Town of Oyster Bay v. Lizza Indus., Inc.

• Decision Date: 17 December 2013
• Citation: 981 N.Y.S.2d 643,4 N.E.3d 944,2013 N.Y. Slip Op. 08370,22 N.Y.3d 1024
• Parties: TOWN OF OYSTER BAY, Appellant, v. LIZZA INDUSTRIES, INC., Respondent. Town of Oyster Bay, Appellant, v. J.D. Posillico, Inc., et al., Respondents. Town of Oyster Bay, Appellant, v. Hendrickson Bros., Inc., Respondent. Village of Babylon, Appellant, v. Hendrickson Bros., Inc., Respondent. Village of Lindenhurst, Appellant, v. Hendrickson Bros., Inc., Respondent. Village of Lindenhurst, Appellant, v. Lizza Industries, Inc., Respondent. Town of Oyster Bay, Appellant, v. J.D. Posillico, Inc., Respondent. Town of Oyster Bay, Appellant, v. S. Zara and Sons Contracting Corporation, Respondent. Town of Oyster Bay, Appellant, v. Marvec Allstate, Inc., Respondent. Village of Lindenhurst, Appellant, v. J.D. Posillico, Inc., Respondent.
• Court: New York Court of Appeals Court of Appeals

22 N.Y.3d 1024

4 N.E.3d 944

981 N.Y.S.2d 643

2013 N.Y. Slip Op. 08370

TOWN OF OYSTER BAY, Appellant,

v.LIZZA INDUSTRIES, INC., Respondent.

Town of Oyster Bay, Appellant,

v.J.D. Posillico, Inc., et al., Respondents.

Town of Oyster Bay, Appellant,

v.Hendrickson Bros., Inc., Respondent.

Village of Babylon, Appellant,

v.Hendrickson Bros., Inc., Respondent.

Village of Lindenhurst, Appellant,

v.Hendrickson Bros., Inc., Respondent.

Village of Lindenhurst, Appellant,

v.Lizza Industries, Inc., Respondent.

Town of Oyster Bay, Appellant,

v.J.D. Posillico, Inc., Respondent.

Town of Oyster Bay, Appellant,

v.S. Zara and Sons Contracting Corporation, Respondent.

Town of Oyster Bay, Appellant,

v.Marvec Allstate, Inc., Respondent.

Village of Lindenhurst, Appellant,

v.J.D. Posillico, Inc., Respondent.

Court of Appeals of New York.

Dec. 17, 2013.

Carman, Callahan & Ingham, LLP, Farmingdale (Michael F. Ingham of counsel), for appellants in the first through tenth above-entitled actions.

Devitt Spellman Barrett, LLP, Smithtown (John M. Denby and William J. Barrett of counsel), for Lizza Industries, Inc. and another, respondents in the first, third, fourth, fifth and sixth above-entitled actions.

White Fleischner & Fino, LLP, New York City(Jared T. Greisman and Renee S. Schwartz of counsel), for Marvec Allstate, Inc., Agovino & Asselta, LLP, Mineola (Joseph P. Asselta and David A. Loglisci of counsel), for J.D. Posillico, Inc., and Wade Clark Mulcahy, New York City(Robert J. Cosgrove and Cheryl D. Fuchs of counsel), for S. Zara and Sons Contracting Corporation, respondents in the second, seventh, eighth, ninth and tenth above-entitled actions.

Dennis M. Brown, County Attorney, Hauppauge (Christopher A. Jeffreys of counsel), for County of Suffolk, amicus curiae in the first through tenth above-entitled actions.

Couch White LLP, Albany (Jeremy M. Smith of counsel), for Associated General Contractors of New York State, LLC and another, amici curiae in the first through tenth above-entitled actions.

Plunkett Cooney, Bloomfield Hills, Michigan (Mary Massaron Ross and Karen E. Beach of counsel), and Goldberg Segalla, Albany, for DRI—The Voice of the Defense Bar, amicus curiae in the first through tenth above-entitled actions.

OPINION OF THE COURTMEMORANDUM.

The orders of the Appellate Division should be affirmed, with costs.

This litigation arises out of defendants' construction of a sewer system throughout Nassau and Suffolk Counties (the Counties), including areas under plaintiffs' jurisdiction.In the 1970s, the Counties entered into public works contracts with defendants to perform the sewer construction work.The Counties included “protection clauses” in the contracts, which incorporated statutory language from County Law § 263 requiring defendants to restore plaintiffs' roadways to their “usual condition” after the sewer construction was complete.

Defendants completed their sewer construction work at various points in the 1970s and 1980s.Sometime thereafter, the areas surrounding the sewer lines settled, causing damage to plaintiffs' adjacent roadways, sidewalks, and curbs.

Plaintiffs commenced these 10 related actions in July 2009 alleging a single cause of action in continuing public nuisance.Plaintiffs claimed that defendants“committed faulty workman-ship under [the] contracts” by, among other things, “failing to properly excavate and backfill the sewer trenches” and “failing to provide adequate subjacent support to plaintiffs['] roadways, curbs, gutters and other facilities both during and after actual construction operations.”This “faulty workmanship,”plaintiffs alleged, “created a continuing public nuisance.”

Supreme Court dismissed the complaint in each action, and the Appellate Division affirmed in 10 separate decisions.In its lead decision, Village of Lindenhurst v. J.D. Posillico, Inc.,94 A.D.3d 1101, 943 N.Y.S.2d 553(2d Dept.2012), the court held that, viewing the complaint as asserting the Village's rights as a third-party beneficiary to the sewer construction contract, “the action is barred by the six-year statute of limitations for a cause of action alleging breach of contract”(94 A.D.3d at 1102, 943 N.Y.S.2d 553).Noting the rule from City School Dist. of City of Newburgh v. Stubbins & Assoc.,85 N.Y.2d 535, 626 N.Y.S.2d 741, 650 N.E.2d 399(1995)( Newburgh ) that a cause of action arising out of defective construction accrues upon completion of the contractual work, the court stated that this rule applies to actions commenced by a third-party beneficiary to the contract ( seeid.).The court also rejected the Village's argument that “the conduct giving rise to the alleged nuisance is ongoing, thereby giving rise to successive causes of action”( id.).

The Appellate Division held that the other nine actions were “time-barred for the reasons stated” in Village of Lindenhurst(seeTown of Oyster Bay v. Lizza Indus., Inc.,94 A.D.3d 1094, 1094, 942 N.Y.S.2d 808[2d Dept.2012];Town of Oyster Bay v. J.D. Posillico, Inc.,94 A.D.3d 1093, 1093, 942 N.Y.S.2d 806[2d Dept.2012];Town of Oyster Bay v. Hendrickson Bros., Inc.,94 A.D.3d 1092, 1092, 945 N.Y.S.2d 563[2d Dept.2012];Village of Babylon v. Hendrickson Bros., Inc.,94 A.D.3d 1100, 1100, 942 N.Y.S.2d 809[2d Dept.2012];Village of Lindenhurst v. Hendrickson Bros., Inc.,94 A.D.3d 1100, 1101, 942 N.Y.S.2d 808[2d Dept.2012];Village of Lindenhurst v. Lizza Indus., Inc.,94 A.D.3d 1102, 1102, 942 N.Y.S.2d 809[2d Dept.2012];Town of Oyster Bay v. J.D. Posillico, Inc.,94 A.D.3d 1093, 1093, 942 N.Y.S.2d 807[2d Dept.2012];Town of Oyster Bay v. S. Zara & Sons Contr. Corp.,94 A.D.3d 1094, 1094, 942 N.Y.S.2d 806[2d Dept.2012];Town of Oyster Bay v. Marvec Allstate, Inc.,94 A.D.3d 1094, 1094, 942 N.Y.S.2d 805[2d Dept.2012] ).The Court granted plaintiffs leave to appeal (20 N.Y.3d 854, 958 N.Y.S.2d 330, 982 N.E.2d 93[2012] ) and we now affirm.

A breach of contract action must be commenced within six years from the accrual of the cause of action ( seeCPLR203[a]; 213[2] ).“In cases against architects or contractors, the accrual date for Statute of Limitations purposes is completion of performance”( Newburgh,85 N.Y.2d at 538, 626 N.Y.S.2d 741, 650 N.E.2d 399, citingSosnow v. Paul,36 N.Y.2d 780, 369 N.Y.S.2d 693, 330 N.E.2d 643[1975] ).This rule applies “no matter how a claim is characterized in the complaint” because “all liability” for defective construction “has its genesis in the contractual relationship of the parties”( Newburgh,85 N.Y.2d at 538, 626 N.Y.S.2d 741, 650 N.E.2d 399, citingSears, Roebuck & Co. v. Enco Assoc.,43 N.Y.2d 389, 396, 401 N.Y.S.2d 767, 372 N.E.2d 555[1977] ).Even if the plaintiff is not a party to the underlying construction contract, the claim may accrue upon completion of the construction where the plaintiff is not a “ stranger to the contract,” and the relationship between the plaintiff and the defendant is the “functional equivalent of privity”( Newburgh,85 N.Y.2d at 538–539, 626 N.Y.S.2d 741, 650 N.E.2d 399[internal quotation marks omitted] ).

Here, the gravamen of the complaints is that defendants, through their alleged faulty construction, breached their duty to plaintiffs under the protection clauses in the public works contracts.In fact, plaintiffs specifically allege that defendants“committed faulty workmanship under said contracts.”Although characterized as “continuing public nuisance” causes of action, plaintiffs' “claim[s] aris[e] out of defective construction” and thus “accrue[d] on date of completion”( Newburgh,85 N.Y.2d at 538, 626 N.Y.S.2d 741, 650 N.E.2d 399).

The Appellate Division properly applied Newburgh to these actions commenced by third-party beneficiaries to the construction contracts.Newburgh extended the completion of performance accrual rule to actions against architects or contractors brought by “intended beneficiar[ies]” of construction contracts ( id.).Here, the Counties contracted with defendants to install the sewer system for the benefit of municipalities like plaintiffs, a fact which was surely “known to all parties at the time the contracts were negotiated”( id.).

Although plaintiffs do not dispute that they are third-party beneficiaries, they seek to distinguish Newburgh on several bases, noting that they do not own the sewer lines defendants constructed and the Counties never intended to transfer ownership of the sewer system to plaintiffs once construction was complete.But Newburgh is not limited to owners of real property and the Counties' intention to retain ownership of the sewer lines does not diminish plaintiffs' status as intended beneficiaries of the contracts.Plaintiffs further argue that, unlike the plaintiff beneficiary in Newburgh,they had no involvement or control over the construction process ( seeid. at 538–539, 626 N.Y.S.2d 741, 650 N.E.2d 399).However, it is undisputed that plaintiffs, at the very least, consented to the sewer construction project initiated by the Counties and allowed defendants to perform excavation and other construction work on their property.In any case, we cannot say that there is such a complete “lack of privity” that plaintiffs' claims should “not fall under the general rule of accrual” articulated in Newburgh( id. at 538, 626 N.Y.S.2d 741, 650 N.E.2d 399).

Accordingly, Newburgh controls and plaintiffs' causes of action accrued upon defendants' completion of performance under the public works contracts.According to plaintiffs, defendants completed construction of the sewers, at the latest, by 1987.Assuming plaintiffs' claims accrued in 1987, plaintiffs had until 1993 to timely commence these actions.Because they waited until 2009(16 years too late), plaintiffs' actions are plainly time-barred.

Even if plaintiffs' continuing nuisance claims could be considered independent causes of action that do not arise from the contracts—thus avoiding dismissal under Newburgh—the actions were still properly dismissed as time-barred....