Adirondack Classic Design, Inc. v. Farrell

• Decision Date: 16 April 2020
• Docket Number: 527434
• Citation: 122 N.Y.S.3d 790,182 A.D.3d 809
• Parties: ADIRONDACK CLASSIC DESIGN, INC., Respondent, v. Harry FARRELL, Appellant.
• Court: New York Supreme Court — Appellate Division

182 A.D.3d 809

122 N.Y.S.3d 790

ADIRONDACK CLASSIC DESIGN, INC., Respondent,

v.Harry FARRELL, Appellant.

527434

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: February 18, 2020

Decided and Entered: April 16, 2020

Hurwitz & Fine, PC, Lake Placid (Earl K. Cantwell of counsel), for appellant.

Fischer, Bessette, Muldowney & McArdle, LLP, Malone (John J. Muldowney of counsel), for respondent.

Before: Egan Jr., J.P., Lynch, Mulvey, Devine and Colangelo, JJ.

MEMORANDUM AND ORDER

Mulvey, J.

Beginning in 2013, defendant started working with Nils Luderowski, an architect, to design a great camp for defendant's property located on Upper Saranac Lake. Luderowski presented defendant with two different project delivery methods: the design/bid/build method – in which the owner and architect develop complete design and work drawings, present them to potential contractors for bids, then select a contractor and begin building – and the fast track method – in which preliminary designs and drawings are prepared and construction begins based thereon, with the design concept developing as the construction progresses. Defendant selected the fast track method, which permitted construction to begin more quickly. In February 2014, defendant stated that his budget would be $1.1 million to obtain an enclosed structure and whatever was necessary to obtain a certificate of occupancy, not a completed house. Plaintiff indicated that this figure appeared to be a fairly accurate baseline and the costs would be honed as the design developed. The parties then entered into a contract for plaintiff to demolish the existing structure on the property and build a new camp. They signed a written contract stating that the construction would be completed for a stipulated sum, but a blank was left where the sum should be listed. The parties conceded at trial that they proceeded on a time and materials basis, rather than a stipulated sum basis. Plaintiff billed defendant twice monthly, sending invoices and billing worksheets, and defendant made regular payments. In the spring of 2015, defendant applied for and received a construction loan from a bank, which required completion to specifications, not just the minimum required for a certificate of occupancy. In September 2015, a certificate of occupancy was issued and the bank approved release of the final funds from the construction loan. The house was not complete, but the construction was much more than the minimum required for a certificate of occupancy, with many interior finishes added. Although defendant had paid approximately $1.7 million, plaintiff sent an invoice for $169,646.29 for work that had been done. Defendant refused to pay, and plaintiff ceased construction.

Plaintiff commenced this action asserting a breach of contract. Defendant asserted various counterclaims, including that plaintiff breached their contract. At trial, Supreme Court dismissed most of defendant's other counterclaims. The jury rendered a verdict in favor of plaintiff, finding that defendant breached the contract and awarding damages in the amount of $169,646.29. Defendant appeals from the judgment entered thereon.

Supreme Court properly denied defendant's motion for a directed verdict. "A trial court may grant a CPLR 4401 motion for judgment as a matter of law only when, viewing the evidence in the light most favorable to the nonmoving party and affording [it] the benefit of every inference, there is no rational process by which a jury could find in favor of the nonmoving party" ( D.Y. v. Catskill Regional Med. Ctr. , 156 A.D.3d 1003, 1005, 66 N.Y.S.3d 368 [2017] [citations omitted]; see O'Connor v. Shultz , 166 A.D.3d 1104, 1104, 87 N.Y.S.3d 681 [2018] ). To recover for a breach of contract, a party must establish the existence of a contract, the party's own performance under the contract, the other party's breach of its contractual obligations, and damages resulting from the breach (see Carroll v. Rondout Yacht Basin, Inc. , 162 A.D.3d 1150, 1151, 79 N.Y.S.3d 321 [2018], appeal and lv dismissed 32 N.Y.3d 1035, 88 N.Y.S.3d 392, 113 N.E.3d 448 [2018] ; WFE Ventures, Inc. v. Mills , 139 A.D.3d 1157, 1160, 31 N.Y.S.3d 284 [2016] ). Plaintiff offered testimony from, among others, its co-owners, Luderowski, and Paul Carr, a construction expert, as well as emails, invoices and photographs of the construction at different stages. Viewed in a light most favorable to plaintiff, the evidence would support a finding that the parties entered into a contract, plaintiff performed by constructing a building according to the design approved by Luderowski and defendant, and defendant breached the contract by failing to pay the final invoice amount. Contrary to defendant's argument that plaintiff failed to prove that it provided "workmanlike" quality, plaintiff's evidence supports an inference that it performed in a satisfactory manner. Accordingly, the court properly denied defendant's motion for a directed verdict.

We will not disturb the jury's verdict finding that defendant breached the parties' contract but plaintiff did not. "A verdict may be set aside as against the weight of the evidence if the evidence so preponderated in favor of the [losing party] that the verdict could not have been reached on any fair interpretation of the evidence" ( Kennedy v. Nimons , 178 A.D.3d 1302, 1303, 116 N.Y.S.3d 424 [2019] [internal quotation marks, ellipsis, brackets and citations omitted] ). "It is not enough to show that a different verdict would be reasonable since the jury's verdict will be accorded deference if credible evidence exists to support its interpretation" ( Maksuta v. Heitzman , 165 A.D.3d 1550, 1551, 86 N.Y.S.3d 772 [2018] [internal quotation marks and citations omitted] ).

Initially, we reject defendant's argument that the construction contract was a stipulated sum contract. Defendant selected the fast track method to allow construction to begin quickly, so plaintiff began billing on a time and materials basis – in which the contractor bills periodically for labor, materials, subcontractor costs and a mark-up for overhead. Although defendant attempts to hold plaintiff to the terms of the written construction contract, evidence demonstrated that the parties signed that document with a blank left for the fixed price, originally contemplating that they would convert the contract into a stipulated sum contract once the design development process was done, but it was never converted because no final working drawings were ever completed. At trial, the parties agreed, and defendant conceded, that this was a time and materials contract (compare Birk Iron Works v. Van Tulco, Inc. , 178 A.D.2d 137, 137–138, 576 N.Y.S.2d 571 [1991], lv denied 79 N.Y.2d 975, 583 N.Y.S.2d 189, 592 N.E.2d 797 [1992] ). "[B]ecause the parties had agreed to proceed on a time and materials basis," there was no fixed price and the original estimates were not determinative or binding ( CIR Elec. Constr. Corp. v. Black Cr. Integrated Sys. Corp. , 8 A.D.3d 999, 1000, 778 N.Y.S.2d 586 [2004] ).

Despite a provision in the written contract requiring written change orders for any modifications from the original plan, Carr and other witnesses testified that the construction industry does not use written change orders with time and materials contracts, inasmuch as those contracts do not have definite parameters for cost or time of completion and the design elements necessarily change throughout construction as they are intended to accommodate the evolving design. In any event, "[p]rovisions requiring written authorization for extra work are waived where the conduct of the parties demonstrates an indisputable mutual departure from the written agreement and the changes were clearly requested by the owner and executed by the contractor" ( Peter Scalamandre & Sons, Inc. v. FC 80 Dekalb Assoc., LLC , 129 A.D.3d 807, 809, 12 N.Y.S.3d 133 [2015] [internal quotation marks, brackets and citations omitted]; cf. Charles T. Driscoll Masonry Restoration Co., Inc. v. County of Ulster , 40 A.D.3d 1289, 1291, 836 N.Y.S.2d 362 [2007] ). Defendant acknowledged that he approved certain design changes that would increase the cost, such as adding a full basement, even though no official change order was executed. Thus, it was not unreasonable for the jury to conclude that the parties did not require written change orders to update the design specifications for this time and materials contract (see Weaver v. Acampora , 227 A.D.2d 727, 728, 642 N.Y.S.2d 339 [1996] ).

Luderowski testified that, in general for fast track projects and specifically in this case, the owner made design decisions, the architect designed them and passed them along to the contractor, and the contractor built the camp accordingly. Defendant acknowledged his awareness that the $1.1 million estimate was a baseline number, not a contractual sum, and that changes in the scope of the design would affect the cost.

Plaintiff's co-owners testified that, after construction began, the parties decided that including additional components, rather than the bare minimum required for a certificate of occupancy, would be more cost efficient in the long run. Several witnesses testified regarding the evolution of the project from the initial concept – a building shell with one working bathroom and plywood floors and countertops – to a building that was, in the end, a mostly-completed camp, with birch flooring, granite countertops, several completed bathrooms and four fireplaces. Additionally, when defendant obtained a construction loan, the bank would not release those funds unless the building...