Waste Mgt. of N.Y., LLC v Bank of N.Y. Mellon
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Waste Mgt. of N.Y., LLC v Bank of N.Y. Mellon 2011 NY Slip Op 32290(U) August 15, 2011 Sup Ct, Nassau County Docket Number: 013515-09 Judge: Timothy S. Driscoll Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. -------------------------------------------------------------------)( -------------------------------------------------------------------)( [* 1] SUPREME COURT- STATE OF NEW YORK SHORT FORM ORDER Present: HON. TIMOTHY S. DRISCOLL Justice Supreme Court WASTE MANAGEMENT OF NEW YORK, LLC, Plaintiff, TRIAL/IAS PART: 20 NASSAU COUNTY Inde)( No: 013515Motion Seq. Nos: 2 4 and 5 Submission Date: 5/18/11 -againstBANK OF NEW YORK MELLON, FRAKENMUTH MUTUAL INSURACE COMPANY , and SANITARY DISTRICT NO. 1, TOWN OF HEMPSTEAD, Action No. Defendants. FRAKENMUTH MUTUAL INSURANCE COMPAN, Plaintiff, -against- Inde)( No. 022253- WASTE MAAGEMENT OF NEW YORK, L.C. and SANITARY DISTRICT NO. TOWN OF HEMPSTEAD Action No. Defendants. Papers Read on these Motions: Notice of M 0 ti on...................................................... ............ ........... .. Affirmation of Cohen in Support..................................................... Frankenmuth and BONY' s Rule 19-a(l) Statements................. Frankenmuth' s Memorandum of Law in Support.................... BONY Notice of Motion, Affirmation in Support and E)(hibits.. BONY Memorandum of Law in Support....................................... Waste Management' s Notice of Motion, Affirmation in Support and Exhibits.............................................. Waste Management' s Rule 19-a Statement................................... Waste Management' s Memorandum of Law in Support.............. [* 2] Waste Management Exhibits........................................................ .... District' s Notice of Cross Motion, Affidavit in Opposition/Support and E)(hibits........................... District' s Memorandum of Law....................................................... District' s Response to Rule 19-a Statement............................. Affirmation of P. Weinstein in Opposition and E)(hibits............ BONY Memorandum of Law in Opposition/Further Support.... BONY Response to Waste Management' s Rule 19-a Statement.. Frankenmuth Memorandum of Law in Opposition................... Fihma Affirmation in Opposition and E)(hibit........................... Waste Management Memorandum of Law in Opposition............ Waste Management' s Response to BONY and Frankenmuth Rul e 19-a S ta tem en ts................................ ........... ...... BONY Response to District' s Rule 19-a Statement.................. Weinstein Affirmation in Opposition and E)(hibit...................... BONY Reply Memorandum of Law in Support/Opposition........ Fihma Affirmation in Opposition and E)(hibit............................. Waste Management Response to District' s Rule 19-a Statement.. Waste Management Memorandum of Law in Opposition........... Waste Management Reply Memorandum of Law...................... Cohen Affirmation in Opposition/Reply and E)(hibits................ Frankenmuth Memorandum of Law in Opposition/eply.......... Frankenmuth' s Rule 19-a Response to District' s Statement........ Master List of Exhib its... ................................................................... This matter is before the cour on 1) the motion by Franenmuth Mutual Insurance Company ("Franenmuth" ), filed on Februar 18 , 2011 (motion sequence # 2), 2) the motion by Ban of New York Mellon (" BONY" ), fied on Februar 18 2011 (motion sequence # 3), 3) the motion by Waste Management of New York , LLC (" Waste Management" ), filed on 2011 (motion sequence # 4), and 4) the cross motion by the Distrct , fied on 2011 (motion sequence # 5), all of which were submitted on May 18 2011 , following Februar 22 March 18 oral arguent before the Cour. I For the reasons set forth below, the Cour denies the motions. BACKGROUND A. Relief Sought In motion sequence number 2 , Franenmuth moves for sumar judgment 1) against the District on its claims and cross claims for breach of contract, promissory estoppel and unjust I Although these two actions have not been formally consolidated under a single caption, the Cour has directed that they shall be tried jointly. [* 3] enrichment against the Distrct , and 2) against Waste Management on Franenmuth' counterclaims , and on its claims set forth in the Franenmuth Complaint against Waste Management. In motion sequence number 3 , BONY moves for an Order , pursuant to CPLR 93212 1) dismissing Waste Management' s Complaint against BONY; 2) granting BONY judgment on its cross claims against the District; and 3) awarding BONY its costs and expenses , including reasonable attorney s fees , incured in connection with the defense ofthis proceeding. In motion sequence number 4 , Waste Management moves for an Order , pursuant to CPLR 93212 , 1) as to Count One , directing a declaratory judgment that Waste Management owns and is immediately entitled to the fuds in the Debt Service Reserve Fund (" Account" which total at least $409 889. November 1 , and that it is entitled to recover the $343 500 payment made on 2007 2) as to Count Two , alleging unjust enrchment , directing that Defendants BONY and Franenmuth were unjustly enriched in the amount of$343 500 based on the November 1 2007 payment and by BONY' s retention of the Account, and that those Defendants are liable for a money judgment to Waste Management in the amount of $343 500 , plus the amount in the Account, 3) as to Count Three , alleging breach of contract, directing that BONY is liable to Waste Management for a money judgment of $343 500 , plus the amount in the Account, and 4) as to Action No. , entering sumar judgment in favor of Waste Management and against Franenmuth on Counts One and Thee , alleging breach of contract and promissory estoppel in connection with the Amended and Restated Lease. In motion sequence number 5 , the District cross moves for 1) an Order , pursuat to CPLR 93212 , dismissing the complaint of Waste Management in Action No. , 2) an Order pursuat to CPLR 93212 , dismissing the First and Second Cross Claims of Waste Management as asserted in its Answer , Cross Claims and Counterclaims interposed in Action No. , 3) an Order , pursuant to CPLR 93212 , dismissing the complaint of Franenmuth in Action No. 4) an Order , pursuant to CPLR 9 3212 , dismissing Franenmuth' s Eighth Affnnative Defense and Cross Claims seeking relief against the District as contained in Franenmuth' s Answer and Cross Claims in Action No. , and 5) an Order , pursuant to CPLR 9 3212 , dismissing the First and Second Cross Claims of Defendant BONY. [* 4] B. The Paries ' History Action No. 1 was the subject of a prior decision of the Cour dated December 3 , 2009 Prior Decision ) which addressed Franenmuth' s motion for dismissal of the Complaint Prior Motion ), and the Cour incorporates the Prior Decision herein by reference. The Cour provide the following background in the Prior Decision: Waste Management seeks to recover a $343,450. 00 payment that it made on October 30 2007 to the Distrct , which was forwarded to Defendant The Ban of New York Mellon , the Trustee , which allegedly released it to Franenmuth as bond holder on November 1 2007. Waste Management, which operated a solid waste disposal facilty at propert owned by the District , alleges that 1) an "Event of Operator Termination" occured when the District terminated its services; 2) its obligations under its Service Agreement and Amended Lease with the District ended on August 14 2006; and 3) Waste Management made the payment in error and is entitled to reimbursement for that payment. The Complaint alleges as follows: . The Industrial Development Agency ("IDA") financed the constrction of a solid waste disposal facility (" Facilty") in Lawrence , New York via the issuance of $3 600 000 in revenue bonds , all of which Franenmuth purchased. Payment on those bonds was due semi-anually, May and November each year. The District leased the propert to IDA , which in tur leased it to Waste Management' s predecessor, Eastern Waste , and ultimately to Waste Management. Pursuant to a series of agreements , at various times , the rent on the facilty was paid either to the District or directly to the Trustee to reduce the amount due on the bonds. In its complaint , Waste Management tracks the history of the Facility and its relationship with the District. Waste Management alleges that, on the eve of the expiration of its agreement with the District, Waste Management and the District failed to reach a new agreement. By letter dated August 11 2006 , the District rejected Waste Management's proposed agreement and declared that "the curent contractual arangement between the District and (Waste Management) will expire at 5 p. m. on Monday, August 14 2006 , at which time the District expects (Waste Management) to remove its containers and vehicles; to remove the solid waste material pursuant to its contractual obligation and to surender the Facility and equipment in the condition called for by the terms of the ' Fifth Amendment.'" In addition , the August 11 2006 "" [* 5] letter stated that " it would appear appropriate for (Waste Management) to notify the Trustee of the IDA bonds that the Distrct will no longer be makng monthly remittance on behalf of (Waste Management). " Waste Management alleges that this tennination by the Sanitar Distrct constituted an " Event of Operator Tennination" under their agreement and that, pursuant to their agreement, WaSte Management was no longer responsible for payments. Waste Management alleges that it was the District' s obligation to make the bond payments to the Trustee and that , following its tennination , the District in fact continued to make those payments. Waste Management alleges , however, that nine months later , on May 14 2007 the Distrct notified the Trustee that it had been remitting those monthy bond payments merely as " an accommodation such monthly sum presumably representing the payment due from Waste Management towards the satisfaction of the reference bonds " (Compi. at the District 58) and that fuer advised the Trustee that its relationship with Waste Management had been tenninated and that it would no longer remit payments on Waste Management's behalf. The District did not send a copy of this letter to Waste Management. Waste Management alleges that these representations were blatantly incorrect and that they were clearly refuted by the Fift Amendment to their agreement , pursuant to which the Distrct was contractually responsible for the bond payments to the Trustee. In the Complaint , Waste Management fuher alleges that , in reliance on the District' May 14 2007 correspondence , the Trustee made demand on Waste Management , via telephone on October 30 2007 , for a bond payment of $343 450. 00 that was due on November 1 2007. The Trustee also advised Waste Management that it would be in default ifit payment to the Trustee. Waste Management alleges that, by virte of did not make this its business and contractu relationships with the Trustee, the Trustee was ina position of trust with Waste Management. Based on the Trustee s representation that Waste Management would be in default if it did not make the payment , and because it did not have all of the pertinent documents necessar to assess its obligations , Waste Management made the payment, mistakenly believing that the monies that the Trustee sought related to the time period when Waste Management was operating the Facility, not to a subsequent time period. Waste Management fuher alleges that when the agreement was tenninated , Waste Management was curent on its payments and had no obligation to make any furter payments. Waste Management alleges that once it realized its [* 6] error , it demanded that the Trustee retur the monies but he never did. Waste Management also alleges , upon information and belief, that the Trustee distributed the fuds to Franenmuth as the bond holder. Waste Management additionally alleges that the Trustee maintans the Account whose fuds properly belong to Waste Management by vire of Waste Management' s status as successor to Eastern Waste ofL.I. , Inc. , a company that previously entered into agreements related to the development and construction of the Facilty. Waste Management specifically seeks to recover from this Account. In the first cause of action in the Complaint, Waste Management seeks a declaratory judgment that 1) Waste Management owns the fuds in the Account , including any accrued interest; 2) the Trustee must pay the fuds in the Account , including any accrued interest, to Waste Management; 3) an Event of Operator Termination occured under the Amended and Restated Lease as of August 14 2006; 4) Waste Management had no contractul obligation make the November 2007 payment; 5) Waste Management erroneously paid $343 450 to the Trustee in or about November 2007; 6) neither the Trustee nor Franenmuth has the right to retan the $343,450 that Waste Management paid in or about November 2007; and 7) the Trustee and/or Franenmuth must pay to Waste Management the sum of $343 450 , representing fuds that Waste Management erroneously paid. In the second cause of action , Waste Management seeks to recover from the Trustee and Franenmuth on a theory of unjust emichment. In the third cause of action , Waste Management seeks to recover from the Trustee for breach of contract. In the four cause of action , Waste Management seeks to recover from the Trustee on a theory of promissory estoppel. And in the fift cause of action , Waste Management seeks to recover from the District and the Trustee on a theory of negligent misrepresentation. Franenmuth' s Prior Motion centered on the issue of whether there was an "Event of Operator Termination" as defined by the applicable agreements. The Cour denied the Prior Motion , concluding, inter alia that Franenmuth had not definitively established that Waste Management was required to give notice and , assuming, arguendo that Waste Management was required to give notice , there was an issue whether the District' s thee- day termination rendered it impossible for Waste Management to comply with the applicable notice provision. [* 7] The complaint in Action No. 2 (Ex. 8 to Master Exhbit List - Vol. 1) contains four (4) causes of action: 1) against Waste Management for breach of contract , 2) against the District for breach of contract , 3) against the District and Waste Management on a theory of promissory estoppel , and 4) against the District on a theory of unjust enrchment. The determination of the motions sub judice involves the application of Section 24 of the IDA- Distrct Lease (Ex. G to Fihma Aff. in Supp. ), on which the Distrct relies in support of its argument that it is absolved from financial responsibilty for repayment of the Bonds. Section , titled " Executory Contract " provides as follows: Notwithstanding any other provision of this Agreement, (i) ths Agreement shall be deemed executory only to the extent of the moneys budgeted and appropriated and available for the purose of this Agreement, and no liabilty on account thereof shall be incured by the District beyond the amount of such moneys , and (ii) it is understood that neither this Agreement nor any representation by any public employee or offcer creates any legal or moral obligation to request , budget appropriate or make available moneys for the purose of ths Agreement. C. The Paries ' Franenmuth Positions submits, inter alia that 1) the Distrct breached its contractual obligations under the Lease by failng to make required payments under the Lease and subletting the Facilty; 2) pursuant to the Lease , the Distrct is liable for costs and expenses incured with respect to the enforcement of the obligations under the Lease; 3) as the sole holder of the Bonds Franenmuth is a third-par beneficiar to the obligations and agreements of the Distrct pertning to the Bonds and , therefore , is a third-par beneficiar of the Lease; 4) Section 24 of the Lease does not relieve the District of its obligations under the Lease; 5) assuming, arguendo that the Cour determines that Franenmuth is not a third-par beneficiar of the agreements related to the Bond and the Facility, Franenmuth is entitled to judgment on the grounds of promissory estoppel or unjust enrichment; 6) the Lease governs Waste Management' s notice obligations; 7) Waste Management abandoned the Facilty prior to the termination of the Services Agreement; 8) Waste Management intended to permanently cease operations at the Facilty; 9) Waste Management failed to provide the required notice of its cessation of operations at the Facility; and 10) there was no Event of Operator Termination prior to the November 2007 Payment. In addition , Franenmuth adopts BONY' s arguments that 1) BONY [* 8] and Franenmuth by reference , properly retained the fuds in the Account that were held in trust for Franenmuth; and 2) Waste Management is not entitled to a refud of its November Bond Payment, 2007 because there is no issue of fact that an Event of Operator Termination occured prior to that payment. BONY submits inter alia that 1) the documentar evidence establishes that the fuds in the Account may not be released to Waste Management, the Lessee , until the Bonds are fully paid; 2) the occurence of an Event of Operator Termination does not entitle Waste Management to possession ofthe fuds in the Account; 3) Waste Management' s claims are belied by the documenta evidence , which establishes that BONY is properly holding the fuds at issue in trust for Franenmuth; 4tinformation obtained during discovery establishes that Waste Management did not provide the required notice to invoke the Event of Operator Termination provisions in the Lease and , therefore , Waste Management properly made the November 1 2007 Bond Payment and is not entitled to recover that payment; 5) Waste Management has not provided support for its claims that it mistakenly made the November 2007 Bond Payment and that it is entitled to the fuds in the Account; 6) Waste Management' s arguments would 'require the Cour to ignore the plain language of the relevant agreements , which provide that the fuds in the Account wil not be released to Waste Management until the Bonds are paid in full; 7) Waste Management has failed to raise an issue of material fact disputing that it properly made the November 2007 payment; and 8) BONY is entitled to sumar judgment against the Distrct, in light of the District' s violation of its contractual obligations. Waste Management submits inter alia that 1) its obligation to pay rent for the Facilty, and futue obligations , terminated upon an Event of Operator Termnation , which occured effective August 14 2006 , the date on which Waste Management ceased operation of the Facility based on the Distrct's instrction; 2) Waste Management had no legal obligation to provide notice; 3) even if notice was required , it was met , excused and/or futile; 4) the failure of BONY , which is acting as trustee for the Bonds , to pay Waste Management the proceeds of the Account constitutes a breach of contract; 5) Waste Management is entitled to retu of the November 2007 Payment; 6) the relevant agreements between the paries payment of the Bond a condition to release of those fuds to Waste sufficient relationship between Waste Management and the Distrct do not make ful Management; 7) there is a to support a claim for [* 9] negligent misrepresentation; 8) there exist issues of fact as to whether the information that the District provided in its May 14 2007 letterto BONY , regarding whether it made payment to the Trustee as an accommodation to Waste Management , constituted misrepresentations; and 9) Waste Management' s reliance on the May 14 , 2007 letter was reasonable. The District submits inter alia that 1) pursuant to Section 24 of the Lease , it had no obligation to make payments on the Bond; 2) while recognizing the policy implications of its proposed interpretation of Section 24 of the Lease , the District clearly communicated its intent not to make the bond payments , and the Lease was drafed accordingly; and 3) the moneys sent by the District to the Trustee were transmitted on behalf of Waste Management. RULING OF THE COURT To grant sumar judgment , the cour must find that there are no material , trable issues of fact, that the movant has established his cause of action or defense sufficiently to warant the cour, as a matter of law, directing judgment in his favor , and that the proof tendered is in Mene/cu admissible form. v. Crean 222 A.D.2d 418 419- 420 (2d Dept 1995). If the movant tenders sufficient admissible evidence to show that there are no material issues of fact, the burden then shifts to the opponent to produce admissible proof establishing a material issue of fact. at 420. Sumar judgment is a drastic remedy that should not be granted where there Id is any doubt regarding the existence of a trable issue of fact. Id. The Cour is mindful of the policy implications of the interpretation of Section 24 urged by the Distrct. Indeed , the Appellate Division decision in Rochester Fund Municipals Amsterdam Municipal Leasing Corp. 296 A.D. 2d 785 (3d Dept. 2002) seems to at least question the Distrct' s position: General Municipal Law 109-b(2)(f) requires that all contracts with a municipality contan an executory clause providing, in relevant par , as follows: " This contract shall be deemed executory only to the extent of monies appropriated and available for the purose of the contract , and no liabilty on account thereof shall be incured by the political subdivision beyond the amount of such monies. " Such clauses are enforceable only where it has been established that fuds were not available " the course of ordinar budgeta procedure( s)" (citations omitted). Stated another way, " any unavailabilty of fuds must not have been the result of any improper act or omission by the (muncipality)" (citations omitted), nor may the municipality make such fuds "unavailable" as a matter of convenience (citations omitted). Id at 786. [* 10] Ths case is complicated , however, by the IDA' s involvement in the Facilty, the language of Section 24 , and the representation of Mr. Swergold , who represented the District and testified on its behalf, that it was never the District' s intention to make payments on the Bond because it was financially unable to do so , and that the Distrct communicated that intent and ensured that it was reflected in the Lease. The Cour canot rule , given the numerous agreements at issue in ths action and the paries ' disputes regarding the interpretation of those agreements , that , as a matter of law , the Distrct' s proposed interpretation of Section 24 is untenable. There are numerous factual disputes before the Cour. These include , but are not limited , whether 1) the paries intended that the District be liable for Bond payments , 2) there was an event of operator termination , 3) Waste Management was required to provide notice to the Trustee , 4) if it was required to provide notice , Waste Management' s failure to provide that notice was otherwse remedied S) the District made misrepresentations by stating that it was making payments on behalf of Waste Management, and 6) Waste Management properly made the November 2007 payment , the Cour concludes that sumar judgment is inappropriate and that these issues , and others , must be resolved at a trial ofthis matter. In light of these disputes sumar judgment is not appropriate at this junctue. All matters not decided herein are hereby denied. This constitutes the decision and order of the Cour. Counsel for the paries are reminded of their required appearance before the Cour for a pre-trial conference on October 14 2011 at 11 :00 a. ENTER DATED: Mineola, NY August 15 2011 BON. TIMOT DRISColL etrERED AU6 18 2011 NA88U COUNTY COTY CLERK' S OFFICf
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