Heart Constr. Corp. v Gower

[*1] Heart Constr. Corp. v Gower 2004 NY Slip Op 51805(U) Decided on October 14, 2004 District Court Of Nassau County, First District Cooper, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on October 14, 2004
District Court of Nassau County, First District

HEART CONSTRUCTION CORP. t/a EMERSON BUILDERS, Plaintiff(s)

against

DR. STUART GOWER, D.M. d/b/a GOWER ANIMAL CLINIC., Defendant(s)



33139/03

Alfred D. Cooper, J.

DECISION AFTER TRIAL

In this civil plenary action Heart Construction Corporation, t/a/ Emerson Builders (hereinafter the plaintiff) has brought suit against Dr. Stuart Gower, D.V.M. d/b/a Gower Animal Clinic (hereinafter the defendant) based on an alleged breach of a written contract for construction and remodeling of the defendant's commercial space. The plaintiff alleges three (3) causes of action against the defendant in its Amended Complaint. Those causes of action are:

BREACH OF CONTRACT For breach of a written contract and written change orders for certain goods, services and labor agreed and provided to the defendant pursuant to the March 3, 2003 written agreement for the sum of $68,188.00. That the defendant has only paid the sum of $53,703.00, and after credits given the defendant there remains outstanding due and owing the sum of $14,695.00 to the plaintiff. That the defendant has breached the written agreement by failing to tender the sum of $14,695.00;

ACCOUNT STATED

The plaintiff alleges, it has regularly invoiced the defendant for the [*2]outstanding sum of $14,695.00 representing the value of the goods, services and labor rendered to the defendant, and that the defendant has not disputed or otherwise objected to the amount set forth in the invoices, and therefore, the plaintiff has established an "account stated";

ATTORNEYS FEES

The plaintiff, pursuant to the written agreement of March 3, 2003, seeks to recover reasonable attorney's fees with interest on the outstanding balance at 18% per annum.

The defendant has filed a Verified Answer and Counterclaim to the plaintiff's Amended Complaint denying various allegations of the plaintiff's Amended Complaint. The defendant raises one (1) Affirmative Defense and three (3) counterclaims against the plaintiff. The defendant's first affirmative defense is:

FIRST AFFIRMATIVE DEFENSE

The Amended Complaint fails to set forth a cause of action upon which the relief requested can be granted;

FIRST COUNTERCLAIM

The defendant's first counterclaim acknowledges the March 3, 2003 written contract for material services and labor associated with the construction work at his offices but, denies agreeing to the written progress payments schedule, but agreed to pay on completion, and that the plaintiff failed to complete the agreed services pursuant to the parties agreement, and that said breach by the plaintiff damaged the defendant in the sum of $50,000.00;

SECOND COUNTERCLAIM The defendant alleges the plaintiff breached the implied warranties of the agreement that the work would be performed in a workmanlike manner, timely completed, and according to the written specification. That said breach of the implied warranty damaged the defendant in the sum of $50,000.00;

THIRD COUNTERCLAIM

The defendant alleged that the plaintiff was negligent in its performance and damaged the defendant in the sum of $50,000.

The Court conducted a bench trial of this action on September 14, 2004. Based on [*3]the credible evidence adduced at trial the Court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

The plaintiff construction and remodeling corporation was the successful bidder on a proposed contract submitted to the bidding process by the defendant veterinarian for remodeling office space. The remodeling was to be performed at the defendants' commercial veterinarian facility located at 3 West Davidson Avenue, Oceanside, New York.

The parties executed a written detailed construction/remodeling agreement dated February 26, 2003, and executed on March 3, 2003. The total contract price of the remodeling, of the defendant's offices, by the plaintiff, was initially stated to be $64,000.00 [Pl. Exh. 1 In Evidence]. The defendant was required to make an initial deposit of $10,000.00 which the Court finds was made. The Court finds that the agreement called for a payment schedule to be forward subsequent to the execution date of the parties' agreement (March 3, 2003), and to be separately agreed upon by the parties. The plaintiff provided the defendant with a written payment schedule subsequent to the date of the original contract. The payment schedule [Pl. Exh. 2 In Evid.] provided for a deposit of $10,000.00 on March 5, 2003, which was paid by the defendant, and is not in dispute. In addition to the initial deposit the payment schedule provided for five progress payments. Four (4) of the progress payments were scheduled to be paid over the course of twenty (20) days, i.e., March 11, 17, 24 and 31, 2003. The scheduled sums of each progress payment were to be $12,000.00, for the first three(3) and $14,000.00 for the fourth scheduled payment. There was also scheduled a final payment upon completion of the contract in the sum of $6,000.00. The Court finds the first progress payment was made in the sum of $10,000.00 on or about March 11, 2003 and said payment was reflected in the payment schedule. The schedule also reflected a deficiency balance of $2,000.00 which was due on March 17, 2003 with the second scheduled progress payment.

The Court finds that the parties, subsequent to the execution of their original remodeling contract of March 3, 2003, executed fifteen (15) change orders [Pl. Exhs. 3A through 3O In Evid.]. The Court finds further, that the fifteen (15) change orders increased the price of the parties original contract from $64,000.00 to $68,000.00. Furthermore, the Court finds change orders 1 through 3 actually resulted in a credit to the defendant for service, materials and labor pursuant to the original agreement.

Pursuant to the parties agreement, the defendant and his retained architect were responsible for securing all necessary and required work permits from the appropriate government agencies. The parties original agreement did not contain an explicit and definite completion date. The payment schedule did provide for a definite completion date which was to be three (3) weeks from March 17, 2003, assuming the plaintiff was "...allowed to continue the work unimpeded, without any delays from outside services, such as, building department, material supplies, etc." Further, the payment schedule provided, "3. Work as of 3/24/03 will be delayed for one week pending permits processing, change [*4]order authorization and payment of monies..." [Pl. Exh. 2 In Evid.].

The Court finds, the plaintiff recommenced performance pursuant to the parties' agreement in April 2003. Further, the Court finds the plaintiff ceased performance after approximately three weeks as the plaintiff had to secure work permits [Pl. Exh. 4 In Evid.]. Furthermore, the Court finds the plaintiff resumed performance on May 9, 2003, after the necessary work permits had been secured by the defendant and his architect. The plaintiff continued its performance pursuant to the parties' agreement until June 2003. Finally, the Court finds the plaintiff ceased performance after the defendant's tender of $5,400.00 in the form of a check which was subsequently returned by the defendant's bank for insufficient funds [Pl. Exh. 5 In Evid.]. The plaintiff had made a demand for payment in the beginning of June 2003 in the sum of $12,000.00 pursuant to the payment schedule. The defendant, in response to the plaintiff's demand had tendered to the plaintiff only $5,400.00 by check which was subsequently returned by defendant's bank for insufficient funds on June 12, 2003. The plaintiff ceased performance of the contract three days after the check tendered by the defendant was returned by the bank unpaid. It is undisputed that the defendant paid the plaintiff a total of $54,000.00 on the agreement for plaintiff's performance pursuant to the parties' agreement. The plaintiff in this action seeks the sum of $14,695.00 as a balance due on the contract for the work. The defendant claims the plaintiff breached the agreement by not completing the contract, and waiting for payment upon completion of the contract. The defendant contends further that the plaintiff can not recover any damages for breach of contract as the plaintiff was required to complete its performance before holding the defendant in breach for non payment. On the other hand the plaintiff alleges it ceased performance pursuant to the terms of the written agreement and is entitled to recover damages for the work performed despite its failure to complete the contract.

ISSUES

The Court finds that the issues raised in this litigation are whether the defendant agreed to the payment schedule tendered subsequent to the execution of the parties' agreement; and if not, whether the plaintiff was in breach of the parties' agreement upon ceasing performance upon the defendant tendering of a check for $5,400.00 in June 2003 as opposed to the $12,000.00 demanded by the plaintiff; or whether the plaintiff pursuant to the terms of the written agreement was permitted to terminate performance after the defendant failed to tender the sum of $12,000.00, and in the alternative tendered a check for $5,400.00 which was subsequently returned for insufficient funds in June 2003; whether the plaintiff was required to complete the contract before demanding payment. Finally, whether the return of the defendant's check for insufficient funds on June 17, 2003 constituted an anticipatory repudiation/breach of the parties' contract on the part of the defendant, permitting the plaintiff to cease its performance and sue for damages prior to completion of the contract.

THE LAW

"Ratification depends on intention and payment is merely evidence of intention" Canto, Inc. v. Farinola, 129 NYS2d 595, 596 [1954], Parsons v. Teller, 188 NY 318, 326 [1907]; Millard v. Hewlett, 301, 302 [1838]. "If there are surrounding circumstances which taken in connection with the payment, justify the inference of a promise implied in fact to pay the whole, it is probable that the original liability would be held to have been ratified." Williston on Contracts, Vol. 1, p 532 Revised Edition. Canto, Inc. v. Farinola, supra at 596, "Where there is no ambiguity in a contract, it is the responsibility of the Court to interpret [the contract]" (Hartford Acc. & Indem. Co. v. Wesolowski, 33 NY2d 169, 172; see also, W.W.W. Assocs. v. Giancontieri, 77 NY2d 157, 162). "Even where ..., a contract is ambiguous, its interpretation remains the exclusive function of the Court unless "determination of the intent of the parties depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence" (Hartford Acc. & Indem. Co. v. Wesolowski, supra , at 172) .... In absence of any extrinsic evidence concerning communications during contract negotiations, the issue of the parties' intent is one of law for the Court (see, Hudson-Port Even Assocs. v. Chien Kuo, 165 AD2d 301, 305 afield 78 NY2d 944; Tracey Rd. Equip. v. Village of Johnson City, 174 AD2d 849, 851; see also, Sutton v. East River Savings Bank, 55 NY2d 550, 553-554; cf., New in Corp. v. Hartford Acc. & Indem Co., 62 NY2d 916, 919; Kirby's Grill v. Westville Plaza, 272 AD2d 978; Bayer Realtors v. W. E. Pears, Inc., 256 AD2d 1164), Village of Hamburg v. American Ref-Fuel Co. Of Niagara, L.P., 284 AD2d 85; 727 NYS2d 843 [2001].

"In determining whether the contract before us is" reasonably certain in its material terms" and therefore sufficiently definite as to be enforceable, we must apply a standard that "is necessarily flexible, varying for example with the subject of the agreement, its complexity, the purpose for which the contract was made, the circumstances under which it was made, and the relation of the parties" (Cobble Hill Nursing Home v. Henry & Warren Corp, 74 NY2d 475, 482-483, rears denied 75 NY2d 863, cert. denied 498 US 816; see also, Matter of Express Indus. & Term. Corp. v. New York State Dept. of Transp., 93 NY2d 584, 589-590, rear. denied 93 NY2d 1042; Martin Delicatessen v. Schumacher, 52 NY2d 105, 109).

"When interpreting a written contract, the Court should give effect to the intent of the parties as revealed by the language, and structure of the contract (see Breed v. Insurance Co., 46 NY2d 351, 355, rear denied 46 NY2d 940), and should ascertain such intent by examination of the document as a whole (see, William Press v. State of New York, 37 NY2d 434, 440). Effect and meaning must be given to every term of the contract (see, County of Columbia v. Continental Ins. Co., 83 NY2d 618, 628), and reasonable effort must be made to harmonize all of its terms (see, Facet Indus. v. Wright, 95 AD2d 262, 265, revd on other grounds 62 NY2d 769; Canlanucci v. Reliance Ins. Co., 43 AD2d 622, 623, afield 35 NY2d 890). Moreover, the contract must be interpreted so as to give effect to, not nullify, its general or primary purpose (see, Williams Press v. State of New York, supra , at 440; Murray Oil Prods. v. Royal Exch. Assur. Co., 21 NY2d 440, 445, mot. to amend remittitur granted 22 NY2d 722); (Reda v. Eastman Kodak Co., [appeal No. 2], 233 AD2d [*5]914, 914-915).

It has been held, "[w]here the contract is wholly executory there must be some express and absolute refusal to perform, or some voluntary act on the part of the individual which renders it impossible for him to perform, in order to constitute an anticipatory breach for which an action will lie. Whereas by a partially executed contract the breach may result from a failure to perform some of the provisions of the contract. But in either case, after a breach by one party, the right of the other party and his remedies are the same as to the unexecuted provisions of the contract. (Howard v. Daly, 61 NY 362) "...[A]fter the renunciation of the agreement by the defendant, the plaintiff should be at liberty to consider himself absolved from any future performance of it, retaining his right to sue for any damage he has suffered from the breach of it. Thus, instead of remaining idle and laying out money in preparation which must be useless, he is at liberty to * * * [mitigate] ... the damages to which he would otherwise be entitled for a breach of contract". Ga Nun v. Palmer, 202 NY 483, 490 [1911].

"The man who wrongfully renounces a contract into which he has deliberately entered cannot justly complain if he is immediately sued for a compensation in damages by the man whom he has injured; and it seems reasonable to allow an option to the injured party, either to sue immediately, or to wait until the time when the act was to be done, still holding it as prospectively binding for the exercise of this option, which may be advantageous to the innocent party, and cannot be prejudicial to the wrongdoer." Ga Nun v. Palmer, supra at 490-491. Anticipatory breach occurs when one of the parties to a bilateral contract repudiates the contract. Under 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 non-repudiating party to claim damages for total breach (see, generally, 11 Williston, Contracts, §1301; 4 Corbin, Contracts, §959) (Long Island Railroad Co. v. Northville Industries Corp; 41 NY2d 455, 463 [1977]). The repudiation may be express or implied. An express repudiation is a clear, positive, unequivocal refusal to perform (Restatement [Second] of Contracts §250; see, II Farnsworth, Contracts §8.21...); (Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp., 92 NY2d 458, 463 [1998]), an implied repudiation results from conduct where the promissor put out of its power to perform so as to make substantial performance of its promise impossible (Norcon Power Partners v. Niagara Mohawk Power Corp., supra ).

ANALYSIS

In the case before the Court, the parties' agreement of March 3, 2003, embodied mutual and inter-dependant conditions and obligations, therefore it constituted a bilateral agreement (Long Island Railroad Co. v. Northville Industries Corp;, supra at 463). The defendant contended by his testimony that he never agreed to the written payment schedule [Pl. Exh. 2 In Evid.], and therefore, was not bound by said payment schedule, and was not obligated to pay the plaintiff $12,000.00 as demanded on June 2003, prior [*6]to the plaintiff's ceasing to perform. The defendant, would have the trier of facts believe the parties never reached an agreement on the schedule of payments, and therefore, the plaintiff lacked a basis to cease its performance in June 2003, and therefore was in breach of the parties' agreement as of June 2003. The plaintiff, on the other hand, takes the position that pursuant to paragraph number 5 of the "Conditions of Proposal", printed on the back of the first page of the written agreement, it had the right to stop work upon the defendant's failure to make payment as demanded. Paragraph 5 states: "If the owner fails to make payment to the contractor a [sic] herein provided, then the contractor may stop work without prejudice to any other remedy it may have".

Consequently, this Court must determine whether the parties' agreed to the payment schedule [Pl. Exh. 2 In Evid.] within the terms of the parties' agreement, then the Court must determine whether to give effect to paragraph number 5 of the parties' agreement. The agreement provides for the parties to separately agree to a written payment schedule subsequent to the execution of the original agreement. A review of the payment schedule herein [Pl. Exh. 2 In Evid.] demonstrates that after the defendant made the initial deposit of $10,000.00 to the plaintiff, the defendant had paid the first progress payment in the sum of $10,000.00 on March 11, 2003, leaving a balance of $2,000.00 which was to be added to the second progress payment due on March 17, 2003. Although the progress payment schedule was not signed by the defendant, he did make a partial payment pursuant to the agreement. The payment schedule provided for three additional progress payments in the sums of $12,000.00, $12,000.00, and $14,000.00 with an additional payment of $6,000.00 upon the completion of the contract. "Ratification depends on intention and payment is merely evidence of intention" Canto, Inc. v. Farinola, supra . The payment of the initial progress payment, listed in the payment schedule, by the defendant is evidence of the defendant's intention to ratify the payment schedule (Canto, Inc. v. Farinola, supra ). The surrounding circumstances indicate that subsequent to the defendant's payment of the first progress payment on the schedule, the defendant accepted the plaintiff's continued performance in the remodeling and construction agreement. The partial payment by the defendant coupled with his acceptance of the plaintiff's continued performance would lead a reasonable person to believe the parties were in agreement with the terms of the payment schedule. The Court finds that this conduct on the part of the defendant gave rise to an implied promise to make all the scheduled payments, and the Court finds as a matter of law that the defendant ratified the payment schedule presented to him by the plaintiff. Willston on Contracts, Vol. 1, p. 532 Revised Edition. Canto, Inc. v. Farinola, supra . Consequently, the Court finds the parties agreed to the payment schedule which became a term of their original agreement. The Court also finds that paragraph 5 of the parties agreement is enforceable, and gave the plaintiff the right to cease performance upon the defendant's failure to make the payment of $12,000.00 demanded by the plaintiff in June 2003.

With respect to the defendant's presentation and tender of a check to the plaintiff for $5,400.00 as an alternative to the sum demanded by the plaintiffs, which was [*7]subsequently returned by the defendant's bank unpaid for insufficient funds, the Court finds this conduct constituted an implied repudiation and an anticipation breach of the parties' agreement (Norcon Power Partners v. Niagara Mohawk Power Corp., supra ). The Court finds defendant rather than tendering the sum demanded pursuant to the parties' agreement tendered a check in the sum of $5,400.00 to the plaintiff, despite the fact that the latter check did not constitute good funds. The plaintiff accepted the check in good faith. Upon the defendant's bank returning this check for insufficient funds, the defendant had impliedly repudiated its obligation to pay the plaintiff pursuant to the terms of contract. The plaintiff, based on this latter conduct, was entitled to cease performance pursuant to paragraph 5 of the parties' agreement. Furthermore, the Court also finds that the tender of the check for $5,400.00, which was returned by the defendant's bank for insufficient funds, constituted an implied repudiation and an anticipatory breach of the parties agreement (Norcon Power Partners v. Niagara Mohawk Power Corp, supra ). The Court finds the plaintiff was absolved from any future performance of the parties' agreement, and had an immediate right to sue for any outstanding damages he had suffered from the defendant's breach (Ga Nun v. Palmer, supra ). The plaintiff was not required to continue performance to completion before demanding full payment, but since he was injured financially by the conduct of the defendant, which constituted a repudiation of the payment schedule and a violation of paragraph 5 of the contract, he had a right to sue immediately, or to wait till completion of the work to demand full payment, Ga Nun v. Palmer, supra at 490-491 . The plaintiff had the right to exercise the option to sue immediately for anticipatory breach (Ga Nun v. Palmer, supra ).

CONCLUSION

The Court finds that although the defendant never signed the payment schedule tendered by the plaintiff, he ratified the payment scheduled by making the first progress payment to the plaintiff in the payment schedule, and accepted the plaintiff's continued performance. These latter acts, the Court finds, constituted an implied promise to pay in accordance with the payment schedule and paragraph number 5 (Ga Nun v. Palmer, supra ). The Court also finds that paragraph 5 of the parties agreement required the defendant to make all payments pursuant to the payment schedule to avoid plaintiff's stoppage in performance. Further, the Court finds, the defendant was in breach of the parties' agreement when he tendered a check for $5,400.00, instead of the $12,000.00 demanded, and the return of the defendant's check for $5,400.00 for insufficient funds constituted an implied repudiation of the parties agreement. The latter conduct on the part of the defendant gave the plaintiff an immediate right to sue for damages.

Based on the fifteen (15) change orders, the original contract price was increased from $64,000.00 to $68,188.00. The Court finds the defendant tendered the sum of $53,703.00 leaving a balance due the plaintiff of $14,485.00. The Court finds the plaintiff is entitled to recover the sum of $14,485.00 with interest from March 3, 2003. Further, based on the Court's conclusions, the first cause of action for breach of contract is sustained; the second cause of action for an account stated is dismissed; the third cause of action for attorney's fees is sustained, and the Court will schedule an attorney's fees [*8]hearing.

As to the defendant's first affirmative defense, it is dismissed. With respect to the defendant's first, second, and third counterclaims, they are all dismissed.

There will be an attorney's fees hearing scheduled for November 19, 2004, in Part Civil 4, in the District Court of Nassau County, 99 Main Street, Hempstead, New York at 9:30a.m..

The Court directs the clerk of the District Court to enter a money judgment in favor of the plaintiff against the defendant in the sum of $14,485.00, with interest from June 30, 2003. This constitutes the decision and order of this Court.

So ordered:

DISTRICT COURT JUDGE

Dated: October 14, 2004

cc:Martin & Molinari, Esqs. LLP

Dr. Stuart Gower, pro se

ADC:cw