Movant's application for late claim relief is granted. Defendant's motion for
an order pursuant to Court of Claims Act § 9 (6) allowing defendant to
interplead the St. Paul Companies "and/or such other related or different surety
who may claim all or part of the contract balance" is denied as premature. The
proposed claim (movant's Exhibit F) seeks to recover the sum of $33,759.00 plus
interest and costs, an amount alleged to be due and owing on a construction
contract dated April 1, 1997 between B. Milligan Contracting Company, Inc. (B.
Milligan) and the State University of New York for Project No. SUNY # L 15076,
HSC 219.03 titled Vascular Angiography Suite Alterations, 3 West Wing,
University Hospital Contract No. DOF 5870. The original contract price of
$382,000 was modified by a change order in the amount of $35,320.00 which
reduced the contract price to $346,680.00. The contractor, B. Milligan, was
paid $312,921.00 leaving an unpaid balance of $33,759.00. It is alleged that
the outstanding balance represents two final payments in the amount of
$16,425.00 and retainage of $17,334.00 (see, Exhibit F). By invoice
dated March 22, 1999 B. Milligan requested payment of the outstanding balance
but took no further action to collect the amount due.
On June 29, 2000 B. Milligan filed for Chapter 7 Bankruptcy relief in the
United States Bankruptcy Court for the Northern District of New York
(see, Movant's Exhibit B). Movant Mary E. Leonard, Esquire was appointed
as trustee in bankruptcy for B. Milligan and on August 27, 2001 Howard D.
Olinsky, Esquire was appointed special counsel to the trustee by the Honorable
Stephen D. Gerling, Chief Judge of the U.S. Bankruptcy Court, Northern District,
replacing B. Milligan's former attorneys. Mr. Olinsky later acquired files
relative to the instant contract from Thomas Lynch, Esquire of Syracuse
following his court ordered withdrawal as attorney for B. Milligan in an action
brought in Supreme Court, Onondaga County by the St. Paul Companies (St. Paul).
Movant's counsel does not specify in his affidavit when the files were
Movant now moves for late claim relief pursuant to Court of Claims Act §
10 (6). Defendant opposed the motion and, in the event late claim relief was
granted, cross-moved for an order allowing the State to interplead the St. Paul
Companies and such other surety as may lay claim to the contract proceeds at
Subdivision 6 of section 10 of the Court of Claims Act permits this Court, if
the applicable Statute of Limitations set forth in article 2 of the CPLR has not
expired, to allow the filing of a late claim upon consideration of the
following factors: "whether the delay in filing the claim was excusable;
whether the state had notice of the essential facts constituting the claim;
whether the state had an opportunity to investigate the circumstances underlying
the claim; whether the claim appears to be meritorious; whether the failure to
file or serve upon the attorney general a timely claim or to serve upon the
attorney general a notice of intention resulted in substantial prejudice to the
state; and, whether the claimant has any other available remedy".
The motion filed on March 3, 2003 is timely in that a claim alleging breach of
contract is subject to the six year Statute of Limitations set forth in CPLR
§ 213 (2).
Turning to the statutory factors, this Court has broad discretion in deciding a
motion to permit the late filing of a claim (Ledet v State of New York,
207 AD2d 965) and the statutory factors are not exhaustive or one factor
controlling (Matter of Gavigan v State of New York, 176 AD2d 1117). The
most important factor is whether the potential claim has merit, as it would be a
futile exercise to permit litigation of a clearly baseless lawsuit (Savino v
State of New York, 199 AD2d 254).
Movant's counsel ascribes the delay in serving and filing the claim to his
alleged lack of knowledge of the contract's existence until the permitted
withdrawal of another attorney in a related Supreme Court action on various
bonds issued by St. Paul. As noted above, however, Mr. Olinsky was appointed
special counsel to the bankruptcy trustee on August 27, 2001. Since he failed
to advise the Court of the date on which he first allegedly acquired knowledge
of the potential claim the almost two year delay following his appointment is
deemed unexplained. This factor weighs against the movant.
The intertwined issues of notice, opportunity to investigate and prejudice will
be considered together. Movant alleges that the defendant has been aware of the
facts surrounding the contract from its inception and of B. Milligan's request
for payment of the unpaid balance on the contract since March 22, 1999. The
affidavit of Stephen Macko, Jr. and the exhibits attached to defendant's
opposition and cross-motion (particularly, Exhibits F-L) convince the Court that
the defendant was aware of B. Milligan's unsatisfied demand for payment and
conducted an investigation aimed at the amicable resolution of the issue with
St. Paul as surety. It does not appear from the submissions on the motion and
cross-motion that the defendant has been prejudiced by the movant's delay in
filing and serving the claim and the factors of notice, opportunity to
investigate and lack of prejudice favor granting the motion (Lockwood v State
of New York, 267 AD2d 832, 833).
As to the issue of merit, the proposed claim appears to present a potentially
viable cause of action for breach of contract. Despite defense counsel's
assertion that B. Milligan irrevocably assigned its rights to all proceeds under
the contract to its surety, United States Fidelity & Guaranty Co.,
(USF&G) now the St. Paul Companies, an assignment has not been
satisfactorily demonstrated on the motion. While Barbara Milligan's letter to
the State University of New York dated March 22, 1999 relied upon by the
defendant requests that future payments under the subject contract be made
jointly to B. Milligan and USF & G and forwarded to St. Paul Fire and Marine
Insurance Company this letter does not constitute an assignment of B. Milligan's
rights under the contract. Thus, at this stage of the proceedings the Court is
not persuaded that movant as trustee in bankruptcy of B. Milligan's estate lacks
standing to maintain this breach of contract action as alleged by the defendant.
Moreover, under the circumstances movant has met its burden of showing that the
claim is not patently groundless, frivolous or legally defective and there is
reasonable cause to believe that a valid claim exists (see, Rosenhack
v State of New York, 112 Misc 2d 967; Santana, Matter of v New York State
Thruway Auth., 92 Misc 2d 1).
As to the final factor, it does not appear that movant has any other legal
remedy available under the circumstances and this factor weighs in favor of
granting the application.
Movant is directed to file a verified claim with the Clerk of the Court and to
serve a copy thereof upon the Attorney General either personally or by certified
mail, return receipt requested, as provided in Court of Claims Act § 11 (a)
(i) within 30 days of service by defendant upon movant's counsel of a copy of
this decision and order.
The defendant cross-moved for an order permitting the interpleader of the St.
Paul Companies and/or such other related or different surety who may claim all
or part of the contract balance sought in the proposed claim. While it appears
that the St. Paul Companies may indeed have a right to claim all or part of the
contract proceeds which will be placed at issue upon the anticipated filing and
service of a verified claim no claim currently exists. Since no action is
currently pending in the Court defendant's motion for interpleader is denied as