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Luckow v. RBG Design-Build, Inc.

Supreme Court of New York, Third Department

December 28, 2017

ROBERT LUCKOW et al., Appellants- Respondents,
v.
RBG DESIGN-BUILD, INC., Respondent- Appellant, and CHARLES ROSE et al., Respondents.

          Calendar Date: November 16, 2017

          Picciano & Scahill, PC, Bethpage (Robert J. Lally of counsel), for appellants-respondents.

          Norton & Christensen, Goshen (Harold M. Pressberg of counsel), for RBG Design-Build, Inc., respondent-appellant, and Charles Rose, respondent.

          Wilson Elser Moskowitz Edelman & Dicker LLP, White Plains (James F. O'Brien of counsel), for Robert E. Zampolin & Associates, respondent.

          Levy Sonet & Siegel LLP, New York City (Steven G. Sonet of counsel), for Reger Designs, Inc. and another, respondents.

          Before: McCarthy, J.P., Lynch, Devine, Mulvey and Aarons, JJ.

          MEMORANDUM AND ORDER

          McCarthy, J.P.

         Cross appeal from an order of the Supreme Court (Gilpatric, J.), entered January 5, 2017 in Ulster County, which, among other things, granted motions by defendants Reger Designs, Inc., Patricia Reger and Robert E. Zampolin & Associates for summary judgment dismissing the complaint against them.

         In April 2007, plaintiff Stefanie Luckow entered into a design-build agreement with defendant RBG Design-Build, Inc. to provide turnkey design and building services for construction of a large ski house. The design-build agreement provides that defendant Robert E. Zampolin & Associates (hereinafter RZA) would perform all architectural services. A few months later, Stefanie Luckow entered into a construction agreement with RBG to build the residence in the Town of Windham, Greene County for $4, 460, 000 and within 14 months. The scope of RBG's work was later expanded to include interior design services. The interior design agreement between Stefanie Luckow and RBG provided that defendant Reger Designs, Inc. (hereinafter RDI) would "perform all interior design services under the management and administration of [RBG]." Plaintiff Robert Luckow has no ownership interest in the property and is not a party to any of the contracts related to the property, but acted as an agent for Stefanie Luckow, his daughter, on all aspects of the construction project. Stefanie Luckow terminated the construction agreement in July 2010, a decision allegedly reached after months of communications and meetings with RBG by her family and representatives notifying RBG of problems that were not addressed.

         Plaintiffs commenced this action in March 2011. RBG and its president, defendant Charles Rose, moved for summary judgment dismissing Robert Luckow as a plaintiff, and to dismiss the causes of action asserted against those two defendants on the ground that the pleading fails to state causes of action or, alternatively, for summary judgment. RBG and Rose further requested that Supreme Court grant them their reasonable costs and counsel fees. RZA moved for summary judgment dismissing the complaint against it. RDI and its president, defendant Patricia Reger, similarly moved for summary judgment. Supreme Court granted summary judgment dismissing Robert Luckow as a plaintiff and dismissing all causes of action against all defendants, except the first cause of action against RBG alleging breach of contract. Plaintiffs appeal, and RBG cross-appeals.

         It is undisputed that neither plaintiff entered into a contract with RZA nor RDI. Rather, RBG entered into contracts with each of those entities, as would be expected in a turnkey project. "In turnkey or design-build construction projects, an owner contracts with one entity to both design and build the project and the turnkey builder is responsible for every phase of the construction from final design through subcontracting, construction, finishing, and testing. The design-builder generally cannot shift liability and is the single point of responsibility under a design-build contract, because" the design-builder is responsible for all phases of construction, including "the responsibility for holding the contracts with its trade contractors" (797 Broadway Group, LLC v Stracher Roth Gilmore Architects, 123 A.D.3d 1250, 1251 [2014] [internal quotation marks, brackets, emphasis and citations omitted].

         Generally, a party may not assert a cause of action for breach of contract against a person or entity with whom it is not in privity (see Spectrum Painting Contrs., Inc. v Kreisler Borg Florman Gen. Constr. Co., Inc., 64 A.D.3d 565, 576 [2009]; IMS Engrs.-Architects, P.C. v State of New York, 51 A.D.3d 1355, 1357 [2008], lv denied 11 N.Y.3d 706 [2008]). Without a contractual relationship and the resulting privity, plaintiffs could proceed against RZA or RDI only if plaintiffs were third-party beneficiaries of RBG's contract with those entities or had the functional equivalent of privity (see Lake Placid Club Attached Lodges v Elizabethtown Bldrs., 131 A.D.2d 159, 161 [1987]). "[O]rdinarily, construction contracts are not construed as conferring third-party beneficiary enforcement rights" (id. at 162; see Port Chester Elec. Constr. Corp. v. Atlas, 40 N.Y.2d 652, 656 [1976]).

         To prevail as third-party beneficiaries, plaintiffs had to establish "'(1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for [their] benefit, and (3) that the benefit to [them] is sufficiently immediate... to indicate the assumption by the contracting parties of a duty to compensate [them] if the benefit is lost'" (Mandarin Trading Ltd. v Wildenstein, 16 N.Y.3d 173, 182 [2011], quoting Mendel v Henry Phipps Plaza W., Inc., 6 N.Y.3d 783, 786 [2006]; accord Saratoga Schenectady Gastroenterology Assoc., P.C. v Bette & Cring, LLC, 83 A.D.3d 1256, 1257 [2011]). The existence of the relevant contracts (one between RBG and RZA, and one between RBG and RDI) is not disputed. There is no indication that the parties to those underlying contracts intended to benefit Robert Luckow. Those contracts were entered into for the purpose of completing the construction project on Stefanie Luckow's property, so they were intended for her benefit. Nevertheless, there is no indication that RZA or RDI assumed any duty to compensate Stefanie Luckow if any benefit from those contracts was lost. Indeed, the turnkey contract between Stefanie Luckow and RBG indicates that RBG bears the responsibility for its subcontractors and their potential errors or failure to perform (see 797 Broadway Group, LLC v Stracher Roth Gilmore Architects, 123 A.D.3d at 1251). Therefore, plaintiffs cannot recover against RZA or RDI under a third-party beneficiary theory. For the same reasons, to the extent that the concept of functional equivalent of privity is applicable to any of the causes of action, plaintiffs did not have the functional equivalent of privity with RZA or RDI. Accordingly, Supreme Court properly granted summary judgment dismissing the complaint against those parties.

         Similarly, Supreme Court properly granted summary judgment to Reger. Plaintiffs alleged that Reger wrongfully accepted payments for services that were not adequately performed and participated in a fraud conducted by RBG. Reger was not personally a party to any contract, but signed on behalf of RDI for its contract with RBG and performed interior design services in her capacity as an agent for RDI. Moreover, the record lacks factual information supporting ...


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