| U.W. Marx, Inc. v Koko Contr., Inc. |
| 2015 NY Slip Op 00589 [124 AD3d 1121] |
| January 22, 2015 |
| Appellate Division, Third Department |
[*1]
| U.W. Marx, Inc., Appellant, v Koko Contracting, Inc.,Respondent. (Action No. 1.) Koko Contracting, Inc., Respondent, v U.W. Marx,Inc., et al., Appellants, et al., Defendant. (Action No. 2.) |
Mastropietro Law Group, PLLC, Saratoga Springs (Eric W. Gentino of counsel), forappellants.
Milber Makris Plousadis & Seiden, LLP, Woodbury (Joseph J. Cooke ofcounsel), for respondent.
Rose, J. Appeals (1) from an order of the Supreme Court (Connolly, J.), enteredOctober 28, 2013 in Rensselaer County, upon a decision of the court, among otherthings, partially in favor of plaintiff in action No. 2, and (2) from the judgment enteredthereon.
U.W. Marx, Inc., as the general contractor on a school construction project, enteredinto a subcontract with Koko Contracting, Inc. for roofing work. After not being paid forthree months of work despite repeated demands for payment, Koko ceased performingany work on the [*2]site on October 31, 2007. By letterdated November 3, 2007, Marx gave Koko three days' notice to cure its alleged defaultof, 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 workbased on nonpayment as called for in section 4.7.1 of the subcontract. Marx ultimatelydeclared Koko in default and terminated the contract based on Koko's removal of itsworkers. These actions followed.[FN1]
After a nonjury trial, Supreme Court fully credited the testimony of Koko's ownerand discredited the testimony of Marx's witnesses, finding the latter's testimony to beconclusory and unsupported by documentary evidence. Accordingly, the court concludedthat, among other things, Marx's reasons for withholding progress payments wereunsubstantiated and unjustified, and it found that Marx's failure to pay was a materialbreach 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 thecontract well before the last day that Koko's forces were on the job. Rather, they arguethat Koko is precluded from recovery because it suspended its work on the projectwithout complying with the provisions of section 4.7.1 of the contract. That section, astandard form clause drafted by the American Institute of Architects, provides as follows:"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 sevenadditional days' written notice to the Contractor, stop the [w]ork of this Subcontract untilpayment of the amount owing has been received. The Subcontract Sum shall, byappropriate adjustment, be increased by the amount of the Subcontractor's reasonablecosts of demobilization, delay and remobilization." Clearly, Koko was not in compliancewith this section, as it had ceased performing work on October 31, 2007 and did not givenotice of its suspension until November 7, 2007. Nevertheless, as found by SupremeCourt, Marx had materially breached the contract by failing to make three successiveprogress payments that Koko was entitled to receive (see e.g. Serena Constr. Corp. vValley 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 relievedKoko from performing its remaining obligations under the contract (seeRestatement [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]; AllbrandDiscount Liqs. v Times Sq. Stores Corp., 60 AD2d 568, 568 [1977], lvdenied 44 NY2d 642 [1978]; see also Framingham Heavy Equip. Co., Inc. v JohnT. Callahan & Sons, Inc., 61 Mass App Ct 171, 179-180, 807 NE2d 851,857-858 [2004] [holding that general contractor's failure to pay excused subcontractorfrom having to comply with notice provisions of AIA section 4.7.1]).
Put another way, Marx cannot preclude Koko from recovering for Marx's materialbreach of the contract by relying on Koko's subsequent failure to comply with a clausethat inures to Koko's benefit. Nor can we agree with Marx and Continental that SupremeCourt's [*3]determination rendered the clausemeaningless. In our view, the clause has meaning inasmuch as it is designed to protectthe subcontractor and to compensate it in the event that it has to stop work fornonpayment and then remobilize. Koko's failure to comply with the clause wouldpreclude it from recovering remobilization costs in the event that it resumed work. Kokoalso put itself at risk that, if the court had determined that Marx's nonpayment did notbreach the contract, the work stoppage without compliance with the notice provision ofthe clause would then be considered a breach, leaving Koko liable for the resultingdamages.[FN2]Accordingly, under the circumstances as found by Supreme Court, Koko's failure tostrictly comply with section 4.7.1 does not provide a basis to disturb the judgment inKoko's favor.
Peters, P.J., Lahtinen, Garry and Egan Jr., JJ., concur. Ordered that the order andjudgment are affirmed, with costs.
Footnote 1:These actions havepreviously been before us (97 AD3d 893 [2012]).
Footnote 2:We note that the AIAform clause is similar to General Business Law § 756-b, which sets forth aprocedure by which a subcontractor may suspend performance for nonpayment withoutbeing considered to be in breach of the contract (see General Business Law§ 756-b [2] [a] [iii]).