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L.L.C. v. King Sha Group, Inc.

Supreme Court of New York, New York County

July 2, 2013

EAST 77 OWNERS CO, L.L.C., Plaintiff,
v.
KING SHA GROUP, INC., S.T.A. Parking Corp., Golden Vale Construction Corp., Hawk Consulting Services, Inc., and Certified Testing Laboratories, Inc., Defendants. King Sha Group, Inc., Third-Party Plaintiff,
v.
Richard J. Zaloum, P.E., Third-Party Defendant. S.T.A. Parking Corp., Third-Party Plaintiff,
v.
Richard J. Zaloum, P.E., Third-Party Defendant. S.T.A. Parking Corp., Third-Party Plaintiff,
v.
Golden Vale Construction Corp., Third-Party Defendant. No. 603340/07.

Editorial Note:

This decision has been referenced in a table in the New York Supplement.

Simon Block of Quinn MaCabe LLP, for Plaintiff.

Russell M. Wolfson of Baritz & Colman LLP, for STA.

MARTIN SCHOENFELD, J.

BACKGROUND

Plaintiff, East 77 Owners CO, L.L.C, owns the apartment building at 436 East 77th Street, New York, N.Y. (" the apartment building" or " building" ). At all times relevant here, the property adjacent to Plaintiff's apartment building at 434 East 77th Street was a parking garage (" the parking garage" ) owned by Defendant, S.T.A. Parking Corp. (STA). In late 2004, STA began construction work on the parking garage, including excavation to create a sub-basement. It hired as its general contractor Defendant King Sha Group, Inc. (King Sha) to do this work. King Sha's subcontractor for foundation, underpinning and concrete work was Defendant Golden Vale Construction Corp. (Golden Vale).

On March 8, 2005, the New York City Department of Buildings (DOB) issued a Notice of Violation stating that STA was in violation of the Administrative Code of New York City § 27-1031(b)(1) for failure to properly carry out excavation work at more than 10 feet below grade and to protect the adjoining property. Affidavit of Allen F. London, sworn to 9/27/12 Exhibit I. The citation stated that STA excavated to 16 feet, and in doing so, failed to protect adjacent structures resulting in " substantial cracks & separation on various floors of adjacent properties." Id. DOB ordered STA " to stop all excavation work. Immediately stabilize & protect adjacent structures." Id. Again on March 18, 2005, DOB issued a Notice of Violation of § 27-1031(b)(1) indicating that there was " major structural damage to adjoining structure." Affidavit of Allen F. London, Exhibit J. It ordered STA to " Make safe immediately!" Id.

STA challenged this second violation in an administrative hearing held on June 30, 2005. After hearing evidence, the Administrative Law Judge found that the lack of structural support created dangerous conditions and that the work that was done constituted " unsafe excavation." Affidavit of Allen F. London, Exhibit K. The Administrative Law Judge upheld the Notice of Violation. Id.

Beginning in April 2005, due to the structural damage caused by the excavation of the garage, Plaintiff was forced to commence vacating the apartment building, which was fully rented at the time. As a result, Plaintiff had to hire counsel to aid in the process of buying out and relocating tenants. There were ten rental units in the building bringing in $16,116.48 per month. The building was completely vacated by December 2005 and remained vacant for four years until December 2009.

In addition, Plaintiff hired engineers and consultants to determine the damage to the building. Between 2005 and 2006 Plaintiff hired experts to make emergency repairs, which included underpinning, shoring and support work on the apartment building.

Despite these efforts, extensive work on the building was required to rebuild structural elements. Settlement of the building had caused, among other things, beams to twist, brick walls to become destabilized, and windows to become misaligned. Plaintiff relied on various consultants including members of engineering companies to evaluate the building and to recommend further remedial measures. By early 2007 Plaintiff's engineers had prepared repair plans. These were sent out for contract bids by Spring 2007. Work began on the building around November of 2007. The work done included adjusting joists, replacing floors, and repairing plumbing. In total, between 2005 and 2010, Plaintiff incurred more than $2 million in construction costs.[1]

Plaintiff asserts that to finance this work it had to take out a $2 million loan in 2010, and as a result incurred $484,290.81 in closing costs and interest. In addition, because of the damage to the building, Plaintiff's insurance company did not renew its coverage. The replacement insurance coverage Plaintiff was able to procure during the period the building was vacant and under construction cost substantially more than its prior costs. Plaintiff claims to have incurred $551,953.18 in excess premium costs during that time.

Plaintiff received $800,093.97 from its insurer Interstate Insurance Company (Interstate) for property damage and lost rental income under its first party insurance program. According to Plaintiff, in April 2011 it entered into an agreement with Interstate as a means of settling its claims against the insurer, in which Interstate assigned its rights related to the damage caused by the excavation to Plaintiff, including subrogation rights against STA. Plaintiff, however, has not provided this agreement to the Court, explaining that it is subject to a confidentiality provision.

LEGAL HISTORY

The legal history of this case is long and complex. Plaintiff filed suit on October 11, 2007 against STA, its general contractor King Sha, the subcontractor for foundation work, Golden Vale, and two other entities. STA asserted cross claims against Golden Vale for indemnification and contribution, alleging that it relied completely on Golden Vale's expertise for the foundation, excavation and underpinning work. Golden Vale failed to answer the complaint and cross claims.

In March 2010, Plaintiff moved for a default judgment against Golden Vale. However, this motion was denied by Justice Kenny as untimely, pursuant to CPLR 3215(c), and Plaintiff's case against Golden Vale was dismissed.

On July 2, 2010, STA commenced a third party action against Golden Vale for indemnification and contribution. Golden Vale again failed to answer, and on September 12, 2011 the court found Golden Vale had defaulted, and ordered an inquest for an assessment of damages. STA, however, did not pursue ...


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