Cool Sheet Metal, Inc. v Dart Mech. Corp.

[*1] Cool Sheet Metal, Inc. v Dart Mech. Corp. 2009 NY Slip Op 50631(U) [23 Misc 3d 1108(A)] Decided on February 23, 2009 Supreme Court, Suffolk County Pines, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 February 23, 2009
Supreme Court, Suffolk County

Cool Sheet Metal, Inc., Plaintiff,

against

Dart Mechanical Corporation, Defendant. UNITED STATED FIDELITY & GUARANTY CO., Additional Defendant by Counterclaim. UNITED STATES FIDELITY & GUARANTY COMPANY, Third Party Plaintiff, - COOL SHEET METAL, INC., K & R REALTY CO., RICHARD KERN SHARON R. KERN, THOMAS RAMMELKAMP and DEBRA A. RAMMELKAMP Third Party Defendants.



11966-2002



Attorney for Plaintiff Cool Sheet

Andrew Gutman, Esq.

Gutman & Gutman, LLP

19 Roslyn Road

Mineola, New York 11501

Attorney for Defendant Dart

Michael D. Ganz, Esq.

Tunstead & Schechter

500 North Broadway, Suite 101

Jericho, New York 11753

Attorney for Defendant Fidelity

Christopher J. Sheehy, Esq.

Westerman Hamilton Sheehy Aydelott & Keenan, LLP

Garden City Center, Suite 502

100 Quentin Roosevelt Blvd.

Garden City, New York 11530

Emily Pines, J.

Motion number 1: Defendant, Dart Mechanical Corporation ("Dart") moves by Notice of Motion (motion sequence No. 008) for an Order, pursuant to CPLR § 3212 1) dismissing Plaintiff's claims under its first subcontract (contract #

1) with Dart except for the amount of $87,086.65; 2) dismissing the Plaintiff's claims under its second subcontract (contract #

2) with Dart for which it contracted directly with the general contractor and not with Dart; 3)dismissing certain of such claims as having been paid in full; 4)dismissing those claims under its first subcontract for extra and modified work for which the Owner made a determination of a value of $0.00; 5) dismissing the Plaintiff's claims under both contracts which are improperly sought for "Shop Drawing Review"; and 6) dismissing Plaintiff's claim under contract #

1 which seek damages for delay by the Owner. Plaintiff, Cool Sheet Metal, Inc. ("Cool Sheet Metal") opposes the motion, setting forth its contention that numerous issues of fact preclude Judgment as a matter of law.

The dispute between the parties arises out of a construction project entered into in 1993. The Federal Bureau of Prisons ("FBOP") hired Morganti/Tratoros ("Morganti") to construct a 1000 bed facility in Brooklyn, New York. Thereafter, Morganti retained Dart as the Heating and Ventilating ("HVAC") subcontractor and Dart sub-subcontracted with Cool Sheet Metal. The contract price of the first sub-subcontract (contract #

1) was $3,550,000.00. Under the terms of both subcontracts, the sub-subcontractor was required to perform both modifications requested by the Owner , referred to as MODs and Contractor Proposed Changes , referred to as CPC's, which represent claims of the contractor for work they believed to be changes in the original contract documents. In April, 1997, the Federal Bureau of Prisons held Morganti in default of its prime contract and terminated the same. [*2]

It was not until December of 1997 that Morganti's performance Bond Surety, Lehrer McGovern Bovis, Inc ("Bovis") was retained by FBOP to complete the project. In the interim, Dart, Cool Sheet Metal, Cool Sheet Metal's surety, USF & G, and Bovis and Morganti engaged in negotiations concerning the completion of the work. Ultimately, Dart entered into a second sub-subcontract (contract #

2) with Cool Sheet Metal to complete the project. However, prior to entering into this second agreement, Dart wrote to Cool Sheet Metal, informing Plaintiff that Dart would be required to provide Morganti with releases for all of Dart's subcontractors. The letter also informed Cool Sheet Metal that it was required to provide Dart with a release both for Morganti and for Dart and to provide Dart with USF & G labor, material and performance bonds. In return, Cool Sheet Metal would receive a new contract for completion of the project in the amount of $2,100,000.00. The letter also states that Dart will pay Cool Sheet Metal $253,817.00 and that it will repay Dart its retainer balance in the amount of $80,748.00 as that amount is received from Bovis. Attached to the new subcontract is a "Rider #

2" which states both of these above amounts will be paid to Cool Sheet Metal upon Cool Sheet Metal signing a completion contract with Dart and providing Dart with a release. The second subcontract is clearly signed by the presidents of Dart and Cool Sheet Metal. The payments were made as set forth and the new sub-subcontract for the amount set forth was signed. Also attached to Dart's motion papers is a General Release by Cool Sheet Metal in favor of Dart, dated December 23, 1997 and containing the apparent signature of Richard Kern, President of Cool Sheet Metal.

The second subcontract also contains a provision that Cool Sheet Metal will provide Dart with a General Release to enable Dart to conclude its prior contract with Morganti. In addition, the second subcontract states as follows at paragraph 23: "Cool authorizes Morganti and National to deduct 20% of Cool's portion of any MOD or CPC resolved by and paid for by the FBOP to the extent that FBOP includes an allowance for Cool Sheet Metal".

During the period between 2000 and September 28, 2006, Morganti, Dart and Cool Sheet Metal all, as set forth in various letters attached to Dart's motion papers, negotiated their various claims for extra work with FBOP (Exhs 19 & 33 to Dart's Motion). By letter dated August 18, 2004, Cool Sheet Metal set forth in writing its claims in the amount of $2,338,973.71 that would be passed through Dart to Morganti and ultimately to FBOP (Exh 20 to Dart's motion). In November 2005, the FBOP adjusted its contract with Morganti by recognizing over $10 million in extra work claims. As set forth in documents attached to the motion papers, many of the claims submitted were valued by the owner at $0.0 (Exh. 22 to Dart's motion).The total allowed for Cool Sheet's extra work claims, when the attorney's fee percentage [*3]is deducted, was $87,086.65. As per the motion papers, Article 4.6 of both contracts signed by Cool Sheet metal states that "(t)he determination of the Owner or Owner's Representative as to the extent or value of the Work performed and materials and equipment furnished by the Subcontractor shall bind the Subcontractor". As Cool Sheet Metal's current complaint contains claims against Dart for extra work, which the owner valued at zero and a delay claim which the owner included within the $87,086.65 already mentioned, Dart asserts that all other and duplicative claims should be dismissed.

Dart also moves to dismiss certain of the second sub-subcontract claims as either duplicative or already paid. Accordingly, it argues that a $150,000.00 claim for Fire Smoke Damper Sleeves was paid in full (Exhibit 31 to motion papers) and that post termination claim #

39, for the review of shop drawings is identical to pretermination claim #

39A,found not compensable by the owner. Finally, Dart moves to dismiss those claims in contract #

2, which Dart asserts were for work negotiated directly between Bovis (the new general contractor) and Cool Sheet Metal.

Cool Sheet Metal, through its President, Richard Kern, opposes Dart's motion for Summary Judgment, alleging that it was influenced to return to the jobsite and complete its work based on certain misrepresentations. These included assertions that no entity had yet been paid its MODs or CPC's and Cool Sheet Metal would receive all its extra work claims , less 20% for attorney's fees for everything it had supplied prior to the 1997 termination of Morganti. Kern states that such promises were made to him by Dart and by his own surety USF & G, which he now questions, since he later learned that Dart's surety had become a wholly owned subsidiary of USF & G. He then alleges that he has no recollection of signing any releases attached to Dart's moving papers. He states that he entered into the second agreement only based on assurances that Morganti and Dart would seek to collect his pretermination claims; that USF & G would finance its completion and that Cool Sheet Metal would be paid timely for its work on the second contract. Kern asserts that none of these promises were valid. He later discovered that Dart had collected over $7 million on its signing with Bovis, much of which belonged to Cool Sheet Metal. He asserts further that he has since learned that Dart was submitting Cool Sheet Metal's extra work claims in the first contract and collecting them without passing through payment. This continued, according to Kern throughout Cool Sheet Metal's work on the second contract. In large part, Kern appears to be arguing that it entered into the second agreement, believing it was owed over $4 million, because it was promised that Dart and USF & G would be collecting much of this sum from the owner. It later learned that such monies could not be collected because Dart had [*4]already been paid for Cool Sheet's work and, therefore, would not be paid again in a dispute with the FBOP.

Now, Kern argues he has learned that Dart received $550,000 from Morganti as part of the settlement of a mediation between Dart and Morganti in September 2006 but that Cool Sheet Metal was not told about this, nor did it receive any pass thorough from Dart. Dart, he asserts, has no real excuse for this and its latter day claim that Cool Sheet owes Dart $268,986for work not completed by Plaintiff on the second contract is simply made up. Kern asserts that there is no proof that Dart paid a second subcontractor for uncompleted work on the second contract. Based on Dart's misrepresentations and conversion of funds belonging to Cool Sheet Metal, the sub-subcontractor asserts that Dart cannot obtain Summary Judgment.

In reply to Kern's allegations, Dart's Vice-President sets forth that documentary evidence belies each and every one of Kern's claims. First, by letter dated July 9, 1996, Cool Sheet Metal received a summary of all the extra work payments that Dart was receiving on the first contract (Exhs 2 & 3 to Karol Aff); second, by the time of the termination of contract #

1, Cool Sheet Metal had received $190,124 in extra work payments (Exh 7 to Reply papers); third, there exists no written agreement setting forth that Cool Sheet Metal will be paid in full for all its extra work claims in return for entering into the second contract and it is obvious from the written agreements that Cool Sheet Metal would only get paid for that extra work approved by the FBOP; fourth, it is undisputed that Cool Sheet Metal was to furnish a General Release of the First Contract as a condition to receiving the Second Contract; fifth, contemporaneous documents issued prior to this lawsuit from St. Paul to Richard Kern (Exh 10 to Reply) state that the Release from Cool Sheet metal was indeed executed. Sixth, Kern cannot dispute the clear provision of its written agreement, paragraph 4.6 to both agreements which makes the owner the final arbiter of extra work claims and binds the subcontractor to its determination With regard to the second contract, in its Reply, Dart states that Cool Sheet Metal does not refute that certain of its claims; the $150,000 was already paid (Exh 33 to Dart motion). The Defendant reiterates its grounds for defeating Cool Sheet Metal's claims that were for work sought by Bovis and claim #

39 as being duplicative of a claim made pretermination and rejected by the owner.

A party moving for Summary Judgment must, in the first instance, make a prima facie showing of entitlement to judgment as a matter of law, offering the Court evidence to demonstrate that no material issues of fact exist. Goldberger v Brick & Ballerstien, 217 AD2d 682, 629 NYS2d 814 ( 2d Dep't 1995 ( internal citations omitted). The burden then shifts to the opponent of the motion to come forward with proof in admissible form to demonstrate that genuine [*5]issues of fact exist precluding the grant of Judgment. Zayas v Half Hollow Hills Cent School Dist., 226 AD2d 7143, 641 NYS wd 701 ( 2d Dep't 1996).

The initial determination of whether the provisions of a contract are ambiguous is left, in the first instance, for the Court to determine. Master-Built Construction Co Inc v Thorne, 22 AD3d 535 ( 2d Dep't 2005). Where the Court finds that the language of a written agreement is clear, it will glean its meaning from the four corners of the instrument without resort to extrinsic evidence. Id. Indeed, extrinsic and parole evidence is not admissible to create an ambiguity in a written agreement which appears clear on its face. Reiss v Financial Performance Corp, 97 NY2d 195, 738 NYS2d 658, 764 NE2d 958 ( 2001). When interpreting a contract, the court must strive to arrive at a construction "(w)hich will give fair meaning to all the language employed by the parties to reach a practical interpretation of the expressions of the parties so that their reasonable expectations will be realized" (Joseph v Creek & Pines, 217 AD2d 534, 535, 629 NYS2d 75; see, Fetner v Fetner, 293 AD2d 645, 741 NYS2d 256); Master Built Construction Co v Thorne, supra .

In the commercial world, where parties are sophisticated entities, negotiating at arms length, enforcement of their agreements preserves the necessity for commercial clarity. See, South Rapid Associates v International Business Machines, 4 NY3d 272m, 793 NYS2d 835, 826 NE2d 806 ( 2005).

Where the language of a release is clear and it is accompanied by valuable consideration, the allegation of economic duress will not lie. See Capstone Enterprises of Port Chester v County of Westchester, 262 AD2d 343, 691 NYS2d 574 ( 2d Dep't 1999).

Viewing the writings of the parties in December 1997, including Dart's December 19, 1997 letter to Cool Sheet Metal; the signed second subcontract agreement dated December 20, 1997, specifically requiring and agreeing to the release of all claims against Dart and Morganti; the reference in the signed December 20, 1997 subcontract to the attached release, the contemporaneous writing prior to any litigation to the release signed by Cool Sheet Metal; the consideration, with proof that payment was made, of the amounts set forth in the December 19, 1997 letter to Cool Sheet Metal, the receipt by Cool Sheet metal of a second subcontract in the amount of $2,100,000 , the intent of the parties is far from ambiguous. Cool Sheet Metal released Dart from any and all claims relating to contract # [*6]

1 ( the pretermination phase) and Dart granted Cool Sheet Metal $253,817 and $80,748 in payments plus a new agreement for over $2 million. In that same written agreement, it is made clear that the release is necessary in order "(t)o enable Dart (to) conclude our prior contract with Morganti national" and that any claims for MODs and CPCs, to the extent determined in Cool Sheet Metal's favor, will require a deduction of 20% in attorney's fees. Both the 1993 and the 1997 agreements state that the determination of the owner (FBOP) as to the extent of the value of any work performed by the subcontractor "(s)hall bind the Subcontractor". The moving papers contain FBOP's final determination on contract #

1, which, when subtracting the agreed upon percentage for attorney's fees, equals $87,086.65. Accordingly, other than for that amount, which Plaintiff will be permitted to seek at trial, Plaintiff's claims for the pretermination contract are hereby dismissed pursuant to the clear meaning of the parties' agreement.

With regard to the post termination claims, Dart has been unable to demonstrate the same kind of clear agreement, which would entitle it to Judgment on those, with the exception of the claim for $150,000, which exhibit 33 to the motion papers demonstrates was paid in full. With regard to Cool Sheet Metal's other post termination claims, there remains a dispute as to whether some were for work performed directly for Bovis or whether they were for work performed for Dart when Plaintiff merely contacted Bovis because it was not receiving timely payment from Dart. It is also unclear from the moving papers whether the claims for review of shop drawings in the post termination phase is for new work or for work, for which a claim had already been rejected. Those claims, the claims which were not the subject of this motion, as well as Dart's counterclaim allegedly relating to payments made due to Cool Sheet Metal's default prior to leaving the job on contract #

2 will be preserved for trial. Accordingly, with the exception of the claim for $150,000 for sleeves for fire smoke damages which appear to have been paid in full and is thus dismissed. The Plaintiff's and Defendant's claims with regard to contract #

2 are not dismissed and will proceed to trial, as material questions of fact remain as to their validity.

Motion #

2: USF & G moves, by Notice of Motion ( motion sequence #

009) for Summary Judgment pursuant to CPLR § 3212, dismissing Dart's counterclaim against that party on the ground that such claim is time barred under the terms of the performance bond issued by USF & G. As set forth in the surety's papers, an action on the performance bond must be commenced within two (2) years "(f)rom date on which final payment under the subcontract falls due". According to [*7]USF & G, a September 7, 1999 letter from Dart to USF & G informed the surety that Cool Sheet Metal had abandoned the project, that Dart had retained a new subcontractor and that USF & G would be responsible for any back charges asserted against it by Bovis arising out of Cool Sheet Metal's abandonment. The surety argues that because it attached a copy of a $55,000 agreement with the new subcontractor, that Dart had ascertained its damages as of September 7, 1999, and was required to bring suit against it by September 2001. This counterclaim was not asserted until June 2002 and the surety , therefore, claims it is untimely.

Dart opposes the motion for Summary Judgment on the ground that final payment was certainly not due Cool Sheet Metal in 1999, due to its default and that the precise amount of Bovis' back charges due to Cool Sheet Metal's default did not become precisely known until the completion of an arbitration with the general contractor in September 2006. Attached to the opposition papers is a July 28, 1999 letter from the general contractor on contract #

2, Bovis, to Dart stating, inter alia, that Cool Sheet Metal's abandonment of the project constituted an event of default.

Applying the principles of law set forth above, this Court is unable to grant USF & G Summary Judgment on Dart's counterclaim. It is unclear when, if ever, final payment was due Cool Sheet Metal for its work on the second contract . The writings from the entities involved seem to contradict each other and, therefore, trial will be necessary to determine whether the claim is timely. If an amount due Cool Sheet Metal was ascertainable as final payment in September 1999, then the counterclaim against USF & G will be dismissed. Otherwise, it will be subject to the terms of its bond.

Accordingly, Summary Judgment is granted in part on Dart's motion, to the extent of dismissing all pretermination claims with the exception of $87,086.6. Summary Judgment dismissing Cool Sheet Metal's post termination claims against Dart is denied with the exception of the claim for $150,000 as defined above. USF & G's motion for Summary Judgment dismissing Dart's counterclaim against it is denied.

This constitutes the DECISION and ORDER of the Court.

This matter is set for trial to commence on March 23 ,2009. There will be no adjournments granted. [*8]Dated: February _23_, 2009 Riverhead, New York

EMILY PINES J. S. C.