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Zeus Construction Services, LLC v. Fame Construction, Inc.

Supreme Court of New York, Second Department

June 15, 2018

Zeus Construction Services, LLC, Respondent,
Fame Construction, Inc., Appellant, and Stamatis Stakias, Marika Stakias, Theodoros Toumazou, and "John Does," #1-10, Defendants.

          Jerri Papapanayotou, Esq., for appellant.

          King & King, LLP (Peter Kutil, Esq.), for respondent.


         Appeal from a judgment of the Civil Court of the City of New York, Queens County (Sally E. Unger, J.), entered September 24, 2014. The judgment, after a nonjury trial, awarded plaintiff the principal sum of $9, 020 as against defendant Fame Construction, Inc. and dismissed that defendant's counterclaim.

         ORDERED that the judgment is reversed, without costs, and the matter is remitted to the Civil Court for a new trial limited to a determination of defendant Fame Construction, Inc.'s defense of a setoff against the $9, 020 awarded to plaintiff, and its counterclaim, for the expenses it incurred in remedying alleged defects in plaintiff's work on the caulking of the rear yard and in plaintiff's work pertaining to stress cracks on the ground floor, "holes to steel plates," and "sealant," all of which were set forth in the punchlist, and for the entry of an appropriate judgment thereafter.

         In this action, plaintiff seeks to recover the principal sum of $9, 520 on its construction subcontract with defendant Fame Construction, Inc. (defendant). The action was brought against defendant and a number of individuals; however, the parties stipulated to the dismissal of so much of the complaint as was against the individuals. In its verified answer, defendant asserted a counterclaim for $7, 500, which demand was, in effect, increased at trial to $14, 800.

         At a nonjury trial, the testimony established that defendant was the general contractor on a project to construct a delicatessen in Astoria, New York. Michael Andreou was defendant's president. The premises were leased to Develop Your Taste Corp., the entity that was developing the delicatessen. Theodore Toumazou was both the principal of Develop Your Taste Corp. and the owner of Artemis Plumbing. Toumazou oversaw the work on the project and paid for the work. Eleni Klouvas was employed as the comptroller of Artemis Plumbing and frequently communicated on behalf of Toumazou. Plaintiff Zeus Construction Services, LLC was a construction company owned by Fotios Mihas and his wife.

         Defendant and plaintiff entered into a subcontract dated August 7, 2012, pursuant to which defendant hired plaintiff, as subcontractor, to perform work at the project, which initially included excavations, the installation of concrete, the application of stucco to a wall, and waterproofing an existing floor; the scope of the work was later extended to add rear yard concrete, among other items. The original subcontract price was $18, 920, which, with change orders, was increased to $34, 020.

         Under paragraph 4.1.5 of the subcontract, defendant, as contractor, had the authority to reject any of plaintiff's work which did not conform to the prime contract. Paragraph 3.4.1 of the subcontract provided that, if plaintiff defaulted or neglected to perform "in accordance with this agreement," and, within three days following the receipt of a written notice, failed to remedy "such default or neglect," then, after three days following plaintiff's receipt of an additional written notice, defendant could, "without prejudice to any other remedy [defendant] may have," "make good such deficiencies and... deduct the reasonable cost thereof" from payments due to plaintiff. The subcontract further stated, at paragraph 7.2.1, that, in the event of plaintiff's persistent or repeated failure or neglect to carry out the work of the subcontract and its failure "within seven days after receipt of written notice to commence and continue correction of such default or neglect with diligence and promptness," then, "after seven days following receipt by [plaintiff] of an additional written notice and without prejudice to any other remedy," defendant was entitled to terminate the subcontract, "to finish [plaintiff's] Work by whatever method [defendant] may deem expedient," and, in effect, to charge plaintiff with the cost thereof.

         Despite the August 7, 2012 subcontract date, plaintiff actually began performing excavations for the project on July 9, 2012. On July 12, 2012, the New York City Department of Buildings and the New York City Environmental Control Board issued violations because the excavations had been performed without permits; it was undisputed that Toumazou ultimately paid $5, 800 in fines as a result of the nonpermitted excavations that plaintiff had performed.

         The evidence at trial showed that, at least with respect to invoicing and the communication of a punchlist of deficiencies in plaintiff's work which, defendant asserted, required repair or remediation, the parties and their representatives had communicated in part through email. Plaintiff completed the bulk of its work before November 2012, following which the parties, through their representatives, had numerous communications concerning the adequacy of plaintiff's work. On December 18, 2012, Mihas, on behalf of plaintiff, sent an invoice by attaching it to an email to Klouvas. The invoice showed an unpaid balance of $9, 020 on the subcontract; in his email, Mihas referenced a meeting "we had" on December 17, 2012 and stated that "[a]ll work as discussed in meeting will be taken care within... the next couple of days, upon completion we will like to receive final payment." This was followed, on December 20, 2012, by an email from Mihas to Klouvas, stating that the punchlist, which he listed as including "caulking rear yard," "stress cracks ground floor," "holes to steel plates," and "sealant," had been completed, and, on December 29, 2012, by another email from Mihas to Klouvas which referenced a walk-through of the project. In his testimony, Mihas denied that plaintiff had received any objection to its invoice, but confirmed on cross-examination that he had received a letter signed by Toumazou, dated January 25, 2013, which had been the first response he had received to the December 2012 emails.

         In his testimony, Toumazou confirmed that he had signed the January 25, 2013 letter. Defendant first offered the letter into evidence following the testimony of defendant's president, Andreou, that he was familiar with Toumazou's signature and recognized it on the letter of January 25, 2013. The January 25, 2013 letter stated the following:

"As per our previous conversations and our emails to you over the past several weeks work at the above mentioned premises is defective and incomplete. If work is not completed as per our agreement by February 8, 2013 we will hire a new contractor to complete all work including your defective work and back charge you for any and all costs and expenses to have your work completed and corrected...."

         The Civil Court declined to admit to admit the letter into evidence on the ground that it was "not proper for this witness." After Klouvas testified that she had drafted the letter for Toumazou, that she had seen Toumazou sign the letter, and that she had thereafter mailed the letter by certified mail, return receipt requested, defendant again offered it into evidence. The court declined to admit the ...

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