Borough Constr. Group, LLC. v Red Hook 160 LLC

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Borough Constr. Group, LLC. v Red Hook 160 LLC 2022 NY Slip Op 33198(U) September 19, 2022 Supreme Court, Kings County Docket Number: Index No. 500308/19 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. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 RECEIVED NYSCEF: 09/22/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS : CIVIL TERM: COMMERCIAL 8 ----- ----------------------~------- ·--X BOROUGH CONSTRUCTION GROUP, LLC . , Plaintiffi - against - Decision and brder Index No. 5003D8/19 RED HOOK 160 LLC, PHILADELPHIA INDEMNITY INSURANCE COMPANY, ACREFI MORTGAGE LENDING, LLC, TRI STATE LUMBER, AF SUPPLY CORP, UNITED RENTALS (NORTH AMERICA), TNC., WORLDWIDE PtUMBING SUPPLYt INC., CASTLE MASONRY, INC., WOODBURY C()NSTRTJCTION, INC,, GO GREENER PLUMBING, ING6, PREMIUM BUILDING MATERIALS, INC., UNIVERSAL MARBLE AND GRANITE OF QUEENS AND TPG CONTRACTING, CORP., Defendants, September 19, 2022 --------------- --- .. ---------------- X Red Hook 160 LLC, Third Party Plaintiff, - against - BOROUGH EQUITIES LLC 1 EMANUEL KANARIS, MICHAEL BAUER & Third-Party Defendants, _____._____.__ . -- .--· ------- ·----.----· ---·---x· UNITED RENTALS {NORTH AMERICA) ING,, Tbird Party Plaintiff, - against ATLANTIC SPECIALTY INSURANCE COMPANY, a/k/a ATLANTIC SPECIALTY INSURANCE INC., D/b/a ASIC INSURANCE, Third-l?arty Defendants, -. ---·. --. -----. ----. -.-.--·---- .-- .- .-.-----··-X UNIVEB.SA;L MARBLE & GRANiTE OF QUEENS INC: .• , Third-Party· :Plaintiff' -again.stBOROUGH E~UITIES LLC and ATLA~TIC SPECIALTY INSURANCE COMPANY, Third-Party Defendants, of· 14 -· · · · ·.........-.................................. . [* 1] - - - - - - - - - - - - - - - - - - - - - -1 - FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 INDEX NO. 500308/2019 RECEIVED NYSCEF: 09/22/2022 -·--. ·-- - ---. - ·-- - - - -.-- - - - - - - -· . ·-- - -- . - - - - ·ex PRESENT: HON. LEON RUCHELSMAN The plaintiff/third party defendant Borough Construction Group LLC ahd the other third party defendants have moved seeking summary judgement dismissing the third party complaint on the grounds there are no questions of fact no liability can be established. Further, they move seeking summary judgement on certain of the claims contained in the complaint. LLC has. opposed the motion. Red Hook 160 Papers were submitted by the parties and arguments held. After reviewing all the arguments, this court now makes the following determination. As recorded in prior decisions Borough Construction Group LLC entered into a contract with Red Hook 160 LLC concerning the construction and renovation of a project located at 160 Imlay Street in Kings County. owed over two Borough Construction sued alleging it is and a half million: dollars. asserted various counterclaims. Red Hook 160 LLC Borough Construction has now moved seeking summary judgement, essentially arguing there are no questions Of fact the Borough parties cannot be liable for any of the third party claims and should be awarded judgement for some of its claims. Conclusions of L~w Where the material facts at is.sue in a .case are in dispute summary judgment cannot be gr.anted (.Zuckerman v. C.i.ty .of .New 2 2 of 14 [* - -2]- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - · · · · · · - - · · - · · · - · · - - · · · INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 York, RECEIVED NYSCEF: 09/22/2022 49 NYS2d 557, 427 NYS2d 595 [1980]). Generally, it is for the jury, the trier of fact to determine the legal cause of any injury (Aronson v. Horace Mann-Barnard School, 224 AD2d 249, 637 NYS2d 410 [ 1 st Dep1:., 1996J) . However, where only one conclusion may 1:::ie drawn from the facts then the question of legal c~use may be decided by the trial court as a matter of law (Derdiarian v. Felix Contracting Inc., 51 NY2d 308, 434 NYS2d 166 [1980]). First, on December 27, 2019 Red Hook 16D LLC entered into an agreement whereby Red Hook 160 LLC collaterally assigned "all of the a:ssigriable right, title and interest of assignor, to and under the following documentsl' to Churchill 160 Imlay Lender LLG (see, ASSIGNMENT OF AGREEMENT~, LICENSES, <J[2 [NYSCEF Doc. #524]). PERMITS AND CONTRACTS, However, the assignee only had the ability to exercise its rights if an event of default occurred {<JI3(c)). Further, the agreement provides that "this Assignment is made- for collateral purposes only and the duties and obligations of Assignor under this Assignment shall terminate upon the payment in full of the Debt" (see, ':118.) . Thus, the assignment was only provided to secure the outstanding del::it. Thus, i t was not an "absolute" assignment (seei Matter of Coastal Nursing center Inc., 164 B .R. 788 Savannah Division, ~993]). [Squthern District of Georgia, In addition; there is no evidence the. 9-ssignee ever exercised arty of its rights pursuant to. this agreement which would thereby preempt Red Hook 160 LLC from 3 of 14 [* 3]- - - - - - - - - - - - - - - - - - - - - - - - -3- -·---------------------------- INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 RECEIVED NYSCEF: 09/22/2022 rrtaintaining ownership and standing over its agreement. Therefore, since no assignment tcmk place Red Hook 160 LLC maintains standing to pursue its couri.terclaims. Moreover, Section 4(d) of the assignment which states that ''assignor is not in default under the Documents, and, to the best of Assignor's knowledge, no other party to the Documents is in default thereunder" is not an c1dmission at all that Borough was not in default of its agreement. Turning to substantive issues, a siqe a,greement was entered between th~ parties on October 25, 2016. Article 3 of the agreement states that "notw±thstanding any provision on the Contract to the contrary, the Owner, and not the Construction Manager, shall be responsible for the entire cost Of performing the Work, without reimbursement by Construction Manager or any deduction in any amounts owed to Construction Manager, including without limitation ar1y costs in excess of the Guaranteed Maximum Price. Without limiting the foregoing, Owner shall be responsible :for the cost of all insurance required to be maintained by the Construction Manager in connection With the Project. Further, Construction Manager's liability with respect to any costs of correcting any errors, omissions or other deficiencies in the Work; cost 9 arising o:ut of o-r relating to any extensions in the ?reject Schedule; and any costs associated with changes required to be made. to the Work because of site 4 4 of 14 [* - -4] -----------------------------------------·--·--·-·---······--··-···-··--·- FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 INDEX NO. 500308/2019 RECEIVED NYSCEF: 09/22/2022 conditions at the Project, irrespective of whether the same were or should have been reasonaply foreseeable to Construction Manager, shall be expressly limited to the insurance proceeds actually recovered under Construction Manager's insurance policies maintained by Construction Manager pursuant to 11.5.1 of the General Conditions to the Contract pursuant to claim(s) made in connection therewith" (see, Side Letter Agreement [NYSCEF #102]). The Borough parties argue that "this provision of the Side Agreement makes cJ,ear that whatever damages Defendant is claiming as a result of the alleged breaches of contract are to be borne by Defendant, not BCG" (see, Memorandum of Law, page 6 {NYSCEF #525]). However, that provision only requires the owner to he responsible for all costs "of performing the work" (id) and does not act as a waiver absolving Borough from omissions or for conduct that haci nothing to do with the work and in fact is contrary to the work to be performed. Further, implicit within that article, the owner is only responsible for all costs whereby Borough acts to further the goal5 o.f the agreement, riot where Borough possibly breaches· the agreement. There is no reasonable reading of that article that permits Borough to actually breach the agreement and then shield itself. from any liability on the grounds the owner is responsible f.or a,11 ~osts of work performed at. the site. Of course, pursµarit to the side agreement the owner .is responsible for all c.osts associated with the work, howev.er, 5 [* 5] 5 of 14 .... ·····--····-···················--··-··· ...... ···················--··--·-·-··--····-··················---·······--·-·-·-·------------------------- INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 RECEIVED NYSCEF: 09/22/2022 again, the allegations raised do not concern the performance of the work at all. Indeed, Borough does not raise any questions of fact challenging the allegations of the first counterclaim. Rather; Borough makes the curious argument that "the allegations in RH160' s BOC counterclaim fall within the definition of 'Work'"· tsee, Memorandum in Reply, Page 3 [NYSCEFDoc. #576]). of that counterclaim is therefore necessary. of (i) A review It accuses Borough failing to act in the best interest of Red Hook 160; ( (ii) failing to plan, prosecute and manage the work in an cost effective and economical manner; (iii) failing to properly issue bid packages to subcontractors and enter into written subcontracts that complied with the CM Agreement; perform cost-control management; (iv) failing to (v) failing to coordinate: subcontractors work; (vi) failing to protect work in place from damage during construction; (vii) failing to provide required back-up documentation in support of payment applications; (viii) performing defective work; and (ix) failing to comply with Red Hook 1601 s .demand for an audit'' Third Party Complaint, -'J[ (~, Amended Counterclaim arid 147 [NYSGEF #196]). These allegations, if true, frustrated rather than supported the 1,r,1ork to be performed. The side agreement does not sh1ft the costs of such frustration of the work upon the owner. agreement doe,;; not act a,s a: Therefore, the.side bar to pursue any counterclaims. Borough .next argues that in arty event any liability is limited to 6 [* 6] 6 of 14 INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 RECEIVED NYSCEF: 09/22/2022 the insurance proceeds actually recovered. However, again, that limitation only applies to "costs of correcting .any errors, omissions or other deficiencies ih the Work; costs arising out of or relating to any extensions in the Proje.ct Schedule; and any costs associated with changes required to be made to the Work because of site conditions at the Project" {supra). That limitation cannot be read to confine the liability based upoh tortious conduct alleged that is not included within the express provisions o.f the side agreement at a·ll. Thus, the allegations contained in the counterclaim allege far more than the discrete reasons enumerated in the side agreement. questions of fact in this regard. Surely, there are Consequently, the motion seeking summary judgement dismissing the first cOunterc:laini. is denied. Turning to the motion seeking to dismiss the counterclaim of a breach of implied covenant of good faith and fair dealing, in ah order dated June 1, 2020 the court denied the dismissal of such counterclaim. It is true the court did not analyze whether this claim is duplicative of a breach of contract claim. A claim of a breach of an implied covenant of good faith arid fair dealing will riot be duplicative where the allegations are based upon facts that are ciistinct from the. bi,each .of contract claim (LePatner ahd Associates, LLP v. RSUI Group Inc., 2021 WL 4.555761 [S. D, N. Y; 2 021 J ) ; The counterclaim supporting this allegation is. 7 [* 7] 7 of 14 INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 RECEIVED NYSCEF: 09/22/2022 contained in 6ne paragraph of the Amended Counterclaim and Third Party Complaint. Paragraph 151 asserts that Borough committed this tort by ''purposely slowing down the work, not implementing any cost controls for the Project and acting arbitrarily and unr.easo:nably in the amounts invoiced for work Borough c:onstruction claims was performed at the Project and in Carrying out its work at the Project" (supra, CJ[l51). The allegation that Borough purposely slowed down the work is virtually indistinguishable and surely duplicative of "failing to plan, prosecute and manage the work in an cost effective and economical manner" (supra, 'lI147) . Further, the allegation Borough failed to implement any cost controls is duplicative of the breach of contract allegation of "failing to perform cost-control management" (supra, 'lI14T). Again, the allegation that Borough arbitrarily and unre~sonably invoiced amounts for work at the site is duplicative of :the allegation Borough breached the contract by "failing to provide required back-up documentation in support of payment application:s" {supra, '31147). Thu$, all the allegations of the breach of the covenant of good faith and fair dealing are already covered by the breach of contract clairn. Theref-ore, the motion seeking to dismiss the counterclaim alleging the breach of the covenant is granted. ~urning to the motion s~eking to dismiss the fraud counterclaJm, the court has already held certain of the fraud 8 [* 8] 8 of 14 INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 RECEIVED NYSCEF: 09/22/2022 counterclaims are not dupl{c(3.tive of the breach of contract counterclaim. Specifically, the counterclaim alleged that certain Borough employees created false manpower logs which caused Red Hook 160 LLC tci make- unwarranted payments. Thus, any arguments this fraud claim is duplicative of the breach of contract claim is rejected. Borough how argues that substantively the fraud claim must be dismissed because Red Hook 160 LLC cannot prove reliance upon any fraud. This is true argues Borough because Red Hook 160 LLC had an opportunity to review the logs and could have- easily discovered the true number of workers at the site. Indeed, Red Hook 16() LLC maintained various supervisors at the site yet none of them "nor anybody on behalf of Defendant counted the number of laborers on the Project and compared that to the number of people who signed the labor sign-in sheets" (Memorandum in Support, page 14). It is true that where a misrep:tesentatioh could be discovered with due diligence then no reliance upon such .fraud is possible (KNK Enterprises Inc., v. Harriman Enterprises Inc., 33 AD3d 872, 824 NYS2d 307 [2d Dept,, 2006]). However, in this case the number of workers presented were with.in the exclusive knowledge of Borough. wherein s.uch fraud Thus, there were no documents to review cou:lo. then hav.e be.en. discovereq (see, Korika Green Lighting Go., Ltd., v. Green Logic LED Electrical supply Inc., 2019 WL 6A98094 [S..• b,N.Y. 2019]). 9 [* 9] Anhui 9 of 14 Moreover, there INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 RECEIVED NYSCEF: 09/22/2022 were no· transactions here that could hav_e b~en inv~$tiga.ted to Rather.,_ the sole d:Lscovery any possible misrepresent ation$. basis asserting there can be no reliance is the fact Red Hook 160 "LLC should have taken a head count ·of workers ·present anct: compared them: with the. manpower logs presented. questions of fact whether Red Hook 160 LLC inairitained such a ;rt cannot be said as duty. There are surely ·9- mat_ter of_ law that such a duty affirmatively existed foreclosing any reiianoe upon any misre·p·r.esent a-t:ions. Thereto.re, the mot.:L.on for surnmary jµdgl,'!rtleht ~t3eking to dismiss t:he frauq claim is denied. Next, the conversion counterclaim is based upqn allegations that Borough too-k mate.r-:Lals- from t . he Re<;i. Hook- site to However, there is use a,t other sites where they were engaged. evidence at all substantiatin g those allegations. o·f Jama· Simon an ·employee of Borough dq_es D-Ot nd Tbe affidavit raise any qµestfons While he does state that he was told to order materials of fact.. for i;l.nother project "th·rotigh the Borough empl"·o.yees that Q,rdered m~teria:ls .tor the. 160 Imli3Y "?.rojeqt'-'. ( ~ , Af_fidavit of Jama S.imon, ~ 15) there is no evidence of any conversion of any rnateria".is, There.fore, the motion seeking. summary j:µdgeme1.1t pismissing this cause of action is granted. Conc:e.rhing the motion· to dismiss the a.lter ego col,lnterclaim, R~d,- Hook _160 L_LC points to an af.fidavit of. Jam.es- Miller an expert in construction operations rnanagement. 1.0 [* 10] 10 of 14 Mr. Miller states in his INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 RECEIVED NYSCEF: 09/22/2022 affidavit that "Borough and its principals disregarded any corporate distinctions between Bor0;ugh Construction and Borough Equities. The Project documents clearly establish that Mr. Bauer and Mr. Kanaris (the principals arid co-founders of Borough Equities and Borough .Construction) operated Borough Construction and Borough Eqqities as a single entity building the Project. Borough Construction vias the construction. manager for the Project. Therefore, if Borough Equities was truly a distinct entity, its name should not be found on any project documents after its short stint as a consultant prior to Borough Construction being engaged as the construction manager. But that is not at all the case" (.§s§., Affidavit of James Miller, <JI<J:[19-21 [NYSCEF Doc. #129]). That expert testimony raises questions of fact which must be determined by a tri-er of fa.ct. The mere fact Mr. Miller was not disclosed as a witness does not alter this analysis at all. Further, the court already addressed these issues in a decision dated October 23, 2019. The court stated in that decision that "Red Hook has submitted two subcontracts between Borough and other entitie's wherein the entity contained in those contracts is Borough Equities. Thus, an agreement with City Glass regarding the subject property isrriade with Borough Equities as the construction manager, Likewise, an agreement with Vitroni reg.arding 1::he subject property is with Borough Equities. More.over, Red Hook subrni tted the. title page of 11 [* 11] 11 of 14 INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 RECEIVED NYSCEF: 09/22/2022 Borough's website which -highl.ights -both companies by stating in large print: ''BOROUGH ~QUITIES_, B.ORQUGH CONSTR:UCTION GROUP" and by further stating that "Borough Eq1.lities and Borough Construction. Group is a ·privately. ·held full s-ervi¢.e- ,development firm, We oversee: every aspect of a. project from cbnception to acquis-i tion to completion. We al.so act as the co:tYstruction We. are a full service construction ---jnanage_r fo:t .c::erta.in proj:ect.s. company that provides a full range of Construction Managei;nent and General Contracting Services·" (see-., i3qr.o.ugJiequ.i tie·s_. com -submitted within Exhi,bit B of Jani.es Mille:t' s affidavit)_. These document,$ surely raise questions whether Borough, Equities is the alter-ego o.f Borough ·-Constr.µctio.n' ;· {see,. Decision dated Octol;>er 23, 2019")-. Bc:,rough has f ail.ed to eliminate all questions o.f fact in this regard. and the motion s·eeking to d.ismis's. the alter e.go cl~ims i,s denied. TUrnin~ to the :i:::~gtie~t seeking irtdemhificat ibh, the side ·agreement sp·e.cific.a11y st.ate-s: ·that indernpif ic;3.tion is {3.V-i;i-,ilabl.e for Borough for a).i clai,ms "otl'1e:i::: than those matters which ar:e the dir.ect and sole re.sult of- the negligent acts or omissiqns or willf·u1 mis.conduct of the Construct:;i.on Sid'$ Agreement Letter, CJ[ 6(bl). H_a-,1ag¢_:r; P~rti-es" (see, Indeed, on pages 24 anci 25 Of Borough'- -s Memorandum of Law this section is: quoteq., a·1 thdugh the provisions· irnini:;ldiate.ly preceding it and followin9 i t are highlighted. In any event, as noted there are qu,estions of fact 12 [* 12] 12 of 14 INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 RECEIVED NYSCEF: 09/22/2022 whether Borough committed any acts which would preclucie any If no determination of wrongdoing indemnification at this tirne. is found then Borough may seek indemnification (FSI Architecture P.C., v. Acheson Dciyle Partners Architecti1re P.C., 2022 WL 170646 [S.D.N.Y. 2022]). Thus, the motion seeking indemnification is held in abeyance pending the outcome of the trial. Turning tb the motion seeking to foreclose the mechanic's lien, it is well settled that no such foreclosure can take place if there are questions of fact whether the party seeking to foreclose, Borough in this case, owes money to the owner Red Hook 160 LLC (see, _Tomasell.i v. Oneida County Industrial Development Agency, 77 AD3d 1315, 908 NYS2d 477 [4 th Dept., 2010]). Since there are signif icaht questions of f.act whether Borough breached its contract the motion seeking summary judgement to foreclose the mechanic's lien is denied. Likewise, Borough's motion seeking su:mmary judgement on it's claim for breach of contract is denied. There are significant factual issues whether Borough's conduct constituted a breach of its contract absolving Red HOok 160 LLC from fulfilling its obligations. These issues canndt be summarily decided. Thus~ all of Borough's motions are denied except the motions seeking summary judgement dismissing the counterclaim of a pr-each of the covenant of good. faith and fair dealing and the counterclaim of conversion.. The motion see.king indemnification 13 [* 13] 13 of 14 INDEX NO. 500308/2019 FILED: KINGS COUNTY CLERK 09/22/2022 12:43 PM NYSCEF DOC. NO. 579 is held in abeyance. RECEIVED NYSCEF: 09/22/2022 As noted, the remainder of Borough's motion is denied. So ordered. ENTER: DATED: September 19, 2022 Brooklyn, NY Hor?" Leon Ruchelsmart JSC 14 14 of 14 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _....._,,.,, [* 14] ' , • , , , ~ ~ ~••: .......... • M • • • • • • • • • • • ~ • • • • • • • • • • • - - -

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