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UNITED STATES EX REL. PEROSI ELEC. CORP. v. MANSHU

July 25, 1996

UNITED STATES OF AMERICA FOR THE USE AND BENEFIT OF PEROSI ELECTRICAL CORPORATION, Plaintiff, against MANSHUL CONSTRUCTION CORP., et al., Defendants.


The opinion of the court was delivered by: LEVY

 LEVY, United States Magistrate Judge:

 This action arises out of a renovation and improvement project for the Community Facilities Building at the United States Naval Station in Staten Island, New York, (the "Project"). Defendant Manshul Construction Corp. ("Manshul") was the general contractor on the Project. Manshul hired plaintiff Perosi Electrical Corp. ("plaintiff" or "Perosi") as an electrical subcontractor. In this action, brought pursuant to the Miller Act, 40 U.S.C. §§ 270a and 270b. Perosi is seeking to recover from Manshul and its surety, defendant Aetna Casualty and Surety Company ("Aetna"), payments it claims it is owed for work performed and materials furnished in connection with the Project. Manshul is counterclaiming for damages it allegedly incurred in order to correct or complete work Perosi was under contract to perform.

 By stipulation dated February 20, 1996, the parties consented to a trial before a Magistrate Judge. Accordingly, a bench trial was held before me on March 20 and 21, 1996, at which three witnesses testified: Richard Perosi, an officer of the plaintiff corporation; Alfred Haugland, Project Manager for the defendant corporation; and George Oprescu, Senior Project Manager for the Maximum Electric Company, an electrical subcontractor that also contracted to perform work for the Project. For the reasons stated below, I find in favor of plaintiff Perosi, in the total amount of $ 83,713.33, plus interest.

 FINDINGS OF FACT AND CONCLUSIONS OF LAW

 On January 17, 1992, Perosi commenced performance of its obligations under the Electrical Subcontract Agreement. It is undisputed that, to date, Manshul has paid $ 720,245 to or on behalf of Perosi under that agreement. (See Amended Civil Pretrial Order at P 5) *fn2"

 Perosi's Claims

 Perosi contends that it duly completed and performed all of its obligations under the Electrical Subcontract Agreement, except as prevented or frustrated by Manshul's "material breaches": it thus seeks to recover the remainder of the balance due under that agreement, in the sum of $ 114,755, together with interest from February 17, 1994. (See First Amended Complaint at P 11). Perosi also seeks to recover for additional and extra work, not included in the Electrical Subcontract Agreement, that it claims Manshul directed it to perform and for which it claims it has not received payment. According to Perosi, such work includes: (a) furnishing control wiring for VAV boxes for the temperature control equipment; (b) remedying defective sheetrock cuts; (c) providing and maintaining temporary light and power to perform "miscellaneous site work" ordered by Manshul; (d) repairing ducts damaged by others; and (e) wiring a radio transmitter in the Administration Building. Perosi alleges that the fair and reasonable value of this extra work was $ 53,849.43; it thus seeks recovery of that amount, together with interest from February 17, 1994. Each of plaintiff's claims will be addressed in turn.

 The Electrical Subcontract Agreement

 The Electrical Subcontract Agreement, dated January 6, 1993, required Perosi to "supply all labor, materials and equipment necessary to complete all Electrical Work, as called for by the contract specifications and amendments and as shown on the contract drawings." Such work was to include, but was not limited to: (a) demolition and removal work, (b) electrical general requirements, (c) the underfloor raceway system, (d) overhead electrical work, (e) interior wiring systems, (f) interior switchboard, low-voltage, (g) pad mounted transformer (750 KVA), (h) interior lighting, (i) exterior lighting, and (j) the fire alarm and fire detecting system, all as described in the contract specifications and amendments. In addition, the agreement required Perosi to, inter alia, (1) furnish to the jobsite all extension cords as required, (2) provide all ground fault detectors as required, (3) provide all temporary light and power systems "for all days that work of the General Contractors trades shall be at the jobsite," (4) provide temporary site lighting as per the contract plans, specifications and amendments, (5) perform all site electrical work, including site lighting and all underground work, (6) furnish and install all new telephone ducts per the plans and specifications, (7) remove existing overhead electric lines, poles and transformers, as per the plans, specifications and amendments, (8) provide electrical lighting and power for the general contractor, (9) place all rubbish and debris into containers, for removal by others, (10) coordinate with other trades and provide coordination drawings, (11) provide all shop drawings, certificates as required by the Navy, test reports, catalogs and cuts, (12) perform all testing and provide all reports required for the Project, (13) furnish and install all underground work as per the plans, specifications and amendments, (14) provide all access doors related to its work, (15) furnish and install all electrical cells as shown on electrical drawing S-1, (16) furnish and install header trenches and covers, (17) furnish and install concrete bases for light poles, (18) provide all safety features including safety nets, goggles, signs, etc., and (19) furnish and install all sleeves required to be installed in foundation walls.

 Specifically excluded from the agreement were, inter alia, "control wiring," unless "shown on the electrical drawings under requirements of the electrical specifications," and "H.V.A.C. Control Wiring," defined by Richard Perosi at trial as "any control wiring that has to do with the heating, ventilating and air-conditioning system . . . ." (Trial Transcript ("Tr.") at 14).

 In addition, Paragraph 9 of the agreement, as amended, states in pertinent part:

 
Total payment to the Subcontractor for work performed hereunder shall be the total sum of $ 835,000 which sum shall be payable as follows: Payments to be made as work progresses and within ten (10) days of receipt of payment by General Contractor from the Owner, less ten percent (10%) retainage. Retainage to be paid within ten (10) days of receipt of payment of same by the General Contractor from the Owner.

 According to Richard Perosi's trial testimony, it was plaintiff's practice to submit requisition forms, or bills, to Manshul on a monthly basis, in order to receive payment for the work performed in the preceding thirty-day period. (Tr. at 18-19). Perosi submitted a total of twenty-four such requisition forms to Manshul in connection with work it performed for the Project. (Tr. at 19) Richard Perosi stated that, in order to determine the dollar amount of each requisition, Perosi's project supervisor, Al Santiago, would meet with a representative of Manshul and agree on a "percentage complete," which would be communicated back to Richard Perosi's office for submission. (Tr. at 23-24). It was Richard Perosi's understanding that Manshul was then expected to pay Perosi the amount billed, minus a "retainage," typically ten percent, which Richard Perosi described as an amount "that the general contractor holds to make sure the job gets completed." (Tr. at 25). Nevertheless, Mr. Perosi did not explain how he reached that understanding or describe any communications with Manshul in which such an arrangement was discussed. Nor did he personally witness any conversations or meetings in which Mr. Santiago and a representative of Manshul discussed or agreed on a "percentage complete."

 According to a payment summary sheet prepared by plaintiff and admitted in evidence as Exhibit 42, Perosi submitted requisitions totaling $ 835,000 and received payments totaling $ 704,730. Perosi thus claims that Manshul owes it $ 109,395 for work performed pursuant to the agreement, plus $ 20,875 in retainage, for a total of $ 130,270. Taking into account the $ 15,515 paid by Manshul directly to Hallmark Electric, in settlement of claims made by Hallmark Electric against Perosi for labor and materials provided in connection with the Project, Perosi's actual claim is for $ 114,755, plus claims for "extra" work, discussed in more detail below.

 Despite his statements concerning the alleged agreement between Perosi and Manshul regarding billing for work performed pursuant to the contract, Richard Perosi testified that Manshul often paid plaintiff less than the amount billed on the requisition form, so "the payments never matched or corresponded to the requisitions." (Tr. at 25-26). Indeed, on at least four occasions Manshul paid Perosi amounts ranging from $ 10,000 to $ 36,000 without having received a requisition for work performed.

 Contrary to Mr. Perosi's description of the requisition process, Alfred Haugland testified that the procedure was as follows:

 (Tr. at 166). Thus, Mr. Haugland testified that it was common for subcontractors, including Perosi, to be paid less than the amount of their requisitions depending on Manshul's and the Navy's determinations concerning the percentage complete. (Tr. at 167).

 More significantly, however, Mr. Perosi admitted on cross-examination that he only visited the job site "once every couple of weeks. . . usually for about an hour." (Tr. at 61). Thus, he did not supervise his employees on a daily, or even a weekly, basis. Mr. Perosi further testified that his company did not maintain time sheets or payroll records for regular contract work related to the Project. (Tr. at 62, 76) Accordingly, Mr. Perosi has no direct, personal knowledge of what work was performed, by whom and when, and maintained no documentation to show what work his company completed. Of course, plaintiff bears the burden of proving its claims by a preponderance of the evidence. Richard Perosi's bare, unsubstantiated assertion that his company performed all of the work required under the Electrical Subcontract Agreement, without more, is insufficient to satisfy that burden.

 Notwithstanding plaintiff's failure to produce testimony from witnesses with personal knowledge, or some other documentation to support its assertion that it complied with all of its obligations under the contract, defendant concedes that Perosi is entitled to the full contract price minus backcharges for the work it failed adequately to perform or complete. (See Defendants' Post-Trial Brief at 15). Accordingly, each of Manshul's claimed backcharges will be addressed in turn.

 "Punch List" Work

 Among the tasks plaintiff was required to perform under the Electrical Subcontract Agreement were items contained on various "punch lists." In his trial testimony, Richard Perosi described "punch list" work as follows:

 
After an inspector visits the site and inspects all the work, he'll come up with work that is not to his liking or to the specs and he'll put on a list and the list has to be taken care of by whoever's responsibility it is.

 (Tr. at 31). Thus, a punch list is a list of corrective work to be completed. (Tr. at 68) Mr. Perosi testified that at some point, Manshul presented him with a punch list and the plaintiff company performed the work included on that list. (Tr. at 31, 67-68). A letter from Al Santiago, Project Manager for Perosi, to Lawrence Horowitz, Project Manager for Manshul, dated March 3, 1994, purports to confirm that Perosi completed at least some of that work. The letter, which was received in evidence as Exhibit 73, states in relevant part:

 
The electrical contract work on this project has been on a "Beneficial Occupancy Status" going back prior to February 7, 1994. This includes completing preliminary punch list work, dated 1/28/94 for the Third Floor, 2/1/94 for the Second Floor and 2/14/93 for the First Floor, generated by your C.Q.C. representatives.
 
The exceptions to the above are approximately 11 light fixtures that are being replaced for defective reasons ...

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