Archstone v Tocci Bldg. Corp. of N.J. Inc.
Annotate this CaseDecided on October 2, 2012
Supreme Court, Nassau County
Archstone f/k/a ARCHSTONE-SMITH OPERATING TRUST AND TISHMAN SPEYER ARCHSTONE-SMITH, L.P. f/k/a ASN ROOSEVELT CENTER, LLC, Plaintiffs,
against
Tocci Building Corporation of New Jersey Inc., LIBERTY MUTUAL INSURANCE COMPANY, PERKINS EASTMAN ARCHITECTS, INC. and ELDORADO STONE, LLC, , Defendants. TOCCI BUILDING CORPORATION OF NEW JERSEY, INC. Third-Party Plaintiff, ADJO CONTRACTING CORPORATION, AMERICAN ENGINEERING SERVICES, P.C., APRO CONSTRUCTION GROUP, ATLAS COMFORT SYSTEMS, USA, L.P., d/ba ATLAS AIR CONDITIONING, BUILDERS HARDWARE, CLEM'S ORNAMENTAL IRON WORKS, DAVINCI CONSTRUCTION OF NASSAU, INC. d/b/a DAVINCI CONSTRUCTION, FOUR SEASONS INSULATION CORP., HAVANA CONSTRUCTION CORP., HOUSTON STAFFORD ELECTRICAL CONTRACTORS, L.P., d/b/a HOUSTON STAFFORD ELECTRIC, KLEET LUMBER COMPANY, KNIGHT WATERPROOFING COMPANY, INC., MANNING PLUMBING AND HEATING CORP., METRO PAINTING, M.I. CONCRETE CORP., MID-ATLANTIC STONE, INC., PATTI ROOFING, LLC, SIDNEY B. BROWNE & SON, LLP, SIPALA LANDSCAPE SERVICES, INC., STAT FIRE SUPPRESSION, INC., SUPERSEAL MANUFACTURING CO., THREE B'S PLUMBING HEATING AND AIR CONDITIONING CORP. and UNIVERSAL FOREST PRODUCTS, Third-Party Defendants FJR CONSTRUCTION, INC., Plaintiff, ARCHSTONE-SMITH COMMUNITIES, LLC, TOCCI BUILDING CORPORATION OF NEW JERSEY, INC., et al., Defendants. DAVINCI CONSTRUCTION OF NASSAU, INC., Plaintiff, ARCHSTONE-SMITH COMMUNNITES, LLC, TOCCI BUILDING CORPORATION OF NEW JERSEY, INC., et al., Defendants. TOCCI BUILDING CORPORATION OF NEW JERSEY, INC., Second Third-Party Plaintiff, MG CONSULTING SERVICES, INC., RMS ENGINEERING and ROBINSON, MULLER & SCHIAVONE ENGINEERS, P.C., Second Third-Party Defendants. SIPALA LANDSCAPE SERVICES, INC., Fourth-Party Plaintiff/ Third-Party Defendant, THOMAS BALSEY ASSOCIATES LANDSCAPE ARCHITECTURE, PLLC, HINES & SAFFARESE LANDSCAPING, INC., JD CONSTRUCTION & LANDSCAPING, INC. and JOHN DIORIO LANDSCAPING, INC., Fourth-Party Defendants.
FJR CONSTRUCTION, INC., Plaintiff, -against-
against
ARCHSTONE-SMITH COMMUNITIES, LLC, TOCCI BUILDING CORPORATION OF NEW JERSEY, INC., et al., Defendants.
DAVINCI CONSTRUCTION OF NASSAU, INC., Plaintiff, -against-
against
ARCHSTONE-SMITH COMMUNNITES, LLC, TOCCI BUILDING CORPORATION OF NEW JERSEY, INC., et al., Defendants.
001018-08
Vito M. DeStefano, J.
The following papers and the attachments and exhibits thereto have been read on the motion and cross motion:
Notice of Motion1
Notice of Cross Motion2
Memorandum of Law in Support of Cross Motion3
Affirmation in Opposition to Motion4
Affirmation in Opposition to Cross Motion5
Memorandum of Law in Opposition to Motion6
Memorandum of Law in Opposition to
Cross Motion7
Reply Affirmation in Support of Cross Motion8
Reply Memorandum in Support of Cross Motion9
In this action to recover for damages for, inter alia, breach of contract, the defendant Tocci Building Corp. of New Jersey, Inc. ("Tocci") moves for partial summary judgment pursuant to CPLR 3212 dismissing the first, third and fourth causes of action in the second amended complaint insofar as they seek attorneys' fees and litigation costs incurred in prosecuting the instant action. The defendant Perkins Eastman Architects, Inc. ("Perkins") cross-moves for partial summary judgment pursuant to CPLR 3212 "dismissing that portion of the Fifth and Sixth Causes of Action in the Second Amended Complaint of Archstone * * * that seeks plaintiffs' attorney's fees and litigation costs incurred in this action".
It is hereby ordered that the motion is granted to the extent that the first, third and fourth [*2]causes of action, to the extent that they seek attorneys' fees incurred in the prosecution of the within action, based on the contractual indemnification provision contained in the relevant contract, are dismissed insofar as asserted against Tocci. It is further ordered that the cross motion is granted to the extent that the sixth cause of action is dismissed to the extent that it seeks attorneys' fees incurred in the prosecution of the within action based on the contractual indemnification provision contained in the relevant contract. In all other respects, the motion and cross motion are denied.
This action arises out of allegedly defective work by the defendants at a residential housing development in Westbury owned by the plaintiffs and/or their predecessors in interest (collectively referred to as "Archstone"). Tocci, as general contractor at the project, and Perkins as architect, entered into agreements with Archstone regarding their work which contained substantially similar indemnification provisions.
As a result of "water intrusion and damage issues" (Affirmation in Opposition to the motion at ¶4), Archstone incurred substantial repair and litigation costs (as a defendant in actions brought by aggrieved tenants of the residential housing development). Archstone commenced the instant action seeking, inter alia, recovery of all costs incurred as a result of the water intrusion, including costs incurred in connection with the prosecution of this action, which is the subject of the instant motion and cross motion.
More specifically, according to the complaint (Exhibit "C" to Motion), "29. As a result of the water intrusion and entrapment issues, resulting conditions, and other items of defective work, Archstone has suffered, and will continue to suffer, damages, losses, liability and expenses believed to be in excess of $40 million, including, but not limited to: * * * (g) attorney's fees and legal expenses incurred in pursuing this action and other actions for the recovery of Archstone's losses, damages and expense arising out of the water intrusion and entrapment issues. 30. Upon information and belief, and other than the items referenced in Paragraph 27 above, the Defendants' collective actions have caused Archstone to suffer the damages, loss, liability and expenses set forth above, and thus they are jointly and severally liable to Archstone."
In the first cause of action for breach of contract, which is against Tocci, paragraph 38 recites that "Archstone is entitled to recovery of attorney's fees and expenses in pursuing the claims contained in this Complaint, and otherwise due to Tocci's breach of the Construction Contract, as expressly permitted by the terms of the Construction Contract, all in an amount to be more fully shown upon the trial of this matter." In the third cause of action, entitled "Action on Performance Bond", which is asserted against Tocci and defendant Liberty Mutual Insurance Company, Archstone alleges that "Liberty Mutual and Tocci executed and issued the Performance Bond to * * * guarantee the performance by Tocci of all its obligations under the Construction Contract" and that Archstone is entitled to judgment against the defendants for "recovery of all damages incurred by Archstone * * * including interest and attorney's fees * * * in an amount in excess of $40 million". In the fourth cause of action, Archstone seeks judgment against Tocci on a contractual indemnity theory for "all damages incurred by Archstone, [*3]including interest and attorney's fees (including the attorney's fees and litigation costs of pursuing this action), as a result of Tocci's breach of the Construction Contract."
In the fifth cause of action for negligence and professional malpractice against Perkins, Archstone alleges that it "is entitled to judgment in its favor against Perkins for all damages incurred * * * including interest as a direct and proximate result of Perkins' negligence in an amount in excess of $40 million."
In the sixth cause of action against Perkins, sounding in breach of contract, Archstone alleges (after incorporating paragraphs one through 30) that it "is entitled to judgment in its favor and against Perkins for all damages suffered by Archstone as a result of Perkins' breach of contract, plus interest, in an amount in excess of $40 million."
The contractual indemnification provision in Archstone-Tocci contract reads as follows:
14.3.3 To the fullest extent permitted by law, the Contractor shall indemnify, defend, protect and hold harmless the Owner and its officers, employees, shareholders and trustees (collectively, the "Indemnitees") from and against all losses, claims, causes of action, liabilities, injuries, damages and expenses, including attorneys and consultants' fees and expenses (collectively, "Losses"), that the Indemnitees may incur by reason of any injury or damage sustained to any person or property (including, but not limited to, anyone or more of the Indemnitees) arising out of, or occurring in connection with, the performance or lack of performance of the Work, breach of the requirements of the /contract Documents by Contractor or the acts or omissions of the Contractor, its Subcontractor, sub-contractors, suppliers or any one directly or indirectly employed by any one of them or anyone for whose acts them may be liable. Such obligation shall not, however, extend to any Loses which are the result of the negligence or willful misconduct of an Indemnitee nor to the portion of any Losses which are attributable to or the result of the negligence or willful misconduct of an Indemnitee. Nothing herein shall be deemed to abridge the rights, if any, of the Owner or the Contractor to seek contribution where appropriate.
14.3.3.1 The Contractor shall be notified of any claim against any Indemnitee and given such reasonable information, authority and assistance as may be required by the Contractor to enable it to perform the obligations set forth in this indemnification. A failure to notify the contractor of a claim shall not discharge the obligations set forth in this indemnification, except to the extent that the Contractor has been materially and adversely prejudiced in the defense of such claim by such failure to notify.
The contractual indemnification provision in the Archstone-Perkins contract reads as follows:
11.1 INDEMNIFICATION
11.1.1 To the fullest extent permitted by law, the Architect shall indemnify and hold harmless [*4]the Owner, its officers, directors, partners, employees and trustees (collectively called the "Indemnitees") from and against all losses liabilities, injuries, including reasonable attorneys' fees and litigation costs (collectively a "Loss"), resulting from the allegedly negligent performance, or failure to perform, by the Architect or its employees, consultants, agents or representatives of the Architect's duties and obligations under or pursuant to this Agreement, to the extent that any such Loss is cause by any failure of the Architect or any such parties to perform it services hereunder in accordance with the care, diligence and professional standards of members of the same profession currently practicing in the same locality as the Project, engaged in connection with projects of similar scope, magnitude and quality as the Project and under similar conditions and circumstances as those pertaining to the Work. The foregoing indemnification shall not extend to any Loss caused by the negligence of any Indemnitee or any other party for whose actions the Architect is not responsible. The foregoing indemnification shall be construed to extend to all legal, defense and investigation costs, as well as all other reasonable costs, expenses and liabilities incurred by the party indemnified, from and after the date upon which the party receives notification that a claim or demand is being made or threatened against it. The indemnification provided for in this Paragraph 11.1.1 shall not be limited by the type or amount of insurance obtained by the Architect and shall survive the completion of the services hereunder and the termination of this Agreement. The Architect hereby waives any right it may have under any economic loss doctrine applicable in the jurisdiction in which the Project is located. The indemnification provided for in this Paragraph 11.1.1 shall not be construed as an indemnity for the benefit of the Contractor or any Subcontractor.
Contrary to Archstone's contention, the foregoing provisions do not permit recovery of attorneys' fees incurred in the prosecution of the instant action. In this regard, the referenced provisions do not clearly create an obligation to indemnify for attorneys' fees incurred in a suit against the movants. Moreover, Tocci correctly asserts that the scope of the indemnification provision in its contract with Archstone is further clarified by reference to the notice provision section 14.3.3.1. In this regard, it is evident that the indemnification provision contemplated third-party claims. The Archstone-Perkins contract is similarly worded.
In Hooper Associates, Ltd. v AGS Computers, Inc. (74 NY2d 487, [1989]), the Court of Appeals reversed the order of the Appellate Division and determined that an indemnification clause similar to the ones at issue here did not permit the recovery of attorneys' fees incurred in a suit against the indemnitor. In Hooper Associates, Ltd. v AGS Computers (supra at 490), the indemnification clause provided:
9. INDEMNITY "(A) AGS shall at all times indemnify and hold harmless HLTD [Hooper], its successors and assigns and any of its officers, directors, employees representatives, and/or agents, and their heirs, executors, administrators, successors and assigns or each of them against and from any and all claims, damages, liabilities, costs and expenses, including reasonable counsel fees arising out of:[*5]"(i) Any breach by AGS of any express or implied warranty hereunder and any express representation or provision hereof;"(ii) The performance of any service to be performed hereunder;
* * * (emphasis in original)
The Court of Appeals went on to state that: [u]nder the general rule, attorney's fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule (see, Matter of A.G. Ship Maintenance Corp. v. Lezak, 69 NY2d 1, 5, 511 N.Y.S.2d 216, 503 N.E.2d 681; Mighty Midgets v. Centennial Ins. Co., 47 NY2d 12, 21—22, 416 N.Y.S.2d 559, 389 N.E.2d 1080; City of Buffalo v. Clement Co., 28 NY2d 241, 262—263, 321 N.Y.S.2d 345, 269 N.E.2d 895). It is not uncommon, however, for parties to a contract to include a promise by one party to hold the other harmless for a particular loss or damage and counsel fees are but another form of damage which may be indemnified in this way (see, e.g., Breed, Abbott & Morgan v. Hulko, supra; Brooklyn Union Gas Co. v. Shields Detective Bur., 121 AD2d 587, 590, 503 N.Y.S.2d 852, appeal denied 69 NY2d 610, 517 N.Y.S.2d 1025, 511 N.E.2d 84; Rosano's Farm Store v. International Collection Serv., 115 AD2d 195, 196, 495 N.Y.S.2d 264; Lavorato v. Bethlehem Steel Corp., 91 AD2d 1184, 1185, 459 N.Y.S.2d 170; see also, Zissu v. Bear, Stearns & Co., 2nd Cir., 805 F.2d 75, 79—80; Atlantic Richfield Co. v. Interstate Oil Transp. Co., 2nd Cir., 784 F.2d 106, 115, cert. denied 479 U.S. 817, 107 S. Ct. 75, 93 L.Ed.2d 31). In the contract before us the parties provided that defendant must indemnify plaintiff for "reasonable counsel fees". They failed to define the scope of defendant's promise, however, and thus, we must interpret the language and determine whether it is limited to attorney's fees incurred by plaintiff in actions involving third parties or also includes those incurred in prosecuting a suit against defendant for claims under the contract.
Words in a contract are to be construed to achieve the apparent purpose of the parties. Although the words might "seem to admit of a larger sense, yet they should be restrained to the particular occasion and to the particular object which the parties had in view" (Robertson v. Ongley Elec. Co., 146 NY 20, 23, 40 N.E. 390). This is particularly true with indemnity contracts. When a party is under no legal duty to indemnify, a contract assuming that obligation must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed (Levine v. Shell Oil Co., 28 NY2d 205, 211, 321 N.Y.S.2d 81, 269 N.E.2d 799; Kurek [*6]v. Port Chester Hous. Auth., 18 NY2d 450, 456, 276 N.Y.S.2d 612, 223 N.E.2d 25). The promise should not be found unless it can be clearly implied *492 from the language and purpose of the entire agreement and the surrounding facts and circumstances (Niagara Frontier Transp. Auth. v. Tri—Delta Constr. Corp., 107 AD2d 450, 452, 487 N.Y.S.2d 428, affd. for reasons stated in opn of Justice M. Dolores Denman 65 NY2d 1038, 494 N.Y.S.2d 695, 484 N.E.2d 1047; Margolin v. New York Life Ins. Co., 32 NY2d 149, 153, 344 N.Y.S.2d 336, 297 N.E.2d 80; Inman v. Binghamton Hous. Auth., 3 NY2d 137, 147, 164 N.Y.S.2d 699, 143 N.E.2d 895). Inasmuch as a promise by one party to a contract to indemnify the other for attorney's fees incurred in litigation between them is contrary to the well-understood rule that parties are responsible for their own attorney's fees, the court should not infer a party's intention to waive the benefit of the rule unless the intention to do so is unmistakably clear from the language of the promise (see, Tokyo Tanker Co. v. Etra Shipping Corp., 142 AD2d 377, 378, 536 N.Y.S.2d 75; Carr v. First Fed. Sav. & Loan Assn., 132 AD2d 513, 514, 517 N.Y.S.2d 256). The clause in this agreement does not contain language clearly permitting plaintiff to recover from defendant the attorney's fees incurred in a suit against defendant. On the contrary, it is typical of those which contemplate reimbursement when the indemnitee is required to pay damages on a third-party claim. It obligates defendant to "indemnify and hold harmless [plaintiff] * * * from any and all claims, damages, liabilities, costs and expenses, including reasonable counsel fees" arising out of breach of warranty claims, the performance of any service to be performed, the installation, operation and maintenance of the computer system, infringement of patents, copyrights or trademarks and the like. All these subjects are susceptible to third-party claims for failures in the installation or operation of the system. None are exclusively or unequivocally referable to claims between the parties themselves or support an inference that defendant promised to indemnify plaintiff for counsel fees in an action on the contract.
At bar, the relevant indemnification clauses, construed strictly, do not create an obligation on the part of the indemnitors to indemnify Archstone for attorneys' fees incurred in pursuit of litigation against them. As such, the motion and cross motion are granted to the extent indicated herein (see infra at p.4). The court notes that the fifth cause of action does not sound in breach of contract nor does it reference or seek enforcement of a contractual provision, and, therefore, the motion for dismissal in regard to that cause of action must be denied. Regarding the sixth cause of action, it apparently seeks attorneys' fees incurred in prosecuting the within action by referencing paragraph 30. The parties do not dispute that the cause of action seeks such fees, and it is therefore dismissed to the extent indicated.
This constitutes the decision and order of the court.
DATE: October 2, 2012
[*7]
_____________________________
Hon. Vito M. DeStefano, J.S.C.
.
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