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New York appellate court has decided the duties that a completion
contractor owes to an original contractor who was terminated.
In
Rothberg v. Bogdanow & Associates Architects,
705 N.Y.S.2d 115 (2000), a homeowner contracted with architects
to design a residence and later contracted with a general
contractor to build the home. As the construction progressed,
the owner became aware of structural and other construction
deficiencies. Almost a year after the original scheduled
completion date, the owner hired a second contractor to
finish building the home.
The
owner brought suit against the architects and the original
general contractor, among others, seeking damages arising
from negligence, breach of contract, fraud and professional
negligence. (The opinion does not say whether the termination
was for default or for convenience, but does mention deficient
construction work and allegations of breach of contract
and negligence by the homeowner against the original contractor.)
The
original contractor answered the complaint and brought a
third-party action against the contractor who completed
the construction. The completion contractor asserted cross-
and counterclaims for contribution and indemnification.
The architects also asserted contribution and indemnification
claims against the completion contractor.
The
completion contractor moved for summary judgment as to the
third-party claims against him for negligence as well as
to all the cross- and counterclaims brought against him.
The trial court denied the completion contractor's motion,
finding that the defendants could seek contribution from
him.
Agreeing
with the completion contractor, the appellate court reversed
the lower court's ruling. The appellate court found that
the trial court erred in failing to dismiss the original
general contractor's claim for negligence against the completion
contractor. The court noted that a defendant may be liable
for negligence only upon breaching some duty owed to the
plaintiff. Here, the completion contractor owed no duty
to the original contractor because "there was no relationship,
contractual or otherwise, giving rise to such a duty…."
705 N.Y.S.2d at 117.
The
appellate court also found that the general contractor could
not assert a claim for contribution against the completion
contractor. Under New York law, " 'a defendant may
not seek contribution from other defendants where the alleged
'tort' is essentially a breach of contract claim.' "
705 N.Y.S.2d at 117. Although the appellate court noted
that the homeowner's complaint contained claims for negligence
and professional malpractice, the court looked to the measure
of damages the owner was seeking and determined that she
was seeking damages to recover purely economic losses. In
other words, the owner sought to recover what she was due
under her contract with the defendants -- the difference
between the construction that the defendants provided to
her and the construction that the defendants were contractually
obligated to provide to her. Because the owner's claim essentially
was a suit to recover contractual damages, the general contractor
could not seek any contribution from the completion contractor.
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