Mitchell v Abrams

[*1] Mitchell v Abrams 2008 NY Slip Op 52503(U) [21 Misc 3d 1145(A)] Decided on December 8, 2008 Supreme Court, New York County Tolub, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 8, 2008
Supreme Court, New York County

David Mitchell, Plaintiff,

against

Steven Abrams, Defendant.



110403/08



ATTORNEY FOR THE PLAINTIFF :

DOBSHINSKY & PRIYA, LLC

Neal Dobshinsky, Esq.

61 BROADWAY, STE 3025

NEW YORK, NY 10006

Phone : (212) 344-0900

ATTORNEY FOR THE DEFENDANT

(not scanned into our system, however to the best of my recollection:)

Howard Blum

Rivelis, Pawa and Blum, LLP

286 Madison Avenue

14th Floor

New York, New York 10017

Phone:212-557-3000

Walter B. Tolub, J.

This is a motion by the Defendant to renew and reargue (CPLR §§ 2221[d] and [e]) this Court's decision dated September 25, 2008 which granted Plaintiff's motion for summary judgment on a guarantee pursuant to CPLR § 3213.

Facts

As stated in this Court's decision dated September 25, 2008 (Prior Decision), this action arises out of construction work performed at Plaintiff's penthouse apartment located at 45 East 66th Street, New York, NY (the "Premises"). Plaintiff hired non-party Fountainhead Construction, LLC ("Fountainhead") to perform the necessary work (the "Project"). Defendant Steven Abrams is the principal owner and managing member of Fountainhead. [*2]

Fountainhead and Plaintiff entered into an agreement for work on Plaintiff's residence on June 29, 2007 ("Agreement"). In order to perform the work under the Agreement, Fountainhead required that a deposit of $750,000 be pre-funded ("Deposit"). Plaintiff agreed to pre-fund the Deposit by entering into a separate agreement with the Defendant. Defendant and Plaintiff signed a guarantee for the Project ("Guarantee"). The Guarantee states in relevant part that:

This will confirm that we have agreed to amend the Owner-Contractor Agreement between David Mitchell and Fountainhead Construction, LLC, dated June 29, 2007 ("Agreement") as follows (abbreviated terms used herein in the same manner as in the Agreement):

The Owner (David Mitchell) will pre-fund a deposit of Seven hundred and Fifty Thousand Dollars ($750,000)("Deposit") to the contractor (Fountainhead Construction, LLC), which deposit will be used by Contractor to pay deposits on subcontracts and materials, and to fund Contractor's startup General Condition Costs. . .

...

As a material inducement for the Owner to agree to this amendment of the Agreement, and by executing this letter agreement in the space provided below, Steve Abrams ("Guarantor") hereby grants a personal financial guarantee that the Deposit will be used solely for the benefit of the Project and that the Deposit will be fully credited to the Owner as described in the preceding paragraph. Without limitation, in the event that the Deposit is misused by Contractor, Contractor defaults under the Agreement or this letter agreement, any portion of the Deposit is paid to a Subcontractor that subsequently defaults, or the Owner is not credited with the full amount of the Deposit or does not otherwise receive the full benefit of the Deposit, and not withstanding anything to the contrary in the Agreement, Guarantor (in addition to the Contractor) shall be personally liable to the Owner for the full amount of the Deposit. . .

(Guarantee, p.1 [bold emphasis added]).

Plaintiff claimed, and Defendant did not deny, that is now out of business. Plaintiff submitted the Affidavit of Allen Bloom, a minority owner of Fountainhead and a participant of the day to day construction activities of the company. Mr. Bloom stated in his affidavit that Fountainhead abandoned the Project, is currently out of business and fired its employees. As a result, Plaintiff had to hire new employees to complete the [*3]Project. Plaintiff claimed that by virtue of going out of business and abandoning the Project, Defendant was liable under the Guarantee for full payment of the Deposit.

Additionally, Plaintiff cited the Bloom Affidavit to support the claim that the Deposit was diverted to other endeavors constituting a misuse of the funds. Plaintiff argued that the use of the Deposit for purposes other than the Project constituted a breach of the Guarantee entitling him to full repayment of the $750,000.

Defendant argued that the Guarantee obligated him personally only in the event that the non-party contractor, Fountainhead, misused the Deposit. As evidence that neither Defendant nor Fountainhead misused funds, Defendant submitted Exhibits 2 and 3. Exhibit 2 purported to be an "Application and Certification for Payment" by Fountainhead indicating how Plaintiff's full Deposit was used. However, this exhibit was unsigned by Fountainhead and the Architect, failed to state by whom it was created and how it was created. Defendant also submitted Exhibit 3, 11 forms entitled "Waiver of Lien and General Release" which Defendant claimed were provided to the subcontractors upon payment by Fountainhead. However, even if Fountainhead was to be credited with the full amount of the waivers it claims, $497.053.35 remained unaccounted for.

Defendant argued that ultimately, whether or not Fountainhead misused the funds was a question of fact and was impossible to prove by the terms of the Guarantee an therefore impermissible to decide under CPLR §3213. Defendant also argued that Plaintiff's new contractor, who was hired to complete Fountainhead's work, was made up of former Fountainhead employees who credited Plaintiff the full amount of the Deposit. Defendant submitted that there was no misuse of funds and therefore no breach of he Guarantee.

By decision dated September 25, 2008, this Court held that:

Plaintiff has made out a prima facie case against the Defendant: (1) Plaintiff has provided the court with proof of a Guarantee and Defendant concedes that there is a personal guarantee; (2) a default on the underlying obligation secured by the Guarantee, namely abandonment of the project by virtue of Fountainhead going out of business; and (3)Defendant's failure to honor the Guarantee and return the Deposit.

This case is appropriate for an accelerated judgment because Plaintiff has demonstrated, by "simple proof" that Defendant has breached the Guarantee and has not returned the Deposit. There is no need to look at the underlying agreement to determine the parties rights and obligations under the Guarantee. In this case, the Guarantee stands on its own and can be enforced separate and apart from an underlying agreement (Dresdner Bank AG [*4]v. Morse Diesel, Inc., 115 AD2d 64[1st Dept 1986]).

Moreover, the Defendant has not raised any material issues of fact that would require a trial on this matter. Once Plaintiff has made a prima facie case by proof of the agreement and a failure to make the payments called for in the agreement, it is incumbent upon the Defendant to establish, by admissible evidence, that a triable issue of fact exists (SCP (Bermuda), Inc. v. Bermudatel Ltd., 224 AD2d 214 [1st dept 1996]). Here, Defendant has failed to establish that a triable issue of fact exists as to its abandonment of the Project, fails to sufficiently call into question Mr. Bloom's Affidavit stating that Fountainhead did in fact misuse the Deposit. Defendant's proof consists of conclusory, self-serving statements and unsigned documents concerning the alleged use of the Deposit and mentions nothing about abandoning the Project.

It follows that Plaintiff's motion for summary judgment in lieu of the complaint is granted.



(Prior Decision, Defendant Ex. 1, pp. 7-8).

Defendant now makes this motion to renew and reargue [FN1] the Court's Prior Decision and presents "new evidence" for consideration.

In the Prior Motion for summary judgment, Plaintiff submitted the affidavit of Allen Bloom, a minority owner of Fountainhead, in which he stated that he was a participant of the day to day construction activities of the company, that, Fountainhead abandoned the Project, that Fountainhead is currently out of business and that the Deposit was diverted to other endeavors constituting a misuse of the funds.

Now, Defendant submits the an affidavit by Allen Bloom, recanting his prior statements and states that Fountainhead fully earned the Deposit money and that Fountainhead performed $1,279,086.35 of work.

Defendant also submits, for the first time, an affidavit by Mark Carthew, the Project manager. Mr. Carthew worked for the Spector Group, the architectural firm hired by Plaintiff to design, supervise, review and certify Fountainhead's work and payment requisitions (Requisitions). In his affidavit, Mr. Carthew states that prior to Plaintiff making payments, Fountainhead was obligated to prepare and submit an Application and Certification for Payment to the Spector Group for review and formal certification. In order to certify the Requisitions, the [*5]Spector Group would observe and review the work performed. Mr. Carthew further stated that he was the person who personally observed the work by Fountainhead to determine whether the dollar amounts being requested by Fountainhead accurately accounted for the amount of labor and materials actually performed and supplied to the Project. Mr. Carthew certified two Requisitions, the first for $1,037,934.90 and the second for $226,980.44. Mr. Carthew certified that a total of $1,279,086.35 of work was complete.

In addition to the affidavits, Defendant now submits documents supporting of certification of the Requisitions. Furthermore, Defendant argues that based on the affidavits and the Requisitions, that Plaintiff owes Defendant $106,479.90 for work performed, certified and not paid.

In response to Defendant's motion to renew, Plaintiff argues that the motion must be denied because: (1) these facts existed and were known to the Defendant at the time of the Prior Motion and; (2) Defendant has failed to provide any justification for not presenting the appropriate opposition in the Prior Motion.

Discussion

A motion for leave to renew shall be based upon additional material facts which existed at the time that the prior motion was made but which were not then known to the party seeking leave to renew and a valid excuse must be offered for not supplying such facts (CPLR 2221[e]; Cuccia v. City of New York, 306 AD2d 2 [1st Dept 2003]). Renewal is not available as a second chance for parties who have not exercised due diligence in making their first factual presentation (Chelsea Piers Management v. Forest Electric Corp., 281 AD2d 252 [1st Dept 2001]).

There is disagreement among the courts as to whether on a motion to renew, the court has discretion to consider evidence and facts not included in the original motion.

Prior to the CPLR §2221 amendment in 1999, the function of CPLR §2221 was to steer motions affecting prior orders to the judges who signed the underlying orders (Poag v. Atkins, 3 Misc 3d 1109(A) [Sup. Ct., NY County; June 7, 2004]). "One of the judicially crafted rules regarding the motion for leave to renew was the principle that the motion should not be granted based upon facts known to the moving party at the time of the prior motion, unless the moving party offers a reasonable excuse for not having submitted such facts on the prior motion" (Poag v. Atkins, 3 Misc 3d 1109(A) [Sup. Ct., NY County; June 7, 2004] internal cites omitted). The nature and effect of the motion for leave to renew was not addressed by the statute, and the task of establishing the law governing that motion became the labor of the courts (Id. internal citations omitted).

CPLR §2221 was amended in 1999 to provide a coherent structure for the treatment of motions for leave to renew and [*6]reargue (Id.). The amendment provided that a motion for leave to renew shall be based upon new facts not offered on the prior motion that would change the court's prior determination and that there shall be reasonable justification for the failure to present such facts on the prior motion (CPLR §2221 [e][2] and [e][3]).

After the amendment there was disagreement as to whether and how much discretion courts had to review new evidence on a motion to renew. The Poag v. Atkins case indicates that the Third and Fourth Departments view CPLR §2221[e][3] as divesting the courts of their discretion to consider evidence which was available earlier but not presented until the renewal motion. On the other hand, Poag v. Atkins case also notes that the First Department disagrees with the Third and Fourth Departments and continues to apply the pre-amendment exception permitting the exercise of discretion (Id.; Trinidad v. Lantigua, 2 AD3d 163 [1st Dept 2003]; Mejia v. Nanni, 307 AD2d 870 [1st Dept 2003]).

Here, there is a recantation of Mr. Bloom's earlier affidavit which was a key element in this court's prior determination, along with an affidavit from Plaintiff's architect. Moreover, there are documents raising serious questions of fact as to what and how much work was performed, and paid for. Additionally, although not stated in any papers, Defense counsel stated at oral argument on the motion to renew, that Defendant was ill and that acquiring the appropriate documents was not possible at the time of the Prior Motion.

Under the circumstances in this case, and in the interest of justice, this court exercises its discretion and grants Defendant's motion for leave to renew. Upon renewal, this court vacates its prior order and find that there is a triable issue of fact in this matter.

Accordingly, it is

ORDERED that Defendant's motion to renew is granted; and it is further

ORDERED that this court's prior order dated September 25, 2008 is vacated; and it is further

ORDERED that the Clerk of the Court enter judgment accordingly.

Counsel for the parties are directed to appear for a preliminary conference on January 16, 2009, at 11AM in room 335 at 60 Centre Street.

This memorandum opinion constitutes the decision and order of the Court.

Dated:December 8, 2008

____________________________ [*7]

HON. WALTER B. TOLUB, J.S.C. Footnotes

Footnote 1:Although Defendant makes this motion to renew and reargue, the Court treats it as a motion to renew based on the "new evidence".