Unpublished decision in New York State:



DISTRICT COURT OF NASSAU COUNTY

FIRST DISTRICT CIVIL PART

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NEW YORK MERCHANTS PROTECTIVE COMPANY, INC.,

					Plaintiff(s)

Present:

Against	 						Hon. Scott Fairgrieve



INDEX NO. 12183/04

SUSAN RAIA,

Defendant(s)

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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