Auburn Custom Millwork, Inc. v. Schmidt & Schmidt, Inc.

• Decision Date: 24 March 2017
• Docket Number: 64 CA 16-00907.
• Citation: 50 N.Y.S.3d 635,148 A.D.3d 1527
• Court: New York Supreme Court — Appellate Division
• Parties: AUBURN CUSTOM MILLWORK, INC., Plaintiff–Respondent–Appellant, v. SCHMIDT & SCHMIDT, INC., Defendant–Appellant–Respondent.

148 A.D.3d 1527

50 N.Y.S.3d 635

AUBURN CUSTOM MILLWORK, INC., Plaintiff–Respondent–Appellant,

v.SCHMIDT & SCHMIDT, INC., Defendant–Appellant–Respondent.

64 CA 16-00907.

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

March 24, 2017.

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.

PRESENT: WHALEN, P.J., SMITH, PERADOTTO, DeJOSEPH, AND CURRAN, JJ.

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 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 A.D.3d 1374, 1376, 975 N.Y.S.2d 280, lv. denied 22 N.Y.3d 864, 2014 WL 1243559 ). 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 N.Y.2d 562, 569, 750 N.Y.S.2d 565, 780 N.E.2d 166 ). "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 N.Y.3d 272, 278, 793 N.Y.S.2d 835, 826 N.E.2d 806 ; see Greenfield, 98 N.Y.2d at 569, 750 N.Y.S.2d 565, 780 N.E.2d 166 ). "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 fairly be placed thereon" (Kibler v. Gillard Constr., Inc., 53 A.D.3d 1040, 1042, 863 N.Y.S.2d 306 [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 N.Y.2d at 570–571, 750 N.Y.S.2d 565, 780 N.E.2d 166 ). 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 A.D.3d 1253, 1254, 960 N.Y.S.2d 764 ). 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 A.D.2d 243, 244, 723 N.Y.S.2d 444 ). 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...