Opinion
590630/03.
Decided June 28, 2004.
The various motions before the court are consolidated herein for disposition. Defendant Pavarini Construction Co., Inc. (Pavarini) moves, pursuant to CPLR 3212, for partial summary judgment dismissing the fifth cause of action and the parts of the first and fourth causes of action seeking damages for "extra work" due to delays in a construction project in which plaintiff Commercial Electrical Contractors, Inc. (CEC) participated. In addition: (i) fourth-party defendant, Ambrosino, Depinto Schmeider Consulting Engineers, P.C. (ADS) moves, pursuant to CPLR 3211(a)7, to dismiss the fourth-party complaint against it brought by third-party defendant and fourth-party plaintiff Tod Williams/Billie Tsien Associates (TWBTA); (ii) TWBTA moves, pursuant to CPLR 3212, to dismiss the third-party complaint against it brought by third-party plaintiff and defendant Museum of American Folk Art (MAFA); and (iii) Pavarini moves, pursuant to CPLR 3025(b), to amend its answer to CEC's complaint to include a cross claim for indemnification against MAFA.
In its motion, Pavarini also sought partial summary judgment on its cross claim against MAFA for a contract balance in the amount of $387,344. That part of the motion was withdrawn without prejudice upon oral argument (Transcript, at pp. 5, 32).
FACTS
MAFA engaged general contractor Pavarini to construct a museum at the premises known as 45-47 West 53rd Street, New York, New York (the Premises). On March 17, 2000 Pavarini executed a purchase order in which certain work was subcontracted to CEC (the Subcontract). CEC was scheduled to begin work at the Premises in April of 2000 and agreed to perform the work in "a prompt and diligent manner". See id., Terms and Conditions, ¶ 4. CEC and Pavarini disaccord as to the agreed length of the entire job. CEC claims that the job was to be completed within six months of the starting date, while Pavarini maintains that it was to be completed in fourteen months (Transcript, pp. 22-24). There is no date for the completion of the work specified in the Subcontract.
Section 2 of the Subcontract provides that:
[CEC] is bound to [Pavarini] for the performance of the Work in the manner as [Pavarini] is bound to [MAFA] under [Pavarini's] contract with [MAFA]. . . . In the event of any conflict between these Terms and Conditions and a contract between [Pavarini] and [MAFA], the more strict provision in favor of [Pavarini] shall govern.
CEC alleges that as a result of revisions to the schedule and incomplete plans and specifications, it had to do extra work on the Premises, which work was completed in May 2002, for which it is now owed $1,629,825. Paragraph 5 of the Subcontract provides that:
In the event [CEC] is delayed in the performance of the Work, [CEC] shall be entitled only to extension of time. [CEC] waives any claim for damages or additional compensation for a delay in the performance of the Work, regardless of the cause of such delay.
Section 7.1.4 of the contract between Pavarini and MAFA (the Prime Contract), which Pavarini claims has been incorporated by reference in paragraph 2 of the Subcontract, states that:
No damages, payment, additional compensation, or adjustment of any kind, other than the extension of time [as provided in this agreement] shall be made to the General Contractor due to any delays, disruptions or hindrance in the performance of any of the Work, whether or not such delays are due to the fault of [Pavarini], [MAFA], [MAFA's] Representative, or [TWBTA], including, but not limited to delays caused by design deficiencies . . .; and [Pavarini] agrees that an extension of time shall be its sole, exclusive and complete remedy and that it shall accept such extension of time in full satisfaction and settlement of any and all costs and damages incurred by reason of any delays, disruptions or hindrances.
The Prime Contract also contained notice provisions related to compensation for extra work. Section 9.1 provides that for any extra work or change in work that is contrary to the provisions of the Prime Contract:
[Pavarini] shall . . . notify [MAFA and TWBTA] in writing within twenty four (24) hours of such determination, order or directive and in any event before performing the Work in question or incurring any cost, of the reasons for its opinion and request a final determination thereon by [MAFA]
Pavarini alleges that any defect in the plans and specifications provided to CEC is the responsibility of MAFA. MAFA, in turn, makes claims against TWBTA for contribution, proportionate liability, and express and implied indemnity because TWBTA, as the architect/designer for the work at the Premises, was responsible for said plans and specifications. Finally, TWBTA claims that if MAFA sustained any damages, then ADS, as subcontractor to TWBTA for HVAC, electrical, plumbing, and fire-protection design, is responsible in common law indemnity and/or contribution for a proportion of the judgment.
The contract between TWBTA and MAFA contains an indemnity clause which states that:
[TWBTA] shall save, indemnify and hold harmless [MAFA], from and against all claims, demands, liabilities, damages, losses, costs and expenses . . . of any nature whatsoever in any way arising out of or resulting from . . . (ii) performance by [TWBTA] of the services required under this Agreement which are caused in whole or in part by any negligent or willful act, error or omission or breach of contract by [TWBTA.]
In the first cause of action of its complaint CEC seeks $1,629,895 from Pavarini for extra work which it directed to be performed. Said cause of action makes no allegation of damages due to delays, but at oral argument CEC's counsel stated that, except for approximately $70,000, the claim is based on delays caused by Pavarini (Transcript p. 12). The second and third causes of action assert breaches of the trust fund provisions of the Lien Law, and in the fourth cause of action CEC seeks foreclosure of its mechanic's lien. In its fifth cause of action CEC asserts (¶¶ 45-46):
"As a result of errors and omissions in the plan's specifications and other unanticipated circumstances caused by (Pavarini), the plaintiff has been required to perform additional work, was delayed in completion of the Project, was required to keep its men and equipment idle and available and has incurred additional direct and indirect costs and expenses as a result thereof (and) by reason of the foregoing, (Pavarini) is indebted to the plaintiff in the amount of approximately $1,500,000.ANALYSIS Partial Summary Judgment
To obtain summary judgment Pavarini must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact. Winegrad v. New York Univ. Med. Center, 64 NY2d 851, 853 (1985); Zuckerman v. City of New York, 49 NY2d 557, 562 (1980); Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 (1957).
Pavarini argues that: (i) the Subcontract contains a valid and binding clause waiving damages for delay in the performance of CEC's work and, as such, CEC cannot recover such damages; (ii) the Prime Contract, which has been incorporated by reference into the Subcontract, also bars recovery of damages for delays; (iii) Pavarini is not, in any event, responsible for delays that were not caused by an agency or instrumentality under its control; and (iv) CEC waived its right to recover additional compensation by its failure to comply with the written notice requirements under the Prime Contract.
CEC argues that the incorporation clause in the Subcontract is not enforceable because New York law sets a particularized standard for determining the obligations of subcontractors under a prime contract. Specifically, CEC relies on the principle that "[u]nder New York law, incorporation clauses in a construction subcontract, which incorporate by reference clauses in the prime contract into the subcontract, bind a subcontractor only to the prime contract provisions relating to the scope, quality, character and manner of the work to be performed by the subcontractor." S. Leo Harmonay, Inc. v. Binks Mfg. Co., 597 F. Supp 1014, 1024(SD NY 1984), affd. 762 F2d 990 (2nd Cir 1985). Accord, Bussanich v. 310 East 55th St. Tenants, 282 AD2d 243, 244 (1st Dept 2001). The essential principle in those cases was whether an indemnification provision of a prime contract could be extended, through incorporation by reference, to bind a subcontractor. In contrast, the "time schedule of [a] prime contract [is] incorporated into the subcontract because it relates to the scope, quality, character and manner of plaintiff's work. . . ." S. Leo Harmonay, Inc. v. Binks Mfg. Co., supra at 1026. Thus, CEC's argument that time schedule issues, such as delays, are not covered by the incorporation clause in the Subcontract lacks merit.
In any event, reference to the Prime Contract is not requisite because paragraph 5 of the Subcontract specifically refers to the eventuality of delay in the performance of the work. That no-damages-for-delay clause is unambiguous, valid, and binding upon CEC. See, R/S Assoc. v. New York Job Dev. Auth., 98 NY2d 29, 32 (2002) ("where the language [of a contract] is clear, unequivocal and unambiguous, the contract is to be interpreted by its own language").
CEC maintains, however, that the no-damages-for-delay clause is inapplicable to it based upon certain exceptions to the enforcement of such a clause. Specifically, Corrino Civetta Constr. Corp. v. City of New York, ( 67 NY2d 297, 309) establishes that no-damages-for-delay clauses are unenforceable if the delays are caused by: (i) "the contractee's bad faith, or its willful, malicious, or grossly negligent conduct"; (ii) "uncontemplated delays"; (iii) "delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee"; or (iv) "contractee's breach of a fundamental obligation of the contract".
The applicability of the first of the above public policy exceptions is dubious. CEC argues that Pavarini's failure to timely obtain a crane permit and scheduling steamfitters and welders to work at the same time as electricians constitutes gross negligence and demonstrates willful misconduct. Thus, CEC asserts that, at the very least, triable issues of fact have been raised pertaining to Pavarini's bad faith and gross negligence.
To defeat the exculpatory clause in question here, CEC must do more than engage in the "facile use of the expression gross negligence." Sol E. Feldman Furs Inc. v. Jewelers Protection Serv. Ltd., 134 AD2d 171, 172 (1st Dept 1987). "[A]n exculpatory clause is unenforceable when, in contravention of acceptable notions of morality, the misconduct for which it would grant immunity smacks of intentional wrongdoing." Kalisch-Jarcho, Inc. v. City of New York, 58 NY2d 377, 385 (1983). See also, Hartford Ins. Co. v. Holmes Protection Group, 250 AD2d 526, 528 (1st Dept 1998) ("gross negligence is not typically found absent more outrageous acts of folly"); Coniber v. Hults, 15 AD2d 252, 256 (4th Dept 1962) (gross negligence is similar in character to "culpable," "criminal," or "reckless").
It strains all reason to assert that failure to timely obtain a permit for a crane, or to schedule workers in the most efficient manner is gross negligence. Thus, it would not appear that CEC has not set forth sufficient evidence to raise a triable issue as to gross negligence so as to invalidate the no-damages-for-delay clause.
CEC also argues that the amount of extra work performed under the Subcontract and Pavarini's failure to provide a hoist for the Premises constitutes a cardinal change to the Subcontract. CEC has not indicated the existence of any contractual provision requiring a hoist, but only refers to a discussion with Pavarini about the hoist in the pre-contract period. See, Memorandum of Law in Opposition, at pp. 15-16. CEC bears a heavy burden to show that Pavarini's failure to provide a hoist is a breach of a fundamental obligation of the contract when it cannot point to any language in the contract, or any related contract, requiring the provision of a hoist.
CEC's claim that the extra work resulted from uncontemplated delays, however, presents quite a different picture. Corrino Civetta Constr. Corp. provides that "even broadly worded exculpatory clauses . . . are generally held to encompass only those delays which are reasonably foreseeable, arise from the contractor's work during performance, or which are mentioned in the contract." Id. at 310. See also, Eldor Contracting Corp. v. County of Nassau, ___ AD2d ___, NYLJ April 29, 2004, p. 30 (2d Dept.); Abax Inc. v. New York City Housing Authority, 282 AD2d 372 (1st Dept. 2001).
Whether the delays that ensued during the work on the Premises were anticipated, unanticipated, or reasonably foreseeable, depends on a determination of what Pavarini and CEC assented to in the formation of their agreement. See, Martin Mech. Corp. v. City of New York, 100 Misc 2d 1107, 1111 (Sup Ct, NY County 1979) (claim for unanticipated delays affirmatively puts what the parties contemplated in formulating an agreement at issue). This issue, thus, presents a question of fact that cannot at this time be resolved on summary judgment. See, Sillman v. Twentieth Century-Fox Film Corp., supra at 404 (on summary judgment, "[t]he function of the court is one of issue finding not issue determination").
Nevertheless, Pavarini also asserts that CEC has waived its right to compensation due to its failure to comply with the strict written notice requirements of the Prime Contract. Pavarini argues that because there is no written record to satisfy CEC's obligation to give written notice and Section 9.1.2.2 of the Prime Contract states that failure to give such notice will constitute waiver of a claim for extra work, CEC has waived its claim for additional compensation. In support of this contention, Pavarini cites Morelli Masons, Inc. v. Peter Scalamandre Sons, Inc., 294 AD2d 113 [1st Dept 2002]; F. Garofalo Elec. Co., Inc. v. New York Univ., 270 AD2d 76 [1st Dept 2000]; and A.H.A. Gen. Constr., Inc. v. New York City Hous. Auth., 92 NY2d 20.
Reliance on these cases is not, however, fully justified. Where parties to a contract demonstrate mutual departure from the written agreement, such a modification is enforceable. In Morelli Masons, Inc., the court stated that a notice requirement for extra work must be given effect because "there was no clear relinquishment of the right to rely on the contractual provision by an indisputable departure based on a course of conduct or oral agreement." In F. Garofalo Elec. Co., Inc., it was stated that an oral modification to a written contract, even where the written contract prohibits such modification, is valid where "the oral modification is fully executed or there has been a partial performance 'unequivocally referable' to the oral modification." See also, Rose v. Spa Realty Assoc., 42 NY2d 338, 343-344 (1977); Austin v. Barber, 227 AD2d 826, 828 (3rd Dept 1996) (where the "conduct of the parties demonstrates an indisputable mutual departure from the written agreement" the prohibition of General Obligations Law § 15-301 against oral modification does not apply). In A.H.A. Gen. Constr., Inc., the defendant was not involved with the change orders and the court found that the defendant had not frustrated or prevented the notification requirement under the contract. Also, the contract in that case contained a merger clause which raised a presumption against oral modification.
Here, Pavarini cites no merger clause and it is alleged to have interfered with CEC's notification to MAFA by acknowledging, and permitting execution of, informal changes to the work. CEC claims that oral modifications to the Subcontract (and thereby to the Prime Contract) were made. CEC has noted specific conversations about the extra work with Pavarini. See, Lupo affidavit in opposition to Pavarini's motion for partial summary judgment, ¶¶ 23-28. Moreover, CEC has made reference in its correspondence with Pavarini to "approved tickets and AWO's we still have no purchase orders for" and "waiting for the below purchase orders you claim I have". CEC has also provided extensive correspondence with references to changes that were made to the work, where neither CEC nor Pavarini mentioned the requirement of a writing in order to make such changes. Finally, CEC has more than "partially performed" the extra work. It claims to have fully performed that work. See, Rose v. Spa Realty Assoc., supra at 343-344. If oral modification and execution can be proven, the written notice requirement could be obviated and CEC entitled to compensation for the extra work.
Alternatively, to the extent that CEC can prove the oral modifications were agreed and CEC then relied upon the oral modifications with Pavarini's knowledge of such reliance, Pavarini may be estopped from invoking the Prime Contract to deny compensation to CEC. Rose v. Spa Realty Assoc., supra at 344.
Thus, although the no-damages-for-delay clause in the Subcontract is generally valid, a determination of whether specific delays fall within the public policy exception for uncontemplated delays cannot be made on summary judgment. As summary judgment is already precluded on these bases, the remainder of CEC's arguments in opposition will not be addressed. Therefore, the motion of Pavarini to dismiss the parts of the first, fourth, and fifth causes of action seeking damages for extra work due to delays in the construction project is denied, without prejudice to renewal after the completion of discovery.
The Third-Party Action
In its third-party action against TWBTA, MAFA asserts that if "CEC obtains a judgment against MAFA such liability will be the liability of (TWBTA) to the extent of any such damages caused by the actions of (TWBTA) and the consultants retained by it . . . based on principles of (a) contribution, (b) proportionate liability and (c) express and implied indemnity" (¶¶ 9-10).
However, the only allegations of CEC's complaint involving MAFA relate to an alleged diversion of trust funds (the second and third causes of action) and a foreclosure of the mechanic's lien. There is nothing in CEC's pleading that could result in a money judgment against MAFA that would give rise to a viable claim over against TWBTA as is asserted in said third-party complaint.
Moreover, since CEC has only asserted a contract claim for economic loss and not a claim in tort for damage to property, a claim in contribution does not lie. See, CPLR 1401; Trump Village Section 3 v. New York State Housing Finance Agency, 307 AD2d 891 (1st Dept. 2003). Nor is the provision for contractual indemnity pursuant to the contract between MAFA and TWBTA available to MAFA as no claim of negligence has been asserted against MAFA by CEC nor by Pavarini in its current cross-claim. Lastly, no basis has been set forth for implied imdemnity.
This, based on the current status of the pleadings, the motion to dismiss the third-party complaint is granted, with the consequence that the fourth-party action against ADS is also dismissed.
Cross Motion to Amend
Pavarini seeks to amend its answer to CEC's complaint to include a cross-claim against MAFA for indemnification with respect to CEC's claims that the plans, drawings and specifications provided by MAFA contained errors and omissions and were incomplete and thereby caused CEC to do extra work.
It is apodictic that leave to amend a pleading shall be freely granted absent prejudice or surprise resulting from the delay. CPLR 3025(b); Crimmins Contr. Co. v. City of New York, 74 NY2d 166 (1989). However, if a proposed claim patently lacks merit, amendment of a pleading to assert that claim would serve no purpose, but would needlessly complicate discovery and trial. Id. at 170. Thus, in order "to conserve judicial resources, an examination of the proposed amendment is warranted, . . . and leave to amend should be denied when the proposed pleading is palpably insufficient as a matter of law." Ancrum v. St. Barnabas Hosp., 301 AD2d 474, 475 (1st Dept 2003).
Here, MAFA and TWBTA both oppose Pavarini's motion to amend its complaint. MAFA argues that: (i) the Prime Contract contains an indemnity clause that prevents Pavarini from recovering from MAFA for design deficiencies; (ii) Pavarini cannot recover through implied indemnity because Pavarini has an absolute defense to CEC's fifth cause of action and, as such, there will be no recovery to "pass through" to MAFA; and (iii) a contribution claim against MAFA must fail because CEC's claim seeks a purely economic recovery based on contract.
Similarly, TWBTA argues that Pavarini has an absolute defense to the fifth cause of action alleged by CEC. In addition, TWBTA states that it would suffer irreparable harm in being forced to defend a claim which lacks legal merit and upon which TWBTA would ultimately be entitled to summary judgment.
While MAFA's arguments do address the viability of Pavarini's proposed amendments, neither MAFA nor TWBTA address how the amendment would lead to unfair surprise or prejudice. See, A.J. Pegno Const. Corp. v. City of New York, 95 AD2d 655, 656 (1st Dept 1983); Ozen v. Yilmaz, 181 AD2d 666, 667 (2nd Dept 1992. TWBTA's claim of potential prejudice, that it would need to expend time and money to defend a lawsuit that is purportedly without merit, is not the type of prejudice that CPLR 3025 contemplates. See, e.g., Ozen v. Yilmaz, supra at 667.
With respect to the merits of Pavarini's proposed amendment, the assertion advanced by both MAFA and TWBTA (that CEC cannot recover for delays because of the existence of no-damages-for-delay clauses) has, herein above, been confuted. As Pavarini's motion to amend is not palpably insufficient as a matter of law ( Ancrum v. St. Barnabas Hosp., 301 AD2d at 475); precedes the close of discovery ( A.J. Pegno Const. Corp. v. City of New York, 95 AD2d at 656); and does not lead to unfair surprise or prejudice, it is granted and is deemed served upon service of a copy of this order.
This decision constitutes the order of the court.