Megrant Corp. v Inc.

[*1] Megrant Corp. v Inc. 2013 NY Slip Op 52311(U) Decided on January 2, 2013 Supreme Court, Nassau County DeStefano, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through April 17, 2014; it will not be published in the printed Official Reports.

Decided on January 2, 2013
Supreme Court, Nassau County

Megrant Corporation, Plaintiff,

against

John P. Picone, Inc., CHUBB GROUP OF INSURANCE COMPANIES and FEDERAL INSURANCE COMPANY, Defendants.



017641-09



Attorney for Plaintiff:

Salamon, Gruber, Blaymore & Strenger, P.C.

Sanford Strenger, Esq.

97 Powerhouse Rd #102

Roslyn Heights, NY 11577

(516)625-1700

Attorney for Defendant:

Peckar & Abramson, P.C.

Paul Monte, Esq. and Cesar Pereira, Esq.

41 Madison Avenue, 20th floor

New York, NY 10010

(212) 382-0909

Vito M. DeStefano, J.

The following papers and the attachments and exhibits thereto have been read on this motion:

Notice of Motion1

Memorandum of Law in Support2

Affidavit in Opposition3

Memorandum of Law in Opposition4

Reply Affirmation5

Notice of Motion6

Memorandum of Law in Support7

Affidavit in Opposition8

Memorandum of Law in Opposition9

Memorandum of Law in Reply10

Plaintiff's Response to Defendants'

Rule 19-A Statement of Material Facts11

Introduction

Motion pursuant to CPLR 3212 by the plaintiff, Megrant Corporation, for summary judgment on its first and second causes of action and for dismissal of the counterclaim interposed by co-defendant John P. Picone, Inc.

Motion, inter alia, pursuant to CPLR 3212: by John P. Picone, Inc. for summary judgment dismissing the first and second causes of action and for partial summary judgment on its counterclaim, and; by Chubb Group of Insurance and Federal Insurance Company for summary judgment dismissing the third and fourth causes of action asserted against them.

Factual and Procedural Background

In August of 2009, the plaintiff-subcontractor Megrant Corporation ["Megrant"], commenced the within action against general contractor John P. Picone, Inc ["Picone"]. Megrant's claims arises out of a 2005, $1.6 million subcontract, pursuant to which Megrant agreed, inter alia, to replace ten, electric fire pumps and install water piping systems in connection with a Port Authority public construction project at JFK International Airport.

In August 2008, however, Picone terminated the subcontract based upon Megrant's alleged failure to timely perform the work, in response to which Megrant commenced the within action against Picone and its purported payment/performance sureties, Chubb Group of Insurance ["Chubb"] and Federal Insurance Company ["Federal"]). Megrant's amended verified complaint alleges, inter alia, that Megrant was paid approximately $1,265,217.00 for its pre-termination work, but that an unpaid balance of $167,080.00 still remains for work allegedly approved and performed prior to Picone's cancellation of the contract (Cmplt., ¶¶ 16-17). The amended [*2]complaint further avers, among other things, that: (1) Megrant is entitled to $330,559.00 in "escalation" monies attributable to project delays — costs which were subsequently recovered in part by Picone from the Port Authority, but never passed on to Megrant; and; (2) that both Chubb and Federal are liable to Megrant on the project bonds issued.

The defendants answered, denying the material allegations of the complaint and interposing a counterclaim predicated upon the theory that certain pipe welding work performed by Megrant was rejected by the Port Authority's engineer/inspector as defective, thereby requiring Picone — at the Port Authority's direction — to remove and replace the piping at a substantial cost (Ans.,¶¶ 19-25).

Discovery has been conducted and the parties now move for summary judgment to the extent indicated.

The Court's Determination

The motions are denied except that Chubb's motion for summary judgment is granted.

Preliminarily, the Court cannot summarily resolve the parties' contradictory, expert assertions with respect to whether the Port Authority and/or Picone utilized the proper contract specifications in testing and then replacing the pipe welds performed by Megrant (see, Durkin Aff., ¶¶; Asp Aff., ¶¶ 5-21; Lutens Aff.,¶¶ 9-20). More specifically, the court cannot determine whether, as Megrant claims, only one of the various industry standards and codes concededly listed in the contract is actually applicable to the weld joints performed (see, Subcontract, Div. 15, Section 15375, ¶ 1.02[A], at 397 see also, ¶ 3.01[A][1], at 405). Among other things, the assertions by the parties' experts concerning the applicability of various, contract-referenced Codes and standards are diametrically opposed. It bears noting in this respect that the primecontract (incorporated into the subcontract) provides that all work shall be subject to the inspection of the project engineer and/or his or her inspectors, and that "[t]he engineer shall be the judge of the quality and suitability of the Work, construction, process of manufacture and methods of construction * * *" (Main contract, Section74, Division I) (see generally, Thomas Crimmins Contr. Co. v City of New York, 138 AD2d 138, 142-143, aff'd, 74 NY2d 166, 170 [1989]; Savin Bros. v State of New York, 62 AD2d 511, 516, aff'd, 47 NY2d 934 [1979]).

Nor can it be definitively concluded that Megrant's contract performance was sufficient to satisfy, as a matter of law, the fact-intensive requirements associated with the substantial performance or prevention/frustration doctrines (see Kooleraire Serv. & Installation Corp. v Board of Educ. of City of NY, 28 NY2d 101, 107 [1971] see, Clarke v. Rodriguez, 16 NY3d 815, 816 [2011]; ADC Orange, Inc. v. Coyote Acres, Inc., 7 NY3d 484, 490-491 [2006] see also, Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 693-695 [1995]; Jacob & Youngs v. Kent, 230 NY 239, 241-243 [1921]). [*3]

It is settled that, " [i]n order to recover for substantial performance, the plaintiff must establish that its failure to perform was inadvertent or unintentional and that the defects were insubstantial" (Sear—Brown Assoc. v. Blackwatch Dev. Corp., 112 AD2d 76 see also, Novair Mechanical Corp. v. Universal Management & Contracting Corp., 81 AD3d 909, 910; Jerry B. Wilson Roofing & Painting v Jobco—E. R. Kelly Assoc., 128 AD2d 953, 954). However, "[t]here is no simple test for determining whether substantial performance has been rendered" (Hadden v. Consolidated Edison Co. of New York, Inc., 34 NY2d 88, 96 [1974]), and where, as here, "there is any doubt" "[t]he question of * * * substantial performance * * * is to be determined by the trier of fact" (F. Garofalo Elec. Co., Inc. v. New York University, 300 AD2d 186, 189 see, Jacob & Youngs v. Kent, supra, 230 NY at 241-243; J.C. Drywall & Accoustical Contrs. v. West Shore Partners, supra, 187 AD2d 564; Jerry B. Wilson Roofing & Painting v Jobco—E. R. Kelly Assoc., supra; Botco Developments, Inc. v. Mikealice, Management Corp., 291 AD2d 871).

Similarly, factual issues preclude summary disposition of the parties' opposing claims with respect to the propriety of Picone's August, 2008 termination notice. Insofar as relevant, the record indicates that certain delays ensued with respect to the installation of the fire pumps which cannot be attributed to Megrant. However, it is undisputed that Megrant unilaterally "demobilized" and/or removed key personnel from the job-site without Picone's permission and over Picone's objections (Megrant Brief in Supp., at 4). While Megrant claims that it reasonably removed personnel from the site because it allegedly had no further bona fide contract work to perform at the time (e.g., Livson Aff., ¶¶ 39-48), Picone has vigorously disputed this assertion, claiming that there were contract tasks to be performed at the site and that Megrant's actions were largely driven by self-serving, economic considerations. Notably, Megrant has not cited to governing provisions of the contract which would authorize it to unilaterally remove personnel or "demobilize" its work-site presence over the prime contractor's express objections (cf., Tri-Mar Contractors, Inc. v. ITCO Drywall, Inc., 74 AD2d 601, 602; Farrell Bldg. Co., Inc. v. Shinnecock Elec., Inc., 71 AD3d 821).

Although Megrant contends that it was impermissibly denied an opportunity to cure any alleged breach in connection with Picone's termination notice, Megrant has not identified an applicable cure provision in the parties' governing contract (see, Awards.com, LLC v. Kinko's, Inc., 14 NY3d 791, 793 [2010]). It is settled that sophisticated, counseled parties — such as those involved here — "are free to make their contracts" and that Courts are "extremely reluctant to interpret an agreement as impliedly stating something which the parties [themselves] have neglected to specifically include" (Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V., 17 NY3d 269, 277 [2011], quoting from, Rowe v. Great Atlantic & Pac. Tea Co., Inc., 46 NY2d 62, 72 [1978]; Welsbach Elec. Corp. v. MasTec North America, Inc., supra; Kaygreen Realty Co. v. Goldman, 231 AD2d 682, 684; CBS, Inc. v. P.A. Bldg. Co., 200 AD2d 527). Moreover, the record contains evidence that Megrant was, given the opportunity to return to the job site, but that it declined to do so in light of its assertion that there were no viable contract tasks to be performed (cf., Taikina [July 29, 2013] Aff., ¶¶ 10-12).

The Defendants also dispute Megrant's claim of entitlement to $167,088.00 for allegedly [*4]approved, pre-termination contract work. Specifically, Picone asserts that it has already over-paid Megrant and that it is entitled to substantial damages on its pending counterclaim, which would more than offset any potential recovery by Megrant. The Court agrees that these opposing averments, taken together with the records and documents submitted on the motion, have generated disputed issues which must be resolved by the trier of fact.

While Picone submitted a $2.2 million "escalation/delay" cost claim to the Port Authority, which was later settled for $815,000.00 (after Megrant's subcontract was terminated), issues of fact similarly exist as to precisely how the settlement amount was generated and what portion of that amount is due and payable to Megrant. The Court notes, however, that Picone has conceded that Megrant is entitled to at least $110,261.00 of the escalation settlement — although Picone's damage claims, if successful, would result in a recovery materially exceeding this amount (Picone Resp. to Notice to Admit, ¶ 21 [Livson Aff., Exh., "BB"], Monte Aff at ¶ 99, Ex. "GG" to Defendants' Motion).

Under the circumstances, the Court agrees that upon the trial of the action, Megrant would be entitled to set off the foregoing sum (or whatever it may recover on this claim), as against any damage recovery which Picone may later obtain on its claims (CPLR 3212[g]; cf., CPLR 3212[e][2]; Metropolitan Switch Bd. Mfg. Co., Inc. v. B & G Elec. Contractors, Div. of B & G, 96 AD3d 725, 726; Tri-Mar Contrs. v Itco Drywall, supra, 74 AD2d 601, 603; Mosionzhnik v. Chowaiki, ___Misc.3d.___, 2013 WL 3884177, at 4 [Supreme Court, New York County 2013]).

Last, that branch of the defendants' motion which is to dismiss the complaint as against co-defendant Chubb, should be granted. The defendants have established their prima facie entitlement to judgment as a matter of law by, submitting the relevant payment bond, which reveals that the named surety is exclusively co-defendant Federal Insurance Company and not Chubb (Defs' Exhibit Compendium, "JJ").

In opposition to this branch of the motion, Megrant has offered only unsubstantiated assertions which fail to establish that Chubb issued or was a party to the bond (see, Megrant Response to Picone's 19A Statement, ¶ 3, at 2) (American Real Estate Holdings Ltd. Partnership v Citibank, N.A., 45 AD3d 277, 278). Contrary to Megrant's assertions, the operative bond language does not establish that Chubb is a subsidiary or affiliate of Federal or that Federal is a subsidiary or affiliate of Chubb, for the purposes of imposing liability on the bond instruments.

In any event, and absent evidence not presented here, even "[a] parent corporation's complete ownership of a subsidiary's stock is * * * insufficient, by itself, to pierce the corporate veil" (cf., Oxbow Calcining USA Inc. v American Indus. Partners, 96 AD3d 646, 948-649 see generally, Mitchell v. TAM Equities, Inc., 27 AD3d 703, 708; Montes Serrano v. New York Times Co., Inc., 19 AD3d 577, 578; Potash v Port Auth. of NY & N.J., 279 AD2d 562, 563). Nor does the record support the assertion that Chubb is a party to the bond agreement or liable thereunder because Chubb's logo or name appears on some of the bond letterhead materials (Defs' Exhibit [*5]Compendium, "JJ") (see, American Real Estate Holdings Ltd. Partnership v Citibank, N.A., supra, 45 AD3d 277, 278).

The Court has considered the parties' remaining contentions and concludes that they are without merit and otherwise do not warrant the granting of further and different relief.

Therefore, it is hereby ordered that the motions by the Plaintiff and the Defendants are denied except that the branch of the Defendants' motion seeking dismissal of the complaint insofar as asserted against Chubb is granted.

This constitutes the decision and order of the court.

Dated: January 2, 2013

_____________________________

Hon. Vito M. DeStefano, J.S.C.

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