Opinion
# 2012-015-350 Claim No. 120193 Motion No. M-80872 Cross-Motion No. CM-81205
08-15-2012
SCHAAP MOVING SYSTEMS, INC. v. THE STATE OF NEW YORK
Synopsis
Claim against the State for storage fees was dismissed. Belated invoices were expressly prohibited by the terms of the Agreement absent extraordinary circumstances. Case information
UID: 2012-015-350 Claimant(s): SCHAAP MOVING SYSTEMS, INC. Claimant short name: SCHAAP Footnote (claimant name) : Defendant(s): THE STATE OF NEW YORK Footnote (defendant name) : Third-party claimant(s): Third-party defendant(s): Claim number(s): 120193 Motion number(s): M-80872 Cross-motion number(s): CM-81205 Judge: FRANCIS T. COLLINS Claimant's attorney: David M. Lenney, Esquire Honorable Eric T. Schneiderman, Attorney General Defendant's attorney: By: Thomas R. Monjeau, Esquire Assistant Attorney General Third-party defendant's attorney: Signature date: August 15, 2012 City: Saratoga Springs Comments: Official citation: Appellate results: See also (multicaptioned case) Decision
Defendant moves for an Order pursuant to CPLR 3211 and 3212 dismissing the instant breach of contract claim and requiring the release of certain records held by the claimant in storage. Claimant opposes the motion and cross-moves for summary judgment in its favor, and for leave to amend its amended claim to add additional damages or, in the alternative, for permission to file and serve a late claim pursuant to Court of Claims Act § 10 (6).
The Facts
Schaap Records Managemententered into a contract with the New York State Department of Labor ("DOL") for the transportation and storage of records (defendant's Exhibit F, contract). The contract was for an initial three-year period commencing August 5, 2005 and expressly provided for renewal for two one-year periods upon mutual consent of the parties (Id. at Art. III). According to Paul Danaher, Director of Property and Procurement Services for the DOL, "[a]fter the expiration of the initial three (3) year term, the contract was extended for an additional two (2) years. In 2010, at the end of the five (5) year term of the contract, DOL was once again required to, and did, issue a request for bids for these same services" (defendant's Exhibit H, affidavit of Paul Danaher, ¶ 7). Following the 2010 request for bids, the contract was awarded to a different company with services to begin February 1, 2011 (id.). While defense counsel indicates claimant's contract renewal expired on August 4, 2010, Alan Fish, Treasurer of the claimant's company, indicates that the contract was "extended by written agreement through March 2011" (affidavit of Alan Fish, ¶¶ 6, 14). Although neither party submitted a copy of the written extension agreement, it is undisputed that the services for which claimant seeks additional payment in its original and first amended claim concluded prior to the issuance of its invoice dated November 15, 2010 (see defendant's Exhibit G, last invoice in exhibit).
For the purpose of the instant motions the Court assumes that Schaap Records Management and claimant, Schaap Moving Systems, Inc., are one and the same, although the claim itself makes no such allegation.
The invoice which is the subject of this action, invoice number SRM-0300-1 dated February 1, 2011 in the amount of $130,890.65 (defendant's Exhibit G, first invoice in exhibit), sets forth corrected billing amounts for services rendered prior to November 15, 2010 (see defendant's Exhibit G; claimant's Exhibits C and D). Mr. Fish, claimant's Treasurer, explains in an affidavit that it was discovered during a routine audit that "for certain services, instead of billing Defendants at the agreed upon rate of $10.00 per cubic foot of stored records, Claimant had innocently and mistakenly billed Defendants at an incorrect rate" (affidavit of Alan Fish, ¶ 9).
Upon review of the "corrected" invoice and supporting documentation, however, it appears the transportation rate of $10.00 per cubic foot was properly charged but the quantity was changed. As defendant points out, none of the invoices for which claimant seeks additional payment reflect the dates the services were allegedly provided rendering it impossible to determine or otherwise confirm the accuracy of the additional billing amounts for which the claimant seeks additional payment.
Mr. Danaher, on the other hand, indicates that the claimant's issuance of the February 1st invoice was "seemingly" motivated by the fact that claimant was not awarded the new contract (defendant's Exhibit H, affidavit of Paul Danaher, ¶ 8). In any event, the invoice dated February 1, 2011 was received by the DOL on March 4, 2011 (Id. at 3) and payment was denied by letter dated May 5, 2011 (defendant's Exhibit 2, Letter from Paul D. Danaher, annexed to affirmation of Thomas R. Monjeau, Esq., dated April 30, 2012). The Pleadings
The original claim alleges the defendant failed and refused "to pay Claimant for its work, labor and services in connection with Contract C-000141, including but not limited to invoice SRM -0300-1" (defendant's Exhibit A, Notice of Claim, ¶ 2). The claim alleges an accrual date "no earlier than May 28, 2011 when the Defendant[']s May 27, 2011 correspondence to Claimant's counsel disputed Claimant's right to payment" (defendant's Exhibit A, ¶ 4). The claim also states "[t]his notice of intention to file claim is served and filed within 90 days of accrual" (defendant's Exhibit A, Notice of Claim, ¶ 6). The claim is stamped as received by personal service by the New York State Department of Law, Office of Legal Records at 2:45 p.m. on August 5, 2011. A second stamp indicates its receipt by the Attorney General's Claims Bureau on August 8, 2011. Defense counsel rejected the claim by letter dated August 8, 2011 for the reason that the claim "is unverified" (defendant's Exhibit A, Correspondence dated August 8, 2011). Defendant also served an answer to the claim in which the lack of a verification was raised as an affirmative defense "in an abundance of caution" (affirmation of Thomas R. Monjeau dated January 3, 2012, ¶ 3; defendant's Exhibit B, Answer, ¶ "FIFTH"). The answer was served by regular mail on August 22, 2011 (defendant's Exhibit B, Verified Answer). Claimant thereafter amended the claim to change the alleged accrual date from May 28, 2011 to May 5, 2011, deleted the reference to the document being a "notice of intention" and included an attorney's verification of the claim (defendant's Exhibit C, Amended Claim). The amended claim was served by regular mail on September 16, 2011, according to the postmark on the envelope (id.).Defendant served an answer to the amended claim, again raising lack of a verification as an affirmative defense (defendant's Exhibit D). While no defense was raised with respect to the manner of service of the amended claim, defendant did raise as a defense to both the claim and amended claim that "the claim is untimely in that neither the claim nor a notice of intention was served within ninety (90) days of accrual of the claim as required by Court of Claims Act Sections 10 (3) and 11" (defendant's Exhibits B and D, fourth affirmative defenses).
The amended claim was not filed in the Office of the Clerk.
The Parties' Contentions
Defendant contends that the claim was untimely filed and served because claimant's damages were reasonably ascertainable when the final invoice for services performed under the contract was mailed on or about November 15, 2010, the claim fails to meet the pleading requirements of Court of Claims Act § 11 (b) because it was unverified, among other things, and that the amended claim is a nullity because it was served without leave of court and by regular mail rather than one of the methods prescribed by Court of Claims Act § 11 (a). Finally, defendant seeks summary judgment on the ground that the plain and unambiguous terms of the contract required that invoices for services rendered be submitted at the conclusion of each month (defendant's Exhibit F, contract, p. 10 of Invitation For Bids, ¶ 5) and that invoices not received within 90 days of services performed would not be paid absent "extraordinary conditions" (defendant's Exhibit F, contract, p. 10 of Invitation For Bids, ¶ 7). Defendant contends summary judgment is required because no extraordinary circumstances warranted the belated invoice dated February 1, 2011 seeking $130,890.55 for "Transportation Undercharging Dept. of Labor" covering the previous five years. In addition to dismissal of the claim, defendant seeks an Order requiring the return of records it contends the claimant has improperly refused to release.
Claimant opposes dismissal, arguing first that the claim was timely filed and served in August 2011 because its invoice for the amounts which had previously been underbilled was not denied until May 2011. The underpayments were discovered, and the corrected invoice dated February 1, 2011 was sent (defendant's Exhibit G, top invoice) after an internal audit on an undisclosed date allegedly revealed billing errors spanning the previous five-year period.
According to Mr. Danaher, this invoice was received on March 4, 2011 (affidavit of Paul Danaher, ¶ 3) and claimant's counsel avers it was denied by letter dated May 5, 2011 (affidavit of David M. Lenney, ¶ 39).
With respect to whether the initial claim was properly verified, claimant contends that because the claim was signed before a notary public it meets the verification requirements of the Court of Claims Act. Moreover, according to the claimant, the first amended claim in which the attorney's verification was included corrected any defect in the original claim and, absent prejudice to the defendant, should be permitted to stand. With respect to its proposed second amended claim in which additional damages are alleged for "post-termination storage and retrieval fee" and transportation fees (affidavit of Alan Fish, ¶ 23; Exhibit K, Proposed Second Amended and Supplemental Claim), claimant contends that its damages continue to accrue, thereby giving rise to a garagemen's lien until final payment is received (affidavit of David M. Lenney, ¶ 48).
In the event the claim is dismissed as untimely, claimant alternatively requests late claim relief pursuant to Court of Claims Act § 10 (6), apparently relying on its proposed second amended claim as its proposed claim for this purpose.
The Law
Addressing first defendant's contention that the claim is untimely, Court of Claims Act §10 (4) requires that a breach of contract claim be filed and served "within six months after the accrual of such claim" unless a notice of intention to file a claim is served within that time, in which case the period to file and serve a claim is extended to two years. A claim accrues for purposes of applying the time limitations of the Court of Claims Act "when damages are reasonably ascertainable" (Inter-Power of N.Y. v State of New York, 230 AD2d 405, 408 [1997], quoting Flushing Natl. Bank v State of New York, 210 AD2d 294, 294 [1994], lv denied 86 NY2d 706 [1995]; see also Richard A. Hutchens CC, L.L.C. v State of New York, 59 AD3d 766, 768 [2009], lv denied 12 NY3d 712 [2009]). It is generally recognized that damages are ascertainable when the work is "substantially completed or a detailed invoice of the work performed is submitted", not when payment for the work is denied (C.S.A. Contr. Corp. v New York City School Constr. Auth., 5 NY3d 189 [2005]; New York City School Constr. Auth. v Kallen & Lemelson, 290 AD2d 497 [2002]; G.A. Contrs. v Board of Educ. of City of N.Y., 176 AD2d 856 [1991]). With respect to the allegations in both the initial and first amended claim, claimant's damages were reasonably ascertainable no later than November 15, 2010 when all of the services for which claimant seeks additional payment were concluded and the last invoice for this work was submitted. Had claimant exercised even the slightest degree of diligence at that point its billing errors, which spanned the course of the entire contract term, would have been ascertained. Claimant's contrary contention that the claim accrued when its corrected invoice was denied is contrary to existing law (see C.S.A. Contr. Corp. v New York City School Constr. Auth., supra). A discovery accrual rule applies in very few instances and would be inappropriate in a case such as this where claimant's damages were at all times readily ascertainable with the exercise of due diligence. No such diligence was exercised here, however, and the claim filed and served in August 2011, nearly nine months after the date of the final invoice for the contract work, was untimely.
Nevertheless, defendant waived its objection to the timeliness of the claim by raising the incorrect period of limitations as a defense. Court of Claims Act § 11 (c) provides that an objection to the timeliness of a claim is waived unless raised with "particularity" in either a pre-answer dismissal motion or a responsive pleading. While defendant raised as its fourth affirmative defense the time limitations of Court of Claims Act § 10 (3) applicable only to unintentional torts, it did not raise the time limitations of Court of Claims Act § 10 (4) applicable to an action for breach of contract. The instant claim being one for breach of contract, defendant waived any objection to the timeliness of the claim by citing the wrong statute as an affirmative defense (see Court of Claims Act §11 [c]; Sinacore v State of New York, 176 Misc 2d 1 [1998]).
Defendant also seeks dismissal on the grounds that the claim was unverified and the amended claim purporting to correct this error is a nullity because it was served without leave of court.
While defense counsel observes that the original claim was unverified, he argues, incorrectly, that the amended claim purporting to correct this error was untimely and improperly served. Section 206.7(b) of the Uniform Rules for the Court of Claims (22 NYCRR § 206.7[b]) permits a pleading to be amended in the manner provided by CPLR Rule 3025, "except that a party may amend a pleading once without leave of court within 40 days after its service, or at any time before the period for responding to it expires, or within 40 days after service of a pleading responding to it." The amended claim in issue here was mailed on September 16, 2011, well within 40 days of the date the defendant's answer to the claim was served on August 22, 2011, and was therefore timely served as a matter of right. With respect to the defendant's contention that the amended claim was improperly served, defendant raised no such defense in its answer to the amended claim and, in any event, CPLR 2103 (b) (2) specifically provides for service by regular mail on an attorney in a pending action (see also 22 NYCRR 206.1 [c]; CPLR 3012 [a]; Rohany v State of New York, 144 Misc 2d 940 [1989]). Service of the amended claim by regular mail was therefore proper. Defendant's contention that the amended claim is a nullity because it was served without leave of court and by regular mail service is simply incorrect.
Section 11 (b) of the Court of Claims Act requires that "a claim . . . shall be verified in the same manner as a complaint in the supreme court." CPLR 3021 sets forth the manner in which a complaint in the Supreme Court must be verified:
"The affidavit of verification must be to the effect that the pleading is true to the knowledge of the deponent, except as to the matters therein stated to be alleged on information and belief, and that as to those matters he believes it to be true. If it is made by a person other than the party, he must set forth in the affidavit the grounds of his belief as to all matters not stated upon his knowledge and the reason why it is not made by the party."
The claim here bears only the notarized signature of claimant's president without the verification language required by CPLR 3021 (see defendant's Exhibit A). As this Court made clear in Pinckney v State of New York, UID No. 2001-015-210 [Ct Cl, Collins, J., January 9, 2002], a notarized signature on a claim, without more, fails to fulfill the statutory verification requirements of CPLR 3021 and Court of Claims Act § 11 (b) (see also Young v State of New York, 2003 WL 25670247 [Ct Cl 2003]; Gilbert v State of New York, UID No. 2003-028-542 [Ct Cl, Sise, P.J., May 30, 2003]).
The law is settled that "all of the requirements in section 11 (b) are 'substantive conditions upon the State's waiver of sovereign immunity' . . . The failure to satisfy any of the conditions is a jurisdictional defect" (Kolnacki v State of New York, 8 NY3d 277, 280-281 [2007], quoting Lepkowski v State of New York, 1 NY3d 201, 207 [2003]). It is equally well settled that "a jurisdictionally defective claim cannot be cured through an amendment" (Hogan v State of New York, 59 AD3d 754, 755 [2009]; Manshul Constr. Corp. v State Ins. Fund, 118 AD2d 983 [1986]; Grande v State of New York, 160 Misc 2d 383 [1994]). Absent waiver, therefore, the failure to verify or properly verify a claim requires dismissal (see Mason v State of New York, UID No. 2010-015-152 [Ct Cl, Collins, J., June 11, 2010]).
In Lepkowski v State of New York (1 NY3d 201 [2003]) the Court of Appeals held that Court of Claims Act §11 (b) embraces the remedy set forth in CPLR 3022, which provides that an improperly verified pleading may be treated as a nullity "provided [the recipient] gives notice with due diligence" that he or she elects to do so. Following the Court of Appeals' decision in Lepkowski, Court of Claims Act § 11 (c) (iii) was added to clarify that defendant must both reject the unverified or improperly verified claim and assert its objection "with particularity" in either a pre-answer dismissal motion or as a defense in its answer(6) (see Court of Claims Act § 11 [c] [iii]; Gillard v State of New York, 28 Misc 3d 1139 [2010]; Rister v City Univ. of N.Y., 20 Misc 3d 195 [2008]; see also Myers v State of New York, UID No. 2004-015-444 [Ct Cl, Collins, J., December 1, 2004]). While defendant properly raised its objection to the unverified pleading in its answers to the claim and amended claim, it failed to establish that it notified the claimant "with due diligence". "Due diligence" has been interpreted to require notice to the attorney for the adverse party "immediately" or within 24 hours (Matter of Ladore v Mayor & Bd. of Trustees of Vil. of Port Chester, 70 AD2d 603, 604 [1979]). While the Court of Appeals in Lepkowski (supra) stated that it has "never specified a uniform time period by which to measure due diligence" (Lepkowski, 1 NY3d at 210), a three-day delay has been held by the Appellate Division, Third Department, to result in waiver of the objection (Air N.Y. v Alphonse Hotel Corp., 86 AD2d 932 [1982]). As stated earlier herein, the original claim was personally served upon the Attorney General's Office of Legal Records on August 5, 2011. Here, defense counsel has failed to provide any explanation for the three-day delay, until August 8, 2011, in executing the notice informing claimant of its objection to the claim. As a result the Court is unable to conclude, at least on this record, that defendant notified claimant with "due diligence" of its failure to verify the claim as required.
Turning to that branch of the defendant's motion seeking summary judgment on the merits, it is well established that " 'summary judgment is a drastic remedy and should not be granted where there is any doubt as to the existence of a triable issue' " (Rotuba Extruders v Ceppos, 46 NY2d 223, 231 [1978][citation omitted]). "The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case" (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). Once the movant has made this showing, the burden shifts to the party opposing the motion "to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986], citing Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).
The plain and unambiguous terms of the parties' contract required that "[a]ll requests for payments for services rendered shall be submitted at the conclusion of each month . . ." (defendant's Exhibit F, contract, Invitation For Bids, p. 10, ¶ 5). In addition, the contract made clear that "[i]f an invoice has not been received within ninety (90) days of services performed, the State will not be responsible for payment unless extraordinary condition [sic] exists, and are approved by the Labor Department" (Id. at ¶ 7). It is undisputed that the claim seeks to recover amounts allegedly underbilled on various invoices dated from July 1, 2006 through November 15, 2010. It is further undisputed that the invoice seeking payment of amounts allegedly underbilled, although dated February 1, 2011, was not received until March 4, 2011. Inasmuch as the March 4, 2011 receipt of claimant's invoice occurred more than 90 days after the date of the last invoice affected by the alleged underbilling for work under the contract, payment for the allegedly underbilled services reflected in the belated invoice was properly denied as untimely pursuant to the express terms of the contract (cf. Environmental Tech. Group, Inc. v Gannett Fleming Project Dev. Corp., 94 AD3d 943 [2012] [defendant failed to establish in support of its summary judgment motion that the subject invoices were received more than 90 days after the plaintiff performed the invoiced work in breach of the terms of the contract).
Moreover, Mr. Danaher indicates in his affidavit that claimant's own billing errors, together with its prolonged failure to submit corrected invoices, do not constitute the type of "extraordinary condition" necessary to warrant waiver of the contract requirement for prompt billing (defendant's Exhibit H, ¶ 11). He states that "[a] claim that Schaap incorrectly calculated the sums due under numerous invoices submitted between July 1, 2006 and November, 2010 would not be approved as an extraordinary condition in order to allow the submission of a late invoice as the preparation of invoices is a regular part of its day to day operations and is entirely under the control of Schaap itself" (defendant's Exhibit H, affidavit of Paul Danaher, ¶ 11). Mr. Danaher indicates further that, in addition to the transportation services provided by claimant, the DOL was also permitted to transport the records (Id. at ¶ 6) and correspondence from both Mr. Danaher and counsel for the DOL sent in May 2011 make the point that had claimant's invoices throughout the contract period reflected the transportation charges claimant now seeks to recover, the DOL would not have utilized the claimant for the performance of that service (part of defendant's Exhibit 2 annexed to the affirmation of Thomas R. Monjeau, Esq., dated April 30, 2012). Notably, none of the invoices for which claimant seeks payment include the date the transportation services were rendered and confirmation of the claimant's belated transportation charges, per cubic feet of cargo, appears impossible. Accordingly, the express contract provision clearly stating that no payment would be made for services rendered more than 90 days prior to the date the invoice is received except for "extraordinary" circumstances, not present here, requires that the claim be dismissed.
In light of this determination, claimant's continued refusal to release DOL's records from storage is baseless. To the extent defendant requests an Order directing claimant to release its records from storage, however, this Court lacks the jurisdiction to grant such relief. The law is clear that the jurisdiction of the Court of Claims is limited to an award of money damages against the State (NY Const, art VI, § 9; Court of Claims Act §§ 8, 9). "As a court of limited jurisdiction, the Court of Claims has no jurisdiction to grant strictly equitable relief" (Madura v State of New York, 12 AD3d 759, 760 [2004], lv denied 4 NY3d 704 [2005], see also Psaty v Duryea, 306 NY 413 [1954]; Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d 670, 671 [1997]). While equitable relief is available where it is incidental to a claim seeking a money judgment (Psaty v Duryea, 306 NY at 417), the State has asserted no claim against the claimant and it cannot be concluded, therefore, that the equitable relief requested here - an Order requiring the return of its records, is incidental to the primary relief sought (see C.O. Falter v New York State Thruway Auth., UID No. 2008-015-054 [Ct Cl, Collins, J., July 21, 2008]).
Based on the foregoing, defendant's motion for summary judgment dismissing the claim is granted and the claim is dismissed. Claimant's cross-motion for summary judgment or for leave to file a late claim is denied.
The Court considered the following papers:
1. Notice of motion dated January 3, 2012;
2. Affirmation of Thomas R. Monjeau dated January 3, 2012 with exhibits;
3. Notice of cross-motion dated March 12, 2012;
4. Affidavit of David M. Lenney sworn to March 12, 2012 with exhibits;
5. Affidavit of Alan Fish sworn to March 12, 2012 with exhibits;
6. Affirmation of Thomas R. Monjeau dated April 30, 2012 with exhibits.
August 15, 2012
Saratoga Springs, New York
FRANCIS T. COLLINS
Judge of the Court of Claims