Kreutzer v East Islip Union Free Sch. Dist.

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Kreutzer v East Islip Union Free Sch. Dist. 2015 NY Slip Op 32322(U) December 2, 2015 Supreme Court, Suffolk County Docket Number: 14-70174 Judge: Joseph Farneti Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [* 1] SJI< )Jr! !'ORM UROJ: R rNDEX No. 14-70174 SUPREME COURT - STATE OF NEW YORK I.J\.S. PART 37 - SUFFOLK COUNTY PRESENT: Hon. .JOSEPf I J.'ARNETI Acting Justice Supreme Court ---------------------------------------------------------------)( DOROTHY H. KREUTZER, Plaintiff, - against - EAST ISLIP UNION FREE SCHOOL DISTRICT; BOARD OF EDUCATION OF EAST ISLIP SCIIOOL DISTRICT; and EAST ISUP ASSOCIATION OF SCIIOOL ADMINISTRATORS, Defendants. ---------------------------------------------------------------)( MOTION DJ\TF 2-20- J 5 3-26-15 ADJ. DATE Mot. Seq, # 001 - MG . # 002 - MotD MARLIESE FUS, ESQ. Attorney for Plaintiff 149 East Main Street, Suite 3, P.O. Box 2 East Islip, New York 11 730 RUTHERFORD & CHRlSTIE, LLP Attorney for East Islip Union Free School District & I3oard of Education 369 Lexington Avenue, 811i Floor New York, New York 10017 BRAD A. STUHLER, ESQ. Attorney for East Islip Association of School Administrators 490 Wheeler Road, Suite 280 Hauppauge, New York 11788 Upon the reading and filing of the following papers in this matter: (I) Notice of Motion to Dismiss by defendant East Islip Association of School Administrators, dated January 16, 2015, and suppo1t ing papers; (2) Affidavit in Opposition by the plaintiff dated March 20, 20 15, and supporting papers; (3) Reply Affirmation by defendant East Islip Association of School Administrators dated March 24, 20 15, and supporting papers; (4) Notice of Motion to Dismiss by defendants East Isl ip Union Free School District and Board ofEducation ofEast Islip School District dated January 30, 2015, and supporting papers; (5) Affidavit in Opposition by the plaintiff dated March 20, 2015, and supporting papers; and (6) Reply Affirmation by defendants East Islip Union Free School District and 13oard of Education of East Islip School District dated March 25, 20 15, and supporting papers; it is ORDERED that these motions are hereby consolidated for purposes of this determination; and it is further ORDERED that the motion by defendant East Islip Association of School Administrators to dismiss the complaint against it pursuant to CPLR 321 l (a) (7) is granted; and it is further ORDt.'RED that the motion by defendants East Islip Union Free School District and Board of Education of East Islip School District to dismiss the complaint against them pursuant to CPLR 32 11 (a) (7) is granted to the extent of dismissing the second, third, fourth, fifth and sixth causes of action against them. and is otherwise denied. [* 2] Krcut.1-cr v East Islip UFSD lndc:\ o. 14-70174 Pagt! o. 2 This is an action .to recover damages for, inter a/ia, breach of contract, negligence, fraud anti breach or fid uciary duty, relating to an insurance policy on the life or the plaintiff' s husband allegedly procured by. and to be administered by, the defendants for the benefit of the plaintiff. The plainti1rs husband. I kmy Kreutzer. was employed by the East Islip School District in 1955 as a gym teacher. and subseq uently as tlu: school's athletic director. until his retirement in 1989. The plaintiff aJleges that by virtue of a written agreement between the defendant East Islip School District ("School District") and the East Islip Association of School Administrators ("Association"), of which her husband was a member, her husband was entitled to a $100.000 split life insurance policy that would pay $80,000 to his named beneficiary. the plaintiff, upon his death. The plaintifrs complaint alleges that the Association was to pay the premiums through a Trust fund known as the E.l.J\.S.A. Welfare Trust Fund, and the School District was to pay into the fund the sums necessary to provide for the additional fringe benefits to members and associate members, including the funds which would be used to pay the insw-ance premiums on split life policies. The p~aintiff believes that in 1994, the School District reduced its contribution to the E.I./\.S.A Welfare Trust Fund and took over administration of the life insurance policies. According to the complaint, on or about May 2, 1990, Mr. Kreutzer applied for the policy. l lis application was approved and he was apparently required to turn in a prior policy for $50.000 to which he was entitled pursuant to a collective bargaining agreement between the School District and the Association. The J\ssociation paid the first premium of $1,364 by check dated May 2, 1990. The plaintiff believes that upon obtaining this new policy for which the premiums would be paid on his behalf, her husband let lapse another$ I00,000 policy for which he had been paying out-of-pocket premiums. Following Mr. Kreutzer's death on December 5, 20 13, the plaintiff contacted the insurance company to collect on the $100,000 split life insurance policy and was informed that it had no record of the policy and that the policy had probably lapsed due to unpaid premiums. The plaintiff contacted the defendants and all denied responsibility for the cancellation of the policy due to unpaid premiums. This action followed. The plaintiff asserts nine causes of action in her complaint- three against the Association only, Cour against the School District and Board of Education only, and two against all of the defendants. As against the Association, the first cause of action sounds in breach of contract for failing to pay the premiums on the $ I 00,000 split-life policy and thereby causing the policy to lapse, the second sounds in negligence for fai ling to pay the premiums on the $100,000 split-life policy and thereby causing the policy to lapse, and the third sounds in breach of fiduciary duty for failing to ensure that the premiums were paid and that th<.: policy remained intact. As against the School District and the Board of Education, the first cause of action sounds in breach of contract for failing to pay the premiwns on the $100,000 split-life policy or to ensure that the premiums were paid, the second sounds in negligence for failing to pay the premiums on the $100.000 split-life policy or to ensure that the premiums were paid, the third sounds in negligence for fai ling to investigate whether Mr. Krcut:ter's policy had lapsed after becoming aware that other similar policies had lapsed. and the fourt h sounding in fraud for falsely representing that it wtmld pay the premiums. The first cause of action against all defendants (which is the fourth cause of action against thi: Association and the fifth cause of action against the School District and the Board of Education) sounds in negligence for fai ling to inquire as to the status of all policies when the School District reduced the wclfori: fund and took over the administration of the policies, and the second (which is the fifth cause of action against the Association and sixth cause of action against the School District and the Board of Education) [* 3] Kreutzer v East Islip UFSD Index No. 14-70 174 Page No. 3 sounds in negligence for allowing the policy to lapse and not providing for all of their contractees resulting in the loss of additional contractual benefits to which the plaintiffs spouse may have been entitled. The defendants now separately move, pre-answer. to dismiss the complaint. The /\ssociation moves fo r an Order dismissing the action against it pursuant to CPLR 3211 (a) (1 ), (5), (7), and (I 0), and CPLR 2 17 (2) (a). The School District and the Board or Education move for an Order dismissing the action against them pursuant to CPLR 3211 (a) (1) and (7), and Education Law~ 38 13 (2-h ). The Association's motion is granted for failure to state a cause of action (CPLR 321 1 [.a] [7.1). Pursuant to CPLR 32 J 1 (a) (7), pleadings shall be liberally construed, the facts as alleged accepted as true. and every possible favorable inference give to plaintiff (Leon v Martinez, 84 NY2d 83, 614 NYS2cl 972 [1994J). On such a motion, a court is limited to examining the pleading to determine whether it states a cause of action (Guggenheimer v Ginzburg, 43 NY2d 268, 401 NYS2d 182 [1977)). In examining the sufficiency of the pleading, a court must accept the facts alleged therein as true and interpret them in the light most favorable to the plaintiff (Pacific Carlton Development Corp. v 752 Pacific, LLC, 62 ADJd 677, 878 NYS2d 421 [2d Dept 2009_1; Gjonlekaj v Sot, 308 AD2d.47 I, 764 NYS2d 278 [2d Dept 20031). On such a motion, a court's sole inquiry is whether the facts alleged in the complaint fit within any cognizable legal theory, not whether there is evidentiary support for the complaint (see Leon v Martinez. supra; International Oil Field Supply Servs. Corp. v Fadeyi, 35 AD3d 372, 825 NYS2d 730 l.2d Dept 2006]~ Thomas McGee v City of Rensselaer, 174 Misc 2d 49 1 [Sup Ct, Rensselaer County 19971). Upon a motion to dismiss, a pleading will be liberally construed and such motion will not be granted unless the moving papers conclusively establish that no cause of action exists (Chan Ming v Chui Pak Hoi. 163 AD2d 268, 558 NYS2d 546 [1st Dept 1990]). The Court finds the case of Martin v Curran (303 NY 276 [1951]) dispositive as to all causes of action alleged against the Association. In Martin, the Court of Appeals held that because a voluntary, unincorporated membership association has no existence independent of its members, a plaintiff cannot maintain a cause of action against it "unless the debt which he seeks to recover is one upon which he could maintain an action against all the associates by reason of their liability therefor, either jointly or severally" (id. at 281, quoting McCabe v Goodfellow, 133 NY 89, 92 [1892]). Through the affidavit or its current president, the defendant has established that it is an unincorporated association. The plaintiff does not allege that the individual, current members of the Association approved, ratified, purchased. discontinued or had any knowledge or involvement with any life insurance policy for Mr. Kreutzer. Through affidavits attached in support of the Association·s motion to dismiss, current members or the Association attest that they had no knowledge of, or involvement with, any such insurance policy and that they were never informed that any such insurance policy had lapsed or expired. In her reply papers, the plaintiff concedes that Martin controls as to her claims sounding in breach of contract, but not as to her remaining claims sounding in negligence. Contrary to the plaintiffs contentions, the Martin decision makes no distinction between contract and negligence claims. Indeed, the decision itself explicitly states that the line of consistent precedent on this holding beginning with McCabe v Goodfellow, supra, includes not only contract but tort cases. Interpreting General Associations Law § 13. the Court of Appeals elaborated, "(s]o., for better or worse, wisely or otherwise, the Legislature has limited such suits against association officers, whether for breaches of agreements or for tortious wrongs, to cases where the individual liability of every single member can be alleged and proven" (Martin v Curran , supro [* 4] Kreutzer v East Is lip lJFSD Indcx No. 14-70 174 Page No. 4 at 282). Therefore, even assuming that the plaintiff's negligence claims were otherwise viable, they would fai l pursuant to Martin. While the plaintiff seeks to rely on the dissenting opinion in Jvfartin, as well as some narrow exceptions that have been carved out with respect to the negligence of agents of a union, the Court !inds the plaintiffs arguments unpersuasive. Not only is the case law involving negligence of agents or unions inapplicable here, but the plaintiff's claims arc clearly rooted in the breach of alleged contractual obligations. 1 Additionally, despite criticism, the Martin rule has recently been upheld by the Court of Appeals. In Palladino v CNY Centro, Inc., 23 NY3d 140, 989 NYS2d 438 [2014], a case in which a union member sought damages from his union for breach of the duty of fair representation, the Court of Appeals directly addressed criticism of the Martin rule and declined to overrule its precedent (see also Lallendro v New York State United Teachers Assn., 88 AD3d 1142, 931 NYS2d 724 [Jd Dept 2011]; Walsh v TorresLynch, 266 AD2d 817, 697 NYS2d 434 [4th Dept 1999]). Accordingly, as Martin remains the law in New York, the Association's motion to dismiss the complaint against it is granted. As to the motion by the School District and the Board of Education, the Court finds that the plaintiff's negligence and fraud claims are not separate and apart from her claim for breach of contract, as they are predicated upon the same purported wrongful conduct of the defendants in failing to pay the premiums on Mr. K.reutzer's life insurance policy (see Beta Holdings Inc. v Goldsmith, 120 J\.D3d l 022, 992 NYS2d 25 [ l st Dept 20 14]; OP Solutions, Inc. v Crowe/ & Moring, LLP, 72 AD3d 622, 900 NYS2d 48I1st Dept 2010_1). A simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated. "Merely charging a breach of a 'duty of due care,' employing language familiar to tort law, does not, without more, transform a simple breach of contract into a tort claim'' (C/arkFitzpatrick, Inc. v Long ls. R.R. Co., 70 NY2d 382, 521NYS2d653 [1987]). Moreover, "New York docs not recognize tort claims arising out of the negligent performance of a contract'' (Inter-Community Mem. llo~p. of Newfane v Hamilton Wharton Group, Inc., 93 AD3d 1176, 11 77, 941 NYS2d 360 I4th Dept 2012], quoting Verizon New York, Inc. v Bar/am Constr. Corp., 90 AD3d 1537, 1538, 935 NYS2d 420 [4th Dept 201 IJ) and, despite using language sounding in tort, the plaintiff has not alleged the breach of a duty separate and apart from that to abide by the terms of the purported contract. Nor is there any allegation that the nature of the alleged economic..: harm gives rise to a duty of reasonable care independent of the contract itself (see Verizon New York, Inc. v Optical Communications Group, Inc., 91 AD3d 176, 936 NYS2d 86 [1st Dept 2011 "!). 1 While the Martin rule and its rationale applies to all of the plaintifrs claims against the /\ssociat.ion, tile Cou11 further notes that the plaintiff's claims sounding in negligence and breach of fiduciary duty are based on the same facts and theories as their breach of contract claim. Without identifying a legal duty separate and apart. from the alleged contract itself that has been violated, these claims are not actionable (see Clark-Fitzpatrick, Inc. 11 Long ls. R.R. Co., 70 NY2d 382, 52 1 NYS2d 653 (19871; Brooks 11 Key Trust Co. Natl. Assn. , 26 /\D3d 628, 809 NYS2d 270 [3d Dept 2006]). [* 5] Krcut~cr v East Isl ip UFSD Index o.14-70174 Page No. 5 llcre. all or the plaintiff's allegations stem from the same set of facts- the alleged failure or the defendants to pay or otherwise contribute lo premiums on a life insurance policy for the plaintiff's spouse. /\ny duty allegedly owed by the defendants to the plaintiff arises solely as a result of this contractually based agreement. Each of the plaintiff's negligence claims is merely a restatement, in slightly diffcrcnl terms, of' the explici t or implied contractual obligations asserted in the cause of action for breach or contract. Similarly, a fraud claim may coexist with a breach of contract cause or action only where the alleged fraud constitutes the breach of a duty separate and apart from the duty to abide by the terms of the contract (see Verizon New York, Inc. v Optical Communications Group, Inc. , supra) . The essence of the plaintifrs fraud claim is that the defendants represented to the plaintifrs spouse that it would pay the premiums on the $100,000 split-life policy but that such representation was false when made and, as a result, the plaintiff's spouse was induced to turn in another policy for $50,000, harming the plain.tiff as beneficiary. The fraud alleged is based on the same set of facts as w1derlie the contract claim and mere general allegations that a defendant entered into a contract while lacking the intent to perform it arc insufficient to support fraud-based claims (see OP Solutions, Tnc. v Crowe/ & Moring, LLP, supra; Maiias v VMS Assoc., LLC, 53 AD3d 451, 863 NYS2d 4 (I st Dept 2008]; J.E. Morgan Knitting Mills v R eeves Bros., 243 AD2d 422, 663 NYS2d 211 [1st Dept 1997)). The plaintiff has failed to allege a misrepresentation of present fact, rather that a misrepresentation offuture intent to perform under the contract, that is collateral to the contract and would therefore involve a separate breach of duty (GoSmile, Inc. v Levine. 81 AD3d 77, 915 NYS2d 521 [I st Dept 201 OJ). Thus. the plaintiff has failed to state causes of action for either negligence or fraud. Turn ing to the remaining claim, accepting the facts alleged in the complaint as true and providing the plaintiff the benefit of every possible favorable inference, the Court finds that the plaintiff's complaint states a cause of action for breach of contract. Despite the defendants ' assertions that they did not have any contrnctual obligation based on a reading of the collective bargaining agreement, on a motion to dismiss for failure to state a cause of action, the Court is not to determine whether there is evidentiary support for the complaint but, rather, whether the facts as alleged fit within a cognizable legal theory. The Court finds that the complaint adequately alleges all of the essential clements of a cause or action to recover for breach of contract, specifically, the existence of a contract, the plaintiffs performance under the contract, the defendant's breach of that contract, and resulting damages (see JP Morgan Chase v J./l. Electric of New York, /11c., 69 /\D3d 802, 893 NYS2d 237 [2d Dept 20101). The documentaiy evidence submitted by the defendants in their motion to dism iss the complaint docs not conclusively dispose of the plaintiffs claims. /\ motion to dismiss a complaint pursuant to CPLR 3211 (a) (I) may be granted only if the documentary evidence submitted utterly refutes the factual allegations of the complaint and conclusively establishes a defense to the claims as a matter of law (see Flus/zing Sav. Bank, FSB v Siunykalimi, 94 AD3d 807, 941 NYS2d 719 f2d Dept 2012.l; Integrated Co11str. Servs., Inc. vScottsdale Ins. Co., 82 AD3d 1160, 920 NYS2d 166 [2d Dept 201 IJ). While the defendants seek to rely on the collective bargaining agreement and the universal whole li fe application to establish that they did not have any role in the administration of the policies, there are not only questions as to Mr. Krcutzer's effective date of retirement and, accordingly, which collective bargaining agreement governed at the time, but also questions of fact as to the School District's role and obligations in [* 6] Kreutzer v l·:ast Islip lJFSD Index o.14-70174 Page No. 6 maintaining the policit:s that turn on di11cring interpretations of the agreement in force. Moreover, tht: universal whole life application provided is not the alleged contract itself, and the plaintiff asserts that more discovery is nt:cdcd to find the relevant documents and establish her claims. f inally, with respect to the dcfondants' contention that the plaintiffs claims are barred by the ont:ycar statute of limitations applicable to school districts (Education Law§ 38 13 12-bl), the Court finds that de fendants have fai led to conclusively establish, primu jacie, the date of the alleged breach. A breach of contract cause of action accrues at the time of the breach (see Ely-Cruikshank Co., Inc. v Bank of Montreal, 81 NY2d 399, 599 NYS2d 501 [ 1993 J). The present action is not against an insurer for payment of insurance procet:ds. but rather is against an employer for an alleged breach or a collective bargaining agreement to maintain life insurance coverage. Therefore, despite the plaintiff's contentions that the statute of limitations should run from the time of her husband's death, the Court finds that the breach would have occurred at the time the defendants allegedly failed to perform their obligations under the pu1vorted contract (by failing to make required contributions to the premiums), and that the statute would thus run from that date (see LaGreca v City of Niagara Falls, 244 AD2d 862, 665 NYS2d 229 [4th Dept 1997]). Although the Court is aware of the potentially harsh result of this finding, it is well-established U1at the statute runs from the time of the breach even if no damage occurs until later, and even though the injured party may be ignorant of the existence of the wrong or injury (see Ely-Cruikslza11k Co., I nc. v B ank of Montreal, supra; Reid v /11corporated Vil. of Floral Park, 107 AD3d 777, 967 NYS2d 135 [2d Dept 20131; Chelsea Piers L.P. v H udson R iv. Park Trust, 106 AD3d 410, 964 NYS2d 147 I l st Dept 2013]). The Court also finds (and the plaintiff docs not contest) that the one-year statute of limitations provided by Education Law § 3813 (2-b) is applicable to the plaintiffs breach of contract claims (see East Hampton Unio11 Free School Dist. v Sandpebble Bldrs., I nc., 90 AD3d 821, 935 NYS2d 616 f2d Dept 20111). However, on this record the Court is unable to discern the exact date of the alleged breach, as there is no claim or.document indicating precisely when the defendants allegedly failed to fulfill their contractual obligations, aside from the defendants' mere statement in their motion that the insurance policy lapsed ''on or about July 9, 1991." Accordingly, this branch of the motion is denied. I Dated: December 2, 20 l 5 FINAL DISPOSITION _ X _ NON-FINAL DISPOSITION

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