Opinion
124043
04-30-2021
A. SERVIDONE INC./B. ANTHONY CONSTRUCTION CORP., J.V., Claimant(s) v. The STATE of New York, Defendant(s)
Claimant's attorney: HODGSON RUSS, LLP, By: Laurence I. Fox, Esq., Aaron M. Saykin, Esq. Defendant's attorney: HON. LETITIA JAMES, Attorney General for the State of New York, By: Cornelia Mogor, Assistant Attorney General, Erica Pritchard Assistant Attorney General
Claimant's attorney: HODGSON RUSS, LLP, By: Laurence I. Fox, Esq., Aaron M. Saykin, Esq.
Defendant's attorney: HON. LETITIA JAMES, Attorney General for the State of New York, By: Cornelia Mogor, Assistant Attorney General, Erica Pritchard Assistant Attorney General
Walter Rivera, J.
This breach of contract claim arises out of a contract between claimant, the general contractor, and defendant, New York State Department of Transportation (DOT), regarding a project to reconstruct and replace bridges on Route 59 in Rockland County. Claimant seeks additional compensation from DOT, on behalf of claimant's subcontractor, L.M. Sessler Excavating & Wrecking, Inc., that had subcontracted to perform demolition and debris disposal under the contract.
Claimant and the subcontractor entered into a liquidating agreement wherein claimant assumed liability for the subcontractor's costs of compliance with Rockland County's enforcement of its Flow Control Law and the subcontractor agreed to accept the sum, if any, that claimant recovered from DOT in full satisfaction of the subcontractor's claim for the costs of compliance (Ex. 33).
Claimant alleges that, during the second construction season of the contract, there was a significant change in the scope and character of the work. The change alleged is due to Rockland County's enforcement of its Flow Control Law (Local Law No. 2-2008 of County of Rockland). The Flow Control Law required that the subcontractor dispose of the demolition debris, in accordance with the Flow Control Law requirements, solely at a Rockland County owned facility and to pay Rockland County a fee for the disposal. Claimant argues that the additional costs incurred by the subcontractor and the loss of the opportunity to obtain compensation for the demolition debris was a significant change under the terms of the contract which entitles claimant to additional compensation. The trial of this claim was unified, addressing both liability and damages.
BACKGROUND
In 2010, during the first construction season of performance under the contract, demolition debris was hauled to MRO Pump & Tank, Inc. (MRO), a privately-owned permitted site, that paid compensation to the subcontractor for the debris (Court's Ex. 2, ¶ 24). On or about March 25, 2011, during the second construction season, claimant and the subcontractor advised DOT that the Rockland County Solid Waste Management Authority had provided notice that it would enforce Rockland County's Flow Control Law for the demolition debris on the project and require the subcontractor to dispose of the debris solely at a Rockland County owned facility and pay Rockland County fees for the disposal. The subcontractor complied with the Flow Control Law from March 25, 2011 through April 20, 2011 and paid disposal fees to Rockland County.
Claimant commenced the instant action against the State for additional compensation under the contract. The State moved for summary judgment dismissing the claim on numerous grounds, including that claimant had failed to allege the specific contract provisions which DOT had allegedly breached. Claimant opposed the motion and cross moved for summary judgment.
Claimant argued, inter alia, that Rockland County's enforcement of its Flow Control Law constituted a significant change in the character of the work warranting additional compensation under the contract and Section 104-04 of the Standard Specifications, incorporated into the contract. Additionally, claimant argued that Section 107-01 of the Standard Specifications does not bar recovery because it requires compliance with only applicable ordinances. Claimant also argued that, pursuant to the contract and Section 107-10 of the Standard Specifications, demolition debris constituted surplus and used materials, which became the property of the contractor.
The Court of Claims granted the State's motion for summary judgment dismissing the claim for failure to state a cause of action and denied claimant's cross motion for summary judgment as moot ( A. Servidone, Inc./ B. Anthony Constr. Corp., J.V. v State of New York , UID No. 2015-029-082 [Ct Cl, Mignano, J., Nov. 6, 2015]). Claimant appealed.
The Appellate Division modified the order of the Court of Claims by substituting the provision granting the State's motion for summary judgment with a provision denying the State's motion and, as so modified, affirmed the order of the Court of Claims ( A. Servidone, Inc./ B. Anthony Constr. Corp., J.V. v State of New York , 168 AD3d 648 [2d Dept 2019] ). In it's analysis of the matter, the Appellate Division found that there was an ambiguity in the terms of the contract and thus there was an issue of fact which precluded an award of summary judgment to either party. Specifically, the Appellate Division found:
However, the contract also contained specific provisions regarding the disposal of waste at permitted facilities, which acknowledged the value of removed waste to the claimant as a commodity that could be sold to permitted facilities for beneficial reuse, recovery, or recycling purposes. The contract provided that nothing therein was intended to prevent the claimant from removing the waste to appropriate facilities for such purposes. Additional disposal site requirements were listed only for Nassau and Suffolk Counties and the Adirondack Park. Contrary to the determination of the Court of Claims, these provisions raised an ambiguity as to whether the claimant would be required to deposit waste in Rockland County inasmuch as no Rockland County waste facilities existed at the time the parties entered into the contract, thereby permitting extrinsic evidence of the parties’ intent. The claimant submitted evidence by way of affidavits to the effect that, at the time of the bid, Rockland County had no facility for the recycling of concrete and was not enforcing the Flow Control Law with regard to any DOT projects. The claimant also submitted a letter from the DOT to the RCSWMA that took the position that the project was immune from the Flow Control Law. In addition, a change order issued by the DOT under Highway Law § 38, which provides for the alteration of contracts due to ‘unforeseen cause[s],’ expanded the project site to permit on-site disposal so as to avoid the costs of compliance with the Flow Control Law.
The State failed to controvert this evidence that the means of compliance anticipated at the time of the contract were not the means of compliance that later arose when the Rockland County facility opened, which raised a triable issue of fact regarding the scope of the work and whether this was a ‘significant change in the character of work’ that would entitle the claimant to additional compensation under the contract, precluding an award of summary judgment to either party [citations omitted]"
( id. at 650-651).
By Order filed on February 1, 2019, the Hon. Richard E. Sise, Acting Presiding Judge of the Court of Claims, transferred the claim to the Individual Assignment Calendar of the Hon. Walter Rivera. Thereafter, a trial was conducted to determine whether the requirement to dispose of the construction debris solely in the Rockland County facility in accordance with the Flow Control Law and pay fees to Rockland County for such disposal was a significant change in the scope and character of the work which entitles claimant to additional compensation under the contract and the Standard Specifications incorporated into the contract and, if so, what amount of damages is appropriate.
The parties submitted a STIPULATED SET OF FACTS, dated November 14, 2019, and an AMENDMENT TO NOVEMBER 14, 2019 STIPULATION, amending paragraphs 24, 25 and 39 of the STIPULATED SET OF FACTS (Court's Exs. 1, 2). The facts, as stipulated by the parties, are as follows. At the time of the contract bid and when the parties entered into the contract, Rockland County did not have a designated facility to receive the construction debris generated by the project (Court's Ex. 1, ¶¶ 18-19). Additionally, at the time of the award of the contract, Rockland County was not enforcing its Flow Control Law regarding the disposal of construction debris ( id. at 20). During the first construction season in 2010, demolition debris was hauled to MRO, a privately-owned permitted site, that paid compensation to the subcontractor for the debris (Court's Ex. 2, ¶ 24).
On or about March 23, 2011, during the second construction season, Rockland County notified claimant and the subcontractor that Rockland County would enforce its Flow Control Law for the concrete demolition debris and require disposal of the concrete waste solely at a Rockland County owned facility ( id. at 25).
By letter dated March 24, 2011, the subcontractor complained to claimant, "we have concrete piled up all around us on this job site" (Ex. 21, p 3). The subcontractor noted in its letter that it had intended to dispose of the debris as it had done during the first construction season; however the Rockland County Solid Waste Authority visited the job site on March 23, 2011 and made it clear that the concrete debris is subject to Rockland County's Flow Control Law. Accordingly, the debris had to be disposed of solely at the Rockland County facility, which required hauling the debris to the Rockland County facility, "prepare[d] to their liking," and paying the associated fees to Rockland County for disposal ( id.). The letter indicates that the subcontractor would begin compliance with the Flow Control law on March 25, 2011 to keep the project moving because the "[f]ailure to load this concrete out immediately will cause direct and significant delay to our work" ( id.). The letter further states:
"[w]e feel that this is clearly a change of conditions as concrete was not included in their flow [control] law at the time of bid. Furthermore, the solid waste authority did not even have an approved facility to receive concrete at the time of bid ... this letter is to put the state on notice that we will be requesting reimbursement"
( id. ).
Thereafter, pursuant to the dispute resolution process set forth in the contract, claimant sent DOT a "Notice Letter Regarding Flow Law" dated March 25, 2011 (Court's Ex. 1 ¶ 30; Ex. 23, p 11). The letter states that the requirement to take the construction debris from the work site to Rockland County's facility "significantly changes the character of the work" because it entails the removal and transport of construction debris from the work site to the Rockland County facility and will result in additional costs (Ex. 23, p 11). The letter further states, "[t]hese costs are considered extra work not contract work and exceed the work provisions of the contract in accordance with Standard Specification[s] Section[s] 105-14 and 104-02" ( id. ). Claimant sent DOT a "2nd Notice Letter Regarding Flow Law" dated March 29, 2011, which is essentially the same as the letter dated March 25, 2011 (Ex. 23, p 13).
By letter to Rockland County dated April 14, 2011, DOT protested the enforcement of the Flow Control Law in connection with the project (Ex. 19). Specifically, the letter asserts that the State, in the performance of work under the contract, is immune from the application of local ordinances, such as the Rockland County Flow Control Law, and that any attempt to impose the State's compliance with the law is inconsistent with, and pre-empted by, State law and the principles of sovereign immunity ( id. ). The letter further provides that, "[m]oreover, the imposition of the County's local law on the State's contractors will unnecessarily increase the costs for all taxpayers of the State" ( id. ). The letter concludes with the request that the threatened enforcement of the Flow Control Law against claimant should be immediately withdrawn and, if not withdrawn, then the Department of Law will be consulted. Despite DOT's protest, Rockland County continued to demand claimant's compliance with the Flow Control Law (Court's Ex. 1, ¶ 27). Accordingly, the subcontractor complied with the Flow Control Law and hauled the debris to the Rockland County facility where the subcontractor paid fees for the disposal and met the facility's other requirements ( id. at 32).
While performance under the contract continued, the parties engaged in the dispute resolution process set forth in the contract ( id. at 30).
During the third construction season, DOT issued a "Change Order," Order-on-Contract No. 26, which was approved on December 29, 2011 ( id. at 28; Ex. 20). The Change Order was issued by DOT, pursuant to Highway Law § 38, "to alter" the contract to include a disposal site for the debris generated by the project (Ex. 20). The Change Order provided:
"[t]he County of Rockland started implementing their flow law after the project was awarded, which is extremely costly to the DOT and their Contractors. This approved disposal site will eliminate the need to pay the high cost of disposal at the County's facility"
( id. ). As a result of the Change Order, during the third construction season, the subcontractor disposed of the debris at the newly approved disposal site at no additional cost (Court's Ex. 1, ¶ 29).
The project was accepted by DOT on July 2, 2013. The closeout meeting was scheduled and held on September 17, 2013 ( id. at 30). A Final Agreement, with a reservation of rights to file a claim in the Court of Claims, was signed by the parties on February 7, 2014 (Ex. 32). The Final Agreement provides that the reservation of rights is required because the subcontractor has an unresolved dispute with DOT. The State Comptroller approved the Final Agreement on June 4, 2014 ( id. ). As previously noted, claimant and the subcontractor entered into a liquidating agreement permitting claimant to proceed against the State on behalf of the subcontractor and this claim ensued (Ex. 33).
Vincent Mazzone, Civil Engineer and Project Manager for claimant, testified at trial that contractors are encouraged to recycle materials to the maximum extent possible and that claimant herein had complete flexibility to transport the construction debris to any outside facility. In that regard, Mazzone noted that during the first construction season the subcontractor disposed of the debris with MRO. MRO hauled the concrete debris from the work site to MRO's offsite facility and paid the subcontractor by the ton for the debris. In addition to the payment that the subcontractor received from MRO, the subcontractor also obtained the benefit of not having to use its trucks to transport the debris to MRO's offsite facility.
Laverne Sessler, the vice president and owner of the subcontractor, also testified at trial. According to Sessler, during the second construction season Rockland County was aggressive in its enforcement of its Flow Control Law and deployed personnel to ensure that the truckers knew that citations of $1000.00 would be imposed if the truckers did not dispose of the debris at the Rockland County facility. The subcontractor did not want to interrupt or delay the project by leaving the debris on site because that would result in the imposition of liquidated damages.
Sessler further testified that:
"[w]ell, the work did change in the aspect that when we had, as we referenced in a letter at the time, piles of concrete all around us, impeding our work and our schedule on the project as a result of this whole issue with the flow control, our process of work changed considerably. We were not loading out the material at the rates that we would prefer to, and progressing with the demolition of both the bridges and the substructure"
References to the trial transcript are preceded by the letter "T."
ANALYSIS
The Court has carefully considered the stipulated facts and the exhibits. Additionally, upon hearing the witnesses testify at trial and observing their demeanor as they did so, the Court has assessed their credibility and determined the weight to be accorded to their testimony.
As was noted by the Appellate Division in its review of the contract and the facts and circumstances surrounding compliance with the terms of the contract, a contract is to be construed in accordance with the parties’ intent, which is generally discerned from the four corners of the contract ( see MHR Capital Partners LP v Presstek, Inc. , 12 NY3d 640, 645 [2009] ; Greenfield v Philles Records , 98 NY2d 562, 569 [2002] ; A. Servidone, Inc./ B. Anthony Constr. Corp., J.V. , 168 AD3d at 650 ). However, where the language of the contract is ambiguous, such that it is reasonably susceptible to more than one interpretation, extrinsic evidence is permitted to determine the parties’ intent as to the meaning of that language ( see Union Carbide Corp. v Affiliated FM Ins. Co. , 16 NY3d 419, 425 [2011] ; Yarom v Poliform S.P.A. , 153 AD3d 760, 761 [2017] ; Chimart Assoc. v Paul , 66 NY2d 570, 573 [1986] ; A. Servidone, Inc./ B. Anthony Constr. Corp., J.V. , 168 AD3d at 650 ).
The Appellate Division found that the provisions of the contract in this matter raised an ambiguity as to whether it would be required that the disposal of the construction debris be made in Rockland County. In reaching this determination, the Appellate Division noted that the contract contained specific provisions regarding the disposal of construction debris at permitted facilities and that additional disposal site requirements were listed only for Nassau County, Suffolk County and the Adirondack Park. There was no reference in the contract to Rockland County and the Rockland County waste facility was not in existence when the parties entered into the contract. Additionally, the Appellate Division found that the specific provisions of the contract regarding the disposal of construction debris acknowledged the value of the debris as a commodity that could be removed and sold and that the contract provided that nothing therein was intended to prevent the removal and sale of the debris ( A. Servidone, Inc./ B. Anthony Constr. Corp., J.V. , 168 AD3d at 650-651 ). In finding an issue of fact precluding summary judgment to either party, the Appellate Division noted that the State had not controverted the evidence presented by claimant, i.e., that at the time of the contract bid Rockland County was not enforcing its Flow Control Law with regard to any DOT projects and that DOT's letter to Rockland County evidenced DOT's position that the project was immune from the Flow Control Law (Ex. 19). Additionally, this Court finds that the letter evidences DOT's acknowledgment that the added costs would be borne by the State in its payment to the contractors who are subject to compliance with the Flow Control Law.
Upon review of the facts, as stipulated by the parties, and all the trial evidence, this Court notes that it is undisputed that, at the time of the contract bid and when the parties entered into the contract, Rockland County did not have a designated facility to receive construction debris and Rockland County was not enforcing its Flow Control Law regarding disposal of construction debris on any DOT projects (Court's Ex. 1, ¶¶ 18-20). DOT's Standard Specifications make specific reference to the disposal requirements applicable to the Adirondack Park and Nassau and Suffolk Counties, without any reference to Rockland County (Ex. 13, p 3). This supports claimant's position that the contract permitted claimant to determine where to dispose of the debris and that Rockland County was not a potential disposal site. Additionally, the subcontract between claimant and the subcontractor made reference to disposal of debris offsite (Ex. 16, pp 20-21). Offsite, as referenced in the specifications, did not include a Rockland County facility. The subcontract further provided that, if an on-site disposal area were available, then claimant would notify the subcontractor.
Accordingly, this Court finds that, based upon the foregoing, claimant has established that Rockland County's enforcement of its Flow Control Law, which required the subcontractor to dispose of construction debris, during the second construction season, solely at the Rockland County facility in accordance with the Flow Control Law and pay fees associated with the disposal to Rockland County, was a significant change in the scope and character of the work that entitles claimant to additional compensation under the contract and Standard Specifications Section 104-04 [A], incorporated into the contract. In support of its findings, the Court relies upon, inter alia, the Appellate Division's reasoning that the contract "acknowledged the value of removed waste to the claimant as a commodity that could be sold" and that "nothing therein was intended to prevent the claimant from removing the waste to appropriate facilities for such purposes" ( A. Servidone, Inc./ B. Anthony Constr. Corp., J.V. , 168 AD3d at 648-650 ). The requirement that the subcontractor dispose of the construction debris during the second construction season solely at the Rockland County facility in accordance with the Flow Control Law was a significant change in the character of the work because it deprived the subcontractor of a commodity that could be sold and had been sold to MRO during the first construction season. Further, the necessity to separate and transport the debris to the Rockland County facility entailed more labor and the use of the subcontractor's trucks. Additionally, Sessler testified how the "process of work changed considerably" due to the required compliance with the Flow Control Law which resulted in piles of concrete around the work site that impeded the subcontractor's progress due to the change in the manner and rate of loading the debris (T:255).
The single case cited by the State, Del Balso Const. Corp. v City of New York (278 NY 154 [1938] ), is inapposite. In that case, the contract contained an omission clause which expressly provided that the city could omit any portion of the work contracted without constituting grounds for any claim by the contractor for damages.
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The Court will now address the issue of damages. Claimant seeks $123,540.00 for the alleged additional costs incurred by the subcontractor due to the required compliance with Rockland County's Flow Control Law during the second construction season (Court's Ex. 2, ¶ 39; Ex. 1). Those damages are detailed in the claim as follows:
| $83,677.00 | Disposal fees paid to Rockland County |
| 15,155.00 | Increased costs for labor, equipment, materials and overhead |
| 19,766.40 | Lost revenue from the sale of demolition debris to a recycler |
| 4,941.60 | Loss of general contractor's mark-up profit |
(Ex. 1, ¶ 16)
The Court notes that the amount of damages set forth in the claim at paragraph 16, includes damages alleged to have been incurred prior to March 25, 2011, the date when claimant and the subcontractor gave notice to DOT about the significant change in the scope and character of the work (Court's Ex. 2, ¶ 25). Accordingly, the damages incurred on February 28, 2011, March 1, 2011 and March 2, 2011 were not considered by the Court in its assessment of damages (Ex. 23, pp 21-28). Rather, the Court's assessment of damages is limited to March 25, 2011 through April 20, 2011 (Court's Ex. 2, ¶ 25; Ex. 23, pp 21-23).
The Court calculates the amount of damages as follows:
| $74,993.00 | Disposal fees paid to Rockland County |
| 15,155.00 | Increased costs for labor, equipment, materials and overhead |
| 13,280.00 | Lost revenue from the sale of demolition debris to a recycler |
| 4,413.65 | Loss of general contractor's mark-up profit |
(Ex. 23, pp 21-143).
Accordingly, claimant is entitled to damages in the amount of $107,841.65, with appropriate interest from October 17, 2013 (Court's Ex. 2, ¶ 39).
It is further ordered that, to the extent that claimant has paid a filing fee, it may be recovered pursuant to Court of Claims Act § 11-a (2).
LET JUDGMENT BE ENTERED ACCORDINGLY.