Court Opinion

ID: 4155539
Source: CourtListenerOpinion
Date Created: 2017-03-24 19:11:08.648898+00
Date Added: 2024-06-11T14:34:00.164394
License: Public Domain

SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

64
CA 16-00907
PRESENT: WHALEN, P.J., SMITH, PERADOTTO, DEJOSEPH, AND CURRAN, JJ.

AUBURN CUSTOM MILLWORK, INC.,
PLAINTIFF-RESPONDENT-APPELLANT,

                    V                             MEMORANDUM AND ORDER

SCHMIDT & SCHMIDT, INC.,
DEFENDANT-APPELLANT-RESPONDENT.

FOX & KOWALEWSKI, LLP, CLIFTON PARK (LAURENCE I. FOX OF COUNSEL), FOR
DEFENDANT-APPELLANT-RESPONDENT.

SHEATS & BAILEY, PLLC, BREWERTON (JASON B. BAILEY OF COUNSEL), FOR
PLAINTIFF-RESPONDENT-APPELLANT.

     Appeal and cross appeal from an order of the Supreme Court,
Cayuga County (Matthew A. Rosenbaum, J.), entered February 25, 2016.
The order, among other things, denied in part plaintiff’s motion for
summary judgment and denied defendant’s cross motion for summary
judgment.

     It is hereby ORDERED that the order so appealed from is
unanimously modified on the law by denying plaintiff’s motion in its
entirety and vacating the award of damages, and as modified the order
is affirmed without costs.

     Memorandum: Defendant, a general contractor, entered into a
contract with the Town of Charlton (Town) in August 2006 for the
construction of a town hall building. The architect hired by the Town
prepared detailed specifications for the project. Plaintiff, a
manufacturer of architectural millwork, submitted a quote to defendant
for the fabrication and delivery of custom millwork for the project.
Defendant’s president, Walter Schmidt, issued an initial purchase
order agreeing to the quoted price and setting forth certain
conditions, including the requirement that plaintiff forward
“submittals” of its product data and shop drawings. Upon the request
of plaintiff’s owner and president, Christopher J. Colella, Schmidt
subsequently issued a revised purchase order that removed a condition
of the agreement that had purported to make the purchase order itself
pending architect approval of the submittals, and replaced that
condition with a different requirement. Plaintiff produced and
delivered certain millwork, and then sent a first invoice to defendant
in June 2007, which defendant paid. Plaintiff also produced and
shipped custom millwork identified in a second invoice, which was
issued in August 2007. In the meantime, apparently as a result of
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                                                         CA 16-00907

contentious relations between defendant and the Town and its
architect, including difficulties in obtaining approved submittals,
the Town terminated defendant’s contract for cause in September 2007.
Defendant’s surety was called upon to facilitate completion of the
project pursuant to defendant’s public improvement performance bond.
Thereafter, plaintiff’s then-manager of accounts payable and
receivable followed up with Schmidt by email in early October 2007
about the second invoice being unpaid and the fact that plaintiff had
other completed material stored at its facility ready for the project.
Schmidt replied the following day, requesting that plaintiff forward
an itemized bill reflecting materials delivered and costs incurred to
date for review by the bonding company. Plaintiff subsequently sent
defendant a third invoice in October 2007. The remaining millwork
identified in the third invoice was stored at plaintiff’s offices
pending defendant’s request that it be shipped to the project.

     Plaintiff subsequently commenced this action for breach of
contract, unjust enrichment and an account stated, seeking to recover
the amount of the unpaid second and third invoices plus interest and
attorneys’ fees. Supreme Court, among other things, granted that part
of plaintiff’s motion for summary judgment on the breach of contract
cause of action and awarded plaintiff damages, denied that part of
plaintiff’s motion seeking summary judgment on the account stated
cause of action, and denied defendant’s cross motion for summary
judgment dismissing the complaint. Defendant appeals, and plaintiff
cross-appeals.

     On its appeal, defendant contends that the court erred in
granting plaintiff’s motion in part inasmuch as there are triable
issues of fact with respect to the breach of contract cause of action.
We agree. “It is well settled that the elements of a breach of
contract cause of action are ‘the existence of a contract, the
plaintiff’s performance under the contract, the defendant’s breach of
that contract, and resulting damages’ ” (Niagara Foods, Inc. v
Ferguson Elec. Serv. Co., Inc., 111 AD3d 1374, 1376, lv denied 22 NY3d
864). It is undisputed that the revised purchase order constituted
the contract between the parties. The parties dispute, however,
whether the revised purchase order required that plaintiff comply with
the procedure for obtaining architect approval of its submittals as
set forth in the specifications and, if so, whether plaintiff
performed its contractual obligations.

     “[A] written agreement that is complete, clear and unambiguous on
its face must be enforced according to the plain meaning of its terms”
(Greenfield v Philles Records, 98 NY2d 562, 569). “Whether a contract
is ambiguous is a question of law and extrinsic evidence may not be
considered unless the document itself is ambiguous” (South Rd. Assoc.,
LLC v International Bus. Machs. Corp., 4 NY3d 272, 278; see
Greenfield, 98 NY2d at 569). “The proper inquiry in determining
whether a contract is ambiguous is whether the agreement on its face
is reasonably susceptible of more than one interpretation[,] . . .
[and a] party seeking summary judgment has the burden of establishing
that the construction it favors is the only construction which can
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                                                         CA 16-00907

fairly be placed thereon” (Kibler v Gillard Constr., Inc., 53 AD3d
1040, 1042 [internal quotation marks omitted]).

     Here, plaintiff failed to meet that burden. In relevant part,
the initial purchase order issued by defendant following plaintiff’s
quote required as the first condition that “Submittals . . . include
(6) copies” of “Product Data” and “Shop Drawings”; specified in the
second condition that the purchase order would be “pending architect
approved submittals”; and requested in the sixth condition that
submittals be forwarded at plaintiff’s first opportunity. Plaintiff
thereafter requested a change to the language on the ground that the
purchase order itself could not be made contingent on the architect’s
approval of submittals because the parties would be under a binding
agreement once plaintiff started shop drawings. In response,
defendant issued the revised purchase order that retained the other
conditions, but replaced the challenged language in the second
condition with the requirement that “[a]ll work . . . comply with
drawings and specifications.” Thus, on its face, the revised purchase
order contemplated that plaintiff, as part of its contractual
obligations, would be required to forward submittals; however, it did
not provide any definite or precise language regarding the nature of
the submittal procedure or the requirements thereof.

     Plaintiff contends that the only fair construction of the
contract is that it merely required that plaintiff’s work product
comply with the specifications, but did not require plaintiff’s
compliance with the administrative procedures contained therein, i.e.,
formal architect approval. We conclude, however, that the contract
terms are ambiguous because there is a reasonable basis for a
difference of opinion whether the revised purchase order, which
required that plaintiff make submittals that included its shop
drawings, also required that plaintiff comply with the requirements
for obtaining architect approval of that work as set forth more fully
in the specifications referenced in the second condition of the
revised purchase order (see generally Greenfield, 98 NY2d at 570-571).
We further conclude that the contractual terms, coupled with the
extrinsic evidence of the parties’ intent—which included Colella’s
deposition testimony indicating plaintiff’s possession of the
specifications and understanding of their requirements, Colella’s
assurance to Schmidt that plaintiff would go through the submittal
procedure to obtain architect approval, and the parties’ discussion of
plaintiff’s compliance with the submittal procedure during performance
of the contract—establish that the revised purchase order required
that plaintiff obtain approved shop drawings from the architect in
accordance with the specifications.

     Plaintiff nonetheless contends that the architect approval
requirement of the submittal procedure contained in the specifications
of the prime contract between defendant and the Town cannot be
incorporated into the revised purchase order, and thus cannot be
binding upon it. We reject that contention. “ ‘[A] reference by the
contracting parties to an extraneous writing for a particular purpose
makes it a part of their agreement only for the purpose specified’ ”
(Hayward Baker, Inc. v C.O. Falter Constr. Corp., 104 AD3d 1253,
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                                                         CA 16-00907

1254). Thus, “[u]nder New York law, incorporation clauses in a
construction subcontract, incorporating prime contract clauses by
reference into a subcontract, bind a subcontractor only as to prime
contract provisions relating to the scope, quality, character and
manner of the work to be performed by the subcontractor” (Bussanich v
310 E. 55th St. Tenants, 282 AD2d 243, 244). Contrary to plaintiff’s
contention, we conclude that the architect approval provisions of the
specifications related to the scope, quality, character and manner of
plaintiff’s millwork inasmuch as compliance with those provisions was
the method by which the parties ensured that the quality and character
of the work met the requirements of the project.

     Having established that the revised purchase order required that
plaintiff obtain architect approval through the submittal procedure,
defendant contends that summary judgment on the breach of contract
cause of action is inappropriate because there is a triable issue of
fact whether plaintiff fulfilled its contractual obligations. We
agree. Plaintiff’s own submissions, which included both Colella’s
affidavit indicating that plaintiff had produced “approved” millwork
and Schmidt’s deposition testimony to the contrary, raised triable
issues of fact regarding whether it had performed in compliance with
the contract (see Micro-Link, LLC v Town of Amherst, 109 AD3d 1130,
1131; Andrews, Pusateri, Brandt, Shoemaker & Roberson, P.C. v County
of Niagara, 91 AD3d 1287, 1287-1288; Schenectady Air Sys. v Campito
Plumbing & Heating, 84 AD2d 863, 864). Even assuming, arguendo, that
plaintiff met its initial burden, we conclude that defendant raised a
triable issue of fact in opposition to plaintiff’s motion by
submitting Schmidt’s affidavit and his email exchange with one of
plaintiff’s representatives. Those submissions indicated, among other
things, that plaintiff had failed to obtain submittals with the
requisite architect approval and that, consequently, the architect had
refused to recommend payment and the Town refused to pay defendant for
the material furnished by plaintiff (see generally Zuckerman v City of
New York, 49 NY2d 557, 562).

     Nonetheless, relying primarily upon defendant’s submissions in
opposition, plaintiff contends, in essence, that the record
establishes that defendant waived the contractual requirement that the
millwork be approved pursuant to the specifications because plaintiff
had obtained verbal approval from the project architect to which
defendant failed to object. We reject that contention. Although
“[c]ontractual rights may be waived if they are knowingly, voluntarily
and intentionally abandoned,” and “[s]uch abandonment ‘may be
established by affirmative conduct or by failure to act so as to
evince an intent not to claim a purported advantage,’ ” a waiver
“ ‘should not be lightly presumed’ and must be based on ‘a clear
manifestation of intent’ to relinquish a contractual protection”
(Fundamental Portfolio Advisors, Inc. v Tocqueville Asset Mgt., L.P.,
7 NY3d 96, 104). “Generally, the existence of an intent to forgo such
a right is a question of fact” (id.).

     Here, we conclude that the submissions—including Schmidt’s
deposition testimony regarding the apprehensions he expressed to
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                                                         CA 16-00907

plaintiff about proceeding without architect approval, the email
exchange with plaintiff’s representative regarding plaintiff’s failure
to obtain such approvals, and Schmidt’s affidavit regarding his hope
that plaintiff would comply despite defendant’s payment of the first
invoice and his admonishment to plaintiff that the architect would not
authorize payment for materials that it was treating as nonconforming
and unacceptable for the project—do not demonstrate, as a matter of
law, that defendant and its architect intended to waive the formal,
written architect approval requirement of the contract (see G. De
Vincentis & Son Constr. v City of Oneonta, 304 AD2d 1006, 1008-1009;
Engineered Air, Div. of Thermal Components v LeCesse Bros. Contr., 149
AD2d 951, 951; cf. McFadyen Consulting Group, Inc. v Puritan’s Pride,
Inc., 87 AD3d 620, 621-622). We similarly conclude that, contrary to
plaintiff’s contention, it failed to eliminate all triable issues of
fact with respect to defendant’s alleged liability pursuant to
provisions of the Uniform Commercial Code (see generally Hooper
Handling v Jonmark Corp., 267 AD2d 1075, 1075-1076).

     Although plaintiff submitted evidence that defendant sought and
may have recovered some portion of the value of plaintiff’s millwork
in defendant’s separate lawsuit against the Town, the record evidence
in that regard does not entitle plaintiff to summary judgment as a
matter of law on the breach of contract cause of action. We note that
there was a postverdict lump sum settlement in that lawsuit; thus, the
evidence submitted by plaintiff indicating that the jury awarded
defendant the sum of the first and second invoices provides only
limited proof that defendant is in possession of funds rightfully
belonging to plaintiff and such proof, in any event, would be relevant
to the unjust enrichment cause of action that was not the subject of
the motions below and is not addressed on appeal (see generally
Hayward Baker, Inc., 104 AD3d at 1255). In addition, to the extent
that the evidence from defendant’s lawsuit against the Town supports
the proposition that defendant considered plaintiff’s millwork
compliant, that evidence merely raises an issue of fact in view of the
conflicting evidence in the record (see generally Zuckerman, 49 NY2d
at 562). We thus conclude that the court erred in granting that part
of plaintiff’s motion for summary judgment on the breach of contract
cause of action and awarding plaintiff damages, and we modify the
order accordingly.

     On its cross appeal, plaintiff contends that the court erred in
denying that part of its motion for summary judgment on the account
stated cause of action. We reject that contention. “ ‘An account
stated represents an agreement between the parties reflecting an
amount due on a prior transaction . . . An essential element of an
account stated is an agreement with respect to the amount of the
balance due’ ” (Seneca Pipe & Paving Co., Inc. v South Seneca Cent.
Sch. Dist., 83 AD3d 1540, 1541; see Micro-Link, LLC, 109 AD3d at
1131). “[W]hile the mere silence and failure to object to an account
stated cannot be construed as an agreement to the correctness of the
account, the factual situation attending the particular transactions
may be such that, in the absence of an objection made within a
reasonable time, an implied account stated may be found” (Interman
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                                                         CA 16-00907

Indus. Prods. v R. S. M. Electron Power, 37 NY2d 151, 154; see
Schwerzmann & Wise, P.C. v Town of Hounsfield [appeal No. 2], 126 AD3d
1483, 1484). “ ‘Whether a bill has been held without objection for a
period of time sufficient to give rise to an inference of assent, in
light of all the circumstances presented, is ordinarily a question of
fact, and becomes a question of law only in those cases where only one
inference is rationally possible’ ” (Schwerzmann & Wise, P.C., 126
AD3d at 1484).

     Here, we conclude that plaintiff met its initial burden by
establishing that it contracted with defendant to provide millwork for
the project, that the relevant invoices were sent to and received by
defendant, and that defendant neither paid the second and third
invoices nor objected to them (see Chianis & Anderson Architects, PLLC
v Courterback Dev. Co., LLC, 140 AD3d 1286, 1288, lv denied in part
and dismissed in part 28 NY3d 1021). However, viewing the evidence in
the light most favorable to defendant as the nonmoving party (see
generally Esposito v Wright, 28 AD3d 1142, 1143), we conclude that
defendant’s submissions are sufficient to raise an issue of fact. In
particular, Schmidt’s affidavit raises an issue of fact whether there
was a dispute between the parties regarding plaintiff’s compliance
with the contract that would preclude payment of the balance owed
under the second and third invoices, i.e., a dispute over the amounts
due (see generally Chianis & Anderson Architects, PLLC, 140 AD3d at
1288-1289; Micro-Link, LLC, 109 AD3d at 1131; Construction & Mar.
Equip. Co. v Crimmins Contr. Co., 195 AD2d 535, 535). While bald,
self-serving assertions of oral objections are insufficient to raise
an issue of fact (see Darby & Darby v VSI Intl., 95 NY2d 308, 315),
Schmidt’s affidavit was corroborated, at least in part, by
contemporaneous documentation in the form of the email exchange in
which he expressed to plaintiff’s representative that plaintiff had
not obtained approved submittals for any work that it had been
providing (see generally Chianis & Anderson Architects, PLLC, 140 AD3d
at 1289). Moreover, while Schmidt may not have specifically recalled
objecting to or approving the second and third invoices, we conclude
that acquiescence to the account on those invoices cannot be implied
from that silence given the plausible explanation that no payment
would be made on fabricated millwork that lacked shop drawings
approved by the architect, and that fact was or should have been
evident to plaintiff (see id.). We thus conclude that the record does
not establish that the only rational inference to be drawn from
defendant’s retention of the second and third invoices was its
agreement to pay them (see generally Schwerzmann & Wise, P.C., 126
AD3d at 1484-1485).

     In light of our determination, we do not address plaintiff’s
remaining contention on its cross appeal.

Entered:   March 24, 2017                       Frances E. Cafarell
                                                Clerk of the Court