In re Apollo H.V.A.C. Corp.
| Decision Date | 30 July 2021 |
| Docket Number | Adv. Pro. 20-08160-AST,19-76981-AST |
| Parties | In re: Apollo H.V.A.C. Corporation fdba Apollo Air Conditioning Debtor Allan B. Mendelsohn, as Trustee of the Estate of Apollo H.V.A.C. Corporation, fdba Apollo Air Conditioning, as trustee of the Trust Created for work performed at 461 West 34th Street, New York, New York, Section 732, Lot 1 Plaintiff, v. Atria Builders, L.L.C., 34-10 Development LLC, and “John Doe One” Through “John Doe Ten, ” Defendants. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Eastern District of New York |
ORDER ON PARTIAL MOTION TO DISMISS
On September 30, 2020, Allan B. Mendelsohn (the "Trustee") in his capacity as trustee of the Estate of Apollo H.V.A.C. Corporation, fdba Apollo Air Conditioning (the "Debtor"), filed a complaint asserting fourteen causes of action (the "Complaint"). These claims revolve around foreclosing a mechanic's lien filed against the property located at 461 West 34th Street, New York, New York and known as Block 732, Lot 1 (the "Property"), and to recover monies allegedly owed for work, labor, and services provided to the Property.
The Defendants are Atria Builders, LLC ("Defendant Atria"), as contractor (the "Contractor"), and 34-10 Development LLC ("Defendant 34-10"), as owner of the Property (the "Owner") (collectively "Defendants"). In lieu of an answer, Defendants filed a motion to dismiss most but not all of Plaintiff's claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and Rule 7012 of the Federal Rules of Bankruptcy Procedure (the "MTD"). [Dkt. 7; Dkt. 9; Dkt. 15].
After due deliberation and for the reasons to follow Plaintiff's complaint is dismissed as to Count III (Quantum Meruit); Count IV (Turnover); Count IX through X (Actual Fraudulent Conveyance); Count XI (Attorneys' Fees); Count XII (Unjust Enrichment); Count XIII (Promissory Estoppel); and Count XIV (Unconstitutional Taking). The balance of the MTD is denied.
This adversary proceeding is brought pursuant to Rule 7001 of the Federal Rules of Bankruptcy Procedure. The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157 and 1334. This action is a core proceeding, pursuant to § § 157 (b)(2)(E), (H). Venue is properly placed in the court and is consistent with 28 U.S.C. § 1409 as it relates to a chapter 7 case currently pending before this Court.
Pursuant to Federal Rule of Civil Procedure 12(b)(6), as incorporated by Federal Rule of Bankruptcy Procedure 7012, to survive a motion to dismiss under Rule 12(b)(6), the Complaint "must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). A claim to relief is plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. The plausibility standard is not akin to a "probability requirement," however it does ask for more than a sheer possibility that a defendant has acted unlawfully. Id. Conclusory allegations are not entitled to credit. Ashcroft, 556 U.S. at 686. All adequately plead facts are presumed to be true and all reasonable inferences therefrom are drawn in favor or the Trustee.
The Debtor was formed in or about June 1992. Debtor operated a heating ventilation and air conditioning company for many years. Debtor's business focused on two main activities (1) acting as a sub-contractor on certain projects to install heating, ventilation, and air conditioning systems in and around Long Island and the greater New York City area; and (2) performing service and maintenance on its installed systems. While Debtor's business was divided into these two distinct categories, it operated as one corporate entity. [Dkt. Item 1; ¶ 12].
For reasons not germane to this dispute, Debtor filed for chapter 7 bankruptcy on October 10, 2019.
The Trustee commenced this adversary on September 30, 2020.
The Trustee alleges that on or about and between June 6, 2016 and August 29, 2018, the Debtor, at the special insistence and request of Defendant Atria as Contractor, and with the knowledge and consent of Defendant 34-10 as Owner, provided all labor and materials necessary to install an HVAC system and related construction services at the Property, for an agreed upon price of $1, 249, 220.90. Despite the fact that the labor and materials were furnished for improvement of the Property, the Trustee alleges that Defendants failed to pay the $1, 249, 220.90 despite demand for payment having duly been made. [Dkt. Item 1; ¶ 12-15].
On or about December 20, 2018, within eight months after providing the last item of labor and materials, Debtor filed a Notice of Mechanic's Lien (the "Mechanic's Lien") in the Office of the Clerk of the County of New York, in proper form, in the amount of $1, 249, 220.90. The Mechanic's Lien was duly filed and docketed. [Dkt. Item 1; ¶ 16; Exhibit A]. The Mechanic's Lien was served upon the Contractor and Owner pursuant to Section 11 of the Lien Law, and proof of service was filed with the Clerk of New York County. [Dkt. Item 1; ¶ 17; Exhibit B].
On or about December 16, 2019, Debtor filed an Extension of Notice of Mechanic's Lien, extending the Mechanic's Lien an additional year, through and including December 16, 2020. [Dkt. Item 1; ¶ 18; Exhibit C]. Debtor's Mechanic's Lien has not been paid, cancelled, or discharged, and no other action or proceeding at law or in equity has been brought by or no behalf of Debtor for its foreclosure. [Dkt. Item 1; ¶ 19].
The Trustee's first cause of action seeks to foreclose upon the Mechanic's Lien. The Trustee's second cause of action, in the alternative, seeks to collect the unpaid amounts owed to Debtor. Defendants have not sought dismissal of either Count I or Count II.
While Defendants do seek to dismiss Counts III through XIV, the Trustee has not responded to Defendants' request to dismiss his claims for Quantum Meruit (Count III); Unjust Enrichment (Count XII); Promissory Estoppel (Count XIII); and Unconstitutional Taking of Property under the U.S. and New York State Constitutions (Count XIV). Due to the similarity of claims III, XII and XIII, and the lack of a response those will be discussed together.
In his quantum meruit claim, the Trustee alleges that Defendants knew that Debtor provided labor and materials, that Debtor expected payment thereof, and although payment has been demanded, Defendants have failed to pay Debtor the agreed upon value. In his unjust enrichment claim, the Trustee alleges Defendants have received a $1, 249, 220.90 windfall while creditors of the estate have been left without sufficient assets from which their claims may be satisfied. In his promissory estoppel claim, the Trustee alleges Debtor reasonably relied upon Defendants and the promises made by their authorized agents to pay for the work performed by Debtor.
Quantum meruit is rooted in "quasi-contract" and may only apply in the absence of an express agreement. See Bald Hill Builders, LLC. v. 2138 Secuttle Hole Rd. Realty, LLC, 2017 WL 3668769 at *4 (E.D.N.Y. 2017) (citing Beth Israel Med. Ctr. v. Blue Cross and Blue Shield of N.J., 448 F.3d 573, 586 (2d. Cir. 2006)). The existence of an express, undisputed agreement governing the same subject matter precludes recovery in quantum meruit. See Smith v. Mikki More, LLC, 21 F.Supp.3d 276, 283 (S.D.N.Y. 2014). Accordingly, in these circumstances a quantum meruit claim should be dismissed as "duplicative" of an ancillary breach of contract claim. See Bald Hill Builders, 2017 WL 3668769 at *4-5.
Unjust enrichment does not require the performance of any wrongful act by the one enriched; rather, generally, the requirement is that a party hold property under such circumstances that in equity and good conscience he ought not to retain it. See In re Moyer Group, Inc. 586 B.R. 401, 408 (Bankr. S.D.N.Y. 2018).
A claim for promissory estoppel under New York law arises out of breached promises in circumstances where it is fair to hold the promisor to the terms of his promise. See In re Cairns & Associates, Inc., 372 B.R. 637, 658 (Bankr. S.D.N.Y. 2007).
Claims for unjust enrichment and promissory estoppel cannot be stated and should be dismissed as "duplicative" where a valid contract exists and a claim for breach of contract is already asserted based on the same conduct. See iSentium, LLC V. Bloomberg Fin. L.P., 2018 WL 6025864 at *4-5 (Bankr. S.D.N.Y. 2018).
Here, Trustee is asserting a breach of contract claim and alleges that an express written contract between Defendant Atria and Debtor governs Debtor's work. [Dkt. 1; ¶ 21-23]. The contract between the parties was attached to the Declaration filed by Defendants' counsel in support of the MTD (the "Contract"). [Dkt. 8; Exhibit A]. Neither side disputes the existence or validity of the Contract.
Therefore, because the quantum meruit, unjust enrichment, and promissory estoppel claims are for nonpayment of the same services governed by the Contract, and thus are the subject of the Trustee's breach of contract claim, Claims III, XII, and XIII are precluded and should be dismissed.
The Trustee seeks to recover the value of services transferred to the Defendants, alleging claims of constructive fraudulent transfers pursuant to New York Debtor and Creditor Law ("NYDCL") Sections 273, 275 and 278, and ...
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