I.S. DESIGN, INC. v. GASHO OF JAPAN, INTL, N.Y. App. Div., Judgment, Law, casemine.com

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Attorney(S)

Marc A. Stadtmauer, for Plaintiff-Respondent-Appellant. David L. Levinson, for Defendants-Appellants-Respondents.

Judges

Peter Tom
David B. Saxe

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Smart Summary

Factual and Procedural Background

Plaintiff, I.S. Design, Inc., an architectural and design consulting firm whose principal is not a licensed architect, was engaged as a design consultant in connection with the construction of a new Japanese-style restaurant owned by defendant Gasho of Japan, International, Ltd. Defendant Aoki is the principal of Gasho. Gasho initially hired Frank Carlino as the architect under a written contract, while plaintiff did not have a written contract but had an agreement with Carlino to receive one-third of Carlino's architectural fee. Gasho terminated Carlino’s services due to dissatisfaction. Plaintiff’s relationship with the project ended when it failed to reach a written agreement with the subsequent architect. Carlino did not pay plaintiff any fees, and plaintiff did not sue Carlino but instead sued Gasho and Aoki personally to recover its portion of Carlino's fee, alleging that Aoki had orally promised to pay plaintiff if Carlino failed to do so.

The procedural posture includes a judgment by the Supreme Court, New York County, awarding plaintiff damages against defendant Aoki, which was reversed by the Appellate Division, First Department, resulting in dismissal of the complaint. The court also affirmed an order vacating judgment against defendant Gasho and dismissed an order amending the caption.

Legal Issues Presented

Whether the plaintiff’s claim that defendant Aoki orally promised to pay plaintiff one-third of the architectural fee, if Carlino failed to do so, is barred by the Statute of Frauds.
Whether the plaintiff provided sufficient proof to overcome the Statute of Frauds requirement for a written agreement binding the promisor.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
General Obligations Law § 5-701(a)(2)	Defines a "special promise to answer for the debt, default or miscarriage of another person" subject to the Statute of Frauds requiring a written agreement.	The court found plaintiff’s claim to be a special promise barred by the Statute of Frauds absent a written, subscribed agreement by Aoki.
Parma Tile Mosaic Marble Co. v. Estate of Short, 87 N.Y.2d 524	Confirms that agreements by owners or general contractors to pay debts owed by contractors to third parties fall within the Statute of Frauds and require a subscribed writing.	The court applied this precedent to hold that Aoki’s alleged oral promise was insufficient to satisfy the Statute of Frauds.
Baytree Associates v. Forster, 240 A.D.2d 305, 307	Establishes the standard that proof must be "unequivocally referable" to the alleged oral promise to overcome the Statute of Frauds.	The court held that the evidence, including a letter from Aoki, was not unequivocally referable to the alleged promise to pay plaintiff.
Anostario v. Vicinanzo, 59 N.Y.2d 662, 664	Clarifies that actions must be "unintelligible or at least extraordinary" and explainable only by reference to the oral agreement to satisfy the Statute of Frauds exception.	The court found plaintiff’s actions were not sufficiently extraordinary to overcome the statutory bar.

Court's Reasoning and Analysis

The court analyzed whether the plaintiff’s claim that Aoki orally promised to pay plaintiff’s portion of Carlino’s fee was barred by the Statute of Frauds. Under General Obligations Law § 5-701(a)(2), such a promise is a special promise to answer for the debt of another, which requires a written and subscribed agreement. The court cited Parma Tile Mosaic Marble Co. to reinforce that an owner’s oral promise to pay a contractor’s debt to a third party is insufficient without a subscribed writing. The plaintiff’s evidence, including a letter from Aoki to Carlino, was not unequivocally referable to the alleged oral promise to pay plaintiff, as required under Baytree Associates and Anostario. The plaintiff’s actions were not so extraordinary or unintelligible as to be explainable only by the alleged oral promise. Therefore, the court concluded there was insufficient proof to overcome the Statute of Frauds.

Holding and Implications

The judgment awarding damages to plaintiff against defendant Aoki was reversed and the complaint dismissed. The order vacating judgment against defendant Gasho was affirmed, and the order amending the caption was dismissed. The direct effect is that plaintiff’s claims against Aoki and Gasho were rejected, and no damages were awarded. The decision did not establish new precedent but applied existing Statute of Frauds principles to bar the oral promise claim.

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I.S. DESIGN, INC., Plaintiff-Respondent-Appellant, v. GASHO OF JAPAN, INTERNATIONAL, LTD., etc., et al., Defendants-Appellants-Respondents.

Plaintiff is an architectural and design consulting firm whose principal, Setsuo Ito, is not a licensed architect. Defendant Gasho, whose principal is defendant Aoki, owns and operates a chain of Japanese style restaurants. In connection with Gasho's construction of a new restaurant, it hired Frank Carlino as architect. Plaintiff allegedly was hired as a design consultant. Although Carlino had a written contract with Gasho, plaintiff did not. Rather, it is undisputed that plaintiff and Carlino agreed that plaintiff would be entitled to one-third of Carlino's architectural fee due under his written agreement with Gasho. Gasho eventually became dissatisfied with Carlino and terminated his services. When plaintiff and the new architect could not agree on terms for a written agreement governing their relationship, plaintiff's own connection with the project ended. Carlino, who did not receive his full fee from Gasho, never paid plaintiff any fee, although plaintiff did not sue him for any such payment. Rather, plaintiff sued Gasho, and Aiko personally, under various contract and quasi-contract theories, to recover from them its portion of the fee due from Carlino. The present dispute addresses whether Aoki had independently orally promised to pay plaintiff one-third of Carlino's fee if Carlino failed to do so.

The action is barred by the Statute of Frauds. In effect, plaintiff alleges that Aiko promised to pay plaintiff's fees if Carlino failed to do so, which on the basis of plaintiff's own evidence is a "special promise to answer for the debt, default or miscarriage of another person" (General Obligations Law § 5-701 Gen. Oblig.[a][2]). It is well established that an agreement by an owner or general contractor to pay sums owed by a contractor, to another contractor or vendor, with which the promisor is not in privity as to that particular agreement, falls within the Statute of Frauds (Parma Tile Mosaic Marble Co. v. Estate of Short, 87 N.Y.2d 524). To satisfy the statute, the promisee must prove a written agreement binding the alleged promisor, who must have subscribed to it. It is unavailing to argue that in the absence of a subscribed writing, the obligation was nevertheless incurred (id.).

That doctrine applies to these facts. Nor is the present proof, including a letter from Aoki to Carlino insisting that plaintiff be paid, "unequivocally referable" (Baytree Associates v. Forster, 240 A.D.2d 305, 307 lv denied 90 N.Y.2d 81, citing Anostario v. Vicinanzo, 59 N.Y.2d 662, 664) to Aoki's alleged promise to pay plaintiff to the extent that Carlino failed to do so. "It is not sufficient . . . that the oral agreement gives significance to plaintiff's actions. Rather, the actions alone must be `unintelligible or at least extraordinary', explainable only with reference to the oral agreement" (id.). As such, there is insufficient proof to overcome the statutory bar.

THIS CONSTITUTES THE DECISION AND ORDER OF SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

I.S. DESIGN, INC. v. GASHO OF JAPAN, INTL