G.C.M. Metal Indus. Inc. v J.B.C. Contr. Co. Inc.

[*1] G.C.M. Metal Indus. Inc. v J.B.C. Contr. Co. Inc. 2005 NY Slip Op 50835(U) Decided on June 3, 2005 Civil Court Of The City Of New York, Kings County Battaglia, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 3, 2005
Civil Court of the City of New York, Kings County

G.C.M. Metal Industries Inc., Plaintiff,

against

J.B.C. Contracting Co. Inc., Defendant.



73807 / 04

Jack M. Battaglia, J.

In its Complaint, G.C.M. Metal Industries, Inc. alleges that, at the "specific instance and request" of J.B.C. Contracting Co., Inc., it "performed work, labor and services" for which it has not been paid. J.B.C. was the general contractor on a project for the Dormitory Authority of the State of New York, the construction of a daycare center at York College, Jamaica. In a counterclaim, J.B.C. alleges that G.C.M. "placed a mechanics' (sic) lien..., resulting in damage to [J.B.C.'s] credit and preventing [it] from receiving bonds for other contracts, also resulting in monetary damages."

Trial was held on April 26 and April 27, 2005, at which there were only two witnesses. G.C.M. Metal offered the testimony of Hermie Dionisio, its general manager and construction manager; J.B.C. Contracting presented the testimony of Mohammed Kabir, its President. Both parties were represented by counsel. At the conclusion of trial, the parties were invited to make written submissions, arguing their respective views of the law and evidence; only G.C.M. accepted the Court's invitation.

With a Proposal dated January 15, 2004, G.M.C. Metal offered to "[t]o supply labor, materials, and equipment necessary to fabricate and install" metal components for the York College project at a total Proposed Price of $375,000.00. The description of the work that G.C.M. was to do was barebones, but G.C.M. had submitted a prior proposal, and there had been oral negotiations as to price with J.B.C. Contracting, so the parties presumably understood, at least, the general nature of the work. For present purposes, it is sufficient to note that the description included "Shop Drawing", and specifically excluded 21 numbered items. No separate price was specified for the Shop Drawing or the other items of work that G.C.M. was to do.

On January 19, 2004, J.B.C. Contracting faxed a letter to G.C.M. Metal designated: "Award and accepted contract For (sic) York College...Structural steel and related works as your contract & proposal Dated (sic) on January 15th, 2004 Total prices (sic) $375,000.00." The letter [*2]continued: "Please proceed on & prepare and submit shop drawing and related paper works (sic) as soon as possible."

On January 22, J.B.C. Contracting faxed a "Letter of Contract" dated January 21 to G.C.M. Metal "to confirm...[y]our proposal is accepted and awarded to your firm." G.C.M. was requested to "sign and fax back." But the letter contained a description of the work, also barebones, that differed from that in G.C.M.'s January 15 Proposal, which had been accepted by J.B.C. on January 19. Mr. Dionisio wrote "ok" next to those items that were consistent, and "excluded" next to those items that were not, signed the letter and faxed it back to J.B.C. on January 23. At trial, Mr. Dionisio explained how the items marked "excluded" fell within the specific exclusions in its January 15 Proposal. Mr. Dionisio also testified that there was no response from J.B.C. at that point to the changes G.C.M. made to the January 21 letter, and Mr. Kabir testified to none objecting to the changes. To the contrary, G.C.M. was invited to a project coordination meeting that was held on January 27.

At this point in the history, it is worthwhile noting that nothing in the writings nor the testimony of Mr. Dionisio or Mr. Kabir suggests that anything additional was required in the way of writings or approvals for the parties to be contractually bound to each other. Specifically, there is no reference in the writings to the Project Manual for the York College project, stating that the Dormitory Authority "reserves the right to disapprove the use of any proposed Subcontractor and in such event the Bidder shall submit the name of another Subcontractor." Mr. Dionisio testified that he first learned of the Dormitory Authority's disapproval rights at the January 27 coordination meeting. He also testified that he had seen the Project Manual at some point.

The Court finds and concludes that G.C.M. Metal's January 15 Proposal and J.B.C. Contracting's "award and accepted contract" dated January 19 created a contract between them on the terms of G.C.M.'s Proposal. Mr. Kabir gave no explanation at trial for the January 21 "letter of contract", and the writing must be considered a proposal to modify the contract previously entered into a proposal that was rejected by G.C.M. Although unnecessary, J.B.C.'s proceeding with G.C.M. at the coordination meeting evidences its acquiescence to G.C.M.'s rejection. The Court will assume, however, that the Dormitory Authority's "reservation" of disapproval rights as to subcontractors became an implied term of the G.C.M. / J.B.C. contract.

At the January 27 meeting, J.B.C. Contracting and G.C.M. Metal discussed the plan and schedule for the project with a representative of the Dormitory Authority and a representative of the Authority's construction manager, Velez Organization. Among other things, it was agreed that G.C.M. would submit the shop drawings for the metal work to J.B.C. by February 17 for approval by the Authority's engineer. In the meanwhile, J.B.C. was to deliver to G.C.M. the structural and architectural plans G.C.M. needed to prepare the shop drawings.

In a letter dated January 27, J.B.C. Contracting told G.C.M. Metal "don't do anything about this job until we notify you." The letter expressed confusion that G.C.M. "changed the scope" of the work it was to do, apparently a reference to J.B.C.'s January 21 letter and Mr. [*3]Dionisio's exclusions. Mr. Kabir, who authored the January 27 letter, offered no explanation for

attending the coordination meeting with G.C.M., where the timeline for its work was discussed, and then, virtually immediately, directing that the work cease.

There was no evidence of any communication between the parties, other than J.B.C. Contracting's cancelling of a meeting scheduled for January 28, from that date until February 2 when, according to Mr. Dionisio, Mr. Kabir told him to proceed with the shop drawings. On the next day, again according to Mr. Dionisio, G.C.M. Metal received the structural and architectural plans it needed for the shop drawings. Mr. Kabir denied both the February 2 conversation and delivery of the plans the next day. On these important discrepancies, the Court finds Mr. Dionisio's account to be more credible.

There was again no evidence of any communication between the parties until February 20, when J.B.C. Contracting in effect terminated its contract with G.C.M. Metal. During that period, however, G.C.M. arranged for a third-party "detailer" to prepare the shop drawings, and J.B.C. arranged for a replacement for G.C.M. to do the metal work on the York College project. A February 14 letter from Velez Organization advised J.B.C. that Barone Steel Fabrication was "approved as an (sic) supplier and installer for this project." G.C.M. was not advised that it was being replaced.

Meanwhile, on February 6, G.C.M. Metal received a proposal from the detailer, Joseph V. Vattamattan, P.E., for the preparation of the shop drawings "for a fixed fee of $14,000.00." G.C.M. was asked to accept the proposal by signing a copy and returning it, but there is no evidence that this was done. Mr. Dionisio testified, however, that on the same day he told Mr. Vattamattan to proceed. Mr. Dionisio testified that Mr. Vattamattan performed as agreed, and that G.C.M. is "obligated to pay $14,000.00."

On February 19, G.C.M. Metal advised J.B.C. Contracting and Velez Organization that the shop drawings were ready for submission. In typed and handwritten communications to G.C.M. dated February 20, J.B.C. advised that it was "not comfortable to make contract" with G.C.M., and that: G.C.M. "no longer deal with us. You don't have to do anythings. (sic) I am not doing business with you." On the same day, G.C.M. notified the Dormitory Authority, Velez Organization and J.B.C. Contracting that it was asserting a lien against the project for the "shop drawing which cost me the amount of $14,000.00." Also on the same day, G.C.M. sent J.B.C. a "schedule of values", which Mr. Dionisio characterized as an invoice, showing a price for the shop drawing of $15,500.00.

There was no evidence of any further communication between the parties until this lawsuit. On July 27, 2004, the Dormitory Authority advised J.B.C. Contracting that it would be terminating its contract for the York College project unless J.B.C. made "satisfactory arrangements to finish the Project", which it apparently did not do. [*4]

At trial, J.B.C. Contracting contended primarily that it terminated its contract with G.C.M. because G.C.M. had not been approved by the Dormitory Authority. But there is no mention of that in the February 20 termination note. Mr. Kabir acknowledged that there was no writing from the Dormitory Authority or Velez indicating that G.C.M. was not acceptable, and he acknowledged that G.C.M. was never informed in writing by anyone that it was not approved. Mr. Dionisio testified that G.C.M. was never advised that it was not approved by the Dormitory Authority.

Mr. Kabir did testify that a consultant hired by J.B.C. Contracting had a negative opinion of G.C.M. Metal, and the February 20 letter stated that "consultant have no faith as your previous works with him" (sic). Mr. Kabir testified that as a result he had previously requested additional references from G.C.M., which were not provided; this too appears in the letter. But there was no testimony or other evidence, admissible or not, as to the existence of any justifiable concern regarding G.C.M.'s likely performance on the project.

The February 20 letter stated two other reasons for the termination. One, that G.C.M. Metal "did not provide as [J.B.C.] required" was not explained at trial, and there is no evidence of any deficiency in performance on G.C.M.'s part. The two-day delay beyond the date for delivery of the shop drawings was not shown to be anything but de minimus, and in any event could be ascribed to J.B.C.'s direction that any work cease from January 27 through February 2. The other reason specified, that G.C.M. had "no right to call" the Dormitory Authority, is frivolous.

Breach of Contract

The Dormitory Authority's reservation of a right to disapprove of a subcontractor, contained in the Project Manuel for the York College daycare center, is at best a condition subsequent (see Board of Education v Statewide Vending Corp., 84 AD2d 754, 755-56 [2d Dept 1981], aff'd 58 NY2d 718 [1982]) that became an implied term of the contract between G.C.M. Metal and J.B.C. Contracting (see Rowe v Great Atlantic & Pacific Tea Co., Inc., 46 NY2d 62, 69 [1978].) "A condition subsequent does not delay the enforceability of a contract; it only preserves the possibility that a contract can be set aside later in time if the condition is not fulfilled." (Benincasa v Garrubbo, 141 AD2d 636, 638 [2d Dept 1988].)

The party relying on a condition subsequent, in this case J.B.C. Contracting, has the burden of proving the occurrence of the condition. (See Blandford Land Clearing Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 260 AD2d 86, 91 [1st Dept 1999].) J.B.C. did not carry the burden of showing that the Dormitory Authority disapproved of G.C.M. Metal as a subcontractor; and, even if it did, J.B.C. cannot reply on a disapproval that, without justification, J.B.C. made happen.

"[A] party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition." (Kooleraire [*5]Service & Installation Corp. v Board of Education of City of New York, 28 NY2d 101, 106 [1971]; see also A.H.A. General Const., Inc. v New York City Housing Authority, 92 NY2d 20, 31 [1998]; Central School Dist. No. 1 v Double M. Construction Corp., 41 AD2d 771, 772 [2d Dept 1973], aff'd 34 NY2d 695 [1974]; Holland v Ryan, 307 AD2d 723, 724 [4th Dept 2003].)

The principle is not limited to conditions precedent (see A-1 General Contracting Inc. v River Market Commodities Inc., 212 AD2d 897, 900 [3d Dept 1995]; Greenspan v Amsterdam, 145 AD2d 535, 536 [2d Dept 1988]; Benincasa v Garrubbo, 141 AD2d at 638; Farrell Heating, Plumbing, Air Conditioning Contractors, Inc. v Facilities Development and Improvement Corp., 68 AD2d 958, 959 [3d Dept 1979]), and can be grounded in the "implied obligation of a party not to 'do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of a contract' " (see A.H.A. General Const., Inc. v New York City Housing Authority, 92 NY2d at 31 [quoting Kirke La Shelle Co. v Paul Armstrong Co., 263 NY 79, 87 [1933]).

More specifically, where the contract requires third-party approval as a condition to a party's performance, the party may not frustrate or prevent the giving of approval. (See Arc Electrical Construction Co. v George A. Fuller Co., 24 NY2d 99, 101 [1969][architect]; Ellenberg Morgan Corp. v Hard Rock Cafe Associates, 116 AD2d 266, 270-71 [1st Dept 1986][consent of partners]; Felix Contracting Corp. v Oakridge Land and Property Corp., 106 AD2d 488, 489 [2d Dept 1984][building permits]; Hoffman v Manley, 1985 US Dist LEXIS 16463, *8 [SDNY][coop board].)

"There are instances when this kind of frustration is justified by the conduct of the other party." (Kooleraire Service & Installation Corp. v Board of Education of City of New York, 28 NY2d at 107.) But the party who interferes and frustrates or prevents third-party approval must at least proceed in good faith. (See Ellenberg Morgan Corp. v Hard Rock Cafe Associates, 116 AD2d at 271; Hoffman v Manley, 1985 US Dist LEXIS 16463, at *8.)

The Court finds and concludes that if the Dormitory Authority disapproved G.C.M. Metal as a subcontractor for the York College project and, again, there is no evidence, other than Mr. Kabir's testimony, that it did J.B.C. Contracting brought it about without justification. There was no evidence of any facts or circumstances that would support a concern that G.C.M. would not fully and satisfactorily perform the contract.

Since neither the alleged disapproval of the Dormitory Authority, nor the other reasons specified in J.B.C. Contracting's February 20 letter, would justify J.B.C.'s termination of the contract, the termination of the contract and J.B.C.'s interference with G.C.M.'s performance under it constitute a total breach by J.B.C.

Damages [*6]

For more than one hundred and fifty years, the law of New York, in accordance with the general rule, has allowed a contractor who has been wrongfully prevented from completing the work an election to sue on the contract or on quantum meruit: "[W]hen the contract is terminated by one party against the consent of the other, the latter will not be confined to the contract price, but may bring his action for a breach of the contract and recover as damages all that he may lose by way of profits in not being allowed to fulfil the contract; or he may waive the contract and bring his action...for work and labor generally, and recover what the work done is actually worth. But in the latter case he will not be allowed to recover as damages any thing for speculative profits, but the actual value of the work and materials must be the rule of damages." (Clark v City of New York, 4 NY 338, 343 [1850][emphasis added]; see also New Era Homes Corporation v Forster, 299 NY 303, 307 [1949]; Martin Iron & Construction Co. v Grace Industries, Inc., 14 AD3d 495, 496 [2d Dept 2005]; Meyers v Town of Coxsackie, 139 AD2d 855, 856 [3d Dept 1988]; Raile v Peerless American Products Co., Inc., 192 AD 506, 508 [1st Dept 1920]; Sterling v Cambria Construction Corp., 2003 NY Slip Op 50740[U], *2-*3 [App Term, 2d and 11th Jud Dists]; Scaduto v Orlando, 381 F2d 587, 595 [2d Cir 1967][applying Mass. law].)

A suit on the contract seeks "the value of what plaintiff has lost that is, the contract price, less payments made and less the cost of completion." (New Era Homes Corporation v Forster, 299 NY at 307; see also Alm v Unified Church Structures, Inc., 61 AD2d 886, 886-87 [4th Dept 1978]; Shapiro v Mollat, 168 NYS 723, 724 [App Term, 1st Dept 1918]; United States ex. rel. Evergreen Pipeline Construction Co., Inc. v Merritt-Meridian Construction Corp., 2000 US Dist LEXIS 2868, *1-*2 [SDNY].) Perhaps needless to say, the contract measure of damages serves the contractor's expectancy interests by attempting to provide the benefit of the bargain. (See Pumpelly v Phelps, 40 NY 59, 65-66 [1869]; Brown v Lockwood, 76 AD2d 721, 742-43 [2d Dept 1980].)

"[I]n an action on a quantum meruit the substantive facts are the furnishing and the delivery of goods to the defendant, on which the law implies a promise to pay." (Raile v Peerless American Products Co., Inc., 192 AD at 510.) The contract may be used "to prove that the work was done at the special instance and request of the defendant" (id.), and "to fix the amount of recovery" (id., at 509-10.) "Although the contract rate may be considered in receiving evidence of value, it neither measures value nor limits the amount which can be recovered." (Scaduto v Orlando, 381 F2d at 595-96 [footnote omitted].) On quantum meruit, "it is permissible for [the contractor's] damages to exceed the contract price." (Meyers v Town of Coxsackie, 139 AD2d at 857.) The quantum meruit measure of damages serves the contractor's restitution interests by attempting to provide the value of the benefit conferred. (See Bradkin v Leverton, 26 NY2d 192, [*7]197-99 [1970]; Zolotar v New York Life Ins. Co., 172 AD2d 27, 33 [1st Dept 1991]; Moors v Hall, 143 AD2d 336, 337-38 [2d Dept 1988].)

In a number of recent cases, particularly in the Third Department, the court has stated that, where a construction contract has been terminated before completion, the "appropriate" or "proper" measure of damages is quantum meruit, and no mention is made of the contractor's ability to elect the contract measure. (See MCK Building Associates, Inc. v St. Lawrence University, 301 AD2d 726, 728 [3d Dept 2003]; Schultz Construction. Inc. v Franbilt Inc., 285 AD2d 936, 938 [3d Dept 2001]; C.R. Drywall, Inc. v Wade Lupe Construction Corp., 184 AD2d 923, 923-24 [3d Dept 1992]; Ambrosino Architects, P.C. v Conrad, 2003 NY Slip Op 51032[U], *2 [App Term, 9th and 10th Jud Dists]; but see Custom Remodelers Group, Ltd. v Katz, 2002 NY Slip Op 40321[U], *2 [App Term, 9th and 10th Jud Dists].) Since in our case Plaintiff has clearly elected to proceed on quantum meruit (see Plaintiff's post-trial submission dated May 16, 2005), the Court need not consider the effect, if any, of these statements.

Quantum meruit recovery is determined by the "reasonable value of the work performed and of the materials...furnished." (Najjar Industries, Inc. v City of New York, 87 AD2d 329, 330 [1st Dept 1982], aff'd 68 NY2d 943 [1986]; see also Meyers v Town of Coxsackie, 139 AD2d at 857 ["fair value of...partial performance"]; Lossing v Cushman, 123 AD 693, 697 [2d Dept 1908], rev'd on other grounds 195 NY 386 [1909].) "The standard for measuring the value of the [contractor's] services, of course, is the amount for which the services and materials supplied could have been purchased from one in [the contractor's] position at the time and place the services were rendered." (Scaduto v Orlando, 381 F2d at 595.)

As a measure of "reasonable value", however, market price may prove of limited utility. "There is no market, nor any prevailing or customary market price, for municipal incinerators, unfinished or even finished." (Najjar Industries, Inc. v City of New York, 87 AD2d at 332.) "The reasonable value of a municipal incinerator...is what it reasonably costs to build." (Id.) And so, courts have long accepted the "actual cost of material and labor and a reasonable profit to the contractor" as evidence of the "value of the work done." (See General Supply & Construction Co. v Goelet, 149 AD 80, 88 [1st Dept 1912].)

As a result, therefore, it may now be said that "[t]he customary method of calculating damages on a quantum meruit basis in construction contract cases both on completed contracts and contracts terminated before completion is actual job costs plus an allowance for overhead and profit minus amounts paid." (See Najjar Industries, Inc. v City of New York, 87 AD2d at 331-32; see also Whitmyer Bros., Inc. v State of New York, 47 NY2d 960, 962 [1979]; Mid-State Precast Systems Inc. v Corbetta Construction Co. Inc., 202 AD2d 702, 704 [3d Dept 1994]; Aniero Concrete Co. v Aetna Casualty & Surety Co., 2002 US Dist LEXIS 20527, *2 [SDNY].)

The inclusion of overhead and profit in the quantum meruit calculus takes that method of computing damages closer to the contract measure of expectancy. There is, of course, nothing wrong with that, and it may well be preferable than a more elusive assessment of the "value" [*8]conferred. It does, however, blur the distinction between "gains prevented" and "losses sustained." (See Lieberman v Templar Motor Co., 236 NY 139, 149 [1923].) And, to the extent that the calculation includes "actual job costs", it serves the contractor's reliance interests, compatible with the contract damages rule that allows a non-breaching party to recover "payments for labor and materials, reasonably made in part performance of the contract, to the extent that they are wasted if performance is abandoned." (See id.; see also Harry Kolomick Contractors, Inc. v Shelter Rock Estates, Inc., 172 AD2d 492, 492 [2d Dept 1991]; Haven Associates v Donro Realty Corp., 121 AD2d 504, 509 [2d Dept 1986].)

Consideration of the interests served by the damages rules in construction contract cases provides a useful context for evaluating evidence submitted to support a damage award. Here, the issues are whether G.C.M. Metal may recover the amount that it may be obligated to pay its "detailer" for the drawings completed, even though the detailer has not been paid, and, if so, whether G.C.M.'s evidence is sufficient.

"It would seem to be axiomatic that a suitor cannot recover damages for breach of a contract unless he has suffered them." (Degnon Contracting Co. v City of New York, 235 NY 481, 486 [1923]; see also France & Canada S.S. Corporation v Berwind-White Coal Mining Co., 229 NY 89, 95 [1920]["It is elemental that damages cannot be recovered in excess of the actual damages sustained"].) "Although the fact that the plaintiff has sustained damages must be proved with certainty, nothing like precise mathematical accuracy can be obtained in the calculation of the amount of damages." (Borne Chemical Co., Inc. v Dictrow, 85 AD2d 646, 650 [2d Dept 1981][emphasis added].) Should a recovery based on obligation in the absence of payment be foreclosed because of fatal deficiency as to the fact of damage, or be permitted as reflecting an acceptable uncertainty akin to their amount?

"[A]t common law the wrongful imposition of liability to a third person has long been considered actual damage even while the liability remains unsatisfied." (Weitzman v Stein, 459 FSupp 400, 403 [SDNY 1978][footnote with citations omitted].) In somewhat analogous circumstances, based upon contractor / subcontractor "liquidating agreements", courts "allow contractors to bring an action against the owner on behalf of their subcontractors" for increased costs to the subcontractors resulting from delays or extra-contractual work caused by the owner. (See Bovis Lend Lease LMB Inc. v GCT Venture, Inc., 285 AD2d 68, 69-70 [1st Dept 2001].)

A liquidating agreement requires an "actual contractual commitment" by the contractor to "pass through" to the subcontractor the amount recovered from the owner. (See Barry, Bette & Led Duke Inc. v State of New York, 240 AD2d 54, 56 [3d Dept 1998].) But the contractor's claim is recognized even though the subcontractor has not asserted a claim against the contractor (see Schiavone Construction Co., Inc. v Triborough Bridge & Tunnel Authority, 209 AD2d 598, 600 [2d Dept 1994]), and "even though no damages have been suffered directly by the contractor" (see American Standard, Inc. v New York City Transit Authority, 133 AD2d 595, 596 [2d Dept 1987]). [*9]

The cases addressing liquidity agreements are not entirely apposite to the issue raised by this case. "[A]bsent a contractual commitment to the contrary, a prime contractor is not responsible for delays that its subcontractor may incur unless those delays are caused by some agency or circumstance under the prime contractor's direction or control." (Triangle Sheet Metal Works, Inc. v James H. Merritt and Co., 79 NY2d 801, 802 [1991].) Here, on the other hand, G.C.M. Metal's liability to its detailer is in no way dependent upon its control over the Dormitory Authority or J.B.C. Contracting; it is a consequence of G.C.M.'s own contract with, and request for services from, the detailer. Also, at least in our case, there is no need to "liquidate" the amount that G.C.M. owes the detailer, since G.C.M. asserts that it is bound to pay an agreed price, and not the reasonable value of the detailer's services.

But, as in the liquidating agreement cases, the crucial element in establishing the contractor's loss here is its "actual contractual commitment" to pay the third party (see Barry, Bette & Led Duke Inc. v State of New York, 240 AD2d at 56.) G.C.M. Metal has admitted its liability to pay Mr. Vattamattan $14,000.00 for the drawings. (See Mars Associates, Inc. v New York City Educational Construction Fund, 126 AD2d 178, 192 [1st Dept 1987]; Honeywell, Inc. v J.P. Maguire Co., 2000 US Dist LEXIS 3699, *38 [SDNY]; see also Savoy Little Neck Associates, L.P. v Halpern Construction, Inc., 1 AD3d 129, 130 [1st Dept 2003][no showing that plaintiffs "have paid, or intend to pay", subcontractor's liens].)

In GSGSB, Inc. v New York Yankees (1996 US Dist LEXIS 10646 [SDNY], aff'd 1997 US App LEXIS 17433 [2d Cir]), an architectural firm sued the Yankees for payment for services rendered in preparing drawings and specifications for proposed renovations to the team's stadium. Because no contract was ever signed, recovery was on a quantum meruit basis. The Yankees contended that GSGSB could not recover for work done by subcontractors "where the subcontractors have not been paid or have not taken legal action to preserve the claim." (1996 US Dist LEXIS 10646, at *42.) The court disagreed, finding that "subcontractor recovery remains squarely within the rubric of GSGSB's reasonable expectation of payment under quantum meruit." (Id., at *44.) "[U]nder quantum meruit, GSGSB was entitled to litigate the subcontractor claims as part of the services it provided." (Id., at 45.) GSGSB provided proof through the testimony of an expert that "the services provided by the subcontractors were fair and reasonable." (See id., at 46.)

The only arguable material difference from the facts of our case is that "the Yankees [had] already received the benefit of the subcontractors' performance." (See id., at 45.) For recovery of reliance damages, however, it is not necessary that an actual benefit have been conferred on the defendant. (See Farash v Sykes Datatronics, Inc., 59 NY2d 500, 504-06 [1983]; see also Kennedy v Leibowitz, 303 AD2d 375, 376 [2d Dept 2003]; Long Island Pen Corp. v Shatsky Metal Stamping Co., Inc., 112 AD2d 980, 980 [2d Dept 1985]; Town of Haverstraw v Columbia Electric Corp., 2004 US Dist LEXIS 6386, *29 [SDNY].) And even though an element of the case for restitution damages is the defendant's acceptance of the services (see Skillgames, LLC v Brody, 1 AD3d 247, 251 [1st Dept 2003]; Moors v Hall, 143 AD2d 336, 337-38 [2d Dept 1988]), here again, the defendant having requested the services cannot refuse [*10]without justification to accept them.

"Proof of damages may be based solely on oral testimony as long as the witness has knowledge of the actual costs." (Electronic Services International, Inc. v Silvers, 284 AD2d 367, 368 [2d Dept 2001]; see also D'Angelo v State of New York, 39 NY2d 781, 782 [1976]; Merchants Bank of New York v Dajoy Diamonds, Inc., 5 AD3d 167, 167 [1st Dept 2004].) "[T]he oral testimony of a knowledgeable witness may, if accepted by the factfinder, sufficiently prove actual costs in a quantum meruit case, even if the testimony is unaccompanied and unsupported by documents." (Aniero Concrete Co. v New York City Construction Authority, 2003 US Dist LEXIS 7536, *18-*19 [SDNY]; see also Austin v Barber, 227 AD2d 826, 828 [3d Dept 1996]; Reed Paving, Inc. v Glen Avenue Builders, Inc., 148 AD2d 934, 935 [4th Dept 1989].)

Here, Mr. Dionisio testified that he agreed to Mr. Vattamattan's proposal that the detailer prepare the shop drawings "for a fixed fee of $14,000.00", that the detailer properly performed, and that G.C.M. Metal owes him payment. The testimony was supported with Mr. Vattamattan's written proposal. We allow recovery for amounts paid without any evidence that payment was legally required, or even that it was in fact made. Why should not credible testimony that payment will be made be sufficient? Does the law so little value the obligations it creates that more is required to support a damage award?

If fraud or collision is the concern, even evidence of payment is not conclusive (see CPLR 4533-a), and testimony from the person owed must still be accepted or rejected by a determination of credibility. With the capability provided by computer technology to so easily create authentic-looking documents of virtually any sort, a writing may be no more probative than the credibility of the person who offers it.

Whether considered a measure of value or detriment, the price G.C.M. Metal agreed to pay its detailer is sufficient to establish its damages. Mr. Dionisio 's assessment of the value of the detailer's services should be considered in light of the common-sense proposition that G.C.M. Metal "was not a charitable organization, and consequently had no interest in making donations to sub-contractors in amounts greater than the costs and values of the subcontractors' labor and materials would justify in the market place." (See Aniero Concrete Co. v New York City Construction Authority, 2003 US Dist LEXIS 7536, at *18-*19.) The commitments businesspeople make to each other have significance in the marketplace, and they should, as well, have significance in court.

As to overhead and profit, included as part of the quantum meruit formula, G.C.M. Metal added $1,500.00 to the $14,000.00 that it is obligated to pay Mr. Vattamattan, representing 10.7% of the amount due. Such an additional award is consistent with decisions that find 10% for overhead to be "fair and reasonable compensation" (see Fehlhaber Corp. v State of New York, 65 AD2d 119, 130 [3d Dept 1978]), and that accept an "arbitrary allowance of fifteen percent for overhead and profit" (see Westcott v State of New York, 264 AD 463, 465-66 [3d [*11]Dept 1942].) (See also Manshul Construction Corp. v Dormitory Authority of New York, 79 AD2d 383, 392 [1st Dept 1981]; United States ex rel. Maris Equipment Co., Inc. v Morganti, Inc., 163 FSupp2d 174, 187-88 [EDNY 2001].)

In its invoice to J.B.C. Contracting for the drawings, G.M.C. Metal deducted 10% of the total of $15,500.00, leaving the invoice amount of $13,950.00. Mr. Dionisio testified that it is customary in the construction industry to bill only 90% of amounts otherwise due, with the balance paid at the completion of the work. (See Arc Electrical Construction Co. v George A. Fuller Co., 24 NY2d at101-02.) But "[t]he mode of submitting invoices and calculating intermediate payments became irrelevant at the time of defendant's breach." (Aqua Dredge, Inc. v Stony Point Marina and Yacht Club, Inc., 183 AD2d 1055, 1057 [3d Dept 1992].)

G.C.M. Metal has not moved to amend its prayer for damages from $13, 950.00 to $15,500.00. But since G.C.M.'s invoice shows the total amount before deduction of the 10% holdback, and since the increased amount is highly unlikely to have "hindered [J.B.C. Contracting's] case preparation or affected [its] trial strategy" (see New Country Development Group, Inc. v Demitasse, Inc., 278 AD2d 728 , 729 [3d Dept 2000]), G.C.M. will be awarded the full amount warranted by the evidence.

Finally, G.C.M. Metal seeks prejudgment interest on its quantum meruit recovery, and it will be awarded from the date of submission of the invoice to J.B.C. (See Precision Foundations v Ives, 4 AD3d 589, 593 [3d Dept 2004]; Leroy Callender, P.C. v Fieldman, 252 AD2d 468, 469 [1st Dept 1998].)

With respect to J.B.C. Contracting's counterclaim, there was no showing that G.C.M. Metal's assertion of a lien against the project was not fully lawful, and no evidence that J.B.C. sustained damages as a result.

Judgment is awarded to Plaintiff for $15,500.00, with interest from February 20, 2004, plus costs. Defendant's counterclaim is dismissed.

June 3, 2005

Judge, Civil Court