Opinion
10959/09.
Decided February 8, 2010.
Gil Santamarina, Esq., Santamarina Associates, New York, NY, Attorney for Plaintiff.
Oleg Rybak, Esq., The Rybak Firm, PLLC, Brooklyn, NY, Attorney for Defendants Sergey Rybak Rybak Dev. and Const. Corp.
Yevgeny Tsyngauz, Esq., Tsyngauz Associates, PC, New York, NY, Attorney for Defendant 20 Highlawn.
Defendant Sergey Rybak moves pursuant to CPLR 3211(a)(1), (5) and (7) to dismiss the third and fourth causes of action asserted in the complaint against Sergey Rybak personally. Defendant 20 Highlawn Avenue, LLC moves to dismiss the fifth cause of action pursuant to CPLR 3211(a)(1) and for an order pursuant to Lien Law § 20 directing the New York City Department of Finance to distribute to 20 Highlawn Avenue, LLC the sum of $136,470.00, plus interest accrued, that was deposited by 20 Highlawn Avenue, LLC to discharge a mechanic's lien filed by the plaintiff, and to dismiss the sixth, and seventh causes of action pursuant to CPLR 3211(a) (7).
BACKGROUND
This action arises out of construction work performed on the property 26 Highlawn Avenue, Brooklyn, New York ("Property"). Non-party ground lessee 390 Kings Highway, LLC ("390 Kings") entered into a written contract ("Contract") wherein Rybak Development and Construction Corp. ("Rybak Corp.") agreed to construct a multi-story building on the Property for 390 Kings. Subsequently, Rybak Corp. entered into a subcontract ("Subcontract") with plaintiff Trofien Steel Construction, Inc. ("Trofien") wherein Rybak Corp. agreed to pay Trofien $155,000 to complete the structural steel work at the Property. The complaint alleges that Trofien completed the work and is owed $135,619.00.
The complaint alleges that there were change orders of $15,619.00 for additional work and that Trofien received a payment of $35,000.
The complaint names Sergey Rybak ("Rybak"), sole owner and principal of Rybak Corp., as an individual defendant and alleges that Rybak abused the privilege of doing business in the corporate form and breached a constructive trust created by Lien Law Article 3A. 20 Highlawn Avenue LLC ("20 Highlawn") is a condominium association located at the Property. On April 21, 2009, Trofien filed a mechanic's lien ("Lien") on the Property against 20 Highlawn for $135,618.98. Although the Contract lists 390 Kings as the "owner," 20 Highlawn submitted a certified copy of the deed, dated August 13, 2007, demonstrating that it is the owner of the Property.
In an attorney affirmation in support of 20 Highlawn's motion, 390 Kings is alleged to be a "ground lessee" of 20 Highlawn. In opposition to 20 Highlawn's motion, Trofien's attorney affirmation states, "[u]nder Highlawn's theory, all a building owner would have to do to avoid his building being subjected to the filing of a mechanic's lien would be to set up a ground lease' company which would then contract with general contractors." However, Trofien does not dispute that 20 Highlawn is the owner of the Property.
The fifth cause of action seeks to foreclose the Lien against 20 Highlawn. Trofien seeks equitable relief against 20 Highlawn in the sixth and seventh causes of action claiming that 20 Highlawn was unjustly enriched by retaining the benefit of the work, labor and materials provided by Trofien and seeks relief in quantum meruit for the value of the materials and labor performed by Trofien. 20 Highlawn moved to dismiss the fifth cause of action based on documentary evidence, to dismiss the sixth and seventh causes of action for failure to state a cause of action, and to order the New York City Department of Finance to distribute the sum of $136,470.00, plus interest, deposited by 20 Highlawn to discharge the Lien on the Property. Ryback cross-moved to dismiss the third and fourth causes of action to pierce the corporate veil and for breach of constructive trust, respectively, based upon documentary evidence and payment and release.
DISCUSSION
On a motion to dismiss pursuant to CPLR 3211, the court must accept the facts alleged by the plaintiff as true and liberally construe the complaint, according it the benefit of every possible favorable inference ( Campaign for Fiscal Equity, Inc. v State of New York, 86 NY2d 307, 318; see also Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409, 414). The role of the court is to "determine only whether the facts as alleged fit within any cognizable legal theory" ( Leon v Martinez, 84 NY2d 83, 87). Therefore, the complaint must be declared legally sufficient if the court determines that plaintiffs may be entitled to relief on any reasonable view of the facts stated ( Campaign for Fiscal Equity, Inc., 86 NY2d at 318). "Where documentary evidence definitively contradicts the plaintiff's factual allegations and conclusively disposes of the plaintiff's claim, dismissal pursuant to CPLR 3211(a)(1) is warranted" ( Berardino v Ochlan , 2 AD3d 556 , 557 [2d Dept 2003]).
The fifth cause of action for foreclosure of the lien must be dismissed as 20 Highlawn cannot be held liable for Trofien's work as a subcontractor where the complaint has not alleged that 20 Highlawn was in privity with Trofien or assumed the obligation to pay Trofien for the work. "It is well established that a landowner who has had the benefit of a subcontractor's services, pursuant to a contractual obligation with a general contractor in a construction contract, is not liable for the work done by the subcontractor unless he has, in some way, agreed to pay therefor.' [The] mere fact that [the landowner] has consented to the improvements provided by the subcontractor and accepted their benefit does not render him liable to the subcontractor, whose sole remedy lies against the general contractor.' The theory is that the services performed by the subcontractor are for the benefit of the general contractor who is responsible for the completion of the improvement, not for the benefit of the owner'" ( Sybelle Carpet Linoleum, Inc. v East End Collaborative, Inc., 167 AD2d 535, 536 [2d Dept 1990] (internal citations omitted); see also Podolsky v Citation Abstract, Inc., 279 AD2d 559, 560 [2d Dept 2001]). The complaint does not allege that 20 Highlawn was in privity of contract with Trofien or that 20 Highlawn, by it's actions, assumed an obligation to pay Trofien for the work. Further, no affidavit by an individual with knowledge of the facts has been submitted in opposition to the motion indicating as such. As a subcontractor, Trofien must seek relief from Rybak Corp., the general contractor with which it contracted. Accordingly, the fifth cause of action seeking to foreclose the Lien must be dismissed based upon documentary evidence ( see Sybelle, 167 AD2d at 536-537; CPLR 3211[a] [1]).
Furthermore, "[a]lien will only attach to amounts due and owing to the general contractor at the time of the filing of the lien" ( Broadway Houston Mack Dev. LLC v Kohl , 22 Misc 3d 1001 , 1009 [Sup Ct, Suffolk County 2008]; see Lien Law § 4; see Falco Constr. Corp. v P F Trucking, Inc., 158 AD2d 510 [2d Dept 1990]). In support of it's motion, 20 Highlawn submitted a waiver signed by Rybak Corp. on February 2, 2009 that "acknowledges that there [was] no money due" to Rybak Corp. under the Contract. As there was no money due to the general contractor under the Contract on April 21, 2009, the date the notice of mechanic's lien was filed, the Lien was invalid and must be discharged ( see Lien Law § 4; Broadway, 22 Misc 3d at 1010; Falco, 158 AD2d at 510). In it's opposition, Trofien's attorney claims that Rybak Corp.'s waiver is insufficient evidence to support the motion to discharge the Lien as there is no proof of payment to Rybak Corp. and 20 Highlawn cannot raise this defense as "[t]he waiver and release does not indicate whether [20 Highlawn] or [390 Kings] supplied the consideration." However, these arguments are unavailing as 20 Highlawn has produced documentary evidence demonstrating that no money was due to the general contractor on the Contract when the Lien was filed and Trofien has failed to produce evidence or an affidavit by an individual with knowledge of the facts contradicting this assertion. Accordingly, the fifth cause of action must be dismissed and, pursuant to Lien Law § 20, 20 Highlawn is entitled to recover the $136,470.00 payment, plus interest, that was deposited with the Kings County Clerk for the discharge of the Lien ( see Sybelle, 167 AD2d at 536-537; Broadway, 22 Misc 3d at 1010; Berardino, 2 AD3d at 557; Lien Law §§ 4, [20]).
The sixth cause of action against 20 Highlawn claiming unjust enrichment must be dismissed as the existence of a written contract between Trofien and Rybak Corp. precludes recovery in a quasi contract claim. "The existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter. . . . [A] quasi contract' only applies in the absence of an express agreement, and is not really a contract at all, but rather a legal obligation imposed in order to prevent a party's unjust enrichment.' Unjust enrichment is a quasi contract claim barred by this principle. The preclusion is not limited to claims against a party to the written contract. [A] nonsignatory to a contract cannot be held liable where there is an express contract covering the same subject matter'" ( Geller v Hority, 2002 NY Slip Op 50273U [1st App Term 2002] (internal citations omitted); see Vitale v Steinberg, 307 AD2d 107, 111 [1st Dept 2003]; Contelmo's Sand Gravel, Inc. v J J Milano, Inc., 96 AD2d 1090, 1091 [2d Dept 1983]). Similarly, the seventh cause of action seeking recovery against 20 Highlawn in quantum meruit is also "barred if an express contract exists covering the services rendered" ( Schwartz v Pierce , 57 AD3d 1348 , 1352 [3d Dept 2008]; see M. Paladino, Inc. v J. Lucchese Son Contr. Corp., 247 AD2d 515, 515-516 [2d Dept 1998]; Contelmo's, 96 AD2d at 1091). Accordingly, the sixth and seventh causes of action are dismissed pursuant to CPLR 3211(a)(7).
Trofien's contention that 20 Highlawn's motion to dismiss should be denied as premature due to a lack of discovery is unavailing as Trofien has not provided anything beyond mere speculation that discovery would yield material evidence. In order for a motion to dismiss to be denied to allow for discovery, Trofien was "obliged to provide some evidentiary basis for its claim that further discovery would yield material evidence and also demonstrate how further discovery might reveal material facts in the movant's exclusive knowledge'" ( Rochester Linoleum Carpet Ctr. v Cassin , 61 AD3d 1201 , 1202 [3d Dept 2009]). The motion to dismiss should not be denied where the plaintiff "provides nothing beyond mere speculation that further discovery would yield material results" ( Id.). Trofien did not support it's opposition with an affidavit by an individual with knowledge of the facts or dispute the validity of the documentary evidenceof the written contract for the construction services and material at issue or the waiver issued by Rybak Corp. indicating that there was no money due on the Contract with 390 Kings. Accordingly, the fifth, sixth and seventh causes of action are dismissed. As no other claims remain against defendant, 20 Highlawn, the action is dismissed as to that defendant.
Rybak moved to dismiss the third cause of action that seeks to pierce the corporate veil and hold Rybak individually liable for the acts and omissions of Rybak Corp. "A party seeking to pierce the corporate veil must establish that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in the plaintiff's injury.' The party seeking to pierce the corporate veil must further establish that the controlling corporation abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will intervene'" ( Millennium Constr., LLC v Loupolover , 44 AD3d 1016 [2d Dept 2007] (internal citations omitted)). Rybak argues that the complaint contains merely conclusory allegations as to Rybak that are devoid of particularized facts and Trofien has not provided any evidence that Rybak Corp. was operated as Rybak's "alter ego."
The third cause of action solely seeks to pierce the corporate veil as against Rybak Corp. and Rybak and must be dismissed in its entirety as New York "does not recognize a separate cause of action to pierce the corporate veil" ( Hart v Jassem , 43 AD3d 997 , 998 [2d Dept 2007]). Further, the complaint is devoid of nonconclusory allegations regarding Rybak's operation of Rybak Corp. as his corporate alter-ego. "A complaint should be upheld at least at the pleading stage unless it can be said that it is totally devoid of solid, nonconclusory allegations'" ( Zurich Am. Ins. Co. v Whitmore Group, Ltd., 11 Misc 3d 1070A [Sup Ct, New York County 2006], citing Int'l Credit Brokerage Co. v Agapov, 249 AD2d 77, 78 [1st Dept 1998]; see Itamari v Giordan Dev. Corp., 298 AD2d 559, 560 [2d Dept 2002]). All of the allegations in the complaint, with respect to Rybak, are conclusory and the complaint is devoid of any specific claims that Rybak abused the corporate form. The complaint claims that Rybak entered the Subcontract "on behalf of" Rybak Corp. and lists numerous bald allegations, on information and belief, against Rybak including assertions that Rybak "exercised complete domination and control over [Rybak Corp.]", and "abused the privilege of doing business in the corporate form by deliberately undercapitalizing [Rybak Corp.] and otherwise intermingling the assets of [Rybak Corp.] with his own assets or other corporations in which he has an interest. "However, Trofien argues that two "potentially forged" waivers ("Trofien Waivers"), submitted by Rybak in support of it's motion, "is evidence of a fraud which would support the inference that [Rybak] did not conduct [Rybak Corp.] legitimately at all times relevant hereto." Although ambiguous, the affidavit submitted in support of this argument by the president of Trofien, Felix Loja ("Loja"), supports the complaint's allegations that a fraud was committed against Trofien. Accordingly, Trofien's application for leave to amend the complaint is granted as leave to amend pleadings should be "freely given" and, if proven, Loja's allegations could persuade the court to impose Rybak Corp.'s obligations on Rybak ( see CPLR 3025[b]).
The first purported waiver, dated April 3, 2008, acknowledges the receipt of $49,150.95 by Trofien and waives all liens and claims against Rybak Corp. The second purported waiver, dated June 5, 2008, acknowledges the receipt of $145,902.73 by Trofien and waives all liens and claims against Rybak Corp.
In the affidavit submitted in opposition to Rybak's motion, Loja acknowledges that, "[t]he first release . . . is admittedly is [ sic] [his] signature" (Loja Affidavit, ¶ 5). However, without affirmatively stating that he did not sign the first release, Loja also states, "[he has] no recollection of signing it; one possibility that comes to mind is that the signature was copied from some other document" (Loja Affidavit, ¶ 6) and he "question[s] the signatures on each [release]" (Loja Affidavit, ¶ 8).
The fourth cause of action alleges that Rybak Corp. and Rybak misappropriated funds that were to be held in a constructive trust for the benefit of Trofien, pursuant to Lien Law § 79-a. "Article 3-A of the Lien Law creates trust funds out of certain construction payments or funds to assure payment of subcontractors, suppliers, architects, engineers, laborers, as well as specified taxes and expenses of construction'" ( Aspro Mech. Contr., Inc. v Fleet Bank, NA , 1 NY3d 324 , 328, quoting Caristo Constr. Corp. v Diners Fin. Corp., 21 NY2d 507, 512, citing Lien Law §§ 70, 71). "These statutory provisions were intended to insure that funds obtained for financing of an improvement of real property and moneys earned in the performance of a contract for either a privately owned improvement or a public improvement will in fact be used to pay the costs of that improvement'" ( Canron Corp. v City of New York, 89 NY2d 147, 154, quoting 1959 Report of NY Law Rev Commn, at 209, reprinted in 1959 NY Legis Doc No. 65 [F], at 25, see also West-Fair Elec. Contrs. v Aetna Cas. Sur. Co., 87 NY2d 148, 157-158). "To ensure this end, the Lien Law establishes that designated funds received by owners, contractors and subcontractors in connection with improvements of real property are trust assets and that a trust begins when any asset thereof comes into existence, whether or not there shall be at that time any beneficiary of the trust'" ( Aspro Mech. Contr., Inc., 1 NY3d at 328, quoting Lien Law § 70, [3], see also City of New York v Cross Bay Contr. Corp., 93 NY2d 14, 19). The basis for Trofien's claim of personal liability against Rybak rests on Lien Law Article 3-A, under which the principals of an entity found to have diverted trust funds may be held personally liable to the beneficiaries ( Atlas Building Systems, Inc. v Rende, 236 AD2d 494, 495 [2d Dept 1997]).
Rybak's motion to dismiss the fourth cause of action against Rybak must be denied as Trofien has sufficiently alleged a cause of action for a breach of constructive trust pursuant to Lien Law 79-a at the pleading stage. Rybak contends that the complaint fails to allege all the elements required to impose a constructive trust. However, the complaint sufficiently alleges that a constructive trust was created for Trofien's benefit, Rybak obtained funds for Trofien's benefit on the project at issue, and Rybak violated Article 3-A of the Lien Law by misappropriating the funds. Accordingly, a legally sufficient cause of action for a breach of constructive trust has been asserted ( see Martirano Constr. Corp. v Briar Contracting Corp., 104 AD2d 1028, 1031 [2d Dept 1984]; see also Forest Elec. Corp. v Karco-Davis, Inc., 259 AD2d 303 [1st Dept 1999]).
Alternatively, Rybak contends that the fourth cause of action should be dismissed as documentary evidence, submitted in support of the motion, demonstrates that Trofien "waive[d] and relinquish[ed] all liens and claims of liens upon [the Property]" by signing the Trofien Waivers. However, in opposition to the motion, Trofien submitted an affidavit by it's president, Loja, the alleged signer of the Trofien Waivers, indicating that the signature on the June 5, 2008 waiver is not his and called into question the validity of his signature on the April 3, 2008 waiver. As there are issues of fact as to the validity of the Trofien Waivers, Rybak's motion to dismiss is denied.
CONCLUSION
Accordingly, the defendants' motions to dismiss the fifth cause of action, pursuant to CPLR 3211(a)(1), and the third, sixth and seventh causes of action, pursuant to CPLR 3211(a)(7), are granted. Defendant's motion to dismiss the fourth cause of action is denied. Plaintiff's application for leave to amend the complaint is granted.
The New York City Department of Finance is ordered to release to 20 Highlawn Avenue, LLC the sum of $136,470.00, plus any interest accrued, that was deposited by 20 Highlawn Avenue, LLC to discharge the mechanic's lien on 26 Highlawn Avenue, Brooklyn, New York.
Plaintiff is ordered to file and serve an amended complaint within 30 days of entry of this Decision and Order and defendants are ordered to serve an answer within 30 days of service of the amended complaint. A conference is scheduled in this matter in Commercial Part 1 on June 9, 2010.
The foregoing constitutes the decision and order of the Court.