U.W. Marx, Inc. v. Koko Contracting, Inc.

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
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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]).
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"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
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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]).