S.A.B. Enterprises, Inc. v. Village of Athens

• Decision Date: 10 January 1991
• Citation: 564 N.Y.S.2d 817,164 A.D.2d 558
• Parties: S.A.B. ENTERPRISES, INC., Doing Business as Brady's Laundry and Dry Cleaning, Respondent, v. VILLAGE OF ATHENS, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 817

564 N.Y.S.2d 817

164 A.D.2d 558

S.A.B. ENTERPRISES, INC., Doing Business as Brady's Laundry and Dry Cleaning, Respondent, v. VILLAGE OF ATHENS, Appellant.

Supreme Court, Appellate Division Third Department.

Jan. 10, 1991.

Karl H. Schrade, Delmar, (Donna B. Heinrichs, of counsel), and Ellen C. Brotman, of counsel, of Feit & Schlender, Albany, for appellant.

Deily, Testa & Dautel (Susan S. Dautel, of counsel), Albany, for respondent.

Before MAHONEY, P.J., and WEISS, MIKOLL, YESAWICH and LEVINE, JJ.

LEVINE, Justice.

In 1967, three brothers, Seymour, Alvin and Bertram Kadan, formed plaintiff, S.A.B. Enterprises, Inc., for the purpose of acquiring the assets and business of Brady's Laundry and Dry Cleaning, a home laundry located in the Village of Athens, Greene County. Their family acquired a similar home laundry in Columbia County in 1963. Following the acquisition of Brady's, plaintiff expended substantial sums in replacing equipment and substituting larger and more automated washers and ironers to convert Brady's from a home laundry to a large-volume commercial linen laundry and linen supply operation for serving resort hotels and motels in the Catskill Mountains region. Plaintiff's principal witness, Bertram Kadan, testified that by 1972 the laundry had been successful in acquiring as customers many of the major resorts in the area. During the peak summer season, the laundry was then using up to 30,000 gallons of water daily, which was obtained from the municipal water lines of defendant and paid for on a metered basis.

In July 1972, plaintiff first found that the water supply from defendant was often badly discolored and was permanently staining the fabrics during laundering. Repeated complaints to officials of defendant were responded to by recommendations to flush the lines before using the water. When this was unavailing, plaintiff brought in as consultants a local college professor of chemistry and a sanitation engineer with expertise in water treatment systems. Their evidence was that the staining was caused by live and dead microscopic animal and vegetable matter suspended in the water, attributable to the condition of the nearby lake which was defendant's sole water source. Defendant's filtration system had been inoperable for several years. The problem was further aggravated by the way defendant stored water from the lake. Defendant had applied for a Federal grant to finance the installation of a new filtration system, averring that the existing water supply failed to meet State Health Department bacteriological, physical and chemical standards. The application was still pending during the pertinent period. Bertram Kadan testified, however, that defendant rejected plaintiff's offer to repair the existing filtration system at plaintiff's expense because of its fear that repair of the existing system might prejudice its application for funding to construct a new one. The evidence also was that plaintiff was advised by one of its consultants to install its own filtration system, at an estimated cost of $96,000, but was unable to obtain the financing necessary to pay for the project.

In the fall of 1973, plaintiff commenced this action against defendant for its expense of relaundering and replacing permanently stained linens and loss of business from displeased customers, asserting causes of action for negligence and breach of implied warranty of fitness of defendant's water supply (see, UCC 2-315). In November 1973, plaintiff closed its doors, claiming to have lost its entire clientele from dissatisfaction with the stained linens.

This case was first tried in 1981, ending in a mistrial on the court's own motion for a lack of time at the end of the trial term to complete the proof. A second trial in 1982 ended when Supreme Court dismissed the action after ruling that plaintiff's use of defendant's water supply once it had discovered the impurities in July 1972 was contributory negligence as a matter of law. This court reversed, holding that an issue of fact was presented as to whether continued use of the water after such discovery, under plaintiff's circumstances, constituted contributory negligence (see, S.A.B. Enters. v. Village of Athens, 94 A.D.2d 915, 463 N.Y.S.2d 624, appeal dismissed 60 N.Y.2d 860). A third trial, in 1987, ended in a mistrial due to the sudden onset of illness of plaintiff's then-counsel. Finally, upon this, the fourth trial of the action, the proof was completed and submitted to the jury. The jury found in plaintiff's favor on both its negligence and breach of warranty causes of action. It awarded plaintiff $975,000 for loss of business and $25,000 for replacing damaged linens. Judgment was entered for $1,860,423.65, which included over $800,000 in interest on the loss of business damages award from November 30, 1975, the approximate date when plaintiff ceased operations. This appeal by defendant followed.

At the outset, we decline to consider the claim asserted on appeal by defendant's special counsel that defendant was performing a governmental function in supplying water to plaintiff and, hence, was immune from tort liability in the absence of proof of a special relationship between it and plaintiff. Defendant clearly permitted the case to be tried and submitted to the jury on the basis that the traditional rule still applied, i.e., that a municipality, in supplying water through lines to local consumers for a volume-based fee, is exercising a proprietary function for which it may be subject to liability in tort (see, Canavan v. City of Mechanicville, 229 N.Y. 473, 128 N.E. 882). Accordingly, defendant failed to preserve this issue for appeal (see, Miller v. Miller, 68 N.Y.2d 871, 873, 508 N.Y.S.2d 418, 501 N.E.2d 26; De Leon v. New York City Tr. Auth., 50 N.Y.2d 176, 179 n. 1, 428 N.Y.S.2d 625, 406 N.E.2d 442; Matter of State of New York v. Avco Fin. Serv. of N.Y., 50 N.Y.2d 383, 390-391, 429 N.Y.S.2d 181, 406 N.E.2d 1075). The distinction between governmental/proprietary functions has become blurred and has been eliminated in some contexts (see, Matter of County of Monroe [City of Rochester], 72 N.Y.2d 338, 533 N.Y.S.2d 702, 530 N.E.2d 202; County of Nassau v. South Farmingdale Water Dist., 46 N.Y.2d 794, 413 N.Y.S.2d 921, 386 N.E.2d 832), but not as yet regarding municipal tort liability. On the state of this record, we should not reach the issue of abandonment of the distinction in the tort field by exercising our discretion to review in the interest of justice.

Defendant appears to have conceded on this appeal the sufficiency of the evidence of its negligence. However, defendant contends that the proof failed to establish that any negligence on its part was a proximate cause of plaintiff's loss of business and that the case should not have been submitted to the jury on the basis of purely circumstantial evidence of causation. We disagree. The jury's specific finding of proximate cause should be upheld unless " ' * * * there is simply no valid line of reasoning and permissible inferences which could possibly lead rational men to the conclusion reached by the jury on the basis of the evidence presented at trial' " (Dominguez v. Manhattan & Bronx Surface Tr. Operating Auth., 46 N.Y.2d 528, 532, 415 N.Y.S.2d 634, 388 N.E.2d 1221, quoting Cohen v. Hallmark Cards, 45 N.Y.2d 493, 499, 410 N.Y.S.2d 282, 382 N.E.2d 1145). There was direct evidence from testimony and photographs that the foreign matter in defendant's water caused unsightly, irradicable staining of items such as sheets and towels laundered by plaintiff and that, in the high-speed automated pressing and folding process, it was not unusual for stained articles to pass through plaintiff's screening and be delivered to customers. Bertram Kadan also testified as to stained articles being returned "many times" by customers who eventually terminated their accounts with plaintiff. This evidence certainly supports a rational inference that the stain-producing impurities in the water caused plaintiff's loss of business (see, Dominguez v. Manhattan & Bronx Surface Tr. Operating Auth., supra ). Moreover, to the extent that the foregoing proof was circumstantial rather than direct evidence of a causal relationship, there was no evidence of any other reason for plaintiff's loss of accounts. Thus, there was no other reasonable hypothesis established in the record which plaintiff had the burden of excluding before the issue was properly submitted to the jury (cf., Nieskes & Craig v. Schoonerman, 40 A.D.2d 931, 932, 337 N.Y.S.2d 750).

It follows from the foregoing that the jury's verdict holding defendant liable on plaintiff's negligence cause of action should be upheld. This renders academic defendant's challenge to the jury's award on plaintiff's breach of warranty cause of action unless the imposition of the substantial prejudgment interest on the loss of business damages award could only have been made for the breach of warranty, and not on the award in plaintiff's negligence cause of action. We have concluded that the better and prevailing weight of authority...