A.H.A. General Construction Inc. v. New York City Housing Authority
Court: Appellate Division of the Supreme Court of the State of New York; July 31, 1997; New York; State Appellate Court
An order from the Supreme Court of New York County, dated January 17, 1996, initially granted the Housing Authority's motion for summary judgment and denied A.H.A. General Construction, Inc.'s (AHA) cross-motion for a declaration of extra work and an inquest for payment. This ruling has been modified on appeal: the defendant’s motion is now denied, and the case is remanded for further proceedings. AHA was awarded two construction contracts by the New York City Housing Authority in 1990 for projects in the Bronx, with contract prices of $2,316,000 for the Jennings Project and $2.41 million for the Hoe Project. AHA claims that it was frequently directed to perform extra work through change orders, either verbally or in writing. Disputes arose regarding whether certain tasks were considered extra work or part of the original contracts, with mixed responses from the Housing Authority regarding change orders. AHA filed Notices of Claim on October 29, 1993, requesting $700,513.42 for the Jennings Project and $205,126.34 for the Hoe Project, citing additional drawings not included in the original contracts. Despite the City paying the contractual amounts, it refused compensation for the claimed extra work. AHA's lawsuit included four causes of action for breach of contract and unjust enrichment due to the Housing Authority's refusal to pay for extra work. The Housing Authority contended that AHA waived its right to recover by not adhering to contractually mandated notice and reporting requirements, specifically citing Article 51, which stipulates that no compensation claim for extra work can be pursued unless notice requirements are strictly followed.
Notice requirements in Article 27 stipulate that if the Housing Authority determines that work performed by a contractor is not extra work, the contractor must notify the Authority within 5 days that the work is being done "under protest" to avoid waiving claims for extra work. Additionally, contractors seeking damages due to the Housing Authority's actions must provide notice within 5 days and detailed proof of damages within 30 days, or risk waiver of their claims. Article 28 mandates that contractors performing extra or disputed work submit daily statements to the Housing Authority, detailing workforce, hours worked, and materials used.
AHA filed for summary judgment and an inquest for damages, claiming the Housing Authority was untruthful and acted in bad faith regarding the lack of documentation for AHA's extra work claims. AHA's president, James Liapakis, mentioned extensive correspondence and record-keeping, asserting that separate records for extra work could not be maintained due to physical constraints. AHA alleged that the Housing Authority's practice of ordering and then rescinding extra work constituted wrongful conduct and claimed misrepresentation regarding architectural drawings added post-contract signing.
The IAS Court granted the Housing Authority's summary judgment motion and denied AHA's cross motion, citing AHA's failure to meet the contract's notice and reporting requirements, which were strictly enforced. The court noted that strict compliance was required by the contract, barring AHA from recovering extra work costs. It also dismissed the unjust enrichment claims due to an express agreement covering the matter. In a subsequent motion for reargument, AHA reiterated claims of bad faith regarding the drawings and argued that some extra work should be exempt from daily reporting requirements and that the Authority had previously waived strict compliance.
On September 11, 1996, the IAS Court denied AHA's motion to reargue and renew. AHA appealed, claiming that material factual issues existed regarding the Housing Authority's bad faith and intentional misconduct in contract performance. The appellate court agreed, emphasizing that strict compliance with notice and reporting requirements in New York City construction contracts is mandatory for contractors to assert claims for additional work. Although AHA failed to comply with these requirements, the court noted that exculpatory clauses limiting liability may not be enforceable if the contractee has acted in bad faith or engaged in grossly negligent behavior.
AHA presented sufficient evidence suggesting the Housing Authority may have acted in bad faith, including instances where the Housing Authority directed AHA to perform work, issued change orders, and later rescinded them, claiming the work was contractually required. Additionally, AHA provided evidence of misrepresentation regarding contract drawings, asserting that the Housing Authority falsely claimed certain drawings were part of the original contract. The Housing Authority's defense was deemed insufficient to dismiss these claims as a matter of law.
The court found that AHA's evidence raised a triable issue regarding the Housing Authority's potential bad faith or gross negligence, despite dismissing AHA's unjust enrichment claims due to the existence of a valid written contract covering the same subject matter.
