Dormitory Auth. of N.Y. v. Samson Constr. Co.

• Decision Date: 15 February 2018
• Docket Number: No. 8,8
• Citation: 70 N.Y.S.3d 893,94 N.E.3d 456,30 N.Y.3d 704
• Parties: DORMITORY AUTHORITY of the State of New York, et al., Respondents, v. SAMSON CONSTRUCTION CO., Also Known as Samson Construction Co., Inc., Doing Business as Samson Construction Company and Others, Defendants, Perkins Eastman Architects, P.C., Appellant. (And other actions)
• Court: New York Court of Appeals Court of Appeals

30 N.Y.3d 704
94 N.E.3d 456
70 N.Y.S.3d 893

DORMITORY AUTHORITY of the State of New York, et al., Respondents,
v.
SAMSON CONSTRUCTION CO., Also Known as Samson Construction Co., Inc., Doing Business as Samson Construction Company and Others, Defendants,

Perkins Eastman Architects, P.C., Appellant.

(And other actions)

No. 8

Court of Appeals of New York.

Decided February 15, 2018

94 N.E.3d 457

Flemming Zulack Williamson Zauderer LLP, New York City (Mark C. Zauderer, Jason T. Cohen and Grant A. Shehigian of counsel), for appellant.

Zachary W. Carter, Corporation Counsel, New York City (Ben- jamin Welikson, Kathy Chang Park, Richard Dearing and Devin Slack of counsel), for respondents.

30 N.Y.3d 707

OPINION OF THE COURT

DiFIORE, Chief Judge:

The two questions on this appeal are whether plaintiff City of New York is an

94 N.E.3d 458

intended third-party beneficiary of the architectural services contract between plaintiff Dormitory Authority of the State of New York (DASNY) and defendant Perkins Eastman Architects, P.C. and whether DASNY's negligence claim against Perkins is duplicative of its breach of contract claim. We hold that summary judgment should have been granted in defendant Perkins' favor on both issues.

This action arose out of a construction project to build a forensic biology laboratory at 26 ^th Street and First Avenue in Manhattan, adjacent to Bellevue Hospital, for use by the Office of the Chief Medical Examiner (OCME). The City (on behalf of OCME) and DASNY entered into a project management agreement, which provided that DASNY would finance and manage the design and construction of the laboratory (the project). DASNY was authorized to enter into contracts with the necessary contractors and consultants including, as relevant here, the architect, Perkins.

Pursuant to the contract between DASNY and Perkins (the Perkins contract), Perkins was to provide design, architectural, and engineering services for the project and supervise its construction. Perkins was also responsible for providing a site plan for the location of the laboratory in relation to the hospital. The contract further provides that Perkins would "indemnify and hold harmless" DASNY and the "Client" (that

30 N.Y.3d 708

is, OCME, and the NYC Police and Fire Departments) from any claims arising out of Perkins' negligent acts or omissions and that extra costs or expenses incurred by DASNY and the Client as a result of Perkins' "design errors or omissions shall be recoverable from [Perkins] and/or its Professional Liability Insurance carrier."

Pursuant to a separate contract, DASNY retained Samson Construction Co., which is not a party to this appeal, as the contractor to provide excavation and foundation work for the Project. Significantly, the contract executed between DASNY and Samson provides that the client—i.e., the City—"is an intended third party beneficiary of the Contract for the purposes of recovering any damages caused by [Samson]." Although there are passing references to the client in the Perkins contract, no analogous language providing that the City is an intended third-party beneficiary appears there.

Work began on the foundation in May 2002, but the failure to properly install an excavation support system led to substantial damage and delays. In particular, this failure caused the adjacent C & D building on the Bellevue campus to "settle" by as much as eight inches, damaged other adjacent structures (including sidewalks, sewers and water mains), and required emergency repairs. These issues caused the project to be delayed by more than 18 months at an additional cost of $37 million.

Plaintiffs commenced this action against Samson in August 2006. Perkins was added as a defendant in February 2007 through the filing of a supplemental summons and complaint, which contained two causes of action against Perkins—one alleging breach of contract and the other alleging negligence. The breach of contract claim alleges that Perkins breached the contract by:

"failing to provide adequate designs for the Project, by failing to properly supervise the subcontractors and subconsultants that it retained with regard to the Project, by failing to monitor the progress of the Work to ensure that it was being completed properly and in substantial compliance with the design recommendations, specifications and their intent, by failing to ascertain the actual field conditions, including the subsurface

94 N.E.3d 459

conditions at the Site and the foundations beneath [the C &]D Building

30 N.Y.3d 709

and by failing to advise DASNY of the risks to the [C &]D Building posed by the installation of the [excavation support system] and taking precautions against such risks."

The allegations set forth in the negligence cause of action are virtually identical in every respect, but with an introductory phrase that references Perkins' failure "to comply with professional standards of care" instead of breach of contract. The damages for both claims are described as the "significant additional expenses" necessary to complete the project. Although the complaint's ad damnum clause states a figure for Perkins' negligence that is $4 million higher than for its breach of contract, there is no basis given for the additional amount. During early discovery, plaintiffs produced a binder and provided testimony showing that the total cost of fixing the damage was approximately $37 million, including repairs to the project site and the adjacent structures, with no distinction drawn between the two claims.

Perkins moved for summary judgment to dismiss the City's breach of contract and negligence claims and to dismiss DASNY's negligence claim as duplicative of its breach of contract claim. Supreme Court granted the motion in part, dismissing the City's breach of contract and negligence claims (2013 NY Slip Op 34183[U] [2013] ). The court held that the City was not an intended third-party beneficiary of the Perkins contract and that the City's claim for simple negligence was therefore time-barred. The court allowed both of DASNY's claims to proceed, finding that its negligence claim was not duplicative of its contract claim.

The Appellate Division modified by denying Perkins' motion for summary judgment on the City's breach of contract claim and, as so modified, affirmed ( 137 A.D.3d 433, 27 N.Y.S.3d 114 [1st Dept. 2016] ). The Court held that the City had raised an issue of fact whether it was an intended third-party beneficiary of the parties' contract. The Court also denied Perkins' motion for summary judgment to dismiss DASNY's negligence claim as duplicative of its breach of contract claim. The Court held there was an issue of fact whether Perkins assumed a duty of care to perform in accordance with professional standards that was independent of its contractual obligations.

One Justice dissented in part, and would have dismissed DASNY's negligence claim as duplicative. The Appellate Division granted Perkins' motion for leave to appeal to this Court,

30 N.Y.3d 710

certifying the following question: "Was the order of this Court, which modified the order of the Supreme Court, properly made?" We answer the certified question in the negative.

Intended Third–Party Beneficiary

"[A] third party may sue as a beneficiary on a contract made for [its] benefit. However, an intent to benefit the third party must be shown, and, absent such intent, the third party is merely an incidental beneficiary with no right to enforce the particular contracts" ( Port Chester Elec. Constr. Corp. v. Atlas, 40 N.Y.2d 652, 655, 389 N.Y.S.2d 327, 357 N.E.2d 983 [1976] [citations omitted] ). We have previously sanctioned a third party's right to enforce a contract in two situations: when the third party is the only one who could recover for the breach of contract or when it is otherwise clear from the language of the contract that there was "an intent to permit enforcement by the third party" ( Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., 66 N.Y.2d 38, 45, 495 N.Y.S.2d 1, 485 N.E.2d 208 [1985] ).

94 N.E.3d 460

With respect to construction contracts, we have generally required express contractual language stating that the contracting parties intended to benefit a third party by permitting that third party "to enforce [a promisee's] contract with another" ( Port Chester, 40 N.Y.2d at 656, 389 N.Y.S.2d 327, 357 N.E.2d 983 ). In the absence of express language, "[s]uch third parties are generally considered mere incidental beneficiaries" ( 40 N.Y.2d at 656, 389 N.Y.S.2d 327, 357 N.E.2d 983 ). This rule reflects the particular nature of construction contracts and the fact that—as is the case here—there are often several contracts between various entities, with performance...