Frampton v Axiom Constr. Corp.

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Frampton v Axiom Constr. Corp. 2022 NY Slip Op 32929(U) August 25, 2022 Supreme Court, Kings County Docket Number: Index No. 514314/2019 Judge: Leon Ruchelsman Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 514314/2019 FILED: KINGS COUNTY CLERK 08/30/2022 01:09 PM NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 08/30/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS: CIVIL TERM: COMMERCIAL 8 -·------. ------------.. : . ----.-.-·-----.. -. - . X ADAM SNOW FRAMPTON, AJA, Decision and order Plaintiff, Index No. 514314/2019 . . - against AXIOM CONSTRUCTION CORP., and SAMUEL KIM, August 25, 2022 Defendants, ~-------~----- -- ---- --------- ---- X PRESENT: HON. LEON RUCHELSMAN The plaintiff has moved seeking to amend the complaint pursuant to CPLR §3025. The defendant has cross-moveci pursuant toCPLR §3211 seeking to dismiss the complaint. been opposeci respectively. and arguments held. The motions have Papers were submitted by the parties After reviewing all the arguments this court now makes the following determination. According to the Complaint, on September 25, 2018 the plaintiff Adam Snow Frampton the owner of property located at 172 Putnam Avenue in Kings County entered into a contract with de.f.enctant Axiom Construction Corp. The contract required the defend-arit to substantially complete a .one family home at the premises within on:.e year.. al: $977,000~71. The price for the work was agrr::ed upon The pla.intiff paid the defendant $232,998.37 and on March 22, 2019 cancelled the contract. The p.laintiff requested.. a return of money which had. not bee.n ear.ned and no such return ever took place. The piaintiff initiated th:i.s lawsuit .and a.lleged cause.s of a.cti.on for breai=h of contr21ct, conversion, [* 1] 1 of 10 INDEX NO. 514314/2019 FILED: KINGS COUNTY CLERK 08/30/2022 01:09 PM NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 08/30/2022 unjust enrichment, an accounting, fraud and a claim for trust fund diversion. The plaintiff has now moved seeking to amend the complaint to assert a cause of action for trust fund diversion and conversion against Samuel Kim:, Axiom's principal. That motion is opposed and the defendants have moved seeking to diSmiss some of the original causes of action. Conclusions of Law It is well settled that a request to amend a pleading shall be freely given unless the proposed amendment would unfairly prejudice or surprise the op:posing party, or is palpably insufficient or patently devoid of merit (Adduci v. 1829 Park Place LLC, 176 AD3d 658, 107 NYS3d 690 [2d Dept., 2019]). The decision whether to grant such leave is within the court's sound discretion and such determination will not lightly be set aside (Ravnikar v. Skyline Credit~Ride Inc;, 79 AD3d 1118, 913 NYS2d 339 [2d Dept., 2010]). Therefore, when exercising that discretion the court should consider whether the party seeking the amendment was aware of the facts upon which the request is based and whether a reasonable e){cuse .:for any delay has been presented and whether any prejudice will result (Cohen v. Ho, 38 AD3d 705, 833 NYS2d 542 [ 2d Dept., 2007 l) . The defendant::; argue that there i.s no ca.se that "ever allowed a Lien Law claim to proceed based on an owner suing a contractor for es 9 entia11y a refund 11 {see, Memorandllm in Reply, 2 [* 2] 2 of 10 INDEX NO. 514314/2019 FILED: KINGS COUNTY CLERK 08/30/2022 01:09 PM NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 08/30/2022 page 5 [NYSCEF Doc. #34] ) . However, in Roos v. King Construction, 179 AD3d 857, 116 NYS3d 344 [2d Dept,, 2020]) the court acknowledged that ;,'the plaintiff sought cost-of-completion damages and the return of a payment in the sum of $50,000 that, according to the plaintiff, constituted diverted trust funds" (id). The court did hold that "the plaintiff's own submissions raise triable issues of fact as to whether, and to whc1t extent, trust furn:is may have been diverted by the defendants'' (id). In any event, the possibility of asserting a trust fund diversion Claim Was not in doubt (see, also, 610 Park SE LLC v. Best & Company Inc., 61 Mi.sc3d 1225 (A), 111 NYS3d ,807 [Supreme Court New York County 2018]). The case of Teves v. Greenspan, 159 AD3d 1105i 72 NYS3d 191 [3 rd Dept., 2018] is instructive. Tri that ca-?e "plaintiff thereafter commenced this action against defendants alleging, among other things, that they failed to . . .. , . . deposit and hold in trust $4 3, 333. 22 that was advanced on the home construction contract and diverted a portion of these trust funds for •expenditures that were unrelated contraventi•n of the Lien Law'' ( id) . to the projecti in The court held that "pursuant to Lien Law article 3-a, payments received by a contractor from an owner for a home improvement contract prior to the sup,st~mtial completion of wor.k pursuar1t to said contract must be deposited into a .trust account" (id). The court did not limit th.e availability of a diversion. of trust fund ciaim only tq case.s 3 [* 3] 3 of 10 INDEX NO. 514314/2019 FILED: KINGS COUNTY CLERK 08/30/2022 01:09 PM NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 08/30/2022 where sup.contractors are involved. Thus, ' 1 Li12n Law article 3--:A mandates that once a trust comes into existence, its funds may not be diverted for non-tn1st purposes/I (Ippolito v, TJC Development LLC, 83 AD3d 57, 920 NYS2d108 [2d Dept., 2011)). The -defendants argue that rule is only true where the funds are intended for subcontractors. However, as in this case, where there are no sµbcontractors theh the plaintiff cannot moire alleging a trust diversion claim. The defendants cite to Langston v. Triboro Contracting Inc., 44 AD3d 365, 843 NYS2d 49 [Pt Dept., 2007]. That case held that "the primary purpose -of Lien Law article 3-A is to ensure that those who have expended labor arid materials to improve real property at the direction of ah owner or a general contra:ctor receive payment for the work actually performed ... Thus, the issue, in deciding whether there has been a di version. of trust funds, is not whether the funds have been deposited in a bank, but whether the funds have actually been used to pay subcontractors, suppliers and laborers" (id). However, that opinion was distinguished in Ippolitd (supra) where the court explained that '',case is readily distinguishable from the facts presented here. In Langston; the plaintiff's claim was solely 'that he is entitled to return of the money pa,id to c:iefend_ant simply because the money, paid over time with checks, admittedly was.never deposited into an escrow account, in a bank, 9-S required by Lien Law 4 [* 4] 4 of 10 § 71-a ( 4 l _, but instead INDEX NO. 514314/2019 FILED: KINGS COUNTY CLERK 08/30/2022 01:09 PM NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 08/30/2022 was immediately G<::l.Shed' (id. at :365, 843 N.Y.S.2d 49). Here 1 the plaintiffs' claim relates to the alleged diversion of trust funds, not the mere manner in which the funds were handled" (id). Thµs, the language in Langston (supra) concerning "subcontractors, suppliers and laborers" did not foreclose the possibility of a trust diversion claim if those workers are absent. Rather, a trust diversion claim is possible whenever a homeowner'S funds. are diverted, even if by the contractor hi!Tl.self/herself. Indeed, i t makes little sense to permit a homeowner to claim diversion bf trust funds where the contractor fails to pay subcontractors but to forbid such claims where the contractor actually diverts the funds themselves. The argument that in the second scena-rio there are no· subcontractors who will make claims against the homeowner does not alter the reality that trust funds have been diverted, It really does not.matter if the contractor diVerted them by simply riot utilizing them for the work they were supposed to perform or failed to pay subcontractors. Moreover, Lien Law §71(2) (fl states that a lien law trust ·applies to any "payment to which the owner is entitled pursuant to the provisions of section seventy-one-a of this chapter" (id). Lien Law §71-a(4) (a) states that "under a home improvement oontrq..ct, payments. pec.eiv.ed from an owner by a home improvement corittactor prior to the substantia:.l completion of work under the contract shali be deposited within five busJness 5 [* 5] 5 of 10 INDEX NO. 514314/2019 FILED: KINGS COUNTY CLERK 08/30/2022 01:09 PM NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 08/30/2022 days thereafter by the recipient in an escrow account in a bank, trust company, savings bank, or state or federal savings and lo 9 n association, located in this state ... Such deposit or deposits shall remain the property of such owner except as otherwise provided herein" (id}. Thus, there i.s no question the claims .of trust diversion are valid against Axiom and Kim. While it is true the plaintiff could have filed this claim against Kim sooner, the defendants have failed to demonstrate any prejudice in this regard. Consequently, the motion seeking to amend the complaint to add and enlarge this Cause Of action is granted. The motion s,eeking to dismiss th.is cause of action is denied. Turning to the motion seeking to add a conversion claim aga·inst Kim and to dismiss the conversion claim altogether, where a conversion claim arises from the same circumstances as the breach of contract claim then such conversion claim is duplicative (Connecticut New Yor.k Lighting Company v. Manos Business Management Company Inc., 171 ACi3d 698, 98 NYS3d 101 [2d Dept., 2019)). "To dete;rmine whether a conversion claim is duplicative, courts look both to the material facts upon which each claim is based and to the alleged injuries for which damages are sought" (.Medequa LLC .2916475 [S .. O.N.. Y. 202-2] ). . v. O'Neill and PartnersLLC, 2022 WL In th,is case the bre.ach of contract claim es.seritially asserts the defendants owe the plaintif.f a refund for money the plaintiff. paid wl1e1;ein no work had beep 6 [* 6] 6 of 10 FILED: KINGS COUNTY CLERK 08/30/2022 01:09 PM NYSCEF DOC. NO. 35 INDEX NO. 514314/2019 RECEIVED NYSCEF: 08/30/2022 performed by the defendants. The conversion claim seeks a return of funds the plaintiff gave to the: defendants in anticipation of the work beil1g performed. Thus, the conversion claim relies upon the same .facts as the breach of contract claim and seeks the same damages. Therefore, "if Plaintiff were to recover on each claim, it 'would in effect be paid twice'" {id}. The plaintiff argues that "because Frampton ha.s pled that the Defendants wrongfully and intentionally exercised dominion over Frampton's Deposit and diverted the Deposit for their own gain, the conversion claim is not duplicative contract claim" <'.lf the breach of ( ~ , Memoran.dum in Support an.ct in Opposition, page 8 [NYSCEF Doc. #32]). seek a return of the funds. However, both claims at their core Thus, the plaintiff has essentially failed to present any basis for distinguishing between the two claims. Consequently, the conversion claim is dupliactive of the conversion claim and the motion seeking to dismiss the claim is granted. Further, the motion seeking to amend the complaint in this regard is denied. Concerning the remaining causes of action, first, Sll.ch motion is timely. The mot.ion seeking to dismiss the third claim for unjust enrichment is granted. Tt is well settled that a ciaim of unjust enrich.m.ent is not avail?ble whe.n it duplicates or replaces. a cbriventiortal contract or tort claim ( see, Cots el lo v. Verizon New York Inc., 1.8 NY)d 7 77, 944 NYS2d 732. [ 2 0J2.J) • 7 [* 7] 7 of 10 .As INDEX NO. 514314/2019 FILED: KINGS COUNTY CLERK 08/30/2022 01:09 PM NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 08/30/2022 the court noted "unjust enrichment is not a catchall c:ause of aqtion to be used when others fail" (id). since a viable c:laim for breach of contract remains, the claim for unjust enrichment is not proper. Concerning the cause of action for an accounting, the motion seeking to dismiss that cause of action is granted, It is well settled that \\the right to an accounting is premised upon the existence of a confidential or fiduciary relationship and a breach of the duty imposed by that relationship respecting property in which the party seeking the accounting has an interest" (see, Palazzo v. Palazzo, 121 AD2d 2.61, 503 NYS2d 381 [2d Dept., 1986]) . relationship.. In this case there is no confidential Rather, the relationship is one whereby there is a claim of money owed. Consequently, the cause of action seeking an accolihting is dismissed as well. Lastly, the motioh seeking to dismiss the clai~ for fraud is granted. It is well settled that to succeed upon a clair:n of fraud i t must be demonstrated there was a material i:nisrepresentation of fact, made with knowledge of the falsity, the intent to indu.ce reliance, reliance upon the misrepresentation and damages (Cruciata v. O'Donnell & M'c'.Laughlin, Esgs, 14 9 A.D3d 103.4, 53 NY~3d 328 [ 2d bept. , 201 7 l ) . These elements must each be .supported by factual allegations containing details cons,tituting this wrong alle.ged (see, JPMorgan 8 [* 8] 8 of 10 INDEX NO. 514314/2019 FILED: KINGS COUNTY CLERK 08/30/2022 01:09 PM NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 08/30/2022 Chase Barikt N.A. v. Hall, i22 AD3d 576r ~96 NYS2d 309 [2d Dept., 2014]). Coricerriing the fraud claim, Paragraph 71 of the Proposed Amended Complaint alleges that ''upon information and belief, Axiom knowingly and fraudulently infli3.ted the percent of work performed on the Project" (id). Tha:t allegation does not specifically allege any representations or omissions at all that could constitute fraud. First, the allegation is entirely conclusory merely noting that the defendants materially misrepresented the work performed. However, no facts whatsoever are presented detailing the misrepresentations. The Proposed Amended Complaint does not provide any accompanying information such as who made the material misrepresentations, when they were made, in what context they were made and how such statements were misrepresentations anct how there was reliance upon them. Thus, pursuant to CPLR §3016(b) to plead fraud the complaint must ''sufficiently detail the alleged conduct" and contain fact that "are sufficient to permit a reasonable inference of the alleg.ed conduct" ( Pludeman v .. Northern Leasing Systems Inc., lo NY3d 486, 860 NYS2d 422 [2010]). There are absolutely no facts supporting allegations o.f fraud contained in the Proposed Amended Complaint. The aiieg.a:tions merely contain conclusions t:.hat :i:ra.ud was c.ommi tted without explaining, with the detail required, ho.w such fraud occurred. Thus, a c9mplaint that alieges fraud ''abs.ent 9 [* 9] 9 of 10 INDEX NO. 514314/2019 FILED: KINGS COUNTY CLERK 08/30/2022 01:09 PM NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 08/30/2022 specific and detailed allegations establishing a material misrepre:sentation of fact, knowledge of falsity or reckless disregard for the truth, scienter, justifiable reliance, and damages proximately oabsed thereby~ is ihsufficiertt to state a cause of a,ction for fraud" (Old Republic National Title Insurance Company v. Cardinal Abstract Corp., 14 AD3d 67H, 790 NYS2d 143 [2d Dept., 2005]). Mqreover, where a claim to recover damages for fraud "is premised upon alleged breach of contractual duties and the supporting allegations do not concern misrepresentations which are collateral or extraneous to the terms of the parties agreement, a cause of action sounding in fraud does not lie" (Mc Ke rnin v. F artny Fa rm.er Candy Shops Irie. , 176 AD2d 2 3 3, 5 7 4 NYS2d 58, [2 nd Dept., 1991] ) . In this case, the fr 9 ud claim is wholly duplicative of the breach of contract claim. Therefore, based on the foregoing the motion seeking to dismiss the £raud claim is granted. Thus, the only claims that remain are breach of contract against Axiom and a trust fund diversion claim a,gainst Axiom and Kim. So o.rdered. ENTE.R: DATED: August 25, 2022 Brooklyn N.Y. Hdh. Leon Ruchelsman Jsc 10 [* 10] 10 of 10

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