Decided December 11, 2008.
Jay A. Press, P.C., Melville, New York, Counsel for Plaintiff.
Torino Bernstein, P.C., Mineola, New York, Counsel for Defendant.
Defendant, D'Agostino Supermarkets, Inc. ("D'Agostino"), moves for summary judgment pursuant to CPLR 3212 dismissing the complaint and for sanctions against Plaintiff, Alarm Monitoring Corp. ("Alarm"), for commencing a frivolous action. Alarm cross-moves for summary judgment against D'Agostino.
Pursuant to the preliminary conference order, the deadline to file dispositive motions was on or before sixty days after certification. This case was certified ready for trial on June 30, 2008 following a conference with the Court. During that conference, the following briefing schedule was established: Plaintiff was to move for summary judgment by August 15, 2008, Defendant was to cross-move for summary judgment and oppose Plaintiff's motion by September 12, 2008, Plaintiff was to oppose the cross-motion and reply by September 19, 2008 and Defendant was to reply on September 26, 2008. By order, dated September 9, 2008, this Court granted Plaintiff's request to extend its time to file a summary judgment motion for one week post-receipt of the September 9, 2008 order.
Thereafter, Defendant moved for summary judgment by notice dated October 15, 2008 and Plaintiff cross-moved by notice dated October 31, 2008. Defendant does not provide any explanation as to why it did not move by the date set by the Court as the deadline for its cross-motion. Plaintiff's counsel provided an affirmation to the effect that he was hospitalized and underwent two surgeries at the time that Plaintiff was to move.
Consequently, it appears to the Court that neither motion is timely pursuant to the deadlines set by the Court. See, Brill v. City of New York, 2 NY3d 648 (2004). However, given the circumstances surrounding Plaintiff's counsel's recent medical issues which impacted upon Defendant's ability to "cross-move", the Court finds there is good cause to waive adherence to the original and amended briefing schedules and considers both motions on the merits.
Alarm is in the business of selling and servicing commercial theft and fire alarm systems and providing alarm system monitoring services. D'Agostino, a large regional operator of supermarkets, retained Alarm dating back to 1987 to provide monitoring services for its stores. In 1992, D'Agostino retained Alarm to provide services to it's main office. All of the services provided by Alarm to D'Agostino were pursuant to a written contract.
In July 2005, Ali Khan ("Khan"), a then employee of D'Agostino, entered into a contract with Alarm for Store No. 14, 411 King Street, Chappaqua, New York, for a burglar alarm system. In the contract, Khan identified himself as "Maintenance Director", a title which he did not hold.
On January 17, 2006, Khan, on behalf of D'Agostino as "Maintenance Director", executed another contract with Alarm for ongoing monitoring at multiple locations, including 20 supermarkets and D'Agostino's main office, for a five year term commencing February 1, 2006. In addition, an amendment to the agreement provided for installation of an alarm system in the mail room area of D'Agostino's main office in Larchmont, New York. The contract, dated February 1, 2006, mirrored the services provided by Alarm to D'Agostino pursuant to a prior contract, dated February 1, 2003.
The February 1, 2003 contract, which preceded the February 1, 2006 contract signed by Khan, had a three year term. The contract had an automatic annual renewal provision in the absence of a writing canceling the contract.
The February 1, 2003 contract was executed by Dan Steffan ("Steffan"). Steffan was D'Agostino's Director of Design and Construction and Khan's supervisor until he left D'Agostino's employ in late 2003 or early 2004. After Steffan left, Khan reported directly to Nicholas D'Agostino III ("Nicholas"), president and chief operating officer of D'Agostino .
Pursuant to ¶ 4(A) of the February 1, 2003, July 15, 2005 and February 1, 2006 contracts, fees for ongoing monitoring and/or service were payable monthly in advance commencing from the date service is operative. Alarm's invoices indicate "payment due upon receipt of this bill". The contracts also state, in ¶ 8, that "(t)his Agreement may not be changed, modified or varied except by writing and signed by an authorized representative of (Alarm)."
All three contracts provide, at ¶ 14, that, in the event Alarm commences legal action to recover any money owed pursuant to the contracts, D'Agostino would pay Alarm's legal fees of "33% of every amount due to (Alarm) by (D'Agostino)." Furthermore, the contracts contain an acceleration clause providing that in the event D'Agostino defaulted in paying, the entire balance would immediately become due and payable and Alarm would have the option of removing its equipment without relieving D'Agostino of its contractual obligations.
On March 14, 2007, Nicholas sent a letter to Alarm. In that letter, Nicholas informed Alarm that it had come to his attention that a contract was signed by someone without the authority to do so; to wit: Khan. This, Nicholas wrote:
I am, therefore, informing you that the contract dated February 1, 2006, is not valid because of the signature. At your earliest convenience I would like to go over with you what we should do about the fact that presently we do not have a contract with your company. In the meantime, D'Agostino plans on continuing to pay for the services that your company is providing.
In response, Amedeo A. Marotti, Jr. ("Marotti") a/k/a Tony Marotti, president of Alarm, wrote back to D'Agostino on March 19, 2007 setting forth Alarm's position that it was providing burglar alarm services to D'Agostino pursuant to a valid contract. Alarm requested that D'Agostino acknowledge the existence and validity of the February 1, 2006 contract in writing, otherwise, Alarm would cease providing services to D'Agostino on April 30, 2007. Moreover, Alarm noted that if D'Agostino refused to acknowledge the agreement, in addition to ceasing service pursuant to the February 1, 2006 contract, Alarm would accelerate the full balance due under the contract and seek judicial intervention.
Marotti sent D'Agostino a follow-up letter, dated April 18, 2007, informing D'Agostino that in order for Alarm to continue to provide services to D'Agostino it was necessary for D'Agostino to acknowledge the existence and validity of the February 1, 2006 contract. As evidence of such acknowledgment, Marotti asked that Nicholas sign the April 18, 2007 letter underneath the words "Acknowledged and Agreed to" and return the executed acknowledgment to Alarm. Marotti expressed that the letter was being sent in an attempt to resolve the matter of D'Agostino's "improper termination of the February 1, 2006 contract, and shall not constitute any admission or waiver of (Alarm's) rights or remedies with respect thereto."
On April 30, 2007, Marotti sent a further letter to D'Agostino informing D'Agostino that it was in default of the February 1, 2006 and July 15, 2005 agreements by failing to pay $2,700.03 as demanded in Alarm's March 20, 2007 invoice. As a result, Alarm was terminating the agreements and, pursuant to ¶ 13, demanded payment of the full balance. The letter also noted that D'Agostino failed to respond to Alarm's correspondence, dated March 18, 2007 and April 18, 2007, or subsequent phone calls inquiring into D'Agostino's assertion that the February 1, 2006 contract was invalid.
With respect to the March 20, 2007 invoice, Marotti testified at an examination before trial that Alarm received payment from D'Agostino for that invoice around May 4, 2007. Marotti, testified that payment was due by April 1, 2007 and any payment not received within thirty days of mailing of the invoice would be delinquent. Marotti stated that he reviewed D'Agostino's invoices for 2005 and 2006 and normally D'Agostino paid within 30 days of the invoice, except that, on one or two occasions, payment was made outside of that time frame. On one occasion in 2005 or 2006, payment for D'Agostino's bill was two or three months past due. He also acknowledged that 35 to 40 days following Alarm's mailing of an invoice was the normal payment cycle established by the parties during their relationship. Marotti further testified that the balance remained outstanding because Alarm did not deposit the payment. Alarm did not send out any further invoices to D'Agostino after the March 20, 2007 invoice and, according to Marotti's deposition testimony, the only outstanding invoice that exists is the March 20, 2007 invoice.
It was Alarm's normal practice and procedure to not terminate services if a customer paid within sixty days of the invoice. In case of an emergency, Alarm would be willing to extend the 60 day period to accommodate a customer before taking any action to terminate services. It was Alarm's practice to send out a past due statement by regular mail about fifteen days after invoicing a client if payment had not yet been received. Following that letter, if payment was still not received, a 30-day notice would be sent out and then another letter informing the client that the contract would be terminated for failure to pay.
Plaintiff commenced this suit alleging three causes of action. The first cause of action alleges that D'Agostino entered into written contracts to lease, service or monitor burglar and/or fire alarm equipment from Alarm for a monthly fee and that D'Agostino breached the contracts by "failing and omitting to pay the rental and/or service charges pursuant to the contracts, resulting in an acceleration requiring [D'Agostino] to pay the full balance due under the contracts." (Complaint ¶ 4). For its second cause of action, Alarm seeks return of its equipment based upon D'Agostino's breach of the contracts. For its third cause of action, Plaintiff alleges that D'Agostino wrongfully repudiated the contracts. For these three causes of action, Plaintiff seeks a declaration from the Court deeming the contracts, dated July 15, 2002 and February 1, 2006, valid between the parties, deeming D'Agostino's attempt to cancel the agreements to be an anticipatory breach, accelerating the balance due on each contract and awarding Plaintiff attorney's fees.
D'Agostino moves for summary judgment dismissing the complaint on the grounds that it alleges that Alarm is seeking payment pursuant to the acceleration clause due to its failure to pay an invoice within 30 days. D'Agostino notes that the contract is silent with respect to the date payment is to be received; consequently, a reasonable time for payment is implied by law and the parties' conduct for the past twenty years establishing that the payment date is 35 to 40 days after Alarm sends an invoice. Alternatively, D'Agostino argues that, even if a date for payment was specified in the contract, Alarm's conduct of accepting payment 40 days after an invoice was mailed constitutes a waiver of any firm payment date. D'Agostino maintains that Alarm timely received payment for the invoices in question but failed to deposit the check and that this is the basis for Plaintiff's suit. D'Agostino asserts that Alarm's refusal to accept Defendant's tender of a timely payment for the March 20, 2007 invoice is an unjustifiable breach by the Plaintiff of the parties' contract.
D'Agostino argues that, assuming arguendo, that the payment was tendered late, Alarm's refusal to accept a cure and enforce the acceleration clause is apparently in retaliation for Nicholas's March 14, 2007 letter and is unconscionable. Moreover, it asserts that D'Agostino's conduct does not support a claim that it repudiated the contract so as to justify Alarm's termination and by continuing to perform pursuant to the contract after the "breach" Alarm waived its rights to terminate. Additionally, since Alarm received D'Agostino's payment for the March 20, 2007, D'Agostino maintains that Alarm will be unable to establish damages, which is an essential element of a breach of contract claim and that Alarm's prayer for relief seeking of counsel fees must be denied as the contract does not allow for such an award. Finally, D'Agostino seeks the imposition of sanctions on the basis that Alarm's suit is frivolous without basis in law or fact.
Alarm cross-moves for summary judgment and opposes D'Agostino's application based upon D'Agostino's wrongful termination of the existing contracts between the parties premised upon Khan's lack of authority to enter into the contracts more than a year after the contracts had been executed. Given that services were provided for fourteen months pursuant to the agreements executed by Khan at D'Agostino's main office, where Nicholas worked on a daily basis, Alarm argues that D'Agostino had notice of Khan's execution of the contracts. In addition, D'Agostino paid for the services provided pursuant to contracts executed by Khan during that entire time period.
Alarm also argues that it cannot provide alarm monitoring services to any of its clients without a specific written contract given Alarm's liability insurance coverage requirements. Failure to obtain a written contract would preclude Alarm from obtaining insurance coverage for its services. Moreover, Alarm retained Counterforce Central Alarm Services Corp. ("Counterforce"), a central station, to provide monitoring to Alarm's customers, including D'Agostino. The contract between Counterforce and Alarm required Alarm to have a written contract with its customers who received monitoring services from Counterforce.
Alarm also notes that, despite D'Agostino's claim that no D'Agostino employee had authority to enter into contracts on behalf of D'Agostino besides Nicholas, during the relationship between the parties, three contracts were signed on behalf of D'Agostino by employees other than Nicholas. In 1998, Sal Gargailio signed a contract; in 1991, Edward Clair signed one; and in 2003, Steffan signed a contract.
Alarm opines that D'Agostino repudiated the contracts because it was updating its phone systems to voice over internet protocol ("VOIP") telephone lines which would have required Alarm's equipment to be changed to accommodate the VOIP lines. Alarm believes that D'Agostino wanted to change alarm service providers so that the new provider would update the equipment at a substantial discount in order to obtain D'Agostino's business.
Alarm seeks damages in the amount of $138,730.65 plus interest from April 1, 2007. Plaintiff alleges that D'Agostino's March 14, 2007 letter was an anticipatory breach of the contract that was "ratified" by D'Agostino's conduct after the letter. Alarm maintains that ¶ 13(A) of the contract allows Alarm to accelerate the payments due under the contract given D'Agostino's repudiation of the contracts. With respect to payment, Alarm states that the contracts have an exact payment date, "monthly in advance" and that D'Agostino was habitually late in its payments. Alarm maintains that it only continued to provide alarm monitoring services until D'Agostino engaged a new alarm monitoring company as an accommodation to D'Agostino. Furthermore, in light of Nicholas's letter, dated March 14, 2007, Alarm maintains that it had a right to demand adequate assurance for future performance.
Alarm seeks $118,521.30 pursuant to the February 1, 2006 contract for 46 months at $2,576.55/mo. and $4,939.20 on the July 15, 2005 contract for 40 months at $123.48/mo. In addition, Alarm seeks $7,228.54 (58 months at $124.63/mo.) for D'Agostino's failure to pay for monitoring of 315 West 23rd Street, New York, New York commencing April 1, 2006 and $7,103.91 (57 months at $124.63/mo.) for monitoring at 532 East 20th Street, New York, New York commencing May 1, 2006. Those services are covered by the February 1, 2006 contract. Alarm also seeks $937.70 for alarm repair services billed on April 19, 2007.
In response to Alarm's motion, D'Agostino argues that it was timely in its payment of monies owed to Alarm and that its acts did not convey a clear and unequivocal repudiation of the Alarm contracts.
1. Summary Judgment — Standard
The party seeking summary judgment must establish an entitlement to judgment as a matter of law. Alvarez v. Prospect Hosp., 68 NY2d 320 (1986); and Zuckerman v. City of New York, 49 NY2d 557 (1980). If the party moving for summary judgment fails to establish a prima facie entitlement to judgment as a matter of law, the motion must be denied. Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851 (1985); Widmaier v. Master Products, Mfg., 9 AD3d 362 (2nd Dept. 2004); and Ron v. New York City Housing Auth., 262 AD2d 76 (1st Dept. 1999).
Once the party seeking summary judgment makes a prima facie showing of entitlement to judgment as a matter of law, the party opposing the motion must come forward with proof in evidentiary form to establish the existence of triable issues of fact or must demonstrate an acceptable excuse for its failure to do so. Zuckerman v. City of New York, supra; Davenport v. County of Nassau, 279 AD2d 497 (2nd Dept. 2001); and Bras v. Atlas Construction Corp., 166 AD2d 401 (2nd Dept. 1991).
2. Breach of Contract
The elements of a cause of action for breach of contract are the existence of a contract between the plaintiff and defendant, consideration, performance by the plaintiff, breach by the defendant and damages resulting from the breach. Furia v. Furia, 116 AD2d 694 (2nd Dept. 1986).
A. Anticipatory Repudiation
"[U]nder the doctrine of anticipatory breach . . . if one party to a contract repudiates his duties thereunder prior to the time designated for performance and before he has received all of the consideration due him thereunder, such repudiation entitles the nonrepudiating party to claim damages for total breach." Long Island R.R. Co. v. Northville Industries Corp.,41 NY2d 455, 463 (1977). "The nonrepudiating party need not, however, tender performance nor prove its ability to perform the contract in the future." American List Corp. v. U.S. News and World Report, Inc., 75 NY2d 38, 44 (1989).
The Court of Appeals has found that:
A repudiation can be either a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach' or a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach'. That switch in performance expectation and burden is readily available, applied and justified when a breaching party's words or deeds are unequivocal. Such a discernible line in the sand clears the way for the nonbreaching party to broach some responsive action. When, however, 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.
The Norcon Court was presented with the following question, "(d)oes a party have the right to demand adequate assurance of future performance when reasonable grounds arise to believe that the other party will commit a breach by non-performance of a contract governed by New York law, where the other party is solvent and the contract is not governed by the U.C.C.?" Id. at 460. In Norcon, the plaintiff brought a declaratory judgment action in federal court seeking a declaration that the defendant was not entitled to any such assurances after defendant demanded same based upon concerns that the plaintiff would not be able to abide by its contractual obligations. Id. at 462. The defendant counterclaimed for a declaration that the assurances it sought were proper. Id. In that instance, the Court of Appeals found that such assurances are appropriate when the words or deeds of the breaching party are unequivocal. Id. at 463.
In the event of an anticipatory repudiation, the nonrepudiating party can elect to either treat the repudiation as a breach and rescind the contract or wait until its time to perform expires and then bring an action. Velazquez v. Equity LLC, 28 AD3d 473, 474 (2nd Dept. 2006). See also, Smith v. Tenshore Realty, Ltd., 31 AD3d 741 (2nd Dept. 2006).
"(I)t is clear that there must be a definite and final communication of the intention to forego performance before the anticipated breach may be the subject of a legal action." Rachmani Corp. v. 9 E. 96th St. Apt. Corp., 211 AD2d 262, 267 (1st Dept. 1995). See also, Coney Island Exhaust, Inc. v. Mobil Oil Corp., 304 AD2d 706 (2nd Dept. 2003) (for an anticipatory breach there must be an unequivocal, definite and final repudiation of the agreement).
Whether or not a party's statements or acts constitute unequivocal repudiation is an issue of fact. O'Connor v. Sleasman, 14 AD3d 986 (3rd Dept. 2005); and BT Triple Crown Merger Co., Inc. v. Citigroup Global Markets Inc., 19 Misc 3d 1129(A) (Sup.Ct. NY Co. 2008). Thus, Plaintiff's cross-motion for summary judgment on the ground that D'Agostino anticipatorily breached the February 1, 2006 contract must be denied as there are triable issues of fact to be decided. In addition, the issue of whether D'Agostino anticipatorily breached the February 1, 2006 precludes summary judgment in its favor as well.
B. Timing of Payments
"When a contract does not specify time of performance, the law implies a reasonable time. What constitutes a reasonable time for performance depends upon the facts and circumstances of the particular case (citations omitted)." Savastav. 470 Newport Assocs., 82 NY2d 763, 765 (1993). See also, Parker v. Booker, 33 AD3d 602, 603 (2nd Dept. 2006).
Contractual rights may be waived if they are knowingly, voluntarily and intentionally abandoned. Fundamental Portfolio Advisors v. Tocqueville Asset Mgt., 7 NY3d 96, 104 (2006). A waiver may be established by affirmative conduct or by failure to act so as to evince an intent not to claim a purported advantage provided by the contract. General Motors Acceptance Corp. v. Clifton-Fine Cent. School Dist., 85 NY2d 232, 236 (1995). A waiver should not be lightly presumed and must be based on a clear manifestation of intent to relinquish a contractual protection. Fundamental Portfolio Advisors v. Tocqueville Asset Management, supra at 104. An intent to waive a contractual right may be inferred despite a "no waiver" clause in the agreement. Madison Ave. Leasehold v. Madison Bentley Assoc., 30 AD3d 1, 6 (1st Dept.), affd. other grds., 8 NY3d 59 (2006). Generally, the existence of an intent to forego a contractual right is a question of fact. Fundamental Portfolio Advisors v. Tocqueville Asset Mgt., supra at 104.
The Alarm contracts provide for payment "monthly in advance commencing from the date service is operative and for any renewals of this Agreement." Alarm Contracts ¶ 4(B). Given the language of the contract, it is not clear when payments were due other than that they are to be paid "in advance". Thus, it appears that payment was due in a reasonable time based upon the facts and circumstances of the case presenting an issue of fact to be determined at trial.
Furthermore, Alarm testified that D'Agostino was habitually late in its payments. Marotti also stated that Alarm's policy was to not consider a client in breach of its payment obligations until more than sixty days had passed from the date an invoice was mailed to the client. With respect to D'Agostino's payment of the invoice, dated March 20, 2007, by May 4, 2007, Marotti testified that since payment was due upon receipt the March 20, 2007 invoice should have been paid by April 1, 2007 for the services to be rendered that month. Thus, it is question of fact whether the payment of the March 20, 2007 invoice for services to be rendered in April 2007 by May 4, 2007, made the payment one month and four days latefor the purpose of determining that there was a breach of contract.
The question of Defendant's anticipatory breach of the February 1, 2006 contract remains outstanding precluding summary judgment. In addition, the motions for summary judgment must be also denied concerning the breach of the July 15, 2005 and February 1, 2006 contracts in light of the triable issues of fact regarding the reasonableness of the date D'Agostino made payment responsive to the March 20, 2007 invoice and whether Alarm has waived any of its contractual rights to timely payments.
3. Attorney's Fees
It is well-settled that attorneys' fees are considered an incident of litigation and, unless authorized by statute, court rule or written agreement of the parties, are not recoverable. Hooper Assocs. v. AGS Computers, 74 NY2d 487, 491 (1989).
Attorneys' fees may be awarded pursuant to the terms of a contract only to an extent that is reasonable and warranted for services actually rendered. Kamco Supply Corp. v. Annex Contracting Inc., 261 AD2d 363 (2nd Dept. 1999). Provisions or stipulations in contracts for payment of attorneys' fees in the event it is necessary to resort to aid of counsel for enforcement or collection are valid and enforceable. Roe v. Smith, 278 NY 364 (1938); and National Bank of Westchester v. Pisani, 58 AD2d 597 (2nd Dept. 1977).
The Alarm contracts allow for Alarm to recoup legal fees in the event that it commenced legal action to recover pursuant to the contracts. Consequently, Plaintiff's claim seeking legal fees should not be dismissed. Alarm's right to recover its legal fees can only be determined after it prevails on its underlying claims.
4. Frivolous Action
22 NYCRR 130-1.1(a) provides:
The court, in its discretion, may award to any party or attorney in any civil action or proceeding before the court, except where prohibited by law, costs in the form of reimbursement for actual expenses reasonably incurred and reasonable attorney's fees, resulting from frivolous conduct as defined in this Part. In addition to or in lieu of awarding costs, the court, in its discretion may impose financial sanctions upon any party or attorney in a civil action or proceeding who engages in frivolous conduct as defined in this Part.
Frivolous conduct is defined as that which is completely without merit in law, undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or it asserts material factual statements that are false. 22 NYCRR 130-1.1(c)
D'Agostino seeks the imposition of sanctions against Alarm including reimbursement of D'Agostino's costs in defending this suit. In light of the factual issues which exist requiring a trial, it is inappropriate to impose sanctions pursuant to 22 NYCRR 130-1.1.
Accordingly, it is
ORDERED, that the motion of Defendant, D'Agostino Supermarkets, Inc., for summary judgment and sanctions is denied; and it is further
ORDERED, that the cross-motion of Plaintiff, Alarm Monitoring Corp., for summary judgment is denied.
This constitutes the decision and Order of the Court.