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Necdet Aktas and Lisa Filomia-Aktas v. Jmc Development Co.

June 28, 2012


The opinion of the court was delivered by: Mae A. D'Agostino, U.S. District Judge:



Plaintiffs Necdet Aktas and Lisa Filomia-Aktas commenced the within action against defendants alleging various claims arising out of work performed at their home on 223 Mill Creek Road in Adirondack, New York. Presently before the Court are the following motions: (1) defendant JMC Development Co., Inc and Joseph M. Cantanucci Jr.'s motion for spoliation sanctions against plaintiffs and summary judgment including dismissal of plaintiffs' fraud claims; (2) defendant James P. Lynch, P.E.'s motion for summary judgment; (3) third-party defendant Michael Terry's motion for spoliation sanctions against plaintiffs; (4) third-party defendant Northwoods Concrete, Inc. motion for summary judgment and dismissal of the third-party complaint pursuant to Fed. R. Civ. P. 56; and (5) third-party defendant North East Underlayments, LLC motion for summary judgment and dismissal of the third-party complaint pursuant to Fed. R. Civ. P. 56.*fn1 Plaintiff has submitted opposition to all motions. (Dkt. No. 107).*fn2 This court has jurisdiction pursuant to 28 U.S.C. § 1332.


This matter contains few undisputed facts. In 2000, plaintiffs purchased a vacation home at 223 Mill Creek Road in Adirondack, New York, located in the Town of Horicon.On Labor Day 2008, plaintiffs met Joseph Cantanucci ("Cantanucci"), the sole owner of JMC Development Co., Inc. ("JMC") and defendant Stephen Jung ("Jung"), an architect, at their vacation home to discuss a renovation project. Cantanucci testified that the plans for the project included two bedrooms over the garage, a playroom in the basement, new placement for the front door, a new deck and a powder room. Plaintiffs testified that the scope of the initial contract also included a new access staircase, a new bedroom with screened in porch to replace a bedroom that was removed and a fire pit below a two story deck. The work was to be performed pursuant to plans, construction documents and specifications prepared by Jung.

On or around October or November 2008, plaintiffs and JMC entered into a contract for the renovation of plaintiffs' residence at 223 Mill Creek Road.*fn4 The contract was for additions and renovations to the property pursuant to the drawings prepared by Jung Architecture on October 30, 2008. On November 14, 2008, plaintiffs paid Cantanucci $87,500.00 to start construction pursuant to the contract. Defendant Michael Terry ("Terry") was hired by JMC to work as a contractor on the site and was paid by the hour by JMC. Cantanucci testified that Terry was hired to supervise construction at the site.

On November 25, 2008, after demolition began, Jung contacted defendant James P. Lynch ("Lynch"), via email. Lynch was retained for the limited purpose of performing structural engineering calculations for six specific beams. Jung provided Lynch with drawings with markings depicting the areas and the specific beams for which Jung wanted Lynch to provide calculations. On December 3, 2008, Lynch provided a report with the requested calculations. There were no further discussions between Lynch and Jung and plaintiffs never met Lynch.

On December 11, 2008, Northwoods Concrete, Inc. ("Northwoods") sent a proposal to JMC for work at plaintiffs' home. Northwoods is in the business of pouring residential and commercial foundations and concrete slabs. Craig House, the owner of Northwoods, testified that he became involved with the project because he had previously worked with JMC. The proposal included "specifications and estimates" for footings, interior pier footings, frost walls, retaining wall and 4" concrete slab. The proposal excluded, "footings for desk post; extra additives to concrete forming and pouring on ledge rock; and layout of building corners". On December 19, 2008, JMC accepted the proposal. Northwoods poured the foundation for a crawl space which was three to four inches thick. Craig House entered into an Indemnification, Hold Harmless and Insurance Agreement with JMC and Cantanucci.*fn5 The agreement provides:

Northwoods agrees to defend, indemnify, and hold harmless JMC and Cantanucci, . . . from and against any and all claims, suits . . . arising in whole or in part and in any manner from acts, omissions, breach or default of Subcontractor, in connection with performance of any work by Subcontractor, its officers, directors, agents, employees or subcontractors.

Subcontractor hereby agrees that it will obtain and keep in force an insurance policy or policies to cover its liability hereunder and to defend and save harmless General Contractor and Owner in the minimum amounts of $1,000,000 per occurrence (or another appropriate agreed upon amount) for personal injury, bodily injury, and property damage.

Said liability policies shall name General Contractor and Owner as additional insureds and shall be primary to any other insurance policies.

On December 12, 2008 and December 16, 2008, Warren County performed foundation inspections. During these inspections, the inspector observed the footings. The foundation inspections were passed. On January 9, 2009, another foundation inspection was conducted and "approved". Frank Waite Cowles, code enforcement officer for Warren County, testified that there were no problems with foundation and that it "passed" inspection.

In early 2009, Cantanucci contacted North East Underlayments, LLC. ("North East") and requested a quote for sprayfoam insulation work at plaintiffs' residence. Douglas Kwazneski, a sales representative for North East, visited plaintiffs' residence and met Terry. On February 27, 2009, North East prepared a "Revised Letter of Intent" to, "supply and install Icynene Insulation System at 223 Mill Creek Rd, Adirondack, NY Aktas Proj." Cantanucci executed the Letter of Intent on behalf of JMC.

During 2009, due to disagreements regarding the completion date and payments for the project, the relationship between plaintiffs and JMC/Cantanucci began to deteriorate. Plaintiffs testified that they were advised, "a few days before Memorial Day" that the house was not liveable. Therefore, they attempted to get a completion date from defendant. Plaintiffs claim that Cantanucci involved his attorney, Paul Wein, in those discussions. On May 26, 2009, JMC's attorney forwarded a letter to plaintiffs advising, "[w]e have been retained by JMC in reference to outstanding issues relating to a contract of work executed in October 200 regarding renovations of your home".*fn6 The letter also provided, "JMC is prepared to commit to a complete date of June 26, 2009" with some conditions that were outlined in the letter. The letter was executed by Cantanucci and Lisa Aktas.

On June 26, 2009, plaintiffs entered into a contract with George Villar ("Villar") and Atelier Consulting, LLC for owner's representation services for 223 Mill Creek Road, New York. Plaintiffs claim that they retained Villar to "get JMC to keep its promises concerning completion of the job". At that time, Villar was aware that JMC had retained an attorney. Within 60 days of executing the contract with plaintiffs, Villar visited plaintiffs' home on two or three occasions. During those visits, Villar took photographs and prepared a "punch list". Villar testified that he deemed the workmanship to be "poor" and had concerns about the safety of the construction. Villar also testified that he thought there were code violations.

Plaintiffs testified that between June 26, 2009 and July 4, 2009, Villar visited the site with Richard Mullady ("Mullady"), president of Recony Construction.*fn7 At that time, Mullady observed what he deemed to be, "safety issues with respect to the deck, fire pit and fire place."

On July 4, 2009, Cantanucci visited the site for the last time. Cantanucci testified that at that time, the project was "90% complete". From July 4, 2009 until July 19, 2009, JMC did not work on the house. Cantanucci testified that at approximately the same time, he received a telephone call from Villar:

A. . . . he asked me to get him a copy of the approved drawings from Warren County and some other documentation along with some stuff he requested from the architect, and told me if I was to send them to him, that he would pay me for my shipping cost and three percent for my time. So we spent the week of July 4th, I believe it was, gathering and sending him all of the documentation.

On July 12, 2009, Cantanucci forwarded an email to Villar with an outline of his "outstanding debts". Cantanucci concluded the email, "[p]lease send a copy of all correspondence to myself, and Paul Wein, at, so I know how to proceed".

Cantanucci testified regarding his subsequent conversations with Villar:

A. . . . [h]e gave me his phone numbers and told me he was again a mediator hired by a mutual friend John Poulin, and he was in this to make sure everyone was treated fairly. We talked about moneys owed. He agreed that we were very close according to his calculations on what I was owed, and that he would have a commitment from the Aktases by a certain date, and when he didn't return my calls at that date, I called him and he told me the Aktases were out of the country and he only had communication via his Blackberry phone.

Q. Did there come a point in time when Mr. Villar told you that either he or the Aktases were dissatisfied with your work or the time for completion of the project?

A. The only time that I got any information from him in that respect was an email that he sent me stating that - - well, could I back up a moment please?

A. Right. Mr. Villar contacted me and said that he was going to change the locks that's [sic] on the house. Because of those beer cans that we found in the yard, he was under the impression that there were kids in the neighborhood coming to the house and drinking. So I assumed he was going to give me a new set of keys because we had just put three new locks on the house. Well, when I called him to get the lock set, or the new keys, he didn't return my calls but I received an email from him, and I'm sure you have a copy of it, that they installed security cameras, I'm no longer allowed on the job, and to not violate that. And he installed security cameras at that date and to please contact him to get my equipment off the job which was locked at this point in the house.*fn8

Cantanucci testified that the aforementioned communication took place after July 4th.

During their last conversation, Cantanucci and Villar arranged a meeting so that Cantanucci could retrieve JMC's equipment. Cantanucci could not recall when that conversation took place. Cantanucci testified that, "[h]e made it a point with us to come let us in and never showed. We came the next day and he threw all our equipment out on the lawn. And that was the last I heard from him until they gutted the house".

Shortly thereafter, Villar recommended that plaintiffs retain Kevin Archer ("Archer")*fn9 and William B. Fink, Jr. ("Fink")*fn10 . On July 16, 2009, Archer received an email from Villar.*fn11 Archer testified that the email "indicate[d] remediation". Archer testified that he took notes from his first telephone conversation with Villar regarding Archer's involvement. Archer testified that he and Villar had some conversation about potential litigation in the matter. Archer testified that he knew that there was "an attorney on board".

On July 19, 2009, plaintiffs "stopped the [construction] process" by changing the locks on the house effectively precluding JMC from continuing to work on the project. Plaintiffs made the decision due to the lack of progress and "some quality issues". Plaintiffs testified that no one from JMC including Cantanucci was on the property after July 19, 2009.

Villar testified that in "June or July of '09", "all the sheetrock" was removed so that "the engineer come and look at the framing". He also testified, "a few weeks later more drywall was removed to look at not just the vertical, but also the horizontal framing".

On July 27, 2009, Archer visited the site with Villar and Mullady and took photographs. Archer was at the site for roughly four hours.*fn12 On August 15, 2009, Fink visited the site with Villar. On August 19, 2009, Fink issued a report entitled "Preliminary Engineering Review - 223 Mill Creek Road, Adirondack, New York". The review was, "limited to the mechanical and electrical systems". In the report, Fink outlines forty-eight items that he opines are "deficient, incomplete or non-existent" with respect to heating, ventilating, air conditioning, plumbing and electrical work.*fn13

Villar testified that he recommended that plaintiffs terminate their relationship with JMC. On September 4, 2009, at plaintiffs' direction,Villar wrote a letter to Cantanucci and JMC and stated:

. . . over the last few weeks, several independent evaluations of the Property and the work done by you or your subcontractors thereat were performed. These evaluations revealed that said work was performed in an inadequate, negligent and un-professional manner that did not meet industry standards or applicable building codes. It has been revealed that it will be necessary, at best, to completely remedy the work performed by you due to the gross defects, and, at worst, demolish and rebuild the currently uninhabitable property. . . . please cease and desist any involvement with any aspect of the Property, immediately turn over all documents in your possession pertaining thereto, and consider yourself on notice to refrain from entering the Property and/or damaging the Property in any way. The letter further provided:

Lastly, consider yourself on notice that a claim will be made by the Aktas' for the damages sustained by them due to your performance, or better yet lack thereof, at the Property. Accordingly, please notify me in writing of the identity and policy limits of your insurance carrier and refrain from attempting to disburse and/or waste any of your corporate or personal assets.

Villar continued:


On September 4, 2009, Archer prepared a Structural Inspection Report for the residence based upon his July 27, 2009 inspection. Archer stated, "[t]he inspection was undertaken to provide a general review of the structure of the house with reference to the 2007 New York State Residential Building Code and good standards of construction". Archer noted, "[t]he inspection was limited to visual review of the as-built conditions with some probes made through finish materials to gain better view of the structure".

On September 14, 2009, Mullady returned to the site with Archer and Fink. There is conflicting testimony regarding the condition of the house at that time. As noted previously, Villar testified that "all of the sheetrock" was removed in June or July. Fink testified that during the September visit, "basically the drywall or sheetrock had been removed for most of the building". Conversely, Mullady testified that, during the September visit, he made four or five small openings in the walls, at Villar's direction, for the experts and a few weeks later, "bigger openings" were made but by the Fall of 2009, all sheetrock was "down". Archer testified that during that visit, "sheetrock was removed in certain portions of the house so I could see the structure better". Lisa Aktas testified that "demolition" began in September 2009 which included, "[r]emoving existing sheetrock walls and ceilings, need to purchase hot water heater, connecting water to house system to test waste and septic systems and vents".

On September 22, 2009, Archer prepared Structural Inspection Report 2 after a "follow-up" inspection on September 14, 2009. Archer stated, "[t]his follow-up inspection was undertaken to review additional exposed portions of the structure of the house following the removal of areas of sheetrock and insulation".

In the Spring of 2010, Recony began construction on plaintiffs' home. Mullady testified that he did not salvage the sheetrock because it was "impossible" because it was painted and had holes. Plaintiffs testified that the materials were "carted away" and "thrown out".

Procedural History and Pleadings

On November 5, 2009, plaintiffs filed a lawsuit in the Southern District of New York against defendants.*fn14 On November 24, 2009, JMC filed a mechanic's lien with the Warren County Clerk against the 223 Mill Creek Road Property. On December 22, 2009, the federal complaint was dismissed for improper venue.

On December 24, 2009, plaintiffs filed the within action in this court. Defendants filed a motion to dismiss for lack of subject matter jurisdiction and plaintiffs' cross moved to amend the complaint. In support of the motion to amend, plaintiffs disclosed reports from Archer and Fink. On June 15, 2010, Chief United States District Court Judge Gary L. Sharpe issued a decision granting plaintiffs' motion to amend and denying defendant JMC's motion to dismiss.*fn15

On June 21, 2010, plaintiffs filed an amended complaint. Plaintiffs asserted several causes of action against JMC and Cantanucci including breach of contract, breach of warranty, negligence, fraud, personal liability and cancellation of mechanics' lien.*fn16 Plaintiffs also asserted causes of action for breach of contract and negligence against Jung, Lynch, Granville Granite, Brady's Wood Floors and Hamilton Plumbing. Plaintiffs also seek punitive damages.

On November 23, 2010, JMC filed a third-party summons and complaint alleging that JMC is entitled to common law and contractual indemnification and/or apportionment of fault amount and between third-party defendants pursuant to its hold harmless and insurance agreements. JMC also claims that third-party defendants failed to name JMC as an additional insured on its insurance policies and that JMC is entitled to a defense.



Defendants move for spoliation sanctions and argue that plaintiffs failed to allow JMC access to the premises and destroyed all relevant evidence of JMC's purported defective work. Based upon the circumstances, defendants argue that dismissal is the appropriate remedy.

"Spoliation is the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation". West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999) (the sanction should "serve the prophylactic, punitive and remedial rationales underlying the doctrine"). The district court is vested with wide discretion in determining the appropriate sanction. Reilly v. Nat-West Mkts. Group, Inc., 181 F.3d 253, 267 (2d Cir. 1999). "The right to impose sanctions for spoliation arises from a court's inherent power to control the judicial process and litigation, but the power is limited to that necessary to redress conduct which abuses the judicial process". Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2000).

To secure spoliation sanctions based on the destruction or delayed production of evidence, a moving party must prove that: (1) the party having control over the evidence had an obligation to preserve or timely produce it; (2) the party that destroyed or failed to produce the evidence in a timely manner had a "culpable state of mind"; and (3) the missing evidence is "relevant" to the moving party's claim or defense, "such that a reasonable trier of fact could find that it would support that claim or defense." Id. If a party has an obligation to preserve evidence, the degree of the party's culpability and the amount of prejudice caused by its actions will determine the severity of the sanctions to be imposed. Henkel Corp. v. Polyglass USA, Inc., 194 F.R.D. 454, 456 (E.D.N.Y. 2000) (citations omitted). "[A] court should never impose spoliation sanctions of any sort unless there has been a showing-inferential or otherwise-that the movant has suffered prejudice." GenOn Mid-Atlantic, LLC v. Stone & Webster, Inc., 2012 WL 1414070, at *7 (S.D.N.Y. 2012) (citing Orbit One Commc'ns, Inc. v. Numerex Corp., 271 F.R.D. 429, 441 (S.D.N.Y. 2010) ("[i]t is difficult to see why even a party who destroys information purposefully or is grossly negligent should be sanctioned where there has been no showing that the information was at least minimally relevant.")).

A. Obligation to preserve

A party has a duty to preserve evidence when it has "notice that the evidence is relevant to litigation, or should have known that the evidence might be relevant to future litigation". Fujitsi v. Fed. Exp. Corp., 247 F.3d 423, 426 (2d Cir. 2001). The duty to preserve extends to "any documents or tangible things (as defined by Rule 34(a)) . . . 'likely to have discoverable information that the disclosing party may use to support its claims or defenses' ". Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003) (citations omitted) (the parties "must not destroy unique, relevant evidence that might be useful to an adversary"). Where a party attempts to document damage through photographs and reports and brings in counsel and experts to assess the damage, that party has a duty to preserve the evidence. Wade v. Tiffin Motorhomes, Inc., 686 F.Supp.2d 174, 194 (N.D.N.Y. 2009).

Here, the record establishes that plaintiffs recognized that litigation was imminent. Thus, plaintiffs had a duty to preserve the evidence, specifically, defendants' work product. This evidence was not only unique, but solely within plaintiffs' control. As early as May 2009, plaintiffs were aware that JMC/Cantanucci was represented by counsel. Plaintiffs negotiated with defendants' attorney in an effort to complete the project by June 26, 2009. On June 26, 2009, plaintiffs began the process of documenting all of the alleged defective construction in anticipation of litigation. To wit, plaintiffs retained Villar, Mullady, Archer and Fink. These individuals inspected the site, photographed the evidence and prepared reports. Moreover, in September 2009, plaintiff clearly notified defendants that they intend to make a "claim". Based upon the record, plaintiffs knew that litigation was "likely to be commenced" and thus, had an obligation to preserve the subject evidence.

B. Culpability

While plaintiffs clearly had a duty to preserve the evidence, the Court recognizes that the obligation to preserve evidence does not continue indefinitely. Allstate Ins. Co. v. Hamilton Beach/Proctor Silex, Inc., 473 F.3d 450, 458 (2d Cir. 2007). The duty to preserve evidence may be extinguished by providing the opposing party with an adequate and meaningful opportunity to inspect. Gaffield v. Wal-Mart Stores East, L.P., 616 F.Supp.2d 329, 337 (N.D.N.Y. 2009); see also Cedar Petrochemicals, Inc. v. Dongbu Hannong Chemical Co., Ltd., 769 F.Supp.2d 269, 291 (S.D.N.Y. 2011) (spoliation sanctions are not warranted when the movant has had an opportunity to inspect the evidence prior to its destruction). When a party fails to request an inspection of the evidence after being notified of its existence, spoliation sanctions are not appropriate. Fujitsu Ltd., 247 F.3d at 435; see also Townes v. Cove Haven, Inc., 2003 WL 22861921, at *4 (S.D.N.Y. 2008) (citation omitted) (spoliation sanctions inappropriate where the defendant reconstructed a pool two years after the incident and over one year after a complaint because the opposing party was afforded a reasonable opportunity to avail themselves of the evidence); see also Sterbenz v. Attina, 205 F.Supp.2d 65, 73 (E.D.N.Y. 2002) (the defendant waited nearly three months to dispose of the vehicle after the plaintiff's counsel admittedly was notified of the vehicle's location and therefore provided the defendant with adequate and meaningful opportunity to inspect the evidence.

The Second Circuit has held that the "culpable state of mind" factor is satisfied by a showing that the evidence was destroyed "knowingly, even if without intent to (breach a duty to preserve it), or negligently". Pastorello v. City of New York, 2003 WL 1740606, at *10 (S.D.N.Y. 2003) (citing Byrnie v. Town of Crowell, Bd. of Educ., 243 F.3d 93, 109 (2d Cir. 2001)). Simple or ordinary negligence is, "a sufficiently culpable 'state of mind' for the purposes of spoliation". Wade, 686 F.Supp.2d at 194 (the plaintiff's expert had thirty years of experience as a fire investigator and should have known that other experts would be inspecting the RV). A party acts with negligence when he makes diligent efforts to document damage in anticipation of a lawsuit but fails to take reasonable precautions to preserve the evidence. Id. at 195. Nevertheless, a property owner is not required to retain property that is in a negligent condition for an indefinite period of time. Townes, 2003 WL 28861921, at *4.

To determine whether plaintiffs were culpable, the Court examines when and to what extent defendants' work was demolished and removed from the site. The parties testified that Recony Construction was responsible for the initial demolition and remedial work. The record contains no competent or admissible evidence regarding plaintiffs' working relationship with Recony. Without contracts or documentary evidence, there is no record establishing when Recony performed the work. Accordingly, the Court must rely upon the parties' and witness deposition testimony regarding when the demolition/remedial work began. In this regard, the record is conflicting.

Villar testified that "most of the sheetrock was removed" in June or July 2009. Fink and Archer testified that during the September 14, 2009 inspection, "most of the sheet rock" had been removed. Mullady testified that he made "four or five small openings" in the walls in September 2009 and that "all of the sheetrock" was removed by Fall 2009. Plaintiffs claim that demolition work did not begin until September 2009. Despite these inconsistencies, the record clearly establishes that plaintiffs and Villar knew that JMC was represented by counsel when the destruction commenced. Villar testified that he was aware that JMC had retained an attorney and admits that he did not notify JMC or JMC's attorney about the demolition. Villar testified that he made no effort to contact the attorney and made no effort to allow defendant on the premises:

Q. At any time did you notify JMC or his attorney that this destruction was occurring and the property was being removed?

A. No.

Q. Okay. So, you were aware back then that Mr. Cantanucci had an attorney?

A. Okay. Yes.

Q. At any time during the deconstruction process did you make any effort to contact my office to advise me about the deconstruction?

A. No.

Q. During the last break that we had what conversation did you have with Mr. Steck outside?

A. We discussed Mr. Wein's request of how come I didn't contact him, you know, as the attorney, when, in fact, he did get - -I'm sure through JMC - - a letter that we sent FedEx explaining that JMC is not to enter the property and that corrective work would happen. So I am sure his client gave him a copy of that.

Q. Was there any effort to give Mr. Wein or JMC or any of the other folks that were involved in the original construction an opportunity to go in and look at the things that you were claiming were done ...

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