World Trade Knitting Mills, Inc. v. Lido Knitting Mills, Inc.

• Decision Date: 20 February 1990
• Citation: 551 N.Y.S.2d 930,154 A.D.2d 99
• Court: New York Supreme Court — Appellate Division
• Parties: WORLD TRADE KNITTING MILLS, INC., et al., Plaintiffs-Respondents, v. LIDO KNITTING MILLS, INC., et al., Defendant-Respondents, Honeywell, Inc., Appellant.

Page 930

551 N.Y.S.2d 930

154 A.D.2d 99

WORLD TRADE KNITTING MILLS, INC., et al., Plaintiffs-Respondents, v. LIDO KNITTING MILLS, INC., et al., Defendant-Respondents, Honeywell, Inc., Appellant.

Supreme Court, Appellate Division,

Second Department.

Feb. 20, 1990.

Hinckley & Silbert, P.C., New York City (Michael B. Sena of counsel; Wickens, Hare, Koches & Cale [Brendan M. Hare and David B. Chaffin] on the brief), for appellant.

Speyer & Perlberg, Melville (Ellen M. Hoffer of counsel), for plaintiffs-respondents.

Leon Traube, New York City, for defendants-respondents.

Before BRACKEN, J.P., and LAWRENCE, EIBER, HARWOOD and BALLETTA, JJ.

BALLETTA, Justice.

The defendant Lido Knitting Mills, Inc. (hereinafter Lido), of which the defendant Bernard Goldglancz is an officer, operates an apparel manufacturing facility at 694 Metropolitan Avenue in Brooklyn. The defendant Honeywell, Inc. (hereinafter Honeywell) is engaged in the business of installing and servicing burglar and fire alarm systems. Lido and Honeywell executed an "Installation and Service Agreement" on May 30, 1978, whereby Honeywell agreed to install and maintain a "central station fire alarm" at Lido's manufacturing facility. The alarm was designed to transmit a signal to Honeywell's monitoring office in the event that Lido's sprinkler system was activated. However, when, on February 15, 1986, a fire occurred at Lido's facility, causing extensive damage to the building and its contents, the alarm system failed to function as intended.

The plaintiffs commenced the instant action alleging that they had delivered certain property "consisting of raw materials to be processed into finished goods" to Lido prior to February 15, 1986, and that this property had been damaged as a result of the fire and the activation of the sprinkler system. The complaint set forth four causes of action against Lido and Goldglancz sounding in negligence and gross negligence, and two causes of action against Honeywell sounding in breach of contract. The plaintiffs alleged that they were third-party beneficiaries of the contract between Lido and Honeywell. Lido and Goldglancz cross-claimed against Honeywell for indemnification and contribution.

Honeywell moved for summary judgment dismissing the complaint insofar as it is asserted against it on the grounds that (1) no triable issues of fact exist since it owed no legal duty to plaintiffs, and (2) it was not liable to the plaintiffs or to the codefendants due to the contract's exculpatory clause, or, alternatively, its liability was limited in any event to $348 according to the limitation of liability provision contained in the contract. In support of the motion, Honeywell claimed that the agreement explicitly negated any intent to confer any contractual rights upon third parties. Hence, Honeywell asserted, the plaintiffs' cause of action against it should be dismissed as a matter of law since the plaintiffs were merely incidental beneficiaries of the contract. Additionally, Honeywell argued that, even if it owed a legal duty to the plaintiffs, their rights were circumscribed by the contract's exculpatory clause or, alternatively, by the liability cap provided therein.

The plaintiffs cross-moved for further discovery, and for leave to serve an amended complaint including an allegation of gross negligence by Honeywell. The plaintiffs' proposed amended complaint would have added a seventh and eighth cause of action against Honeywell alleging, inter alia:

"The aforesaid fire and resulting damages to plaintiff [World Trade Knitting Mills, Inc.] were caused solely through the gross negligence of defendant HONEYWELL, in failing to perform its contractual duties and through its recklessness and wilful acts and omissions".

As to their third-party beneficiary theory, the plaintiffs reiterated their contentions that Honeywell "knew or should have known [they] would rely on [its] representations for fire and sprinkler alarm protection" and claimed that "Honeywell was to perform its services directly for the protection of third party property in the custody of Lido".

In the order appealed from, Supreme Court, Kings County, denied Honeywell's motion for summary judgment without opinion. The court failed to address that branch of the plaintiffs' cross motion which was for leave to serve an amended complaint.

We would reverse insofar as appealed from, grant Honeywell's motion for summary judgment, and dismiss the complaint insofar as it asserted against it and dismiss the cross claim as against it. The plaintiffs have not raised any triable issues of fact relative to their purported status as third-party beneficiaries of the Honeywell-Lido agreement, nor have they presented any question as to whether Honeywell committed any affirmative acts of misfeasance to support their proposed tort claims. In any event, it has not been shown that Honeywell's alleged conduct rose to such a level as to constitute gross negligence; therefore, the plaintiffs' causes of action against Honeywell and the cross claim against it are barred by the exculpatory clause contained in the contract.

It is well established that summary judgment will only be granted if there are no material and triable issues of fact (see, Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 404, 165 N.Y.S.2d 498, 144 N.E.2d 387). Once the moving party has made a prima facie showing of being entitled to summary judgment, the burden shifts to the opposing party to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action (see, Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923, 501 N.E.2d 572). Thus, it is imperative that a plaintiff opposing a defendant's motion for summary judgment "assemble, lay bare and reveal his proofs, in order to show that the matters set up in his [complaint] are real and are capable of being established upon a trial" (DiSabato v. Soffes, 9 A.D.2d 297, 301, 193 N.Y.S.2d 184). However, "only the existence of a bona fide issue raised by evidentiary facts and not one based on conclusory or irrelevant allegations will suffice to defeat summary judgment" (Rotuba Extruders v. Ceppos, 46 N.Y.2d 223, 231, 413 N.Y.S.2d 141, 385 N.E.2d 1068), and mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient ( see, Zuckerman v. City of New York, 49 N.Y.2d 557, 562, 427 N.Y.S.2d 595, 404 N.E.2d 718).

The plaintiffs and Honeywell's codefendants have failed to come forth with any evidentiary proof in admissible form which would justify the denial of Honeywell's motion for summary judgment. At most, they have only set forth conclusory allegations, unsubstantiated assertions, and mere expressions of hope.

First, the plaintiffs' contentions that they were third-party beneficiaries of the contract between Lido and Honeywell must be rejected. This court has adopted the following principles with respect to the law of third-party beneficiaries:

"A third party may sue as a beneficiary on a contract made for his benefit (Lawrence v Fox, 20 NY 268). The intent to benefit a third party must be shown (Port Chester Elec. Constr. Corp. v Atlas, 40 NY2d 652 [389 N.Y.S.2d 327, 357 N.E.2d 983]; Beveridge v New York El. R.R. Co., 112 NY 1 and the benefit must not be merely incidental but immediate to such a degree as to indicate the assumption of a duty to make reparation if the benefit is lost (Associated Flour Haulers & Warehousemen v Hoffman, 282 NY 173 ; Moch Co. v. Rensselaer Water Co., 247 NY 160 . Absent such intent, the third party is merely an incidental beneficiary with no right to enforce the contract (Port Chester Elec. Constr. Corp. v Atlas, supra; Associated Flour Haulers & Warehousemen v Hoffman, supra; Moch Co. v Rensselaer Water Co., supra; Flemington Nat. Bank & Trust Co. [N.A.] v Domler Leasing Corp., 65 AD2d 29 . An incidental beneficiary is a third party who may derive benefit from the performance of a contract though he is neither the promisee nor the one to whom performance is to be rendered (2 Williston, Contracts [3d ed], § 402). While it is not necessary that a third-party beneficiary be identified or even identifiable at the time that the contract is made, he has no right to enforce the contract himself until such time as he is identified (Matter of Associated Teachers of Huntington v Board of Educ., 33 NY2d 229 [351 N.Y.S.2d 670, 306 N.E.2d 791]. A party, claiming to be a third-party beneficiary, has the burden of demonstrating that he has an enforceable right (Flemington Nat. Bank & Trust Co. [N.A.] v Domler Leasing Corp. supra )" (Airco Alloys Div. v. Niagara Mohawk Power Corp., 76 A.D.2d 68, 79, 430 N.Y.S.2d 179; see, Strauss v. Belle Realty Co., 98 A.D.2d 424, 426-427, 469 N.Y.S.2d 948, affd. 65 N.Y.2d 399, 492 N.Y.S.2d 555, 482 N.E.2d 34; see also, Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., 66 N.Y.2d 38, 43-45, 495 N.Y.S.2d 1, 485 N.E.2d 208; Key Intl. Mfg. v. Morse/Diesel, Inc., 142 A.D.2d 448, 455-457, 536 N.Y.S.2d 792).

The courts, based upon the above-established principles, have consistently dismissed assertions of third-party beneficiary status made by nonparties to contracts for alarm systems (see, e.g., Nieves v. Holmes Protection, 56 N.Y.2d 914, 916, 453 N.Y.S.2d 430, 438 N.E.2d 1145; Eaves Brooks Costume Co. v. Y.B.H. Realty Corp., 149 A.D.2d 652, 540 N.Y.S.2d 464, lv. granted 75 N.Y.2d 702, 552 N.Y.S.2d 108, 551 N.E.2d 601 [1990]; Northbrook Prop. & Cas. Ins. Co. v. D.J.L. Warehouse Corp., 146 A.D.2d 574, 536 N.Y.S.2d 179; Corporate Leasing v. AFA Protective Systems, 101 A.D.2d 768, 476 N.Y.S.2d 134, cf., Appliance Assoc. v. Dyce-Lymen Sprinkler Co., 123 A.D.2d 512, 513, 507 N.Y.S.2d 104). Security-System contractors have not been held liable to injured parties that claim to be third-party beneficiaries of such contracts (see, e.g., Bernal v. Pinkerton's, Inc., 41 N.Y.2d...