Opinion
Index No. 656123/2021 MOTION SEQ. No. 001
01-11-2024
CNY RESIDENTIAL LLC, Plaintiff, v. 68-70 SPRING PARTNERS, LLC, UNITED STATES FIRE INSURANCE COMPANY, INFINITES SAFETY QUALITY & CONSTRUCTION MANAGEMENT INC., INFRASTRUCTURE DEVELOPMENT SPECIALISTS, INC, SC CONSTRUCTION GROUP LLC. ELMHARDT CONSTRUCTION CORP., ATLANTIC SPECIALTY INSURANCE COMPANY, JOHN DOE NOS. 1-5, THE NAME JOHN DOE BEING FICTITIOUS, TRUE NAMES OF THE DEFENDANTS BEING UNKNOWN Defendant.
Unpublished Opinion
DECISION + ORDER ON MOTION
HON. MELISSA A. CRANE, JUDGE.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 68, 69, 70, 71, 72, 73, 74 were read on this motion to/for PARTIAL SUMMARY JUDGMENT.
In July 2018, plaintiff CNY Residential LLC (CNY or plaintiff), as construction manager, and defendant 68-70 Spring Partners, LLC (Spring or defendant), as owner, entered into a written agreement (the Agreement), pursuant to which plaintiff was to provide construction management services for a construction project located at 68-70 Spring Street, New York, New York (the Project). Pursuant to the terms of the Agreement, in the event that defendant terminates the Agreement for convenience, plaintiff is entitled to recover a termination fee equal to its total billings through the date of termination. In its second cause of action, plaintiff contends that defendant terminated the Agreement for its convenience, effective June 10, 2021, and that it is owed $3,113,948.55 - the amount of CNY's billings through the date of termination. The action also seeks to foreclose on two mechanic's liens in the amounts of $551,242.59 and $204,915.80, respectively.
Plaintiff now moves, pursuant to CPLR 3212(e), for an order granting it partial summary judgment, as to liability and damages, on its second cause of action in the amended complaint or, alternatively, scheduling an inquest to determine its damages. Plaintiff also moves: (1) pursuant to CPLR 3212(e) and CPLR 3211(a)(7), for an order dismissing defendant's first, second, third, fifth, and sixth counterclaims in the amended answer; and (2), pursuant to CPLR 3212(e) and 3211(b), for an order dismissing defendant's third affirmative defense and second and third setoffs contained in the amended answer.
For the reasons set forth below, plaintiffs motion is granted in its entirety.
FACTS
Plaintiff is in the business of construction management, and was the construction manager for the Project, that consisted of constructing an eight-story mixed use building. Plaintiff was to perform management services in accordance with the Agreement, that the parties entered into on July 3, 2018 (see NYSCEF Doc No. 53). An Addendum to the Agreement was prepared in or about August 2020, but the parties never executed or delivered it (see NYSCEF Doc No. 42).
1. Work, Services and Compensation Under The Agreement
The Agreement generally provides for plaintiffs work and services as follows:
"This Agreement will constitute Owner's written authorization for CNY to perform services identified in Exhibit A ('Services'); and upon transfer to CNY of existing building permits and approvals,: i) begin field work and ii) commence construction including the retention of major trades in accordance with a mutually agreed upon contracting strategy, (i) and (ii) hereinafter collectively referred to as the 'Work'"(Agreement, at 1).
Attached to the Agreement as Exhibit A is a detailed list of construction management services that plaintiff was to perform at the Project. These services generally included: (1) meeting with the design team, (2) conducting a review of the condition of the existing site and preconstruction surveys of each adjacent building, (3) managing the architect's and expeditor's review and identification of the ongoing requirements of regulatory bodies with jurisdiction over the Project, (4) reviewing governmental requirements and developing an updated Site Safety Plan and Site Logistics Plan, (5) reviewing the consulting engineers' design of utility services, (6) preparing a Target Budget of the Project's hard costs for review and approval, (7) reviewing drawings and specifications, (8) formulating an overall Project Schedule, (9) reviewing bid packages, (10) reviewing trade contracts and (11) preparing monthly cost reports (see id., Exhibit A).
Under the terms of the Agreement, defendant was to pay plaintiff a Construction Fee at the rate of 4% of the parties' Construction Budget, together with all of plaintiff s reimbursable costs and expenses, including general conditions, personnel costs, trade costs, all third-party billings and all customary out-of-pocket expenses such as reproduction, local travel, etc. Plaintiffs personnel costs were to be billed at direct salaries times 1.56 to cover employee and fringe benefits (see id. at 1-2).
2. Default and Termination Provisions of The Agreement
The Agreement contains a provision allowing either party to terminate it for cause, after providing an opportunity to cure, as follows:
"In case of a material breach of this Agreement, the aggrieved party upon a failure to cure (or commence to cure) after thirty (30) days' written notice, is entitled to terminate this Agreement for cause. If Owner terminates this Agreement for cause, CNY shall be paid for the Services and Work up through the date of termination, including a proration of the Fee due for the month in which such termination occurs less Owner's damages directly caused by CNY's material default"(see id. at 3).
Thus, in the event of any purported defaults by either party under the Agreement, the Agreement required the aggrieved party to deliver a thirty-day written notice to cure any purported defaults of the other party. Only after this curative period had lapsed without cure could the aggrieved party terminate the Agreement.
In lieu of the foregoing termination provision, the Agreement also allowed defendant (and not plaintiff) to terminate the Agreement for convenience, providing as follows:
"The Owner may also terminate this Agreement for its convenience upon thirty (30) days written notice. In the event Owner terminates this Agreement for convenience or if Owner does not award CNY the construction phase of the Project, CNY shall be paid for all Services and Work rendered through the date of termination and due to the termination, including costs incurred to protect and safeguard the Project's premises or as otherwise required by authorities having jurisdiction plus a proration of the particular Fee due for the month in which such termination occurs, and a Termination Fee equal to the amount of total billings through the date of termination"(see id.)
3. Defendant's Termination of The Agreement For Convenience
Plaintiff alleges that it properly and timely performed its construction management role under the Agreement, despite defendant's unreasonable delays, changes to the scope of work and continuous lack of funding for completion of the Project (see affidavit of Steven Colao, plaintiffs COO [NYSCEF Doc No. 40], ¶ 14). However, on June 9,2021 (almost three years after the parties consummated the Agreement), defendant emailed a document entitled Notice of Default, signed by a John A. Zaccaro Sr., defendant's principal, to Kenneth Colao, plaintiffs president (see NYSCEF Doc No. 43 [notice of default]). The Notice of Default stated that:
"This letter serves as Notice to CNY ... of Default under its contract for the provision of construction management services as agent for Spring Partners[]. Despite repeated instructions by Spring Partners to take prompt and affirmative
measures to cure, these ongoing defaults have remained uncured by CNY for many consecutive months, far in excess of any reasonable time to cure.
As such, this Notice serves to advise CNY that in light of the ongoing, uncured defaults, Spring Partners possesses a right to immediately terminate the Contract for cause"(id. at 1).
Plaintiff responded in detail by letter dated June 15, 2021 (see NYSCEF Doc No. 44), and later in the day, Kenneth Colao had a telephone conversation with Stephen Guzzardi, defendant's representative, and John Zaccaro, Sr., defendant's principal, in which they agreed that defendant would terminate the Agreement for convenience effective June 10, 2021 (Steven Colao aff, ¶ 16).
Defendant memorialized its termination for convenience by email dated June 17, 2021 [see NYSCEF Doc No. 45), to plaintiff. In that email, John Zaccaro, Sr., stated:
"This email memorializes the June 15 2021 telephone conversation between Kenneth Colao, Stephen Guzzardi and John Zaccaro Sr regarding construction management at the 68-70 Spring Street Project. Whereby it is agreed that 68-70 Spring Partners LLC shall terminate CNY Residential LLC for convenience] effective June 10, 2021.
CNY shall assign and provide copies of the executed contracts and change orders between CNY and the trade contractors and vendors to Spring Street Partners LLC. Spring Street Partners will accept the contracts] as of June 10, 2021. CNY will accept the termination and will waive any notice requirement relating to termination. Both sides reserve any and all right relating to the project of any kind including, but not limit[ed] to management and funding"(id.).
The court notes that the text of the email is cut off in a few places. However, the text leaves little question how the words at issue were going to end. In any event, the court refers to the Steven Colao affidavit, which recites the text of the June 17, 2021 email (Steven Colao aff, ¶ 17).
By email dated June 21, 2021, defendant acknowledged plaintiffs confirmation and acceptance of the termination of the Agreement for convenience:
"We received your acknowledgement of CNY's termination for convenience. Kindly send over the contracts, change orders and all other paperwork to Gladys at your earliest convenience"(see NYSCEF Doc No. 46).
However, defendant failed to pay plaintiff its outstanding balances and the Termination Fee after termination of the Agreement for convenience (Steven Colao aff, ¶ 19). Accordingly, by email dated August 10, 2021, from Kenneth Colao to John Zaccaro, Sr., plaintiff demanded payment as follows:
"I am disappointed. Steve and I have provided everything that was requested by you for closeout and Termination for Convenience of CNY Residential LLC and you accordingly confirmed that to be the case. Thus the Termination for Convenience which has been in effect since June 10, 2021 has been fully accomplished by you and yet we have not heard anything back from you regarding payment of our outstanding balances. It's been three months and I demand to know when CNY will be paid its outstanding balance"(see NYSCEF Doc No. 47).
4. The Termination Fee Owed to Plaintiff Upon Termination of The Agreement For Convenience
The Termination Fee only would become due and payable by defendant if it terminated the Agreement for convenience before plaintiff completed all work and services. By defendant's admission, the termination of the Agreement for convenience became effective as of June 10,2021, at which time "a Termination Fee equal to the amount of total billings through the date of termination" became due and payable to plaintiff. Plaintiff contends that the Termination Fee is $3,113,948.55, which constitutes plaintiffs total billings through June 10, 2021-the agreed date on which defendant terminated the Agreement for convenience (see NYSCEF Doc No. 48 [attaching copies of 39 requisitions for personnel expenses and pay, constituting the total billings of defendant from June 29, 2018 through May 28, 2021]). According to plaintiff, the aggregate amount of the total billings is $3,113,948.55-the Termination Fee (see NYSCEF Doc No. 49 [a summary of the total billings showing each requisition by number, and the corresponding amounts which, in the aggregate, equal the Termination Fee of $3,113,948.55]).
The Steven Colao affidavit refers to July 25, 2018 as the start date. However, July 25, 2018 appears to be the date that plaintiff issued the requisition (see NYSCEF Doc No. 48, Requisition No. 01). The first date of work that CNY billed for on this requisition was June 29, 2018 (id.).
DISCUSSION
Partial Summary Judgment on the Second Cause of Action
In the second cause of action, plaintiff seeks the Termination Fee under the express terms of the Agreement in the amount of $3,113,948.55, based on defendant's termination of the Agreement for convenience on June 10, 2021.
'"[T]he proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact"' (Ayotte v. Gervasio, 81 N.Y.2d 1062, 1063 [1993] [citation omitted]; Winegrad v. New York Univ. Med. Or., 64 N.Y.2d 851, 853 [1985]). The burden is a heavy one: the facts must be viewed in the light most favorable to the non-moving party and every available inference must be drawn in the non-moving party's favor (Medina-Ortiz v. Seda, 157 A.D.3d 499 [1st Dept 2018]). "Failure to make such showing requires denial of the motion, regardless of the sufficiency of the opposing papers" (Winegrad, 64 N.Y.2d at 853; see also Lesocovich v. 180 Madison Ave. Corp., 81 N.Y.2d 982, 985 [1993]).
The party opposing summary judgment has the burden of presenting evidentiary facts sufficient to raise triable issues of fact (Zuckerman v. City of New York, 49 N.Y.2d 557, 562 [1980]; CitiFinancial Co. [DE] v. McKinney, 27 A.D.3d 224, 226 [1st Dept 2006]). Summary judgment may be granted only when it is clear that no triable issues of fact exist (Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 [1986]), and "is inappropriate in any case where there are material issues of fact in dispute or where more than one conclusion may be drawn from the established facts" (Friends of Thayer Lake LLC v. Brown, 27 N.Y.3d 1039, 1043 [2016]; see also Tronlone v. Lac d'Amiante Du Quebec, 297 A.D.2d 528, 528-529 [1st Dept 2002], aff'd 99 N.Y.2d 647 [2003]).
New York courts routinely grant summary judgment where, as here, summary resolution may be determined as a matter of law based on the plain language of the operative contracts (see Jagarnauth v. Massey Knakal Realty Services, Inc., 104 A.D.3d 564, 564 [1st Dept 2013] [finding that court properly granted motion for summary judgment based on the "plain language of the co-brokerage agreement"]; Bartfield v. RMTS Associates, LLC, 283 A.D.2d 240, 241 [1st Dept 2001] [finding that the lower court properly found that the plaintiff was entitled to summary judgment on his breach of contract claim "since the plain language of the Agreement establishes that RMTS was obligated to repurchase Bartfield's equity interest upon the termination of his relationship with RMTS, regardless of the reason for the termination and regardless of whether any of his purchase price had been paid"]; Creditone, LLC v. Fang Mei Feldman, 34 Misc.3d 1218[A], 2012 NY Slip Op 50136[U], * 5 [Sup Ct, NY County 2012] ["'matters extrinsic to the agreement may not be considered when the intent of the parties can be gleaned from the face of the instrument'"], quoting Chimart Assoc, v. Paul, 66 N.Y.2d 570, 572-573 [1986]).
Plaintiff contends that, based on the express terms of the Agreement, and indisputable facts revealing that defendant expressly exercised its right to terminate for convenience, the court should grant summary judgment on its second cause of action. According to plaintiff, defendant's election to terminate the Agreement for convenience relied on the clear terms of the Agreement and negates any claims that it may have for purported breaches of the Agreement by plaintiff. Moreover, the Agreement expressly sets forth the Termination Fee that plaintiff seeks. Defendant's election to terminate for convenience triggered this provision. Plaintiff argues that, thus, there are no factual issues requiring a trial of plaintiffs second cause of action.
In opposition to the motion, defendant argues, that despite the email it sent to plaintiff in which it confirms that "it is agreed that 68-70 Spring Partners LLC shall terminate CNY Residential LLC for convenience effective June 10, 2021," it "did not intend to and did not terminate CNY for convenience," and thus, "there are questions of fact as to whether Spring terminated CNY for convenience" (defendant's memorandum of law [NYSCEF Doc No. 66], at 7, 8).
This court agrees with plaintiffs position, as principles of contract construction dictate summary judgment in its favor on the second cause of action. It is black-letter law in New York that courts will enforce a contract according to the plain meaning of its terms. In interpreting a contract, the court must look to the language used, for "a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms" (Quadrant Structured Prods. Co., Ltd. v. Vertin, 23 N.Y.3d 549, 559-560 [2014] [quotation marks and citation omitted]; accord Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475-476 [2004]; Greenfield v. Philles Records, 98 N.Y.2d 562, 569 [2002]). "Construction of an unambiguous contract is a matter of law, and the intention of the parties may be gathered from the four corners of the instrument and should be enforced according to its terms" (Beal Sav. Bank v. Sommer, 8 N.Y.3d 318, 324 [2007]). The court must construe the contract "to give full meaning and effect to the material provisions," and "should not render any portion meaningless" (id. [quotation marks and citations omitted]). Agreements "should be read as a whole, and every part will be interpreted with reference to the whole; and if possible it will be so interpreted as to give effect to its general purpose" (id. at 324-325 [quotation marks and citation omitted]).
Whether contractual language is ambiguous is a question of law for the court to decide (W. W. W. Assoc, Inc. v. Giancontieri, 77 N.Y.2d 157,162 [1990]). Evidence outside the four corners of the document as to what was really intended, but unstated or misstated, is generally inadmissible to add to or vary the terms of an unambiguous contract (Mercury Bay Boating Club v. San Diego Yacht Club, 76 N.Y.2d 256, 267 [1990]; see also Lake Const, and Dev. Corp. v. City of New York, 211 A.D.2d 514, 515 [1st Dept 1995] ["It is well settled that, on a motion for summary judgment, the construction of an unambiguous contract is a question of law for the court to pass on, and that circumstances extrinsic to the agreement or varying interpretations of the contract provisions will not be considered, where, as here, the intention of the parties can be gathered from the instrument itself']). Accordingly, the parties' disagreement about the plain language of the contracts at issue is a legal determination appropriate for summary resolution (see Mount Vernon Fire Ins. Co. v. Creative Horn., 88 N.Y.2d 347, 352 [1996] ["provisions in a contract are not ambiguous merely because the parties interpret them differently"]).
To determine if the Agreement here was terminable for convenience, the court must look first to the terms of the written Agreement (see e.g. Few Spirits v. UB Distribs., LLC, 192 A.D.3d 418, 418 [1st Dept 2021] ["court correctly found that the contract was unambiguous and was the 'complete and exclusive statement of the terms of (the parties') understanding and agreement'"]). Here, this court finds, as a matter of law, that the termination for convenience provision in the Agreement, stating that "[t]he Owner may also terminate this Agreement for its convenience upon thirty (30) days written notice" (Agreement, p. 3), is clear and unambiguous, and reflects the intent of the parties (see Crow & Sutton Assoc, Inc. v. Welliver McGuire, Inc., 32 A.D.3d 651, 651-652 [3d Dept 2006] [enforcing plain meaning of termination-for-convenience payment provision]).
This court also finds that it is undisputed that defendant exercised its right to terminate the Agreement based upon this express provision. The record reveals that, by email dated June 17, 2021 from defendant to plaintiff, defendant's principal, John Zaccaro, Sr., stated that "[t]his email memorializes the June 15 2021 telephone conversation between Kenneth Colao, Stephen Guzzardi and John Zaccaro Sr regarding construction management at the 68-70 Spring Street Project," and that "it is agreed that 68-70 Spring Partners LLC shall terminate CNY Residential LLC for convenience] effective June 10, 2021" (NYSCEF Doc No. 45). The parties made this election after defendant's delivery to plaintiff of a notice to cure "defaults" under the Agreement. Following discussions between the parties, defendant withdrew the notice, and instead terminated the Agreement for convenience effective June 10, 2021, by the email communication. Accordingly, it is clear that defendant expressly terminated the Agreement "for convenience" in accordance with the unambiguous provision of the Agreement.
In the event of termination for convenience, as here, the Agreement unambiguously provides that plaintiff "shall be paid for all Services and Work rendered through the date of termination and due to the termination, including costs incurred to protect and safeguard the Project's premises ... plus a proration of the particular Fee due for the month in which such termination occurs, and a Termination Fee equal to the amount of total billings through the date of termination" (Agreement, p. 3). The record reveals that, following the termination of the Agreement for convenience, plaintiff wound down its management services, and that, in accordance with the terms of the Agreement, the amount of total billings through the date of termination, which constitutes the Termination Fee, was in the amount of $3,113,948.55, calculated in accordance with the 39 requisitions for personnel expenses and pay.
Thus, plaintiff has established a prima facie right to summary judgment on its second cause of action (see Paragon Restoration Group, Inc. v. Cambridge Sq. Condominiums, 42 A.D.3d 905, 906 [4th Dept 2007] ["Contrary to the contention of defendant on its cross appeal, the court properly granted that part of plaintiff s motion for partial summary judgment on liability. Plaintiff met its initial burden by establishing that defendant terminated the contract without cause, pursuant to a termination for convenience clause, and defendant failed to raise a triable issue of fact in opposition"]; see also Elsaeidy v. Guarino, 2 A.D.3d 486, 487 [2d Dept 2003] ["Since the unconditional cancellation clause permitted the defendants to cancel the contract for any reason, the cancellation was authorized by the parties' contract"]).
Where, as here, a contract is terminated for convenience and not for cause, the party terminating the contract is precluded from claiming that the other party was in default under the subject contract, negating any claims for damages, and must pay the terminated party's costs, expenses and fees in accordance with the subject termination provision (see Matter of Stone Cast, Inc, 2014 WL 6435717, * 4 [Bankr SDNY 2014] ["Contract ¶ 12.1 is clear on its face and thus must be enforced according to its terms as expressing the parties' intentions. This requirement is especially apt here because the Contract was terminated as of right under a termination-for-convenience clause, and, therefore, such termination did not constitute a breach, the only amount owing being that specified by the parties in ¶ 12.1 in the event of such a bargained-for termination"] [internal citations omitted]; see also 400 15th St., LLC v. Promo-Pro, Ltd., 28 Misc.3d 1233[A], 2010 NY Slip Op 51580[U] * 6 [Sup Ct, Kings County 2010] ["In support of its motion for summary judgment, Colonial points out that plaintiffs January 18,2006 letter advised Promo-Pro that, in spite of plaintiff s grounds to terminate Promo-Pro for cause pursuant to section 14.2.1 of the General Conditions, it was electing to terminate Promo-Pro for convenience pursuant to section 14.4.1 of the General Conditions. Where a contract is terminated for convenience, the owner, and not the surety, is responsible for the costs associated with completion of performance, and the owner cannot recover for the cost of curing any alleged default"]).
In opposition to the motion, defendant fails to raise a triable issue of fact. Defendant opposes the motion by arguing that it "did not intend to and did not terminate CNY for convenience," and that "there are questions of fact as to whether Spring terminated CNY for convenience pursuant to the [Agreement], thereby precluding an award of summary judgment in favor of CNY" (defendant's memorandum of law [NYSCEF Doc No. 66], at 7, 8); see also aff of Stephen Guzzardi [NYSCEF Doc No. 57], ¶ 13 ["Spring in no way intended to terminate CNY for convenience pursuant to the construction management agreement," because "'[convenience,' to myself and Mr. Zaccaro Sr., meant that the parties would walk away without any further obligations to each other or any acrimony, aside from CNY's claim of approximately $500,000.00, which the parties would continue to discuss."]; aff of John Zaccaro, Sr. [NYSCEF Doc No. 59], ¶ 12 [stating "I in no way intended to terminate CNY 'for convenience' pursuant to the Agreement," as "'[convenience', to me, meant that the parties would walk away without any further obligations to each other or any acrimony"]). Defendant argues that, "[i]nstead, Spring and CNY ended the Agreement amicably, with the parties intending to continue to discuss CNY's claimed outstanding balances to try and come to some equitable solution" (defendant's memorandum at 8).
However, because the Agreement is unambiguous, the parol evidence rule bars the admission of defendant's assertions relating to its principals' and managers' intent, lack of understanding and other conclusory "evidence" contradicting the express terms of the Agreement (see Buckthorn, Ltd. v. Rollins Burdick Hunter of New York, Inc., 109 A.D.2d 8 [1st Dept 1985]); see also FGP 1, LLC v. Pirogova, 217 A.D.3d 602, 604 [1st Dept 2023] ["Extrinsic or parol evidence concerning what the parties intended in the FGP assignment agreement and release is inadmissible to create an ambiguity, as the agreements are clear and unambiguous"]; Few Spirits v. Ub Distributors, LLC, 192 A.D.3d418 [1st Dept 2021] ["the court correctly found that the contract was unambiguous and was the 'complete and exclusive statement of the terms of [the parties'] understanding and agreement.' Thus, the court properly excluded plaintiffs proffered parol evidence regarding the intent of the parties"]).
Moreover, defendant's own email confirming a termination-for-convenience shows at the time it fully understood that it was not terminating the Agreement for cause (see MCAP Robeson Apt. Ltd. Partnership v. MuniMae TE Bond Subsidiary, LLC, 136 A.D.3d 602, 603 [1st Dept 2016] ["Contrary to plaintiffs' contention that defendants' email did not constitute notice of termination of the commitment agreement, plaintiffs' contemporaneous response demonstrates that they understood the email as notice of termination"]; see also Webster's Red Seal Publ. v. Gilberton World-Wide Publ., 67 A.D.2d 339,341 [1st Dept 1979] ["the most persuasive evidence of the agreed intention of the parties in those circumstances is what the parties did when the circumstances arose"], aff'd 53 N.Y.2d 643 [1981]).
Here, the Agreement's terms relating to termination-for-convenience are clear. Moreover, the confirmatory email reveals that defendant was fully aware that defendant terminated the Agreement for convenience, and not for cause. Accordingly, defendant's attempts to interject its own version of facts by extrinsic evidence must be rejected, and summary judgment is granted on the second cause of action.
In opposition to the motion, defendant also contends that there must be an inquest on damages. The court disagrees. The Agreement specifically provides that, upon a termination-for-convenience, plaintiff shall be paid a "Termination Fee equal to the amount of total billings through the date of termination" (Agreement, p. 3). Plaintiff has provided the court with the requisitions it submitted to defendant over a period of three years, that equal the amount of total billings. Thus, the amount of the Termination Fee that the parties expressly agreed would be due upon a termination-for-convenience is clear - $3,113,948.55 (see NYSCEF Doc Nos. 48 and 49). Because the parties stipulated in the Agreement that the Termination Fee would be the amount of total billings, defendant is not entitled to an inquest (see X.L.O. Concrete Corp. v. Brady and Co., 104 A.D.2d 181, 184-185 [1st Dept 1984], aff'd, 66 N.Y.2d 970 [1985] ["As early as 1902, the Court of Appeals recognized that 'when the parties by their contract provide for the consequences of a breach, lay down a rule to admeasure the damages and agree when they are to be paid, the remedy thus provided must be exclusively followed."], quoting McCready v. Lindenhorn, 172 NY 400,409 [1902]; see e.g., Crow & Sutton Assoc, Inc., 32 A.D.3d 651, 652 [3d Dept 2006] [finding that the termination for convenience provision "adequately supports the damages awarded herein," and that the "[p]laintiff submitted extensive proof, including detailed records supporting its claim"]).
Motion To Dismiss Counterclaims, Affirmative Defense and Setoffs
1. First Through Third Counterclaims
The first through third Counterclaims contained in the answer to the amended complaint (see NYSCEF Doc No. 11) each seek damages for plaintiffs alleged defaults under, and breach of, the Agreement and a December 1, 2019 amendment to the Agreement (the Amendment). Specifically, the first counterclaim seeks damages for breach of the Agreement:
"That due to [plaintiffs] mismanagement including shoddy and inferior workmanship; assignment of unapproved staffing to the Project; excessive billing of administrative expenses; use of unapproved contractors; insufficient and inadequate involvement and supervision and changing of staffing without notice, both at the executive and field levels; invoicing at union labor rates on a non-union Project; failure to manage the project and supervise trades, which has resulted in excessive delays; the actual cost of the Project will be in excess of $39,100,000, including [plaintiffs] fees"(answer, ¶ 115).
The second counterclaim seeks damages for breach of the Amendment:
"That [plaintiffs] defaults included but were not limited to, shoddy and inferior workmanship; assignment of unapproved staffing to the Project; excessive billing of administrative expenses; use of unapproved contractors; insufficient and inadequate involvement and supervision, both at the executive and field levels; invoicing at union labor rates on a non-union Project"(Id., ¶ 124).
Likewise, the third counterclaim seeks damages for breach of contract, alleging that Spring "overpaid [plaintiff]," that Spring was "forced to hire York to complete CNY's incomplete work and to correct CNY's shoddy and inferior work," and "[f]hat [defendant's] aforesaid money damages are a result of CNY's material breaches of contract detailed herein" (id., ¶¶ 131-133).
However, because defendant elected to terminate the Agreement for convenience, it is precluded from asserting counterclaims based on plaintiffs alleged defaults, as it expressly relinquished any claims based on them.
For instance, in Tishman Const. Corp., Inc. v. City of New York (228 A.D.2d 292, 292 [1st Dept 1996]), the defendant City terminated the plaintiff construction manager's construction management agreement for convenience. The plaintiff commenced the action to recover payments due and owing from the defendant (id.). The Court affirmed the lower court's ruling that the defendant was precluded from asserting counterclaims based on the plaintiffs alleged defaults:
"For the reasons stated in the opinion of the IAS court, we agree that the City's termination of plaintiff s services under section 15 of the agreement precludes the City from raising its counterclaims under the agreement. Had the City wished to pursue these claims, plaintiff should have been terminated under section 16 of the agreement, which provides for recouping the expense of curing plaintiffs default. Where the City elects to terminate for convenience, as provided in section 15, whether with or without cause, it cannot counterclaim for the cost of curing any alleged default"(id. at 292-293 [internal citation omitted]).
Likewise, in Paragon Restoration Group, Inc. (42 A.D.3d 905 [4th Dept 2007]), the plaintiff-contractor "entered into a contract to repair the roofs and replace the windows in a series of buildings owned by [the defendant]," and thereafter commenced a breach of contract action after the defendant terminated the contract for convenience and refused to make the payments provided for therein (id. at 905-906). The plaintiff moved for summary judgment on the complaint, and for dismissal of the defendant's counterclaims against it (id.). With respect to the branch of the plaintiffs motion that sought dismissal of the defendant's counterclaims, the Court held:
"We agree with the further contention of plaintiff that the court should have dismissed defendant's counterclaims against it in their entirety, and we therefore modify the order accordingly. We conclude that the first counterclaim should have been dismissed against plaintiff to the extent that it sought an offset for the costs of completing the project because, '[w]here [defendant] elects to terminate for convenience ..., whether with or without cause, it cannot counterclaim for the cost of curing any alleged default'"(id. at 906 [citation omitted]).
Similarly here, defendant's first through third counterclaims seek damages based upon plaintiffs alleged defaults and breaches of the Agreement and/or Amendment. Because defendant elected to terminate the Agreement for convenience, it is now precluded from asserting the counterclaims based on plaintiffs purported defaults. Accordingly, the first, second and third counterclaims are dismissed as a matter of law.
Although defendant asserts that the "reservation of rights" language in the email of John Zaccaro, Sr. terminating the Agreement for convenience permits the interposition of counterclaims, the court rejects this argument. Where, as here, an agreement is terminated for convenience, this termination completely bars the interposition of counterclaims, regardless of any purported reservation of rights (see Tishman, 228 D2d at 293 [noting that "the City cannot prevail by citing sections 20.4 ('All Defenses Reserved') and 21.2 ('No Waivers') for the proposition that the City's rights in any and all circumstances were without limitation" because such a "disclaimer" would "defeat[] the principle that a contract sets forth the respective rights and liabilities between the parties"]). Indeed, defendant cites no relevant cases supporting this proposition. If defendant wanted to pursue claims for breach of the Agreement or the Amendment, it should not have withdrawn its notice of termination for cause and agreed to termination for convenience.
2. Fifth and Sixth Counterclaims
Defendant also moves for dismissal of the fifth counterclaim for unjust enrichment, and the sixth counterclaim for negligent misrepresentation.
The fifth counterclaim for unjust enrichment is not viable because a contract governs the subject matter of the claim. It is well-settled under New York law that "a party may not recover in quantum meruit or unjust enrichment where the parties have entered into a contract that governs the subject matter" (Cox v. NAP Constr. Co., Inc., 10 N.Y.3d 592, 607 [2008]; see also Clark-Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382, 388 [1987] ["The existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter"]; Goldstein v. CIBC World Mkts. Corp., 6 A.D.3d 295, 296 [1st Dept 2004] ["A claim for unjust enrichment, or quasi contract, may not be maintained where a contract exists between the parties covering the same subject matter"]). Thus, unjust enrichment is available only "in the absence of an actual agreement" (Pappas v. Tzolis, 20 N.Y.3d 228, 234 [2012] [emphasis in original; citation and internal quotation marks omitted]; see also Goldman v. Metropolitan Life Ins. Co., 5 NY3d 561, 572 [2005] [unjust enrichment "is an obligation the law creates in the absence of any agreement"]).
The fifth counterclaim for unjust enrichment relies on the same facts and circumstances that underlie defendant's breach of contract counterclaims, and only relate to the alleged breach of the Agreement:
"[Plaintiff] had a duty to [defendant] to perform pursuant to the Agreement and Amendment.
[Defendant] performed its obligations owed to [plaintiff] pursuant to the Agreement and Amendment.
Despite [defendant's] good faith performance, due demand, and being compensated, [plaintiff] has failed to perform.
As a result, [plaintiff] was unjustly enriched resulting in damages to [defendant]" (amended answer, ¶¶ 145-148).
Thus, because a contract governs the subject matter of the dispute, the court dismisses the unjust enrichment counterclaim (see e.g., ECD NY Inc. v. 616 First Ave. Dev. LLC, 187 A.D.3d 600, 601 [1st Dept 2020] [dismissing unjust enrichment claim where "there [was] a detailed, 100-page written contract between plaintiff and Developer and neither side disputes its validity"]; Remora Capital S.A. v. Dukan, 175 A.D.3d 1219, 1221 [1st Dept 2019] ["The unjust enrichment claim must be dismissed because it arises from matters covered by the contracts"]; Scavenger, Inc. v. GT Interactive Software Corp., 289 A.D.2d 58, 59 [1st Dept 2001] ["since the matters here in dispute are governed by an express contract, defendant's counterclaim for unjust enrichment was properly found untenable"]).
With respect to the sixth counterclaim for negligent misrepresentation, "a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated" (Clark-Fitzpatrick, Inc., 70 N.Y.2d at 389). For instance, in OP Solutions, Inc. v. Crowell & Moring, LLP (72 A.D.3d 622,622 [1st Dept 2010]), the Court affirmed the lower court's dismissal of plaintiff s claims based on fraud and negligent misrepresentation, finding that:
"[P]laintiff s causes of action for fraud and negligent misrepresentation are not separate and apart from its claim for breach of contract. The claims are predicated upon precisely the same purported wrongful conduct as is the claim for breach of contract inasmuch as they all involve defendant's disclosure of plaintiff s purported proprietary and confidential information to a consultant"(id.; see also Greenman-Pedersen, Inc. v. Levine, 37 A.D.3d 250, 250 [1st Dept 2007] ["The court properly dismissed the claims for fraudulent concealment and negligent misrepresentation as duplicative of the claims for breach of contract and warranty. Plaintiff failed to allege the breach of any duty separate and apart from the contractual obligations"]).
Accordingly, in order for the sixth counterclaim for negligent misrepresentation to be viable, it must allege facts and duties that are separate and apart from plaintiffs counterclaims for breach of contract. However, the sixth counterclaim relies upon the same breaches of the Agreement as in defendant's breach of contract counterclaims: "[Plaintiff] represented to [defendant] that it could perform the work pursuant to the Agreement and Amendment" (amended answer, f 151). Hence, the sixth counterclaim must also be dismissed, because it does not allege a duty that plaintiff owed defendant that is separate and apart from its contractual duty.
3. Third Affirmative Defense and Third Setoff
CPLR 3211(b) provides: "A party may move for judgment dismissing one or more defenses, on the ground that a defense is not stated or has no merit."
Defendant alleges in the third affirmative defense that "[p]laintiff s claim should be offset and/or its complaint dismissed by virtue of its excess billing and the costs incurred by Defendant to complete Plaintiffs work and correct Plaintiffs poor workmanship" (amended answer, ¶ 33).
Similarly, the third setoff merely reiterates plaintiffs alleged breaches and defaults under the Agreement. Indeed, the allegations contained in the third setoff duplicate the allegations in the counterclaims and the waived allegations contained in defendant's Notice of Default (see id., f 101).
Because defendant's third affirmative defense and third setoff merely reallege plaintiffs alleged breaches and defaults under the Agreement, they are dismissed because defendant expressly relinquished the claims underlying the defense and setoff when it terminated the Agreement for convenience.
4. Second Setoff
In the second setoff, defendant alleges that plaintiff should not have been entitled to "payroll costs" under the Agreement for the time period in or about March 2020 through in or about May 2020, because plaintiff received a loan under the Paycheck Protection Program (PPP) covering that period, and thus would get a windfall absent an offset. However, defendant cites no legal or regulatory basis to support the proposition that PPP loan recipients in the private sector must pay back, or offset, another contracting party's allocable costs under the contract when those party's costs were the same or similar as those intended to be covered by the PPP loan. Similarly, there is no legal or regulatory basis to support the proposition that the possible forgiveness of qualifying PPP loans triggers a duty to offset another party's allocable costs or required obligations under a private contract. PPP payments are loans that must be repaid. Forgiveness of the loan occurs only if the debtor meets certain conditions (see Melendez v. City of New York, 16 F4th 992, 1041 [2d Cir 2021] [noting that "forgiveness of low-interest PPP loans to small businesses is conditioned on maintenance of workforce and compensation levels"]). Even if plaintiff received PPP funds that it used to pay personnel expenses and even if the government forgave this loan, that forgiveness would have nothing to do with defendant, that signed an unequivocal agreement to pay CNY "for all Services and Work rendered through the date of termination" in the event of a termination for convenience (Agreement, p. 3). Therefore, the second setoff must be dismissed as well.
The court has considered the parties' remaining contentions and finds them unavailing.
Accordingly, it is
ORDERED that plaintiffs motion for partial summary judgment on the second cause of action in the complaint, both as to liability and damages, is granted. Plaintiff is awarded damages in the amount of $3,113,948.55, together with prejudgment interest at the statutory rate of 9% per annum from the date of June 11, 2021; and it is further
ORDERED that plaintiffs motion to dismiss defendant's first, second, third, fifth and sixth counterclaims, third affirmative defense and second and third setoffs in the amended answer is granted; it is further
ORDERED that the Clerk is directed to enter judgment in the amount of $3,113,948.55 against defendant 68-70 SPRING PARTNERS, LLC and in favor of plaintiff CNY RESIDENTIAL LLC; and it is further
ORDERED that the remainder of the action is severed and shall continue.