Town of Oyster Bay v. Lizza Industries, Inc.

OPINION OF THE COURT

Memorandum.

The orders of the Appellate Division should be affirmed, with costs.

This litigation arises out of defendants’ construction of a sewer system throughout Nassau and Suffolk Counties (the *1029 Counties), including areas under plaintiffs’ jurisdiction. In the 1970s, the Counties entered into public works contracts with defendants to perform the sewer construction work. The Counties included “protection clauses” in the contracts, which incorporated statutory language from County Law § 263 requiring defendants to restore plaintiffs’ roadways to their “usual condition” after the sewer construction was complete.

Defendants completed their sewer construction work at various points in the 1970s and 1980s. Sometime thereafter, the areas surrounding the sewer lines settled, causing damage to plaintiffs’ adjacent roadways, sidewalks, and curbs.

Plaintiffs commenced these 10 related actions in July 2009 alleging a single cause of action in continuing public nuisance. Plaintiffs claimed that defendants “committed faulty workmanship under [the] contracts” by, among other things, “failing to properly excavate and backfill the sewer trenches” and “failing to provide adequate subjacent support to plaintiffs[’] roadways, curbs, gutters and other facilities both during and after actual construction operations.” This “faulty workmanship,” plaintiffs alleged, “created a continuing public nuisance.”

Supreme Court dismissed the complaint in each action, and the Appellate Division affirmed in 10 separate decisions. In its lead decision, Village of Lindenhurst v J.D. Posillico, Inc. (94 AD3d 1101 [2d Dept 2012]), the court held that, viewing the complaint as asserting the Village’s rights as a third-party beneficiary to the sewer construction contract, “the action is barred by the six-year statute of limitations for a cause of action alleging breach of contract” (94 AD3d at 1102). Noting the rule from City School Dist. of City of Newburgh v Stubbins & Assoc. (85 NY2d 535 [1995]) (Newburgh) that a cause of action arising out of defective construction accrues upon completion of the contractual work, the court stated that this rule applies to actions commenced by a third-party beneficiary to the contract (see id.). The court also rejected the Village’s argument that “the conduct giving rise to the alleged nuisance is ongoing, thereby giving rise to successive causes of action” {id.).

The Appellate Division held that the other nine actions were “time-barred for the reasons stated” in Village of Lindenhurst (see Town of Oyster Bay v Lizza Indus., Inc., 94 AD3d 1094, 1094 [2d Dept 2012]; Town of Oyster Bay v J.D. Posillico, Inc., 94 AD3d 1093, 1093 [2d Dept 2012]; Town of Oyster Bay v Hendrickson Bros., Inc., 94 AD3d 1092, 1092 [2d Dept 2012]; Village of Babylon v Hendrickson Bros., Inc., 94 AD3d 1100, 1100 *1030 [2d Dept 2012]; Village of Lindenhurst v Hendrickson Bros., Inc., 94 AD3d 1100, 1101 [2d Dept 2012]; Village of Lindenhurst v Lizza Indus., Inc., 94 AD3d 1102, 1102 [2d Dept 2012]; Town of Oyster Bay v J.D. Posillico, Inc., 94 AD3d 1093, 1093 [2d Dept 2012]; Town of Oyster Bay v S. Zara & Sons Contr. Corp., 94 AD3d 1094, 1094 [2d Dept 2012]; Town of Oyster Bay v Marvec Allstate, Inc., 94 AD3d 1094, 1094 [2d Dept 2012]). The Court granted plaintiffs leave to appeal (20 NY3d 854 [2012]) and we now affirm.

A breach of contract action must be commenced within six years from the accrual of the cause of action (see CPLR 203 [a]; 213 [2]). “In cases against architects or contractors, the accrual date for Statute of Limitations purposes is completion of performance” (Newburgh, 85 NY2d at 538, citing Sosnow v Paul, 36 NY2d 780 [1975]). This rule applies “no matter how a claim is characterized in the complaint” because “all liability” for defective construction “has its genesis in the contractual relationship of the parties” (Newburgh, 85 NY2d at 538, citing Sears, Roebuck & Co. v Enco Assoc., 43 NY2d 389, 396 [1977]). Even if the plaintiff is not a party to the underlying construction contract, the claim may accrue upon completion of the construction where the plaintiff is not a “stranger to the contract,” and the relationship between the plaintiff and the defendant is the “functional equivalent of privity” (Newburgh, 85 NY2d at 538-539 [internal quotation marks omitted]).

Here, the gravamen of the complaints is that defendants, through their alleged faulty construction, breached their duty to plaintiffs under the protection clauses in the public works contracts. In fact, plaintiffs specifically allege that defendants “committed faulty workmanship under said contracts.” Although characterized as “continuing public nuisance” causes of action, plaintiffs’ “claim[s] aris[e] out of defective construction” and thus “accrue[d] on date of completion” (Newburgh, 85 NY2d at 538).

The Appellate Division properly applied Newburgh to these actions commenced by third-party beneficiaries to the construction contracts. Newburgh extended the completion of performance accrual rule to actions against architects or contractors brought by “intended beneficiar[ies]” of construction contracts (id.). Here, the Counties contracted with defendants to install the sewer system for the benefit of municipalities like plaintiffs, a fact which was surely “known to all parties at the time the contracts were negotiated” (id.).

*1031 Although plaintiffs do not dispute that they are third-party beneficiaries, they seek to distinguish Newburgh on several bases, noting that they do not own the sewer lines defendants constructed and the Counties never intended to transfer ownership of the sewer system to plaintiffs once construction was complete. But Newburgh is not limited to owners of real property and the Counties’ intention to retain ownership of the sewer lines does not diminish plaintiffs’ status as intended beneficiaries of the contracts. Plaintiffs further argue that, unlike the plaintiff beneficiary in Newburgh, they had no involvement or control over the construction process (see id. at 538-539). However, it is undisputed that plaintiffs, at the very least, consented to the sewer construction project initiated by the Counties and allowed defendants to perform excavation and other construction work on their property. In any case, we cannot say that there is such a complete “lack of privity” that plaintiffs’ claims should “not fall under the general rule of accrual” articulated in Newburgh (id. at 538).

Accordingly, Newburgh controls and plaintiffs’ causes of action accrued upon defendants’ completion of performance under the public works contracts. According to plaintiffs, defendants completed construction of the sewers, at the latest, by 1987. Assuming plaintiffs’ claims accrued in 1987, plaintiffs had until 1993 to timely commence these actions. Because they waited until 2009 (16 years too late), plaintiffs’ actions are plainly time-barred.

Even if plaintiffs’ continuing nuisance claims could be considered independent causes of action that do not arise from the contracts—thus avoiding dismissal under Newburgh—the actions were still properly dismissed as time-barred. An action to recover damages for injury to property must be commenced within three years of the date of the injury (see CPLR 214 [4]). It is well-settled, however, that injuries to property caused by a continuing nuisance involve a “continuous wrong” and, therefore, generally give rise to successive causes of action that accrue each time a wrong is committed (see e.g. Jensen v General Elec. Co., 82 NY2d 77, 85 [1993]; 509 Sixth Ave. Corp. v New York City Tr. Auth., 15 NY2d 48, 52 [1964]; see also Covington v Walker, 3 NY3d 287, 292 [2004], cert denied 545 US 1131 [2005]).

While plaintiffs assert that the continued presence of roadway defects caused by defendants’ faulty construction constitutes a continuing public nuisance, the Appellate Division *1032 properly rejected this theory. Although plaintiffs allege that the injuries to their property are ongoing, defendants’ tortious conduct consisted of discrete acts (i.e., negligent excavation and backfilling) that ceased upon completion of the sewer construction over 20 years ago (cf. Bloomingdales, Inc. v New York City Tr. Auth., 13 NY3d 61, 65 [2009] [trespass and nuisance claims “not tied to (a) single negligent act” and thus constituted “successive causes of action”]; New York Seven-Up Bottling Co. v Dow Chem. Co., 96 AD2d 1051, 1052 [2d Dept 1983], affd 61 NY2d 828 [1984] [finding no “continuing tort or torts” where “there was one tortious act complained of,” and noting that “the accrual date does not change as a result of continuing consequential damages”]). Plaintiffs also have not alleged the existence of an “unlawful encroachment” on their property (Bloomingdales, 13 NY3d at 66; see 509 Sixth Ave. Corp., 15 NY2d at 52), or a “continuous interference” with their property easements (Cranesville Block Co. v Niagara Mohawk Power Corp., 175 AD2d 444, 446 [3d Dept 1991]). Accordingly, defendants’ alleged wrongs do not give rise to successive causes of action under the continuous wrong doctrine, and plaintiffs’ claims, which were interposed more than three years after defendants substantially completed the construction work, are time-barred (see 509 Sixth Ave. Corp., 15 NY2d at 51-52).