Opinion
No. 2022-31502 Index Nos. 652219/2018 595409/2018
05-09-2022
GILBANE BUILDING COMPANY, AND GILBANE RESIDENTIAL CONSTRUCTION, LLC, Plaintiff, v. FORTHILL CONSTRUCTION CORP., AND MARTIN MCKERNAN, INDIVIDUALLY, Defendant. FORTHILL CONSTRUCTION CORP. Plaintiff, v. TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA Defendant.
Unpublished Opinion
PRESENT: HON. SABRINA KRAUS Justice.
DECISION + ORDER ON MOTION
SABRINA KRAUS, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 002) 120, 121, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163, 164, 165, 166 were read on this motion to/for SUMMARY JUDGMENT.
BACKGROUND
This matter stems from four written construction subcontract agreements between plaintiffs Gilbane Building Company (Gilbane Building) and Gilbane Residential Construction LLC (Gilbane Residential) (collectively "Gilbane") and Forthill Construction Corp. (Forthill), where Forthill agreed to work as a structural concrete subcontractor to Gilbane (collectively referred to as the "Subcontracts") at four discrete construction projects. Gilbane alleges that Forthill breached these contracts and sued for damages. Forthill alleges that Gilbane breached the contracts by failing to pay amounts due thereby entitling Forthill to stop work on the projects.
PENDING MOTION
On February 4, 2021, Gilbrane moved for an Order pursuant to CPLR §§ 3211 and 3212 as follows: (a) granting Gilbane' motion for summary judgment as to liability on the First and Second Causes of Action of the Verified Complaint; (b) ordering a hearing to determine Gilbane's damages on the First and Second Causes of Action of the Verified Complaint; (c) dismissing the Counterclaim and Third-Party Complaint with prejudice, in their entirety; and (d) declaring that Forthill's liens be cancelled as nullities.
The motion was marked submitted on March 11, 2021, and recently referred to this court for determination.
The motion is granted to the extent set forth below.
ALLEGED FACTS
The Brooklyn Navy Yard (BNY) Project
On or about January 23, 2017, Gilbane Building and Forthill entered into the BNY Subcontract related to the construction of a structure known as Building 72, located at 63 Flushing Avenue, Brooklyn, NY 11205, in the amount of $9,050,000. On December 21, 2017, Forthill could not complete its work because it could not procure the requisite concrete for the BNY Project. On December 22, 2017, Forthill's superintendent informed Gilbane Building that Forthill was going out of business and would no longer be supplying labor, material, or equipment to the BNY Project.
On December 22, 2017, Gilbane Building gave Forthill written notice that it had materially breached the BNY Subcontract and demanded adequate assurance of Forthill's ability to complete the BNY Subcontract, and provided Forthill a 48-hour opportunity to cure, or else Gilbane Building would hold Forthill in default and terminate it (the "BNY Default Notice"). Forthill did not respond to the BNY Default Notice or return to the BNY Project.
On December 28, 2017, Gilbane Building gave Forthill written notice that because Forthill failed to timely cure its material breaches of the BNY Subcontract, Forthill was in default of the BNY Subcontract and as a result, Forthill's employment under the BNY Subcontract was terminated for cause (the "BNY Project Termination Notice"). Forthill never responded to the BNY Project Termination Notice nor did it ever return to the BNY Project.
The 1010 Park Project
On or about December 28, 2016, Gilbane Residential and Forthill entered into the 1010 Park Subcontract related to the construction of a structure known as 1010 Park Avenue- Extell, located at 1010 Park Avenue, New York, NY 10028, in the amount of $6,000,000.
On December 20, 2017, Forthill could not perform its work because it could not procure the requisite concrete for the 1010 Park Project.
On December 22, 2017, Gilbane Residential gave Forthill written notice that it had materially breached the 1010 Park Subcontract and demanded adequate assurance of Forthill's ability to complete the 1010 Park Subcontract, and provided Forthill a 48-hour opportunity to cure, or else Gilbane Residential would hold Forthill in default and terminate it (the "1010 Park Default Notice").
Forthill did not respond to the 1010 Park Default Notice.
On December 28, 2017, Gilbane Residential gave Forthill written notice that because Forthill failed to timely cure its material breaches of the 1010 Park Subcontract, Forthill was in default of the 1010 Park Subcontract and as a result, Forthill's employment under the 1010 Park Subcontract was terminated for cause (the "1010 Park Termination Notice"). Forthill did not respond to the 1010 Park Termination Notice nor did it ever return to the 1010 Park Project.
The 200 E. 59th and 86th Street Projects
On or about December 12, 2016, Gilbane Residential and Forthill entered into the 200 E. 59th Subcontract related to the construction of a structure known as Macklowe 200 E. 59th Street, located at 200 E. 59th St., New York, NY 10022, in the amount of $1,830,000.
On or about March 3, 2017, Gilbane Residential and Forthill entered into the 86th Street Subcontract related to the construction of a structure known as 147-151 East 86th St., located at 147-151 East 86th St., New York, NY 10028, in the amount of $1,240,000.
Each of the 1010 Park, 200 E. 59th and 86th Street Subcontracts contained a cross-default clause, which provides that if Forthill materially breaches one of the agreements with Gilbane Residential, it is a breach of all of them.
On December 22, 2017, Gilbane Residential gave Forthill written notice that since it had materially breached the 1010 Park Subcontract, pursuant to the terms of the Subcontracts, it was in material breach of the 200 E. 59th Street and 86th Street Subcontracts, and would default Fortill on those Projects if it did not cure its defaults at the 1010 Park Project (respectively, the "200 E. 59th Default Notice" and the "86th Street Default Notice").
Forthill did not respond to the 200 E. 59th or 86th Street Default Notices or return to the 200 E. 59th or 86th Street Projects.
On December 28, 2017, Gilbane Residential gave Forthill written notice that because Forthill failed to timely cure its material breaches of the 1010 Park Subcontract, Forthill was also in default of the 59th Street and 86th Street Subcontracts and as a result, Forthill's employment under those Subcontracts was also terminated for cause (respectively, the "200 E. 59th Street Termination Notice" and the "86th Street Termination Notice"). Forthill did not respond to the 200 E. 59th or 86th Street Termination Notices or return to the 1010 Park, 200 E. 59th or 86th Street Projects after December 22, 2017.
Forthill does not deny most of the alleged facts but asserts that it stopped working because payments were due and demanded but not made.
DISCUSSION
In order to prevail on a motion for summary judgment, the moving party must establish its cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment in its favor. Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851 (1985); Zuckerman v. City of New York, 49 N.Y.2d 557 (1980). Absent such aprima facie showing, the motion must be denied, regardless of the sufficiency of the opposing papers (Alvarez v Prospect Hospital, 68 N.Y.2d 320, 324 [1986]).
However, "[o]nce the movant makes the required showing, the burden shifts to the party opposing the motion to produce evidentiary proof in admissible form sufficient to establish the existence of a material issue of fact that precludes summary judgment and requires a trial" (Dallas-Stephenson v Waisman, 39 A.D.3d 303, 306 [1st Dept 2007], citing Alvarez, 68 N.Y.2d at 324). "[A]ll of the evidence must be viewed in the light most favorable to the opponent of the motion" (People v Grasso, 50 A.D.3d 535, 544 [1st Dept 2008]). "On a motion for summary judgment, the court's function is issue finding, not issue determination, and any questions of credibility are best resolved by the trier of fact" (Martin v Citibank, N.A., 64 A.D.3d 477, 478 [1st Dept 2009]; see also Sheehan v Gong, 2 A.D.3d 166, 168 [1st Dept 2003] ["The court's role, in passing on a motion for summary judgment, is solely to determine if any triable issues exist, not to determine the merits of any such issues"], citing Sillman v Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 404 [1957]).
In this case, the court finds that plaintiffs have established aprimafacie entitlement to summary judgment as to liability and that defendant failed to rebut that by presenting a material question of fact requiring a trial.
It is well settled that a subcontractor's abandonment of a construction contract is a material breach of contract. Kleinberg Elec, Inc. v E-JElec. Installation Co., Ill A.D.3d 410, 410 [1st Dept 2013]; Yonkers Contracting Co. v. Romano Enterprises of N.Y., Inc., 40 A.D.3d 629 [2d Dept 2007]; FarrellBldg Co., Inc. v. ShinnecockElec, Inc., 71 A.D.3d 821 [2d Dept 2010]; Tri-Mar Contractors. Inc. v ITCO Drywall, Inc., 74 A.D.2d 601, [2d Dept 1980].
The Subcontracts explicitly provide:
9.4 In the event [Forthill], at any time, should: (1) refuse, fail or neglect to supply sufficient and properly skilled workers, supervision, equipment, and materials of the proper quality; (2) fail in any respect to prosecute the work timely, in compliance with this Agreement; (3) fail in the performance of any obligation or duty of this Agreement; ... and/or (9) fail to properly remedy a noticed violation of this Agreement; then in that event, [Gilbane] after forty-eight (48) hours written notice to [Forthill], shall have the right, but not the obligation, to any and all remedies under this Agreement in addition to those available at law or in equity, or both, including without prejudice to any other remedy, the following contractual remedies: ***
(c) Terminate further performance by [Forthill] under this Agreement without further notice or payment, and renegotiate and re-execute a contract or contracts for the completion of the [Forthill]'s work with such persons, firms or companies as may be appropriate in the opinion of [Gilbane], and in such event, deduct any and all costs, Damages, expenses, completion costs, remediation expenses, delay damages, and any other Damages as provided in this Agreement from [Forthill]'s Contract Amount;
9.4.2 In addition to [Gilbane]'s rights of set-off provided in Article 3.9 above, in the event the [Forthill]'s unpaid Contract Balance is not sufficient to fully pay for all such Damages, then in that event, Trade Contractor, and its Surety, if applicable, shall promptly pay Construction Manager for any deficiency so that all such Damages are fully paid.
These provisions establish that Forthill's actions constituted breaches. If Forthill had intended to terminate for nonpayment it was also required to provide statutory notices, which Forthill does not allege doing.
The PPA has specific pre-suspension notice and opportunity to cure requirements, none of which Forthill proves or even alleges it complied with:
A subcontractor intending to suspend performance for failure to receive timely payments within the time limits established pursuant to this article must provide both the owner and the contractor written notice at least ten calendar days before the subcontractor's intended suspension. Such notice shall:
(A) inform the owner and the contractor that payment for undisputed billing amounts have not been received; and
(B) state the intent of the contractor to suspend performance for non-payment.
If after the tenth calendar day following written notice either the owner or the contractor has not cured the deficiency, the subcontractor may suspend performance ....GBL §756-b(2)(b)(ii).
Forthill comes forward with no evidence or allegation that it complied with these provisions. Gilbane has met its prima facie showing that Forthill materially breached the Subcontracts. Forthill has failed to meet its burden to raise a genuine dispute of material fact. Forthill abandoned the Subcontracts and the Projects without notice and thereby materially breached each of them.
Forthill's Material Breaches of The BNY and 1010 Park Subcontracts Require the Dismissal of Forthill's Counterclaims on those Projects
It is axiomatic that the party that materially breaches a contract cannot recover damages under the contract - only the non-breaching party may recover. See Kasowitz Benson Torres LLP v Cabrera, 188 A.D.3d 602 [1st Dept 2020]; Apogee Handcraft, Inc. v Verragio, Ltd., 155 A.D.3d 494, 495 [1st Dept 2017]; Yonkers Contracting Co. v. Romano Enterprises of N.Y., Inc., 40 A.D.3d 629 [2d Dept 2007]. As the court has determined, that Forthill materially breached the BNY and 1010 Park Subcontracts, Forthill's breach of contract counterclaims arising from those Subcontracts are subject to dismissal. Gilbane Building and Gilbane Residential are entitled to summary judgment dismissing Forthill's First and Fourth Counterclaims, respectively.
Forthill Materially Breached the 200 E. 59th and 86th Street Subcontracts Mandating the Dismissal of its Counterclaims with Respect to Them
Forthill breached the 200 E. 59th and 86th Street Subcontracts in two ways: (1) by virtue of the cross-default clauses contained in all four of the Subcontracts, which provide that a material breach of a subcontract with one Gilbane entity is a breach under all Subcontracts with that entity; and (2) by its abandonment of these Projects and Subcontracts. Each of the four Subcontracts contain a cross-default provision at Section 3.9, which provides that a Forthill material breach of any of other of its Subcontracts with the applicable Gilbane entity, constitutes a material breach of that subcontract.
3.9 [Forthill] further agrees that a material breach by [Forthill] of any other Agreement between [Gilbane Residential] and [Forthill], whether on the same or another project, shall constitute an absolute breach under this Agreement, and [Gilbane Residential] shall have the right to assert any and all rights and remedies available to [Gilbane Residential] under this Agreement or otherwise under the law or in equity. In the event of such a breach, [Gilbane Residential] shall also have the absolute right to apply any payments due to or retainage held for [Forthill] under this Agreement as a set-off to satisfy any unpaid expenses, costs, claims, or Damages as defined herein, including attorneys' fees, incurred by [Gilbane Residential] as a result of any such breach under any other Agreement with [Forthill]. Likewise, [Gilbane Residential] shall have the absolute right to apply any payments due to or retainage held for [Forthill] under any other agreement between [Gilbane Residential] and [Forthill] to satisfy any unpaid expenses, costs, claims, or Damages as defined herein, including attorneys' fees, incurred by [Gilbane Residential] as a result of [Forthill] 's breach of this Agreement.
Cross-default clauses, such as this one, are routinely enforced in commercial transactions where the same parties enter into multiple agreements. Parties that enter into multiple agreements can freely negotiate and agree that if there is a material breach of one agreement, they should not have to isolate that breach from their larger relationship and that sums that might otherwise be due under one of the agreements should be available to set off breach-induced damages on another. See Jet Acceptance Corp v. Quest Mexicanan, SA DE CV, 87 A.D.3d 850 [1st Dept 2011]; Jones Apparel Group, Inc. v. Polo Ralph Lauren Corp., 16 A.D.3d 279 [1st Dept 2005]; Durso Supermarkets, Inc. v. D 'Urso, 193 A.D.2d 377 [1st Dept 1993].
Because Forthill materially breached the 1010 Park Subcontract with Gilbane Residential by abandoning it, Gilbane Residential properly invoked the cross-default clauses in the 200 E. 59th and the 86th Street Subcontracts.
On December 22, 2017, pursuant to the terms of the 200 E. 59th and 86th Street Subcontracts, Gilbane Residential issued the 200 E. 59th and 86th Street Notices of Default. Forthill did not respond to the Notices of Default, so on December 28, 2017, Gilbane Residential issued the 200 E. 59th and 86th Street Notices of Termination. Forthill did not respond to the Notices of Termination or return to the 1010 Park, the 200 E. 59th or 86th Street Projects and, thus, abandoned them all materially breaching them on this, independent, basis. Because Forthill materially breached each of the 200 E. 59th and 86th Street Subcontracts both by virtue of its abandonment of them and because of the cross-default clauses, its counterclaims asserted with respect to them (the Seventh and Tenth Counterclaims) must be dismissed. See Kasowitz, 188 A.D.3d 602; Apogee, 155 A.D.3d 494.
Forthill's Causes of Action Sounding in Quantum Meruit Must Be Dismissed Because the Parties Do Not Dispute the Existence of Valid and Enforceable Contracts
Forthill's Second, Fifth, Eighth, and Eleventh Causes of Action, sounding in quantum meruit, must be dismissed as a matter of law because Forthill does not dispute the validity of the subcontracts that govern this dispute. Forthill pleads the existence of the Subcontracts in the Counterclaim/Third-Party Complaint. Since Forthill seeks relief under the terms of the Subcontracts, it cannot also dispute their validity.
As a matter of law, a claim based on an implied contract cannot be maintained where an express contract exists that governs the subject matter of the dispute.
The existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter. A 'quasi contract' only applies in the absence of an express agreement, and is not really a contract at all, but rather a legal obligation imposed in order to prevent a party's unjust enrichment.Clark-Fitzpatrick Inc. v, Long Island Rail Road Co., 70 N.Y.2d 382, 388 [1987]; Sheiffer v Shenkman CapitalMgt., Inc., 291 A.D.2d 295, 295 [1st Dept 2002]; Aviv Constr., Inc v. Antiquarium, Ltd., 259 A.D.2d 445, 446 [1st Dept 1999].
Forthill admitted the existence and validity of the BNY, 1010 Park, 200 E. 59th, and the 86th Street Subcontracts in its pleadings. Since the parties do not dispute the existence of the Subcontracts, Forthill cannot proceed under a quasi-contract theory of recovery. Clark-Fitzpatrick Inc., 70 N.Y.2d at 388. Based on the foregoing, the Second, Fifth, Eighth, and Eleventh Causes of Action in the counterclaims are dismissed.
Forthill's Causes of Action to Foreclose Its Liens On The Projects Must be Dismissed Because of Forthill's Material Breach
Forthill's Third, Sixth, Ninth, and Twelfth Causes of Action, each for lien foreclosure on the respective Projects and the associated lien discharge bonds posted by Gilbane through Travelers as surety, must be dismissed because Forthill materially breached the Subcontracts.
Lien Law § 4(1) provides that Forthill's lien right "shall not be for a sum greater than the sum earned and unpaid on the contract at the time of filing the notice of lien." As discussed above, because Forthill materially breached and abandoned the Subcontracts in December 2017, when it filed liens months later in April 2018, it was owed nothing, rendering its liens invalid. New Day Builders, Inc. v SJC Realty, 219 A.D.2d 623, 623-24 [2d Dept 1995].
On or about April 3, 2018, Forthill filed a Notice Under Mechanic's Lien Law with respect to each of the four projects. Since it abandoned the projects on December 22, 2017, it was not owed money at the time it filed its liens, based on the foregoing Gilbrane's motion to dismiss Forthill's Third, Sixth, Ninth, and Twelfth Causes of Action is granted.
Additionally, pursuant to N.Y. Lien Law § 19(6), where a lien is invalid on its face, the Court, upon application, shall make an Order discharging the alleged lien of record. The Forthill BNY Lien is invalid and must be discharged because: (a) the property against which the Forthill BNY Lien was filed is publicly owned; and (b) the law prohibits private mechanic's liens, like the Forthill BNY Lien here, from attaching against publicly-owned properties. Furthermore, the failure of the Forthill BNY Lien to correctly identify the true owner of the purportedly-liened property as required by N.Y. Lien Law § 9(2) is a jurisdictional defect that cannot be cured and renders the lien void and subject to discharge.
The first of these conditions cannot be disputed. The property upon which the BNY Project was built is publicly owned by the City of New York. The City of New York is the correct fee simple owner. The deed to the Lot 1 Property confirms that the City of New York, a public entity, is the owner.
The second condition for discharge - that the law prohibits private mechanic's liens from attaching to publicly-owned property - is also established. See Matter of Paerdegat, 57 N.Y.2d 966, 968 [1982]; EMC Iron Works v. City of New York, 294 A.D.2d 173, 174 [1st Dept 2002]; George Washington Bridge Bus Station Dev. v. Associated, 149 A.D.3d 525, 525-6 [1st Dept 2017].
Properties owned by the City of New York are inalienable under the New York City Charter, and not subject to the attachment of a mechanic's lien against the City-owned property. EMC Iron Works, 294 A.D.2d at 174.
Where private mechanic's liens are claimed against publicly owned property, such as that owned by the City of New York, they are properly vacated, cancelled, or discharged of record, and declared null and void. See, i.e., BPC Site 25 Associates, LLC v. A. Liss & Co., Inc., 192 Misc.2d 390, 394 [Sup Ct 2002] (lien vacated); George Washington Bridge Bus Station Dev. v. Associated, 149 A.D.3d at 525.
Since the Forthill BNY Lien is invalid as a matter of law, the Court dismisses Forthill's Third Cause of Action, and the Forthill BNY Lien must be vacated, canceled, discharged of record, and declared null and void. Since the Forthill BNY Lien is invalid, its claim against the lien discharge bond posted through Travelers must be dismissed.
CONCLUSION
It appearing to the court that plaintiff is entitled to judgment on liability on its first and second causes of action and that the only triable issues of fact arising on plaintiffs motion for summary judgment relate to the amount of damages to which plaintiff is entitled, it is
ORDERED that Forthill's counterclaim and Third-Party Complaint are dismissed in their entirety; and it is further
ORDERED that Gilbrane's motion for summary judgment is granted with regard to liability; and it is further
ORDERED that an immediate trial of the issues regarding damages shall be had before the court; and it is further
ORDERED that liens filed by Forthill on April 3, 2018 and docketed in the Office of the New York County Clerk for the following properties are hereby vacated, canceled and discharged
200 East 59th Street a/k/a 989 3rd Avenue, New York, New York Block 1332 Lot 45 1010 Parke Avenue, New York, New York Block 1496 Lots 1101 & 1102 147-151 East 86th Street, New York, New York Block 1515, Lots 20, 2363 Flushing Avenue (Bdlg 72) Brooklyn, New York Block 2023, Lots 1 & 50And it is further
ORDERED that plaintiff shall, within 20 days from entry of this order, serve a copy of this order with notice of entry upon counsel for all parties hereto and upon the Clerk of the General Clerk's Office (60 Centre Street, Room 119), and said Clerk shall cause the matter to be placed upon the calendar for such trial before the undersigned; and it is further
ORDERED that such service upon the General Clerk's Office shall be made in accordance with the procedures set forth in the Protocol on Courthouse and County Clerk Procedures for Electronically Filed Cases (accessible at the "E-Filing" page on the court's website at the address www.nycourts.gov/supctmanh)].