected with the sponsor's offering plan are unconvincing and fail to meet the standard for invoking the "functional equivalent" doctrine. Accordingly, dismissal of all claims against defendant Royal is warranted.

CONCLUSION

The foregoing constitutes the decision of the court. In light of the above, defendant Architect's motions are denied as to the eight and ninth causes of action, and granted as to the thirteenth cause of action. Defendant Marke's motion is denied in its entirety, and defendant Royal's motion is granted in its entirety. Plaintiff is directed to settle order in accordance with this decision.

____________________________

J.S.C. Footnotes

Footnote 1:Under Real Property Law § 339 dd, plaintiff, as the Board of Managers of the condominium, is empowered to maintain an action on behalf of the condominium owners with respect to any cause of action relating to the common elements of more than one unit.

See Residential Bd. v Union Square.-14th St. Assoc., 190 AD2d 636, 594 NYS2d 161

(1st Dept. 1993).

Footnote 2: The introductory paragraph of the letter agreement identifies the Owner as "Mr. Mike Marke, c/o Royal Construction."

Footnote 3: Although not a moving party with respect to the instant motion, defendant Corcoran Group-Brooklyn Landmark, LLC d/b/a Corcoran Group Brooklyn is identified as the broker of record for the sales of all the Marke Gardens units.

Footnote 4: The Certificate of Occupancy for the building was issued on August 16, 2004. Paragraph 7 on page 119 of the Rider to Purchase Agreement provides: "Written notice of any Warranty claim must be made on the attached "Notice of Warranty Claim Form" and must be received by the Seller no later than the tenth (10) day after the expiration of the applicable Warranty Period. . . .Completion and delivery of such notice of warranty claim in a timely manner is necessary to protect the rights of the purchaser under this limited warranty."

Footnote 5: General Business Law article 23-A, commonly known as the Martin Act, provides the regulatory framework governing the offer and sale of securities, commodities and other investment vehicles in and from New York. See also, People v. Landes, 84 NY2d 655, 660, 621 NYS2d 283, 645 NE2d 716 (1994). GBL § 23-A is remedial in nature and enacted to prevent fraud in connection with the sale of securities and commodities including unscrupulous transactions involving deliberate and willful misrepresentations by sponsors of cooperative and condominium conversions. See People v. Hasslinger, 4 AD3d 564, 771 NYS2d 589 (3rd Dept. 2004).

Footnote 6: The sponsor LLC has not moved for any of the relief requested by defendants Marke and Royal.