Friday, August 7, 2015

A quantum meruit claim is denied.

Practice point:  The Appellate Division reversed the motion court and denied that branch of plaintiff's motion which was for summary judgment on the cause of action seeking to recover damages against the defendant bank based on quantum meruit.

Plaintiff construction company entered into a construction contract with the individual defendant who was principal of the defendant owner of a commercial building. Pursuant to the contract, plaintiff was to furnish all material and perform all work necessary to renovate the owner's building for a price of $4,200,000. In order to pay for the work, the owner obtained a construction loan from the bank, which was secured by a mortgage on the property. Pursuant to the agreement between the bank and the owner, the bank disbursed money from the loan directly to plaintiff in installments on proof of completion of certain stages of work, but kept 10% of all such funds to be disbursed to plaintiff when the project was complete.  Under the loan agreement, in the event of the owner's default, the bank was entitled to keep all undisbursed funds from the loan.big

The owner defaulted and the bank commenced an action to foreclose on the property. The project was not completed, and plaintiff commenced this action against the owner and the bank asserting, among other things, a claim sounding in quantum meruit. The owner did not appear in the action.

The Appellate Division determined that plaintiff failed to establish its entitlement to judgment as a matter of law, as it failed to submit any evidence of the value of any services it may have performed which were accepted by the bank.  Plaintiff does not dispute that the sum of $416,566.50 represents the amount it was owed for work it performed pursuant to its contract with the owner and prior to any default by the owner, and it does not dispute that it previously received the other 90% of the payment owed for those services.  Plaintiff's evidence that the bank retained the sum of $416,566.50, pursuant to the loan agreement between the bank and the owner, for work performed by the plaintiff prior to the owner's default, is not evidence of the value of any services accepted by the bank. Moreover, the remaining 10% of funds that were to be disbursed to plaintiff pursuant to the loan agreement when the project was complete are also not evidence of the reasonable value of services rendered which were accepted by the bank.

The bank established its prima facie entitlement to judgment as a matter of law dismissing the claim as against it through the submission of the construction contract between plaintiff and the owner, which specifically outlined the contractor's work on the project.  In opposition, plaintiff failed to raise a triable issue of fact.

Student note:  A plaintiff seeking to recover on a cause of action sounding in quantum meruit must demonstrate (1) the performance of services in good faith; (2) the acceptance of the services by the person to whom they are rendered; (3) an expectation of compensation therefor; and (4) the reasonable value of the services allegedly rendered.

Case:  Crown Constr. Bldrs. & Project Mgrs. Corp. v. Chavez, NY Slip Op 06310 (2d Dept. 2015)

Here is the decision.

Monday's issue:  Taking a deposition by remote electronic means.