In this commercial litigation, arising out of the construction of the PAYTON LANE NURSING HOME, located in Southampton, New York, AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY and AMERICAN MOTORISTS INSURANCE COMPANY ("THE SURETY") make several motions. THE SURETY issued both a payment bond and a performance bond, in December 2001, to the general contractor on the project, IDI CONSTRUCTION CO. INC. ("IDI") As a result of the owner's termination of IDI in May, 2004, THE SURETY entered a Takeover Agreement with the owner and completed the project. The Plaintiff in this action, S & J MECHANICAL CORP ("S&J") sued IDI, the general contractor, and THE SURETY, inter alia, for damages for delay as well as for extra work and materials. To the extent relevant to these motions, THE SURETY has counterclaimed against S&J for failure to complete the work, failure to deliver certain components to whirlpool bathtubs; breach of contract and breach of warranty both in failing to complete the work and failing to provide the job in the proper manner, causing damage to THE SURETY, which was required to complete the job . Although neither counsel has seen fit to provide the Court with a copy of the current Amended Verified Complaint, the general basis for the lawsuit is gleaned from the existing Answer as well as the deposition testimony of Plaintiff's President.

THE SURETY now moves for the following relief: 1) by Notice of Motion (motion sequence number 001) for an Order pursuant to CPLR § 3124, compelling the Plaintiff's compliance with certain discovery requests made by THE SURETY's counsel during the deposition of Plaintiff's President; 2) by Notice of Motion (motion sequence number 002) for an Order permitting THE SURETY to serve and file an Amended Answer with Counterclaims and Third-Party Complaint, adding affirmative defenses, new causes of action and additional parties; and 3) by Notice of Motion (motion sequence number 003) for an Order dismissing the Plaintiff's Amended Complaint against the Surety and permitting THE SURETY to amend its Counterclaims to include a Counterclaim against the individual owner of S&J, James Ambrosio.

THE SURETY argues that as a result of the deposition testimony of S&J's president, it has requested documents and other information which are both relevant and which may lead to relevant evidence in this case. The documents sought on the record of the August 16, 2006 deposition were reiterated in a August 30, 2006 letter from SURETY's counsel to Plaintiff's attorney. Based on the papers before the Court, the following information has not been provided by Plaintiff: 1)The identity of the IDI foreman who instructed S&J to cease all work on the project; 2) the names, addresses and telephone numbers of the S&J employees that worked on the project, including Mr. Logan, Mr. Spear and Mr DeWitt, along with a statement concerning whether these persons are currently employed by a second corporation owned by Mr. Ambrosio, Ambrosio and Company, Inc. ("Ambrosio and Company"); 3) addresses and telephone numbers for current employees of Ambrosio and Company; 4) documents reflecting the consolidation of S&J and Ambrosio Plumbing into Ambrosio and Company; 5)bank records for the three [*2]corporations for the years 2002 to the present; 6) S&J's bid documents to IDI for the project; 7) the construction schedule provided to Mr. Ambrosio by IDI; 8) copies of records relating to S&J's receipt or deposit of funds from IDI relating to the project; 9) S&J's accounting records from January 2002, in Quick Books format, relative to the project; 10) Ambrosio and Company's records reflecting expenses incurred by that entity for the project; 11) the identity of the attorney that S&J claims reviewed S&J's contract with IDI; 12) copies of documents that S&J provided to THE SURETY's completion plumber, Aztec Plumbing; 13) a copy of Key Span's "blue books" that set forth the standard for installing natural gas systems on the project; 14) all "RFI's" relating to benchmarks; 15) documents reflecting work performed by S&J on the project in 2004; and 16) documents concerning pumps and tubs that S&J alleges it left at the project.

During the August 16 deposition, Mr. Ambrosio testified, under oath ,that he was the President and sole shareholder of S&J (dep. At 15); that he merged two of his companies, Ambrosio Plumbing and S&J into a new company, Ambrosio and Company (dep. At 21); that the consolidation was effectuated in 2003 (dep. at 27); and that Mr. Ambrosio sent documents quantifying its claim against THE SURETY in 2004 on Ambrosio and Company letterhead (dep. at 54). He also stated both that the last date S&J was on the project was in early October 2003 (dep. at 55) and that S&J performed certain supervisory and inventory work in 2004 (dep. at 162); that he keeps separate Quick Books accounts for S&J, for Ambrosio Plumbing and for Ambrosio and Company and that he has all such information dating back to 2002 (dep. at 94, 95); that certain bills and invoices on the Payton Lane project were entered on the software accounting system as being from Ambrosio and Company (dep. at 97, 98). Mr. Ambrosio also stated that when S&J left the job, he provided specifications on fixtures, pumps and pump equipment that would be needed to complete the project to THE SURETY's plumbing subcontractor (dep. at 123); that S&J was in contact with Keyspan and had a copy of the "BlueBook", which contained the utility's specifications for gas piping (dep. at 124); that all benchmarks for floor elevations were provided to S&J by the general contractor, IDI, through its construction supervisor as a result of S&J's request for information (dep. at 129, 130). Finally, Mr. Ambrosio stated that he believes he was told by IDI's foreman to leave [*3]the jobsite in October 2003 because the job had been stopped (dep. at 169,170).

Plaintiff opposes the motions on the grounds that the disclosure sought is over road, constitutes a fishing expedition and can only be characterized as harassment of the Plaintiff, since it does not seek relevant and/or material evidence. Plaintiff's counsel opposes the application to amend the Counterclaim to add new parties on the grounds of laches. With regard to the motion to add the affirmative defense of lack of capacity to sue, Plaintiff argues that such application is waived under CPLR § 3211 (e) since it was neither interposed in the Answer nor in a pre-Answer motion to dismiss. Plaintiff also opposes the application to amend the Answer to add a Third Party Complaint against Mr. Ambrosio individually on the basis that S&J has set forth no basis for contribution or indemnification, which are the underpinnings for a Third Party action.

LACK OF CAPACITY TO SUE

A party waives the right to assert the affirmative defense of "lack of capacity to sue" when it fails to assert such defense either in its Answer or in a motion served prior to the answer. CPLR § 3211 (a)(3) and CPLR § 3211 (e); see, Erjur Associates v Ocho Realty Corp., 134 AD2d 321, 520 NYS2d 798 ( 2d Dep't 1987). In Erjur, supra , the Defendant sought to dismiss the action by a corporation on a contract it entered into after it had been dissolved for failure to pay its franchise taxes. The taxes were paid during the litigation. In affirming the lower court's denial of the motion, the Appellate Court cited the provisions of the CPLR, which grant a party the opportunity to raise certain affirmative defenses prior to or with the Answer.

The Appellate Court in Erjur, supra , went on to state that if a corporation actually pays its franchise taxes during the pendency of the suit, such payment reinstates the corporation's powers nunc pro tunc. Id.

THE SURETY's Answer in this litigation to the First Amended Complaint is annexed to its moving papers as Exhibit B. Set forth as an affirmative defense is the Surety's assertion that the First Amended Complaint should be [*4]dismissed because Plaintiff is not licensed to conduct business in the State of New York. Accordingly, in this Court's view, interpreting the existing Answer in a broad manner, the Surety has not waived the defense.

However, Plaintiff's counsel has averred that S&J is in the process of paying its taxes and becoming reinstated. THE SURETY has raised the policy issue of allowing a corporation which has failed to pay it taxes to pursue a lawsuit in the corporation's name; however, such litigation has not always been considered alien to the purpose of the Tax Laws. As set forth in Erjur, supra , a case remarkably similar to the one at bar, the Court stated that "(t)o bar the Plaintiff corporation from bringing suit to enforce the contract would needlessly cause it financial hardship and would not promote the purpose of the Tax Law, which is to provide an incentive for paying taxes. . . ." Id.

Under the circumstances and following the procedure set forth by the Second Department in the case cited by the Surety, Lorisa Capital Corp v Gallo, 119 AD2d 99, 506 NYS2d 62 ( 2d Dep't 1986), the Court grants the Surety's motion to dismiss S&J's affirmative action unless the Plaintiff secures reinstatement, through payment of back taxes within ninety (90) days from the date of service of this order on S&J's counsel with Notice of Entry. If, as set forth by S&J's counsel, reinstatement is forthcoming within such period, the condition will be considered met and the motion denied.

Parties to civil litigations are granted broad rights to [*5]disclosure of all relevant and material matters as well as documentation that might lead to the discovery of admissible proof. See, Montgomery v Taylor, 275 AD2d 698, 713 NYS2d 188 (2d Dep't 2000); Keenan v Harbor View Health & Beauty Spa, Inc., 205 AD2d, 613 NYS2d 419 (2d Dep't 1994).

Based on a careful review of the deposition of S&J's President, it is clear to the Court that all items sought by THE SURETY, with one exception, both on the record of August 16, 2006 and reiterated in the letter of August 30, 2006 are relevant to the prosecution and defense of delay and extra work claims on a construction project. In view of Mr. Ambrosio's statements concerning the status of Ambrosio and Company and the fact that he merged his other two construction companies into such new corporation, the records sought from all three corporations clearly fall within the scope of CPLR§ 3101 and must be produced. Moreover, since Defendant has already demonstrated that there was at least some commingling of both bills and invoices for the various corporations, and that Plaintiff seeks to be reimbursed for overhead in some its claims, it must provide the Surety with the documents requested.

However, the Surety has not set forth to this Court's satisfaction the relevance or materiality of the name of a counsel retained by S&J prior to bidding on the construction job nor does the Court find that such information would lead to relevant evidence. With that exception, THE SURETY's motion under CPLR§ 3124 to compel disclosure is granted and such information shall be provided to THE SURETY's counsel within thirty (30) days from the date of entry of this Order.

Leave to amend a pleading should be freely granted where the proposed amendment is neither palpably devoid of merit and will not result in surprise or prejudice to the opposing party. Old World Custom Homes , Inc. v Crane, 33 AD3d 600, 822 NYS2d 155 ( 2d Dep't 2006). THE SURETY, in this case, seeks to amend its Answer to add additional affirmative defenses and counterclaims, including a Counterclaim against S&J for negligence and new Counterclaims, adding Ambrosio and Company and Mr. Ambrosio, individually, as counterclaim Defendants. In its initial motion to amend, THE SURETY sought to add a Third Party action against Mr. Ambrosio; however, it appears to have withdrawn that application in a subsequent motion, where it seeks to add a direct Counterclaim against Mr. Ambrosio.

Where a corporation is involved in a merger under circumstances where the successor corporation becomes owner of its predecessor's assets and liabilities, a cause of action against the predecessor can clearly be brought against the successor. see, Maline v City of Utica, 267 AD2d 1022, 701 NYS2d 202 (4th Dep't 1999).From the deposition of Mr. Ambrosio, it is at least conceivable that THE SURETY can make the claim that Ambrosio and Company, Inc. is the successor corporation to S&J. Under the circumstances, where discovery is still ongoing, the Court cannot state that the proposed Counterclaim against that corporation is without merit.

However, a reading of the Amended Answer as well as the discovery provided to the Court does not provide a basis for assertion of a Counterclaim either for negligence against any party nor on any cause of action against Mr. Ambrosio individually. THE SURETY's causes of action are based on an alleged breach of contract by a corporation with which THE SURETY's principal contracted. There is no basis on the record at this juncture to seek to hold an officer/director/shareholder of such corporation personally liable since he did not bind himself individually on such contract. See, Westminster Construction Corp. v Sherman, 160 AD2d 867, 554 NYS2d 300 (1990). Moreover, concerning the proposed cause of action for negligence, the gravamen of THE SURETY's claim is that the Plaintiff performed its work under the contract in a less than skillful manner. As set forth in Gordon v Teramo & Co., 308 AD2d 432, 764 NYS2d 144 ( 2d Dep't 2003), such assertions are "(m)erely a restatement, albeit in slightly different language, of the . . . contractual obligations asserted in the causes of action for breach of contract against the . . . corporation". Id. They do not give rise to a cause of action for negligence. Id.

Based on the above, THE SURETY's motion to amend its Answer to assert new affirmative defenses is granted; the motion to assert Counterclaims against Mr. Ambrosio and Company, Inc. is granted; the application to assert a Counterclaim against Mr. Ambrosio, individually, is denied and the motion to add a Counterclaim against any party for negligence is denied. THE SURETY's motion to add a Third Party action against Mr. Ambrosio individually is considered withdrawn, or if not withdrawn, it is denied. [*7]

This constitutes the DECISION and ORDER of the Court.

March 16, 2007,

Emily Pines

J. S. C.