U.W. Marx, Inc. v. Koko Contracting, Inc. ( 2015 )


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  •                            State of New York
    Supreme Court, Appellate Division
    Third Judicial Department
    Decided and Entered: January 22, 2015                    518611
    ________________________________
    U.W. MARX, INC.,
    Appellant,
    v
    KOKO CONTRACTING, INC.,
    Respondent.
    (Action No. 1.)
    _______________________________              MEMORANDUM AND ORDER
    KOKO CONTRACTING, INC.,
    Respondent,
    v
    U.W. MARX, INC., et al.,
    Appellants,
    et al.,
    Defendant.
    (Action No. 2.)
    ________________________________
    Calendar Date:   November 13, 2014
    Before:    Peters, P.J., Lahtinen, Garry, Rose and Egan Jr., JJ.
    __________
    Mastropietro Law Group, PLLC, Saratoga Springs (Eric W.
    Gentino of counsel), for appellants.
    Milber Makris Plousadis & Seiden, LLP, Woodbury (Joseph J.
    Cooke of counsel), for respondent.
    __________
    Rose, J.
    Appeals (1) from an order of the Supreme Court (Connolly,
    J.), entered October 28, 2013 in Rensselaer County, upon a
    -2-                518611
    decision of the court, among other things, partially in favor of
    plaintiff in action No. 2, and (2) from the judgment entered
    thereon.
    U.W. Marx, Inc., as the general contractor on a school
    construction project, entered into a subcontract with Koko
    Contracting, Inc. for roofing work. After not being paid for
    three months of work despite repeated demands for payment, Koko
    ceased performing any work on the site on October 31, 2007. By
    letter dated November 3, 2007, Marx gave Koko three days' notice
    to cure its alleged default of, among other things, failing to
    provide workers on the job. On November 6, 2007, Koko belatedly
    provided Marx with the seven days' notice of its suspension of
    work based on nonpayment as called for in section 4.7.1 of the
    subcontract. Marx ultimately declared Koko in default and
    terminated the contract based on Koko's removal of its workers.
    These actions followed.1
    After a nonjury trial, Supreme Court fully credited the
    testimony of Koko's owner and discredited the testimony of Marx's
    witnesses, finding the latters' testimony to be conclusory and
    unsupported by documentary evidence. Accordingly, the court
    concluded that, among other things, Marx's reasons for
    withholding progress payments were unsubstantiated and
    unjustified, and it found that Marx's failure to pay was a
    material breach of the contract. Judgment was then entered in
    Koko's favor. Marx and its surety, Continental Casualty Company,
    now appeal.
    Marx and Continental do not contest the finding that Marx
    materially breached the contract well before the last day that
    Koko's forces were on the job. Rather, they argue that Koko is
    precluded from recovery because it suspended its work on the
    project without complying with the provisions of section 4.7.1 of
    the contract. That section, a standard form clause drafted by
    the American Institute of Architects, provides as follows:
    1
    These actions have previously been before us (97 AD3d 893
    [2012]).
    -3-                518611
    "If the Contractor does not pay the
    Subcontractor through no fault of the
    Subcontractor, within seven days from the
    time payment should be made as provided in
    this Agreement, the Subcontractor may,
    without prejudice to any other available
    remedies, upon seven additional days'
    written notice to the Contractor, stop the
    [w]ork of this Subcontract until payment
    of the amount owing has been received.
    The Subcontract Sum shall, by appropriate
    adjustment, be increased by the amount of
    the Subcontractor's reasonable costs of
    demobilization, delay and remobilization."
    Clearly, Koko was not in compliance with this section, as it had
    ceased performing work on October 31, 2007 and did not give
    notice of its suspension until November 7, 2007. Nevertheless,
    as found by Supreme Court, Marx had materially breached the
    contract by failing to make three successive progress payments
    that Koko was entitled to receive (see e.g. Serena Constr. Corp.
    v Valley Drywall Serv., 45 AD2d 896, 896 [1974], lv denied 35
    NY2d 642 [1974]). Marx's prior material breach was an uncured
    failure of performance that relieved Koko from performing its
    remaining obligations under the contract (see Restatement
    [Second] of Contracts § 237; see generally J. Petrocelli Constr.,
    Inc. v Realm Elec. Contrs., Inc., 15 AD3d 444, 446 [2005];
    Sunshine Steak, Salad & Seafood v W.I.M. Realty, 135 AD2d 891,
    892 [1987]; Allbrand Discount Liqs. v Times Sq. Stores Corp., 60
    AD2d 568, 568 [1977], lv denied 44 NY2d 642 [1978]; see also
    Framingham Heavy Equip. Co., Inc. v John T. Callahan & Sons,
    Inc., 61 Mass App Ct 171, 179-180 [2004] [holding that general
    contractor's failure to pay excused subcontractor from having to
    comply with notice provisions of AIA section 4.7.1]).
    Put another way, Marx cannot preclude Koko from recovering
    for Marx's material breach of the contract by relying on Koko's
    subsequent failure to comply with a clause that inures to Koko's
    benefit. Nor can we agree with Marx and Continental that Supreme
    Court's determination rendered the clause meaningless. In our
    view, the clause has meaning inasmuch as it is designed to
    -4-                  518611
    protect the subcontractor and to compensate it in the event that
    it has to stop work for nonpayment and then remobilize. Koko's
    failure to comply with the clause would preclude it from
    recovering remobilization costs in the event that it resumed
    work. Koko also put itself at risk that, if the court had
    determined that Marx's nonpayment did not breach the contract,
    the work stoppage without compliance with the notice provision of
    the clause would then be considered a breach, leaving Koko liable
    for the resulting damages.2 Accordingly, under the circumstances
    as found by Supreme Court, Koko's failure to strictly comply with
    section 4.7.1 does not provide a basis to disturb the judgment in
    Koko's favor.
    Peters, P.J., Lahtinen, Garry and Egan Jr., JJ., concur.
    ORDERED that the order and judgment are affirmed, with
    costs.
    ENTER:
    Robert D. Mayberger
    Clerk of the Court
    2
    We note that the AIA form clause is similar to General
    Business Law § 756-b, which sets forth a procedure by which a
    subcontractor may suspend performance for nonpayment without
    being considered to be in breach of the contract (see General
    Business Law § 756-b [2] [a] [iii]).
    

Document Info

Docket Number: 518611

Judges: Rose, Peters, Lahtinen, Garry, Egan

Filed Date: 1/22/2015

Precedential Status: Precedential

Modified Date: 3/2/2024