| Phoenix Corp. v U.W. Marx, Inc. |
| 2009 NY Slip Op 05724 [64 AD3d 967] |
| July 9, 2009 |
| Appellate Division, Third Department |
| Phoenix Corporation, Respondent, v U.W. Marx, Inc., et al.,Appellants. |
—[*1] Jay H. Kesslen, Saratoga Springs (G. Kimball Williams of McNamee, Lochner, Titus &Williams, P.C., Albany, of counsel), for respondent.
Stein, J. Appeal from an order of the Supreme Court (Doyle, J.), entered April 9, 2008 inRensselaer County, upon a decision of the court in favor of plaintiff.
Plaintiff was hired as a subcontractor by defendant U.W. Marx, Inc. (hereinafter defendant)to install steel reinforcement on a fast-track construction project pursuant to a writtensubcontract executed by the parties. It is undisputed that plaintiff's contemplated start date wasdelayed for a variety of reasons, all unrelated to plaintiff.
Shortly after plaintiff finally began its work with an initial crew of six workers and ananticipated maximum crew of 15, defendant's vice-president asked David J. Murray, plaintiff'sowner, to put between 25 and 35 workers on the job with each working six 10-hour days perweek. When Murray initially indicated that he would not accede to this request, an oralagreement was reached. According to Murray, in exchange for his agreement to increase theanticipated number of workers by more than twofold and to pay unanticipated overtime,defendant agreed to float plaintiff's entire weekly payroll and to cover the additional overtimeexpense. Defendant's vice-president acknowledges that he orally agreed to floatplaintiff's weekly payroll (which included overtime costs) if Murray acceded to his request thatplaintiff substantially increase the number of workers on the job. However, he denies that thisoral [*2]modification to the written subcontract included anagreement to pay overtime expenses.
Following this conversation, plaintiff substantially increased the number of workers on theproject and defendant began paying plaintiff's weekly payroll. After a dispute arose concerningplaintiff's failure to pay union benefits, defendant stopped floating the payroll. Plaintiff thereafterresumed paying its own weekly payroll and ultimately completed the job, with the exception of asmall area at a particular loading dock. As to this unfinished work, plaintiff made three attemptsto complete it but the area was not ready through no fault of its own.
Plaintiff, as now relevant, commenced this action to recover $209,650 in overtime expensespursuant to the alleged oral agreement. Defendant, along with its bonding companies,counterclaimed for back charges pertaining to the unfinished work at the loading dock and forreimbursement of its payment of one half of the union's counsel fees in a federal actioncommenced by the union to collect moneys due.[FN*]Following a nonjury trial, Supreme Court found that the parties entered into an oral agreementthat included a commitment by defendants to cover plaintiff's overtime expenses and that thisoral agreement was enforceable despite a clause in the subcontract precluding oral modifications.The court also denied defendants' requests for the back charges and for reimbursement ofcounsel fees. Defendants now appeal.
Plaintiff has failed to demonstrate an enforceable oral modification to the parties' writtensubcontract with regard to the payment of overtime expenses. Generally, a written agreementthat includes a provision prohibiting oral modification—as does the subcontracthere—"cannot be changed by an executory agreement unless such executory agreement isin writing and signed by the party against whom enforcement . . . is sought"(General Obligations Law § 15-301 [1]; see Rose v Spa Realty Assoc., 42 NY2d338, 343 [1977]). However, the statutory requirement of a writing may be avoided by proof ofeither partial performance of an oral agreement to modify a written contract, which must be"unequivocally referable to the oral modification" (Rose v Spa Realty Assoc., 42 NY2dat 343), or equitable estoppel, based upon conduct which is "not otherwise . . .compatible with the agreement as written" (id. at 344; see Turk v Anello, 280AD2d 819, 820 [2001]). The Court of Appeals has articulated that it is not sufficient that theconduct of the parties indisputably evidences a mutual departure from the written agreement ifsuch conduct does not satisfy these rules (see Rose v Spa Realty Assoc., 42 NY2d at344).
Here, the written contract provided for compensation to plaintiff based upon a price per tonof reinforcing steel, which price was to be "all inclusive." The contract further provided that theprice per ton "includes the cost of any overtime or work shifts necessary for completion of thework of this subcontract and the project in accordance with the contractor's schedules," and thatplaintiff would be responsible for payment of its own payroll. There is no dispute that the writtencontract contemplated plaintiff's payment of overtime expenses, that in response to defendant'srequest to accelerate plaintiff's work it was necessary for plaintiff to perform some of its basecontract work during overtime hours thereby increasing its labor costs, or that defendant agreedto advance plaintiff's payroll and overtime expenses. Nor is there any dispute that the partiesvaried from the terms of the written contract simply by virtue of the fact that defendant [*3]advanced payments to plaintiff in order to meet its payroll andovertime expenses. Since it is uncontroverted that the parties agreed to orally modify theagreement and did, in fact, do so, we have no disagreement with Supreme Court's finding to thatextent. However, the issue is not whether any oral modification was made, but whetherthe parties' conduct is unequivocally referable to an agreement that defendant would actuallyassume responsibility for the payment of any of plaintiff's overtime expenses.
Neither plaintiff's hiring of additional laborers (and incurring unanticipated overtime costs)nor defendant's advancement of payments to plaintiff are unequivocally referable to such anagreement. For example, inasmuch as plaintiff concedes that the amounts advanced by defendantto pay plaintiff's payroll were to be offset against amounts otherwise due to plaintiff pursuant tothe written agreement, the payment of overtime expenses is consistent with the same intent.Indeed, Murray testified that, notwithstanding defendant's oral agreement to advance payrollexpenses, including overtime, the overtime expenses remained plaintiff's responsibility. His onlytestimony regarding any alleged agreement by defendant to cover any of plaintiff's expenses washis statement that there was no "concrete number placed on it but it was a good faith agreementthat there would be compensation at the end of the job." This is clearly insufficient to establishthe purported agreement. Likewise, the fact that plaintiff spent more on overtime costs thanoriginally anticipated is not sufficient to demonstrate that the parties agreed to deviate from thewritten agreement with respect to responsibility for those costs (see Charles T. Driscoll MasonryRestoration Co., Inc. v County of Ulster, 40 AD3d 1289, 1292 [2007]; Isaacs Bus.Ventures v Thompson, 223 AD2d 957, 958 [1996]). Under these circumstances, defendant'sagreement to advance payments on plaintiff's behalf is not incompatible with plaintiff's ultimateresponsibility therefor, as set forth in the written subcontract. In addition, the recorddemonstrates that many modifications to the contract involving work andcompensation—including several that concerned authorization for additional work andovertime—were made with written change orders, demonstrating the parties' adherence tothe terms of the written contract (see Charles T. Driscoll Masonry Restoration Co., Inc. vCounty of Ulster, 40 AD3d at 1292). This prior conduct of the parties is a strong indicationthat, had the parties agreed to deviate from the written contract in a manner as significant as themodification alleged by plaintiff here, such agreement would have been reflected in a writtenchange order.
Absent a demonstration of partial performance or entitlement to equitable estoppel basedupon conduct "unequivocally referable to the purported oral modification" (Turk vAnello, 280 AD2d at 820)—to wit, to require defendant to compensate plaintiff forovertime costs—the statutory requirement of a writing was not obviated. Therefore, therewas no basis for Supreme Court to delve into determinations of witness credibility regarding theterms of the alleged oral modification. Accordingly, we modify the judgment by reducing it inthe amount of $191,870. In view of this determination, defendant's dispute regarding plaintiff'sprecise calculation of overtime costs, raised for the first time on this appeal, is academic.
Finally, we find no error in Supreme Court's determination that defendants failed to meettheir burden with respect to their counterclaims. According to the testimony of defendant's ownproject manager, plaintiff made efforts to complete the unfinished work on the subject dock butdefendant, through its own fault, was not "ready for them." The record further reveals that theunion's delay in receiving its money was based in part on defendant's dilatory conduct.
Mercure, J.P. and Kavanagh, J., concur.
McCarthy, J. (concurring in part and dissenting in part). Clearly this case rested in large partupon Supreme Court's resolution of a sharp credibility dispute concerning the entire scope of anoral agreement between plaintiff and defendant U.W. Marx, Inc. (hereinafter defendant) in thecourse of a large scale and fast-track construction project. This credibility dispute was resolvedin favor of plaintiff as Supreme Court found that the parties entered into an oral agreement thatincluded a commitment by defendant to pay overtime expenses incurred by plaintiff. SupremeCourt further found, correctly in my view, that this oral agreement was enforceable despite aclause in the subcontract precluding oral modifications. In modifying Supreme Court's order, themajority concludes that "the issue is not whether any oral modification was made, butwhether the parties' conduct is unequivocally referable to an agreement that defendant wouldactually assume responsibility for the payment of any of plaintiff's overtime expenses." Webelieve this too narrowly defines the issue. The issue is more properly framed as whether an oralagreement to modify the written subcontract was made and whether there was partialperformance of that entire agreement (not just one component of that agreement). Finding thatplaintiff sufficiently demonstrated an enforceable oral modification to the subcontract, werespectfully dissent.
Defendant was hired to complete excavation and concrete work under a $5.5 million contractwith the project's construction management firm. Plaintiff, in turn, was hired to install steelreinforcement under a $408,940 subcontract with defendant.[FN1]According to the testimony of the senior project manager employed by the management firm,defendant had never taken on a project of this magnitude and made several management errors inorchestrating work and coordinating subcontractors. Moreover, according to this witness, noneof the problems at the job site related to plaintiff's job performance and plaintiff would have beenable to complete its responsibilities without incurring overtime had the project not been delayed.
As noted by the majority, plaintiff's start date under the subcontract was thus delayedthrough no fault of its own.[FN2]This delay prompted a discussion between plaintiff's owner, David Murray, and defendant'svice-president, John Bishop, which is at the heart of this dispute. Murray testified that, shortlyafter plaintiff was finally able to begin its installation work on the [*4]project, Bishop came to him and asked if it would employ morethan double the number of anticipated ironworkers and have each ironworkerwork substantial amounts of overtime (i.e., each worker was to work 20 hours ofovertime per week). Inasmuch as the project as bid did not remotely encompass this magnitudeof overtime work or manpower, because plaintiff had only expended approximately $3,000 inlabor at that point and because plaintiff was not responsible for the delays that resulted in the"fiasco" faced by defendant, Murray told Bishop that it made more financial sense for plaintiff tojust walk away from the job. Indeed, according to Murray, if plaintiff acceded to defendant'srequest to so drastically increase its work force and overtime expenses without an agreement fordefendant to pay these expenses at this point, it would have constituted "corporatesuicide."[FN3]
According to Murray, Bishop then therefore offered to not only float plaintiff's entire weeklypayroll if plaintiff agreed to stay on the job, but to also pay the additional overtime expenses.Murray agreed, which resulted in plaintiff staying on the job and complying with the requests forthe expanded work force and overtime hours. Significantly, Bishop did not dispute that, shortlyafter plaintiff was finally able to begin its installation work on the project, he asked Murray tosubstantially increase his work force and also orally agreed to float plaintiff's weekly payrollinclusive of overtime. Bishop denied, however, that this oral arrangement included an ultimateagreement to compensate plaintiff for overtime expenses. There is no dispute that, following thisconversation, Bishop notified the management firm that defendant requested additional workerson site to respond to delays, and that he had personally taken action to locate even more workers.
On appeal, defendant argues that the "alleged oral exchange [between Murray andBishop] does not constitute an oral modification to the [s]ubcontract" (emphasis added) andfurther claims that Supreme Court "should have determined that [plaintiff] failed to establish thatthe parties entered into an oral agreement." Defendant's own witnesses, however, did not disputethat the parties entered into an oral agreement during this "alleged" oral exchange whereby theyvaried from the terms of the subcontract. The real dispute concerned the precise terms of it.Significantly, Supreme Court resolved this sharp credibility dispute in plaintiff's favor. Whilethis Court, upon reviewing a verdict following a nonjury trial, independently reviews the weightof the evidence and may grant the judgment warranted by the record, this Court accords duedeference to factual findings particularly where, as here, they rest largely upon credibilityassessments (see Charles T. DriscollMasonry Restoration Co., Inc. v County of Ulster, 40 AD3d 1289, 1291 [2007]).Indeed, this case did rest largely upon the credibility assessment of Murray and Bishop with therecord providing no reason whatsoever to disturb Supreme Court's implicit decision to credit thetestimony of Murray, who testified that the oral agreement included payment of overtime, overthat of Bishop, who claimed that it did not (see Weaver v Acampora, 227 AD2d 727, 728[1996]).
Next, the Court of Appeals has held that an oral modification to a written contract will beenforced if there is partial performance that is "unequivocally referable to the oral modification"(Rose v Spa Realty Assoc., 42 NY2d 338, 343 [1977]; see Turk v Anello, 280[*5]AD2d 819, 820 [2001]; Isaacs Bus. Ventures vThompson, 223 AD2d 957, 958 [1996]; Pau v Bellavia, 145 AD2d 609, 610 [1988]),that is to say, "not compatible with any option in the written agreement" (Rose v Spa RealtyAssoc., 42 NY2d at 345). Here, there was partial performance that is unequivocally referableto the oral modification. To this end, the oral modification was not exclusively an agreement tocover overtime expenses such that the parties' conduct must be solely and only referable to thisaspect of it. Rather, the oral modification included an agreement to more than double theworkers, significantly increase overtime hours, compensate plaintiff for the additional expensesincurred for these overtime hours (if Murray is to be believed) and to modify the payment termsbetween the parties (with defendant taking on the noncontractual obligation of paying plaintiff'scurrently weekly payroll inclusive of overtime). Plaintiff's conduct in substantially increasing itsanticipated work force and overtime expenses at defendant's specific request, at a time when itcould have walked away from the project, and defendant's conduct in assisting plaintiff insecuring more workers on the job and paying plaintiff's weekly payroll, despite no contractualobligation to do either, constituted the requisite partial performance.
Defendant argues that its agreement to pay plaintiff's current weekly wages was consistentand compatible with their written agreement. We disagree. While articles 29 and 33 of thesubcontract gave defendant certain options in the event that plaintiff failed to pay "wages,""bills" or other financial "obligations," no such triggering event had occurred at the time theparties entered the oral agreement. In other words, at the time of the oral agreement, plaintiff hadnot failed to comply with its contractual obligation to pay the weekly wages of its workers, anddefendant, therefore, had no occasion to invoke the provisions under article 29 or 33. To thecontrary, defendant offered to pay current weekly wages for plaintiff, which was indeeda major departure from and, thus, inconsistent with the subcontract, particularly articles 29 and33.
With respect to plaintiff's conduct, we are unpersuaded by the majority's contention that "thefact that plaintiff spent more on overtime costs than originally anticipated is not sufficient todemonstrate that the parties agreed to deviate from the written agreement with respect toresponsibility for those costs." The uncontradicted proof at trial established that the amount ofmoney spent on overtime was $209,650, which was 10 times the amount of anticipated overtimeand 51% of the original per ton contract price. These extraordinary and uncontradicted figuresare alone compelling proof that the parties did agree to deviate from the written agreement withrespect to responsibility for overtime costs, particularly where plaintiff had the option of walkingaway from the project with only $3,000 in out-of-pocket expenses. In sum, as the conduct of theparties demonstrates an indisputable mutual departure from the written agreement, SupremeCourt did not err in finding that plaintiff was entitled to its claim for overtime based on this oralagreement (see Rose v Spa Realty Assoc., 42 NY2d at 343-344; CGM Constr. vMiller, 263 AD2d 831, 832-833 [1999]; Austin v Barber, 227 AD2d 826, 828[1996]; Pau v Bellavia, 145 AD2d at 610).
Finally, sufficient credible evidence was also adduced establishing that plaintiff substantiallyrelied upon the oral modification to its detriment. As noted by the Court of Appeals, "[o]nce aparty to a written agreement has induced another's significant and substantial reliance upon anoral modification, the first party may be estopped from invoking [General Obligations Law§ 15-301] to bar proof of that oral modification" (Rose v Spa Realty Assoc., 42NY2d at 344). Here, Murray's testimony established that he relied upon Bishop's oral assuranceto cover additional payroll expenses so as not to commit "corporate suicide." Moreover, theconduct relied upon to establish estoppel—Murray's conduct in staying on the job andincreasing [*6]work force and overtime when he could havewalked away and Bishop's conduct in agreeing to pay plaintiff's payroll inclusive ofovertime—was not "otherwise . . . compatible with the agreement as written"(id. at 344).
We would affirm the judgment in its entirety.
Spain, J., concurs. Ordered that the order is modified, on the law, without costs, by reducingthe amount thereof by $191,870, and, as so modified, affirmed.
Footnote *: Plaintiff and defendants agreedto split the union's counsel fees in that federal action with each reserving the right to seekreimbursement from the other.
Footnote 1: Plaintiff's owner, David Murray,testified, without contradiction, that he consulted with defendant's estimator about the parametersof the job before placing plaintiff's bid and was told that only minimum overtime wouldbe necessary. Therefore, although he originally intended to bid $440 per ton without overtime,he and defendant's estimator ultimately negotiated a set unit price of $460 per ton (whichincluded $17,780 in contemplated overtime).
Footnote 2: Of note, defendant spentconsiderable effort during the trial defending against the claim for overtime expenses on theground that plaintiff was the cause of many delays. The evidence overwhelmingly establishedthat plaintiff was not the source of the project's many delays. Defendant has abandoned thisstance on appeal.
Footnote 3: To this end, the superintendentemployed by the project's management firm confirmed that plaintiff "bid the job for so manyguys to put so much tonnage in a day. . . When [Murray] went over that limit therewas no way he was going to get the tonnage to pay for the men."