New York Law Review

C.S.A. Contracting Corp. v. New York City School Construction Authority, 5 N.Y.3d 189 (2005): Accrual of Claims in Public Works Contracts

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The New York Law Review

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5 N.Y.3d 189 (2005)

A contractor’s claim against the New York City School Construction Authority accrues when its damages are ascertainable, typically upon substantial completion of work or submission of a detailed invoice, not when payment is denied, unless the Legislature amends the Public Authorities Law similarly to the Education Law.

Summary

C.S.A. Contracting Corp. sued the New York City School Construction Authority (SCA) for breach of contract, seeking payment for asbestos abatement work. The Court of Appeals affirmed the dismissal of the case because C.S.A. failed to file a notice of claim within three months of the claim’s accrual, as required by Public Authorities Law § 1744(2). The court held that the claim accrued when the work was substantially completed and a detailed invoice was submitted, not when the SCA denied payment. The Court declined to extend the Education Law’s later accrual date (date of payment denial) to cases involving the SCA, stating that such a change must come from the legislature.

Facts

In 1993, C.S.A. Contracting Corp. contracted with the New York City School Construction Authority (SCA) for asbestos abatement work at various schools. On December 3, 1993, C.S.A. submitted a payment request of $151,994.96 for extra work at PS 29 in Staten Island. The SCA approved the request in February 1994 but, in April 1994, refused payment, alleging overcharges on a separate project at Bushwick High School. C.S.A. contended it filed a notice of claim in May 1994 and later a notice of dispute on June 30, 1994. A formal notice of claim for $595,850 was filed September 21, 1994, covering work at PS 29, additional costs for work above 14 feet, and wet cleaning/encapsulation expenses.

Procedural History

C.S.A. commenced a breach of contract action in April 1995. The SCA asserted C.S.A.’s failure to properly serve a timely notice of claim as an affirmative defense and counterclaimed for overpayment at Bushwick High School. At trial, C.S.A. lacked documentary evidence of the May 1994 notice. The Supreme Court dismissed the complaint due to C.S.A.’s failure to submit a timely notice of claim, and severed the SCA’s counterclaim. The Appellate Division affirmed. The Court of Appeals granted leave to appeal and affirmed the dismissal.

Issue(s)

Whether C.S.A.’s notice of claim was timely filed pursuant to Public Authorities Law § 1744(2), requiring it to be presented within three months after the accrual of the claim.

Holding

No, because C.S.A.’s claim accrued when its damages were ascertainable, which was upon substantial completion of the work and submission of a detailed invoice in December 1993, and the notice of claim was not filed within three months of that date.

Court’s Reasoning

Public Authorities Law § 1744(2) requires a detailed written notice of claim within three months of accrual as a condition precedent to an action against the SCA. The Court relied on the precedent set in Matter of Board of Educ. of Enlarged Ogdensburg City School Dist. [Wager Constr. Corp.], 37 NY2d 283, 290 (1975), stating, “it generally has been recognized that damages are ascertainable once the work is substantially completed or a detailed invoice of the work performed is submitted”. The Court found C.S.A.’s work was completed, and a detailed invoice submitted, before December 1993. The Court rejected C.S.A.’s argument that the claim accrued only when the SCA denied payment in April 1994, noting that while the Legislature amended Education Law § 3813(1) to reflect this rule for school districts, it did not similarly amend Public Authorities Law § 1744(2). Therefore, the Wager ruling stands for Public Authorities Law cases, absent legislative action.

Judge R.S. Smith concurred, expressing his view that the Wager decision was based on “questionable logic” and has led to “unfortunate results,” as it requires a contractor to submit a claim before there is any reason to expect litigation. He pointed out that the Legislature addressed this issue in Education Law § 3813(1) but has not done so in Public Authorities Law § 1744(2). Judge Smith argued, “The courts’ interpretation… makes no sense”.

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