District Court, Nassau County, New York. First District. NEW YORK

      MERCHANTS PROTECTIVE COMPANY, INC., Plaintiff(s) v. Susan RAIA,

                   Defendant. No. 12183/04. Nov. 5, 2004.





SCOTT FAIRGRIEVE, J.

**1 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, plaintiff's

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 plaintiff's

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.

**2 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 (1st Dep't 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 plaintiff's 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.

N.Y.Dist.Ct.,2004.

New York Merchants Protective Co., Inc. v. Raia

5 Misc.3d 1011(A), 2004 WL 2532294 (N.Y.Dist.Ct.), 2004 N.Y. Slip Op.

51335(U) Unpublished Disposition

END OF DOCUMENT