IN RE: the Application of AWL Industries (2026)

This action arises from a retainage dispute about a New York City library renovation project. Plaintiff, AWL Industries, Inc., seeks a declaratory judgment under CPLR 3001, declaring that defendant, Armand Corporation, may withhold no more than five-percent retainage on progress payments under the parties' subcontract, and directing payment of the balance allegedly incorrectly withheld, $357,455.56.¹ (NYSCEF No. 1; NYSCEF No. 7). Armand opposes and seeks dismissal (NYSCEF No. 16). The motion is denied, and the action is dismissed.

BACKGROUND

In January 2017, the New York City Economic Development Corporation (EDC) entered into a construction-management-services agreement with defendant to renovate the Red Hook Branch Library at 7 Wolcott Street in Brooklyn. (See NYSCEF No. 17 at ¶¶ 3-4). In May 2023, defendant subcontracted with plaintiff to perform general construction on the project. (See NYSCEF No. 1 at ¶ 7; NYSCEF No. 3.) Plaintiff furnished performance and labor-and-material payment bonds in the full subcontract amount. (See NYSCEF No. 4.)

Section 4.02 of the subcontract provides that "[i]f Subcontractor provides a payment bond pursuant to this Section, then the retainage withheld pursuant to Section 5.01 of this Agreement, shall be reduced to five (5%) percent." (NYSCEF No. 3.) Notwithstanding plaintiff's furnishing of the bonds, defendant has withheld ten-percent retainage from each progress payment since January 2024. (See NYSCEF No. 1 at ¶ 13.) Plaintiff claims $357,455.56 in excess retainage. (See id.)

In seeking dismissal, defendant argues that (i) EDC, a not-for-profit corporation, is not bound by State Finance Law § 139-f or General Municipal Law § 106-b (2); (ii) the main contract—between EDC and defendant—authorizes continued ten-percent retainage when subcontractor performance is "questionable"; (iii) defendant may withhold payment under subcontract § 5.09 for plaintiff's subcontract breaches; (iv) plaintiff waived any challenge by submitting 21 payment requisitions listing ten-percent retainage; and (v) the amount that defendant owes plaintiff is conditioned on the amount that EDC pays defendant. (See NYSCEF No. 16).

DISCUSSION

I. Whether Declaratory Judgment is Proper

Defendant argues that declaratory relief is inappropriate because plaintiff's claim is strictly monetary and other remedies are available, such as a breach-of-contract action. Defendant also contends that subcontract § 22.05, titled "Waiver of Remedies," limits AWL to money damages by waiving "any and all rights and remedies . . . saving only the Subcontractor's right to money." (NYSCEF No. 3 at 43 [subcontract].) Defendant seeks dismissal of the action on these grounds.

Here, not only does plaintiff seek an adjudication of the parties' rights, but plaintiff also seeks payment of $357,455.56 in withheld retainage. Plaintiff claims entitlement to that sum based on the subcontract. But plaintiff has not asserted separate contract claims. (See Columbia Consultants, LLC v Danucht Entertainment, LLC, 222 AD3d 479, 481-482 [1st Dept 2023] [holding that declaratory-judgment claim may proceed when plaintiff raised no contract claims].) And "[t]he mere existence of other adequate remedies . . . does not require dismissal." (Morgenthau v Erlbaum, 59 NY2d 143, 148 [1983].) The court thus declines to dismiss the action.

II. General Municipal Law § 106-b and State Finance Law § 139-f

Plaintiff's declaratory-relief request is premised on General Municipal Law § 106-b and State Finance Law § 139 (f). These statutes direct contractors to pay their subcontractors from the proceeds received from the public owner of the project, minus a permissible retained amount. Under those provisions, contractors may not retain more than five percent of each payment to the subcontractor if the subcontractor provides the contractor with performance bond and a labor and material bond. Plaintiff argues that defendant's withholding of ten-percent retainage on progress payments violates these provisions.

Defendant argues that General Municipal Law § 106-b and State Finance Law § 139-f do not apply to EDC—the project's sponsor—and therefore that 106-b does not apply to AWL and Armand's subcontract for the project. Plaintiff contends in opposition that the library project is a "public works" project, in that the project is being paid for by public funds and being made for public use. (NYSCEF No. 20 at 4.) Plaintiff says that General Municipal Law § 106-b and State Finance Law § 139-f cover public-works projects.

1. This court agrees with defendant that General Municipal Law § 106-b does not apply to EDC. General Municipal Law § 106-b applies to "public owners"—defined as "the appropriate officer, board or agency of a political subdivision or of any district therein." (See General Municipal Law § 106-b.) A "[p]olitical subdivision" is a "municipal corporation, school district, district corporation and board of cooperative educational services." (Id. § 100 [1].) EDC is a not-for-profit development corporation. (See Tribeca Community Ass'n, Inc. v New York State Urban Dev. Corp., 200 AD2d 536, 537 [1st Dept 1994] [noting that EDC's enabling statute is Not-for-Profit Corporation Law § 1411 [c]].) And a not-for-profit corporation is not a municipal corporation, district corporation, or educational corporation.² (See General Construction Law § 66 [defining not-for-profit corporation separately from these other entities].) Therefore, notwithstanding that the library will provide a public function, this court is unpersuaded that the EDC is a "public owner" under General Municipal Law § 106-b. (See Executive Cleaning Services Corp. v New York State Dept. of Labor, 193 AD3d 13, 20-21 [3d Dept 2021] [holding that a public library does not constitute a municipal corporation under General Municipal Law § 100]; French v Board of Educ. of Three Vil. Cent. School Dist. of Brookhaven & Smithtown, 72 AD2d 196, 198-199 [2d Dept 1980] [holding that an "association" library that the public is free to use is not subject to General Municipal Law § 101 because, under Education Law § 253, it is a private organization, not a public corporation].)

2. State Finance Law § 139-f does not apply, either. That provision applies to "all contracts made and awarded by the state, or by any public department, or by any public benefit corporation or by any public corporation or official thereof." But the EDC is a not-for-profit corporation. It is neither part of the State or a public department; nor is it a public-benefit corporation or public corporation. (See General Construction Law § 66.)

The branch of plaintiff's motion for a declaratory judgment based on General Municipal Law § 106-b and State Finance Law § 139-f is denied.

III. The Parties' Subcontract

Plaintiff also argues that the parties' subcontract permits defendant to withhold no more than five-percent retainage. In opposition, defendant contends that because plaintiff's performance was unsatisfactory, EDC retained 10 percent when it paid defendant and therefore that defendant may, in turn, withhold 10 percent from plaintiff. This court agrees with defendant.

Section 5.01 of the subcontract provides that "Subcontractor shall be entitled to partial payment in such amount equal to the percentage approved for his Work completed, approved and paid by the Economic Development Corporation, less an amount necessary to satisfy any claims, liens, or judgments against Subcontractor which have not been suitably discharged, and less retainage equal to ten (10%) percent of the amount so computed." (NYSCEF No. 3 at 16.) Section 4.02 provides that "[i]f Subcontractor provides a payment bond pursuant to this Section, then the retainage withheld pursuant to Section 5.01 of this Agreement, shall be reduced to five (5%) percent." (NYSCEF No. 3 at 16.)

Section 5.04 (a) provides that payment to subcontractor must be made within seven days after "after receipt by Construction Manager of payment from the Economic Development Corporation for such Subcontractor's Work." (NYSCEF No. 3 at 18.) Section 5.04 (c) provides that receipt of funds from EDC is an "absolute pre-condition to the Subcontractor's right to payment" no matter whether "Subcontractor's Work is at issue between the Economic Development Corporation and Construction Manager, and regardless of the reason for the Economic Development Corporation's non-payment."

It is undisputed that EDC provided at least some funds to defendant, although the funds received encompassed a ten-percent retainage. The subcontract is unclear, however, about whether defendant's payments to plaintiff must be made on a five-percent-retainage basis (assuming plaintiff has posted a payment bond), when EDC's payments to defendant reflect ten-percent retainage.³

Defendant further argues, however, that it is permitted to withhold payment because plaintiff violated the subcontract—specifically by failing to finish its work by the deadline provided for in the contract. (NYSCEF No. 16 at 9.) Plaintiff does not address this argument in its reply papers.

Section 5.09 of the subcontract provides that defendant may withhold payment to protect itself from loss if it appears the work will not be timely completed; if the subcontractor does not perform in conformity with the contract documents; or if EDC withholds payments due to plaintiff's work. Defendant provides an affidavit from its project manager, Shamsell Abdill, who represents that plantiff provided incomplete and untimely performance to the extent that defendant issued a notice-to-cure letter to defendant in June 2025. (See NYSCEF No. 17 at 3 [affidavit]; NYSCEF No. 19 [notice to cure].) The court thus concludes that defendant has shown that it had sufficient justification to withhold complete payment.

The branch of plaintiff's motion for a declaratory judgment based on the subcontract is denied. The court does not reach defendant's argument that plaintiff waived its right to contest the ten-percent retainage.

Accordingly, it is

ORDERED that plaintiff's motion for a declaratory judgment is denied, and the action is dismissed, with costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further

ORDERED, ADJUDGED and DECLARED that retainage under the parties' subcontract is not subject to General Municipal Law § 106-b (2) or State Finance Law 139-f and that the subcontract does not prohibit defendant from withholding ten-percent retainage due to plaintiff's deficient or incomplete performance under the subcontract; and it is further

ORDERED that defendant shall serve notice of entry on plaintiff; and shall serve notice of entry on the office of the County Clerk (using the NYSCEF filing event "Notice to the County Clerk - CPLR § 8019 (c)"), which shall enter judgment accordingly.

DATE 6/11/2026

FOOTNOTES

1.   Plaintiff filed this matter as a petition rather than an action. Defendant contends that plaintiff's use of a verified petition and order to show cause is procedurally improper and warrants dismissal. (See NYSCEF No. 16 at 1-4). This court concludes, however, that the matter may proceed as a plenary action. (See CPLR 103 [c]; Fragoso v Romano, 268 AD2d 457, 457 [2d Dept 2000] [converting proceeding into an action for declaratory judgment].) For convenience, this court refers to the parties as "plaintiff" and "defendant."

2.   Moreover, the court is unpersuaded that a basis exists to sue the general contractor under General Municipal Law § 106-b. That statute governs a public municipality's obligations with respect to retainage, not the actions of private contractors. In addition, does not provide a private cause of action. (Mount Vernon City Sch. Dist. v Nova Cas. Co., 78 AD3d 1028, 1030 [2d Dept 2010] ["While this section of the General Municipal Law entitles a public owner to withhold funds, the statute does not create a private cause of action for a municipality's failure to retain such funds."] [internal quotation marks omitted], affd 19 NY3d 28 [2012].)

3.   Defendant points to EDC's contract with defendant, which, defendant says, is incorporated into the subcontract. (NYSCEF No. 16 at 6.) According to defendant, this main contract provides that "if the performance of the Subcontractors is questionable, the Corporation shall continue to hold 10% Retainage." (NYSCEF No. 12 at 127 [draft contract] [pdf pagination].) But that argument is in tension with the language of subcontract § 5.04 (c), which suggests that payment from EDC to defendant will trigger plaintiff's right to payment even if plaintiff's "Work is at issue between the Economic Development Corporation and [defendant]." (NYSCEF No. 3 at 19.)

Gerald Lebovits, J.