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 plaintiff appeals from an order of the Supreme Court, Queens County (Janice A. Taylor, J.), entered April 19, 2022.  The order denied the plaintiff's renewed motion for summary judgment on the causes of action to recover damages for breach of contract and breach of the implied covenant of good faith and fair dealing insofar as asserted against the defendants A.J. Pegno Construction Corp./Tully Construction Co., Inc., and Tully Construction Co., Inc., and dismissing those defendants' counterclaims, to sever the cause of action to recover damages for breach of a subcontract for a trial on damages on that cause of action, and for an award of attorneys' fees pursuant to 22 NYCRR 130–1.1.

ORDERED that the order is affirmed, with costs.

The defendants prepared and won a bid to the New York City Department of Environmental Protection (hereinafter the City) for an award of a contract for a project at the Newtown Creek Water Pollution Control Plant (hereinafter the project).  The defendants thereafter hired the plaintiff as a subcontractor on the project.  After the project's completion was delayed, the defendants commenced an action against the City to recover damages based on the delays and their increased costs.

A.J. Pegno Construction Corp. and Tully Construction Co., Inc. (hereinafter together the joint venture defendants), and the plaintiff executed a liquidating agreement, which provided, among other things, that the joint venture defendants would prosecute the plaintiff's claim against the City for damages arising from the project delays.  The liquidating agreement also required the joint venture defendants and the plaintiff to cooperate with one another for purposes of prosecuting their claims, including the sharing of information and documents, set forth the formula by which the joint venture defendants and the plaintiff would share the costs of litigation and any amounts recovered, and contained a provision wherein each party to the liquidating agreement released the other from liability for claims arising from the project (hereinafter the release).  Thereafter, the joint venture defendants settled all claims against the City and distributed the amounts recovered as per the liquidating agreement.

The plaintiff commenced this action against the joint venture defendants, and another defendant, inter alia, to recover damages for breach of the liquidating agreement and breach of the implied covenant of good faith and fair dealing.  The defendants interposed an answer asserting counterclaims, inter alia, for a judgment declaring that 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 the litigation with the City and to recover damages for the plaintiff ‘s alleged improper valuation of the claim that the plaintiff submitted to the City.

The plaintiff moved for summary judgment on the causes of action to recover damages for breach of the liquidating agreement and breach of the implied covenant of good faith and fair dealing insofar as asserted against the joint venture defendants and dismissing the joint venture defendants' counterclaims, to sever the plaintiff's cause of action alleging breach of the subcontract by the joint venture defendants for a trial on damages on that cause of action, and for an award of attorneys' fees pursuant to 22 NYCRR 130–1.1. The Supreme Court denied the motion with leave to renew upon the submission of proper papers in compliance with the Uniform Rules.  Thereafter, the plaintiff renewed its motion, and in an order entered April 19, 2022, the court denied the plaintiff's renewed motion.  The plaintiff appeals.

The Supreme Court properly denied those branches of the plaintiff's renewed motion which were for summary judgment on the causes of action to recover damages for breach of the liquidating agreement and breach of the implied covenant of good faith and fair dealing insofar as asserted against the joint venture defendants (see Grala v. Structural Preserv.  Sys., LLC, 242 A.D.3d 1181, 244 N.Y.S.3d 576).  Contrary to the plaintiff's contentions, the plaintiff failed to establish, prima facie, that the parties intended for the provisions of the liquidating agreement requiring the parties to cooperate and share information to extend beyond the context of the prosecution of the claims against the City or that such provisions required the joint venture defendants to share documents and information to enable the plaintiff to review and challenge the joint venture defendants' disbursement of the amounts recovered.  Moreover, the joint venture defendants raised triable issues of fact, in opposition, as to whether they adequately responded to the plaintiff's requests for information to enable the plaintiff to review the claim valuations, costs incurred, and disbursement of amounts recovered.  The plaintiff also failed to establish, prima facie, that the joint venture defendants' method for calculating, inter alia, the amount of the joint venture defendants' damages was improper or resulted in the inflation of the value of the joint venture defendants' claims.

The Supreme Court also properly denied that branch of the plaintiff's renewed motion which was for summary judgment dismissing the joint venture defendants' counterclaims based upon the release.  “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 N.Y.3d 269, 276, 929 N.Y.S.2d 3, 952 N.E.2d 995 [citation and internal quotation marks omitted];  see JM UC Group, LLC v. Precious Care Mgt., LLC, 221 A.D.3d 877, 878, 201 N.Y.S.3d 98).  “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 N.Y.3d 675, 680, 16 N.Y.S.3d 21, 37 N.E.3d 78 [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 N.Y.3d 1, 12, 164 N.Y.S.3d 39, 184 N.E.3d 860 [internal quotation marks omitted] ).

Here, the plain language of the release demonstrated that the joint venture defendants and the plaintiff released one another from liability for claims arising from their obligations with respect to the project and their performance of those obligations.  However, the release is ambiguous as to whether it also applied to causes of action arising from the settlement of the claims against the City, claims from the liquidating agreement, and/or claims accruing after the execution of the release.  Since the plaintiff failed to submit any evidence demonstrating that the joint venture defendants and the plaintiff did not intend for the release to apply to such causes of action, the plaintiff failed to establish, prima facie, that the joint venture defendants' first counterclaim, for a judgment declaring that 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 the litigation with the City, must be dismissed.  Moreover, the plaintiff failed to establish, prima facie, that the joint venture defendants' second counterclaim, to recover damages for the plaintiff ‘s alleged improper valuation of the claims that it submitted to the City, must be dismissed.

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.