Pennoni Assocs. v. Phx. Design

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2022 NY Slip Op 33079(U)

PENNONI ASSOCIATES, INC., Plaintiff, v. PHOENIX DESIGN, LLC D/B/A PHOENIX DESIGNAND DEVELOPMENT, JAMES FRANCIS AND JOHANNA FRANCES A/K/A JOHANNA M.L. FRANCIS, Defendants.

Index No. 511583/2015

Supreme Court, Kings County

September 9, 2022

Unpublished Opinion

DECISION AFTER TRIAL

Debra Silber, Judge

Plaintiff Pennoni Associates Inc. commenced this action against defendants Phoenix Design, LLC d/b/a Phoenix Design and Development (Phoenix), James Francis (James) and Johanna Francis a/k/a Johanna M.L. Francis (Johanna) by electronically filing a summons and complaint on September 22, 2015. The complaint asserts that plaintiff is an engineering/surveying company that was hired in 2008 by Phoenix (a construction/renovation contractor) for professional services; Phoenix agreed to pay plaintiff its usual rate pursuant to purchase orders and invoices. The pleading also asserts that James and Johanna are principals of Phoenix. Johanna denied this and averred that she has her own business. Next, plaintiff claims that by September 9 2009, Phoenix owed plaintiff the principal balance of $217,574.09, and to continue to work for defendants plaintiff asked Phoenix to enter into a letter agreement with personal guaranties from James and Johanna.

This agreement, the pleading continues, required Phoenix to make two payments, in September and November of 2009, and then to continue making monthly payments until the debt was paid in full by August 31, 2010. The agreement further states that any balance owed on August 31, 2010 would be satisfied by a balloon payment on that date. Plaintiff asserts that Phoenix made nine payments but, as of August 31, 2010, the principal balance of $202,167.00 remained, and Phoenix failed to make any balloon payment on that date. Moreover, plaintiff contends, the subject agreement provided that 6% interest per year would accrue on any unpaid sum. Also, plaintiff asserts that the subject agreement was personally guaranteed by Johanna and James. The complaint concludes by asserting that defendants are liable for the principal sum of $202,167.00 plus 6% interest per year from August 31, 2010. Lastly plaintiff claims that defendants are liable pursuant to three causes of action: breach of contract, quantum meruit and unjust enrichment.

The 2009 agreement is dated September 9, 2009, and was attached as Exhibit A to the complaint. It is typed on Pennoni stationery, and is signed by Richard Roberts for plaintiff, by James Francis as Managing Director of Phoenix and again "personally," and by Johanna Francis "personally". There is an addition in handwriting, which was initialed by Mr. Roberts. It states, "In event there is an accounting error, it will be remedied." This document is not solely addressed to past bills due. Paragraph 5 states "For all future engineering services provided by Pennoni, Phoenix will provide Pennoni with a list of requested services. Pennoni will provide an estimate of costs for the services for approval by Phoenix prior to commencement. Phoenix will pay 50% of the fee up front and the remaining 50% upon completion of the services." Paragraph 6 states "Pennoni's fees will be personally guaranteed by you and Johanna ML Francis" [emphasis added].

Defendants, initially represented by the law firm Goldberg Weprin Finkel Goldstein LLP (GWFG), interposed an answer on January 21, 2016. The answer claims to be on behalf of Johanna "herself and on behalf of Phoenix Design LLC and James Francis pursuant to a certain indemnification agreement[.]" The answer contains a general denial and asserts affirmative defenses common to contract actions.

Discovery proceeded for about a year. However, in early 2017, GWFG filed an order to show cause (MS #2) seeking to be relieved as counsel for Phoenix and James Francis. The order to show cause also sought an order allowing Johanna to amend her answer and assert cross claims. While that motion was pending, James (represented by new counsel before GWFG was relieved, the Law Office of Arthur A. Hirschler) cross-moved (MS #4) for an order dismissing the action for lack of personal jurisdiction and disqualifying GWFG from representing Johanna due to a conflict of interest. In addition, plaintiff cross-moved (MS #3) for an order for either an extension of time to serve James or to have the service upon him deemed sufficient nunc pro tunc.

By order dated July 19, 2017 (Doc 56), another justice of this court issued one order resolving all three motions. She granted the motion of GWFG solely to the extent that GWFG was relieved from representing James, apparently forgetting about Phoenix, but otherwise denied the motion. This court notes that a motion to be relieved is not usually accompanied by a motion to amend the answer of the party which the firm is not seeking to be relieved for. It is noted that you cannot serve a cross claim on a defendant who has not been served with the summons and complaint. Plaintiff's motion, in requesting more time to serve him, acknowledged that he had not been served. The order says that other than relieving the firm as counsel for James Francis, the motion was "in all other respects, denied." Thus, GWFG was not relieved as counsel for Phoenix. The court also granted James' cross motion to the extent that GWFG was disqualified from representing Johanna, but otherwise denied James' cross motion. Lastly, the court granted plaintiff's motion for additional time to serve James, stayed the case for sixty days to allow Johanna and James time to retain new counsel, and extended the note of issue deadline. James retained Kravet & Vogel LLP, and they acknowledged service of the summons and complaint on November 1, 2017 (Doc 72). The firm then filed a Notice of Substitution of Counsel for Phoenix (Doc 84) which states that they were substituted for GWFG.

Subsequently, James electronically filed an amended answer with a cross claim against Johanna (Doc 86), dated December 18, 2017, based on the allegation that a 2015 agreement that settled certain claims between them regarding the ARC Project required her to indemnify him against claims by (among other creditors) plaintiff herein. As nobody objected or rejected his answer, combined with the prior order which determined that James Francis had not been served with the summons and complaint, and granted plaintiff more time to serve him, the prior answer filed by GWFG on James Francis' behalf became a nullity. Discovery and motion practice resumed. Johanna retained Dimitri L. Karapelou, Esq., as her new attorney. The note of issue, requesting a non-jury trial, was electronically filed on April 19, 2018. James moved for summary judgment and plaintiff cross-moved for summary judgment and discovery sanctions against James. By order dated May 18, 2018, another Justice of this court denied both motions for summary judgment (but directed James to appear for deposition). Subsequently, plaintiff, James and Johanna separately moved for leave to reargue the summary judgment motions; these motions were denied by the court's order dated September 16, 2019.

Trial of this action began on November 13, 2019 and continued on January 7, 2020. During the COVID-19 pandemic, trial was adjourned at counsel's request, and then continued remotely on August 4, 2020, August 5, 2020, November 24, 2020, March 10, 2021, May 25, 2021, May 27, 2021, and June 1, 2021. The court heard testimony from Richard Roberts on behalf of plaintiff, James on his own behalf and on behalf of Phoenix, Kevin Nash, a principal of GWFG and the escrow agent of an escrow account which was funded to pay the specified creditors (including plaintiff) of a building venture (referred to as ARC or The ARC Project) and Ted Donovan, another GWFG attorney, who prepared the order to show cause seeking leave to withdraw as counsel for Phoenix and James. Many documents were introduced into evidence, chief among them are the subject letter agreement proffered by plaintiff, an agreement dated February 10, 2015, among James, Johanna and other entities and natural persons, and many invoices/bills related to plaintiff's services allegedly rendered to defendants.

Several notable events occurred during the trial. First, plaintiff withdrew its quantum meruit and unjust enrichment claims, and instead agreed to proceed solely with the breach of contract claim. Also, plaintiff stated on the record that it was seeking only $195,000.00 in damages, and not the amount stated in the complaint. Moreover, plaintiff settled all claims against Phoenix and James for the sum of $71,000.00; plaintiff indicated that its only remaining claim is against Johanna for the balance of $124,000.00 ($195,000 - 71,000). Thus, the only two claims tried were Pennoni's claim against Johanna for her alleged breach of the personal guaranty and James' cross claim against Johanna for indemnification. While the cross-claim states that it is also asserted on behalf of Phoenix, this court has not considered it to be a valid claim by Phoenix, as this entity did not challenge service, and answered the complaint. GWFG was not relieved as its attorneys: the firm was substituted by a different firm. Without leave of court, Phoenix had no permission to amend its answer or to assert a cross claim.

Additionally during virtual proceedings on August 5, 2020, the court became aware that Dimitri L. Karapelou, Esq., did not have (as required by Judiciary Law § 470) a physical office within the State of New York. The court disqualified him as Johanna's counsel, and Joanna was given the opportunity to obtain new counsel. She did so, and retained Domenick Napoletano, Esq., as counsel. However, on November 17, 2020, Domenick Napoletano moved to be relieved as counsel for Johanna,...