Court Opinion

ID: 6014570
Source: CourtListenerOpinion
Date Created: 2022-01-13 11:10:45.703376+00
Date Added: 2024-06-11T08:50:29.629589
License: Public Domain

Order modified on the law and as modified affirmed without costs in accordance with the following Memorandum: Defendant City of Syracuse (City) contracted with Continental Webb Realty for the construction of a multilevel parking garage. Continental Webb Realty assigned its contractual rights to Webb/St. James Parking Corporation, which ultimately changed its name to Harrison Garage Parking Corp. (HGPC). Under the contract and a "Turnkey Agreement” with the City, defendant HGPC was to acquire properties in downtown Syracuse, construct the garage and, upon completion of construction, deliver title to the property and garage to the City of Syracuse Industrial Development Agency. The City, which provided all of the funding for the project, retained the right to approve the construction plans and specifications and any changes thereto and to inspect the work. The contract required the City to retain 5% of all construction payment requests until substantial completion of the project.
HGPC subcontracted with plaintiff for construction of the garage. Pursuant to the subcontract, plaintiff submitted requests for progress payments, less 5% retainage. Plaintiff’s requests were incorporated in payment requests submitted by HGPC to the City. After HGPC failed to pay plaintiff the amount claimed to be due and owing, plaintiff attempted to file a public improvement lien and claim against HGPC’s payment bond. Upon learning that HGPC did not post a payment bond, plaintiff commenced this action against HGPC and the City, among other defendants. With respect to the City, the amended complaint alleges that the City breached its contract with HGPC by failing to withhold the 5% retainage and that plaintiff is a third-party beneficiary of that contractual provision. The amended complaint further alleges that the City failed to require HGPC or its predecessors to post a labor and material payment bond, thereby violating State Finance Law § 137 (1). Supreme Court denied the motion of plaintiff for partial summary judgment and granted the cross motion of the City for summary judgment dismissing the amended complaint against it.
The court erred in dismissing that part of the amended complaint alleging that the City breached its contractual obligation to retain 5% of the progress payments to HGPC. The court *883should have granted plaintiff partial summary judgment on liability on that claim. The evidence establishes that the City breached its contractual duty to retain 5% of the progress payments made to HGPC, and plaintiff is a third-party beneficiary of that contractual duty (see, Avco Delta Corp. Canada v United States, 484 F2d 692, 703, cert denied sub nom. Canadian Parkhill Pipe Stringing v United States 415, US 931).
Plaintiff also sought summary judgment on its retainage claim on the ground that the City failed to perform its duty to retain as mandated by General Municipal Law § 106-b. That section, however, creates no private cause of action for a municipality’s failure to retain, and no such cause of action may be implied. Subdivision (2) of section 106-b provides in relevant part: "Nothing provided herein shall create any obligation on the part of the public owner to pay or to see to the payment of any moneys to any subcontractor or materialman from any contractor nor shall anything provided herein serve to create any relationship in contract or otherwise, implied or expressed, between the subcontractor or materialman and the public owner.” We reject plaintiff’s contention that the above language applies only to the contractor’s duty to retain, which is the focus of subdivision (2), not to the municipality’s duty to retain, which is the focus of subdivision (1). That language demonstrates that the Legislature, in requiring public owners and their contractors to retain a percentage of progress payments pending substantial completion of the project, did not intend to impose any liability upon public owners for their failure or the failure of their contractors to retain moneys pursuant to section 106-b.
The court properly dismissed that part of the amended complaint alleging that the City failed to require HGPC to post a labor and material payment bond pursuant to State Finance Law § 137. Pursuant to that section, in any contract involving the construction of a public improvement, the municipal corporation must require each contractor to post a labor and material payment bond. In the circumstances of this case, the parking garage does not constitute a public improvement.
In order to constitute a public improvement, the land where the work specified in the contract is to be completed must be owned by the State or a public corporation at the time that contract is executed (see, Lien Law § 2 [7] ["public improvement” is "an improvement of any real property belonging to the state or a public corporation” (emphasis supplied)]). Here, the record establishes that the City did not own the land when the contract was executed.
*884Plaintiff’s reliance on State Finance Law § 137 (1) is misplaced. Because this project is a turnkey agreement, the City did not own the property prior to its formal approval of the project. It certainly did not own the property at the time that plaintiff, as general contractor, entered into a contract with the developer to build the garage. Indeed, plaintiff signed documents acknowledging that fact. Thus, because plaintiff did not enter into an agreement with a municipality, plaintiff was entitled to the benefits provided it under the Lien Law and nothing more. State Finance Law § 137 (1) was enacted to provide protection in instances where contractors are denied Lien Law protection (see, Davidson Pipe Supply Co. v Wyoming County Indus. Dev. Agency, 85 NY2d 281, 285; Chittenden Lbr. Co. v Silberblatt & Lasker, 288 NY 396, 402). If plaintiff had wanted the additional protection of a payment bond, it should have placed that requirement in its contract.
We reject the dissent’s conclusion that the holding of the Court of Appeals in Davidson Pipe Supply Co. (supra) mandates a contrary result. In Davidson, title to the land to be improved was in a public, corporation when the contract was executed. Because the project was for the benefit of a privately owned company and was not for a public purpose, the Court held that it did not qualify as a public improvement. Nothing in the Court’s decision indicates that State Finance Law § 137 (1) would apply where the title owner of the real property was not a municipality.
Plaintiff is also entitled to summary judgment dismissing the City’s counterclaim, which alleged that plaintiff failed to construct the garage in accordance with codes “sufficient to obtain a certificate of occupancy.” The City admits that it issued a Certificate of Substantial Completion and a Certificate of Occupancy. Thus, the counterclaim has no merit.
We further conclude that the action was timely commenced within one year and 90 days from the date on which final payment was due and that plaintiff complied with the notice of claim requirements of General Municipal Law § 50-e and Syracuse City Charter § 8-115 (2). We have reviewed the remaining contentions of the parties and conclude that they are without merit.
Consequently, we modify the order by granting in part the motion of plaintiff for partial summary judgment on liability to the extent that the City breached its contractual obligation to retain 5% of the progress payments made to HGPC and by denying in part the cross motion of the City to that extent. We further modify the order by dismissing the counterclaim.
*885All concur except Bailo, J., who dissents in part in the following Memorandum.