RLI Ins. Co. v New York City School Constr. Auth.

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[*1] RLI Ins. Co. v New York City School Constr. Auth. 2007 NY Slip Op 52196(U) [17 Misc 3d 1130(A)] Decided on October 19, 2007 Supreme Court, New York County Ramos, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 19, 2007
Supreme Court, New York County

RLI Insurance Company, Plaintiff,


New York City School Construction Authority, Defendant.


Charles Edward Ramos, J.

Defendant, the New York City School Construction Authority (the "SCA"), moves, pursuant to CPLR 3212, for partial summary judgment [FN1] on counts two and four of the complaint. Plaintiff, RLI Insurance Company ("RLI"), cross-moves, pursuant to CPLR 3126, to compel discovery, or preclude the admission of non-produced documents from trial, or striking the SCA's answer for failure to comply with RLI's discovery demands, or compelling the production of certain individuals for deposition.

On June 23, 1998, the SCA entered into contract with Zanis Construction Corporation ("Zanis") to perform repair work on the roof and exterior masonry of Public School 40 (the "40 project") for $2,109,000. Similarly, on June 25, 1998, the parties executed a second contract for the repair of the roof and exterior of Public School 102 (the "102 project")for $1,823,000. RLI, as surety for Zanis, executed performance and payment bonds for both projects. Zanis was unable to complete the work on the 40 project. Consequently, on October 19, 1999, as required by the indemnity agreement, Zanis executed an assignment of the proceeds from the 40 project to RLI. On March 1, 2001, the SCA's "emergency" contractor, York Hunter, Inc.[FN2], achieved substantial completion on the 40 project and ultimately cost $486,510.43 to complete.

On March 14, 2001, RLI submitted a requisition for payment in the amount of $367,545.03 for the 40 project. On or about April, 30, 2002, a unilateral credit change order was issued to RLI for $486,510.43 to back-charge Zanis for uncompleted contract work (the "York Hunter back-charge"). On November 20, 2001, RLI served a notice of claim on the SCA seeking recovery of the amounts requested totaling $639,749.65, as well as $78,269 representing alleged amounts due on various change orders at 40.

On January 9, 2002 this action was commenced alleging four causes of action [FN3].

Summary Judgment

[*2]In order to grant summary judgment, the court must determine whether a material and triable issue of fact exists. See Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395 (1957). After the movant makes a prima facie case, the burden shifts to the opposing party to produce evidentiary proof sufficient to establish the existence of a material issue of fact that requires a trial. Winegrad v New York Medical Univ. Med. Cen., 64 NY2d 851 (1985). When deciding a motion for summary judgment, the court must view the evidence in a light most favorable to the party opposing the motion and must give that party the benefit of every inference which can be drawn from the evidence. See Assaf v Ropog Cab Corp., 153 AD2d 520 (1st Dept 1989).


The SCA's motion for partial summary judgment dismissing counts two and four of the complaint is granted.

This dispute concerns the application of the notice of claim requirement imposed by Public Authorities Law ("PAL") § 1744 (2)[FN4], specifically, the question of when the three-month period to file a notice of claim began to run against RLI.

A timely notice of claim is a condition precedent to maintaining an action against a school construction authority, and RLI has the obligation to plead and prove that its notice of claim was served within three months after the accrual of its claim. C.S.A. Contr. Corp. v NY City Sch. Constr. Auth., 5 NY3d 189 (2005). A contractor's claim accrues when its damages are ascertainable. Id. Although the determination of the date on which damages are ascertainable may vary based on the facts and circumstances of each particular case, it generally has been recognized that damages are ascertainable once the work is substantially completed or a detailed invoice of the work performed is submitted. Id.

While the parties expend much effort in disputing the latter, the date upon which the project was substantially complete is undisputed. According to RLI's notice of claim, the 40 project was substantially complete on or before March 1, 2001. Therefore, the requisite three-month period to file a notice of claim runs from this date. Thus, RLI's November 20, 2001 notice of claim was untimely.

Further, the SCA argues that the notice of claim is untimely because RLI submitted a detailed invoice on March 14, 2001, over three months before the notice of claim was filed. RLI, [*3]in an apparent attempt to discredit the allegation, retorts that it had sent a subsequent requisition for payment on December 13, 2001, after serving the notice of claim. However, inconsistently, RLI argues that it timely filed its notice of claim shortly after the SCA's September 2001 announcement that the York Hunter back-charge would not be amended. These assertions defy logic in that RLI appears to argue that damages were not ascertainable before the December 13, 2001 invoice, but were ascertainable as of the September 1, 2001 announcement. In any event, a contractor's claim accrues when it can ascertain the amount appropriate as compensation for the items of work performed. Koren-DiResta Constr. Co. v NY City Sch. Constr. Auth., 293 AD2d 189 (1st Dept 2002), affd 2 AD3d 114 (2003). For purposes of the notice of claim, it matters not one wit that a breach has not yet occurred, such as the refusal to pay for the work in question. Id. Therefore, the detailed invoice of the work performed at 40, submitted by RLI on March 14, 2001 would (along with the project's substantial completion on or before March 1, 2001) result in RLI's November 20, 2001 notice of claim to be untimely.Finally, RLI contends that the SCA is estopped from relying upon on PAL § 1744(2) because the SCA actively caused RLI to reasonably delay the filing of the notice of claim.

This Court does not agree. Indeed, a public corporation, under exceptional circumstances (Luka v New York City Tr. Auth., 100 AD2d 323 (1st Dept 1984), affd 63 NY2d 667 (1984)(emphasis added), may be estopped from demanding strict compliance with statutory requirements as to the service of a notice of claim, if the representations lull the claimant into taking no action until after the statutory period for filing has passed. Welsh v Gindele & Johnson, 50 AD2d 971 (3d Dept 1975); Conquest Cleaning Corp. v New York City Sch. Constr. Auth., 279 AD2d 546 (2d Dept 2001). Here, however, the communications from the SCA did not include any affirmative promise to pay [see Lenz Hardware v Bd. of Educ., 24 AD3d 1278 (4th Dept 2005)], as payment was contingent on the review and disposition of the York Hunter back-charge.

In Debes v Monroe County Water Authority, 16 AD2d 381 (4th Dept 1962), on which RLI relies, the Water Authority's representative admitted responsibility and had engaged in negotiations as to the amount of damages. Therefore, in Debes, the plaintiff was justified in believing that the matter would be adjusted in the near future. Here, no evidence of admitted liability was present with regard to the York Hunter back-charge.In the August 20, 2001 letter from Paul Taylor, Senior Project Officer at the SCA, to Richard Bostwick, at the RLI Surety Division, Taylor states: Requisition No.25 [the March 14, 2001 invoice], will not be released until PCO #277 [the York Hunter back-charge] (credit for balance of contract work) has been executed by the Change Order Unit.

As a matter of law, the foregoing is not a promise to pay or

any assurance that the March 14, 2001 invoice would be paid. The record clearly reflects an ongoing dispute regarding the York Hunter back-charge that had not yet been resolved, and at that time, may never have been resolved. Moreover, at the time of this letter, the 40 project damages had become ascertainable due to the substantial completion on March 1, 2001, thereby mooting the intent of the letter.

Paul Mandal's affirmation (RLI's attorney) criticizes the SCA's counsel for attempting to characterize the intent of the letter, because she is not the author nor qualified to give an opinion. However, RLI submits the affidavit of Manfred Gruenwald, a consultant for RLI, whom offers his take on the language in the letter as well. Gruenwald is not the author (nor the primary recipient), has no personal knowledge as to the letter's meaning, or is designated as a expert to give his opinion, if he were so qualified. In any event, no further inquiry is needed. The plain language of the letter is clear.

The opponent of a summary judgment motion must present evidentiary facts sufficient to raise a triable issue. Gridley v Lever Bros. Co., 66 AD2d 703 (1st Dept 1978). However, [*4]Gruenwald's affidavit falls short of the mark. In an apparent attempt to defeat summary judgment, Gruenwald presents facts and circumstances in which RLI could reasonably rely on the actions and communications of the SCA. However, none of the accounts are telling. For example, Gruenwald refers to two faxes from Marie Graves, one of the SCA's construction managers that worked on the "close out phases"[FN5] of the 40 project. Graves Deposition, 2/20/07, 12:14-16. Graves' notes on the fax transmittal sheets contains language such as "I am trying to close out the project in the next few weeks" and "I am trying to close out project and process some payments." These are not representations reasonably sufficient to lull RLI from exercising its rights. It is clear from both the fax transmittal sheets and the faxes themselves that the subject matter concerned a tax levy and change orders unrelated to the York Hunter back-charge.Furthermore, Graves was only involved in the 40 project to the extent of verifying percentages of work completed. Id. at 22:20-23:4. In effect, she played a purely administrative role. It would be unreasonable for a fact finder to conclude that these communications purported to speak for the SCA to a degree sufficient to cause RLI to abandon means known to it for the enforcement of its claim. See Triple Cities Constr. Co. v Maryland Casualty Co., 4 NY2d 443 (1958).

What is noteworthy from Gruenwald's affidavit is the fact that after a February 2001 meeting with the SCA regarding, in great part, the York Hunter back-charge, Gruenwald drafted the March 14, 2001 payment requisition. In Gruenwald's words he drafted and submitted the invoice "[i]n order to give some order to calculating the quantum of money that was remaining...I prepared Request for Payment 25.'" Gruenwald Affidavit, ¶ 9. Any purported characterization that this detailed invoice was anything less than a request for payment is absurd. Neither the content of the August 20, 2001 letter nor the events presented by Gruenwald are such that can be rightfully relied upon to support an estoppel of the defense. Triple Cities Constr. Co., 4 NY2d 443 (1958) supra (insurance company was estopped from asserting as a defense the subcontractor's failure to foreclose its lien because the insurance company had engaged in protracted settlement negotiations to mislead the subcontractor into not foreclosing on the lien). Accordingly, no genuine issue of material fact can be found.

RLI's cross-motion to compel discovery is moot and will not be discussed.

Accordingly it is,

ORDERED that the New York City School Construction Authority's motion for partial summary judgment on count two and four on the complaint is hereby granted; and it is further

ORDERED that the parties shall appear for a pre-trial conference on November 8, 2007 at 9:30 A.M. to discuss the trial of the remaining causes of action, or if moot [FN6], the parties are directed to file a stipulation is discontinuance.

Dated: October 19, 2007



Counsel are hereby directed to obtain an accurate copy of this Court's opinion from the record room and not to rely on decisions obtained from the internet which have been altered in the scanning process. Footnotes

Footnote 1: Although not captioned or initially indicated, according to Barbara Peabody's affirmation of January 2, 2007 (¶14), the SCA seeks partial summary judgment dismissing counts two and four of the complaint.

Footnote 2: The work completed by York was alleged to be emergent, because 40 was left in an extreme state of disrepair that caused further damage to the school, including water damage.

Footnote 3: The first cause of action seeks monies due and owing on the 102 project. The second cause of action seeks monies due and owing on the 40 project. The third cause of action seeks monies owed due to alleged bond losses. The fourth cause of action seeks monies allegedly due on various change orders at P.S. 40.

Footnote 4: § 1744 provides:

Claims and actions against the authority. (2) No action or proceeding for any cause whatever, other than the one for personal injury, death, property damage or tort, which shall be governed by subdivision one of this section, relating to the design, construction, reconstruction, improvement, rehabilitation, repair, furnishing or equipping of educational facilities, shall be prosecuted or maintained against the authority or any member, officer, agent, or employee thereof, unless (i) it shall appear by and as an allegation in the complaint or moving papers, that a detailed, written, verified notice of each claim upon which any part of such action or proceeding is founded was presented to the board within three months after the accrual of such claim, that at least thirty days have elapsed since such notice was so presented and that the authority or the officer or body having the power to adjust or pay said claim has neglected or refused to make an adjustment or payment thereof, and (ii) the action or proceeding shall have been commenced within one year after the happening of the event upon which the claim is based; provided, however, that nothing contained in this subdivision shall be deemed to modify or supersede any provision of law or contract specifying a shorter period of time in which to commence such action or proceeding, or to excuse compliance with any other conditions required by contract to be satisfied prior to the commencement of such action or proceeding.

Footnote 5: According to the Graves Deposition, the "close out phases" meant "trying to transfer the job [to the SCA] to close it at the end." 12:17-20.

Footnote 6: In their motion papers, the parties have eluded to the fact that full payment may have been made with regard to counts one and three, thereby mooting adjudication.