Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., Inc.

• Decision Date: 15 October 1985
• Citation: 66 N.Y.2d 38,485 N.E.2d 208,495 N.Y.S.2d 1
• Parties: , 485 N.E.2d 208 FOURTH OCEAN PUTNAM CORP., Appellant, v. INTERSTATE WRECKING CO., INC. et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 1

495 N.Y.S.2d 1

66 N.Y.2d 38, 485 N.E.2d 208

FOURTH OCEAN PUTNAM CORP., Appellant, v. INTERSTATE WRECKING CO., INC. et al., Respondents.

Court of Appeals of New York.

Oct. 15, 1985.

A. Thomas Levin, Garden City, for appellant.

Joseph Winston, New York City, Stanley S. Getzoff of counsel, for Interstate Wrecking Co., Inc., respondent.

Frank L. Amoroso, Garden City, for Inc. Village of Atlantic Beach, respondent.

OPINION OF THE COURT

MEYER, Judge.

An action brought by a property owner claiming to be the third-party beneficiary of a contract between a wrecking company, as promisor, and a municipality, as promisee, is an action "arising out of a contract" of the municipality within the meaning of CPLR 9802 and, no notice of claim having been filed until four years after completion of the contract, is barred as to the municipality by that section. Nor may the action be maintained against the wrecking company-promisor by the property owner as a third-party beneficiary, the latter not being an intended beneficiary of the contract. The order of the Appellate Division, 108 A.D.2d 3, 487 N.Y.S.2d 591, dismissing the complaint in its entirety should, therefore, be affirmed, with costs.

I

Plaintiff, Fourth Ocean Putnam Corp. (Fourth Ocean), owned the Atlantic Beach Hotel. The hotel was so severely damaged by fire that in 1977 the Incorporated Village of Atlantic Beach (Village), acting under a Village ordinance so authorizing, obtained a court order compelling plaintiff to remove the structure as a public nuisance and as a dangerous, unsafe fire hazard. When plaintiff failed to demolish the structure within the time required, the Village entered into a demolition contract with defendant Interstate Wrecking Co., Inc. (Interstate) as authorized by the Supreme Court order and the ordinance.

The contract called for Interstate to demolish and remove buildings and boardwalk and stated that as demolition progressed all materials and debris were to be removed from the premises and that the lot, after demolition, was to be compacted and graded to "grade level" with dirt. In paragraph 5 the parties also agreed that, "All walls and foundations shall be removed one (1) foot below the elevation of the existing grade of the sidewalk adjacent to it. The slab will be crushed for drainage and all large pieces removed." Before demolition commenced, Fourth Ocean brought an action for injunction to prevent it, but after a preliminary injunction was denied, the action was, apparently, abandoned. Demolition was concluded in July 1978, at a cost of $86,373.63 to the Village, which subsequently recovered that sum from Fourth Ocean.

In March 1982, Fourth Ocean began construction of new buildings on the site formerly occupied by the hotel. During initial excavation work it discovered that the walls and foundations had not been removed one foot below existing grade nor had the slab been crushed and all large pieces removed as required by the contract. It concedes, however, that it knew at the time that the demolition took place that the boardwalk had not been removed. In July 1982, plaintiff filed a notice of claim against the Village and, in September 1982, commenced this action against both the Village and Interstate.

The first cause of action, for breach of contract, was asserted against both defendants and alleged that plaintiff was a third-party beneficiary of the demolition contract entered into by the defendants, that Interstate failed to remove the concrete foundation and boardwalk, to crush the slab and to remove the large pieces, and that the Village breached its obligation to the plaintiff in failing to supervise and to insure that the contract and the judgment were fully complied with. Plaintiff also pleaded a second cause of action, against the Village alone, for "return of that portion of the cost of demolition which was paid to cover the cost of the removal of the foundation, slab and boardwalk."

Interstate moved for summary judgment, contending that as a matter of law Fourth Ocean could not be a third-party beneficiary. The Village also moved for summary judgment on the same ground and on the further ground that Fourth Ocean's notice of claim was not timely served and filed nor was the action timely commenced.

Special Term dismissed the action against the Village as untimely, holding that the claimed breach of contract occurred upon completion of the demolition and that notice of claim had not been filed nor the action begun within the 18 months after completion allowed by CPLR 9802. Defendant Interstate's motion was, however, denied, the court holding that the contract conferred a benefit upon plaintiff "as the owner of the property where the hazardous structures were demolished," but that whether such benefit was intended by the parties was a triable issue of fact.

Both Fourth Ocean and Interstate appealed. The Appellate Division modified the order of Special Term by granting Interstate's motion for summary judgment and dismissing the complaint in its entirety, and otherwise affirmed. It held that, as a matter of law, Fourth Ocean could not be considered a third-party beneficiary because the demolition "was not done to prepare the latter's property for further income producing development but rather was done to benefit the community at large by removing structurally dangerous and unsafe buildings." (108 A.D.2d, at p. 8, 487 N.Y.S.2d 591.) The court also noted Fourth Ocean's recalcitrant posture in regard to the demolition and concluded that plaintiff was merely an incidental beneficiary and could not maintain an action for breach of contract. Fourth Ocean appeals to us as of right on the basis of that modification, thus also bringing up for review that part of the Appellate Division order which affirmed dismissal of the complaint against the Village (Dalrymple v. Shults Chevrolet, 39 N.Y.2d 795, 385 N.Y.S.2d 756, 351 N.E.2d 423). We affirm, although as to the third-party claim on somewhat different reasoning.

II

To the extent pertinent to this appeal, CPLR 9802 provides that: "no action shall be maintained against the village upon or arising out of a contract of the village unless the same shall be commenced within eighteen months after the cause of action therefor shall have accrued, nor unless a written verified claim shall have been filed with the village clerk within one year after the cause of action shall have accrued * * * The omission to present a claim or to commence an action thereon within the respective periods of time above stated applicable to such claim, shall be a bar to any claim or action therefor against said village".

Plaintiff's first cause of action alleges that the Village breached its obligation to plaintiff in failing to supervise and see that the items of the contract awarded by the Village to Interstate were fully carried out and claims damages of $100,000 for the breach. Its second cause of action repeats and realleges the claimed breach and avers that as a result thereof it is entitled to the return of that portion of the cost of demolition paid by it to the Village which relates to removal of the foundation, slab and boardwalk. Both causes of action, therefore, as pleaded and as argued by the parties, rest either on the contract between the Village and Interstate of which plaintiff claims to be third-party beneficiary (first cause of action), upon an implied in fact obligation resulting from that contract (first cause of action), or upon an implied in law restitution claim resulting from breach of that contract (second cause of action). Both claims are, therefore, either "upon or arising out of a contract of the village," within the meaning of CPLR 9802.

Plaintiff does not argue otherwise. Rather, although it admits knowledge at the time demolition was completed that the boardwalk had not been removed, it contends that it did not discover until it sought to rebuild that the contract provisions concerning the foundation and slab had not been carried out, and argues by analogy to the foreign object cases, such as Martin v. Edwards Labs., 60 N.Y.2d 417, 469 N.Y.S.2d 923, 457 N.E.2d 1150, that it should be held that its cause of action did not accrue until discovery. For a number of reasons we disagree. First, unlike the situation in Victorson v. Bock Laundry Mach. Co., 37 N.Y.2d 395, 373 N.Y.S.2d 39, 335 N.E.2d 275, plaintiff had cause to complain from the moment the demolition work was completed and a ground (the same third-party beneficiary basis on which the present action rests) upon which a claim could be made (id., at p. 403, 373 N.Y.S.2d 39, 335 N.E.2d 275). Second, plaintiff was fully aware that the contract had been made, concedes awareness that the boardwalk portion of the contract had not been carried out and as the owner of the property was free to excavate sufficiently to ascertain whether its foundation and slab provisions had been carried out. There is, therefore, no need for a discovery rule as in foreign object cases (see, Martin v. Edwards Labs., supra, 60 N.Y.2d at p. 427, 469 N.Y.S.2d 923, 457 N.E.2d 1150).

Third, and most importantly, the purpose behind statutes such as CPLR 9802 is to give the municipality early notice of a claim so that investigation can be promptly made and evidence relating to the claim can be preserved (see, Matter of Beary v. City of Rye, 44 N.Y.2d 398, 412, 406 N.Y.S.2d 9, 377 N.E.2d 453). A cause of action against a municipality for breach of contract accrues when the breach occurs (Kassner & Co. v. City of New York, 46 N.Y.2d 544, 550, 415 N.Y.S.2d 785, 389 N.E.2d 99; Stage v. Village of Owego, 39 N.Y.2d 1017, 387 N.Y.S.2d 245, 355 N.E.2d 300, affg on mem at App Div 48 A.D.2d 985, 369 N.Y.S.2d 883; 4 Corbin, Contracts § 820). To adopt the discovery rule for which plaintiff contends would be inconsistent not only with the purpose of CPLR 9802, but also with the mandate of CPLR 201 that, "No court shall extend the time limited...