New York Merchants Protective Company, Inc. v. Susan Raia, First District Court, Nassau County, Civil Part, Index No. 12183/04, dated November 5, 2004

 Unpublished decision in New York State:


DISTRICT COURT OF NASSAU COUNTY
FIRST DISTRICT CIVIL PART
----------------------------------------------------------- X
NEW YORK MERCHANTS PROTECTIVE COMPANY, INC.,
Plaintiff(s)
Present:
Against Hon. Scott Fairgrieve


INDEX NO. 12183/04
SUSAN RAIA,
Defendant(s)
----------------------------------------------------------- X
The following named papers numbered 1 to 4 submitted on 
this Motion on August 4, 2004
     Papers Numbered  

                                   
Notice of of Motion and Affidavits Annexed     1-2
Order to Show Cause and Affidavits Annexed 
Answering Affidavits                                    3
Reply Affidavits                                            4
Plaintiff, New York Merchants Protective Company moves pursuant to CPLR 3211(a)(6) 
to dismiss defendant's counterclaim because the contract between the parties prohibits same. 
The issue pending before this Court is whether the counterclaim survives the contractual 
waiver, because the allegations support a fraud claim or whether the allegations only support a 
contract claim, and thus can be waived.
FACTS
Plaintiff alleges that the parties executed a contract, dated April 4, 2002, "whereby 
plaintiff agreed to lease, service, and monitor an alarm system for defendant for a period of five 
years" (paragraph 4 of the complaint).
Plaintiff alleges that defendant breached the contract by failing to pay amounts owed.  
Thus, plaintiff seeks recovery of the amounts owed, plus attorney fees.
Defendant has asserted the following counterclaim in its answer:
12. On or about April 4, 2002, plaintiff, through its agents, servants and/or 
employees visited the home of defendant. During that visit, they made numerous 
representations concerning the quality and promptness of the security services 
provided by plaintiff's organization. Those representations included the ability to 
promptly and timely maintain and repair plaintiff's security system, and keep it in 
full functioning condition at all times.
13. As a result of the affirmative representations made by plaintiff and its agents 
and/or employees on April 4, 2002, defendant agreed to enlist the services of 
plaintiff to monitor and maintain her security system at the residence. As part 
of that agreement, she tendered to the plaintiff and its agents and/or employees, her 
check in the amount of $56.50 representing the first quarterly charge, covering the 
period April, May and June of 2002.
14. During the period between April and June 2002, several calls were placed to 
plaintiff to obtain service on the alarm system and to keep it in functioning form. Those 
requests for service were met with delay and otherwise nonresponsive conduct. As a 
direct result thereof, in June, 2002, plaintiff telephoned the defendant, advising that it was 
canceling the contract. The plaintiff s employees said they would take care of the 
paperwork. When further bills were received, defendant again telephoned and 
subsequently wrote on two separate occasions demanding that the contract be terminated 
and that the bills would not be paid.


15. During discussions with plaintiff in December, 2003, plaintiffs employees 
suggested that the matter could be resolved for payment of $100, a payment which was 
made on December 30, 2003 by the defendant.


16. Despite the plaintiff's assurance that the matter was resolved, the plaintiff has 
maliciously filed litigation against the defendant seeking $1,053.93 plus $319.00 in 
attorney's fees, none of which is supported by the charges referenced in the agreement, 
even if it were still in force and effect.


17. The defendant seeks of the plaintiff, return of its $156.50 it paid to the plaintiff 
in connection with the contract and its termination; punitive and treble damages 
based upon plaintiffs malicious prosecution of a frivolous litigation in the amount of 
$3,150; and attorney's fees at a rate and amount to be determined by the Court.
The April 4, 2002 agreement provides in paragraph 12, entitled "LEGAL ACTION" that,
"In any action commenced by NYMP against Lessee, Lessee shall not be permitted 
to interpose any counterclaim."
DECISION
Plaintiff contends that the above clause bars defendant from asserting the counterclaim. 
Defendant counters that the waiver of counterclaim is not applicable because the contract was 
"formed by virtue of the fraudulent representations of the plaintiff, its agents servants and/or 
employees . . . " - see paragraph 3 of defendant's affirmation in opposition, dated 7/28/04.
Contractual waivers of counterclaims or setoffs are valid and enforceable in New York. 
See, Federal Deposit Ins. Corp. v. Frank L. Marino Corp., 74 A.D.2d 620, 425 N.Y. S.2d 34 
(2nd Dep't 1980); Sterling Nat. Bank & Trust Co. of New York v. Giannetti, 53 A.D.2d 533, 
384 N.Y.S.2d 176 (l" Dept 1976). This rule is not applicable to counterclaims based upon fraud. 
See, Federal Deposit, supra. and Sterling Nat. Bank, supra. Also supporting this principle of 
law is Federal Deposit Insurance Corp. v. Borne, 599 F. Supp. 891 (U.S. Dist. Ct., Eastern 
Dist. 1984).
The issue before this Court is whether the allegations of the counterclaim constitute 
fraud or are merely allegations supporting a breach of contract action. Based upon a review of 
the allegations, the Court concludes that the allegations support a breach of contract action, and 
not a fraud action. The allegations in the counterclaims allege representations concerning the 
defendant's "quality and promptness" of its security services to be performed in the future. 
These allegations are contract based and do not support a viable independent tort claim of 
fraud. See, Briefstein v. P.J. Rotondo Constr. Co., 8 A.D.2d 349 (1st  Dept. 1959); Metropolitan 
Life Ins. Co. v. Noble Lowndes Int'l Inc., 84 N.Y.2d 430; Meehan v. Meehan, 227 A.D.2d 268 
(1st  Dept. 1996); Kotick v. Desai, 123 A.D.2d 744 (2nd  Dept. 1986); see also, generally, 'When 
Contract Claims and Fraud Claims Intersect," N.J.L.J. 1, 9/17/99 (col. 1); and Ross v. 
DeLorenzo, N.J.L.J., 10/22/04, p. 23, col. 3 (Sup. Ct., Suff. Ct., Justice Burke).
CONCLUSION
The plaintiffs motion to dismiss the defendant's counterclaim is granted based upon the 
waiver in the contract. However, defendant may assert her allegations as defenses. See, 
Sterling Nat., supra.
So ordered:
 
 
Dated: November 5, 2004
CC: Kirschenbaum & Kirschenbaum, P.C. 
           DeOrchis & Partners, LLP
SF/mp