Board of Mgrs. of 647 & 649 Place Condominium v. 647 & 649 Wash. Ave., LLC, Index No. 30288/2010, 10/5/2015 (Demarest, J.)

Breach of contract; piercing the corporate veil; individual principals; certifications; offering plan; purchase agreement; incorporation by reference.

By Mena Beshay | Staff Writer

647 & 649 Washington Ave, LLC, (“Washington Ave”), Haijar Elayyan (“Haijar”), Double M Development, LLC (“Double M”), and Munzer Elayyan (Munzer) (collectively, the defendants), issued an offering plan providing for the sale of 16 newly constructed condominium units in the 647& 649 Washington Avenue Condominium (the condominium). Haijar and Munzer were the sole principals of Washington Ave and Double M, respectively. Haijar and Washington Ave retained an architect group to prepare plans and specifications for the design and construction of the condominium and create a report which would describe the condition of the condominium as it would be upon completion. This report was included and made part of the offering plan.

Washington Ave later conveyed the condominium to Double M. Munzer and Double M executed and signed a certification, which states that the offering plan and the incorporated documents did not omit any material fact, did not contain any untrue statement of material fact, and did not contain any fraud. Haijar and Washington Ave also executed and signed a similar certification. All certifications were included and made part of the offering plan. Washington Ave and Double M started selling and closing on units in the condominium.

Plaintiff, the Board of Managers of the condominium, alleged that numerous construction defects caused many leaks throughout the building. Plaintiff commenced this action against the defendants, which included fifteen causes of action, and sought to hold Haijar and Munzer personally liable as the principals of Washington Ave and Double M.

Haijar and Munzer moved to dismiss plaintiff’s claim for breach of contract against them as individuals. They argued that there was no contractual privity, since the offering plan and certifications were executed by Washington Ave and Double M, not in their individual capacities. They further asserted that the allegations in plaintiff’s complaint do not satisfy their burden to establish that the corporate veil of Washington Ave and Double M should be pierced so as to hold Haijar and Munzer individually liable. Plaintiffs contend that they do not intend to pierce the corporate veil. Instead, they seek to hold the defendants personally liable on the grounds that they both executed and signed certifications of the offering plan that were included into the purchase agreements. Plaintiffs further assert these certifications were executed in their personal capacities.

The court held that a plaintiff could seek damages for a breach of contract against individual principals of a sponsor in certain situations. The court explained that individual principals of a sponsor may be held personally liable based upon (1) the certification of the offering plan, and (2) the incorporation of the terms of the offering plan in a specific provision of the purchase agreement. The court held that the defendants did individually execute the certifications. This is evidenced by the fact that the defendants signed the certifications twice, once on behalf of the Washington Ave, LLC, and Double M, LLC, and then on behalf of themselves as individuals. The court further held that that the terms of the offering plan were incorporated into the purchase agreements by a number specific provisions in the purchase agreements, where a paragraph of the purchase agreement expressly stated that the purchaser agreed to purchase the unit in accordance with the terms of the offering plan. The court concluded that the certifications executed by the defendants exposed them to personal liability. The court denied defendant’s motion to dismiss plaintiff’s cause of action for breach of contract against the defendants.

Board of Mgrs. of 647 & 649 Place Condominium v. 647 & 649 Wash. Ave., LLC, Index No. 30288/2010, 10/5/2015 (Demarest, J.).

 

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