WDF INC v. PEGNO CONSTRUCTION CORP TULLY CONSTRUCTION CO INC (2026)

DECISION & ORDER

In an action, inter alia, to recover damages for breach of contract, the defendants appeal from an order of the Supreme Court, Queens County (Janice A. Taylor, J.), entered April 21, 2022.  The order, insofar as appealed from, denied those branches of the defendants' motion which were for summary judgment dismissing the causes of action to recover damages for breach of contract and breach of the implied covenant of good faith and fair dealing or, in the alternative, on their first counterclaim.

ORDERED that the order is affirmed insofar as appealed from, with costs.

The facts of this case are more fully set forth in this Court's decision and order on a related appeal (see WDF, Inc. v A.J. Pegno Construction Corp./Tully Construction Co., Inc., ––– AD3d –––– [Appellate Division Docket No. 2022–03700;  decided herewith] ).

In November 2021, the defendants moved, inter alia, for summary judgment dismissing the second and fourth causes of action of the amended complaint, to recover damages for breach of a liquidating agreement and breach of the implied covenant of good faith and fair dealing, respectively, or, in the alternative, on their first counterclaim, for a judgment declaring that a release provision in the liquidating agreement (hereinafter the release) barred the plaintiff's second and fourth causes of action and otherwise limited the scope of those causes of action to the reasonableness of the costs and expenses incurred by the defendants during certain litigation with the New York City Department of Environmental Protection (hereinafter the City).  In an order entered April 21, 2022, the Supreme Court, among other things, denied those branches of the motion.  The defendants appeal.

“Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release.  If the language of a release is clear and unambiguous, the signing of a release is a jural act binding on the parties” (Centro Empresarial Cempresa S.A. v América Móvil, S.A.B. de C.V., 17 NY3d 269, 276 [citation and internal quotation marks omitted];  see JM UC Group, LLC v. Precious Care Mgt., LLC, 221 AD3d 877, 878).  “Ambiguity in a contract arises when the contract, read as a whole, fails to disclose its purpose and the parties' intent, or where its terms are subject to more than one reasonable interpretation” (Universal Am. Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 25 NY3d 675, 680 [citations and internal quotation marks omitted] ).  “[W]here a contract was negotiated between sophisticated, counseled business people negotiating at arm's length, courts should be especially reluctant to interpret an agreement as impliedly stating something which the parties specifically did not include” (Donohue v. Cuomo, 38 NY3d 1, 12 [internal quotation marks omitted] ).

Here, the plain language of the release demonstrated that the parties to the liquidating agreement released one another from liability for claims arising from their obligations with respect to the project and their performance of those obligations.  However, contrary to the defendants' contentions, the release is ambiguous as to whether it also applied to claims arising from the settlement of the claims against the City, claims arising from the liquidating agreement, and/or claims accruing after the execution of the release.  The defendants failed to establish, prima facie, that the parties to the liquidating agreement intended for the release to apply to these types of claims and, thus, failed to demonstrate that the release barred the second and fourth causes of action and otherwise limited the scope of those causes of action to the reasonableness of the costs and expenses incurred by the defendants during their litigation with the City, as those causes of action arose from the defendants' settlement of the claims against the City after the execution of the liquidating agreement and from the liquidating agreement itself.  Therefore, the Supreme Court properly determined that the defendants failed to establish their prima facie entitlement to judgment as a matter of law dismissing the second and fourth causes of action and on their first counterclaim based upon the release.

Furthermore, the defendants failed to establish, prima facie, that the second cause of action, to recover damages for breach of the liquidating agreement, should be dismissed because they demonstrated that they complied with the terms of the liquidating agreement.  Contrary to the defendants' contentions, the language of the liquidating agreement is ambiguous as to whether the defendants were required to share documents and information with the plaintiff regarding, inter alia, the calculation of the value of the defendants' claim against the City, the defendants' costs and fees incurred during their litigation with the City, and the methods used to calculate the defendants' claim.  The defendants failed to establish, prima facie, that the parties to the liquidating agreement did not intend for the liquidating agreement to require this type of disclosure.

Moreover, the defendants failed to establish, prima facie, that they complied with the plaintiff's requests for information and provided all the information requested.  Therefore, the Supreme Court properly denied that branch of the defendants' motion which was for summary judgment dismissing the second cause of action.

The defendants failed to establish that the fourth cause of action, to recover damages for breach of the implied covenant of good faith and fair dealing, should be dismissed on the merits.  The defendants failed to establish, prima facie, that the method used to calculate the value of their claim against the City was appropriate or that they did not improperly inflate the value of their claim in violation of the implied covenant of good faith and fair dealing.

The parties' remaining contentions either are without merit or need not be reached in light of our determination.

CHAMBERS, J.P., DOWLING, WAN and GOLDBERG VELAZQUEZ, JJ., concur.