| Saratoga Schenectady Gastroenterology Assoc., P.C. v Bette & Cring,LLC |
| 2011 NY Slip Op 02991 [83 AD3d 1256] |
| April 14, 2011 |
| Appellate Division, Third Department |
| Saratoga Schenectady Gastroenterology Associates, P.C., et al.,Respondents, v Bette & Cring, LLC, Appellant. |
—[*1] Nixon Peabody, L.L.C., Albany (Jena R. Rotheim of counsel), for respondents.
Mercure, J.P. Appeal from an order of the Supreme Court (Lynch, J.), entered June 8, 2010in Albany County, which denied defendant's motion to dismiss the complaint.
Pursuant to a contract with nonparty Saratoga Schenectady Real Property, LLC (hereinafterSSRP), defendant agreed to design and build an endoscopy center. Upon the building'scompletion, SSRP leased it to plaintiffs, which are related entities owned by the members ofSSRP. After defects in the building's construction were discovered, SSRP served a demand forarbitration pursuant to the terms of the contract and sought damages for, among other things,plaintiffs' lost profits. An arbitration tribunal determined that defendant had failed to properlyinstall the flooring in the building and awarded SSRP approximately $194,000, but ruled thatSSRP could not recover damages for plaintiffs' lost profits.
Plaintiffs then commenced this action for breach of contract against defendant. Prior tojoinder of issue, defendant moved to dismiss the complaint, asserting that plaintiffs were notintended third-party beneficiaries under the contract and, in any event, were barred fromadvancing their claim by the arbitration award. Supreme Court denied the motion, and defendantnow appeals. Accepting the facts alleged in the complaint as true and according plaintiffs thebenefit of every favorable inference, as is required on a motion to dismiss the complaint (see Mandarin Trading Ltd. vWildenstein, 16 NY3d 173, 178 [2011]), we affirm.
In order to recover as third-party beneficiaries to a contract, plaintiffs "must establish: (1) theexistence of a valid and binding contract between other parties, (2) that the contract was intendedfor [their] benefit, and (3) that the benefit to [them] is sufficiently immediate . . . toindicate the assumption by the contracting parties of a duty to compensate [them] if the benefit islost" (id. at 182 [internal quotation marks and citation omitted]; see IMS Engrs.-Architects, P.C. v State ofNew York, 51 AD3d 1355, 1357 [2008], lv denied 11 NY3d 706 [2008]). Here,defendant argues that its contract with SSRP to design and build the endoscopy center did notintentionally afford plaintiffs an immediate benefit. The complaint alleged, however, thatplaintiff Saratoga Schenectady Gastroenterology Associates, P.C. (hereinafter SSGA) initiallycontacted defendant with regard to the project, set out specifications for it, and routinely met withdefendant to custom design the building.
While plaintiff Saratoga Schenectady Endoscopy Center, LLC had not yet been formed, theidentity of a third-party beneficiary to a contract need not be known at the time the contract isexecuted, and SSGA allegedly notified defendant that endoscopy procedures at the facility wouldbe performed by a related entity (see MK W. St. Co. v Meridien Hotels, 184 AD2d 312,313 [1992]; Key Intl. Mfg. v Morse/Diesel, Inc., 142 AD2d 448, 455 [1988]). SSRP, inturn, was formed by SSGA solely to enter into the contract with defendant and own the building.Moreover, each page of the body of the contract states that it is a document for "SARA SCHENGASTRO," which plaintiffs allege is a reference to SSGA. Under these circumstances and giventhe procedural posture of this case, we agree with Supreme Court that plaintiffs have sufficientlystated a claim as intended third-party beneficiaries for breach of the contract between defendantand SSRP (see Williams v Sidley AustinBrown & Wood, L.L.P., 38 AD3d 219, 220-221 [2007]; Rotterdam Sq. vSear-Brown Assoc., 246 AD2d 871, 872 [1998]; Key Intl. Mfg. v Morse/Diesel, Inc.,142 AD2d at 454-457; cf. Lake Placid Club Attached Lodges v Elizabethtown Bldrs.,131 AD2d 159, 161-162 [1987]).
Defendant's argument that plaintiffs' claim is barred by res judicata or collateral estoppel issimilarly unavailing. Plaintiffs were not parties in the prior arbitration proceeding. AlthoughSSRP sought to recover plaintiffs' lost profits as damages, defendant contended that SSRP couldnot do so, and the arbitrators agreed. Plaintiffs allege, however, that no determination was maderegarding whether those damages could be directly recovered by plaintiffs and, in ourview, the language of the award is ambiguous in that regard. Inasmuch as the arbitrators' failureto reach the issue of whether plaintiffs could directly recover for their lost profits would renderboth collateral estoppel and the res judicata doctrine inapplicable here, defendant has notestablished its entitlement to dismissal on this ground (see Matter of Halyalkar v Board ofRegents of State of N.Y., 72 NY2d 261, 268 [1988]; Rembrandt Indus. v HodgesIntl., 38 NY2d 502, 504 [1976]; Rebh v Rotterdam Ventures, 252 AD2d 609, 610[1998]; ICN Pharms. v Bristol-Myers Co., 245 AD2d 182 [1997]; B. O. W. CleaningCorp. v Doe, 84 AD2d 527, 528 [1981]).
Defendant's remaining arguments have been considered and found to be without merit.
Peters, Malone Jr., Kavanagh and Stein, JJ., concur. Ordered that the order is affirmed, withcosts.