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Gessin Electrical Contractors, Inc. v. 95 Wall Associates

June 10, 2010

GESSIN ELECTRICAL CONTRACTORS, INC., PLAINTIFF-RESPONDENT,
v.
95 WALL ASSOCIATES, LLC, DEFENDANT-APPELLANT, HRH CONSTRUCTION LLC, ET AL., DEFENDANTS.



Order, Supreme Court, New York County (James A. Yates, J.), entered October 16, 2009, which declared null and void the agreement between plaintiff and defendant 95 Wall Associates, dated September 22, 2008, and denied said defendant's motion for summary judgment dismissing the complaint as against it and for judgment on its counterclaim, unanimously affirmed, with costs.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Andrias, J.P., Saxe, Sweeny, Freedman, RomÁn, JJ.

104784/09

This action involves a claim for approximately $1.7 million in change orders that plaintiff, a contractor on a construction project, submitted to 95 Wall, the premises owner.

At a September 2008 meeting, attended by 95 Wall's chief financial officer, Joseph Moinian, and plaintiff's principals, David Wasserman and Cory Gessin, the parties, without counsel, agreed to resolve the dispute by having 95 Wall pay plaintiff $500,000. However, 95 Wall did not realize that about $1.09 million of plaintiff's claim had already been satisfied by payments from the general contractor. Accordingly, 95 Wall thought it was settling the full $1.7 million claim for $500,000, and plaintiff thought it was settling a $580,000 balance for $500,000.

After the meeting, 95 Wall's in house counsel drafted a one-page agreement that provided in relevant part: 1. Owner and Contractor agree to value all change orders and extras . . . arising from the date of the inception of the Contract at the sum of $500,000 (the "Extra Amount").2. Owner shall pay the Extra Amount as follows: (a) Owner shall make four payments of $75,000.00 each on a weekly basis. Contractor acknowledges receipt of 2 payments of $75,000.00 under this Agreement. The remaining weekly payments shall be paid on the date of full execution of this Agreement and on the same day in the following week; (b) Owner shall make four payments of $50,000.00, on the first business day of each month, commencing November 3, 2008 and on the first business day of each succeeding month thereafter.

The agreement also provided that plaintiff would not file any mechanic's lien as long as 95 Wall was not in breach, that lien waivers would be executed and held in escrow until each payment cleared, and that plaintiff would receive an additional $350,000 as a credit for certain rebates. Plaintiff signed the agreement without the benefit of counsel.

After 95 Wall paid the first $450,000 due under the agreement, it realized that it had already paid $1 million for change orders and took the position that plaintiff had been overpaid. When 95 Wall refused to make any further payments, plaintiff filed a mechanic's lien for $555,237 and brought this action to enforce it. 95 Wall answered, counterclaimed for a $493,603 alleged overpayment, and moved for summary judgment.

The motion court directed an evidentiary hearing on the issue of what the parties intended and understood their agreement to be. After hearing testimony, the court, noting that the agreement had been drafted by an attorney who had not attended the negotiation session, found that the future payment schedule was because [plaintiff's principal] thought he was owed the money and that was the payment schedule for the money he thought he was owed.There is no theft or fraud here, it is just a payment schedule of a settlement of what he thought he was, what he was owed.On the other hand, I agree that [95 Wall's principal] just probably was totally unaware of what . . . 95 Wall had paid out in total.. . . I conclude there was no meeting of the minds. I credit that Gessin thought he was settling the 580 thousand dollar claim for 500 thousand dollars. And I credit Mr. Moinian when he says he thought he was paying eight point two million [the contract price] plus 500 thousand and that was it.

Accordingly, the court denied 95 Wall's summary judgment motion and declared the contract null and void.

The courts should construe a contract in a manner that avoids inconsistencies and reasonably harmonizes its terms (James v Jamie Towers Hous. Co., 294 AD2d 268, 269 [2002]). Where internal inconsistencies in a contract point to ambiguity, extrinsic evidence is admissible to determine the parties' intent (see Federal Ins. Co. v Americas Ins. Co., 258 AD2d 39, 43 [1999]. The ultimate aim is to realize the parties' "reasonable expectations" through a practical interpretation of the contract language (see Sutton v East Riv. Sav. Bank, 55 NY2d 550, 555 [1982]). Even if parties intend to be bound by a contract, it is unenforceable if there is no meeting of the minds, i.e., if the parties understand the contract's material terms differently (see Brands v Urban, 182 AD2d 287 [1992]; see also McNamara v Tourneau, Inc., 464 F Supp 2d 232, 238 [SD NY 2006]).

Here, although paragraph 1 of the settlement agreement values all change orders arising from the date of the inception of the underlying contract at $500,000, paragraph 2 provides that plaintiff will be paid $500,000 on specified future dates, and paragraph 5 adds $350,000 more in rebates, which demonstrates that plaintiff never intended to return over $400,000 to 95 Wall; there was no meeting of the minds on this material term.

In Computer Assoc. Intl., Inc. v U.S. Balloon Mfg. Co., Inc. (10 AD3d 699 [2004]), the buyer's witness established that the buyer understood the computer software "service pack" addendum to the parties' contract included all the educational services he and his employees would need to use the software. When, shortly after contract execution, the seller tried to sell a separate education package at additional cost, the buyer sought to rescind the contract. In direct conflict with this testimony, the seller's witnesses established that they understood that educational services were not included in the contract price, but were to be included in a separate agreement. The Second Department found the language employed in the contract was not susceptible of only one meaning, and thus the contract was ambiguous as a matter of law. There was a ...


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