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PRICE BROS. CO. v. OLIN CONSTR. CO.

December 28, 1981

PRICE BROTHERS COMPANY and Erie County Water Authority to the use and benefit of Price Brothers Company, Plaintiffs,
v.
OLIN CONSTRUCTION CO., INC. and Fidelity and Deposit Company of Maryland, Defendants; FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Third-Party Plaintiff, v. George W. OLIN; Sherman D. Olin; and Camillus Airport, Inc., Third-Party Defendants



The opinion of the court was delivered by: ELFVIN

MEMORANDUM and ORDER

This action arises out of three separate contracts between Price Brothers Company ("Price") and Olin Construction Co., Inc. ("Olin") for the sale of pipe for use in two separate water transmission main projects, one with the Erie County Water Authority in 1977 and the other with the Niagara County Water District in 1978. Price alleges that Olin failed to pay a part of the purchase price and accumulated service charges. Defendant Fidelity and Deposit Company of Maryland ("Fidelity") had provided a labor and material payment bond for each project on behalf of Olin. As a supplier of materials to Olin, Price asserts that it is entitled to payment from Fidelity of any unpaid balances and service charges due from Olin. Price also seeks payment from Olin of the costs, expenses and attorney's fees incurred by it in this action. *fn1"

 Olin's Amended Answer asserts one affirmative defense and five counterclaims. The affirmative defense alleges that prior negotiations between Price and Olin regarding the amounts due relative to both projects had resulted in an agreement to offset any amount due Price from amounts due Olin from Price. Olin alleges that Price owes it an amount in excess of that claimed by Price to be due from Olin. In its first three counterclaims, Olin asserts that certain Snap Ring Joints provided by Price for use in the Erie County Water Authority project were defective, that Price thereby breached the express warranty contained in the August 1977 contract and an implied warranty of fitness for a particular purpose and that damages to Olin were subsequently caused solely by Price's negligence in the manufacture and/or supply of the Snap Ring Joints. By its fourth counterclaim, Olin seeks indemnity from Price with regard to a separate action to which Olin claims it was subjected solely by reason of Price's negligence. Olin's fifth counterclaim is based on fraudulent inducement to contract. The fraud counterclaim also states the basis for Olin's assertions that the contractual warranty limitations and exclusions, and claims procedures, are unconscionable.

 Price moved for partial summary judgment against Olin and Fidelity on its first three causes of action relative to the Niagara County Water District project, for an order striking Olin's affirmative defense and dismissing Olin's second through fifth counterclaims for the failure of each to state a claim. Olin moved for partial summary judgment on its first, second and fourth counterclaims. Fidelity moved for partial summary judgment against Olin and the third party defendants seeking indemnity for any amounts it may be required to pay to Price as a result of this action, together with its attorney's fees. Fidelity also moved for partial summary judgment dismissing Price's claims under the payment bond for service charges and attorney's fees.

 Following oral argument, I issued an Order pursuant to rule 54(b) of the Federal Rules of Civil Procedure *fn2" granting judgment to Price against Olin on its first, second and third causes of action relative to the Niagara County Water District project and against Fidelity on the first cause of action, granting judgment to Fidelity against Price dismissing the third and sixth causes of action as against it, further granting Fidelity judgment against Olin and the third-party defendants for any sums Fidelity may be required to pay Price and for the amount of Fidelity's attorney's fees in this action. I now turn to consideration of the remaining motions upon which I reserved decision.

 Olin's Affirmative Defense

 Olin asserts in its Amended Answer that, "on information and belief," as a result of settlement negotiations conducted prior to the commencement of this action, the parties agreed to offset against any amounts due Price under its contracts with Olin moneys due Olin from Price, which moneys exceed any amount owed to Price by Olin. Price seeks an order striking the affirmative defense pursuant to Fed.R.Civ.P. rule 12(e).

 To the extent that the affirmative defense merely reasserts Olin's contention that Price's debt to it exceeds Olin's debt to Price, that claim is fully set forth in Olin's counterclaims and is, as Price asserts, redundant. If offered as proof of settlement, it is inadequate under New York's General Obligations Law § 15-501. That section provides that an executory accord cannot be raised as a defense to a claim in the absence of a writing signed by the holder of the claim.

 For the foregoing reasons, the affirmative defense will be stricken insofar as it is redundant and merely repeats Olin's right to relief on its counterclaims. The remaining allegation concerning settlement also will be stricken, with leave to re-plead, if possible, in accordance with the requirements of section 15-501 of the General Obligations Law.

 Olin's Counterclaims

 Olin's Amended Answer asserts five counterclaims:

 (1) Breach of the express warranty contained in the contract between Price and Olin;

 (2) Breach of an implied warranty of fitness for a particular purpose;

 (3) Negligence;

 (4) Olin's expenses, costs and attorney's fees in a separate action; *fn3" and

 (5) Fraud.

 All of the counterclaims concern the August 1977 contract between Price and Olin for the sale of certain 48 prestressed concrete steel cylinder pipe with LCP Snap Ring Joints for use in the Erie County Water Authority water transmission main project. Olin claims that the Snap Ring Joints were defective and failed to seal properly.

 Olin seeks partial summary judgment on its first, second and fourth counterclaims. Olin asserts, as it must, that there is no material issue of fact as to these claims. Such is simply not the case. As to the first counterclaim, numerous material questions of fact exist including, among others, the presence of defects in the Snap Ring Joints, when and in what manner notice of the alleged defects was given to Price, Price's alleged refusal to repair or replace, any one of which precludes the granting of partial summary judgment as to the first counterclaim. *fn4"

 The same issues, and others, similarly preclude the granting of partial summary judgment as to Olin's second and fourth counterclaims. Olin's claim of breach of an implied warranty of fitness for a particular purpose presumes that such a warranty exists and, if it exists, that it has not been properly excluded by the contract and, if it exists and was properly excluded, that such exclusion is unenforceable by reason of fraud or unconscionability. Without reciting each and every question of fact involved in these claims, it is ...


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