Opinion
8605/08.
Decided October 22, 2008.
Attorney for Plaintiff: Frank Ribaudo, Esq., Tunstead Schechter, Jericho, NY.
Attorney for Defendant: Deborah Roth, Esq., Holland Knight, New York, NY.
Upon the foregoing papers in this action by plaintiff Almar Plumbing Heating Corp. (Almar) for breach of contract, defendant Dormitory Authority of the State of New York (DASNY) moves for an order, pursuant to CPLR 3211 (a) (1), dismissing the second and third causes of action of Almar's complaint based upon the ground that these claims are barred by a contract and a release, and that DASNY has been released and discharged from these claims.
DASNY is a public authority which issues bonds for the financing of construction projects at non-profit institutions in the State, including the City University of New York (CUNY). For CUNY projects, DASNY also acts as the owner, and it enters into contracts for the design and construction of the projects, awarding these contracts to the lowest responsible bidder after public bidding. Following open competitive bidding by DASNY, Almar was the successful bidder for the plumbing work on a project involving the gut renovation of the existing library and the construction of a substantial new addition at Brooklyn College. DASNY, as owner, entered into a written contract, designated Brooklyn College Library Rehabilitation and Expansion, L-3, Plumbing Work, DA No. 66292, with Almar, as contractor, dated May 10, 1999 (the Contract), under which Almar agreed to perform the plumbing work on the project at a base bid amount of $1,453,000, plus $55,770 for work to provide an irrigation system, for a total sum of $1,508,770.
Construction of the project began in 1999, and the Contract called for the completion of the project by March 10, 2001 (within 670 days). Almar performed the plumbing work under the contract. However, as a result of delays (which was not the fault of Almar), the work for the Contract was not completed by Almar until November 5, 2002.
Section 17.01 A of the General Conditions of the Contract provided that DASNY would make partial payments to Almar on the basis of an approved estimate of the work performed during each preceding business month. Pursuant to this Section, DASNY would retain 5% of the amount of each of such progress payment under the Contract as retainage (i.e., money withheld from progress payments in order to ensure proper completion of a contractor's work).
In 2005, Almar requested a reduction of retainage. Section 17.01 D of the General Conditions of the Contract, provided for the reduction of retainage following substantial completion of the work by Almar by stating, in pertinent part, as follows:
"The Owner, when all the Work is substantially complete, shall pay to the Contractor the balance due the Contractor pursuant to the Contract, less:
1.two (2) times the value of any remaining items of Work to be completed or corrected; and
2.an amount necessary to satisfy any and all claims, liens or judgments against the Contractor.
As the remaining items of Work are completed and accepted by the Owner, the Owner shall pay the appropriate amount pursuant to the duly completed and submitted monthly requisitions."
Section 17.02 of the General Conditions of the Contract, entitled "Acceptance of the First Payment Pursuant to Section 17.01 D of the Contract Constitutes Release," in pertinent part, provided that:
"The acceptance by the Contractor of the first payment pursuant to Section 17.01 D shall be and shall operate as a release to the Owner of all claims by and all liability to the Contractor for all things in connection with the Work and for every act and neglect of the Owner and others relating to or arising out of the Work."
Section 17.03 of the General Conditions of the Contract, entitled "Release and Consent of Surety," provided:
"Notwithstanding any other provision of the Contract Documents to the contrary, the first payment pursuant to Section 17.01 D. shall not become due until the Contractor submits to the Owner a General Release and a Consent of Surety to said payment pursuant to Section 17.01 D., both in form and content acceptable to the Owner."
Pursuant to Section 17.03 of the General Conditions of the Contract, DASNY provided Almar with a "Release Form for Reduction of Retainage" (the Release) to be executed by Almar, as Contractor, and a "Consent of Surety for Reduction of Retainage" (Consent of Surety) to be executed by Travelers Casualty Surety Company of America (Travelers), as Surety on the Performance and Labor and Material Payment Bonds of Almar, in connection with the retainage reduction requisition. The Release states that in consideration of DASNY's payment of the sum of $2,076,394.77 (which is the sum of all prior payments plus the retainage reduction payment), Almar:
"has remised, released and forever discharged and by these presents does, for itself, its successors and its assigns, remise, release, and forever discharge [DASNY], its members, officers, agents, employees, successors, and assigns of and from all claims of liability to the Contractor for anything furnished or performed in connection with, or arising out of [the Contract]."
The Release expressly includes, but is not limited to:
"all claims for existing work or by reason of extra work, labor or materials, or additional work or by reason of additional work, labor, or materials furnished or performed in connection with, relating to, or arising out of the subject matter of said contract, and any prior act, neglect, or default on the part of [DASNY]."
The Release contains a written exclusion for the portion of the retainage which was not being released by Almar by providing that Almar "specifically excludes from this Release and hereby retains and reserves any and all right in connection with and concerning retention being now held by [DASNY] in the amount of . . . $10,434.14." This written exclusion in the Release then goes on to provide a space for Almar to write in any additional exclusion for a claim for damages in a specified amount, by stating "and a claim for damages in the amount ofdollars ($) presented to [DASNY]."
On February 25, 2005, Lawrence Martino (Martino), Almar's secretary/treasurer, executed the Release on behalf of Almar. Martino's signature on the Release was notarized by a notary public, and, in addition, the notary public signed a corporate acknowledgment, attesting that Martino was an officer of Almar, and that Martino signed his name to the Release "by authority of the board of directors of [Almar]." Martino, on behalf of Almar, wrote "$ 0" in the space that was provided in the Release for the exclusion of a claim for damages in a specified amount.
The Consent of Surety provides that Travelers "hereby approves of reduction of retainage on the Contract." The Consent of Surety was executed by Travelers on February 25, 2005 and was notarized by a notary public.
DASNY received the executed Release and the Consent of Surety on March 4, 2005. Following the receipt of the executed Release and the Consent of Surety, DASNY paid Almar the requested retainage reduction.
More than two years after Almar executed and delivered the Release and the Consent of Surety, Almar, by a Request for Additional Compensation dated May 28, 2007, requested additional compensation from DASNY on account of alleged delays to, and interferences with Almar's work under the Contract. DASNY rejected these claims on the basis that Almar, by its execution of the Release on February 25, 2005, had provided it with a full release from any claims associated with the subject work.
By summons and complaint dated March 11, 2008, Almar commenced this action against DASNY. Almar's first cause of action alleges that by reason of additions to and deductions from the work required to be performed by Almar under the Contract, the Contract price was adjusted and fixed by DASNY to equal the sum of $2,116,501.54 and that payments have been made by DASNY to Almar on account of the Contract in the sum of $2,105,918.66. It asserts that there is due and owing to Almar the balance of the Contract monies in the sum of $10,582.88. Almar's second cause of action alleges that it has performed certain extra work in addition to the work required by the Contract, and it seeks $5,280.04 as the fair and reasonable value of the labor furnished and material supplied by it in performing this work. Almar's third cause of action alleges that DASNY breached the Contract with it by disrupting, hampering, interfering with, delaying, and impeding its performance and completion of the work for 20 months beyond the March 10, 2001 Contract completion date, until November 5, 2002. It seeks delay and impact damages in the sum of $820,792.98 based upon these claims of delays and interferences.
In its instant motion, DASNY notes that Almar's first cause of action for the remaining monies due and owing under the Contract, seeks the retainage balance under the Contract. While Almar's first cause of action alleges that this retainage balance is $10,582.88, the Release states this amount to be $10,434.14. However, since the retainage balance was specifically reserved in the Release, DASNY does not seek dismissal of Almar's first cause of action.
DASNY, by its motion, seeks dismissal of Almar's second and third causes of action. DASNY contends that Almar released and discharged it by its acceptance of the Section 17.01 D payment, pursuant to Section 17.02 of the General Conditions of the Contract, and its execution and delivery of the Release, pursuant to Section 17.03 of the General Conditions of the Contract, without reserving any claims arising under the Contract in that Release.
It is well established that a broad release, clear on its face, is enforceable ( see Herman H. Schwartz, Inc. v City of New York [Rockaway Pollution Control Plant], 100 AD2d 610, 612; E.M. Substructures v City of New York, 73 AD2d 608, 608; Mars Assoc. v City of New York, 70 AD2d 839, 840, affd 53 NY2d 627). Here, the Release given to Almar by DASNY pursuant to Section 17.03 of the General Conditions of the Contract, is broad, detailed, plainly written, and clear on its face. There is no ambiguity in the interpretation of the language contained in the Release ( compare Eaton Elec., Inc. v Dormitory Auth. of State of NY , 48 AD3d 619 , 624; Clifton Steel Corp. v County of Monroe Pub. Works Dept., 136 AD2d 950, 951).
The language of the Release specifically provided Almar with a space in which, and thus an opportunity to, reserve any alleged additional claim it had against DASNY. As noted above, Almar executed the Release, in consideration for obtaining a reduction of retainage payment pursuant to Section 17.01 D, without reserving any claim (other than for $10,434.14 in retainage) and, instead, specifically wrote that it was excluding "$0" with respect to a claim for damages. Thus, by the express terms of the Release, Almar affirmatively released all claims arising out of the Contract other than its claim for retainage ( see Martin Iron Constr. Corp. v Howell Co., 242 AD2d 608, 609; Herman H. Schwartz, Inc., 100 AD2d at 612; E.M. Substructures, 73 AD2d at 608; Mars Assoc., 70 AD2d at 840).
Furthermore, as stated above, Section 17.02 of the General Conditions of the Contract explicitly provided that Almar's acceptance of the first payment pursuant to Section 17.01 D "shall be and shall operate as a release to the Owner of all claims by and all liability to the Contractor for all things in connection with the Work and for every act and neglect of the Owner and others arising out of the Work." It is undisputed that Almar accepted and obtained the benefit of the first payment made by DASNY pursuant to Section 17.01 D. Courts routinely enforce contract release provisions similar to Section 17.02 of the General Conditions of the Contract, which provide that an acceptance of a payment constitutes a release of all further claims in connection with work on a contract ( see Buffalo Elec. Co. v State of New York, 14 NY2d 453, 462; Brandt Corp. v City of New York, 14 NY2d 217, 219-220; Conway v Town of Islip, 194 AD2d 710, 710; Walter Sign Corp. v State of New York, 22 AD2d 740, 740). Thus, by the operation of Section 17.02 of the General Conditions of the Contract (as well as by the terms of the Release itself), Almar released DASNY from any claims and all liability in connection with Almar's work ( see Buffalo Elec. Co., 14 NY2d at 462-463; Brandt Corp., 14 NY2d at 219-220; Conway, 194 AD2d at 710-711; Walter Sign Corp., 22 AD2d at 740).
Despite the explicit terms of the Release and Sections 17.02 and 17.03 of the General Conditions of the Contract, Almar asserts that it is nevertheless entitled to assert its claims for extra work and impact and delay damages set forth in its second and third causes of action. Almar, in opposition to DASNY's motion, contends that issues of fact exist as to whether Sections 17.01 D, 17.02, and 17.03 of the General Conditions of the Contract and the Release executed by it act as a bar to its second and third causes of action.
In support of its contention, Almar has submitted the affidavit of Alexander Vecchione (Vecchione), its president, in which Vecchione states that he monitored the construction project's progress on a daily basis and visited the project site, and that all relevant and material communications with DASNY and Almar in connection with the project involved his superintendent and him. Vecchione asserts that he was unaware that Martino had executed the Release and mistakenly reserved $0 in additional claims against DASNY. Vecchione states that Martino does not handle public projects for Almar and is unfamiliar with the contract terms, release terms, and the reservations of rights required to preserve a claim against DASNY. Vecchione explains that Martino had no involvement with the project, aside from executing payment applications in his capacity as Almar's secretary and treasurer.
Almar's attempt, however, to argue that it should not be bound by the terms of the Release on the basis that Martino was not the proper officer to execute it and lacked the requisite knowledge to do so, is unavailing. A third person dealing with an authorized agent has the right to assume that the acts of the agent are within that agent's authority and authorized by the principal ( see Hallock v State of New York, 64 NY2d 224, 231; Merrell-Benco Agency, LLC v HSBC Bank USA , 20 AD3d 605 , 608; Parlato v Equitable Life Assur. Socy. of U.S., 299 AD2d 108, 112). Thus, the principal is bound to a third person by the act of an agent even if it is in excess of the agent's actual authority where the third person has a right to believe that the agent was acting within the authority granted to the agent by the principal ( see Hallock, 64 NY2d at 231; Merrell-Benco Agency, LLC, 20 AD3d at 608; Parlato, 299 AD2d at 112).
Here, Martino was the secretary and treasurer of Almar and, as noted above, the corporate acknowledgment to Martino's signature on the Release specifically stated that Martino "did depose and say" that he was the officer of Almar and that he signed his name to the Release "by [the] authority of [Almar's] board of directors." Thus, the act of Martino, in executing the Release, was within the apparent scope of his authority as Almar's authorized agent, and is, thus, binding upon Almar, his principal. Moreover, Almar, having accepted, reaped, and retained the benefit of the Section 17.01 D payment, ratified the Release and cannot avoid the consideration it gave in return therefor ( see Surlak v Surlak, 95 AD2d 371, 387-388; E.M. Substructures, 73 AD2d at 608).
Almar also argued that the Release and its acceptance of the Section 17.01 D payment should not bar its second and third causes of action on the ground of excusable mistake. Specifically, Almar contends that Martino's processing of the reduction of retainage payment and his execution of the Release was a mistake.
In support of this argument, Almar has submitted Martino's affidavit, in which Martino claims that when the Release arrived at Almar, he believed that the Release was merely a receipt or authorization for payment, and that, under this mistaken understanding by him of what the Release was, he executed it and returned it to DASNY to process Almar's payment. Martino explains that the reason that he believed the Release was merely a receipt or authorization for payment was because he had executed DASNY payment request nos. 2 through 40 on behalf of Almar to receive progress payments due from DASNY, and that, as the secretary and treasurer of Almar, he routinely executes documents needed for receipts of payment on Almar's projects.
Martino, in his affidavit, points to the fact that each of DASNY's payment applications included the statement that:
"Acceptance by the Consultant of Final Payment shall operate as and by a Release to the Owner in accordance with the terms and conditions set forth in the Agreement."
Martino asserts that based upon this statement in the payment applications, he believed that Almar could not waive its right to assert its claims as long as it did not accept the final payment. Martino avers that since the execution of the Release only partially reduced the retainage and still allegedly left $15,862.92 (the claimed $10,582.88 in retainage plus the claimed $5,280.04 for extra work) remaining under the Contract, final payment was not made by DASNY or accepted by Almar. Martino claims that he was unaware that by executing the Release and indicating Almar's acceptance of the first payment of retainage, he, on behalf of Almar, was indicating that Almar was waiving its additional claims against DASNY. Martino asserts that he also did not know that he was required to indicate a dollar amount for any additional claims that Almar had against DASNY, and that he mistakenly wrote $0 in the space provided for additional claims against DASNY.
Almar's contention that because Martino had signed previous progress payment applications which also contained release language, he thought he was merely executing a similar document, does not constitute a basis for mistake sufficient to prevent enforcement of the Release. It is well established that where the language of a release is clear and unambiguous on its face, a party cannot claim mistake by merely alleging that it misinterpreted its terms ( see Koster v Ketchum Communications, 204 AD2d 280, 280; Booth v 3669 Delaware, Inc., 242 AD2d 921, 921-922, affd 92 NY2d 934; Touloumis v Chalem, 156 AD2d 230, 231-232). The cases cited and relied upon by Almar in opposition to DASNY's instant motion are in inapposite and distinguishable from the case at bar since they involved specific releases or partial waivers made pursuant to progress payments ( see Maquesten Gen. Contr., Inc., v HCE, Inc., 128 Fed Appx 782, 784-785 [2d Cir 2005]; Navillus Tile v Turner Constr. Co. , 2 AD3d 209 , 210-211; West End Interiors v Aim Constr. Contr. Corp., 286 AD2d 250, 251-252; Orange Steel Erectors v Newburgh Steel Prods., 225 AD2d 1010, 1012; Clifton Steel Corp., 136 AD2d at 951).
In contrast to these above cited cases, the Release in the case at bar is not a specific release related to a progress payment, but, instead, is a general broad release which was executed and submitted by Almar at the completion of the project pursuant to Sections 17.02 and 17.03 of the General Conditions of the Contract with DASNY. Almar has not raised any issues of fact regarding DASNY's conduct which would show that DASNY intended to entertain additional claims by it. Rather, the Contract between DASNY and Almar specifically addressed the release of all claims upon Almar's acceptance of its first reduction of retainage payment.
Furthermore, it is undisputed that the Release did not pertain to the receipt of progress payments and was not executed while work was still being performed by Almar. Rather, the Release was submitted by Almar to DASNY on February 25, 2005, over two years after Almar alleges that it completed its contract work on November 5, 2002. Thus, the nine-page Release which required that it be executed not only by Almar, but also its surety, Travelers, and which pertained to a reduction of retainage, was sufficiently dissimilar in content and form to the applications for routine monthly partial payments, which were submitted by Almar during the course of the project, to avoid confusion between them ( compare Eaton Elec., Inc., 48 AD3d at 624-625).
Almar, in contending that a mistake was made, relies upon the principle that "[a] party may be relieved from a mistake made without fault on its part where some ambiguity or peculiar circumstances are shown to have induced the mistake, provided, in addition thereto, the mistake is one which is known or ought to have been known to the other party" ( Assurance Co. of Am. v Pulin, 142 NYS2d 809, 810 [1955]; see also Dill Enters. v De Leo, 113 Misc 2d 544, 545). Almar asserts that peculiar circumstances are presented in this case, and that DASNY was aware or should have been aware that Almar intended to assert additional damage claims because Almar kept an open contract balance of $15,862.92 with DASNYdue and owing for years, when it otherwise would not have done so. It argues that the maintenance of this open contract balance with DASNY should have indicated to DASNY that it did not intend to relinquish its right to pursue its claims for extra work and delay damages.
This argument must be rejected. "It is well settled that [w]here, as here, "the language of a release is clear and unambiguous, the signing of a release is a jural act' binding on the parties" and will . . . be set aside [only] as a result of "duress, illegality, fraud, or mutual mistake"'" ( Young v Williams , 47 AD3d 1084 , 1086, quoting Gohar v Albany Hous. Auth., 288 AD2d 657, 658 [internal citations omitted]). When a signed document is clear and unambiguous, there is a heavy presumption that it evidences the intent of the parties, and a party seeking to set it aside by reason of mistake must come forward with a high order of evidence and the proof of mistake must be strong and convincing ( see Torrence v Hastings, 178 AD2d 803, 805; Burnside Bargain Store v Carmel, 156 AD2d 248, 248). Allegations of knowledge of the mistake must be supported by circumstances from which such knowledge can be inferred ( see Middle East Banking Co. v State St. Bank Intl., 821 F2d 897, 906 [2d Cir 1987]; Assurance Co. of Am., 142 NYS2d at 810).
Here, Almar has failed to cite any contract provisions, correspondence, general industry practices, or other circumstances to support its bare conclusory allegation that DASNY knew or should have known that an open contract balance served as notice of potential claims. Instead, there is absolutely no showing that upon receipt of Almar's executed Release, in which Almar unequivocally stated that its claim for damages was "$0," DASNY had any reason whatsoever to suspect that such representation was a mistake. Almar cannot rely upon an undisclosed intention not to waive its claim for these damages in the face of its express written representation that it was claiming "$0" in additional damages. The Contract itself provides the procedures for making claims, and the Release provided Almar with an opportunity to reserve any such claims. There is no ambiguity in Almar's insertion of "0" with respect to its claim for additional damages in the Release ( compare Eaton Elec., Inc., 48 AD3d at 624).
It is well established that "where the language of a release is clear and unambiguous, effect will be given to the intention of the parties as indicated by the language employed and the fact that one of the parties may have intended something else is irrelevant"' ( Niagara Frontier Transp. Auth. v Patterson-Stevens, Inc., 237 AD2d 965, 965, quoting LeMay v H.W. Keeney, Inc., 124 AD2d 1026, 1027; see also Booth, 242 AD2d at 922). As previously noted, "one who executes a plain and unambiguous release cannot avoid its effect by merely stating that [it] misinterpreted its terms" ( Koster, 204 AD2d at 280; see also Booth, 242 AD2d at 921-922). At best, Almar has alleged a mere unilateral mistake on the part of Martino with respect to the meaning and effect of the Release ( see Angel v Bank of Tokyo-Mitsubishi, Ltd. , 39 AD3d 368 , 369; Booth, 242 AD2d at 922). Such a unilateral mistake, standing alone, does not suffice to constitute an adequate basis for invalidating this clear, unambiguous, and validly executed Release ( see Canino v Electronic Tech. Co. , 49 AD3d 1050 , 1051; Young, 47 AD3d at 1088; Angel, 39 AD3d at 369-370; Carney v Carozza , 16 AD3d 867 , 869; Booth, 242 AD2d at 922; Vermilyea v Vermilyea, 224 AD2d 759, 761; Surlak, 95 AD2d at 384). Martino's signing of the Release, on Almar's behalf, was a jural act that is binding upon Almar ( see Booth, 242 AD2d at 922).
Consequently, the Release must be upheld as barring any claim not specifically reserved, including the claims asserted in Almar's second and third causes of action ( see Herman H. Schwartz, Inc., 100 AD2d at 612; E.M. Substructures, 73 AD2d at 608; Mars Assoc., 70 AD2d at 840). Dismissal of Almar's second and third causes of action based upon the terms of the Contract and the Release is, therefore, mandated ( see CPLR 3211 [a] [1], [5]).
The court further notes, in passing, that public policy also supports the barring of Almar's second and third causes of action based upon Sections 17.02 and 17.03 of the General Conditions of the Contract and Almar's execution of the Release, without reserving these claims. The requirement that contractors must specifically reserve claims or release them upon accepting payment after substantial completion is imperative for DASNY, a public authority, for purposes of financial planning, budgeting for future public projects, reporting accurately to CUNY and other institutions for which it constructs projects, and bringing about finality to contracts ( see Brandt Corp., 14 NY2d at 222).
Accordingly, DASNY's motion for an order, pursuant to CPLR 3211 (a) (1), dismissing the second and third causes of action of Almar's complaint, is granted.
This constitutes the decision and order of the court.