Tishman Construction Corporation of New York v. City of New York

• Decision Date: 20 February 2001
• Citation: 280 A.D.2d 374,720 N.Y.S.2d 487
• Parties: TISHMAN CONSTRUCTION CORPORATION OF NEW YORK, Respondent,<BR>v.<BR>CITY OF NEW YORK, Appellant.
• Court: New York Supreme Court — Appellate Division

280 A.D.2d 374

720 N.Y.S.2d 487

TISHMAN CONSTRUCTION CORPORATION OF NEW YORK, Respondent,

v.CITY OF NEW YORK, Appellant.

Decided February 20, 2001.

Concur — Sullivan, P.J., Rosenberger, Nardelli, Tom and Lerner, JJ.

Plaintiff Tishman Construction Corporation of New York and defendant City of New York entered into a contract in October 1987 pursuant to which plaintiff was to perform construction management services in connection with the rehabilitation and reconstruction of certain vacant multiple dwellings at the Harlem Renovation-Manhattan Project (the Project). Plaintiff's responsibilities included recommending contractors in each trade to bid on the prime contract, preparing the bid and contract documents with the goal of selecting the lowest responsible bidder, supervising sealed biddings, and recommending the award or rejection of prime contracts. The Project Executive, with overall responsibility for the Project on plaintiff's behalf, was John Bauer, a Vice President of Tishman who had full authority to bind plaintiff.

Royal Mechanical, Inc. (Royal) was awarded two prime contracts for the Project which defendant, ultimately, declared in default due to Royal's failure to perform. Defendant subsequently terminated plaintiff's management contract after the Project remained incomplete even after the date of completion had been extended. At the time plaintiff's contract was terminated, defendant maintains it was unaware that Kevin Darby, the principal owner of Royal, had paid a $100,000 bribe to Bauer which resulted in the award of the contracts to Royal.

Plaintiff commenced this action in 1992 seeking contractual payments totaling approximately $2,000,000. Defendant contends that after serving its answer, it learned that the New York County District Attorney's Office was investigating allegations made by Darby concerning Bauer's acceptance of a bribe. Darby died prior to testifying before the Grand Jury, and the investigation was closed in 1994.

The District Attorney, in 1994, allowed defendant to inspect certain records taken from plaintiff's field office at the Project site, as well as plaintiff's home office, but these did not include Bauer's bank records. Defendant, in an effort to obtain additional information, and after negotiations failed, served the District Attorney with a subpoena in October 1996, which was later withdrawn, allegedly on the strength of the District Attorney's representations that the matter could be resolved.

On March 12, 1998, defendant attempted to depose Bauer, who asserted his Fifth Amendment right and refused to answer questions regarding plaintiff, the Project, the bribe and the District Attorney's investigation. Defendant also acted on information supplied at that time by the District Attorney and served Chemical Bank with a subpoena in order to obtain Bauer's bank account records, but was informed they no longer existed.

In the interim, plaintiff moved for summary judgment and defendant cross-moved, inter alia, to amend its answer to interpose "Defenses, Setoffs and Counterclaims" which sought recission of the contract and damages based on Bauer's acceptance of a bribe. The motion court denied that portion of the cross motion with respect to the Bauer bribe, and found that the only evidence in support of the contention that Bauer had accepted a bribe was "rank hearsay, coupled with the fact that when two former [Tishman] employees were questioned about the matter they refused to testify, invoking instead their Fifth Amendment privilege." On appeal, this Court, inter alia, affirmed the denial of leave to assert the claims and defenses arising out of the bribe, holding that there was no basis for the amendment other than Bauer's refusal to testify (269 AD2d 179).

Defendant, prior to this Court's decision, moved to compel disclosure from the District Attorney and by order dated January 3, 2000, Justice Herbert Adlerberg ordered the District Attorney to disclose the bank records of Bauer and his company, Alpha Consulting, Inc., which had been obtained with a Grand Jury subpoena and search warrant. The District Attorney subsequently produced those items as well as records seized from Bauer's home, including checkbooks, bank statements and related documents, all of which defendant claims support its allegations of bribery and corruption.

Defendant thereafter moved for leave to renew its motion to amend its answer, seeking to interpose various defenses, setoffs and counterclaims arising out of Bauer's acceptance of bribes, to reopen discovery and to stay the trial. The court denied the motion and found that defendant had not met its burden of demonstrating that it could not, with due diligence, have presented the new evidence at the time the initial motion was made or at least when the appeal was perfected. Defendant appeals and we now reverse.

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