Magliocco v MKB Family, LLC

[*1] Magliocco v MKB Family, LLC 2020 NY Slip Op 50870(U) Decided on July 28, 2020 Supreme Court, New York County Lebovits, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 28, 2020
Supreme Court, New York County

Joseph Magliocco and ALLISON MAGLIOCCO, Plaintiffs,

against

MKB Family, LLC, and MARIA KHUDOYAN, Defendants.



650227/2019



Quinn McCabe LLP, New York, NY (Christopher P. McCabe and Simon Block of counsel), for plaintiffs.

Ingram Yuzek Gainen Carroll & Bertolotti, LLP, New York, NY (Robert A. Banner and Maurizio Anglani of counsel), for defendants.
Gerald Lebovits, J.

This is an action for trespass and private nuisance. Defendants, MKB Family, LLC, and Maria Khudoyan, move under CPLR 3211 to dismiss some of the claims brought by plaintiffs, Joseph Magliocco and Allison Magliocco; and defendants move under CPLR 7503 to stay the remaining claims pending arbitration. Defendants' motion to dismiss is granted in part and denied in part; the motion to stay is granted.

BACKGROUND

This action arises out of the defendants' construction of a townhouse located at 109 East 81st Street in Manhattan. Plaintiffs live in the adjacent townhouse, at 111 East 81st Street.

In 2013, defendants began renovating their townhouse. Plaintiffs complained that these renovations caused dust and debris continually to penetrate the common wall onto plaintiffs' premises. Plaintiffs also objected that defendants had caused their contractors to encroach onto plaintiff's property without permission. And plaintiffs contended that defendants had failed to install agreed-upon protections for plaintiffs' property.

In May 2018, the parties entered into an agreement (the Access Agreement) to resolve their disputes over the ongoing construction undertaken by defendants. Section 5 of the Access Agreement provided that defendants would pay plaintiffs $55,508.85 "in full satisfaction of all past damages" caused to plaintiffs' property by defendants' construction project, as set forth in Exhibit F to the agreement. (NYSCEF No. 24 at 8.) Plaintiffs "agree[d] that the damages set forth in Exhibit[] F are all known damages" to plaintiffs' property "allegedly caused by [defendants] to date." (Id.)

Section 4 of the Access Agreement dealt with scaffolding and fencing erected by defendants on plaintiffs' property in connection with the project. Section 4 required defendants to remove that scaffolding and fencing by October 2018. It also provided that should defendants fail to do so, they would be required to pay plaintiffs a $4,000 monthly license fee pending the removal of the scaffolding and fencing. (See NYSCEF No. 24 at 6-7.)

Section 7 of the Access Agreement provided that defendants would maintain $30,000 in an escrow account to cover any damage that the construction project caused to plaintiffs' property after the date of the agreement. (See id. at 9-11.)

On January 14, 2019, plaintiffs brought this action, asserting claims in trespass, private nuisance, and breach of contract. Plaintiffs are seeking damages for alleged harms to their property that arose both before and after the Access Agreement. Plaintiffs further seek to hold Maria Khudoyan personally liable for these damages on a veil-piercing theory.

Defendants now move under CPLR 3211 to dismiss plaintiffs' trespass and private-nuisance causes of action, aspects of plaintiffs' breach-of-contract cause of action, and plaintiffs' veil-piercing claim. Defendants move under CPLR 7503 to stay the remaining aspects of plaintiffs' breach-of-contract cause of action, which defendants argue are subject to arbitration under the Access Agreement.

DISCUSSION

I. The Branch of Defendants' Motion Seeking Dismissal of Plaintiff's Trespass Cause of Action

Plaintiffs' first cause of action sounds in trespass. Defendants move to dismiss this claim under CPLR 3211 (a) (1) and (a) (7). The motion is granted.

Trespass consists of the intentional entry onto the land of another without justification or permission. (See Korinsky v Rose, 120 AD3d 1307, 1309-1310 [2nd Dept 2014])). "Trespass does not require an intent to produce the damaging consequences, merely intent to perform the act that produces the unlawful invasion." (Berenger v 261 West LLC, 93 AD3d 175, 182 [1st Dept 2012]).

The basis for plaintiffs' trespass claim can be divided into two basic categories: intrusion of dust and debris and the presence of scaffolding and construction materials on plaintiffs' property prior to execution of the Access Agreement; and continued intrusion of scaffolding and other construction-related infrastructure onto plaintiffs' property after execution of the Access Agreement. (See NYSCEF No. 47 at 5-7 [describing plaintiffs' claims].) Neither claim states a cause of action.[FN1]

With respect to plaintiffs' allegations of trespassory conduct that occurred before execution of the 2018 Access Agreement, plaintiff settled those claims pursuant to the Access Agreement and therefore cannot assert them here. That Agreement expressly provides that the $58,508.85 to be paid by defendants to plaintiffs under the Agreement would fully satisfy all past damages to plaintiffs' property then known to plaintiffs. (See NYSCEF No. 24 at 8.) Plaintiffs neither allege in the complaint, nor contend in opposition to the motion to dismiss, that they became aware after execution of the Agreement of additional pre-Agreement damages. Plaintiffs' trespass claim, to the extent based on defendants' pre-Agreement conduct, is subject to dismissal because it has already been released.[FN2]

Plaintiffs' allegations that defendants trespassed on their property by failing to remove the scaffolding (and related infrastructure) on the schedule set out in the Access Agreement also fails to state a cause of action. The Agreement expressly contemplates that possibility: It provides that if the construction infrastructure is not removed from plaintiffs' property on schedule, plaintiffs will receive $4,000 a month from defendants as a license fee. (See NYSCEF No. 24 at 6-7.) It is undisputed that plaintiffs have received that monthly license fee through drawing on the escrow account set up under the Agreement. Since plaintiffs granted defendants a license to remain on their property, plaintiffs cannot now sue defendants in trespass for that same [*2]alleged conduct.[FN3]

II. The Branch of Defendants' Motion Seeking Dismissal of Plaintiff's Private-Nuisance Cause of Action

Plaintiffs' third cause of action sounds in private nuisance. Defendants move to dismiss this claim under CPLR 3211 (a) (1) and (a) (7). The motion is granted in part and denied in part.

To state a private-nuisance cause of action, a plaintiff must allege "(1) an interference substantial in nature, (2) intentional in origin, (3) unreasonable in character, (4) with a person's property right to use and enjoy land, (5) caused by another's conduct in acting or failure to act." (Berenger, 93 AD3d at 182.) Nuisance is "characterized by a pattern of continuity or recurrence of objectionable conduct." (Id.)

Here, plaintiffs' nuisance claim draws heavily on defendants' conduct before the Access Agreement's execution. (See NYSCEF No. 47 at 14-15 [items i through vii].) But as with plaintiffs' trespass claims, the private-nuisance claims based on pre-Agreement conduct are subject to dismissal here because they were fully settled by the Access Agreement itself.[FN4]

Plaintiffs also allege that defendants failed to install a more comprehensive scaffolding system surrounding the construction on the back of their townhouse—as required under the Access Agreement. Plaintiffs allege that this failure has caused them to minimize their use of their backyard, for fear of falling debris and the like from defendants' construction project. (See NYSCEF No. 2 at101-102.) These allegations state a cause of action in private nuisance. (See JP Morgan Chase Bank v Whitmore, 41 AD3d 433, 435 [2d Dept 2007] [holding after bench trial that plaintiff satisfied elements of private-nuisance claim through evidence that noise from defendants' conduct prevented plaintiff from "using her deck and sleeping in her bedroom"]; see also Duffy v Baldwin, 183 AD3d 1053, 1054 [3d Dept 2020] [holding that plaintiff stated private-nuisance cause of action by alleging that defendant's conduct significantly hindered plaintiffs' ability to see oncoming traffic from their driveway, thereby causing plaintiffs significant anxiety about being in a traffic accident].)

Defendants argue that this private-nuisance claim duplicates plaintiffs' action for breach of contract. This court disagrees. To be sure, defendants are correct that "a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated." (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 389 [1987].) Here, though, plaintiffs' allegation is not merely that defendants failed to discharge one of their contractual obligations under the Access Agreement (installing an enclosed scaffold on the back [*3]wall of their townhouse), but that as a result, defendants have improperly interfered with plaintiffs' ability to use their property. This court concludes that defendants' obligation to avoid such interference, although plainly related to the circumstances under which the parties executed the Agreement, exists independently of the Agreement itself. Moreover, the Agreement does not provide for damages in the event that defendants fail to install the required enclosed scaffold. As a result, plaintiffs' private-nuisance claim does not duplicate the remedies available under their breach-of-contract claim.

III. The Branch of Defendants' Motion Seeking Dismissal of Part of Plaintiffs' Breach-of-Contract Cause of Action

Plaintiffs' second cause of action sounds in breach of contract. This cause of action has two parts: one relating to the scaffolding on the back of the townhouses (and the associated license fee provided for by the Access Agreement), and one relating to construction on the wall—the party wall—common to the two adjoining townhouses. Defendants move to dismiss the scaffolding-related claims under CPLR 3211 (a) (1) and (a) (7). That motion is granted in part and denied in part. Defendants also move to stay the party-wall-related claim pending arbitration. That motion is dealt with in Point IV, infra.

The elements of a cause of action for breach of contract are "the existence of a contract, the plaintiff's performance thereunder, the defendant's breach thereof, and resulting damages." (Markov v Katt, 176 AD3d 401 [1st Dep't 2019].)

Here, plaintiffs argue that defendants have breached the Access Agreement in several respects. Plaintiffs contend that defendants failed either to remove the temporary scaffolding behind their townhouse (as required by the Agreement) or to pay timely the $4,000 monthly fee licensing the continued presence of that temporary scaffolding. Defendants contend that plaintiffs suffered no damages relating to late payments of the license fee because plaintiffs were able each month to obtain the $4,000 by drawing on the escrow fund established under the Agreement. (See NYSCEF No. 45 at 9.)

Defendants concede, however, that because defendants failed to pay the license fee as required under § 4 of the Agreement, plaintiffs were forced each month to apply to their own counsel (acting as escrow agent under the Agreement) for release of funds from escrow to satisfy that fee. (See id.; NYSCEF No. 43.) And the escrow agreement provides that the parties are required to hold harmless plaintiffs' counsel in its capacity as escrow agent—including with respect to reasonable fees incurred by the escrow agent in that capacity. (See NYSCEF No. 24.) Thus, to the extent that plaintiffs have been (or will be) forced to cover the escrow agent's attorney fees incurred in connection with the $4,000 monthly license, that expense constitutes damages that plaintiffs may recover in a claim for breach of contract. Plaintiffs have, to that extent, stated a cause of action related to the license fee.[FN5]

Relatedly, plaintiffs assert that defendants breached the Agreement by failing to maintain [*4]the escrow account at the required level of $30,000. But as defendants point out, plaintiffs fail to allege any resulting damages, such as the escrow account's being insufficient at some point to cover needed expenditures related to the license fee or construction-related harms. Absent damages, plaintiffs fail to state a cause of action about the level of funds in the escrow account.

Plaintiffs claim defendants breached the Agreement by failing to give plaintiffs proof that defendants had obtained the necessary liability insurance (and named plaintiffs as additional insureds). Here, too, this claim fails as currently pleaded: Plaintiffs do not explain how the alleged breach has caused them to suffer damages.

Plaintiffs further argue that defendants breached the Agreement by failing to install enclosed scaffolding around the construction work on the back of defendants' townhouse (as the contract requires). They seek injunctive relief directing defendants to install that scaffolding. Defendants contend that plaintiffs have failed to allege any harm from the lack of enclosed scaffolding. As discussed above in the context of the private-nuisance claim, though, plaintiffs have sufficiently alleged that the lack of proper scaffolding creates a risk to them from falling construction debris. Defendants also claim that this claim has been rendered academic by the completion of the exterior construction work that the scaffolding would enclose. (See NYSCEF No. 45 at 7.) But defendants have not provided documentary evidence conclusively establishing that no further need for the enclosed scaffolding exists.[FN6] At this stage of the action, plaintiffs have stated a breach-of-contract claim for injunctive relief as to the enclosed scaffolding.

IV. The Branch of Defendants' Motion Seeking a Stay of the Other Part of Plaintiffs' Breach-of-Contract Cause of Action

An additional aspect of the Access Agreement pertains to certain construction work that defendants were to undertake with respect to the townhouses' party wall. Plaintiffs claim that defendants breached that agreement, and seek damages and injunctive relief. Defendants move under CPLR 7503 to stay this claim as subject to alternative dispute resolution under the Agreement. The motion is granted.

Plaintiffs do not dispute that under the Agreement, their claim relating to the party wall is subject to alternative dispute resolution by a third-party neutral (the Thornton Tomasetti engineering firm). Instead, plaintiffs argue that defendants have waived their right to compel alternative resolution of the party-wall claim. This court disagrees.

A defendant waives its right to compel alternative resolution of claims against it "where the defendant's participation in the lawsuit manifests an affirmative acceptance of the judicial forum, with whatever advantages it may offer in the particular case," in contrast to a "later claim that only the arbitral forum is satisfactory." (De Sapio v Kohlmeyer, 35 NY2d 402, 405 [1974].) Here, it is undisputed that only party-wall-related claims are subject to resolution by the third-[*5]party neutral. The question is whether defendants' conduct with respect to those claims was "an affirmative acceptance of the judicial forum." (Id.) The court concludes that it was not.

Defendants' answer raised the affirmative defense that claims relating to the party wall are subject to alternative dispute resolution. (See NYSCEF No. 12 at 147.) Defendants have not since taken a contrary position—they did not, for example, assert counterclaims relating to the party wall, pursue (or indeed provide) discovery relating to the party wall, or otherwise contest in litigation the merits of plaintiffs' claims relating to the party wall. (See Nolan v DynCorp Intl., LLC, 108 AD3d 436, 437 [1st Dept 2013] [finding no waiver of arbitration where defendant had not exchanged discovery related to the allegedly arbitrable claim and had not sought to litigate the merits of that claim]; Two Cent. Tower Food, Inc. v Pelligrino, 212 AD2d 441, 442 [1st Dept 1995] [finding no waiver of arbitration where defendants did not engage in discovery or otherwise actively participate in litigation beyond filing an answer].) And defendants sought a stay of the party-wall claims at the same time they sought dismissal of plaintiffs' other claims—i.e., in this motion.

Plaintiffs argue that defendants waived their right to alternative resolution by asserting counterclaims and actively litigating the merits of those counterclaims. (See NYSCEF No. 47 at 12-13.) But defendants' counterclaims did not pertain to the party wall and were not subject to alternative dispute resolution. Active participation in the litigation with respect to those claims did not waive defendants' right to alternative resolution of disputes over the party wall. (See Nolan, 108 AD3d at 437.) Nor does the fact that defendants appeared at and participated in mandatory court conferences manifest an affirmative acceptance of the benefits of the judicial forum. (See NYSCEF No. 47 at 12.)

Finally, plaintiffs emphasize that defendants did not seek a stay of the party wall claims until 12 months into the litigation. But as noted above, defendants did not seek any relief relating to any of plaintiffs' claims until that time. Plaintiff has not shown that this delay was unreasonable—particularly given the parties' active litigation of defendants' counterclaims. Indeed, defendant provides correspondence between counsel for the parties that suggests they were attempting (perhaps unsuccessfully) to resolve disputes relating to the party wall amicably, without resort either to litigation or alternative dispute resolution. (See generally NYSCEF No. 59.) This court concludes on these facts that defendants did not waive the right to have the party-wall disputes addressed in the first instance by Thornton Tomasetti, rather than by this court.

V. The Branch of Defendants' Motion Seeking Dismissal of Plaintiffs' Veil-Piercing Claim

Plaintiffs also seek to pierce MKB Family, LLC's corporate veil and hold Maria Khudoyan personally liable. Defendants move under CPLR 3211 (a) (7) to dismiss this veil-piercing claim. The motion is granted.

To state a veil-piercing claim, a plaintiff "bears the heavy burden of showing that: (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff's injury." (Skanska USA Bldg. Inc. v Atl. Yards B2 Owner, LLC, 146 AD3d 1, 12 [1st Dep't 2016] [internal quotation marks omitted].) Plaintiffs do not meet this burden here. Instead, they provide only "conclusory allegations" that "merely recit[e] typical veil-piercing factors." (Id.) And they do so only on information and belief, without identifying the source of [*6]that information and belief. (See NYSCEF No. 2 at116-121; see also Apfelberg v E. 56th Plaza, Inc., 78 AD2d 606, 607 [1st Dept 1980] [allegations on information and belief without source of information insufficient].)

Accordingly, for the foregoing reasons, it is hereby

ORDERED that the branch of defendants' motion seeking dismissal under CPLR 3211 of plaintiffs' cause of action for trespass (and associated request for injunctive relief) is granted; and it is further

ORDERED that the branch of defendants' motion seeking dismissal under CPLR 3211 of plaintiffs' cause of action for private nuisance is denied as to plaintiffs' allegations relating to the absence of enclosed scaffolding (and the associated interference with plaintiffs' use and enjoyment of their back yard), and otherwise granted; and it is further

ORDERED that the branch of defendants' motion seeking dismissal under CPLR 3211 of plaintiffs' cause of action for breach of contract is denied as to plaintiff's allegations relating to the absence of enclosed scaffolding (and the associated request for injunctive relief regarding the scaffolding); and it is further

ORDERED that the branch of defendants' motion seeking dismissal under CPLR 3211 of plaintiffs' cause of action for breach of contract is denied as to plaintiff's allegations relating to defendants' failure to pay the monthly license fee, but only to the extent set forth above in Point III, supra; and it is further

ORDERED that the branch of defendants' motion seeking dismissal under CPLR 3211 of plaintiffs' cause of action for breach of contract is otherwise granted; and it is further

ORDERED that the branch of defendants' motion seeking a stay under CPLR 7503 of plaintiffs' claims relating to the party wall is granted, and those claims are stayed; and it is further

ORDERED that the branch of defendants' motion seeking dismissal under CPLR 3211 of plaintiffs' cause of action for piercing the corporate veil is granted.

DATE 7/28/2020 Footnotes

Footnote 1:The trespass-cause-of-action section of plaintiffs' complaint also alleges that defendants committed trespass by permitting overgrown tree branches from a tree on defendants' property to intrude onto plaintiffs' property. (See NYSCEF No. 2 at126-127.) Plaintiffs do not, however, mention these allegations in opposing defendants' motion to dismiss the trespass cause of action, leaving it unclear whether plaintiffs are still asserting this claim. To the extent that they are, the claim fails to state a cause of action. Plaintiffs allege only that the tree is overgrown—not that the tree is unhealthy or decayed. That "defendant allowed what appeared to be a healthy tree to grow naturally and cross over into plaintiff's . . . property airspace[] cannot be viewed as an intentional act so as to constitute trespass." (Ivancic v Olmstead, 66 NY2d 349, 352 [1985].)

Footnote 2:Plaintiffs assert that "nowhere in the [Access] Agreement do Plaintiffs release Defendants for this initial trespass, for the continuing nature of this trespass . . . or for any of the other trespasses alleged in Plaintiffs' Complaint." (NYSCEF No. 47 at 7.) It is true that the Access Agreement does not contain express release causes. But plaintiffs do not explain how they can recover in damages stemming from injuries for which plaintiffs were concededly fully compensated under the Agreement. (See Morales v Solomon Mgt. Co., 38 AD3d 381, 382 [1st Dept 2007] [noting that plaintiffs may not recover damages for injuries that were fully compensated under a prior settlement].)

Footnote 3:Nor, for the same reasons, would plaintiffs be entitled to injunctive relief requiring the removal of that scaffolding, as plaintiffs request in their fourth cause of action.

Footnote 4:Plaintiffs also suggest that the sheer longevity of defendants' construction project constitutes a private nuisance because it has impaired the marketability of plaintiffs' property. (See NYSCEF No. 47 at 15-16.) But plaintiffs' ability to use and enjoy their property while it is in their possession is on its face distinct from plaintiffs' ability to alienate their property from their possession. And plaintiffs provide no authority for the proposition that impairment of marketability can constitute a private nuisance.

Footnote 5:Plaintiffs also claim they were harmed because they received the $4,000 a couple of weeks late each month. They do not, however, allege how this brief—albeit recurring—delay in payment of the $4,000 caused them harm. And although plaintiffs are not required at this stage to prove that they were harmed, they must at least articulate what their asserted harm is.

Footnote 6:Defendants' counsel's affirmation in support of the motion to dismiss attaches various photographs, apparently of plaintiffs' townhouse. (See NYSCEF Nos. 38 [affirmation], 44 [photographs].) The affirmation does not, however, articulate the basis of counsel's knowledge of what the photographs depict, or provide sufficient context for the viewer to understand the significance of each photograph. Nor does the affirmation connect these photographs to the assertion in defendants' memorandum of law that exterior construction has been completed.