1992 Third Realty LLC v Third Ave NY Realty LLC
Judges
Attorneys and Parties
Brief Summary
This construction and real estate dispute concerns whether an adjacent landowner can be sued in negligence by a developer for project delay costs after a stop work order was issued during excavation and foundation work.
The lower court denied dismissal of the developer's negligence counterclaim, holding that the building owner owed a common-law duty as an adjacent landowner and that the developer had sufficiently alleged damages from the construction stoppage.
The Appellate Division reversed the denial of the motion to dismiss and dismissed the developer's negligence counterclaim.
The court held that the adjoining owner owed no common-law duty to design, construct, or maintain its building to protect the developer's excavation work from delay, especially because New York City Building Code § BC 3309.4 [requires the person performing soil or foundation work to preserve and protect adjoining structures at its own expense] places that responsibility on the excavator. The court also held that the developer sought only purely economic losses, which are outside the scope of any such tort duty absent personal injury or property damage.
Background
1992 Third Realty LLC owns a nine-story building at 1992 Third Avenue in Manhattan. Third Ave NY Realty LLC owns the adjacent property and began excavation and foundation work in March 2023 for a new development project. The plaintiff alleged that pile driving and dewatering at the project site caused groundwater movement, soil loss, and settlement that damaged its building and caused it to lean toward the excavation. The plaintiff sued for, among other things, strict liability under New York City Building Code § BC 3309.4, negligence, trespass, nuisance, and breach of contract. The developer then asserted counterclaims, including negligence, alleging that the plaintiff's building itself was structurally deficient, not code-compliant, and unsafe, and that those conditions led the Department of Buildings (DOB) to issue a stop work order that delayed the project and caused at least $16 million in losses. The developer did not allege bodily injury or property damage to itself.
Lower Court Decision
Supreme Court, New York County, denied the plaintiff's motion to dismiss the negligence counterclaim under CPLR 3211 [rule governing dismissal for failure to state a cause of action]. The court reasoned that an adjacent landowner may owe a duty to avoid injuring neighboring property interests and found the developer had sufficiently alleged that negligent design and construction of the plaintiff's building caused instability that triggered the stop work order. The court also rejected the plaintiff's economic loss argument, relying on its reading of Yenem Corp. v 281 Broadway Holdings.
Appellate Division Reversal
The Appellate Division reversed and granted dismissal of the negligence counterclaim. It held that no legally cognizable common-law duty ran from the plaintiff, as adjoining owner, to the developer to protect the developer's excavation and foundation work from delays caused by the condition of the plaintiff's preexisting building. The court stressed that only the developer was engaged in the relevant construction activity when the stop work order was issued, and that the Building Code places the duty to preserve and protect adjoining structures on the excavator, not the adjoining owner. The court also found that the developer had abandoned any argument that some unspecified Building Code provision independently imposed a duty on the plaintiff. Finally, even if a duty existed, the developer sought only economic loss from delay, which is not recoverable in negligence without accompanying personal injury or property damage.
Legal Significance
The decision clarifies that, in New York City excavation cases, an adjacent owner does not owe a reciprocal tort duty to maintain or retrofit its own building for the benefit of a neighbor's future construction project. The ruling reinforces the allocation of responsibility under New York City Building Code § BC 3309.4 to the party performing excavation or foundation work and limits negligence recovery where the claimant alleges only delay-related economic losses. It also distinguishes Yenem Corp. because that case involved economic losses tied to actual property damage in the affected building.
A developer cannot convert an adjoining owner's allegedly weak or code-deficient building into a negligence claim for construction-delay losses. In excavation disputes, the excavator bears the statutory duty to protect neighboring structures, and purely economic damages alone will not support a negligence counterclaim.