| First Keystone Consultants, Inc. v DDR Constr. Servs. |
| 2010 NY Slip Op 05508 [74 AD3d 1135] |
| June 22, 2010 |
| Appellate Division, Second Department |
| First Keystone Consultants, Inc., et al., Plaintiffs, v DDRConstruction Services et al., Defendants/Third-Party Plaintiffs-Appellants, et al.,Defendant/Third-Party Plaintiff. Schlesinger Electrical Contractors, Inc., et al., Third-PartyDefendants-Respondents, et al., Third-Party Defendants. |
—[*1] Melvin J. Kalish, Mineola, N.Y. (Joshua Spitalnik of counsel), for third-partydefendant-respondent Schlesinger Electrical Contractors, Inc. Manatt, Phelps & Phillips, LLP, New York, N.Y. (Kenneth D. Friedman of counsel), forthird-party defendant-respondent Schlesinger-Siemens Electrical, LLC.
In an action, inter alia, for a judgment declaring, among other things, that the defendants arenot entitled to the net profits of a certain joint venture, the defendants/third-party plaintiffs DDRConstruction Services, Clifford R. Weiner, and Debbie Ann Weiner appeal from so much of anorder of the Supreme Court, Queens County (Hart, J.), entered October 23, 2009, as granted thatbranch of the motion of the third-party defendant Schlesinger-Siemens Electrical, LLC, whichwas to dismiss the second amended third-party complaint insofar as asserted against it pursuantto CPLR 3211 (a) (1) and (7), and denied that branch of their cross motion which was to appointa referee, inter alia, to conduct an accounting of the third-party defendants SFD Associates andSchlesinger-Siemens Electrical, LLC.
Ordered that the appeal by the defendants/third-party plaintiffs Clifford R. Weiner andDebbie Ann Weiner is dismissed as abandoned, without costs or disbursements; and it is further,
Ordered that the order is modified, on the facts and in the exercise of discretion, by deletingthe provision thereof denying that branch of the cross motion which was to appoint a referee toconduct an accounting of the third-party defendant SFD Associates, and substituting therefor aprovision granting that branch of the cross motion; as so modified, the order is affirmed insofaras appealed from by the defendant/third-party plaintiff DDR Construction Services, withoutcosts or disbursements, and the matter is remitted to the Supreme Court, Queens County, forfurther [*2]proceedings in accordance herewith.
"On a motion to dismiss a complaint pursuant to CPLR 3211 (a) (1), if the documentaryevidence submitted by the defendant 'utterly refutes [the] plaintiff's factual allegations' andconclusively establishes a defense to the asserted claims as a matter of law, the motion may begranted (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]). Further, ona motion to dismiss a complaint pursuant to CPLR 3211 (a) (7) for failure to state a cause ofaction, the court must determine whether, accepting the facts alleged in the complaint as true andaccording the plaintiff the benefit of every possible inference, the facts as alleged fit within anycognizable legal theory (see Leon v Martinez, 84 NY2d 83, 87 [1994])" (Hallman v Kantor, 72 AD3d 895,896 [2010]).
The Supreme Court properly granted that branch of the motion of the third-party defendantSchlesinger-Siemens Electrical, LLC (hereinafter SSE), which was to dismiss the third-partycause of action alleging a breach of fiduciary duty insofar as asserted against it pursuant toCPLR 3211 (a) (1) and (7). A fiduciary relationship is "necessarily fact-specific, is grounded in ahigher level of trust than normally present in the marketplace between those involved in arm'slength business transactions. Generally, where parties have entered into a contract, courts look tothat agreement to discover . . . the nexus of [the parties'] relationship and theparticular contractual expression establishing the parties' interdependency. If the parties. . . do not create their own relationship of higher trust, courts should not ordinarilytransport them to the higher realm of relationship and fashion the stricter duty for them.However, it is fundamental that fiduciary liability is not dependent solely upon an agreement orcontractual relation between the fiduciary and the beneficiary but results from the relation" (EBC I, Inc. v Goldman, Sachs & Co.,5 NY3d 11, 19-20 [2005] [internal quotation marks and citations omitted]). The secondamended third-party complaint failed to plead facts evincing the existence of a relationshipbetween the defendant/third-party plaintiff DDR Construction Services (hereinafter DDR) andSSE that involved "a higher level of trust than normally present in the marketplace betweenthose involved in arm's length business transactions" (id.). Although the second amendedthird-party complaint alleged that SSE owed DDR a fiduciary duty by virtue of their purportedstatus as joint venturers, that pleading failed to allege facts sufficient to make out a claim thatSSE agreed to share, with DDR, the profits and losses of certain contracts awarded to SSE by theNew York City Department of Environmental Protection (see Rocchio v Biondi, 40 AD3d 615, 616 [2007]; Latture v Smith, 1 AD3d 408,408-409 [2003]; Ackerman v Landes, 112 AD2d 1081, 1082 [1985]). Additionally, thedocumentary evidence, which included SSE's operating agreement, conclusively established thatDDR was not a member of SSE. The documentary evidence also included an agreement formingthe third-party defendant SFD Associates (hereinafter the SFD Joint Venture Agreement), inwhich DDR is a partner. That agreement established that SSE was not a partner in SFDAssociates.
DDR's argument that it was an intended third-party beneficiary of the SSE operatingagreement was also refuted by the documentary evidence, since the operating agreement stated,in a paragraph entitled "No Third Party Beneficiaries," that the parties to the agreement "do notintend to confer any benefit under this Agreement on anyone other than the parties, and nothingcontained in this Agreement will be deemed to confer any such benefit on any other person" (see Edge Mgt. Consulting, Inc. vBlank, 25 AD3d 364, 368-369 [2006]).[*3]
The Supreme Court also properly granted that branch ofSSE's motion pursuant to CPLR 3211 (a) (7) which was to dismiss the third-party cause of actionalleging the aiding and abetting of a breach of fiduciary duty insofar as asserted against it. "Acause of action [to recover damages] for aiding and abetting breach of fiduciary duty merely'requires a prima facie showing of a fiduciary duty owed to plaintiff . . . a breach ofthat duty, and defendant's substantial assistance . . . in effecting the breach, togetherwith resulting damages' (Ulico Cas. Co.v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 11 [1st Dept 2008];Kaufman v Cohen, 307 AD2d 113, 125 [2003])" (Yuko Ito v Suzuki, 57 AD3d 205, 208 [2008]). The secondamended third-party complaint merely alleges that SSE knew of a purported breach of fiduciaryduty and allowed it to occur. Such allegations do not support a claim of aiding and abettingwhere, as here, "[SSE] owes [no] fiduciary duty directly to [DDR]" (Kaufman v Cohen,307 AD2d at 126).
Additionally, a confidential or fiduciary relationship is a necessary element for theimposition of a constructive trust (see Rocchio v Biondi, 40 AD3d at 616). Since nofiduciary relationship exists between DDR and SSE, the Supreme Court properly granted thatbranch of SSE's motion which was to dismiss the third-party cause of action to impose aconstructive trust insofar as asserted against it.
The Supreme Court also properly granted that branch of SSE's motion which was pursuant toCPLR 3211 (a) (7) to dismiss the third-party cause of action to recover damages for unfaircompetition insofar as asserted against it, inasmuch as the second amended third-party complaintfailed to allege SSE's bad faith misappropriation of a commercial advantage belongingexclusively to DDR (see Precision Concepts v Bonsanti, 172 AD2d 737 [1991];Davis & Co. Auto Parts, Inc. v Allied Corp., 651 F Supp 198, 203 [1986], citingSaratoga Vichy Spring Co. v Lehman, 625 F2d 1037, 1044 [1980]; MetropolitanOpera Assn., Inc. v Wagner-Nichols Recorder Corp., 279 App Div 632 [1951]).
The Supreme Court also properly granted that branch of SSE's motion which was pursuant toCPLR 3211 (a) (7) to dismiss the third-party cause of action alleging fraud insofar as assertedagainst it. The second amended third-party complaint merely contained allegations that SSEknew about a purported fraudulent scheme to oust DDR from SFD Associates, and failed todisclose it. The mere nondisclosure of a material fact, unaccompanied by some deceptive act,does not constitute fraud absent a confidential or fiduciary relationship (see Shomar Constr.Servs. v Lawman Constr. Co., 262 AD2d 956, 957 [1999]; Levine v Yokell, 245AD2d 138 [1997]; East 15360 Corp. v Provident Loan Socy. of N.Y., 177 AD2d 280[1991]; Lane v McCallion, 166 AD2d 688, 691 [1990]; County of Westchester vWelton Becket Assoc., 102 AD2d 34, 50-51 [1984], affd 66 NY2d 642 [1985];Moser v Spizzirro, 31 AD2d 537 [1968], affd 25 NY2d 941 [1969]). Further, thesecond amended third-party complaint contains no allegations of fact from which it could beinferred that SSE agreed to cooperate in a fraudulent scheme to oust DDR from SFD Associates.Thus, the second amended third-party complaint failed to state a cause of action against SSEsounding in conspiracy to commit fraud (see Agostini v Sobol, 304 AD2d 395, 396[2003]; National Westminster Bank v Weksel, 124 AD2d 144, 147 [1987]). Accordingly,the Supreme Court properly dismissed the third-party cause of action alleging conspiracy tocommit fraud insofar as asserted against SSE.
The Supreme Court also properly granted that branch of SSE's motion which was pursuant toCPLR 3211 (a) (7) to dismiss the third-party cause of action alleging tortious interference withcontract insofar as asserted against it. Active and intentional procurement of a breach is anessential element of a cause of action alleging tortious interference with contract (see BellinoSchwartz Padob Adv. v Solaris Mktg. Group, 222 AD2d 313, 314 [1995]). The secondamended third-party complaint contained no allegations of fact from which it could be inferredthat SSE committed any acts, intentional or otherwise, to procure the breach of the SFD JointVenture Agreement.
Contrary to the DDR's contention, the Supreme Court also properly granted that branch ofSSE's motion which was to dismiss the third-party cause of action alleging unjust enrichmentinsofar as asserted against it, inasmuch as the second amended third-party complaint alleged onlythat the third-party defendants Schlesinger Electrical Contractors, Inc., and Jacob Levita [*4]were unjustly enriched on account of the benefits conferred uponthem by DDR.
The Supreme Court improvidently exercised its discretion in denying that branch of the crossmotion of the defendants/third-party plaintiffs which was to appoint a referee to conduct anaccounting of the third-party defendant SFD Associates. For reasons that are not clear from therecord before this Court, the referees appointed by the Supreme Court in its prior orders datedJune 4, 2008, and July 23, 2008, respectively, never conducted such an accounting. DDR was apartner in SFD Associates, and is entitled to an accounting of that joint venture (seeWesselmann v International Images, 259 AD2d 448 [1999]; Grossman v LaurenceHandprints-N.J., 90 AD2d 95, 104-105 [1982]).
DDR's remaining contentions are without merit. Skelos, J.P., Angiolillo, Dickerson andLeventhal, JJ., concur. [Prior Case History: 25 Misc 3d 1217(A), 2009 NY Slip Op52166(U).]