New York State Court of Claims

New York State Court of Claims

SARBRO IX v. THE STATE OF NEW YORK, #2002-001-069, Claim No. 104627, Motion Nos. M-65021, CM-65310


Synopsis



Case Information

UID:
2002-001-069
Claimant(s):
SARBRO IX, d/b/a SHELDON HALL ASSOCIATES, and SARKISIAN BROS., INC.
Claimant short name:
SARBRO IX
Footnote (claimant name) :

Defendant(s):
THE STATE OF NEW YORK
Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
104627
Motion number(s):
M-65021
Cross-motion number(s):
CM-65310
Judge:
SUSAN PHILLIPS READ
Claimant's attorney:
O'Connor, Gacioch, Pope & Tait, LLPBy: Alan J. Pope, Esq., Of Counsel
Defendant's attorney:
Hon. Eliot Spitzer, NYS Attorney GeneralBy: C. Michael Reger, Esq., Assistant Attorney General, Of Counsel
Third-party defendant's attorney:

Signature date:
September 6, 2002
City:
Albany
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision

The following papers were read and considered on defendant's motion for summary judgment and claimants' cross motion for summary judgment pursuant to CPLR 3212: Notice of Motion, dated and filed April 10, 2002; Affidavit of C. Michael Reger, Esq., AAG, sworn to and filed April 10, 2002, with Exhibits A-Q;[1] Affidavit of Kevin E. Jones, Esq., sworn to and filed April 10, 2002; Defendant's Memorandum of Law, dated and received April 10, 2002; Notice of Cross Motion, dated June 4 and filed June 5, 2002; Affidavit of Alan J. Pope, Esq., sworn to June 4 and filed June 5, 2002, with annexed Exhibits 1-5; Claimants' Memorandum of Law, dated June 4 and received June 5, 2002; Reply Affidavit of C. Michael Reger, Esq., AAG, sworn to June 11 and filed June 12, 2002, with annexed Exhibits R-X; Defendant's Reply Memorandum of Law, dated June 11 and received June 12, 2002; the Claim, dated July 19 and filed July 24, 2001; and Verified Answer, dated September 4 and filed September 18, 2001.
  1. Background
  1. Prior proceedings

Claimants Sarbro IX, d/b/a Sheldon Hall Associates ("Sarbro IX"), a limited partnership, and Sarkisian Brothers, Inc. ("Sarkisian") (collectively, "claimants") filed this claim on July 24, 2001. The events underlying this claim, which spans nearly two decades, were partially summarized by the Appellate Division, Third Department, in a factually related CPLR article 78 proceeding:
In July 1985, [Sarbro IX] contracted with the State [of New York] for the conversion of Sheldon Hall on the campus of the State University of New York at Oswego in Oswego County into a hotel and conference center and subsequent operation of the facility under a 40-year lease. In 1988, a dispute arose as to whether the job was a public work project subject to the prevailing wage requirement of Labor Law § 220. Ultimately, the controversy was settled with a $30,000 payment and agreement by Sarbro IX and [Sarkisian], the general construction contractor on the project, that all remaining work would be subject to the applicable prevailing wage rate schedule.[[2]] Thereafter, Sarbro IX brought two claims against the State seeking damages for breach of the Sheldon Hall lease agreement. The actions [Claim Nos. 88143 and 91028] were settled for $2.6 million, which the State agreed to pay to Sarbro IX. The State paid only $2,275,000, however, withholding the $325,000 balance in accordance with notices issued by the Department of Labor for prevailing wage rate deficiencies on the project

(Matter of Sarbro IX v McGowan, 271 AD2d 829).

Sarbro IX thereafter moved in the Court of Claims for an order to compel the State of New York ("the State") to release the withheld funds or, alternatively, to set aside the stipulation of settlement (see, Sarbro IX d/b/a/ Sheldon Hall Assocs. v State of New York, Ct Cl, unreported decision filed July 27, 1998, McNamara, J., M-57503 [Reger Aff., Exh. G]). Judge McNamara denied Sarbro IX's motion for want of subject matter jurisdiction over the Department of Labor ("DOL")'s prevailing wage rate determinations (id., at 2). He also denied the request to set aside the stipulation, observing that Sarbro IX had unsuccessfully "attempted to have incorporated into the Stipulation of Settlement a provision to withdraw any [DOL] enforcement proceeding concerning the payment of prevailing wages on the Sheldon Hall project"; therefore, "allowing the stipulation to be set aside on the basis that enforcement action was taken would give [Sarbro IX] a benefit it did not bargain for" (id., at 3).

On July 23, 1998, claimants also commenced a CPLR article 78 proceeding to annul both DOL's notice to withhold the $325,000 from the settlement monies and a number of notices of hearing for alleged underpayment of prevailing wages by three subcontractors who had performed work on the Sheldon Hall project (Reger Aff., Exh. H [Petition]). Supreme Court granted so much of the petition as sought release of the $325,000[3] and denied the remainder of claimants' petition (Affidavit of Alan J. Pope, Esq., sworn to June 4 and filed June 5, 2002, with annexed Exhibits 1-5 ["Pope Aff."], Exh. 1; Reger Aff., Exh. I). The State appealed from this judgment, but released the funds to Sarbro IX while the appeal was pending when it was determined that Sarkisian, not Sarbro IX, was the general contractor for the Sheldon Hall project for purposes of enforcing article 8 of the Labor Law (Affidavit of Kevin E. Jones, Esq., sworn to and filed April 10, 2002 ["Jones Aff."], ¶ 41, Reger Aff., Exh. J and Exh. M, at 2, 5-6). The Appellate Division subsequently dismissed the State's appeal as moot (Matter of Sarbro IX v McGowan, 271 AD2d 829, supra).
  1. This claim
On July 24, 2001, claimants filed this claim, which seeks essentially three distinct types of relief. First, Sarbro IX seeks interest on the $325,000 withheld from the settlement payment at the statutory rate of 9% (State Finance Law § 16) for the period from March 30, 1998 to July 29, 1999, or $39,000 (claim, dated July 19 and filed July 24, 2001 ["claim"], ¶¶ 36, 39); and its legal expenses and attorneys' fees in an amount exceeding $50,000 related to the previously discussed Court of Claims motion (M-57503), the CPLR article 78 proceeding in Supreme Court and its response to the State's appeal of Supreme Court's decision and order (claim, ¶¶ 39, 41). For its part, Sarkisian seeks $188,646.44 for allegedly improper cross-withholding of payments owed to it from a construction project for the State University Construction Fund at the New York State College of Agriculture and Life Sciences at Cornell University, which resulted from the alleged failure of three subcontractors on the Sheldon Hall project to pay prevailing wages (Labor Law §§ 220-b [2] [a], 223; Matter of Pav-Lak Contr. v McGowan, 184 Misc 2d 386, 389) (claim, ¶¶ 37, 40).

In answering the claim, the State interposed a number of affirmative defenses, including that the notice of intention[4] was not served within the time periods required by Court of Claims Act §§ 10 (3) and (4) (Verified Answer, dated September 4 and filed September 18, 2001 ["answer"], ¶¶ Sixteenth and Seventeenth) and, relatedly, that the claim was untimely filed and served pursuant to Court of Claims Act §§ 10 (3) and (4) (id., ¶¶ Eighteenth and Nineteenth).
  1. This Motion and Cross Motion
The State has now moved for summary judgment pursuant to CPLR 3212 to dismiss the entire claim (Notice of Motion, dated and filed April 10, 2002); claimants have cross-moved for summary judgment for the damages alleged (Notice of Cross Motion, dated June 4 and filed June 5, 2002).
  1. Sarbro IX's claim for interest on the $325,000 withheld from the settlement payment, legal expenses
    and attorneys' fees
The State first attacks so much of the claim as seeks interest on the $325,000 withheld from the settlement payment, legal expenses and attorneys' fees by assailing the claim's timeliness, a defense preserved in its answer (see, Court of Claims Act § 11 [c]). The notice of intention served upon the Attorney-General on August 30, 1999, the State argues, could not operate to extend Sarbro IX's time to serve and file a claim for such damages inasmuch as it was served outside the time period mandated by the Court of Claims Act in the first instance (Reger Aff., ¶¶ 4-10; Defendant's Memorandum of Law, dated and received April 10, 2002 ["Defendant's Mem."], 3-6). At best, the State explains, Sarbro IX failed to serve the Attorney-General within the six-month time period following accrual, as specified in Court of Claims Act § 10 (4), which sets filing and service time limits for claims not "otherwise provided for" (Court of Claims Act § 10 [4]).[5] Thus, the claim, served and filed almost two years later, was also untimely and the Court has no jurisdiction to entertain it.

Claimants, by way of the cross motion, contend that Sarbro IX's action for interest, legal expenses and attorneys' fees related to the $325,000 withheld from the settlement payment was timely commenced because the Attorney-General was served with the notice of intention within a month after July 29, 1999, the date when these funds were released and, accordingly, the cause of action accrued (Pope Aff., ¶¶ 3-5; Claimants' Mem., 1-2).[6] Thus, Sarbro IX contends that the claim was also timely because it was served within two years of this purported accrual date (id.).
  1. Interest on the withheld settlement funds
Assuming for the moment that interest on the $325,000 is recoverable in an action against the State for damages in this Court,[7] such a claim would accrue when the damages are reasonably ascertainable (see, Arbor Hill Partners v New York State Commr. of Housing & Community Renewal, 267 AD2d 675; Augat v State of New York, 244 AD2d 835, lv denied 91 NY2d 814).

Here, the $325,000 was withheld in March 1998 (Reger Aff., ¶ 5; Jones Aff., ¶ 27; claim, ¶ 36); Sarbro IX filed its motion in the Court of Claims to compel its payment or to withdraw the stipulation of settlement on May 19, 1998; Supreme Court's decision and order in Sarbro IX's CPLR article 78 proceeding, which vacated the notices to withhold the $325,000, was dated July 28 and judgment entered on October 7, 1998; and, according to claimants, these withheld settlement funds were released on July 29, 1999 (see, n 6, supra). If the Court were to accept July 29, 1999 as the date damages were first "reasonably ascertainable" for purposes of the claim's timeliness, it would follow that the "earliest ascertainable date the cause of action existed" for purposes of computing interest on the judgment would be the same (see, CPLR 5001 [b]; Malsin v Stockman, 265 AD2d 533, 534 [in an action to recover on a promissory note interest computed from earliest ascertainable date cause of action existed]). Obviously, no interest would be due if the cause of action accrued on the same day the funds were released. Instead, of course, Sarbro IX seeks interest from March 30, 1998, when the $325,000 was first withheld from the settlement payment, because this date, and certainly no date later than October 7, 1998 when Supreme Court vacated the notices to withhold, marks the point in time when damages were "readily observable and ascertainable, albeit . . . indefinite to some extent" (Ton-Da-Lay Ltd. v State of New York, 70 AD2d 742, 743, lv denied 48 NY2d 612; see, Arbor Hill Partners v New York State Commr. of Housing & Community Renewal, supra; Johnson v State of New York, 131 Misc 2d 630, 633, quoting Schmidt v Merchants Despatch Transp. Co., 270 N.Y. 287 [injury occurs and the action accrues when "there is a wrongful invasion of personal or property rights"]).

"The Court of Claims does not obtain jurisdiction to adjudicate a claim unless the claimant timely files a claim or a notice of intention to file a claim" (Selkirk v State of New York, 249 AD2d 818, 819; see, Alston v State of New York, 97 NY2d 159). Sarbro IX's notice of intention, served more than 10 months after Supreme Court's decision and order and well over a year after the date of the withholding was, therefore, untimely as is so much of the claim as seeks interest on the $325,000 withheld from the settlement payment (Court of Claims Act § 10 [4]).
  1. Legal fees and expenses
Although claimants characterize the sought after legal fees and expenses as "damages that flow from the independent liability on the part of the State" (Claimants' Mem., 4), they seek to recover legal fees and expenses "for the motion in the Court of Claims [to compel payment or set aside the stipulation of settlement], the motion in . . . Supreme Court [to annul the withholding], the response to the State's appeal of Justice Monserrate's July 28, 1998 Decision and Order, and additional fees in connection with this action" (claim, ¶ 41).

First, Court of Claims Act § 27 provides that, except in certain enumerated instances not applicable here, "costs, witnesses' fees and disbursements shall not be taxed, nor shall counsel or attorney's fees be allowed by the court to any party". Thus, as a jurisdictional matter, claimants are precluded from seeking legal expenses and attorneys' fees related to the motion decided by Judge McNamara (see, Gittens v State of New York, 175 AD2d 530; Taylor v State of New York, 160 Misc 2d 120).

Sarbro IX's claim for legal expenses and attorneys' fees related to the CPLR article 78 proceeding and appeal is also infirm: the vehicle for such recovery, had Sarbro IX availed itself of it, was by way of Article 86 of the CPLR. Claimants' attempt to recharacterize the relief sought as "business expenses and costs" (Claimants' Mem., 3) does not alter this.

Article 86 of the CPLR[8] provided Sarbro IX with a means to recover fees and expenses incurred after it sought judicial review of DOL's issuance of notices to withhold payment (see, Matter of Greer v Wing, 95 NY2d 676): the "New York State Equal Access to Justice Act" (CPLR 8600 et seq.) allows a prevailing petitioner to recover fees and expenses provided that the court does not find that the State's position was "substantially justified" or that "special circumstances make an award unjust" (see, CPLR 8601; 8602). The "substantially justified" qualifier was meant to insulate the State from payment of attorneys' fees except in those instances where it could be established that an agency had no fair basis for its action. By requiring this threshold showing, the Legislature intended to negate any potential chilling effect on diligent agency action (see, Bill Jacket, L 1989, ch 770; Governor's Mem. approving L 1989, ch 770, McKinney's Session Laws of NY, at 2436).

This Court does not have jurisdiction to award money damages for a State agency's alleged wrongful act if to do so would require the overturning or annulment of the agency's administrative determination (see, Ouziel v State of New York, 174 Misc 2d 900, 905), and thus likewise may not determine whether an agency's action was "substantially justified" (CPLR 8601 [a]). Only Supreme Court could have made that determination (see, Matter of Sutherland v Glennon, 224 AD2d 819 [application for attorneys' fees should be made in the court of original instance]). In short, Sarbro IX cannot circumvent the statutory requirements of CPLR article 86 by recasting the relief sought as a claim for money damages in the Court of Claims (see, generally, Lublin v State of New York, 135 Misc 2d 419, 420, affd 135 AD2d 1155, lv denied 71 NY2d 802).
  1. Sarkisian's claim seeking $188,646.44 for the allegedly improper cross-withholding
The State explains in its moving papers that the sum of $188,646.44 represents the cross-withholding for deficiencies arising out of the Sheldon Hall work for which Sarkisian was the general contractor, and matches to the penny the amount released to the underpaid workers of several subcontractors who worked at Sheldon Hall (Jones Aff., ¶¶ 44-47, Exh. Q). DOL's cross-withholding determinations were unsuccessfully challenged administratively (Jones Aff., ¶ 44, Exhs. N-O) and subsequently confirmed by the Appellate Division (Jones Aff., ¶ 45; Matter of Nelson's Lamp Lighters v New York State Dept. of Labor, 267 AD2d 937; Matter of Sarbro Realty Corp. v McGowan, 267 AD2d 939, lv denied 94 NY2d 763).

Claimants do not appear to contest this. Instead, besides stating that "the State improperly confiscated and took [c]laimant's monies in the amount of $188,646.44" on March 27, 2001 (Claimants' Mem., 2; see, Reger Aff., Exh. Q), claimants somewhat confusingly argue that this portion of the claim (i.e., its exposure to prevailing wage deficiencies arising out of Sheldon Hall work of subcontractors) was an aspect of damages not encompassed by the settlement agreement settling Claim Nos. 88143 and 91028, and that the present claim is not challenging DOL's enforcement of the Labor Law, but rather somehow arises out of the alleged breach of the development and lease agreements, which were the cornerstone of Sarbro IX's settled claims (Claimants' Mem., 5-8; Pope Aff., ¶¶ 17-35).

Notwithstanding claimants' contention that this portion of the claim "is not an attempt to contest enforcement of Article 8 by the [DOL]" (Pope Aff., ¶ 25 [emphasis in original]), in order for the Court to agree with claimants that Sarkisian is entitled to $188,646.44 of "improperly confiscated" funds on account of DOL's cross-withholding notices, it would first have to determine that this withholding of payment was somehow improper and, second, would have to ignore, as it cannot, the Appellate Division's confirmation of the agency's action. The limitations of this Court's jurisdiction (see, Ouziel v State of New York, 174 Misc 2d 900, 905, supra; Bertoldi v State of New York, 164 Misc 2d 581, 587, supra) as well as the doctrine of stare decisis preclude this cause of action.
  1. Conclusion
Based on the foregoing, the Court grants defendant's motion for summary judgment and denies claimants' cross motion for summary judgment. The claim is dismissed in its entirety.


September 6, 2002
Albany, New York

HON. SUSAN PHILLIPS READ
Judge of the Court of Claims




[1]Exhibits F and H are separately bound.
[2]This April 1992 Stipulation of Settlement and Release pertained only to claims for underpayment of prevailing wage rates at Sheldon Hall listed in an audit covering the period May 7, 1987 through November 18, 1988 (Affidavit of C. Michael Reger, Esq., AAG, sworn to and filed April 10, 2002, with Exhibits A-Q ["Reger Aff."], Exh. N, at 29; Exh. O, at 12 n *, 30-31; see, Matter of Sarbro Realty Corp. v Sweeney, 238 AD2d 967, lv denied 91 NY2d 810).
[3]Supreme Court principally relied on the April 1992 Stipulation which, it concluded, had settled any claims for unpaid wages up to that date (see, Pope Aff., Exh. 1, at 5 ["petitioners' motion to vacate the notices to withhold payment will be granted on the strength of the parties' April 16, 1992 agreement to settle claims for pre-April 1991 unpaid wages for the sum of $30,000.00"]). As noted in n 2, supra, this settlement appears, in fact, to have been more limited.
[4]The notice of intention was served on behalf of Sarbro IX only (Reger Aff., Exh. D).
[5]In pertinent part the statute states that such a claim "shall be filed and served upon the attorney general within six months after the accrual of such claim, unless the claimant shall within such time serve upon the attorney general . . . a notice of intention . . . in which event the claim shall be filed and served upon the attorney general within two years after such accrual" (Court of Claims Act § 10 [4]).
[6]Claimants state that the $325,000 was not released until about July 29, 1999 (Claimants' Memorandum of Law, dated June 4 and received June 4, 2002 ["Claimants' Mem."], 1). The State, on the other hand, avers that the withholding was voluntarily released on April 6, 1999 (Reger Aff., ¶¶ 21-23; Jones Aff. ¶¶ 41-42). This factual discrepancy is irrelevant to the resolution of these motions.
[7]The Court seriously doubts that it is. The right to interest is purely statutory and absent a statutory exception, not present in this case, may not be obtained upon review of an administrative agency's action (see, Matter of Patrick v Perales, 172 AD2d 279, lv denied 78 NY2d 862; Matter of Gross v Perales, 133 AD2d 37, affd 72 NY2d 231; Matter of Gordon v Board of Educ. of City of New York, 52 Misc 2d 175). Since Sarbro IX could not recover interest against the State in the CPLR article 78 proceeding, the Court is hard-pressed to see how this relief might nonetheless be available in the Court of Claims, where jurisdiction is limited to awarding damages in tort or contract (see, Bertoldi v State of New York, 164 Misc 2d 581, 587, affd 275 AD2d 227, lv denied 96 NY2d 706).
[8]By definition, Court of Claims actions are not within the scope of CPLR article 86 (see, CPLR 8602 [a]).