### Inspirit Dev. & Constr. LLC v GMF 157 LP 2024 NY Slip Op 33265(U) September 16, 2024 Supreme Court, New York County Docket Number: Index No. 652022/2020 Judge: Nancy M. Bannon Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001 (U), are republished from various New York State and local government sources, including the New

York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.652022/2020 INSPIRIT DEVELOPMENT AND vs. GMF 157 LP

Motion No. 005 Page 1 of 5 The following e

- filed documents, l isted by NYSCEF document number (Motion 005) 190, 191, 192, 193, 194, 195, 196, 197, 198, 199, 200, 201, 202, 203, 204, 205, 206, 207, 208, 209, 210, 211, 212, 213, 214, 215, 216, 217, 218, 219, 220, 221, 222, 223
were read on this motion to/for AMEND CAPTION/PLEADINGS

.

INTRODUCTION
In this breach of contract action, defendant GMF 157 LP (“GMF”) moves, pursuant to CPLR 3025 (b)
, to amend its answer to add a trust fund di version counter claim against the plaintiff
, Inspirit Development and Construction LLC (“IDC ” )
, and IDC’s president/managing partner, Alex Chiesi. GMF’s separate trust fund diversion action against Chiesi and IDC was dismissed by this court ( J o e l Cohen, J.) on April 30 , 202 4

. IDC opposes the motion

. The motion
is denied f o r t h e f o l l o w i n g r e a s o n s

.

BACKGROUND
In May 2017, GMF , as owner, and IDC , as contractor, signed an Agreement Between Owner and Contractor for a Residential or Small Commercial Project (the “Contract”) for the
renovation of unit 64AB at 57 W est 57 th Street in Manhattan

. Pursuant to the Contract, IDC would supervise the renovation of the property and hire subcontractors. GMF was to pay IDC on a “cost

- plus” basis, meaning that IDC would charge GMF the costs of the subcontractors engaged by IDC, plus IDC’s markup. Payments to IDC, made for the improvement of real property , were to be held in trust pursuant to NY Lien Law § 7 0(2)

. In March 2020, GMF
terminated IDC , claiming IDC was in breach of the Contract.



## SUPREME COURT OF THE STATE OF NEW YORK

NEW YORK COUNTY

PRESENT: HON. NANCY M. BANNON PART 61M
Justice

----------------------------------------------------------------- -- -------------- X INDEX NO. 652022/2020

MOTION DATE 0 6 /1 4 /2024

MOTION SEQ. NO. 005

DECISION + ORDER ON MOTION INSPIRIT DEVELOPMENT AND CONSTRUCTION LLC,

Plaintiff,

- v
- GMF 157 LP, POLIZZOTTO DEVELOPMENT, LLC,3RE PARTNERS, and GINO POLIZZOTTO,

Defendant s

.

------------------------------------------------------------------- -- ------------ X 

## FILED: NEW YORK COUNTY CLERK 09/17/2024 03:47 PM INDEX NO. 652022/2020

NYSCEF DOC. NO. 227 RECEIVED NYSCEF: 09/17/2024

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Motion No. 005 Page 2 of 5 IDC commenced the instant a ction on May 27, 2020 , asserting causes of action against GMF for (1) breach of contract, (2) wrongful termination, (3) quantum meruit, and (4) unjust
enrichment
, as well as claims against defendants Polizzotto Development LLC, 3RE partners, and Gino Polizzotto (collectively, the “Polizzotto defendants”) for (5) negligence, and (6) tortious
interference

. GMF answered, asser ting a counterclaim against IDC for breach of contract and interposing a third

- party complaint against IDC’s sole member, Alex Chiesi , alleging a single cause of action against him for fraud

. By Decision and Order dated January 25, 2021, the court (Ostrager, J. [Ret.]) dismissed IDC’s third, fourth, and fifth causes of action, and further
dismissed GMF’s third

- party complaint against Chiesi in its entirety . NYSCEF Doc. No. 41. In March 2022, the Appellate Division, First Department modifie d the court’s dismissal order to also dismiss IDC’s sixth cause of action, and otherwise affirmed

. See Inspirit Dev. & Constr.,
LLC v GMF 157 LP , 203 AD3d 430 (1 st Dept. 2022)

.
On February 28, 2023, IDC filed a Note of I ssue and Certificate of Readiness

. IDC
thereafter moved for summary judgment on its two remaining causes of action against GMF for
breach of contract and wrongful termination, and for dismissal of G MF’s sole counterclaim against it for breach of contract (MOT SEQ 004). By an order dated October 5, 2023
, the court (Ostrager, J. [Ret.]) denied the motion in its entirety.

The very same day, October 5, 2023, GMF commenced a separate action i n t h i s c o u r t against IDC and Chiesi
, under Index No. 654907/2023
, alleging a single cause of action for Lien
Law Art. 3

- A trust fund diversion (the “ Trust Fund Action”)

. By an order dated April 30, 2 024, Judge Cohen granted the defendants’ motion to dismiss that action pursuant to CPLR 3211(a)(4)
, prior action pending

. However, the dismissal was n o t o n t h e m e r i t s a n d w a s without prejudice to any arguments that may be raised in the p r esent action w h i c h was al ready pending between substantially the same parties and concerned claims arising out of the sam e underlying
set of transactions.

On May 14, 2024, GMF filed the instant motion to amend its answer , pursuant to CPLR 3025, to add a trust fund diversion counterclaim against IDC and Chiesi . GMF transposes to its proposed amended answer the cause of action and supporting allegations asserted in its
dismissed complaint in the Trust Fund Action
, alleging that IDC and Chiesi failed to maintain required books and records, failed to furnish GMF with information related to trust assets, and
divert ed trust funds meant to pay subcontractors
, resulting in alleged damages to GMF of no less than $907,402.81. 

## FILED: NEW YORK COUNTY CLERK 09/17/2024 03:47 PM INDEX NO. 652022/2020

NYSCEF DOC. NO. 227 RECEIVED NYSCEF: 09/17/2024

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Motion No. 005 Page 3 of 5 Notably, t he only allegat ions included in the Trust Fund Action complaint but left out of GMF’s proposed amended answer highlight the fact that GMF was already aware of the essential facts underpinning its proposed trust fund diversion counter claim four years ago when it answered the initial complaint in this action, and certainly no later than April 2021. Specifically, the allegations left out of GMF’s proposed amended answer assert that GMF became aware in late 2019 and early 2020 that IDC had not paid its subcontractors with the funds paid to it by
GMF ; that, following IDC’s termination in the spring of 2020, in order to obtain the continued performance of certain of IDC’s subcontractors , including Arista A ir Conditioning Corp. (“Arista”), Continental Lighting Corp. (“Continental”), Nevco Contracting Inc. (“Nevco”) and PROFAC, Inc. (“PROFAC”) , and to avoid the imposition of mechanic’s liens, GMF retained said subcontractors and directly paid amounts allegedly owed to them by IDC, by virtue of which GMF became subrogated to the rights of those subcontractors to recoup from IDC the subject amount s that should have been paid out of the trust ; and that, on April 21, 2021, GMF , as subrogee,
demanded a trus t fund accounting from IDC

. Compare NYSCEF Doc. No. 207 ( Trust Fund
Action Compl

. ), ¶¶ 9

- 28, with NYSCEF Doc. No. 218 (Proposed Am. Answer) , ¶¶ 31

- 47.

DISCUSSION Leave to amend a pleading should be freely granted absent evidence of substantial prejudice or surprise, or unless the proposed amendment is palpably insufficient or patently
devoid of merit. See CPLR 3025(b) ; JPMorgan Chase Bank, N.A. v Low Cost Bearings NY, Inc.
, 107 AD3d 643 (1 st Dept. 2013); Cherebin v Empress Ambulance Serv., Inc. , 43 AD3d 364, 365 (1 st Dept. 2007). A court must examine the merit of the proposed amendment in order to

conserve judicial resources.” 360 West 11th LLC v ACG Credit Co. II, LLC , 90 AD3d 552, 553 (1 st Dept. 2011). “ [ W ] here the amendment is sought after a long delay, and a statement of readiness has been filed, judicial discretion in allowing the amendment should be discreet, circumspect, prudent and cautious.” Cseh v New York City Tr. Auth. , 240 AD2d 270, 272 (1 st Dept. 1997). To be sure, the mere “fact that a motion to amend is made after a Note of Issue does not of necessity call for its denial.” Jacobson v Croman , 107 AD3d 644, 645 (1 st Dept. 2013). N o n e t h e l e s s , “ w here there has been an extended delay in moving to amend, the party seeking leave to amend must establish a reasonable excuse for the delay.” Oil Heat Inst. of Long Island Ins. Tr. v RMTS Assocs., LLC , 4 AD3d 290, 293 (1 st Dept. 2004) (internal quotation marks omitted). C o n v e r s e l y , t he burden is on the party opposing the motion to establish substantial prejudice or surprise if leave to amend is granted. See Forty Cent. Park S., Inc. v
Anza , 130 AD3d 491 (1 st Dept. 2015). I n that regard
, t h e o p p o s i n g p a r t y m a y establish p r e j u d i c e 

## FILED: NEW YORK COUNTY CLERK 09/17/2024 03:47 PM INDEX NO. 652022/2020

NYSCEF DOC. NO. 227 RECEIVED NYSCEF: 09/17/2024

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Motion No. 005 Page 4 of 5 b y s h o w i n g a n u n j u s t i f i e d d e l a y and t h a t i t w a s h i n d e r e d f r o m s e e k i n g d i s c o v e r y o n t h e n e w l y
p r o p o s e d c l a i m

. S e e e

. g E n d o t h e l e x , I n c

. v V a s o m e d i c a l
, I n c

. , 2 0 2 A D 3 d 6 2 0 ( 1 s t D e p t

. 2 0 2 2 ) ; V a n D a m m e v G e l b e r , 1 1 1 A D 3 d 4 0 8 ( 1 s t D e p t

. 2 0 2 3 )

.
Here, GMF did not file the instant motion to amend until May 14, 2024, four years after
the instant action was commenced, almost fifteen (15) months after the Note of Issue was filed and more than seven (7) months after IDC’s summary judgment motion was denied. GMF does not establish any reasonable excuse for this delay. It contends that it did not obtain evidence
that IDC wa s failing to use trust funds to pay subcontractors until the deposition of one such subcontractor, Janusz Gierlak, in January 2023. However, GMF itself states in its motion
papers , as it did in the Trust Fund Action complaint, that, “[b]eginning in late 20 19, and then in early 2020, it became apparent that IDC had not paid all of its subcontractors with the funds paid to it by GMF.” Indeed, GMF’s original Answer filed on August 18, 2020, expressly alleges the failure to pay subcontractors as a basis for it s breach of contract counterclaim against IDC

.
Moreover, in April 2021, as alluded to in the Trust Fund Action complaint
, GMF sought a trust fund accounting from IDC, serving it with a Demand for a Verified Statement Pursuant to
Art. 3

- A of the Lien Law, a copy of which is submitted by IDC in opposition to the present
motion. The April 2021 Demand listed four trust beneficiar ies

— Arista, Continental, Nevco and
PROFAC

— and stated that the amount purportedly due and unpaid to these beneficiaries was $907,402.81 plus interest. These are the same four subcontractors alleged in the Trust Fund Action complaint , as well as in GMF’s pre sent motion papers, to have been retained by GMF in the spring of 2020 and directly paid outstanding amounts owed to them by IDC, which amounts should have been paid out of the trust . A nd GMF’s present proposed amended pleading seeks exactly the same amount of damages

— $ 907,402.81

.
In short, I D C h a s s h o w n t h a t GMF was aware of the factual basis for its proposed trust fund diversion claim at the commencement of this action in May 2020, and certainly no later than April 2021, but nevertheless did not seek to amend its counterclaims fo r four years, until after the Note of Issue was filed and IDC’s summary judgment motion was decided

. T o allow the amendment at this juncture would prejudice both I D C and Chiesi, neither of whom had any opportunity to conduct discovery related to th e propos ed new claim. See Endothelix, Inc. v Vasomedical, Inc.
, s u p r a , Van Damme v Gelber
, s u p r a

. Indeed, Chiesi has not been a party to
this action in his individual capacity since the dismissal of G MF’s third

- party complaint against
him in January 2021, which preceded the start of discovery herein. 

## FILED: NEW YORK COUNTY CLERK 09/17/2024 03:47 PM INDEX NO. 652022/2020

NYSCEF DOC. NO. 227 RECEIVED NYSCEF: 09/17/2024

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Motion No. 005 Page 5 of 5 CONCLUSION Accordingly, u pon the foregoing papers , it is

ORDERED that the motion of defendant GMF 157 LP for leave to amend its answer and
counterclaims pursuant to CPLR 3025(b) is denied; and it is further

ORDERED that the Clerk shall mark the file accordingly.

This Constitutes the Decision and Order of the court.

9 /1 6 /2024 $SI G$ DATE

CHECK ONE: CASE DISPOSED X NON

- FINAL DISPOSITION

X GRANTED DENIED GRANTED IN PART OTHER

APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE 

## FILED: NEW YORK COUNTY CLERK 09/17/2024 03:47 PM INDEX NO. 652022/2020

NYSCEF DOC. NO. 227 RECEIVED NYSCEF: 09/17/2024

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# N;:n~

HON. NANCY M. BANNON

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