50 Gramercy Park N. Owners Corp. v GPH Partners, LLC

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50 Gramercy Park N. Owners Corp. v GPH Partners, LLC 2017 NY Slip Op 31201(U) June 5, 2017 Supreme Court, New York County Docket Number: 103736/2011 Judge: Jeffrey K. Oing 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. [*FILED: NEW YORK COUNTY CLERK 06/06/2017 10:19 AM 1] NYSCEF DOC. NO. 134 INDEX NO. 103736/2011 RECEIVED NYSCEF: 06/06/2017 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: IAS PART 48 ----------------------------------------x 50 GRAMERCY PARK NORTH OWNERS CORP., Plaintiff, --againstGPH PARTNERS I LLC ( SPO_NSOR) I GPH INVESTORS LLC, RFR GRAMERCY PARK, LLC, S/A GRAMERCY LLC, ABY ROSEN, MICHAL FUCHS,· IAN SCHRAGER, and MICHAEL OVERINGTON, Defendants. --~-------------------~--7--------------x GPH PARTNERS, LLC (SPONSOR), GPH INVESTORS LLC, RFR GRAMERCY PARK, LLC, S/A GRAMERCY LLC, ABY ROSEN, MICHAL FUCHS, IAN SCHRAGER, and MICHAEL OVERINGTON, Third-Party Plaintiffs, -againstPACE PLUMBING CORP., AMROSINO DEPINTO & SCHMEIDER, P.C., BRENNAN BEER GORMAN/ARCHITECTS, L.L.P., ISMAEL· LEYVA ARCHITECT, P.C., EUROTECH CONSTRUCTION CORP., CONVENTIONAL STONE & MARBLE CORP., PATTI & SONS, INC., EPIC MECHANICAL CONTRACTORS, LC, JAMES F. VOLPE ELECTRIC CONTRACTING CORP., S&C PRODUCTIONS CORPORATION, HOFFMAN FLOOR COVERING CORP., and JOHN DOE 1-3, being fictitious names of contr~ct6rs, design professionals or material suppliers potentially responsible for the allegations of the Complaint, Third-Party Defendants. -~--------------------------------------x GPH PARTNERS, LLC (SPONSOR), GPH INVESTORS LLC, RFR GRAMERCY PARK, 2 of LLC, S/A GRAMERCY LLC, ABY ROSEN, 11 Index No.: 103736/2011 Mtn Seq. No. 003 DECISION AND ORDER [*FILED: NEW YORK COUNTY CLERK 06/06/2017 10:19 AM 2] NYSCEF DOC. NO. 134 INDEX NO. 103736/2011 RECEIVED NYSCEF: 06/06/2017 Page 2 of Index No.: 103736/2011 Mtn Seq. No. 003 MICHAL FUCHS, IAN SCHRAGER, and . MICHAEL OVERINGTON, 10 \ Second Third-Party Plaintiffs, -againstLEND LEASE (US) CONSTRUCTION LMB, INC.j f/k/a BOVIS LEND LEASE LMB, INC., Second Third-Party Defendants. ----------------------------------------x JEFFREY K. OING, J.: Preliminary Statement Plaintiff, a residential cooperative corporation owned by 'individual shareholders, commenced this action against defendants, the cooperative seeking damages for, defects. spons~r, promoters, and prior owner, among other·things, construction and design The cooperative sponsor, promoters, and prior owner commenced a third-party action against various designers, architects, and subcontractors, seeking damages for .breach of contract and seeking indemnification. The cooperative sponsor, promoters and prior owner then commenced a second third-party action against second third~party defendant, the construction manager, seeking damages for breach of contract and seeking indemnification. 3 of 11 [*FILED: NEW YORK COUNTY CLERK 06/06/2017 10:19 AM 3] NYSCEF DOC. NO. 134 INDEX NO. 103736/2011 RECEIVED NYSCEF: 06/06/2017 Page 3 of Index No. : 103736/2011 Mtn Seq. No. 003 10 Relief Sought Second third-party defendant, Lend Lease (US) Construction LMB, Inc. f/k/a Bovis Lend Lease LMB, Inc. ("Bovis»), the construction manager and general contractor, now moves to dismiss the second third-party complaint of the first-party defendants/second thir·d-party plaintiffs GPH Partners, LLC ("Sponsor"), GPH Investors LLC, RFR Gramercy Park, LLC,· S/A Gramercy LLC, Aby Rosen, Michal Fuchs, Iari Schrager, and Michael Overington (collectively, "GPH") , former owner, sponsor_, and promoters of the offering plan for the cooperative, arguing tha~ GPH's claims seeking damages for breach of contract, and seeking contractual and common indemnity, are barred by the antisubrogation doctrine. Factual Background Plaintiff owns a 17-story Manhattan cooperative building located at 50 Gramercy Park North. The building was built in 1924 and adjoins a 19-story building known as 2 Lexington The cooperative sponsor owns the Gramercy Park Hotel Avenu~. ("Hotel"), which is located at 2 LexingtoQ Avenue pursuant t6 a ground lease with the fee owner of 2 Lexington Avenue. In 2007, SO-Gramercy Park North, the 17-story building, _was converted into residential cooperative apartments. The offering plan for the cooperative ' project i~cluded 23 residential apartments and 27 storage lockers, to be used by the residential cooperative and the Hotel. 4 of 11 [*FILED: NEW YORK COUNTY CLERK 06/06/2017 10:19 AM 4] NYSCEF DOC. NO. 134 INDEX NO. 103736/2011 RECEIVED NYSCEF: 06/06/2017 Page 4 of Index No.: 103736/2011 Mtn Seq. No. 003 10 There are various easements granted between plaintiff and the Hotel. One such easement permits the Hotel to use and occupy approximately 8,100 square feet of space in the sub-cellar, cellar, and first/lobby floor of the building, for a restaurant and service area for the Hotel. The Hotel also has an easement. to use and occupy approximately 5,700 square feet of space in the . . \ sub-cellar, cellar, fiist/lobby floor, on a shared basis with the plaintiff, for use as an access corridor arid mechanicial spaces. In 2004, at the start of the cooperative conversion project, GPH hired Bovis to perform construction management and general construction work on the project, and on November 1, 2004, GPH and Bovis entered into a Construction Management Agreement (the "Agreement").· Pursuant to Article 15 of the Agreement, GPH agreed to procure and maintain, during the term of the project, and at its sols expense, an Owner Controlled Insurance Program ("OCIP"), which provided, among other things, general commercial liability coverage. The OCIP policy named Bovis as an additional named insured and, in compliance with the Agreement, included a waiver of subrogation against Bovis, as construction manager. Pursuant to Article 16 of the Agreement, Bovis was required to obtain insurance coverage for its professional liability and pollution liability. that "~a]ll Article 16.8 set forth, in relevant part, insurance policies required above as they apply to [GPH] shall be written as primary policies not contributing with, 5 of 11 [*FILED: NEW YORK COUNTY CLERK 06/06/2017 10:19 AM 5] INDEX NO. 103736/2011 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 06/06/2017 Page 5 of Index No.: 103736/2011 Mtn Seq. No. 003 or in excess of, any insurance c~rried by [GPH] ." 10 There is no dispute that both GPH and Bovis obtained insurance1 as provided in the Agreement. The construction and cooperative conversion process was completed in 2007, at which time ownership of the 17story cooperative building was conveyed ~o plaintiff. Procedural History On March 28, 2011, plaintiff commenced this action against GPH seeking damages for construciion defects, misappropriation of space, misappropriation of utilities, breach of fiduciary duty, self-dealing, and breach of the offering plan.· Plaintiff made specific allegations regarding defective plumbing, defective HVAC operations, defective electrical installation, failure to build. to code, as well as claims regarding the Hotel's misuse of the entry space and the cellar/sub-cellar space. On October 7, 2013, GPH commenced a third-party action against various designers, arch~t~cts, and contractors., assertihg a breach of contract cause of action, as ~ell as asserting contractual and common .law indemnity claims. On February 4, 2016, GPH commenced a second third-party action against Bovis alleging an action in breach of contract, and contractual and common law inde~nification. In the second third-party complaint, GPH alleges that the problems raised by plaintiff in the main action are the result of Bovis's failure to properly perform its construction and construction management duties. 6 of 11 [*FILED: NEW YORK COUNTY CLERK 06/06/2017 10:19 AM 6] NYSCEF DOC. NO. 134 INDEX NO. 103736/2011 RECEIVED NYSCEF: 06/06/2017 Page 6 of Index No.: 103736/2011 Mtn Seq .. No. 003 10 Contentions Bovis now moves for summary judgment dismissing the second third-party complaint on.the ground that, pursuant to the terms of the Agreement, GPH cannot bring this action because it has no right of subrogation against Bovis. Bovis notes that Article 15.3 of the Agreement expressly provides that GPH waived its right of subrogation and recovery against Bovis, as the construction manager, to the extent that any loss or damage is covered by the OCIP. Bovis claims that the design and construction defects alleged by plaintiff in the main action, are all covered under the OCIP. Bovis argues that although it procured professional liability and pollution liability insurince, plaintiff's claims, as set forth in the main action, do not arise from professional liability or pollution re_lated defects. Thus, pursuant to the anti-subrogation doctrine, the second third-party complaint must be dismissed. In opposition, GPH argues that Bovis did not establish prima facie entitlement to summary judgment dismissing the second third-party complaint because the waiver of subrogation only waives subrogation for 16sses that are Covered under the OCIP. GPH ~laims that Bovis, however, did not establish, as a matter of law, that plaintiff's alleged losses, due to design and construction defects, are, covered by the OCIP. Moreover, GPH argues that, pursuant to section 16.8 of the Agreement, the 7 of 11 [*FILED: NEW YORK COUNTY CLERK 06/06/2017 10:19 AM 7] NYSCEF DOC. NO. 134 INDEX NO. 103736/2011 RECEIVED NYSCEF: 06/06/2017 Page 7 of Index No.: 103736/2011 Mtn Seq. No. 003 10 insurance procured by Bovis is- primary to any insurance procured by GPH,-thus, Bovis cannot rely on the coverage of the OCIP until it establishes, as a matter of law, that the l6sses due to the defects alleged by plaintiff, are not covered under its own professional liability and pollution liability policies. GPH also argues that Bovis's motion is premature ~ecause there has been no discovery in this case. In reply, Bovis argues that beca-use it did not do any design work on the project it cannot be liable for any of the design \ Bovis argues further that some of defects alleged by plaintiff. the allegations in t.he complaint have no connection to the work performed by Bovis, including the allegations regarding the Hotel~.s misuse of certain shared areas. Bovis also argues that the professional liability and pollution liability policies it procured do not apply to the allegations in the complaint. Discussion The proponent of summary judgment must establish its defense or cause of action sufficiently to warrant a court's· directing judgment in its favor as a matter of law (Zuckerman v City of New York, 49 NY2d 557, 562 [1980)). If this burden is not met, summary judgment must be denied, regardless of the sufficiency of the opposition papers (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985)). 8 of 11 \ [*FILED: NEW YORK COUNTY CLERK 06/06/2017 10:19 AM 8] NYSCEF DOC. NO. 134 INDEX NO. 103736/2011 RECEIVED NYSCEF: 06/06/2017 Page 8 of Index No.: 103736/2011 Mtn Seq. No. 003 10 Bovis argues it is entitled·to dismissal of the second third-party action based upon the anti-subrogation rule. "Subrogation, an equitable doctrine, entitles an insurer to 'stand ih the shoes' of its insured to seek indemnification from third parties. whose wrongdoing has caused a loss for which the insurer is bound to reimburse" (North Star Re_ins. Corp. v Continental Ins~ Co., 82 NY2d 281, 294 [1993] quoting Pennsylvania Gen. Ins. Co. v Austin Po0der Co., [1986]). 68 NY2d 46~, 471 The subrogation doctrine allocates responsibility for the loss to the party who ought to pay it, thus, avoiding freeing the wrcingdoer from liability because the insured party had the foresight to obtain insurance coverage (Id.). The anti-subrogation doctrine, however, provides that an insurer has no right of subrogation against its own insured for a claim arising from th~ very risk for which the insured was covered (See Pennsylvania Gen.· Ins., 68 NY2d at 468). policy req~ires this, exception to the gener~l "Public rule both to prevent the insurei from passing the inciderice of loss to its own insured and to guard against the potential for conf l{ct of interest that may affect the insurer's incentive to provide a vigorous d~fense for its insured" (North Start Reins., 82 NY2d at 294-295; see also Pennsvlvania Gen., 68 NY2d at 471-472). Here, although GPH and Bovis are not an insured and insurer, the anti-subrogation doctrine applies to an action, such as this 9 of 11 [*FILED: NEW YORK COUNTY CLERK 06/06/2017 10:19 AM 9] INDEX NO. 103736/2011 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 06/06/2017 Page 9 of Index No.: 103736/2011 Mtn Seq. No. 003 10 one, where an owner seeks coverage from a general contractor or ·construction manager ·(see New York City Dept. of Transp. v Petric & Assoc., 132 AD3d 614, 615 [1st Dept 2015]; Maksymowicz v New York City Dept. of Educ., 232 AD2d 223, 224 [1st Dept 1996]). Bovis, however, fails to establish prima facie entitlement to summary judgment dismissing the second third-party complaint (see Calderone v Town of Cortlandt, 15 AD3d 602 [2d Dept 2005] [movant must affirmatively demonstrate the merits of its claim to sustain a motion for summary judgment]). In support of its summary judgment motion, Bovis argues that the construction and design defects alleged by plaintiff in the main action are covered under the OCIP, and not under its professional and pollution liability policies. Bovis, however, does not proffer a copy of the OCIP or its professional and pollution liability policies. Coverage cannot be determined in the absence of the language of the policies. Bovis cannot prevail on a motion for summary judgment by merely stating the defects alleged by plaintiff ar~ not covered under the OCIP, without any evidentiary support for such a claim (cf. DeFreese v Ryan Sanitation Corp., 125 AD2d 289 [2d Dept 1986] [In reversing the motion court, the appellate court held that because the defendants failed to submit evidentiary support for their motion, the grant of summary judgment was improper)]. 10 of 11 [*FILED: NEW YORK COUNTY CLERK 06/06/2017 10:19 AM 10] NYSCEF DOC. NO. 134 INDEX NO. 103736/2011 RECEIVED NYSCEF: 06/06/2017 Page 10 of Index No.: 103736/2011 · Mtn Seq. No. 003 10 Moreover, pursuant to the terms of the Agreement~ the insurance coverage procured by Bovis is primary to the coverage available under th~ OCIP. Bovis does not, however, proffer an affidavit of a person with personal knowledge of the work it performed on the project. Thus, again, Bovis failed to demonstrate that plaintiff's claims a~e not covered under its own policies in the first instance (see Castro v New York University, 5 AD3d 135 (1st Dept 2004] [The affidavits of movant failed to assert facts from personal knowledge and as such, the affidavits lacked any probative value.]) . . Without factual support for its contention that there is no coverage under its owri insurance policies, which are primary to / the OCIP, Bovis failed to sustain its initial burden of tendering evidentiary proof in admissible form sufficient to warrant judgment in its favor as a matter of law (see ·Aetna Cas. & Sur. Co. v Island Transp. Corp.1 233 AD2d 157 [1st Dept 1996]). Accordingly, it is ORDERED that Bovis's motion for summary judgment dismissing the second third-party complaint is denied. This memorandum opinion constitutes the decision and order of the Court. Dated: HON. JEFFREY K. OING, J.S.C. 11 of 11

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