Esanu v Klein

[*1] Esanu v Klein 2011 NY Slip Op 51690(U) Decided on August 1, 2011 Supreme Court, New York County Edmead, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 1, 2011
Supreme Court, New York County

Warren Esanu, Plaintiff,

against

Allen Klein, THE RIZZO GROUP, LLP and CHARLES RIZZO, Defendants.



650741/2011

 

ATTORNEY FOR THE PLAINTIFF :

LAWRENCE B. GOLDBERG

220 FIFTH AVENUE - 13TH FLOOR

NEW YORK, NEW YORK 10001

1-212 252-8300

ATTORNEY FOR THE DEFENDANT Allen Klein

CHARLES J. SIEGEL - LAW OFFICE

40 WALL STREET - 7TH FLR.

NEW YORK, NEW YORK 10005

Phone : 1-212 440-2350

Fax: (212) 440-2380

ATTORNEY FOR THE DEFENDANTS: THE RIZZO GROUP, LLP and CHARLES RIZZO

PLATZER SWERGOLD KARLIN/ET ANO

1065 AVE OF AMERICAS - 18TH FL

NEW YORK, NEW YORK 10018

1-212 593-3000

212-593-0353

Carol R. Edmead, J.

Plaintiff Warren Esanu ("plaintiff") seeks to recover damages for negligence of the defendants Allen Klein ("Klein"), The Rizzo Group, LLP and Charles Rizzo (collectively, the [*2]"Rizzo defendants").[FN1]

The Rizzo defendants move pursuant to CPLR §3211 (a) (7) to dismiss plaintiff's complaint for failure to state a cause of action.[FN2] Plaintiff opposes the motion and cross-moves to amend the complaint to add Charles Rizzo & Associates of NY, Inc. as a defendant.

Background Facts [FN3]

At all relevant times, plaintiff was an owner of a first-floor apartment on East 84th Street in Manhattan, New York. Charles Rizzo is a principal of the corporate entity Charles Rizzo and Associates, Inc., d/b/a/ The Rizzo Group, a consulting firm specializing in land use and zoning.

In 2004, plaintiff purchased the apartment located below his existing apartment which had exclusive access to the backyard garden (the "garden apartment"), with the intention to connect the two apartments, extend the garden apartment into the backyard area and build a terrace on the top of the extension (the "project").

To implement the project, in October 2006, he retained Klein, a licensed architect. Thereafter, Klein hired the Rizzo defendants for the purpose of obtaining and expediting the necessary approvals of the project by the New York City Landmark Preservation Commission ("LPC") and the Department of Buildings (the "DOB"). In or about the end of 2009, plaintiff discovered that in 2008, the DOB denied his permit application for "inactivity" and the time within which to file an appeal had already expired. Plaintiff refused to pay an additional $15,000 fee required by the Rizzo defendants for a new filing and in May 2010, the Rizzo defendants "resigned" from plaintiff's representation. This litigation ensued.

Alleging various failures on the part of the Rizzo defendants, plaintiff asserts one cause of action for negligence against, inter alia, the Rizzo defendants as corporation and Charles Rizzo individually.

Plaintiff's complaint alleges that the Rizzo defendants were negligent in (1) failing to timely obtain the DOB's requisite approval for the project; (2) failing to research and advise plaintiff that the project was prohibited by the requirements of the New York City Zoning Resolution (the "Zoning Resolution"); (3) failing to disclose to plaintiff that the application was delayed due to its non-compliance with the zoning regulations; (4) causing an additional delay by failing to timely resubmit the application; and (5) causing the expiration of the original application.

It is also alleged that the Rizzo defendants misrepresented their ability to timely secure the DOB's approval by assuring plaintiff that it would be obtained "shortly" or that it was "forthcoming," and plaintiff relied on such representations. [*3]

Plaintiff also relied on the expertise claimed by the Rizzo defendants as "land use professionals, engineers and attorneys" in their "knowledge of the intricacies of the Zoning Resolution" and abilities of navigating the DOB's approval process. In this regard, the Rizzo defendants "knew or should have known" that the Zoning Resolution prohibited construction of an extension of the garden apartment at or above grade level and therefore, required an application to the New York City Board of Standards and Appeals ("BSA") for a "variance" based on a showing of "impracticability" or "undue hardship." And in any event, in October 2008, the DOB examiner raised objections with respect to plaintiff's application, but the Rizzo defendants failed to timely resubmit a new, corrected application, allowing the original application to lapse.

As a result of defendants' negligent failure to timely obtain the DOB's approval, plaintiff suffered damages, in the form of the substantial sums in fees paid to the Rizzo defendants for the original application, mortgage carrying charges, cooperative maintenance fees, insurance costs for the vacant second apartment and the loss of the value of the combined apartments.

It is alleged that Charles Rizzo is personally liable, as a principal of the Rizzo Group, for all the above acts of negligence and for representing to plaintiff that according to the Rizzo Group's "counsel's" review of the Zoning Resolution, the project was in compliance with the requirements for "Rear Yard Additions" and "permissible projections," when in fact the project was prohibited from the very start by the zoning regulations.

The Rizzo defendants now move to dismiss the complaint for failure to state a cause of action.

In their motion, defendants argue that plaintiff failed to allege all the elements of the cause of action for negligence and specifically, he failed to "prove" that any negligence on the part of the Rizzo defendants was a proximate cause of his alleged damages.

Further, since plaintiff alleges professional negligence on the part of defendants, plaintiff failed to allege and "prove" that "but for" defendants' alleged professional negligence, the DOB's permit would have been granted and plaintiff would not have sustained damages. Rather, plaintiff's allegation that the approval of the intended project was doomed from the very start, in effect, defeats his own claim. Furthermore, since the Zoning Resolution's prohibition existed at the time of the purchase, plaintiff could not have "lost opportunity" to turn it into a "valuable combined apartment." In addition, plaintiff assumed the risk that the project may not be approved and should have done "his own homework."

Further, there are no allegations that plaintiff purchased the second apartment in reliance on any advice or representation of the Rizzo defendants that the approval of the project would be granted.

Furthermore, defendants cannot be a proximate cause of plaintiff's alleged damages that were incurred prior to defendants' involvement (fees owed to the designer, Klein and the DOB filing fees) or the mortgage carrying charges, cooperative maintenance fees and insurance costs.

Finally, the complaint fails to state a cause of action against Charles Rizzo as he cannot be held personally liable for the negligence of the corporation. There are no allegations that Rizzo acted in his individual capacity or that, as an officer of the corporation, he exercised complete control over the corporation or abused the corporate form to commit fraud against plaintiff. Neither can Charles Rizzo be held liable as an agent of the principal (corporation), as [*4]there is no evidence that he intended to substitute his personal liability for that of the corporation.

In opposition, plaintiff argues that plaintiff's cause of action is not "legal malpractice, but for negligence;" while the Rizzo defendants' firm is composed of professionals such as architects, attorneys and land use specialists, he did not have attorney-client relationship with them as they were not plaintiff's attorneys.

The Rizzo defendants falsely represented to him that the DOB's approval would be obtained "shortly"; he relied on their representations; defendants failed to "acquaint themselves" with the requirements of the Zoning Resolution prohibiting above-the ground structures in residential backyards and to inform plaintiff of the need for a special permit ("variance") because of the different "standard" used by the DOB for measuring the physical level of the projected structure. Defendants' negligence was a proximate cause of his damages, as plaintiff was unable to commence the renovations and was compelled to expend substantial sums on fees to the defendants and other related expenses, when in fact, the regulatory prohibition existed at the time when defendants assured plaintiff that the approval would be obtained "shortly."

Charles Rizzo, as a principal of the Rizzo defendants, cannot hide behind the fictitious corporation to escape liability. He never signed any documents in his representative capacity, but rather, as "Charles Rizzo." If Charles Rizzo denies that Rizzo Group LLP existed at the time it represented plaintiff, then Charles Rizzo acted for a "fictitious legal entity" and therefore, should be held personally liable.

In reply, the Rizzo defendants again argue that plaintiff sued the wrong entity, and cannot hold the "President of the Rizzo Group, Charles Rizzo, individually liable"; that plaintiff voluntarily assumed the expenses for the project which had been unsuccessful from the start; and the alleged damages of the costs of mortgage, maintenance, utilities or insurance could not be caused by any alleged negligence of the Rizzo defendants.

Discussion

The standard on a motion to dismiss a pleading for failure to state a cause of action (CPLR 3211 [a][7]) is not whether the party has artfully drafted the pleading, but whether deeming the pleading to allege whatever can be reasonably implied from its statements, a cause of action can be sustained (see Stendig, Inc. v Thom Rock Realty Co., 163 AD2d 46 [1st Dept 1990]; Leviton Manufacturing Co., Inc. v Blumberg, 242 AD2d 205, 660 NYS2d 726 [1st Dept 1997]). Thus, "if from [the pleading's] four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law, a motion for dismissal will fail" (Guggenheimer v Ginzburg, 43 NY2d 268, 401 NYS2d 182 [1977]; Beer v Florsheim, 96 AD2d 485, 465 NYS2d 196 [1st Dept 1983]). "Pleadings should not be dismissed or ordered amended unless the allegations therein are not sufficiently particular to apprise the court and parties of the subject matter of the controversy" (Foley v D'agostino, 21 AD2d 60, 248 NYS2d 121 [1st Dept 1964], quoting 3 Weinstein-Korn-Miller, NY Civ Prac, ¶ 3013.03). The court's inquiry is limited to determining whether the complaint states any cause of action, not whether there is evidentiary support for it (Rovello v Orofino Realty Co., 40 NY2d 633, 635-636, 389 NYS2d 314 [1976]). And, any deficiencies in the complaint may be amplified by supplemental pleadings and other evidence (id.).

Claim Against the Rizzo Defendants [*5]

At the outset, while some allegations in the complaint appear to be in the nature of professional negligence,[FN4] under the facts of this case, the Rizzo defendants as a "land use consulting firm" do not fall within the known categories of "professionals" who may be sued for professional malpractice.

It is well settled that "[i]n order to maintain a claim for professional malpractice, the defendant must be a professional as a matter of law (Chase Scientific Research, Inc. v NIA Group, Inc., (96 NY2d 20 [2001]). A profession has been defined as "an occupation generally associated with extensive formal learning and training, licensure and regulation indicating a qualification to practice, a code of conduct imposing standards beyond those accepted in the marketplace and a system of discipline for violation of those standards" (Dimsey v Bank of New York, 2006 WL 3740349 [Sup Ct, New York County 2006], citing Chase Scientific Research, Inc.). The New York State Bar Association specifically named "architect[s], engineer[s], lawyer[s] or accountant[s]" when discussing professional malpractice (Chase Scientific Research, at 29).

And while New York courts have expanded the area of malpractice beyond that of a physician, dentist, pharmacist, attorney, accountant and engineer (see Van Ness v Aetna Casualty & Surety Co., 91 Misc 2d 720, 398 NYS2d 482 [Sup Ct, Westchester County 1977] [insurance broker]; Roizen v Marder's Nurseries, Inc., 161 Misc 2d 689, 615 NYS2d 235 [Supt Ct, Suffolk County 1994][landscaper]; Seger v Cornwell, 44 Misc 2d 994, 255 NYS2d 744 [Sup Ct, Albany County 1964][surveyor]), the court's research has not uncovered a New York case holding that land use consultants are professionals for the purposes of a professional malpractice claim. On the other hand, at least one court held that consultants hired as expediters of the DOB's permits could be liable on the theory of negligence (see Children's Corner Learning Center v A. Miranda Contracting Corp., 64 AD3d 318, 879 NYS2d 418 [1st Dept 2009][permitting a [third-party] plaintiff to proceed with a common law indemnification claim based on the negligence of consultants hired as expediters in the obtaining of the DOB's permits]).

In Children's Corner, the opening of a childcare center was delayed in spite of the architect's assurances that all necessary construction permits and licenses would be timely obtained. Plaintiff sued the architect, who filed a third-party complaint against consultants hired as "expediter[s] with respect to the filing of applications, to obtain permits, licenses and other approvals of the work performed at the subject building ." Although primarily addressing the architect's third-party claims against the consultants, the court held that the architect stated a valid cause of action against the consultants for common-law indemnification by alleging that the architect's alleged failure to obtain permits in a timely fashion was solely the result of the negligence of consultants hired as expediters.

Similarly, in the instant case, plaintiff's allegations that he relied on the Rizzo defendants' expertise and special knowledge as expediters in obtaining the DOB's permits are more in the nature of ordinary negligence rather than malpractice. Moreover, plaintiff emphasized in his opposition to the motion that his claim is not for malpractice but for negligence. Therefore, in [*6]this motion, the court determines the sufficiency of plaintiff's sole cause of action for negligence against the Rizzo defendants.

To state a cause of action for negligence plaintiff must allege the existence of a duty, breach of that duty, injury to plaintiff resulting therefrom, and damages (see Benjamin v. City of New York, 99 AD2d 995 [1st Dept 1984]).

The court holds that plaintiff's allegations are sufficient to withstand the instant motion to dismiss.

Plaintiff has alleged that the Rizzo defendants "owed him a duty to act with professional care consistent with their positions as experts or specialists in filing [the applications with] the DOB." Indeed, such duty which arose from "the parties' consensual undertaking" (see Sommer v Federal Signal Corp., 79 NY2d 540, 593 NE2d 1365 [1992]), when plaintiff (or alternatively, Klein on plaintiff's behalf) retained the Rizzo defendants as experts in expediting the filing of the DOB's permit; they assured plaintiff that the permit would be obtained "shortly," and plaintiff relied on such representations. Such duty obligated the defendants as here, to perform their services "promptly, in good faith and in accordance with the reasonable commercial standards of its business" (see Children's Corner Learning Center v A. Miranda Contracting Corp., 64 AD3d 318, 879 NYS2d 418 [1st Dept 2009]).

Further, the complaint alleges that the Rizzo defendants breached their duty by failing to timely obtain the permit, allowing the application to lapse, and to disclose that the project, from its inception, was prohibited by the existing zoning regulations.

Furthermore, plaintiff alleges that he was damaged by the Rizzo defendants' negligence to the extent that, while knowing that the project was prohibited by the zoning regulations, the Rizzo defendants continued to seek compensation and receive payments from plaintiff for their "expert services," causing plaintiff to incur unnecessary expenses and the value of the premises diminish, as plaintiff was unable to commence the renovation and use the premises as intended.

These allegations are sufficient to set forth a viable cause of action for negligence against the Rizzo's defendants.

As to the Rizzo defendants' contention that defendants could not have proximately caused the damages incurred prior to the Rizzo defendants' involvement, i.e., - fees owed to the project designer, Klein and the DOB filing fees, or the mortgage carrying charges, cooperative maintenance fees and insurance costs, - it has been stated that it is not the court's role, at this juncture, when "passing on the sufficiency of the complaints to state a cause of action, to determine with particularity what items of expense or loss may properly be taken into account in computation of the damages recoverable. Such questions properly await consideration and resolution presumably on trial, after liability has been proved, if it can be" (Becker v Schwartz, 46 NY2d 401, 408, 413 NYS2d 895 [1978], citing Johnson v Yeshiva Univ, 42 NY2d 818, 396 NYS2d 647 [1977]).

Likewise, the fact that plaintiff did not ascertain for himself the zoning resolution's restrictions and assumed the risk of the denial of the permit, does not preclude plaintiff from stating a cause of action for negligence against the Rizzo defendants and "any analysis beyond that point would involve a review of facts beyond the scope allowed on a motion to dismiss" (HSBC Bank USA v Bond, Schoeneck and King, PLCC, 16 Misc 3d 813, 838 NYS2d 419 [Sup Ct, New York County 2007], citing Leon v Martinez, 84 NY2d 83, 87-88, 614 NYS2d 972, 638 [*7]NE2d 511 [1994]).

Therefore, since plaintiff stated a viable cause of action for negligence against the Rizzo defendants, the portion of the motion seeking the dismissal of plaintiff's claim as against the Rizzo defendants (as corporation) is denied.

Claim Against Charles Rizzo

Charles Rizzo argues that he cannot be held personally liable to plaintiff for negligence because he acted on behalf of the corporation.

While as a matter of the accepted principle, owners or officers of a corporation are generally not liable for the debts of the corporation (Walkovszky v Carlton, 18 NY2d 414, 276 NYS2d 585 [1966]), and "the courts will disregard the corporate form, or [ . . . ] pierce the corporate veil,' only when "it is necessary to prevent fraud or to achieve equity" (id.), it is equally well established that "a corporate officer who participates in the commission of a tort may be held individually liable, regardless of whether the officer acted on behalf of the corporation in the course of official duties and regardless of whether the corporate veil is pierced" (Peguero v 601 Realty Corp., 58 AD3d 556, 873 NYS2d 17 [1st Dept 2009], citing Espinosa v Rand 24 AD3d 102, 806 NYS2d 186 [1st Dept 2005][an individual officer of landlord corporation who allegedly misled plaintiff tenants by telling them that lead paint had not been used in apartment building for more than 10 years, was not entitled to dismissal of complaint against him since misrepresentation, if proven and shown to have induced detrimental reliance, would provide basis for imposing liability on officer individually, even though he allegedly spoke on behalf of corporation]).

In this case, while plaintiff did not sufficiently allege facts to pierce the corporate veil, at this pleading stage, he has stated a tort claim against Charles Rizzo.

Indeed, plaintiff's complaint alleges that Charles Rizzo either intentionally or negligently misled plaintiff, by representing to him, in a statement (invoice) dated September 8, 2008 and in follow-up communications, that the "counsel" at Rizzo Group (Barbina) "reviewed" the Zoning Resolutions regarding "Rear Yard Additions" and "permissible projections" and that the Project was within these "Additions" and "permissible projections, and could "move forward and receive Community Board and NYC-DOB approval as presented." It is also alleged that Charles Rizzo represented that plaintiff had "options" to contest the NYC-DOB's denial of the Application (based on the prohibitions in the Zoning Resolutions), and should continue "to have Rizzo Group and its principal and employees [ . . . ] to work on his behalf where Plaintiff had already paid Rizzo Group in excess of $34,000 (and Charlie Rizzo had told Plaintiff that he would "cap" all fees at $34,000), Rizzo Group wanted another $20,000 in February, 2010 to proceed to work with Plaintiff by filing an "appeal" with the NYC-BSA . . . " (Complaint ¶¶ 99-101).

Such misrepresentations, if proven and shown to have induced detrimental reliance, as alleged by plaintiff, would provide a basis for imposing liability on Charles Rizzo individually, even though he allegedly spoke on behalf of the corporation (see Espinosa v Rand, 24 AD3d 102, supra, citing American Express Travel Related Servs. Co., Inc. v North Atl. Resources, 261 AD2d 310, 311 [1st Dept 1999]; see also Ideal Steel Supply Corp. v Fang, 1 AD3d 562, 563 [2d Dept 2003]).

Therefore, construing the complaint liberally, as the court must within the scope of a motion to dismiss, the court concludes that plaintiff stated a cause of action for negligence [*8]against Charles Rizzo, sufficient to withstand dismissal. Thus, this portion of the motion is likewise denied.

Plaintiff's Cross-Motion to Amend the Complaint

Plaintiff seeks to add the name "Charles Rizzo & Associates of NY, Inc.," as an additional defendant in this action. The Rizzo defendants oppose the cross-motion by arguing that there is no need to add another defendant, only to amend the complaint to reflect the correct name "Charles Rizzo & Associates of NY, Inc. d/b/a The Rizzo Group."

It is well-established that leave to amend a pleading should be freely granted provided there is no prejudice or surprise to the nonmoving party (CPLR §3025(b); Eighth Ave. Garage Corp. v H.K.L. Realty Corp., 60 AD3d 404, 405 [1st Dept 2009]). Leave to amend a pleading should be freely granted provided there is no prejudice or surprise to the nonmoving party (CPLR §3025(b).

Plaintiff states in his affirmation that, at the relevant time, the Rizzo defendants have held themselves out as "The Rizzo Group LLP." Alternatively, the Rizzo defendants' presented evidence of their registered name as "Charles Rizzo & Associates of NY, Inc.," and a 2007 filing of the certificate of an assumed name - "Rizzo Group." However, it appears from the record that all of these names refer to the same original entity.

Therefore, based on the above and in the absence of the demonstrated prejudice on the part of the Rizzo defendants, plaintiff's cross-motion to amend is granted to the extent that (1) the caption is amended by deleting the name "The Rizzo Group, LLP" and substituting it with the name "Charles Rizzo & Associates of NY, Inc., a/k/a Rizzo Group LLP, a/k/a Rizzo Group;" and (2) plaintiff is to conform his pleading accordingly and to serve the proposed amended complaint on all parties within 20 days of this order.

Conclusion

Based on the foregoing, it is hereby

ORDERED that the branch of the motion of the defendants The Rizzo Group, LLP, and Charles Rizzo, pursuant to CPLR §3211 (a) (7), to dismiss plaintiff's complaint for failure to state a cause of action as against the corporation is denied; and it is further

ORDERED that the branch of the defendants' motion to dismiss plaintiff's cause of action for negligence as against Charles Rizzo individually, is denied; and it is further

ORDERED that branch of the plaintiff's cross-motion to amend the complaint is granted and the caption is amended to read as follows:

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK: PART 35

-X

WARREN ESANU,

Plaintiff,

-against-

 

ALLEN KLEIN, CHARLES RIZZO & ASSOCIATES

of NY, INC., a/k/a RIZZO GROUP LLP, a/k/a [*9]

RIZZO GROUP and CHARLES RIZZO,

Defendants.

--X

And it is further

ORDERED that plaintiff shall serve the amended complaint containing the new caption upon all parties within 20 days of this order; and it is further

ORDERED that upon receipt of a copy of this order, the Trial Support Office (Room 158) shall amend the caption accordingly.

This constitutes the decision and order of the court.

Dated: August 1, 2011___________________________________

Hon. Carol R. Edmead, J.S.C.

In accordance with the accompanying Memorandum Decision, it is hereby

ORDERED that the branch of the motion of the defendants The Rizzo Group, LLP, and Charles Rizzo, pursuant to CPLR §3211 (a) (7), to dismiss plaintiff's complaint for failure to state a cause of action as against the corporation is denied; and it is further

ORDERED that the branch of the defendants' motion to dismiss plaintiff's cause of action for negligence as against Charles Rizzo individually, is denied; and it is further

ORDERED that branch of the plaintiff's cross-motion to amend the complaint is granted and the caption is amended to read as follows:

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK: PART 35

-X

WARREN ESANU,

Plaintiff,

-against-

ALLEN KLEIN, CHARLES RIZZO & ASSOCIATES

of NY, INC., a/k/a RIZZO GROUP LLP, a/k/a

RIZZO GROUP and CHARLES RIZZO,

Defendants. [*10]

X

And it is further

ORDERED that plaintiff shall serve the amended complaint containing the new caption upon all parties within 20 days of this order; and it is further

ORDERED that defendants serve and file their Answer within 30 days; and it is further

ORDERED that the parties appear for a preliminary conference on September 27, 2011, 2:15 p.m.; and it is further

ORDERED that upon receipt of a copy of this order, the Trial Support Office (Room 158) shall amend the caption accordingly.

This constitutes the decision and order of the court.

Footnotes

Footnote 1: According to the Rizzo defendants, the name in the caption is incorrect and the proper name of the entity is "Charles Rizzo Associates of NY Inc.," d/b/a The Rizzo Group.

Footnote 2: The court notes that Klein submitted a partial opposition to the Rizzo defendants' motion, in which he argues that, the motion is premature absent full discovery, and that if the court dismisses plaintiff's claims against the Rizzo defendants, Klein's cross-claims "filed" against the Rizzo defendants would be destroyed. However, the court's record contains no evidence of the existence of such cross-claim or any proof of service of it on any party in this action.

Footnote 3: Background facts are based on plaintiff's complaint.

Footnote 4: For example, the complaint alleges that "[Rizzo defendants] were negligent as professionals," and plaintiff relied on their claimed expertise as "land use professionals, engineers and attorneys" in navigating the DOB's approval process and in their knowledge of the zoning laws and regulations.