KOVALENKO v. BHATTI GENERAL CONTRACTING DEVELOPMENT LLC (2025)

DECISION & ORDER

In an action, inter alia, to recover damages for breach of contract, the defendants appeal from an order of the Supreme Court, Kings County (Rupert V. Barry, J.), dated August 9, 2023.  The order, insofar as appealed from, denied those branches of the defendants’ motion which were pursuant to CPLR 3211(a)(7) to dismiss the complaint insofar as asserted against the defendant Farhan Ali Bhatti and the first, second, fourth, fifth, eighth, and ninth causes of action insofar as asserted against the defendant Bhatti General Contracting & Development, LLC.

ORDERED that the order is modified, on the law, by deleting the provision thereof denying those branches of the defendants’ motion which were pursuant to CPLR 3211(a)(7) to dismiss the second, fifth, eighth, and ninth causes of action, and substituting therefor a provision granting those branches of the motion;  as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.

The plaintiff commenced this action against the defendant Bhatti General Contracting & Development, LLC (hereinafter BGCD), and its principal, the defendant Farhan Ali Bhatti.  The plaintiff alleged, inter alia, that the defendants breached a construction contract and asserted causes of action, among other things, to recover damages for fraudulent inducement (first cause of action), a violation of General Business Law § 349 (second cause of action), unjust enrichment (fourth cause of action), negligence (fifth cause of action), breach of the implied covenant of good faith and fair dealing (eighth cause of action), and breach of the implied warranty of workmanlike performance (ninth cause of action).

The defendants moved, inter alia, pursuant to CPLR 3211(a)(7) to dismiss the complaint insofar as asserted against Bhatti and the first, second, fourth, fifth, eighth, and ninth causes of action insofar as asserted against BGCD. The Supreme Court denied those branches of the defendants’ motion, and the defendants appeal.

Generally, a plaintiff seeking to pierce the corporate veil must show (1) that the owners exercised complete domination of the corporation or limited liability company in respect to the transaction attacked, and (2) that such domination was used to commit a fraud or wrong against the plaintiff that resulted in the plaintiff's injury (see Louis Monteleone Fibres, Ltd. v. Hudson Baylor Brookhaven, LLC, 228 A.D.3d 641, 644, 214 N.Y.S.3d 390).  The plaintiff must adequately allege the existence of a corporate obligation and that the defendant exercised complete domination and control over the corporation or limited liability company and abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice (see id.).

Here, in the complaint, the plaintiff sufficiently alleged that Bhatti dominated BGCD and that the defendants engaged in acts amounting to an abuse of the corporate form to perpetrate a wrong or injustice against the plaintiff (see Cortlandt St. Recovery Corp. v. Bonderman, 31 N.Y.3d 30, 46–47, 73 N.Y.S.3d 95, 96 N.E.3d 191;  Gold v. 22 St. Felix, LLC, 219 A.D.3d 588, 590, 195 N.Y.S.3d 207).  Accordingly, the Supreme Court properly denied that branch of the defendants’ motion which was to dismiss the complaint insofar as asserted against Bhatti on the ground that he could not be held personally liable.

To prevail on a cause of action alleging fraudulent inducement, “it must be shown that there was a knowing misrepresentation of material present fact, which [was] intended to deceive another party and induce that party to act on it, resulting in injury” (New Hackensack Realty, LLC v. Lawrence Dev. Realty, LLC, 226 A.D.3d 799, 801, 210 N.Y.S.3d 129 [internal quotation marks omitted]).  “Where a cause of action ․ is based upon ․ fraud, ․ the circumstances constituting the wrong shall be stated in detail” (CPLR 3016[b];  see Robles v. Patel, 165 A.D.3d 858, 859, 86 N.Y.S.3d 186).

Here, the complaint stated a viable fraudulent inducement cause of action by alleging that the defendants induced the plaintiff to enter into the contract by misrepresenting facts regarding their licenses and their familiarity and compliance with New York regulatory requirements and construction and safety codes.  Accordingly, the Supreme Court properly denied that branch of the defendants’ motion which was to dismiss the first cause of action, alleging fraudulent inducement.

“The elements of a cause of action to recover [damages] for unjust enrichment are (1) the defendant was enriched, (2) at the plaintiff's expense, and (3) that it is against equity and good conscience to permit the defendant to retain what is sought to be recovered” (Berkovits v. Berkovits, 190 A.D.3d 911, 917, 141 N.Y.S.3d 84 [internal quotation marks omitted];  see Travelsavers Enters., Inc. v. Analog Analytics, Inc., 149 A.D.3d 1003, 1007, 53 N.Y.S.3d 99).  “Where the existence of a contract is in dispute, the plaintiff may allege a cause of action to recover [damages] for unjust enrichment as an alternative to a cause of action alleging breach of contract” (El–Nahal v. FA Mgt., Inc., 126 A.D.3d 667, 668, 5 N.Y.S.3d 201;  see CPLR 3014;  F & R Goldfish Corp. v. Furleiter, 210 A.D.3d 643, 646, 178 N.Y.S.3d 87).  Where a defendant does “not have a license to perform home improvements pursuant to ․ Administrative Code of City of New York § 20–387 at the time the contract was entered into and the work was performed[,] ․ the contract [is] unenforceable” (San Sung Korean Methodist Church of N.Y. v. Professional USA Constr. Corp., 14 A.D.3d 501, 502, 789 N.Y.S.2d 65[internal quotation marks omitted).

Here, in the complaint, the plaintiff alleged that although the plaintiff paid the defendants the sum of $260,000 for a home improvement project, the defendants failed to adequately complete the project.  The plaintiff also alleged that the defendants were unjustly enriched at the plaintiff's expense by failing to give the plaintiff a refund for the incomplete portion of the construction project.  Since the plaintiff alleged that the defendants were not licensed, which may render the contract unenforceable, the existence of the purported contract does not preclude the plaintiff from asserting an unjust enrichment cause of action (see CPLR 3014;  Tzu Yen Cheung v. Dolar Shop Rest. Group, LLC, 229 A.D.3d 738, 740, 216 N.Y.S.3d 616;  F & R Goldfish Corp. v. Furleiter, 210 A.D.3d at 646, 178 N.Y.S.3d 87).  Accordingly, the Supreme Court properly denied that branch of the defendants’ motion which was to dismiss the fourth cause of action, alleging unjust enrichment.

General Business Law § 349(a) provides that “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are ․ unlawful” (see Singh v. City of New York, 40 N.Y.3d 138, 147, 195 N.Y.S.3d 429, 217 N.E.3d 1).  “To establish a cause of action under General Business Law § 349, a plaintiff must allege that:  (1) the defendant's conduct was consumer-oriented;  (2) the defendant's act or practice was deceptive or misleading in a material way;  and (3) the plaintiff suffered an injury as a result of the deception” (Abraham v. Torati, 219 A.D.3d 1275, 1280, 197 N.Y.S.3d 235;  see General Business Law § 349[h];  Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP v. Matthew Bender & Co., Inc., 37 N.Y.3d 169, 176, 150 N.Y.S.3d 79, 171 N.E.3d 1192).  “As a threshold matter, plaintiffs claiming the benefit of the statute ․ must charge conduct of the defendant that is consumer-oriented” (Tiffany Tower Condominium, LLC v. Insurance Co. of the Greater N.Y., 164 A.D.3d 860, 863, 84 N.Y.S.3d 167 [alterations and internal quotation marks omitted];  see Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20, 25, 623 N.Y.S.2d 529, 647 N.E.2d 741).  “The conduct need not be repetitive or recurring but [the] defendant's acts or practices must have a broad impact on consumers at large;  private contract disputes unique to the parties ․ would not fall within the ambit of the statute” (New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 320, 639 N.Y.S.2d 283, 662 N.E.2d 763 [alteration and internal quotation marks omitted];  see Sakandar v. American Tr. Ins. Co., 231 A.D.3d 759, 760, 219 N.Y.S.3d 391).  “A single shot transaction, which is tailored to meet the purchaser's wishes and requirements, does not, without more, constitute consumer-oriented conduct for the purposes of [General Business Law § 349]” (Katsorhis v. 718 W. Beech St, LLC, 234 A.D.3d 744, 749, 226 N.Y.S.3d 249 [citations and internal quotation marks omitted];  see New York Univ. v. Continental Ins. Co., 87 N.Y.2d at 321, 639 N.Y.S.2d 283, 662 N.E.2d 763).

Here, in the complaint, the plaintiff failed to allege that the defendants’ conduct was consumer-oriented conduct.  The plaintiff did not allege that the defendants offered their services to the general consuming public or that the defendants’ acts and practices were of a recurring nature and harmful to the public at large (see Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d at 25, 623 N.Y.S.2d 529, 647 N.E.2d 741;  Abraham v. Torati, 219 A.D.3d at 1281, 197 N.Y.S.3d 235).  Rather, even liberally construing the complaint, the plaintiff merely alleged a “single-shot transaction outside the scope of” General Business Law § 349 (Teller v. Bill Hayes, Ltd., 213 A.D.2d 141, 148, 630 N.Y.S.2d 769;  see Eva Chen Fine Jewelry, Inc. v. Recovery Racing IX, LLC, 222 A.D.3d 840, 842, 199 N.Y.S.3d 695;  JP Morgan Chase Bank, N.A. v. Hall, 122 A.D.3d 576, 581, 996 N.Y.S.2d 309).  Accordingly, the Supreme Court should have granted that branch of the defendants’ motion which was to dismiss the second cause of action, alleging a violation of General Business Law § 349.

“ ‘To establish a cause of action sounding in negligence, a plaintiff must establish the existence of a duty on [the] defendant's part to [the] plaintiff, breach of the duty and damages’ ” (Katsorhis v. 718 W. Beech St, LLC, 234 A.D.3d at 747, 226 N.Y.S.3d 249, quoting Davila v. Orange County, 215 A.D.3d 632, 633–634, 187 N.Y.S.3d 261).  “[A] simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated ․ This legal duty must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract” (Kollatz v. KOS Bldg. Group, LLC, 188 A.D.3d 1175, 1178, 137 N.Y.S.3d 491 [internal quotations marks omitted];  see 431 Conklin Corp. v. Rice, 181 A.D.2d 716, 717, 580 N.Y.S.2d 475).  However, a “ ‘legal duty independent of contractual obligations may be imposed by law as an incident to the parties’ relationship’ and ․ several types of defendants—including professionals—can be held liable in tort ‘for failure to exercise reasonable care, irrespective of their contractual duties’ ” (Dormitory Auth. of the State of N.Y. v. Samson Constr. Co., 30 N.Y.3d 704, 711, 70 N.Y.S.3d 893, 94 N.E.3d 456, quoting Sommer v. Federal Signal Corp., 79 N.Y.2d 540, 551, 583 N.Y.S.2d 957, 593 N.E.2d 1365;  see Michael Davis Constr., Inc. v. 129 Parsonage Lane, LLC, 194 A.D.3d 805, 806–807, 149 N.Y.S.3d 118).  “[T]his independent duty has been imposed based on the nature of the services performed and the defendant's relationship with its customer—specifically, where the defendant ‘perform[s] a service affected with a significant public interest [and where the] failure to perform the service carefully and competently can have catastrophic consequences’ ” (Dormitory Auth. of the State of N.Y. v. Samson Constr. Co., 30 N.Y.3d at 711, 70 N.Y.S.3d 893, 94 N.E.3d 456, quoting Sommer v. Federal Signal Corp., 79 N.Y.2d at 553, 583 N.Y.S.2d 957, 593 N.E.2d 1365).

Here, in the complaint, the plaintiff failed to allege a legal duty independent of the breach of contract cause of action (see id.;  298 Humboldt, LLC v. Torres, 197 A.D.3d 1081, 1084, 153 N.Y.S.3d 507;  Kollatz v. KOS Bldg. Group, LLC, 188 A.D.3d at 1179–1179, 137 N.Y.S.3d 491).  Likewise, contrary to the plaintiff's contention, General Business Law § 349, General Business Law article 36–A, and Lien Law article 3–A do not impose an additional standard of care upon New York State contractors.  Accordingly, the Supreme Court should have granted that branch of the defendants’ motion which was to dismiss the fifth cause of action, alleging negligence.

“ ‘Implicit in every contract is a covenant of good faith and fair dealing which encompasses any promise that a reasonable promisee would understand to be included’ ” (25 Bay Terrace Assoc., L.P. v. Public Serv. Mut. Ins. Co., 144 A.D.3d 665, 667, 40 N.Y.S.3d 469, quoting Elmhurst Dairy, Inc. v. Bartlett Dairy, Inc., 97 A.D.3d 781, 784, 949 N.Y.S.2d 115).  An implied covenant of good faith and fair dealing “cause of action must be dismissed if it is merely duplicative of a breach of contract cause of action” (Cortazar v. Tomasino, 150 A.D.3d 668, 670, 54 N.Y.S.3d 89;  see Tiffany Tower Condominium, LLC v. Insurance Co. of the Greater N.Y., 164 A.D.3d at 862, 84 N.Y.S.3d 167).

Here, the eighth cause of action, alleging breach of the implied covenant of good faith and fair dealing, was based on “conduct and [a] resulting injury” that was “identical to that alleged in the breach of contract cause of action” (Cortazar v. Tomasino, 150 A.D.3d at 670, 54 N.Y.S.3d 89;  see Hymowitz v. Nguyen, 209 A.D.3d 997, 1002, 177 N.Y.S.3d 143;  BT Holdings, LLC v. Village of Chester, 189 A.D.3d 754, 759, 137 N.Y.S.3d 458).  Accordingly, the Supreme Court should have granted that branch of the defendants’ motion which was to dismiss the eighth cause of action.

While there is an implied housing merchant warranty “for the sale of a newly constructed home” (Milstein v. Incorporated Vil. of Port Jefferson, 154 A.D.2d 442, 443, 546 N.Y.S.2d 13;  see Caceci v. Di Canio Constr. Corp., 72 N.Y.2d 52, 56, 530 N.Y.S.2d 771, 526 N.E.2d 266), for an alleged breach of a guarantee that renovations would be performed in a certain manner or in a nonnegligent manner, “[n]o warranty attaches to the performance of a service” (Town of Poughkeepsie v. Espie, 41 A.D.3d 701, 706, 840 N.Y.S.2d 600 [internal quotation marks omitted];  see Milau Assoc. v. North Ave. Dev. Corp., 42 N.Y.2d 482, 488, 398 N.Y.S.2d 882, 368 N.E.2d 1247).  Here, the implied warranty does not apply because the contract was for renovations to the plaintiff's current home, not a newly constructed home that was being sold (cf.  Caceci v. Di Canio Constr. Corp., 72 N.Y.2d at 56, 530 N.Y.S.2d 771, 526 N.E.2d 266;  Milstein v. Incorporated Vil. of Port Jefferson, 154 A.D.2d at 442–443, 546 N.Y.S.2d 13).  Accordingly, the Supreme Court should have granted that branch of the defendants’ motion which was to dismiss the ninth cause of action, alleging breach of the implied warranty of workmanlike performance.

In light of our determination, we need not reach the defendants’ remaining contention.

MILLER, J.P., DOWLING, VENTURA and GOLIA, JJ., concur.