Opinion
48528/02.
Decided December 2, 2009.
Chris Georgoulis, Esq., Georgoulis Associates PLLC, New York, NY, Attorney for Plaintiff.
Bob Bailey, Esq., NYC Law Department, Office of the Corporation Counsel, New York, NY, Attorney for Defendant.
The New York City School Construction Authority ("SCA") has moved for summary judgment seeking dismissal of Volmar Construction Corporation's ("Volmar") complaint pursuant to CPLR 3212 based on the Public Authorities Law § 1744(2) one year statute of limitations. Volmar has cross-moved for summary judgment seeking dismissal of the SCA's affirmative defenses that Volmar failed to file a timely notice of claim and failed to commence its action within one year of the accrual of its causes of action. At oral argument on April 1, 2009, based upon ambiguities in the documents annexed to the motion papers, this Court ordered a hearing to determine whether Volmar's suit was timely. After several adjournments, the hearing was held on September 10, 2009.
BACKGROUND
This action arises out of a 1993 written contract ("Agreement") between Volmar, a general contractor, and the SCA for the modernization of Prospect Heights High School (the "School Building"), located in Brooklyn, New York, at an agreed price of $29,764,000. Volmar began work on the School Building in 1993. Section 16.01D of the Agreement provides that "after the Authority has determined that the Work is substantially complete, the Contractor shall submit . . . a detailed estimate of the value of the known remaining items of Work." Section 16.01D continues:
The Authority, when all the Work is substantially complete, shall pay to the Contractor the balance due to the Contractor pursuant to the Contract, less:
1.four (4) 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 Authority, the Authority shall pay the appropriate amount pursuant to the duly completed and submitted monthly requisitions.
The term "substantial completion" is defined in Article 1 as "the date certified by the Authority when construction is sufficiently complete, in accordance with the Contract Documents, so the occupant can occupy or utilize the Work for the use for which it is intended." In accordance with Section 16.01D, on January 26, 2000, Volmar signed a Substantial Completion Certificate certifying "SUBSTANTIAL COMPLETION OF ENTIRE PROJECT" and that the School Building was "satisfactorily completed in accordance with the Contract Documents" and could be "safely occupied or used for its intended purpose." On March 6, 2000, after reviewing the status of the work, the SCA signed the same Substantial Completion Certificate that Volmar had submitted, verifying that there was "substantial completion of entire project." Subsequently, pursuant to Public Authorities Law § 1744, Volmar filed a Verified Notice of Claim with the SCA on March 31, 2000. In the Verified Notice of Claim, Volmar asserted that the SCA owed Volmar $12,928,614, as adjusted, for delay on account of:
[T]hree and one half years of delay, interference and hindrance caused, among other things, by unanticipated and misrepresented site conditions, unsuitable soil conditions, design errors and omissions (revisions to the storm/site drainage system), adverse winter weather, lack of timely payment by the SCA for completed work, a multitude of change orders (exceeding 500), denial of timely access to project areas and unanticipated asbestos abatement.
In its March 31, 2000 Verified Notice of Claim, Volmar states: "the dates of the events underlying the Claim as described . . . continued through January 3, 2000, the date of substantial completion." In the final paragraph of the Notice of Claim, Volmar requested payment of the claimed amount and warned that it would commence an action if the claim was not paid. In Volmar's Requisition for Payment No. 60, sworn by Volmar's Vice President, John Volandes, on May 23, 2000, which covered the period ending February 29, 2000, Volmar confirmed that 100% of the "Total Contract" and 99.37% of "Total [Work] with Changes" was completed.
Although the School Building construction was certified to be substantially complete on March 6, 2000 by the SCA, the SCA subsequently issued numerous Notices of Direction to Volmar, directing the performance of additional minor tasks such as, "replace seal on house pump," "replace broken belt," and "determine why lights are not working and turn them on." On October 2, 2000, Volmar sent the SCA a supplement to its March 31, 2000 Verified Notice of Claim, which indicated that $12,928,614 still constituted the entire claim for delay, but also listed amounts due on open items, including Disputed Unilateral Change Orders totaling $554,698 and Pending Change Orders and Work Completed without RFP totaling $2,029,591, upon which Volmar requested negotiation and settlement.
Section 10.02 of the General Conditions of the Agreement precludes claims for delay. At oral argument, counsel for the SCA declined to argue such provision in seeking dismissal, relying exclusively on the statute of limitations contained in Public Authorities Law § 1744 (Transcript of April 1, 2009 at 10).
In support of plaintiff's cross motion, Mr. Volandes claimed in his affidavit that the SCA approached Volmar in December 2000, indicating that it wanted to hold meetings to resolve and pay the outstanding items from Volmar's March 31, 2000 Notice of Claim. Mr. Volandes stated that he participated in meetings with the SCA beginning on March 21, 2001, in order to negotiate the unpaid claims. These meetings continued through October 2002. Meanwhile, Volmar was still working at the School Building in compliance with the Notices of Direction. On June 24, 2002, Volmar sent a second Notice of Claim to the SCA, stating that the claim arose out of:
Five and one-half years of delay, interference and hindrance caused, among other things, by unanticipated and misrepresented site conditions, unsuitable soil conditions, design errors and omissions, adverse weather, lack of timely payments by the NYCSCA for completed work, a multitude of change orders (exceeding 500) denial of timely access to project areas, actual and constructive acceleration of work and unanticipated asbestos abatement.
Within the June 24, 2002 Notice of Claim, Volmar again listed amounts due, including $554,698 for Disputed Unilateral Change Orders and $2,029,590 for Open Requests for Proposals. On October 8, 2002, Volmar sent the SCA Requisition for Payment No. 61 covering the period from March 1, 2000 to September 30, 2002, incorporating the work done upon the Notices of Direction.
Section 16.02B of the Agreement provides that "the first payment pursuant to Section 16.01D shall not become due until the Contractor submits to the Authority a general release." On May 25, 2000 and on October 11, 2002, Volmar signed a document entitled "General Release-Substantial Completion," provided to Volmar by the SCA, based upon the SCA's representations that it would release payment to Volmar if this document was signed. The document states that the Contractor "has remised, released, and forever discharged" the SCA "of and from all manner of action and actions, cause of action, suits, debts, dues, sums of money . . . claims and demands whatsoever, in law or equity except for the items listed in Schedule A." Attached to the General Release-Substantial Completion is Volmar's "Schedule A," in which Volmar reserved the right to bring claims for certain items, including "any and all pending and unilateral change orders for work performed, or to be performed, which are in the process of negotiation with and/or execution by SCA" and "additional impact costs, time, and damages incurred." The SCA did not sign this document. Volmar argues that the October 11, 2002, execution of the "General Release-Substantial Completion" document represents the date of substantial completion. Volmar filed suit for breach of contract on November 14, 2002, including claims for the balance of the original contract, additional change order work, and delay damages.
THE HEARING
On September 10, 2009, a hearing was held to determine whether this suit was "commenced within one year after the happening of the event upon which the claim is based" pursuant to the Public Authorities Law § 1744(2). At that hearing, Mr. Volandes testified that work on the original contract was completed "sometime in 2000," but that from 2000 to 2002 Volmar was at the School Building "sporadically" for "negotiations or to execute" work (Transcript at 131:23; 130:25). When asked what kind of work Volmar did during that time, Mr. Volandes responded, "there was plumbing, there was carpentry, electrical, and there was heating and ventilation and air conditioning known as HVAC" (Transcript at 131:8-12). The type of work described by Mr. Volandes is consistent with the corrective work requested by the SCA in the Notices of Direction. Michael Bitingon, a Deputy Chief Project Officer with the SCA involved with the Prospect Heights modernization project during the year 2000, testified that extra work "doesn't change the fact that the substantial completion certificate has been issued" (Transcript at 54:20). George Toma, the current Vice President for Construction Management at the SCA and previously the Chief Project Officer for Brooklyn from 2002 to 2008, testified that, as a standard practice, the SCA formally transfers a building to the Board of Education within "30 days from declaring substantial completion" (Transcript at 66:4-7). In this case, Mr. Toma agreed that the School Building was transferred to the Board of Education for operation by April 6, 2000, because "substantial completion was March 6th, right after that was in the 30 days we should have it transferred" (Transcript at 66:14-19). Furthermore, Mr. Toma testified, the SCA approved Volmar's payment request of $1,418,835 in 2000 because substantial completion had been achieved (Transcript at 74:15-24). Mr. Volandes claimed that he did not know that this payment was made because of substantial completion, but believed that Volmar was entitled to this payment based on "mutual agreement" (Transcript 140:22).
As to the "General Release-Substantial Completion" document of May 2000, Mr. Volandes testified that the Schedule A reservation of rights annexed to that document was the same as in the Notice of Claim of June 24, 2002, acknowledging that he knew in May 2000 that he might have to prosecute those claims (Transcript at 146:6-18). Mr. Toma testified that it is a requirement of the finance department that a copy of a general release be submitted with every payment request after substantial completion, indicating that the SCA had Volmar sign the General Release-Substantial Completion because it was a standard practice after the date of substantial completion (Transcript at 82:14-16). On cross-examination, Mr. Volandes testified that, in consultation with another Volmar stockholder, a Mr. Marinacus, and their attorneys, he instructed plaintiff to delay suit. Mr. Volandes admitted that the SCA did not instruct Volmar to hold off on legal action or say it would pay the delay claims (Transcript at 150:4-25).
Mr. Volandes further testified that beginning in May 2000, Volmar had meetings with the SCA regarding resolution of their March 31, 2000 Notice of Claim, and had about 10-15 meetings with SCA representatives after that time in order to negotiate unpaid claims (Transcript at 129:4; 124:20-25). Mr. Toma admitted that there "must have been a dozen meetings negotiating change orders" during 2001 and 2002 (Transcript at 103:12-16).
DISCUSSION
In order to obtain summary judgment, the movant must establish its cause of action or defense sufficiently to warrant a court's directing judgment in its favor as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact ( Zuckerman v City of New York, 49 NY2d 557, 562; CPLR 3212[b]). Where the proponent of the motion makes a prima facie showing of entitlement to summary judgment, the burden shifts to the party opposing the motion to demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action ( Vermette v Kenworth Truck Co., 68 NY2d 714, 717). Defendant has raised the legal defense of statute of limitations which, if sustained, would preclude plaintiff's suit as a matter of law. Evidence at hearing held pursuant to CPLR 3212(c) has resolved any factual questions in defendant's favor, thus warranting the granting of defendant's motion to dismiss.
Pursuant to Public Authorities Law § 1744(2), an action relating to the construction, reconstruction, improvement, rehabilitation, or repair of educational facilities may be brought against the SCA only if "commenced within one year after the happening of the event upon which the claim is based." It is well settled that a school construction contract claim accrues at the time damages become ascertainable, usually on the date of substantial completion or when a detailed invoice of the work performed is submitted ( C.S.A. Contr. Corp. v NY City Sch. Constr. Auth., 5 NY3d 189, 192; NY City Sch. Constr. Auth. v Kallen Lemelson, 290 AD2d 497 [2d Dept 2002]; G.A. Contractors, Inc. v Board of Educ., 176 AD2d 856, 857 [2d Dept 1991]).
In this case, the Agreement defines substantial completion as "the date certified by the Authority when construction is sufficiently complete, in accordance with the Contract Documents, so the occupant can occupy or utilize the Work for the use for which it is intended." The SCA certified the School Building work as substantially complete on March 6, 2000 and Mr. Toma testified that the SCA transferred the School Building to the Board of Education within "30 days from declaring substantial completion" (Transcript at 66:6-7). Furthermore, Volmar's requisition for payment for the period ending in February 2000 stated that 99.37% of work was completed and Mr. Volandes testified the original contract work was completed in 2000. Although Volmar asserts that the October 11, 2002 General Release-Substantial Completion document represents the date of substantial completion, the evidence is that this is a standard form the SCA requires before releasing a payment after the date of substantial completion. The fact that the SCA did not sign the document certifying substantial completion on that date and Volmar had previously signed another General Release-Substantial Completion document in May 2000, establishes that the controlling date of substantial completion is March 6, 2000. This suit was not filed until November 14, 2002, over two and a half years after the accrual of the claim.
Volmar argues that the additional work it performed following March 6, 2000 extends the date of substantial completion. While the date of substantial completion may be different for original contract work and "extra" work ( see G.A. Contractors, Inc. v Board of Educ., 176 AD d 856 [2d Dept 1991]; Amsterdam Wrecking Salvage Co. v Greater Amsterdam School Dist., 83 AD2d 654, 655 [3d Dept 1981]) mere repairs do not amount to "extra" work and incidental work will not extend the completion date ( Phillips Constr. Co. v New York, 61 NY2d 949, 950(finding suit was time-barred because "[e]xamination of the punch list work . . . discloses only incidental items and no proof that actual construction had not already been completed"); State v Lundin, 60 NY2d 987, 990("construction may be complete even though incidental matters relating to the project remain open"). Nor do price negotiations or communications alone effect an extension of the substantial completion date ( Id.; see also Philson Painting Co. v Board of Education, 133 AD2d 619 [2d Dept 1987](applying Education Law § 3813, "the mere fact that communications were exchanged between the parties is insufficient to relieve the plaintiffs of its statutory duty").
Here, although the SCA issued at least seven Notices of Direction ordering Volmar to do work at the School Building after the date substantial completion was certified, all of the work was merely incidental or repair work. This is evidenced by the nature of the work directed, such as "replace broken belt," "recalibrate freon detector," and "troubleshoot why chillers not working," all in the nature of punch list items. Only $42,310 was requested for change order work for the period from March 2000 to September 2002 on a $34 million contract, indicating that the incidental work performed subsequent to substantial completion was not major construction work. Moreover, testimony indicates that these claims were the subject of negotiation and have been largely paid. It is noted that Volmar's second Notice of Claim, filed in June 2002, is practically identical to the March 31, 2000 Notice of Claim, indicating that Volmar did not have any more claims than it had two years earlier. Thus, the date of substantial completion was not extended beyond March 6, 2000.
Furthermore, if the submission date of a detailed invoice of the work performed is used to determine when the claim accrued, Volmar submitted its first Notice of Claim to the SCA on March 31, 2000. That Notice of Claim included a list of all the payments due to Volmar throughout the contract, and qualifies as a detailed invoice. Volmar also submitted a detailed Request for Payment in May 2000, due for the period December 1, 1998 to February 29, 2000, invoicing the items for which payment was demanded. As both the date of substantial completion and the date of Request for Payment are more than one year prior to the filing of this action, the suit was untimely ( C.S.A. Contr. Corp. v NY City Sch. Constr. Auth., 5 NY3d 189, 192; NY City Sch. Constr. Auth. v Kallen Lemelson, 290 AD2d 497 [2d Dept 2002]; G.A. Contractors, Inc. v Board of Educ., 176 AD2d 856, 857 [2d Dept 1991]).
Volmar further contends that the statute of limitations did not begin to run until the SCA rejected or denied payment, which Volmar claims occurred in November 2002. Although the SCA did not explicitly refuse payment to Volmar until November 2002, this argument is unavailing because constructive rejection is sufficient for a claim to accrue ( see Dodge, Chamberlin, Luzine, Weber Architects v Dutchess County Bd. of Coop. Educ. Servs., 258 AD2d 434, 435 [2d Dept 1999]). Constructive rejection may occur when "the putative debtor declines to timely respond to the claimant's demand letter" ( Alfred Santini Co. v City of New York, 266 AD2d 119, 120 [1st Dept 1999]). Under Public Authorities Law § 1744(2), a contractor is required to allege in its complaint "that at least thirty days have elapsed since [a notice of claim was] presented and that the authority or the officer or body having the power to adjust or pay said claim has neglected or refused to make an adjustment or payment thereof." Although plaintiff alleges in its complaint (at paragraph 8) that a notice of claim was submitted on or about July 2002, Volmar sent the SCA its first Notice of Claim on March 31, 2000. When the SCA did not pay Volmar's claims or indicate that it would pay after thirty days, the claims were constructively rejected, effective May 1, 2000.
Plaintiff also argues that even if March 6, 2000 is the date the statute of limitations began to run, the SCA should be estopped from moving to dismiss Volmar's suit based on untimeliness. Plaintiff asserts the SCA lulled Volmar into sleeping on its rights by holding various negotiation meetings to settle claims. Volmar claims that since it relied on these meetings to its detriment, the SCA should be estopped from raising the statute of limitations affirmative defense.
Generally, estoppel does not apply to a government agency acting in a government capacity ( Hamptons Hospital Medical Center, Inc. v Moore, 52 NY2d 88, 93), although a government subdivision may be estopped from asserting a defense when it negligently or wrongfully induced reliance by a party who changed its position to its detriment based upon that reliance ( Bender v New York City Health Hospitals Corp., 38 NY2d 662, 668). However, to support an estoppel claim, a plaintiff must show that a "municipal defendant's conduct was calculated to, or negligently did, mislead or discourage" the plaintiff ( Mohl v Town of Riverhead , 62 AD3d 969 , 970 [2d Dept 2009], citing Wade v New York City Health Hosps. Corp. , 16 AD3d 677 [2d Dept 2005]; see also JCH Delta Contr., Inc. v City of New York, 2007 NY Slip Op 7507, 1 [1st Dept 2007]("[n]or was defendant estopped from relying upon the statute of limitations defense on the basis it entertained ongoing negotiations with plaintiff regarding the claims")).
Volmar claims that the SCA should be estopped based on the negotiation meetings that were held. There is some discrepancy as to when the meetings began. In Mr. Volandes's affidavit, he states that the first meeting occurred on March 21, 2001. In that case, Volmar could not have relied to its detriment on the meetings because March 21, 2001 was already a year after the date of substantial completion. At the hearing, Mr. Volandes stated on direct examination that the first meeting occurred in May 2000 (Transcript at 129:4). Then on cross-examination, Mr. Volandes stated he had "meetings with the SCA starting sometime in the fall of 2000" (Transcript at 151:14). Such inconsistency is insufficient to establish plaintiff's estoppel argument, particularly in light of fax transmittals from Project Officer Steve Vianelli, beginning May 17, 2002, indicating that these negotiations concerned change order work performed before the date of substantial completion. There is no documentary evidence that delay damages were ever discussed, and only one fax, sent on October 4, 2002, referred to change order work from the Notices of Direction sent after the date of substantial completion. Moreover, Mr. Volandes admitted at the hearing that the SCA had neither told him to "hold off" on litigation nor affirmatively promised to pay the additional sums demanded for delay. Clearly, the meetings the SCA had with Volmar, which appear to have related only to change orders, did not amount to calculated or misleading conduct that wrongfully induced Volmar to sleep on its rights regarding the claims in its complaint.
The evidence at hearing established that Volmar's suit was filed more than a year after the date of substantial completion of all work under the Contract, upon which the claim is based. Thus, the SCA is entitled to summary judgment.
Whatever the merit of Volmar's claim that the SCA has agreed to pay the amount alleged in Volmar's first cause of action, the contract balance and retainage, thus warranting a denial of the motion to dismiss as to the first cause of action, it is noted that such contention relies on communications between counsel in 2004. In any event, Public Authorities Law § 1744 does not provide for an extension of the statute of limitations for certain causes of action. The complaint is therefore dismissed in its entirety.
CONCLUSION
Accordingly, defendant's motion for summary judgment dismissing the complaint is granted as plaintiff's complaint was not filed within the one year Statute of Limitations set forth in Public Authorities Law § 1744. Plaintiff's cross-motion for summary judgment is denied.
The foregoing constitutes the decision and order of the Court.