All in One Bus. Prods. v Scarangella & Sons, Inc.

[*1] All in One Bus. Prods. v Scarangella & Sons, Inc. 2011 NY Slip Op 51829(U) Decided on October 12, 2011 County Court, Suffolk County Tarantino, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 12, 2011
County Court, Suffolk County

All in One Business Products, and Angelo Perico, Plaintiffs,

against

Scarangella & Sons, Inc., and Patrick Scarangella, Defendants.



8377/08



James F. Misiano, Esq.

Attorney for Plaintiffs

510 Broadhollow Road, Suite 110

Melville, NY 11747

631-396-0255

Darrell J. Conway, Esq.

Attorney for Defendants

179 Little East Neck Road

Babylon, NY 11704

631-669-0001

Andrew G. Tarantino, J.

NATURE OF THE ACTION

Plaintiff All In One Business Products ("All In One") commenced this action by filing a Summons and Verified Complaint on January 7, 2008. Angelo Perico was the owner of All In One. Plaintiffs alleged breach of contract and an account stated, seeking $46,742.40 in total damages, including $7,790.40 in attorney's fees.

Defendants denied each and every allegation and counterclaimed for breach of contract, seeking $30,000 in damages. [*2]

In September 2010 the action was transferred, pursuant to CPLR §325(d), to this Court for trial without a jury. Prior to the trial, the parties entered into a stipulation pursuant to which Angelo Perico was joined as an additional Plaintiff. Trial commenced with Plaintiff's testimony on November 12, 2010. Before cross-examination could begin, Plaintiff had an apparent nervous collapse, and was sent to the hospital. Trial was then adjourned again on December 16, 2010 and March 22, 2011, because of Plaintiff's health. The trial continued on June 20, 2011. At the conclusion, both sides requested an adjournment so that an additional witness could be called to testify. Shortly thereafter, both sides informed the Court that neither party would be calling the witness; closing arguments were then heard on July 5, 2011. The Court reserved decision.

TESTIMONY AND FACTS

Plaintiffs' testimony

Angelo Perico ("Perico") was a software developer D/B/A All In One. He stated that he met Defendants in 1990 after he used Defendant for an oil burner repair at his home. Perico said he was hired as a consultant because Defendants' pre-existing computer systems were antiquated, had problems, and lacked any computer support services. Plaintiffs were paid a monthly fee of $271.00, for which Plaintiff stated he was paid in full.

Patrick Scarangella ("Scarangella") was president of Village Fuel. Perico had known him since 1990. Scarangella was not involved directly with Perico. Instead, Perico worked with Gerard Nastri ("Nastri"), Village Fuel's office manager.

In late 1999 Nastri told Perico that Scarangella was interested in replacing the company's existing billing software. At that time Village Fuel's office had 5 or 6 computers. Perico recommended purchasing a commercially available complete software program specifically designed for a fuel oil business. Perico and Nastri attended several presentations by various software companies, but Village Fuel did not purchase any of the products. Perico stated that in early 2000 Scarangella and Nastri asked Perico to develop a customized computer program for Village Fuel "from scratch." Perico prepared a written agreement for the development of a customized fuel oil distribution software system. The software would be called "All In One Business Accounting System" ("AIOS"). Perico stated that on May 15, 2000 Scarangella signed the agreement on behalf of Village Fuel and himself as a guarantor in Perico's presence.

The May 15, 2000 Agreement ("May 2000 Agreement") stated the following:

Charges and License Fee

The actual AIOS base license fee for the use of the base package has been provided to Village Fuel Oil, at no charge. This special arrangement was in consideration of payment of $300.00 per month. The license will continue to be in force as long as the monthly license and maintenance fee of $300.00 per month remain in force. Cancellation of license will be acknowledged 60 days after nonpayment of $300.00 monthly license fee. A system with no license will not be usable [*3]until reinstatement is made. Reinstatement may be made by making all payments due and in full.

Client Support and Costs

As part of the monthly license and maintenance fee, Angelo Perico has been contracted to provide support at an initial discounted hourly rate of $60.00 per hour. (Normal rate for contract clients is $75.00 per hour.) Contract will provide Angelo to be paid on an hourly basis for any and all support provided.

Perico explained that while the industry standard hourly rate was $95, he only charged Defendants $60 per hour because of his long-time relationship. Perico further testified that although he spent 1200 -1500 hours developing the AIOS, he only intended to bill Village Fuel for a fraction of the actual cost because he would use the final software package as a demo to prospective clients. Perico completed the AIOS system in September 2002. Installation was postponed until Spring 2003 to avoid interfering with Village Fuel's winter season. Perico stated that he gave a full demonstration to Nastri before installing the program. Nastri was present when the program was installed. There were discrepancies between the old and new systems which Perico described to be the fault of the older system inaccuracies. Nastri then wanted the AIOS installed parallel to the existing older software until he was confident the AIOS was working properly. According to Perico, Defendants did not use the AIOS because Nastri became ill so data was not added to the AIOS. Defendants continued using the pre-existing system. One or two weeks later Perico completed a second conversion along with testing, but Nastri became ill again and unable to maintain both systems. In August 2003, Perico claimed he converted the programs again. However, Nastri left the Defendants' employ and the AIOS was never used by the Defendants.

Perico submitted an August 8, 2003 invoice for $28,740 for the work performed pursuant to the May 2000 Agreement. It stated,

The following charges reflect the development cost for the Village Fuel Oil Project. These charges are based on the agreement dated May 5, 2000 [sic]. The agreement stipulated that Angelo Perico (All In One Business Products) had been contracted to develop a customized fuel oil distribution system for Village Fuel Oil, under the supervision of Jerry Nastri. The discounted rate for the development project is based on a discounted hourly rate of $60.00 per hour.

The invoice described the following items:

Time log for 6 design meetings & demo testing — time: 30 hours; charge: $1,800

Time log for 3 separate installations of Village Fuel Oil Project. This was due to the customer not using the system after each successful install. — time: 15 hours; charge: $900

Charge for fuel oil tickets module including alignment of customer fuel oil tickets — time: 10 hours; charge: $600 [*4]

Charge for setting up multiple printers and network set up to use network for the 4 workstations installed — time: 4 hours; charge: $240

Attached screen layouts indicating the main modules that were developed for the Village Oil Fuel Project. On request a detail breakdown of all related menus and programs will be provided — time: 295 hours; charge: $17,700

Base Package Price was originally $12,000 per Agreement provided a discount to meet competitors price of $7,500 — time: Base sys.; charge: $7,500.00

Total cost of the above services — time: 354 hours; charge: $28,740.00

Perico testified that he mailed the invoice to Scarangella. It was never paid.

Perico then introduced a list of other open invoices ranging from May 1999 through September 2004. The list contained, among others, references to two invoices for $271 each dated September 1, 2004. Perico explained that they were payments for a monthly retainer, which included a licensing fee for the new system and a fee for support, pursuant to the May 2000 Agreement. Perico admitted that both invoices had erroneous dates. He testified that he received no complaints regarding these invoices after he mailed them to Village Fuel. He also acknowledged that he never dealt personally with Scarangella regarding the office computers and never spoke to him about the unpaid balances. Perico said he knew that Scarangella was the one who approved the charges. Perico only spoke to Nastri about the invoices, and then to Marie after Nastri left the company. At some point Marie disputed some of Perico's invoices (which are not in evidence). Perico said he credited many of the invoices and dismissed others because of his business relationship.

During cross examination Perico testified that in 1999 he prepared a quote for Scarangella for the development of a basic accounting system without any customization for a fuel oil business. Although Scarangella approved the quote it was later superseded by the May 2000 Agreement. Perico explained that the use of the term "support" in the Client Support and Costs clause in the May 2000 Agreement authorized him to "develop" new software and charge Defendant for it. He admitted he "should have used a better word." He stated he invested "hundreds or thousands" of hours developing the AIOS, but had no logs to support his assertion. He worked over 70 hours per week on the AIOS, as well as providing his services to other clients. Finally, Perico acknowledged that when Village Fuel failed to pay him the $271.00 AIOS licensing fee, he installed a lock on Defendants' office computer system which prevented Defendants' from using the pre-existing system. He stated that "any" use of the system without the payment of the licensing fee was unauthorized so he kept resetting the lock after each payment of $271.00 hoping to insure his next $271.00 fee.

Defendants' Testimony

[*5]Patrick Scarangella, president of Village Fuel and a co-defendant in this action, was president of Village Fuel, which was subsequently sold in May of 2006. Since 1994, Perico and All In One had been performing maintenance and support of Village Fuel's existing billing software, pursuant to an oral agreement, for a monthly fee of $271.00. Scarangella stated that the AIOS software installed by All In One lacked the capacity to input and tabulate various taxes specific to the fuel oil business. The taxes had to be manually computed and added to customers' bills.

Defendants submitted a signed Customer Quote prepared by All In One for Village Fuel dated August 17, 1999. Scarangella testified that after discussing the quote with Perico, they agreed that the modification of Village Fuel existing program would cost $1,600.00. Scarangella then wrote above the signature line "$1,600 total cost" and signed the quote. In the meantime, Village Fuel continued paying All In One the $271.00 monthly support fee. In winter 2001 Scarangella called Perico to inquire about the status of the modification and was told by Perico that it was still being developed.

In August 2003, Perico attempted to install the AIOS, but the system kept crashing. Scarangella explained that he was in the office when Perico attempted to install the AIOS. He observed that the new system applied customer payments only to the new invoices and not to the older ones, that balances were improperly calculated, and that there was no tax breakdown. As a result, the AIOS designed by Perico was never operational, never used, and it was eventually removed by Perico. Scarangella stated that he never received any bill from Perico for the unsuccessful installation and that Village Fuel continued paying Plaintiffs the $271 monthly service fee.

Scarangella said that Perico's first system block occurred in December 2003. The block not only blocked the AIOS, but it rendered the pre-existing billing software inoperative and prevented employees from accessing its business records and inputting new data. When Perico was paid the $271 monthly service fee, he unblocked the programs, only to be blocked again automatically in 30 days. Scarangella complained to Perico and eventually terminated All In One services. Scarangella submitted a letter from Village Fuel to All In One dated October 14, 2004 which stated that All In One was terminated because of the threat that Perico would never permanently remove the block which interfered with the business operations. The letter also mentioned that Village Fuel has been making monthly payments of $271 "for nothing more than you coming in and unlocking the system for a few months at a time."

During cross examination Scarangella acknowledged that Gerard Nastri was employed by Village Fuel from 1994-2003. He worked three hours a day writing oil tickets. Scarangella denied that Nastri handled computers at Village Fuel and that he attended design meetings with Perico. Nastri was not authorized to make any decisions about the company's computers, and added that no one in the company worked with Perico on a computer program design. At the time of the failed AIOS installation, Perico was working with Scarangella's wife, Marie. Scarangella examined the May 2000 Agreement and denied signing it; he stated his signature was forged, his name was misspelled, and his middle initial was missing. Scarangella stated that the first time he saw the May 2000 Agreement was after the lawsuit was filed. Scarangella also denied receiving any of the invoices submitted by Perico, and added that Perico never performed any of the claimed services.

Defendants' witness

[*6]Marie Scarangella ("Marie") testified that she began working for Village Fuel in 2000, performing general office work, including working with the existing billing software. She denied hearing Perico and Nastri talking about Perico designing a new computer system for the company. Although she never spoke with Perico about modification of the existing billing system, she recalled being aware that Perico was supposed to upgrade it to include the fuel oil taxes.

In 2003, she was still working in the same capacity. On August 6, 2003 Perico attempted to install a program on one of the office computers. The attempt failed because no balances were carried forward, no taxes were computed and the program only showed new charges. Marie informed Perico of the problem after which he removed the AIOS from the office computer. Marie said the program was never reinstalled. On December 1, 2003 Marie's computer became permanently locked and she was unable to access the company accounts. She telephoned Perico who unlocked the system for 30 days in exchange for the $271 service fee. The block recurred every 30 days. Defendant introduced into evidence four $271 checks which Marie state were paid to Perico for unlocking the office computer system for each 30 day period. Marie denied ever disputing any invoices with Perico, but acknowledges that Perico gave her a list of invoices Perico claimed were outstanding and demanded payment of $6,475.

Marie testified that Perico informed her that he would "never take the lock off." Village Fuel had no alternative but to replace its computers. Marie testified that Defendant paid $1,630 to Carosella Software for a "Quick Oil" software package and replacement billing software. Another $998 was paid to Carosella Software for the software support services. Finally, Marie stated that Defendant paid $500 to Argyle Tech for the cost of setting up the new computers. Defendants also introduced into evidence a proposal from Dell for a 48-month business lease for four computers for the sum of $3,828.00. Marie testified that Village Fuel accepted the proposal and signed a lease with Dell.

ANALYSIS

The elements of a cause of action for breach of contract are: (1) formation of a contract between the parties; (2) performance by plaintiff; (3) defendants' failure to perform; and (4) resulting damage (Furia v. Furia, 116 AD2d 694, 498 N.Y.S.2d 12 [2nd Dept 1986]). A contract is formed when there are at least two parties with legal capacity to enter into a contract give their mutual assent to the terms of a contract and there is consideration. 2 PJI 3d 4:1 at 626(2010); see: Maas v. Cornell University, 94 NY2d 87, 93, 721 N.E.2d 966, 699 N.Y.S.2d 716 (1999). An account stated represents an agreement between the parties reflecting amounts due on prior transactions. Jim-Mar Corp. v. Aquatic Constr., 195 AD2d 868, 600 NYS2d 790 [3d Dep't 1993]. Such an account cannot be made the instrument to create a liability where none existed, but only determines the amount of an existing valid debt. Bauer v. Ambs, 144 App Div 274. Where either no account has been presented or there is any dispute regarding the correctness of the account, the cause of action fails. Abbott, Duncan & Wiener v Ragusa, 214 AD2d 412, 625 NYS2d 178 [1st Dep't1995]).

In a matter such as this, it is the province and indeed the obligation of the trial court to assess and determine matters of credibility. Morgan v McCaffrey, 14 AD3d 670, 789 N.Y.S.2d 274 [2d Dep't 2005]; Matter of Liccione v Michael A., 65 NY2d 826, 482 N.E.2d 917, 493 N.Y.S.2d 121 (1985). Here, the burden is upon the Plaintiffs to plead and prove their direct case by a fair preponderance of the credible, relevant and material evidence with the same burden [*7]imposed upon the Defendants respecting their affirmative defenses and their counterclaim. Prince-Richardson on Evidence, § 3-210; Torem v Central Avenue Rest, 133 AD2d 25, 518 N.Y.S.2d 620 [1st Dep't 1987]. Credible evidence has been defined as evidence that proceeds from a credible source and reasonably tends to support the proposition for which it is offered and is evidentiary in nature and not merely a conclusion of law, nor mere conjecture. Dille v. Kelly, 31 Misc 3d 1232(A) (NY Supreme, NY County, 2011). The burden of proving the existence of a contract and performance according to its terms is upon the party suing for damages for its breach, and if he relies on the theory of substantial performance he has the burden of showing the nature of his defects and omissions, their unsubstantiality and the expense of making them good. Fisch on New York Evidence, Second Edition, § 1098, Lond Publications 1977/2008. The failure of a party to call as a witness an available person under his control who is in a position to testify concerning a material fact creates an adverse inference that the witness would not have controverted material testimony adverse to the party who failed to call him. Fisch on New York Evidence, Second Edition, § 1126, Lond Publications 1977/2008. An adverse inference will not arise when a prospective witness is equally available to the opposing party. Fisch on New York Evidence, Second Edition, § 1126, Lond Publications 1977/2008. Once called by a party, the failure to interrogate the witness as to a controverted fact calls the adverse inference into being. Fisch on New York Evidence, Second Edition, § 1126, Lond Publications 1977/2008. The adverse inference gives rise to the presumption that the witness would not have controverted material testimony adverse to the party who failed to call the witness, or that the evidence would be unfavorable to such party. Fisch on New York Evidence, Second Edition, § 1126, Lond Publications 1977/2008.

Based upon the testimony of Angelo Perico, and after observing his demeanor in Court, the Court finds his testimony not credible and the evidence submitted by Plaintiff purporting to prove their performance under the alleged May 2000 Agreement insufficient and unreliable. Absent from Plaintiff's exhibits were any documents evidencing Perico's work spent on developing the new computer system such as time sheets, screen layouts of the developed modules, developer's notes or testing logs. As a result, Perico's testimony that he developed and successfully installed the AIOS on Village Fuel's computer pursuant to the May 2000 Agreement was uncorroborated by any credible evidence. The Court also notes a contradiction in Plaintiffs' evidence. The Court does not see the parallel interpretations of "support" and "development" that would have authorized Plaintiff to "develop a software program "from scratch." Next, the August 8, 2003 invoice stated that the Base Package "was originally $12,000 per Agreement," yet, neither the May 2000 Agreement, nor any other writing, contained a reference to a $12,000.00 base price.

The Court must also discount about $4775.00 of Plaintiffs' claim because the invoices are older than the 6 year statute of limitations for contract actions which is not extended merely by Plaintiffs' repeated requests for payment.

Furthermore, after describing Nastri as the only person with whom Perico worked, and after Scarangella denied that Nastri handles the office computer system, it was apparent that Nastri was a crucial witness in establishing Plaintiffs' claims. Plaintiff acknowledged that Nastri lived locally and was reachable. Yet, after being provided an adjournment to subpoena Nastri as a witness, Perico informed the Court that he intended to proceed to closing without Nastri's testimony. Accordingly, the Court is left to presume that Nastri's testimony would not have controverted Scarangella's testimony, and that the testimony would have been unfavorable to [*8]Plaintiff.

Lastly, Perico failed to establish by the preponderance of credible evidence that his software package was ever successfully installed and useable.

The Court now turns to the merits of Defendants' counterclaim for damages.

Based upon the Court's observations of Scarangella's demeanor, as well as the manner and nature of his testimony, it finds him to be credible. Specifically, the Court credits Scarangella's testimony that he did not sign the 2000 Agreement nor know of its existence prior to the commencement of this litigation. Although the Court does not profess to be a handwriting expert, Scarangella's signature on the 2000 Agreement differs significantly from his signature on the cancelled checks (spanning 10 months) and other documents in evidence. Accordingly, the Court finds Scarangella's defense that neither he nor Village Fuel entered into the May 2000 contract with Plaintiffs credible.

Because there was no contract between the parties for the development of a new computer system, and no new system was ever successfully installed, Plaintiffs were not entitled to any licensing fee. Moreover, Plaintiff was certainly without the right to resort to self-help by installing a block on Defendant's computer system, especially the pre-existing and operating billing system which was rendered non-functional by Plaintiffs' block. Therefore, Defendant Village Fuel is entitled to be compensated $3,128 for the cost of the new billing software, software support, and for the cost of the setup of the new computers that it had to purchase.

Defendant's remaining claims are dismissed as unsupported by sufficient evidence.

By reason of the foregoing, it is hereby

ADJUDGED that the Plaintiff failed to plead and prove its case by a fair preponderance of the credible, relevant and material evidence; and it is further

ADJUDGED that, Defendant SCARANGELLA & SONS, INC. having succeeded in pleading and proving its counterclaim regarding the damages they sustained as a result of Plaintiffs' conduct, by a fair preponderance of the credible, relevant and material evidence, judgment be entered in favor of Defendant SCARANGELLA & SONS, INC. and against Defendants ALL IN ONE BUSINESS PRODUCTS and ANGELO PERICO, jointly and severally, in the amount of THREE THOUSAND ONE HUNDRED TWENTY EIGHT ($3,128.00), together with interest from October 1, 2004.

This constitutes the decision and order of the Court.

Submit judgment.

________________________________ [*9]

JFC/JCC