City of Elmira v. Larry Walter, Inc.

• Decision Date: 12 October 1989
• Citation: 546 N.Y.S.2d 183,150 A.D.2d 129
• Court: New York Supreme Court — Appellate Division
• Parties: CITY OF ELMIRA, Respondent-Appellant, v. LARRY WALTER, INC., et al., Appellants-Respondents, and Newman & Doll Consulting Engineers, Respondent.

Page 183

546 N.Y.S.2d 183

150 A.D.2d 129

CITY OF ELMIRA, Respondent-Appellant, v. LARRY WALTER, INC., et al., Appellants-Respondents, and Newman & Doll Consulting Engineers, Respondent.

Supreme Court, Appellate Division,

Third Department.

Oct. 12, 1989.

Couch, White, Brenner, Howard & Feigenbaum, Albany, and Friedman, Wang & Bleiberg, P.C. (Arthur S. Friedman, of counsel), New York City, for appellants-respondents.

Smith, Sovik, Kendrick, Schwarzer & Sugnet, P.C. (Laurence F. Sovik, of counsel), Syracuse, for respondent-appellant.

MacKenzie, Smith, Lewis, Michell & Hughes (Arthur A. Chalenski, Jr., of counsel), Syracuse, for respondent.

Before WEISS, J.P., and MIKOLL, YESAWICH, MERCURE and HARVEY, JJ.

YESAWICH, Justice.

Defendant Larry Walter, Inc. (hereinafter Walters) ^* and plaintiff, the City of Elmira (hereinafter the City), entered into a contract for the construction of the Centertown Parking Garage facility in October 1975. The contract contained a liquidated damages clause providing that in the event that completion of the project was delayed, Walters could pay the City $1,000 per day. Similarly, if Walters finished the job prior to the stipulated completion date, then the City would pay it $1,000 per day.

Under the contract, the City was to compensate Walters $3,259,000 in periodic payments for constructing the garage. These progress payments were to be based on estimates Walters made, subject to the approval of defendant Newman & Doll Consulting Engineers (hereinafter Newman & Doll). The City had previously contracted with Newman & Doll to serve as consulting engineers for, among others, this construction job. Defendant Travelers Indemnity Company (hereinafter Travelers) posted a performance bond for Walters, and thus became Walters' surety.

Walters began construction in November 1975. The City paid the first four payment requisitions in full and the fifth in part for a total of $1,041,115.50. Newman & Doll recommended reducing the fifth requisition and rejecting entirely the sixth, seventh and eighth because the City believed that it had overpaid Walters, and thus was owed money. Because the City failed to make payments, and because the parties disagreed about other issues, including alleged changes in the plans and a claimed interference in the method of construction, Walters discontinued work on the project in July 1976 and sought arbitration. On the City's motion, arbitration of all issues except that of nonpayment was stayed (Matter of City of Elmira [Larry Walter, Inc.], 60 A.D.2d 669, 670, 400 N.Y.S.2d 204). Before proceeding to arbitration, the parties stipulated that the arbitrators would decide only the issue of nonpayment and not whether either party breached the contract. The arbitrators determined that the City owed Walters $100,000 plus interest, and directed it to pay Walters accordingly. This award was confirmed, and thus became the law of the case. Although binding upon the City, this determination did not affect Newman & Doll; the engineers were not parties to the arbitration proceeding.

Ultimately the City commenced the instant action to recover the excess cost of completion. Forty different causes of action were alleged against defendants, who in turn asserted various cross claims and counterclaims. At the start of the trial, to eliminate potential prejudice to Newman & Doll, Supreme Court ruled that evidence of the arbitration proceeding and award was inadmissible. After the evidence was closed, the court dismissed a number of the City's causes of action, along with several cross claims and counterclaims; the case was ultimately given to the jury.

By special verdict, the jury found that Walters breached its contract with the City. It awarded the City actual damages of $778,872.72 plus interest, and awarded the City liquidated damages which, as thereafter computed by the Supreme Court, totaled $721,119.45. The jury also found that the City breached its contract with Newman & Doll and awarded the latter $29,359.99, plus interest. The City, Walters and Travelers appeal.

Walters and Travelers contend that because Supreme Court permitted the City to introduce evidence regarding the ratio of work completed to the amount the City paid Walters, it violated the law of the case. We disagree. The prior arbitration proceeding determined only whether the City overpaid or underpaid Walters; it did not address who breached the contract. The challenged evidence is relevant to both issues. As the arbitrators did not decide the precise issue of whether Walters justifiably abandoned the job, Supreme Court cannot be faulted for permitting the City to introduce evidence of the payment ratio (see, Locilento v. Coleman Catholic High School, 134 A.D.2d 39, 43, 523 N.Y.S.2d 198).

We do find merit in Walters' and Travelers' argument that the liquidated damages award was inappropriate. Damages from a delay in completion of a construction project are not easily ascertainable; therefore, a reasonable provision liquidating them in advance of loss is valid (J.R. Stevenson Corp. v. County of Westchester, 113 A.D.2d 918, 920, 493 N.Y.S.2d 819). But a liquidated damages clause for delay which is reasonable--and the reasonableness of the clause here is not at issue--does not apply when the contractor abandons work prior to the stipulated completion date (Village of Canton...