[*1]
Board of Mgrs. of the Chelsea Quarter Condominium v 129 W. Residential Partners LLC
2007 NY Slip Op 50007(U) [14 Misc 3d 1212(A)]
Decided on January 3, 2007
Supreme Court, New York County
Fried, 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This opinion is uncorrected and will not be published in the printed Official Reports.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 January 3, 2007
Supreme Court, New York County


The Board of Managers of the Chelsea Quarter Condominium, on behalf of all the Unit Owners, Plaintiff,

against

129 W. Residential Partners LLC, 129 Member, LLC, Kenneth S. Horn, Theo David, Theo David & Associates, Aquaterra Environmental Services Corp., and Charles A. Schmidt, Defendants.




604380/05



For Plaintiff:

Wagner Davis, P.C.

99 Madison Avenue, 11th Floor

New York, NY 10016

(Bonnie Reid Berkow, Esq.)

For Defendants:

129 W. Residential Partners LLC, 129 Member, LLC, Kenneth S. Horn

Duval & Stachenfeld, LLP

300 East 42nd Street

Third Floor

New York, NY 10017

(Allan N. Taffet, Esq.)

Theo David, Theo David & Associates

Stephen Latzman, Esq.

276 Fifth Avenue

Suite 306

New York, NY 10001

Bernard J. Fried, J.

Fried, J.:

This matter arises in connection with the construction and sale of condominiums located at 129 West 20th Street, New York, New York (the "Building"). The complaint alleges that in constructing and selling units in the Building, defendants: (i) engaged in fraud and [*2]misrepresentations; (ii) were negligent in the design and preparation of the plans and specifications; and (iii) breached purchase agreements with the eventual unit owners.

Defendants 129 W. Residential Partners LLC, 129 Member, LLC, and Kenneth S. Horn (collectively, the "Sponsors") were the sponsors of an offering plan, amended as of June 25, 1999 (the "Offering Plan"), to sell condominium units in the Building. Defendants Theo David, and Theo David & Associates ("Associates") (collectively, the "Architects") are erstwhile architects for the conversion of the Building to condominiums.

According to the complaint, the Sponsors and Architects committed fraud by failing to fulfill certain obligations arising from the Offering Plan, and failing to disclose certain material facts upon which eventual unit owners relied (first cause of action). The complaint also asserts a cause of action for negligence against Architects for failing to adhere to the specifications of the Offering Plan (second cause of action). Finally, the complaint claims that the Sponsors breached purchase agreements with the individual unit owners (the "Purchase Agreements") by failing to complete work on the Building in accordance with those Agreements and the incorporated Offering Plan (third cause of action).

The Sponsors move, pursuant to CPLR 3211(a)(1), (5), and (7), to dismiss the complaint based upon documentary evidence, statute of limitations, and failure to state a cause of action. In the alternative, the Sponsors move, pursuant to CPLR 3212, for summary judgment. The Architects cross-move, pursuant to CPLR 3211(a)(5), for an order dismissing the complaint.

Here, as on any motion to dismiss based upon CPLR 3211, the complaint is to be afforded a liberal construction (CPLR 3026). The allegations of the complaint are to be accepted as true, and the nonmovant, in this case, plaintiff, the Board of Managers of the Chelsea Quarter Condominium (the "Board"), is to be afforded the benefit of every possible favorable inference. Zumpano v Quinn, 6 NY3d 666, 681 (2006); but see Mark Hampton, Inc. v Bergreen, 173 AD2d 220, 220 (1st Dept 1991), appeal denied 80 NY2d 788 (1992) (inherently incredible, unsupported, or flatly contradicted facts, as well as allegations consisting of bare legal conclusions are not entitled to the presumption of truth and the benefit of every favorable inference).

Under CPLR 3211(a)(1), a dismissal is warranted only where the documentary evidence presented conclusively establishes a defense to the claims as a matter of law. Leon v Martinez, 84 NY2d 83, 87-88 (1994). The criterion for a motion to dismiss, pursuant to CPLR 3211(a)(7), is whether the Board has any cause of action, not whether it has technically stated such a cause of action. Guggenheimer v Ginzburg, 43 NY2d 268, 275 (1977).

First Cause of Action Fraud and Misrepresentation

As the first of two threshold matters, Sponsors and Architects seek to dismiss the first cause of action because it is time-barred. The applicable Statute of Limitations for a cause of action for fraud is the later of six years from the date the cause of action accrued, or two years from the time the fraud could have, or could with reasonable diligence have, been discovered. CPLR 213(8), 203(g); 60A NY Jur 2d, Fraud & Deceit §196; Yatter v William Morris Agency, Inc., 268 AD2d 335, 335 (1st Dept 2000).

Sponsors and Architects, relying upon West 90th Owners Corp. v Schlechter (137 AD2d 456, 459 [1st Dept 1988]), assert that a cause of action for fraud under these facts accrued upon the Attorney General's first acceptance of the Plan for filing on June 28, 1998. However, West 90th Owners Corp. held that a conveyance that reaffirms covenants (such as the Offering Plan [*3]amendments, or the Purchase Agreements herein) represents a new and different commitment, and starts the limitations period running from that reaffirmation. Id. at 459; compare State v 7040 Colonial Road Assoc. Co., 176 Misc 2d 367, 374 (Sup Ct, NY County 1998) (new cause of action under General Business Law §352-c [Martin Act] accrues each time a sponsor disseminates the offering plan).

The complaint states that the Offering Plan was "declared effective" as of December 15, 1999, and the first transfer of a unit under the Offering Plan occurred on February 25, 2000. In addition, the Board asserts, and no defendant denies, that the seventh amendment of the Offering Plan was dated May 23, 2000.[FN1] To the extent that the seventh amendment to the Offering Plan reaffirmed the representations and assumed the obligations of the first version, the limitations period began to run on May 23, 2000. See 61 West 62 Owners Corp. v Harkness Apt. Owners Corp., 222 AD2d 358, 360 (1st Dept 1995). The complaint, filed December 15, 2005, within six years of that date, is timely as a matter of law. See CPLR 213(8) and 203(g).

The second threshold issue is that such a reaffirmation is, if the allegations of the complaint be true, either a violation of General Business Law §352-c (the "Martin Act"), or properly addressed in a cause of action for breach of contract or fraud related to the Purchase Agreements. Here, the Board bases the first cause of action upon the contents of the Offering Plan, yet claims in its memorandum of law that the claim is based upon the respective Purchase Agreements of the unit owners. Placing these arguments in the memorandum of law are, as argued by Sponsors and Architects, an attempt to modify the complaint outside the purview of CPLR 3025.

First, I agree that this is a patent attempt to modify the complaint. Nowhere in the first cause of action is it incorporated or mentioned that the claim is based upon any of the Purchase Agreements executed by the unit owners. CPLR 3025 provides the proper mechanisms for parties to amend their complaints without leave, or with the leave of the court; memoranda are not vehicles for amendment.

Second, to the extent that the Purchase Agreements underlie the first cause of action, the existence of a third cause of action for breach of those Agreements duplicates the first cause of action. First Bank of Americas v Motor Car Funding, Inc., 257 AD2d 287, 291 (1st Dept 1999) (fraud claim that merely restates a breach of contract claim should be dismissed as redundant).

Third, many of the failures to disclose, and material misrepresentations alleged in the first cause of action are prospective in nature. In order to maintain an action for fraud where a complaint alleges breach of contract, the alleged fraud or representation must pertain to present facts, not to future intent. Deerfield Communications Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954, 956 (1986); First Bank of Americas, 257 AD2d at 291-292.

Thus, paragraphs 22(a), (f), (g), (h), (j), (n), and (p) of the complaint, which allege false representations with regard to future events, are insufficient to support the first cause of action. First Bank of Americas, 257 AD2d at 291-292 ("a cause of action for fraud may be maintained where a plaintiff pleads a breach of duty separate from, or in addition to, a breach of the [*4]contract") (citation omitted); accord Ross v DeLorenzo, 28 AD3d 631, 636 (2nd Dept 2006).

Finally, to the extent that the remaining paragraphs under the first cause of action, which allege failure to disclose various defects in the construction of the Building, allege material omissions of fact, they indicate a viable cause of action under the Martin Act. State v Rachmani Corp., 71 NY2d 718, 726 (1988); Whitehall Tenants Corp. v Estate of Olnick, 213 AD2d 200 (1st Dept), lv denied 86 NY2d 704 (1995). As the Attorney General enjoys exclusive jurisdiction of claims under the Martin Act (Rachmani Corp., 71 NY2d at 726), and private causes of action in fraud are preempted by that Act (Kralik v 229 East 79th St. Owners Corp., 5 NY3d 54 [2005]; 15 E. 11th Apt. Corp. v Elghanayan, 220 AD2d 295, 296 [1st Dept 1995], lv dismissed in part, denied in part 87 NY2d 1050 [1996]), the first cause of action should be dismissed.[FN2] See also Board of Managers of Bayberry Greens Condominium v Bayberry Green Assoc., 174 AD2d 595, 596 (2nd Dept 1991); Kramer v Zeckendorf, 10 Misc 3d 1056(A), 809 NYS2d 482 (Sup Ct, NY County 2005).

"In order to establish a viable independent claim for deception and false representation, plaintiff must plead ... a unique set of circumstances whose remedy is not already available to the Attorney General." Thompson v Parkchester Apts. Co., 249 AD2d 68, 68 (1st Dept), lv dismissed 92 NY2d 946 (1998); 15 E. 11th Apt. Corp., 220 AD2d at 296. The Board has failed to establish any obligations under the Offering Plan that are not within the purview of the Attorney General, and, thus, has no standing to bring an action for fraud under the Offering Plan. Whitehall Tenants Corp., 213 AD2d at 200; see generally CPC Intl. Inc. v McKesson Corp., 70 NY2d 268, 277-278 (1987); but see Caprer v Nussbaum, 2006 WL 2963128, *17, 2006 NY App Div LEXIS 12491, *53-54 (2nd Dept, October 17, 2006) (where fraud goes "far beyond the mere breach of the offering plan," and enriches individuals, it is a viable cause of action). The first cause of action for fraud and misrepresentation is dismissed.

Second Cause of Action Negligence

The second cause of action is directed toward the Architects. The Board maintains that Architects failed to execute the construction of the Building according to the specifications of the Offering Plan, or in the manner prescribed by applicable city, state, and federal laws, rules, and regulations.

Architects raise the threshold issues that the action, as against them, was not filed within the applicable limitations period for general claims of negligence against architects, and that Architects are not privy to the obligations or representations made under the Offering Plan or pursuant to the Purchase Agreements.

The parties agree that the Statute of Limitations for a cause of action for negligence against an architect is three years. CPLR 214(6); Matter of R.M. Kliment & Frances Halsband, Architects (McKinsey & Co., Inc.), 3 NY3d 538, 541 (2004). The parties disagree, however, as to when the limitation period starts to run. The Board contends, relying upon Board of Mgrs. of Yardarm Beach Condominium v Vector Yardarm Corp. (109 AD2d 684 [1st Dept], appeal [*5]dismissed 65 NY2d 998 [1985]), that the limitations period only began to run upon issuance of the permanent certificate of occupancy for the Building in 2006.

Architects argue, on the contrary, that bacause Architects were not responsible for obtaining the certificate of occupancy (an allegation that is conceded by the Board), the limitations period began running upon substantial completion of the contract with the Sponsors.

The latter argument is correct. In fact, Board of Mgrs. of Yardarm Beach Condominium specifically found that since the architect was not responsible for obtaining the certificate of occupancy, the limitations period began to run when the architect received the final payment for services. 109 AD2d at 686-687. Although City School Dist. of City of Newburgh v Hugh Stubbins & Assoc., Inc. (85 NY2d 535, 538 [1995]) held that the accrual date for Statute of Limitations purposes is the date of completion of performance, here, the result is the same. The Building was completed by February 2000 (when the first unit was sold), or at the latest when the entire Building was temporarily certified for occupancy in October 2000. Using the later of those dates, in order to give the Board the benefit of every favorable inference (Zumpano v Quinn, 6 NY3d at 681), the limitation period for bringing a negligence cause of action against Architects expired in November of 2003. The second cause of action, brought on December 15, 2005, is untimely as a matter of law.

Moreover, Architects aver, and the Board does not contest, that other architects became the architects of record as of December 1999, which date is before any representations were made to unit owners in the Purchase Agreements. The first cause of action has been dismissed; Architects have no further arguable connection with this litigation, and the complaint is dismissed as to them.

Third Cause of Action Breach of Contract

The third cause of action is based upon the theory that as Sponsors reaffirmed the obligations of the Offering Plan in the Purchase Agreements, and failed, intentionally or not, to meet those obligations, Sponsors are liable for breach of the Purchase Agreements.

Sponsors move to dismiss this cause of action because: (i) it is time-barred; (ii) several of the units in the Building have been re-sold, and the new purchasers are not signatories to the original Purchase Agreements; and (iii) the unit owners have not complied with the notice provisions of the Purchase Agreements.

The applicable Statute of Limitations in contract cases is six years, and a cause of action for breach of contract begins to run from the time of breach, omission to perform a contractual obligation, or false representation in the contract. CPLR 213(2); John J. Kassner & Co., Inc. v City of New York, 46 NY2d 544, 550 (1979); Squeri v Moriches Assoc., Inc., 307 AD2d 260, 261 (2nd Dept 2003); West 90th Owners Corp., 137 AD2d at 458.

Here all parties agree that the first unit was sold as of February 25, 2000. Thus, that date is the very earliest date that the any type of affirmation of the Offering Plan, or false representation in the respective Purchase Agreements could have occurred. It is also, therefore, the very earliest date that any breach could have occurred under those Agreements. Accordingly, an action for breach of the Purchase Agreements filed before February 25, 2006, would be timely as a matter of law. The instant action was filed as of December 15, 2005. Thus, none of the alleged breaches of the Purchase Agreements are statutorily time-barred.

Sponsors state that because many of the units have been resold since the original execution of the Purchase Agreements, and because those new purchasers were not original [*6]signatories to those Agreements, the new unit owners have no standing to bring an action for breach of contract.

First, in support of their motion Sponsors offer fail to: (i) show that the obligations of the Offering Plan, as incorporated into the Purchase Agreements, are non-assignable; or (ii) affirm that Sponsors have never granted permission for the Agreements to be assigned. See Offering Plan, at 30; Offering Plan, Exhibit A, Purchase Agreements, at A10 (rights and obligations may be assigned with permission of Sponsors). Nor have Sponsors explained the specific enumeration of unit owners' rights in the Offering Plan that "each conveyance of a Unit by a Unit Owner will include such Unit Owner's undivided interest in the Common Elements...." Offering Plan, at 48.

Second, under CPLR 3211(a)(1), dismissal is warranted only where the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law. Leon, 84 NY2d at 87-88. Sponsors have failed to submit an affirmation challenging the assumption that the new owners were assigned rights under the Purchase Agreements. Id., at 88 ("[n]o particular words are necessary to effect an assignment; it is only required that there be a perfected transaction between the assignor and assignee, intended by those parties to vest in the assignee a present right in the things assigned"). The unaffirmed, unsupported, conclusory, and bare allegations of the Memorandum in Support that there were no proper assignments or assumptions of the Purchase Agreements are insufficient to warrant dismissal.

Third, the By-laws of the condominium state that no residential unit in the Building may be sold without also selling that unit's "undivided interest in the Common Elements appurtenant thereto ... and the interest of such Unit Owner in any other assets of the Condominium." Offering Plan, Exhibit H, By-Laws, at H27. In fact, the By-Laws prohibit sale of a unit without its "Appurtenant Interests." Id., at H29.

In any event, lack of standing of some of the unit owners does not conclusively implicate lack of standing of the remaining, original, unit owners; the action cannot be dismissed because some of the unit owners arguably have no standing. Nor is there any indication that the right of recovery of the original unit owners is somehow diminished or eliminated by the fact of some unit owners having resold their units. See Offering Plan, at 42 (Sponsors assumed obligation to complete all work on the Building after the sale of only one unit).

Sponsors also argue that the Board did not comply with a "sunset provision" of the Purchase Agreements requiring that

... in the case of a Unit [Sponsor] is notified in writing of such defects within one (1) year from the closing of title to, or first leasing of, such Unit, and in the case of the Common Elements, [that] the Sponsor is notified of such defects within fourteen (14) months of the date of closing of title of the first Unit to a bona fide purchaser.


Offering Plan, at 41.

"Sunset provisions," such as this one, are generally enforceable, provided that they, as here, shorten the applicable limitations period, and are in writing. John J. Kassner & Co., Inc., 46 NY2d at 551. Despite this, construing the contract strictly against the drafter (Jacobson v Sassower, 66 NY2d 991, 993 [1985]), and giving the Board the benefit of every favorable inference (Zumpano v Quinn, 6 NY3d at 681), it appears that the notice requirement in the case [*7]of a Unit calls for a writing, while the requirement in the case of the Common Elements does not. Thus, the argument of Sponsors that they were not given notice of the alleged defects in the common elements in writing is unpersuasive. See Morlee Sales Corp. v Manufacturers Trust Co., 9 NY2d 16, 19 (1961) (courts may not add or excise terms under the guise of interpreting the contract) (citation and internal quotation marks omitted).

In any event, the Board claims that a survey of the Building (the "Survey", see Affirmation in Opposition, Exhibit B) gave Sponsors notice of the defects at issue here. Two points of contention are: (i) whether the Survey itself constitutes notice of the defects to Sponsors; and (ii) whether the Survey gave notice of specific defects in the roof of the Building.

With regard to the first, the Board has submitted a letter, dated April 4, 2001, specifically referring to the Survey from the then architect for the Building (Tjartjalis) to the Sponsors. This letter was sent within the fourteen-month period following the sale of the first unit in the Building (which period ended, by Sponsors' own calculation on April 25, 2001). See Affirmation in Opposition, Exhibit F; Memorandum in Support, at 21. At the very least, as of April 4, 2001, Sponsors were aware of the Survey.

Sponsors argue that the express intention of the Survey, however, was to inform condominium owners of defects in the Building, and not to inform Sponsors. However, the purpose of the Survey has nothing whatsoever to do with notice of its contents. Under Sponsors' logic, the Board would have been required to do another survey with the express purpose of notifying the Sponsors of the defects. No such restriction is contained in the notice provision of the Offering Plan.

With regard to the second point, the Survey only references some of the alleged roof defects. See Survey, at 19. Nonetheless, it is clear that by April 4, 2001 (before the expiration of the notice period), many of the specific roof defects in the complaint had been at least discussed among Tjartjalis, the Sponsors, and the unit owners.[FN3] See Affirmation in Opposition, Exhibit F, Tjartjalis letter, ¶¶10, 12.

For example, the letter from Tjartjalis informed Sponsors that:

[s]ubsequent amended plans indicating the installation of removable grade wood planking in lieu of pre-cast pavers were submitted and approved by the NYCDOB. The existing cornice was deemed to be structurally sound and it was decided not to disturb the existing supports, cladding and brackets.


Id. at ¶10.

Since it is evident that the Sponsors knew of, at least, some of the defects alleged in the complaint before the notice period had expired, the motion to dismiss the third cause of action for breach of contract is denied.

Accordingly, it is hereby

ORDERED that the motion of defendants to dismiss the complaint is granted to the extent that the first and second causes of action are dismissed; and it is further

ORDERED that the cross motion of defendants Theo David and Theo David & [*8]Associates to dismiss the complaint as to them in its entirety, is granted with costs and disbursements to Theo David and Theo David & Associates as taxed by the Clerk of the Court; and it is further

ORDERED that the Clerk is directed to enter judgment in favor of Theo David and Theo David & Associates accordingly; and it is further

ORDERED that the remaining defendants are directed to serve an answer to the complaint within twenty (20) days of service of a copy of this order with notice of entry.

______________________________

J.S.C.

Footnotes


Footnote 1:There also appears to have been an eighth amendment to the Offering Plan as of November 29, 2000 (Taffet Affirmation, Exhibit B, at 2; Memorandum in Opposition, at 12-13), however, the Board has not affirmed that specific date in its submissions. See Berkow Affirmation, ¶3.

Footnote 2:The Office of the Attorney General (AG) has, while this action for fraud is pending, declined to act under the Martin Act. Contrary to the arguments of the Board, that it may have no venue in which to pursue its fraud claims if they are dismissed, the AG does not appear to have made a final determination.

Footnote 3:Although this letter may satisfy a requirement that notice be in writing, as discussed above, the Offering Plan does not require written notice.