| Crystal Clear Dev., LLC v Devon Architects of N.Y., P.C. |
| 2012 NY Slip Op 05609 [97 AD3d 716] |
| July 18, 2012 |
| Appellate Division, Second Department |
| Crystal Clear Development, LLC,Appellant-Respondent, v Devon Architects of New York, P.C., et al.,Respondents-Appellants. |
—[*1] Milber Makris Plousadis & Seiden, LLP, Woodbury, N.Y. (Joseph V. Cambareri of counsel),for respondents-appellants.
In an action, inter alia, to recover damages for breach of contract, the plaintiff appeals fromso much of an order of the Supreme Court, Nassau County (Phelan, J.), entered May 13, 2010, asgranted those branches of the defendants' motion which were pursuant to CPLR 3211 (a) (7) todismiss the fourth cause of action, pursuant to CPLR 3211 (a) (7) to dismiss the complaintinsofar as asserted against the defendant Steven Lane, and for summary judgment dismissing somuch of the complaint as sought to recover damages for lost profits, denied that branch of itscross motion which was for leave to amend the fourth cause of action, severed the action insofaras asserted against the defendant Devon Architects of New York, P.C., and amended the captionto eliminate the defendant Steven Lane as a named defendant, and the defendants cross-appealfrom so much of the same order as denied those branches of their motion which were pursuant toCPLR 3211 (a) (5) to dismiss the first and second causes of action based on a prior arbitrationaward and for leave to amend their answer to raise collateral estoppel as an affirmative defense.
Ordered that the order is modified, on the law, (1) by deleting the provision thereof grantingthat branch of the defendants' motion which was pursuant to CPLR 3211 (a) (7) to dismiss thesecond cause of action against the defendant Steven Lane, and substituting therefor a provisiondenying that branch of the motion, and (2) by deleting the provision thereof severing the actioninsofar as asserted against the defendant Devon Architects of New York, P.C., and amending thecaption to eliminate the defendant Steven Lane as a named defendant; as so modified, the order isaffirmed insofar as appealed and cross-appealed from, without costs or disbursements.
The defendants contend that a determination made in a prior arbitration matter between theplaintiff and a nonparty construction company bars the plaintiff from seeking to recover damagesagainst them for breach of contract and architectural malpractice. We disagree. Under thedoctrine of collateral estoppel, a party is precluded "from relitigating in a subsequent action orproceeding an issue clearly raised in a prior action or proceeding and decided against that party orthose in privity, whether or not the tribunals or causes of action are the same" (Ryan v NewYork Tel. Co., 62 NY2d 494, 500 [1984]; see Simpson v Alter, 78 AD3d 813, 814 [2010]; Motors Ins. Corp. v Mautone, 41 AD3d800, 800-801 [2007]; AltegraCredit Co. v Tin Chu, 29 AD3d 718 [2006]).[*2]
Preclusive effect, however, will only be given where theparticular issue was "actually litigated, squarely addressed and specifically decided" (Ross vMedical Liab. Mut. Ins. Co., 75 NY2d 825, 826 [1990]; see Motors Ins. Corp. vMautone, 41 AD3d at 801). Here, the contract between the plaintiff and the defendants wasseparate and distinct from the contract between the plaintiff and the nonparty constructioncompany, and different duties and obligations were promised. The arbitration, which wasmandated by the construction contract, did not include claims by or against the defendants. Underthe circumstances, the defendants failed to establish that the issues of whether they breached theirduties under the architectural contract or whether they are liable for professional malpracticewere actually litigated, squarely addressed, and specifically decided in the prior arbitrationproceeding (see Simpson v Alter, 78 AD3d at 814; Motors Ins. Corp. v Mautone,41 AD3d at 801). Since the doctrine of collateral estoppel cannot properly be invoked herein, thecourt properly denied those branches of the defendants' motion which were pursuant to CPLR3211 (a) (5) to dismiss the first and second causes of action based on the prior arbitration awardand for leave to amend their answer to include the affirmative defense of collateral estoppel(see CPLR 3025 [b]; Motors Ins. Corp. v Mautone, 41 AD3d at 801).
Contrary to the plaintiff's contention, the Supreme Court properly held that the defendantswere entitled to summary judgment dismissing so much of the complaint as sought to recoverdamages for lost profits. In an action to recover damages for breach of contract, "thenonbreaching party may recover general damages which are the natural and probableconsequence of the breach" (Kenford Co. v County of Erie, 73 NY2d 312, 319 [1989]; see Yenrab, Inc. v 794 Linden Realty,LLC, 68 AD3d 755, 759 [2009]). "A claim for lost profits is generally a claim forspecial or extraordinary damages" (Yenrab, Inc. v 794 Linden Realty, LLC, 68 AD3d at759). "Lost profits may be recoverable for breach of a contract if it is demonstrated with certaintythat such damages have been caused by the breach, and the alleged loss is capable of proof withreasonable certainty. There also must be a showing that the particular damages were fairly withinthe contemplation of the parties to the contract at the time the contract was made" (Blinds to Go [US], Inc. v Times PlazaDev., L.P., 88 AD3d 838, 839-840 [2011]; see American List Corp. v U.S. News &World Report, 75 NY2d 38, 43 [1989]; Kenford Co. v County of Erie, 67 NY2d 257,261 [1986]; Reads Co., LLC v Katz,72 AD3d 1054, 1056 [2010]).
Here, the defendants established their prima facie entitlement to judgment as a matter of lawdismissing the plaintiff's claim for lost profits by showing that such damages were notcontemplated by the parties in entering into the subject contract (see Reads Co., LLC vKatz, 72 AD3d at 1056). A review of the terms of the subject contract demonstrates thatthere was no intent by the parties to allow for economic loss as a potential basis for damages inthe event of a breach (see Awards.com vKinko's, Inc., 42 AD3d 178, 183 [2007], affd 14 NY3d 791 [2010]; compareAshland Mgt. v Janien, 82 NY2d 395, 404-405 [1993]). In opposition, the plaintiff failed toraise a triable issue of fact. Accordingly, the Supreme Court properly granted that branch of thedefendants' motion which was for summary judgment dismissing the plaintiff's claim for lostprofits.
The Supreme Court also properly granted that branch of the defendants' motion which waspursuant to CPLR 3211 (a) (7) to dismiss the fourth cause of action, which alleged grossnegligence. The plaintiff's conclusory assertion that the defendants performed their duties"recklessly" and with "willful disregard," unsupported by any factual allegations of conductevincing a reckless disregard for the rights of others or "smack[ing]" of intentional wrongdoing,was insufficient to state a cause of action alleging gross negligence (Colnaghi, U.S.A. vJewelers Protection Servs., 81 NY2d 821, 823-824 [1993]; see Smith-Hoy v AMC Prop. Evaluations,Inc., 52 AD3d 809, 810 [2008]; Mancuso v Rubin, 52 AD3d 580, 583 [2008]). Moreover, as theplaintiff's proposed amendment did not seek to add any factual allegation that would supportsuch a claim, that branch of the plaintiff's cross motion which was for leave to amend the fourthcause of action was properly denied (see CPLR 3025 [b]; see generally Lucido v Mancuso, 49AD3d 220, 225-229 [2008]).
The Supreme Court erred, however, in granting that branch of the defendants' motion whichwas pursuant to CPLR 3211 (a) (7) to dismiss the second cause of action insofar as assertedagainst the defendant Steven Lane, alleging architectural malpractice. Business Corporation Law§ 1505 (a), which applies only to professional corporations, provides that a shareholder,employee, [*3]or officer of a professional corporation shall beliable for negligent or wrongful acts committed by him or her or any person under his or herdirect supervision while rendering services on behalf of the corporation (see Ecker v Zwaik &Bernstein, 240 AD2d 360 [1997]; Somer & Wand v Rotondi, 219 AD2d 340[1996]). Here, the record indicates that Lane handled and supervised the architectural planningand represented the professional corporation, which was the defendant Devon Architects of NewYork, P.C. (hereinafter Devon), throughout the contractual relationship. As such, BusinessCorporation Law § 1505 (a) renders Lane potentially liable for the malpractice of Devon tothe extent of his own personal negligence or to the extent of negligent acts committed at hisdirection (see Somer & Wand v Rotondi, 219 AD2d at 343). Since the plaintiff hassufficiently stated a cause of action sounding in architectural malpractice against Lane, theSupreme Court should not have severed the action as to Devon and amended the caption toeliminate defendant Steven Lane as a named defendant. Rivera, J.P., Florio, Austin and Sgroi,JJ., concur. [Prior Case History: 2010 NY Slip Op 31267(U).]