Court Opinion

ID: 9959927
Source: CourtListenerOpinion
Date Created: 2024-04-12 20:12:43.850448+00
Date Added: 2024-06-11T08:18:59.867411
License: Public Domain

Charles Condominiums, LLC v Victor RPM First,
                          LLC
               2024 NY Slip Op 31174(U)
                      April 5, 2024
           Supreme Court, New York County
        Docket Number: Index No. 657040/2019
                Judge: Margaret A. Chan
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.
                                                                                                  INDEX NO. 657040/2019
  NYSCEF DOC. NO. 173                                                                        RECEIVED NYSCEF: 04/05/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 49M
            --------------------.X
             THE CHARLES CONDOMINIUMS, LLC,                                    INDEX NO.          657040/2019

                                               Plaintiff,
                                                                               MOTION DATE        07/14/2023
                                       - V -
                                                                               MOTION SEQ. NO.      MS 005
             VICTOR RPM FIRST, LLC,VRE DEVELOPMENTS INC.
             D/B/A VICTOR GROUP, MOSHE SHUSTER, RAN
             KOROLIK, 1355 FIRST AVENUE FEE HOLDER LLC, 1355
             FIRST AVENUE LAND OWNER LLC,RAMIN KAMFAR,                          DECISION+ ORDER ON
             PHILIP MENDLOW                                                           MOTION
                                               Defendant.
            --------------------X

             HON. MARGARET A CHAN:

            The following e-flled documents, listed by NYSCEF document number (Motion 005) 115, 116, 117, 118,
            119, 120, 121, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138,
            139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158,
            159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172
            were read on this motion to/for                      PARTIAL SUMMARY JUDGMENT

                   This action arises out of a pipe burst incident in a luxury residential
            condominium owned by the plaintiff The Charles Condominiums, LLC ("Charles" or
            the plaintiffJ. In its complaint, Charles alleges that it sustained millions of dollars in
            damages as the result of the incident. Defendant Victor RPM First, LLC ("Victor" or
            the defendant) is the Development Manager for the development and construction of
            the condominium under the parties' Am.ended and Restated Development
            Management Agreement. Plaintiff now moves for partial summary judgment
            pursuant to CPLR 3212 solely on the issue of Victor's liability for breach of contract.
            Victor opposes the motion. For the reasons below, the motion is denied.

                                                            Background
                  The following facts are taken from the parties' Rule 19·a statements, affidavits,
            and exhibits. They are not in dispute unless otherwise noted.

            The Development Agreement

                  On January 17, 2013, Charles and Victor entered into the Amended and
            Restated Development Management Agreement (Development Agreement or
            Agreement) regarding the construction of a luxury high·rise condominium in
            Manhattan's Upper East Side neighborhood (the Condominium or the Project)
             657040/2019 CHARLES CONDOMINIUMS, LLC vs. VICTOR RPM FIRST, LLC                       Page 1 of 6
             Motion No. 005

[* 1]                                                        1 of 6
                                                                                      INDEX NO. 657040/2019
  NYSCEF DOC. NO. 173                                                          RECEIVED NYSCEF: 04/05/2024

            (NYSCEF # 118, Development Agreement). The Development Agreement defines
            Victor as the "Development Manager" and Charles as the "Owner" (id at Preamble).

                  Under the Agreement, the affiliates of Charles provided substantially all the
            equity capital for the Project, while Victor was to "undertake and complete all tasks
            necessary to construct a luxury residential condominium" (id at Third WHEREAS
            Clause). Specifically, section 2 states:

                           Development Manager shall at Owner's expense perform, or cause to be
                           performed, all of the work necessary to construct and build ·out the
                           Project, and supply all of the materials and finishings in connection
                           therewith in accordance with the plans and specifications ...

            (id§ 2).

                   Section 5 discusses the performance of the construction. As relevant here,
            section 5(a) states:

                           Development Manager shall promptly cause the commencement and
                           diligent continuance of the construction of the Project Work by
                           Contractor under the Construction Contract until completion ...

            (id § 5(a)). Section 5(b) further states that "Development Manager shall be solely
            responsible for the supervision of all of the Project Work" and that "[a]ny appropriate
            corrections required by Owner shall be promptly performed" (id § 5(b)). Finally,
            section 5(d) states that "[t]he Project Work shall be deemed 'Complete' when all of the
            conditions specified in the definition of 'Complete the Project' in the Construction
            Loan Documents have been met" (id§ 5(d)).

            The 2016 Burst Pipe Incident

                   In July 2016, a pipe on the 16th floor of the Condominium burst, causing a leak
            of water and glycol throughout some units ("the 2016 Burst Pipe Incident" or "the
            Incident") (NYSQEF # 116, Michael Konig Aff ,r 18; NYSCEF # 123, Exh F of Konig
            Aff at 46). RAND Engineering & Architecture DPC (RAND), Charles' engineer, and
            Cumming Corporation, Charles' project manager, issued reports indicating that the
            Condominium suffered from construction defects (NYSCEF # 116 ,r,r 20·29; see
            NYSCEF #s 120-124, Exhs D, E, F, G of Konig Aff). RAND detailed specific defects
            relating to the pipe insulation system and the roof, railings, door clearances and
            sprinkler systems in its reports (NYSCEF # 116 ,r,r 20, 22; NYSCEF # 120, RAND
            Prelim. Report; NYSCEF #s 122 & 123, RAND Report Parts 1 and 2).

                   Charles spent more than $2 million to investigate and remediate the
            construction defects (NYSCEF # 116, ,r,r 52·53; NYSCEF # 140, Settlement
            Agreement Between Plaintiff & Condominium Board; NYSCEF # 141, Amendment
            to Condo Offering Plan). Moreover, Charles was required "to suspend all the
             657040/2019 CHARLES CONDOMINIUMS, LLC vs. VICTOR RPM FIRST, LLC          Page 2 of 6
             Motion No. 005

[* 2]                                                     2 of 6
                                                                                       INDEX NO. 657040/2019
  NYSCEF DOC. NO. 173                                                           RECEIVED NYSCEF: 04/05/2024

            marketing and sale of Condominium units" for approximately 17 months (from July
            2016 to November 2017) so that the defects could be repaired and appropriate
            disclosures could be filed with the New York Attorney General (NYSCEF # 116 ,r,r
            62·64; NYSCEF # 141). Charles avers that it missed opportunities to sell the six
            unsold units at favorable prices because of the 17·month suspension (NYSCEF # 116
            ,r,r 65·69; NYSCEF # 142, Sales Analysis).
                   Charles filed a complaint on November 26, 2019 (NYSCEF # 1), and on July
            14, 2023, moved for partial summary judgment as to Victor's contractual liability for
            defective construction of the Project under the Development Agreement (NYSCEF #
            115). Victor argues that the motion should be denied as premature since no
            meaningful discovery has been conducted (NYSCEF # 170, Deft Opp, at 1).

                                                        Discussion
                   In moving for partial summary judgment as to Victor's liability for breach of
            the Development Agreement, Charles argues that it meets the prima facie burden to
            demonstrate (i) the existence of construction defects, (ii) that those defects caused
            damages, and (iii) that Victor had contractual responsibility for those defects
            (NYSCEF # 147, PltfMOL at 12). Charles avers that it is undisputed that the project
            was constructed in a defective manner that caused damage to Charles (id at 13·14).
            Charles further argues that the Development Agreement unambiguously made
            Victor solely responsible for the proper supervision and construction of the Project
            (id at 15·23).

                   Victor counters that Charles' motion is premature because no meaningful
            discovery has been conducted (NYSCEF # 170 at 1). Victor argues that (i) the
            contractual provisions of the Development Agreement are ambiguous, and (ii) the
            extrinsic evidence demonstrates that Victor bore no responsibility for causmg,
            remediating, or funding the purported construction defects (id at 15·20).

                   Specifically, Victor asserts that the pertinent provisions of the Development
            Agreement are susceptible to more than one interpretation. According to Victor,
            words in the Development Agreement such as "perform," "cause," and "supervise,"
            impose on Victor obligations to facilitate timely performance of the construction and
            coordinate activities among parties, but not responsibility for the quality of the
            Project work. Charles by contrast avers that those words indicate that Victor bears
            the responsibility for the construction quality (id at 14).

                   Victor further avers that extrinsic evidence indicates that other participants of
            the Project, including Leyva Architects, P.C. (ILA), Triton Construction, LLC
            (Triton), Charles' engineering consultants and special inspectors, and Triton's
            subcontractor were responsible for the quality of the design, construction, and
            inspection of the Project (id at 20).

             657040/2019 CHARLES CONDOMINIUMS, LLC vs. VICTOR RPM FIRST, LLC           Page 3 of6
             Motion No. 005

[* 3]                                                     3 of 6
                                                                                        INDEX NO. 657040/2019
  NYSCEF DOC. NO. 173                                                            RECEIVED NYSCEF: 04/05/2024

                   In reply, Charles argues, inter alia, that (i) Victor's obligations to "undertake,"
            "complete," "perform," and "supervise" the construction are unambiguous; (ii) Victor's
            resort to extrinsic evidence is unavailing because the Development Agreement is
            unambiguous and the extrinsic evidence cannot create an ambiguity; and (iii) the
            involvement of other parties does not eliminate Victor's liability for the Project's
            quality (NYSCEF # 172, Pltf Reply, at 2-9).

                   As explained below, Charles' motion for partial summary judgment is denied.

            A. Summary Judgment Standard

                   Under CPLR 3212, "[t]he proponent of a motion for summary judgment must
            establish that there are no material issues of fact in dispute and that it is entitled to
            summary judgment as a matter of law" (Mazurke v Metropolitan Museum ofArt, 27
            AD3d 227, 228 [1st Dept 2006]). Once a movant makes its prima facie showing, the
            burden shifts to the opposing party to produce evidentiary proof sufficient to raise an
            issue of fact (CitiFinancial Co. (DE) v Mc.Kinney, 27 AD3d 224,226 [1st Dept 2006]).

                   When resolving a motion for summary judgment, the court must view facts in
            a light most favorable to the non ·moving party (see Vega v Restani Constr. Corp., 18
            NY3d 499, 503 [2012]). In the presence of a genuine issue of material fact, a motion
            for summary judgment must be denied (see Rotuba Extruders v Ceppos, 46 NY2d
            223, 231 [1978]; Grossman v Amalgamated Haus. Corp, 298 AD2d 224, 226 [1st Dept
            2002]).

            B. Breach of Contract

                   Written agreements are construed in accordance with the parties' intent and
            "[t]he best evidence of what parties to a written agreement intend is what they say
            in their writing" (Schron v Troutman Sanders LLP, 20 NY3d 430, 436 [2013], quoting
            Greenfield v Philles Records, 98 NY2d 562, 569 [2002] [internal quotation marks and
            citation omitted]). As such, "a written agreement that is complete, clear and
            unambiguous on its face must be enforced according to the plain meaning of its terms"
            (id). The agreement should be read as a whole to determine its purpose and intent,
            and it should be construed to give effect and meaning to all provisions ( W W W
            Assocs., Inc. v Giancontieri, 77 NY2d 157, 162 [1990]).

                   Whether a writing is ambiguous is a "question of law to be resolved by the
            courts" (id). A "contract is unambiguous if the language it uses has a definite and
            precise meaning, unattended by danger of misconception in the purport of the
            [agreement] itself and concerning which there is no reasonable basis for a difference
            of opinion" ( White v Continental Gas. Co., 9 NY3d 264, 267 [2007], quoting Greenfield,
            98 NY2d at 569). Conversely, a contract is ambiguous if "language is susceptible of
            two reasonable interpretations" (Ladder Cap. Fin. LLC v 1250 N. SD Mezz LLC, 211

             657040/2019 CHARLES CONDOMINIUMS, LLC vs. VICTOR RPM FIRST LLC              Page4of6
             Motion No. 005                                            '

[* 4]                                                    4 of 6
                                                                                                  INDEX NO. 657040/2019
  NYSCEF DOC. NO. 173                                                                      RECEIVED NYSCEF: 04/05/2024

            AD3d 608 [1st Dept 2022], quoting Ellington v EMI Music, Inc., 24 NY3d 239, 244
            [2014] [internal quotation marks omitted]).

                   Resort to extrinsic evidence is appropriate to resolve an ambiguity in
            contractual language to determine the parties' intent (LDIR, LLC v DB Structured
            Prod, Inc., 172 AD3d 1, 5-6 [1st Dept 2019]; 330 W. 86th St., LLC v City of New
            York, 68 AD3d 562, 563-64 [1st Dept 2009] ["Resolution of ... ambiguities (in a deed)
            must await discovery as to the intent of the parties"]; Federal Ins. Co. v Americas Ins.
            Co., 258 AD2d 39, 43 [1st Dept 1999] ["Where ... internal inconsistencies in a contract
            point to ambiguity, extrinsic evidence is admissible to determine the parties' intent"]).
            Parties may not use extrinsic evidence to create an ambiguity in the agreement
            (Sterling Res. Int1, LLCv Leerink Swann, LLC, 92 AD3d 538, 539 [1st Dept 2012]).

                   Here, there is no dispute that the Condominium is defective. The key disputed
            issue is whether the Development Agreement unambiguously assigns responsibility
            to Victor for the quality of the Project, and, if ambiguous, whether the parties'
            extrinsic evidence is admissible and resolves the ambiguity. The Court agrees with
            Victor that it is premature to conclude the Development Agreement is unambiguous,
            but for different reasons.

                   To determine whether Victor is responsible for the quality of the Project, the
            analysis starts from the plain meanings of keywords in the Development Agreement.
            One provision the parties focus on is§ 5(b), under which Victor is "solely responsible
            for the supervision of all of the Project Work" (NYSCEF # 118, § 5(b) [emphasis
            added]). The Cambridge Dictionary defines "supervise" to mean "to watch a person or
            activity to make certain that everything is done correctly, safely, etc." and "to be
            responsible for the good performance of an activity or job" .1 There is no reason why
            the unambiguous term "supervise" should not be construed according to its plain,
            ordinary meaning such that Victor is responsible for making certain that everything
            is done correctly.

                   The Third WHEREAS Clause clarifies that "doing things correctly" refers to
            "undertak[ing] and complet[iniJ all tasks necessary to construct" the Project
            (NYSCEF # 118, Third WHEREAS Clause [emphasis added]). Section 5(a) similarly
            binds Victor to "promptly cause the commencement and diligent continuance of the
            construction of the Project Work ... until completion' (id § 5(a) [emphasis added]).
            Section 5(d) of the Development Agreement defines "complete" as "when all of the
            conditions specified in the definition of 'Complete the Project' in the Construction
            Loan Documents have been met" (id,§ 5(d)). In short, to supervise the Project, Victor
            should complete all tasks, and to complete those tasks, Victor should meet the
            conditions in in Construction Loan Documents.

            1
             "Supervise." Cambridge Online Dictionary,
            https://dictionary.cambridge.org/us/dictionary/english/supervise (retrieved February 24, 2024).
                657?40/2019 CHARLES CONDOMINIUMS, LLC vs. VICTOR RPM FIRST, LLC                     Page 5 of 6
                Motion No. 005

[* 5]                                                        5 of 6
                                                                                                  INDEX NO. 657040/2019
  NYSCEF DOC. NO. 173                                                                       RECEIVED NYSCEF: 04/05/2024

                   However, the parties did not file those Construction Loan Documents in any
            obvious place on the docket. Without those documents, the Court cannot determine
            the meaning of "complete" in the Agreement and Victor's specific contractual
            obligations under this provision. To the extent this creates an ambiguity, that
            ambiguity can only be resolved by reference to the Construction Loan Documents, not
            to the other extrinsic evidence cited by Victor. As such, there is a material dispute of
            fact, and discovery is necessary to determine what the parties intend the word
            "complete" to mean, and therefore whether Victor in fact is liable for breach of the
            Agreement.

                   That said, since the Development Agreement unambiguously assigns sole
            responsibility for supervision of the work to Victor, Victor's assertion that the
            defects are caused by other participants, such as Triton and ILA, cannot stand (see
            Rite Aid ofNew York, Inc. v Beach 109th Street Associates, LLC, 2011 WL
            11074350, *2 [Sup Ct, NY County, Mar. 11, 2011, index No. 107705/2010] ["The
            assertion that whatever defects exist are the result of directions given by agents of
            plaintiff during construction cannot stand in view of the provisions (of the
            agreement) which assigns sole responsibility for supervision and direction of the
            work to defendant"]). Therefore, Victor, as the supervisor of the Project, is
            responsible for the construction defects (see id; see also Villamar v 13th and 14th
            Street Realty, LLC, 2014 NY Slip Op 30652[U], *1 [Sup Ct, NY County 2014]
            [defendant Sponsor, who was responsible for construction, corrections, and repairs of
            a building under agreements, was responsible to make repairs to Plaintiffs'
            apartment and "may not disclaim liability" to its curtain provider, a third party to
            the case]). Whether this means Victor is liable for those defects will depend on the
            promised quality implied in the definition of "complete" under the Construction Loan
            Documents.

                   In conclusion, the missing definition of "complete" creates a material issue of
            fact as to the required condition of the finalized Project. Therefore, Charles is not
            entitled to the partial summary judgment.

                   Accordingly, it is ORDERED that plaintiffs motion for partial summary
            judgment against Victor RPM First, LLC for liability for breach of contract (MS005)
            is denied.

                     4/5/2024
                      DATE                                                     MARGARET A. CHAN, J.§.c.

                                     ~
             CHECK ONE:                  CASE DISPOSED                   NON-FINAL DISPOSITION

                                         GRANTED         0    DENIED     GRANTED IN PART         □ OTHER
             APPLICATION:                SETTLE ORDER                    SUBMIT ORDER
             CHECK IF APPROPRIATE:       INCLUDES TRANSFER/REASSIGN      FIDUCIARY APPOINTMENT   □ REFERENCE

             657040/2019 CHARLES CONDOMINIUMS, LLC vs. VICTOR RPM FIRST, LLC                      Page 6of6
             Motion No. 005

[* 6]                                                     6 of 6