This matter comes before the Court upon a cross motion of Plaintiff, Paragon Restoration Group, Inc., (Paragon) for partial summary judgment in its favor against Defendant, Cambridge Square Condominiums (Cambridge Square). At oral argument on April 26, 2006, the Court heard argument on this cross motion and on a motion by Cambridge Square brought on by Order to Show Cause seeking to compel the production of documents. At that time, the Court denied the motion to compel, and reserved decision on the cross motion.

Upon due consideration, the Court grants that part of Paragon's motion that seeks summary judgment on liability on its first cause of action for breach of contract; denies summary judgment on the issue of damages; and denies that part of the motion that seeks to dismiss Cambridge Square's counterclaims, except with respect to the claim that the Contract was unenforceable.

Mr. Klaich also testified that, although the By-Laws of Cambridge Square required that there be two signatures on the Contract (cf. By-Laws ¶ 4.08),^[FN1] he consulted Cambridge Square's attorney and Mr. Browne and, because there was only one blank on the Contract in which to sign, he alone signed on behalf of Cambridge Square (see Klaich EBT at 78-79). Mr. Klaich testified that, to his knowledge, Paragon's President, Frank DeCarlo, was not aware of the By-Laws' requirement (see id. at 79).

The work was to commence on September 13, 2004 and to be substantially completed within [*2]sixty (60) days, at a cost of $483,688.00 (Contract ¶¶3, 4.1, at 2-3). Paragon subcontracted the work of removing and replacing the roof to Defendants, Brian Lorenc and Mark Lorenc, doing business as BML Contracting (hereinafter BML) (see Manna Affid. Exhibit A [hereinafter Complaint] ¶ 12). According to the Complaint, BML "did not appear timely to perform the work", necessitating an extension of the completion date and hiring of another subcontractor, Banach Roofing, to complete the work (see Complaint at ¶¶13-15). On or about November 4, 2004, Plaintiff and Klaich executed an extension agreement (see Petricca Affirm. Exhibit G to Exhibit H [hereinafter Extension Agreement]). That letter agreement provided in pertinent part:

Pursuant to the contract with provisions for claims for additional time, Paragon Restoration Group Inc. requests an additional 30 days for roof completion. This does not include the installation of windows and final trim work that will complete your job, due to the fact that legally, it was not agreed1 upon by the previous attorney, Tom Keefe, and Cambridge Square Condominiums to pre-order and pre-pay for all the windows * * * . Therefore, it was agreed on by all parties that * * * the windows would be ordered in accordance with the completion of the buildings.

This explains the continued delay and reasons why the job will run over the estimated 60 days * * *. If you recall, due to starting the job late, the delay of financial disclosure by Cambridge Square Condominiums, as outlined in a letter to you dated August 23rd and the delay of weather, and the ordering of the windows [sic] has definitely taken this job out of the 60-day window. * * * Therefore, as a memorandum of understanding between Paragon * * * and the Cambridge Square Homeowner's Association, we are requesting 30 days for the completion of the roofing and an additional 45 days in order to order windows and complete the entire project, barring no complications with unit owners and /or ordering of materials.

In addition, the parties executed a change order, increasing the price by $23,072.00 to $506,706.00 (see Manna Affid. ¶ 7 & Exhibit E).^[FN2] According to Gary Browne, the increase was due to the need for additional plywood decking, insulation, and ice and water shields (see Manna Affid. Exhibit D [hereinafter Browne EBT] at 75-76).

On November 23, 2004, the unit owners at Cambridge Square voted into office a new Board of Managers, and a new president of the Board, Clifton Winters (Winters) (Manna Affid. ¶8 & Exhibit F [hereinafter Winters EBT] at 96).

DeCarlo, Browne and Winters met on November 29, 2004, along with the remaining members of the Board of Managers (see Winters EBT at 97, 107-108). DeCarlo presented a pay application for $70,279.10 (see Manna Affid. Exhibit G). That application had been certified as due by Browne, according to the Contract (see Manna Affid. Exhibit G; Browne EBT at 85-86; Contract [*3]¶ 5.1).^[FN3] However, according to Browne, at that meeting the Board indicated that Cambridge Square would pay no more money for the roof and would not pay for the windows (see Browne EBT at 95-96).

Board President Winters testified at his EBT that he told Mr. DeCarlo on November 29 that time was of the essence because the roof was unfinished, but Mr. DeCarlo "basically just said no, he wasn't going to do anything else unless he received more money" (Winters EBT at 97, 175-176). Winters stated that they told Mr. DeCarlo that, because Paragon had already been paid approximately $230,000, Cambridge Square would pay the additional progress payment after the roofing was completed (see Winters EBT at 108, 176).

The following day, November 30, 2004, the Board voted to terminate the Contract (see Winters EBT at 97, 175). Cambridge Square's counsel, Arc Petricca, spoke to Mr. DeCarlo on December 2, 2004 and orally terminated the Contract, and followed up with a letter of the same date, terminating the Contract pursuant to "Article 6.2" (see Manna Affid., Exhibit H).^[FN4] According to Winters, that letter was the first written notice of termination Paragon received (see Winters EBT at 133). Cambridge Square then hired BML to complete the job (see Manna Affid. ¶ 12 & Petricca Affirm., Exhibit M to Exhibit H [contracts with BML]).

Paragraph 6.1 of the Contract provides that either the Owner or the Contractor may terminate the Contract pursuant to the procedures laid out in Article 14 of the General Conditions (see Contract ¶6.1; General Conditions [A201-1997] ¶ 14). Specifically, with respect to termination of the Contractor for cause, the Contract provides:

14.2.1 The Owner may terminate the Contract if the Contractor:

.1persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials; * * *

* * *, or

.4otherwise is guilty of substantial breach of a provision of the Contract Documents.

14.2.2 When any of the above reasons exist, the Owner, upon certification by the Architect [Consultant] that sufficient cause exists to justify such action, may without prejudice to any other rights or remediesof the Owner and after giving the Contractor and the Contractor's surety, if any, seven days' written notice, terminate employment of the Contractor and may, subject to any prior rights of the surety: [*4]

.1take possession of the site * * *

.2accept assignment of subcontracts * * *; and

.3finish the Work by whatever reasonable method the Owner may deem expedient. * * *

14.2.3 When the Owner terminates the Contract for one of the reasonsstated in Subparagraph 14.2.1, the Contractor shall not be entitledto receive further payment until the Work is finished.

14.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing the work, including compensation for the Architect's services andexpenses made necessary thereby, and other damages incurred by the Owner and not expressly waived, such excess shall be paid tothe Contractor. If such costs and damages exceed the unpaidbalance, the Contractor shall pay the difference to the Owner. * * *

The Contract also provides for termination by the Owner for the Owner's convenience and without cause, at any time (Contract ¶ 14.4.1). Upon receipt of written notice from the Owner that it seeks to terminate for its own convenience, the Contractor is required to cease operations as directed; "take actions necessary, or that the Owner may direct, for the protection and preservation of the Work;" and terminate all subcontracts and supply contracts (id. ¶ 14.4.2). With respect to the Contractor's rights, that paragraph provides in pertinent part:

14.4.3 In case of such termination for the Owner's convenience, theContractor shall be entitled to receive payment for Work executed, and costs incurred by reason of such termination, along with reasonable overhead and profit on the Work not executed.

(Contract ¶ 14.4.3).

Because the installation of windows was not completed, and there were "gaps which allowed snow to the interior of premises", Cambridge Square hired Elite Property Management (Elite) on December 23, 2004 for emergency inspection and repairs (Oberg Affid. ¶¶3-4 & Exhibit A). Christopher Oberg, General Partner of Elite, assessed the quality of the work performed by Paragon and its subcontractors and opined that the roof was repaired, not replaced as required; that 1,000 additional sheets of new plywood should have been supplied and installed; that Cambridge Square was overcharged in the amount of $150,000; and, that the roof must be redone at a cost of $300,000 (see Oberg Affid. ¶¶6-8 & Exhibit B).

In January 2005, Paragon sued Cambridge Square, BML and Advanced Property Management, the property manager for Cambridge Square that allegedly handled payments to Paragon and BML (see Complaint ¶ 19-20). Paragon alleged that Cambridge Square had breached the Contract (first cause of action), committed fraud (fifth) and conversion (sixth cause of action); BML committed fraud in holding itself out as an experienced contractor (second cause of action), was negligent (third cause of action), and tortiously interfered with Paragon's Contract with Cambridge Square (fourth cause of action).

Cambridge Square answered, asserting five defenses and two counterclaims. The first counterclaim is against Paragon and BML for negligence and for failing to timely and effectively complete the work; the second alleges that the Contract is ultra vires and unenforceable because made in violation of the By-Laws of Cambridge Square, that therefore Paragon is entitled to only a quantum meruit recovery, but has already been overpaid because the work and materials were [*5]performed and supplied in a negligent and unworkmanlike manner, and because Paragon fraudulently held itself out as an experienced contractor (see Manna Affid. Exhibit B [hereinafter Answer]).

Cambridge Square, on the other hand, alleges that Paragon may not obtain summary judgment because it has failed to meet its burden of proof with evidentiary facts (see Petricca Responding Affirm. ¶ 5-6).^[FN5] It asserts that there are numerous defenses to the action, properly raised in the answer, which Paragon has failed to refute (id. ¶ 5). Specifically, Cambridge Square contends: (1) that there was no valid contract because the meeting of unit owners on August 4, 2004 (at which the unit owners allegedly agreed to permit Mr. Klaich to contract for roof replacement) was not properly noticed, in accordance with the condominium By-Laws (Petricca Affirm. ¶6 [A], [F]); (2) the Board is not authorized under the By-Laws to repair or replace windows, unless a unit owner fails to make necessary repairs (id.); and (3) Paragon did not have the right to demand a progress payment of $70,279 on November 29; rather, that sum would not have been due until thirty (30) days later (see Petricca Affirm. ¶ 6 [G]).^[FN6]

On a motion for summary judgment,

the proponent * * * must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact * * *. Failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers * * *. Once this showing has been made, however, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action

Paragon has established as a matter of law that it was terminated as Contractor on December 2, 2004, orally and in writing, by Cambridge Square's attorney, without any prior notice and time to cure (see Manna Affid. Exhibit H [termination letter]; Winter EBT at 132-133; Contract ¶ 14.2.2 [procedures for termination for cause]). In response, Cambridge Square fails to raise any issue of fact whether it complied with the procedures for termination for cause. It defends on the basis that the Contract was ultra vires, in that it was not approved and executed in compliance with the condominium By-Laws.

ByLaws

It is well-settled that a president of a corporation and chairman of a board of directors is presumed to have authority to enter into contracts in the ordinary course of a corporation's business, and the same is held true for presidents of boards of managers of condominiums, by analogy, where, as here, the By-Laws grant the president "all of the general powers and duties which are incident to the office of president of a stock corporation organized under the Business Corporation Law of the State of New York" (see Odell v 704 Broadway Condominium, 284 AD2d 52, 57 [1st Dept 2001]; see Bylaws ¶ 4.04 [same as in Odell case]; see also A & M Wallboard, Inc. v Marina Towers Associates,169 AD2d 751, 752 [2d Dept 1991], lv denied 78 NY2d 854 [1991]). "[A] president of a corporation has apparent authority to act within the general scope of his office and such acts are binding on the corporation against one who does not know of any limitation o[n] the president's true authority" (Odell v 704 Broadway Condominium, 284 AD2d at 57). There is no evidence in the record that Paragon had any knowledge of any limitations on the authority of Mr. Klaich, the Board of Manager's president who signed the Contract. Thus, Cambridge Square has failed to raise an issue of fact concerning Mr. Klaich's authority to execute the contract.

The issue of the alleged necessity of two signatures on the Contract was dealt with also in the Odell case, concerning a condominium association with virtually the identical By-Law to Cambridge Square's By-Laws ¶ 4.08:

All * * * contracts * * * of the Condominium shall be executed by any two officers of the Condominium or by such other person or persons as may be designated by the Board of Managers

Thus, Cambridge Square has failed to raise an issue of fact whether the Contract was unenforceable because ultra vires. Termination under Construction Law

In construction law, procedures for termination of contractors must be strictly followed (see [*7]generally General Supply and Constr. Co. v Goelet, 241 NY 28, 35 [1925]); Filmline (Cross-Country) Productions, Inc. v United Artists Corp., 865 F2d 513, 518-519 [2d Cir 1989] [applying New York law]). The failure to permit the contractor the contractual cure period (in this case, seven days) along with the requisite certificate from the Architect (in this case, Mr. Browne) before termination, renders the termination wrongful (see Contract ¶ 14.2.2; MCK Building Assoc. Inc. v St. Lawrence Univ., 301 AD2d 726, 728 [3d Dept 2003], lv dismissed 99 NY2d 651 [2003]). Thus, even though Paragon appeared as of December 2, 2004 to be about to breach the extension contract, under which it had obtained an additional 30 days to complete the roof,

[h]aving indicated [the] purpose to keep the contract alive in spite of delays on the part of the contractor, the owner could not suddenly abandon the purpose and treat as essential an element in the contract which he had previously waived [i.e. the date for substantial completion], as ground for termination [citation omitted]. The termination of the contract * * * without the required previous notice and without a certificate from the architect in accordance with the terms of the contact was wrongful

The Court notes that there is no evidence in the record that Cambridge Square terminated the Contract under the termination for convenience clause (see Contract ¶ 14.4.1-14.4.3, discussed supra; see MCK Building Assoc., Inc., 301 AD2d at 727-728; cf. Fruin-Colnon Corp. v Niagara Frontier Transportation Auth., 180 AD2d 222, 233 [4th Dept 1992]; Tishman v Construction Co. v City of New York, 228 AD2d 292, 293 [1st Dept 1996]; A.J. Temple Marble & Tile, Inc. v Long Island Rail Road, 172 Misc 2d 422, 423 [Sup Ct Queens County], aff'd as modified on other grounds 256 AD2d 526 [2d Dept 1998]). A termination for convenience under a contractual provision permitting such a termination is not a breach of contract (see e.g. Elsaeidy v Guarino, 2 AD3d 486, 487 [2d Dept 2003]), but may limit the recovery of the owner in a counterclaim for default by the contractor (see Fruin-Colnon Corp. v Niagara Frontier Transportation Auth., 180 AD2d 222, 233 [4th Dept 1992] [denying NFTA recovery for payments made to third parties to carry out remedial grouting on tunnels constructed by Plaintiff]).

Paragon is mistaken, therefore, in its assertion that Cambridge Square's counterclaims must necessarily be dismissed because it failed to properly terminate the contract (cf. Paragon Memo of Law at 13). Because, unlike in the contract in the Fruin-Colnon case cited by Paragon, the termination is not deemed one for convenience, Defendant may still seek an offset for reimbursement for payments made to third parties to correct Paragon's defaults (see e.g. General Supply & and Constr. Co. v Goelet, 241 NY 28, 33 [1906]; Oberg Affid. ¶¶6-8). Thus, Paragon's [*8]motion insofar as it seeks dismissal of Cambridge Square's first counterclaim, is denied.^[FN7]

Cambridge Square's second counterclaim appears to include three separate claims. Insofar as the second counterclaim asserts that the Contract was unenforceable because executed in violation of the By-Laws, the Court determines that, on this record, Paragon has established as a matter of law that the President of the Board of Managers had at least apparent authority to execute the Contract, and Cambridge Square has failed to raise a question of fact with respect to its enforceability. Therefore, the Court grants that part of the motion for summary judgment that seeks dismissal of the claim that the Contract was unenforceable (see Answer ¶ 19). The second counterclaim survives to the extent that it asserts negligence and fraud by Paragon (see Answer ¶¶ 20-22).

With respect to Cambridge Square's claim that Paragon must sue in quantum meruit, it is well-settled under New York law that, upon a wrongful termination, the Contractor may elect either to sue on the contract (see e.g. Tibbetts Contracting Corp. v O & E Contracting Co., 15 NY2d 324 [1965]; Alm v Unified Church Structures Inc., 61 AD2d 886, 887 [4th Dept 1978]),^[FN8] or to sue in quantum meruit (see New Era Homes Corp. v Forster, 299 NY 303, 306 [1949]), subject to any set-off to which Cambridge Square may be entitled.

Thus, the Court grants Paragon's motion insofar as it seeks summary judgment on liability on its first cause of action for breach of contract; denies summary judgment on the issue of damages on that cause of action; and denies that part of the motion that seeks to dismiss Cambridge Square's counterclaims, except with respect to the counterclaim that the Contract was unenforceable.

Counsel for Paragon to submit order on notice to all parties.

EUGENE M. FAHEY, J.S.C.

Dated: May 11, 2006 [*9]