HANSON AGGREGATES v. NEW YORK STATE THRUWAY AUTHORITY, #2008-015-070, Claim No.
115013, Motion No. M-74968
In an action for breach of contract arising out of two construction contracts,
summary judgment on liability was granted in favor of the claimant on one
contract but denied on the other. Court held defendant may not defeat summary
judgment by the assertion of a right to set off which was not pleaded as an
affirmative defense or counterclaim.
HANSON AGGREGATES NEW YORK, INC.
Footnote (claimant name)
NEW YORK STATE THRUWAY AUTHORITY
Footnote (defendant name)
FRANCIS T. COLLINS
Gates & Adams, P.C.By: Anthony J. Adams, Jr., Esquire
Honorable Andrew M. Cuomo, Attorney General
EsquireAssistant Attorney General
September 26, 2008
See also (multicaptioned
Claimant moves for summary judgment on its claim asserting the defendant has
failed to pay monies due and owing under two highway construction contracts.
Claimant alleges causes of action for breach of contract, account stated,
unjust enrichment and quantum meruit with respect to two contracts. On or about
July 27, 2006 the parties entered into contract number TAS 06-42 / D213631
(hereinafter Contract 42) whereby in consideration of the sum of $8,962,404.15
claimant agreed to furnish all labor and materials for the reconstruction and
paving of 13.5 miles of the New York State Thruway between milepost 220.0 and
On or about October 31, 2006
the parties entered into contract number TAS 06-38 / D213584 (hereinafter
Contract 38) whereby in consideration of the sum of $6, 796,940.53 claimant
agreed to furnish all labor and materials for the reconstruction and paving of
7.4 miles of the New York State Thruway between milepost 233.5 and milepost
With respect to the work performed
under Contract 38, claimant alleges that the work was completed on or about
November 28, 2007 and that there is a balance due in the amount of
$1,589,538.38. With respect to the work performed under Contract 42, claimant
alleges the work was completed on or about August 31, 2007 and there is a
balance due in the amount of $1,024,886.99.
Because a portion of the work performed under Contract 42 was found
unacceptable, the defendant directed the claimant to remove and replace ten (10)
lane miles of pavement between mile posts 219.9 and 225.1. Inasmuch as
claimant asserted the pavement conformed to the contract specifications and
disputed that replacement was required, claimant completed the work and notified
the defendant the work would be performed on a "force account" basis (see
Exhibit M annexed to claim). A "force account" in the amount of
$669,127.08 was established and claimant seeks to recover this amount as well.
In support of its motion for summary judgment, the claimant submitted
affidavits and reports from its expert, Brian D. Prowell, Ph. D., P.E., the
verified claim and various correspondence received from the defendant. Dr.
Prowell states that he inspected the work performed pursuant to Contract 42 both
before and after replacement of that portion of the pavement deemed unacceptable
by the defendant. He opined that the work performed pursuant to Contract 42
conformed to contract specifications. He also rendered the opinion that had the
pavement not been removed and replaced in October 2007 it would have performed
In addition to the verified claim, the claimant submitted two letters from
Christopher A. Waite, P.E., an employee of the Thruway Authority, in support of
its motion for summary judgment on Contract 38. In the first letter, dated
February 13, 2008, Mr. Waite stated his intention to "close out" contract 38
and offset the balance due under Contract 38 ($1,583,000) against the amount
claimant was overpaid on Contract 42 ($2,300,000) (see claimant's Exhibit
In the second letter, dated April 9, 2008, Mr. Waite states "we are closing out
Contract TAS 06-38 and using the balance due to offset the overpayment on 06-42"
(see claimant's Exhibit D). This letter indicated that the portion of
the pavement which was removed and replaced in 2007 (for which the "force
account" was established) represented the worst of the problem pavement placed
pursuant to Contract 42. In addition, Mr. Waite indicated that the remainder of
the pavement work performed pursuant to the contact was not found to be
acceptable by the Authority due to "early performance problems". He indicated
that "at this time we do not intend to direct Hanson to remove additional
pavement we are willing to wait for the warmer days of summer to determine
whether or not the remaining pavement remains stable. If the pavement is found
acceptable we will close out the project and release all monies owed. Should
the pavement not perform as expected, we will be in contact to determine
remedial action" (claimant's Exhibit D).
In opposition to the claimant's motion for summary judgment, the defendant does
not dispute that the work performed pursuant to Contract 38 was acceptable. The
defendant states in this regard "It is not disputed that Claimant fully
performed its work under [Contract 38]. It is, however, disputed that it fully
performed its obligations under [Contract 42]" (defendant's Memorandum of Law,
In opposition to that branch of the claimant's motion seeking summary judgment
on Contract 42, the defendant submitted an affidavit from Ted C. Shields, who is
employed by the New York State Thruway Authority as a Civil Engineer I in the
Office of Construction Management. Mr. Shields inspected the pavement placed by
the claimant pursuant to Contract 42 and states the following in this
3. Because the newly laid pavement remained unusually soft and in somewhat of a
plastic state, the additional compaction attributed to wheel loads from traffic
forced the asphalt binder, dust and finer aggregate particles to the surface
while the larger aggregates shifted and interlocked deeper in the mat creating
segregation in the intended matrix.
4. The asphalt pavement exhibited atypical flushing; i.e., it was soft and was
possibly slippery and the plastic instability of the pavement could lead to
wheel rutting. Shortly thereafter, isolated wheel rutting was observed.
Mr. Shields indicates the claimant failed to follow contract specifications
because it did not include all of the additives in the liquid asphalt binder,
which included polyphosphoric acid (PPA), on the job mix formula submitted to
the defendant (Shields affidavit ¶¶ 5,6 and 7). He states that
sections 401-2.01 and 402-2.02 of the contract specifications require the
contractor to submit this information, and supports this contention with a copy
of the specifications (defendant's Exhibit B). Subsequent to the completion of
the work under Contract 42, the defendant issued Engineering Bulletin 08-014
which appears to prohibit the use of the PPA additive (defendant's Exhibit C,
Special Note #1).
Mr. Shields avers that the Thruway Authority rejected certain areas of the
asphalt pavement on Contract 42, which were subsequently removed and replaced at
the contractor's expense (Shields Affidavit, ¶ 11). Mr. Shields also
states the following:
13. In addition, the Thruway Authority has rejected $2,263,616 worth of asphalt
paving that did not meet specifications, on contract TAS 06-42. Claimant has
already been paid for this pavement through progress payments on that contract,
although, only work that meets contract specifications is eligible for payments.
An affidavit of Andrew M. Nagy, Claims Engineer for the New York State Thruway
Authority, indicates based upon his review of the records and paragraph 13 of
Mr. Shields' affidavit that claimant was "overpaid $2,263,616 for the paving
item under [Contract 42] because it has been paid for work that was not in
compliance with the specifications" (Nagy Affidavit, ¶ 3). He also
indicates that there is approximately $570,205 due claimant in unpaid items
other than paving, leaving a net balance due from the claimant in the amount of
$1,693,411 on Contract 42.
Mr. Nagy noted that the New York State Thruway Authority sent a check in the
amount of $170,693.37 to the claimant on May 27, 2008 (subsequent to the filing
of the instant motion), leaving a net balance due on Contract 38 in the amount
of $1,412,600. Referencing the setoff language of the contract, Mr. Nagy states
that "[t]his amount is being withheld to set-off money that is owed to the NYSTA
on [Contract 42]" (Nagy Affidavit, ¶ 9).
The defendant relies on the setoff language in its contract in opposing the
claimant's motion for summary judgment on Contract 38. The contract states in
this regard the following:
8. SET-OFF RIGHTS. The Authority/Corporation shall have rights of set-off.
These rights shall include, but not be limited to, the Authority's/Corporation's
option to withhold for the purposes of set-off any moneys due to the Contractor
under this contract up to any amounts due and owing by the Contractor to the
Authority/Corporation with regard to this contract, or any other contract with
the Authority/Corporation, including any contract for a term commencing prior to
the term of this contract, plus any amounts due and owing to the
Authority/Corporation for any other reason including, without limitation,
monetary penalties, adjustments, fees, or claims for damages by the
Authority/Corporation and third parties in connection therewith.
It is well established that " 'summary judgment is a drastic remedy and should
not be granted where there is any doubt as to the existence of a triable issue'
" (Rotuba Extruders v Ceppos
, 46 NY2d 223, 231 [citation
"The proponent of a summary judgment motion must make a prima facie showing of
entitlement to judgment as a matter of law, tendering sufficient evidence to
eliminate any material issues of fact from the case" (Winegrad v New York
Univ. Med. Ctr.
, 64 NY2d 851, 853 )
. Once the movant has made
this showing, the burden shifts to the party opposing the motion "to produce
evidentiary proof in admissible form sufficient to establish the existence of
material issues of fact which require a trial of the action" (Alvarez v
, 68 NY2d 320, 324  citing Zuckerman v City of
, 49 NY2d 557, 562 ).
Here, claimant established its prima facie entitlement to summary judgment on
the issue of liability on its cause of action for breach of contract with
respect to Contract 38. The claimant established in this regard that the work
performed pursuant to this contract was completed in accordance with the
contract specifications and that defendant failed to make payment in accordance
with the terms of the contract. The claim together with the defendant’s
answer thereto sufficiently established the existence of the contract and the
letters from Mr. Waite constitute admissions that the work conformed to the
contract specifications and that payment has not yet been made.
In opposition to that part of the motion relating to Contract 38, the
defendant does not dispute that the work conformed to contract specifications or
that money is owed. Rather defendant argues that the setoff clause contained in
the contract entitles it to offset the amount owed under Contract 38 against the
amount it asserts the claimant was overpaid for unacceptable work performed
pursuant to Contract 42.
CPLR 3019 (a) describes a counterclaim as including any cause of action in
favor of a defendant as against a plaintiff alleged to be liable. CPLR 3018
(b) Affirmative defenses. A party shall plead all matters which if not pleaded
would be likely to take the adverse party by surprise or would raise issues of
fact not appearing on the fact of a prior pleading . . .
CPLR 3018 (b) is written in the disjunctive and, while defendants alleged
contractual right to setoff cannot surprise the claimant, the allegations first
formally raised in the moving papers present issues of fact not appearing on
the face of the claim. In any event, whether denominated an affirmative defense
or setoff, the right to a setoff must be set forth in the answer or it is waived
(Kivort Steel v Liberty Leather Corp., 110 AD2d 950 ; cf.
Reich v Knopf, 65 AD2d 618 ).
In Ellenville Natl. Bank v Freund, 200 AD2d 827 ) the Appellate
Division, Third Department addressed the propriety of summary judgment in favor
of the plaintiff despite the defendant's assertion of an unpleaded right to
setoff. The Court stated:
"Although defendants maintain that they may have a right to set off against the
amount due on the note amounts allegedly overpaid on prior loans, their answer,
given the most amiable reading, does not even contain conclusory allegations
that they intended to assert such a defense or counterclaim, let alone any facts
in support thereof. Their claimed entitlement to a setoff, whether considered an
affirmative defense or a counterclaim, has therefore been waived" (Id. at
828, citing Kivort Steel v Liberty Leather Corp., 110 AD2d 950,
Here the assertion that the defendant is entitled to set off amounts allegedly
overpaid on Contract 42 against monies admittedly owed to the claimant on
Contract 38 appears only in defendant's papers submitted in opposition to the
motion for summary judgment. The answer does not set forth the defendant's
right to a setoff either as an affirmative defense or a counterclaim. The
defendant did not amend its answer as of right to include such a defense or
counterclaim and has not cross-moved for permission to amend the answer. Absent
either an affirmative defense or a counterclaim alleging the State's right to a
setoff, and there being no claim asserted for the amount of the purported
overpayment on Contract 42, the defendant may not defeat claimant’s motion
for summary judgment seeking payment of amounts admittedly due and owing under
While the State's right to offset a valid claim of the State is well
established, "the setoff must be 'due and payable [as opposed to] contingent,
possible and in futuro' " (Matter of Northville Indus. Corp. v State
of New York, 14 AD3d 817, 818 , quoting Matter of Fehlhaber Corp. v
O'Hara, 53 AD2d 746, 747 ). The right of setoff to collect a debt
owed to the State is not defeated merely because the debt has not been reduced
to a judgment or is unrelated to the State's debt to the claimant (Morash v
State of New York, 268 AD2d 510, 511, lv denied 95 NY2d 755 ).
Even absent a judgment, the State may properly assert a right to setoff as an
affirmative defense and seek recoupment of any additional monies owed by way of
a counterclaim (Slate v State of New York, 284 AD2d 767, 770 ;
Court of Claims Act § 9 ; C.O. Falter Constr. Corp. v New York State
Thruway Auth., 19 Misc 3d 1127 [A] ). However, as stated earlier
herein, the defendant failed to interpose any such defense or counterclaim. Nor
is the Court aware of any separate action in which the defendant has asserted
its right to recover monies improperly paid to the claimant for work performed
under Contract 42 which failed to meet the contract specifications. As a
result, at present, no monies are "due and payable" to the defendant on contract
42 and any right to a setoff must therefore be considered contingent, possible
and in futuro (Matter of Northville Indus. Corp. v State of New
York, 14 AD3d at 818). In similar circumstances the Appellate Division,
Third Department in Matter of Fehlhaber v O'Hara, supra, rejected
the contention that an un-asserted claim for monies allegedly owed on one
construction contract warranted the withholding of monies admittedly due the
contractor on another construction contract, stating:
"We do not question appellants' statement that 'under the proper circumstances
the State is entitled to setoff against payments due on a contract not only
claims against the contractor on the same contract, but also claims against the
same contractor on other contracts' (e.g., Williams Press v State of New
York, 45 AD2d 397, revd 37 NY2d 434). Appellants' position in this regard is
untenable because the record does not show the existence of any justiciable
setoff or counterclaim in favor of the State against petitioner. Appellants
attempt to justify their refusal to act because the State claims a 'potential
counterclaim exists' under a separate contract between the State and petitioner
for the construction of part of the Cultural Center. The record also shows that
petitioner's performance of the contract on the Cultural Center project was
guaranteed by a $10,000,000 surety bond. . . We hold that the record does not
show the existence of a separate setoff or counterclaim at the time and
withholding payment under the circumstances was arbitrary and illegal. . . It
is axiomatic that 'claims or demands sought to be set off must not only be
mutual to the extent that they are owing by each to the other, but they must be
due and payable, and, therefore, a claim not due cannot be set off against one
which may be thereafter enforced. (De Camp v. Thomson, 159 N. Y. 444).'
(Michigan Sav. Bank v Millar, 110 App Div 670, 672, affd 186 NY
606). The State has attempted to justify nonpayment by the assertion of a
counterclaim or setoff not only not due and payable, but contingent, possible
and in futuro (Id. at 747).
Like the facts in Matter of Fehlhaber v O'Hara, supra, the
defendant's contention that its contractual setoff rights warrant the denial of
claimant's motion for summary judgment on Contract 38 must fail. There is no
debt due and payable to the defendant nor has any such claim been formally
filed. Moreover, the issue of whether the claimant owes the defendant monies on
Contract 42 is vigorously disputed. Absent any claim asserting a debt owed by
the claimant, the defendant's contractual right to a setoff is merely
contingent, possible or in futuro and provides no basis for
opposition to the claimant's motion for summary judgment on the monies
admittedly owed on Contract 38 ( see also Northville Indus.
Corp. v State of New York, supra ; Matter of Mutual Tickets
Agents Union, Local 23293, AFL-CIO v McCall, 210 AD2d 845 [1994, lv
denied 86 NY2d 703 ; cf. Matter of 3 Lafayette Ave. Corp. v
Comptroller of State of N.Y., 186 AD2d 301 , lv denied 81
NY2d 705 ).
However, the parties disagree as to the amount owed on Contract 38. While
the claimant contends that the amount owed under the contract is $1,589,538.38,
the defendant contends that the amount due the claimant is
The Court therefore grants the
claimant's motion for summary judgment as to the issue of liability only. The
causes of action contained in the claim which relate to Contract 38 shall be
severed from the remaining causes of action and scheduled for trial on the issue
of damages at the appropriate juncture (see
CPLR 3212 [e]).
With respect to Contract 42, the Court finds that the claimant failed to
establish its prima facie entitlement to summary judgment. While the claimant
submitted an affidavit from its expert, Dr. Prowell, who opined that the work
performed pursuant to this contract conformed to the contract specifications, it
failed to submit the contract or otherwise support the expert's assertions by
relevant industry standards (see Diaz v NewYork Downtown Hosp., 99
NY2d 542 ; Reid v Schalmont School Dist., 50 AD3d 1323 ;
Stocklas v Auto Solutions of Glenville, Inc., 9 AD3d 622 ). In
addition, through the submission of Mr. Shields’ affidavit, the defendant
raised material questions of fact as to whether or not the work performed
pursuant to Contract 42 conformed to the contract specifications.
Based on the foregoing, claimant's motion for summary judgment is granted to
the extent the Court finds the defendant liable for payment of monies due for
the work performed pursuant to Contract 38. The first through fourth causes of
action alleged in the claim are severed, and a trial on the issue of damages
will be scheduled at the appropriate juncture.
Claimant's motion for summary judgment on Contract 42 is denied.
Saratoga Springs, New York
HON. FRANCIS T. COLLINS
the Court of Claims
The Court considered the following papers:
Notice of motion dated May 16, 2008;
Memorandum of Law of Anthony J. Adams, Jr. dated May 16, 2008;
Affidavit of Brian D. Prowell, Ph.D., P.E. sworn to May 13, 2008 with
Affirmation of Anthony J. Adams, Jr. filed May 19, 2008 with exhibits;
Memorandum of Law of Eidin Beirne dated June 12, 2008;
Affidavit of Andrew M. Nagy, P.E. sworn to June 11, 2008 with exhibits;
Affidavit of Ted C. Shields sworn to June 11, 2008 with exhibits;
Affirmation of Anthony J. Adams, Jr. dated June 23, 2008.
. This allegation in the claim was admitted
by the defendant in its answer (see
claim ¶ 4; defendant's answer
¶ 1(claimant's Exhibits A and B).
. This allegation in the claim was admitted
by the defendant in its answer (see
claim ¶ 3; defendant's answer
¶ 1(claimant's Exhibits A and B).
. Although a check was recently issued for
retainage in the amount of $170,693.37, counsel for the claimant appears to
maintain in a reply affirmation (paragraph 7) that this payment was made in
connection with Contract 42 and that notwithstanding the issuance of this check,
the amount owed on Contract 38 is $1,583,538.38.