Opinion
No. A00193/2013.
11-06-2015
TURNER CONSTRUCTION COMPANY, Plaintiff, v. US FRAMING INC., Defendant.
Peckar & Abramson, P.C., Howard M. Rosen of counsel, New York, NY, Attorneys for Plaintiff. E. Stewart Jones Hacker Murphy, LLP, Ryan M. Finn of counsel, Troy, NY, Attorneys for Defendant.
Peckar & Abramson, P.C., Howard M. Rosen of counsel, New York, NY, Attorneys for Plaintiff.
E. Stewart Jones Hacker Murphy, LLP, Ryan M. Finn of counsel, Troy, NY, Attorneys for Defendant.
RICHARD M. PLATKIN, J.
This is a commercial contract action. Discovery is complete, and a trial-term Note of Issue was filed on March 11, 2015. Plaintiff Turner Construction Company ("Turner") then moved for partial summary judgment, as to liability only, on its breach of contract claims against defendant U.S. Framing Inc. ("Framing"). Turner also moved for dismissal of Framing's counterclaims, which allege breaches of the same construction contract by Turner, and for the setting of an inquest to determine damages. Framing opposed the motion and cross-moved for partial summary judgment in its favor. The motions were made returnable on August 21, 2015, and the action was scheduled for a trial before the Court commencing on October 21, 2015.
At a pre-trial conference held on October 6, 2015, the parties explored with the Court several options for facilitating the cost-effective resolution of their competing liability claims in the event that the issue of liability could not be determined as matter of law in advance of trial. The conference concluded with both sides expressing a desire to have the liability issues determined on the basis of the summary judgment record presently before the Court, including affidavits, deposition transcripts and documentary evidence (see NYSCEF Nos. 17–84). In essence, the parties requested a trial on the papers.
The parties entered into a Stipulation dated October 15, 2015, by which they agreed and acknowledged: (a) the Court shall decide their claims and defenses (liability only) on the basis of the motion record; (b) in rendering its decision, the Court may engage in fact-finding and resolve disputed issues of fact; and (c) the written decision of the Court shall be deemed to be one made pursuant to CPLR 4213. The Court so-ordered the Stipulation on October 20, 2015, and this Decision & Order follows.
BACKGROUND
In January 2013, Turner entered into a contract with non-party Shelter Cove LLC to provide general construction services with respect to a 104–unit apartment complex. On January 16, 2013, Tom English and Mike Humble, Framing's president and vice-president, respectively, attended a meeting in Turner's Albany office with Jason Perillo, Turner's project manager, and another Turner employee. At the meeting, a written agreement naming Turner as contractor and Framing as framing subcontractor, dated January 14, 2013 ("Subcontract"), was executed by Humble on behalf of Framing, with Humble and a Turner employee initialing each page. Framing left the meeting with a copy of the Subcontract signed by Framing and initialed by both sides.
A supply bond dated January 16, 2013 then was issued on behalf of Framing's lumber supplier, Bridgewell Resources, LLC ("Bridgewell"). Within one week of execution of the Subcontract, Framing submitted to Turner two applications for payment. The payment requests referenced the Subcontract sum of $2,370,000 and sought payments of $996,968, corresponding to the value of Framing's lumber contract with Bridgewell, and $25,000, corresponding to Framing's cost to store the building materials. Turner paid the applications by check on January 31, 2013, and Framing accepted and deposited the funds on or about February 4, 2013.
On February 7, 2013, Turner countersigned the Subcontract and sent it to Framing via Federal Express ("FedEx") to the address set forth in the Subcontract. However, Framing's address had changed in the interim, and Framing claims that the fully executed Subcontract never was delivered. Apparently, the FedEx package was forwarded to Framing's new address, a multi-tenant complex, and an unknown individual signed for and accepted receipt of the package.
In late April and early May 2013, Framing and Bridgewell made several submittals to Turner, and there were ongoing discussions between Framing and Turner concerning certain pricing issues. Turner claims that it was growing concerned by delays in Framing's hardware submittals and by the failure of Framing to return calls and emails. Framing denies any failure to perform under the Subcontract and claims that it was growing concerned about Turner's delays in approving change orders and fixing a firm start date.
On the morning of June 4, 2013, after receiving an "out of office" reply to an email sent to Humble, Perillo sent the following email to Humble (with a copy to English and Bridgewell): "Turner is calling the bond in on the lumber and will be soliciting pricing from a local framer. US Framing has made it clear that they cannot perform on this project." Turner claims that the purpose of this email ("Perillo email") was to generate a sense of urgency on the part of Framing to timely perform its obligations under the Subcontract. Turner maintains that the email was not a termination notice and was not issued pursuant to the termination provisions of the Subcontract. Framing responds that the only reasonable interpretation of the Perillo email is as a termination notice and that such conclusion is supported by other contemporaneous communications between Turner and Framing's material suppliers.
In this connection, Framing submits an email from Turner engineer Aaron Straight to Framing's truss supplier, sent shortly after the Perillo email, in which Turner requests "truss pricing as we will be looking to hold a contract with you direct". In addition, the sales manager for Bridgewell, who was copied on the Perillo email, submits an affidavit averring to discussions with Perillo regarding Turner's efforts to find a replacement for Framing and the effect that replacing Framing would have on the purchased lumber.
After sending the email, Perillo made repeated efforts throughout the day to reach Humble or English, leaving multiple messages for both individuals. Perillo finally reached English that evening. Perillo maintains that English assured him that Framing would perform under the Subcontract. English denies this, claiming that he told Perillo that he did not understand why Perillo had sent the email terminating Framing's contract and that Turner should expect a letter on the subject. In an email sent to English the following afternoon, Perillo referred to their conversation of the prior evening and requested that English contact him after speaking with the Framing team about the delays encountered by Framing.
On June 6, 2013, Framing's counsel advised Turner in writing that it considered the June 3, 2013 email to represent a wrongful termination of the Subcontract. The letter also took the alternative position that the parties never had a valid Subcontract because Turner had failed to return a countersigned copy to Framing or advise Framing in writing that the Subcontract had been countersigned within 45 days, as required by Article II(1) of the General Conditions of the Subcontract ("Article II").
Turner's counsel responded on June 7, 2013 with proof that the Subcontract had been executed and delivered to Framing on February 13, 2013. The letter also attempted to clarify that the June 4, 2013 email was not a termination notice and that Turner expected Framing's continued performance under the Subcontract. The letter sought assurances from Framing that it would continue to honor the Subcontract, as well as certain specific actions on Framing's part, including the prompt delivery of outstanding submittals.
Framing did not respond to the letter. By letter dated June 14, 2013, Turner invoked Article XI of the Subcontract and issued a three-day written notice to Framing of its default. Framing did not respond to the notice, and on June 21, 2013, Turner issued a notice of termination of the Subcontract.
Turner thereafter engaged replacement contractors to complete the work called for under the Subcontract. By novation agreement dated August 20, 2013, Framing's materials contract with Bridgewell was assigned to a replacement contractor.
This action was commenced on or about July 1, 2013. In an Amended Verified Complaint filed on November 1, 2013 ("Complaint"), Turner seeks damages for Framing's alleged unjustified repudiation of the Subcontract and for its failure or refusal to perform thereunder. In an amended answer filed on December 12, 2013 ("Answer"), Framing alleges that it is not bound by the Subcontract due to Turner's failure to give timely notice of acceptance. further contends that, even if the Subcontract remained in effect, Turner wrongfully terminated it via the Perillo email. In its two counterclaims, Framing seeks damages from Turner's breach of the Subcontract and recovery for unjust enrichment.
ANALYSIS
A.Rescission
To establish a claim for breach of contract, the proponent bears the burden of establishing formation of a valid contract, the other party's breach of the contact, the proponent's own performance and resulting damages (see Clearmont Prop., LLC v. Eisner, 58 AD3d 1052 [3d Dept 2009] ).
Framing does not dispute that the Subcontract was validly formed. Rather, it contends that it permissibly rescinded the Subcontract pursuant to Article II and, therefore, it cannot be liable for any breach. Article II(1) provides, in pertinent part:
[Framing] will execute this Subcontract first, however Turner reserves the right to not execute this Subcontract pending an internal review and prior approval by the Owner where appropriate. Unless and until Turner ... executes this Subcontract, Turner shall not be bound.... [Framing], however, shall be bound and hereby waives the right to withdraw, rescind or in any way cancel this Subcontract. If Turner does not notify [Framing] that Turner has executed this Subcontract, either in writing or by returning a fully executed Subcontract to [Framing], within 45 days of bid, [Framing] may then notify Turner in writing that it shall not be bound by its obligations under this Subcontract. In such an event, neither Turner nor [Framing] shall have any liability to the other.... Should Turner execute this Subcontract and notify [Framing] before Turner receives written notice that [Framing] will not be bound ..., [Framing] shall be bound any may not withdraw.... [Framing] shall not be obliged to perform Work until Turner executes this Subcontract....Turner argues that Framing's invocation of Article II(1) is barred by the doctrines of waiver and estoppel and, in any event, is an untenable interpretation of the Subcontract. The Court agrees.
After executing the Subcontract on January 16, 2013, Framing timely commenced performance by, among other things, procuring a supply bond, providing insurance certificates, and submitting payment applications to Turner. Indeed, Framing requested, received, accepted and deposited more than $1 million in payments under the Subcontract from Turner, about 40% of the total contract value. And following the expiration of Turner's time to return the fully-executed Subcontract on March 2, 2013, Framing did not raise any questions or concerns with Turner about the effectiveness of the Subcontract. Rather, as defendant itself contends, Framing continued to perform under the Subcontract by reviewing and providing pricing for various items and working with its truss supplier on framing designs for the project. It was not until June 6, 2013—almost five months after Framing signed the Subcontract and more than three months after the expiration of Turner's time to deliver to Framing the fully-executed Subcontract—that Framing first purported to invoke its right of rescission under Article II.
Waiver is the voluntary and intentional relinquishment of a known right (see Nassau Trust Co. v. Montrose Concrete Prods. Corp., 56 N.Y.2d 175, 184 [1982], rearg. denied 57 N.Y.2d 674 [1982] ). "A waiver ... may be accomplished by express agreement or by such conduct or a failure to act as to evince an intent not to claim the purported advantage" (Hadden v. Consolidated Edison Co. of NY, 45 N.Y.2d 466, 469 [1978] [citations omitted] ). The Court finds that the foregoing conduct on the part of Framing manifested a clear and unmistakable intention to waive its right of rescission under Article II.
Framing's belated invocation of Article II also is barred by the doctrine of equitable estoppel. "[A] person may be precluded by his act or conduct, or silence when it is his duty to speak, from asserting a right which he otherwise would have had. Under this theory, a party is precluded from asserting rights against another who has justifiably relied upon such conduct and changed his position so that he will suffer injury if the former is allowed to repudiate the conduct" (Besicorp Group v. Enowitz, 235 A.D.2d 761, 764 [3d Dept 1997] [internal quotation marks and citations omitted] ). Having performed under the Subcontract for five months, accepted substantial payments from Turner, and remained silent about the non-receipt of the Subcontract after the deadline had passed, Framing knew or should have known that Turner would rely upon its continuing silence by failing to remedy the misdelivery and/or refraining from taking timely steps to replace Framing as subcontractor. Having reasonably relied upon Framing's silence, Turner would be substantially and unjustifiably prejudiced by the delay and additional expense attendant to Framing's belated invocation of Article II.
In any event, Framing's interpretation of Article II as permitting it to rescind the Subcontract at any time—regardless of how long it had performed and how much it had been paid, and without ever alerting Turner that it had not received a counter-signed copy of the Subcontract—is absurd and could not have been within the reasonable contemplation of the contracting parties (see Currier, McCabe & Assoc., Inc. v. Maher, 75 AD3d 889, 891–892 [3d Dept 2010] ; Tougher Heating & Plumbing Co. v. State of New York, 73 A.D.2d 732, 733 [3d Dept 1979] ; see also Matter of Lipper Holdings v. Trident Holdings, 1 AD3d 170, 171 [1st Dept 2003] ).
B.Repudiation
Framing contends that Perillo's email of June 4, 2013 constituted an unjustified repudiation of the Subcontract that it was entitled to treat as an anticipatory breach. Turner responds that the Perillo email was not a contractual notice of termination or a repudiation of the Subcontract, but simply was designed to elicit a response from Framing after it repeatedly ignored Turner's calls and emails. Turner further maintains that subsequent conversations between the parties confirmed that Turner had not repudiated the Subcontract and was, in fact, relying upon Framing's continued performance. Finally, Turner argues that even if the Perillo email were construed as a repudiation of the Subcontract, any such repudiation was timely retracted.
At the outset, it is clear that the Perillo email was not a contractual notice of termination. As Turner observes, the email makes no reference to the termination provisions of the Subcontract, it includes no particularized allegations of default, and it fails to accord Framing the opportunity to cure—provisions that ordinarily would appear in a proper notice of termination. But as Framing correctly argues, even a "defective notice of cancellation [may constitute] an Amanticipatory repudiation of the contract" (Velazquez v. Equity LLC, 28 AD3d 473, 474 [2d Dept 2006] ).
"A claim of anticipatory repudiation must be supported by evidence of an unqualified and clear refusal to perform with respect to the entire contract" (Joseph P. Carrara & Sons, Inc. v. A.R. Mack Constr. Co., Inc., 89 AD3d 1190, 1191 [3d Dept 2011] ). The declared refusal to perform must be "positive and unequivocal" (Tenavision, Inc. v. Neuman, 45 N.Y.2d 145, 150 [1978] ). Measured against this standard, the Perillo email falls short of evincing the clear and unequivocal announcement of Turner's refusal to perform required for Framing to invoke the doctrine of anticipatory repudiation.
In contracting with Turner, Framing bound itself to an intricate Subcontract consisting of 75 or so pages of contractual language, general conditions, special conditions and specifications, including detailed provisions governing disputes, defaults and termination. Against this backdrop, Perillo's informal email can reasonably be understood as notifying Framing of Turner's dissatisfaction and articulating certain measures that Turner intended to take to prepare for a potential default. In other words, the Perillo email can be construed as a statement of Turner's intention to avail itself of its rights and remedies under the Subcontract, rather than as an extra-contractual repudiation. As such, the email "was not an unequivocal, definite, and final expression of the plaintiff's intention not to perform its obligations" (Children of Am. [Cortlandt Manor], LLC v. Pike Plaza Assoc., LLC, 113 AD3d 583, 585 [2d Dept 2014] ).
When "the apparently breaching party's actions are equivocal or less certain, then the nonbreaching party who senses an approaching storm cloud, affecting the contractual performance, is presented with a dilemma, and must weigh hard choices and serious consequences" (Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp., 92 N.Y.2d 458, 463 [1998] ). Thus, insofar as the Perillo email gave Framing reasonable grounds for insecurity, it would have been entitled to demand adequate assurance of Turner's continued performance (id.at 464–465 ).
In any event, even if the June 4, 2013 email from Perillo could be understood as announcing Turner's clear and unqualified refusal to continue performance under the Subcontract, any such repudiation was nullified by Perillo's subsequent retraction. "The effect of a statement as constituting a repudiation ... is nullified by a retraction of the statement if notification of the retraction comes to the attention of the injured party before he materially changes his position in reliance on the repudiation or indicates to the other party that he considers the repudiation to be final" (Restatement [Second] of Contracts § 256 [1] ).
Perillo testified that in a telephone conversation with English later on June 4, 2013, he spoke to English about Framing's lack of responsiveness and the need for improvement. During the call, English is said to have reaffirmed Framing's desire to complete the Subcontract, and he assured Perillo that he would speak to the Framing team about moving the project forward. Consistent with that conversation, Perillo sent English an email the following day memorializing their telephone conversation and requesting the follow-up that was discussed.
While English denies Perillo's account of the telephone conversation, the Court finds Perillo's account to be more credible given his confirming email of the following day and the lack of any contemporaneous response from Framing. Moreover, in his affidavit, English does not that he told Perillo that Framing considered the Subcontract to have been terminated (see AG Props. of Kingston, LLC v. Besicorp–Empire Dev. Co., LLC, 14 AD3d 971, 973 [3d Dept 2005] ). Under the circumstances, the Court finds that the subsequent telephone and email communications between Perillo and English amounted to a bona fide retraction.
Finally, even if Perillo's subsequent communications with English did not effect a retraction of any repudiation, the June 7, 2013 letter to Framing from Turner's counsel plainly amounted to a bona fide retraction. This letter, which was written in response to a letter from Framing's counsel that did not treat Perillo's alleged repudiation as final, manifested Turner's intent to continue to perform its obligations under the Subcontract and, if necessary, to pursue contractual remedies against Framing.
In this connection, the Court rejects Framing's contention that the June 7, 2013 letter from Turner's counsel would not represent a bona fide retraction because it attempted to impose new, extra-contractual terms (see Beinstein v. Navani, 131 AD3d 401 [1st Dept 2015] ; see also Joseph P. Carrara & Sons, 89 AD3d at 1191 ). Given the letter from Framing's counsel of June 6, 2013, Turner was entitled to demand adequate assurances of due performance, a demand that went entirely unresponded to by Framing. And Framing has failed to demonstrate that specific demands for performance made by Turner's counsel were extra-contractual.
The Court therefore concludes that Turner was entitled to issued a notice of default to Framing on June 14, 2013. And following Framing's failure to cure the default, Turner permissibly terminated the Subcontract on June 21, 2013.
CONCLUSION
Based on the foregoing, Turner has established its claim that Framing breached the Subcontract. Further, Framing's counterclaims, which are predicated upon allegations that Turner breached the Subcontract or Framing validly rescinded the Subcontract, are without merit and must be dismissed. Accordingly, it is
ORDERED that Turner is entitled to a judgment as to liability only on its complaint; and it is further
ORDERED that Framing's counterclaims are dismissed; and it is further
ORDERED that the parties shall confer regarding a process and a schedule for the determination of damages (and any other remaining issues), and shall thereafter request a conference with the Court for the purpose of scheduling further proceedings.
This constitutes the Decision and Order of the Court. The original Decision and Order is being transmitted to plaintiff's counsel for filing and service. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220. Counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.