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Crest Condominium v. City View Gardens

35 Misc.3d 1223(A), 951 N.Y.S.2d 85, 2012 WL 1660679 (N.Y.Sup.), 2012 N.Y. Slip Op. 50826(U)
(Table, Text in WESTLAW), Unreported Disposition
(Cite as: 35 Misc.3d 1223(A), 2012 WL 1660679 (N.Y.Sup.))

(The decision of the Court is referenced in a table in the New York Supplement.)

Supreme Court, Kings County, New York.


CITY VIEW GARDENS PHASE II, LLC, Boymelgreen Developers, LLC, Shaya B. Developers, Inc., R & I City Corp., Ronald Fatato, Itzhak Katan, Jeshayahu Boymelgreen, Lin & Associates, Emily Lin, M.A., Day Engineering, PC, Abraham Joselow, PE, PC, Defendants.

No. 4873/2011.
May 11, 2012.

Adam Leitman Bailey PC, New York, for plaintiff.

David Berg, Berg Law PLLC, Brooklyn, for defend-ants.

*1 This action by The Board of Managers of the Crest Condominium (“Board”) alleges, inter alia, breach of contract, arising out of the construction of a newly erected building. Defendants City View Gar-dens Phase II, LLC (“City View”), Boymelgreen Developers, LLC (“Boymelgreen Developers”), Shaya B. Developers, Inc. (“Shaya”), R & I City Corp. (“R & I”), Ronald Fatato (“Fatato”), Itzhak Katan (“Katan”), Jeshayahu Boymelgreen (“Boymelgreen”), collectively referred to as “Defendants”, move to dismiss each of the seventeen causes of action in the complaint, pursuant to CPLR 3211(a)(1), (3), and (7).

City View was the sponsor of The Crest Condominium, located at 302 Second Street, Brooklyn, New York (“Condominium”). The building consists of 68 residential housing units, and one non-residential garage unit, with an alleged capacity of 32 parking spaces. Defendant Lin & Associates was the architectural firm retained “to prepare a report describing the construction” of the Condominium premises, pursuant to an agreement with City View. Defendant Emily Lin is alleged to be the principal of Lin & Associates (collectively, “Defendant Architect”). City View submitted the offering plan for the condominium project to the Attorney General, which was accepted on April 2, 2007. The offering plan was certified by defendants Fatato, Katan, and Boymelgreen, who are the principals of City View. Boymelgreen is also an alleged member of Boymelgreen Developers which is alleged to be a “controlling sponsor entity”. Shaya and R & I are alleged to be “principals” of City View.

According to the Complaint, under the offering plan, City View was to “perform such work and sup-ply such materials, or will cause the same to be per-formed and supplied, as is necessary in order to complete the Building with a quality of construction comparable to the currently prevailing local standards.” The Sponsor was “obligated to bear all costs and expenses incurred in connection with completing construction of the Building substantially in accordance with the plans and specifications.” The complaint further alleges that under the offering plan, City View “will attempt to obtain a Permanent Certificate of Occupancy for the Building within 2 years after the first closing 1/4 but in any event, before the expiration of the applicable Temporary Certificate of Occupancy, as the same may be renewed, replaced or extended.” It is also alleged that City View was not in compliance with General Business Law 352–e (2–b) and 352–h, to maintain a special trust account containing funds certified by the Architect as reasonably necessary to complete the work needed to obtain a Permanent Certificate of Occupancy.

Plaintiff alleges that shortly after moving into their units in the Condominium, owners began expe-riencing “conditions indicating that the design and construction of their individual units and the building was defective and not constructed in a skillful manner, in that the workmanship and materials used in the construction did not meet the specific standards of the Building Code.” The unit owners and the Board gave notice to City View of these defects, and subsequently retained Howard L. Zimmerman Architects, P.C. and Jack Green Associates Consulting Engineers (collec-tively “HLZA”) to perform an investigation of the physical condition of the premises. On April 12, 2010, HLZA issued a report detailing various defects and violations relating to the construction of the Condo-minium. After the filing of a formal complaint against City View and a site visit by the New York State Attorney General, City View “acknowledged the presence of construction defects and agreed to remedy the same.” Plaintiff alleges that “only minor patch work was ever commenced.”

*2 According to the Complaint, City View has also “failed to pay invoices in connection with the cost of the construction of the Building, causing mechanic’s liens to be placed against the property” by multiple contractors. FN1

FN1. According to the Complaint, on or about June 7, 2007, Total Safety Consulting, LLC filed a lien against the premises in the sum of $3,000 allegedly owed under a con-tract with City View. On or about Aril 21, 2008, Okin–Wallack Corp. filed a lien against the premises in the sum of $2,861.47 allegedly owed under a contract with City View. On or about June 17, 2008, Metropolitan Lumber, Hardware & Building Supplies, Inc. filed a lien against the premises in the sum of $1,285.94 allegedly owed under a contract with City View.

Defendants, in support of their instant motion, argue that each of the seventeen causes of action alleged by Plaintiff in the complaint must be dismissed pursuant to CPLR 3211(a)(1), (3), and (7). Defendants also cite to CPLR 3013, 3014, and 3016(b), asserting that dismissal is also required as the allegations in the pleading are not sufficiently particular to give the court and parties notice of the transactions or occurrences intended to be proved, as well as the material elements of each cause of action.

Where a motion to dismiss is brought pursuant to CPLR 3211(a)(1) on the grounds that the action is barred by documentary evidence, such motion may be appropriately granted only where the documentary evidence utterly refutes plaintiff’s factual allegations, conclusively establishing a defense as a matter of law ( Leon v. Martinez, 84 N.Y.2d 83, 88 [1994]; Rubinstein v. Salomon, 46 A.D.3d 536, 539, 849 N.Y.S.2d 69 [2d Dept 2007] ).

“When assessing the adequacy of a complaint in light of a CPLR 3211(a)(7) motion to dismiss, the court must afford the pleadings a liberal construction, accept the allegations of the complaint as true, and provide [the] plaintiff 1/4 the benefit of every possible favorable inference” ( AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 5 N.Y.3d 582, 591 [2005], quoting Leon, 84 N.Y.2d at 87, 614 N.Y.S.2d 972, 638 N.E.2d 511; see also Goshen v. Mutual Life Inc. Co. of NY, 98 N.Y.2d 314, 326 [2002] ). Whether a plaintiff can ultimately establish its allegations “is not part of the calculus to determine a motion to dis-miss” ( EBC, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 19 [2005] ). “Further, any deficiencies in the complaint may be amplified by supplemental pleadings and other evidence” ( AG Capital Funding Partners, L.P., 5 N.Y.3d at 591, 808 N.Y.S.2d 573, 842 N.E.2d 471; see also Rovello v. Orogino Realty Co., 40 N.Y.2d 633, 635–636 [1976] ). Such a motion, pursuant to CPLR 3211(a)(7), must fail if the facts as alleged fit within any cognizable legal theory (see Leon, 84 N.Y.2d at 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511; Morone v. Morone, 50 N.Y.2d 481, 484 [1980]; Rovello, 40 N.Y.2d at 634, 389 N.Y.S.2d 314, 357 N.E.2d 970).

As a threshold matter, Defendants assert that the Plaintiff Board lacks the legal capacity pursuant to CPLR 3211(a)(3), to bring this action, arguing that Plaintiff is no more than a group of “disgruntled” unit owners. With respect to a cause of action relating to the sale of condominium units, a “condominium board has standing to make such a claim on behalf of the individual condominium unit owners by reason of explicit statutory authority, namely, Real Property Law § 339–dd, under which the board of managers of a condominium is empowered to maintain an action on behalf of the condominium owners with respect to any cause of action’ relating to common elements of more than one unit” (see Residential Bd. of Managers of Zeckendorf Towers v. Union Square–14th Street As-soc., 190 A.D.2d 636, 594 N.Y.S.2d 161 [1st Dept 2003] ). The Complaint alleges numerous defects affecting the common areas, as well as multiple units on different floors, thus satisfying the commonality elements required by the statute. Further, Plaintiff has submitted an affidavit showing unanimous consent of the Board members to commence the action in the form of individually signed letters dated February 28, 2011 that are purportedly in compliance with the Condominium’s by-law § 2.17(B).FN2 Accordingly, Defendants’ contention that plaintiff lacks standing is unsubstantiated and the motion to dismiss for lack of standing is denied except as discussed below.

FN2. Although both parties refer to the Condominium by-laws with respect to the issue of plaintiff’s standing to commence this action, the by-laws were not included in the motion papers. In the reply, defendants claim that “the majority of the documents referred to in the motion are already in front of this Court by virtue of plaintiff’s Order to Show Cause and were not annexed in an effort to avoid duplication.” It is noted that this assumption was inappropriate and this motion was decided based upon the papers submitted on this motion alone. The court did not search the record to track down papers purportedly included in prior motions.

*3 Defendants also argue that the individual defendants, Fatato, Katan, and Boymelgreen, cannot be held liable to Plaintiff on a breach of contract theory, due to their lack of privity with Plaintiff, citing, Retropolis, Inc. v. 14th Street Dev. LLC, 17 A.D.3d 209, 210, 797 N.Y.S.2d 1 [1st Dept 2005] and Collins v. E–Magine, 291 A.D.2d 350, 351, 739 N.Y.S.2d 15 [1st Dept 2002].

It is well settled within the Second Department that a plaintiff may seek damages for a breach of contract against the individual principals of the sponsor, based upon certification of the offering plan and the incorporation of the terms of the offering plan in a specific provision of the purchase agreement (see Hamlet on Olde Oyster Bay Home Owners Assn., Inc. v. Holiday Org., Inc., 65 AD3d 1284, 1288 [2d Dept 2009]; Tiffany at Westbury Condominium v. Marelli Dev. Corp., 40 A.D.3d 1073, 1075–1076, 840 N.Y.S.2d 74 [2d Dept 2007]; Kikirov v. 335 Realty Assoc. LLC, 31 Misc.3d 1212[A] [Sup Ct, Kings County 2010]; Board of Mgrs. Of Woodpoint Plaza Condominium v. Woodpoint Plaza LLC, 24 Misc.3d 1233[A] [Sup Ct, Kings County 2009] ). Accordingly, as the Complaint asserts such certifications were contained in the offering plan, which was incorporated by reference into the purchase agreements, the motion to dismiss for lack of privity as to the individual defendants Fatato, Katan and Boymelgreen is denied.

Plaintiff’s first cause of action alleges breach of contract against Defendants City View, Boymelgreen Developers, Shaya, R & I, Fatato, Katan, and Boymelgreen with respect to the defects in the Condominium’s construction. Defendants assert that Plaintiff has not properly pled pursuant to CPLR 3013, asserting that the complaint fails to adequately set forth, in nonconclusory language, the specific in-stances upon which liability is predicated, and there-fore should be dismissed.

For a complaint to be sufficient, the pleadings must contain enough detail “to give the court and parties notice of the transactions, occurrences, or se-ries of transactions or occurrences, intended to be proved and the material elements of each cause of action or defense” (CPLR 3013; see Johnson v. Ve-rona Oil, Inc., 36 A.D.3d 991, 993, 827 N.Y.S.2d 747 [3d Dept 2007]; compare Eklund v. Pinkey, 27 A.D.3d 878, 879, 810 N.Y.S.2d 547 [3d Dept 2006]; Hassan v. Schweizer, 277 A.D.2d 797, 800, 716 N.Y.S.2d 169 [3d Dept 2000]; see also Lepkowski v. State of New York, 2 NY3d 201, 208 [2003]; Robin BB. v. State of New York, 56 A.D.3d 932, 933, 867 N.Y.S.2d 284 [3d Dept 2008] ). Additionally, “when evidentiary material is considered [i.e., the purchase agreement and the relevant terms of the offering plan], the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one” ( Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 375 [1977]; see also Jordan Panel Sys. Corp. v. Turner Constr. Co., 45 A.D.3d 165, 188, 841 N.Y.S.2d 561 [1st Dept 2007] ). “It is well-established law that a pleading, although inartfully drawn, should not be dismissed, so long as it sets forth a cause of action” ( McLaughlin v. Thaima Realty Corp., 161 A.D.2d 383, 384, 555 N.Y.S.2d 125 [1st Dept 1990] ).

*4 Here, Plaintiff has alleged that Defendants failed to comply with the terms of the purchase agreement. The Board asserts that Defendants failed to “construct the Building substantially in accordance with the Offering Plan and the Plans and Specifications; correct any defects in the construction; construct the Building in accordance with the plans, and with all applicable zoning and building laws; perform such work and supply such materials in order to construct a building with a quality of construction comparable to the currently prevailing local standards, and pay or cause to be paid all contractors, subcontractors and material persons in accordance with New York Lien Law.”

In support of these allegations, the Plaintiff has annexed page 98 of the offering plan, which was incorporated into the purchase agreement, outlining the obligations of City View to ensure that the construction of the premises is “in accordance with all applicable codes and filed plan.” Plaintiff also references Paragraph 17.2 of the purchase agreement, incorporated from the offering plan, which states “[t]he construction of the Building and the Unit and the correction of any defects in the construction thereof to the extent required under the Plan are the sole responsibility of the Sponsor.” Further, Plaintiff includes an itemization of those construction defects identified and complained of in the report prepared by HLZA. In consideration of all the above, the Plaintiff has alleged in sufficient detail the material elements of its claim. Plaintiff has adequately set forth a cause of action for breach of contract and the motion to dismiss the first cause of action is denied.

Plaintiff also pleads in its second cause of action a breach of contract claim against Lin & Associates, its alleged principal, Emily Lin, as well as City View and its principals, based upon Lin’s agreement with City View to provide architectural services for the development and planning of the construction of the Condominium.FN3 Plaintiff alleges that Defendant Architect “knowingly and intentionally or negligently prepared the building plans and specifications so that the resulting construction of the Condominium did not meet the specific standards called for by the Building Code, thereby causing the many construction defects”, and that City View and its principals “knew or should have known” of the intentionally or negligently prepared plans.

FN3. Plaintiff brought a similar breach of contract claim against M.A. Day Engineering, P.C., Abraham Joselow, P.E., P.C., City View, and City View’s principals in their third cause of action. However, the action against M.A. Day and Joselow has been discontinued in accordance with a stipulation so ordered by this court on December 1, 2011. As to the other sponsor defendants, the third cause of action is redundant of the first breach of contract claims and must therefore be dismissed.

It has long been held that a plaintiff who purchases a condominium unit is merely an incidental third-party beneficiary to the contracts between the sponsor and service providers which participated in the development of the condominium, and thus has no standing to bring a breach of contract claim against such contractors (see Leonard v. Gateway II, LLC, 68 AD3d 408, 408–409 [1st Dept 2009]; Kerusa Co., LLC v. W10Z/515 Real Estate Ltd. Partnership, 50 A.D.3d 503, 504, 858 N.Y.S.2d 109 [1st Dept 2008]; Residential Bd. of Mgrs of Zeckendorf Towers, 190 A.D.2d at 637, 594 N.Y.S.2d 161). However, a plain-tiff may be held to be an intended third-party beneficiary to such a contract when the contract is expressly intended to benefit such plaintiff, and the plaintiff relied upon the contractor’s obligations under the contract (see Caprer v. Nussbaum, 36 A.D.3d 176, 201, 825 N.Y.S.2d 55 [2d Dept 2006]; Kidd v. Havens, 171 A.D.2d 336, 339, 577 N.Y.S.2d 989 [4th Dept 1991]; Board of Mgrs. of Marke Gardens Condominium v. 240/242 Franklin Ave. LLC, 20 Misc.3d 1138[A] [Sup Ct, Kings County 2008]; Bridge St. Homeowners Ass’n. v. Brick Condominium Developers, LLC, 18 Misc.3d 1128[A], [Sup Ct, Kings County 2008] ).

*5 Plaintiff does not dispute that it was a non-party to the architectural contract between City View and Defendant Architect. Further, the architectural plans were merely incorporated into the larger offering plan amid the other numerous provisions. Neither the plans, nor any other agreement between Plaintiff and Defendant Architect, reflect the intent to specifically benefit Plaintiff. Therefore, the contract between City View and Defendant Architect does not extend privity to Plaintiff as an intended third-party beneficiary, and since Plaintiff has no standing to bring a breach of contract claim against Defendants Lin & Associates and Emily Lin (see Leonard, LLC, 68 A.D.3d at 408, 890 N.Y.S.2d 33; Kerusa, 50 A.D.3d at 504, 858 N.Y.S.2d 109; Residential Bd. of Mgrs of Zeckendorf Towers, 190 A.D.2d at 637, 594 N.Y.S.2d 161), there is no cause of action stated against the moving defendants separate from the breach of contract claim set forth in the first cause of action. Accordingly, Plaintiff’s second cause of action must be dismissed.

In the fourth cause of action, Plaintiff further alleges that Defendants are in breach of the express warranty as prescribed in the offering plan, requiring them to “correct, repair, or replace any and all defects relating to the construction of the Building”. Defendants argue that Plaintiff has failed to state a cause of action upon which relief can be granted, as they are not entitled to monetary damages for breach of express warranty claims under the offering plan. Defendants specifically cite the terms of the offering plan, noting that “[n]othing contained in this section will be construed so as to render sponsor liable for money dam-ages (whether based on 1/4 breach of warranty, or otherwise), it being intended that sponsor’s sole obligation under the plan will be to repair or replace any defective item of construction.”

However, the Plaintiff alleged in the Complaint that Defendants have discontinued the repairs that were not only required under the express warranty, but were agreed to after a meeting with the Office of the Attorney General on February 23, 2011. Plaintiff has sufficiently asserted facts under CPLR 3013, describing Defendant’s failure to fully repair those alleged defects identified in the HLZA report, as well as those defects agreed to after a meeting with the Office of the Attorney General (see Johnson, 36 A.D.3d at 993, 827 N.Y.S.2d 747). As Defendants have allegedly abandoned their prescribed duties under the ex-press warranty provided, the motion to dismiss this cause of action must be denied.

Seeking dismissal of Plaintiff’s fifth cause of action, which is premised upon a breach of the common law housing merchant implied warranty, Defendants argue that the common law implied warranty is not applicable in the present case, as the codification of the Housing Merchant Implied Warranty contained in General Business Law Article 36–B is a substitute for plaintiff’s common law remedy for breach of warranty. Fumarelli v. Marsam Development, Inc., 92 N.Y.2d 298, 302 [1998] (“today, we build on that viewpoint and expressly hold that General Business Law Article 36–B is a full, effective, and realistic substitute of the protection and rationale recognized in” the common law implied housing merchant warranty). Defendants go on to state that the limited warranty provided expressly excluded all other implied warranties, including Article 36–B. Plaintiffs argue that whereas the building exceeds five stories, the Building is exempt from the statutory authority of Article 36–B of the New York General Business Law, and thus the common law warranty remains intact.

*6 Under New York General Business Law § 777–b, the exclusion or modification of the housing merchant implied warranty is permitted only if the buyer is offered a limited warranty in accordance with the provisions of that statute. As the court is not in possession of the complete offering plan, and there-fore has an incomplete accounting of all warranties prescribed therein, it is unable to determine whether a cause of action for breach of the housing merchant implied warranty has been stated at this time. Dis-missal of this cause of action must therefore be denied.

Plaintiff’s sixth cause of action against City View and its principals alleges a breach of contract regarding the sponsors’ failure to “obtain a Permanent Certificate of Occupancy for the Building within two years of the first closing … but in any event before the expiration of the applicable Temporary Certificate of Occupancy” as required by the offering plan. Defendants assert that the offering plan does not require the acquisition of a Permanent Certificate Occupancy as long as a Temporary Certificate of Occupancy is in place, and that this cause of action is duplicative of plaintiff’s first cause of action for breach of contract.

Again, as the court is not in receipt of the complete offering plan, it can make no determination as to any duties imposed under the terms of the contract. Further, this cause of action is solely predicated upon the failure of the Defendants to obtain a Permanent Certificate of Occupancy, which is more than adequately set forth with the requisite detail required under CPLR 3013. Moreover, as these facts are not set forth elsewhere in the complaint, the cause of action is not duplicative of any of the other causes of action (see Sitar v. Sitar, 50 A.D.3d 667, 670, 854 N.Y.S.2d 536 [2d Dept 2008]; New York Med. Coll. v. Histo-genetics Inc., 6 A.D.3d 410, 411, 774 N.Y.S.2d 356 [2d Dept 2004] ). For the foregoing reasons, the motion to dismiss the sixth cause of action is denied.

Plaintiff’s seventh cause of action alleges Defendants’ failure to comply with General Business Law §§ 352–e (2)(b) and 352(h). The Complaint alleges, that based upon contracts between the sponsor and defendant architects and MA Day and Joslow, the professional defendants were obligated to certify that sufficient funds were available in an Escrow Account to complete the project and obtain a permanent certificate of occupancy. Sponsor is alleged to have failed to properly fund the Escrow Account upon the negligent or fraudulent certification by the defendant architects and engineers in breach of these defendants’ contracts with Sponsor. It is further alleged that the Sponsor knew or should have known of Defendants’ alleged deficient and untruthful certifications when it improperly directed the escrow agent to release funds needed to obtain a Permanent Certificate of Occupancy. Based upon these alleged breaches, plaintiff seeks “compensation” damages of $50 million. Defendants assert that Plaintiff’s seventh cause of action should be dismissed, as the Attorney General is vested with exclusive authority to litigate claims under the Martin Act.

*7 The Martin Act was designed to be a “statutory mechanism in which the Attorney General would have broad regulatory and remedial powers to prevent fraudulent securities practices by investigating and intervening at the first indication of possible securities fraud on the public and, thereafter, if appropriate, to commence civil or criminal prosecution.” CPC Int’l Inc. v. McKesson Corp., 70 N.Y.2d 268, 276 [1987], citing General Business Law §§ 352, 353, 353–a, 354, 358. With the addition of section 352–e, the Martin Act was expanded to include the offer and sale of condominiums and cooperative apartments. As explained by the Court of Appeals, “[t]he Martin Act makes it illegal for a person to make or take part in a public offering of securities consisting of participation interests in real estate unless an offering statement is filed with the Attorney General’ and numerous dis-closures are made pursuant to the statute and its implementing regulations” ( Assured Guaranty (UK) Ltd. v. J.P. Morgan Investment Management Inc., 18 N.Y.3d 341, 350 [2011], quoting Kerusa, 12 N.Y.3d at 243, 879 N.Y.S.2d 17, 906 N.E.2d 1049). The Court of Appeals further clarified, “CPC Int’l and Kerusa stand for the proposition that a private litigant may not pursue a common-law cause of action where the claim is predicated solely on a violation of the Martin Act or its implementing regulations and would not exist but for the statute. But, an injured [party] may bring a common-law claim (for fraud or otherwise) that is not entirely dependent on the Martin Act for its viability. Mere overlap between the common law and the Martin Act is not enough to extinguish common-law remedies.” Assured Guaranty, 18 N.Y.3d at 353, 939 N.Y.S.2d 274, 962 N.E.2d 765.

General Business Law §§ 352–e(2)(b) and 352(h), both part of the Martin Act, mandate that payments made by investors or purchasers to the sponsor of a real estate development or seller of securities be maintained in a separate escrow account, and not be co-mingled with the funds of the sponsor or seller, until the transaction is consummated. If the transaction is not “consummated”, in the case of real estate, by delivery of the completed unit, the funds must be returned to the investor or purchaser. General Business Law § 352–e(2)(b) authorizes the Attorney General to enforce this requirement by, promulgating rules and regulations “including … determining when escrow funds may be released.” By the terms of the statute, the determination as to the sufficiency of the escrow fund and releases therefrom, is vested exclusively in the Attorney General. Although the pleading contains reference to common law causes of action for breach of contract (for which plaintiff would have no standing in any event as the contracts alleged to have been breached were solely between the defendants), the only basis for plaintiff’s seventh cause of action is the Martin Act; the cause of action does not exist, absent the statute. The seventh cause of action must, therefore, be dismissed upon the authority of Assured Guaranty (18 N.Y.3d at 352–353, 939 N.Y.S.2d 274, 962 N.E.2d 765), CPL Int’l, (70 N.Y.2d at 276–277, 519 N.Y.S.2d 804, 514 N.E.2d 116) and Kerusa (12 N.Y.3d at 245, 879 N.Y.S.2d 17, 906 N.E.2d 1049), as there is no private right of action to enforce the Martin Act.

*8 Defendants move to dismiss the eighth cause of action for negligence. The complaint alleges that the defendants violated their “duty to exercise rea-sonable care and skill according to standard practices in their trades in the design and oversight of the con-struction of the units and the building of the Condo-minium”. “[A]llegations against a corporation and its officers for negligent construction of a house state a breach of contract cause of action and not a tort cause of action” ( Merrit v. Hooshang Constr., 216 A.D.2d 542, 543, 628 N.Y.S.2d 792 [2d Dept 1995]; see 431 Conklin Corp. v. Rice, 181 A.D.2d 716, 717–18, 580 N.Y.S.2d 475 [2d Dept 1992] ). Moreover, “a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract has been vi-olated…. This legal duty must spring from circum-stances extraneous to, and not constituting elements of the contract, although it may be connected therewith and dependent upon the contract” ( Board of Manag-ers of Riverview at College Point Condominium III v. Schorr Bros. Dev. Corp., 182 A.D.2d 664, 665–666, 582 N.Y.S.2d 258 [2d Dept 1992], quoting Clark–Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382, 389 [1987] ). Here, plaintiff has failed to allege that Defendants owed a legal duty to it outside the contract and the eighth cause of action is nothing more than an allegation of a breach of contract against the sponsor and its principals. Accordingly, the eighth cause of action is dismissed (see Board of Managers of Riverview, 182 A.D.2d at 665–666, 582 N.Y.S.2d 258; Merrit, 216 A.D.2d at 543, 628 N.Y.S.2d 792; 431 Conklin, 181 A.D.2d at 717–18, 580 N.Y.S.2d 475).

Plaintiff’s eleventh cause of action alleges a claim of fraud and/or negligent misrepresentation, in that Defendants allegedly made false statements and rep-resentations in the offering plan and in the purchase agreements. According to the offering plan and pur-chase agreements, the Condominium would be con-structed “substantially in accordance with the offering plan and the plans and specifications.” Further, City View agreed to correct any defects in the construction of the building to the extent required by the offering plan, as well as correct any defects in the construction of the Condominium in accordance with the plans and specifications and in compliance with applicable zoning and Building Code provisions.

In order to sustain a claim for fraud, “there must be a knowing misrepresentation of material fact, which is intended to deceive another party and to induce [him or her] to act upon it, causing injury” ( Sokolow, Dunaud, Mercadier & Carreras v. Lacher, 299 A.D.2d 64, 70, 747 N.Y.S.2d 441 [1st Dept 2003]; see also Gordon v. Dino De Laurentiis Corp., 141 A.D.2d 435, 437, 529 N.Y.S.2d 777 [1st Dept 1988]; Brine v. 65th St. Townhouse LLC, 20 Misc.3d 1138[A] [Sup Ct, New York County 2008] ). Plaintiff alleges that Defendants knew or should have known that their representations were false and were intended to induce the purchase of the unit. The allegations here are premised exclusively upon the representations con-tained in the purchase agreements and the offering plan, and are thus part of the covenants expressed within the contracts between the parties. “A cause of action alleging fraud does not lie where the only fraud claim relates to a breach of contract” ( Tiffany at Westbury Condominium, 40 A.D.3d at 1076, 840 N.Y.S.2d 74, citing WIT Holding Corp., v. Klein, 282 A.D.2d 527, 528, 724 N.Y.S.2d 66 [2d Dept 2001] and Morgan v. Smith Corp., 265 A.D.2d 536, 536, 697 N.Y.S.2d 152 [2d Dept 1999] ).Therefore, Plaintiff’s cause of action for fraud, based upon misrepresenta-tions as to whether the work would be adequately performed, must be dismissed because it is duplicative of the first cause of action for breach of contract. The eleventh cause of action is dismissed.

*9 Plaintiff’s thirteenth cause of action alleges that the Sponsor Defendants made “false, deceptive and misleading statements” in the purchasing agree-ments and offering plan regarding the construction of the building in violation of General Business Law § 349(a). General Business Law § 349(a) makes un-lawful “deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state.” NY Gen. Bus. Law § 349(a). Initially, the statute granted the Attorney General the sole enforcement power, however, the Legislature later added a private right of action for “any person who has been injured by reason of any violation of this section,” allowing injunctive relief and damages, as well as reasonable attorney’s fees (General Business Law § 349[h] ).

In order to plead a claim for deceptive practices under this statute, “a plaintiff must allege (1) that the act, practice, or advertisement was consumer-oriented, (2) that the act, practice, or advertisement was mis-leading in a material respect, and (3) that the plaintiff was injured as a result of the deceptive practice, act, or advertisement” ( Stutman v. Chemical Bank, 95 N.Y.2d 24, 29 [2000] ). In order to demonstrate that the act was “consumer-oriented”, Plaintiff “need not show that the defendant committed the complained-of acts repeatedly—either to the same plaintiff or to other consumers—but instead must demonstrate that the acts or practices have a broader impact on consumers at large” ( Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N .A., 85 N.Y.2d 20, 25 [1995]; see also Walsh v. Liberty Mut. Ins. Co., 289 A.D.2d 842, 844, 734 N.Y.S.2d 710 [3d Dept 2001]; New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 320 [1995] ). General Business Law § 349 “was intended [as] a consumer protection statute” ( Teller v. Bill Hayes, Ltd., 213 A.D.2d 141, 145, 630 N.Y.S.2d 769 [2d Dept 1995] ), so “[p]rivate transactions without ramifications for the public at large are not the proper subject of [such] a claim” ( Canario v. Gunn, 300 A.D.2d 332, 333, 751 N.Y.S.2d 310 [2d Dept 2002] ). Contracts between parties, involving the purchase of condominium units have been held “unique to the parties” and “[do] not fall within the ambit of the statute” ( Thompson v. Parkchester Apts. Co., 271 A.D.2d 311, 311–312, 706 N.Y.S.2d 637 [1st Dept 2000]; see generally, Genesco Entertainment, Div. of Lymutt Industries, Inc. v. Koch, 593 F.Supp. 743, 752 [SD N.Y.1984] (holding “single shot trans-action” outside purview of General Business Law § 349); Quail Ridge Assoc. v. Chemical Bank, 162 A.D.2d 917, 920, 558 N.Y.S.2d 655 [3d Dept 1990] (dismissing cause of action pursuant to General Business Law § 349 as there was only a “single shot” commercial transaction at issue), lv dismissed 76 N.Y.2d 936 [1990] ).

In an effort to overcome this authority and estab-lish that defendants’ alleged misrepresentations do have the requisite broad impact upon the public at large, plaintiff has cited to three other pending suits against the Sponsor Defendants alleging similar defects in construction. However, although plaintiff would not be precluded from the prosecution of a viable common law fraud cause of action (see Kramer v. W 10Z/515 Real Estate Ltd., 44 A.D.3d 457, 844 N.Y.S.2d 18 [1st Dept 2007] ), plaintiff does not have standing to prosecute its claim under General Business Law § 349 as “pursuant to the Martin Act, the Attor-ney General has exclusive jurisdiction to prosecute sponsors who make false statements in condominium offering plans filed thereunder” ( Thompson v. Park-chester Apts. Co., 271 A.D.2d 311, 706 N.Y.S.2d 637 [1st Dept 2000] ). To permit plaintiff to proceed with its private claims under General Business Law § 349, given the allegations contained in the thirteenth cause of action, which are exclusively premised upon the representations contained in the purchase agreement and offering plan, and track the breach of contract claims, would be to authorize “a backdoor private cause of action to enforce the Martin Act” in violation of the statutory scheme ( Assured Guaranty v. JP Morgan, 18 N.Y.3d at 353, 939 N.Y.S.2d 274, 962 N.E.2d 765; CPL Intl. v. McKesson, 70 N.Y.2d at 276–277, 519 N.Y.S.2d 804, 514 N.E.2d 116). Defendants’ motion to dismiss the thirteenth cause of action is granted.

*10 Plaintiff’s fourteenth cause of action alleges a violation of the Interstate Land Sale Full Disclosure Act (“ILSA”), specifically 15 U.S.C. § 1703(a)(2)(A),(B) and (C). Section 1703(a)(2) of ILSA provides that “[i]t shall be unlawful for any developer or agent, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce, or of the mails” with respect to the sale of property: to employ any device, scheme, or artifice, to defraud; to obtain money or property by means of any untrue statement of a material fact, or any omission to state a material fact necessary in order to make the statements made (in light of the circumstances in which they were made and within the context of the overall offer and sale or lease) not misleading, with respect to any information pertinent to the lot or subdivision; to engage in any transaction, practice, or course of business which operates or would op-erate as a fraud or deceit upon a purchaser;

The fourteenth cause of action alleges that the Sponsor made false, deceptive and misleading statements in the purchase agreements and the joint certification in the offering plan with respect to constructing the building in accordance with the offering plan and local standards, as well as with respect to the correction of any defects in the construction of the building. There are no allegations against the remaining defendants. The complaint further recites the language of 15 U.S.C. § 1703(a)(2)(A),(B) and (C), without any specificity, and states, “[t]he Sponsor conducted the foregoing acts using the means and instruments of interstate and international commerce and communication and the mails.”

Defendants assert that the cause of action should be dismissed as it is entirely duplicative of the Plain-tiff’s first cause of action for breach of contract. Fur-ther, Defendants allege that Plaintiff does not sufficiently plead a violation of 15 U.S.C. § 1703 against the individual Defendants, which requires the Defendants to have a personal involvement in the sale of any condominium unit, or allege fraud with the required level of particularity.

In passing ILSA, Congress “desired to protect purchasers from unscrupulous sales of undeveloped home sites, frequently involving out-of state sales of land purportedly suitable for development but actually under water or useful only for grazing.” Beauford v. Helmsley, 740 F.Supp. 201, 209 [SD N.Y.1990] (quoting Winter v. Hollingsworth Properties, Inc., 777 F.2d 1444, 1447 [11th Cir1985] ). ILSA has been applied to the sale of a condominium (see Cruz v. Leviev Fulton Club, LLC, 711 F Supp 2d 329, 331 [SD N.Y.2010] (“While the ILSA’s text refers to the sale of lots,’ its protections apply to the sale of condominiums as well.”); Pasquino v. Lev Parkview Developers, LLC, 2011 U.S. Dist LEXIS 112460, 2011 WL 4502205 [SD N.Y.2011]; Bodansky v. Fifth on the Park Condo, LLC, 732 F Supp 2d 281, 285 n. 6 [SD N.Y.2010] (“HUD Guidelines make it clear, and other courts have found, that a lot’ may also mean a condominium, unit.”), vacated on other grounds, 635 F.3d 75). However, violations of 15 U.S.C. § 1703(a)(2) are claims sounding in fraud and, thus, must be pled with particularity (see Garcia v. Santa Maria Resort, Inc., 528 F Supp 2d 1283, 1295–96 [SD Fla 2007] (applying Federal Rules of Civil Procedure for pleading elements of fraud under ILSA); Degirmenci v. Sapphire–Fort Lauderdale, LLLP, 642 F Supp 2d 1344, 1351–52 [SD Fla 2009] (dismissing plaintiff’s fraud cause of action under 15 U.S.C. § 1703(a)(2)(A),(B) and (C) for lack of specificity pursuant to Federal Rule of Civil Procedure 9(b)).

*11 New York State courts do not appear to have ever addressed the pleading requirements of a 15 U.S.C. § 1703 cause of action or the issue of whether it must be dismissed where the allegations are duplicative of the claims in a breach of contract cause of action. However, the federal District Court for the Eastern District of New York recently held that a condominium board does not have standing to bring a cause of action under the federal ILSA statute as an association does not have standing to litigate such cause of action where “the relief requested requires the participation of individual members in the lawsuit” ( Bd. of Managers v. 72 Berry St., LLC, 801 F Supp 2d 30, 34 [ED N.Y.2011] ).

In the 72 Berry action, the board of a condominium building brought an ILSA claim, similar to the claim at issue in this action, on behalf of the unit owners against the sponsors alleging design and construction defects in the building. The court held that “associational standing [could not] be maintained … because proving the claims in the complaint would require the participation of each individual purchaser” with respect to, among other issues, the prices each individual paid for the units and the costs expended by the purchasers ( Bd. of Managers v. 72 Berry St., LLC, 801 F Supp 2d at 35–36). It is noted that the plaintiff in 72 Berry, like the plaintiff in the present action, relied upon New York Real Property Law § 339–dd in support of its argument that the board had standing to bring an ILSA action against the sponsors (see Bd. of Managers v. 72 Berry St., LLC, 801 F Supp 2d at 33). However, the court specifically noted that this argument was unavailing as “the fact that a state law confers on an entity the power to participate in litigation does not mean that such entity automatically has standing to sue under federal statute. State laws cannot expand or limit the scope of federal jurisdiction” (see Bd. of Managers v. 72 Berry St., LLC, 801 F Supp 2d at 36–37, citing Woodsmoke Ranch Assoc. v. Woodsmoke Resorts, Inc., 1991 U.S. Dist LEXIS 5689, at *11, 1991 WL 70924 [ND Ill 1991] ). Dis-missing the complaint, the court noted that the individual unit purchasers were “free to institute their own federal action or to interpose their claims in [another] pending state litigation” ( Bd. of Managers v. 72 Berry St., LLC, 801 F Supp 2d at 40). Accordingly, as the plaintiff in this action is the board of managers of the Condominium, the plaintiff does not have standing to bring a federal ILSA cause of action and the fourteenth cause of action must be dismissed without prejudice to the claims of individual unit owners (see Bd. of Managers v. 72 Berry St., LLC, 801 F Supp 2d at 36–37).

According to plaintiff’s fifteenth cause of action, defendants, as owners of the underground parking garage, have breached their contractual obligations pursuant to the offering plan and the related by-laws, by allowing in excess of 32 cars within the parking garage, causing “the walkways to the mechanical room, electrical room and exit to the basement to be blocked with little or no access”. Plaintiff seeks injunctive relief compelling Defendants to eliminate the “unlawful and dangerous overcrowding of the parking garage.” Defendants move to dismiss this cause of action, arguing that Plaintiff has not suffered an irreparable injury. Defendants argue that “[w]hatever this lack of access may constitute, it is clear it does not constitute a substantial prejudice’ to plaintiff” and the alleged conduct “does not rise to the serious level requiring [the] Court to grant the injunctive relief sought by Plaintiff.”

*12 In order to state a cause of action for a permanent injunction, the complaint must allege the “violation of a right presently occurring, or threatened and imminent … that the plaintiff has no adequate remedy at law … that serious and irreparable injury will result if the injunction is not granted … and … that the equities are balanced in the plaintiff’s favor” ( Elow v. Svenningsen, 58 A.D.3d 674, 675, 873 N.Y.S.2d 319 [2d Dept 2009], citing 67A N.Y. Jur 2d Injunctions § 153). “A permanent injunction is a drastic remedy which may be granted only where the plaintiff demonstrates that it will suffer irreparable harm absent the injunction” ( Merkos L’Inyonei Chinuch, Inc. v. Sharf, 59 A.D.3d 403, 408, 873 N.Y.S.2d 148 [2d Dept 2009]; see Kane v. Walsh, 295 N.Y. 198, 205–206 [1946]; Icy Splash Food & Bev., Inc. v. Henckel, 14 A.D.3d 595, 789 N.Y.S.2d 505 [2d Dept 2005] ). An irreparable injury constitutes a “continuing harm resulting in substantial prejudice cased by the acts sought to be restrained if permitted to continue pendete lite ” ( Chrysler Corp. v. Fedders Corp., 63 A.D.2d 567, 404 N.Y.S.2d 844 [1st Dept 1978] ). Further, injunctive relief is “to be invoked only to give protection for the future [t]o prevent repeated violations, threatened or probable, of the [plaintiffs’] property rights” ( Exchange Bakery & Rest. v. Rifkin, 245 N.Y. 260, 264–265 [1927] ).

Plaintiff has sufficiently alleged a cause of action for permanent injunction. The plaintiff clearly alleged that the defendants are presently violating the alleged limitation on the maximum number of cars that may be parked in the non-residential garage unit, that this violation is resulting in the blocking of access to mechanical rooms and the exit, which is dangerous, and that there is no adequate remedy at law. Although the finding of a permanent injunction will ultimately depend on the merits of the plaintiff’s claim, the plaintiff has sufficiently alleged a cause of action for a permanent injunction (see Elow, 58 A.D.3d at 675, 873 N.Y.S.2d 319). Therefore, Defendants’ motion to dismiss Plaintiff’s fifteenth cause of action is denied.

As to Defendants’ motion to dismiss Plaintiff’s sixteenth cause of action for attorney’s fees, the motion is denied. Plaintiff contends that under the Condominium By–Laws, “the Board may collect costs and expenses incurred in order to abate and/or enjoin any nuisance and/or violation of the by-laws from the unit owner that necessitated such costs and expenses.” Attorney’s fees are incidents of litigation which may not be recovered unless authorized by agreement between the parties, statute or court rule ( Hooper Associates, Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487, 491 [1989] ). Although asserted in the complaint, there has been no actual determination regarding nuisance or a violation of the Condominium By–Laws. Until such determination has been made, Plaintiff’s cause of action stands, and Defendants’ motion to dismiss is denied.

Regarding Plaintiff’s seventeenth cause of action against City View and its principals seeking damages for breach of contract, Plaintiff asserts that City View has failed to “pay common charges in the amount of $30,627.17, allocated to unsold residential units prior to the closing of said units” pursuant to the purchase agreements. In connection with this claim, the pleadings distinctly set forth the specific provision of the offering plan allegedly breached by Defendants, in addition to the monetary damages demanded. This alleged breach is not set forth elsewhere in the pleadings, and contains the requisite detail to provide Defendants notice (see Sitar, 50 A.D.3d at 670, 854 N.Y.S.2d 536; see also Johnson, 36 A.D.3d at 993, 827 N.Y.S.2d 747). The motion to dismiss Plaintiff’s seventeenth cause of action is denied.

*13 Accordingly, Defendant’s motion is granted regarding the second, third, seventh, eighth, eleventh, thirteenth, and fourteenth causes of action, and denied regarding the first, fourth, fifth, sixth, fifteenth, sixteenth, and seventeenth causes of action. Plaintiff’s request for leave to replead is denied as to the second, third, seventh, eighth, and thirteenth and fourteenth causes of action, but granted as to the eleventh cause of action. Should plaintiff seek to amend the com-plaint, plaintiff is to serve and file the amended com-plaint within 20 days of notice of entry. Defendant to serve and file an answer within 20 days of service. A preliminary conference is scheduled for July 25, 2012.

This constitutes the decision, order, and judgment of the court.

Board of Managers of Crest Condominium v. City View Gardens Phase II, LLC

35 Misc.3d 1223(A), 951 N.Y.S.2d 85, 2012 WL 1660679 (N.Y.Sup.), 2012 N.Y. Slip Op. 50826(U)



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