Charles Condominiums, LLC v. Victor RPM First, LLC

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)

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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

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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).

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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

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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).

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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

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Motion No. 005

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